METROPOLITAN MANILA G.R. No.

179554 allowed to such height as is legally and technically feasible, (b) lease or
DEVELOPMENT AUTHORITY,
Petitioner, Present:
PUNO, C.J., Chairperson,
-versus- CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.
TRACKWORKS RAIL TRANSIT
ADVERTISING, VENDING Promulgated:
AND PROMOTIONS, INC.,
Respondent. December 16, 2009
RESOLUTION
BERSAMIN, J.:
This case concerns whether the Metropolitan Manila Development Authority (MMDA)
could unilaterally dismantle the billboards, signages and other advertizing media in the
structures of the Metro Rail Transit 3 (MRT3) installed by respondent advertising
company by virtue of its existing contract with the owner of the MRT3.
The trial and appellate courts ruled that MMDA did not have the authority to dismantle.
MMDA is now before the Court to assail such adverse ruling.
Antecedents
In 1997, the Government, through the Department of Transportation and
Communications, entered into a build-lease-transfer agreement (BLT agreement) with
Metro Rail Transit Corporation, Limited (MRTC) pursuant to Republic Act No. 6957 (Build,
Operate and Transfer Law), under which MRTC undertook to build MRT3 subject to the
condition that MRTC would own MRT3 for 25 years, upon the expiration of which the
ownership would transfer to the Government.
The BLT agreement stipulated, among others, that MRTC could build and develop
commercial premises in the MRT3 structures, or obtain advertising income therefrom, viz:
16.1. Details of Development Rights. DOTC hereby confirms
and awards to Metro Rail the rights to (a) develop commercial premises
in the Depot and the air space above the Stations, which shall be
sub-lease interests or assign such interests in the Depot and such air
space and (c) obtain any advertising income from the Depot and such
air space and LRTS Phase I.
LRTS Phase I means the rail transport system comprising about
16.9 line kilometers extending from Taft Avenue, Pasay City, to North
Avenue, Quezon City, occupying a strip in the center of EDSA
approximately 10.5 meters wide (approximately 12 meters wide at or
around the Boni Avenue, Santolan and Buendia Stations), plus about 0.1
to 0.2 line kilometers extending from the North Avenue Station to the
Depot, together with the Stations, 73 Light Rail Vehicles and all ancillary
plant, equipment and facilities, as more particularly detailed in the
Specifications.
16.2. Assignment of Rights. During the Development Rights
Period, Metro Rail shall be entitled to assign all or any of its rights, titles
and interests in the Development Rights to bona fide real estate
developers. In this connection, Metro Rail may enter into such
development, lease, sub-lease or other agreements or contracts
relating to the Depot and the air space above the Stations (the space
not needed for all or any portion of the operation of the LRTS) for all or
any portion of the Development Rights Period.
In 1998, respondent Trackworks Rail Transit Advertising, Vending & Promotions, Inc.
(Trackworks) entered into a contract for advertising services with MRTC. Trackworks
thereafter installed commercial billboards, signages and other advertizing media in the
different parts of the MRT3. In 2001, however, MMDA requested Trackworks to dismantle
the billboards, signages and other advertizing media pursuant to MMDA Regulation No.
96-009, whereby MMDA prohibited the posting, installation and display of any kind or
form of billboards, signs, posters, streamers, in any part of the road, sidewalk, center
island, posts, trees, parks and open space. After Trackworks refused the request of
MMDA, MMDA proceeded to dismantle the formers billboards and similar forms of
advertisement.
On March 1, 2002, Trackworks filed against MMDA in the Regional Trial Court (RTC) in
Pasig City an injunction suit (with prayer for the issuance of a temporary restraining order
[TRO] and preliminary injunction), docketed as Civil Case No. 68864.
On March 6, 2002, the RTC (Branch 155) issued a TRO, enjoining MMDA from
dismantling or destroying Trackworks billboards, signages and other advertizing media.
On March 25, 2002, the RTC issued a writ of preliminary injunction for the same purpose.
Without filing a motion for reconsideration to challenge the RTCs issuances,
MMDA brought a petition for certiorari and prohibition before the Court of Appeals (CA),
docketed as C.A.-G.R. SP No. 70932, but the CA denied the petition and affirmed the RTC
on August 31, 2004. The CA ultimately denied MMDAs motion for reconsiderationthrough
its resolution issued on March 14, 2005.
Thence, MMDA appealed to this Court (G.R. No. 167514), which denied MMDAs
petition for review on October 25, 2005.[1]
Ruling of the RTC
In the meanwhile, on October 10, 2005, the RTC (Branch 155) rendered its
decision permanently enjoining MMDA from dismantling, removing or destroying the
billboards, signages and other advertizing media installed by Trackworks on the interior
and exterior structures of the MRT3.[2]
Ruling of the CA
MMDA appealed the RTCs decision to the CA.
On April 30, 2007, the CA denied the MMDAs appeal, [3] holding that Trackworks
right to install billboards, signages and other advertizing media on the interior and
exterior structures of the MRT3 must be protected by a writ of permanent injunction; and
that MMDA had no power to dismantle, remove or destroy Trackworks billboards,
signages and other advertizing media.[4]
MMDA moved for reconsideration, but the CA resolution denied the motion for
reconsideration on September 3, 2007.[5]
Hence, this appeal by petition for review.
Issues
MMDA claims that its mandate under its charter [6] of formulating, coordinating
and monitoring of policies, standards, progress and projects for the use of thoroughfares
and the promotion of safe and convenient movement of persons and goods prompted its
issuance of MMDA Regulation No. 96-009, which reads in part:
h. ) It is unlawful for any person/s, private or public corporations,
advertising and promotions companies, movie producers, professionals
and service contractors to post, install, display any kind or form of
billboards, signs, posters, streamers, professional service
advertisements and other visual clutters in any part of the road,
sidewalk, center island, posts, trees parks and open space.
MMDA avers that the conversion of the center island of Epifanio Delos
Santos Avenue (EDSA) into the carriageway of the MRT3 line did not exempt the
EDSA center island from the coverage of the MMDA regulation; [7] that the
Governments grant of development rights to MRTC was not an abdication of its right
to regulate, and, therefore, the development of the MRT3 remained subject to all
existing and applicable national and local laws, ordinances, rules and regulations;
[8]
that MMDA was merely implementing existing and applicable laws; [9] that
Trackworks advertising materials were placed indiscriminately and without due
regard to safety, and as such might be classified as obstructions and distractions to
the motorists traversing EDSA;[10] and that the interests of a few should not
prevail over the good of the greater number in the community whose safety and
general welfare MMDA was mandated to protect.[11]
Trackworks maintains, on the other hand, that MMDAs petition was defective for its
failure to raise any genuine question of law; and that the CAs decision dated April 30,
2007was valid and correct.[12]
Ruling of the Court
The petition has no merit.
That Trackworks derived its right to install its billboards, signages and other advertizing
media in the MRT3 from MRTCs authority under the BLT agreement to develop
commercial premises in the MRT3 structure or to obtain advertising income therefrom is
no longer debatable. Under the BLT agreement, indeed, MRTC owned the MRT3 for 25
years, upon the expiration of which MRTC would transfer ownership of the MRT3 to the
Government.
Considering that MRTC remained to be the owner of the MRT3 during the time
material to this case, and until this date, MRTCs entering into the contract for advertising
services with Trackworks was a valid exercise of ownership by the former. In fact,
in Metropolitan Manila Development Authority v. Trackworks Rail Transit Advertising,
Vending & Promotions, Inc.,[13] this Court expressly recognized Trackworks right to install
the billboards, signages and other advertising media pursuant to said contract. The latters
right should, therefore, be respected.
It is futile for MMDA to simply invoke its legal mandate to justify the dismantling of
Trackworks billboards, signages and other advertising media. MMDA simply had no power
on its own to dismantle, remove, or destroy the billboards, signages and other advertising
media installed on the MRT3 structure by Trackworks. In Metropolitan Manila
Development Authority v. Bel-Air Village Association, Inc.,[14] Metropolitan Manila
Development Authority v. Viron Transportation Co., Inc.,[15] and Metropolitan Manila
Development Authority v. Garin,[16] the Court had the occasion to rule that MMDAs
powers were limited to the formulation, coordination, regulation, implementation,
preparation, management, monitoring, setting of policies, installing a system, and
administration. Nothing in Republic Act No. 7924 granted MMDA police power, let alone
legislative power.[17]
Clarifying the real nature of MMDA, the Court held:
xxx The MMDA is, as termed in the charter itself, a development
authority. It is an agency created for the purpose of laying down policies
and coordinating with the various national government agencies,
peoples organizations, non-governmental organizations and the private
sector for the efficient and expeditious delivery of basic services in the
vast metropolitan area. All its functions are administrative in nature and
these are actually summed up in the charter itself, viz:
Sec.2. Creation of the Metropolitan Manila Development
Authority.- xxx.
The MMDA shall perform planning, monitoring and
coordinative functions, and in the process exercise regulatory
and supervisory authority over the delivery of metro-wide
services within Metro Manila, without diminution of the
autonomy of local government units concerning purely local
matters.[18]
The Court also agrees with the CAs ruling that MMDA Regulation No. 96-009 and
MMC Memorandum Circular No. 88-09 did not apply to Trackworks billboards, signages
and other advertising media. The prohibition against posting, installation and display of
billboards, signages and other advertising media applied only to public areas, but MRT3,
being private property pursuant to the BLT agreement between the Government and
MRTC, was not one of the areas as to which the prohibition applied. Moreover, MMC
Memorandum Circular No. 88-09 did not apply to Trackworks billboards, signages and
other advertising media in MRT3, because it did not specifically cover MRT3, and because
it was issued a year prior to the construction of MRT3 on the center island of EDSA.
Clearly, MMC Memorandum Circular No. 88-09 could not have included MRT3 in its
prohibition.
MMDAs insistence that it was only implementing Presidential Decree No. 1096 (Building
Code) and its implementing rules and regulations is not persuasive. The power to enforce
the provisions of the Building Code was lodged in the Department of Public Works and
Highways (DPWH), not in MMDA, considering the laws following provision, thus:
Sec. 201. Responsibility for Administration and Enforcement.
The administration and enforcement of the provisions of this Code
including the imposition of penalties for administrative violations
thereof is hereby vested in the Secretary of Public Works,
Transportation and Communications, hereinafter referred to as the
Secretary.
There is also no evidence showing that MMDA had been delegated by DPWH to
implement the Building Code.
WHEREFORE, we deny the petition for review, and affirm the decision dated April 30,
2007 and the resolution dated September 3, 2007.
Costs against the petitioner.
SO ORDERED.
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST CONSUMERS
NETWORK, INC. (ECN),
Petitioners,
-versus-
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL
POWER CORPORATION (NPC), POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG),
and PANAYELECTRIC COMPANY INC. (PECO),
G.R. No. 159796
DECISION
NACHURA, J.:
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers
Network, Inc. (ECN) (petitioners), come before this Court in this original action praying
that Section 34 of Republic Act (RA) 9136, otherwise known as the Electric Power Industry
Reform Act of 2001 (EPIRA), imposing the Universal Charge, [1] and Rule 18 of the Rules
and Regulations (IRR)[2] which seeks to implement the said imposition, be declared
unconstitutional. Petitioners also pray that the Universal Charge imposed upon the
consumers be refunded and that a preliminary injunction and/or temporary restraining
order (TRO) be issued directing the respondents to refrain from implementing, charging,
and collecting the said charge.[3] The assailed provision of law reads:
SECTION 34. Universal Charge. Within one (1) year from the
effectivity of this Act, a universal charge to be determined, fixed and
approved by the ERC, shall be imposed on all electricity end-users for
the following purposes:
(a) Payment for the stranded debts[4] in excess of the amount assumed
by the National Government and stranded contract costs of
NPC[5] and as well as qualified stranded contract costs of
distribution utilities resulting from the restructuring of the
industry;
(b) Missionary electrification;[6]
 (c) The equalization of the taxes and royalties applied to indigenous or
renewable sources of energy vis--vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo
per kilowatt-hour (P0.0025/kWh), which shall accrue to an
environmental fund to be used solely for watershed rehabilitation
and management. Said fund shall be managed by NPC under
existing arrangements; and
(e) A charge to account for all forms of cross-subsidies for a period not
exceeding three (3) years.
The universal charge shall be a non-bypassable charge which shall be
passed on and collected from all end-users on a monthly basis by the
distribution utilities. Collections by the distribution utilities and the
TRANSCO in any given month shall be remitted to the PSALM Corp. on
or before the fifteenth (15th) of the succeeding month, net of any
amount due to the distribution utility. Any end-user or self-generating
entity not connected to a distribution utility shall remit its
corresponding universal charge directly to the TRANSCO. The PSALM
Corp., as administrator of the fund, shall create a Special Trust Fund
which shall be disbursed only for the purposes specified herein in an
open and transparent manner. All amount collected for the universal
charge shall be distributed to the respective beneficiaries within a
reasonable period to be provided by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect.[7]
On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities
Group[8] (NPC-SPUG) filed with respondent Energy Regulatory Commission (ERC) a
petition for the availment from the Universal Charge of its share for Missionary
Electrification, docketed as ERC Case No. 2002-165.[9]
On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No. 2002-
194, praying that the proposed share from the Universal Charge for the Environmental
charge of P0.0025 per kilowatt-hour (/kWh), or a total of P119,488,847.59, be approved
for withdrawal from the Special
Trust Fund (STF) managed by respondent Power SectorAssets and
Liabilities Management Group (PSALM)[10] for the rehabilitation and management of
watershed areas.[11]
On December 20, 2002, the ERC issued an Order [12] in ERC Case No. 2002-165
provisionally approving the computed amount of P0.0168/kWh as the share of the NPC-
SPUG from the Universal Charge for Missionary Electrification and authorizing the
National Transmission Corporation (TRANSCO) and Distribution Utilities to collect the
same from its end-users on a monthly basis.
On June 26, 2003, the ERC rendered its Decision [13] (for ERC Case No. 2002-165) modifying
its Order of December 20, 2002, thus:
WHEREFORE, the foregoing premises considered, the
provisional authority granted to petitioner National Power Corporation-
Strategic Power Utilities Group (NPC-SPUG) in the Order dated
December 20, 2002 is hereby modified to the effect that an additional
amount of P0.0205 per kilowatt-hour should be added to the P0.0168
per kilowatt-hour provisionally authorized by the Commission in the
said Order. Accordingly, a total amount of P0.0373 per kilowatt-hour is
hereby APPROVED for withdrawal from the Special Trust Fund managed
by PSALM as its share from the Universal Charge for Missionary
Electrification (UC-ME) effective on the following billing cycles:
(a) June 26-July 25, 2003 for National Transmission Corporation
(TRANSCO); and
(b) July 2003 for Distribution Utilities (Dus).
 Relative thereto, TRANSCO and Dus are directed to collect the
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194, authorizing the NPC to
UC-ME in the amount of P0.0373 per kilowatt-hour and remit the same
to PSALM on or before the 15th day of the succeeding month. draw up to P70,000,000.00 from PSALM for its 2003 Watershed Rehabilitation Budget
subject to the availability of funds for the Environmental Fund component of the
In the meantime, NPC-SPUG is directed to submit, not later
than April 30, 2004, a detailed report to include Audited Financial Universal Charge.[16]
Statements and physical status (percentage of completion) of the
projects using the prescribed format.
On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO)
Let copies of this Order be furnished petitioner NPC-SPUG and charged petitioner Romeo P. Gerochi and all other
all distribution utilities (Dus).

SO ORDERED.
end-users with the Universal Charge as reflected in their respective electric bills starting
from the month of July 2003.[17]
On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, among Hence, this original action.
others, [14]
to set aside the above-mentioned Decision, which the ERC granted in its Order
dated October 7, 2003, disposing: Petitioners submit that the assailed provision of law and its IRR which sought to
implement the same are unconstitutional on the following grounds:
WHEREFORE, the foregoing premises considered, the Motion for
Reconsideration filed by petitioner National Power Corporation-Small
Power Utilities Group (NPC-SPUG) is hereby GRANTED. Accordingly, the 1) The universal charge provided for under Sec. 34 of the EPIRA and
Decision dated June 26, 2003 is hereby modified accordingly. sought to be implemented under Sec. 2, Rule 18 of the IRR of the
said law is a tax which is to be collected from all electric end-users
Relative thereto, NPC-SPUG is directed to submit a quarterly report on and self-generating entities. The power to tax is strictly a legislative
the following: function and as such, the delegation of said power to any executive
or administrative agency like the ERC is unconstitutional, giving the
1. Projects for CY 2002 undertaken; same unlimited authority. The assailed provision clearly provides
2. Location that the Universal Charge is to be determined, fixed and approved
3. Actual amount utilized to complete the project; by the ERC, hence leaving to the latter complete discretionary
4. Period of completion; legislative authority.
5. Start of Operation; and
6. Explanation of the reallocation of UC-ME funds, if 2) The ERC is also empowered to approve and determine where the
any. funds collected should be used.
SO ORDERED.[15]
3) The imposition of the Universal Charge on all end-users is
oppressive and confiscatory and amounts to taxation without
 representation as the consumers were not given a chance to be
possess the essential characteristics of a tax, that its imposition would redound to the
heard and represented.[18]
benefit of the electric power industry and not to the public, and that its rate is uniformly
levied on electricity end-users, unlike a tax which is imposed based on the individual
Petitioners contend that the Universal Charge has the characteristics of a tax and
taxpayer's ability to pay. Moreover, respondents deny that there is undue delegation of
is collected to fund the operations of the NPC. They argue that the cases[19] invoked by the
legislative power to the ERC since the EPIRA sets forth sufficient determinable standards
respondents clearly show the regulatory purpose of the charges imposed therein, which
which would guide the ERC in the exercise of the powers granted to it. Lastly, respondents
is not so in the case at bench. In said cases, the respective funds [20] were created in order
argue that the imposition of the Universal Charge is not oppressive and confiscatory since
to balance and stabilize the prices of oil and sugar, and to act as buffer to counteract the
it is an exercise of the police power of the State and it complies with the requirements of
changes and adjustments in prices, peso devaluation, and other variables which cannot
due process.[23]
be adequately and timely monitored by the legislature. Thus, there was a need to
delegate powers to administrative bodies. [21] Petitioners posit that the Universal Charge is
On its part, respondent PECO argues that it is duty-bound to collect and remit the amount
imposed not for a similar purpose.
pertaining to the Missionary Electrification and Environmental Fund components of the
On the other hand, respondent PSALM through the Office of the Government Corporate
Universal Charge, pursuant to Sec. 34 of the EPIRA and the Decisions in ERC Case Nos.
Counsel (OGCC) contends that unlike a tax which is imposed to provide income for public
2002-194 and 2002-165. Otherwise, PECO could be held liable under Sec. 46 [24] of the
purposes, such as support of the government, administration of the law, or payment of
EPIRA, which imposes fines and penalties for any violation of its provisions or its IRR. [25]
public expenses, the assailed Universal Charge is levied for a specific regulatory purpose,
The Issues
which is to ensure the viability of the country's electric power industry. Thus, it is exacted
by the State in the exercise of its inherent police power. On this premise, PSALM submits
The ultimate issues in the case at bar are:
that there is no undue delegation of legislative power to the ERC since the latter merely
exercises a limited authority or discretion as to the execution and implementation of the 1) Whether or not, the Universal Charge imposed under Sec. 34 of
the EPIRA is a tax; and
provisions of the EPIRA.[22]
2) Whether or not there is undue delegation of legislative power to
tax on the part of the ERC.[26]
Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the
Solicitor General (OSG), share the same view that the Universal Charge is not a tax
because it is levied for a specific regulatory purpose, which is to ensure the viability of the
country's electric power industry, and is, therefore, an exaction in the exercise of the Before we discuss the issues, the Court shall first deal with an obvious procedural

State's police power. Respondents further contend that said Universal Charge does not lapse.

Petitioners filed before us an original action particularly denominated as a
Complaint assailing the constitutionality of Sec. 34 of the EPIRA imposing the Universal
Charge and Rule 18 of the EPIRA's IRR. No doubt, petitioners have locus standi. They
impugn the constitutionality of Sec. 34 of the EPIRA because they sustained a direct injury
as a result of the imposition of the Universal Charge as reflected in their electric bills.
However, petitioners violated the doctrine of hierarchy of courts when they filed
this Complaint directly with us. Furthermore, the Complaint is bereft of any allegation of
grave abuse of discretion on the part of the ERC or any of the public respondents, in order
for the Court to consider it as a petition for certiorari or prohibition.
Article VIII, Section 5(1) and (2) of the 1987 Constitution [27] categorically provides
that:
SECTION 5. The Supreme Court shall have the following powers:
1. Exercise original jurisdiction over cases affecting ambassadors,
other public ministers and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as
the law or the rules of court may provide, final judgments and
orders of lower courts in:
(a) All cases in which the constitutionality or validity of
any treaty, international or executive
agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or
regulation is in question.
But this Court's jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, and habeas corpus, while
concurrent with that of the regional trial courts and the Court of
Appeals, does not give litigants unrestrained freedom of choice of
forum from which to seek such relief.[28] It has long been established
that this Court will not entertain direct resort to it unless the redress
desired cannot be obtained in the appropriate courts, or where
exceptional and compelling circumstances justify availment of a remedy
within and call for the exercise of our primary jurisdiction. [29] This
circumstance alone warrants the outright dismissal of the present
action.
This procedural infirmity notwithstanding, we opt to resolve the constitutional
issue raised herein. We are aware that if the constitutionality of Sec. 34 of the EPIRA is
not resolved now, the issue will certainly resurface in the near future, resulting in a repeat
of this litigation, and probably involving the same parties. In the public interest and to
avoid unnecessary delay, this Court renders its ruling now.
The instant complaint is bereft of merit.
The First Issue
To resolve the first issue, it is necessary to distinguish the States power of
taxation from the police power.
The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging
in its very nature no limits, so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency that is to pay
it.[30] It is based on the principle that taxes are the lifeblood of the government, and their
prompt and certain availability is an imperious need. [31] Thus, the theory behind the
exercise of the power to tax emanates from necessity; without taxes, government cannot
fulfill its mandate of promoting the general welfare and well-being of the people. [32]
On the other hand, police power is the power of the state to promote public welfare by
restraining and regulating the use of liberty and property. [33] It is the most pervasive, the
least limitable, and the most demanding of the three fundamental powers of the State.
The justification is found in the Latin maxims salus populi est suprema lex (the welfare of
the people is the supreme law) and sic utere tuo ut alienum non laedas (so use your
property as not to injure the property of others). As an inherent attribute of sovereignty
which virtually extends to all public needs, police power grants a wide panoply of
instruments through which the State, as parens patriae, gives effect to a host of its
regulatory powers.[34] We have held that the power to "regulate" means the power to
protect, foster, promote, preserve, and control, with due regard for the interests, first and
foremost, of the public, then of the utility and of its patrons. [35]
The conservative and pivotal distinction between these two 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. [36]
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police
power, particularly its regulatory dimension, is invoked. Such can be deduced from Sec.
34 which enumerates the purposes for which the Universal Charge is imposed [37] and
which can be amply discerned as regulatory in character. The EPIRA resonates such
regulatory purposes, thus:
SECTION 2. Declaration of Policy. It is hereby declared the policy of the
State:
(a) To ensure and accelerate the total electrification of the country;
(b) To ensure the quality, reliability, security and affordability of the
supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a
regime of free and fair competition and full public accountability
to achieve greater operational and economic efficiency and
enhance the competitiveness of Philippine products in the global
market;
(d) To enhance the inflow of private capital and broaden the ownership
base of the power generation, transmission and distribution
sectors;
(e) To ensure fair and non-discriminatory treatment of public and
private sector entities in the process of restructuring the electric
power industry;
(f) To protect the public interest as it is affected by the rates and
services of electric utilities and other providers of electric power;
(g) To assure socially and environmentally compatible energy sources
and infrastructure;
(h) To promote the utilization of indigenous and new and renewable
energy resources in power generation in order to reduce
dependence on imported energy;
(i) To provide for an orderly and transparent privatization of the assets
and liabilities of the National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and
system to ensure consumer protection and enhance the
competitive operation of the electricity market; and
(k) To encourage the efficient use of energy and other modalities of
demand side management.
From the aforementioned purposes, it can be gleaned that the assailed Universal Charge
is not a tax, but an exaction in the exercise of the State's police power. Public welfare is
surely promoted.
 government to secure the physical and economic survival and well-
being of the community, that comprehensive sovereign authority we
Moreover, it is a well-established doctrine that the taxing power may be used as an designate as the police power of the State.[46]
implement of police power.[38] In Valmonte v. Energy Regulatory Board, et al.[39] and
in Gaston v. Republic Planters Bank,[40] this Court held that the Oil Price Stabilization Fund
This feature of the Universal Charge further boosts the position that the same is an
(OPSF) and the Sugar Stabilization Fund (SSF) were exactions made in the exercise of the
exaction imposed primarily in pursuit of the State's police objectives. The STF reasonably
police power. The doctrine was reiterated in Osmea v. Orbos[41] with respect to the
serves and assures the attainment and perpetuity of the purposes for which the Universal
OPSF. Thus, we disagree with petitioners that the instant case is different from the
Charge is imposed, i.e., to ensure the viability of the country's electric power industry.
aforementioned cases. With the Universal Charge, a Special Trust Fund (STF) is also
created under the administration of PSALM. [42] The STF has some notable characteristics
The Second Issue
similar to the OPSF and the SSF, viz.:

1) In the implementation of stranded cost recovery, the ERC shall
conduct a review to determine whether there is under-recovery or
over recovery and adjust (true-up) the level of the stranded cost
recovery charge. In case of an over-recovery, the ERC shall ensure
that any excess amount shall be remitted to the STF. A separate
account shall be created for these amounts which shall be held in
trust for any future claims of distribution utilities for stranded cost
recovery. At the end of the stranded cost recovery period, any
remaining amount in this account shall be used to reduce the
electricity rates to the end-users.[43]
2) With respect to the assailed Universal Charge, if the total amount
collected for the same is greater than the actual availments against
it, the PSALM shall retain the balance within the STF to pay for
periods where a shortfall occurs.[44]
3) Upon expiration of the term of PSALM, the administration of the
STF shall be transferred to the DOF or any of the DOF attached
agencies as designated by the DOF Secretary.[45]
The OSG is in point when it asseverates:
Evidently, the establishment and maintenance of the Special Trust Fund,
under the last paragraph of Section 34, R.A. No. 9136, is well within the
pervasive and non-waivable power and responsibility of the
The principle of separation of powers ordains that each of the three branches of
government has exclusive cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere. A logical corollary to the doctrine of separation of
powers is the principle of non-delegation of powers, as expressed in the Latin
maxim potestas delegata non delegari potest (what has been delegated cannot be
delegated). This is based on the ethical principle that such delegated power constitutes
not only a right but a duty to be performed by the delegate through the instrumentality
of his own judgment and not through the intervening mind of another. [47]
In the face of the increasing complexity of modern life, delegation of legislative power to
various specialized administrative agencies is allowed as an exception to this principle.
[48]
Given the volume and variety of interactions in today's society, it is doubtful if the
legislature can promulgate laws that will deal adequately with and respond promptly to
the minutiae of everyday life. Hence, the need to delegate to administrative bodies - the
principal agencies tasked to execute laws in their specialized fields - the authority to
promulgate rules and regulations to implement a given statute and effectuate its policies.
All that is required for the valid exercise of this power of subordinate legislation is that
the regulation be germane to the objects and purposes of the law and that the regulation
be not in contradiction to, but in conformity with, the standards prescribed by the law.
These requirements are denominated as the completeness test and the sufficient
standard test.
Under the first test, the law must be complete in all its terms and conditions when it
leaves the legislature such that when it reaches the delegate, the only thing he will have
to do is to enforce it. The second test mandates adequate guidelines or limitations in the
law to determine the boundaries of the delegate's authority and prevent the delegation
from running riot.[49]
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34
thereof, is complete in all its essential terms and conditions, and that it contains sufficient
standards.
Although Sec. 34 of the EPIRA merely provides that within one (1) year from the
effectivity thereof, a Universal Charge to be determined, fixed and approved by the ERC,
shall be imposed on all electricity end-users, and therefore, does not state the specific
amount to be paid as Universal Charge, the amount nevertheless is made certain by the
legislative parameters provided in the law itself. For one, Sec. 43(b)(ii) of the EPIRA
provides:
SECTION 43. Functions of the ERC. The ERC shall promote competition,
encourage market development, ensure customer choice and penalize
abuse of market power in the restructured electricity industry. In
appropriate cases, the ERC is authorized to issue cease and desist order
after due notice and hearing. Towards this end, it shall be responsible
for the following key functions in the restructured industry:
xxxx
(b) Within six (6) months from the effectivity of this Act, promulgate
and enforce, in accordance with law, a National Grid Code and a
Distribution Code which shall include, but not limited to the following:
xxxx
(ii) Financial capability standards for the generating companies, the
TRANSCO, distribution utilities and suppliers: Provided, That in the
formulation of the financial capability standards, the nature and
function of the entity shall be considered: Provided, further, That such
standards are set to ensure that the electric power industry participants
meet the minimum financial standards to protect the public interest.
Determine, fix, and approve, after due notice and public hearings the
universal charge, to be imposed on all electricity end-users pursuant to
Section 34 hereof;
Moreover, contrary to the petitioners contention, the ERC does not enjoy a wide latitude
of discretion in the determination of the Universal Charge. Sec. 51(d) and (e) of the
EPIRA[50] clearly provides:
SECTION 51. Powers. The PSALM Corp. shall, in the performance of its
functions and for the attainment of its objective, have the following
powers:
xxxx
(d) To calculate the amount of the stranded debts and stranded
contract costs of NPC which shall form the basis for ERC in the
determination of the universal charge;
(e) To liquidate the NPC stranded contract costs, utilizing the proceeds
from sales and other property contributed to it, including the
proceeds from the universal charge.
 Thus, the law is complete and passes the first test for valid delegation of
legislative power.
As to the second test, this Court had, in the past, accepted as sufficient standards the
following: "interest of law and order;" [51] "adequate and efficient instruction;"[52] "public
interest;" [53]
"justice and equity;" [54]
"public convenience and welfare;" [55]
"simplicity,
economy and efficiency;"[56] "standardization and regulation of medical education;" [57] and
"fair and equitable employment practices." [58] Provisions of the EPIRA such as, among
others, to ensure the total electrification of the country and the quality, reliability,
security and affordability of the supply of electric power [59] and watershed rehabilitation
and management[60] meet the requirements for valid delegation, as they provide the
limitations on the ERCs power to formulate the IRR. These are sufficient standards.
It may be noted that this is not the first time that the ERC's conferred powers were
challenged. In Freedom from Debt Coalition v. Energy Regulatory Commission,[61] the
Court had occasion to say:
In determining the extent of powers possessed by the ERC, the
provisions of the EPIRA must not be read in separate parts. Rather, the
law must be read in its entirety, because a statute is passed as a whole,
and is animated by one general purpose and intent. Its meaning cannot
to be extracted from any single part thereof but from a general
consideration of the statute as a whole. Considering the intent of
Congress in enacting the EPIRA and reading the statute in its entirety, it
is plain to see that the law has expanded the jurisdiction of the
regulatory body, the ERC in this case, to enable the latter to implement
the reforms sought to be accomplished by the EPIRA. When the
legislators decided to broaden the jurisdiction of the ERC, they did not
intend to abolish or reduce the powers already conferred upon ERC's
predecessors. To sustain the view that the ERC possesses only the
powers and functions listed under Section 43 of the EPIRA is to frustrate
the objectives of the law.
In his Concurring and Dissenting Opinion [62] in the same case, then Associate Justice, now
Chief Justice, Reynato S. Puno described the immensity of police power in relation to the
delegation of powers to the ERC and its regulatory functions over electric power as a vital
public utility, to wit:
Over the years, however, the range of police power was no
longer limited to the preservation of public health, safety and morals,
which used to be the primary social interests in earlier times. Police
power now requires the State to "assume an affirmative duty to
eliminate the excesses and injustices that are the concomitants of an
unrestrained industrial economy." Police power is now exerted "to
further the public welfare a concept as vast as the good of society
itself." Hence, "police power is but another name for the governmental
authority to further the welfare of society that is the basic end of all
government." When police power is delegated to administrative bodies
with regulatory functions, its exercise should be given a wide latitude.
Police power takes on an even broader dimension in developing
countries such as ours, where the State must take a more active role in
balancing the many conflicting interests in society. The Questioned
Order was issued by the ERC, acting as an agent of the State in the
exercise of police power. We should have exceptionally good grounds to
curtail its exercise. This approach is more compelling in the field of rate-
regulation of electric power rates. Electric power generation and
distribution is a traditional instrument of economic growth that affects
not only a few but the entire nation. It is an important factor in
encouraging investment and promoting business. The engines of
progress may come to a screeching halt if the delivery of electric power
is impaired. Billions of pesos would be lost as a result of power outages
or unreliable electric power services. The State thru the ERC should be
able to exercise its police power with great flexibility, when the need
arises.
This was reiterated in National Association of Electricity
Consumers for Reforms v. Energy Regulatory Commission[63] where the
Court held that the ERC, as regulator, should have sufficient power to
 respond in real time to changes wrought by multifarious factors
affecting public utilities.
From the foregoing disquisitions, we therefore hold that there is no undue delegation of
legislative power to the ERC.
Petitioners failed to pursue in their Memorandum the contention in the
Thus, the EPIRA provides a framework for the restructuring of the
industry, including the privatization of the assets of the National Power
Corporation (NPC), the transition to a competitive structure, and the
delineation of the roles of various government agencies and the private
entities. The law ordains the division of the industry into four (4)
distinct
sectors, namely: generation, transmission, distribution and supply.
Corollarily, the NPC generating plants have to privatized and its
transmission business spun off and privatized thereafter. [67]

Complaint that the imposition of the Universal Charge on all end-users is oppressive and
confiscatory, and amounts to taxation without representation. Hence, such contention is Finally, every law has in its favor the presumption of constitutionality, and to justify its
deemed waived or abandoned per Resolution [64]
of August 3, 2004. [65]
Moreover, the nullification, there must be a clear and unequivocal breach of the Constitution and not
determination of whether or not a tax is excessive, oppressive or confiscatory is an issue one that is doubtful, speculative, or argumentative. [68] Indubitably, petitioners failed to
which essentially involves questions of fact, and thus, this Court is precluded from overcome this presumption in favor of the EPIRA. We find no clear violation of the
reviewing the same. [66]
Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule
18 of its IRR are unconstitutional and void.
As a penultimate statement, it may be well to recall what this Court said of EPIRA:

One of the landmark pieces of legislation enacted by Congress in recent WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
years is the EPIRA. It established a new policy, legal structure and
regulatory framework for the electric power industry. The new thrust is
to tap private capital for the expansion and improvement of the SO ORDERED.
industry as the large government debt and the highly capital-intensive
character of the industry itself have long been acknowledged as the
critical constraints to the program. To attract private investment, largely
foreign, the jaded structure of the industry had to be addressed. While ANTONIO EDUARDO B. NACHURA
the generation and transmission sectors were centralized and Associate Justice
monopolistic, the distribution side was fragmented with over 130
utilities, mostly small and uneconomic. The pervasive flaws have caused
a low utilization of existing generation capacity; extremely high and
uncompetitive power rates; poor quality of service to consumers;
dismal to forgettable performance of the government power sector;
high system losses; and an inability to develop a clear strategy for
overcoming these shortcomings.
WE CONCUR:

