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11/18/2014 G.R. No.

L-7859
http://www.lawphil.net/judjuris/juri1955/dec1955/gr_l-7859_1955.html 1/3

Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
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.
Ernesto J. Gonzaga for appellant.
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres and
Solicitor
Felicisimo R. Rosete for 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
11/18/2014 G.R. No. L-7859
http://www.lawphil.net/judjuris/juri1955/dec1955/gr_l-7859_1955.html 2/3

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
11/18/2014 G.R. No. L-7859
http://www.lawphil.net/judjuris/juri1955/dec1955/gr_l-7859_1955.html 3/3

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.
The Lawphil Project - Arellano Law Foundation

11/18/2014 G.R. No. L-7859


http://www.lawphil.net/judjuris/juri1955/dec1955/gr_l-7859_1955.html 1/3

Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
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.
Ernesto J. Gonzaga for appellant.
Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres and
Solicitor
Felicisimo R. Rosete for 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
11/18/2014 G.R. No. L-7859
http://www.lawphil.net/judjuris/juri1955/dec1955/gr_l-7859_1955.html 2/3

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
11/18/2014 G.R. No. L-7859
http://www.lawphil.net/judjuris/juri1955/dec1955/gr_l-7859_1955.html 3/3

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.
The Lawphil Project - Arellano Law Foundation

11/18/2014 G.R. No. L-28138


http://www.lawphil.net/judjuris/juri1986/aug1986/gr_28138_1986.html 1/3

Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-28138 August 13, 1986
MATALIN COCONUT CO., INC., petitioner-appellee,
vs.
THE MUNICIPAL COUNCIL OF MALABANG, LANAO DEL SUR, AMIR M. BALINDONG and HADJI
PANGILAMUN MANALOCON, MUNICIPAL MAYOR and MUNICIPAL TREASURER OF MALABANG, LANAO
DEL SUR, respondents-appellants. PURAKAN PLANTATION COMPANY, intervenor-appellee.
YAP, J.:
On August 24, 1966, the Municipal Council of Malabang, Lanao del Sur, invoking the authority of Section 2 of
Republic Act No. 2264, otherwise known as the Local Autonomy Act, enacted Municipal Ordinance No. 45-46,
entitled "AN ORDINANCE IMPOSING A POLICE INSPECTION FEE OF P.30 PER SACK OF CASSAVA
STARCH
PRODUCED AND SHIPPED OUT OF THE MUNICIPALITY OF MALABANG AND IMPOSING PENALTIES
FOR
VIOLATIONS THEREOF." The ordinance made it unlawful for any person, company or group of persons "to
ship
out of the Municipality of Malabang, cassava starch or flour without paying to the Municipal Treasurer or his
authorized representatives the corresponding fee fixed by (the) ordinance." It imposed a "police inspection fee"
of
P.30 per sack of cassava starch or flour, which shall be paid by the shipper before the same is transported or
shipped outside the municipality. Any person or company or group of individuals violating the ordinance "is
liable
to a fine of not less than P100.00, but not more than P1,000.00, and to pay Pl.00 for every sack of flour being
illegally shipped outside the municipality, or to suffer imprisonment of 20 days, or both, in the discretion of the
court.
The validity of the ordinance was challenged by the Matalin Coconut, Inc. in a petition for declaratory relief filed
with the then Court of First Instance of Lanao del Sur against the Municipal Council, the Municipal Mayor and
the
Municipal Treasurer of Malabang, Lanao del Sur. Alleging among others that the ordinance is not only ultra
vires,
being violative of Republic Act No. 2264, but also unreasonable, oppressive and confiscatory, the petitioner
prayed that the ordinance be declared null and void ab initio, and that the respondent Municipal Treasurer be
ordered to refund the amounts paid by petitioner under the ordinance. The petitioner also prayed that during
the
pendency of the action, a preliminary injunction be issued enjoining the respondents from enforcing the
ordinance. The application for preliminary injunction, however, was denied by the trial court; instead respondent
Municipal Treasurer was ordered to allow payment of the taxes imposed by the ordinance under protest.
Claiming that it was also adversely affected by the ordinance, Purakan Plantation Company was granted leave
to
intervene in the action. The intervenor alleged that while its cassava flour factory was situated in another
municipality, i.e., Balabagan, Lanao del Sur, it had to transport the cassava starch and flour it produced to the
seashore through the Municipality of Malabang for loading in coastwise vessels; that the effect of the
enactment
of Ordinance No. 45-46, is that intervenor had to refrain from transporting its products through the Municipality
of
Malabang in order to ship them by sea to other places.
After trial, the Court a quo rendered a decision declaring the municipal ordinance in question null and void;
ordering the respondent Municipal Treasurer to refund to the petitioner the payments it made under the said
ordinance from September 27, 1966 to May 2, 1967, amounting to P 25,500.00, as well as all payments made
subsequently thereafter; and enjoining and prohibiting the respondents, their agents or deputies, from collecting
the tax of P.30 per bag on the cassava flour or starch belonging to intervenor, Purakan Plantation Company,
manufactured or milled in the Municipality of Balabagan, but shipped out through the Municipality of Malabang.
After the promulgation of the decision, the Trial Court issued a writ of preliminary mandatory injunction, upon
motion of petitioner, requiring the respondent Municipal Treasurer to deposit with the Philippine National Bank,

Iligan Branch, in the name of the Municipality of Malabang, whatever amounts the petitioner had already paid
or
shall pay pursuant to the ordinance in question up to and until final termination of the case; the deposit was not
to
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be withdrawn from the said bank without any order from the court. On motion for reconsideration by
respondents,
the writ was subsequently modified on July 20, 1967, to require the deposit only of amounts paid from the
effectivity of the writ up to and until the final termination of the suit.
From the decision of the trial court, the respondents appealed to this Court.
A motion to dismiss appeal filed by petitioner-appellee, was denied by this court in its resolution of October 31,
1967. Subsequently, respondents-appellants filed a motion to dissolve the writ of preliminary mandatory
injunction
issued by the trial court on July 20, 1967. This motion was also denied by this Court on January 10, 1968.
Of the assignments of error raised by the appellants in their Brief, only the following need be discussed: (1) that
the trial court erred in adjudicating the money claim of the petitioner in an action for declaratory relief; and (2)
that
the trial court erred in declaring the municipal ordinance in question null and void.
The respondents-appellants maintain that it was error for the trial court, in an action for declaratory relief, to
order
the refund to petitioner-appellee of the amounts paid by the latter under the municipal ordinance in question. It
is
the contention of respondents-appellants that in an action for declaratory relief, all the court can do is to
construe
the validity of the ordinance in question and declare the rights of those affected thereby. The court cannot
declare
the ordinance illegal and at the same time order the refund to petitioner of the amounts paid under the
ordinance,
without requiring petitioner to file an ordinary action to claim the refund after the declaratory relief judgment has
become final. Respondents maintain that under Rule 64 of the Rules of Court, the court may advise the parties
to
file the proper pleadings and convert the hearing into an ordinary action, which was not done in this case.
We find no merit in such contention. Under Sec. 6 of Rule 64, the action for declaratory relief may be converted
into an ordinary action and the parties allowed to file such pleadings as may be necessary or proper, if before
the
final termination of the case "a breach or violation of an...ordinance, should take place." In the present case, no
breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees imposed
by
the ordinance. Such payment did not affect the case; the declaratory relief action was still proper because the
applicability of the ordinance to future transactions still remained to be resolved, although the matter could also
be
threshed out in an ordinary suit for the recovery of taxes paid (Shell Co. of the Philippines, Ltd. vs. Municipality
of
Sipocot, L-12680, March 20, 1959). In its petition for declaratory relief, petitioner-appellee alleged that by
reason
of the enforcement of the municipal ordinance by respondents it was forced to pay under protest the fees
imposed pursuant to the said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that
the respondents be ordered to refund all the amounts it paid to respondent Municipal Treasurer during the
pendency of the case. The inclusion of said allegation and prayer in the petition was not objected to by the
respondents in their answer. During the trial, evidence of the payments made by the petitioner was introduced.
Respondents were thus fully aware of the petitioner's claim for refund and of what would happen if the
ordinance
were to be declared invalid by the court.
Respondents' contention, if sustained, would in effect require a separate suit for the recovery of the fees paid
by
petitioner under protest. Multiplicity of suits should not be allowed or encouraged and, in the context of the
present case, is clearly uncalled for and unnecessary.
The main issue to be resolve in this case whether not Ordinance No. 45-66 enacted by respondent Municipal

Council of Malabang, Lanao del Sur, is valid. The respondents-appellants contend that the municipality has the
power and authority to approve the ordinance in question pursuant to Section 2 of the Local Autonomy Act
(Republic Act No. 2264).
Since the enactment of the Local Autonomy Act, a liberal rule has been followed by this Court in construing
municipal ordinances enacted pursuant to the taxing power granted under Section 2 of said law. This Court has
construed the grant of power to tax under the above-mentioned provision as sufficiently plenary to cover
"everything, excepting those which are mentioned" therein, subject only to the limitation that the tax so levied is
for public purposes, just and uniform (Nin Bay Mining Company vs. Municipality of Roxas, Province of Palawan,
14 SCRA 661; C.N. Hodges vs. Municipal Board, Iloilo City, et al., 19 SCRA 28).
We agree with the finding of the trial court that the amount collected under the ordinance in question partakes
of
the nature of a tax, although denominated as "police inspection fee" since its undeniable purpose is to raise
revenue. However, we cannot agree with the trial court's finding that the tax imposed by the ordinance is a
percentage tax on sales which is beyond the scope of the municipality's authority to levy under Section 2 of the
Local Autonomy Act. Under the said provision, municipalities and municipal districts are prohibited from
imposing"
any percentage tax on sales or other taxes in any form based thereon. " The tax imposed under the ordinance
in
question is not a percentage tax on sales or any other form of tax based on sales. It is a fixed tax of P.30 per
bag
of cassava starch or flour "shipped out" of the municipality. It is not based on sales.
However, the tax imposed under the ordinance can be stricken down on another ground. According to Section
2
of the abovementioned Act, the tax levied must be "for public purposes, just and uniform" (Emphasis supplied.)
As
correctly held by the trial court, the so-called "police inspection fee" levied by the ordinance is "unjust and
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unreasonable." Said the court a quo:


... It has been proven that the only service rendered by the Municipality of Malabang, by way of
inspection, is for the policeman to verify from the driver of the trucks of the petitioner passing by at
the police checkpoint the number of bags loaded per trip which are to be shipped out of the
municipality based on the trip tickets for the purpose of computing the total amount of tax to be
collect (sic) and for no other purpose. The pretention of respondents that the police, aside from
counting the number of bags shipped out, is also inspecting the cassava flour starch contained in the
bags to find out if the said cassava flour starch is fit for human consumption could not be given
credence by the Court because, aside from the fact that said purpose is not so stated in the
ordinance in question, the policemen of said municipality are not competent to determine if the
cassava flour starch are fit for human consumption. The further pretention of respondents that the
trucks of the petitioner hauling the bags of cassava flour starch from the mill to the bodega at the
beach of Malabang are escorted by a policeman from the police checkpoint to the beach for the
purpose of protecting the truck and its cargoes from molestation by undesirable elements could not
also be given credence by the Court because it has been shown, beyond doubt, that the petitioner
has not asked for the said police protection because there has been no occasion where its trucks
have been molested, even for once, by bad elements from the police checkpoint to the bodega at the
beach, it is solely for the purpose of verifying the correct number of bags of cassava flour starch
loaded on the trucks of the petitioner as stated in the trip tickets, when unloaded at its bodega at the
beach. The imposition, therefore, of a police inspection fee of P.30 per bag, imposed by said
ordinance is unjust and unreasonable.
The Court finally finds the inspection fee of P0.30 per bag, imposed by the ordinance in question to
be excessive and confiscatory. It has been shown by the petitioner, Matalin Coconut Company, Inc.,
that it is merely realizing a marginal average profit of P0.40, per bag, of cassava flour starch shipped
out from the Municipality of Malabang because the average production is P15.60 per bag, including
transportation costs, while the prevailing market price is P16.00 per bag. The further imposition,
therefore, of the tax of P0.30 per bag, by the ordinance in question would force the petitioner to close
or stop its cassava flour starch milling business considering that it is maintaining a big labor force in
its operation, including a force of security guards to guard its properties. The ordinance, therefore,
has an adverse effect on the economic growth of the Municipality of Malabang, in particular, and of
the nation, in general, and is contrary to the economic policy of the government.

Having found the ordinance in question to be invalid, we find it unnecessary to rule on the other errors assigned
by the appellants.
WHEREFORE, petition is dismissed. The decision of the court a quo is hereby affirmed. No costs.
SO ORDERED.
Narvasa, Melencio-Herrera, Cruz and Paras, JJ., concur.
The Lawphil Project - Arellano Law Foundation

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Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 118295 May 2, 1997
WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as
taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives
and as taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES
UNION, NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE
DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL
RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC.,
and
PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental
organizations, petitioners,
vs.
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO
AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA.
MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEA, SANTANINA RASUL,
RAMON
REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as
members of the Philippine Senate who concurred in the ratification by the President of the Philippines of
the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as
Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer;
RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his
capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance;
ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his
capacity as Executive Secretary, respondents.
PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the
vast majority of countries has revolutionized international business and economic relations amongst states. It
has
irreversibly propelled the world towards trade liberalization and economic globalization. Liberalization,
globalization, deregulation and privatization, the third-millennium buzz words, are ushering in a new borderless
world of business by sweeping away as mere historical relics the heretofore traditional modes of promoting and
protecting national economies like tariffs, export subsidies, import quotas, quantitative restrictions, tax
exemptions
and currency controls. Finding market niches and becoming the best in specific industries in a market-driven
and
export-oriented global scenario are replacing age-old "beggar-thy-neighbor" policies that unilaterally protect
weak
and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known
management guru, "Increased participation in the world economy has become the key to domestic economic
growth and prosperity."
Brief Historical Background
To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the
establishment of three multilateral institutions inspired by that grand political body, the United Nations
were
discussed at Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB) which was to address
the
rehabilitation and reconstruction of war-ravaged and later developing countries; the second, the International
Monetary Fund (IMF) which was to deal with currency problems; and the third, the International Trade
Organization (ITO), which was to foster order and predictability in world trade and to minimize unilateral
protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons,
including its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What
remained
was only GATT the General Agreement on Tariffs and Trade. GATT was a collection of treaties governing
access to the economies of treaty adherents with no institutionalized body administering the agreements or

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dependable system of dispute settlement.


After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo
Round
and the Uruguay Round, the world finally gave birth to that administering body the World Trade Organization
with the signing of the "Final Act" in Marrakesh, Morocco and the ratification of the WTO Agreement by its
members. 1
Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as
articulated by President Fidel V. Ramos in two letters to the Senate (infra), of improving "Philippine access to
foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly
agricultural and industrial products." The President also saw in the WTO the opening of "new opportunities for
the
services sector . . . , (the reduction of) costs and uncertainty associated with exporting . . . , and (the attraction
of)
more investments into the country." Although the Chief Executive did not expressly mention it in his letter, the
Philippines and this is of special interest to the legal profession will benefit from the WTO system of
dispute
settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute
Settlement
Panels and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where
solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak and
underdeveloped countries were at a disadvantage.
The Petition in Brief
Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products of member-countries
on
the same footing as Filipinos and local products" and (2) that the WTO "intrudes, limits and/or impairs" the
constitutional powers of both Congress and the Supreme Court, the instant petition before this Court assails the
WTO Agreement for violating the mandate of the 1987 Constitution to "develop a self-reliant and independent
national economy effectively controlled by Filipinos . . . (to) give preference to qualified Filipinos (and to)
promote
the preferential use of Filipino labor, domestic materials and locally produced goods."
Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization
and
economic globalization? Does it proscribe Philippine integration into a global economy that is liberalized,
deregulated and privatized? These are the main questions raised in this petition for certiorari, prohibition and
mandamus under Rule 65 of the Rules of Court praying (1) for the nullification, on constitutional grounds, of the
concurrence of the Philippine Senate in the ratification by the President of the Philippines of the Agreement
Establishing the World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of its
implementation and enforcement through the release and utilization of public funds, the assignment of public
officials and employees, as well as the use of government properties and resources by respondent-heads of
various executive offices concerned therewith. This concurrence is embodied in Senate Resolution No. 97,
dated
December 14, 1994.
The Facts
On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department of Trade and Industry
(Secretary Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in
Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations
(Final Act, for brevity).
By signing the Final Act, 2 Secretary Navarro on behalf of the Republic of the Philippines, agreed:
(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective
competent authorities, with a view to seeking approval of the Agreement in accordance with their
procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the
President of the Philippines, 3 stating among others that "the Uruguay Round Final Act is hereby submitted to the
Senate
for its concurrence pursuant to Section 21, Article VII of the Constitution."

On August 13, 1994, the members of the Philippine Senate received another letter from the President of the

Philippines 4 likewise dated August 11, 1994, which stated among others that "the Uruguay Round Final Act, the
Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the
Understanding on
Commitments in Financial Services are hereby submitted to the Senate for its concurrence pursuant to Section 21,
Article
VII of the Constitution."

On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S.
1083, a resolution entitled "Concurring in the Ratification of the Agreement Establishing the World Trade
Organization." 5
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On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which "Resolved, as it is hereby
resolved, that the Senate concur, as it hereby concurs, in the ratification by the President of the Philippines of
the
Agreement Establishing the World Trade Organization." 6 The text of the WTO Agreement is written on pages 137
et
seq. of Volume I of the 36-volume Uruguay Round of Multilateral Trade Negotiations and includes various
agreements and
associated legal instruments (identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively referred
to as
Multilateral Trade Agreements, for brevity) as follows:

ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of he
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating
Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and Annexes
Annex 1C: Agreement on Trade-Related Aspects of Intellectual
Property Rights
ANNEX 2
Understanding on Rules and Procedures Governing
the Settlement of Disputes
ANNEX 3
Trade Policy Review Mechanism
On December 16, 1994, the President of the Philippines signed 7 the Instrument of Ratification, declaring:
NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the
Philippines, after having seen and considered the aforementioned Agreement Establishing the World
Trade Organization and the agreements and associated legal instruments included in Annexes one
(1), two (2) and three (3) of that Agreement which are integral parts thereof, signed at Marrakesh,
Morocco on 15 April 1994, do hereby ratify and confirm the same and every Article and Clause
thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement
Proper and "the associated legal instruments included in Annexes one (1), two (2) and three (3) of that
Agreement which are integral parts thereof."
On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its

integral annexes aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the
Understanding on Commitments in Financial Services. In his Memorandum dated May 13, 1996, 8 the Solicitor
General describes these two latter documents as follows:

The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide
range of matters, such as measures in favor of least developed countries, notification procedures,
relationship of WTO with the International Monetary Fund (IMF), and agreements on technical
barriers to trade and on dispute settlement.
The Understanding on Commitments in Financial Services dwell on, among other things, standstill or
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limitations and qualifications of commitments to existing non-conforming measures, market access,


national treatment, and definitions of non-resident supplier of financial services, commercial
presence and new financial service.
On December 29, 1994, the present petition was filed. After careful deliberation on respondents' comment and
petitioners' reply thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the
parties thereafter filed their respective memoranda. The court also requested the Honorable Lilia R. Bautista,
the
Philippine Ambassador to the United Nations stationed in Geneva, Switzerland, to submit a paper, hereafter
referred to as "Bautista Paper," 9 for brevity, (1) providing a historical background of and (2) summarizing the said
agreements.

During the Oral Argument held on August 27, 1996, the Court directed:
(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2)
the transcript of proceedings/hearings in the Senate; and
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior
to the Philippine adherence to the WTO Agreement, which derogate from Philippine sovereignty and
(2) copies of the multi-volume WTO Agreement and other documents mentioned in the Final Act, as
soon as possible.
After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a
Compliance dated September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume
Uruguay
Round of Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996, he listed the
various "bilateral or multilateral treaties or international instruments involving derogation of Philippine
sovereignty." Petitioners, on the other hand, submitted their Compliance dated January 28, 1997, on January
30,
1997.
The Issues
In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows:
A. Whether the petition presents a political question or is otherwise not justiciable.
B. Whether the petitioner members of the Senate who participated in the deliberations and voting
leading to the concurrence are estopped from impugning the validity of the Agreement Establishing
the World Trade Organization or of the validity of the concurrence.
C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene
the provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine
Constitution.
D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit,
restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article
VI, 1987 Philippine Constitution is "vested in the Congress of the Philippines";
E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the
exercise of judicial power.
F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to
lack or excess of jurisdiction when they voted for concurrence in the ratification of the constitutionallyinfirm
Agreement Establishing the World Trade Organization.
G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to
lack or excess of jurisdiction when they concurred only in the ratification of the Agreement
Establishing the World Trade Organization, and not with the Presidential submission which included
the Final Act, Ministerial Declaration and Decisions, and the Understanding on Commitments in
Financial Services.
On the other hand, the Solicitor General as counsel for respondents "synthesized the several issues raised by
petitioners into the following": 10

1. Whether or not the provisions of the "Agreement Establishing the World Trade Organization and
the Agreements and Associated Legal Instruments included in Annexes one (1), two (2) and three (3)
of that agreement" cited by petitioners directly contravene or undermine the letter, spirit and intent of
Section 19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution.
2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of
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legislative power by Congress.


