1

GROUP 2
SECTIONS 28, 29, 30 & 32
FULL CASES
MEMBERS

Guimbungan,
Mahicon
Juanitez, Ken
Sawac, Amefil
Manayod, Charity Joy
Kinawag, Franzi

Mang-usan, Karen
Sheila
**moderator**
Gonadan, Ericha Joy

AND

DIGESTS

CASE

Lung Center vs. Quezon City

(G.R. No. 144101, June 29, 2004)
Abra Valley College vs. Aquino
(G.R. No. L-39086, June 15, 1988)
Osmena vs. Orbos
(GR No. 99886, March 31, 1993)
Aglipay vs. Ruiz
(G.R. No. 45459, March 13, 1937)
Diaz vs. CA
(G.R. No. 109698, December 5,
1994)
First Lepanto Ceramics, Inc. vs.
CA (G.R. No. 110571, March 10,
1994)
Subic Bay Metropolitan
Authority vs. COMELEC
(G.R. No. 125416, September 26,
1996)

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LEGISLATIVE DEPARTMENT
(ARTICLE VI)
SECTION 28. The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.
The Congress may, by law, authorize the President to fix within specified limits, and
subject to such limitations and restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the
national development program of the Government.
Charitable institutions, churches and parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly,
and exclusively used for religious, charitable, or educational purposes shall be exempt from
taxation.
(4) No law granting any tax exemption shall be passed without the concurrence of a majority of
all the Members of the Congress.
CASE
Lung Center vs. Quezon
City
(G.R. No. 144101, June 29,
2004)
(2) Abra Valley College vs.
Aquino
(G.R. No. L-39086, June 15,
1988)
(1)

(1) Lung Center vs. Quezon City

(G.R. No. 144101, June 29, 2004)
FULL CASE:
(G.R. No. 144104
June 29, 2004)
LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in
his capacity as City Assessor of Quezon City, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended,
of the Decision1 dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which
affirmed the decision of the Central Board of Assessment Appeals holding that the lot owned by
the petitioner and its hospital building constructed thereon are subject to assessment for
purposes of real property tax.
The Antecedents
The petitioner Lung Center of the Philippines is a non-stock and non-profit entity
established on January 16, 1981 by virtue of Presidential Decree No. 1823.2 It is the registered
owner of a parcel of land, particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495,
located at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an

3
area of 121,463 square meters and is covered by Transfer Certificate of Title (TCT) No. 261320 of
the Registry of Deeds of Quezon City. Erected in the middle of the aforesaid lot is a hospital
known as the Lung Center of the Philippines. A big space at the ground floor is being leased to
private parties, for canteen and small store spaces, and to medical or professional practitioners
who use the same as their private clinics for their patients whom they charge for their
professional services. Almost one-half of the entire area on the left side of the building along
Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon
Avenue and Elliptical Road, is being leased for commercial purposes to a private enterprise
known as the Elliptical Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical services to
out-patients, both paying and non-paying. Aside from its income from paying patients, the
petitioner receives annual subsidies from the government.
On June 7, 1993, both the land and the hospital building of the petitioner were assessed
for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City.3
Accordingly, Tax Declaration Nos. C-021-01226 (16-2518) and C-021-01231 (15-2518-A) were
issued for the land and the hospital building, respectively.4 On August 25, 1993, the petitioner
filed a Claim for Exemption5 from real property taxes with the City Assessor, predicated on its
claim that it is a charitable institution. The petitioners request was denied, and a petition was,
thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA, for
brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that under
Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property
taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity
patients and that the major thrust of its hospital operation is to serve charity patients. The
petitioner contends that it is a charitable institution and, as such, is exempt from real property
taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable
for real property taxes.6
The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of
Assessment Appeals of Quezon City (CBAA, for brevity)7 which ruled that the petitioner was not
a charitable institution and that its real properties were not actually, directly and exclusively
used for charitable purposes; hence, it was not entitled to real property tax exemption under the
constitution and the law. The petitioner sought relief from the Court of Appeals, which rendered
judgment affirming the decision of the CBAA.8
Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX
EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF
ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE
PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTER,
PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION.
The petitioner avers that it is a charitable institution within the context of Section 28(3),
Article VI of the 1987 Constitution. It asserts that its character as a charitable institution is not
altered by the fact that it admits paying patients and renders medical services to them, leases
portions of the land to private parties, and rents out portions of the hospital to private medical
practitioners from which it derives income to be used for operational expenses. The petitioner
points out that for the years 1995 to 1999, 100% of its out-patients were charity patients and of
the hospitals 282-bed capacity, 60% thereof, or 170 beds, is allotted to charity patients. It
asserts that the fact that it receives subsidies from the government attests to its character as a
charitable institution. It contends that the "exclusivity" required in the Constitution does not
necessarily mean "solely." Hence, even if a portion of its real estate is leased out to private
individuals from whom it derives income, it does not lose its character as a charitable institution,
and its exemption from the payment of real estate taxes on its real property. The petitioner cited
our ruling in Herrera v. QC-BAA9 to bolster its pose. The petitioner further contends that even if
P.D. No. 1823 does not exempt it from the payment of real estate taxes, it is not precluded from
seeking tax exemption under the 1987 Constitution.