[1]
Sec. 4 (ddd) of the EPIRA provides that the Universal Charge refers to the charge, if any,
imposed for the recovery of the stranded cost and other purposes pursuant to Section 34
hereof.
[2]
Rules and Regulations to Implement Republic Act No. 9136, entitled "Electric Power
Industry Reform Act of 2001, (IRR) approved on February 27, 2002, particularly Rule 4
(rrrr) provides that the "Universal Charge" refers to the charge, if any, imposed for the
recovery of the Stranded Debts, Stranded Contract Costs of NPC, and Stranded Contract
Costs of Eligible Contracts of Distribution Utilities and other purposes pursuant to Section
34 of the EPIRA.
[3]
Particularly denominated as Complaint dated September 15, 2003; rollo, pp. 3-15.
[4]
Sec. 4 [vv] of the EPIRA provides that Stranded Debts of NPC refer to any unpaid
financial obligations of NPC which have not been liquidated by the proceeds from the
sales and privatization of NPC assets.
[5]
Sec. 4 [uu] of the EPIRA also provides that Stranded contract costs of NPC or
distribution utility refer to the excess of the contracted cost of electricity under eligible
contracts over the actual selling price of the contracted energy output of such contracts in
the market. Such contracts shall have been approved by the ERB as of December 31,
2000.
[6]
Rule 4 (ddd) of the IRR provides that Missionary Electrification refers to the provision of
basic electricity service in Unviable Areas with the ultimate aim of bringing the operations
in these areas to viability levels.
[7]
Manila Electric Company, Inc. v. Lualhati, G.R. Nos. 166769 and 166818, December 6,
2006.
[8]
IRR, Rule 4 (bbbb) states that Small Power Utilities Group or SPUG refers to the
functional unit of NPC created to pursue Missionary Electrification function.
[9]
ERC Record for ERC Case No. 2002-165, pp. 1-7.
[10]
PSALM is a government-owned and controlled corporation created under Sec. 49 of
the EPIRA, which shall take ownership of all existing NPC generation assets, liabilities, IPP
contracts, real estate and all other disposable assets. All outstanding obligations of the
NPC arising from loans, issuances of bonds, securities and other instruments of
indebtedness shall be transferred to and assumed by the PSALM.
[11]
ERC Record for ERC Case No. 2002-194, pp. 1-5.
[12]
Supra note 9, at 110-122.
[13]
Id. at 215-224.
[14]
NPC-SPUG's Motion for Reconsideration dated August 13, 2003 also prayed that it be
allowed (1) to have flexibility in the utilization of UC-ME considering its mandate to
implement the MEDP responsive to the needs and constraints of missionary
electrification; (2) to authorize it to re-prioritize its CAPEX and its OPEX to the extent
possible, for CY 2003; and (3) to give it the flexibility to reallocate available UC-ME funds
among the revised priority activities/projects for CY 2003, Id. at 225-236.
[15]
Id. at 237-239.
[16]
Supra note 11, at 110-122.
[17]
Rollo, p. 8.
[18]
Supra note 3.
[19]
Osmea v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA 703; Valmonte v. Energy
Regulatory Board, G.R. Nos. L-79601-03, June 23, 1988, 162 SCRA 521; and Gaston v.
Republic Planters Bank, No. L-77194, March 15, 1988, 158 SCRA 626.
[20]
These funds are the Oil Price Stabilization Fund (OPSF) and Sugar Stabilization Fund
(SSF).
[21]
Petitioners' Memorandum dated October 6, 2004; rollo, pp. 123-138.
[22]
PSALM's Memorandum dated December 8, 2004; id. at 154-167.
[23]
OSG's Memorandum dated January 4, 2005; id. at 168-187.
[24]
SECTION 46. Fines and Penalties. The fines and penalties that shall be imposed by the
ERC for any violation of or non-compliance with this Act or the IRR shall range from a
minimum of Fifty thousand pesos (P50,000.00) to a maximum of Fifty million pesos
(P50,000,000.00).
Any person who is found guilty of any of the prohibited acts pursuant to Section 45
hereof shall suffer the penalty of prision mayor and a fine ranging from Ten thousand
pesos (P10,000.00) to Ten million pesos (P10,000.000.00), or both, at the discretion of the
court.
The members of the Board of Directors of the juridical companies participating in or
covered in the generation companies, the distribution utilities, the TRANSCO or its
concessionaire or supplier who violate the provisions of this Act may be fined by an
amount not exceeding double the amount of damages caused by the offender or by
imprisonment of one (1) year or two (2) years or both at the discretion of the court. This
rule shall apply to the members of the Board who knowingly or by neglect allows the
commission or omission under the law.
If the offender is a government official or employee, he shall, in addition, be dismissed
from the government service with prejudice to reinstatement and with perpetual or
temporary disqualification from holding any elective or appointive office.
If the offender is an alien, he may, in addition to the penalties prescribed, be deported
without further proceedings after service of sentence.
Any case which involves question of fact shall be appealable to the Court of Appeals and
those which involve question of law shall be directly appealable to the Supreme Court.
The administrative sanction that may be imposed by the ERC shall be without prejudice to
the filing of a criminal action, if warranted.
To ensure compliance with this Act, the penalty of prision correccional or a fine ranging
from Five thousand pesos (P5,000.00) to Five million pesos (P5,000,000.00), or both, at
the discretion of the court, shall be imposed on any person, including but not limited to disbursed in an open and transparent manner and shall only be used for the intended
the president, member of the Board, Chief Executive Officer or Chief Operating Officer of purposes specified in Section 3 of this Rule.
the corporation, partnership, or any other entity involved, found guilty of violating or [48]
The recognized exceptions to the general principle are as follows:
refusing to comply with any provision of this Act or its IRR, other than those provided (1) Delegation of tariff powers to the President under Section 28(2) of Article VI of the
herein. Constitution;
Any party to an administrative proceeding may, at any time, make an offer to the ERC, (2) Delegation of emergency powers to the President under Section 23(2) of Article VI of
conditionally or otherwise, for a consented decree, voluntary compliance or desistance the Constitution;
and other settlement of the case. The offer and any or all of the ultimate facts upon (3) Delegation to the people at large;
which the offer is based shall be considered for settlement purposes only and shall not be (4) Delegation to local governments; and
used as evidence against any party for any other purpose and shall not constitute an (5) Delegation to administrative bodies. Abakada Guro Party List v. Ermita, supra note 47,
admission by the party making the offer of any violation of the laws, rules, regulations, at 117 and Santiago v. Comelec, 336 Phil. 848, 897-898 (1997), citing People v. Vera, 65
orders and resolutions of the ERC, nor as a waiver to file any warranted criminal actions. Phil. 56 (1937).
In addition, Congress may, upon recommendation of the DOE and/or ERC, revoke such
franchise or privilege granted to the party who violated the provisions of this Act. April 25, 2017
[25]
PECO's Memorandum dated April 18, 2005; rollo, pp. 205-210.
[37]
The purposes are: G.R. No. 199669
(a) Payment for the stranded debts in excess of the amount assumed by the
National Government and stranded contract costs of NPC and as well as qualified
SOUTHERN LUZON DRUG CORPORATION, Petitioner,
stranded contract costs of distribution utilities resulting from the restructuring of the
vs.
industry;
THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT, THE NATIONAL COUNCIL
(b) Missionary electrification;
FOR THE WELFARE OF DISABLED PERSONS, THE DEPARTMENT OF FINANCE, and THE
(c) The equalization of the taxes and royalties applied to indigenous or
BUREAU OF INTERNAL REVENUE, Respondents
renewable sources of energy vis--vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo per
DECISION
kilowatt-hour (P0.0025/kWh), which shall accrue to an environmental fund to be used
solely for watershed rehabilitation and management. Said fund shall be managed by NPC
under existing arrangements; and REYES, J.:
(e) A charge to account for all forms of cross-subsidies for a period not exceeding
three (3) years.
[42]
Last paragraph, Sec. 34, EPIRA provides: The PSALM Corp., as administrator of the
fund, shall create a Special Trust Fund which shall be disbursed only for the purposes
specified herein in an open and transparent manner. All amount collected for the
universal charge shall be distributed to the respective beneficiaries within a reasonable
period to be provided by the ERC.
IRR of the EPIRA, Rule 18, SECTION 6, also provides:
(a) Pursuant to the last paragraph of Section 34 of the Act, PSALM shall act as the
administrator of the funds generated from the Universal Charge. For this purpose, the
PSALM shall create a STF to be established in the Bureau of Treasury (BTr) or in a
Government Financing Institution (GFI) that is acceptable to the DOF. Separate STFs shall
be established for each of the intended purposes of the Universal Charge. Funds shall be
Before the Court is a Petition for Review on Certiorari1under Rule 45 of the Rules of Court,
assailing the Decision2dated June 17, 2011, and Resolution3 dated November 25, 2011 of
the Court of Appeals (CA) in CA-G.R. SP No. 102486, which dismissed the petition for
prohibition filed by Southern Luzon Drug Corporation (petitioner) against the Department
of1 Social Welfare and Development (DSWD), the National Council for the Welfare of
Disabled Persons (NCWDP) (now National Council on Disability Affairs or NCDA), the
Department of Finance (DOF) and the Bureau of: Internal Revenue (collectively, the
respondents), which sought to prohibit the implementation of Section 4(a) of Republic
Act (R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act of 2003" and
Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled
Persons," particularly the granting of 20% discount on the purchase of medicines by
senior citizens and persons with disability (PWD),: respectively, and treating them as tax
deduction.
The petitioner is a domestic corporation engaged in the business of: drugstore operation
in the Philippines while the respondents are government' agencies, office and bureau
tasked to monitor compliance with R.A. Nos. 9257 and 9442, promulgate implementing
rules and regulations for their effective implementation, as well as prosecute and revoke
licenses of erring1 establishments.
Factual Antecedents
On April 23, 1992, R.A. No. 7432, entitled "An Act to Maximize the Contribution of Senior
Citizens to Nation-Building, Grant Benefits and Special Privileges and For Other
Purposes," was enacted. Under the said law, a senior citizen, who must be at least 60
years old and has an annual income of not more than P60,000.00, 4 may avail of the
privileges provided in Section 4 thereof, one of which is 20% discount on the purchase of
medicines. The said provision states:
Sec. 4. Privileges for the Senior Citizen. - x x x:
a) the grant of twenty percent (20%) discount from all establishments relative to
utilization of transportation services, hotels and similar lodging establishment,
restaurants and recreation centers and purchase of medicine anywhere in the country:
Provided, That private establishments may claim the cost as tax credit[.]
x x x x (Emphasis ours)
To recoup the amount given as discount to qualified senior citizens, covered
establishments can claim an equal amount as tax credit which can be applied against the
income tax due from them.
On February 26, 2004, then President Gloria Macapagal-Arroyo signed R.A. No. 9257,
amending some provisions of R.A. No. 7432. The new law retained the 20% discount on
the purchase of medicines but removed the annual income ceiling thereby qualifying all
senior citizens to the privileges under the law. Further, R.A. No. 9257 modified the tax
treatment of the discount granted to senior citizens, from tax credit to tax deduction from
gross income, computed based on the net cost of goods sold or services rendered. The
pertinent provision, as amended by R.A. No. 9257, reads as follows:
SEC. 4. Privileges for the Senior Citizens. - The senior citizens shall be entitled to the
following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the
utilization of services in hotels and similar lodging establishments, restaurants and
recreation centers, and purchase of medicines in all establishments for the exclusive use
or enjoyment of senior citizens, including funeral and burial services for the death of
senior citizens;
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax
deduction based on the net cost of the goods sold or services rendered: Provided, That
the cost of the discount shall be allowed as deduction from gross income for the same
taxable year that the discount is granted. Provided, further, That the total amount of the
claimed tax deduction net of value-added tax if applicable, shall be included in their gross
sales receipts for tax purposes and shall be subject to proper documentation and to the
provisions of the National Internal Revenue Code, as amended. (Emphasis ours)
On May 28, 2004, the DSWD issued the Implementing Rules and Regulations (IRR) of R.A.
No. 9257. Article 8 of Rule VI of the said IRR provides:
Article 8. Tax Deduction of Establishments. - The establishment may claim the discounts
granted under Rule V, Section 4 - Discounts for Establishments; Section 9, Medical and
Dental Services in Private Facilities and Sections 10 and 11 -Air, Sea and Land
Transportation as tax deduction based on the net cost of the goods sold or services
rendered. Provided, That the cost of the discount shall be allowed as deduction from
gross income for the same taxable year that the discount is granted; Provided, further,
That the total amount of the claimed tax deduction net of value-added tax if applicable,
shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as
amended; Provided, finally, that the implementation of the tax deduction shall be subject
to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and
approved by the Department of Finance (DOF). (Emphasis ours)
The change in the tax treatment of the discount given to senior citizens did not sit well
with some drug store owners and corporations, claiming it affected the profitability of
their business. Thus, on January 13, 2005, I Carlos Superdrug Corporation (Carlos
Superdrug), together with other. corporation and proprietors operating drugstores in the
Philippines, filed a Petition for Prohibition with Prayer for Temporary Restraining Order
(TRO) I and/or Preliminary Injunction before this Court, entitled Carlos
Superdrug I Corporation v. DSWD,5docketed as G.R. No. 166494, assailing the
constitutionality of Section 4(a) of R.A. No. 9257 primarily on the ground that it amounts
to taking of private property without payment of just compensation. In a Decision dated
June 29, 2007, the Court upheld the constitutionality of the assailed provision, holding
that the same is a legitimate exercise of police power. The relevant portions of the
decision read, thus:
The law is a legitimate exercise of police power which, similar to the power of eminent
domain, has general welfare for its object. Police power is not capable of an exact
definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response to conditions and circumstances, thus assuring the greatest benefits.
Accordingly, it has been described as "the most essential, insistent and the least limitable
of powers, extending as it does to all the great public needs." It is "[t]he power vested in
the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with penalties or
without, not repugnant to the constitution, as they shall judge to be for the good and
welfare of the commonwealth, and of the subjects of the same."
For this reason, when the conditions so demand as determined by the legislature,
property rights must bow to the primacy of police power because property rights, though
sheltered by due process, must yield to general welfare.
xxxx
Moreover, the right to property has a social dimension. While Article XIII of the
Constitution provides the precept for the protection of property, various laws and
jurisprudence, particularly on agrarian reform and the regulation of contracts and public
utilities, continuously serve as a reminder that the right to property can be relinquished
upon the command of the State for the promotion of public good. Undeniably, the
success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the
means employed in invoking the active participation of the private sector, in order to
achieve the purpose or objective of the law, is reasonably and directly related. Without
sufficient proof that Section 4(a) of RA. No. 9257 is arbitrary, and that the continued
implementation of the same would be unconscionably detrimental to petitioners, the
Court will refrain from quashing a legislative act.
WHEREFORE, the petition is DISMISSED for lack of merit.6 (Citations omitted)
On August 1, 2007, Carlos Superdrug filed a motion for reconsideration of the foregoing
decision. Subsequently, the Court issued Resolution dated August 21, 2007, denying the
said motion with finality. 7
Meanwhile, on March 24, 1992, R.A. No. 7277 pertaining to the "Magna Carta for
Disabled Persons" was enacted, codifying the rights and privileges of PWDs. Thereafter,
on April 30, 2007, R.A. No. 9442 was enacted, amending R.A. No. 7277. One of the salient
amendments in the law is the insertion of Chapter 8 in Title 2 thereof, which enumerates
the other privileges and incentives of PWDs, including the grant of 20% discount on the
purchase of medicines. Similar to R.A. No. 9257, covered establishments shall claim the
discounts given to PWDs as tax deductions from the gross income, based on the net cost
of goods sold or services rendered. Section 32 ofR.A. No. 9442 reads:
CHAPTER 8. Other Privileges and Incentives
SEC. 32. Persons with disability shall be entitled to the following:
xxxx
(c) At least twenty percent (20%) discount for the purchase of medicines in all drugstores
for the exclusive use or enjoyment of persons with disability;
xxxx
The establishments may claim the discounts granted in subsections (a), (b), (c), (e), (t) and
(g) as taxdeductions based on the net cost of the goods sold or services
rendered: Provided, however, That the cost of the discount shall be allowed as deduction
from gross income for the same taxable year that the discount is granted: Provided,
further, That the total amount of the claimed tax deduction net of value-added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation and to the provisions of the National Internal Revenue
Code (NIRC), as amended. (Emphasis ours)
Pursuant to the foregoing, the IRR of R.A. No. 9442 was promulgated by the DSWD,
Department of Education, DOF, Department of Tourism and the Department of
Transportation and Communications.8Sections 5 .1 and 6.1.d thereof provide:
Sec. 5. Definition of Terms. For purposes of these Rules and Regulations, these terms are
defined as follows:
5.1. Persons with Disability are those individuals defined under Section
4 of RA 7277, "An Act Providing for the Rehabilitation, Self-
Development and Self-Reliance of Persons with Disability as amended
and their integration into the Mainstream of Society and for Other
Purposes." This is defined as a person suffering from restriction or
different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in a manner or within the range
considered normal for human being. Disability shall mean: (1) a physical
or mental impairment that substantially limits one or more
psychological, physiological or anatomical function of an individual or
activities of such individual; (2) a record of such an impairment; or (3)
being regarded as having such an impairment.
xxxx
6.1.d Purchase of Medicine - At least twenty percent (20%) discount on
the purchase of medicine for the exclusive use and enjoyment of
persons with disability. All drug stores, hospital, pharmacies, clinics and
other similar establishments selling medicines are required to provide
at least twenty percent (20%) discount subject to the guidelines issued
by DOH and PHILHEALTH.
On February 26, 2008, the petitioner filed a Petition for Prohibition with Application for
TRO and/or Writ of Preliminary Injunction9 with the CA, seeking to declare as
unconstitutional (a) Section 4(a) of R.A. No. 9257, and (b) Section 32 of R.A. No. 9442 and
Section 5.1 of its IRR, insofar as these provisions only allow tax deduction on the gross
income based on the net cost of goods sold or services rendered as compensation to
private establishments for the 20% discount that they are required to grant to senior
citizens and PWDs. Further, the petitioner prayed that the respondents be permanently
enjoined from implementing the assailed provisions.
Ruling of the CA
On June 17, 2011, the CA dismissed the petition, reiterating the ruling of the Court
in Carlos Superdrug10particularly that Section 4(a) of R.A. No. 9257 was a valid exercise of
police power. Moreover, the CA held that considering that the same question had been
raised by parties similarly situated and was resolved in Carlos Superdrug, the rule of stare
decisis stood as a hindrance to any further attempt to relitigate the same issue. It further
noted that jurisdictional considerations also compel the dismissal of the action. It
particularly emphasized that it has no original or appellate jurisdiction to pass upon the
constitutionality of the assailed laws, 11 the same pertaining to the Regional Trial Court
(RTC). Even assuming that it had concurrent jurisdiction with the RTC, the principle of
hierarchy of courts mandates that the case be commenced and heard by the lower
court. 12 The CA further ruled that the petitioner resorted to the wrong remedy as a
petition for prohibition will not lie to restrain the actions of the respondents for the
simple reason that they do not exercise judicial, quasi-judicial or ministerial duties relative
to the issuance or implementation of the questioned provisions. Also, the petition was
wanting of the allegations of the specific acts committed by the respondents that
demonstrate the exercise of these powers which may be properly challenged in a petition
for prohibition.13
The petitioner filed its Motion for Reconsideration 14 of the Decision dated June 17, 2011
of the CA, but the same was denied in a Resolution 15 dated November 25, 2011.
Unyielding, the petitioner filed the instant petition, raising the following assignment of
errors, to wit:
I
THE CA SERIOUSLY ERRED WHEN IT RULED THAT A PETITION FOR PROHIBITION FILED
WITH THE CA IS AN IMPROPER REMEDY TO ASSAIL THE CONSTITUTIONALITY OF THE 20%,
SALES DISCOUNT FOR SENIOR CITIZENS AND PWDs;
II
THE CA SERIOUSLY ERRED WHEN IT HELD THAT THE SUPREME COURT'S RULING
IN CARLOS SUPERDRUG CONSTITUTES STARE DECISIS;
III
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
20%, SALES DISCOUNT FOR SENIOR CITIZENS AND PWDs IS A VALID EXERCISE OF POLICE
POWER. ON THE CONTRARY, IT IS AN INVALID EXERCISE OF THE POWER OF EMINENT
DOMAIN BECAUSE IT FAILS TO PROVIDE JUST COMPENSATION TO THE PETITIONER AND
OTHER SIMILARLY SITUATED DRUGSTORES;
IV
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
20°/o SALES DISCOUNT FOR SENIOR CITIZENS AND PWDs DOES NOT VIOLATE THE
PETITIONER'S RIGHT TO EQUAL PROTECTION OF THE LAW; and
V
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
DEFINITIONS OF DISABILITIES AND PWDs ARE NOT VAGUE AND DO NOT VIOLATE THE
PETITIONER'S RIGHT TO DUE PROCESS OF LAW.16
Ruling of the Court
Prohibition may be filed to question
the constitutionality of a law
In the assailed decision, the CA noted that the action, although denominated as one for
prohibition, seeks the declaration of the unconstitutionality of Section 4(a) of R.A. No.
9257 and Section 32 of R.A. No.9442. It held that in such a case, the proper remedy is not
a special civil 1 action but a petition for declaratory relief, which falls under the exclusive
original jurisdiction of the RTC, in the first instance, and of the Supreme Court, on
appeal. 17
The Court clarifies.
Generally, the office of prohibition is to prevent the unlawful and oppressive exercise of
authority and is directed against proceedings that are done without or in excess of
jurisdiction, or with grave abuse of discretion, there being no appeal or other plain,
speedy, and adequate remedy in the ordinary course of law. It is the remedy to prevent
inferior courts, corporations, boards, or persons from usurping or exercising a jurisdiction
or power with which they have not been vested by law. 18 This is, however, not the lone
office of an action for prohibition. In Diaz, et al. v. The Secretary of Finance, et
al., 19 prohibition was also recognized as a proper remedy to prohibit or nullify acts of
executive officials that amount to usurpation of legislative authority. 20 And, in a number
of jurisprudence, prohibition was allowed as a proper action to assail the constitutionality
of a law or prohibit its implementation.
In Social Weather Stations, Inc. v. Commission on Elections, 21therein petitioner filed a
petition for prohibition to assail the constitutionality of Section 5.4 of R.A. No. 9006, or
the "Fair Elections Act," which prohibited the publication of surveys within 15 days before
an election for national candidates, and seven days for local candidates. Included in the
petition is a prayer to prohibit the Commission on Elections from enforcing the said
provision. The Court granted the Petition and struck down the assailed provision for being
unconstitutional. 22
In Social Justice Society (SJS) v. Dangerous Drugs Board, et al.,23 therein petitioner assailed
the constitutionality of paragraphs (c ), (d), (f) and (g) of Section 36 of R.A. No. 9165,
otherwise known as the "Comprehensive Dangerous Drugs Act of 2002," on the ground
that they constitute undue delegation of legislative power for granting unbridled
discretion to schools and private employers in determining the manner of drug 'testing of
their employees, and that the law constitutes a violation of the right against
unreasonable searches and seizures. It also sought to enjoin the Dangerous Drugs Board
and the Philippine Drug Enforcement Agency from enforcing the challenged
provision.24The Court partially granted the petition by declaring Section 36(f) and (g) of
R.A. No. 9165 unconstitutional, and permanently enjoined the concerned agencies from
implementing them. 25
In another instance, consolidated petitions for prohibitions 26 questioning the
constitutionality of the Priority Development Assistance Fund were deliberated upon by
this Court which ultimately granted the same.
Clearly, prohibition has been found an appropriate remedy to challenge the
constitutionality of various laws, rules, and regulations.
There is also no question regarding the jurisdiction of the CA to hear and decide a petition
for prohibition. By express provision of the law, particularly Section 9(1) of Batas
Pambansa Bilang 129,27 the CA was granted "original jurisdiction to issue writs
of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary
writs or I processes, whether or not in aid of its appellate jurisdiction." This authority· the
CA enjoys concurrently with RTCs and this Court.
In the same manner, the supposed violation of the principle of the ·. hierarchy of courts
does not pose any hindrance to the full deliberation of the issues at hand. It is well to
remember that "the judicial hierarchy of courts is not an iron-clad rule. It generally
applies to cases involving warring factual allegations. For this reason, litigants are
required to [refer] to the trial courts at the first instance to determine the truth or falsity
of these contending allegations on the basis of the evidence of the parties. Cases which
depend on disputed facts for decision cannot be brought immediately before appellate
courts as they are not triers of facts. Therefore, a strict application of the rule of hierarchy
of courts is not necessary when the cases brought before the appellate courts do not
involve factual but legal questions."28
Moreover, the principle of hierarchy of courts may be set aside for special and important
reasons, such as when dictated by public welfare and ' the advancement of public policy,
or demanded by the broader interest of justice. 29Thus, when based on the good judgment
of the court, the urgency and significance of the issues presented calls for its intervention,
it should not hesitate to exercise its duty to resolve.
The instant petition presents an exception to the principle as it basically raises a legal
question on the constitutionality of the mandatory discount and the breadth of its rightful
beneficiaries. More importantly, the resolution of the issues will redound to the benefit of
the public as it will put to rest the questions on the propriety of the granting of discounts
to senior citizens and PWDs amid the fervent insistence of affected establishments that
the measure transgresses their property rights. The Court, therefore, finds it to the best
interest of justice that the instant petition be resolved.
The instant case is not barred by
stare decisis
The petitioner contends that the CA erred in holding that the ruling in Carlos
Superdrug constitutes as stare decisis or law of the case which bars the relitigation of the
issues that had been resolved therein and had been raised anew in the instant petition. It
argues that there are substantial differences between Carlos Superdrug and the
circumstances in the instant case which take it out from the operation of the doctrine
of stare decisis. It cites that in Carlos Superdrug, the Court denied the petition because
the petitioner therein failed to prove the confiscatory effect of the tax deduction scheme
as no proof of actual loss was submitted. It believes that its submission of financial
statements for the years 2006 and 2007 to prove the confiscatory effect of the law is a
material fact that distinguishes the instant case from that of Carlos Superdrug. 30
The Court agrees that the ruling in Carlos Superdrug does not constitute stare decisis to
the instant case, not because of the petitioner's submission of financial statements which
were wanting in the first case, but because it had the good sense of including questions
that had not been raised or deliberated in the former case of Carlos Superdrug,
i.e., validity of the 20% discount granted to PWDs, the supposed vagueness of the
provisions of R.A. No. 9442 and violation of the equal protection clause.
Nonetheless, the Court finds nothing in the instant case that merits a reversal of the
earlier ruling of the Court in Carlos Superdrug. Contrary to the petitioner's claim, there is
a very slim difference between the issues in Carlos Superdrug and the instant case with
respect to the nature of the senior citizen discount. A perfunctory reading of the
circumstances of the two cases easily discloses marked similarities in the issues and the
arguments raised by the petitioners in both cases that semantics nor careful play of words
can hardly obscure.
In both cases, it is apparent that what the petitioners are ultimately questioning is not the
grant of the senior citizen discount per se, but the manner by which they were allowed to
recoup the said discount. In particular, they are protesting the change in the tax
treatment of the senior citizen discount from tax credit to being merely a deduction from
gross income which they claimed to have significantly reduced their profits.
This question had been settled in Carlos Superdrug, where the Court ruled that the
change in the tax treatment of the discount was a valid exercise of police power, thus:
Theoretically, the treatment of the discount as a deduction reduces the net income of the
private establishments concerned. The discounts given would have entered the coffers
and formed part of the gross sales of the private establishments, were it not for R.A. No.
9257.
xxxx
A tax deduction does not offer full reimbursement of the senior citizen discount. As such,
it would not meet the definition of just compensation.
Having said that, this raises the question of whether the State, in promoting the health
and welfare of a special group of citizens, can impose upon private establishments the
burden of partly subsidizing a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior
citizens to nation-building, and to grant benefits and privileges to them for their
improvement and well-being as the State considers them an integral part of our society.
The priority given to senior citizens finds its basis in the Constitution as set forth in the
law itself. Thus, the Act provides:
SEC. 2. [R.A.] No. 7432 is hereby amended to read as follows:
SEC. 1. Declaration of Policies and Objectives.- Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the
State may design programs of social security for them. In addition to this, Section 10 in
the Declaration of Principles and State Policies provides: "The State shall provide social
justice in all phases of national development." Further, Article XIII, Section 11, provides:
"The State shall adopt an integrated and comprehensive approach to health development
which shall endeavor to make essential goods, health and other social services available
to all the people at affordable cost. There shall be priority for the needs of the
underprivileged sick, elderly, disabled, women and children." Consonant with these
constitutional principles the following are the declared policies of this Act:
xxxx
(f) To recognize the important role of the private sector in the improvement of the
welfare of senior citizens and to actively seek their partnership.
To implement the above policy, the law grants a twenty percent discount to senior
citizens for medical and dental services, and diagnostic and laboratory fees; admission
fees charged by theaters, concert halls, circuses, carnivals, and other similar places of
culture, leisure and amusement; fares for domestic land, air and sea travel; utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers;
and purchases of medicines for the exclusive use or enjoyment of senior citizens. As a
form of reimbursement, the law provides that business establishments extending the
twenty percent discount to senior citizens may claim the discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent
domain, has general welfare for its object. Police power is not capable of an exact
definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response to conditions and circumstances, thus assuring the greatest benefits.
Accordingly, it has been described as "the most essential, insistent and the least limitable
of powers, extending as it does to all the great public needs." It is "[t]he power vested in
the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with penalties or
without, not repugnant to the constitution, as they shall judge to be for the good and
welfare of the commonwealth, and of the subjects of the same."
For this reason, when the conditions so demand as determined by the legislature,
property rights must bow to the primacy of police power because proper rights, though
sheltered by due process, must yield to general welfare. 31 (Citations omitted and
emphasis in the original)
Verily, it is the bounden duty of the State to care for the elderly as they reach the point in
their lives when the vigor of their youth has diminished and resources have become
scarce. Not much because of choice, they become needing of support from the society for
whom they presumably spent their productive days and for whose betterment they'
exhausted their energy, know-how and experience to make our days better to live.
In the same way, providing aid for the disabled persons is an equally important State
responsibility. Thus, the State is obliged to give full support to the improvement of the
total well-being of disabled persons and their integration into the mainstream of
society. 32This entails the creation of opportunities for them and according them
privileges if only to balance the playing field which had been unduly tilted against them
because of their limitations.
The duty to care for the elderly and the disabled lies not only upon the State, but also on
the community and even private entities. As to the State, the duty emanates from its role
as parens patriae which holds it under obligation to provide protection and look after the
welfare of its people especially those who cannot tend to themselves. Parens
patriae means parent of his or her country, and refers to the State in its role as
"sovereign", or the State in its capacity as a provider of protection to those unable to care
for themselves. 33 In fulfilling this duty, the State may resort to the exercise of its inherent
powers: police power, eminent domain and power of taxation.
In Gerochi v. Department of Energy,34the Court passed upon one of the inherent powers
of the state, the police power, where it emphasized, thus:
[P]olice power is the power of the state to promote public welfare by restraining and
regulating the use of liberty and property. It is the most pervasive, the least limitable, and
the most demanding of the three fundamental powers of the State. The justification is
found in the Latin maxim salus populi est suprema lex (the welfare of the people is the
supreme law) and sic utere tuo ut alienum non laedas (so use your property as not to
injure the property of others). As an inherent attribute of sovereignty which virtually
extends to all public needs, police power grants a wide panoply of instruments through
which the State, as parens patriae, gives effect to a host of its regulatory powers. We have
held that the power to "regulate" means the power to protect, foster, promote, preserve,
and control, with due regard for the interests, first and foremost, of the public, then of
the utility and of its patrons. 35 (Citations omitted)
It is in the exercise of its police power that the Congress enacted R.A. Nos. 9257 and
9442, the laws mandating a 20% discount on purchases of medicines made by senior
citizens and PWDs. It is also in further exercise of this power that the legislature opted
that the said discount be claimed as tax deduction, rather than tax credit, by covered
establishments.
The petitioner, however, claims that the change in the tax treatment of the discount is
illegal as it constitutes taking without just compensation. It even submitted financial
statements for the years 2006 and 2007 to support its claim of declining profits when the
change in the policy was implemented.
The Court is not swayed.
To begin with, the issue of just compensation finds no relevance in the instant case as it
had already been made clear in Carlos Superdrug that the power being exercised by the
State in the imposition of senior citizen discount was its police power. Unlike in the
exercise of the power of eminent domain, just compensation is not required in wielding
police power. This is precisely because there is no taking involved, but only an imposition
of burden.
In Manila Memorial Park, Inc., et al. v. Secretary of the DSWD, et al., 36 the Court ruled
that by examining the nature and the effects of R.A. No. 9257, it becomes apparent that
the challenged governmental act was an exercise of police power. It was held, thus:
[W]e now look at the nature and effects of the 20% discount to determine if it constitutes
an exercise of police power or eminent domain.
The 20% discount is intended to improve the welfare of senior citizens who, at their age,
are less likely to be gainfully employed, more prone to illnesses and other disabilities,
and, thus, in need of subsidy in purchasing basic commodities. It may not be amiss to
mention also that the discount serves to honor senior citizens who presumably spent the
productive years of their lives on contributing to the development and progress of the
nation. This distinct cultural Filipino practice of honoring the elderly is an integral part of
this law.
As to its nature and effects, the 20% discount is a regulation affecting the ability of private
establishments to price their products and services relative to a special class of
individuals, senior citizens, for which the Constitution affords preferential concern. In
turn, this affects the amount of profits or income/gross sales that a private establishment
can derive from senior citizens. In other words, the subject regulation affects the pricing,
and, hence, the profitability of a private establishment. However, it does not purport to
appropriate or burden specific properties, used in the operation or conduct of the
business of private establishments, for the use or benefit of the public, or senior citizens
for that matter, but merely regulates the pricing of goods and services relative to, and the
amount of profits or income/gross sales that such private establishments may derive
from, senior citizens.
The subject regulation may be said to be similar to, but with substantial distinctions from,
price control or rate of 'return on investment control laws which are traditionally
regarded as police power measures. x x x.37 (Citations omitted)
In the exercise of police power, "property rights of private individuals are subjected to The Court also entertains no doubt on the legality of the method taken by the legislature
restraints and burdens in order to secure the general comfort, health, and prosperity of to implement the declared policies of the subject laws, that is, to impose discounts on the
the State."38 Even then, the State's claim of police power cannot be arbitrary or medical services and purchases of senior citizens and PWDs and to treat the said
unreasonable. After all, the overriding purpose of the exercise of the power is to promote discounts as tax deduction rather than tax credit. The measure is fair and reasonable and
general welfare, public health and safety, among others. It is a measure, which by sheer no credible proof was presented to prove the claim that it was confiscatory. To be
necessity, the State exercises, even to the point of interfering with personal liberties or considered confiscatory, there must be taking of property without just compensation.
property rights in order to advance common good. To warrant such interference, two
requisites must concur: (a) the interests of the public generally, as distinguished from Illuminating on this point is the discussion of the Court on the concept of taking in City of
those of a particular class, require the interference of the! State; and (b) the means Manila v. Hon. Laguio, Jr.,43viz.:
employed are reasonably necessary to the: attainment of the object sought to be
accomplished and not unduly oppressive upon individuals. In other words, the proper There are two different types of taking that can be identified. A "possessory" taking
exercise of the police power requires the concurrence of a lawful subject and a lawful occurs when the government confiscates or physically occupies property. A "regulatory"
method.39 taking occurs when the government's regulation leaves no reasonable economically
viable use of the property.
The subjects of R.A. Nos. 9257 and 9442, i.e., senior citizens and PWDs, are individuals
whose well-being is a recognized public duty. As a public duty, the responsibility for their xxxx
care devolves upon the concerted efforts of the State, the family and the community. In
Article XIII, Section 1 of the Constitution, the State is mandated to give highest priority to
No formula or rule can be devised to answer the questions of what is too far and when
the enactment of measures that protect and enhance the right of all the people to human
regulation becomes a taking. In Mahon, Justice Holmes recognized that it was "a question
dignity, reduce social, economic, and political inequalities, and remove cultural inequities
of degree and therefore cannot be disposed of by general propositions." On many other
by equitably diffusing wealth and political power1 for the common good. The more
occasions as well, the U.S. Supreme Court has said that the issue of when regulation
apparent manifestation of these social inequities is the unequal distribution or access to
constitutes a taking is a matter of considering the facts in each case. x x x.
healthcare services. To: abet in alleviating this concern, the State is committed to adopt
an integrated! and comprehensive approach to health development which shall endeavor
What is crucial in judicial consideration of regulatory takings is that government
to make essential goods, health and other social services available to all the people at
regulation is a taking if it leaves no reasonable economically viable use of property in a
affordable cost, with priority for the needs of the underprivileged sick, elderly, disabled,
manner that interferes with reasonable expectations for use. A regulation that
women, and children.40
permanently denies all economically beneficial or productive use of land is, from the
owner's point of view, equivalent to a "taking" unless principles of nuisance or property
In the same manner, the family and the community have equally significant duties to
law that existed when the owner acquired the land make the use prohibitable. When the
perform in reducing social inequality. The family as the basic social institution has the
owner of real property has been called upon to sacrifice all economically beneficial uses
foremost duty to care for its elderly members.41 On the other hand, the community,
in the name of the common good, that is, to leave his property economically idle, he has
which include the private sector, is recognized as an active partner of the State in
suffered a taking.
pursuing greater causes. The private sector, being recipients of the privilege to engage
business in our land, utilize our goods as well as the services of our people for proprietary
xxxx
purposes, it is only fitting to expect their support in measures that contribute to common
good. Moreover, their right to own, establish and operate economic enterprises is always
subject to the duty of the State to promote distributive justice and to intervene when the A restriction on use of property may also constitute a "taking" if not reasonably necessary
common good so demands.42 to the effectuation of a substantial public purpose or if it has an unduly harsh impact on
the distinct investment-backed expectations of the owner.44 (Citations omitted)
The petitioner herein attempts to prove its claim that the pertinent provisions of R.A.
Nos. 9257 and 9442 amount to taking by presenting financial statements purportedly
showing financial losses incurred by them due to the adoption of the tax deduction
scheme.
For the petitioner's clarification, the presentation of the financial statement is not of
compelling significance in justifying its claim for just compensation. What is imperative is
for it to establish that there was taking in the constitutional sense or that, in the
imposition of the mandatory discount, the power exercised by the state was eminent
domain.
According to Republic of the Philippines v. Vda. de Castellvi,45five circumstances must be
present in order to qualify "taking" as an exercise of eminent domain. First, the
expropriator must enter a private property. Second, the entrance into private property
must be for more than a momentary period. Third, the entry into the property should be
under warrant or color of legal authority. Fourth, the property must be devoted to a
public use or otherwise informally appropriated or injuriously affected. Fifth, the
utilization of the property for public use must be in such a way as to oust the owner and
deprive him of all beneficial enjoyment of the property. 46
The first requirement speaks of entry into a private property which clearly does not
obtain in this case. There is no private property that is; invaded or appropriated by the
State. As it is, the petitioner precipitately deemed future profits as private property and
then proceeded to argue that the State took it away without full compensation. This
seemed preposterous considering that the subject of what the petitioner supposed as
taking was not even earned profits but merely an expectation of profits, which may not
even occur. For obvious reasons, there cannot be taking of a contingency or of a mere
possibility because it lacks physical existence that is necessary before there could be any
taking. Further, it is impossible to quantify the compensation for the loss of supposed
profits before it is earned.
The supposed taking also lacked the characteristics of permanence 47 and
consistency.1âwphi1 The presence of these characteristics is significant because they can
establish that the effect of the questioned provisions is the same on all establishments
and those losses are indeed its unavoidable consequence. But apparently these
indications are wanting in this case. The reason is that the impact on the establishments
varies depending on their response to the changes brought about by the subject
provisions. To be clear, establishments, are not prevented from adjusting their prices to
accommodate the effects of the granting of the discount and retain their profitability
while being fully compliant to the laws. It follows that losses are not inevitable because
establishments are free to take business measures to accommodate the contingency.
Lacking in permanence and consistency, there can be no taking in the constitutional
sense. There cannot be taking in one establishment and none in another, such that the
former can claim compensation but the other may not. Simply told, there is no taking to
justify compensation; there is only poor business decision to blame.
There is also no ousting of the owner or deprivation of ownership. Establishments are
neither divested of ownership of any of their properties nor is anything forcibly taken
from them. They remain the owner of their goods and their profit or loss still depends on
the performance of their sales.
Apart from the foregoing, covered establishments are also provided with a mechanism to
recoup the amount of discounts they grant the senior citizens and PWDs. It is provided in
Section 4(a) of R.A. No. 9257 and Section 32 of R.A. No. 9442 that establishments may
claim the discounts as "tax deduction based on the net cost of the goods sold or services
rendered." Basically, whatever amount was given as discount, covered establishments
may claim an equal amount as an expense or tax deduction. The trouble is that the
petitioner, in protesting the change in the tax treatment of the discounts, apparently
seeks tax incentive and not merely a return of the amount given as discounts. It premised
its interpretation of financial losses in terms of the effect of the change in the tax
treatment of the discount on its tax liability; hence, the claim that the measure was
confiscatory. However, as mentioned earlier in the discussion, loss of profits is not the
inevitable result of the change in tax treatment of the discounts; it is more appropriately
a consequence of poor business decision.
It bears emphasizing that the law does not place a cap on the amount of mark up that
covered establishments may impose on their items. This rests on the discretion of the
establishment which, of course, is expected to put in the price of the overhead costs,
expectation of profits and other considerations into the selling price of an item. In a
simple illustration, here is Drug A, with acquisition cost of ₱8.00, and selling price of
₱10.00. Then comes a law that imposes 20% on senior citizens and PWDs, which affected
Establishments 1, 2 and 3. Let us suppose that the approximate number of patrons who
purchases Drug A is 100, half of which are senior citizens and PWDs. Before the passage
of the law, all of the establishments are earning the same amount from profit from the
sale of Drug A, viz.:
Before the passage of the law:
Drug A
 Acquisition cost ₱8.00 Selling price ₱11.20
Selling price ₱10.00
Number of patron 100
Number of patrons 100 Senior Citizens/PWDs 50
Sales: Sales
100 x ₱10.00 = ₱1,000.00 100 x ₱10.00 = ₱1,000.00
Profit: ₱200 Deduction: ₱112.00
Profit: ₱208.00
After the passage of the law, the three establishments reacted differently. Establishment 1
was passive and maintained the price of Drug A at ₱8.00 which understandably resulted
in diminution of profits. For its part, Establishment 3 raised the mark up on Drug A to only ₱3.00 just to even out
the effect of the law. This measure left a negligible effect on its profit, but Establishment 3
took it as a social duty: to share in the cause being promoted by the government while
Establishment 1
still maintaining profitability.

Drug A Establishment 3
Acquisition cost ₱8.00
Selling price ;₱10.00 Drug A
Number of patrons 100 Acquisition cost ₱8.00
Senior Citizens/PWD 50 Selling price ₱11.20
Sales Number of patrons 100
Senior Citizens/PWD 50
100 x ₱10.00 = ₱1,000.00
Sales
Deduction: ₱100.00
100 x ₱10.00 = ₱1,000.00
Profit: ₱100.00
Deduction: ₱110.00
On the other hand, Establishment 2, mindful that the new law will affect the profitability Profit: ₱190.00
of the business, made a calculated decision by increasing the mark up of Drug A to ₱3.20,
instead of only ₱2.00. This brought a positive result to the earnings of the company.
The foregoing demonstrates that it is not the law per se which occasioned the losses in
the covered establishments but bad business I judgment. One of the main considerations
Establishment 2
in making business decisions is the law because its effect is widespread and inevitable.
Literally, anything can be a subject of legislation. It is therefore incumbent upon business
Drug A managers to cover this contingency and consider it in making business strategies. As
shown in the illustration, the better responses were exemplified by Establishments 2 and
Acquisition cost ;₱8.00 3 which promptly put in the additional costs brought about by the law into the price
of Drug A. In doing so, they were able to maintain the profitability of the business, even
earning some more, while at the same time being fully compliant with the law. This is not
to mention that the illustration is even too simplistic and not' the most ideal since it dealt
only with a single drug being purchased by both regular patrons and senior citizens and
PWDs. It did not consider the accumulated profits from the other medical and non-
medical products being sold by the establishments which are expected to further curb the
effect of the granting of the discounts in the business.
It is therefore unthinkable how the petitioner could have suffered losses due to the
mandated discounts in R.A. Nos. 9257 and 9442, when a fractional increase in the prices
of items could bring the business standing at a balance even with the introduction of the
subject laws. A level adjustment in the pricing of items is a reasonable business measure
to take in order to adapt to the contingency. This could even make establishments earn
more, as shown in the illustration, since every fractional increase in the price of covered
items translates to a wider cushion to taper off the effect of the granting of discounts and
ultimately results to additional profits gained from the purchases of the same items by
regular patrons who are not entitled to the discount. Clearly, the effect of the subject
laws in the financial standing of covered companies depends largely on how they respond
and forge a balance between profitability and their sense of social responsibility. The
adaptation is entirely up to them and they are not powerless to make adjustments to
accommodate the subject legislations.
Still, the petitioner argues that the law is confiscatory in the sense that the State takes
away a portion of its supposed profits which could have gone into its coffers and utilizes it
for public purpose. The petitioner claims that the action of the State amounts to taking
for which it should be compensated.
To reiterate, the subject provisions only affect the petitioner's right to profit, and not
earned profits. Unfortunately for the petitioner, the right to profit is not a vested right or
an entitlement that has accrued on the person or entity such that its invasion or
deprivation warrants compensation. Vested rights are "fixed, unalterable, or
irrevocable."48 More extensively, they are depicted as follows:
Rights which have so completely and definitely accrued to or settled in a person that they
are not subject to be defeated or cancelled by the act of any other private person, and
which it is right and equitable that the government should recognize and protect, as being
lawful in themselves, and settled according to the then current rules of law, and of which
the individual could not be deprived arbitrarily without injustice, or of which he could not
justly be deprived otherwise than by the established methods of procedure and for the
public welfare. x x x A right is not 'vested' unless it is more than a mere expectation based
on the anticipated continuance of present laws; it must be an established interest in
property, not open to doubt. x x x To be vested in its accurate legal sense, a right must be
complete and consummated, and one of which the person to whom it belongs cannot be
divested without his consent.x x x.49 (Emphasis ours)
Right to profits does not give the petitioner the cause of action to ask for just
compensation, it being only an inchoate right or one that has not fully developed 50 and
therefore cannot be claimed as one's own. An inchoate right is a mere expectation, which
may or may not come into existence. It is contingent as it only comes "into existence on
an event or condition which may not happen or be performed until some other event
may prevent their vesting."51Certainly, the petitioner cannot claim confiscation or taking
of something that has yet to exist. It cannot claim deprivation of profit before the
consummation of a sale and the purchase by a senior citizen or PWD.
Right to profit is not an accrued right; it is not fixed, absolute nor indefeasible. It does not
come into being until the occurrence or realization of a condition precedent. It is a mere
"contingency that might never eventuate into a right. It stands for a mere possibility of
profit but nothing might ever be payable under it."52
The inchoate nature of the right to profit precludes the possibility of compensation
because it lacks the quality or characteristic which is necessary before any act of taking or
expropriation can be effected. Moreover, there is no yardstick fitting to quantify a
contingency or to determine compensation for a mere possibility. Certainly, "taking"
presupposes the existence of a subject that has a quantifiable or determinable value,
characteristics which a mere contingency does not possess.
Anent the question regarding the shift from tax credit to tax deduction, suffice it is to say
that it is within the province of Congress to do so in the exercise of its legislative power. It
has the authority to choose the subject of legislation, outline the effective measures to
achieve its declared policies and even impose penalties in case of non-compliance. It has
the sole discretion to decide which policies to pursue and devise means to achieve them,
and courts often do not interfere in this exercise for as long as it does not transcend
constitutional limitations. "In performing this duty, the legislature has no guide but its
judgment and discretion and the wisdom of experience." 53 In Carter v. Carter Coal
Co.,54legislative discretion has been described as follows:
Legislative congressional discretion begins with the choice of means, and ends with the
adoption of methods and details to carry the delegated powers into effect. x x x [W]hile
the powers are rigidly limited to the enumerations of the Constitution, the means which
may be employed to carry the powers into effect are not restricted, save that they must
be appropriate, plainly adapted to the end, and not prohibited by, but consistent with,
the letter and spirit of the Constitution. x x x. 55 (Emphasis ours)
Corollary, whether to treat the discount as a tax deduction or tax credit is a matter
addressed to the wisdom of the legislature. After all, it is within its prerogative to enact
laws which it deems sufficient to address a specific public concern. And, in the process of
legislation, a bill goes through rigorous tests of validity, necessity and sufficiency in both
houses of Congress before enrolment. It undergoes close scrutiny of the members of
Congress and necessarily had to surpass the arguments hurled against its passage. Thus,
the presumption of validity that goes with every law as a form of deference to the process
it had gone through and also to the legislature's exercise of discretion. Thus, in lchong,
etc., et al. v. Hernandez) etc., and Sarmiento,56the Court emphasized, thus:
It must not be overlooked, in the first place, that the legislature, which is the
constitutional repository of police power and exercises the prerogative of determining the
policy of the State, is by force of circumstances primarily the judge of necessity, adequacy
or reasonableness and wisdom, of any law promulgated in the exercise of the police
power, or of the measures adopted to implement the public policy or to achieve public
interest.x x x.57 (Emphasis ours)
The legislature may also grant rights and impose additional burdens: It may also regulate
industries, in the exercise of police power, for the protection of the public. R.A. Nos. 9257
and 9442 are akin to regulatory laws, the issuance of which is within the ambit of police
power. The minimum wage law, zoning ordinances, price control laws, laws regulating the
operation of motels and hotels, laws limiting the working hours to eight, and the like fall
under this category. 58
Indeed, regulatory laws are within the category of police power measures from which
affected persons or entities cannot claim exclusion or compensation. For instance, private
establishments cannot protest that the imposition of the minimum wage is confiscatory
since it eats up a considerable chunk of its profits or that the mandated remuneration is
not commensurate for the work done. The compulsory nature of the provision for
minimum wages underlies the effort of the State; as R.A. No. 6727 59 expresses it, to
promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its
just share in the fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business and industry reasonable
returns on investment, expansion and growth, and as the Constitution expresses it, to
affirm labor as a primary social economic force. 60
Similarly, the imposition of price control on staple goods in R.A. No. 7581 61 is likewise a
valid exercise of police power and affected establishments cannot argue that the law was
depriving them of supposed gains. The law seeks to ensure the availability of basic
necessities and prime commodities at reasonable prices at all times without denying
legitimate business a fair return on investment. It likewise aims to provide effective and
sufficient protection to consumers against hoarding, profiteering and cartels with respect
to the supply, distribution, marketing and pricing of said goods, especially during periods
of calamity, emergency, widespread illegal price manipulation and other similar
situations.62
More relevantly, in Manila Memorial Park, Inc.,63it was ruled that it is within the bounds
of the police power of the state to impose burden on private entities, even if it may affect
their profits, such as in the imposition of price control measures. There is no
compensable taking but only a recognition of the fact that they are subject to the
regulation of the State and that all personal or private interests must bow down to the
more paramount interest of the State.
This notwithstanding, the regulatory power of the State does not authorize the
destruction of the business. While a business may be regulated, such regulation must be
within the bounds of reason, i.e., the regulatory ordinance must be reasonable, and its
provision cannot be oppressive amounting to an arbitrary interference with the business
or calling subject of regulation. A lawful business or calling may not, under the guise of
regulation, be unreasonably interfered with even by the exercise of police power. 64 After
all, regulation only signifies control or restraint, it does not mean suppression or absolute
prohibition. Thus, in Philippine Communications Satellite Corporation v. Alcuaz, 65the
Court emphasized:
The power to regulate is not the power to destroy useful and harmless enterprises, but is
the power to protect, foster, promote, preserve, and control with due regard for the
interest, first and foremost, of the public, then of the utility and of its patrons. Any
regulation, therefore, which operates as an effective confiscation of private property or
constitutes an arbitrary or unreasonable infringement of property rights is void, because
it is repugnant to the constitutional guaranties of due process and equal protection of the
laws. 66 (Citation omitted)
Here, the petitioner failed to show that R.A. Nos. 9257 and 9442, under the guise of
regulation, allow undue interference in an otherwise legitimate business.1avvphi1 On the
contrary, it was shown that the questioned laws do not meddle in the business or take
anything from it but only regulate its realization of profits.
The subject laws do not violate the
equal protection clause
The petitioner argues that R.A. Nos. 9257 and 9442 are violative of the equal protection
clause in that it failed to distinguish between those who have the capacity to pay and
those who do not, in granting the 20% discount. R.A. No. 9257, in particular, removed the
income qualification in R.A. No. 7432 of'₱60,000.00 per annum before a senior citizen
may be entitled to the 20o/o discount.
The contention lacks merit.
The petitioner's argument is dismissive of the reasonable qualification on which the
subject laws were based. In City of Manila v. Hon. Laguio, Jr., 67 the Court emphasized:
Equal protection requires that all persons or things similarly situated should be treated
alike, both as to rights conferred and responsibilities imposed. Similar subjects, in other
words, should not be treated differently, so as to give undue favor to some and unjustly
discriminate against others. The guarantee means that no person or class of persons shall
be denied the same protection of laws which is enjoyed by other persons or other classes
in like circumstances.68 (Citations omitted)
"The equal protection clause is not infringed by legislation which applies only to those
persons falling within a specified class. If the groupings are characterized by substantial
distinctions that make real differences, one class may be treated and regulated differently
from another."69 For a classification to be valid, (1) it must be based upon substantial
distinctions, (2) it must be germane to the purposes of the law, (3) it must not be limited
to existing conditions only, and (4) it must apply equally to all members of the same
class. 70
To recognize all senior citizens as a group, without distinction as to income, is a valid
classification. The Constitution itself considered the elderly as a class of their own and
deemed it a priority to address their needs. When the Constitution declared its intention
to prioritize the predicament of the underprivileged sick, elderly, disabled, women, and
children,71 it did not make any reservation as to income, race, religion or any other
personal circumstances. It was a blanket privilege afforded the group of citizens in the
enumeration in view of the vulnerability of their class.
R.A. No. 9257 is an implementation of the avowed policy of the Constitution to enact
measures that protect and enhance the right of all the people to human dignity, reduce
social, economic, and political inequalities. 72 Specifically, it caters to the welfare of all
senior citizens. The classification is based on age and therefore qualifies all who have
attained the age of 60. Senior citizens are a class of their own, who are in need and
should be entitled to government support, and the fact that they may still be earning for
their own sustenance should not disqualify them from the privilege.
It is well to consider that our senior citizens have already reached the age when work
opportunities have dwindled concurrently as their physical health.1âwphi1 They are no
longer expected to work, but there are still those who continue to work and contribute
what they can to the country. Thus, to single them out and take them out of the privileges
of the law for continuing to strive and earn income to fend for themselves is inimical to a
welfare state that the Constitution envisions. It is tantamount to penalizing them for their
persistence. It is commending indolence rather than rewarding diligence. It encourages
them to become wards of the State rather than productive partners.
Our senior citizens were the laborers, professionals and overseas contract workers of the
past. While some may be well to do or may have the capacity to support their
sustenance, the discretion to avail of the privileges of the law is up to them. But to
instantly tag them. as undeserving of the privilege would be the height of ingratitude; it is
an outright discrimination.
The same ratiocination may be said of the recognition of PWDs as a class in R.A. No. 9442
and in granting them discounts.1âwphi1 It needs no further explanation that PWDs have
special needs which, for most,' last their entire lifetime. They constitute a class of their
own, equally deserving of government support as our elderlies. While some of them
maybe willing to work and earn income for themselves, their disability deters them from
living their full potential. Thus, the need for assistance from the government to augment
the reduced income or productivity brought about by their physical or intellectual
limitations.
There is also no question that the grant of mandatory discount is germane to the purpose
of R.A. Nos. 9257 and 9442, that is, to adopt an integrated and comprehensive approach
to health development and make essential goods and other social services available to all
the people at affordable cost, with special priority given to the elderlies and the disabled,
among others. The privileges granted by the laws ease their concerns and allow them to
live more comfortably.
The subject laws also address a continuing concern of the government for the welfare of
the senior citizens and PWDs. It is not some random predicament but an actual,
continuing and pressing concern that requires preferential attention. Also, the laws apply
to all senior citizens and PWDs, respectively, without further distinction or reservation.
Without a doubt, all the elements for a valid classification were met.
The definitions of "disabilities" and
"PWDs" are clear and unequivocal
Undeterred, the petitioner claims that R.A. No. 9442 is ambiguous particularly in defining
the terms "disability" and "PWDs," such that it lack comprehensible standards that men
of common intelligence must guess at its meaning. It likewise bewails the futility of the
given safeguards to prevent abuse since government officials who are neither experts nor
practitioners of medicine are given the authority to issue identification cards that
authorizes the granting of the privileges under the law.
The Court disagrees.
Section 4(a) of R.A. No. 7277, the precursor of R.A. No. 94421 defines "disabled persons"
as follows:
(a) Disabled persons are those suffering from restriction or different abilities, as a result of
a mental, physical or sensory impairment, to perform an activity in the manner or within
the range considered normal for a human being[.]
On the other hand, the term "PWDs" is defined in Section 5.1 of the IRR of R.A. No. 9442
as follows:
5.1. PersonswithDisability are those individuals defined under Section 4 of [R.A. No.] 7277
[or] An Act Providing for the Rehabilitation, Self-Development and Self-Reliance of
Persons with Disability as amended and their integration into the Mainstream of Society
and for Other Purposes. This is defined as a person suffering from restriction or different
abilities, as a result of a mental, physical or sensory impairment, to perform an activity in
a manner or within the range considered normal for human being. Disability shall mean
(1) a physical 1or mental impairment that substantially limits one or more psychological,
physiological or anatomical function of an individual or activities of such individual; (2) a
record of such an impairment; or (3) being regarded as having such an impairment.
The foregoing definitions have a striking conformity with the definition of "PWDs" in
Article 1 of the United Nations Convention on the Rights of Persons with Disabilities which
reads:
Persons with disabilities include those who have long-term physical, mental, intellectual
or sensory impairments which in interaction with various barriers may hinder their full
and effective participation in society on an equal basis with others. (Emphasis and italics
ours)
The seemingly broad definition of the terms was not without good reasons. It recognizes
that "disability is an evolving concept"73 and appreciates the "diversity of PWDs."74 The
terms were given comprehensive definitions so as to accommodate the various forms of
disabilities, and not confine it to a particular case as this would effectively exclude other
forms of physical, intellectual or psychological impairments.
Moreover, in Estrada v. Sandiganbayan, 75 it was declared, thus:
A statute is not rendered uncertain and void merely because general terms are used
therein, or because of the employment of terms without defining them; much less do we
have to define every word we use. Besides, there is no positive constitutional or statutory
command requiring the legislature to define each and every word in an enactment.
Congress is not restricted in the form of expression of its will, and its inability to so define
the words employed in a statute will not necessarily result in the vagueness or ambiguity
of the law so long as the legislative will is clear, or at least, can be gathered from the
whole act x x x.76 (Citation omitted)
At any rate, the Court gathers no ambiguity in the provisions of R.A. No. 9442. As regards
the petitioner's claim that the law lacked reasonable standards in determining the
persons entitled to the discount, Section 32 thereof is on point as it identifies who may
avail of the privilege and the manner of its availment. It states:
Sec. 32. x x x
The abovementioned privileges are available only to persons with disability who are
Filipino citizens upon submission of any of the following as proof of his/her entitlement
thereto:
(I) An identification card issued by the city or municipal mayor or the
barangay captain of the place where the persons with disability resides;
(II) The passport of the persons with disability concerned; or
 (III) Transportation discount fare Identification Card (ID) issued by the Certificate of
National Council for the Welfare of Disabled Persons (NCWDP). Disability  Head of the Business

It is, however, the petitioner's contention that the foregoing authorizes government
officials who had no medical background to exercise discretion in issuing identification
Establishment
cards to those claiming to be PWDs. It argues that the provision lends to the
indiscriminate availment of the privileges even by those who are not qualified.
 Head of Non-
Government
The petitioner's apprehension demonstrates a superficial understanding of the law and its
Organization
implementing rules. To be clear, the issuance of identification cards to PWDs does not
depend on the authority of the city or municipal mayor, the DSWD or officials of the
NCDA (formerly NCWDP). It is well to remember that what entitles a person to the Non-Apparent Medical Licensed Private or
privileges of the law is his disability, the fact of which he must prove to qualify. Thus, in Disability Certificate Government Physician
NCDA Administrative Order (A.O.) No. 001, series of 2008, 77 it is required that the person
claiming disability must submit the following requirements before he shall be issued a
PWD Identification Card:
To provide further safeguard, the Department of Health issued A.O. No. 2009-0011,
providing guidelines for the availment of the 20% discount on the purchase of medicines
1. Two "1 x l" recent ID pictures with the names, and signatures or thumb marks at the
by PWDs. In making a purchase, the individual must present the documents enumerated
back of the picture.
in Section VI(4)(b ), to wit:
2. One (1) Valid ID
i. PWD identification card x x x
3. Document to confirm the medical or disability condition 78
ii. Doctor's prescription stating the name of the PWD, age, sex, address, date,
generic name of the medicine, dosage form, dosage strength, quantity, signature
To confirm his disability, the person must obtain a medical certificate or assessment, as
over printed name of physician, physician's address, contact number of physician
the case maybe, issued by a licensed private or government physician, licensed teacher or
or dentist, professional license number, professional tax receipt number and
head of a business establishment attesting to his impairment. The issuing entity depends
narcotic license number, if applicable. To safeguard the health of PWDs and to
on whether the disability is apparent or non-apparent. NCDAA.O. No. 001 further
prevent abuse of [R.A. No.] 9257, a doctor's prescription is required in the
provides:79
purchase of over-the-counter medicines. x x x.