3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this
Honorable Court in promulgating the rules of evidence.
4. Whether or not the concurrence of the Senate "in the ratification by the President of the Philippines
of the Agreement establishing the World Trade Organization" implied rejection of the treaty embodied
in the Final Act.
By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has
effectively ignored three, namely: (1) whether the petition presents a political question or is otherwise not
justiciable; (2) whether petitioner-members of the Senate (Wigberto E. Taada and Anna Dominique Coseteng)
are estopped from joining this suit; and (3) whether the respondent-members of the Senate acted in grave
abuse
of discretion when they voted for concurrence in the ratification of the WTO Agreement. The foregoing
notwithstanding, this Court resolved to deal with these three issues thus:
(1) The "political question" issue being very fundamental and vital, and being a matter that probes into the
very
jurisdiction of this Court to hear and decide this case was deliberated upon by the Court and will thus be
ruled
upon as the first issue;
(2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have
effectively waived it by not pursuing it in any of their pleadings; in any event, this issue, even if ruled in
respondents' favor, will not cause the petition's dismissal as there are petitioners other than the two senators,
who
are not vulnerable to the defense of estoppel; and
(3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an
integral part of the disposition of the four issues raised by the Solicitor General.
During its deliberations on the case, the Court noted that the respondents did not question the locus standi of
petitioners. Hence, they are also deemed to have waived the benefit of such issue. They probably realized that
grave constitutional issues, expenditures of public funds and serious international commitments of the nation
are
involved here, and that transcendental public interest requires that the substantive issues be met head on and
decided on the merits, rather than skirted or deflected by procedural matters. 11
To recapitulate, the issues that will be ruled upon shortly are:
(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED,
DOES THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO
JURISDICTION?
(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE
SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR
IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL
POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES
SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT,
MINISTERIAL DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON
COMMITMENTS IN FINANCIAL SERVICES?
The First Issue: Does the Court
Have Jurisdiction Over the Controversy?
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the
petition
no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have
infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute.
"The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the

supremacy of the Constitution is upheld." 12 Once a "controversy as to the application or interpretation of a


constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court is
bound
by constitutional mandate to decide." 13
The jurisdiction of this Court to adjudicate the matters 14 raised in the petition is clearly set out in the 1987
Constitution, 15 as follows:
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Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government.
The foregoing text emphasizes the judicial department's duty and power to strike down grave abuse of
discretion
on the part of any branch or instrumentality of government including Congress. It is an innovation in our political
law. 16 As explained by former Chief Justice Roberto Concepcion, 17 "the judiciary is the final arbiter on the question
of
whether or not a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction
or so
capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not only a judicial
power but
a duty to pass judgment on matters of this nature."
As this Court has repeatedly and firmly emphasized in many cases, 18 it will not shirk, digress from or abandon its
sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it
in
appropriate cases, committed by any officer, agency, instrumentality or department of the government.

As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in
the
ordinary course of law, we have no hesitation at all in holding that this petition should be given due course and
the
vital questions raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and
mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when
proper, acts of legislative and executive officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of
the
decision of the President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade
liberalization as a policy espoused by said international body. Neither will it rule on the propriety of the
government's economic policy of reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other
import/trade barriers. Rather, it will only exercise its constitutional duty "to determine whether or not there had
been a grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in
ratifying
the WTO Agreement and its three annexes.
Second Issue: The WTO Agreement
and Economic Nationalism
This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution mandating "economic
nationalism"
are violated by the so-called "parity provisions" and "national treatment" clauses scattered in various parts not
only of the WTO Agreement and its annexes but also in the Ministerial Decisions and Declarations and in the
Understanding on Commitments in Financial Services.
Specifically, the "flagship" constitutional provisions referred to are Sec 19, Article II, and Secs. 10 and 12,
Article
XII, of the Constitution, which are worded as follows:
Article II
DECLARATION OF PRINCIPLES
AND STATE POLICIES
xxx xxx xxx
Sec. 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.
xxx xxx xxx

Article XII
NATIONAL ECONOMY AND PATRIMONY
xxx xxx xxx
Sec. 10. . . . The Congress shall enact measures that will encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.
xxx xxx xxx
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Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them competitive.
Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions
quoted
in their memorandum: 19
a) In the area of investment measures related to trade in goods (TRIMS, for brevity):
Article 2
National Treatment and Quantitative Restrictions.
1. Without prejudice to other rights and obligations under GATT 1994, no Member shall
apply any TRIM that is inconsistent with the provisions of Article II or Article XI of GATT
1994.
2. An illustrative list of TRIMS that are inconsistent with the obligations of general
elimination of quantitative restrictions provided for in paragraph I of Article XI of GATT
1994 is contained in the Annex to this Agreement." (Agreement on Trade-Related
Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p. 22121, emphasis
supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List
1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of
Article III of GATT 1994 include those which are mandatory or enforceable under domestic law or
under administrative rulings, or compliance with which is necessary to obtain an advantage, and
which require:
(a) the purchase or use by an enterprise of products of domestic origin or from any
domestic source, whether specified in terms of particular products, in terms of volume or
value of products, or in terms of proportion of volume or value of its local production; or
(b) that an enterprise's purchases or use of imported products be limited to an amount
related to the volume or value of local products that it exports.
2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions
provided for in paragraph 1 of Article XI of GATT 1994 include those which are mandatory or
enforceable under domestic laws or under administrative rulings, or compliance with which is
necessary to obtain an advantage, and which restrict:
(a) the importation by an enterprise of products used in or related to the local production
that it exports;
(b) the importation by an enterprise of products used in or related to its local production
by restricting its access to foreign exchange inflows attributable to the enterprise; or
(c) the exportation or sale for export specified in terms of particular products, in terms of
volume or value of products, or in terms of a preparation of volume or value of its local
production. (Annex to the Agreement on Trade-Related Investment Measures, Vol. 27,
Uruguay Round Legal Documents, p. 22125, emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:
The products of the territory of any contracting party imported into the territory of any
other contracting party shall be accorded treatment no less favorable than that accorded
to like products of national origin in respect of laws, regulations and requirements
affecting their internal sale, offering for sale, purchase, transportation, distribution or
use, the provisions of this paragraph shall not prevent the application of differential
internal transportation charges which are based exclusively on the economic operation
of the means of transport and not on the nationality of the product." (Article III, GATT
1947, as amended by the Protocol Modifying Part II, and Article XXVI of GATT, 14

September 1948, 62 UMTS 82-84 in relation to paragraph 1(a) of the General


Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments p.
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177, emphasis supplied).


(b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity):
Each Member shall accord to the nationals of other Members treatment no less
favourable than that it accords to its own nationals with regard to the protection of
intellectual property. . . (par. 1 Article 3, Agreement on Trade-Related Aspect of
Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments, p. 25432
(emphasis supplied)
(c) In the area of the General Agreement on Trade in Services:
National Treatment
1. In the sectors inscribed in its schedule, and subject to any conditions and
qualifications set out therein, each Member shall accord to services and service
suppliers of any other Member, in respect of all measures affecting the supply of
services, treatment no less favourable than it accords to its own like services and service
suppliers.
2. A Member may meet the requirement of paragraph I by according to services and
service suppliers of any other Member, either formally suppliers of any other Member,
either formally identical treatment or formally different treatment to that it accords to its
own like services and service suppliers.
3. Formally identical or formally different treatment shall be considered to be less
favourable if it modifies the conditions of completion in favour of services or service
suppliers of the Member compared to like services or service suppliers of any other
Member. (Article XVII, General Agreement on Trade in Services, Vol. 28, Uruguay
Round Legal Instruments, p. 22610 emphasis supplied).
It is petitioners' position that the foregoing "national treatment" and "parity provisions" of the WTO Agreement
"place nationals and products of member countries on the same footing as Filipinos and local products," in
contravention of the "Filipino First" policy of the Constitution. They allegedly render meaningless the phrase
"effectively controlled by Filipinos." The constitutional conflict becomes more manifest when viewed in the
context
of the clear duty imposed on the Philippines as a WTO member to ensure the conformity of its laws, regulations
and administrative procedures with its obligations as provided in the annexed agreements. 20 Petitioners further
argue that these provisions contravene constitutional limitations on the role exports play in national development and
negate
the preferential treatment accorded to Filipino labor, domestic materials and locally produced goods.

On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not
self-executing and merely set out general policies; (2) that these nationalistic portions of the Constitution
invoked
by petitioners should not be read in isolation but should be related to other relevant provisions of Art. XII,
particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do not conflict with
Constitution;
and (4) that the WTO Agreement contains sufficient provisions to protect developing countries like the
Philippines
from the harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.
Declaration of Principles
Not Self-Executing
By its very title, Article II of the Constitution is a "declaration of principles and state policies." The counterpart of
this article in the 1935 Constitution 21 is called the "basic political creed of the nation" by Dean Vicente Sinco. 22
These
principles in Article II are not intended to be self-executing principles ready for enforcement through the courts. 23
They are
used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its
enactment of laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato, 24 the principles and state
policies
enumerated in Article II and some sections of Article XII are not "self-executing provisions, the disregard of which can
give

rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines
for
legislation."
In the same light, we held in Basco vs. Pagcor 25 that broad constitutional principles need legislative enactments
to
implement the, thus:

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13
(Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational
Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are merely
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statements of principles and policies. As such, they are basically not self-executing, meaning a law
should be passed by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing
principles ready for enforcement through the courts. They were rather directives
addressed to the executive and to the legislature. If the executive and the legislature
failed to heed the directives of the article, the available remedy was not judicial but
political. The electorate could express their displeasure with the failure of the executive
and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2).
The reasons for denying a cause of action to an alleged infringement of board constitutional principles are
sourced from basic considerations of due process and the lack of judicial authority to wade "into the uncharted
ocean of social and economic policy making." Mr. Justice Florentino P. Feliciano in his concurring opinion in
Oposa vs. Factoran, Jr., 26 explained these reasons as follows:
My suggestion is simply that petitioners must, before the trial court, show a more specific legal right
a right cast in language of a significantly lower order of generality than Article II (15) of the
Constitution that is or may be violated by the actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can validly render judgment grating all or part of the
relief prayed for. To my mind, the court should be understood as simply saying that such a more
specific legal right or rights may well exist in our corpus of law, considering the general policy
principles found in the Constitution and the existence of the Philippine Environment Code, and that
the trial court should have given petitioners an effective opportunity so to demonstrate, instead of
aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which is an essential component of a cause of action be
a specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2)
reasons. One is that unless the legal right claimed to have been violated or disregarded is given
specification in operational terms, defendants may well be unable to defend themselves intelligently
and effectively; in other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration where a specific violation of law or applicable
regulation is not alleged or proved, petitioners can be expected to fall back on the expanded
conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution
which reads:
Sec. 1. . . .
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis
supplied)
When substantive standards as general as "the right to a balanced and healthy ecology" and "the
right to health" are combined with remedial standards as broad ranging as "a grave abuse of
discretion amounting to lack or excess of jurisdiction," the result will be, it is respectfully submitted, to
propel courts into the uncharted ocean of social and economic policy making. At least in respect of
the vast area of environmental protection and management, our courts have no claim to special
technical competence and experience and professional qualification. Where no specific, operable
norms and standards are shown to exist, then the policy making departments the legislative and
executive departments must be given a real and effective opportunity to fashion and promulgate
those norms and standards, and to implement them before the courts should intervene.
Economic Nationalism Should Be Read with
Other Constitutional Mandates to Attain
Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to
the
national economy and patrimony, should be read and understood in relation to the other sections in said article,
especially Secs. 1 and 13 thereof which read:
Sec. 1. The goals of the national economy are a more equitable distribution of opportunities, income,
and wealth; a sustained increase in the amount of goods and services produced by the nation for the
benefit of the people; and an expanding productivity as the key to raising the quality of life for all
especially the underprivileged.
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The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of human and
natural resources, and which are competitive in both domestic and foreign markets. However, the
State shall protect Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given
optimum opportunity to develop. . . .
xxx xxx xxx
Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms
and arrangements of exchange on the basis of equality and reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as
follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the
people;
and
3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged.
With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing
preference in favor of qualified Filipinos "in the grant of rights, privileges and concessions covering the national
economy and patrimony" 27 and in the use of "Filipino labor, domestic materials and locally-produced goods"; (2) by
mandating the State to "adopt measures that help make them competitive; 28 and (3) by requiring the State to
"develop a
self-reliant and independent national economy effectively controlled by Filipinos." 29 In similar language, the
Constitution
takes into account the realities of the outside world as it requires the pursuit of "a trade policy that serves the general
welfare and utilizes all forms and arrangements of exchange on the basis of equality ad reciprocity"; 30 and speaks of
industries "which are competitive in both domestic and foreign markets" as well as of the protection of "Filipino
enterprises
against unfair foreign competition and trade practices."
It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al., 31 this
Court held that "Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is
complete
in itself and which needs no further guidelines or implementing laws or rule for its enforcement. From its very words
the
provision does not require any legislation to put it in operation. It is per se judicially enforceable." However, as the
constitutional provision itself states, it is enforceable only in regard to "the grants of rights, privileges and concessions
covering national economy and patrimony" and not to every aspect of trade and commerce. It refers to exceptions
rather
than the rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the
issue is
whether, as a rule, there are enough balancing provisions in the Constitution to allow the Senate to ratify the
Philippine
concurrence in the WTO Agreement. And we hold that there are.

All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and
enterprises,
at the same time, it recognizes the need for business exchange with the rest of the world on the bases of
equality
and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices
that are unfair. 32 In other words, the Constitution did not intend to pursue an isolationist policy. It did not shut out
foreign

investments, goods and services in the development of the Philippine economy. While the Constitution does not
encourage
the unlimited entry of foreign goods, services and investments into the country, it does not prohibit them either. In fact,
it
allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair.

WTO Recognizes Need to


Protect Weak Economies
Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak
and
developing economies, which comprise the vast majority of its members. Unlike in the UN where major states
have permanent seats and veto powers in the Security Council, in the WTO, decisions are made on the basis
of
sovereign equality, with each member's vote equal in weight to that of any other. There is no WTO equivalent of
the UN Security Council.
WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference
and the General Council shall be taken by the majority of the votes cast, except in cases of
interpretation of the Agreement or waiver of the obligation of a member which would require three
fourths vote. Amendments would require two thirds vote in general. Amendments to MFN provisions
and the Amendments provision will require assent of all members. Any member may withdraw from
the Agreement upon the expiration of six months from the date of notice of withdrawals. 33
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Hence, poor countries can protect their common interests more effectively through the WTO than through
oneonone negotiations with developed countries. Within the WTO, developing countries can form powerful blocs to
push their economic agenda more decisively than outside the Organization. This is not merely a matter of
practical alliances but a negotiating strategy rooted in law. Thus, the basic principles underlying the WTO
Agreement recognize the need of developing countries like the Philippines to "share in the growth in
international
trade commensurate with the needs of their economic development." These basic principles are found in the
preamble 34 of the WTO Agreement as follows:
The Parties to this Agreement,
Recognizing that their relations in the field of trade and economic endeavour should be conducted
with a view to raising standards of living, ensuring full employment and a large and steadily growing
volume of real income and effective demand, and expanding the production of and trade in goods
and services, while allowing for the optimal use of the world's resources in accordance with the
objective of sustainable development, seeking both to protect and preserve the environment and to
enhance the means for doing so in a manner consistent with their respective needs and concerns at
different levels of economic development,
Recognizing further that there is need for positive efforts designed to ensure that developing
countries, and especially the least developed among them, secure a share in the growth in
international trade commensurate with the needs of their economic development,
Being desirous of contributing to these objectives by entering into reciprocal and mutually
advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade
and to the elimination of discriminatory treatment in international trade relations,
Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system
encompassing the General Agreement on Tariffs and Trade, the results of past trade liberalization
efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations,
Determined to preserve the basic principles and to further the objectives underlying this multilateral
trading system, . . . (emphasis supplied.)
Specific WTO Provisos
Protect Developing Countries
So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic principles, the
WTO Agreement grants developing countries a more lenient treatment, giving their domestic industries some
protection from the rush of foreign competition. Thus, with respect to tariffs in general, preferential treatment is
given to developing countries in terms of the amount of tariff reduction and the period within which the
reduction is
to be spread out. Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to

be effected within a period of six (6) years while developing countries including the Philippines are
required
to effect an average tariff reduction of only 24% within ten (10) years.
In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural
products by 20% over six (6) years, as compared to only 13% for developing countries to be effected within ten
(10) years.
In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their
budgetary outlays for export subsidy by 36% and export volumes receiving export subsidy by 21% within a
period
of six (6) years. For developing countries, however, the reduction rate is only two-thirds of that prescribed for
developed countries and a longer period of ten (10) years within which to effect such reduction.
Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices
including anti-dumping measures, countervailing measures and safeguards against import surges. Where local
businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is
hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be
wiped
out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of
developing nations like the Philippines have been taken into account; thus, there would be no basis to say that
in
joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision
to
steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set
aside
on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe
only
in other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the
advantages and disadvantages of trade liberalization as an economic policy. It will only perform its
constitutional
duty of determining whether the Senate committed grave abuse of discretion.
Constitution Does Not
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Rule Out Foreign Competition


Furthermore, the constitutional policy of a "self-reliant and independent national economy" 35 does not
necessarily
rule out the entry of foreign investments, goods and services. It contemplates neither "economic seclusion" nor
"mendicancy in the international community." As explained by Constitutional Commissioner Bernardo Villegas,
sponsor of
this constitutional policy:

Economic self-reliance is a primary objective of a developing country that is keenly aware of


overdependence on external assistance for even its most basic needs. It does not mean autarky or
economic seclusion; rather, it means avoiding mendicancy in the international community.
Independence refers to the freedom from undue foreign control of the national economy, especially
in such strategic industries as in the development of natural resources and public utilities. 36
The WTO reliance on "most favored nation," "national treatment," and "trade without discrimination" cannot be
struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO
members. Aside from envisioning a trade policy based on "equality and reciprocity," 37 the fundamental law
encourages industries that are "competitive in both domestic and foreign markets," thereby demonstrating a clear
policy
against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that
can
compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises have shown
capability and
tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs and managers in
Hongkong
have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez
faire.

Constitution Favors Consumers,


Not Industries or Enterprises
The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it

contain any specific pronouncement that Filipino companies should be pampered with a total proscription of
foreign competition. On the other hand, respondents claim that WTO/GATT aims to make available to the
Filipino
consumer the best goods and services obtainable anywhere in the world at the most reasonable prices.
Consequently, the question boils down to whether WTO/GATT will favor the general welfare of the public at
large.
Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality?
Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will as promised by its
promoters expand the country's exports and generate more employment?
Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates
to
the Filipino public?
The responses to these questions involve "judgment calls" by our policy makers, for which they are answerable
to
our people during appropriate electoral exercises. Such questions and the answers thereto are not subject to
judicial pronouncements based on grave abuse of discretion.
Constitution Designed to Meet
Future Events and Contingencies
No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987.
That does not mean however that the Charter is necessarily flawed in the sense that its framers might not have
anticipated the advent of a borderless world of business. By the same token, the United Nations was not yet in
existence when the 1935 Constitution became effective. Did that necessarily mean that the then Constitution
might not have contemplated a diminution of the absoluteness of sovereignty when the Philippines signed the
UN
Charter, thereby effectively surrendering part of its control over its foreign relations to the decisions of various
UN
organs like the Security Council?
It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of
contemporary
events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its
drafters that a Constitution can withstand the assaults of bigots and infidels but at the same time bend with the
refreshing winds of change necessitated by unfolding events. As one eminent political law writer and respected
jurist 38 explains:
The Constitution must be quintessential rather than superficial, the root and not the blossom, the
base and frame-work only of the edifice that is yet to rise. It is but the core of the dream that must
take shape, not in a twinkling by mandate of our delegates, but slowly "in the crucible of Filipino
minds and hearts," where it will in time develop its sinews and gradually gather its strength and finally
achieve its substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown from
the brow of the Constitutional Convention, nor can it conjure by mere fiat an instant Utopia. It must
grow with the society it seeks to re-structure and march apace with the progress of the race, drawing
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from the vicissitudes of history the dynamism and vitality that will keep it, far from becoming a
petrified rule, a pulsing, living law attuned to the heartbeat of the nation.
Third Issue: The WTO Agreement and Legislative Power
The WTO Agreement provides that "(e)ach Member shall ensure the conformity of its laws, regulations and
administrative procedures with its obligations as provided in the annexed Agreements." 39 Petitioners maintain
that
this undertaking "unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative power which
under
Sec. 2, Article VI of the 1987 Philippine Constitution is vested in the Congress of the Philippines. It is an assault on
the
sovereign powers of the Philippines because this means that Congress could not pass legislation that will be good for
our
national interest and general welfare if such legislation will not conform with the WTO Agreement, which not only
relates to
the trade in goods . . . but also to the flow of investments and money . . . as well as to a whole slew of agreements on
socio-cultural matters . . . 40

More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in
the

Congress. 41 And while the Constitution allows Congress to authorize the President to fix tariff rates, import and
export
quotas, tonnage and wharfage dues, and other duties or imposts, such authority is subject to "specified limits and . . .
such
limitations and restrictions" as Congress may provide, 42 as in fact it did under Sec. 401 of the Tariff and Customs
Code.

Sovereignty Limited by
International Law and Treaties
This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments on this
issue. However, while sovereignty has traditionally been deemed absolute and all-encompassing on the
domestic
level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or
impliedly, as a member of the family of nations. Unquestionably, the Constitution did not envision a hermit-type
isolation of the country from the rest of the world. In its Declaration of Principles and State Policies, the
Constitution "adopts the generally accepted principles of international law as part of the law of the land, and
adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." 43 By the
doctrine of incorporation, the country is bound by generally accepted principles of international law, which are
considered to
be automatically part of our own laws. 44 One of the oldest and most fundamental rules in international law is pacta
sunt
servanda international agreements must be performed in good faith. "A treaty engagement is not a mere moral
obligation
but creates a legally binding obligation on the parties . . . A state which has contracted valid international obligations
is
bound to make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations
undertaken." 45

By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act,
nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived
from a convention or pact. After all, states, like individuals, live with coequals, and in pursuit of mutually
covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute
rights. Thus, treaties have been used to record agreements between States concerning such widely diverse
matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the
regulation of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling
of
claims, the laying down of rules governing conduct in peace and the establishment of international
organizations.
46 The sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter

into
the picture: (1) limitations imposed by the very nature of membership in the family of nations and (2) limitations
imposed by
treaty stipulations. As aptly put by John F. Kennedy, "Today, no nation can build its destiny alone. The age of selfsufficient
nationalism is over. The age of interdependence is here." 47

UN Charter and Other Treaties


Limit Sovereignty
Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict
its
sovereign rights under the "concept of sovereignty as auto-limitation." 47-A Under Article 2 of the UN Charter,
"(a)ll
members shall give the United Nations every assistance in any action it takes in accordance with the present Charter,
and
shall refrain from giving assistance to any state against which the United Nations is taking preventive or enforcement
action." Such assistance includes payment of its corresponding share not merely in administrative expenses but also
in
expenditures for the peace-keeping operations of the organization. In its advisory opinion of July 20, 1961, the
International
Court of Justice held that money used by the United Nations Emergency Force in the Middle East and in the Congo
were
"expenses of the United Nations" under Article 17, paragraph 2, of the UN Charter. Hence, all its members must bear
their

corresponding share in such expenses. In this sense, the Philippine Congress is restricted in its power to appropriate.
It is
compelled to appropriate funds whether it agrees with such peace-keeping expenses or not. So too, under Article 105
of the
said Charter, the UN and its representatives enjoy diplomatic privileges and immunities, thereby limiting again the
exercise
of sovereignty of members within their own territory. Another example: although "sovereign equality" and "domestic
jurisdiction" of all members are set forth as underlying principles in the UN Charter, such provisos are however
subject to
enforcement measures decided by the Security Council for the maintenance of international peace and security under
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Chapter VII of the Charter. A final example: under Article 103, "(i)n the event of a conflict between the obligations of
the
Members of the United Nations under the present Charter and their obligations under any other international
agreement, their
obligation under the present charter shall prevail," thus unquestionably denying the Philippines as a member
the
sovereign power to make a choice as to which of conflicting obligations, if any, to honor.