4
In their comment on the petition, the respondents aver that the petitioner is not a
charitable entity. The petitioners real property is not exempt from the payment of real estate
taxes under P.D. No. 1823 and even under the 1987 Constitution because it failed to prove that it
is a charitable institution and that the said property is actually, directly and exclusively used for
charitable purposes. The respondents noted that in a newspaper report, it appears that graft
charges were filed with the Sandiganbayan against the director of the petitioner, its
administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and Garden
Center, for entering into a lease contract over 7,663.13 square meters of the property in 1990 for
only P20,000 a month, when the monthly rental should be P357,000 a month as determined by
the Commission on Audit; and that instead of complying with the directive of the COA for the
cancellation of the contract for being grossly prejudicial to the government, the petitioner
renewed the same on March 13, 1995 for a monthly rental of only P24,000. They assert that the
petitioner uses the subsidies granted by the government for charity patients and uses the rest of
its income from the property for the benefit of paying patients, among other purposes. They aver
that the petitioner failed to adduce substantial evidence that 100% of its out-patients and 170
beds in the hospital are reserved for indigent patients. The respondents further assert, thus:
13. That the claims/allegations of the Petitioner LCP do not speak well of its record of
service. That before a patient is admitted for treatment in the Center, first impression is that it is
pay-patient and required to pay a certain amount as deposit. That even if a patient is living
below the poverty line, he is charged with high hospital bills. And, without these bills being first
settled, the poor patient cannot be allowed to leave the hospital or be discharged without first
paying the hospital bills or issue a promissory note guaranteed and indorsed by an influential
agency or person known only to the Center; that even the remains of deceased poor patients
suffered the same fate. Moreover, before a patient is admitted for treatment as free or charity
patient, one must undergo a series of interviews and must submit all the requirements needed
by the Center, usually accompanied by endorsement by an influential agency or person known
only to the Center. These facts were heard and admitted by the Petitioner LCP during the
hearings before the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent
patients, instead of seeking treatment with the Center, they prefer to be treated at the Quezon
Institute. Can such practice by the Center be called charitable?10
The Issues
The issues for resolution are the following: (a) whether the petitioner is a charitable
institution within the context of Presidential Decree No. 1823 and the 1973 and 1987
Constitutions and Section 234(b) of Republic Act No. 7160; and (b) whether the real properties of
the petitioner are exempt from real property taxes.
The Courts Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner is a charitable institution within the context
of the 1973 and 1987 Constitutions. To determine whether an enterprise is a charitable
institution/entity or not, the elements which should be considered include the statute creating
the enterprise, its corporate purposes, its constitution and by-laws, the methods of
administration, the nature of the actual work performed, the character of the services rendered,
the indefiniteness of the beneficiaries, and the use and occupation of the properties.11
In the legal sense, a charity may be fully defined as a gift, to be applied consistently with
existing laws, for the benefit of an indefinite number of persons, either by bringing their minds
and hearts under the influence of education or religion, by assisting them to establish
themselves in life or otherwise lessening the burden of government.12 It may be applied to
almost anything that tend to promote the well-doing and well-being of social man. It embraces
the improvement and promotion of the happiness of man.13 The word "charitable" is not
restricted to relief of the poor or sick.14 The test of a charity and a charitable organization are in
law the same. The test whether an enterprise is charitable or not is whether it exists to carry out
a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private
advantage.