DISABILITY DOCUMENT ISSUING ENTITY iii. Purchase booklet issued by the local social/health office to PWDs for free
containing the following basic information:
Apparent Medical Licensed Private or
Disability Certificate Government Physician
a) PWD ID number

School Licensed Teacher duly b) Booklet control number

Assessment signed by the School
Principal c) Name of PWD
 d) Sex government agencies, must actively participate in monitoring compliance with the law so
that only the intended beneficiaries of the law can avail of the privileges.
e) Address
Indubitably, the law is clear and unequivocal, and the petitioner claim of vagueness to
f) Date of Birth cast uncertainty in the validity of the law does not stand.

g) Picture
h) Signature of PWD
i) Information of medicine purchased:
i.1 Name of medicine
i.2 Quantity
i.3 Attending Physician
i.4 License Number
i.5 Servicing drug store name
i.6 Name of dispensing pharmacist
j) Authorization letter of the PWD x x x in case the medicine is
bought by the representative or caregiver of the PWD.
The PWD identification card also has a validity period of only three years which facilitate
in the monitoring of those who may need continued support and who have been relieved
of their disability, and therefore may be taken out of the coverage of the law.
At any rate, the law has penal provisions which give concerned establishments the option
to file a case against those abusing the privilege Section 46(b) of R.A. No. 9442 provides
that "[a]ny person who abuses the privileges granted herein shall be punished with
imprisonment of not less than six months or a fine of not less than Five Thousand pesos
(₱5,000.00), but not more than Fifty Thousand pesos (₱50,000.00), or both, at the
discretion of the court." Thus, concerned establishments, together with the proper
WHEREFORE, in view of the foregoing disquisition, Section 4(a) of Republic Act No. 9257
and Section 32 of Republic Act No. 9442 are hereby declared CONSTITUTIONAL.
G.R. No. 81958 June 30, 1988
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,
vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D.
ACHACOSO, as Administrator of the Philippine Overseas Employment
Administration, respondents.
Gutierrez & Alo Law Offices for petitioner.
SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm
"engaged principally in the recruitment of Filipino workers, male and female, for overseas
placement," 1 challenges the Constitutional validity of Department Order No. 1, Series of
1988, of the Department of Labor and Employment, in the character of "GUIDELINES
GOVERNING THE TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO DOMESTIC
AND HOUSEHOLD WORKERS," in this petition for certiorari and prohibition. Specifically,
the measure is assailed for "discrimination against males or females;" 2 that it "does not
apply to all Filipino workers but only to domestic helpers and females with similar
skills;" 3 and that it is violative of the right to travel. It is held likewise to be an invalid
exercise of the lawmaking power, police power being legislative, and not executive, in
character.
In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the
Constitution, providing for worker participation "in policy and decision-making processes
affecting their rights and benefits as may be provided by law." 4 Department Order No. 1,
it is contended, was passed in the absence of prior consultations. It is claimed, finally, to
be in violation of the Charter's non-impairment clause, in addition to the "great and
irreparable injury" that PASEI members face should the Order be further enforced.
On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor
and Administrator of the Philippine Overseas Employment Administration, filed a
Comment informing the Court that on March 8, 1988, the respondent Labor Secretary
lifted the deployment ban in the states of Iraq, Jordan, Qatar, Canada, Hongkong, United
States, Italy, Norway, Austria, and Switzerland. * In submitting the validity of the
challenged "guidelines," the Solicitor General invokes the police power of the Philippine
State.
It is admitted that Department Order No. 1 is in the nature of a police power measure.
The only question is whether or not it is valid under the Constitution.
The concept of police power is well-established in this jurisdiction. It has been defined as
the "state authority to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare." 5 As defined, it consists of (1) an
imposition of restraint upon liberty or property, (2) in order to foster the common good. It
is not capable of an exact definition but has been, purposely, veiled in general terms to
underscore its all-comprehensive embrace.
"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the
future where it could be done, provides enough room for an efficient and flexible
response to conditions and circumstances thus assuring the greatest benefits." 6
It finds no specific Constitutional grant for the plain reason that it does not owe its origin
to the Charter. Along with the taxing power and eminent domain, it is inborn in the very
fact of statehood and sovereignty. It is a fundamental attribute of government that has
enabled it to perform the most vital functions of governance. Marshall, to whom the
expression has been credited, 7 refers to it succinctly as the plenary power of the State "to
govern its citizens." 8
"The police power of the State ... is a power coextensive with self- protection, and it is not
inaptly termed the "law of overwhelming necessity." It may be said to be that inherent
and plenary power in the State which enables it to prohibit all things hurtful to the
comfort, safety, and welfare of society." 9
It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is
"rooted in the conception that men in organizing the state and imposing upon its
government limitations to safeguard constitutional rights did not intend thereby to
enable an individual citizen or a group of citizens to obstruct unreasonably the enactment
of such salutary measures calculated to ensure communal peace, safety, good order, and
welfare." 10 Significantly, the Bill of Rights itself does not purport to be an absolute
guaranty of individual rights and liberties "Even liberty itself, the greatest of all rights, is
not unrestricted license to act according to one's will." 11 It is subject to the far more
overriding demands and requirements of the greater number.
Notwithstanding its extensive sweep, police power is not without its own limitations. For
all its awesome consequences, it may not be exercised arbitrarily or unreasonably.
Otherwise, and in that event, it defeats the purpose for which it is exercised, that is, to
advance the public good. Thus, when the power is used to further private interests at the
expense of the citizenry, there is a clear misuse of the power. 12
In the light of the foregoing, the petition must be dismissed.
As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of clear and
convincing evidence to the contrary, the presumption logically stands.
The petitioner has shown no satisfactory reason why the contested measure should be
nullified. There is no question that Department Order No. 1 applies only to "female
contract workers," 14 but it does not thereby make an undue discrimination between the
sexes. It is well-settled that "equality before the law" under the Constitution 15does not
import a perfect Identity of rights among all men and women. It admits of classifications,
provided that (1) such classifications rest on substantial distinctions; (2) they are germane
to the purposes of the law; (3) they are not confined to existing conditions; and (4) they
apply equally to all members of the same class. 16
The Court is satisfied that the classification made-the preference for female workers —
rests on substantial distinctions.
As a matter of judicial notice, the Court is well aware of the unhappy plight that has
befallen our female labor force abroad, especially domestic servants, amid exploitative
working conditions marked by, in not a few cases, physical and personal abuse. The sordid
tales of maltreatment suffered by migrant Filipina workers, even rape and various forms
of torture, confirmed by testimonies of returning workers, are compelling motives for
urgent Government action. As precisely the caretaker of Constitutional rights, the Court is
called upon to protect victims of exploitation. In fulfilling that duty, the Court sustains the
Government's efforts.
The same, however, cannot be said of our male workers. In the first place, there is no
evidence that, except perhaps for isolated instances, our men abroad have been afflicted
with an Identical predicament. The petitioner has proffered no argument that the
Government should act similarly with respect to male workers. The Court, of course, is
not impressing some male chauvinistic notion that men are superior to women. What the
Court is saying is that it was largely a matter of evidence (that women domestic workers
are being ill-treated abroad in massive instances) and not upon some fanciful or arbitrary
yardstick that the Government acted in this case. It is evidence capable indeed of
unquestionable demonstration and evidence this Court accepts. The Court cannot,
however, say the same thing as far as men are concerned. There is simply no evidence to
justify such an inference. Suffice it to state, then, that insofar as classifications are
concerned, this Court is content that distinctions are borne by the evidence.
Discrimination in this case is justified.
As we have furthermore indicated, executive determinations are generally final on the
Court. Under a republican regime, it is the executive branch that enforces policy. For their
part, the courts decide, in the proper cases, whether that policy, or the manner by which
it is implemented, agrees with the Constitution or the laws, but it is not for them to
question its wisdom. As a co-equal body, the judiciary has great respect for
determinations of the Chief Executive or his subalterns, especially when the legislature
itself has specifically given them enough room on how the law should be effectively
enforced. In the case at bar, there is no gainsaying the fact, and the Court will deal with
this at greater length shortly, that Department Order No. 1 implements the rule-making
powers granted by the Labor Code. But what should be noted is the fact that in spite of
such a fiction of finality, the Court is on its own persuaded that prevailing conditions
indeed call for a deployment ban.
There is likewise no doubt that such a classification is germane to the purpose behind the
measure. Unquestionably, it is the avowed objective of Department Order No. 1 to
"enhance the protection for Filipino female overseas workers" 17 this Court has no quarrel
that in the midst of the terrible mistreatment Filipina workers have suffered abroad, a ban
on deployment will be for their own good and welfare.
The Order does not narrowly apply to existing conditions. Rather, it is intended to apply
indefinitely so long as those conditions exist. This is clear from the Order itself ("Pending
review of the administrative and legal measures, in the Philippines and in the host
countries . . ."18), meaning to say that should the authorities arrive at a means impressed
with a greater degree of permanency, the ban shall be lifted. As a stop-gap measure, it is
possessed of a necessary malleability, depending on the circumstances of each case.
Accordingly, it provides:
9. LIFTING OF SUSPENSION. — The Secretary of Labor and Employment
(DOLE) may, upon recommendation of the Philippine Overseas
Employment Administration (POEA), lift the suspension in countries
where there are:
1. Bilateral agreements or understanding with the Philippines, and/or,
2. Existing mechanisms providing for sufficient safeguards to ensure the
welfare and protection of Filipino workers. 19
The Court finds, finally, the impugned guidelines to be applicable to all female domestic
overseas workers. That it does not apply to "all Filipina workers" 20 is not an argument for
unconstitutionality. Had the ban been given universal applicability, then it would have
been unreasonable and arbitrary. For obvious reasons, not all of them are similarly
circumstanced. What the Constitution prohibits is the singling out of a select person or
group of persons within an existing class, to the prejudice of such a person or group or
resulting in an unfair advantage to another person or group of persons. To apply the ban,
say exclusively to workers deployed by A, but not to those recruited by B, would obviously
clash with the equal protection clause of the Charter. It would be a classic case of what
Chase refers to as a law that "takes property from A and gives it to B." 21 It would be an
unlawful invasion of property rights and freedom of contract and needless to state, an
invalid act. 22 (Fernando says: "Where the classification is based on such distinctions that
make a real difference as infancy, sex, and stage of civilization of minority groups, the
better rule, it would seem, is to recognize its validity only if the young, the women, and
the cultural minorities are singled out for favorable treatment. There would be an
element of unreasonableness if on the contrary their status that calls for the law
ministering to their needs is made the basis of discriminatory legislation against them. If
such be the case, it would be difficult to refute the assertion of denial of equal
protection." 23 In the case at bar, the assailed Order clearly accords protection to certain
women workers, and not the contrary.)
It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas
deployment. From scattered provisions of the Order, it is evident that such a total ban has
hot been contemplated. We quote:
5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and
workers of similar skills defined herein to the following [sic] are
authorized under these guidelines and are exempted from the
suspension.
 5.1 Hirings by immediate members of the family of
Heads of State and Government;
5.2 Hirings by Minister, Deputy Minister and the other
senior government officials; and
5.3 Hirings by senior officials of the diplomatic corps
and duly accredited international organizations.
5.4 Hirings by employers in countries with whom the
Philippines have [sic] bilateral labor agreements or
understanding.
xxx xxx xxx
7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR
SKILLS--Vacationing domestic helpers and/or workers of similar skills
shall be allowed to process with the POEA and leave for worksite only if
they are returning to the same employer to finish an existing or partially
served employment contract. Those workers returning to worksite to
serve a new employer shall be covered by the suspension and the
provision of these guidelines.
xxx xxx xxx
9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment
(DOLE) may, upon recommendation of the Philippine Overseas
Employment Administration (POEA), lift the suspension in countries
where there are:
1. Bilateral agreements or understanding with the
Philippines, and/or,
2. Existing mechanisms providing for sufficient
safeguards to ensure the welfare and protection of
Filipino workers. 24
xxx xxx xxx
The consequence the deployment ban has on the right to travel does not impair the right.
The right to travel is subject, among other things, to the requirements of "public safety,"
"as may be provided by law." 25 Department Order No. 1 is a valid implementation of the
Labor Code, in particular, its basic policy to "afford protection to labor," 26 pursuant to the
respondent Department of Labor's rule-making authority vested in it by the Labor
Code. 27 The petitioner assumes that it is unreasonable simply because of its impact on
the right to travel, but as we have stated, the right itself is not absolute. The disputed
Order is a valid qualification thereto.
Neither is there merit in the contention that Department Order No. 1 constitutes an
invalid exercise of legislative power. It is true that police power is the domain of the
legislature, but it does not mean that such an authority may not be lawfully delegated. As
we have mentioned, the Labor Code itself vests the Department of Labor and
Employment with rulemaking powers in the enforcement whereof. 28
The petitioners's reliance on the Constitutional guaranty of worker participation "in policy
and decision-making processes affecting their rights and benefits" 29 is not well-taken. The
right granted by this provision, again, must submit to the demands and necessities of the
State's power of regulation.
The Constitution declares that:
Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality
of employment opportunities for all. 30
"Protection to labor" does not signify the promotion of employment alone. What
concerns the Constitution more paramountly is that such an employment be above all,
decent, just, and humane. It is bad enough that the country has to send its sons and
daughters to strange lands because it cannot satisfy their employment needs at home.
Under these circumstances, the Government is duty-bound to insure that our toiling
expatriates have adequate protection, personally and economically, while away from
home. In this case, the Government has evidence, an evidence the petitioner cannot
seriously dispute, of the lack or inadequacy of such protection, and as part of its duty, it
has precisely ordered an indefinite ban on deployment.
The Court finds furthermore that the Government has not indiscriminately made use of
its authority. It is not contested that it has in fact removed the prohibition with respect to
certain countries as manifested by the Solicitor General.
The non-impairment clause of the Constitution, invoked by the petitioner, must yield to
the loftier purposes targetted by the Government. 31 Freedom of contract and enterprise,
like all other freedoms, is not free from restrictions, more so in this jurisdiction,
where laissez faire has never been fully accepted as a controlling economic way of life.
This Court understands the grave implications the questioned Order has on the business
of recruitment. The concern of the Government, however, is not necessarily to maintain
profits of business firms. In the ordinary sequence of events, it is profits that suffer as a
result of Government regulation. The interest of the State is to provide a decent living to
its citizens. The Government has convinced the Court in this case that this is its intent. We
do not find the impugned Order to be tainted with a grave abuse of discretion to warrant
the extraordinary relief prayed for.
WHEREFORE, the petition is DISMISSED. No costs.
12 It is generally presumed, notwithstanding the plenary character of
the lawmaking power, that the legislature must act for public purposes.
In Pascual v. Secretary of Public Works [110 Phil. 331 (1960)], the Court
nullified an act of Congress appropriating funds for a private purpose.
The prohibition was not embodied in the Constitution then in force,
however, it was presumed that Congress could not do it.
June 7, 2017
G.R. No. 195003
CITY OF BATANGAS, represented by Hon. Severina Vilma Abaya, 1 in her capacity as City
Mayor of Batangas, Petitioner
vs.
PHILIPPINE SHELL PETROLEUM CORPORATION and SHELL PHILIPPINES EXPLORATION
B.V., Respondents
DECISION
CAGUIOA, J.:
The policy of ensuring the autonomy of local governments was not intended to create
an imperium in imperio and install intra-sovereign political subdivisions independent of
the sovereign state.2 As agents of the state, local governments should· bear in mind that
the police power devolved to them by law must be, at all times, exercised in a manner
consistent with the will of their principal.
The Case
This is a petition for review on certiorari3 (Petition) filed under Rule 45 of the Rules of
Court against the Decision4dated May 25, 2010 (Assailed Decision) and Resolution 5 dated
December 30, 2010 (Assailed Resolution) in CA-G.R. CV No. 90373 rendered by the Tenth
Division of the Court of Appeals (CA). The Assailed Decision and Resolution stem from an
appeal from the Decision6 dated June 29, 2007 rendered by the Regional Trial Court of
Batangas City (RTC), Branch 84 in SP. Civil Case Nos. 7924-7925, declaring as invalid
Ordinance No. 3, series of 2001,7 (Assailed Ordinance), enacted by the Sangguniang
Panlungsod (Sangguniang Panlungsod) of the City of Batangas (Batangas City).8
The Facts
Batangas City is a local government unit created by virtue of its charter, Republic Act No.
5495 (RA 5495). Under RA 5495, Batangas City constitutes a political body corporate, and
is endowed with powers which pertain to a municipal corporation. 9 The Sangguniang
Panlungsod is the legislative body of Batangas City.
Philippine Shell Petroleum Corporation (PSPC) is a duly organized Philippine corporation
engaged in the business of manufacturing, refining and distribution of petroleum
products. 10 PSPC owns and operates a refinery situated in Tabangao, Batangas City
(Tabangao Refinery). 11
Shell Philippines Exploration, B.V. (SPEX) is a foreign corporation licensed to do business in
the Philippines. 12 In furtherance of the mandate of Presidential Decree No. 87 (PD 87) to
promote the discovery and production of indigenous petroleum, the Department of
Energy (DOE) executed Service Contract No. 38 (SC 38) with SPEX under which SPEX was
tasked to explore and develop possible petroleum sources in North Western
Palawan. 13SPEX's exploration led to the discovery of an abundant source of natural gas in
the Malampaya field off the shores of Palawan, which thereafter gave rise to the
Malampaya Project. The Malampaya Project required the construction of a 504-kilometer
offshore pipeline for the transport of natural gas from Malampaya field to Batangas, for
treatment in PSPC's Tabangao Refinery. 14
On May 28, 2001, the Sangguniang Panlungsod enacted the Assailed Ordinance which
requires heavy industries operating along the portions of Batangas Bay within the
territorial jurisdiction of Batangas City to construct desalination plants to facilitate the use
of seawater as coolant for their industrial facilities. 15 The pertinent portions of the
Assailed Ordinance state:
SECTION 3. - MANDATORY REQUIREMENT FOR THE APPROVAL OF HEAVY INDUSTRIES
ALONG THE BATANGAS CITY PORTION OF BATANGAS BAY AND OTHER AREAS. - In addition
to the requirements provided by laws and ordinances, the City Government shall not
grant permit or clearance or its approval for any project or program involving the
construction or establishment of heavy industries along the Batangas City portion of the
Batangas Bay and other areas delineated as Heavy Industrial Zone without the required
DESALINATION PLANT for use of sea water instead of underground fresh water for cooling
system and industrial purposes.
SECTION 4. - GRACE PERIOD PROVIDED FOR HEAVY INDUSTRIES. - All heavy industries
already established or approved by the City Government prior to the enactment of this
Ordinance, including those to be established, are granted a period of five (5) years,
counted from the date of approval of this Ordinance, to install [a] desalination plant.
SECTION 5. - AUTHORITY TO GRANT EXEMPTION FROM THE CONSTRUCTION OF
DESALINATION PLANT. - The City Mayor with the concurrence of the Sangguniang
Panlungsod may grant exemption for a given period to an industry from installation or
construction of DESALINATION PLANT on the basis of the following conditions:
5.1. The exemption will not adversely affect the environment, public health, public safety
and the welfare of the people, more particularly, the local aquifers, as shown by a
comprehensive ground water assessment or comprehensive hydrological study conducted
by the industry and presented by the industry applying for exemption.
5.2. The industry or proposed project will support economic-based activities and provide
livelihood, employment, vital community services and facilities while at the same time
posing no adverse effect on the community.
5.3. A public hearing is conducted.
5.4. Such other reasonable conditions which the City Mayor may require with the
concurrence of the Sangguniang Panlungsod.
x x xx
SECTION 7. PENAL CLAUSE. -Any person who shall authorize the start of the construction,
development or operation of any project considered as heavy industry without the
approval of the government authorities herein mentioned shall suffer an imprisonment of
not less than six (6) months nor more than one (1) year and a fine of ₱5,000.00.
If the violator is a juridical person or association, the penalty shall be imposed upon the
owner, President, project manager and/or persons directly in charge of the construction,
development and operation of the project.
SECTION 8. POWER OF THE CITY MAYOR TO ISSUE A CEASE AND DESIST ORDER. - The City
Mayor, upon knowledge of the violation of this ordinance shall issue a cease and desist
order for the stoppage of the construction, development or operation of the project or
industry and shall exercise all powers necessary to give effect to the said order.
SECTION 9. ADMINISTRATIVE FINE. - An administrative fine/penalty of ₱5,000.00 per day
of violation of this ordinance shall be imposed upon the owner, President, project
manager, and/or persons directly in charge of the construction, development and
operation of the project or industry. 16
The Assailed Ordinance was approved by the city mayor on June 7, 2001.
Heavy industries subject of the Assailed Ordinance had until May 28, 2006 to comply with
its provisions. 17 Among the facilities affected by the Assailed Ordinance is PSPC's
Tabangao Refinery.
Proceedings before the RTC
On May 23, 2006, PSPC filed against Batangas City and the Sangguniang Panlungsod a
Petition for Declaration of Nullity (PSPC Petition) before the RTC praying that the Assailed
Ordinance be declared null and void. The PSPC Petition was raffled to Branch 84, and
docketed as SP Civil Case No. 7924.18 Thereafter, SPEX filed a petition-in-intervention
(Intervention) praying for the same relief. 19
JG Summit Petrochemical Corporation (JG Summit) and First Gas Power Corporation (First
Gas) filed similar petitions docketed as SP Civil Case Nos. 7925 (JG Summit Petition) and
7926 (First Gas Petition), respectively.20These petitions were likewise raffled to Branch 84,
and consolidated with the PSPC Petition for joint trial.21
For its part, PSPC averred that the Assailed Ordinance constitutes an invalid exercise of
police power as it failed to meet the substantive requirements for validity.22 Particularly,
PSPC argued that the Assailed Ordinance contravenes the Water Code of the Philippines
(Water Code), and encroaches upon the power of the National Water Resources Board
(NWRB) to regulate and control the Philippines' water resources. 23 In addition, Batangas
City and the Sangguniang Panlungsod failed to sufficiently show the factual or technical
basis for its enactment. 24 In this connection, PSPC
alleged that the Assailed Ordinance unduly singles out heavy industries, and holds them
solely accountable for the loss of water and destruction of aquifers without basis,
resulting in the deprivation of their property rights without due process of law. 25
On the procedural aspect, PSPC contended that the Assailed Ordinance was not posted or
published in a newspaper of general circulation in the province, nor were public hearings
or consultations involving concerned parties conducted thereon. 26 Further, there are no
records showing that the Assailed Ordinance, as approved by the Sangguniang
Panlungsod, was forwarded to the Sangguniang Panlalawigan of the Province of
Batangas after it was approved by the city mayor, as required by Section 56 of the Local
Government Code (LGC).27
SPEX essentially adopted the allegations of PSPC and prayed for the same relief, asserting
that it possesses material and direct interest in the subject matter of the PSPC Petition. 28
In response, Batangas City and the Sangguniang Panlungsod maintained that they have
the power to enact the Assailed Ordinance pursuant to the general welfare clause under
the LGC.29 According to them, the rationale of the Assailed Ordinance is to stop PSPC and
other industries similarly situated from relying "too much" on ground water as coolants
for their machineries, and alternatively promote the use of seawater for such purpose,
considering that fresh ground water is a "perishable commodity." 30 Further, Batangas City
and the Sangguniang Panlungsod countered that the "regulation or prohibition" on the
use of ground water is merely incidental to the main purpose of the Assailed Ordinance,
which is to compel heavy industries such as PSPC to construct desalination plants. Hence,
provisions having regulatory and prohibitive effect may be taken out of the Assailed
Ordinance without entirely impairing its validity. 31
Further, Batangas City and the Sangguniang Panlungsod took exception to PSPC's
allegations and asserted that the Assailed Ordinance had been published in Dyaryo
Veritas, a newspaper of general circulation in the area. Moreover, Batangas City and
the Sangguniang Panlungsod claimed that a joint public hearing on the Assailed
Ordinance had in fact been conducted by the Sangguniang Panlungsod and Sangguniang
Panlalawigan, where PSPC was duly represented. 32 In addition, Batangas City and
the Sangguniang Panlungsod argued that the requirement of referral of ordinances to
the Sangguniang Panlalawigan applies only to tax and other revenue measures. 33
Finally, Batangas City and the Sangguniang Panlungsod averred that since PSPC and SPEX,
along with other concerned heavy industries, essentially question the former' s authority
to regulate and prohibit the use of fresh ground water, they should have first referred
their grievances to NWRB by filing a complaint for adjudication on the threatened
revocation of their existing water permits. 34
On June 21, 2007, the RTC resolved the First Gas Petition by issuing a Decision declaring
the Assailed Ordinance null and void. 35
Subsequently, on June 29, 2007 the RTC rendered a Decision, 36 this time resolving the
PSPC and JG Summit petitions. The dispositive portion of said Decision reads:
It is evident that from foregoing factual milieu and parameters, the questioned ordinance
is INVALID, as it is hereby declared INVALID, in its entirety for want of necessity and for
not conducting prior public hearing, and for violating the due process clause of the
Constitution with respect to its (sic) Sec. 8, City Ordinance No. 3, [s]. 2001. No
pronouncement as to costs.
SO ORDERED.37
The RTC gave credence to the testimony of PSPC's witness Engineer Joeffrey Caranto
(Engineer Caranto) who conducted a hydrogeology study on the Tabangao-Malitam
watershed from which PSPC sources fresh ground water. 38 The RTC summarized the
findings of said study in this wise:
1. A water balance x x x calculation of the Tabangao-Malitam groundwater system shows
that the natural recharge (replenishment) rate far exceeds the current demand for water
in the area. Hence, there is no threat of depletion of the groundwater resource[s] in the
Tabangao-Malitam [w]atershed that purportedly may result from PSPC's deep well
pumping.
2. Water levels in the PSPC wells have not lowered significantly over the last three (3)
decades, indicating that there is no substantial diminution of the supply of groundwater.
3. Among the four PSPC wells, only one [1] well shows very slightly elevated levels of
chloride at 300 milligrams per liter which however is very low compared to seawater
(which measures 20,000 milligrams of chloride per liter). The chloride levels in the other
nearby PSPC wells are all within drinking water standards and have not increased in the
last four (4) decades of usage. This indicates that salt water intrusion is not occurring in
the PSPC wells.39 (Emphasis supplied)
The RTC also noted that the Sangguniang Panlungsod failed to consult the NWRB before
enacting the Assailed Ordinance, thereby encroaching upon its authority. 40
Anent Section 8, the RTC concluded that the power granted to the city mayor to cause the
issuance of cease and desist orders against the use of ground water without prior notice
and hearing constitutes a violation of the due process clause. 41
Proceedings before the CA
Batangas City and the Sangguniang Panlungsod filed separate notices of appeal from the
decisions resolving the PSPC, JG Summit and First Gas petitions. 42
The appeals against JG Summit and First Gas were raffled to the Fourth Division (CA
Fourth Division) and were docketed as CA-G.R. CV Nos. 90324 (JG Summit Appeal) and
90365 (First Gas Appeal), respectively. Meanwhile, the appeal filed against PSPC and SPEX
was raffled to the Tenth Division (CA Tenth Division), and docketed as CA-G.R. CV No.
90373 (PSPC Appeal).
In the PSPC Appeal, Batangas City and the Sangguniang Panlungsod, as appellants,
averred that the R TC failed to consider the testimonies of barangay captains Joel Caaway
and Calixto Villena of Barangays Tabangao Aplaya and Pinamucan, respectively, who
testified that some wells in their areas had dried up, while others had begun to produce
salt water.43 These testimonies, according to Batangas City and the Sangguniang
Panlungsod, serve as sufficient factual bases for the enactment of the Assailed Ordinance,
as "there could be no higher degree of evidence than the actual experience of the
inhabitants in the area."44
On May 28, 2009, the CA Fourth Division issued a Joint Decision 45 resolving the JG Summit
and First Gas appeals. The Joint Decision affirmed the RTC's decisions in SP Civil Case Nos.
7924-7925 (involving JG Summit and PSPC) and 7926 (involving First Gas). 46
On October 15, 2009, the CA Tenth Division directed Batangas City and the Sangguniang
Panlungsod on one hand, and PSPC and SPEX on the other, to file their respective
memoranda on the filing of separate appeals, and the implications of the Joint Decision of
the CA Fourth Division on the resolution of the PSPC Appeal. 47
In their Joint Memorandum, 48 PSPC and SPEX averred that the Joint Decision in the JG
Summit and First Gas appeals bars a contrary decision in the PSPC Appeal, pursuant to the
principle of judicial stability.49 PSPC and SPEX further contended that the filing of multiple
appeals involving the same issues and parties was tantamount to forum shopping. 50
In their defense, Batangas City and the Sangguniang Panlungsod claimed that the filing of
separate appeals was made necessary by the fact that the separate decisions of the RTC
in SP Civil Case Nos. 7924-7925 and 7926 were issued more than fifteen (15) days apart. 51
On the basis of the submissions of the parties, the CA Tenth Division issued the Assailed
Decision dismissing the appeal filed against PSPC and SPEX for lack of merit. The relevant
portions of the Assailed Decision read:
City Ordinance No. 3, S.2001 contravenes Presidential Decree No. 1067, better known
as "The Water Code of the Philippines" as it is an encroachment into the authority of the
[NWRB]. The use of water resources is under the regulatory power of the national
government. This is explicit from the provisions of the Water Code which states that -
"The utilization, explo[i]tation, development, conservation and protection of water
resources shall be subject to the control and regulation of the government through the
[NWRB]".
Although respondents-appellants insist that the city ordinance is not an absolute
prohibition but merely a regulation on the use of fresh groundwater for cooling systems
and industrial purposes the argument cannot justify the attempt to usurp the NWRB' s
power to regulate and control water resources. Moreover, not only does the city
ordinance prohibit or regulate the use of fresh groundwater in disregard of previously
granted water permits from the NWRB but also directs the installation of desalination
plants for purposes of utilizing sea water, without the requisite water permit from the
NWRB.
x x x The police power of the Sangguniang Panglungsod is subordinate to the
constitutional limitations that its exercise must be reasonable and for the public good.
Without the concurrence of these two requisites, the ordinance will not muster the test
of a valid police measure and should be struck down. The trial court aptly examined the
city ordinance against the requirement of reasonable necessity and correctly concluded
that the subject ordinance failed to prove that it was reasonably necessary to prohibit
heavy industries from using ground water and requiring them instead to construct
desalination plants. There must be a reasonable relation between the purposes of the
police measure and the means employed for its accomplishment. Arbitrary invasion of
personal rights and those pertaining to private property will not be allowed even under
the guise of protecting public interest. It has not been sufficiently demonstrated that
there exists no other means less intrusive of private rights that would equally be effective
for the accomplishment of the same purpose.
With the foregoing premises considered, there is no more necessity to address the other
errors raised in the instant appeal.
WHEREFORE, the appeal is DISMISSED. The Decision dated 29 June 2007 rendered by the
Regional Trial Court of Batangas City, Branch 84, in SP Civil Case No. 7924, declaring
invalid City Ordinance No. 3, S.2001 is hereby AFFIRMED.
SO ORDERED. 52 (Emphasis supplied)
Batangas City and the Sangguniang Panlungsod filed a Motion for Reconsideration53 (MR)
dated June 21, 2010, which the CA Tenth Division subsequently denied through the
Assailed Resolution. The CA Tenth Division found that the MR merely reiterated the
arguments relied upon in the appeal, which were already passed upon in the Assailed
Decision. 54
Batangas City and the Sangguniang Panlungsod received a copy of the Assailed
Resolution on January 13, 2011.
On January 25, 2011, Batangas City filed the present Petition. 55 Notably, the Petition does
not name the Sangguniang Panlungsod as party,56 and only the signature of then city
mayor Severina Vilma Abaya appears on the Verification and Certification of Non-Forum
Shopping attached thereto.57
PSPC and SPEX filed a Motion for Additional Time 58 dated April 1, 2011, praying for a
period of ten (10) days therefrom to file their comment.
Thereafter, PSPC and SPEX filed a Second Motion for Additional Time 59 dated April 11,
2011, praying for an additional period of seven (7) days to file said comment. Finally, PSPC
and SPEX filed their Joint Comment on and/or Opposition to the Petition for Review
on Certiorarz- 60 (Joint Comment/Opposition) dated April 25, 2011 on even date.
Batangas City failed to timely file its reply to the Joint Comment/Opposition, prompting
them to file a Manifestation and Motion for Extension of Time to File a Reply
(Manifestation and Motion) dated December 12, 2011.61 The Manifestation and Motion
prayed that it be granted twenty (20) days therefrom to file its reply. 62 Accordingly,
Batangas City filed its Reply dated December 21, 2011 on even date. 63
The Issue
The sole issue for this Court's determination is whether the CA erred in affirming the RTC
Decision which declared the Assailed Ordinance invalid.
The Court's Ruling
Batangas City contends that it has the legal authority to enact ordinances in the exercise
of its police power for the purpose of promoting the general welfare of its
inhabitants. 64 Thus, it asserts that it has the power to regulate PSPC's and SPEX's right to
use ground water, as continued use would be injurious to public interest. 65
Further, Batangas City insists that there is factual basis to justify the enactment of the
Assailed Ordinance. 66 As testified to by barangay captains Joel Caaway and Calixto Villena,
a gradual change in the quality and quantity of ground water had taken place due to the
increase in the number of industrial plants along Batangas Bay. 67According to Batangas
City, these testimonies should be given more weight, since they are based on "actual facts
and experience."68
These assertions lack merit.
The amendment of the Petition should be allowed in the interest of justice.
At the outset, the Court notes that Batangas City erroneously referred to the 'Joint
Decision issued by the CA Fourth Division in the JG Summit and First Gas appeals as the
subject of this Petition, instead of the Decision issued by the CA Tenth Division resolving
the PSPC Appeal. Batangas City sought to correct this error in its Reply, thus:
1. After diligent and careful review [of] the Petition for Review submitted by the
undersigned, it was found out that there was an error which was inadvertently committed
in the first paragraph of the fifth (5th) page of the Petition;
2. The first paragraph on page 5 of the Petition for Review on Certiorari x x x;
xxxx
Should be amended to appear as:
"On June 13, 2007, herein Petitioner City Government of Batangas received the decision
of the Regional Trial Court (RTC), Branch 84 of Batangas City ruling in favor of
Respondents, [PSPC] and Intervenor [SPEX] x x x. Petitioner filed its Notice of Appeal x x x
on 26 July 2007. The case was elevated to the Court of Appeals and the Tenth Division
rendered the 25 May 2010 favoring [PSPC] and SPEx x x x. The City Government of
Batangas filed a Motion for Reconsideration x x x. The motion was denied by the Tenth
Division of the Court of Appeals in its resolution dated 30 December 2010 x x x. Hence,
now this Petition."69 (Emphasis omitted)
Considering the nature of the issues involved in the present Petition, and the lack of any
evidence showing that Batangas City's error resulted from anything more than
inadvertence, the Court resolves to permit the amendment of the Petition in the interest
of substantial justice.
The Assailed Ordinance is void for being ultra vires, for being contrary to existing law, and
for lack of evidence showing the existence of factual basis for its enactment.
The requisites for a valid ordinance are well established. Time and again, the Court has
ruled that in order for an ordinance to be valid, it must not only be within the corporate
powers of the concerned LGU to enact, but must also be passed in accordance with the
procedure prescribed by law. Moreover, substantively, the ordinance (i) must not
contravene the Constitution or any statute; (ii) must not be unfair or oppressive; (iii) must
not be partial or discriminatory; (iv) must not prohibit, but may regulate trade; (v) must
be general and consistent with public policy; and (vi) must not be unreasonable. 70
Batangas City claims that the enactment of the Assailed Ordinance constitutes a valid
exercise of its police power. This claim is erroneous.
Police power is the power to prescribe regulations to promote the health, morals, peace,
education, good order, safety, and general welfare of the people. 71 As an inherent
attribute of sovereignty, police power primarily rests with the State. In furtherance of the
State's policy to foster genuine and meaningful local autonomy, the national legislature
delegated the exercise of police power to local government units (LGUs) as agents of the
State.72 Such delegation can be found in Section 1673 of the LGC, which embodies the
general welfare clause. 74
Since LGUs exercise delegated police power as agents of the State, it is incumbent upon
them to act in conformity to the will of their principal, the State. 75 Necessarily, therefore,
ordinances enacted pursuant to the general welfare clause may not subvert the State's
will by contradicting national statutes. Thus, in Batangas CATV, Inc. v. Court of
Appeals, 76 the Court struck down an ordinance enacted by Batangas City which granted
the Sangguniang Panlungsod the power to fix subscriber rates charged by CATV providers
operating within the former's territory, as this directly violated a general law which grants
such power exclusively to the National Telecommunications Commission. In so ruling, the
Court stressed that municipalities are precluded from regulating conduct already covered
by a statute involving the same subject matter, hence:
In De la Cruz vs. Paraz, we laid the general rule "that ordinances passed by virtue of the
implied power found in the general welfare clause must be reasonable, consonant with
the general powers and purposes of the corporation, and not inconsistent with the laws
or policy of the State."
xxxx
In this regard, it is appropriate to stress that where the state legislature has made
provision for the regulation of conduct, it has manifested its intention that the subject
matter shall be fully covered by the statute, and that a municipality, under its general
powers, cannot regulate the same conduct.1avvphi1 In Keller vs. State, it was held
that: "Where there is no express power in the charter of a municipality authorizing it to
adopt ordinances regulating certain matters which are specifically covered by a general
statute, a municipal ordinance, insofar as it attempts to regulate the subject which is
completely covered by a general statute of the legislature, may be rendered invalid. x x x
Where the subject is of statewide concern, and the legislature has appropriated the field
and declared the rule, its declaration is binding throughout the State." A reason advanced
for this view is that such ordinances are in excess of the powers granted to the municipal
corporation.
Since E.O. No. 205, a general law, mandates that the regulation of CATV operations shall
be exercised by the NTC, an LGU cannot enact an ordinance or approve a resolution in
violation of the said law.
It is a fundamental principle that municipal ordinances are inferior in status and
subordinate to the laws of the state. An ordinance in conflict with a state law of general
character and statewide application is universally held to be invalid. The principle is
frequently expressed in the declaration that municipal authorities, under a general grant
of power, cannot adopt ordinances which infringe the spirit of a state law or repugnant to
the general policy of the state. In every power to pass ordinances given to a municipality,
there is an implied restriction that the ordinances shall be consistent with the general
law.x x x77 (Emphasis and underscoring supplied)
In this Petition, the Court is called upon to determine whether the control and regulation
of the use of water may be made subject of a city ordinance under the regime of the
Water Code - a national statute governing the same subject matter.
The Water Code governs the ownership, appropriation, utilization, exploitation,
development, conservation and protection of water resources. 78 Under Article 3 thereof,
water resources are placed under the control and regulation of the government through
the National Water Resources Council, now the NWRB. 79 In turn, the privilege to
appropriate and use water is one which is exclusively granted and regulated by the State
through water permits issued by the NWRB. 80 Once granted, these water permits
continue to be valid save only for reasons spelled out under the Water Code itself. 81
Conversely, the power to modify, suspend, cancel or revoke water permits already issued
also rests with NWRB.82
On the other hand, the avowed purpose of the Assailed Ordinance, as stated in its
whereas clauses, is the protection of local aquifers for the benefit of the inhabitants of
Batangas City.83 Accordingly, the Assailed Ordinance mandates all heavy industries
operating along Batangas Bay to use seawater in the operation of their respective
facilities, and install desalination plants for this purpose. Failure to comply with this
mandatory requirement would have the effect of precluding continuous operation, and
exposing noncompliant parties to penal and administrative sanctions. 84
There is no doubt, therefore, that the Assailed Ordinance effectively contravenes the
provisions of the Water Code as it arrogates unto Batangas City the power to control and
regulate the use of ground water which, by virtue of the provisions of the Water Code,
pertains solely to the NWRB. By enacting the Assailed Ordinance, Batangas City acted in
excess of the powers granted to it as an LGU, rendering the Assailed Ordinance ultra
vzres.
Being ultra vires, the Assailed Ordinance, in its entirety, is null and void. Thus, it becomes
unnecessary to still determine if it complies with the other substantive requirements for a
valid ordinance - i.e., that the ordinance is fair and reasonable.
In any case, it bears emphasizing that the measure of the substantive validity of an
ordinance is the underlying factual basis for which it was enacted. Hence, without factual
basis, an ordinance will necessarily fail the substantive test for validity.
Batangas City's failure to prove the existence of factual basis to justify the enactment of
the Assailed Ordinance had already been passed upon by the lower courts.1âwphi1 The
Court quotes, with approval, the Joint Decision of the CA Fourth Division:
To prohibit an act or to compel something to be done, there must be a shown reason for
the same. The purpose must also be cogent to the means adopted by the law to attain it.
In this case, as seen in the "whereas clause," the purpose of the ordinance is to protect
the environment and prevent ecological imbalance, especially the drying up of the
aquifers of Batangas City. In effect, the drying up of aquifers is being blamed on the
establishments and industries such as petitioners-appellees here. It would have been
acceptable had there been a specific study or findings that the local government
conducted (sic) and not just its reliance on the complaints of some constituents who
merely made its conclusion that the drying up of wells or its salination was due to the
"heavy industries"' use of groundwater.
In addition, if appellants were convinced that those industries adversely affect the
environment and specifically the water resource in Batangas City, there would be no
exemptions, as provided in Section 5 of the Ordinance, as it would negate the purpose of
the Jaw.
It thus becomes apparent that the ordinance was come up with in an arbitrary manner, if
not based purely on emotive or flawed premises. There was no scientific standard or any
acceptable standard at all that the ordinance was based on. x x x 85
While the Joint Decision resolves the JG Summit and First Gas appeals, these cases,
pertain to the same appeal filed by Batangas City and the Sangguniang Panlungsod from
the Decision of the RTC nullifying the Assailed Ordinance. As aptly put by the CA in the
present case:
The factual antecedents and legal issues in the present CA-G.R. CV No. 90373 are identical
to those of CA-G.R. CV Nos. 90324 and 90365. The assignment of errors in the present
appeal are but a restatement of the errors raised in the two consolidated appeals cases,
which errors have already been exhaustively passed upon by the Court's Fourth Division
in its Joint Decision dated May 28, 2009, weighing pieces of evidence that are now the
very same pieces of evidence presented for consideration in this appeal. x x x 86 (Emphasis
supplied)
This Court, not being a trier of facts, accords the highest degree of respect to the findings
of fact of the trial court, especially where, as here, they have been affirmed by the CA;
accordingly, these findings will not be disturbed. To be sure, such findings are binding and
conclusive upon this Court, 87 and it is not the Court's function in a petition for review
on certiorari to examine, evaluate or weigh anew the probative value of the evidence
presented before the trial court. 88 While there are recognized exceptions to this rule, the
Court finds that none is present in this case.
Consequently, since it has been established that Batangas City did not have factual basis
to justify the purpose of the Assailed Ordinance, Batangas City cannot invoke the
presumption of validity. As held in Ermita-Ma/ate Hotel and Motel Operators Association,
Inc. v. City Mayor of Manila, 89 which Batangas City itself cites in its Petition, the
presumption of validity ascribed to an ordinance prevails only in the absence of some
factual foundation of record sufficient to overthrow the assailed issuance. 90 In this case,
the presumption of validity ascribed to the Assailed Ordinance had been overturned by
documentary and testimonial evidence showing that no substantial diminution in the
supply of ground water in the TabangaoMalitam watershed had occurred in the last three
(3) decades, and that no threat of depletion of ground water resources in said watershed
existed.91
Final Note
While the Assailed Ordinance has been struck down as invalid, the pronouncements
hereunder should not be misconstrued by heavy industries to be carte blanche to abuse
their respective water rights at the expense of the health and safety of the inhabitants of
Batangas City, the environment within which these inhabitants live, and the resources
upon which these inhabitants rely. The Court recognizes fresh ground water as an
invaluable natural resource, and deems it necessary to emphasize that Batangas City is
not precluded from exercising its right to protect its inhabitants from injurious effects
which may result from the misuse of natural water resources within its territorial
jurisdiction, should these effects later arise, provided that such exercise is done within the
framework of applicable national law, particularly, the Water Code.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED. The
Decision dated May 25, 2010 and Resolution dated December 30, 2010 of the Court of
Appeals in CA-G.R. CV No. 90373 are AFFIRMED.
SO ORDERED.
G.R. No. 198860 July 23, 2012
ABRAHAM RIMANDO, Petitioner,
vs.
NAGUILIAN EMISSION TESTING CENTER, INC., represented by its President, ROSEMARIE
LLARENAS and HON. COURT OF APPEALS, Respondents.
RESOLUTION
REYES, J.:
Before us is a petition for review on certiorari1 under Rule 45 of the Rules of Court seeking
to annul and set aside Decision2 dated March 30, 2011 of the Court of Appeals (CA) in CA-
G.R. SP NO. 112152.
The Facts
The present controversy stemmed from a petition for mandamus and damages filed
before Branch 67 of the Regional Trial Court (RTC) of Bauang, La Union, by Naguilian
Emission Testing Center, Inc., represented by its President, Rosemarie Llarenas
(respondent) against Abraham P. Rimando (petitioner), who, at the time material to the
case, was the sitting mayor of the Municipality of Naguilian, La Union.
The petition prayed for the issuance of a writ of mandamus to compel the petitioner to
issue a business permit in favor of the respondent.
In support of its plea, the respondent claimed that its business is being conducted on a
parcel of land which formerly belonged to the national government but later on certified
by the Department of Environment and Natural Resources (DENR) as an alienable and
disposable land of the public domain. The respondent had operated its business of
emission testing on the land from 2005 to 2007. On January 18, 2008, the respondent
filed an application for the renewal of its business permit and paid the corresponding fees
therefor.
The petitioner, however, refused to issue a business permit unless and until the
respondent executes a contract of lease with the Municipality of Naguilian. The
respondent was amenable to signing such contract subject to some proposed revisions,
which, however, were not acceptable to the petitioner. The parties did not reach a
common ground hence, the petition for mandamus.
The Ruling of the RTC
On May 26, 2009, the RTC denied the petition3 for lack of merit based on the
ratiocinations that: (a) the Municipality of Naguilian is the declared owner of the subject
parcel of land by virtue of Tax Declaration No. 002-01197; (b) under Section 6A.01 of the
Revenue Code of the Municipality of Naguilian, the municipality has the right to require
the petitioner to sign a contract of lease because its business operation is being
conducted on a real property owned by the municipality; and (c) a mayor’s duty to issue
business permits is discretionary in nature which may not be enforced by a mandamus
writ. The decretal portion of the decision reads:
WHEREFORE, premises considered, the petition is DENIED for lack of merit.
SO ORDERED.4
The Ruling of the CA
Unwaivering, the respondent appealed to the CA. In its Decision 5 dated March 30, 2011,