Apart from the UN Treaty, the Philippines has entered into many other international pacts both bilateral and
multilateral that involve limitations on Philippine sovereignty. These are enumerated by the Solicitor General
in
his Compliance dated October 24, 1996, as follows:
(a) Bilateral convention with the United States regarding taxes on income, where the Philippines
agreed, among others, to exempt from tax, income received in the Philippines by, among others, the
Federal Reserve Bank of the United States, the Export/Import Bank of the United States, the
Overseas Private Investment Corporation of the United States. Likewise, in said convention, wages,
salaries and similar remunerations paid by the United States to its citizens for labor and personal
services performed by them as employees or officials of the United States are exempt from income
tax by the Philippines.
(b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation
with respect to taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation.
(d) Bilateral convention with the French Republic for the avoidance of double taxation.
(e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all
customs duties, inspection fees and other duties or taxes aircrafts of South Korea and the regular
equipment, spare parts and supplies arriving with said aircrafts.
(f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs
duties, excise taxes, inspection fees and other similar duties, taxes or charges fuel, lubricating oils,
spare parts, regular equipment, stores on board Japanese aircrafts while on Philippine soil.
(g) Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the
same privileges as those granted to Japanese and Korean air carriers under separate air service
agreements.
(h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines
exempted Israeli nationals from the requirement of obtaining transit or visitor visas for a sojourn in
the Philippines not exceeding 59 days.
(i) Bilateral agreement with France exempting French nationals from the requirement of obtaining
transit and visitor visa for a sojourn not exceeding 59 days.
(j) Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special
Missions in the Philippines are inviolable and its agents can not enter said premises without consent
of the Head of Mission concerned. Special Missions are also exempted from customs duties, taxes
and related charges.
(k) Multilateral convention on the Law of Treaties. In this convention, the Philippines agreed to be
governed by the Vienna Convention on the Law of Treaties.
(l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the
International Court of Justice. The International Court of Justice has jurisdiction in all legal disputes
concerning the interpretation of a treaty, any question of international law, the existence of any fact
which, if established, would constitute a breach "of international obligation."
In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of

taxation, eminent domain and police power. The underlying consideration in this partial surrender of
sovereignty
is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to
the
Philippines, its officials and its citizens. The same reciprocity characterizes the Philippine commitments under
WTO-GATT.
International treaties, whether relating to nuclear disarmament, human rights, the environment, the
law of the sea, or trade, constrain domestic political sovereignty through the assumption of external
obligations. But unless anarchy in international relations is preferred as an alternative, in most cases
we accept that the benefits of the reciprocal obligations involved outweigh the costs associated with
any loss of political sovereignty. (T)rade treaties that structure relations by reference to durable, welldefined
substantive norms and objective dispute resolution procedures reduce the risks of larger
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countries exploiting raw economic power to bully smaller countries, by subjecting power relations to
some form of legal ordering. In addition, smaller countries typically stand to gain disproportionately
from trade liberalization. This is due to the simple fact that liberalization will provide access to a larger
set of potential new trading relationship than in case of the larger country gaining enhanced success
to the smaller country's market. 48
The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating
the
Constitution, based on the rationale that the Philippines "adopts the generally accepted principles of
international
law as part of the law of the land and adheres to the policy of . . . cooperation and amity with all nations."
Fourth Issue: The WTO Agreement and Judicial Power
Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the Agreement
on
Trade-Related Aspects of Intellectual Property Rights (TRIPS) 49 intrudes on the power of the Supreme Court to
promulgate rules concerning pleading, practice and procedures. 50
To understand the scope and meaning of Article 34, TRIPS, 51 it will be fruitful to restate its full text as follows:

Article 34
Process Patents: Burden of Proof
1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner
referred to in paragraph 1 (b) of Article 28, if the subject matter of a patent is a process for obtaining
a product, the judicial authorities shall have the authority to order the defendant to prove that the
process to obtain an identical product is different from the patented process. Therefore, Members
shall provide, in at least one of the following circumstances, that any identical product when produced
without the consent of the patent owner shall, in the absence of proof to the contrary, be deemed to
have been obtained by the patented process:
(a) if the product obtained by the patented process is new;
(b) if there is a substantial likelihood that the identical product was made by the process
and the owner of the patent has been unable through reasonable efforts to determine
the process actually used.
2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on
the alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the
condition referred to in subparagraph (b) is fulfilled.
3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their
manufacturing and business secrets shall be taken into account.
From the above, a WTO Member is required to provide a rule of disputable (not the words "in the absence of
proof to the contrary") presumption that a product shown to be identical to one produced with the use of a
patented process shall be deemed to have been obtained by the (illegal) use of the said patented process, (1)
where such product obtained by the patented product is new, or (2) where there is "substantial likelihood" that
the
identical product was made with the use of the said patented process but the owner of the patent could not
determine the exact process used in obtaining such identical product. Hence, the "burden of proof"
contemplated
by Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such
presumption. Such burden, properly understood, actually refers to the "burden of evidence" (burden of going

forward) placed on the producer of the identical (or fake) product to show that his product was produced
without
the use of the patented process.
The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of the
presumption provided under paragraph 1 of Article 34, such owner still has to introduce evidence of the
existence
of the alleged identical product, the fact that it is "identical" to the genuine one produced by the patented
process
and the fact of "newness" of the genuine product or the fact of "substantial likelihood" that the identical product
was made by the patented process.
The foregoing should really present no problem in changing the rules of evidence as the present law on the
subject, Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar
presumption
in cases of infringement of patented design or utility model, thus:
Sec. 60. Infringement. Infringement of a design patent or of a patent for utility model shall consist
in unauthorized copying of the patented design or utility model for the purpose of trade or industry in
the article or product and in the making, using or selling of the article or product copying the patented
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design or utility model. Identity or substantial identity with the patented design or utility model shall
constitute evidence of copying. (emphasis supplied)
Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only
if
(1) the product obtained by the patented process in NEW or (2) there is a substantial likelihood that the
identical
product was made by the process and the process owner has not been able through reasonable effort to
determine the process used. Where either of these two provisos does not obtain, members shall be free to
determine the appropriate method of implementing the provisions of TRIPS within their own internal systems
and
processes.
By and large, the arguments adduced in connection with our disposition of the third issue derogation of
legislative power will apply to this fourth issue also. Suffice it to say that the reciprocity clause more than
justifies such intrusion, if any actually exists. Besides, Article 34 does not contain an unreasonable burden,
consistent as it is with due process and the concept of adversarial dispute settlement inherent in our judicial
system.
So too, since the Philippine is a signatory to most international conventions on patents, trademarks and
copyrights, the adjustment in legislation and rules of procedure will not be substantial. 52
Fifth Issue: Concurrence Only in the WTO Agreement and
Not in Other Documents Contained in the Final Act
Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes but not in the other
documents referred to in the Final Act, namely the Ministerial Declaration and Decisions and the Understanding
on Commitments in Financial Services is defective and insufficient and thus constitutes abuse of discretion.
They submit that such concurrence in the WTO Agreement alone is flawed because it is in effect a rejection of
the
Final Act, which in turn was the document signed by Secretary Navarro, in representation of the Republic upon
authority of the President. They contend that the second letter of the President to the Senate 53 which
enumerated
what constitutes the Final Act should have been the subject of concurrence of the Senate.

"A final act, sometimes called protocol de cloture, is an instrument which records the winding up of the
proceedings of a diplomatic conference and usually includes a reproduction of the texts of treaties,
conventions,
recommendations and other acts agreed upon and signed by the plenipotentiaries attending the conference."
54 It

is not the treaty itself. It is rather a summary of the proceedings of a protracted conference which may have taken
place
over several years. The text of the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations" is contained in just one page 55 in Vol. I of the 36-volume Uruguay Round of Multilateral Trade
Negotiations.
By signing said Final Act, Secretary Navarro as representative of the Republic of the Philippines undertook:

(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective
competent authorities with a view to seeking approval of the Agreement in accordance with their
procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its
signatories, namely, concurrence of the Senate in the WTO Agreement.
The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were
approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives of the
members
can meet "to give effect to those provisions of this Agreement which invoke joint action, and generally with a
view
to facilitating the operation and furthering the objectives of this Agreement." 56
The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the
Philippines. It applies only to those 27 Members which "have indicated in their respective schedules of
commitments on standstill, elimination of monopoly, expansion of operation of existing financial service
suppliers,
temporary entry of personnel, free transfer and processing of information, and national treatment with respect
to
access to payment, clearing systems and refinancing available in the normal course of business." 57
On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as
its
integral parts, 58 as follows:
Article II
Scope of the WTO
1. The WTO shall provide the common institutional frame-work for the conduct of trade relations
among its Members in matters to the agreements and associated legal instruments included in the
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Annexes to this Agreement.


2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3, (hereinafter
referred to as "Multilateral Agreements") are integral parts of this Agreement, binding on all
Members.
3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as
"Plurilateral Trade Agreements") are also part of this Agreement for those Members that have
accepted them, and are binding on those Members. The Plurilateral Trade Agreements do not create
either obligation or rights for Members that have not accepted them.
4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred
to as "GATT 1994") is legally distinct from the General Agreement on Tariffs and Trade, dated 30
October 1947, annexed to the Final Act adopted at the conclusion of the Second Session of the
Preparatory Committee of the United Nations Conference on Trade and Employment, as
subsequently rectified, amended or modified (hereinafter referred to as "GATT 1947").
It should be added that the Senate was well-aware of what it was concurring in as shown by the members'
deliberation on August 25, 1994. After reading the letter of President Ramos dated August 11, 1994, 59 the
senators
of the Republic minutely dissected what the Senate was concurring in, as follows: 60

THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day
hearing of this Committee yesterday. Was the observation made by Senator Taada that what was
submitted to the Senate was not the agreement on establishing the World Trade Organization by the
final act of the Uruguay Round which is not the same as the agreement establishing the World Trade
Organization? And on that basis, Senator Tolentino raised a point of order which, however, he
agreed to withdraw upon understanding that his suggestion for an alternative solution at that time
was acceptable. That suggestion was to treat the proceedings of the Committee as being in the
nature of briefings for Senators until the question of the submission could be clarified.
And so, Secretary Romulo, in effect, is the President submitting a new . . . is he making a new
submission which improves on the clarity of the first submission?
MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no
misunderstanding, it was his intention to clarify all matters by giving this letter.
THE CHAIRMAN: Thank you.
Can this Committee hear from Senator Taada and later on Senator Tolentino since they were the

ones that raised this question yesterday?


Senator Taada, please.
SEN. TAADA: Thank you, Mr. Chairman.
Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted
to the Senate for ratification is not the Final Act of the Uruguay Round, but rather the Agreement on
the World Trade Organization as well as the Ministerial Declarations and Decisions, and the
Understanding and Commitments in Financial Services.
I am now satisfied with the wording of the new submission of President Ramos.
SEN. TAADA. . . . of President Ramos, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino? And after him
Senator Neptali Gonzales and Senator Lina.
SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but
I saw the draft of his earlier, and I think it now complies with the provisions of the Constitution, and
with the Final Act itself . The Constitution does not require us to ratify the Final Act. It requires us to
ratify the Agreement which is now being submitted. The Final Act itself specifies what is going to be
submitted to with the governments of the participants.
In paragraph 2 of the Final Act, we read and I quote:
By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO
Agreement for the consideration of the respective competent authorities with a view to seeking
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approval of the Agreement in accordance with their procedures.


In other words, it is not the Final Act that was agreed to be submitted to the governments for
ratification or acceptance as whatever their constitutional procedures may provide but it is the World
Trade Organization Agreement. And if that is the one that is being submitted now, I think it satisfies
both the Constitution and the Final Act itself .
Thank you, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.
SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they
had been adequately reflected in the journal of yesterday's session and I don't see any need for
repeating the same.
Now, I would consider the new submission as an act ex abudante cautela.
THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment
on this?
SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales out of the
abundance of question. Then the new submission is, I believe, stating the obvious and therefore I
have no further comment to make.
Epilogue
In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this
Court's constitutionally imposed duty "to determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction" on the part of the Senate in giving its concurrence therein via
Senate
Resolution No. 97. Procedurally, a writ of certiorari grounded on grave abuse of discretion may be issued by
the
Court under Rule 65 of the Rules of Court when it is amply shown that petitioners have no other plain, speedy
and
adequate remedy in the ordinary course of law.
By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to
lack
of jurisdiction. 61 Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so
gross
as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. 62 Failure on the part of the petitioner to show grave abuse of discretion will result in the
dismissal of
the petition. 63

In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two
sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a constitutional body

independent and coordinate, and thus its actions are presumed regular and done in good faith. Unless
convincing
proof and persuasive arguments are presented to overthrow such presumptions, this Court will resolve every
doubt in its favor. Using the foregoing well-accepted definition of grave abuse of discretion and the presumption
of
regularity in the Senate's processes, this Court cannot find any cogent reason to impute grave abuse of
discretion
to the Senate's exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII
of
the Constitution. 64
It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an
independent
national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products,
domestic
materials and locally produced goods. But it is equally true that such principles while serving as judicial and
legislative guides are not in themselves sources of causes of action. Moreover, there are other equally
fundamental constitutional principles relied upon by the Senate which mandate the pursuit of a "trade policy
that
serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and
reciprocity" and the promotion of industries "which are competitive in both domestic and foreign markets,"
thereby
justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of
legislative
and judicial powers is balanced by the adoption of the generally accepted principles of international law as part
of
the law of the land and the adherence of the Constitution to the policy of cooperation and amity with all nations.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO
Agreement thereby making it "a part of the law of the land" is a legitimate exercise of its sovereign duty and
power. We find no "patent and gross" arbitrariness or despotism "by reason of passion or personal hostility" in
such exercise. It is not impossible to surmise that this Court, or at least some of its members, may even agree
with petitioners that it is more advantageous to the national interest to strike down Senate Resolution No. 97.
But
that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do so
would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate
did
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was a valid exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the
realm of judicial inquiry and review. That is a matter between the elected policy makers and the people. As to
whether the nation should join the worldwide march toward trade liberalization and economic globalization is a
matter that our people should determine in electing their policy makers. After all, the WTO Agreement allows
withdrawal of membership, should this be the political desire of a member.
The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance 65
where
"the East will become the dominant region of the world economically, politically and culturally in the next century." He
refers
to the "free market" espoused by WTO as the "catalyst" in this coming Asian ascendancy. There are at present about
31
countries including China, Russia and Saudi Arabia negotiating for membership in the WTO. Notwithstanding
objections
against possible limitations on national sovereignty, the WTO remains as the only viable structure for multilateral
trading and
the veritable forum for the development of international trade law. The alternative to WTO is isolation, stagnation, if
not
economic self-destruction. Duly enriched with original membership, keenly aware of the advantages and
disadvantages of
globalization with its on-line experience, and endowed with a vision of the future, the Philippines now straddles the
crossroads of an international strategy for economic prosperity and stability in the new millennium. Let the people,
through
their duly authorized elected officers, make their free choice.

WHEREFORE, the petition is DISMISSED for lack of merit.


SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Kapunan, Mendoza, Francisco,
Hermosisima, Jr. and Torres, Jr., JJ., concur.
Padilla and Vitug, JJ., concur in the result.
Footnotes
1 In Annex "A" of her Memorandum, dated August 8, 1996, received by this Court on August 12,
1996, Philippine Ambassador to the United Nations, World Trade Organization and other
international organizations Lilia R. Bautista (hereafter referred to as "Bautista Paper") submitted a
"46-year Chronology" of GATT as follows:
1947 The birth of GATT. On 30 October 1947, the General Agreement on Tariffs and
Trade (GATT) was signed by 23 nations at the Palais des Nations in Geneva. The
Agreement contained tariff concessions agreed to in the first multilateral trade
negotiations and a set of rules designed to prevent these concessions from being
frustrated by restrictive trade measures.
The 23 founding contracting parties were members of the Preparatory Committee
established by the United Nations Economic and Social Council in 1946 to draft the
charter of the International Trade Organization (ITO). The ITO was envisaged as the
final leg of a triad of post-War economic agencies (the other two were the International
Monetary Fund and the International Bank for Reconstruction later the World Bank).
In parallel with this task, the Committee members decided to negotiate tariff concessions
among themselves. From April to October 1947, the participants completed some 123
negotiations and established 20 schedules containing the tariff reductions and bindings
which became an integral part of GATT. These schedules resulting from the first Round
covered some 45,000 tariff concessions and about $10 billion in trade.
GATT was conceived as an interim measure that put into effect the commercial-policy
provisions of the ITO. In November, delegations from 56 countries met in Havana, Cuba,
to consider the to ITO draft as a whole. After long and difficult negotiations, some 53
countries signed the Final Act authenticating the text of the Havana Charter in March
1948. There was no commitment, however, from governments to ratification and, in the
end, the ITO was stillborn, leaving GATT as the only international instrument governing
the conduct of world trade.
1948 Entry into force. On 1 January 1948, GATT entered into force. The 23 founding
members were: Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba,
Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand,
Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom and the
United States. The first Session of the Contracting Parties was held from February to
March in Havana, Cuba. The secretariat of the Interim Commission for the ITO, which
served as the ad hoc secretariat of GATT, moved from Lake Placid, New York, to
Geneva. The Contracting Parties held their second session in Geneva from August to
September.
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1949 Second Round at Annecy. During the second Round of trade negotiations, held
from April to August at Annecy, France, the contracting parties exchanged some 5,000
tariff concessions. At their third Session, they also dealt with the accession of ten more
countries.
1950 Third Round at Torquay. From September 1950 to April 1951, the contracting
parties exchanged some 8,700 tariff concessions in the English town, yielding tariff
reduction of about 25 per cent in relation to the 1948 level. Four more countries
acceded to GATT. During the fifth Session of the Contracting Parties, the United States
indicated that the ITO Charter would not be re-submitted to the US Congress; this, in
effect, meant that ITO would not come into operation.
1956 Fourth Round at Geneva. The fourth Round was completed in May and produced
some $2.5 billion worth of tariff reductions. At the beginning of the year, the GATT
commercial policy course for officials of developing countries was inaugurated.
1958 The Haberler Report. GATT published Trends in International Trade in October.
Known as the "Haberler Report" in honour of Professor Gottfried Haberler, the chairman
of the panel of eminent economists, it provided initial guidelines for the work of GATT.

The Contracting Parties at their 13th Sessions, attended by Ministers, subsequently


established three committees in GATT: Committee I to convene a further tariff
negotiating conference; Committee II to review the agricultural policies of member
governments and Committee III to tackle the problem facing developing countries in
their trade. The establishment of the European Economic Community during the
previous year also demanded large-scale tariff negotiations under Article XXIV: 6 of the
General Agreement.
1960 The Dillon Round. The fifth Round opened in September and was divided into two
phases: the first was concerned with negotiations with EEC member states for the
creation of a single schedule of concessions for the Community based on its Common
External Tariff; and the second was a further general round of tariff negotiations. Named
in honour of US Under-Secretary of State Douglas Dillon who proposed the negotiations,
the Round was concluded in July 1962 and resulted in about 4,400 tariff concessions
covering $4.9 billion of trade.
1961 The Short-Term Arrangement covering cotton textiles was agreed as an exception
to the GATT rules. The arrangement permitted the negotiation of quota restrictions
affecting the exports of cotton-producing countries. In 1962 the "Short Term"
Arrangement became the "Long term" Arrangement, lasting until 1974 when the
Multifibre Arrangement entered into force.
1964 The Kennedy Round. Meeting at Ministerial level, a Trade Negotiations Committee
formally opened the Kennedy Round in May. In June 1967, the Round's Final Act was
signed by some 50 participating countries which together accounted for 75 per cent of
world trade. For the first time, negotiations departed from the product-by-product
approach used in the previous Rounds to an across-the-board or linear method of
cutting tariffs for industrial goods. The working hypothesis of a 50 per cent target cut in
tariff levels was achieved in many areas. Concessions covered an estimated total value
of trade of about $410 billion. Separate agreements were reached on grains, chemical
products and a Code on Anti-Dumping.
1965 A New Chapter. The early 1960s marked the accession to the general Agreement
of many newly-independent developing countries. In February, the Contracting Parties,
meeting in a special session, adopted the text of Part IV on Trade and Development.
The additional chapter to the GATT required developed countries to accord high priority
to the reduction of trade barriers to products of developing countries. A Committee on
Trade and Development was established to oversee the functioning of the new GATT
provisions. In the preceding year, GATT had established the International Trade Centre
(ITC) to help developing countries in trade promotion and identification of potential
markets. Since 1968, the ITC had been jointly operated by GATT and the UN
Conference on Trade and Development (UNCTAD).
1973 The Tokyo Round. The seventh Round was launched by Ministers in September at
the Japanese capital. Some 99 countries participated in negotiating a comprehensive
body of agreements covering both tariff and non-tariff matters. At the end of the Round
in November 1979, participants exchanged tariff reductions and bindings which covered
more than $300 billion of trade. As a result of these cuts, the weighted average tariff on
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manufactured goods in the world's nine major industrial markets declined from 7.0 to 4.7
per cent. Agreements were reached in the following areas: subsidies and countervailing
measures, technical barriers to trade, import licensing procedures, government
procurement, customs valuation, a revised anti-dumping code, trade in bovine meat,
trade in dairy products and trade in civil aircraft. The first concrete result of the Round
was the reduction of import duties and other trade barriers by industrial countries on
tropical products exported by developing countries.
1974 On 1 January 1974, the Arrangement Regarding International Trade in Textiles,
otherwise known as the Multifibre Arrangement (MFA), entered into force. It superseded
the arrangements that had been governing trade in cotton textiles since 1961. The MFA
seeks to promote the expansion and progressive liberalization of trade in textile products
while at the same time avoiding disruptive effects in individual markets and lines of
production. The MFA was extended in 1978, 1982, 1986, 1991 and 1992. MFA
members account for most of the world exports of textiles and clothing which in 1986

amounted to US$128 billion.