5
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject
to the provisions of the decree, is to be administered by the Office of the President of the
Philippines with the Ministry of Health and the Ministry of Human Settlements. It was organized
for the welfare and benefit of the Filipino people principally to help combat the high incidence of
lung and pulmonary diseases in the Philippines. The raison detre for the creation of the
petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have been a priority concern, having been the
leading cause of illness and death in the Philippines, comprising more than 45% of the total
annual deaths from all causes, thus, exacting a tremendous toll on human resources, which
ailments are likely to increase and degenerate into serious lung diseases on account of unabated
pollution, industrialization and unchecked cigarette smoking in the country;lavvph!l.net
Whereas, the more common lung diseases are, to a great extent, preventable, and curable
with early and adequate medical care, immunization and through prompt and intensive
prevention and health education programs;
Whereas, there is an urgent need to consolidate and reinforce existing programs,
strategies and efforts at preventing, treating and rehabilitating people affected by lung diseases,
and to undertake research and training on the cure and prevention of lung diseases, through a
Lung Center which will house and nurture the above and related activities and provide tertiarylevel care for more difficult and problematical cases;
Whereas, to achieve this purpose, the Government intends to provide material and
financial support towards the establishment and maintenance of a Lung Center for the welfare
and benefit of the Filipino people.15
The purposes for which the petitioner was created are spelled out in its Articles of
Incorporation, thus:
SECOND: That the purposes for which such corporation is formed are as follows:
1. To construct, establish, equip, maintain, administer and conduct an integrated medical
institution which shall specialize in the treatment, care, rehabilitation and/or relief of lung and
allied diseases in line with the concern of the government to assist and provide material and
financial support in the establishment and maintenance of a lung center primarily to benefit the
people of the Philippines and in pursuance of the policy of the State to secure the well-being of
the people by providing them specialized health and medical services and by minimizing the
incidence of lung diseases in the country and elsewhere.
2. To promote the noble undertaking of scientific research related to the prevention of lung or
pulmonary ailments and the care of lung patients, including the holding of a series of relevant
congresses, conventions, seminars and conferences;
3. To stimulate and, whenever possible, underwrite scientific researches on the biological,
demographic, social, economic, eugenic and physiological aspects of lung or pulmonary diseases
and their control; and to collect and publish the findings of such research for public consumption;
4. To facilitate the dissemination of ideas and public acceptance of information on lung
consciousness or awareness, and the development of fact-finding, information and reporting
facilities for and in aid of the general purposes or objects aforesaid, especially in human lung
requirements, general health and physical fitness, and other relevant or related fields;
5. To encourage the training of physicians, nurses, health officers, social workers and medical
and technical personnel in the practical and scientific implementation of services to lung
patients;
6. To assist universities and research institutions in their studies about lung diseases, to
encourage advanced training in matters of the lung and related fields and to support educational
programs of value to general health;
7. To encourage the formation of other organizations on the national, provincial and/or city and
local levels; and to coordinate their various efforts and activities for the purpose of achieving a
more effective programmatic approach on the common problems relative to the objectives
enumerated herein;
8. To seek and obtain assistance in any form from both international and local foundations and
organizations; and to administer grants and funds that may be given to the organization;