the CA held that the appeal was dismissible on the ground of mootness considering that
the period for which the business period was being sought had already lapsed. As such,
any ruling on the matter would bring no practical relief. Nonetheless, the CA proceeded to
resolve the issues involved in the appeal for academic purposes.
The CA disagreed with the RTC and found that the factual milieu of the case justifies the
issuance of a writ of mandamus. The CA reasoned that the tax declaration in the name of
the municipality was insufficient basis to require the execution of a contract of lease as a
condition sine qua non for the renewal of a business permit. The CA further observed that
Sangguniang Bayan Resolution No. 2007-81, upon which the municipality anchored its
imposition of rental fees, was void because it failed to comply with the requirements of
the Local Government Code and its Implementing Rules and Regulations.
The CA held that the petitioner may not be held liable for damages since his action or
inaction, for that matter, was done in the performance of official duties that are legally
protected by the presumption of good faith. The CA likewise stressed that the civil action
filed against the petitioner had already become moot and academic upon the expiration
of his term as the mayor of Naguilian, La Union.
Despite its incessant declarations on the mootness of the case, the CA disposed of the
appeal in this wise:
WHEREFORE, the Decision dated 26 May 2009 of the Regional Trial Court, First Judicial
Region, Bauang, La Union, Branch 67, in Special Civil Action Case No. 72-BG, is hereby
REVERSED and SET ASIDE.
SO ORDERED.6
The petitioner moved for reconsideration7 questioning the pronouncement of the CA that
Sangguniang Bayan Resolution No. 2007-81 was void and arguing that a petition for
mandamus is not the proper vehicle to determine the issue on the ownership of the
subject land. The motion was denied in the CA Resolution 8 dated September 30, 2011.
The petitioner is now before this Court reiterating the arguments raised in his motion for
reconsideration.
Our Ruling
We agree with the CA that the petition for mandamus has already become moot and
academic owing to the expiration of the period intended to be covered by the business
permit.
An issue or a case becomes moot and academic when it ceases to present a justiciable
controversy so that a determination thereof would be without practical use and value 9 or
in the nature of things, cannot be enforced.10 In such cases, there is no actual substantial
relief to which the applicant would be entitled to and which would be negated by the
dismissal of the petition.11 As a rule, courts decline jurisdiction over such case, or dismiss
it on ground of mootness.12
The objective of the petition for mandamus to compel the petitioner to grant a business
permit in favor of respondent corporation for the period 2008 to 2009 has already been
superseded by the passage of time and the expiration of the petitioner’s term as mayor.
Verily then, the issue as to whether or not the petitioner, in his capacity as mayor, may be
compelled by a writ of mandamus to release the respondent’s business permit ceased to
present a justiciable controversy such that any ruling thereon would serve no practical
value. Should the writ be issued, the petitioner can no longer abide thereby; also, the
effectivity date of the business permit no longer subsists.
While the CA is not precluded from proceeding to resolve the otherwise moot appeal of
the respondent, we find that the decretal portion of its decision was erroneously
couched.
The CA’s conclusions on the issue of ownership over the subject land and the invalidity of
Sangguniang Bayan Resolution No. 2007-81, aside from being unsubstantiated by
convincing evidence, can no longer be practically utilized in favor of the petitioner. Thus,
the overriding and decisive factor in the final disposition of the appeal was its mootness
and the CA should have dismissed the same along with the petition for mandamus that
spawned it.
More importantly, a mayor cannot be compelled by mandamus to issue a business permit
since the exercise of the same is a delegated police power hence, discretionary in nature.
This was the pronouncement of this Court in Roble Arrastre, Inc. v. Hon. Villaflor 13 where a
determination was made on the nature of the power of a mayor to grant business permits
under the Local Government Code,14 viz:
Central to the resolution of the case at bar is a reading of Section 444(b)(3)(iv) of the
Local Government Code of 1991, which provides, thus:
SEC. 444. The Chief Executive: Powers, Duties, Functions and Compensation.
(b) For efficient, effective and economical governance the purpose of which is
the general welfare of the municipality and its inhabitants pursuant to Section 16
of this Code, the municipal mayor shall:
xxxx
3) Initiate and maximize the generation of resources and revenues, and apply the
same to the implementation of development plans, program objectives and
priorities as provided for under Section 18 of this Code, particularly those
resources and revenues programmed for agro-industrial development and
country-wide growth and progress, and relative thereto, shall:
xxxx
(iv) Issue licenses and permits and suspend or revoke the same for any violation
of the conditions upon which said licenses or permits had been issued, pursuant
to law or ordinance.
As Section 444(b)(3)(iv) so states, the power of the municipal mayor to issue licenses is
pursuant to Section 16 of the Local Government Code of 1991, which declares:
SEC. 16. General Welfare. – Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the
preservation and enrichment of culture, promote health and safety, enhance the right of
the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment among
their residents, maintain peace and order, and preserve the comfort and convenience of
their inhabitants.
Section 16, known as the general welfare clause, encapsulates the delegated police power
to local governments.1âwphi1Local government units exercise police power through their
respective legislative bodies. Evidently, the Local Government Code of 1991 is
unequivocal that the municipal mayor has the power to issue licenses and permits and
suspend or revoke the same for any violation of the conditions upon which said licenses
or permits had been issued, pursuant to law or ordinance. x x x
xxxx
Section 444(b)(3)(iv) of the Local Government Code of 1991, whereby the power of the
respondent mayor to issue license and permits is circumscribed, is a manifestation of the
delegated police power of a municipal corporation. Necessarily, the exercise thereof
cannot be deemed ministerial. As to the question of whether the power is validly
exercised, the matter is within the province of a writ of certiorari, but certainly, not of
mandamus.15 (Citations omitted)
Indeed, as correctly ruled by the RTC, the petition for mandamus filed by the respondent
is incompetent to compel the exercise of a mayor’s discretionary duty to issue business
permits.
WHEREFORE, premises considered, the Decision dated March 30, 2011 of the Court of
Appeals in CA-G.R. SP No. 112152 is hereby SET ASIDE. The Decision dated May 26, 2009
of the Regional Trial Court of Bauang, La Union is REINSTATED.
SO ORDERED.
BIENVENIDO L. REYES
14
Although the case involved the issuance of a business permit for arrastre
service, the general power of a mayor to issue business permits is encapsulated
in the same legal provision of the Local Government Code without distinguishing
the nature of the business for which a permit is sought.
G.R. No. 191945 March 11, 2015
NATIONAL CORPORATION, Petitioner,
vs.
SOCORRO T. POSADA, RENATO BUENO, ALICE BALIN, ADRIAN TABLIZO, TEOFILO
TABLIZO, and LYDIA T. OLIVO, substituted by her heirs, ALFREDO M. OLIVO, ALICIA O.
SALAZAR, ANITA O. ORDONO, ANGELITA O. LIM, AND ADELFA O. ESPINAS, Respondents.
DECISION
LEONEN, J.:
When the taking of private property is no longer for a public purpose, the expropriation
complaint should be dismOOOissed by the trial court. The case will proceed only if the
trial court's order of expropriation became final and executory and the expropriation
causes prejudice to the property owner.
Before this court is a Motion1 filed by the National Power Corporation seeking to
withdraw its Petition for Review2dated June 4, 2010. The Petition sought to reverse the
Decision3 of the Court of Appeals dated August 7, 2009, which affirmed the trial court’s
Decision recalling the Writ of Possession issued in the National Power Corporation’s favor.
The National Power Corporation instituted expropriation proceedings for the acquisition
of a right-of-way easement over parcels of land located in Barangay Marinawa,
Bato,Catanduanes owned by respondents Socorro T. Posada, Renato Bueno, Alice Balin,
Adrian Tablizo, Teofilo Tablizo, and Lydia Tablizo. 4 The expropriation was for the
construction and maintenance of its Substation Island Grid Project. 5 The case was
docketed as Civil Case No. 0008.6 The National Power Corporation offered the price of
₱500.00 per square meter. In their Answer, respondents objected to the offer and alleged
that the value of the properties was ₱2,000.00 per square meter. 7
In the Order dated December 16, 2002, Branch 438 of the Regional Trial Court of Virac,
Catanduanes confirmed the National Power Corporation’s right to expropriate the
properties and ordered the creation of a commission to determine the amount of just
compensation to be paid to respondents.9
On January 28, 2003, the National Power Corporation filed a Notice to Take Possession
before the court on the basis of Rule 67, Section 2 10 of the Rules of Court. It alleged that it
was entitled to a Writ of Possession in view of its deposit with the Land Bank of the
Philippines in the amount of ₱3,280.00, alleging that it represented the provisional value
of the properties.11
On July 10, 2003, the court-appointed commissioners recommended a fair market value
of ₱1,500.00 per square meter based on the following considerations:
a. The location of the subject parcels of land, which is along the highway, within
a fast-growing community, ideal both for residential and business purposes,
about 3 1/2 kilometers from the capital town of Virac, a stones-throw from the
seashore of Cabugao Bay and not too distant from "Maribina Falls", a tourist
attraction;
b. The prevailing market value of the properties along the national highway
ranges from ₱1,500.00 to ₱2, 000.00 per square meter as per interview with the
residents of the place;
 c. Structures and improvements consisting of the residential houses of
[respondents] and others can be found on the property, hence if the
expropriation proceeds, [respondents] would be constrained to leave their
homes to relocate.12
The National Power Corporation opposed the recommendation of the commissioners,
arguing that:
a. the opinion given by the persons who live in the area should not be given
weight because they are not experts in real estate appraisal;
b. the value of the land at the time of taking and not its potential as a building
site is the criteria for determination of just compensation[;]
c. The Provincial Appraisal Committee valued the lot at ₱500.00 per square
meter;
d. The approved zonal values of real properties in Catanduanes classified as
Residential Regular (RR) is ₱105.00;
e. The Schedule of Fair Market Values prescribed ₱160.00 for all lots along the
national road from Marinawa Bridge to FICELCO;
f. Only an easement of right-of-way shall be acquired over the properties of the
other defendants which remain classified as cocoland and as provided in
[Republic Act No.] 6395 (NPC Charter), shall not exceed 10% of the market value
declared by the owner or administrator or anyone having legal interest in the
property, or as determined by the assessor, whichever is lower. 13 On November
19, 2003, the National Power Corporation amended its Complaint stating that it
needed to acquire portions of the properties, instead of just an easement of
right of way, for the construction of the Substation Island Grid Project. For this
reason, it deposited with Land Bank of the Philippines the amount of
₱580,769.93, alleging that this represented the value of the 3,954 square meters
sought to be expropriated.14
The National Power Corporation filed an Urgent Ex Parte Motion for the Issuance of a
Writ of Possession.15 It also served respondents with a Notice to Take Possession stating
that "it shall enter and take possession of the property on September 26, 2005." 16
In the Order dated July 14, 2005, the trial court granted the Urgent Ex Parte Motion for
the Issuance of a Writ of Possession and issued a Writ of Possession. 17
Respondents filed a Motion to Lift and/or Suspend the Issuance of the Writ of Possession,
which the trial court denied.18
Undaunted, respondents filed an Urgent Motion to Grant Defendants Time to Remove
their Houses and Improvements as well as Additional Deposit for Use in Land Acquisition
and Expenses for Transfer of their Respective Residential Houses. 19
The trial court granted respondents’ Motion in its Order dated June 5, 2006. It fixed the
value of the structures and improvements on the land in the amount of ₱827,000.00,
based on the value determined by the commissioners. It ordered the National Power
Corporation to deposit an additional amount of ₱262,639.17. 20 The trial court stated that
this amount was the difference between value of structures and improvements
determined by the trial court (₱827,000.00) and the amount initially deposited by the
National Power Corporation (₱564,360.83).21
The National Power Corporation failed to deposit the additional amount. The trial court
issued an Order during the November 22, 2006 hearing for the National Power
Corporation to make the necessary deposit. The issue on the amount of just
compensation was also submitted for decision.22
On November 27, 2006, the trial court resolved the issue of just compensation as follows:
WHEREFORE, all factors carefully evaluated and considered, this Court, hereby, fixes the
just compensation at TWO THOUSAND PESOS (₱2,000.00) per square meter for the taking
of the properties of [respondents] by [petitioner].
LIKEWISE, in view of NPC’s failure to comply with the Court’s order dated June 5, 2006
and for misleading this Court when it filed its Motion for the Issuance of Writ of
Possession, this Court, hereby, RECALLS its order granting said Motion and CANCELS the
Writ of Possession. AND, AS A FINAL NOTE, the amount determined by the Court in said
Order represents only the value of the structures and improvements and does not include
the value of the land. Even if said amount is fully paid by NPC, still it would not be entitled
to a Writ of Possession until it has paid the value of the land. And what should be its
value? Is it the zonal valuation of the Bureau of Internal Revenue? Under Section 4 of Rep.
[A]ct. No. 8974, payment of one hundred [percent] (100%) of the value of the property
based on the current relevant zonal valuation of the Bureau of Internal Revenue is
required upon the filing of the complaint, and after due notice to the defendant. This
Court believes that this basis is used because the just compensation is yet to be
determined during the second stage of the expropriation proceeding. In the instant case,
the complaint has long been filed, and the just compensation has already been
determined above. Therefore, it should now be the basis for the re-issuance of a Writ of
Possession – nay, even the transfer of ownership if fully paid.
SO ORDERED.23 (Emphasis supplied)
The National Power Corporation appealed the trial court’s Decision to the Court of
Appeals.24 On August 7, 2009,25the Court of Appeals rendered a Decision denying the
appeal.26 It held that the trial court committed no reversible error "in adopting the
recommendation of the appointed commissioners insofar as the value of the subject
property is concerned."27
The Court of Appeals also held that "the writ of possession was correctly recalled by the
lower court."28 Citing Republic v. Judge Gingoyon,29 it held that the National Power
Corporation must first pay respondents the amount determined by the trial court. 30 In the
absence of proof that respondents were paid, the National Power Corporation cannot
take possession of the property.31
The National Power Corporation filed a Motion for Reconsideration, but this was denied
in the Resolution32 dated April 14, 2010. Hence, it filed a Petition for Review on Certiorari
before this court.
Respondents filed their Comment33 on September 17, 2010. The National Power
Corporation filed its Reply34 to the Comment, substantially reiterating the arguments in its
Petition.
During the pendency of the case before this court, the National Power Corporation filed
an Urgent Motion for the Issuance of a Temporary Restraining Order 35 dated December
13, 2012, which was received by this court on January 7, 2013. Respondents, in turn, filed
their Comments and Opposition to the Urgent Motion for Issuance of a Temporary
Restraining Order.36
On March 11, 2013, this court issued a Resolution 37 deferring action on the Motion for the
Issuance of a Temporary Restraining Order.
On May 17, 2013, the National Power Corporation filed a Very Urgent Motion to
Resolve38 stating that "the delay in the possession of the subject properties – intended for
the Marinawa 10 MVA Sub-Station Project – would adversely affect the implementation
of the Codon-Virac Transmission Lines[.]"39
In a turn of events, the National Power Corporation informed its counsel on July 24, 2014
that it no longer needed the properties as it was set to acquire an alternative site. 40 It also
requested its counsel to withdraw Civil Case No. 0008 before the trial court because "it
[was] impractical to pursue the acquisition of the original site[.]" 41
Thus, the National Power Corporation, through counsel, filed the present Motion to
Withdraw Appeal,42 praying for the withdrawal of its appeal before this court and,
ultimately, for its Amended Complaint before the trial court to be dismissed. 43
We are asked to decide whether the National Power Corporation may be allowed to
withdraw its Petition for Review and whether the withdrawal has the effect of dismissing
its Amended Complaint before the trial court.
We grant the Motion to Withdraw the Petition for Review.
I
Expropriation proceedings for national infrastructure projects are governed by Rule 67 of
the Rules of Court and Republic Act No. 8974.44
The power of eminent domain is an inherent competence of the state. It is essential to a
sovereign. Thus, the Constitution does not explicitly define this power but subjects it to a
limitation: that it be exercised only for public use and with payment of just
compensation.45 Whether the use is public or whether the compensation is
constitutionally just will be determined finally by the courts.
However, the manner of its exercise such as which government instrumentality can be
delegated with the power to condemn, under what conditions, and how may be limited
by law. Republic Act No. 8974 does these, but it should not be read as superseding the
power of this court to promulgate rules of procedure. Thus, our existing rules should be
read in conjunction with the law that limits and conditions the power of eminent domain.
Expropriation, the procedure by which the government takes possession of private
property, is outlined primarily in Rule 67 of the Rules of Court. It undergoes two phases.
The first phase determines the propriety of the action. The second phase determines the
compensation to be paid to the landowner. Thus:
There are two (2) stages in every action for expropriation. The first is concerned with the
determination of the authority of the plaintiff to exercise the power of eminent domain
and the propriety of its exercise in the context of the facts involved in the suit. It ends
with an order, if not of dismissal of the action, "of condemnation declaring that the
plaintiff has a lawful right to take the property sought to be condemned, for the public
use or purpose described in the complaint, upon the payment of just compensation to be
determined as of the date of the filing of the complaint." An order of dismissal, if this be
ordained, would be a final one, of course, since it finally disposes of the action and leaves
nothing more to be done by the Court on the merits. So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the
proceedings before the Trial Court, "no objection to the exercise of the right of
condemnation (or the propriety thereof) shall be filed or heard.["]
The second phase of the eminent domain action is concerned with the determination by
the Court of "the just compensation for the property sought to be taken." This is done by
the Court with the assistance of not more than three (3) commissioners. The order fixing
the just compensation on the basis of the evidence before, and findings of, the
commissioners would be final, too. It would finally dispose of the second stage of the suit,
and leave nothing more to be done by the Court regarding the issue. Obviously, one or
another of the parties may believe the order to be erroneous in its appreciation of the
evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party may
seek a reversal of the order by taking an appeal therefrom. 46 (Emphasis supplied, citations
omitted)
The first phase of expropriation commences with the filing of the complaint. It ends with
the order of the trial court to proceed with the expropriation and determination of just
compensation. During the pendency of the complaint before the trial court, the state may
already enter and possess the property subject to the guidelines in Rule 67 of the Rules of
Court.
Rule 67 of the Rules of Court, however, is not the only set of rules that governs the first
phase of expropriation. On November 7, 2000, Congress enacted Republic Act No. 8974
to govern the expropriation of private property for national government infrastructure
projects. The law qualifies the manner by which the government may enter and take
possession of the property to be expropriated.
Rule 67, Section 2 of the Rules of Court states:
Sec. 2. Entry of plaintiff upon depositing value with authorized government depositary. —
Upon the filing of the complaint or at any time thereafter and after due notice to the
defendant, the plaintiff shall have the right to take or enter upon the possession of the
real property involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes of taxation to be
held by such bank subject to the orders of the court. Such deposit shall be in money,
unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a
government bank of the Republic of the Philippines payable on demand to the authorized
government depositary. (Emphasis supplied)
Section 4 of Republic Act No. 8974,on the other hand, mandates: Section 4. Guidelines for
Expropriation Proceedings.- Whenever it is necessary to acquire real property for the
right-of-way or location for any national government infrastructure project through
expropriation, the appropriate implementing agency shall initiate the expropriation
proceedings before the proper court under the following guidelines:
(a) Upon the filing of the complaint, and after due notice to the defendant, the
implementing agency shall immediately pay the owner of the property the amount
equivalent to the sum of (1) one hundred percent (100%) of the value of the property
based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR);
and (2) the value of the improvements and/or structures as determined under Section 7
hereof;
....
Upon compliance with the guidelines abovementioned, the court shall immediately issue
to the implementing agency an order to take possession of the property and start the
implementation of the project. (Emphasis supplied)
As stated in Gingoyon, Republic Act No. 8974 "provides for a procedure eminently more
favorable to the property owner than Rule 67"47 since it requires the immediate payment
of the zonal value and the value of the improvements on the land to the property owner
before the trial court can allow the government to take possession. In contrast, Rule 67
only requires the government to deposit the assessed value of the property for it to enter
and take possession.
In its Petition, the National Power Corporation argues that the amount of just
compensation at ₱2,000.00 per square meter is excessive since the zonal valuation of the
Bureau of Internal Revenue classifies the property as cocoland 48pegged at 4.15 per square
meter, and the commissioners merely "engaged in speculation and guess-work" 49 when
they arrived at the amount.50
The National Power Corporation argues that the Writ of Possession should not have been
recalled because it already deposited ₱580,769.93, the provisional amount required by
Republic Act No. 8974. It argues that the amount ordered by the trial court to be paid to
respondents was the amount of just compensation, which should have been
distinguished from the provisional amount required for the issuance of a Writ of
Possession. The deposit of the provisional amount was sufficient to be granted a Writ of
Possession and to take possession of the property. 51
In their Comment, respondents argue that the Court of Appeals did not err in sustaining
the amount of just compensation determined by the trial court since the value was based
on location, costs of improvements, prevailing market values of the properties similarly
located, and opinions of the residents in the area.52
Respondents also argue that the Court of Appeals correctly upheld the trial court’s recall
of the Writ of Possession because there was no showing that any payment was made to
respondents, as required by Gingoyon.53
The purpose for the taking of private property was for the construction of the National
Power Corporation’s Substation Island Grid Project. According to the Implementing Rules
and Regulations of Republic Act No. 8974, projects related to "power generation,
transmission and distribution"54 are national infrastructure projects covered by the law.
The National Power Corporation must first comply with the guidelines stated in Republic
Act No. 8974 before it can take possession of respondents’ property.
The trial court allowed the National Power Corporation to take possession of the
properties because of its deposit with Land Bank of the Philippines of the alleged
provisional value. However, the trial court recalled the Writ of Possession because the
National Power Corporation failed to deposit the additional amount.
We find that the trial court erred, not in recalling the Writ of Possession, but in granting
the Writ of Possession in the first place.
Section 4 of Republic Act No. 8974, unlike Rule 67, Section 2 of the Rules of Civil
Procedure, requires immediate payment to the landowner of 100% of the value of the
property based on the current relevant zonal valuation of the Bureau of Internal Revenue.
It is the Bureau of Internal Revenue, not the court, which determines the zonal value.
The law also requires the immediate payment of the value of the improvements and/or
structures on the land before the trial court can issue the Writ of Possession.
Thus, the trial court committed two errors. First, it based the value of the improvements
on the property on the determination made by the commissioners, and not on the
determination made by the National Power Corporation, contrary to the requirements of
Section 7 of Republic Act No. 8974:
Section 7. Valuation of Improvements and/or Structures.- The Department of Public
Works and Highways and other implementing agencies concerned, in coordination with
the local government units concerned in the acquisition of right-of-way, site or location
for any national government infrastructure project, are hereby mandated to adopt within
sixty (60) days upon approval of this Act, the necessary implementing rules and
regulations for the equitable valuation of the improvements and/or structures on the land
to be expropriated.
The Implementing Rules and Regulations of Republic Act No. 8974 clarifies:
Section 10. Valuation of Improvements and/or Structures -Pursuant to Section 7 of the
Act, the Implementing Agency shall determine the valuation of the improvements and/or
structures on the land to be acquired using the replacement cost method. The
replacement cost of the improvements/structures is defined as the amount necessary to
replace the improvements/structures, based on the current market prices for materials,
equipment, labor, contractor’s profit and overhead, and all other attendant costs
associated with the acquisition and installation in place of the affected
improvements/structures. In the valuation of the affected improvements/structures, the
Implementing Agency shall consider, among other things, the kinds and quantities of
materials/equipment used, the location, configuration and other physical features of the
properties, and prevailing construction prices. (Emphasis supplied)
According to the law, it is the implementing agency, not the commissioners, that
determines the proffered value of the improvements and structures. A Writ of Possession
may be issued once there is confirmation by the trial court of the proffered value.
The second error of the trial court occurred when it issued a Writ of Possession on the
basis of the National Power Corporation’s deposit of the alleged provisional value with
Land Bank of the Philippines, not on its actual payment to respondents. Even if the
deposit of ₱580,769.93 was the correct provisional value, it cannot be considered as
compliance with Section 4 of Republic Act No. 8974. In Gingoyon:
[T]he law plainly requires direct payment to the property owner, and not a mere deposit
with the authorized government depositary.
Without such direct payment, no writ of possession may be obtained. 55 (Emphasis
supplied)
There are, of course, instances when immediate payment cannot be made even if the
implementing agency is willing to do so. The owner of the property is not precluded from
contesting the power of the implementing agency to exercise eminent domain, the
necessity of the taking, the public character of its use, or the proffered value by the
implementing agency. In these instances, the implementing agency may deposit the
proffered value with the trial court having jurisdiction over the expropriation proceedings.
Considering that the National Power Corporation failed to comply with the guidelines in
Republic Act No. 8974, a Writ of Possession should not have been issued.
II
The recall of an improperly issued Writ of Possession is not the same as an injunction.
In its Urgent Motion for the Issuance of a Temporary Restraining Order, the National
Power Corporation argued that it was unable to commence the Substation Project as it
was paralyzed by the trial court’s Decision dated November 27, 2006 recalling the
issuance of the Writ of Possession in its favor. 56
The National Power Corporation manifested that the project was "intended to resolve the
six (6) to eight (8) hours of daily brownouts being suffered by the residents of the
province."57 It cited Section 3 of Republic Act No. 897558 and argued that the project
cannot be restrained by the recall of a previously issued Writ of Possession because this
amounted to an injunctive writ expressly prohibited by Section 4 of Republic Act No.
8975.59
Respondents, on the other hand, filed their Comments and Opposition to the Urgent
Motion for Issuance of a Temporary Restraining Order. They argued that records of the
First Catanduanes Electric Cooperative, Inc. (FICELCO) 60 showed that brownouts in the
entire province only averaged 2.97 hours per day and not 6 to 8 hours as claimed by the
National Power Corporation. Contrary to the National Power Corporation’s claims,
respondents never filed any motion for the issuance of a restraining order or injunctive
writ against the National Power Corporation. They argued that the trial court recalled the
Writ of Possession upon a finding that the National Power Corporation misled the trial
court by making its own interpretation of Section 4 of Republic Act No. 8974,in that a
provisional deposit was sufficient compliance when the law requires immediate payment
to the owner of the property.61
The National Power Corporation’s argument that the recall of a Writ of Possession
amounts to an injunctive writ prohibited under Section 3 of Republic Act No. 8975 is
without merit.
Section 3 of Republic Act No. 8975 states:
Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary
Injunctions and Preliminary Mandatory Injunctions. - No court, except the Supreme
Court, shall issue any temporary restraining order, preliminary injunction or preliminary
mandatory injunction against the government, or any of its subdivisions, officials or any
person or entity, whether public or private, acting under the government’s direction, to
restrain, prohibit or compel the following acts: (a) Acquisition, clearance and
development of the right-of-way and/or site or location of any national government
project(Emphasis supplied)
The recall of a Writ of Possession for failure to comply with the guidelines of Section 4 of
Republic Act No. 8974 is not the same as the issuance of an injunctive writ. The first is an
action by the trial court to correct an erroneous issuance while the second is an ancillary
remedy to preserve rights.
For an injunctive writ to be issued, parties must specifically pray for its issuance. Under
Rule 58, Section 4(a)62 of the Rules of Civil Procedure, a preliminary injunction or
temporary restraining order may be granted only when, among other requisites, the
applicant is entitled to the relief demanded. In Nerwin Industries Corporation v. PNOC-
Energy Development Corporation:63
A preliminary injunction is an order granted at any stage of an action or proceeding prior
to the judgment or final order, requiring a party or a court, agency or person, to refrain
from a particular act or acts. It is an ancillary or preventive remedy resorted to by a
litigant to protect or preserve his rights or interests during the pendency of the case. As
such, it is issued only when it is established that:
(a) The applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the act or
acts complained of, or in requiring the performance of an act or acts, either for a
limited period or perpetually; or
(b) The commission, continuance or nonperformance of the act or acts
complained of during the litigation would probably work injustice to the
applicant; or
(c) A party, court, agency or a person is doing, threatening, or is attempting to
do, or is procuring or suffering to be done, some act or acts probably in violation
of the rights of the applicant respecting the subject of the action or proceeding,
and tending to render the judgment ineffectual.64
Section 3 of Republic Act No. 8975 contemplates only the issuance of an injunctive writ
by lower courts. In Republic v. Nolasco:65
What is expressly prohibited by the statute is the issuance of the provisional reliefs of
temporary restraining orders, preliminary injunctions, and preliminary mandatory
injunctions. It does not preclude the lower courts from assuming jurisdiction over
complaints or petitions that seek as ultimate relief the nullification or implementation of
a national government infrastructure project. A statute such as Republic Act No. 8975
cannot diminish the constitutionally mandated judicial power 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 government. 66 (Emphasis supplied)
Philippine Ports Authority v. Cipres Stevedoring & Arrastre, Inc. 67 adds:
[I]t is settled that the sole object of a preliminary injunction, may it be prohibitory or
mandatory, is to preserve the status quo until the merits of the case can be heard and the
final judgment rendered. The status quo is the last actual peaceable uncontested status
which preceded the controversy.68
In expropriation cases involving national infrastructure projects, the trial court issues a
Writ of Possession upon compliance by the implementing agency of the guidelines stated
in Section 4 of Republic Act No. 8974. If it is later found that the guidelines were not
complied with, the trial court recalls the Writ of Possession for being improperly issued.
When a trial court recalls a Writ of Possession in an expropriation proceeding, the parties
do not revert to status quo, i.e. the status of the parties before the expropriation
complaint was filed. The trial court’s order of condemnation stands regardless of whether
a Writ of Possession was already issued.
The National Power Corporation was not able to take possession of the property because
it failed to comply with Republic Act No. 8974. Respondents did not file an application for
the issuance of a writ of preliminary injunction or temporary restraining order against it.
The trial court did not issue any injunctive writ. In other words, it was the National Power
Corporation’s own acts that prevented it from implementing its infrastructure project.
III
In accordance, however, with Rule 67,Section 4 of the Rules of Civil Procedure, 69 the trial
court proceeded with the second phase of expropriation, that is, the determination of
just compensation.
Just compensation as required by the Constitution is different from the provisional value
required by Republic Act No. 8974. In Capitol Steel Corporation v. PHIVIDEC Industrial
Authority:70
Upon compliance with the requirements, a petitioner in an expropriation case . . . is
entitled to a writ of possession as a matter of right and it becomes the ministerial duty of
the trial court to forthwith issue the writ of possession. No hearing is required and the
court neither exercises its discretion or judgment in determining the amount of the
provisional value of the properties to be expropriated as the legislature has fixed the
amount under Section 4 of R.A. 8974.
To clarify, the payment of the provisional value as a prerequisite to the issuance of a writ
of possession differs from the payment of just compensation for the expropriated
property. While the provisional value is based on the current relevant zonal valuation, just
compensation is based on the prevailing fair market value of the property. As the
appellate court explained:
The first refers to the preliminary or provisional determination of the value of the
property. It serves a double-purpose of pre-payment if the property is fully expropriated,
and of an indemnity for damages if the proceedings are dismissed. It is not a final
determination of just compensation and may not necessarily be equivalent to the
prevailing fair market value of the property. Of course, it may be a factor to be considered
in the determination of just compensation.
Just compensation, on the other hand, is the final determination of the fair market value
of the property. It has been described as "the just and complete equivalent of the loss
which the owner of the thing expropriated has to suffer by reason of the expropriation."
Market values, has [sic] also been described in a variety of ways as the "price fixed by the
buyer and seller in the open market in the usual and ordinary course of legal trade and
competition; the price and value of the article established as shown by sale, public or
private, in the ordinary way of business; the fair value of the property between one who
desires to purchase and one who desires to sell; the current price; the general or ordinary
price for which property may be sold in that locality.
There is no need for the determination with reasonable certainty of the final amount of
just compensation before the writ of possession may be issued. 71 (Emphasis and
underscoring in the original, citation omitted)
The statutory requirement to pay a provisional amount equivalent to the full Bureau of
Internal Revenue zonal valuation does not substitute for the judicial determination of just
compensation. The payment to the property owner of a preliminary amount is one way to
ensure that property will not be condemned arbitrarily. It allows front loading the costs of
the exercise so that it is the government instrumentality that bears the burden and not
the owner whose property is taken.
The payment of a provisional value may also serve as indemnity for damages in the event
that the expropriation does not succeed. In City of Manila v. Alegar Corporation: 72
[T]he advance deposit required under Section 19 of the Local Government
Code73 constitutes an advance payment only in the event the expropriation prospers.
Such deposit also has a dual purpose: as pre-payment if the expropriation succeeds and
as indemnity for damages if it is dismissed. This advance payment, a prerequisite for the
issuance of a writ of possession, should not be confused with payment of just
compensation for the taking of property even if it could be a factor in eventually
determining just compensation. If the proceedings fail, the money could be used to
indemnify the owner for damages.74 (Emphasis supplied)
The National Power Corporation was only required to pay the provisional value so that it
could take possession of respondents’ properties. Ordinarily, the government, in
accordance with Rule 67 or Republic Act No. 8974, would have already taken possession
of the property before the proper amount of just compensation could be determined by
the court.
However, the trial court had already determined the amount of just compensation even
before the National Power Corporation could take possession of the properties. Payment
of the provisional value is not anymore enough. In Export Processing Zone Authority v.
Judge Dulay:75
The determination of "just compensation" in eminent domain cases is a judicial function.
The executive department or the legislature may make the initial determinations but
when a party claims a violation of the guarantee in the Bill of Rights that private property
may not be taken for public use without just compensation, no statute, decree, or
executive order can mandate that its own determination shall prevail over the court’s
findings. Much less can the courts be precluded from looking into the "just-ness" of the
decreed compensation.76 (Emphasis supplied)
Once the amount of just compensation has been determined, it stands to reason that this
is the amount that must be paid to the landowner as compensation for his or her
property. In the exercise of the power of eminent domain, taking of private property
necessarily includes its possession. Government, then, must pay the proper amount of
just compensation, instead of the provisional value in order to enter and take the private
property.
IV
Before the issue of just compensation can even be considered by this court, any question
on the validity of the exercise of the power of eminent domain must first pertain to its
necessity. In Vda. de Ouano, et al. v. Republic, et al.: 77
In esse, expropriation is forced private property taking, the landowner being really
without a ghost of a chance to defeat the case of the expropriating agency. In other
words, in expropriation, the private owner is deprived of property against his will. Withal,
the mandatory requirement of due process ought to be strictly followed, such that the
state must show, at the minimum, a genuine need, an exacting public purpose to take
private property, the purpose to be specifically alleged or least reasonably deducible from
the complaint.
Public use, as an eminent domain concept, has now acquired an expansive meaning to
include any use thatis of "usefulness, utility, or advantage, or what is productive of
general benefit [of the public]." If the genuine public necessity—the very reason or
condition as it were— allowing, at the first instance, the expropriation of a private land
ceases or disappears, then there is no more cogent point for the government’s retention
of the expropriated land. The same legal situation should hold if the government devotes
the property to another public use very much different from the original or deviates from
the declared purpose to benefit another private person. It has been said that the direct
use by the state of its power to oblige landowners to renounce their productive
possession to another citizen, who will use it predominantly for that citizen’s own private
gain, is offensive to our laws.
A condemnor should commit to use the property pursuant to the purpose stated in the
petition for expropriation, failing which it should file another petition for the new
purpose. If not, then it behooves the condemnor to return the said property to its private
owner, if the latter so desires. The government cannot plausibly keep the property it
expropriated in any manner it pleases and, in the process, dishonor the judgment of
expropriation. This is not in keeping with the idea of fair play[.] 78 (Emphasis supplied)
It is the state that bears the burden of proving that the taking of private property is for a
public purpose. If it fails in discharging this burden, it must return the property to the
private owner, subject to whatever damages were incurred in the course of the taking.
In Heirs of Moreno v. Mactan-Cebu International Airport Authority, 79 private property was
expropriated for the proposed expansion of Lahug Airport in 1949. 80 The property owners
were assured that they would be given a right to repurchase once Lahug Airport is closed
or its operations are transferred to Mactan Airport.81 In 1991, Lahug Airport ceased
operations when Mactan Airport became fully operational. The former owners filed a
Complaint for Reconveyance to compel the repurchase of the expropriated properties. 82
This court considered the case "difficult" as it called for "a difficult but just solution." 83 In
allowing the reconveyance, this court stated:
Mactan-Cebu International Airport Authority[v. Court of Appeals] is correct in stating that
one would not find an express statement in the Decision in Civil Case No. R-1881 to the
effect that "the [condemned] lot would return to [the landowner] or that [the landowner]
had a right to repurchase the same if the purpose for which it was expropriated is ended
or abandoned or if the property was to be used other than as the Lahug Airport." This
omission notwithstanding, and while the inclusion of this pronouncement in the
judgment of condemnation would have been ideal, such precision is not absolutely
necessary nor is it fatal to the cause of petitioners herein. No doubt, the return or
repurchase of the condemned properties of petitioners could be readily justified as the
manifest legal effect or consequence of the trial court’s underlying presumption that
"Lahug Airport will continue to be in operation" when it granted the complaint for
eminent domain and the airport discontinued its activities.
The predicament of petitioners involves a constructive trust, one that is akin to the
implied trust referred to in Art. 1454 of the Civil Code, "If an absolute conveyance of
property is made in order to secure the performance of an obligation of the grantor
toward the grantee, a trust by virtue of law is established. If the fulfillment of the
obligation is offered by the grantor when it becomes due, he may demand the
reconveyance of the property to him." In the case at bar, petitioners conveyed Lots Nos.
916 and 920 to the government with the latter obliging itself to use the realties for the
expansion of Lahug Airport; failing to keep its bargain, the government can be compelled
by petitioners to reconvey the parcels of land to them, otherwise, petitioners would be
denied the use of their properties upon a state of affairs that was not conceived nor
contemplated when the expropriation was authorized.
Although the symmetry between the instant case and the situation contemplated by Art.
1454 is not perfect, the provision is undoubtedly applicable. For, as explained by an
expert on the law of trusts: "The only problem of great importance in the field of
constructive trusts is to decide whether in the numerous and varying fact situations
presented to the courts there is a wrongful holding of property and hence a threatened
unjust enrichment of the defendant." Constructive trusts are fictions of equity which are
bound by no unyielding formula when they are used by courts as devices to remedy any
situation in which the holder of the legal title may not in good conscience retain the
beneficial interest.
....
The rights and obligations between the constructive trustee and the beneficiary, in this
case, respondent MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art.
1190 of the Civil Code, "When the conditions have for their purpose the extinguishment
of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to
each other what they have received. . . . In case of the loss, deterioration or improvement
of the thing, the provisions which, with respect to the debtor, are laid down in the
preceding article shall be applied to the party who is bound to return. . . ."
Hence, respondent MCIAA as representative of the State is obliged to reconvey Lots Nos.
916 and 920 to petitioners who shall hold the same subject to existing liens thereon, i.e.,
leasehold right of DPWH. In return, petitioners as if they were plaintiff-beneficiaries of a
constructive trust must restore to respondent MCIAA what they received as just
compensation for the expropriation of Lots Nos. 916 and 920 in Civil Case No. R-1881, i.e.,
₱7,065.00 for Lot No. 916 and ₱9,291.00 for Lot No. 920 with consequential damages by
way of legal interest from 16 November 1947. Petitioners must likewise pay respondent
MCIAA the necessary expenses it may have incurred in sustaining the properties and the
monetary value of its services in managing them to the extent that petitioners will be
benefited thereby. The government however may keep whatever income or fruits it may
have obtained from the parcels of land, in the same way that petitioners need not
account for the interests that the amounts they received as just compensation may have
earned in the meantime. As a matter of justice and convenience, the law considers the
fruits and interests as the equivalent of each other.
Under Art. 1189 of the Civil Code, "If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor . . .," the creditor being the person
who stands to receive something as a result of the process of restitution. Consequently,
petitioners as creditors do not have to settle as part of the process of restitution the
appreciation in value of Lots Nos. 916 and 920 which is the natural consequence of nature
and time.
Petitioners need not also pay for improvements introduced by third parties, i.e., DPWH,
as the disposition of these properties is governed by existing contracts and relevant
provisions of law. As for the improvements that respondent MCIAA may have made on
Lots Nos. 916 and 920, if any, petitioners must pay respondent their prevailing free
market price in case petitioners opt to buy them and respondent decides to sell. In other
words, if petitioners do not want to appropriate such improvements or respondent does
not choose to sell them, the improvements would have to be removed without any
obligation on the part of petitioners to pay any compensation to respondent MCIAA for
what ever it may have tangibly introduced therein.84 (Emphasis supplied)
Heirs of Moreno illustrates the difficulty of determining the respective rights of the
parties once it has been determined that the expropriated properties will no longer be
devoted for a public purpose. Matters involving the dismissal of an expropriation case or
the return of expropriated property must be determined on a case-to-case basis.
V necessary in the maintenance and operation of its system of waterworks. It was held:
The National Power Corporation now requests this court for leave to withdraw this
Petition on the ground that it was in the process of acquiring a vacant lot owned by
FICELCO. Considering that eminent domain is the taking of private property for public use,
no expropriation proceeding can continue if the property to be expropriated will not be
for public use.
Respondents filed a Motion for Leave to File Comment to Petitioner’s Motion to
Withdraw Appeal.85 They argue that the grant of a Motion to Withdraw would be unjust.
From their point of view, the National Power Corporation cannot resort to a withdrawal of
an appeal in order to invalidate a judgment duly rendered by the trial court and affirmed
by the Court of Appeals. They state that they have no objection to the withdrawal of the
appeal, but they object to the dismissal of the Amended Complaint before the trial court.
They propose that the effect of withdrawing the Petition for Review is to make the Court
of Appeals’ Decision final and executory. 86
In National Housing Authority v. Heirs of Guivelondo: 87
In the early case of City of Manila v. Ruymann, the Court was confronted with the
question: May the petitioner, in an action for expropriation, after he has been placed in
possession of the property and before the termination of the action, dismiss the petition?
It resolved the issue in the affirmative and held:
The right of the plaintiff to dismiss an action with the consent of the court is universally
recognized with certain well-defined exceptions. If the plaintiff discovers that the action
which he commenced was brought for the purpose of enforcing a right or a benefit, the
advisability or necessity of which he later discovers no longer exists, or that the result of
the action would be different from what he had intended, then he should be permitted to
withdraw his action, subject to the approval of the court. The plaintiff should not be
required to continue the action, subject to some well-defined exceptions, when it is not
to his advantage to do so. Litigation should be discouraged and not encouraged. Courts
should not require parties to litigate when they no longer desire to do so. Courts, in
granting permission to dismiss an action, of course, should always take into consideration
the effect which said dismissal would have upon the rights of the defendant.
Subsequently, in Metropolitan Water District v. De Los Angeles, the Court had occasion to
apply the above-quoted ruling when the petitioner, during the pendency of the
expropriation case, resolved that the land sought to be condemned was no longer
It is not denied that the purpose of the plaintiff was to acquire the land in question for a
public use. The fundamental basis then of all actions brought for the expropriation of
lands, under the power of eminent domain, is public use. That being true, the very
moment that it appears at any stage of the proceedings that the expropriation is not for a
public use, the action must necessarily fail and should be dismissed, for the reason that
the action cannot be maintained at all except when the expropriation is for some public
use. That must be true even during the pendency of the appeal of [sic] at any other stage
of the proceedings. If, for example, during the trial in the lower court, it should be made
to appear to the satisfaction of the court that the expropriation is not for some public
use, it would be the duty and the obligation of the trial court to dismiss the action. And
even during the pendency of the appeal, if it should be made to appear to the satisfaction
of the appellate court that the expropriation is not for public use, then it would become
the duty and the obligation of the appellate court to dismiss it. 88 (Emphasis supplied)
respondents only to abandon it later when it finds the amount of just compensation
unacceptable. Indeed, our reprobation in the case of Cosculluela v. Court of Appeals is
apropos:
It is arbitrary and capricious for a government agency to initiate expropriation
proceedings, seize a person’s property, allow the judgment of the court to become final
and executory and then refuse to pay on the ground that there are no appropriations for
the property earlier taken and profitably used. We condemn in the strongest possible
terms the cavalier attitude of government officials who adopt such a despotic and
irresponsible stance.89 (Emphasis supplied)
The rule, therefore, is that expropriation proceedings must be dismissed when it is
determined that it is not for a public purpose, except when:

Considering that the National Power Corporation is no longer using respondents’ First, the trial court’s order already became final and executory;
properties for the purpose of building the Substation Project, it may be allowed to
discontinue with the expropriation proceedings, subject to the approval of the court.
Second, the government already took possession of the property; and

However, the grant of the Motion to Withdraw carries with it the necessary consequence
Lastly, the expropriation case already caused prejudice to the landowner.
of making the trial court’s order of condemnation final and executory. In National Housing
Authority: Notably, [City of Manila and Water District] refer to the dismissal of an action
The expropriation case is not automatically dismissed when the property ceases to be for
for eminent domain at the instance of the plaintiff during the pendency of the case. The
public use. The state must first file the appropriate Motion to Withdraw before the trial
rule is different where the case had been decided and the judgment had already become
court having jurisdiction over the proceedings. The grant or denial of any Motion to
final and executory.
Withdraw in an expropriation proceeding is always subject to judicial discretion.
....
Respondents have not yet been deprived of their property since the National Power
Corporation was never able to take possession. We cannot determine whether damages
In the case at bar, petitioner did not appeal the Order of the trial court dated December
have been suffered as a result of the expropriation.
10, 1999, which declared that it has a lawful right to expropriate the properties of
respondent Heirs of Isidro Guivelondo. Hence, the Order became final and may no longer
This case needs to be remanded to the trial court to determine whether respondents
be subject to review or reversal in any court. A final and executory decision or order can
have already been prejudiced by the expropriation. The withdrawal of the Petition before
no longer be disturbed or reopened no matter how erroneous it may be. Although judicial
this court will have no practical effect other than to make the trial court's order of
determinations are not infallible, judicial error should be corrected through appeals, not
condemnation final and executory. In order to prevent this absurdity, the National Power
through repeated suits on the same claim.
Corporation should file the proper Motion to Withdraw before the trial court. It is now
the burden of the National Power Corporation to plead and prove to the trial court its
....
reasons for discontinuing with the expropriation. Respondents may also plead and prove
damages incurred from the commencement of the expropriation, if any.
Respondent landowners had already been prejudiced by the expropriation case.
Petitioner cannot be permitted to institute condemnation proceedings against
WHEREFORE, the Motion to Withdraw Appeal dated August 28, 2014 is GRANTED insofar
as it withdraws the Petition for Review dated June 4, 2010. The Motion for Leave to File
Comment (to Petitioner's Motion to Withdraw Appeal) dated September 30, 2014 is
NOTED. This case is REMANDED to the Regional Trial Court of Virac, Catanduanes, Branch
43 for appropriate action.
SO ORDERED.
10
RULES OF CIVIL PROCEDURE, Rule 67, sec. 2 provides:
Sec. 2. Entry of plaintiff upon depositing value with authorized
government depositary. — Upon the filing of the complaint or at any
time thereafter and after due notice to the defendant, the plaintiff shall
have the right to take or enter upon the possession of the real property
involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes
of taxation to be held by such bank subject to the orders of the court.
Such deposit shall be in money, unless in lieu thereof the court
authorizes the deposit of a certificate of deposit of a government bank
of the Republic of the Philippines payable on demand to the authorized
government depositary.
G.R. No. 165354 January 12, 2015
REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL POWER
CORPORATION, Petitioner,
vs.
HEIRS OF SATURNINO Q. BORBON, AND COURT OF APPEALS, Respondents.
DECISION
BERSAMIN, J.:
The expropriator who has taken possession of the property subject of expropriation is
obliged to pay reasonable compensation to the landowner for the period of such
possession although the proceedings had been discontinued on the ground that the
public purpose for the expropriation had meanwhile ceased.
Antecedents
The National Power Corporation (NAPOCOR) is a government-owned and -controlled
corporation vested with authority under Republic Act No. 6395, as amended, to
undertake the development of hydro-electric generation of power, production of
electricity from any and all sources, construction, operation and maintenance of power
plants, auxiliary plants, dams, reservoirs, pipes, main transmission lines, power stations
and substations, and other works for the purpose of developing hydraulic power from any
river, lake, creek, spring and waterfalls in the Philippines and to supply such power to the
inhabitants thereof.1
In February 1993, NAPOCOR entered a property located in Barangay San Isidro, Batangas
City in order to construct and maintain transmission lines for the 230 KV Mahabang
Parang-Pinamucan Power Transmission Project.2 Respondents heirs of Saturnino Q.
Borbon owned the property, with a total area of 14,257 square meters, which was
registered under Transfer Certificate of Title No. T-9696 of the Registry of Deeds of
Batangas.3
On May 26, 1995, NAPOCOR filed a complaint for expropriation in the Regional Trial Court
in Batangas City (RTC),4seeking the acquisition of an easement of right of way over a
portion of the property involving an area of only 6,326 square meters, more or
less,5 alleging that it had negotiated with the respondents for the acquisition of the
easement but they had failed to reach any agreement; and that, nonetheless, it was
willing to deposit the amount of ₱9,790.00 representing the assessed value of the portion
sought to be expropriated.6 It prayed for the issuance of a writ of possession upon deposit
to enable it to enter and take possession and control of the affected portion of the
property; to demolish all improvements existing thereon; and to commence construction
of the transmission line project. It likewise prayed for the appointment of three
commissioners to determine the just compensation to be paid. 7
In their answer with motion to dismiss,8 the respondents staunchly maintained that
NAPOCOR had not negotiated with them before entering the property and that the entry
was done without their consent in the process, destroying some fruit trees without
payment, and installing five transmission line posts and five woodpoles for its
project;9 that the area being expropriated only covered the portion directly affected by
the transmission lines; that the remaining portion of the property was also affected
because the transmission line passed through the center of the land, thereby dividing the
land into three lots; that the presence of the high tension transmission line had rendered
the entire property inutile for any future use and capabilities; 10 that, nonetheless, they
tendered no objection to NAPOCOR’s entry provided it would pay just compensation not
only for the portion sought to be expropriated but for the entire property whose potential
was greatly diminished, if not totally lost, due to the project; 11 and that their property was
classified as industrial land. Thus, they sought the dismissal of the complaint, the
payment of just compensation of ₱1,000.00/square meter, and attorney’s fees; 12 and to
be allowed to nominate their representative to the panel of commissioners to be
appointed by the trial court.13
In the pre-trial conference conducted on December 20, 1995, the parties stipulated on:
(1) the location of the property; (2) the number of the heirs of the late Saturnino Q.
Borbon; (3) the names of the persons upon whom title to the property was issued; and
(4) the ownership and possession of the property. 14 In its order of that date, the RTC
directed the parties to submit the names of their nominees to sit in the panel of
commissioners within 10 days from the date of the pre-trial. 15
The RTC constituted the panel of three commissioners. Two commissioners submitted a
joint report on April 8, 1999,16 in which they found that the property was classified as
industrial land located within the Industrial 2 Zone; 17that although the property used to
be classified as agricultural (i.e., horticultural and pasture land), it was reclassified to
industrial land for appraisal or taxation purposes on June 30, 1994; and that the
reclassification was made on the basis of a certification issued by the Zoning
Administrator pursuant to Section 3.10 (d) of the Amended Zoning Ordinance (1989) of
the City of Batangas.18 The two commissioners appraised the value at ₱550.00/square
meter.19However, the third commissioner filed a separate report dated March 16,
1999,20 whereby he recommended the payment of "an easement fee of at least ten
percent (10%) of the assessed value indicated in the tax declaration 21plus cost of damages
in the course of the construction, improvements affected and tower occupancy fee." 22
The parties then submitted their respective objections to the reports. On their part, the
respondents maintained that NAPOCOR should compensate them for the entire property
at the rate of ₱550.00/square meter because the property was already classified as
industrial land at the time NAPOCOR entered it.23 In contrast, NAPOCOR objected to the
joint report, insisting that the property was classified as agricultural land at the time of its
taking in March 1993; and clarifying that it was only seeking an easement of right of way
over a portion of the property, not the entire area thereof, so that it should pay only 10%
of the assessed value of the portion thus occupied.24
In the judgment dated November 27, 2000,25 the RTC adopted the recommendation
contained in the joint report, and ruled thusly:
The price to be paid for an expropriated land is its value at the time of taking, which is the
date when the plaintiff actually entered the property or the date of the filing of the
complaint for expropriation. In this case, there is no evidence as to when the plaintiff
actually entered the property in question, so the reference point should be the date of
filing of the complaint, which is May 5, 1995.
On this date, the property in question was already classified as industrial. So, the Joint
Report (Exhibit "1") is credible on this point. The two Commissioners who submitted the
Joint Report are government officials who were not shown to be biased. So, that their
report should be given more weight than the minority report submitted by a private
lawyer representing the plaintiff. In view of these, the Court adopts the Joint Report and
rejects the minority report. The former fixed the just compensation at ₱550.00 per square
meter for the whole lot of 14,257 square meters.26
Accordingly, the RTC ordered NAPOCOR to pay the respondents: (1) just compensation for
the whole area of 14,257 square meters at the rate of ₱550.00/square meter; (2) legal
rate of interest from May 5, 1995 until full payment; and (3) the costs of suit. 27
NAPOCOR appealed (CA-G.R. No. 72069).
On April 29, 2004,28 the CA promulgated its decision, viz:
WHEREFORE, premises considered, the Decision dated November 27, 2000 of Branch I of
the Regional Trial Court of Batangas City, is hereby AFFIRMED with the MODIFICATION
that plaintiff-appellant shall pay only for the occupied 6,326 square meters of the subject
real property at the rate of ₱550.00 per square meter and to pay legal interest therefrom
until fully paid.
SO ORDERED.29
Hence, this appeal by NAPOCOR.
Issue
On December 3, 2012, during the pendency of the appeal, NAPOCOR filed a Motion to
Defer Proceedings stating that negotiations between the parties were going on with a
view to the amicable settlement of the case.30
On January 3, 2014, NAPOCOR filed a Manifestation and Motion to Discontinue
Expropriation Proceedings,31informing that the parties failed to reach an amicable
agreement; that the property sought to be expropriated was no longer necessary for
public purpose because of the intervening retirement of the transmission lines installed
on the respondents’ property;32 that because the public purpose for which such property
would be used thereby ceased to exist, the proceedings for expropriation should no
longer continue, and the State was now duty-bound to return the property to its owners;
and that the dismissal or discontinuance of the expropriation proceedings was in
accordance with Section 4, Rule 67 of the Rules of Court. Hence, NAPOCOR prayed that
the proceedings be discontinued "under such terms as the court deems just and
equitable,"33 and that the compensation to be awarded the respondents be reduced by
the equivalent of the benefit they received from the land during the time of its
occupation, for which purpose the case could be remanded to the trial court for the
determination of reasonable compensation to be paid to them. 34
In light of its Manifestation and Motion to Discontinue Expropriation Proceedings,
NAPOCOR contends that the expropriation has become without basis for lack of public
purpose as a result of the retirement of the transmission lines; that if expropriation still
proceeds, the Government will be unduly burdened by payment of just compensation for
property it no longer requires; and that there is legal basis in dismissing the proceedings,
citing Metropolitan Water District v. De los Angeles35 where the Court granted petitioner’s
prayer for the quashal of expropriation proceedings and the eventual dismissal of the
proceedings on the ground that the land sought to be expropriated was no longer
"indispensably necessary" in the maintenance and operation of petitioner's waterworks
system.
The issue to be considered and resolved is whether or not the expropriation proceedings
should be discontinued or dismissed pending appeal.
Ruling of the Court
The dismissal of the proceedings for expropriation at the instance of NAPOCOR is proper,
but, conformably with Section 4,36 Rule 67 of the Rules of Court, the dismissal or
discontinuance of the proceedings must be upon such terms as the court deems just and
equitable.
Before anything more, we remind the parties about the nature of the power of eminent
domain. The right of eminent domain is "the ultimate right of the sovereign power to
appropriate, not only the public but the private property of all citizens within the
territorial sovereignty, to public purpose." 37 But the exercise of such right is not unlimited,
for two mandatory requirements should underlie the Government’s exercise of the power
of eminent domain, namely: (1) that it is for a particular public purpose; and (2) that just
compensation be paid to the property owner. 38 These requirements partake the nature of
implied conditions that should be complied with to enable the condemnor to keep the
property expropriated.39
Public use, in common acceptation, means "use by the public." However, the concept has
expanded to include utility, advantage or productivity for the benefit of the public. 40 In
Asia's Emerging Dragon Corporation v. Department of Transportation and
Communications,41 Justice Corona, in his dissenting opinion said that:
To be valid, the taking must be for public use. The meaning of the term "public use" has
evolved over time in response to changing public needs and exigencies. Public use which
was traditionally understood as strictly limited to actual "use by the public" has already
been abandoned. "Public use" has now been held to be synonymous with "public
interest," "public benefit," and "public convenience."
It is essential that the element of public use of the property be maintained throughout
the proceedings for expropriation. The effects of abandoning the public purpose were
explained in Mactan-Cebu International Airport Authority v. Lozada, Sr., 42 to wit:
More particularly, with respect to the element of public use, the expropriator should
commit to use the property pursuant to the purpose stated in the petition for
expropriation filed, failing which, it should file another petition for the new purpose. If
not, it is then incumbent upon the expropriator to return the said property to its private
owner, if the latter desires to reacquire the same. Otherwise, the judgment of
expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the
proper exercise of the power of eminent domain, namely, the particular public purpose
for which the property will be devoted. Accordingly, the private property owner would be
denied due process of law, and the judgment would violate the property owner's right to
justice, fairness and equity.43
A review reveals that Metropolitan Water District v. De los Angeles 44 is an appropriate
precedent herein. There, the Metropolitan Water District passed a board resolution
requesting the Attorney-General to file a petition in the Court of First Instance of the
Province of Rizal praying that it be permitted to discontinue the condemnation
proceedings it had initiated for the expropriation of a parcel of land in Montalban, Rizal to
be used in the construction of the Angat Waterworks System. It claimed that the land was
no longer indispensably necessary in the maintenance and operation of its waterworks
system, and that the expropriation complaint should then be dismissed. The Court,
expounding on the power of the State to exercise the right of eminent domain, then
pronounced:
There is no question raised concerning the right of the plaintiff here to acquire the land
under the power of eminent domain.1âwphi1 That power was expressly granted it by its
charter. The power of eminent domain is a right reserved to the people or Government to
take property for public use. It is the right of the state, through its regular organization, to
reassert either temporarily or permanently its dominion over any portion of the soil of
the state on account of public necessity and for the public good. The right of eminent
domain is the right which the Government or the people retains over the estates of
individuals to resume them for public use. It is the right of the people, or the sovereign,
to dispose, in case of public necessity and for the public safety, of all the wealth contained
in the state.45
Indeed, public use is the fundamental basis for the action for expropriation; hence,
NAPOCOR’s motion to discontinue the proceedings is warranted and should be granted.
The Court has observed in Metropolitan Water District v. De los Angeles:
It is not denied that the purpose of the plaintiff was to acquire the land in question for
public use. The fundamental basis then of all actions brought for the expropriation of
lands, under the power of eminent domain, is public use. That being true, the very
moment that it appears at any stage of the proceedings that the expropriation is not for a
public use, the action must necessarily fail and should be dismissed, for the reason that
the action cannot be maintained at all except when the expropriation is for some public
use. That must be true even during the pendency of the appeal or at any other stage of
the proceedings. If, for example, during the trial in the lower court, it should be made to
appear to the satisfaction of the court that the expropriation is not for some public use, it
would be the duty and the obligation of the trial court to dismiss the action. And even
during the pendency of the appeal, if it should be made to appear to the satisfaction of
the appellate court that the expropriation is not for public use, then it would become the
duty and the obligation of the appellate court to dismiss it.
In the present case the petitioner admits that the expropriation of the land in question is
no longer necessary for public use. Had that admission been made in the trial court the
case should have been dismissed there. It now appearing positively, by resolution of the
plaintiff, that the expropriation is not necessary for public use, the action should be
dismissed even without a motion on the part of the plaintiff. The moment it appears in
whatever stage of the proceedings that the expropriation is not for a public use the
complaint should be dismissed and all the parties thereto should be relieved from further
annoyance or litigation.46 (underscoring and emphasis supplied)
It is notable that the dismissal of the expropriation proceedings in Metropolitan Water
District v. De los Angeles was made subject to several conditions in order to address the
dispossession of the defendants of their land, and the inconvenience, annoyance and
damages suffered by the defendants on account of the proceedings. Accordingly, the
Court remanded the case to the trial court for the issuance of a writ of possession
ordering Metropolitan Water District to immediately return possession of the land to the
defendants, and for the determination of damages in favor of the defendants, the claims
for which must be presented within 30 days from the return of the record to the court of
origin and notice thereof.47
Here, NAPOCOR seeks to discontinue the expropriation proceedings on the ground that
the transmission lines constructed on the respondents’ property had already been
retired. Considering that the Court has consistently upheld the primordial importance of
public use in expropriation proceedings, NAPOCOR’s reliance on Metropolitan Water
District v. De los Angeles was apt and correct. Verily, the retirement of the transmission
lines necessarily stripped the expropriation proceedings of the element of public use. To
continue with the expropriation proceedings despite the definite cessation of the public
purpose of the project would result in the rendition of an invalid judgment in favor of the
expropriator due to the absence of the essential element of public use.
Unlike in Metropolitan Water District v. De los Angeles where the request to discontinue
the expropriation proceedings was made upon the authority appearing in the board
resolution issued on July 14, 1930,48 counsel for NAPOCOR has not presented herein any
document to show that NAPOCOR had decided, as a corporate body, to discontinue the
expropriation proceedings. Nonetheless, the Court points to the Memorandum dated
December 13, 201249 and the Certificate of Inspection/Accomplishment dated February 5,
200550 attached to NAPOCOR’s motion attesting to the retirement of the transmission
lines. Also, Metropolitan Water District v. De los Angeles emphasized that it became the
duty and the obligation of the court, regardless of the stage of the proceedings, to dismiss
the action "if it should be made to appear to the satisfaction of the court that the
expropriation is not for some public use." 51 Despite the lack of the board resolution,
therefore, the Court now considers the documents attached to NAPOCOR’s Manifestation
and Motion to Discontinue Expropriation Proceedings to be sufficient to establish that the
expropriation sought is no longer for some public purpose.
Accordingly, the Court grants the motion to discontinue the proceedings subject to the
conditions to be shortly mentioned hereunder, and requires the return of the property to
the respondents. Having said that, we must point out that NAPOCOR entered the
property without the owners’ consent and without paying just compensation to the
respondents. Neither did it deposit any amount as required by law prior to its entry. The
Constitution is explicit in obliging the Government and its entities to pay just
compensation before depriving any person of his or her property for public
use.52 Considering that in the process of installing transmission lines, NAPOCOR destroyed
some fruit trees and plants without payment, and the installation of the transmission
lines went through the middle of the land as to divide the property into three lots,
thereby effectively rendering the entire property inutile for any future use, it would be
unfair for NAPOCOR not to be made liable to the respondents for the disturbance of their
property rights from the time of entry until the time of restoration of the possession of
the property. There should be no question about the taking. In several rulings, notably
National Power Corporation v. Zabala,53 Republic v. Libunao,54 National Power Corporation
v. Tuazon,55 and National Power Corporation v. Saludares,56 this Court has already
declared that "since the high-tension electric current passing through the transmission
lines will perpetually deprive the property owners of the normal use of their land, it is
only just and proper to require Napocor to recompense them for the full market value of
their property."
There is a sufficient showing that NAPOCOR entered into and took possession of the
respondents’ property as early as in March 1993 without the benefit of first filing a
petition for eminent domain. For all intents and purposes, therefore, March 1993 is the
reckoning point of NAPOCOR’s taking of the property, instead of May 5, 1995, the time
NAPOCOR filed the petition for expropriation. The reckoning conforms to the
pronouncement in Ansaldo v. Tantuico, Jr.,57 to wit:
Normally, of course, where the institution of an expropriation action precedes the taking
of the property subject thereof, the just compensation is fixed as of the time of the filing
of the complaint. This is so provided by the Rules of Court, the assumption of possession
by the expropriator ordinarily being conditioned on its deposits with the National or
Provincial Treasurer of the value of the property as provisionally ascertained by the court
having jurisdiction of the proceedings.
There are instances, however, where the expropriating agency takes over the property
prior to the expropriation suit, as in this case although, to repeat, the case at bar is quite
extraordinary in that possession was taken by the expropriator more than 40 years prior
to suit. In these instances, this Court has ruled that the just compensation shall be
determined as of the time of taking, not as of the time of filing of the action of eminent
domain.
In the context of the State's inherent power of eminent domain, there is a "taking" when
the owner is actually deprived or dispossessed of his property; when there is a practical
destruction or a material impairment of the value of his property or when he is deprived
of the ordinary use thereof. There is a "taking" in this sense when the expropriator enters
private property not only for a momentary period but for a more permanent duration, for
the purpose of devoting the property to a public use in such a manner as to oust the
owner and deprive him of all beneficial enjoyment thereof. For ownership, after all, "is
nothing without the inherent rights of possession, control and enjoyment. Where the
owner is deprived of the ordinary and beneficial use of his property or of its value by its
being diverted to public use, there is taking within the Constitutional sense." x x x. 58
In view of the discontinuance of the proceedings and the eventual return of the property
to the respondents, there is no need to pay "just compensation" to them because their
property would not be taken by NAPOCOR. Instead of full market value of the property,
therefore, NAPOCOR should compensate the respondents for the disturbance of their
property rights from the time of entry in March 1993 until the time of restoration of the
possession by paying to them actual or other compensatory damages. This conforms with
the following pronouncement in Mactan-Cebu International Airport Authority v. Lozada,
Sr.:59
In light of these premises, we now expressly hold that the taking of private property,
consequent to the Government’s exercise of its power of eminent domain, is always
subject to the condition that the property be devoted to the specific public purpose for
which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at
all pursued, and is peremptorily abandoned, then the former owners, if they so desire,
may seek the reversion of the property, subject to the return of the amount of just
compensation received. In such a case, the exercise of the power of eminent domain has
become improper for lack of the required factual justification. 60
This should mean that the compensation must be based on what they actually lost as a
result and by reason of their dispossession of the property and of its use, including the
value of the fruit trees, plants and crops destroyed by NAPOCOR’s construction of the
transmission lines. Considering that the dismissal of the expropriation proceedings is a
development occurring during the appeal, the Court now treats the dismissal of the
expropriation proceedings as producing the effect of converting the case into an action
for damages. For that purpose, the Court remands the case to the court of origin for
further proceedings, with instruction to the court of origin to enable the parties to fully
litigate the action for damages by giving them the opportunity to re-define the factual
and legal issues by the submission of the proper pleadings on the extent of the taking, the
value of the compensation to be paid to the respondents by NAPOCOR, and other
relevant matters as they deem fit. Trial shall be limited to matters the evidence upon
which had not been heretofore heard or adduced. The assessment and payment of the
correct amount of filing fees due from the respondents shall be made in the judgment,
and such amount shall constitute a first lien on the recovery. Subject to these conditions,
the court of origin shall treat the case as if originally filed as an action for damages.
WHEREFORE, the Court DISMISSES the expropriation proceedings due to the intervening
cessation of the need for public use; REMANDS the records to the Regional Trial Court,
Branch 1, in Batangas City as the court of origin for further proceedings to be conducted
in accordance with the foregoing instructions; and ORDERS said trial court to try and
decide the issues with dispatch.
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR TRANSPORTATION OFFICE,
Petitioners,
- versus -
G.R. No. 176625
February 25, 2010
BERNARDO L. LOZADA, SR., and the
HEIRS OF ROSARIO MERCADO, namely, VICENTE LOZADA, MARIO M. LOZADA, MARCIA
L. GODINEZ, VIRGINIA L. FLORES, BERNARDO LOZADA, JR., DOLORES GACASAN,
SOCORRO CAFARO and ROSARIO LOZADA, represented by MARCIA LOZADA GODINEZ,
x On December 29, 1961, the trial court rendered judgment in favor of the Republic and
DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to
[1]
reverse, annul, and set aside the Decision dated February 28, 2006 and the
Resolution[2] dated February 7, 2007 of the Court of Appeals (CA) (Cebu City), Twentieth
Division, in CA-G.R. CV No. 65796.
The antecedent facts and proceedings are as follows:
Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square
meters, more or less, located in Lahug, Cebu City. Its original owner was Anastacio
Deiparine when the same was subject to expropriation proceedings, initiated by the
Republic of the Philippines (Republic), represented by the then Civil Aeronautics
Administration (CAA), for the expansion and improvement of the Lahug Airport. The case
was filed with the then Court of First Instance of Cebu, Third Branch, and docketed as Civil
Case No. R-1881.
As early as 1947, the lots were already occupied by the U.S. Army. They were turned over
to the Surplus Property Commission, the Bureau of Aeronautics, the National Airport
Corporation and then to the CAA.
During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada,
Sr. acquired Lot No. 88 from Deiparine. Consequently, Transfer Certificate of Title (TCT)
No. 9045 was issued in Lozadas name.
ordered the latter to pay Lozada the fair market value of Lot No. 88, adjudged at P3.00
per square meter, with consequential damages by way of legal interest computed from
November 16, 1947the time when the lot was first occupied by the airport. Lozada
received the amount of P3,018.00 by way of payment.
The affected landowners appealed. Pending appeal, the Air Transportation Office (ATO),
formerly CAA, proposed a compromise settlement whereby the owners of the lots
affected by the expropriation proceedings would either not appeal or withdraw their
respective appeals in consideration of a commitment that the expropriated lots would be
resold at the price they were expropriated in the event that the ATO would abandon the
Lahug Airport, pursuant to an established policy involving similar cases. Because of this
promise, Lozada did not pursue his appeal. Thereafter, Lot No. 88 was transferred and
registered in the name of the Republic under TCT No. 25057.
The projected improvement and expansion plan of the old Lahug Airport, however, was
not pursued.
Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr.,
requesting to repurchase the lots, as per previous agreement. The CAA replied that there
might still be a need for the Lahug Airport to be used as an emergency DC-3 airport. It
reiterated, however, the assurance that should this Office dispose and resell the
properties which may be found to be no longer necessary as an airport, then the policy of
this Office is to give priority to the former owners subject to the approval of the
President.
On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the
Department of Transportation, directing the transfer of general aviation operations of
the Lahug Airport to the Mactan International Airport before the end of 1990 and, upon
such transfer, the closure of the Lahug Airport.
Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.) No. 6958,
entitled An Act Creating the Mactan-Cebu International Airport Authority, Transferring
Existing Assets of the Mactan International Airport and the Lahug Airport to the
Authority, Vesting the Authority with Power to Administer and Operate the Mactan
International Airport and the Lahug Airport, and For Other Purposes.
From the date of the institution of the expropriation proceedings up to the present, the
public purpose of the said expropriation (expansion of the airport) was never actually
initiated, realized, or implemented. Instead, the old airport was converted into a
commercial complex. Lot No. 88 became the site of a jail known as Bagong Buhay
Rehabilitation Complex, while a portion thereof was occupied by squatters. [3] The old
airport was converted into what is now known as the Ayala I.T. Park, a commercial area.
Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession and
reconveyance of ownership of Lot No. 88. The case was docketed as Civil Case No. CEB-
18823 and was raffled to the Regional Trial Court (RTC), Branch 57, Cebu City. The
complaint substantially alleged as follows:
(a) Spouses Bernardo and Rosario Lozada were the registered owners of
Lot No. 88 covered by TCT No. 9045;
(b) In the early 1960s, the Republic sought to acquire by expropriation
Lot No. 88, among others, in connection with its program for the
improvement and expansion of the Lahug Airport;
(c) A decision was rendered by the Court of First Instance in favor of the
Government and against the land owners, among whom was
Bernardo Lozada, Sr. appealed therefrom;
(d) During the pendency of the appeal, the parties entered into a
compromise settlement to the effect that the subject property
would be resold to the original owner at the same price when it
was expropriated in the event that the Government abandons
the Lahug Airport;
(e) Title to Lot No. 88 was subsequently transferred to the Republic of
the Philippines (TCT No. 25057);
(f) The projected expansion and improvement of the Lahug Airport did
not materialize;
 (g) Plaintiffs sought to repurchase their property from then CAA
Director Vicente Rivera. The latter replied by giving as assurance
that priority would be given to the previous owners, subject to
the approval of the President, should CAA decide to dispose of
the properties;
(h) On November 29, 1989, then President Corazon C. Aquino, through
a Memorandum to the Department of Transportation and
Communications (DOTC), directed the transfer of general aviation
operations at the Lahug Airport to the Mactan-Cebu
International Airport Authority;
(i) Since the public purpose for the expropriation no longer exists, the
property must be returned to the plaintiffs.[4]
In their Answer, petitioners asked for the immediate dismissal of the complaint. They
specifically denied that the Government had made assurances to reconvey Lot No. 88 to
respondents in the event that the property would no longer be needed for airport
operations. Petitioners instead asserted that the judgment of condemnation was
unconditional, and respondents were, therefore, not entitled to recover the expropriated
property notwithstanding non-use or abandonment thereof.
After pretrial, but before trial on the merits, the parties stipulated on the following set of
facts:
(1) The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate,
situated in the City of Cebu, containing an area of One Thousand
Seventeen (1,017) square meters, more or less;
(2) The property was expropriated among several other properties in
Lahug in favor of the Republic of the Philippines by virtue of a
Decision dated December 29, 1961 of the CFI of Cebu in Civil
Case No. R-1881;
(3) The public purpose for which the property was expropriated was for
the purpose of the Lahug Airport;
(4) After the expansion, the property was transferred in the name of
MCIAA; [and]
(5) On November 29, 1989, then President Corazon C. Aquino directed
the Department of Transportation and Communication to
transfer general aviation operations of the Lahug Airport to the
Mactan-Cebu International Airport Authority and to close the
Lahug Airport after such transfer[.][5]
During trial, respondents presented Bernardo Lozada, Sr. as their lone witness, while
petitioners presented their own witness, Mactan-Cebu International Airport Authority
legal assistant Michael Bacarisas.
On October 22, 1999, the RTC rendered its Decision, disposing as follows:
WHEREFORE, in the light of the foregoing, the Court hereby renders
judgment in favor of the plaintiffs, Bernardo L. Lozada, Sr., and the heirs
of Rosario Mercado, namely, Vicente M. Lozada, Marcia L. Godinez,
Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L.
Cafaro and Rosario M. Lozada, represented by their attorney-in-fact
Marcia Lozada Godinez, and against defendants Cebu-Mactan
International Airport Authority (MCIAA) and Air Transportation Office
(ATO):
1. ordering MCIAA and ATO to restore to plaintiffs the
possession and ownership of their land, Lot No. 88 Psd-821 (SWO-
23803), upon payment of the expropriation price to plaintiffs; and
2. ordering the Register of Deeds to effect the transfer of the
Certificate of Title from defendant[s] to plaintiffs on Lot No. [88],
cancelling TCT No. 20357 in the name of defendant MCIAA and to issue
a new title on the same lot in the name of Bernardo L. Lozada, Sr. and
 the heirs of Rosario Mercado, namely: Vicente M. Lozada, Mario M.
Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr.,
Dolores L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada.
No pronouncement as to costs.
SO ORDERED.[6]
Aggrieved, petitioners interposed an appeal to the CA. After the filing of the necessary
appellate briefs, the CA rendered its assailed Decision dated February 28, 2006, denying
petitioners appeal and affirming in toto the Decision of the RTC, Branch
57, Cebu City. Petitioners motion for reconsideration was, likewise, denied in the
questioned CA Resolution dated February 7, 2007.
Hence, this petition arguing that: (1) the respondents utterly failed to prove that there
was a repurchase agreement or compromise settlement between them and the
Government; (2) the judgment in Civil Case No. R-1881 was absolute and unconditional,
giving title in fee simple to the Republic; and (3) the respondents claim of verbal
assurances from government officials violates the Statute of Frauds.
The petition should be denied.
Petitioners anchor their claim to the controverted property on the supposition that the
Decision in the per\]]
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wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww
wwwwwyhhhhhhhhhhhff tinent expropriation proceedings did not provide for the
condition that should the intended use of Lot No. 88 for the expansion of
the Lahug Airport be aborted or abandoned, the property would revert to respondents,
being its former owners.Petitioners cite, in support of this position, Fery v. Municipality of
Cabanatuan,[7] which declared that the Government acquires only such rights in
expropriated parcels of land as may be allowed by the character of its title over the
properties
If x x x land is expropriated for a particular purpose, with the condition
that when that purpose is ended or abandoned the property shall
return to its former owner, then, of course, when the purpose is
terminated or abandoned the former owner reacquires the property so
expropriated. If x x x land is expropriated for a public street and the
expropriation is granted upon condition that the city can only use it for
a public street, then, of course, when the city abandons its use as a
public street, it returns to the former owner, unless there is some
statutory provision to the contrary. x x x. If, upon the contrary, however,
the decree of expropriation gives to the entity a fee simple title, then, of
course, the land becomes the absolute property of the expropriator,
whether it be the State, a province, or municipality, and in that case the
non-user does not have the effect of defeating the title acquired by the
expropriation proceedings. x x x.
When land has been acquired for public use in fee simple,
unconditionally, either by the exercise of eminent domain or by
purchase, the former owner retains no right in the land, and the public
use may be abandoned, or the land may be devoted to a different use,
without any impairment of the estate or title acquired, or any reversion
to the former owner. x x x.[8]
Contrary to the stance of petitioners, this Court had ruled otherwise in Heirs of
Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority,[9] thus
Moreover, respondent MCIAA has brought to our attention a significant
and telling portion in the Decision in Civil Case No. R-1881 validating our
discernment that the expropriation by the predecessors of respondent
was ordered under the running impression that Lahug Airport would
continue in operation

As for the public purpose of the expropriation
proceeding, it cannot now be
doubted. Although Mactan Airport is being
constructed, it does not take away the actual
usefulness and importance of the Lahug Airport: it is
handling the air traffic both civilian and military. From
it aircrafts fly to Mindanao and Visayas and pass thru
it on their flights to the North and Manila. Then, no
evidence was adduced to show how soon is
the Mactan Airport to be placed in operation and
whether the Lahug Airport will be closed immediately
thereafter. It is up to the other departments of the
Government to determine said matters. The Court
cannot substitute its judgment for those of the said
departments or agencies.In the absence of such
showing, the Court will presume that
the Lahug Airport will continue to be in operation
(emphasis supplied).
Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is
apparent that the acquisition by the Republic of the expropriated lots was subject to the
condition that the Lahug Airport would continue its operation. The condition not having
materialized because the airport had been abandoned, the former owner should then be
allowed to reacquire the expropriated property. [11]
On this note, we take this opportunity to revisit our ruling in Fery, which involved an
expropriation suit commenced upon parcels of land to be used as a site for a public
market.Instead of putting up a public market, respondent Cabanatuan constructed
residential houses for lease on the area. Claiming that the municipality lost its right to the
property taken since it did not pursue its public purpose, petitioner Juan Fery, the former
owner of the lots expropriated, sought to recover his properties. However, as he had
admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to the lands in

While in the trial in Civil Case No. R-1881 [we] could have simply question, judgment was rendered in favor of the municipality, following American
acknowledged the presence of public purpose for the exercise of jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY. Co., [12] McConihay
eminent domain regardless of the survival of Lahug Airport, the trial
court in its Decision chose not to do so but instead prefixed its finding of v. Theodore Wright,[13] and Reichling v. Covington Lumber Co., [14] all uniformly holding that
public purpose upon its understanding that Lahug Airport will continue the transfer to a third party of the expropriated real property, which necessarily resulted
to be in operation. Verily, these meaningful statements in the body of
in the abandonment of the particular public purpose for which the property was taken, is
the Decision warrant the conclusion that the expropriated properties
would remain to be so until it was confirmed that Lahug Airport was no not a ground for the recovery of the same by its previous owner, the title of the
longer in operation. This inference further implies two (2) things: (a)
expropriating agency being one of fee simple.
after the Lahug Airport ceased its undertaking as such and the
expropriated lots were not being used for any airport expansion project,
the rights vis--vis the expropriated Lots Nos. 916 and 920 as between
Obviously, Fery was not decided pursuant to our now sacredly held constitutional right
the State and their former owners, petitioners herein, must be
equitably adjusted; and (b) the foregoing unmistakable declarations in that private property shall not be taken for public use without just compensation. [15] It is
the body of the Decision should merge with and become an intrinsic well settled that the taking of private property by the Governments power of eminent
part of the fallo thereof which under the premises is clearly inadequate
since the dispositive portion is not in accord with the findings as domain is subject to two mandatory requirements: (1) that it is for a particular public
contained in the body thereof.[10] purpose; and (2) that just compensation be paid to the property owner. These
requirements partake of the nature of implied conditions that should be complied with to
enable the condemnor to keep the property expropriated. [16]
More particularly, with respect to the element of public use, the expropriator should
commit to use the property pursuant to the purpose stated in the petition for
expropriation filed, failing which, it should file another petition for the new purpose. If
not, it is then incumbent upon the expropriator to return the said property to its private
owner, if the latter desires to reacquire the same. Otherwise, the judgment of
expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the
proper exercise of the power of eminent domain, namely, the particular public purpose
for which the property will be devoted. Accordingly, the private property owner would be
denied due process of law, and the judgment would violate the property owners right to
justice, fairness, and equity.
In light of these premises, we now expressly hold that the taking of private property,
consequent to the Governments exercise of its power of eminent domain, is always
subject to the condition that the property be devoted to the specific public purpose for
which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at
all pursued, and is peremptorily abandoned, then the former owners, if they so desire,
may seek the reversion of the property, subject to the return of the amount of just
compensation received. In such a case, the exercise of the power of eminent domain has
become improper for lack of the required factual justification. [17]
Even without the foregoing declaration, in the instant case, on the question of whether
respondents were able to establish the existence of an oral compromise agreement that
entitled them to repurchase Lot No. 88 should the operations of the Lahug Airport be
abandoned, we rule in the affirmative.
It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon this
factual issue and have declared, in no uncertain terms, that a compromise agreement
was, in fact, entered into between the Government and respondents, with the former
undertaking to resell Lot No. 88 to the latter if the improvement and expansion of the
Lahug Airport would not be pursued. In affirming the factual finding of the RTC to this
effect, the CA declared
Lozadas testimony is cogent. An octogenarian widower-retiree and a
resident of Moon Park, California since 1974, he testified that
government representatives verbally promised him and his late wife
while the expropriation proceedings were on-going that the
government shall return the property if the purpose for the
expropriation no longer exists. This promise was made at the premises
of the airport. As far as he could remember, there were no
expropriation proceedings against his property in 1952 because the first
notice of expropriation he received was in 1962.Based on the promise,
he did not hire a lawyer. Lozada was firm that he was promised that the
lot would be reverted to him once the public use of the lot ceases. He
made it clear that the verbal promise was made in Lahug with other lot
owners before the 1961 decision was handed down, though he could
not name the government representatives who made the promise. It
was just a verbal promise; nevertheless, it is binding. The fact that he
could not supply the necessary details for the establishment of his
assertions during cross-examination, but that When it will not be used
as intended, it will be returned back, we just believed in the
government, does not dismantle the credibility and truthfulness of his
allegation. This Court notes that he was 89 years old when he testified
in November 1997 for an incident which happened decades ago. Still,
he is a competent witness capable of perceiving and making his
perception known. The minor lapses are immaterial. The decision of the
competency of a witness rests primarily with the trial judge and must
not be disturbed on appeal unless it is clear that it was erroneous. The
objection to his competency must be made before he has given any
testimony or as soon as the incompetency becomes apparent. Though
 Lozada is not part of the compromise agreement, [18] he nevertheless
adduced sufficient evidence to support his claim. [19]
As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v.
Court of Appeals,[20] cited by petitioners, where respondent therein offered testimonies
which were hearsay in nature, the testimony of Lozada was based on personal knowledge
as the assurance from the government was personally made to him. His testimony on
cross-examination destroyed neither his credibility as a witness nor the truthfulness of his
words.
Verily, factual findings of the trial court, especially when affirmed by the CA, are
binding and conclusive on this Court and may not be reviewed. A petition
for certiorariunder Rule 45 of the Rules of Court contemplates only questions of law and
not of fact.[21] Not one of the exceptions to this rule is present in this case to warrant a
reversal of such findings.
As regards the position of petitioners that respondents testimonial evidence violates the
Statute of Frauds, suffice it to state that the Statute of Frauds operates only with respect
to executory contracts, and does not apply to contracts which have been completely or
partially performed, the rationale thereof being as follows:
In executory contracts there is a wide field for fraud because unless
they be in writing there is no palpable evidence of the intention of the
contracting parties. The statute has precisely been enacted to prevent
fraud. However, if a contract has been totally or partially performed, the
exclusion of parol evidence would promote fraud or bad faith, for it
would enable the defendant to keep the benefits already delivered by
him from the transaction in litigation, and, at the same time, evade the
obligations, responsibilities or liabilities assumed or contracted by him
thereby.[22]
In this case, the Statute of Frauds, invoked by petitioners to bar the claim of respondents
for the reacquisition of Lot No. 88, cannot apply, the oral compromise settlement having
been partially performed. By reason of such assurance made in their favor, respondents
relied on the same by not pursuing their appeal before the CA. Moreover, contrary to the
claim of petitioners, the fact of Lozadas eventual conformity to the appraisal of Lot No. 88
and his seeking the correction of a clerical error in the judgment as to the true area of Lot
No. 88 do not conclusively establish that respondents absolutely parted with their
property. To our mind, these acts were simply meant to cooperate with the government,
particularly because of the oral promise made to them.
The right of respondents to repurchase Lot No. 88 may be enforced based on a
constructive trust constituted on the property held by the government in favor of the
former. On this note, our ruling in Heirs of Timoteo Moreno is instructive, viz.:
Mactan-Cebu International Airport Authority is correct in stating that
one would not find an express statement in the Decision in Civil Case
No. R-1881 to the effect that the [condemned] lot would return to [the
landowner] or that [the landowner] had a right to repurchase the same
if the purpose for which it was expropriated is ended or abandoned or if
the property was to be used other than as the Lahug Airport. This
omission notwithstanding, and while the inclusion of this
pronouncement in the judgment of condemnation would have been
ideal, such precision is not absolutely necessary nor is it fatal to the
cause of petitioners herein. No doubt, the return or repurchase of the
condemned properties of petitioners could be readily justified as the
manifest legal effect or consequence of the trial courts underlying
presumption that Lahug Airport will continue to be in operation when it
granted the complaint for eminent domain and the airport discontinued
its activities.
The predicament of petitioners involves a constructive trust, one that is
akin to the implied trust referred to in Art. 1454 of the Civil Code, If an
absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust
by virtue of law is established. If the fulfillment of the obligation is
offered by the grantor when it becomes due, he may demand the
reconveyance of the property to him. In the case at bar, petitioners
conveyed Lots No. 916 and 920 to the government with the latter
obliging itself to use the realties for the expansion of Lahug Airport;
failing to keep its bargain, the government can be compelled by
petitioners to reconvey the parcels of land to them, otherwise,
petitioners would be denied the use of their properties upon a state of
affairs that was not conceived nor contemplated when the
expropriation was authorized.
Although the symmetry between the instant case and the situation
contemplated by Art. 1454 is not perfect, the provision is undoubtedly
applicable. For, as explained by an expert on the law of trusts: The only
problem of great importance in the field of constructive trust is to
decide whether in the numerous and varying fact situations presented
to the courts there is a wrongful holding of property and hence a
threatened unjust enrichment of the defendant. Constructive trusts are
fictions of equity which are bound by no unyielding formula when they
are used by courts as devices to remedy any situation in which the
holder of legal title may not in good conscience retain the beneficial
interest.
In constructive trusts, the arrangement is temporary and passive in
which the trustees sole duty is to transfer the title and possession over
the property to the plaintiff-beneficiary. Of course, the wronged party
seeking the aid of a court of equity in establishing a constructive trust
must himself do equity. Accordingly, the court will exercise its discretion
in deciding what acts are required of the plaintiff-beneficiary as
conditions precedent to obtaining such decree and has the obligation to
reimburse the trustee the consideration received from the latter just as
the plaintiff-beneficiary would if he proceeded on the theory of
rescission. In the good judgment of the court, the trustee may also be
paid the necessary expenses he may have incurred in sustaining the
property, his fixed costs for improvements thereon, and the monetary
value of his services in managing the property to the extent that
plaintiff-beneficiary will secure a benefit from his acts.
The rights and obligations between the constructive trustee and the
beneficiary, in this case, respondent MCIAA and petitioners over Lots
Nos. 916 and 920, are echoed in Art. 1190 of the Civil Code, When the
conditions have for their purpose the extinguishment of an obligation to
give, the parties, upon the fulfillment of said conditions, shall return to
each other what they have received x x x In case of the loss,
deterioration or improvement of the thing, the provisions which, with
respect to the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return x x x. [23]
On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No.
88 to respondents, the latter must return to the former what they received as just
compensation for the expropriation of the property, plus legal interest to be computed
from default, which in this case runs from the time petitioners comply with their
obligation to respondents.
Respondents must likewise pay petitioners the necessary expenses they may have
incurred in maintaining Lot No. 88, as well as the monetary value of their services in
managing it to the extent that respondents were benefited thereby.
Following Article 1187[24] of the Civil Code, petitioners may keep whatever income or
fruits they may have obtained from Lot No. 88, and respondents need not account for the
interests that the amounts they received as just compensation may have earned in the
meantime.
In accordance with Article 1190[25] of the Civil Code vis--vis Article 1189, which provides
that (i)f a thing is improved by its nature, or by time, the improvement shall inure to the
benefit of the creditor x x x, respondents, as creditors, do not have to pay, as part of the
process of restitution, the appreciation in value of Lot No. 88, which is a natural
consequence of nature and time.[26]

WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the Court of
Appeals, affirming the October 22, 1999 Decision of the Regional Trial Court, Branch 87,
Cebu City, and its February 7, 2007 Resolution are AFFIRMED with MODIFICATION as
follows:
1. Respondents are ORDERED to return to petitioners the just compensation they
received for the expropriation of Lot No. 88, plus legal interest, in the case of default, to
be computed from the time petitioners comply with their obligation to reconvey Lot No.
88 to them;
2. Respondents are ORDERED to pay petitioners the necessary expenses the latter
incurred in maintaining Lot No. 88, plus the monetary value of their services to the extent
that respondents were benefited thereby;
3. Petitioners are ENTITLED to keep whatever fruits and income they may have
obtained from Lot No. 88; and
4. Respondents are also ENTITLED to keep whatever interests the amounts they received
as just compensation may have earned in the meantime, as well as the appreciation in
value of Lot No. 88, which is a natural consequence of nature and time;
In light of the foregoing modifications, the case is REMANDED to the Regional Trial Court,
Branch 57, Cebu City, only for the purpose of receiving evidence on the amounts that
respondents will have to pay petitioners in accordance with this Courts decision. No costs.
SO ORDERED.
[24]
Art. 1187. The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when
the obligation imposes reciprocal prestations upon the parties, the fruits and interests
during the pendency of the condition shall be deemed to have been mutually
compensated. x x x.
[25]
Art. 1190. When the conditions have for their purpose the extinguishment of an
obligation to give, the parties, upon the fulfillment of said conditions, shall return to each
other what they have received.
In case of the loss, deterioration or improvement of the thing, the provisions which, with
respect to the debtor, are laid down in the preceding article (Article 1189) shall be applied
to the party who is bound to return.
[26]
Mactan-Cebu International Airport Authority v . Tudtud, supra note 22, at 177.
G.R. No. 210551 June 30, 2015
JOSE J. FERRER, JR., Petitioner,
vs.
CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY TREASURER OF
QUEZON CITY, and CITY ASSESSOR OF QUEZON CITY, Respondents.
DECISION
PERALTA, J.:
Before this Court is a petition for certiorari under Rule 65 of the Rules of Court with
prayer for the issuance of a temporary restraining order (TRO) seeking to declare
unconstitutional and illegal Ordinance Nos. SP-2095, S-2011 and SP-2235, S-2013 on the
Socialized Housing Tax and Garbage Fee, respectively, which are being imposed by the
respondents.
The Case
On October 17, 2011,1 respondent Quezon City Council enacted Ordinance No. SP-2095,
S-2011,2 or the Socialized Housing Tax of Quezon City, Section 3 of which provides:
SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on
the assessed value of land in excess of One Hundred Thousand Pesos (Php100,000.00)
shall be collected by the City Treasurer which shall accrue to the Socialized Housing
Programs of the Quezon City Government. The special assessment shall accrue to the
General Fund under a special account to be established for the purpose.
Effective for five (5) years, the Socialized Housing Tax ( SHT ) shall be utilized by the
Quezon City Government for the following projects: (a) land purchase/land banking; (b)
improvement of current/existing socialized housing facilities; (c) land development; (d)
construction of core houses, sanitary cores, medium-rise buildings and other similar
structures; and (e) financing of public-private partners hip agreement of the Quezon City
Government and National Housing Authority ( NHA ) with the private sector. 3
solely and exclusively in an earmarked special account under the general fund to be
utilized for garbage collections.7 Section 1 of the Ordinance se t forth the schedule and
manner for the collection of garbage fees:
SECTION 1. The City Government of Quezon City in conformity with and in relation to
Republic Act No. 7160, otherwise known as the Local Government Code of 1991 HEREBY
IMPOSES THE FOLLOWING SCHEDULE AND MANNER FOR THE ANNUAL COLLECTION OF
GARBAGE FEES, AS FOLLOWS: On all domestic households in Quezon City;

Under certain conditions, a tax credit shall be enjoyed by taxpayers regularly paying the
LAND AREA IMPOSABLE FEE
special assessment:

SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special assessment tax as imposed Less than 200 sq. m. PHP 100.00
by this ordinance shall enjoy a tax credit. The tax credit may be availed of only after five
(5) years of continue[d] payment. Further, the taxpayer availing this tax credit must be a 201 sq. m. – 500 sq. m. PHP 200.00
taxpayer in good standing as certified by the City Treasurer and City Assessor. 501 sq. m. – 1,000 sq. m. PHP 300.00

The tax credit to be granted shall be equivalent to the total amount of the special 1,001 sq. m. – 1,500 sq. m. PHP 400.00
assessment paid by the property owner, which shall be given as follows: 1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

1. 6th year - 20%

2. 7th year - 20%

On all condominium unit and socialized housing projects/units in Quezon City;
3. 8th year - 20%