1982 Ministerial Meeting. Meeting for the first time in nearly ten years, the GATT
Ministers in November at Geneva reaffirmed the validity of GATT rules for the conduct of
international trade and committed themselves to combating protectionist pressures.
They also established a wide-ranging work programme for the GATT which was to lay
down the groundwork for a new Round 1986. The Uruguay Round. The GATT Trade
Ministers meeting at Punta del Este, Uruguay, launched the eighth Round of trade
negotiations on 20 September. The Punta del Este Declaration, while representing a
single political undertaking, was divided into two sections. The first covered negotiations
on trade in goods and the second initiated negotiation on trade in services. In the area
of trade in goods, the Ministers committed themselves to a "standstill" on new trade
measures inconsistent with their GATT obligations and to a "rollback" programme aimed
at phasing out existing inconsistent measures. Envisaged to last four years, negotiations
started in early February 1987 in the following areas tariffs, non-tariff measures, tropical
products, natural resource-based products, textiles and clothing, agriculture, subsidies,
safe-guards, trade-related aspects of intellectual property rights including trade in
counterfeit goods, and trade-related investment measures. The work of other groups
included a review of GATT articles, the GATT dispute settlement procedure, the Tokyo
Round agreements, as well as the functioning of the GATT system as a whole.
1994 "GATT 1994" is the updated version of GATT 1947 and takes into account the
substantive and institutional changes negotiated in the Uruguay Round GATT 1994 is an
integral part of the World Trade Organization established on 1 January 1995. It is
agreed that there be a one year transition period during which certain GATT 1947
bodies and commitments would co-exist with those of the World Trade Organization.
2 The Final Act was signed by representatives of 125 entities, namely Algeria, Angola, Antigua and
Barbuda, Argentine Republic, Australia, Republic of Austria, State of Bahrain, People's Republic of
Bangladesh, Barbados, The Kingdom of Belgium Belize, Republic of Benin, Bolivia, Botswana, Brazil,
Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Canada, Central African Republic, Chad,
Chile, People's Republic of China, Colombia, Congo, Costa Rica, Republic of Cote d'Ivoire, Cuba,
Cyprus, Czech Republic, Kingdom of Denmark, Commonwealth of Dominica, Dominican Republic,
Arab Republic of Egypt, El Salvador, European Communities, Republic of Fiji, Finland, French
Republic, Gabonese Republic, Gambia, Federal Republic of Germany, Ghana, Hellenic Republic,
Grenada, Guatemala, Republic of Guinea-Bissau, Republic of Guyana, Haiti, Honduras, Hong Kong,
Hungary, Iceland, India, Indonesia, Ireland, State of Israel, Italian Republic, Jamaica, Japan, Kenya,
Korea, State of Kuwait, Kingdom of Lesotho, Principality of Liechtenstein, Grand Duchy of
Luxembourg, Macau, Republic of Madagascar, Republic of Malawi, Malaysia, Republic of Maldives,
Republic of Mali, Republic of Malta, Islamic Republic of Mauritania, Republic of Mauritius, United
Mexican States, Kingdom of Morocco, Republic of Mozambique, Union of Myanmar, Republic of
Namibia, Kingdom of the Netherlands, New Zealand, Nicaragua, Republic of Niger, Federal Republic
of Nigeria, Kingdom of Norway, Islamic Republic of Pakistan, Paraguay, Peru, Philippines, Poland,
Potuguese Republic, State of Qatar, Romania, Rwandese Republic, Saint Kitts and Nevis, Saint
Lucia, Saint Vincent and the Grenadines, Senegal, Sierra Leone, Singapore, Slovak Republic, South
Africa, Kingdom of Spain, Democratic Socialist Republic of Sri Lanka, Republic of Surinam, Kingdom
of Swaziland, Kingdom of Sweden, Swiss Confederation, United Republic of Tanzania, Kingdom of
Thailand, Togolese Republic, Republic of Trinidad and Tobago, Tunisia, Turkey, Uganda, United
Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America,
Eastern Republic of Uruguay, Venezuela, Republic of Zaire, Republic of Zambia, Republic of
Zimbabwe; see pp. 6-25, Vol. 1, Uruguay Round of Multilateral Trade Negotiations.
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3 11 August 1994
The Honorable Members
Senate
Through Senate President Edgardo Angara
Manila
Ladies and Gentlemen:
I have the honor to forward herewith an authenticated copy of the Uruguay Round Final Act signed
by Department of Trade and Industry Secretary Rizalino S. Navarro for the Philippines on 15 April
1994 in Marrakesh, Morocco.

The Uruguay Round Final Act aims to liberalize and expand world trade and strengthen the
interrelationship between trade and economic policies affecting growth and development.
The Final Act will improve Philippine access to foreign markets, especially its major trading partners
through the reduction of tariffs on its exports particularly agricultural and industrial products. These
concessions may be availed of by the Philippines, only if it is a member of the World Trade
Organization. By GATT estimates, the Philippines can acquire additional export from $2.2 to $2.7
Billion annually under Uruguay Round. This will be on top of the normal increase in exports that the
Philippines may experience.
The Final Act will also open up new opportunities for the services sector in such areas as the
movement of personnel, (e.g. professional services and construction services), cross-border supply
(e.g. computer-related services), consumption abroad (e.g. tourism, convention services, etc.) and
commercial presence.
The clarified and improved rules and disciplines on anti-dumping and countervailing measures will
also benefit Philippine exporters by reducing the costs ad uncertainty associated with exporting while
at the same time providing means for domestic industries to safeguard themselves against unfair
imports.
Likewise, the provision of adequate protection for intellectual property rights is expected to attract
more investments into the country and to make it less vulnerable to unilateral actions by its trading
partners (e.g. Sec. 301 of the United States' Omnibus Trade Law).
In view of the foregoing, the Uruguay Round Final Act is hereby submitted to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution.
A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement is enclosed.
Very truly yours,
(SGD.) FIDEL V. RAMOS
4 11 August 1994
The Honorable Members
Senate
Through Senate President Edgardo Angara
Manila
Ladies and Gentlemen:
I have the honor to forward herewith an authenticated copy of the Uruguay Round Final Act signed
by Department of Trade and Industry Secretary Rizalino S. Navarro for the Philippines on 13 April
1994 in Marrakech (sic), Morocco.
Members of the trade negotiations committee, which included the Philippines, agreed that the
Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions,
and the Understanding on Commitments in Financial Services embody the results of their
negotiations and form an integral part of the Uruguay Round Final Act.
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By signing the Uruguay Round Final Act, the Philippines, through Secretary Navarro, agreed:
(a) To submit the Agreement Establishing the World Trade Organization to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution; and
(b) To adopt the Ministerial Declarations and Decisions.
The Uruguay Round Final Act aims to liberalize and expand world trade and strengthen the
interrelationship between trade and economic policies affecting growth and development.
The Final Act will improve Philippine access to foreign markets, especially its major trading partners
through the reduction of tariffs on its exports particularly agricultural and industrial products. These
concessions may be availed of by the Philippines, only if it is a member of the World Trade
Organization. By GATT estimates, the Philippines can acquire additional export revenues from $2.2
to $2.7 Billion annually under Uruguay Round. This will be on top of the normal increase in the
exports that the Philippines may experience.
The Final Act will also open up new opportunities for the services sector in such areas as the
movement of personnel, (e.g., professional services and construction services), cross-border supply
(e.g., computer-related services), consumption abroad (e.g., tourism, convention services, etc.) and
commercial presence.
The clarified and improved rules ad disciplines on anti-dumping and countervailing measures will also
benefit Philippine exporters by reducing the costs and uncertainty associated with exporting while at
the same time providing a means for domestic industries to safeguard themselves against unfair
imports.

Likewise, the provision of adequate protection for intellectual property rights is expected to attract
more investments into the country and to make it a less vulnerable to unilateral actions by its trading
partners (e.g., Sec. 301 of the United States Omnibus Trade Law).
In view of the foregoing, the Uruguay Round Final Act, the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in
Financial Services, as embodied in the Uruguay Round Final Act and forming and integral part
thereof are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of
the Constitution.
A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement is enclosed.
Very truly yours,
(SGD.) FIDEL V. RAMOS
5 December 9, 1994
HON. EDGARDO J. ANGARA
Senate President
Senate Manila
Dear Senate President Angara:
Pursuant to the provisions of Sec. 26 (2) Article VI of the Constitution, I hereby certify to the necessity
of the immediate adoption of P.S. 1083 entitled:
CONCURRING IN THE RATIFICATION OF THE AGREEMENT ESTABLISHING THE
WORLD TRADE ORGANIZATION
to meet a public emergency consisting of the need for immediate membership in the WTO in order to
assure the benefits to the Philippine economy arising from such membership.
Very truly yours,
(SGD.) FIDEL V. RAMOS
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6 Attached as Annex A, Petition; rollo, p. 52. P.S. 1083 is the forerunner of assailed Senate
Resolution No. 97. It was prepared by the Committee of the Whole on the General Agreement on
Tariffs and Trade chaired by Sen. Blas F. Ople and co-chaired by Sen. Gloria Macapagal-Arroyo; see
Annex C, Compliance of petitioners dated January 28, 1997.
7 The Philippines is thus considered an original or founding member of WTO, which as of July 26,
1996 had 123 members as follows: Antigua and Barbuda, Argentina, Australia, Austria, Bahrain,
Bangladesh, Barbados, Belguim, Belize, Benin, Bolivia, Botswana, Brazil, Brunei Darussalam, Burkina
Faso, Burundi, Cameroon, Canada, Central African Republic, Chili, Colombia, Costa Rica, Cote
d'Ivoire, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica, Dominican Republic, Ecuador,
Egypt, El Salvador, European Community, Fiji, Finland, France, Gabon, Germany, Ghana, Greece,
Grenada, Guatemala, Guinea, Guinea Bissau, Guyana, Haiti, Honduras, Honkong, Hungary, Iceland,
India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kenya, Korea, Kuwait, Lesotho, Liechtenstein,
Luxembourg, Macau, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius,
Mexico, Morocco, Mozambique, Myanmar, Namibia, Netherlands for the Kingdom in Europe and
for the Netherlands Antilles, New Zealand, Nicaragua, Nigeria, Norway, Pakistan, Papua New
Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Qatar, Romania, Rwanda, Saint Kitts and
Nevis, Saint Lucia, Saint Vincent & the Grenadines, Senegal, Sierra Leone, Singapore, Slovak
Republic, Slovenia, Solomon Islands, South Africa, Spain, Sri Lanka, Surinam, Swaziland, Sweden,
Switzerland, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Uganda, United Arab
Emirates, United Kingdom, United States, Uruguay, Venezuela, Zambia, and Zimbabwe. See Annex
A, Bautista Paper, infra.
8 Page 6; rollo p. 261.
9 In compliance, Ambassador Bautista submitted to the Court on August 12, 1996, a Memorandum
(the "Bautista Paper") consisting of 56 pages excluding annexes. This is the same document
mentioned in footnote no. 1.
10 Memorandum for Respondents, p. 13; rollo, p. 268.
11 Cf . Kilosbayan Incorporated vs. Morato, 246 SCRA 540, July 17, 1995 for a discussion on locus
standi. See also the Concurring Opinion of Mr. Justice Vicente V. Mendoza in Tatad vs. Garcia, Jr.,
243 SCRA 473, April 6, 1995, as well as Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA
386, 414, December 23, 1994.
12 Aquino, Jr. vs. Ponce Enrile, 59 SCRA 183, 196, September 17, 1974, cited in Bondoc vs. Pineda,
201 SCRA 792, 795, September 26, 1991.
13 Guingona, Jr. vs. Gonzales, 219 SCRA 326, 337, March 1, 1993.

14 See Taada and Macapagal vs. Cuenco, et al., 103 Phil. 1051 for a discussion on the scope of
"political question."
15 Section 1, Article VIII, (par. 2).
16 In a privilege speech on May 17, 1993, entitled "Supreme Court Potential Tyrant?" Senator
Arturo Tolentino concedes that this new provision gives the Supreme Court a duty "to intrude into the
jurisdiction of the Congress or the President."
17 I Record of the Constitutional Commission 436.
18 Cf . Daza vs. Singson, 180 SCRA 496, December 21, 1989.
19 Memorandum for Petitioners, pp. 14-16; rollo, pp. 204-206.
20 Par. 4, Article XVI, WTO Agreement, Uruguay Round of Multilateral Trade Negotiations, Vol. 1. p.
146.
21 Also entitled "Declaration of Principles." The nomenclature in the 1973 Charter is identical with
that in the 1987's.
22 Philippine Political Law, 1962 Ed., p. 116.
23 Bernas, The Constitution of the Philippines: A Commentary, Vol. II, 1988 Ed., p. 2. In the very
recent case of Manila Prince Hotel v. GSIS, G.R. No. 122156, February 3, 1997, p. 8, it was held that
"A provision which lays down a general principle, such as those found in Art. II of the 1987
Constitution, is usually not self-executing."
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24 246 SCRA 540, 564, July 17, 1995. See also Tolentino vs. Secretary of Finance, G.R. No. 115455
and consolidated cases, August 25, 1995.
25 197 SCRA 52, 68, May 14, 1991.
26 224 SCRA 792, 817, July 30, 1993.
27 Sec. 10, Article XII.
28 Sec. 12, Article XII.
29 Sec. 19, Art. II.
30 Sec. 13, Art. XII.
31 G.R. No. 122156, February 3, 1997, pp. 13-14.
32 Sec. 1, Art. XII.
33 Bautista Paper, p. 19.
34 Preamble, WTO Agreement p. 137, Vol. 1, Uruguay Round of Multilateral Trade Negotiations.
Emphasis supplied.
35 Sec. 19, Article II, Constitution.
36 III Records of the Constitutional Commission 252.
37 Sec. 13, Article XII, Constitution.
38 Justice Isagani A. Cruz, Philippine Political Law, 1995 Ed., p. 13, quoting his own article entitled,
"A Quintessential Constitution" earlier published in the San Beda Law Journal, April 1972; emphasis
supplied.
39 Par. 4, Article XVI (Miscellaneous Provisions), WTO Agreement, p. 146, Vol. 1, Uruguay Round of
Multilateral Trade Negotiations.
40 Memorandum for the Petitioners, p. 29; rollo, p. 219.
41 Sec. 24, Article VI, Constitution.
42 Subsection (2), Sec. 28, Article VI, Constitution.
43 Sec. 2, Article II, Constitution.
44 Cruz, Philippine Political Law, 1995 Ed., p. 55.
45 Salonga and Yap, op cit 305.
46 Salonga, op. cit., p. 287.
47 Quoted in Paras and Paras, Jr., International Law and World Politics, 1994 Ed., p. 178.
47-A Reagan vs. Commission of Internal Revenue, 30 SCRA 968, 973, December 27, 1969.
48 Trebilcock and Howse. The Regulation of International Trade, p. 14, London, 1995, cited on p.
55-56, Bautista Paper.
49 Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445.
50 Item 5, Sec. 5, Article VIII, Constitution.
51 Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445.
52 Bautista Paper, p. 13.
53 See footnote 3 of the text of this letter.
54 Salonga and Yap, op cit., pp. 289-290.
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55 The full text, without the signatures, of the Final Act is as follows:
Final Act Embodying the Results of the
Uruguay Round of Multilateral Trade Negotiations
1. Having met in order to conclude the Uruguay Round of Multilateral Trade Negotiations,
representatives of the governments and of the European Communities, members of the Trade
Negotiations Committee, agree that the Agreement Establishing the World Trade Organization
(referred to in the Final Act as the "WTO Agreement"), the Ministerial Declarations and Decisions,
and the Understanding on Commitments in Financial Services, as annexed hereto, embody the
results of their negotiations and form an integral part of this Final Act.
2. By signing to the present Final Act, the representatives agree.
(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities with a view to seeking approval of the Agreement in
accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
3. The representatives agree on the desirability of acceptance of the WTO Agreement by all
participants in the Uruguay Round of Multilateral Trade Negotiations (hereinafter referred to as
"participants") with a view to its entry into force by 1 January 1995, or as early as possible thereafter.
Not later than late 1994, Ministers will meet, in accordance with the final paragraph of the Punta del
Este Ministerial Declarations, to decide on the international implementation of the results, including
the timing of their entry into force.
4. the representatives agree that the WTO Agreement shall be open for acceptance as a whole, by
signature or otherwise, by all participants pursuant to Article XIV thereof. The acceptance and entry
into force of a Plurilateral Trade Agreement included in Annex 4 of the WTO Agreement shall be
governed by the provisions of that Plurilateral Trade Agreement.
5. Before accepting the WTO Agreement, participants which are not contracting parties to the
General Agreement on Tariffs and Trade must first have concluded negotiations for their accession
to the General Agreement and become contracting parties thereto. For participants which are not
contracting parties to the general Agreement as of the date of the Final Act, the Schedules are not
definitive and shall be subsequently completed for the purpose of their accession to the General
Agreement and acceptance of the WTO Agreement.
6. This Final Act and the texts annexed hereto shall be deposited with the Director-General to the
CONTRACTING PARTIES to the General Agreement on Tariffs and Trade who shall promptly furnish
to each participant a certified copy thereof.
DONE at Marrakesh this fifteenth day of April one thousand nine hundred and ninety-four, in a single
copy, in the English, French and Spanish languages, each text being authentic.
56 Bautista Paper, p. 16.
57 Baustista Paper, p. 16.
58 Uruguay Round of Multilateral Trade Negotiations, Vol. I, pp. 137-138.
59 See footnote 3 for complete text.
60 Taken from pp. 63-85, "Respondent" Memorandum.
61 Zarate vs. Olegario, G.R. No. 90655, October 7, 1996.
62 San Sebastian College vs. Court of Appeals, 197 SCRA 138, 144, May 15, 1991; Commissioner of
Internal Revenue vs. Court of Tax Appeals, 195 SCRA 444, 458 March 20, 1991; Simon vs. Civil
Service Commission, 215 SCRA 410, November 5, 1992; Bustamante vs. Commissioner on Audit,
216 SCRA 134, 136, November 27, 1992.
63 Paredes vs. Civil Service Commission, 192 SCRA 84, 94, December 4, 1990.
64 Sec. 21. No treaty or international agreement shall be valid and effective unless concurred in by at
least two-thirds of all the Members of the Senate."
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65 Reader's Digest, December 1996 issue, p. 28.