6
9. To extend, whenever possible and expedient, medical services to the public and, in general, to
promote and protect the health of the masses of our people, which has long been recognized as
an economic asset and a social blessing;
10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the
people in any and all walks of life, including those who are poor and needy, all without regard to
or discrimination, because of race, creed, color or political belief of the persons helped; and to
enable them to obtain treatment when such disorders occur;
11. To participate, as circumstances may warrant, in any activity designed and carried on to
promote the general health of the community;
12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and
supplies by purchase, donation, or otherwise and to dispose of and distribute the same in such
manner, and, on such basis as the Center shall, from time to time, deem proper and best, under
the particular circumstances, to serve its general and non-profit purposes and
objectives;lavvphil.net
13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of
properties, whether real or personal, for purposes herein mentioned; and
14. To do everything necessary, proper, advisable or convenient for the accomplishment of any
of the powers herein set forth and to do every other act and thing incidental thereto or
connected therewith.16
Hence, the medical services of the petitioner are to be rendered to the public in general in
any and all walks of life including those who are poor and the needy without discrimination. After
all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a
subject of charity.17
As a general principle, a charitable institution does not lose its character as such and its
exemption from taxes simply because it derives income from paying patients, whether outpatient, or confined in the hospital, or receives subsidies from the government, so long as the
money received is devoted or used altogether to the charitable object which it is intended to
achieve; and no money inures to the private benefit of the persons managing or operating the
institution.18 In Congregational Sunday School, etc. v. Board of Review,19 the State Supreme
Court of Illinois held, thus:
[A]n institution does not lose its charitable character, and consequent exemption from
taxation, by reason of the fact that those recipients of its benefits who are able to pay are
required to do so, where no profit is made by the institution and the amounts so received are
applied in furthering its charitable purposes, and those benefits are refused to none on account
of inability to pay therefor. The fundamental ground upon which all exemptions in favor of
charitable institutions are based is the benefit conferred upon the public by them, and a
consequent relief, to some extent, of the burden upon the state to care for and advance the
interests of its citizens.20
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital
Association of South Dakota v. Baker:21
[T]he fact that paying patients are taken, the profits derived from attendance upon
these patients being exclusively devoted to the maintenance of the charity, seems rather to
enhance the usefulness of the institution to the poor; for it is a matter of common observation
amongst those who have gone about at all amongst the suffering classes, that the deserving
poor can with difficulty be persuaded to enter an asylum of any kind confined to the reception of
objects of charity; and that their honest pride is much less wounded by being placed in an
institution in which paying patients are also received. The fact of receiving money from some of
the patients does not, we think, at all impair the character of the charity, so long as the money
thus received is devoted altogether to the charitable object which the institution is intended to
further.22
The money received by the petitioner becomes a part of the trust fund and must be
devoted to public trust purposes and cannot be diverted to private profit or benefit.23
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not
lose its character as a charitable institution simply because the gift or donation is in the form of

7
subsidies granted by the government. As held by the State Supreme Court of Utah in Yorgason v.
County Board of Equalization of Salt Lake County:24
Second, the government subsidy payments are provided to the project. Thus, those
payments are like a gift or donation of any other kind except they come from the government. In
both Intermountain Health Care and the present case, the crux is the presence or absence of
material reciprocity. It is entirely irrelevant to this analysis that the government, rather than a
private benefactor, chose to make up the deficit resulting from the exchange between St. Marks
Tower and the tenants by making a contribution to the landlord, just as it would have been
irrelevant in Intermountain Health Care if the patients income supplements had come from
private individuals rather than the government.
Therefore, the fact that subsidization of part of the cost of furnishing such housing is by
the government rather than private charitable contributions does not dictate the denial of a
charitable exemption if the facts otherwise support such an exemption, as they do here.25
In this case, the petitioner adduced substantial evidence that it spent its income, including
the subsidies from the government for 1991 and 1992 for its patients and for the operation of the
hospital. It even incurred a net loss in 1991 and 1992 from its operations.
Even as we find that the petitioner is a charitable institution, we hold, anent the second
issue, that those portions of its real property that are leased to private entities are not exempt
from real property taxes as these are not actually, directly and exclusively used for charitable
purposes.
The settled rule in this jurisdiction is that laws granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the
rule and exemption is the exception. The effect of an exemption is equivalent to an
appropriation. Hence, a claim for exemption from tax payments must be clearly shown and
based on language in the law too plain to be mistaken.26 As held in Salvation Army v. Hoehn:27
An intention on the part of the legislature to grant an exemption from the taxing power of
the state will never be implied from language which will admit of any other reasonable
construction. Such an intention must be expressed in clear and unmistakable terms, or must
appear by necessary implication from the language used, for it is a well settled principle that,
when a special privilege or exemption is claimed under a statute, charter or act of incorporation,
it is to be construed strictly against the property owner and in favor of the public. This principle
applies with peculiar force to a claim of exemption from taxation . 28
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically
provides that the petitioner shall enjoy the tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation
organized primarily to help combat the high incidence of lung and pulmonary diseases in the
Philippines, all donations, contributions, endowments and equipment and supplies to be imported
by authorized entities or persons and by the Board of Trustees of the Lung Center of the
Philippines, Inc., for the actual use and benefit of the Lung Center, shall be exempt from income
and gift taxes, the same further deductible in full for the purpose of determining the maximum
deductible amount under Section 30, paragraph (h), of the National Internal Revenue Code, as
amended.
The Lung Center of the Philippines shall be exempt from the payment of taxes, charges
and fees imposed by the Government or any political subdivision or instrumentality thereof with
respect to equipment purchases made by, or for the Lung Center.29
It is plain as day that under the decree, the petitioner does not enjoy any property tax
exemption privileges for its real properties as well as the building constructed thereon. If the
intentions were otherwise, the same should have been among the enumeration of tax exempt
privileges under Section 2:
It is a settled rule of statutory construction that the express mention of one person, thing, or
consequence implies the exclusion of all others. The rule is expressed in the familiar maxim,
expressio unius est exclusio alterius.