4. 9th year - 20% FLOOR AREA IMPOSABLE FEE

5. 10th year - 20%

Less than 40 sq. m. PHP 25.00
Furthermore, only the registered owners may avail of the tax credit and may not be 41 sq. m. – 60 sq. m. PHP 50.00
continued by the subsequent property owners even if they are buyers in good faith, heirs
or possessor of a right in whatever legal capacity over the subject property. 4 61 sq. m. – 100 sq. m. PHP 75.00
101 sq. m. – 150 sq. m. PHP 100.00
On the other hand, Ordinance No. SP-2235, S-2013 5 was enacted on December 16, 2013
and took effect ten days after when it was approved by respondent City Mayor. 6 The 151 sq. m. – 200 sq. [m.] or more PHP 200.00
proceeds collected from the garbage fees on residential properties shall be deposited
On high-rise Condominium Units
a) High-rise Condominium – The Homeowners Association of high- rise
condominiums shall pay the annual garbage fee on the total size of the entire
condominium and socialized Housing Unit and an additional garbage fee shall be
collected based on area occupied for every unit already so ld or being amortized.
b) High-rise apartment units – Owners of high-rise apartment units shall pay the
annual garbage fee on the total lot size of the entire apartment and an additional
garbage fee based on the schedule prescribed herein for every unit occupied.
The collection of the garbage fee shall accrue on the first day of January and shall be paid
simultaneously with the payment of the real property tax, but not later than the first
quarter installment.8 In case a household owner refuses to pay, a penalty of 25% of the
garbage fee due, plus an interest of 2% per month or a fraction thereof, shall be charged. 9
Petitioner alleges that he is a registered co-owner of a 371-square-meter residential
property in Quezon City which is covered by Transfer Certificate of Title (TCT ) No. 216288,
and that, on January 7, 2014, he paid his realty tax which already included the garbage
fee in the sum of
Php100.00.10
The instant petition was filed on January 17, 2014. We issued a TRO on February 5, 2014,
which enjoined the enforcement of Ordinance Nos. SP-2095 and SP-2235 and required
respondents to comment on the petition without necessarily giving due course thereto. 11
Respondents filed their Comment12 with urgent motion to dissolve the TRO on February
17, 2014. Thereafter, petitioner filed a Reply and a Memorandum on March 3, 2014 and
September 8, 2014, respectively.
Procedural Matters
A. Propriety of a Petition for Certiorari
Respondents are of the view that this petition for certiorari is improper since they are not
tribunals, boards or officers exercising judicial or quasi-judicial functions. Petitioner,
however, counters that in enacting Ordinance Nos. SP-2095 and SP-2235, the Quezon City
Council exercised quasi-judicial function because the ordinances ruled against the
property owners who must pay the SHT and the garbage fee, exacting from them funds
for basic essential public services that they should not be held liable. Even if a Rule 65
petition is improper, petitioner still asserts that this Court, in a number of cases like in
Rosario v. Court of Appeals,13 has taken cognizance of an improper remedy in the interest
of justice.
We agree that respondents neither acted in any judicial or quasi-judicial capacity nor
arrogated unto themselves any judicial or quasi-judicial prerogatives.
A respondent is said to be exercising judicial function where he has the power to
determine what the law is and what the legal rights of the parties are, and then
undertakes to determine these questions and adjudicate upon the rights of the parties.
Quasi-judicial function, on the other hand, is "a term which applies to the actions,
discretion, etc., of public administrative officers or bodies … required to investigate facts
or ascertain the existence of facts, hold hearings, and draw conclusions from them as a
basis for their official action and to exercise discretion of a judicial nature."
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is
necessary that there be a law that gives rise to some specific rights of person s or
property under which adverse claims to such rights are made, and the controversy en
suing therefrom is brought before a tribunal, board, or officer clothed with power and
authority to determine the law and adjudicate the respective rights of the contending
parties.14
For a writ of certiorari to issue, the following requisites must concur: (1) it must be
directed against a tribunal, board, or officer exercising judicial or quasi-judicial functions;
(2) the tribunal, board, or officer must have acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is
no appeal or any plain, speedy, and adequate remedy in the ordinary course of law. The
enactment by the Quezon City Council of the assailed ordinances was done in the exercise
of its legislative, not judicial or quasi-judicial, function. Under Republic Act (R.A.) No.7160,
or the Local Government Code of 1991 (LGC), local legislative power shall be exercised by
the Sangguniang Panlungsod for the city.15Said law likewise is specific in providing that the
power to impose a tax, fee, or charge , or to generate revenue shall be exercised by the
sanggunian of the local government unit concerned through an appropriate ordinance. 16
Also, although the instant petition is styled as a petition for certiorari, it essentially seeks
to declare the unconstitutionality and illegality of the questioned ordinances. It, thus,
partakes of the nature of a petition for declaratory relief, over which this Court has only
appellate, not original, jurisdiction.17
Despite these, a petition for declaratory relief may be treated as one for prohibition or
mandamus, over which we exercise original jurisdiction, in cases with far-reaching
implications or one which raises transcendental issues or questions that need to be
resolved for the public good.18The judicial policy is that this Court will entertain direct
resort to it when the redress sought cannot be obtained in the proper courts or when
exceptional and compelling circumstances warrant availment of a remedy within and
calling for the exercise of Our primary jurisdiction. 19
Section 2, Rule 65 of the Rules of Court lay down under what circumstances a petition for
prohibition may be filed:
SEC. 2. Petition for prohibition. - When the proceedings of any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial
functions, are without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered commanding the respondent to desist from
further proceeding in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.
In a petition for prohibition against any tribunal, corporation, board, or person – whether
exercising judicial, quasi-judicial, or ministerial functions – who has acted without or in
excess of jurisdiction or with grave abuse of discretion, the petitioner prays that judgment
be rendered, commanding the respondents to desist from further proceeding in the
action or matter specified in the petition. In this case, petitioner's primary intention is to
prevent respondents from implementing Ordinance Nos. SP-2095 and SP-2235. Obviously,
the writ being sought is in the nature of a prohibition, commanding desistance.
We consider that respondents City Mayor, City Treasurer, and City Assessor are
performing ministerial functions. A ministerial function is one that an officer or tribunal
performs in the context of a given set of facts, in a prescribed manner and without regard
for the exercise of his or its own judgment, upon the propriety or impropriety of the act
done.20 Respondent Mayor, as chief executive of the city government, exercises such
powers and performs such duties and functions as provided for by the LGC and other
laws.21 Particularly, he has the duty to ensure that all taxes and other revenues of the city
are collected, and that city funds are applied to the payment of expenses and settlement
of obligations of the city, in accordance with law or ordinance. 22 On the other hand, under
the LGC, all local taxes, fees, and charges shall be collected by the provincial, city,
municipal, or barangay treasurer, or their duly-authorized deputies, while the assessor
shall take charge, among others, of ensuring that all laws and policies governing the
appraisal and assessment of real properties for taxation purposes are properly
executed.23 Anent the SHT, the Department of Finance (DOF) Local Finance Circular No. 1-
97, dated April 16, 1997, is more specific:
6.3 The Assessor’s office of the Identified LGU shall:
a. immediately undertake an inventory of lands within its
jurisdiction which shall be subject to the levy of the Social
Housing Tax (SHT) by the local sanggunian concerned;
b. inform the affected registered owners of the effectivity of
the SHT; a list of the lands and registered owners shall also be
posted in 3 conspicuous places in the city/municipality;
c. furnish the Treasurer’s office and the local sanggunian
concerned of the list of lands affected;
6.4 The Treasurer’s office shall:
a. collect the Social Housing Tax on top of the Real Property
Tax, SEF Tax and other special assessments;
b. report to the DOF, thru the Bureau of Local Government
Finance, and the Mayor’s office the monthly collections on
Social Housing Tax (SHT). An annual report should likewise be
submitted to the HUDCC on the total revenues raised during
the year pursuant to Sec. 43, R.A. 7279 and the manner in
which the same was disbursed.
Petitioner has adduced special and important reasons as to why direct recourse to us
should be allowed. Aside from presenting a novel question of law, this case calls for
immediate resolution since the challenged ordinances adversely affect the property
interests of all paying constituents of Quezon City. As well, this petition serves as a test
case for the guidance of other local government units (LGUs).Indeed, the petition at bar is
of transcendental importance warranting a relaxation of the doctrine of hierarchy of
courts. In Social Justice Society (SJS) Officers, et al. v. Lim , 24the Court cited the case of
Senator Jaworski v. Phil. Amusement & Gaming Corp.,25 where We ratiocinated:
Granting arguendo that the present action cannot be properly treated as a petition for
prohibition, the transcendental importance of the issues involved in this case warrants
that we set aside the technical defects and take primary jurisdiction over the petition at
bar . x x x This is in accordance with the well entrenched principle that rules of procedure
are not inflexible tools designed to hinder or delay, but to facilitate and promote the
administration of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate, rather than promote substantial justice, must always
be eschewed.26
B. Locus Standi of Petitioner
Respondents challenge petitioner’s legal standing to file this case on the ground that, in
relation to Section 3 of Ordinance No. SP-2095, petitioner failed to allege his ownership of
a property that has an assessed value of more than Php100,000.00 and, with respect to
Ordinance No. SP-2335, by what standing or personality he filed the case to nullify the
same. According to respondents, the petition is not a class suit, and that, for not having
specifically alleged that petitioner filed the case as a taxpayer, it could only be surmised
whether he is a party-in-interest who stands to be directly benefited or injured by the
judgment in this case.
It is a general rule that every action must be prosecuted or defended in the name of the
real party-in-interest, who stands to be benefited or injured by the judgment in the suit,
or the party entitled to the avails of the suit.
Jurisprudence defines interest as "material interest, an interest in issue and to be affected
by the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest. By real interest is meant a present substantial interest, as
distinguished from a mere expectancy or a future, contingent, subordinate, or
consequential interest." "To qualify a person to be a real party-in-interest in whose name
an action must be prosecuted, he must appear to be the present real owner of the right
sought to be enforced."27
"Legal standing" or locus standi calls for more than just a generalized grievance. 28 The
concept has been define d as a personal and substantial interest in the case such that the
party has sustained or will sustain direct injury as a result of the government al act that is
being challenged.29 The gist of the question of standing is whether a party alleges such
personal stake in the outcome of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues upon which the court depends for illumination
of difficult constitutional questions.30
A party challenging the constitutionality of a law, act, or statute must show "not only that
the law is invalid, but also that he has sustained or is in immediate, or imminent danger of
sustaining some direct injury as a result of its enforcement, and not merely that he suffers
thereby in some indefinite way." It must be shown that he has been, or is about to be,
denied some right or privilege to which he is lawfully entitled, or that he is about to be
subjected to some burdens or penalties by reason of the statute complained of. 31
Tested by the foregoing, petitioner in this case clearly has legal standing to file the
petition. He is a real party-in-interest to assail the constitutionality and legality of
Ordinance Nos. SP-2095 and SP-2235 because respondents did not dispute that he is a
registered co-owner of a residential property in Quezon City an d that he paid property
tax which already included the SHT and the garbage fee. He has substantial right to seek a
refund of the payments he made and to stop future imposition. While he is a lone
petitioner, his cause of action to declare the validity of the subject ordinances is
substantial and of paramount interest to similarly situated property owners in Quezon
City.
C. Litis Pendentia
Respondents move for the dismissal of this petition on the ground of litis pendentia. They
claim that, as early as February 22, 2012, a case entitled Alliance of Quezon City
Homeowners, Inc., et al., v. Hon. Herbert Bautista, et al. , docketed as Civil Case No. Q-12-
7-820, has been pending in the Quezon City Regional Trial Court, Branch 104, which
assails the legality of Ordinance No. SP-2095. Relying on City of Makati, et al. v.
Municipality (now City) of Taguig, et al.,32 respondents assert that there is substantial
identity of parties between the two cases because petitioner herein and plaintiffs in the
civil case filed their respective cases as taxpayers of Quezon City.
For petitioner, however, respondents’ contention is untenable since he is not a party in
Alliance and does not even have the remotest identity or association with the plaintiffs in
said civil case. Moreover, respondents’ arguments would deprive this Court of its
jurisdiction to determine the constitutionality of laws under Section 5, Article VIII of the
1987 Constitution.33
Litis pendentia is a Latin term which literally means "a pending suit" and is variously
referred to in some decisions as lis pendens and auter action pendant. 34 While it is
normally connected with the control which the court has on a property involved in a suit
during the continuance proceedings, it is more interposed as a ground for the dismissal of
a civil action pending in court.35 In Film Development Council of the Philippines v. SM
Prime Holdings, Inc.,36 We elucidated:
Litis pendentia, as a ground for the dismissal of a civil action, refers to a situation where
two actions are pending between the same parties for the same cause of action, so that
one of them becomes unnecessary and vexatious. It is based on the policy against
multiplicity of suit and authorizes a court to dismiss a case motu proprio.
xxxx
The requisites in order that an action may be dismissed on the ground of litis pendentia
are: (a) the identity of parties, or at least such as representing the same interest in both
actions; (b) the identity of rights asserted and relief prayed for, the relief being founded
on the same facts, and (c) the identity of the two cases such that judgment in one,
regardless of which party is successful, would amount to res judicata in the other.
The underlying principle of litis pendentia is the theory that a party is not allowed to vex
another more than once regarding the same subject matter and for the same cause of
action. This theory is founded on the public policy that the same subject matter should
not be the subject of controversy in courts more than once, in order that possible
conflicting judgments may be avoided for the sake of the stability of the rights and status
of persons, and also to avoid the costs and expenses incident to numerous suits.
Among the several tests resorted to in ascertaining whether two suits relate to a single or
common cause of action are: (1) whether the same evidence would support and sustain
both the first and second causes of action; and (2) whether the defenses in one case may
be used to substantiate the complaint in the other.
The determination of whether there is an identity of causes of action for purposes of litis
pendentia is inextricably linked with that of res judicata , each constituting an element of
the other. In either case, both relate to the sound practice of including, in a single
litigation, the disposition of all issues relating to a cause of action that is before a court. 37
There is substantial identity of the parties when there is a community of interest between
a party in the first case and a party in the second case albeit the latter was not impleaded
in the first case.38Moreover, the fact that the positions of the parties are reversed, i.e., the
plaintiffs in the first case are the defendants in the second case or vice-versa, does not
negate the identity of parties for purposes of determining whether the case is dismissible
on the ground of litis pendentia .39
In this case, it is notable that respondents failed to attach any pleading connected with
the alleged civil case pending before the Quezon City trial court.1âwphi1 Granting that
there is substantial identity of parties between said case and this petition, dismissal on
the ground of litis pendentia still cannot be had in view of the absence of the second and
third requisites. There is no way for us to determine whether both cases are based on the
same set of facts that require the presentation of the same evidence. Even if founded on
the same set of facts, the rights asserted and reliefs prayed for could be different.
Moreover, there is no basis to rule that the two cases are intimately related and/or
intertwined with one another such that the judgment that may be rendered in one,
regardless of which party would be successful, would amount to res judicata in the other.
D. Failure to Exhaust Administrative Remedies
Respondents contend that petitioner failed to exhaust administrative remedies for his
non-compliance with Section 187 of the LGC, which mandates:
Section 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue
Measures; Mandatory Public Hearings. – The procedure for approval of local tax
ordinances and revenue measures shall be in accordance with the provisions of this Code:
Provided, That public hearings shall be conducted for the purpose prior to the enactment
thereof: Provided, further, That any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on appeal within thirty (30) days from the
effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60)
days from the date of receipt of the appeal: Provided, however, That such appeal shall not
have the effect of suspending the effectivity of the ordinance and the accrual and
payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30)
days after receipt of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate
proceedings with a court of competent jurisdiction.
The provision, the constitutionality of which was sustained in Drilon v. Lim , 40 has been
construed as mandatory41 considering that –
A municipal tax ordinance empowers a local government unit to impose taxes. The power
to tax is the most effective instrument to raise needed revenues to finance and support
the myriad activities of local government units for the delivery of basic services essential
to the promotion of the general welfare and enhancement of peace, progress, and
prosperity of the people. Consequently, any delay in implementing tax measures would
be to the detriment of the public. It is for this reason that protests over tax ordinances are
required to be done within certain time frames. x x x. 42
The obligatory nature of Section 187 was underscored in Hagonoy Market Vendor Asso. v.
Municipality of Hagonoy:43
x x x [T]he timeframe fixed by law fo r parties to avail of their legal remedies before
competent courts is not a "mere technicality" that can be easily brushed aside. The
periods stated in Section 187 of the Local Government Code are mandatory. x x x Being its
lifeblood, collection of revenues by the government is of paramount importance. The
funds for the operation of its agencies and provision of basic services to its inhabitants
are largely derived from its revenues and collections. Thus, it is essential that the validity
of revenue measures is not left uncertain for a considerable length of time. Hence, the
law provided a time limit for an aggrieved party to assail the legality of revenue measures
and tax ordinances."44
Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones, 45held that there was
no need for petitioners therein to exhaust administrative remedies before resorting to the
courts, considering that there was only a pure question of law, the parties did not dispute
any factual matter on which they had to present evidence. Likewise, in Cagayan Electric
Power and Light Co., Inc. v. City of Cagayan de Oro,46 We relaxed the application of the
rules in view of the more substantive matters. For the same reasons, this petition is an
exception to the general rule.
Substantive Issues
Petitioner asserts that the protection of real properties from informal settlers and the
collection of garbage are basic and essential duties and functions of the Quezon City
Government. By imposing the SHT and the garbage fee, the latter has shown a penchant
and pattern to collect taxes to pay for public services that could be covered by its
revenues from taxes imposed on property, idle land, business, transfer, amusement, etc.,
as well as the Internal Revenue Allotment (IRA ) from the National Government. For
petitioner, it is noteworthy that respondents did not raise the issue that the Quezon City
Government is in dire financial state and desperately needs money to fund housing for
informal settlers and to pay for garbage collection. In fact, it has not denied that its
revenue collection in 2012 is in the sum of ₱13.69 billion.
Moreover, the imposition of the SHT and the garbage fee cannot be justified by the
Quezon City Government as an exercise of its power to create sources of income under
Section 5, Article X of the 1987 Constitution.47 According to petitioner, the constitutional
provision is not a carte blanche for the LGU to tax everything under its territorial and
political jurisdiction as the provision itself admits of guidelines and limitations.
Petitioner further claims that the annual property tax is an ad valorem tax, a percentage
of the assessed value of the property, which is subject to revision every three (3) years in
order to reflect an increase in the market value of the property. The SHT and the garbage
fee are actually increases in the property tax which are not based on the assessed value
of the property or its reassessment every three years; hence, in violation of Sections 232
and 233 of the LGC.48
For their part, respondents relied on the presumption in favor of the constitutionality of
Ordinance Nos. SP-2095 and SP-2235, invoking Victorias Milling Co., Inc. v. Municipality of
Victorias, etc.,49 People v. Siton, et al.,50 and Hon. Ermita v. Hon. Aldecoa-Delorino .51 They
argue that the burden of establishing the invalidity of an ordinance rests heavily upon the
party challenging its constitutionality. They insist that the questioned ordinances are
proper exercises of police power similar to Telecom. & Broadcast Attys. of the Phils., Inc.
v. COMELEC52 and Social Justice Society (SJS), et al. v. Hon. Atienza, Jr. 53 and that their
enactment finds basis in the social justice principle enshrined in Section 9, 54 Article II of
the 1987 Constitution.
As to the issue of publication, respondents argue that where the law provides for its own
effectivity, publication in the Official Gazette is not necessary so long as it is not punitive
in character, citing Balbuna, et al. v. Hon. Secretary of Education, et al. 55 and Askay v.
Cosalan .[56]] Thus, Ordinance No. SP-2095 took effect after its publication, while
Ordinance No. SP-2235 became effective after its approval on December 26, 2013.
Additionally, the parties articulate the following positions:
On the Socialized Housing Tax
Respondents emphasize that the SHT is pursuant to the social justice principle found in
Sections 1 and 2, Article XIII57 of the 1987 Constitution and Sections 2 (a)58 and 4359 of R.A.
No. 7279, or the "Urban Development and Housing Act of 1992 ( UDHA ).
Relying on Manila Race Horse Trainers Assn., Inc. v. De La Fuente, 60and Victorias Milling
Co., Inc. v. Municipality of Victorias, etc., 61respondents assert that Ordinance No. SP-2095
applies equally to all real property owners without discrimination. There is no way that
the ordinance could violate the equal protection clause because real property owners and
informal settlers do not belong to the same class.
Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is
consistent with the UDHA. While the law authorizes LGUs to collect SHT on properties
with an assessed value of more than ₱50,000.00, the questioned ordinance only covers
properties with an assessed value exceeding ₱100,000.00. As well, the ordinance provides
for a tax credit equivalent to the total amount of the special assessment paid by the
property owner beginning in the sixth (6th) year of the effectivity of the ordinance.
On the contrary, petitioner claims that the collection of the SHT is tantamount to a
penalty imposed on real property owners due to the failure of respondent Quezon City
Mayor and Council to perform their duty to secure and protect real property owners from
informal settlers, thereby burdening them with the expenses to provide funds for
housing. For petitioner, the SHT cannot be viewed as a "charity" from real property
owners since it is forced, not voluntary.
Also, petitioner argues that the collection of the SHT is a kind of class legislation that
violates the right of property owners to equal protection of the laws since it favors
informal settlers who occupy property not their own and pay no taxes over law-abiding
real property owners w ho pay income and realty taxes.
Petitioner further contends that respondents’ characterization of the SHT as "nothing
more than an advance payment on the real property tax" has no statutory basis.
Allegedly, property tax cannot be collected before it is due because, under the LGC,
chartered cities are authorized to impose property tax based on the assessed value and
the general revision of assessment that is made every three (3) years.
As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn, was based on
Section 43 of the UDHA, petitioner asserts that there is no specific provision in the 1987
Constitution stating that the ownership and enjoyment of property bear a social function.
And even if there is, it is seriously doubtful and far-fetched that the principle means that
property owners should provide funds for the housing of informal settlers and for home
site development. Social justice and police power, petitioner believes, does not mean
imposing a tax on one, or that one has to give up something, for the benefit of another. At
best, the principle that property ownership and enjoyment bear a social function is but a
reiteration of the Civil Law principle that property should not be enjoyed and abused to
the injury of other properties and the community, and that the use of the property may
be restricted by police power, the exercise of which is not involved in this case.
Finally, petitioner alleges that 6 Bistekvilles will be constructed out of the SHT collected.
Bistek is the monicker of respondent City Mayor. The Bistekvilles makes it clear, therefore,
that politicians will take the credit for the tax imposed on real property owners.
On the Garbage Fee
Respondents claim that Ordinance No. S-2235, which is an exercise of police power,
collects on the average from every household a garbage fee in the meager amount of
thirty-three (33) centavos per day compared with the sum of ₱1,659.83 that the Quezon
City Government annually spends for every household for garbage collection and waste
management.62
In addition, there is no double taxation because the ordinance involves a fee. Even
assuming that the garbage fee is a tax, the same cannot be a direct duplicate tax as it is
imposed on a different subject matter and is of a different kind or character. Based on
Villanueva, et al. v. City of Iloilo63 and Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,64 there is no "taxing twice" because the real property tax is imposed on ownership
based on its assessed value, while the garbage fee is required on the domestic household.
The only reference to the property is the determination of the applicable rate and the
facility of collection.
Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise
of police power. The cases of Calalang v. Williams, 65 Patalinghug v. Court of Appeals,66 and
Social Justice Society (SJS), et al. v. Hon. Atienza, Jr., 67 which were cited by respondents,
are inapplicable since the assailed ordinance is a revenue measure and does not regulate
the disposal or other aspect of garbage.
The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from
domestic households and not from restaurants, food courts, fast food chains, and other
commercial dining places that spew garbage much more than residential property
owners.
Petitioner likewise contends that the imposition of garbage fee is tantamount to double
taxation because garbage collection is a basic and essential public service that should be
paid out from property tax, business tax, transfer tax, amusement tax, community tax
certificate, other taxes, and the IRA of the Quezon City Government. To bolster the claim,
he states that the revenue collection of the Quezon City Government reached Php13.69
billion in 2012. A small portion of said amount could be spent for garbage collection and
other essential services.
It is further noted that the Quezon City Government already collects garbage fee under
Section 4768 of R.A. No. 9003, or the Ecological Solid Waste Management Act of 2000,
which authorizes LGUs to impose fees in amounts sufficient to pay the costs of preparing,
adopting, and implementing a solid waste management plan, and that LGUs have access
to the Solid Waste Management (SWM) Fund created under Section 46 69 of the same law.
Also, according to petitioner, it is evident that Ordinance No. S2235 is inconsistent with
R.A. No. 9003 for whil e the law encourages segregation, composting, and recycling of
waste, the ordinance only emphasizes the collection and payment of garbage fee; while
the law calls for an active involvement of the barangay in the collection, segregation, and
recycling of garbage, the ordinance skips such mandate. Lastly, in challenging the
ordinance, petitioner avers that the garbage fee was collected even if the required
publication of its approval had not yet elapsed. He notes that on January 7, 2014, he paid
his realty tax which already included the garbage fee.
The Court's Ruling
Respondents correctly argued that an ordinance, as in every law, is presumed valid.
An ordinance carries with it the presumption of validity. The question of reasonableness
though is open to judicial inquiry. Much should be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an ordinance as unreasonable unless the
amount is so excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
confiscatory. A rule which has gained acceptance is that factors relevant to such an
inquiry are the municipal conditions as a whole and the nature of the business made
subject to imposition.70
For an ordinance to be valid though, it must not only be within the corporate powers of
the LGU to enact and must be passed according to the procedure prescribed by law, it
should also conform to the following requirements: (1) not contrary to the Constitution or
any statute; (2) not unfair or oppressive; (3) not partial or discriminatory; (4) not prohibit
but may regulate trade; (5) general and consistent with public policy; and (6) not
unreasonable.71 As jurisprudence indicates, the tests are divided into the formal (i.e.,
whether the ordinance was enacted within the corporate powers of the LGU and whether
it was passed in accordance with the procedure prescribed by law), and the substantive
( i.e., involving inherent merit, like the conformity of the ordinance with the limitations
under the Constitution and the statutes, as well as with the requirements of fairness and
reason, and its consistency with public policy).72
An ordinance must pass muster under the test of constitutionality and the test of
consistency with the prevailing laws.73 If not, it is void.74
Ordinance should uphold the principle of the supremacy of the Constitution. 75 As to
conformity with existing statutes,
Batangas CATV, Inc. v. Court of Appeals76 has this to say:
It is a fundamental principle that municipal ordinances are inferior in status and
subordinate to the laws of the state. An ordinance in conflict with a state law of general
character and statewide application is universally held to be invalid. The principle is
frequently expressed in the declaration that municipal authorities, under a general grant
of power, cannot adopt ordinances which infringe the spirit of a state law or repugnant to
the general policy of the state. In every power to pass ordinances given to a municipality,
there is an implied restriction that the ordinances shall be consistent with the general law.
In the language of Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties
Corp., Inc., ruled that:
The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local
councils exercise only delegated legislative powers conferred on them by Congress as the
national lawmaking body. The delegate cannot be superior to the principal or exercise
powers higher than those of the latter. It is a heresy to suggest that the local government
units can undo the acts of Congress, from which they have derived their power in the first
place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it may abridge and control. Unless
there is some constitutional limitation on the right, the legislature might, by a single act,
and if we can suppose it capable of so great a folly and so great a wrong, sweep from
existence all of the municipal corporations in the State, and the corporation could not
prevent it. We know of no limitation on the right so far as to the corporation themselves
are concerned. They are so to phrase it, the mere tenants at will of the legislature.
This basic relationship between the national legislature and the local government units
has not been enfeebled by the new provisions in the Constitution strengthening the
policy of local autonomy. Without meaning to detract from that policy, we here confirm
that Congress retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The power to create still
includes the power to destroy. The power to grant still includes the power to withhold or
recall. True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, which cannot now be
withdrawn by mere statute. By and large, however, the national legislature is still the
principal of the local government units, which cannot defy its will or modify or violate it. 77
LGUs must be reminded that they merely form part of the whole; that the policy of
ensuring the autonomy of local governments was never intended by the drafters of the
1987 Constitution to create an imperium in imperio and install an intra-sovereign political
subdivision independent of a single sovereign state.78
"[M]unicipal corporations are bodies politic and corporate, created not only as local units
of local self-government, but as governmental agencies of the state. The legislature, by
establishing a municipal corporation, does not divest the State of any of its sovereignty;
absolve itself from its right and duty to administer the public affairs of the entire state; or
divest itself of any power over the inhabitants of the district which it possesses before the
charter was granted."79
LGUs are able to legislate only by virtue of a valid delegation of legislative power from the
national legislature; they are mere agents vested with what is called the power of
subordinate legislation.80 "Congress enacted the LGC as the implementing law for the
delegation to the various LGUs of the State’s great powers, namely: the police power, the
power of eminent domain, and the power of taxation. The LGC was fashioned to
delineate the specific parameters and limitations to be complied with by each LGU in the
exercise of these delegated powers with the view of making each LGU a fully functioning
subdivision of the State subject to the constitutional and statutory limitations." 81
Specifically, with regard to the power of taxation, it is indubitably the most effective
instrument to raise needed revenues in financing and supporting myriad activities of the
LGUs for the delivery of basic services essential to the promotion of the general welfare
and the enhancement of peace, progress, and prosperity of the people. 82 As this Court
opined in National Power Corp. v. City of Cabanatuan: 83
In recent years, the increasing social challenges of the times expanded the scope of state
activity, and taxation has become a tool to realize social justice and the equitable
distribution of wealth, economic progress and the protection of local industries as well as
public welfare and similar objectives. Taxation assume s even greater significance with the
ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given direct authority to levy
taxes, fees and other charges pursuant to Article X, Section 5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create its own sources of
revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees
and charges shall accrue exclusively to the local governments."
This paradigm shift results from the realization that genuine development can be
achieved only by strengthening local autonomy and promoting decentralization of
governance. For a long time, the country’s highly centralized government structure has
bred a culture of dependence among local government leaders upon the national
leadership. It has also "dampened the spirit of initiative, innovation and imaginative
resilience in matters of local development on the part of local government leaders." The
only way to shatter this culture of dependence is to give the LGUs a wider role in the
delivery of basic services, and confer them sufficient powers to generate their own
sources for the purpose. To achieve this goal, Section 3 of Article X of the 1987
Constitution mandates Congress to enact a local government code that will, consistent
with the basic policy of local autonomy , set the guidelines and limitations to this grant of
taxing powers x x x84
Fairly recently, We also stated in Pelizloy Realty Corporation v. Province of Benguet 85 that:
The rule governing the taxing power of provinces, cities, municipalities and barangays is
summarized in Icard v. City Council of Baguio :
It is settled that a municipal corporation unlike a sovereign state is clothed with no
inherent power of taxation. The charter or statute must plainly show an intent to confer
that power or the municipality, cannot assume it. And the power when granted is to be
construed in strictissimi juris . Any doubt or ambiguity arising out of the term used in
granting that power must be resolved against the municipality. Inferences, implications,
deductions – all these – have no place in the interpretation of the taxing power of a
municipal corporation. [Underscoring supplied]
xxxx
Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested (1) be equitable and based as far as practicable on the taxpayer’s ability
exclusively on Congress; local legislative bodies are now given direct authority to levy to pay;
taxes, fees and other charges." Nevertheless, such authority is "subject to such guidelines
and limitations as the Congress may provide." (2) be levied and collected only for public purposes;

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted (3) not be unjust, excessive, oppressive, or confiscatory;
Republic Act No. 7160, otherwise known as the Local Government Code of 1991. Book II
of the LGC governs local taxation and fiscal matters.86 (4) not be contrary to law, public policy, national economic policy, or in
restraint of trade;
Indeed, LGUs have no inherent power to tax except to the extent that such power might
be delegated to them either by the basic law or by the statute. 87 "Under the now (c) The collection of local taxes, fees, charges and other impositions shall in no
prevailing Constitution , where there is neither a grant nor a prohibition by statute , the case be left to any private person;
tax power must be deemed to exist although Congress may provide statutory limitations
and guidelines. The basic rationale for the current rule is to safeguard the viability and
(d) The revenue collected pursuant to the provisions of this Code shall inure
self-sufficiency of local government units by directly granting them general and broad tax
solely to the benefit of, and be subject to the disposition by, the local
powers. Nevertheless, the fundamental law did not intend the delegation to be absolute
government unit levying the tax, fee, charge or other imposition unless
and unconditional; the constitutional objective obviously is to ensure that, while the local
otherwise specifically provided herein; and,
government units are being strengthened and made more autonomous , the legislature
must still see to it that (a) the taxpayer will not be over-burdened or saddled with
(e) Each local government unit shall, as far as practicable, evolve a progressive
multiple and unreasonable impositions; (b) each local government unit will have its fair
system of taxation.
share of available resources; (c) the resources of the national government will not be
unduly disturbed; and (d) local taxation will be fair, uniform, and just." 88
SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. –
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
Subject to the provisions of the LGC and consistent with the basic policy of local
municipalities, and barangays shall not extend to the levy of the following:
autonomy, every LGU is now empowered and authorized to create its own sources of
revenue and to levy taxes, fees, and charges which shall accrue exclusively to the local
government unit as well as to apply its resources and assets for productive, (a) Income tax, except when levied on banks and other financial institutions;
developmental, or welfare purposes, in the exercise or furtherance of their governmental
or proprietary powers and functions.89 The relevant provisions of the LGC which establish (b) Documentary stamp tax;
the parameters of the taxing power of the LGUs are as follows:
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis
SECTION 130. Fundamental Principles. – The following fundamental principles shall causa, except as otherwise provided herein;
govern th e exercise of the taxing and other revenue-raising powers of local government
units: (d) Customs duties, registration fees of vessel and wharage on wharves, tonnage
dues, and all other kinds of customs fees, charges and dues except wharfage on
(a) Taxation shall be uniform in each local government unit; wharves constructed and maintained by the local government unit concerned;

(b) Taxes, fees, charges and other impositions shall: (e) Taxes, fees, and charges and other impositions upon goods carried into or out
of, or passing through, the territorial jurisdictions of local government units in
the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes,
fees, or charges in any form whatsoever upon such goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as
pioneer or non-pioneer for a period of six (6) and four (4) years, respectively
from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged
in the transportation of passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof, except
tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except
as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises
and cooperatives duly registered under R.A. No. 6810 and Republic Act
Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as
the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities, and local government units.
SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code, the
city, may levy the taxes, fees, and charges which the province or municipality may
impose: Provided, however, That the taxes, fees and charges levied and collected by
highly urbanized and independent component cities shall accrue to them and distributed
in accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the
province or municipality by not more than fifty percent (50%) except the rates of
professional and amusement taxes.
SECTION 186. Power to Levy Other Taxes, Fees or Charges. – Local government units may
exercise the power to levy taxes, fees or charges on any base or subject not otherwise
specifically enumerated herein or taxed under the provisions of the National Internal
Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or
charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such taxes, fees or charges
shall not be enacted without any prior public hearing conducted for the purpose.
On the Socialized Housing Tax
Contrary to petitioner’s submission, the 1987 Constitution explicitly espouses the view
that the use of property bears a social function and that all economic agents shall
contribute to the common good.90 The Court already recognized this in Social Justice
Society (SJS), et al. v. Hon. Atienza, Jr.:91
Property has not only an individual function, insofar as it has to provide for the needs of
the owner, but also a social function insofar as it has to provide for the needs of the other
members of society. The principle is this:
Police power proceeds from the principle that every holder of property, however absolute
and unqualified may be his title, holds it under the implied liability that his use of it shall
not be injurious to the equal enjoyment of others having an equal right to the enjoyment
of their property, no r injurious to the right of the community. Rights of property, like all
other social and conventional rights, are subject to reasonable limitations in their
enjoyment as shall prevent them from being injurious, and to such reasonable restraints
and regulations established by law as the legislature, under the governing an d controlling
power vested in them by the constitution, may think necessary and expedient. 92
Police power, which flows from the recognition that salus populi est suprema lex (the
welfare of the people is the supreme law), is the plenary power vested in the legislature
to make statutes and ordinances to promote the health, morals, peace, education, good
order or safety and general welfare of the people.93 Property rights of individuals may be
subjected to restraints and burdens in order to fulfill the objectives of the government in
the exercise of police power. 94 In this jurisdiction, it is well-entrenched that taxation may
be made the implement of the state’s police power.95
Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to 0.5% on the
assessed value of land in excess of Php100,000.00. This special assessment is the same
tax referred to in R.A. No. 7279 or the UDHA. 96 The SHT is one of the sources of funds for
urban development and housing program.97 Section 43 of the law provides:
Sec. 43. Socialized Housing Tax . – Consistent with the constitutional principle that the
ownership and enjoyment of property bear a social function and to raise funds for the
Program, all local government units are hereby authorized to impose an additional one-
half percent (0.5%) tax on the assessed value of all lands in urban areas in excess of Fifty
thousand pesos (₱50,000.00).
The rationale of the SHT is found in the preambular clauses of the subject ordinance, to
wit:
WHEREAS, the imposition of additional tax is intended to provide the City Government
with sufficient funds to initiate, implement and undertake Socialized Housing Projects and
other related preliminary activities;
WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing Programs and
Projects of the City Government, specifically the marginalized sector through the
acquisition of properties for human settlements;
WHEREAS, the removal of the urban blight will definitely increase fair market value of
properties in the city[.]
The above-quoted are consistent with the UDHA, which the LGUs are charged to
implement in their respective localities in coordination with the Housing and Urban
Development Coordinating Council, the national housing agencies, the Presidential
Commission for the Urban Poor, the private sector, and other non-government
organizations.98 It is the declared policy of the State to undertake a comprehensive and
continuing urban development and housing program that shall, among others, uplift the
conditions of the underprivileged and homeless citizens in urban areas and in
resettlement areas, and provide for the rational use and development of urban land in
order to bring a bout, among others, reduction in urban dysfunctions, particularly those
that adversely affect public health, safety and ecology, and access to land and housing by
the underprivileged and homeless citizens.99 Urban renewal and resettlement shall
include the rehabilitation and development of blighted and slum areas 100 and the
resettlement of program beneficiaries in accordance with the provisions of the
UDHA.101 Under the UDHA, socialized housing102 shall be the primary strategy in providing
shelter for the underprivileged and homeless.103 The LGU or the NHA, in cooperation with
the private developers and concerned agencies, shall provide socialized housing or re
settlement areas with basic services and facilities such as potable water, power and
electricity, and an adequate power distribution system, sewerage facilities, and an
efficient and adequate solid waste disposal system; and access to primary roads and
transportation facilities.104 The provisions for health, education, communications, security,
recreation, relief and welfare shall also be planned and be given priority for
implementation by the LGU and concerned agencies in cooperation with the private
sector and the beneficiaries themselves. 105
Moreover, within two years from the effectivity of the UDHA, the LGUs, in coordination
with the NHA, are directed to implement the relocation and resettlement of persons
living in danger areas such as esteros , railroad tracks, garbage dumps, riverbanks,
shorelines, waterways, and other public places like sidewalks, roads, parks, and
playgrounds.106 In coordination with the NHA, the LG Us shall provide relocation or
resettlement sites with basic services and facilities and access to employment and
livelihood opportunities sufficient to meet the basic needs of the affected families. 107
Clearly, the SHT charged by the Quezon City Government is a tax which is within its power
to impose. Aside from the specific authority vested by Section 43 of the UDHA, cities are
allowed to exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective
provision of the basic services and facilities which include, among others, programs and
projects for low-cost housing and other mass dwellings. 108 The collections made accrue to
its socialized housing programs and projects.
The tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with
a regulatory purpose. The levy is primarily in the exercise of the police power for the
general welfare of the entire city. It is greatly imbued with public interest. Removing slum
areas in Quezon City is not only beneficial to the underprivileged and homeless
constituents but advantageous to the real property owners as well. The situation will
improve the value of the their property investments, fully enjoying the same in view of an
orderly, secure, and safe community, and will enhance the quality of life of the poor,
making them law-abiding constituents and better consumers of business products.
Though broad and far-reaching, police power is subordinate to constitutional limitations
and is subject to the requirement that its exercise must be reasonable and for the public
good.109 In the words of City of Manila v. Hon. Laguio, Jr.: 110
The police power granted to local government units must always be exercised with
utmost observance of the rights of the people to due process and equal protection of the
law. Such power cannot be exercised whimsically, arbitrarily or despotically as its exercise
is subject to a qualification, limitation or restriction demanded by the respect and regard
due to the prescription of the fundamental law, particularly those forming part of the Bill
of Rights. Individual rights, it bears emphasis, may be adversely affected only to the
extent that may fairly be required by the legitimate demands of public interest or public
welfare. Due process requires the intrinsic validity of the law in interfering with the rights
of the person to his life, liberty and property.
xxxx
To successfully invoke the exercise of police power as the rationale for the enactment of
the Ordinance, and to free it from the imputation of constitutional infirmity, not only
must it appear that the interests of the public generally, as distinguished from those of a
particular class, require an interference with private rights, but the means adopted must
be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals. It must be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. A reasonable
relation must exist between the purposes of the police measure and the means employed
for its accomplishment, for even under the guise of protecting the public interest,
personal rights and those pertaining to private property will not be permitted to be
arbitrarily invaded.
Lacking a concurrence of these two requisites, the police measure shall be struck down as
an arbitrary intrusion into private rights – a violation of the due process clause. 111
As with the State, LGUs may be considered as having properly exercised their police
power only if there is a lawful subject and a lawful method or, to be precise, if the
following requisites are met: (1) the interests of the public generally, as distinguished
from those of a particular class, require its exercise and (2) the mean s employed are
reasonably necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals.112
In this case, petitioner argues that the SHT is a penalty imposed on real property owners
because it burdens them with expenses to provide funds for the housing of informal
settlers, and that it is a class legislation since it favors the latter who occupy properties
which is not their own and pay no taxes.
We disagree.
Equal protection requires that all persons or things similarly situated should be treated
alike, both as to rights conferred and responsibilities imposed. 113 The guarantee means
that no person or class of persons shall be denied the same protection of laws which is
enjoyed by other persons or other classes in like circumstances. 114 Similar subjects should
not be treated differently so as to give undue favor to some and unjustly discriminate
against others.115 The law may, therefore, treat and regulate one class differently from
another class provided there are real and substantial differences to distinguish one class
from another.116
An ordinance based on reasonable classification does not violate the constitutional
guaranty of the equal protection of the law. The requirements for a valid and reasonable
classification are: (1) it must rest on substantial distinctions; (2) it must be germane to the
purpose of the law; (3) it must not be limited to existing conditions only; and (4) it must
apply equally to all members of the same class.117For the purpose of undertaking a
comprehensive and continuing urban development and housing program, the disparities
between a real property owner and an informal settler as two distinct classes are too
obvious and need not be discussed at length. The differentiation conforms to the practical
dictates of justice and equity and is not discriminatory within the meaning of the
Constitution. Notably, the public purpose of a tax may legally exist even if the motive
which impelled the legislature to impose the tax was to favor one over another. 118 It is
inherent in the power to tax that a State is free to select the subjects of
taxation.119Inequities which result from a singling out of one particular class for taxation
or exemption infringe no constitutional limitation.120
Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not
confiscatory or oppressive since the tax being imposed therein is below what the UDHA
actually allows. As pointed out by respondents, while the law authorizes LGUs to collect
SHT on lands with an assessed value of more than ₱50,000.00, the questioned ordinance
only covers lands with an assessed value exceeding ₱100,000.00. Even better, on certain
conditions, the ordinance grants a tax credit equivalent to the total amount of the special
assessment paid beginning in the sixth (6th) year of its effectivity. Far from being
obnoxious, the provisions of the subject ordinance are fair and just.
On the Garbage Fee
In the United States of America, it has been held that the authority of a municipality to
regulate garbage falls within its police power to protect public health, safety, and
welfare.121 As opined, the purposes and policy underpinnings of the police power to
regulate the collection and disposal of solid waste are: (1) to preserve and protect the
public health and welfare as well as the environment by minimizing or eliminating a
source of disease and preventing and abating nuisances; and (2) to defray costs and
ensure financial stability of the system for the benefit of the entire community, with the
sum of all charges marshalled and designed to pay for the expense of a systemic refuse
disposal scheme.122
Ordinances regulating waste removal carry a strong presumption of
validity.123 Not surprisingly, the overwhelming majority of U.S. cases addressing a city's
authority to impose mandatory garbage service and fees have upheld the ordinances
against constitutional and statutory challenges.124
A municipality has an affirmative duty to supervise and control the collection of garbage
within its corporate limits.125The LGC specifically assigns the responsibility of regulation
and oversight of solid waste to local governing bodies because the Legislature determined
that such bodies were in the best position to develop efficient waste management
programs.126 To impose on local governments the responsibility to regulate solid waste
but not grant them the authority necessary to fulfill the same would lead to an absurd
result."127 As held in one U.S. case:
x x x When a municipality has general authority to regulate a particular subject matter,
the manner and means of exercising those powers, where not specifically prescribed by
the legislature, are left to the discretion of the municipal authorities. x x x Leaving the
manner of exercising municipal powers to the discretion of municipal authorities "implies
a range of reasonableness within which a municipality's exercise of discretion will not be
interfered with or upset by the judiciary."128
In this jurisdiction, pursuant to Section 16 of the LGC and in the proper exercise of its
corporate powers under Section 22 of the same, the Sangguniang Panlungsod of Quezon
City, like other local legislative bodies, is empowered to enact ordinances, approve
resolutions, and appropriate funds for the genera l welfare of the city and its
inhabitants.129Section 16 of the LGC provides:
SECTION 16. General Welfare . – Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the
preservation and enrichment of culture, promote health and safety, enhance the right of
the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment among
their residents, maintain peace and order, and preserve the comfort and convenience of
their inhabitants.
The general welfare clause is the delegation in statutory form of the police power of the
State to LGUs.130 The provisions related thereto are liberally interpreted to give more
powers to LGUs in accelerating economic development and upgrading the quality of life
for the people in the community.131 Wide discretion is vested on the legislative authority
to determine not only what the interests of the public require but also what measures are
necessary for the protection of such interests since the Sanggunian is in the best position
to determine the needs of its constituents. 132
One of the operative principles of decentralization is that, subject to the provisions of the
LGC and national policies, the LGUs shall share with the national government the
responsibility in the management and maintenance of ecological balance within their
territorial jurisdiction.133 In this regard, cities are allowed to exercise such other powers
and discharge such other functions and responsibilities as are necessary, appropriate, or
incidental to efficient and effective provision of the basic services and facilities which
include, among others, solid waste disposal system or environmental management
system and services or facilities related to general hygiene and sanitation. 134R.A. No. 9003,
or the Ecological Solid Waste Management Act of 2000, 135 affirms this authority as it
expresses that the LGUs shall be primarily responsible for the implementation and
enforcement of its provisions within their respective jurisdictions while establishing a
cooperative effort among the national government, other local government units, non-
government organizations, and the private sector. 136
Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees
and charges for services rendered.137 "Charges" refer 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.138
The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for
the regulation of an activity. The basis for this could be discerned from the foreword of
said Ordinance, to wit:
WHEREAS, Quezon City being the largest and premiere city in the Philippines in terms of
population and urban geographical areas, apart from being competent and efficient in the
delivery of public service, apparently requires a big budgetary allocation in order to
address the problems relative and connected to the prompt and efficient delivery of basic
services such as the effective system of waste management, public information programs
on proper garb age and proper waste disposal, including the imposition of waste
regulatory measures;
WHEREAS, to help augment the funds to be spent for the city’s waste management
system, the City Government through the Sangguniang Panlungsod deems it necessary to
impose a schedule of reasonable fees or charges for the garbage collection services for
residential (domestic household) that it renders to the public.
Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax. In Smart
Communications, Inc. v. Municipality of Malvar, Batangas , 139the Court had the occasion to
distinguish these two concepts:
In Progressive Development Corporation v. Quezon City, the Court declared that "if the
generating 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 incidentally
revenue is also obtained does not make the imposition a tax."
In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court reiterated that the
purpose and effect of the imposition determine whether it is a tax or a fee, and that the
lack of any standards for such imposition gives the presumption that the same is a tax.
We accordingly say that the designation given by the municipal authorities does not
decide whether the imposition is properly a license tax or a license fee.1awp++i1 The
determining factors are the purpose and effect of the imposition as may be apparent
from the provisions of the ordinance. Thus, "[w]hen no police inspection, supervision, or
regulation is provided, nor any standard set for the applicant to establish, or that he
agrees to attain or maintain, but any and all persons engaged in the business designated,
without qualification or hindrance, may come, and a license on payment of the stipulated
sum will issue, to do business, subject to no prescribed rule of conduct and under no
guardian eye, but according to the unrestrained judgment or fancy of the applicant and
licensee, the presumption is strong that the power of taxation, and not the police power,
is being exercised."
In Georgia, U.S.A., assessments for garbage collection services have been consistently
treated as a fee and not a tax.140
In another U.S. case,141 the garbage fee was considered as a "service charge" rather than a
tax as it was actually a fee for a service given by the city which had previously been
provided at no cost to its citizens.
Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235
violates the rule on double taxation142 must necessarily fail.
Nonetheless, although a special charge, tax, or assessment may be imposed by a
municipal corporation, it must be reasonably commensurate to the cost of providing the
garbage service.143 To pass judicial scrutiny, a regulatory fee must not produce revenue in
excess of the cost of the regulation because such fee will be construed as an illegal tax
when the revenue generated by the regulation exceeds the cost of the regulation. 144
Petitioner argues that the Quezon City Government already collects garbage fee under
Section 47 of R.A. No. 9003, which authorizes LGUs to impose fees in amounts sufficient
to pay the costs of preparing, adopting, and implementing a solid waste management
plan, and that it has access to the SWM Fund under Section 46 of the same law.
Moreover, Ordinance No. S-2235 is inconsistent with R.A. No. 9003, because the
ordinance emphasizes the collection and payment of garbage fee with no concern for
segregation, composting and recycling of wastes. It also skips the mandate of the law
calling for the active involvement of the barangay in the collection, segregation, and
recycling of garbage.
We now turn to the pertinent provisions of R.A. No. 9003.
Under R.A. No. 9003, it is the declared policy of the State to adopt a systematic,
comprehensive and ecological solid waste management program which shall, among
others, ensure the proper segregation, collection, transport, storage, treatment and
disposal of solid waste through the formulation and adoption of the best environmental
practices in ecological waste management.145 The law provides that segregation and
collection of solid waste shall be conducted at the barangay level, specifically for
biodegradable, compostable and reusable wastes, while the collection of non-recyclable
materials and special wastes shall be the responsibility of the municipality or
city.146Mandatory segregation of solid wastes shall primarily be conducted at the source,
to include household, institutional, industrial, commercial and agricultural
sources.147 Segregation at source refers to a solid waste management practice of
separating, at the point of origin, different materials found in soli d waste in order to
promote recycling and re-use of resources and to reduce the volume of waste for
collection and disposal.148 Based on Rule XVII of the Department of Environment and
Natural Resources (DENR) Administrative Order No. 2001-34, Series of 2001, 149which is
the Implementing Rules and Regulations ( IRR ) of R.A. No. 9003, barangays shall be
responsible for the collection, segregation, and recycling of biodegradable, recyclable ,
compostable and reusable wastes.150
For the purpose, a Materials Recovery Facility (MRF), which shall receive biodegradable
wastes for composting and mixed non-biodegradable wastes for final segregation, re-use
and recycling, is to be established in every barangay or cluster of barangays. 151
According to R.A. 9003, an LGU, through its local solid waste management board, is
mandated by law to prepare a 10-year solid waste management plan consistent with the
National Solid Waste Management Framework. 152 The plan shall be for the re-use,
recycling and composting of wastes generated in its jurisdiction; ensure the efficient
management of solid waste generated within its jurisdiction; and place primary emphasis
on implementation of all feasible re-use, recycling, and composting programs while
identifying the amount of landfill and transformation capacity that will be needed for
solid waste which cannot be re-used, recycled, or composted. 153 One of the components
of the so lid waste management plan is source reduction:
(e) Source reduction – The source reduction component shall include a program and
implementation schedule which shows the methods by which the LGU will, in
combination with the recycling and composting components, reduce a sufficient amount
of solid waste disposed of in accordance with the diversion requirements of Section 20.
The source reduction component shall describe the following:
(1) strategies in reducing the volume of solid waste generated at source;
(2) measures for implementing such strategies and the resources necessary to
carry out such activities;
(3) other appropriate waste reduction technologies that may also be considered,
provide d that such technologies conform with the standards set pursuant to this
Act;
(4) the types of wastes to be reduced pursuant to Section 15 of this Act;
(5) the methods that the LGU will use to determine the categories of solid
wastes to be diverted from disposal at a disposal facility through re-use ,
recycling and composting; and
(6) new facilities and of expansion of existing facilities which will be needed to
implement re-use, recycling and composting.
The LGU source reduction component shall include the evaluation and identification of
rate structures and fees for the purpose of reducing the amount of waste generated, and
other source reduction strategies, including but not limited to, program s and economic
incentives provided under Sec. 45 of this Act to reduce the use of non-recyclable
materials, replace disposable materials and products with reusable materials and
products, reduce packaging, and increase the efficiency of the use of paper, cardboard,
glass, metal, and other materials. The waste reduction activities of the community shall al
so take into account, among others, local capability, economic viability, technical
requirements, social concerns, disposition of residual waste and environmental impact:
Provided , That, projection of future facilities needed and estimated cost shall be
incorporated in the plan. x x x154
The solid waste management pl an shall also include an implementation schedule for
solid waste diversion:
SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU plan shall include an
implementation schedule which shows that within five (5) years after the effectivity of
this Act, the LGU shall divert at least 25% of all solid waste from waste disposal facilities
through re-use, recycling, and composting activities and other resource recovery
activities: Provided , That the waste diversion goals shall be increased every three (3)
years thereafter: Provided , further, That nothing in this Section prohibits a local
government unit from implementing re-use, recycling, and composting activities designed
to exceed the goal.
The baseline for the twenty-five percent (25%) shall be derived from the waste
characterization result155 that each LGU is mandated to undertake.156In accordance with
Section 46 of R.A. No. 9003, the LGUs are entitled to avail of the SWM Fund on the basis
of their approved solid waste management plan. Aside from this, they may also impose
SWM Fees under Section 47 of the law, which states:
SEC. 47. Authority to Collect Solid Waste Management Fees – The local government unit
shall impose fees in amounts sufficient to pay the costs of preparing, adopting, and
implementing a solid waste management plan prepared pursuant to this Act. The fees
shall be based on the following minimum factors:
(a) types of solid waste;
(b) amount/volume of waste; and
(c) distance of the transfer station to the waste management facility.
The fees shall be used to pay the actual costs incurred by the LGU in collecting the local
fees. In determining the amounts of the fees, an LGU shall include only those costs
directly related to the adoption and implementation of the plan and the setting and
collection of the local fees.
Rule XVII of the IRR of R.A. No. 9003 sets forth the details:
Section 1. Power to Collect Solid Waste Management Fees . – The Local SWM Board/Local
SWM Cluster Board shall impose fees on the SWM services provided for by the LGU
and/or any authorized organization or unit. In determining the amounts of the fees, a
Local SWM Board/Local SWM Cluster Board shall include only those costs directly related
to the adoption and implementation of the SWM Plan and the setting and collection of
the local fees. This power to impose fees may be ceded to the private sector and civil
society groups which have been duly accredited by the Local SWM Boar d/Local SWM
Cluster Board; provided, the SWM fees shall be covered by a Contract or Memorandum of
Agreement between the respective boa rd and the private sector or civil society group.
The fees shall pay for the costs of preparing, adopting and implementing a SWM Plan
prepared pursuant to the Act. Further, the fees shall also be used to pay the actual costs
incurred in collecting the local fees and for project sustainability.
Section 2. Basis of SWM Service Fees
Reasonable SWM service fees shall be computed based on but not limited to the
following minimum factors:
a) Types of solid waste to include special waste
b) amount/volume of waste
c) distance of the transfer station to the waste management facility
d) capacity or type of LGU constituency
e) cost of construction
f) cost of management
g) type of technology
Section 3. Collection of Fees. – Fees may be collected corresponding to the following
levels:
a) Barangay – The Barangay may impose fees for collection and segregation of
biodegradable, compostable and reusable wastes from households, commerce,
other sources of domestic wastes, and for the use of Barangay MRFs. The
computation of the fees shall be established by the respective SWM boards. The
manner of collection of the fees shall be dependent on the style of
administration of respective Barangay Councils. However, all transactions shall
follow the Commission on Audit rules on collection of fees.
b) Municipality – The municipal and city councils may impose fees on the
barangay MRFs for the collection and transport of non-recyclable and special
wastes and for the disposal of these into the sanitary landfill. The level and
procedure for exacting fees shall be defined by the Local SWM Board/Local SWM
Cluster Board and supported by LGU ordinances; however, payments shall be
consistent with the accounting system of government.
c) Private Sector/Civil Society Group – On the basis of the stipulations of contract
or Memorandum of Agreement, the private sector or civil society group shall
 impose fees for collection, transport and tipping in their SLFs. Receipts and LAND AREA IMPOSABLE FEE
invoices shall be issued to the paying public or to the government.
Less than 200 sq. m. PHP 100.00
From the afore-quoted provisions, it is clear that the authority of a municipality or city to 201 sq. m. – 500 sq. m. PHP 200.00
impose fees is limited to the collection and transport of non-recyclable and special wastes
and for the disposal of these into the sanitary landfill. Barangays, on the other hand, have501 sq. m. – 1,000 sq. m. PHP 300.00
the authority to impose fees for the collection and segregation of biodegradable,
compostable and reusable wastes from households, commerce, other sources of 1,001 sq. m. – 1,500 sq. m. PHP 400.00
domestic wastes, and for the use of barangay MRFs. This is but consistent with 1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