The Lawphil Project - Arellano Law Foundation

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Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L- 41383 August 15, 1988
PHILIPPINE AIRLINES, INC., plaintiff-appellant,
vs.
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his
capacity as National Treasurer, defendants-appellants.
Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.
GUTIERREZ, JR., J.:
What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
This question has been brought before this Court in the past. The parties are, in effect, asking for a
reexamination
of the latest decision on this issue.
This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where
the then Court of First Instance of Rizal dismissed the portion-about complaint for refund of registration fees
paid
under protest.
The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant to
Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code.
The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and
engaged in the air transportation business under a legislative franchise, Act No. 42739, as amended by
Republic
Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the payment of taxes. The pertinent provision
of
the franchise provides as follows:
Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the
National Government during the life of this franchise a tax of two per cent of the gross revenue or
gross earning derived by the grantee from its operations under this franchise. Such tax shall be due
and payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied,
established or collected by any municipal, provincial or national automobiles, Provided, that if, after
the audit of the accounts of the grantee by the Commissioner of Internal Revenue, a deficiency tax is
shown to be due, the deficiency tax shall be payable within the ten days from the receipt of the
assessment. The grantee shall pay the tax on its real property in conformity with existing law.
On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not
been paying motor vehicle registration fees.
Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax
exempt entities, among them PAL to pay motor vehicle registration fees.
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts
imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the amount of P19,529.75
as registration fees of its motor vehicles.
After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner Edu
demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where
it
was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by
virtue of its legislative franchise.
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Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit
Bus
Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory
exceptional. and not revenue measures and, therefore, do not come within the exemption granted to PAL?
under

its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and
National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed
as
Civil Case No. Q-15862.
Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity as National
Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action. In support of the
motion
to dismiss, defendants repatriation the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that
registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of
the
police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except
two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying regulatory fees, such
as
motor vehicle registration fees. The resolution of the motion to dismiss was deferred by the Court until after trial
on the merits.
On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by the later
ruling laid down by the Supreme Court in the case or Republic v. Philippine Rabbit Bus Lines, Inc., (supra)."
From
this judgment, PAL appealed to the Court of Appeals which certified the case to us.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and
Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at bar.
Resolving the issue in the Philippine Rabbit case, this Court held:
"The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised
Motor Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks of "registration fees." The term
is repeated four times in the body thereof. Equally so, mention is made of the "fee for registration."
(Ibid., Subsection G) A subsection starts with a categorical statement "No fees shall be charged."
(lbid., Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires
the payment not of a tax but of a registration fee under the police power. Hence the incipient, of the
section relied upon by defendant-appellee under the Back Pay Law, It is not held liable for a tax but
for a registration fee. It therefore cannot make use of a backpay certificate to meet such an
obligation.
Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by
Republic Act No. 5448. ([1968]. Section 3 thereof as to the imposition of additional tax on privatelyowned
passenger automobiles, motorcycles and scooters was amended by Republic Act No. 5470
which is (sic) approved on May 30, 1969.) A special science fund was thereby created and its title
expressly sets forth that a tax on privately-owned passenger automobiles, motorcycles and scooters
was imposed. The rates thereof were provided for in its Section 3 which clearly specifies the"
Philippine tax."(Cooley to be paid as distinguished from the registration fee under the Motor Vehicle
Act. There cannot be any clearer expression therefore of the legislative will, even on the assumption
that the earlier legislation could by subdivision the point be susceptible of the interpretation that a tax
rather than a fee was levied. What is thus most apparent is that where the legislative body relies on
its authority to tax it expressly so states, and where it is enacting a regulatory measure, it is equally
exploded (at p. 22,1969
In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand, held:
The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are
in section 8 of that law called "fees". But the appellation is no impediment to their being considered
taxes if taxes they really are. For not the name but the object of the charge determines whether it is a
tax or a fee. Geveia speaking, taxes are for revenue, whereas fees are exceptional. for purposes of
regulation and inspection and are for that reason limited in amount to what is necessary to cover the
cost of the services rendered in that connection. Hence, a charge fixed by statute for the service to
be person,-When by an officer, where the charge has no relation to the value of the services
performed and where the amount collected eventually finds its way into the treasury of the branch of
the government whose officer or officers collected the chauffeur, is not a fee but a tax."(Cooley on
Taxation, Vol. 1, 4th ed., p. 110.)
From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle
Office are but a small portionabout 5 per centumof the total collections from motor vehicle
registration fees. And as proof that the money collected is not intended for the expenditures of that
office, the law itself provides that all such money shall accrue to the funds for the construction and
maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for

regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the
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operation of motor vehicles on public highways, for their express object is to provide revenue with
which the Government is to discharge one of its principal functionsthe construction and
maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.
As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it
provides that "no other taxes or fees than those prescribed in this Act shall be imposed," thus
implying that the charges therein imposedthough called feesare of the category of taxes. The
provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of
Republic Act 587, which reads:
Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for
the registration or operation or on the ownership of any motor vehicle, or for the
exercise of the profession of chauffeur, by any municipal corporation, the provisions of
any city charter to the contrary notwithstanding: Provided, however, That any provincial
board, city or municipal council or board, or other competent authority may exact and
collect such reasonable and equitable toll fees for the use of such bridges and ferries,
within their respective jurisdiction, as may be authorized and approved by the Secretary
of Public Works and Communications, and also for the use of such public roads, as may
be authorized by the President of the Philippines upon the recommendation of the
Secretary of Public Works and Communications, but in none of these cases, shall any
toll fee." be charged or collected until and unless the approved schedule of tolls shall
have been posted levied, in a conspicuous place at such toll station. (at pp. 213-214)
Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992
[19511) as amended by Commonwealth Act 123 and Republic Acts Nos. 587 and 1621.
Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation Code, (as
amended by Rep. Acts Nos. 5715 and 64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg. 43, 74 and 398).
Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unsegregated, by
Rep.
Act Nos. 587 and 1603) states:
Section 73. Disposal of moneys collected.Twenty per centum of the money collected under the
provisions of this Act shall accrue to the road and bridge funds of the different provinces and
chartered cities in proportion to the centum shall during the next previous year and the remaining
eighty per centum shall be deposited in the Philippine Treasury to create a special fund for the
construction and maintenance of national and provincial roads and bridges. as well as the streets
and bridges in the chartered cities to be alloted by the Secretary of Public Works and
Communications for projects recommended by the Director of Public Works in the different provinces
and chartered cities. ....
Presently, Sec. 61 of the Land Transportation and Traffic Code provides:
Sec. 61. Disposal of Mortgage. CollectedMonies collected under the provisions of this Act shall be
deposited in a special trust account in the National Treasury to constitute the Highway Special Fund,
which shall be apportioned and expended in accordance with the provisions of the" Philippine
Highway Act of 1935. "Provided, however, That the amount necessary to maintain and equip the
Land Transportation Commission but not to exceed twenty per cent of the total collection during one
year, shall be set aside for the purpose. (As amended by RA 64-67, approved August 6, 1971).
It appears clear from the above provisions that the legislative intent and purpose behind the law requiring
owners
of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of
highways
and to a much lesser degree, pay for the operating expenses of the administering agency. On the other hand,
the
Philippine Rabbit case mentions a presumption arising from the use of the term "fees," which appears to have
been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of
Rep. Act 4136 which reads:
Sec. 13. Payment of taxes upon registration.No original registration of motor vehicles subject to
payment of taxes, customs s duties or other charges shall be accepted unless proof of payment of
the taxes due thereon has been presented to the Commission.
referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle (Sec.
59, b, Rep. Act 4136, as amended).

Fees may be properly regarded as taxes even though they also serve as an instrument of regulation, As stated
by
a former presiding judge of the Court of Tax Appeals and writer on various aspects of taxpayers
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It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as
a source of revenue as well as a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true,
for example, of automobile license fees. Isabela such case, the fees may properly be regarded as
taxes even though they also serve as an instrument of regulation. If the purpose is primarily revenue,
or if revenue is at least one of the real and substantial purposes, then the exaction is properly called
a tax. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593;
Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes
called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal
Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali,
Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).
Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148).
If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the
exaction is properly called a tax (Umali, Id.) Such is the case of motor vehicle registration fees. The conclusions
become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision
appears as Section 591-593). in the Land Transportation code. It is patent therefrom that the legislators had in
mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor
vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is
a
tax, Section 591-593). speaks of "taxes." or fees ... for the registration or operation or on the ownership of any
motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more
apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional" tax," where the law
could
have referred to an original tax and not one in addition to the tax already imposed on the registration, operation,
or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136 were
merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also
speaks of other "fees," such as the special permit fees for certain types of motor vehicles (Sec. 10) and
additional
fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very
minimal to be revenue-raising. Thus, they are not mentioned by Sec. 591-593). of the Code as taxes like the
motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land
Transportation Commission as provided for in the last proviso of see. 61, aforequoted.
It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for rigidly
purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in
number and motor vehicles became absolute necessities without which modem life as we know it would stand
still,
Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without
changing the earlier deputy. of registration payments as "fees," their nature has become that of "taxes."
In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the Land
Transportation and Traffic Code are actually taxes intended for additional revenues. of government even if one
fifth or less of the amount collected is set aside for the operating expenses of the agency administering the
program.
May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?
The answer is NO.
The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments
were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5448 dated June 27, 1968,
repealed all earlier tax exemptions Of corporate taxpayers found in legislative franchises similar to that invoked
by
PAL in this case.
In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)." July 11, 1985),
this Court ruled:
Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio Communications
of the Philippines, Inc., was subject to both the franchise tax and income tax. In 1964, however,
petitioner's franchise was amended by Republic Act No. 41-42). to the effect that its franchise tax of
one and one-half percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all

taxes of any kind, nature, or description levied, established, or collected by any authority whatsoever,
municipal, provincial, or national from which taxes the grantee is hereby expressly exempted." The
issue raised to this Court now is the validity of the respondent court's decision which ruled that the
exemption under Republic Act No. 41-42). was repealed by Section 24 of Republic Act No. 5448
dated June 27, 1968 which reads:
"(d) The provisions of existing special or general laws to the contrary notwithstanding, all
corporate taxpayers not specifically exempt under Sections 24 (c) (1) of this Code shall
pay the rates provided in this section. All corporations, agencies, or instrumentalities
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owned or controlled by the government, including the Government Service Insurance


System and the Social Security System but excluding educational institutions, shall pay
such rate of tax upon their taxable net income as are imposed by this section upon
associations or corporations engaged in a similar business or industry. "
An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all
corporate taxpayers to pay income tax as provided by the statute. There can be no doubt as to the
power of Congress to repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935
Constitution and Article XIV, Section 5 of the Constitution as amended in 1973 expressly provide that
no franchise shall be granted to any individual, firm, or corporation except under the condition that it
shall be subject to amendment, alteration, or repeal by the legislature when the public interest so
requires. There is no question as to the public interest involved. The country needs increased
revenues. The repealing clause is clear and unambiguous. There is a listing of entities entitled to tax
exemption. The petitioner is not covered by the provision. Considering the foregoing, the Court
Resolved to DENY the petition for lack of merit. The decision of the respondent court is affirmed.
Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the
tax
exemption in the franchise of PAL was repealed during the period. However, an amended franchise was given
to
PAL in 1979. Section 13 of Presidential Decree No. 1590, now provides:
In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine
Government during the lifetime of this franchise whichever of subsections (a) and (b) hereunder will
result in a lower taxes.)
(a) The basic corporate income tax based on the grantee's annual net taxable income
computed in accordance with the provisions of the Internal Revenue Code; or
(b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees
from all specific. without distinction as to transport or nontransport corporations;
provided that with respect to international airtransport service, only the gross
passengers, mail, and freight revenues. from its outgoing flights shall be subject to this
law.
The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes,
duties, royalties, registration, license and other fees and charges of any kind, nature or description
imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national
authority or government, agency, now or in the future, including but not limited to the following:
xxx xxx xxx
(5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of
airtransport equipment, motor vehicles, and all other personal or real property of the gravitates (Pres.
Decree 1590, 75 OG No. 15, 3259, April 9, 1979).
PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now
exempt from the payment of any tax, fee, or other charge on the registration and licensing of motor vehicles.
Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of
Section 13, P.D. 1590, and may no longer be exacted.
WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees paid in
1971 is
DENIED. The Land Transportation Franchising and Regulatory Board (LTFRB) is enjoined functions-the
collecting
any tax, fee, or other charge on the registration and licensing of the petitioner's motor vehicles from April 9,
1979
as provided in Presidential Decree No. 1590.
SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes,
Grio Aquino and Medialdea, JJ., concur.
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Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. 115455 October 30, 1995
ARTURO M. TOLENTINO, petitioner,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 115525 October 30, 1995
JUAN T. DAVID, petitioner,
vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance;
LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR
REPRESENTATIVES, respondents.
G.R. No. 115543 October 30, 1995
RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF
INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.
G.R. No. 115544 October 30, 1995
PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING
CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T.
GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his
capacity as Secretary of Finance, respondents.
G.R. No. 115754 October 30, 1995
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 115781 October 30, 1995
KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR.,
JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE
L.
GOZON, RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL,
MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"),
FREEDOM FROM DEBT COALITION, INC., and PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO
TAADA,
petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL
REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.
G.R. No. 115852 October 30, 1995
PHILIPPINE AIRLINES, INC., petitioner,
vs.
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THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.


G.R. No. 115873 October 30, 1995
COOPERATIVE UNION OF THE PHILIPPINES, petitioner,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON. TEOFISTO T.
GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his
capacity as Secretary of Finance, respondents.
G.R. No. 115931 October 30, 1995
PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF PHILIPPINE BOOK
SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the
Commissioner of Internal Revenue; and HON. GUILLERMO PARAYNO, JR., in his capacity as the
Commissioner of Customs, respondents.
RESOLUTION
MENDOZA, J.:
These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the
declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law.
The
motions, of which there are 10 in all, have been filed by the several petitioners in these cases, with the
exception
of the Philippine Educational Publishers Association, Inc. and the Association of Philippine Booksellers,
petitioners
in G.R. No. 115931.
The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine
Airlines, Inc., petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc., petitioner in G.R. No.
115544,
and Juan T. David, petitioner in G.R. No. 115525, each filed a reply. In turn the Solicitor General filed on June 1,
1995 a rejoinder to the PPI's reply.
On June 27, 1995 the matter was submitted for resolution.
I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan,
Inc., Philippine Airlines (PAL), Roco, and Chamber of Real Estate and Builders Association (CREBA)) reiterate
previous claims made by them that R.A. No. 7716 did not "originate exclusively" in the House of
Representatives
as required by Art. VI, 24 of the Constitution. Although they admit that H. No. 11197 was filed in the House of
Representatives where it passed three readings and that afterward it was sent to the Senate where after first
reading it was referred to the Senate Ways and Means Committee, they complain that the Senate did not pass
it
on second and third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it
approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have done was to
amend H. No. 11197 by striking out the text of the bill and substituting it with the text of S. No. 1630. That way,
it
is said, "the bill remains a House bill and the Senate version just becomes the text (only the text) of the House
bill."
The contention has no merit.
The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a
House
revenue bill by enacting its own version of a revenue bill. On at least two occasions during the Eighth
Congress,
the Senate passed its own version of revenue bills, which, in consolidation with House bills earlier passed,
became the enrolled bills. These were:
R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM
FIVE (5) YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON
CAPITAL EQUIPMENT) which was approved by the President on April 10, 1992. This Act is actually a
consolidation of H. No. 34254, which was approved by the House on January 29, 1992, and S. No. 1920, which
was approved by the Senate on February 3, 1992.
R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY
FILIPINO ATHLETE WINNING A MEDAL IN OLYMPIC GAMES) which was approved by the President on May
22,

1992. This Act is a consolidation of H. No. 22232, which was approved by the House of Representatives on
August 2, 1989, and S. No. 807, which was approved by the Senate on October 21, 1991.
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On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of
House and Senate bills. These are the following, with indications of the dates on which the laws were approved
by
the President and dates the separate bills of the two chambers of Congress were respectively passed:
1. R.A. NO. 7642
AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE
PERTINENT SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992).
House Bill No. 2165, October 5, 1992
Senate Bill No. 32, December 7, 1992
2. R.A. NO. 7643
AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE
PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO ALLOW LOCAL GOVERNMENT
UNITS TO SHARE IN VAT REVENUE, AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF
THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992)
House Bill No. 1503, September 3, 1992
Senate Bill No. 968, December 7, 1992
3. R.A. NO. 7646
AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE
PLACE FOR PAYMENT OF INTERNAL REVENUE TAXES BY LARGE TAXPAYERS, AMENDING
FOR THIS PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED (February 24, 1993)
House Bill No. 1470, October 20, 1992
Senate Bill No. 35, November 19, 1992
4. R.A. NO. 7649
AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS,
INSTRUMENTALITIES OR AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS (GOCCS) TO DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE
RATE OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF GOODS AND
SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS (April
6, 1993)
House Bill No. 5260, January 26, 1993
Senate Bill No. 1141, March 30, 1993
5. R.A. NO. 7656
AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO DECLARE
DIVIDENDS UNDER CERTAIN CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR
OTHER PURPOSES (November 9, 1993)
House Bill No. 11024, November 3, 1993
Senate Bill No. 1168, November 3, 1993
6. R.A. NO. 7660
AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE
DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR SPECIFIC
PROGRAMS, AND FOR OTHER PURPOSES (December 23, 1993)
House Bill No. 7789, May 31, 1993
Senate Bill No. 1330, November 18, 1993
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7. R.A. NO. 7717


AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK
LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC
OFFERING, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, BY INSERTING A NEW SECTION AND REPEALING CERTAIN SUBSECTIONS
THEREOF (May 5, 1994)
House Bill No. 9187, November 3, 1993
Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to
propose amendments to bills required to originate in the House, passed its own version of a House revenue
measure. It is noteworthy that, in the particular case of S. No. 1630, petitioners Tolentino and Roco, as
members
of the Senate, voted to approve it on second and third readings.
On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere
matter of form. Petitioner has not shown what substantial difference it would make if, as the Senate actually did
in
this case, a separate bill like S. No. 1630 is instead enacted as a substitute measure, "taking into
Consideration . .
. H.B. 11197."
Indeed, so far as pertinent, the Rules of the Senate only provide:
RULE XXIX
AMENDMENTS
xxx xxx xxx
68. Not more than one amendment to the original amendment shall be considered.
No amendment by substitution shall be entertained unless the text thereof is submitted in writing.
Any of said amendments may be withdrawn before a vote is taken thereon.
69. No amendment which seeks the inclusion of a legislative provision foreign to the subject matter
of a bill (rider) shall be entertained.
xxx xxx xxx
70-A. A bill or resolution shall not be amended by substituting it with another which covers a subject
distinct from that proposed in the original bill or resolution. (emphasis added).
Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate possesses
less
power than the U.S. Senate because of textual differences between constitutional provisions giving them the
power to propose or concur with amendments.
Art. I, 7, cl. 1 of the U.S. Constitution reads:
All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may
propose or concur with amendments as on other Bills.
Art. VI, 24 of our Constitution reads:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on
other Bills" in the American version, according to petitioners, shows the intention of the framers of our
Constitution
to restrict the Senate's power to propose amendments to revenue bills. Petitioner Tolentino contends that the
word "exclusively" was inserted to modify "originate" and "the words 'as in any other bills' (sic) were eliminated
so
as to show that these bills were not to be like other bills but must be treated as a special kind."
The history of this provision does not support this contention. The supposed indicia of constitutional intent are
nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the
1935
Constitution originally provided for a unicameral National Assembly. When it was decided in 1939 to change to
a
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bicameral legislature, it became necessary to provide for the procedure for lawmaking by the Senate and the
House of Representatives. The work of proposing amendments to the Constitution was done by the National
Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assembly's
lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the
following
provision:
All bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills
shall originate exclusively in the Assembly, but the Senate may propose or concur with amendments.
In case of disapproval by the Senate of any such bills, the Assembly may repass the same by a twothirds
vote of all its members, and thereupon, the bill so repassed shall be deemed enacted and may
be submitted to the President for corresponding action. In the event that the Senate should fail to

finally act on any such bills, the Assembly may, after thirty days from the opening of the next regular
session of the same legislative term, reapprove the same with a vote of two-thirds of all the members
of the Assembly. And upon such reapproval, the bill shall be deemed enacted and may be submitted
to the President for corresponding action.
The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted
everything after the first sentence. As rewritten, the proposal was approved by the National Assembly and
embodied in Resolution No. 38, as amended by Resolution No. 73. (J. ARUEGO, KNOW YOUR
CONSTITUTION
65-66 (1950)). The proposed amendment was submitted to the people and ratified by them in the elections held
on June 18, 1940.
This is the history of Art. VI, 18 (2) of the 1935 Constitution, from which Art. VI, 24 of the present Constitution
was derived. It explains why the word "exclusively" was added to the American text from which the framers of
the
Philippine Constitution borrowed and why the phrase "as on other Bills" was not copied. Considering the defeat
of
the proposal, the power of the Senate to propose amendments must be understood to be full, plenary and
complete "as on other Bills." Thus, because revenue bills are required to originate exclusively in the House of
Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue bill
is
passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same
subject matter. This follows from the coequality of the two chambers of Congress.
That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from
the
following commentaries:
The power of the Senate to propose or concur with amendments is apparently without restriction. It
would seem that by virtue of this power, the Senate can practically re-write a bill required to come
from the House and leave only a trace of the original bill. For example, a general revenue bill passed
by the lower house of the United States Congress contained provisions for the imposition of an
inheritance tax . This was changed by the Senate into a corporation tax. The amending authority of
the Senate was declared by the United States Supreme Court to be sufficiently broad to enable it to
make the alteration. [Flint v. Stone Tracy Company, 220 U.S. 107, 55 L. ed. 389].
(L. TAADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))
The above-mentioned bills are supposed to be initiated by the House of Representatives because it
is more numerous in membership and therefore also more representative of the people. Moreover,
its members are presumed to be more familiar with the needs of the country in regard to the
enactment of the legislation involved.
The Senate is, however, allowed much leeway in the exercise of its power to propose or concur with
amendments to the bills initiated by the House of Representatives. Thus, in one case, a bill
introduced in the U.S. House of Representatives was changed by the Senate to make a proposed
inheritance tax a corporation tax. It is also accepted practice for the Senate to introduce what is
known as an amendment by substitution, which may entirely replace the bill initiated in the House of
Representatives.
(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).
In sum, while Art. VI, 24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills must "originate exclusively in the House of
Representatives,"
it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the
Senate
may propose an entirely new bill as a substitute measure. As petitioner Tolentino states in a high school text, a
committee to which a bill is referred may do any of the following:
(1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding sections or
altering its language; (3) to make and endorse an entirely new bill as a substitute, in which case it will
be known as a committee bill; or (4) to make no report at all.
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(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))