Section 10 of R.A. No. 9003 directing that segregation and collection of biodegradable,
On all condominium unit and socialized housing projects/units in Quezon City;
compostable and reusable wastes shall be conducted at the barangay level, while the
collection of non-recyclable materials and special wastes shall be the responsibility of the
municipality or city.
FLOOR AREA IMPOSABLE FEE
In this case, the alleged bases of Ordinance No. S-2235 in imposing the garbage fee is the
volume of waste currently generated by each person in Quezon City, which purportedly
stands at 0.66 kilogram per day, and the increasing trend of waste generation for the past Less than 40 sq. m. PHP 25.00
three years.157 Respondents 41 sq. m. – 60 sq. m. PHP 50.00

did not elaborate any further. The figure presented does not reflect the specific types of 61 sq. m. – 100 sq. m. PHP 75.00
wastes generated – whether residential, market, commercial, industrial,
101 sq. m. – 150 sq. m. PH₱100.00
construction/demolition, street waste, agricultural, agro-industrial, institutional, etc. It is
reasonable, therefore, for the Court to presume that such amount pertains to the totality 151 sq. m. – 200 sq. [m.] or more PHP 200.00
of wastes, without any distinction, generated by Quezon City constituents. To reiterate,
however, the authority of a municipality or city to impose fees extends only to those
On high-rise Condominium Units
related to the collection and transport of non-recyclable and special wastes.

a) High-rise Condominium – The Homeowners Association of high rise

Granting, for the sake of argument, that the 0.66 kilogram of solid waste per day refers
condominiums shall pay the annual garbage fee on the total size of the entire
only to non-recyclable and special wastes, still, We cannot sustain the validity of
condominium and socialized Housing Unit and an additional garbage fee shall be
Ordinance No. S-2235. It violates the equal protection clause of the Constitution and the
collected based on area occupied for every unit already so ld or being amortized.
provisions of the LGC that an ordinance must be equitable and based as far as practicable
on the taxpayer’s ability to pay, and not unjust, excessive, oppressive, confiscatory. 158
b) High-rise apartment units – Owners of high-rise apartment units shall pay the
annual garbage fee on the total lot size of the entire apartment and an additional
In the subject ordinance, the rates of the imposable fee depend on land or floor area and
garbage fee based on the schedule prescribed herein for every unit occupied.
whether the payee is an occupant of a lot, condominium, social housing project or
apartment. For easy reference, the relevant provision is again quoted below:
For the purpose of garbage collection, there is, in fact, no substantial distinction between
an occupant of a lot, on one hand, and an occupant of a unit in a condominium, socialized
On all domestic households in Quezon City;
housing project or apartment, on the other hand. Most likely, garbage output produced
by these types of occupants is uniform and does not vary to a large degree; thus, a similar
schedule of fee is both just and equitable. 159
The rates being charged by the ordinance are unjust and inequitable: a resident of a 200
sq. m. unit in a condominium or socialized housing project has to pay twice the amount
than a resident of a lot similar in size; unlike unit occupants, all occupants of a lot with an
area of 200 sq. m. and less have to pay a fixed rate of Php100.00; and the same amount
of garbage fee is imposed regardless of whether the resident is from a condominium or
from a socialized housing project.
Indeed, the classifications under Ordinance No. S-2235 are not germane to its declared
purpose of "promoting shared responsibility with the residents to attack their common
mindless attitude in over-consuming the present resources and in generating
waste."160 Instead of simplistically categorizing the payee into land or floor occupant of a
lot or unit of a condominium, socialized housing project or apartment, respondent City
Council should have considered factors that could truly measure the amount of wastes
generated and the appropriate fee for its collection. Factors include, among others,
household age and size, accessibility to waste collection, population density of the
barangay or district, capacity to pay, and actual occupancy of the property. R.A. No. 9003
may also be looked into for guidance. Under said law, WM service fees may be computed
based on minimum factors such as type s of solid waste to include special waste,
amount/volume of waste, distance of the transfer station to the waste management
facility, capacity or type of LGU constituency, cost of construction, cost of management,
and type of technology. With respect to utility rates set by municipalities, a municipality
has the right to classify consumers under reasonable classifications based upon factors
such as the cost of service, the purpose for which the service or the product is received,
the quantity or the amount received, the different character of the service furnished, the
time of its use or any other matter which presents a substantial difference as a ground of
distinction.161[A] lack of uniformity in the rate charged is not necessarily unlawful
discrimination. The establishment of classifications and the charging of different rates for
the several classes is not unreasonable and does not violate the requirements of equality
and uniformity. Discrimination to be unlawful must draw an unfair line or strike an unfair
balance between those in like circumstances having equal rights and privileges.
Discrimination with respect to rates charged does not vitiate unless it is arbitrary and
without a reasonable fact basis or justification.162
On top of an unreasonable classification, the penalty clause of Ordinance No. SP-2235,
which states:
SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due plus an interest of
2% per month or a fraction thereof (interest) shall be charged against a household owner
who refuses to pay the garbage fee herein imposed. lacks the limitation required by
Section 168 of the LGC, which provides:
SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. – The
sanggunian may impose a surcharge not exceeding twenty-five (25%) of the amount of
taxes, fees or charges not paid on time and an interest at the rate not exceeding two
percent (2%) per month of the unpaid taxes, fees or charges including surcharges, until
such amount is fully paid but in no case shall the total interest on the unpaid amount or
portion thereof exceed thirty-six (36) months. (Emphasis supplied)
Finally, on the issue of publication of the two challenged ordinances.
Petitioner argues that the garbage fee was collected even if the required publication of its
approval had not yet elapsed. He notes that he paid his realty tax on January 7, 2014
which already included the garbage fee. Respondents counter that if the law provides for
its own effectivity, publication in the Official Gazette is not necessary so long as it is not
penal in nature. Allegedly, Ordinance No. SP-2095 took effect after its publication while
Ordinance No. SP-2235 became effective after its approval on December 26, 2013.
The pertinent provisions of the LGC state:
SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless otherwise stated in the
ordinance or the resolution approving the local development plan and public investment
program, the same shall take effect after ten (10) days from the date a copy thereof is
posted in a bulletin board at the entrance of the provincial capital or city, municipal, or
barangay hall, as the case may be, and in at least two (2) other conspicuous places in the
local government unit concerned.
(b) The secretary to the sanggunian concerned shall cause the posting of an
ordinance or resolution in the bulletin board at the entrance of the provincial
capital and the city, municipal, or barangay hall in at least two
(2) conspicuous places in the local government unit concerned not later than five
(5) days after approval thereof.
The text of the ordinance or resolution shall be disseminated and posted in
Filipino or English and in the language or dialect understood by the majority of
 the people in the local government unit concerned, and the secretary to the
sanggunian shall record such fact in a book kept for the purpose, stating the
dates of approval and posting.
(c) The gist of all ordinances with penal sanctions shall be published in a
newspaper of general circulation within the province where the local legislative
body concerned belongs. In the absence of any newspaper of general circulation
within the province, posting of such ordinances shall be made in all
municipalities and cities of the province where the sanggunian of origin is
situated.
(d) In the case of highly urbanized and independent component cities, the main
features of the ordinance or resolution duly enacted or adopted shall, in addition
to being posted, be published once in a local newspaper of general circulation
within the city: Provided, That in the absence thereof the ordinance or
resolution shall be published in any newspaper of general circulation.
SECTION 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10)
days after their approval, certified true copies of all provincial, city, and municipal tax
ordinances or revenue measures shall be published in full for three (3) consecutive days
in a newspaper of local circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the same may be
posted in at least two (2) conspicuous and publicly accessible places. (Emphasis supplied)
On October 17, 2011, respondent Quezon City Council enacted Ordinance No. SP-2095,
which provides that it would take effect after its publication in a newspaper of general
circulation.163 On the other hand, Ordinance No. SP-2235, which was passed by the City
Council on December 16, 2013, provides that it would be effective upon its approval. 164
Ten (10) days after its enactment, or on December 26, 2013, respondent City Mayor
approved the same.165
The case records are bereft of any evidence to prove petitioner’s negative allegation that
respondents did not comply with the posting and publication requirements of the law.
Thus, We are constrained not to give credit to his unsupported claim.
WHEREFORE, the petition is PARTIALLY GRANTED. The constitutionality and legality of
Ordinance No. SP-2095, S-2011, or the "Socialized Housing Tax of Quezon City," is·
SUSTAINED for being consistent ·with Section·43 of Republic Act No. ·7279. On the other
hand, Ordinance No. SP-2235, S-2013, which collects an annual garbage fee on all
domestic households in Quezon City, is hereby declared as UNCONSTITUTIONAL AND
ILLEGAL. Respondents are DIRECTED to REFUND with reasonable dispatch the sums of
money collected relative to its enforcement. The temporary restraining order issued by
the Court on February 5, 2014 is LIFTED with respect to Ordinance No. SP-2095. In
contrast, respondents are PERMANENTLY ENJOINED from taking any further action to
enforce Ordinance No. SP. 2235.
SO ORDERED.
EN BANC
G.R. No. 78742 July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ,
GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR
B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G.
ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J.
PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO, CONSUELO M. MORALES,
BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310 July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,
HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM
COUNCIL, respondents.
G.R. No. 79744 July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON.
JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT, and Messrs.
SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO
TAAY, respondents.
G.R. No. 79777 July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES, respondents.
CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules
for his life on his way to Mycenae after performing his eleventh labor. The two wrestled
mightily and Hercules flung his adversary to the ground thinking him dead, but Antaeus
rose even stronger to resume their struggle. This happened several times to Hercules'
increasing amazement. Finally, as they continued grappling, it dawned on Hercules that
Antaeus was the son of Gaea and could never die as long as any part of his body was
touching his Mother Earth. Thus forewarned, Hercules then held Antaeus up in the air,
beyond the reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even
the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell of the
elemental forces of life and death, of men and women who, like Antaeus need the
sustaining strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in the
distribution of this precious resource among our people. But it is more than a slogan.
Through the brooding centuries, it has become a battle-cry dramatizing the increasingly
urgent demand of the dispossessed among us for a plot of earth as their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social justice to
"insure the well-being and economic security of all the people," 1 especially the less
privileged. In 1973, the new Constitution affirmed this goal adding specifically that "the
State shall regulate the acquisition, ownership, use, enjoyment and disposition of private
property and equitably diffuse property ownership and profits." 2 Significantly, there was
also the specific injunction to "formulate and implement an agrarian reform program
aimed at emancipating the tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it
also adopted one whole and separate Article XIII on Social Justice and Human Rights,
containing grandiose but undoubtedly sincere provisions for the uplift of the common
people. These include a call in the following words for the adoption by the State of an
agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform program
founded on the right of farmers and regular farmworkers, who are
landless, to own directly or collectively the lands they till or, in the case
of other farmworkers, to receive a just share of the fruits thereof. To
this end, the State shall encourage and undertake the just distribution
of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations and subject to the
payment of just compensation. In determining retention limits, the
State shall respect the right of small landowners. The State shall further
provide incentives for voluntary land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had
already been enacted by the Congress of the Philippines on August 8, 1963, in line with
the above-stated principles. This was substantially superseded almost a decade later by
P.D. No. 27, which was promulgated on October 21, 1972, along with martial law, to
provide for the compulsory acquisition of private lands for distribution among tenant-
farmers and to specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even energized the
thrust for agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino issued
E.O. No. 228, declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and
providing for the valuation of still unvalued lands covered by the decree as well as the
manner of their payment. This was followed on July 22, 1987 by Presidential Proclamation
No. 131, instituting a comprehensive agrarian reform program (CARP), and E.O. No. 229,
providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines took
over legislative power from the President and started its own deliberations, including
extensive public hearings, on the improvement of the interests of farmers. The result,
after almost a year of spirited debate, was the enactment of R.A. No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law of 1988, which President Aquino
signed on June 10, 1988. This law, while considerably changing the earlier mentioned
enactments, nevertheless gives them suppletory effect insofar as they are not
inconsistent with its provisions. 4
The above-captioned cases have been consolidated because they involve common legal
questions, including serious challenges to the constitutionality of the several measures
mentioned above. They will be the subject of one common discussion and resolution, The
different antecedents of each case will require separate treatment, however, and will first
be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and
229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants and owned
by petitioner Nicolas Manaay and his wife and a 5-hectare riceland worked by four
tenants and owned by petitioner Augustin Hermano, Jr. The tenants were declared full
owners of these lands by E.O. No. 228 as qualified farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter
alia of separation of powers, due process, equal protection and the constitutional
limitation that no private property shall be taken for public use without just
compensation.
They contend that President Aquino usurped legislative power when she promulgated
E.O. No. 228. The said measure is invalid also for violation of Article XIII, Section 4, of the
Constitution, for failure to provide for retention limits for small landowners. Moreover, it
does not conform to Article VI, Section 25(4) and the other requisites of a valid
appropriation.
In connection with the determination of just compensation, the petitioners argue that the
same may be made only by a court of justice and not by the President of the Philippines.
They invoke the recent cases of EPZA v. Dulay 5 andManotok v. National Food
Authority. 6 Moreover, the just compensation contemplated by the Bill of Rights is payable
in money or in cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order also
deprives the petitioners of their property rights as protected by due process. The equal
protection clause is also violated because the order places the burden of solving the
agrarian problems on the owners only of agricultural lands. No similar obligation is
imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be
the owners of the lands occupied by them, E.O. No. 228 ignored judicial prerogatives and
so violated due process. Worse, the measure would not solve the agrarian problem
because even the small farmers are deprived of their lands and the retention rights
guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in
the earlier cases ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and
Corn Producers of the Philippines, Inc. v. The National Land Reform Council. 9 The
determination of just compensation by the executive authorities conformably to the
formula prescribed under the questioned order is at best initial or preliminary only. It
does not foreclose judicial intervention whenever sought or warranted. At any rate, the
challenge to the order is premature because no valuation of their property has as yet
been made by the Department of Agrarian Reform. The petitioners are also not proper
parties because the lands owned by them do not exceed the maximum retention limit of
7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not
provide for retention limits on tenanted lands and that in any event their petition is a
class suit brought in behalf of landowners with landholdings below 24 hectares. They
maintain that the determination of just compensation by the administrative authorities is
a final ascertainment. As for the cases invoked by the public respondent, the
constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was decided
in Gonzales was the validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O.
Nos. 228 and 229 (except Sections 20 and 21) have been impliedly repealed by R.A. No.
6657. Nevertheless, this statute should itself also be declared unconstitutional because it
suffers from substantially the same infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz,
owner of a 1. 83- hectare land, who complained that the DAR was insisting on the
implementation of P.D. No. 27 and E.O. No. 228 despite a compromise agreement he had
reached with his tenant on the payment of rentals. In a subsequent motion dated April
10, 1989, he adopted the allegations in the basic amended petition that the above-
mentioned enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill District,
Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc. is an organization
composed of 1,400 planter-members. This petition seeks to prohibit the implementation
of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian Reform
Program as decreed by the Constitution belongs to Congress and not the President.
Although they agree that the President could exercise legislative power until the Congress
was convened, she could do so only to enact emergency measures during the transition
period. At that, even assuming that the interim legislative power of the President was
properly exercised, Proc. No. 131 and E.O. No. 229 would still have to be annulled for
violating the constitutional provisions on just compensation, due process, and equal
protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as the
Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to
cover the estimated cost of the Comprehensive Agrarian Reform Program from 1987 to
1992 which shall be sourced from the receipts of the sale of the assets of the Asset
Privatization Trust and Receipts of sale of ill-gotten wealth received through the
Presidential Commission on Good Government and such other sources as government
may deem appropriate. The amounts collected and accruing to this special fund shall be
considered automatically appropriated for the purpose authorized in this Proclamation
the amount appropriated is in futuro, not in esse. The money needed to cover the cost of
the contemplated expropriation has yet to be raised and cannot be appropriated at this
time.
Furthermore, they contend that taking must be simultaneous with payment of just
compensation as it is traditionally understood, i.e., with money and in full, but no such
payment is contemplated in Section 5 of the E.O. No. 229. On the contrary, Section 6,
thereof provides that the Land Bank of the Philippines "shall compensate the landowner
in an amount to be established by the government, which shall be based on the owner's
declaration of current fair market value as provided in Section 4 hereof, but subject to
certain controls to be defined and promulgated by the Presidential Agrarian Reform
Council." This compensation may not be paid fully in money but in any of several modes
that may consist of part cash and part bond, with interest, maturing periodically, or direct
payment in cash or bond as may be mutually agreed upon by the beneficiary and the
landowner or as may be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort was made
to make a careful study of the sugar planters' situation. There is no tenancy problem in
the sugar areas that can justify the application of the CARP to them. To the extent that
the sugar planters have been lumped in the same legislation with other farmers, although
they are a separate group with problems exclusively their own, their right to equal
protection has been violated.
A motion for intervention was filed on August 27,1987 by the National Federation of
Sugarcane Planters (NASP) which claims a membership of at least 20,000 individual sugar
planters all over the country. On September 10, 1987, another motion for intervention
was filed, this time by Manuel Barcelona, et al., representing coconut and riceland
owners. Both motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian Reform
Program and that, in any event, the appropriation is invalid because of uncertainty in the
amount appropriated. Section 2 of Proc. No. 131 and Sections 20 and 21 of E.O. No. 229
provide for an initial appropriation of fifty billion pesos and thus specifies the minimum
rather than the maximum authorized amount. This is not allowed. Furthermore, the
stated initial amount has not been certified to by the National Treasurer as actually
available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by clear
and convincing evidence the necessity for the exercise of the powers of eminent domain,
and the violation of the fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is the
expropriation of the said land for an amount equal to the government assessor's
valuation of the land for tax purposes. On the other hand, if the landowner declares his
own valuation he is unjustly required to immediately pay the corresponding taxes on the
land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption of
constitutionality in favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity
for the expropriation as explained in the "whereas" clauses of the Proclamation and
submits that, contrary to the petitioner's contention, a pilot project to determine the
feasibility of CARP and a general survey on the people's opinion thereon are not
indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have failed to
show that they belong to a different class and should be differently treated. The
Comment also suggests the possibility of Congress first distributing public agricultural
lands and scheduling the expropriation of private agricultural lands later. From this
viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is against the
payment of public money without the corresponding appropriation. There is no rule that
only money already in existence can be the subject of an appropriation law. Finally, the
earmarking of fifty billion pesos as Agrarian Reform Fund, although denominated as an
initial amount, is actually the maximum sum appropriated. The word "initial" simply
means that additional amounts may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own
behalf, assailing the constitutionality of E.O. No. 229. In addition to the arguments already
raised, Serrano contends that the measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not
expressed in the title;
(3) The power of the President to legislate was terminated on July 2,
1987; and
(4) The appropriation of a P50 billion special fund from the National
Treasury did not originate from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform, in
violation of due process and the requirement for just compensation, placed his
landholding under the coverage of Operation Land Transfer. Certificates of Land Transfer
were subsequently issued to the private respondents, who then refused payment of lease
rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his small
landholding under Operation Land transfer and asked for the recall and cancellation of
the Certificates of Land Transfer in the name of the private respondents. He claims that
on December 24, 1986, his petition was denied without hearing. On February 17, 1987,
he filed a motion for reconsideration, which had not been acted upon when E.O. Nos. 228
and 229 were issued. These orders rendered his motion moot and academic because they
directly effected the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the
Philippines.
(2) The said executive orders are violative of the constitutional provision
that no private property shall be taken without due process or just
compensation.
(3) The petitioner is denied the right of maximum retention provided for
under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before
Congress convened is anomalous and arbitrary, besides violating the doctrine of
separation of powers. The legislative power granted to the President under the Transitory
Provisions refers only to emergency measures that may be promulgated in the proper
exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due
process of law and to the retention of his small parcels of riceholding as guaranteed
under Article XIII, Section 4 of the Constitution. He likewise argues that, besides denying
him just compensation for his land, the provisions of E.O. No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary after
October 21, 1972 shall be considered as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention that the
inclusion of even small landowners in the program along with other landowners with
lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature because the
motion for reconsideration filed with the Minister of Agrarian Reform is still unresolved.
As for the validity of the issuance of E.O. Nos. 228 and 229, he argues that they were
enacted pursuant to Section 6, Article XVIII of the Transitory Provisions of the 1987
Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first
Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was promulgated
on October 21. 1972, the tenant-farmer of agricultural land was deemed the owner of the
land he was tilling. The leasehold rentals paid after that date should therefore be
considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he filed
was resolved on December 14, 1987. An appeal to the Office of the President would be
useless with the promulgation of E.O. Nos. 228 and 229, which in effect sanctioned the
validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners
of rice and corn lands not exceeding seven hectares as long as they are cultivating or
intend to cultivate the same. Their respective lands do not exceed the statutory limit but
are occupied by tenants who are actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:
No tenant-farmer in agricultural lands primarily devoted to rice and
corn shall be ejected or removed from his farmholding until such time
as the respective rights of the tenant- farmers and the landowner shall
have been determined in accordance with the rules and regulations
implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy their
right of retention because the Department of Agrarian Reform has so far not issued the
implementing rules required under the above-quoted decree. They therefore ask the
Court for a writ of mandamus to compel the respondent to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI
474 removing any right of retention from persons who own other agricultural lands of
more than 7 hectares in aggregate area or lands used for residential, commercial,
industrial or other purposes from which they derive adequate income for their family.
And even assuming that the petitioners do not fall under its terms, the regulations
implementing P.D. No. 27 have already been issued, to wit, the Memorandum dated July
10, 1975 (Interim Guidelines on Retention by Small Landowners, with an accompanying
Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978,
(Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated
December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by
Small Landowners), and DAR Administrative Order No. 1, series of 1985 (Providing for a
Cut-off Date for Landowners to Apply for Retention and/or to Protest the Coverage of
their Landholdings under Operation Land Transfer pursuant to P.D. No. 27). For failure to
file the corresponding applications for retention under these measures, the petitioners
are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely initiated this
case notwithstanding the pendency of their appeal to the President of the Philippines.
Moreover, the issuance of the implementing rules, assuming this has not yet been done,
involves the exercise of discretion which cannot be controlled through the writ
of mandamus. This is especially true if this function is entrusted, as in this case, to a
separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not applicable to
them because they do not own more than seven hectares of agricultural land. Moreover,
assuming arguendo that the rules were intended to cover them also, the said measures
are nevertheless not in force because they have not been published as required by law
and the ruling of this Court in Tanada v. Tuvera.10 As for LOI 474, the same is ineffective
for the additional reason that a mere letter of instruction could not have repealed the
presidential decree.
I
Although holding neither purse nor sword and so regarded as the weakest of the three
departments of the government, the judiciary is nonetheless vested with the power to
annul the acts of either the legislative or the executive or of both when not conformable
to the fundamental law. This is the reason for what some quarters call the doctrine of
judicial supremacy. Even so, this power is not lightly assumed or readily exercised. The
doctrine of separation of powers imposes upon the courts a proper restraint, born of the
nature of their functions and of their respect for the other departments, in striking down
the acts of the legislative and the executive as unconstitutional. The policy, indeed, is a
blend of courtesy and caution. To doubt is to sustain. The theory is that before the act
was done or the law was enacted, earnest studies were made by Congress or the
President, or both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members of
the Supreme Court who took part in the deliberations and voted on the issue during their
session en banc.11 And as established by judge made doctrine, the Court will assume
jurisdiction over a constitutional question only if it is shown that the essential requisites
of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual
case or controversy involving a conflict of legal rights susceptible of judicial
determination, the constitutional question must have been opportunely raised by the
proper party, and the resolution of the question is unavoidably necessary to the decision
of the case itself. 12
With particular regard to the requirement of proper party as applied in the cases before
us, we hold that the same is satisfied by the petitioners and intervenors because each of
them has sustained or is in danger of sustaining an immediate injury as a result of the acts
or measures complained of. 13 And even if, strictly speaking, they are not covered by the
definition, it is still within the wide discretion of the Court to waive the requirement and
so remove the impediment to its addressing and resolving the serious constitutional
questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to
question the constitutionality of several executive orders issued by President Quirino
although they were invoking only an indirect and general interest shared in common with
the public. The Court dismissed the objection that they were not proper parties and ruled
that "the transcendental importance to the public of these cases demands that they be
settled promptly and definitely, brushing aside, if we must, technicalities of procedure."
We have since then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when confronted
with constitutional issues like the ones now before it, it will not hesitate to declare a law
or act invalid when it is convinced that this must be done. In arriving at this conclusion, its
only criterion will be the Constitution as God and its conscience give it the light to probe
its meaning and discover its purpose. Personal motives and political considerations are
irrelevancies that cannot influence its decision. Blandishment is as ineffectual as
intimidation.
For all the awesome power of the Congress and the Executive, the Court will not hesitate
to "make the hammer fall, and heavily," to use Justice Laurel's pithy language, where the
acts of these departments, or of any public official, betray the people's will as expressed
in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that —
... when the judiciary mediates to allocate constitutional boundaries, it
does not assert any superiority over the other departments; it does not
in reality nullify or invalidate an act of the Legislature, but only asserts
the solemn and sacred obligation assigned to it by the Constitution to
determine conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights which that
instrument secures and guarantees to them. This is in truth all that is
involved in what is termed "judicial supremacy" which properly is the
power of judicial review under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court must
categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the more
serious challenges to the constitutionality of the several measures involved in these
petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under
martial law has already been sustained in Gonzales v. Estrella and we find no reason to
modify or reverse it on that issue. As for the power of President Aquino to promulgate
Proc. No. 131 and E.O. Nos. 228 and 229, the same was authorized under Section 6 of the
Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the
Congress of the Philippines was formally convened and took over legislative power from
her. They are not "midnight" enactments intended to pre-empt the legislature because
E.O. No. 228 was issued on July 17, 1987, and the other measures, i.e., Proc. No. 131 and
E.O. No. 229, were both issued on July 22, 1987. Neither is it correct to say that these
measures ceased to be valid when she lost her legislative power for, like any statute, they
continue to be in force unless modified or repealed by subsequent law or declared invalid
by the courts. A statute does not ipso facto become inoperative simply because of the
dissolution of the legislature that enacted it. By the same token, President Aquino's loss
of legislative power did not have the effect of invalidating all the measures enacted by her
when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but in fact
substantially affirmed the challenged measures and has specifically provided that they
shall be suppletory to R.A. No. 6657 whenever not inconsistent with its
provisions. 17 Indeed, some portions of the said measures, like the creation of the P50
billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have
been incorporated by reference in the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it does not
conform to the requirements of a valid appropriation as specified in the Constitution.
Clearly, however, Proc. No. 131 is not an appropriation measure even if it does provide for
the creation of said fund, for that is not its principal purpose. An appropriation law is one
the primary and specific purpose of which is to authorize the release of public funds from
the treasury. 19 The creation of the fund is only incidental to the main objective of the
proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24 and
Section 25(4) of Article VI, are not applicable. With particular reference to Section 24, this
obviously could not have been complied with for the simple reason that the House of
Representatives, which now has the exclusive power to initiate appropriation measures,
had not yet been convened when the proclamation was issued. The legislative power was
then solely vested in the President of the Philippines, who embodied, as it were, both
houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be
invalidated because they do not provide for retention limits as required by Article XIII,
Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide for such
limits now in Section 6 of the law, which in fact is one of its most controversial provisions.
This section declares:
Retention Limits. — Except as otherwise provided in this Act, no person
may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors
governing a viable family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in
no case shall retention by the landowner exceed five (5) hectares. Three
(3) hectares may be awarded to each child of the landowner, subject to
the following qualifications: (1) that he is at least fifteen (15) years of
age; and (2) that he is actually tilling the land or directly managing the
farm; Provided, That landowners whose lands have been covered by
Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees
or direct compulsory heirs who still own the original homestead at the
time of the approval of this Act shall retain the same areas as long as
they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill shall
have only one subject, to be expressed in its title, deserves only short attention. It is
settled that the title of the bill does not have to be a catalogue of its contents and will
suffice if the matters embodied in the text are relevant to each other and may be inferred
from the title. 20
The Court wryly observes that during the past dictatorship, every presidential issuance, by
whatever name it was called, had the force and effect of law because it came from
President Marcos. Such are the ways of despots. Hence, it is futile to argue, as the
petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No. 27
because the former was only a letter of instruction. The important thing is that it was
issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still had to
comply with the requirement for publication as this Court held in Tanada v.
Tuvera. 21 Hence, unless published in the Official Gazette in accordance with Article 2 of
the Civil Code, they could not have any force and effect if they were among those
enactments successfully challenged in that case. LOI 474 was published, though, in the
Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of
mandamus cannot issue to compel the performance of a discretionary act, especially by a
specific department of the government. That is true as a general proposition but is
subject to one important qualification. Correctly and categorically stated, the rule is that
mandamus will lie to compel the discharge of the discretionary duty itself but not to
control the discretion to be exercised. In other words, mandamus can issue to require
action only but not specific action.
Whenever a duty is imposed upon a public official and an unnecessary
and unreasonable delay in the exercise of such duty occurs, if it is a
clear duty imposed by law, the courts will intervene by the
extraordinary legal remedy of mandamus to compel action. If the duty
is purely ministerial, the courts will require specific action. If the duty is
purely discretionary, the courts by mandamus will require action only.
For example, if an inferior court, public official, or board should, for an
unreasonable length of time, fail to decide a particular question to the
great detriment of all parties concerned, or a court should refuse to
take jurisdiction of a cause when the law clearly gave it jurisdiction
mandamus will issue, in the first case to require a decision, and in the
second to require that jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a plain,
speedy and adequate remedy available from the administrative authorities, resort to the
courts may still be permitted if the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of eminent
domain that logically preclude the application of both powers at the same time on the
same subject. In the case of City of Baguio v. NAWASA, 24for example, where a law
required the transfer of all municipal waterworks systems to the NAWASA in exchange for
its assets of equivalent value, the Court held that the power being exercised was eminent
domain because the property involved was wholesome and intended for a public use.
Property condemned under the police power is noxious or intended for a noxious
purpose, such as a building on the verge of collapse, which should be demolished for the
public safety, or obscene materials, which should be destroyed in the interest of public
morals. The confiscation of such property is not compensable, unlike the taking of
property under the power of expropriation, which requires the payment of just
compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of
the police power in a famous aphorism: "The general rule at least is that while property
may be regulated to a certain extent, if regulation goes too far it will be recognized as a
taking." The regulation that went "too far" was a law prohibiting mining which might
cause the subsidence of structures for human habitation constructed on the land surface.
This was resisted by a coal company which had earlier granted a deed to the land over its
mine but reserved all mining rights thereunder, with the grantee assuming all risks and
waiving any damage claim. The Court held the law could not be sustained without
compensating the grantor. Justice Brandeis filed a lone dissent in which he argued that
there was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the exercise of
the police power deprives the owner of some right theretofore enjoyed,
and is, in that sense, an abridgment by the State of rights in property
without making compensation. But restriction imposed to protect the
public health, safety or morals from dangers threatened is not a taking.
The restriction here in question is merely the prohibition of a noxious
use. The property so restricted remains in the possession of its owner.
The state does not appropriate it or make any use of it. The state merely
prevents the owner from making a use which interferes with paramount
rights of the public. Whenever the use prohibited ceases to be noxious
— as it may because of further changes in local or social conditions —
the restriction will have to be removed and the owner will again be free
to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the police
power and the power of eminent domain, with the latter being used as an implement of
the former like the power of taxation. The employment of the taxing power to achieve a
police purpose has long been accepted. 26 As for the power of expropriation, Prof. John J.
Costonis of the University of Illinois College of Law (referring to the earlier case of Euclid
v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the police power)
makes the following significant remarks:
Euclid, moreover, was decided in an era when judges located the Police
and eminent domain powers on different planets. Generally speaking,
they viewed eminent domain as encompassing public acquisition of
private property for improvements that would be available for public
use," literally construed. To the police power, on the other hand, they
assigned the less intrusive task of preventing harmful externalities a
point reflected in the Euclid opinion's reliance on an analogy to
nuisance law to bolster its support of zoning. So long as suppression of
a privately authored harm bore a plausible relation to some legitimate
 "public purpose," the pertinent measure need have afforded no
compensation whatever. With the progressive growth of government's
involvement in land use, the distance between the two powers has
contracted considerably. Today government often employs eminent
domain interchangeably with or as a useful complement to the police
power-- a trend expressly approved in the Supreme Court's 1954
decision in Berman v. Parker, which broadened the reach of eminent
domain's "public use" test to match that of the police power's standard
of "public purpose." 27
The Berman case sustained a redevelopment project and the improvement of blighted
areas in the District of Columbia as a proper exercise of the police power. On the role of
eminent domain in the attainment of this purpose, Justice Douglas declared:
If those who govern the District of Columbia decide that the Nation's
Capital should be beautiful as well as sanitary, there is nothing in the
Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to realize
it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the
U.S Supreme Court sustained the respondent's Landmarks Preservation Law under which
the owners of the Grand Central Terminal had not been allowed to construct a multi-story
office building over the Terminal, which had been designated a historic landmark.
Preservation of the landmark was held to be a valid objective of the police power. The
problem, however, was that the owners of the Terminal would be deprived of the right to
use the airspace above it although other landowners in the area could do so over their
respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central Terminal
which it said would "undoubtedly mitigate" the loss caused by the regulation. This "fair
compensation," as he called it, was explained by Prof. Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central was
authorized to transfer to neighboring properties the authorized but unused rights
accruing to the site prior to the Terminal's designation as a landmark — the rights which
would have been exhausted by the 59-story building that the city refused to countenance
atop the Terminal. Prevailing bulk restrictions on neighboring sites were proportionately
relaxed, theoretically enabling Penn Central to recoup its losses at the Terminal site by
constructing or selling to others the right to construct larger, hence more profitable
buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the question of
compensable taking is concerned. To the extent that the measures under challenge
merely prescribe retention limits for landowners, there is an exercise of the police power
for the regulation of private property in accordance with the Constitution. But where, to
carry out such regulation, it becomes necessary to deprive such owners of whatever lands
they may own in excess of the maximum area allowed, there is definitely a taking under
the power of eminent domain for which payment of just compensation is imperative. The
taking contemplated is not a mere limitation of the use of the land. What is required is
the surrender of the title to and the physical possession of the said excess and all
beneficial rights accruing to the owner in favor of the farmer-beneficiary. This is definitely
an exercise not of the police power but of the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain, the
several measures before us are challenged as violative of the due process and equal
protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention
limits are prescribed has already been discussed and dismissed. It is noted that although
they excited many bitter exchanges during the deliberation of the CARP Law in Congress,
the retention limits finally agreed upon are, curiously enough, not being questioned in
these petitions. We therefore do not discuss them here. The Court will come to the other
claimed violations of due process in connection with our examination of the adequacy of
just compensation as required under the power of expropriation.
The argument of the small farmers that they have been denied equal protection because
of the absence of retention limits has also become academic under Section 6 of R.A. No.
6657. Significantly, they too have not questioned the area of such limits. There is also the
complaint that they should not be made to share the burden of agrarian reform, an
objection also made by the sugar planters on the ground that they belong to a particular
class with particular interests of their own. However, no evidence has been submitted to
the Court that the requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or things similar to each other
in certain particulars and different from each other in these same particulars. 31 To be
valid, it must conform to the following requirements: (1) it must be based on substantial
distinctions; (2) it must be germane to the purposes of the law; (3) it must not be limited
to existing conditions only; and (4) it must apply equally to all the members of the
class. 32 The Court finds that all these requisites have been met by the measures here
challenged as arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated must be
treated alike both as to the rights conferred and the liabilities imposed. 33 The petitioners
have not shown that they belong to a different class and entitled to a different treatment.
The argument that not only landowners but also owners of other properties must be
made to share the burden of implementing land reform must be rejected. There is a
substantial distinction between these two classes of owners that is clearly visible except
to those who will not see. There is no need to elaborate on this matter. In any event, the
Congress is allowed a wide leeway in providing for a valid classification. Its decision is
accorded recognition and respect by the courts of justice except only where its discretion
is abused to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the police
power only if there is a concurrence of the lawful subject and the lawful method. Put
otherwise, the interests of the public generally as distinguished from those of a particular
class require the interference of the State and, no less important, the means employed
are reasonably necessary for the attainment of the purpose sought to be achieved and
not unduly oppressive upon individuals. 34 As the subject and purpose of agrarian reform
have been laid down by the Constitution itself, we may say that the first requirement has
been satisfied. What remains to be examined is the validity of the method employed to
achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of the
individual are concerned, the end does not justify the means. It is not enough that there
be a valid objective; it is also necessary that the means employed to pursue it be in
keeping with the Constitution. Mere expediency will not excuse constitutional shortcuts.
There is no question that not even the strongest moral conviction or the most urgent
public need, subject only to a few notable exceptions, will excuse the bypassing of an
individual's rights. It is no exaggeration to say that a, person invoking a right guaranteed
under Article III of the Constitution is a majority of one even as against the rest of the
nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of Article III
of the Constitution. With regard to his property, the owner enjoys the added protection
of Section 9, which reaffirms the familiar rule that private property shall not be taken for
public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to
forcibly acquire private lands intended for public use upon payment of
just compensation to the owner. Obviously, there is no need to
expropriate where the owner is willing to sell under terms also
acceptable to the purchaser, in which case an ordinary deed of sale may
be agreed upon by the parties. 35 It is only where the owner is unwilling
to sell, or cannot accept the price or other conditions offered by the
vendee, that the power of eminent domain will come into play to assert
the paramount authority of the State over the interests of the property
owner. Private rights must then yield to the irresistible demands of the
public interest on the time-honored justification, as in the case of the
police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means absolute
(as indeed no power is absolute). The limitation is found in the constitutional injunction
that "private property shall not be taken for public use without just compensation" and in
the abundant jurisprudence that has evolved from the interpretation of this principle.
Basically, the requirements for a proper exercise of the power are: (1) public use and (2)
just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the
State should first distribute public agricultural lands in the pursuit of agrarian reform
instead of immediately disturbing property rights by forcibly acquiring private agricultural
lands. Parenthetically, it is not correct to say that only public agricultural lands may be
covered by the CARP as the Constitution calls for "the just distribution of all agricultural
lands." In any event, the decision to redistribute private agricultural lands in the manner
prescribed by the CARP was made by the legislative and executive departments in the
exercise of their discretion. We are not justified in reviewing that discretion in the
absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political departments
when they decide what is known as the political question. As explained by Chief Justice
Concepcion in the case of Tañada v. Cuenco: 36
The term "political question" connotes what it means in ordinary
parlance, namely, a question of policy. It refers to "those questions
which, under the Constitution, are to be decided by the people in their
sovereign capacity; or in regard to which full discretionary authority has
been delegated to the legislative or executive branch of the
government." It is concerned with issues dependent upon the wisdom,
not legality, of a particular measure.
It is true that the concept of the political question has been constricted with the
enlargement of judicial power, which now includes the authority of the courts "to
determine whether or not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or instrumentality of the
Government." 37 Even so, this should not be construed as a license for us to reverse the
other departments simply because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to include in the
CARP the redistribution of private landholdings (even as the distribution of public
agricultural lands is first provided for, while also continuing apace under the Public Land
Act and other cognate laws). The Court sees no justification to interpose its authority,
which we may assert only if we believe that the political decision is not unwise, but illegal.
We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company,38 it was held:
Congress having determined, as it did by the Act of March 3,1909 that
the entire St. Mary's river between the American bank and the
international line, as well as all of the upland north of the present ship
canal, throughout its entire length, was "necessary for the purpose of
navigation of said waters, and the waters connected therewith," that
determination is conclusive in condemnation proceedings instituted by
the United States under that Act, and there is no room for judicial
review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled for us by the
Constitution itself No less than the 1987 Charter calls for agrarian reform, which is the
reason why private agricultural lands are to be taken from their owners, subject to the
prescribed maximum retention limits. The purposes specified in P.D. No. 27, Proc. No. 131
and R.A. No. 6657 are only an elaboration of the constitutional injunction that the State
adopt the necessary measures "to encourage and undertake the just distribution of all
agricultural lands to enable farmers who are landless to own directly or collectively the
lands they till." That public use, as pronounced by the fundamental law itself, must be
binding on us.
The second requirement, i.e., the payment of just compensation, needs a longer and
more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property taken from its
owner by the expropriator. 39 It has been repeatedly stressed by this Court that the
measure is not the taker's gain but the owner's loss. 40 The word "just" is used to intensify
the meaning of the word "compensation" to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate more than
a mere regulation of the use of private lands under the police power. We deal here with
an actual taking of private agricultural lands that has dispossessed the owners of their
property and deprived them of all its beneficial use and enjoyment, to entitle them to the
just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the
following conditions concur: (1) the expropriator must enter a private property; (2) the
entry must be for more than a momentary period; (3) the entry must be under warrant or
color of legal authority; (4) the property must be devoted to public use or otherwise
informally appropriated or injuriously affected; and (5) the utilization of the property for
public use must be in such a way as to oust the owner and deprive him of beneficial
enjoyment of the property. All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a deposit upon
its taking possession of the condemned property, as "the compensation is a public charge,
the good faith of the public is pledged for its payment, and all the resources of taxation
may be employed in raising the amount." 43 Nevertheless, Section 16(e) of the CARP Law
provides that:
Upon receipt by the landowner of the corresponding payment or, in
case of rejection or no response from the landowner, upon the deposit
 with an accessible bank designated by the DAR of the compensation in
cash or in LBP bonds in accordance with this Act, the DAR shall take
immediate possession of the land and shall request the proper Register
of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the
Republic of the Philippines. The DAR shall thereafter proceed with the
redistribution of the land to the qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation, which it is
claimed is entrusted to the administrative authorities in violation of judicial prerogatives.
Specific reference is made to Section 16(d), which provides that in case of the rejection or
disregard by the owner of the offer of the government to buy his land-
... the DAR shall conduct summary administrative proceedings to
determine the compensation for the land by requiring the landowner,
the LBP and other interested parties to submit evidence as to the just
compensation for the land, within fifteen (15) days from the receipt of
the notice. After the expiration of the above period, the matter is
deemed submitted for decision. The DAR shall decide the case within
thirty (30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the courts
of justice and may not be usurped by any other branch or official of the
government. EPZA v. Dulay 44 resolved a challenge to several decrees promulgated by
President Marcos providing that the just compensation for property under expropriation
should be either the assessment of the property by the government or the sworn
valuation thereof by the owner, whichever was lower. In declaring these decrees
unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited
decrees constitutes impermissible encroachment on judicial
prerogatives. It tends to render this Court inutile in a matter which
under this Constitution is reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically
would still have the power to determine the just compensation for the
property, following the applicable decrees, its task would be relegated
to simply stating the lower value of the property as declared either by
the owner or the assessor. As a necessary consequence, it would be
useless for the court to appoint commissioners under Rule 67 of the
Rules of Court. Moreover, the need to satisfy the due process clause in
the taking of private property is seemingly fulfilled since it cannot be
said that a judicial proceeding was not had before the actual taking.
However, the strict application of the decrees during the proceedings
would be nothing short of a mere formality or charade as the court has
only to choose between the valuation of the owner and that of the
assessor, and its choice is always limited to the lower of the two. The
court cannot exercise its discretion or independence in determining
what is just or fair. Even a grade school pupil could substitute for the
judge insofar as the determination of constitutional just compensation
is concerned.
xxx
In the present petition, we are once again confronted with the same
question of whether the courts under P.D. No. 1533, which contains the
same provision on just compensation as its predecessor decrees, still
have the power and authority to determine just compensation,
independent of what is stated by the decree and to this effect, to
appoint commissioners for such purpose.
This time, we answer in the affirmative.
xxx
It is violative of due process to deny the owner the opportunity to prove
that the valuation in the tax documents is unfair or wrong. And it is
repulsive to the basic concepts of justice and fairness to allow the
haphazard work of a minor bureaucrat or clerk to absolutely prevail
over the judgment of a court promulgated only after expert
commissioners have actually viewed the property, after evidence and
arguments pro and con have been presented, and after all factors and
considerations essential to a fair and just determination have been
judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer from the
arbitrariness that rendered the challenged decrees constitutionally objectionable.
Although the proceedings are described as summary, the landowner and other interested
parties are nevertheless allowed an opportunity to submit evidence on the real value of
the property. But more importantly, the determination of the just compensation by the cash, the balance to be paid in
DAR is not by any means final and conclusive upon the landowner or any other interested government financial instruments
party, for Section 16(f) clearly provides: negotiable at any time.