To except from this procedure the amendment of bills which are required to originate in the House by
prescribing
that the number of the House bill and its other parts up to the enacting clause must be preserved although the

text of the Senate amendment may be incorporated in place of the original body of the bill is to insist on a mere
technicality. At any rate there is no rule prescribing this form. S. No. 1630, as a substitute measure, is therefore
as much an amendment of H. No. 11197 as any which the Senate could have made.
II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No.
1630
is an independent and distinct bill. Hence their repeated references to its certification that it was passed by the
Senate "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197,"
implying that there is something substantially different between the reference to S. No. 1129 and the reference
to
H. No. 11197. From this premise, they conclude that R.A. No. 7716 originated both in the House and in the
Senate and that it is the product of two "half-baked bills because neither H. No. 11197 nor S. No. 1630 was
passed by both houses of Congress."
In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of
the
corresponding provisions of H. No. 11197. The very tabular comparison of the provisions of H. No. 11197 and
S.
No. 1630 attached as Supplement A to the basic petition of petitioner Tolentino, while showing differences
between the two bills, at the same time indicates that the provisions of the Senate bill were precisely intended
to
be amendments to the House bill.
Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere
amendment of the House bill, H. No. 11197 in its original form did not have to pass the Senate on second and
three readings. It was enough that after it was passed on first reading it was referred to the Senate Committee
on
Ways and Means. Neither was it required that S. No. 1630 be passed by the House of Representatives before
the
two bills could be referred to the Conference Committee.
There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House
bill and Senate bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were
referred
to a conference committee, the question was raised whether the two bills could be the subject of such
conference,
considering that the bill from one house had not been passed by the other and vice versa. As Congressman
Duran put the question:
MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by the
House but not passed by the Senate, and a Senate bill of a similar nature is passed in the Senate but
never passed in the House, can the two bills be the subject of a conference, and can a law be
enacted from these two bills? I understand that the Senate bill in this particular instance does not
refer to investments in government securities, whereas the bill in the House, which was introduced by
the Speaker, covers two subject matters: not only investigation of deposits in banks but also
investigation of investments in government securities. Now, since the two bills differ in their subject
matter, I believe that no law can be enacted.
Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:
THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like this
where a conference should be had. If the House bill had been approved by the Senate, there would
have been no need of a conference; but precisely because the Senate passed another bill on the
same subject matter, the conference committee had to be created, and we are now considering the
report of that committee.
(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))
III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and
unrelated measures also accounts for the petitioners' (Kilosbayan's and PAL's) contention that because the
President separately certified to the need for the immediate enactment of these measures, his certification was
ineffectual and void. The certification had to be made of the version of the same revenue bill which at the
moment
was being considered. Otherwise, to follow petitioners' theory, it would be necessary for the President to certify
as
many bills as are presented in a house of Congress even though the bills are merely versions of the bill he has
already certified. It is enough that he certifies the bill which, at the time he makes the certification, is under

consideration. Since on March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to
be
certified. For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate
enactment
because it was the one which at that time was being considered by the House. This bill was later substituted,
together with other bills, by H. No. 11197.
As to what Presidential certification can accomplish, we have already explained in the main decision that the
phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, 26 (2)
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qualifies not only the requirement that "printed copies [of a bill] in its final form [must be] distributed to the
members three days before its passage" but also the requirement that before a bill can become a law it must
have passed "three readings on separate days." There is not only textual support for such construction but
historical basis as well.
Art. VI, 21 (2) of the 1935 Constitution originally provided:
(2) No bill shall be passed by either House unless it shall have been printed and copies thereof in its
final form furnished its Members at least three calendar days prior to its passage, except when the
President shall have certified to the necessity of its immediate enactment. Upon the last reading of a
bill, no amendment thereof shall be allowed and the question upon its passage shall be taken
immediately thereafter, and the yeas and nays entered on the Journal.
When the 1973 Constitution was adopted, it was provided in Art. VIII, 19 (2):
(2) No bill shall become a law unless it has passed three readings on separate days, and printed
copies thereof in its final form have been distributed to the Members three days before its passage,
except when the Prime Minister certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and
the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the
Journal.
This provision of the 1973 document, with slight modification, was adopted in Art. VI, 26 (2) of the present
Constitution, thus:
(2) No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members three
days before its passage, except when the President certifies to the necessity of its immediate
enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment
thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas
and nays entered in the Journal.
The exception is based on the prudential consideration that if in all cases three readings on separate days are
required and a bill has to be printed in final form before it can be passed, the need for a law may be rendered
academic by the occurrence of the very emergency or public calamity which it is meant to address.
Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the
Philippines where budget deficit is a chronic condition. Even if this were the case, an enormous budget deficit
does not make the need for R.A. No. 7716 any less urgent or the situation calling for its enactment any less an
emergency.
Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there
was
an urgent need for consideration of S. No. 1630, because they responded to the call of the President by voting
on
the bill on second and third readings on the same day. While the judicial department is not bound by the
Senate's
acceptance of the President's certification, the respect due coequal departments of the government in matters
committed to them by the Constitution and the absence of a clear showing of grave abuse of discretion caution
a
stay of the judicial hand.
At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was
discussed for six days. Only its distribution in advance in its final printed form was actually dispensed with by
holding the voting on second and third readings on the same day (March 24, 1994). Otherwise, sufficient time
between the submission of the bill on February 8, 1994 on second reading and its approval on March 24, 1994
elapsed before it was finally voted on by the Senate on third reading.
The purpose for which three readings on separate days is required is said to be two-fold: (1) to inform the
members of Congress of what they must vote on and (2) to give them notice that a measure is progressing

through the enacting process, thus enabling them and others interested in the measure to prepare their
positions
with reference to it. (1 J. G. SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION 10.04, p. 282
(1972)). These purposes were substantially achieved in the case of R.A. No. 7716.
IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of
Attorneys for Brotherhood, Integrity and Nationalism, Inc. (MABINI)) that in violation of the constitutional policy
of
full public disclosure and the people's right to know (Art. II, 28 and Art. III, 7) the Conference Committee met
for
two days in executive session with only the conferees present.
As pointed out in our main decision, even in the United States it was customary to hold such sessions with only
the conferees and their staffs in attendance and it was only in 1975 when a new rule was adopted requiring
open
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sessions. Unlike its American counterpart, the Philippine Congress has not adopted a rule prescribing open
hearings for conference committees.
It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff
members
were present. These were staff members of the Senators and Congressmen, however, who may be presumed
to
be their confidential men, not stenographers as in this case who on the last two days of the conference were
excluded. There is no showing that the conferees themselves did not take notes of their proceedings so as to
give
petitioner Kilosbayan basis for claiming that even in secret diplomatic negotiations involving state interests,
conferees keep notes of their meetings. Above all, the public's right to know was fully served because the
Conference Committee in this case submitted a report showing the changes made on the differing versions of
the
House and the Senate.
Petitioners cite the rules of both houses which provide that conference committee reports must contain "a
detailed, sufficiently explicit statement of the changes in or other amendments." These changes are shown in
the
bill attached to the Conference Committee Report. The members of both houses could thus ascertain what
changes had been made in the original bills without the need of a statement detailing the changes.
The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of
1955) was reported by the Conference Committee. Congressman Bengzon raised a point of order. He said:
MR. BENGZON. My point of order is that it is out of order to consider the report of the conference
committee regarding House Bill No. 2557 by reason of the provision of Section 11, Article XII, of the
Rules of this House which provides specifically that the conference report must be accompanied by a
detailed statement of the effects of the amendment on the bill of the House. This conference
committee report is not accompanied by that detailed statement, Mr. Speaker. Therefore it is out of
order to consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:
MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point of
order raised by the gentleman from Pangasinan.
There is no question about the provision of the Rule cited by the gentleman from Pangasinan, but
this provision applies to those cases where only portions of the bill have been amended. In this case
before us an entire bill is presented; therefore, it can be easily seen from the reading of the bill what
the provisions are. Besides, this procedure has been an established practice.
After some interruption, he continued:
MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the provisions of
the Rules, and the reason for the requirement in the provision cited by the gentleman from
Pangasinan is when there are only certain words or phrases inserted in or deleted from the
provisions of the bill included in the conference report, and we cannot understand what those words
and phrases mean and their relation to the bill. In that case, it is necessary to make a detailed
statement on how those words and phrases will affect the bill as a whole; but when the entire bill itself
is copied verbatim in the conference report, that is not necessary. So when the reason for the Rule
does not exist, the Rule does not exist.
(2 CONG. REC. NO. 2, p. 4056. (emphasis added))

Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it
was
upheld by viva voce and when a division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)
Nor is there any doubt about the power of a conference committee to insert new provisions as long as these
are
germane to the subject of the conference. As this Court held in Philippine Judges Association v. Prado, 227
SCRA
703 (1993), in an opinion written by then Justice Cruz, the jurisdiction of the conference committee is not
limited
to resolving differences between the Senate and the House. It may propose an entirely new provision. What is
important is that its report is subsequently approved by the respective houses of Congress. This Court ruled
that it
would not entertain allegations that, because new provisions had been added by the conference committee,
there
was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no amendment
thereto
shall be allowed."
Applying these principles, we shall decline to look into the petitioners' charges that an amendment
was made upon the last reading of the bill that eventually became R.A. No. 7354 and that copies
thereof in its final form were not distributed among the members of each House. Both the enrolled bill
and the legislative journals certify that the measure was duly enacted i.e., in accordance with Article
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VI, Sec. 26 (2) of the Constitution. We are bound by such official assurances from a coordinate
department of the government, to which we owe, at the very least, a becoming courtesy.
(Id. at 710. (emphasis added))
It is interesting to note the following description of conference committees in the Philippines in a 1979 study:
Conference committees may be of two types: free or instructed. These committees may be given
instructions by their parent bodies or they may be left without instructions. Normally the conference
committees are without instructions, and this is why they are often critically referred to as "the little
legislatures." Once bills have been sent to them, the conferees have almost unlimited authority to
change the clauses of the bills and in fact sometimes introduce new measures that were not in the
original legislation. No minutes are kept, and members' activities on conference committees are
difficult to determine. One congressman known for his idealism put it this way: "I killed a bill on export
incentives for my interest group [copra] in the conference committee but I could not have done so
anywhere else." The conference committee submits a report to both houses, and usually it is
accepted. If the report is not accepted, then the committee is discharged and new members are
appointed.
(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A
COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).
In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that
conference committees here are no different from their counterparts in the United States whose vast powers
we
noted in Philippine Judges Association v. Prado, supra. At all events, under Art. VI, 16(3) each house has the
power "to determine the rules of its proceedings," including those of its committees. Any meaningful change in
the
method and procedures of Congress or its committees must therefore be sought in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, 26 (1) of the
Constitution which provides that "Every bill passed by Congress shall embrace only one subject which shall be
expressed in the title thereof." PAL contends that the amendment of its franchise by the withdrawal of its
exemption from the VAT is not expressed in the title of the law.
Pursuant to 13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all other
taxes,
duties, royalties, registration, license and other fees and charges of any kind, nature, or description, imposed,
levied, established, assessed or collected by any municipal, city, provincial or national authority or government
agency, now or in the future."
PAL was exempted from the payment of the VAT along with other entities by 103 of the National Internal
Revenue Code, which provides as follows:

103. Exempt transactions. The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws or international agreements to which the
Philippines is a signatory.
R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending 103, as
follows:
103. Exempt transactions. The following shall be exempt from the value-added tax:
xxx xxx xxx
(q) Transactions which are exempt under special laws, except those granted under Presidential
Decree Nos. 66, 529, 972, 1491, 1590. . . .
The amendment of 103 is expressed in the title of R.A. No. 7716 which reads:
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE
AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND
REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, AND FOR OTHER PURPOSES.
By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY]
WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES
AMENDING
AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
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AMENDED AND FOR OTHER PURPOSES," Congress thereby clearly expresses its intention to amend any
provision of the NIRC which stands in the way of accomplishing the purpose of the law.
PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to
P.D. No. 1590. It is unnecessary to do this in order to comply with the constitutional requirement, since it is
already stated in the title that the law seeks to amend the pertinent provisions of the NIRC, among which is
103(q), in order to widen the base of the VAT. Actually, it is the bill which becomes a law that is required to
express in its title the subject of legislation. The titles of H. No. 11197 and S. No. 1630 in fact specifically
referred
to 103 of the NIRC as among the provisions sought to be amended. We are satisfied that sufficient notice had
been given of the pendency of these bills in Congress before they were enacted into what is now R.A.
No. 7716.
In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected.
R.A.
No. 7354 is entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS
POWERS,
FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR REGULATION OF THE INDUSTRY AND FOR
OTHER
PURPOSES CONNECTED THEREWITH. It contained a provision repealing all franking privileges. It was
contended that the withdrawal of franking privileges was not expressed in the title of the law. In holding that
there
was sufficient description of the subject of the law in its title, including the repeal of franking privileges, this
Court
held:
To require every end and means necessary for the accomplishment of the general objectives of the
statute to be expressed in its title would not only be unreasonable but would actually render
legislation impossible. [Cooley, Constitutional Limitations, 8th Ed., p. 297] As has been correctly
explained:
The details of a legislative act need not be specifically stated in its title, but matter
germane to the subject as expressed in the title, and adopted to the accomplishment of
the object in view, may properly be included in the act. Thus, it is proper to create in the
same act the machinery by which the act is to be enforced, to prescribe the penalties for
its infraction, and to remove obstacles in the way of its execution. If such matters are
properly connected with the subject as expressed in the title, it is unnecessary that they
should also have special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed.
725)
(227 SCRA at 707-708)
VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not
exempt from the taxing power of the State and that what the constitutional guarantee of free press prohibits are

laws which single out the press or target a group belonging to the press for special treatment or which in any
way
discriminate against the press on the basis of the content of the publication, and R.A. No. 7716 is none of
these.
Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining
those
granted to others, the law discriminates against the press. At any rate, it is averred, "even nondiscriminatory
taxation of constitutionally guaranteed freedom is unconstitutional."
With respect to the first contention, it would suffice to say that since the law granted the press a privilege, the
law
could take back the privilege anytime without offense to the Constitution. The reason is simple: by granting
exemptions, the State does not forever waive the exercise of its sovereign prerogative.
Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other
businesses have long ago been subject. It is thus different from the tax involved in the cases invoked by the
PPI.
The license tax in Grosjean v. American Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be
discriminatory because it was laid on the gross advertising receipts only of newspapers whose weekly
circulation
was over 20,000, with the result that the tax applied only to 13 out of 124 publishers in Louisiana. These large
papers were critical of Senator Huey Long who controlled the state legislature which enacted the license tax.
The
censorial motivation for the law was thus evident.
On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L.
Ed.
2d 295 (1983), the tax was found to be discriminatory because although it could have been made liable for the
sales tax or, in lieu thereof, for the use tax on the privilege of using, storing or consuming tangible goods, the
press was not. Instead, the press was exempted from both taxes. It was, however, later made to pay a special
use tax on the cost of paper and ink which made these items "the only items subject to the use tax that were
component of goods to be sold at retail." The U.S. Supreme Court held that the differential treatment of the
press
"suggests that the goal of regulation is not related to suppression of expression, and such goal is presumptively
unconstitutional." It would therefore appear that even a law that favors the press is constitutionally suspect.
(See
the dissent of Rehnquist, J. in that case)
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Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and
unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously granted to PAL,
petroleum concessionaires, enterprises registered with the Export Processing Zone Authority, and many more
are
likewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden the
base
of the tax.
The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which
are
profit oriented, continue to enjoy exemption under R.A. No. 7716. An enumeration of some of these
transactions
will suffice to show that by and large this is not so and that the exemptions are granted for a purpose. As the
Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural production and,
in
other cases, for the personal benefit of the end-user rather than for profit. The exempt transactions are:
(a) Goods for consumption or use which are in their original state (agricultural, marine and forest
products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn,
sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture of
feeds).
(b) Goods used for personal consumption or use (household and personal effects of citizens
returning to the Philippines) or for professional use, like professional instruments and implements, by
persons coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of
petroleum products subject to excise tax and services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary services, and services rendered
under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)
The PPI asserts that it does not really matter that the law does not discriminate against the press because
"even
nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional." PPI cites in support of
this
assertion the following statement in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):
The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the First
Amendment is not so restricted. A license tax certainly does not acquire constitutional validity
because it classifies the privileges protected by the First Amendment along with the wares and
merchandise of hucksters and peddlers and treats them all alike. Such equality in treatment does not
save the ordinance. Freedom of press, freedom of speech, freedom of religion are in preferred
position.
The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence,
although its application to others, such those selling goods, is valid, its application to the press or to religious
groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets,
is
unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of a
preacher. It is quite another thing to exact a tax on him for delivering a sermon."
A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which
invalidated a city ordinance requiring a business license fee on those engaged in the sale of general
merchandise. It was held that the tax could not be imposed on the sale of bibles by the American Bible Society
without restraining the free exercise of its right to propagate.
The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue purposes. To subject the press to its
payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it
to
general regulation is not to violate its freedom under the Constitution.
Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the
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sales are used to subsidize the cost of printing copies which are given free to those who cannot afford to pay
so
that to tax the sales would be to increase the price, while reducing the volume of sale. Granting that to be the
case, the resulting burden on the exercise of religious freedom is so incidental as to make it difficult to
differentiate it from any other economic imposition that might make the right to disseminate religious doctrines
costly. Otherwise, to follow the petitioner's argument, to increase the tax on the sale of vestments would be to
lay
an impermissible burden on the right of the preacher to make a sermon.
On the other hand the registration fee of P1,000.00 imposed by 107 of the NIRC, as amended by 7 of R.A.
No.
7716, although fixed in amount, is really just to pay for the expenses of registration and enforcement of
provisions
such as those relating to accounting in 108 of the NIRC. That the PBS distributes free bibles and therefore is
not
liable to pay the VAT does not excuse it from the payment of this fee because it also sells some copies. At any
rate whether the PBS is liable for the VAT must be decided in concrete cases, in the event it is assessed this
tax
by the Commissioner of Internal Revenue.

VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation.
CREBA
asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or
exempt without reasonable basis and (3) violates the rule that taxes should be uniform and equitable and that
Congress shall "evolve a progressive system of taxation."
With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of
real property by installment or on deferred payment basis would result in substantial increases in the monthly
amortizations to be paid because of the 10% VAT. The additional amount, it is pointed out, is something that the
buyer did not anticipate at the time he entered into the contract.
The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources
are
cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old
one, interferes with a contract or impairs its obligation, within the meaning of the Constitution. Even though
such
taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of
another, or may impose additional burdens upon one class and release the burdens of another, still the tax
must
be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574
(1919)).
Indeed not only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into
contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135,
147 (1968)) Contracts must be understood as having been made in reference to the possible exercise of the
rightful authority of the government and no obligation of contract can extend to the defeat of that authority.
(Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).
It is next pointed out that while 4 of R.A. No. 7716 exempts such transactions as the sale of agricultural
products,
food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real property
which is equally essential. The sale of real property for socialized and low-cost housing is exempted from the
tax,
but CREBA claims that real estate transactions of "the less poor," i.e., the middle class, who are equally
homeless, should likewise be exempted.
The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and
services
was already exempt under 103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner
is
in error in claiming that R.A. No. 7716 granted exemption to these transactions, while subjecting those of
petitioner to the payment of the VAT. Moreover, there is a difference between the "homeless poor" and the
"homeless less poor" in the example given by petitioner, because the second group or middle class can afford
to
rent houses in the meantime that they cannot yet buy their own homes. The two social classes are thus
differently
situated in life. "It is inherent in the power to tax that the 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.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of
Baguio
v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).
Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, 28(1) which
provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive
system of taxation."
Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be
taxed
at the same rate. The taxing power has the authority to make reasonable and natural classifications for
purposes
of taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to all persons,
forms and corporations placed in similar situation. (City of Baguio v. De Leon, supra; Sison, Jr. v. Ancheta,
supra)

Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716
merely expands the base of the tax. The validity of the original VAT Law was questioned in Kapatiran ng
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made
in
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these cases, namely, that the law was "oppressive, discriminatory, unjust and regressive in violation of Art. VI,
28(1) of the Constitution." (At 382) Rejecting the challenge to the law, this Court held:
As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .
The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,
which are not exempt, at the constant rate of 0% or 10%.
The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons
engaged in business with an aggregate gross annual sales exceeding P200,000.00. Small corner
sari-sari stores are consequently exempt from its application. Likewise exempt from the tax are sales
of farm and marine products, so that the costs of basic food and other necessities, spared as they
are from the incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.
(At 382-383)
The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the
Philippines, Inc. (CUP), while petitioner Juan T. David argues that the law contravenes the mandate of
Congress
to provide for a progressive system of taxation because the law imposes a flat rate of 10% and thus places the
tax
burden on all taxpayers without regard to their ability to pay.
The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive.
What
it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision
has been interpreted to mean simply that "direct taxes are . . . to be preferred [and] as much as possible,
indirect
taxes should be minimized." (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed.
(1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system.
Otherwise,
sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the
proclamation of Art. VIII, 17(1) of the 1973 Constitution from which the present Art. VI, 28(1) was taken.
Sales
taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No.
7716, 3, amending 102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, 4,
amending 103 of the NIRC).
Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:
(a) Goods for consumption or use which are in their original state (agricultural, marine and forest
products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn
livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn
sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture of
feeds).
(b) Goods used for personal consumption or use (household and personal effects of citizens
returning to the Philippines) and or professional use, like professional instruments and implements,
by persons coming to the Philippines to settle here.
(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of
petroleum products subject to excise tax and services subject to percentage tax.
(d) Educational services, medical, dental, hospital and veterinary services, and services rendered
under employer-employee relationship.
(e) Works of art and similar creations sold by the artist himself.
(f) Transactions exempted under special laws, or international agreements.
(g) Export-sales by persons not VAT-registered.
(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.
(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

On the other hand, the transactions which are subject to the VAT are those which involve goods and services
which are used or availed of mainly by higher income groups. These include real properties held primarily for
sale
to customers or for lease in the ordinary course of trade or business, the right or privilege to use patent,
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copyright, and other similar property or right, the right or privilege to use industrial, commercial or scientific
equipment, motion picture films, tapes and discs, radio, television, satellite transmission and cable television
time,
hotels, restaurants and similar places, securities, lending investments, taxicabs, utility cars for rent, tourist
buses,
and other common carriers, services of franchise grantees of telephone and telegraph.
The problem with CREBA's petition is that it presents broad claims of constitutional violations by tendering
issues
not at retail but at wholesale and in the abstract. There is no fully developed record which can impart to
adjudication the impact of actuality. There is no factual foundation to show in the concrete the application of the
law to actual contracts and exemplify its effect on property rights. For the fact is that petitioner's members have
not even been assessed the VAT. Petitioner's case is not made concrete by a series of hypothetical questions
asked which are no different from those dealt with in advisory opinions.
The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as
here, does not suffice. There must be a factual foundation of such unconstitutional taint. Considering
that petitioner here would condemn such a provision as void on its face, he has not made out a case.
This is merely to adhere to the authoritative doctrine that where the due process and equal
protection clauses are invoked, considering that they are not fixed rules but rather broad standards,
there is a need for proof of such persuasive character as would lead to such a conclusion. Absent
such a showing, the presumption of validity must prevail.
(Sison, Jr. v. Ancheta, 130 SCRA at 661)
Adjudication of these broad claims must await the development of a concrete case. It may be that
postponement
of adjudication would result in a multiplicity of suits. This need not be the case, however. Enforcement of the
law
may give rise to such a case. A test case, provided it is an actual case and not an abstract or hypothetical one,
may thus be presented.
Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues. Otherwise,
adjudication would be no different from the giving of advisory opinion that does not really settle legal issues.
We are told that it is our duty under Art. VIII, 1, 2 to decide whenever a claim is made that "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." This duty can only arise if an actual case or controversy is before us. Under Art . VIII, 5
our
jurisdiction is defined in terms of "cases" and all that Art. VIII, 1, 2 can plausibly mean is that in the exercise
of
that jurisdiction we have the judicial power to determine questions of grave abuse of discretion by any branch
or
instrumentality of the government.
Put in another way, what is granted in Art. VIII, 1, 2 is "judicial power," which is "the power of a court to hear
and decide cases pending between parties who have the right to sue and be sued in the courts of law and
equity"
(Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from legislative and executive power. This power
cannot be directly appropriated until it is apportioned among several courts either by the Constitution, as in the
case of Art. VIII, 5, or by statute, as in the case of the Judiciary Act of 1948 (R.A. No. 296) and the Judiciary
Reorganization Act of 1980 (B.P. Blg. 129). The power thus apportioned constitutes the court's "jurisdiction,"
defined as "the power conferred by law upon a court or judge to take cognizance of a case, to the exclusion of
all
others." (United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this
Court
cannot inquire into any allegation of grave abuse of discretion by the other departments of the government.
VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of the
Philippines

(CUP), after briefly surveying the course of legislation, argues that it was to adopt a definite policy of granting
tax
exemption to cooperatives that the present Constitution embodies provisions on cooperatives. To subject
cooperatives to the VAT would therefore be to infringe a constitutional policy. Petitioner claims that in 1973, P.D.
No. 175 was promulgated exempting cooperatives from the payment of income taxes and sales taxes but in
1984,
because of the crisis which menaced the national economy, this exemption was withdrawn by P.D. No. 1955;
that
in 1986, P.D. No. 2008 again granted cooperatives exemption from income and sales taxes until December 31,
1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the framers of the
Constitution "repudiated the previous actions of the government adverse to the interests of the cooperatives,
that
is, the repeated revocation of the tax exemption to cooperatives and instead upheld the policy of strengthening
the cooperatives by way of the grant of tax exemptions," by providing the following in Art. XII:
1. The goals of the national economy are a more equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods and services produced by the nation for the
benefit of the people; and an expanding productivity as the key to raising the quality of life for all,
especially the underprivileged.
The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of human and
natural resources, and which are competitive in both domestic and foreign markets. However, the
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State shall protect Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given
optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar
collective organizations, shall be encouraged to broaden the base of their ownership.
15. The Congress shall create an agency to promote the viability and growth of cooperatives as
instruments for social justice and economic development.
Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out cooperatives
by
withdrawing their exemption from income and sales taxes under P.D. No. 175, 5. What P.D. No. 1955, 1 did
was to withdraw the exemptions and preferential treatments theretofore granted to private business enterprises
in
general, in view of the economic crisis which then beset the nation. It is true that after P.D. No. 2008, 2 had
restored the tax exemptions of cooperatives in 1986, the exemption was again repealed by E.O. No. 93, 1, but
then again cooperatives were not the only ones whose exemptions were withdrawn. The withdrawal of tax
incentives applied to all, including government and private entities. In the second place, the Constitution does
not
really require that cooperatives be granted tax exemptions in order to promote their growth and viability. Hence,
there is no basis for petitioner's assertion that the government's policy toward cooperatives had been one of
vacillation, as far as the grant of tax privileges was concerned, and that it was to put an end to this indecision
that
the constitutional provisions cited were adopted. Perhaps as a matter of policy cooperatives should be granted
tax
exemptions, but that is left to the discretion of Congress. If Congress does not grant exemption and there is no
discrimination to cooperatives, no violation of any constitutional policy can be charged.
Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt from
taxation.
Such theory is contrary to the Constitution under which only the following are exempt from taxation: charitable
institutions, churches and parsonages, by reason of Art. VI, 28 (3), and non-stock, non-profit educational
institutions by reason of Art. XIV, 4 (3).
CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the equal
protection of the law because electric cooperatives are exempted from the VAT. The classification between
electric and other cooperatives (farmers cooperatives, producers cooperatives, marketing cooperatives, etc.)
apparently rests on a congressional determination that there is greater need to provide cheaper electric power
to
as many people as possible, especially those living in the rural areas, than there is to provide them with other
necessities in life. We cannot say that such classification is unreasonable.

We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We
have
in fact taken the extraordinary step of enjoining its enforcement pending resolution of these cases. We have
now
come to the conclusion that the law suffers from none of the infirmities attributed to it by petitioners and that its
enactment by the other branches of the government does not constitute a grave abuse of discretion. Any
question
as to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally
responsible, remembering that, as Justice Holmes has said, "legislators are the ultimate guardians of the
liberties
and welfare of the people in quite as great a degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v.
May, 194 U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in
arguing that we should enforce the public accountability of legislators, that those who took part in passing the
law
in question by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the
flush of enactment. This Court does not sit as a third branch of the legislature, much less exercise a veto power
over legislation.
WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining order
previously issued is hereby lifted.
SO ORDERED.
Narvasa, C.J., Feliciano, Melo, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.
Padilla and Vitug, JJ., maintained their separate opinion.
Regalado, Davide, Jr., Romero, Bellosillo and Puno, JJ, maintained their dissenting opinion.
Panganiban, J., took no part.
The Lawphil Project - Arellano Law Foundation

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Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 131512 January 20, 2000
LAND TRANSPORTATION OFFICE [LTO], represented by Assistant Secretary Manuel F. Bruan, LTO
Regional Office, Region X represented by its Regional Director, Timoteo A. Garcia; and LTO Butuan
represented by Rosita G. Sadiaga, its Registrar, petitioners,
vs.
CITY OF BUTUAN, represented in this case by Democrito D. Plaza II, City Mayor, respondents.
VITUG, J.:
The 1987 Constitution enunciates the policy that the territorial and political subdivisions shall enjoy local
autonomy.1 In obedience to that mandate of the fundamental law, Republic Act ("R.A.") No. 7160, otherwise
known as the Local Government Code,2 expresses that the territorial and political subdivisions of the State
shall
enjoy genuine and meaningful local autonomy in order to enable them to attain their fullest development as
selfreliant
communities and make them more effective partners in the attainment of national goals, and that it is a
basic aim of the State to provide for a more responsive and accountable local government structure instituted
through a system of decentralization whereby local government units shall be given more powers, authority,
responsibilities and resources.
While the Constitution seeks to strengthen local units and ensure their viability, clearly, however, it has never
been the intention of that organic law to create an imperuim in imperio and install an infra sovereign political
subdivision independent of a single sovereign state.

The Court is asked in this instance to resolve the issue of whether under the present set up the power of the
Land
Registration Office ("LTO") to register, tricycles in particular, as well as to issue licenses for the driving thereof,
has likewise devolved to local government units.
The Regional Trial Court (Branch 2) of Butuan City held3 that the authority to register tricycles, the grant of the
corresponding franchise, the issuance of tricycle drivers' license, and the collection of fees therefor had all
been
vested in the Local Government Units ("LGUs"). Accordingly, it decreed the issuance of a permanent writ of
injunction against LTO, prohibiting and enjoining LTO, as well as its employees and other persons acting in its
behalf, from (a) registering tricycles and (b) issuing licenses to drivers of tricycles. The Court of Appeals, on
appeal to it, sustained the trial court.
The adverse rulings of both the court a quo and the appellate court prompted the LTO to file the instant petition
for review on certiorari to annul and set aside the decision,4 dated 17 November 1997, of the Court of Appeals
affirming the permanent injunctive writ order of the Regional Trial Court (Branch 2) of Butuan City.
Respondent City of Butuan asserts that one of the salient provisions introduced by the Local Government Code
is
in the area of local taxation which allows LGUs to collect registration fees or charges along with, in its view, the
corresponding issuance of all kinds of licenses or permits for the driving of tricycles.
The 1987 Constitution provides:
Each local government unit shall have the power to create its own sources of revenues and 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.5
Sec. 129 and Section 133 of the Local Government Code read:
Sec. 129. Power to Create Sources or Revenue. Each local government unit shall exercise its power to
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create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein,
consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to
the local government units.
Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:
xxxxxxxxx
(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.
Relying on the foregoing provisions of the law, the Sangguniang Panglungsod ("SP") of Butuan, on 16 August
1992, passed SP Ordinance No. 916-92 entitled "An Ordinance Regulating the Operation of Tricycles-for-Hire,
providing mechanism for the issuance of Franchise, Registration and Permit, and imposing Penalties for
Violations thereof and for other Purposes." The ordinance provided for, among other things, the payment of
franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and fees
for the issuance of a permit for the driving thereof.
Petitioner LTO explains that one of the functions of the national government that, indeed, has been transferred
to
local government units is the franchising authority over tricycles-for-hire of the Land Transportation Franchising
and Regulatory Board ("LTFRB") but not, it asseverates, the authority of LTO to register all motor vehicles and
to
issue to qualified persons of licenses to drive such vehicles.
In order to settle the variant positions of the parties, the City of Butuan, represented by its City Mayor
Democrito
D. Plaza, filed on 28 June 1994 with the trial court a petition for "prohibition, mandamus, injunction with a
prayer
for preliminary restraining order ex-parte" seeking the declaration of the validity of SP Ordinance No. 962-93
and
the prohibition of the registration of tricycles-for-hire and the issuance of licenses for the driving thereof by the
LTO.
LTO opposed the prayer in the petition.
On 20 March 1995, the trial court rendered a resolution; the dispositive portion read:
In view of the foregoing, let a permanent injunctive writ be issued against the respondent Land

Transportation Office and the other respondents, prohibiting and enjoining them, their employees, officers,
attorney's or other persons acting in their behalf from forcing or compelling Tricycles to be registered with,
and drivers to secure their licenses from respondent LTO or secure franchise from LTFRB and from
collecting fees thereon. It should be understood that the registration, franchise of tricycles and driver's
license/permit granted or issued by the City of Butuan are valid only within the territorial limits of Butuan
City.
No pronouncement as to costs.6
Petitioners timely moved for a reconsideration of the above resolution but it was to no avail. Petitioners then
appealed to the Court of Appeals. In its now assailed decision, the appellate court, on 17 November 1997,
sustained the trial court. It ruled:
WHEREFORE, the petition is hereby DISMISSED and the questioned permanent injunctive writ issued by
the court a quo dated March 20, 1995 AFFIRMED. 7
Coming up to this Court, petitioners raise this sole assignment of error, to wit:
The Court of Appeals [has] erred in sustaining the validity of the writ of injunction issued by the trial court
which enjoined LTO from (1) registering tricycles-for-hire and (2) issuing licenses for the driving thereof
since the Local Government Code devolved only the franchising authority of the LTFRB. Functions of the
LTO were not devolved to the LGU's.8
The petition is impressed with merit.
The Department of Transportation and Communications 9 ("DOTC"), through the LTO and the LTFRB, has since
been tasked with implementing laws pertaining to land transportation. The LTO is a line agency under the
DOTC
whose powers and functions, pursuant to Article III, Section 4 (d) [1], 10 of R.A. No. 4136, otherwise known as
Land Transportation and Traffic Code, as amended, deal primarily with the registration of all motor vehicles and
the licensing of drivers thereof. The LTFRB, upon the other hand, is the governing body tasked by E.O. No.
202,
dated 19 June 1987, to regulate the operation of public utility or "for hire" vehicles and to grant franchises or
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certificates of public convenience ("CPC"). 11 Finely put, registration and licensing functions are vested in the
LTO
while franchising and regulatory responsibilities had been vested in the LTFRB.
Under the Local Government Code, certain functions of the DOTC were transferred to the LGUs, thusly:
Sec. 458. Powers, Duties, Functions and Compensation.
xxxxxxxxx
(3) Subject to the provisions of Book II of this Code, enact ordinances granting franchises and authorizing
the issuance of permits or licenses, upon such conditions and for such purposes intended to promote the
general welfare of the inhabitants of the city and pursuant to this legislative authority shall:
xxxxxxxxx
(VI) Subject to the guidelines prescribed by the Department of Transportation and Communications,
regulate the operation of tricycles and grant franchises for the operation thereof within the territorial
jurisdiction of the city. (Emphasis supplied).
LGUs indubitably now have the power to regulate the operation of tricycles-for-hire and to grant franchises for
the
operation thereof. "To regulate" means to fix, establish, or control; to adjust by rule, method, or established
mode;
to direct by rule or restriction; or to subject to governing principles or laws. 12 A franchise is defined to be a
special
privilege to do certain things conferred by government on an individual or corporation, and which does not
belong
to citizens generally of common right.13 On the other hand, "to register" means to record formally and exactly,
to
enroll, or to enter precisely in a list or the like, 14 and a "driver's license" is the certificate or license issued by
the
government which authorizes a person to operate a motor vehicle. 15 The devolution of the functions of the
DOTC, performed by the LTFRB, to the LGUs, as so aptly observed by the Solicitor General, is aimed at
curbing
the alarming increase of accidents in national highways involving tricycles. It has been the perception that local
governments are in good position to achieve the end desired by the law-making body because of their proximity
to the situation that can enable them to address that serious concern better than the national government.

It may not be amiss to state, nevertheless, that under Article 458 (a)[3-VI] of the Local Government Code, the
power of LGUs to regulate the operation of tricycles and to grant franchises for the operation thereof is still
subject to the guidelines prescribed by the DOTC. In compliance therewith, the Department of Transportation
and
Communications ("DOTC") issued "Guidelines to Implement the Devolution of LTFRBs Franchising Authority
over
Tricycles-For-Hire to Local Government units pursuant to the Local Government Code." Pertinent provisions of
the guidelines state:
In lieu of the Land Transportation Franchising and Regulatory Board (LTFRB) in the DOTC, the
Sangguniang Bayan/Sangguniang Panglungsod (SB/SP) shall perform the following:
(a) Issue, amend, revise, renew, suspend, or cancel MTOP and prescribe the appropriate terms and
conditions therefor;
xxxxxxxxx
Operating Conditions:
1. For safety reasons, no tricycles should operate on national highways utilized by 4 wheel vehicles
greater than 4 tons and where normal speed exceed 40 KPH. However, the SB/SP may provide
exceptions if there is no alternative route.
2. Zones must be within the boundaries of the municipality/city. However, existing zones within more
than one municipality/city shall be maintained, provided that operators serving said zone shall secure
MTOP's from each of the municipalities/cities having jurisdiction over the areas covered by the zone.
3. A common color for tricycles-for-hire operating in the same zone may be imposed. Each unit shall
be assigned and bear an identification number, aside from its LTO license plate number.
4. An operator wishing to stop service completely, or to suspend service for more than one month,
should report in writing such termination or suspension to the SB/SP which originally granted the
MTOP prior thereto. Transfer to another zone may be permitted upon application.
5. The MTOP shall be valid for three (3) years, renewable for the same period. Transfer to another
zone, change of ownership of unit or transfer of MTOP shall be construed as an amendment to an
MTOP and shall require appropriate approval of the SB/SP.
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6. Operators shall employ only drivers duly licensed by LTO for tricycles-for-hire.
7. No tricycle-for-hire shall be allowed to carry more passengers and/or goods than it is designed for.
8. A tricycle-for-hire shall be allowed to operate like a taxi service, i.e., service is rendered upon
demand and without a fixed route within a zone.16
Such as can be gleaned from the explicit language of the statute, as well as the corresponding guidelines
issued
by DOTC, the newly delegated powers pertain to the franchising and regulatory powers theretofore exercised
by
the LTFRB and not to the functions of the LTO relative to the registration of motor vehicles and issuance of
licenses for the driving thereof. Clearly unaffected by the Local Government Code are the powers of LTO under
R.A. No. 4136 requiring the registration of all kinds of motor vehicles "used or operated on or upon any public
highway" in the country. Thus
Sec. 5. All motor vehicles and other vehicles must be registered. (a) No motor vehicle shall be used or
operated on or upon any public highway of the Philippines unless the same is properly registered for the
current year in accordance with the provisions of this Act (Article 1, Chapter II, R.A. No. 4136).
The Commissioner of Land Transportation and his deputies are empowered at anytime to examine and
inspect such motor vehicles to determine whether said vehicles are registered, or are unsightly, unsafe,
improperly marked or equipped, or otherwise unfit to be operated on because of possible excessive
damage to highways, bridges and other infrastructures. 17 The LTO is additionally charged with being the
central repository and custodian of all records of all motor vehicles. 18
The Court shares the apprehension of the Solicitor General if the above functions were to likewise devolve
to local government units; he states:
If the tricycle registration function of respondent LTO is decentralized, the incidence of theft of
tricycles will most certainly go up, and stolen tricycles registered in one local government could be
registered in another with ease. The determination of ownership thereof will also become very
difficult.
Fake driver's licenses will likewise proliferate. This likely scenario unfolds where a tricycle driver, not
qualified by petitioner LTO's testing, could secure a license from one municipality, and when the
same is confiscated, could just go another municipality to secure another license.

Devolution will entail the hiring of additional personnel charged with inspecting tricycles for road
worthiness, testing drivers, and documentation. Revenues raised from tricycle registration may not
be enough to meet salaries of additional personnel and incidental costs for tools and equipment. 19
The reliance made by respondents on the broad taxing power of local government units, specifically under
Section 133 of the Local Government Code, is tangential. Police power and taxation, along with eminent
domain,
are inherent powers of sovereignty which the State might share with local government units by delegation given
under a constitutional or a statutory fiat. All these inherent powers are for a public purpose and legislative in
nature but the similarities just about end there. The basic aim of police power is public good and welfare.
Taxation, in its case, focuses an the power of government to raise revenue in order to support its existence and
carry out its legitimate objectives. Although correlative to each other in many respects, the grant of one does
not
necessarily carry with it the grant of the other. The two powers are, by tradition and jurisprudence, separate and
distinct powers, varying in their respective concepts, character, scopes and limitations. To construe the tax
provisions of Section 133(1) indistinctively would result in the repeal to that extent of LTO's regulatory power
which evidently has not been intended. If it were otherwise, the law could have just said so in Section 447 and
458
of Book III of the Local Government Code in the same manner that the specific devolution of LTFRB's power on
franchising of tricycles has been provided. Repeal by implication is not favored. 20 The power over tricycles
granted under Section 458(8)(3)(VI) of the Local Government Code to LGUs is the power to regulate their
operation and to grant franchises for the operation thereof. The exclusionary clause contained in the tax
provisions of Section 133(1) of the Local Government Code must not be held to have had the effect of
withdrawing the express power of LTO to cause the registration of all motor vehicles and the issuance of
licenses
for the driving thereof. These functions of the LTO are essentially regulatory in nature, exercised pursuant to
the
police power of the State, whose basic objectives are to achieve road safety by insuring the road worthiness of
these motor vehicles and the competence of drivers prescribed by R.A. 4136. Not insignificant is the rule that a
statute must not be construed in isolation but must be taken in harmony with the extant body of laws. 21
The Court cannot end this decision without expressing its own serious concern over the seeming laxity in the
grant of franchises for the operation of tricycles-for-hire and in allowing the indiscriminate use by such vehicles
on
public highways and principal thoroughfares. Senator Aquilino C. Pimentel, Jr., the principal author and sponsor
of
the bill that eventually has become to be known as the Local Government Code, has aptly remarked:
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Tricycles are a popular means of transportation, specially in the countryside. They are, unfortunately, being
allowed to drive along highways and principal thoroughfares where they pose hazards to their passengers
arising from potential collisions with buses, cars and jeepneys.
The operation of tricycles within a municipality may be regulated by the Sangguniang Bayan. In this
connection, the Sangguniang concerned would do well to consider prohibiting the operation of tricycles
along or across highways invite collisions with faster and bigger vehicles and impede the flow of traffic. 22
The need for ensuring public safety and convenience to commuters and pedestrians alike is paramount. It
might be well, indeed, for public officials concerned to pay heed to a number of provisions in our laws that
can warrant in appropriate cases an incurrence of criminal and civil liabilities. Thus
The Revised Penal Code
Art. 208. Prosecution of offenses; negligence and tolerance. The penalty of prision correccional in its
minimum period and suspension shall be imposed upon any public officer, or officer of the law, who, in
dereliction of the duties of his office, shall maliciously refrain from instituting prosecution for the punishment
of violators of the law, or shall tolerate the commission of offenses.
The Civil Code
Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or
neglects, without just cause, to perform his official duty may file an action for damages and other relief
against the latter, without prejudice to any disciplinary administrative action that may be taken.
Art. 34. When a member of a city or municipal police force refuses or fails to render aid or protection to any
person in case of danger to life or property, such peace officer shall be primarily liable for damages, and
the city or municipality shall be subsidiarily responsible therefor. The civil action herein recognized shall be
independent of any criminal proceedings, and a preponderance of evidence shall suffice to support such
1 w p h i1 .n t

action.
Art. 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or injuries
suffered by, any person by reason of the defective condition of roads, streets, bridges, public buildings, and
other public works under their control or supervision.
The Local Government Code
Sec. 24. Liability for Damages. Local government units and their officials are not exempt from liability for
death or injury to persons or damage to property.
WHEREFORE, the assailed decision which enjoins the Land Transportation Office from requiring the due
registration of tricycles and a license for the driving thereof is REVERSED and SET ASIDE.
No pronouncements on costs.
Let copies of this decision be likewise furnished the Department of Interior and Local Governments, the
Department of Public Works and Highways and the Department of Transportation and Communication.
SO ORDERED.
Melo, Panganiban, Purisima and Gonzaga-Reyes, JJ., concur.