Any party who disagrees with the decision may bring the matter to the (c) For lands twenty-four (24)
court of proper jurisdiction for final determination of just hectares and below — Thirty-five
compensation. percent (35%) cash, the balance to
be paid in government financial
The determination made by the DAR is only preliminary unless accepted by all parties instruments negotiable at any time.
concerned. Otherwise, the courts of justice will still have the right to review with finality
the said determination in the exercise of what is admittedly a judicial function. (2) Shares of stock in government-owned or controlled corporations,
LBP preferred shares, physical assets or other qualified investments in
The second and more serious objection to the provisions on just compensation is not as accordance with guidelines set by the PARC;
easily resolved.
(3) Tax credits which can be used against any tax liability;
This refers to Section 18 of the CARP Law providing in full as follows:
(4) LBP bonds, which shall have the following features:
SEC. 18. Valuation and Mode of Compensation. — The LBP shall
compensate the landowner in such amount as may be agreed upon by (a) Market interest rates aligned
the landowner and the DAR and the LBP, in accordance with the criteria with 91-day treasury bill rates. Ten
provided for in Sections 16 and 17, and other pertinent provisions percent (10%) of the face value of
hereof, or as may be finally determined by the court, as the just the bonds shall mature every year
compensation for the land. from the date of issuance until the
tenth (10th) year: Provided, That
The compensation shall be paid in one of the following modes, at the should the landowner choose to
option of the landowner: forego the cash portion, whether in
full or in part, he shall be paid
(1) Cash payment, under the following terms and conditions: correspondingly in LBP bonds;

(a) For lands above fifty (50) (b) Transferability and negotiability.
hectares, insofar as the excess Such LBP bonds may be used by the
hectarage is concerned — Twenty- landowner, his successors-in-
five percent (25%) cash, the balance interest or his assigns, up to the
to be paid in government financial amount of their face value, for any
instruments negotiable at any time. of the following:

(b) For lands above twenty-four (24) (i) Acquisition of land or other real
hectares and up to fifty (50) properties of the government,
hectares — Thirty percent (30%) including assets under the Asset
Privatization Program and other
assets foreclosed by government
financial institutions in the same
province or region where the lands
for which the bonds were paid are
situated;
(ii) Acquisition of shares of stock of
government-owned or controlled
corporations or shares of stock
owned by the government in private
corporations;
(iii) Substitution for surety or bail
bonds for the provisional release of
accused persons, or for
performance bonds;
(iv) Security for loans with any
government financial institution,
provided the proceeds of the loans
shall be invested in an economic
enterprise, preferably in a small and
medium- scale industry, in the same
province or region as the land for
which the bonds are paid;
(v) Payment for various taxes and
fees to government: Provided, That
the use of these bonds for these
purposes will be limited to a certain
percentage of the outstanding
balance of the financial instruments;
Provided, further, That the PARC
shall determine the percentages
mentioned above;
(vi) Payment for tuition fees of the
immediate family of the original
bondholder in government
universities, colleges, trade schools,
and other institutions;
(vii) Payment for fees of the
immediate family of the original
bondholder in government
hospitals; and
(viii) Such other uses as the PARC
may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is
unconstitutional insofar as it requires the owners of the expropriated properties to accept
just compensation therefor in less than money, which is the only medium of payment
allowed. In support of this contention, they cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner of the
property expropriated is entitled to a just compensation, which should
be neither more nor less, whenever it is possible to make the
assessment, than the money equivalent of said property. Just
compensation has always been understood to be the just and complete
equivalent of the loss which the owner of the thing expropriated has to
suffer by reason of the expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent for the
value of the property at the time of its taking. Anything beyond that is
more, and anything short of that is less, than just compensation. It
means a fair and full equivalent for the loss sustained, which is the
measure of the indemnity, not whatever gain would accrue to the
expropriating entity. The market value of the land taken is the just
compensation to which the owner of condemned property is entitled,
the market value being that sum of money which a person desirous, but
not compelled to buy, and an owner, willing, but not compelled to sell,
would agree on as a price to be given and received for such property.
(Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been derived,
the weight of authority is also to the effect that just compensation for property
expropriated is payable only in money and not otherwise. Thus —
The medium of payment of compensation is ready money or cash. The
condemnor cannot compel the owner to accept anything but money,
nor can the owner compel or require the condemnor to pay him on any
other basis than the value of the property in money at the time and in
the manner prescribed by the Constitution and the statutes. When the
power of eminent domain is resorted to, there must be a standard
medium of payment, binding upon both parties, and the law has fixed
that standard as money in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the nature of
things, be regarded as a reliable and constant standard of
compensation. 48
"Just compensation" for property taken by condemnation means a fair
equivalent in money, which must be paid at least within a reasonable
time after the taking, and it is not within the power of the Legislature to
substitute for such payment future obligations, bonds, or other valuable
advantage. 49(Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the payment of just
compensation is money and no other. And so, conformably, has just compensation been
paid in the past solely in that medium. However, we do not deal here with the traditional
excercise of the power of eminent domain. This is not an ordinary expropriation where
only a specific property of relatively limited area is sought to be taken by the State from
its owner for a specific and perhaps local purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found and of
whatever kind as long as they are in excess of the maximum retention limits allowed their
owners. This kind of expropriation is intended for the benefit not only of a particular
community or of a small segment of the population but of the entire Filipino nation, from
all levels of our society, from the impoverished farmer to the land-glutted owner. Its
purpose does not cover only the whole territory of this country but goes beyond in time
to the foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are as involved in
this program as we are today, although hopefully only as beneficiaries of a richer and
more fulfilling life we will guarantee to them tomorrow through our thoughtfulness today.
And, finally, let it not be forgotten that it is no less than the Constitution itself that has
ordained this revolution in the farms, calling for "a just distribution" among the farmers of
lands that have heretofore been the prison of their dreams but can now become the key
at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be tremendous.
Considering the vast areas of land subject to expropriation under the laws before us, we
estimate that hundreds of billions of pesos will be needed, far more indeed than the
amount of P50 billion initially appropriated, which is already staggering as it is by our
present standards. Such amount is in fact not even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty when they
called for agrarian reform as a top priority project of the government. It is a part of this
assumption that when they envisioned the expropriation that would be needed, they also
intended that the just compensation would have to be paid not in the orthodox way but a
less conventional if more practical method. There can be no doubt that they were aware
of the financial limitations of the government and had no illusions that there would be
enough money to pay in cash and in full for the lands they wanted to be distributed
among the farmers. We may therefore assume that their intention was to allow such
manner of payment as is now provided for by the CARP Law, particularly the payment of
the balance (if the owner cannot be paid fully with money), or indeed of the entire
amount of the just compensation, with other things of value. We may also suppose that
what they had in mind was a similar scheme of payment as that prescribed in P.D. No. 27,
which was the law in force at the time they deliberated on the new Charter and with
which they presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any categorical
agreement among the members regarding the meaning to be given the concept of just
compensation as applied to the comprehensive agrarian reform program being
contemplated. There was the suggestion to "fine tune" the requirement to suit the
demands of the project even as it was also felt that they should "leave it to Congress" to
determine how payment should be made to the landowner and reimbursement required
from the farmer-beneficiaries. Such innovations as "progressive compensation" and
"State-subsidized compensation" were also proposed. In the end, however, no special
definition of the just compensation for the lands to be expropriated was reached by the
Commission. 50
On the other hand, there is nothing in the records either that militates against the
assumptions we are making of the general sentiments and intention of the members on
the content and manner of the payment to be made to the landowner in the light of the
magnitude of the expenditure and the limitations of the expropriator.
With these assumptions, the Court hereby declares that the content and manner of the
just compensation provided for in the afore- quoted Section 18 of the CARP Law is not
violative of the Constitution. We do not mind admitting that a certain degree of
pragmatism has influenced our decision on this issue, but after all this Court is not a
cloistered institution removed from the realities and demands of society or oblivious to
the need for its enhancement. The Court is as acutely anxious as the rest of our people to
see the goal of agrarian reform achieved at last after the frustrations and deprivations of
our peasant masses during all these disappointing decades. We are aware that
invalidation of the said section will result in the nullification of the entire program, killing
the farmer's hopes even as they approach realization and resurrecting the spectre of
discontent and dissent in the restless countryside. That is not in our view the intention of
the Constitution, and that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always required to be
made fully in money, we find further that the proportion of cash payment to the other
things of value constituting the total payment, as determined on the basis of the areas of
the lands expropriated, is not unduly oppressive upon the landowner. It is noted that the
smaller the land, the bigger the payment in money, primarily because the small
landowner will be needing it more than the big landowners, who can afford a bigger
balance in bonds and other things of value. No less importantly, the government financial
instruments making up the balance of the payment are "negotiable at any time." The
other modes, which are likewise available to the landowner at his option, are also not
unreasonable because payment is made in shares of stock, LBP bonds, other properties or
assets, tax credits, and other things of value equivalent to the amount of just
compensation.
Admittedly, the compensation contemplated in the law will cause the landowners, big
and small, not a little inconvenience. As already remarked, this cannot be avoided.
Nevertheless, it is devoutly hoped that these countrymen of ours, conscious as we know
they are of the need for their forebearance and even sacrifice, will not begrudge us their
indispensable share in the attainment of the ideal of agrarian reform. Otherwise, our
pursuit of this elusive goal will be like the quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O. No. 229 does
not seem to be viable any more as it appears that Section 4 of the said Order has been
superseded by Section 14 of the CARP Law. This repeats the requisites of registration as
embodied in the earlier measure but does not provide, as the latter did, that in case of
failure or refusal to register the land, the valuation thereof shall be that given by the
provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the
just compensation shall be ascertained on the basis of the factors mentioned in its
Section 17 and in the manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his property even
before actual payment to him in full of just compensation, in contravention of a well-
accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other democratic
jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest the
condemnor until the judgment fixing just compensation is entered and paid, but the
condemnor's title relates back to the date on which the petition under the Eminent
Domain Act, or the commissioner's report under the Local Improvement Act, is filed. 51
... although the right to appropriate and use land taken for a canal is complete at the time
of entry, title to the property taken remains in the owner until payment is actually
made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title
to property does not pass to the condemnor until just compensation had actually been
made. In fact, the decisions appear to be uniformly to this effect. As early as 1838,
in Rubottom v. McLure, 54 it was held that "actual payment to the owner of the
condemned property was a condition precedent to the investment of the title to the
property in the State" albeit "not to the appropriation of it to public use." In Rexford v.
Knight, 55 the Court of Appeals of New York said that the construction upon the statutes
was that the fee did not vest in the State until the payment of the compensation although
the authority to enter upon and appropriate the land was complete prior to the payment.
Kennedy further said that "both on principle and authority the rule is ... that the right to
enter on and use the property is complete, as soon as the property is actually
appropriated under the authority of law for a public use, but that the title does not pass
from the owner without his consent, until just compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding discussion
are attentively examined it will be apparent that the method of
expropriation adopted in this jurisdiction is such as to afford absolute
reassurance that no piece of land can be finally and irrevocably taken
from an unwilling owner until compensation is paid ... . (Emphasis
supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October
21, 1972 and declared that he shall "be deemed the owner" of a portion of land
consisting of a family-sized farm except that "no title to the land owned by him was to be
actually issued to him unless and until he had become a full-fledged member of a duly
recognized farmers' cooperative." It was understood, however, that full payment of the
just compensation also had to be made first, conformably to the constitutional
requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners as of
October 21, 1972 of the land they acquired by virtue of Presidential
Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired under the said decree, after
proof of full-fledged membership in the farmers' cooperatives and full payment of just
compensation. Hence, it was also perfectly proper for the Order to also provide in its
Section 2 that the "lease rentals paid to the landowner by the farmer- beneficiary after
October 21, 1972 (pending transfer of ownership after full payment of just
compensation), shall be considered as advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and ownership of the
land to the government on receipt by the landowner of the corresponding payment or
the deposit by the DAR of the compensation in cash or LBP bonds with an accessible
bank. Until then, title also remains with the landowner. 57 No outright change of
ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by arbitrarily
transferring title before the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D.
No. 27, as recognized under E.O. No. 228, are retained by him even now under R.A. No.
6657. This should counter-balance the express provision in Section 6 of the said law that
"the landowners whose lands have been covered by Presidential Decree No. 27 shall be
allowed to keep the area originally retained by them thereunder, further, That original
homestead grantees or direct compulsory heirs who still own the original homestead at
the time of the approval of this Act shall retain the same areas as long as they continue to
cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No. 78742 that the
appeal filed by the petitioners with the Office of the President has already been resolved.
Although we have said that the doctrine of exhaustion of administrative remedies need
not preclude immediate resort to judicial action, there are factual issues that have yet to
be examined on the administrative level, especially the claim that the petitioners are not
covered by LOI 474 because they do not own other agricultural lands than the subjects of
their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that the
petitioners have not yet exercised their retention rights, if any, under P.D. No. 27, the
Court holds that they are entitled to the new retention rights provided for by R.A. No.
6657, which in fact are on the whole more liberal than those granted by the decree.
V
The CARP Law and the other enactments also involved in these cases have been the
subject of bitter attack from those who point to the shortcomings of these measures and
ask that they be scrapped entirely. To be sure, these enactments are less than perfect;
indeed, they should be continuously re-examined and rehoned, that they may be sharper
instruments for the better protection of the farmer's rights. But we have to start
somewhere. In the pursuit of agrarian reform, we do not tread on familiar ground but
grope on terrain fraught with pitfalls and expected difficulties. This is inevitable. The CARP
Law is not a tried and tested project. On the contrary, to use Justice Holmes's words, "it is
an experiment, as all life is an experiment," and so we learn as we venture forward, and,
if necessary, by our own mistakes. We cannot expect perfection although we should strive
for it by all means. Meantime, we struggle as best we can in freeing the farmer from the
iron shackles that have unconscionably, and for so long, fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the comprehensive agrarian
reform program are removed, to clear the way for the true freedom of the farmer. We
may now glimpse the day he will be released not only from want but also from the
exploitation and disdain of the past and from his own feelings of inadequacy and
helplessness. At last his servitude will be ended forever. At last the farm on which he toils
will be his farm. It will be his portion of the Mother Earth that will give him not only the
staff of life but also the joy of living. And where once it bred for him only deep despair,
now can he see in it the fruition of his hopes for a more fulfilling future. Now at last can
he banish from his small plot of earth his insecurities and dark resentments and "rebuild
in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229
are SUSTAINED against all the constitutional objections raised in the
herein petitions.
2. Title to all expropriated properties shall be transferred to the State
only upon full payment of compensation to their respective owners.
3. All rights previously acquired by the tenant- farmers under P.D. No.
27 are retained and recognized.
4. Landowners who were unable to exercise their rights of retention
under P.D. No. 27 shall enjoy the retention rights granted by R.A. No.
6657 under the conditions therein prescribed.
5. Subject to the above-mentioned rulings all the petitions are
DISMISSED, without pronouncement as to costs.
SO ORDERED.
G.R. No. L-7859 December 22, 1955
WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio
Jayme Ledesma,plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.
REYES, J.B L., J.:
This case was initiated in the Court of First Instance of Negros Occidental to test the
legality of the taxes imposed by Commonwealth Act No. 567, otherwise known as the
Sugar Adjustment Act.
Promulgated in 1940, the law in question opens (section 1) with a declaration of
emergency, due to the threat to our industry by the imminent imposition of export taxes
upon sugar as provided in the Tydings-McDuffe Act, and the "eventual loss of its
preferential position in the United States market"; wherefore, the national policy was
expressed "to obtain a readjustment of the benefits derived from the sugar industry by
the component elements thereof" and "to stabilize the sugar industry so as to prepare it
for the eventuality of the loss of its preferential position in the United States market and
the imposition of the export taxes."
In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the
manufacture of sugar, on a graduated basis, on each picul of sugar manufactured; while
section 3 levies on owners or persons in control of lands devoted to the cultivation of
sugar cane and ceded to others for a consideration, on lease or otherwise —
a tax equivalent to the difference between the money value of the rental or
consideration collected and the amount representing 12 per centum of the
assessed value of such land.
According to section 6 of the law —
SEC. 6. All collections made under this Act shall accrue to a special fund in the
Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization
Fund,' and shall be paid out only for any or all of the following purposes or to
attain any or all of the following objectives, as may be provided by law.
First, to place the sugar industry in a position to maintain itself, despite the
gradual loss of the preferntial position of the Philippine sugar in the United
States market, and ultimately to insure its continued existence notwithstanding
the loss of that market and the consequent necessity of meeting competition in
the free markets of the world;
Second, to readjust the benefits derived from the sugar industry by all of the
component elements thereof — the mill, the landowner, the planter of the sugar
cane, and the laborers in the factory and in the field — so that all might continue
profitably to engage therein;lawphi1.net
 Third, to limit the production of sugar to areas more economically suited to the
production thereof; and
Fourth, to afford labor employed in the industry a living wage and to improve
their living and working conditions: Provided, That the President of the
Philippines may, until the adjourment of the next regular session of the National
Assembly, make the necessary disbursements from the fund herein created (1)
for the establishment and operation of sugar experiment station or stations and
the undertaking of researchers (a) to increase the recoveries of the centrifugal
sugar factories with the view of reducing manufacturing costs, (b) to produce
and propagate higher yielding varieties of sugar cane more adaptable to different
district conditions in the Philippines, (c) to lower the costs of raising sugar cane,
(d) to improve the buying quality of denatured alcohol from molasses for motor
fuel, (e) to determine the possibility of utilizing the other by-products of the
industry, (f) to determine what crop or crops are suitable for rotation and for the
utilization of excess cane lands, and (g) on other problems the solution of which
would help rehabilitate and stabilize the industry, and (2) for the improvement of
living and working conditions in sugar mills and sugar plantations, authorizing
him to organize the necessary agency or agencies to take charge of the
expenditure and allocation of said funds to carry out the purpose hereinbefore
enumerated, and, likewise, authorizing the disbursement from the fund herein
created of the necessary amount or amounts needed for salaries, wages,
travelling expenses, equipment, and other sundry expenses of said agency or
agencies.
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of
Antonio Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum
of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years
1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being
levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion
is not a public purpose for which a tax may be constitutioally levied. The action having
been dismissed by the Court of First Instance, the plaintifs appealed the case directly to
this Court (Judiciary Act, section 17).
The basic defect in the plaintiff's position is his assumption that the tax provided for in
Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act,
and particularly of section 6 (heretofore quoted in full), will show that the tax is levied
with a regulatory purpose, to provide means for the rehabilitation and stabilization of the
threatened sugar industry. In other words, the act is primarily an exercise of the police
power.
This Court can take judicial notice of the fact that sugar production is one of the great
industries of our nation, sugar occupying a leading position among its export products;
that it gives employment to thousands of laborers in fields and factories; that it is a great
source of the state's wealth, is one of the important sources of foreign exchange needed
by our government, and is thus pivotal in the plans of a regime committed to a policy of
currency stability. Its promotion, protection and advancement, therefore redounds
greatly to the general welfare. Hence it was competent for the legislature to find that the
general welfare demanded that the sugar industry should be stabilized in turn; and in the
wide field of its police power, the lawmaking body could provide that the distribution of
benefits therefrom be readjusted among its components to enable it to resist the added
strain of the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L.
Ed. 835; Johnson vs. State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo,
103 Fla. 552, 139 So. 121).
As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida
—
The protection of a large industry constituting one of the great sources of the
state's wealth and therefore directly or indirectly affecting the welfare of so
great a portion of the population of the State is affected to such an extent by
public interests as to be within the police power of the sovereign. (128 Sp. 857).
Once it is conceded, as it must, that the protection and promotion of the sugar industry is
a matter of public concern, it follows that the Legislature may determine within
reasonable bounds what is necessary for its protection and expedient for its promotion.
Here, the legislative discretion must be allowed fully play, subject only to the test of
reasonableness; and it is not contended that the means provided in section 6 of the law
(above quoted) bear no relation to the objective pursued or are oppressive in character. If
objective and methods are alike constitutionally valid, no reason is seen why the state
may not levy taxes to raise funds for their prosecution and attainment. Taxation may be
made the implement of the state's police power (Great Atl. & Pac. Tea Co. vs. Grosjean,
301 U. S. 412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs.
Maryland, 4 Wheat. 316, 4 L. Ed. 579).
That the tax to be levied should burden the sugar producers themselves can hardly be a
ground of complaint; indeed, it appears rational that the tax be obtained precisely from
those who are to be benefited from the expenditure of the funds derived from it. At any
rate, it is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that "inequalities which result from a singling
out of one particular class for taxation, or exemption infringe no constitutional limitation"
(Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495, 81 L. Ed. 1245, citing numerous
authorities, at p. 1251).
From the point of view we have taken it appears of no moment that the funds raised
under the Sugar Stabilization Act, now in question, should be exclusively spent in aid of
the sugar industry, since it is that very enterprise that is being protected. It may be that
other industries are also in need of similar protection; that the legislature is not required
by the Constitution to adhere to a policy of "all or none." As ruled in Minnesota ex rel.
Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil
where it is most felt, it is not to be overthrown because there are other instances to
which it might have been applied;" and that "the legislative authority, exerted within its
proper field, need not embrace all the evils within its reach" (N. L. R. B. vs. Jones &
Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893).
Even from the standpoint that the Act is a pure tax measure, it cannot be said that the
devotion of tax money to experimental stations to seek increase of efficiency in sugar
production, utilization of by-products and solution of allied problems, as well as to the
improvements of living and working conditions in sugar mills or plantations, without any
part of such money being channeled directly to private persons, constitutes expenditure
of tax money for private purposes, (compare Everson vs. Board of Education, 91 L. Ed.
472, 168 ALR 1392, 1400).
The decision appealed from is affirmed, with costs against appellant. So ordered.
Paras, C. J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Labrador, and Concepcion,
JJ., concur.
November 29, 2016
G.R. No. 210588
SECRETARY OF FINANCE CESAR B. PURISIMA AND COMMISSIONER OF INTERNAL
REVENUE KIM S. JACINTO-HENARES, Petitioners
vs.
REPRESENTATIVE CARMELO F. LAZATIN AND ECOZONE PLASTIC ENTERPRISES
CORPORATION, Respondents
DECISION
BRION, J.:
This is a direct recourse to this Court from the Regional Trial Court (RTC), Branch 58,
Angeles City, through a petition for review on certiorari1 under Rule 45 of the Rules of
Court on a pure question of law. The petition seeks the reversal of the November 8, 2013
decision2 of the RTC in SCA Case No. 12-410. In the assailed decision, the RTC declared
Revenue Regulation (RR) No. 2-2012 unconstitutional and without force and effect.
The Facts
In response to reports of smuggling of petroleum and petroleum products and to ensure
the correct taxes are paid and collected, petitioner Secretary of Finance Cesar V. Purisima
- pursuant to his authority to interpret tax laws3 and upon the recommendation of
petitioner Commissioner of Internal Revenue (CIR) Kim S. Jacinto-Henares signed RR 2-
2012 on February 17, 2012.
The RR requires the payment of value-added tax (VAT) and excise tax on the importation
of all petroleum and petroleum products coming directly from abroad and brought into
the Philippines, including Freeport and economic zones (FEZs).4 It then allows the credit
or refund of any VAT or excise tax paid if the taxpayer proves that the petroleum
previously brought in has been sold to a duly registered FEZ locator and used pursuant to
the registered activity of such locator.5
In other words, an FEZ locator must first pay the required taxes upon entry into the FEZ of
a petroleum product, and must thereafter prove the use of the petroleum product for the
locator's registered activity in order to secure a credit for the taxes paid.
On March 7, 2012, Carmelo F. Lazatin, in his capacity as Pampanga First District
Representative, filed a petition for prohibition and injunction 6 against the petitioners to
annul and set aside RR 2-2012.
Lazatin posits that Republic Act No. (RA) 94007 treats the Clark Special Economic Zone and
Clark Freeport Zone (together hereinafter referred to as Clark FEZ) as a separate customs
territory and allows tax and duty-free importations of raw materials, capital and
equipment into the zone. Thus, the imposition of VAT and excise tax, even on the
importation of petroleum products into FEZs (like Clark FEZ), directly contravenes the law.
The respondent Ecozone Plastic Enterprises Corporation (EPEC) sought to intervene in the
proceedings as a co-petitioner and accordingly entered its appearance and moved for
leave of court to file its petition-in- intervention.8
EPEC claims that, as a Clark FEZ locator, it stands to suffer when RR 2-2012 is
implemented. EPEC insists that RR 2-2012's mechanism of requiring even locators to pay
the tax first and to subsequently claim a credit or to refund the taxes paid effectively
removes the locators' tax-exempt status.
The RTC initially issued a temporary restraining order to stay the implementation of RR 2-
2012. It eventually issued a writ of preliminary injunction in its order dated April 4, 2012.
The petitioners questioned the issuance of the writ. On May 17, 2012, they filed a
petition for certiorari9 before the Court of Appeals (CA) assailing the RTC's order. The CA
granted the petition10 and denied the respondents' subsequent motion for
reconsideration.11
The respondents stood their ground by filing a petition for review on certiorari before this
Court (G.R. No. 208387) to reinstate the RTC's injunction against the implementation of
RR 2-2012, and by moving for the issuance of a temporary restraining order and/or writ of
preliminary injunction. We denied the motion but nevertheless required the petitioners
to comment on the petition.
The proceedings before the RTC in the meanwhile continued. On April 18, 2012,
petitioner Lazatin amended his original petition, converting it to a petition for declaratory
relief.12 The RTC admitted the amended petition and allowed EPEC to intervene.
In its decision dated November 8, 2013, the RTC ruled in favor of Lazatin and EPEC.
First, on the procedural aspect, the RTC held that the original petition's amendment is
allowed by the rules and that amendments are largely preferred; it allowed the
amendment in the exercise of its sound judicial discretion to avoid multiplicity of suits
and to give the parties an opportunity to thresh out the issues and finally reach a
conclusion.13
Second, the R TC held that Lazatin and EPEC had legal standing to question the validity of
RR 2-2012. Lazatin's allegation that RR 2-2012 effectively amends and modifies RA 9400
gave him standing as a legislator: the amendment of a tax law is a power that belongs
exclusively to Congress. Lazatin's allegation, according to the RTC, sufficiently shows how
his rights, privileges, and prerogatives as a member of Congress were impaired by the
issuance of RR 2-2012.
The RTC also ruled that the case warrants a relaxation on the rules on legal standing
because the issues touched upon are of transcendental importance. The trial court
considered the encompassing effect that RR 2- 2012 may have in the numerous freeport
and economic zones in the Philippines, as well as its potential impact on hundreds of
investors operating within the zones.
The RTC then held that even if Lazatin does not have legal standing, EPEC' s intervention
cured this defect: EPEC, as a locator within the Clark FEZ, would be adversely affected by
the implementation of RR 2-2012.
Finally, the RTC declared RR 2-2012 unconstitutional. RR 2-2012 violates RA 9400 because
it imposes taxes that, by law, are not due in the first place. 14 Since RA 9400 clearly grants
tax and duty-free incentives to Clark FEZ locators, a revocation of these incentives by an
RR directly contravenes the express intent of the Legislature.15 In effect, the petitioners
encroached upon the prerogative to enact, amend, or repeal laws, which the Constitution
exclusively granted to Congress.
The Petition
The petitioners anchor their present petition on two arguments: 1) respondents have no
legal standing, and 2) RR 2-2012 is valid and constitutional.
The petitioners submit that the Lazatin and EPEC do not have legal standing to assail the
validity of RR 2-2012.
First, the petitioners claim that Lazatin does not have the requisite legal standing as he
failed to exactly show how the implementation of RR 2-2012 would impair the exercise
his official functions. Respondent Lazatin merely generally alleged that his constitutional
prerogatives to pass or amend laws were gravely impaired or were about to be impaired
by the issuance of RR 2-2012. He did not specify the power that he, as a legislator, would
be encroached upon.
While the Clark FEZ is within the district that respondent Lazatin represents, the
petitioners emphasize that Lazatin failed to show that he is authorized to file a case on
behalf of the locators in the FEZ, the local government unit, or his constituents in
general.16 To the petitioners, if RR 2- 2012 ever caused injury to the locators or to any of
Lazatin's constituents, only these injured parties possess the personality to question the
petitioners' actions; respondent Lazatin cannot claim this right on their behalf. 17
The petitioners claim, too, that the RTC should not have brushed aside the rules on
standing on account of transcendental importance. To them, this case does not involve
public funds, only a speculative loss of profits upon the implementation of RR 2-2012; nor
is Lazatin a party with more direct and specific interest to raise the issues in his
petition.18 Citing Senate v. Ermita,19 the petitioners argue that the rules on standing
cannot be relaxed.
Second, petitioners also argue that EPEC does not have legal standing to intervene. That
EPEC will ultimately bear the VAT and excise tax as an end-user, is misguided. 20 The
burden of payment of VAT and excise tax may be shifted to the buyer 21 and this burden,
from the point of view of the transferee, is no longer a tax but merely a component of the
cost of goods purchased. The statutory liability for the tax remains with the seller. Thus,
EPEC cannot say that when the burden is passed on to it, RR 2-2012 effectively imposes
tax on it as a Clark FEZ locator.
The petitioners point out that RR 2-2012 imposes an "advance tax" only upon importers
of petroleum products. If EPEC is indeed a locator, then it enjoys tax and duty exemptions
granted by RA 9400 so long as it does not bring the petroleum or petroleum products to
the Philippine customs territory.22
The petitioners legally argue that RR 2-2012 is valid and constitutional.
First, petitioners submit that RR 2-2012's issuance and implementation are within their
powers to undertake.23 RR 2-2012 is an administrative issuance that enjoys the
presumption of validity in the manner that statutes enjoy this presumption; thus, it
cannot be nullified without clear and convincing evidence to the contrary. 24
Second, petitioners contend that while RA 9400 does grant tax and customs duty
incentives to Clark FEZ locators, there are conditions before these benefits may be availed
of. The locators cannot invoke outright exemption from VAT and excise tax on its
importations without first satisfying the conditions set by RA 9400, that is, the
importation must not be removed from the FEZ and introduced into the Philippine
customs territory.25
These locators enjoy what petitioners call a qualified tax exemption. They must first pay
the corresponding taxes on its imported petroleum. Then, they must submit the
documents required under RR 2-2012. If they have sufficiently shown that the imported
products have not been removed from the FEZ, their earlier payment shall be subject to a
refund.
The petitioners lastly argue that RR 2-2012 does not withdraw the locators' tax exemption
privilege.1âwphi1 The regulation simply requires proof that a locator has complied with
the conditions for tax exemption. If the locator cannot show that the goods were retained
and/or consumed within the FEZ, such failure creates the presumption that the goods
have been introduced into the customs territory without the appropriate permits. 26 On
the other hand, if they have duly proven the disposition of the goods within the FEZ, their
"advance payment" is subject to a refund. Thus, to the petitioners, to the extent that a
refund is allowable, there is in reality a tax exemption.27
Counter-arguments
Respondents Lazatin and EPEC, maintaining that they have standing to question its
validity, insist that RR 2-2012 is unconstitutional.
Respondents have standing as
lawmaker and FEZ locator.
The respondents argue that a member of Congress has standing to protect the
prerogatives, powers, and privileges vested by the Constitution in his office. 28 As a
member of Congress, his standing to question executive issuances that infringe on the
right of Congress to enact, amend, or repeal laws has already been recognized. 29 He
suffers substantial injury whenever the executive oversteps and intrudes into his power as
a lawmaker.30
On the other hand, the respondents point out that RR 2-2012 explicitly covers FEZs. Thus,
being a Clark FEZ locator, EPEC is among the many businesses that would have been
directly affected by its implementation.31
RR 2-2012 illegally imposes taxes
on Clark FEZs.
The respondents underscore that RA 9400 provides FEZ locators certain incentives, such
as tax- and duty-free importations of raw materials and capital equipment. These
provisions of the law must be interpreted in a way that will give full effect to law's policy
and objective, which is to maximize the benefits derived from the FEZs in promoting I. Whether respondents Lazatin and EPEC have legal standing to bring the action of
economic and social development.32 declaratory relief; and

They admit that the law subjects to taxes and duties the goods that were brought into the II. Whether RR 2-2012 is valid and constitutional.
FEZ and subsequently introduced to the Philippine customs territory. However, contrary
to petitioners' position that locators' tax and duty exemptions are qualified, their The Court's Ruling
incentives apply automatically.
We do not find the petition meritorious.
According to the respondents, petitioners' interpretation of the law contravenes the
policy laid down by RA 9400, because it makes the incentives subject to a suspensive I. Respondents have legal
condition. They claim that the condition - the removal of the goods from the FEZ and standing to file petition for
their subsequent introduction to the customs territory - is resolutory; locators enjoy the declaratory relief.
granted incentives upon bringing the goods into the FEZ. It is only when the goods are
shown to have been brought into the customs territory will the proper taxes and duties
The party seeking declaratory relief must have a legal interest in the controversy for the
have to be paid.33 RR 2-2012 reverses this process by requiring the locators to pay
action to prosper.40 This interest must be material not merely incidental. It must be an
"advance" taxes and duties first and to subsequently prove that they are entitled to a
interest that which will be affected by the challenged decree, law or regulation. It must be
refund, thereafter.34 RR 2-2012 indeed allows a refund, but a refund of taxes that were
a present substantial interest, as opposed to a mere expectancy or a future, contingent,
not due in the first place.35
subordinate, or consequential interest.41

The respondents add that even the refund mechanism under RR 2-2012 is problematic.
Moreover, in case the petition for declaratory relief specifically involves a question of
They claim that RR 2-2012 only allows a refund when the petroleum products brought
constitutionality, the courts will not assume jurisdiction over the case unless the person
into the FEZ are subsequently sold to FEZ locators or to entities that similarly enjoy
challenging the validity of the act possesses the requisite legal standing to pose the
exemption from direct and indirect taxes. The issuance does not envision a situation
challenge.42
where the petroleum products are directly brought into the FEZ and are consumed by the
same entity/locator.36Further, the refund process takes a considerable length of time to
Locus standi is a personal and substantial interest in a case such that the party has
secure, thus requiring cash outlay on the part of locators; 37 even when the claim for
sustained or will sustain direct injury as a result of the challenged governmental act. The
refund is granted, the refund will not be in cash, but in the form of a Tax Credit Certificate
question is whether the challenging party alleges such personal stake in the outcome of
(TCC).38
the controversy so as to assure the existence of concrete adverseness that would sharpen
the presentation of issues and illuminate the court in ruling on the constitutional question
As the challenged regulation directly contravenes incentives legitimately granted by a
posed.43
legislative act, the respondents argue that in issuing RR 2-2012, the petitioners not only
encroached upon congressional prerogatives and arrogated powers unto themselves;
We rule that the respondents satisfy these standards.
they also effectively violated, brushed aside, and rendered nugatory the rigorous process
required in enacting or amending laws.39
Lazatin has legal standing as
a legislator.
Issues

Lazatin filed the petition for declaratory relief before the RTC in his capacity as a member
We shall decide the following issues:
of Congress.44 He alleged that RR 2-2012 was issued directly contravening RA 9400, a
legislative enactment. Thus, the regulation encroached upon the Congress' exclusive
power to enact, amend, or repeal laws.45 According to Lazatin, a member of Congress has
standing to challenge the validity of an executive issuance if it tends to impair his
prerogatives as a legislator.46
We agree with Lazatin.
In Biraogo v. The Philippine Truth Commission,47 we ruled that legislators have the legal
standing to ensure that the prerogatives, powers, and privileges vested by the
Constitution in their office remain inviolate. To this end, members of Congress are
allowed to question the validity of any official action that infringes on their prerogatives
as legislators.48
Thus, members of Congress possess the legal standing to question acts that amount to a
usurpation of the legislative power of Congress. 49 Legislative power is exclusively vested in
the Legislature. When the implementing rules and regulations issued by the Executive
contradict or add to what Congress has provided by legislation, the issuance of these
rules amounts to an undue exercise of legislative power and an encroachment of
Congress' prerogatives.
To the same extent that the Legislature cannot surrender or abdicate its legislative power
without violating the Constitution,50 so also is a constitutional violation committed when
rules and regulations implementing legislative enactments are contrary to existing
statutes. No law can be amended by a mere administrative rule issued for its
implementation; administrative or executive acts are invalid if they contravene the laws
or to the Constitution.51
Thus, the allegation that RR 2-2012 - an executive issuance purporting to implement the
provisions of the Tax Code - directly contravenes RA 9400 clothes a member of Congress
with legal standing to question the issuance to prevent undue encroachment of legislative
power by the executive.
EPEC has legal standing as a
Clark FEZ locator.
EPEC intervened in the proceedings before the RTC based on the allegation that, as a
Clark FEZ locator, it will be directly affected by the implementation of RR 2-2012. 52
We agree with EPEC.
It is not disputed that RR 2-2012 relates to the imposition of VAT and excise tax and
applies to all petroleum and petroleum products that are imported directly from abroad
to the Philippines, including FEZs.53
As an enterprise located in the Clark FEZ, its importations of petroleum and petroleum
products will be directly affected by RR 2-2012. Thus, its interest in the subject matter - a
personal and substantial one - gives it legal standing to question the issuance's validity.
In sum, the respondents' respective interests in this case are sufficiently substantial to be
directly affected by the implementation of RR 2-2012. The RTC therefore did not err when
it gave due course to Lazatin's petition for declaratory relief as well as EPEC's petition-in-
intervention.
In light of this ruling, we see no need to rule on the claimed transcendental importance of
the issues raised.
II. RR 2-2012 is invalid and
unconstitutional.
On the merits of the case, we rule that RR 2-2012 is invalid and unconstitutional because:
a) it illegally imposes taxes upon FEZ enterprises, which, by law, enjoy tax-exempt status,
and b) it effectively amends the law (i.e., RA 7227, as amended by RA 9400) and thereby
encroaches upon the legislative authority reserved exclusively by the Constitution for
Congress.
FEZ enterprises enjoy tax- and
duty-free incentives on its
importations.
In 1992, Congress enacted RA 7227 otherwise known as the "Bases Conversion and
Development Act of 1992" to enhance the benefits to be derived from the Subic and Clark
military reservations.54 RA 7227 established the Subic Special economic zone and granted
such special territory various tax and duty incentives.
To effectively extend the same benefits enjoyed in Subic to the Clark FEZ, the legislature
enacted RA 9400 to amend RA 7227.55 Subsequently, the Department of Finance issued
Department Order No. 3-200856 to implement RA 9400 (Implementing Rules).
Under RA 9400 and its Implementing Rules, Clark FEZ is considered a customs
territory separate and distinct from the Philippines customs territory. Thus, as opposed
to importations into and establishments in the Philippines customs territory,57 which are
fully subject to Philippine customs and tax laws, importations into
and establishments located within the Clark FEZ (FEZ Enterprises )58 enjoy special
incentives, including tax and duty-free importation.59More specifically, Clark FEZ
enterprises shall be entitled to the freeport status of the zone and a 5% preferential
income tax rate on its gross income, in lieu of national and local taxes.60
RA 9400 and its Implementing Rules grant the following:
First, the law provides that importations of raw materials and capital equipment into the
FEZs shall be tax- and duty-free. It is the specific transaction (i.e., importation) that is
exempt from taxes and duties.
Second, the law also grants FEZ enterprises tax- and duty-free importation and a
preferential rate in the payment of income tax, in lieu of all national and local taxes. These
incentives exempt the establishment itself from taxation.
Thus, the Legislature intended FEZs to enjoy tax incentives in general - whether with
respect to the transactions that take place within its special jurisdiction, or
the persons/establishments within the jurisdiction. From this perspective, the tax
incentives enjoyed by FEZ enterprises must be understood to necessarily include the tax
exemption of importations of selected articles into the FEZ.
We have ruled in the past that FEZ enterprises' tax exemptions must be interpreted within
the context and in a manner that promotes the legislative intent of RA 7227 61 and, by
extension, RA 9400. Thus, we recognized that FEZ enterprises are exempt from both direct
and indirect internal revenue taxes.62 In particular, they are considered VAT-exempt
entities.63
In line with this comprehensive interpretation, we rule that the tax exemption enjoyed by
FEZ enterprises covers internal revenue taxes imposed on goods brought into the FEZ,
including the Clark FEZ, such as VAT and excise tax.
RR 2-2012 illegally imposes VAT and excise
tax on goods brought into the FEZs.
Section 3 of RR 2-2012 provides the following:
First, whenever petroleum and petroleum products are imported and/or brought
directly to the Philippines, the importer of these goods is required to pay the
corresponding VAT and excise tax due on the importation.
Second, the importer, as the payor of the taxes, may subsequently seek a refund of the
amount previously paid by filing a corresponding claim with the Bureau of
Customs (BOC).
Third, the claim shall only be granted upon showing that the necessary condition has been
fulfilled.
At first glance, this imposition - a mere tax administration measure according to the
petitioners - appears to be consistent with the taxation of similar imported articles under
the Tax Code, specifically under its Sections 107 64 and 14865 (in relation with Sections
12966 and 13167).
However, RR 2-2012 explicitly covers even petroleum and petroleum products imported
and/or brought into the various FEZs in the Philippines. Hence, when an FEZ
enterprise brings petroleum and petroleum products into the FEZ, under RR 2-2012, it
shall be considered an importer liable for the taxes due on these products.
The crux of the controversy can be found in this feature of the challenged regulation.
The petitioners assert that RR 2-2012 simply implements the provisions of the Tax Code
on collection of internal revenue taxes, more specifically VAT and excise tax, on the
importation of petroleum and petroleum products. To them, FEZ enterprises enjoy
a qualified tax exemption such that they have to pay the tax due on the importation first,
and thereafter claim a refund, which shall be allowed only upon showing that the goods
were not introduced to the Philippine customs territory.
On the other hand, the respondents contend that RR 2-2012 imposes taxes on FEZ
enterprises, which in the first place are not liable for taxes. They emphasize that the tax
incentives under RA 9400 apply automatically upon the importation of the goods. The
proper taxes on the importation shall only be due if the enterprises can later show that
the goods were subsequently introduced to the Philippine customs territory.
Since the tax exemptions enjoyed by FEZ enterprises under the law extend even to VAT
and excise tax, as we discussed above, it follows and we accordingly rule that the taxes
imposed by Section 3 of RR 2-2012 directly contravene these exemptions. First, the
regulation erroneously considers petroleum and petroleum products brought into a FEZ
as taxable importations. Second, it unreasonably burdens FEZ enterprises by making them
pay the corresponding taxes - an obligation from which the law specifically exempts them
- even if there is a subsequent opportunity to refund the payments made.
Petroleum and petroleum products brought
into the FEZ and which remain therein are
not taxable importations.
RR 2-2012 clearly imposes VAT and excise tax on the importation of petroleum and
petroleum products into FEZs. Strictly speaking, however, articles brought into these FEZs
are not taxable importations under the law based on the following considerations:
First, importation refers to bringing goods from abroad into the Philippine customs
jurisdiction. It begins from the time the goods enter the Philippine jurisdiction and is
deemed terminated when the applicable taxes and duties have been paid or the
goods have left the jurisdiction of the BOC.68
Second, under the Tax Code, imported goods are subject to VAT and excise tax. These
taxes shall be paid prior to the release of the goods from customs custody.69 Also, for VAT
purposes,70 an importer refers to any person who brings goods into the Philippines.
Third, the Philippine VAT system adheres to the cross border doctrine.71 Under this rule,
no VAT shall be imposed to form part of the cost of the goods destined for
consumption outside the Philippine customs territory.72 Thus, we have already ruled
before that an FEZ enterprise cannot be directly charged for the VAT on its sales, nor can
VAT be passed on to them indirectly as added cost to their purchases.73
Fourth, laws such as RA 7227, RA 7916, and RA 9400 have established certain special
areas as separate customs territories .74 In this regard, we have already held that such
jurisdictions, such as the Clark FEZ, are, by legal fiction, foreign territories.75
Fifth, the Implementing Rules provides that goods initially introduced into the FEZs
and subsequently brought out therefrom and introduced into the Philippine customs
territory shall be considered as importations and thereby subject to the VAT.76 One such
instance is the sale by any FEZ enterprise to a customer located in the customs territory,
which the VAT regulations refer to as a technical importation.77
We find it clear from all these that when goods (e.g., petroleum and petroleum products)
are brought into an FEZ, the goods remain to be in foreign territory and are not therefore
goods introduced into Philippine customs territory subject to Philippine customs and tax
laws.78
Stated differently, goods brought into and traded within an FEZ are generally beyond the
reach of national internal revenue taxes and customs duties enforced in the Philippine
customs territory. This is consistent with the incentive granted to FEZs exempting
the importation itself from taxes and duties.
Therefore, the act of bringing the goods into an FEZ is not a taxable importation. As long
as the goods remain (e.g., sale and/or consumption of the article within the FEZ) in the
FEZ or re-exported to another foreign jurisdiction, they shall continue to be tax-
free.79 However, once the goods are introduced into the Philippine customs territory, it
ceases to enjoy the tax privileges accorded to FEZs. It shall then be considered as
an importation subject to all applicable national internal revenue taxes and customs
duties.
The tax exemption granted to FEZ
enterprises is an immunity from tax liability
and from the payment of the tax.
The respondents claim that when RR 2-2012 was issued, petroleum and petroleum
products brought into the FEZ by FEZ enterprises suddenly became subject to VAT and
excise tax, in direct contravention of RA 9400 (with respect to Clark FEZ enterprises). Such
imposition is not authorized under any law, including the Tax Code. 80
On the other hand, the petitioners argue that RR 2-2012 does not withdraw the tax
exemption privileges of FEZ enterprises.1âwphi1 As their tax exemption is
merely qualified, they cannot invoke outright exemption. Thus, FEZ enterprises are
required to pay internal revenue taxes first on their imported petroleum under RR 2-2012.
They may then refund their previous payment upon showing that the condition under RA
9400 has been satisfied - that is, the goods have not been introduced to the Philippines
customs territory.81 To the petitioners, to the extent that a refund is allowable, there is
still in reality a tax exemption.82
We disagree with this contention.
First, FEZ enterprises bringing goods into the FEZ should not be considered
as importers subject to tax in the same manner that the very act of bringing goods into
these special territories does not make them taxable importations. We emphasize that
the exemption from taxes and duties under RA 9400 are granted not only
to importations into the FEZ, but also specifically to each FEZ enterprise. As discussed, the
tax exemption enjoyed by FEZ enterprises necessarily includes the tax exemption of
the importations of selected articles into the FEZ.
Second, the essence of a tax exemption is the immunity or freedom from a charge or
burden to which others are subjected.83 It is a waiver of the government's right to
collect84 the amounts that would have been collectible under our tax laws. Thus, when
the law speaks of a tax exemption, it should be understood as freedom from the
imposition and payment of a particular tax.
Based on this premise, we rule that the refund mechanism provided by RR 2-2012 does
not amount to a tax exemption. Even if the possibility of a subsequent refund exists, the
fact remains that FEZ enterprises must still spend money and other resources to pay for
something they should be immune to in the first place. This completely contradicts the
essence of their tax exemption.
In the same vein, we cannot agree with the view that FEZ enterprises have the duty to
prove their entitlement to tax exemption first before fully enjoying the same; we find it
illogical to determine whether a person is exempted from tax without first determining if
he is subject to the tax being imposed. We have reminded the tax authorities to
determine first if a person is liable for a particular tax, applying the rule of strict
interpretation of tax laws, before asking him to prove his exemption therefrom. 85 Indeed,
as entities exempted on taxes on importations, FEZ enterprises are clearly beyond the
coverage of any law imposing those very charges. There is no justifiable reason to require
them to prove that they are exempted from it.
More importantly, we have also recognized that the exemption from local and national
taxes granted under RA 7227, as amended by RA 9400, are ipso facto accorded to FEZs. In
case of doubt, conflicts with respect to such tax exemption privilege shall be resolved in
favor of these special territories.86
RR 2-2012 is unconstitutional.
According to the respondents, the power to enact, amend, or repeal laws belong
exclusively to Congress.87 In passing RR 2-2012, petitioners illegally amended the law - a
power solely vested on the Legislature.
We agree with the respondents.
The power of the petitioners to interpret tax laws is not absolute. The rule is that
regulations may not enlarge, alter, restrict, or otherwise go beyond the provisions of the
law they administer; administrators and implementors cannot engraft additional
requirements not contemplated by the legislature.88
It is worthy to note that RR 2-2012 does not even refer to a specific Tax Code provision it
wishes to implement. While it purportedly establishes mere administration measures for
the collection of VAT and excise tax on the importation of petroleum and petroleum
products, not once did it mention the pertinent chapters of the Tax Code on VAT and
excise tax.
While we recognize petitioners' essential rationale in issuing RR 2-2012, the procedures
proposed by the issuance cannot be implemented at the expense of entities that have
been clearly granted statutory tax immunity.
REVISED PAGE
Tax exemptions are granted for specific public interests that the Legislature considers
sufficient to offset the monetary loss in the grant of exemptions. 89 To limit the tax-free
importation privilege of FEZ enterprises by requiring them to pay subject to a refund
clearly runs counter to the Legislature's intent to create a free port where the "free flow
of goods or capital within, into, and out of the zones" is ensured. 90
Finally, the State's inherent power to tax is vested exclusively in the Legislature. 91 We have
since ruled that the power to tax includes the power to grant tax exemptions. 92 Thus, the
imposition of taxes, as well as the grant and withdrawal of tax exemptions, shall only be
valid pursuant to a legislative enactment.
As RR 2-2012, an executive issuance, attempts to withdraw the tax incentives clearly
accorded by the legislative to FEZ enterprises, the *petitioners have arrogated upon
themselves a power reserved exclusively to Congress, in violation of the doctrine of
separation of powers.
In these lights, we hereby rule and declare that RR 2-2012 is null and void.

WHEREFORE, we hereby DISMISS the petition for lack of merit, and

accordingly AFFIRM decision of the Regional Trial Court dated November 8, 2013 2001 in
SCA Case No. 12-410.