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Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-22734 September 15, 1967
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.
Office of the Solicitor General for petitioner.
Manuel B. Pineda for and in his own behalf as respondent.
BENGZON, J.P., J.:
On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of
whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila
(Case
No. 71129) wherein the surviving widow was appointed administratrix. The estate was divided among and
awarded to the heirs and the proceedings terminated on June 8, 1948. Manuel B. Pineda's share amounted to
about P2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax liability
of
the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns
were
not filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for the estate on
the basis of information and data obtained from the aforesaid estate proceedings and issued an assessment for
the following:
1. Deficiency income tax
1945 P135.83
1946 436.95
1947 1,206.91 P1,779.69
Add: 5% surcharge 88.98
1% monthly interest
from November 30,
1953 to April 15, 1957 720.77
Compromise for late
filing 80.00
Compromise for late
payment 40.00
Total amount due P2,707.44

===========
2. Additional residence tax for
1945
P14.50
===========
3. Real Estate dealer's tax for
the fourth quarter of 1946
and the whole year of 1947
P207.50
===========
Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court
of
Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of
the
heirs."
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After hearing the parties, the Court of Tax Appeals rendered judgment reversing the decision of the
Commissioner on the ground that his right to assess and collect the tax has prescribed. The Commissioner
appealed and this Court affirmed the findings of the Tax Court in respect to the assessment for income tax for
the
year 1947 but held that the right to assess and collect the taxes for 1945 and 1946 has not prescribed. For
1945
and 1946 the returns were filed on August 24, 1953; assessments for both taxable years were made within five
years therefrom or on October 19, 1953; and the action to collect the tax was filed within five years from the
latter
date, on August 7, 1957. For taxable year 1947, however, the return was filed on March 1, 1948; the
assessment
was made on October 19, 1953, more than five years from the date the return was filed; hence, the right to
assess income tax for 1947 had prescribed. Accordingly, We remanded the case to the Tax Court for further
appropriate proceedings.1
In the Tax Court, the parties submitted the case for decision without additional evidence.
On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the
payment corresponding to his share of the following taxes:
Deficiency income tax
1945 P135.83
1946 436.95
Real estate dealer's
fixed tax 4th quarter
of 1946 and whole
year of 1947 P187.50
The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pineda liable
for
the payment of all the taxes found by the Tax Court to be due from the estate in the total amount of P760.28
instead of only for the amount of taxes corresponding to his share in the estate.
Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due
the
estate only up to the extent of and in proportion to any share he received. He relies on Government of the
Philippine Islands v. Pamintuan2 where We held that "after the partition of an estate, heirs and distributees are
liable individually for the payment of all lawful outstanding claims against the estate in proportion to the amount
or
value of the property they have respectively received from the estate."
We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he
received from the inheritance.3 His liability, however, cannot exceed the amount of his share.4
As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in
his
possession. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as
1 a w p h l.n t

his share in the inheritance, for unpaid income taxes 4a for which said estate is liable, pursuant to the last
paragraph of Section 315 of the Tax Code, which we quote hereunder:
If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance
company liable to pay the income tax, neglects or refuses to pay the same after demand, the amount shall
be a lien in favor of the Government of the Philippines from the time when the assessment was made by
the Commissioner of Internal Revenue until paid with interest, penalties, and costs that may accrue in
addition thereto upon all property and rights to property belonging to the taxpayer: . . .
By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the
P2,500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a
right of contribution from his co-heirs,5 to achieve an adjustment of the proper share of each heir in the
distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received. This remedy
was adopted in Government of the Philippine Islands v. Pamintuan, supra. In said case, the Government filed
an
action against all the heirs for the collection of the tax. This action rests on the concept that hereditary property
consists only of that part which remains after the settlement of all lawful claims against the estate, for the
settlement of which the entire estate is first liable.6 The reason why in case suit is filed against all the heirs the
tax
due from the estate is levied proportionately against them is to achieve thereby two results: first, payment of the
tax; and second, adjustment of the shares of each heir in the distributed estate as lessened by the tax.
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Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to
property belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the tax due, the estate. This second remedy is the very
avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the
tax
as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood
of
government and their prompt and certain availability is an imperious need. 7 And as afore-stated in this case the
suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective shares due to
the
heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom
the Government recovered said tax.
WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is hereby ordered to pay to the
Commissioner of Internal Revenue the sum of P760.28 as deficiency income tax for 1945 and 1946, and real
estate dealer's fixed tax for the fourth quarter of 1946 and for the whole year 1947, without prejudice to his right
of contribution for his co-heirs. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,
concur.

11/18/2014 G.R. No. L-22074


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Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-22074 April 30, 1965
THE PHILIPPINE GUARANTY CO., INC., petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

Josue H. Gustilo and Ramirez and Ortigas for petitioner.


Office of the Solicitor General and Attorney V.G. Saldajena for respondents.
BENGZON, J.P., J.:
The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts, on
various
dates, with foreign insurance companies not doing business in the Philippines namely: Imperio Compaia de
Seguros, La Union y El Fenix Espaol, Overseas Assurance Corp., Ltd., Socieded Anonima de Reaseguros
Alianza, Tokio Marino & Fire Insurance Co., Ltd., Union Assurance Society Ltd., Swiss Reinsurance Company
and
Tariff Reinsurance Limited. Philippine Guaranty Co., Inc., thereby agreed to cede to the foreign reinsurers a
portion of the premiums on insurance it has originally underwritten in the Philippines, in consideration for the
assumption by the latter of liability on an equivalent portion of the risks insured. Said reinsurrance contracts
were
signed by Philippine Guaranty Co., Inc. in Manila and by the foreign reinsurers outside the Philippines, except
the
contract with Swiss Reinsurance Company, which was signed by both parties in Switzerland.
The reinsurance contracts made the commencement of the reinsurers' liability simultaneous with that of
Philippine
Guaranty Co., Inc. under the original insurance. Philippine Guaranty Co., Inc. was required to keep a register in
Manila where the risks ceded to the foreign reinsurers where entered, and entry therein was binding upon the
reinsurers. A proportionate amount of taxes on insurance premiums not recovered from the original assured
were
to be paid for by the foreign reinsurers. The foreign reinsurers further agreed, in consideration for managing or
administering their affairs in the Philippines, to compensate the Philippine Guaranty Co., Inc., in an amount
equal
to 5% of the reinsurance premiums. Conflicts and/or differences between the parties under the reinsurance
contracts were to be arbitrated in Manila. Philippine Guaranty Co., Inc. and Swiss Reinsurance Company
stipulated that their contract shall be construed by the laws of the Philippines.
Pursuant to the aforesaid reinsurance contracts, Philippine Guaranty Co., Inc. ceded to the foreign reinsurers
the
following premiums:
1953 . . . . . . . . . . . . . . . . . . . . . P842,466.71
1954 . . . . . . . . . . . . . . . . . . . . . 721,471.85
Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file its income tax
returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently, per letter dated
April 13, 1959, the Commissioner of Internal Revenue assessed against Philippine Guaranty Co., Inc.
withholding
tax on the ceded reinsurance premiums, thus:
1953
Gross premium per investigation . . . . . . . . . . P768,580.00
Withholding tax due thereon at 24% . . . . . . . . P184,459.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . 46,114.00
Compromise for non-filing of withholding 100.00
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income tax return . . . . . . . . . . . . . . . . . . . . . . . . .


TOTAL AMOUNT DUE & COLLECTIBLE . . . . P230,673.00
==========
1954
Gross premium per investigation . . . . . . . . . . P780.880.68
Withholding tax due thereon at 24% . . . . . . . . P184,411.00
25% surcharge . . . . . . . . . . . . . . . . . . . . . . . . . . P184,411.00
Compromise for non-filing of withholding
income tax return . . . . . . . . . . . . . . . . . . . . . . . . . 100.00
TOTAL AMOUNT DUE & COLLECTIBLE . . . . P234,364.00
==========
Philippine Guaranty Co., Inc., protested the assessment on the ground that reinsurance premiums ceded to
foreign reinsurers not doing business in the Philippines are not subject to withholding tax. Its protest was
denied

and it appealed to the Court of Tax Appeals.


On July 6, 1963, the Court of Tax Appeals rendered judgment with this dispositive portion:
IN VIEW OF THE FOREGOING CONSIDERATIONS, petitioner Philippine Guaranty Co., Inc. is hereby
ordered to pay to the Commissioner of Internal Revenue the respective sums of P202,192.00 and
P173,153.00 or the total sum of P375,345.00 as withholding income taxes for the years 1953 and 1954,
plus the statutory delinquency penalties thereon. With costs against petitioner.
Philippine Guaranty Co, Inc. has appealed, questioning the legality of the Commissioner of Internal Revenue's
assessment for withholding tax on the reinsurance premiums ceded in 1953 and 1954 to the foreign reinsurers.
Petitioner maintain that the reinsurance premiums in question did not constitute income from sources within the
Philippines because the foreign reinsurers did not engage in business in the Philippines, nor did they have
office
here.
The reinsurance contracts, however, show that the transactions or activities that constituted the undertaking to
reinsure Philippine Guaranty Co., Inc. against loses arising from the original insurances in the Philippines were
performed in the Philippines. The liability of the foreign reinsurers commenced simultaneously with the liability
of
Philippine Guaranty Co., Inc. under the original insurances. Philippine Guaranty Co., Inc. kept in Manila a
register
of the risks ceded to the foreign reinsurers. Entries made in such register bound the foreign resinsurers,
localizing
in the Philippines the actual cession of the risks and premiums and assumption of the reinsurance undertaking
by
the foreign reinsurers. Taxes on premiums imposed by Section 259 of the Tax Code for the privilege of doing
insurance business in the Philippines were payable by the foreign reinsurers when the same were not
recoverable
from the original assured. The foreign reinsurers paid Philippine Guaranty Co., Inc. an amount equivalent to 5%
of
the ceded premiums, in consideration for administration and management by the latter of the affairs of the
former
in the Philippines in regard to their reinsurance activities here. Disputes and differences between the parties
were
subject to arbitration in the City of Manila. All the reinsurance contracts, except that with Swiss Reinsurance
Company, were signed by Philippine Guaranty Co., Inc. in the Philippines and later signed by the foreign
reinsurers abroad. Although the contract between Philippine Guaranty Co., Inc. and Swiss Reinsurance
Company
was signed by both parties in Switzerland, the same specifically provided that its provision shall be construed
according to the laws of the Philippines, thereby manifesting a clear intention of the parties to subject
themselves
to Philippine law.
Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources within the
Philippines. The word "sources" has been interpreted as the activity, property or service giving rise to the
income.
1 The reinsurance premiums were income created from the undertaking of the foreign reinsurance companies
to
reinsure Philippine Guaranty Co., Inc., against liability for loss under original insurances. Such undertaking, as
explained above, took place in the Philippines. These insurance premiums, therefore, came from sources
within
the Philippines and, hence, are subject to corporate income tax.
The foreign insurers' place of business should not be confused with their place of activity. Business should not
be
continuity and progression of transactions 2 while activity may consist of only a single transaction. An activity
may
occur outside the place of business. Section 24 of the Tax Code does not require a foreign corporation to
engage
in business in the Philippines in subjecting its income to tax. It suffices that the activity creating the income is
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performed or done in the Philippines. What is controlling, therefore, is not the place of business but the place of
activity that created an income.

Petitioner further contends that the reinsurance premiums are not income from sources within the Philippines
because they are not specifically mentioned in Section 37 of the Tax Code. Section 37 is not an all-inclusive
enumeration, for it merely directs that the kinds of income mentioned therein should be treated as income from
sources within the Philippines but it does not require that other kinds of income should not be considered
likewise.
The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden
to
preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to
defend its shores from invasion, a corps of civil servants to serve, public improvement designed for the
enjoyment
of the citizenry and those which come within the State's territory, and facilities and protection which a
government
is supposed to provide. Considering that the reinsurance premiums in question were afforded protection by the
government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such
reinsurance premiums and reinsurers should share the burden of maintaining the state.
Petitioner would wish to stress that its reliance in good faith on the rulings of the Commissioner of Internal
Revenue requiring no withholding of the tax due on the reinsurance premiums in question relieved it of the duty
to
pay the corresponding withholding tax thereon. This defense of petitioner may free if from the payment of
surcharges or penalties imposed for failure to pay the corresponding withholding tax, but it certainly would not
exculpate if from liability to pay such withholding tax The Government is not estopped from collecting taxes by
the
mistakes or errors of its agents.3
In respect to the question of whether or not reinsurance premiums ceded to foreign reinsurers not doing
business
in the Philippines are subject to withholding tax under Section 53 and 54 of the Tax Code, suffice it to state that
this question has already been answered in the affirmative in Alexander Howden & Co., Ltd. vs. Collector of
Internal Revenue, L-19393, April 14, 1965.
Finally, petitioner contends that the withholding tax should be computed from the amount actually remitted to
the
foreign reinsurers instead of from the total amount ceded. And since it did not remit any amount to its foreign
insurers in 1953 and 1954, no withholding tax was due.
The pertinent section of the Tax Code States:
Sec. 54. Payment of corporation income tax at source. In the case of foreign corporations subject to
taxation under this Title not engaged in trade or business within the Philippines and not having any office or
place of business therein, there shall be deducted and withheld at the source in the same manner and
upon the same items as is provided in Section fifty-three a tax equal to twenty-four per centum thereof, and
such tax shall be returned and paid in the same manner and subject to the same conditions as provided in
that section.
The applicable portion of Section 53 provides:
(b) Nonresident aliens. All persons, corporations and general copartnerships (compaias colectivas), in
what ever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in
any trust capacity, executors, administrators, receivers, conservators, fiduciaries, employers, and all
officers and employees of the Government of the Philippines having the control, receipt, custody, disposal,
or payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensation,
remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income
of any nonresident alien individual, not engaged in trade or business within the Philippines and not having
any office or place of business therein, shall (except in the case provided for in subsection [a] of this
section) deduct and withhold from such annual or periodical gains, profits, and income a tax equal to twelve
per centum thereof: Provided That no deductions or withholding shall be required in the case of dividends
paid by a foreign corporation unless (1) such corporation is engaged in trade or business within the
Philippines or has an office or place of business therein, and (2) more than eighty-five per centum of the
gross income of such corporation for the three-year period ending with the close of its taxable year
preceding the declaration of such dividends (or for such part of such period as the corporation has been in
existence)was derived from sources within the Philippines as determined under the provisions of section
thirty-seven: Provided, further, That the Collector of Internal Revenue may authorize such tax to be
deducted and withheld from the interest upon any securities the owners of which are not known to the
withholding agent.
1 w p h 1 . t

The above-quoted provisions allow no deduction from the income therein enumerated in determining the
amount
to be withheld. According, in computing the withholding tax due on the reinsurance premium in question, no
deduction shall be recognized.
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WHEREFORE, in affirming the decision appealed from, the Philippine Guaranty Co., Inc. is hereby ordered to
pay
to the Commissioner of Internal Revenue the sums of P202,192.00 and P173,153.00, or a total amount of
P375,345.00, as withholding tax for the years 1953 and 1954, respectively. If the amount of P375,345.00 is not
paid within 30 days from the date this judgement becomes final, there shall be collected a surcharged of 5% on
the amount unpaid, plus interest at the rate of 1% a month from the date of delinquency to the date of payment,
provided that the maximum amount that may be collected as interest shall not exceed the amount
corresponding
to a period of three (3) years. With costs againsts petitioner.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Regala, JJ., concur.
Makalintal and Zaldivar, JJ., took no part.

11/18/2014 G.R. No. L-12518


http://www.lawphil.net/judjuris/juri1961/oct1961/gr_l-12518_1961.html 1/3

Today is Tuesday, November 18, 2014

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-12518 October 28, 1961
COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
J.C. YUSECO and The COURT OF TAX APPEALS, respondents.
Office of the Solicitor General and Antonio H. Garces for petitioner.
Yuseco, Abdon, Yuseco and Narvasa for respondents.
PADILLA, J.:
The Collector of Internal Revenue seeks a review, under section 18, Republic Act No. 1125, and prays for the
setting aside, of the judgment rendered by the Court of Tax Appeals on 25 March 1957, in C.T.A. Case No. 217,
the dispositive part of which is, as follows:
WHEREFORE, pursuant to section 51(d) of the National Internal Revenue Code, judgment is hereby
rendered declaring the warrant of distraint and levy issued by respondent on January 20, 1955 to effect
collection of "the amount of P2,447.30 as income tax for the year 1946 plus 5% surcharge and the 1%
monthly interest from August 16, 1953" allegedly due from petitioner, is hereby declared null and void and
of no legal force and effect and respondent is hereby directed to return to petitioner the properties seized
from the latter under said warrant. The respondent Collector of Internal Revenue is likewise enjoined from
taking any further proceeding to effect by summary methods the collection of the alleged income taxes
assessed against petitioner J. C. Yuseco in the sums of P134.14 and P2,447.30 for the years 1945 and
1946, respectively. Without pronouncement as to costs. (Appendix N)
and the resolution entered by the same Court on 17 June 1957 denying his motion for reconsideration
(Appendix
P).
The facts, which are not disputed, are, as summarized by the Court, as follows:
The facts established in this case show that petitioner did not file income tax returns for the calendar years
1945
and 1946. This fact having come to the knowledge of revenue examiners, they accordingly made income tax
returns for petitioner upon which respondent on August 20, 1948, assessed against and demanded from
petitioner the sums of P134.14 and P7,563.28 representing alleged income taxes and corresponding
surcharges
for the years 1945 and 1946. On September 1, 1948, petitioner wrote the respondent, requesting that he be

informed as to how the assessments were arrived at. In reply thereto, respondent in a letter dated September
17,
1948 furnished the information sought and at the same time demanded the payment of the aforesaid
assessments. On October 4, 1948, petitioner asked that he be given an opportunity to present his side of the
matter. However, respondent on December 13, 1948, denied reconsideration of the assessment and reiterated
his demand upon petitioner for payment thereof which was followed with another demand on June 29, 1949.
On
July 28, 1949, petitioner once more requested for a reinvestigation of the case but the same was denied by
respondent in his letter dated February 7, 1951 wherein he repeated his demand for payment. On April 3, 1951,
petitioner renewed his request for reinvestigation and nothing was heard of the matter for almost three years
thereafter.
On January 6, 1953, respondent issued a warrant of distraint and levy upon petitioner's properties which,
however, was not executed. On January 16, 1953 petitioner sought the withdrawal and/or reconsideration of
said
warrant. Meanwhile, on July 2, 1953, respondent issued a revised assessment notice which reduced the
original
assessment for the 1946 income tax to P2,447.30, including surcharge. On July 18, 1953, petitioner asked that
he
be informed of the action upon his petition for reinvestigation. This request was reiterated in his letter of August
18, 1953 wherein he acknowledged receipt of the modified assessment for the 1946 income tax. On September
1, 1953, respondent wrote petitioner demanding from the latter payment of the said sum of P2,447.30 as
income
tax for the year 1946 plus penalties incident to delinquency, and reiterating the demand for the unrevised
income
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tax assessment for 1945 in the sum of P134.14, but respondent did not take any further action thereafter to
effect
collection of the assessment.
On January 20, 1955, respondent again issued a warrant of distraint and levy on the properties of petitioner,
this
time only to effect collection of the said sum of P2,447.80 as income tax for 1946. The distraint being still
enforce,
petitioner on December 12, 1955 filed his petition for prohibition with this Court.
The petitioner Collector of Internal Revenue assails the jurisdiction of the respondent Court of Tax Appeals to
take
cognizance of the respondent taxpayer's petition that seeks to enjoin him (the petitioner) from collecting his
income taxes due for the years 1945 and 1946 and surcharges by summary distraint of and levy upon his
personal and real properties, under the provisions of sections 316 to 330 of the National Internal Revenue
Code.
The petitioner's contention is that the respondent taxpayer cannot bring in the respondent Court an
independent
special civil action for prohibition without taking to said Court an appeal from the decision or ruling of the
Collector
of Internal Revenue in the cases provided for in sections 7 and 11 of Republic Act No. 1125.
Sections 7, 9 and 11 of Republic No. 1125, creating the Court of Tax Appeals, provides:
SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by
appeal, as herein provided
(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code or other law or part of law administered by the Bureau of
Internal Revenue;
(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other
money charges; seizure, detention or release of property affected; fines; forfeitures or other penalties
imposed in relation thereto; or other matters arising under the Customs Law or other law or part of law
administered by the Bureau of Customs; and
(3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the assessment and
taxation of real property or other matters arising under the Assessment Law, including rules and regulations
relative thereto.

SEC. 9. Fees. The Court shall fix reasonable fees for the filing of an appeal, for certified document, and
for other authorized services rendered by the Court or its personnel.
SEC. 11. Who may appeal; effect of appeal. Any person, association or corporation adversely affected
by a decision or ruling of the Collector of Internal Revenue, the Collector of Customs or any provincial or
city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after the
receipt of such decision or ruling.
No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal Revenue or the
Collector of Customs shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer
for the satisfaction of his tax liability as provided by existing law; Provided, however, That when in the
opinion of the Court the collection by the Bureau of Internal Revenue or the Commissioner of Customs may
jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the proceeding
may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a
surety bond for not more than double the amount with the Court. (Emphasis supplied.)
The foregoing provisions of the law refer and limit only to appeals from decisions or rulings of the Collector of
Internal Revenue, Commissioner of Customs and Provincial or City Boards of Assessment Appeals in the
proper
cases. Nowhere does the law expressly vest in the Court of Tax Appeals original jurisdiction to issue writs of
prohibition and injunction independently of, and apart from, an appealed case. The writ of prohibition or
injunction
that it may issue under the provisions of section 11, Republic Act No. 1125, to suspend the collection of taxes,
is
merely ancillary to and in furtherance of its appellate jurisdiction in the cases mentioned in section 7 of the Act.
The power to issue the writ exists only in cases appealed to it. This is reflected on the explanatory note of the
bill
(House No. 175), creating the Court of Tax Appeals. We quote from the explanatory note:
... It is proposed in the attached bill to establish not merely an administrative body but a regular court
vested with exclusive appellate jurisdiction over cases arising under the National Internal Revenue Code,
Customs Law and the Assessment Law. (Emphasis supplied, p. 2202, Congressional Record, Third
Congress, Vol. I, Part II.)
Congressman Castaeda, one of the proponents of the bill, in his opening remarks sponsoring its enactment
into
law, said that "House Bill No. 175 has for its purpose the creation of a regular court of tax appeals." (p. 2204,
supra.) Answering a question from Congressman Alonzo whether the Court of Tax Appeals would have only
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appellate jurisdiction and no concurrent or original jurisdiction, the proponent said that "It has exclusive
jurisdiction
with reference to matters or cases arising from the Internal Revenue Code, the Customs Law and the
Assessment Law." (pp. 2209-2210, supra). Dwelling further on the subject, the two members of the House of
Representatives continued their discussion, as follows:
Mr. Alonzo. So that under this proposal you will bring the case immediately to this court that you are
proposing to create, without first having it decided by the Commissioner of Customs or the Collector of
Internal Revenue, as the case may be.
Mr. Castaeda. It will have to be appealed from the decision of the Collector of Internal Revenue, the
Collector of Customs or the Assessors, to the Court of Tax Appeals, then to the Supreme Court. (pp. 22092210, supra.)
These statements made during the proceedings indicate that the intention of Congress was to vest the Court of
Tax Appeals with jurisdiction to issue writs of prohibition and injunction only in aid of its appellate jurisdiction in
cases appealed to it and not to clothe it with original jurisdiction to issue them. Such intent is reflected on the
second paragraph of section 11, Republic Act No. 1125 quoted above. Taxes being the chief source of revenue
for the Government to keep it running must be paid immediately and without delay. A taxpayer who feels
aggrieved by the decision or ruling handed down by a revenue officer and appeals from his decision or ruling to
the Court of Tax Appeals must pay the tax assessed, except that, if in the opinion of the Court the collection
would
jeopardize the interest of the Government and/or the taxpayer, it could suspend the collection and require the
taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount of
the
tax assessed.
The judgment under review is annulled and set aside, without pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon and De Leon, JJ.,
concur.
Barrera, J., took no part.
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