8
The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation
of the rule is the principle that what is expressed puts an end to that which is implied.
Expressium facit cessare tacitum. Thus, where a statute, by its terms, is expressly limited to
certain matters, it may not, by interpretation or construction, be extended to other matters.
The rule of expressio unius est exclusio alterius and its variations are canons of restrictive
interpretation. They are based on the rules of logic and the natural workings of the human mind.
They are predicated upon ones own voluntary act and not upon that of others. They proceed
from the premise that the legislature would not have made specified enumeration in a statute
had the intention been not to restrict its meaning and confine its terms to those expressly
mentioned.30
The exemption must not be so enlarged by construction since the reasonable presumption
is that the State has granted in express terms all it intended to grant at all, and that unless the
privilege is limited to the very terms of the statute the favor would be intended beyond what was
meant.31
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:
(3) Charitable institutions, churches and parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly
and exclusively used for religious, charitable or educational purposes shall be exempt from
taxation.32
The tax exemption under this constitutional provision covers property taxes only.33 As
Chief Justice Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission,
explained: ". . . what is exempted is not the institution itself . . .; those exempted from real estate
taxes are lands, buildings and improvements actually, directly and exclusively used for religious,
charitable or educational purposes."34
Consequently, the constitutional provision is implemented by Section 234(b) of Republic
Act No. 7160 (otherwise known as the Local Government Code of 1991) as follows:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually,
directly, and exclusively used for religious, charitable or educational purposes.35
We note that under the 1935 Constitution, "... all lands, buildings, and improvements used
exclusively for charitable purposes shall be exempt from taxation."36 However, under the
1973 and the present Constitutions, for "lands, buildings, and improvements" of the charitable
institution to be considered exempt, the same should not only be "exclusively" used for
charitable purposes; it is required that such property be used "actually" and "directly" for such
purposes.37
In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely
on our ruling in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on
September 30, 1961 before the 1973 and 1987 Constitutions took effect.38 As this Court held in
Province of Abra v. Hernando:39
Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious,
charitable, or educational purposes shall be exempt from taxation." The present Constitution
added "charitable institutions, mosques, and non-profit cemeteries" and required that for the
exemption of "lands, buildings, and improvements," they should not only be "exclusively" but
also "actually" and "directly" used for religious or charitable purposes. The Constitution is worded
differently. The change should not be ignored. It must be duly taken into consideration. Reliance
on past decisions would have sufficed were the words "actually" as well as "directly" not added.
There must be proof therefore of the actual and direct use of the lands, buildings, and
improvements for religious or charitable purposes to be exempt from taxation.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a

9
charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used
for charitable purposes. "Exclusive" is defined as possessed and enjoyed to the exclusion of
others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to
exclude; as enjoying a privilege exclusively."40 If real property is used for one or more
commercial purposes, it is not exclusively used for the exempted purposes but is subject to
taxation.41 The words "dominant use" or "principal use" cannot be substituted for the words
"used exclusively" without doing violence to the Constitutions and the law.42 Solely is
synonymous with exclusively.43
What is meant by actual, direct and exclusive use of the property for charitable purposes
is the direct and immediate and actual application of the property itself to the purposes for which
the charitable institution is organized. It is not the use of the income from the real property that
is determinative of whether the property is used for tax-exempt purposes.44
The petitioner failed to discharge its burden to prove that the entirety of its real property is
actually, directly and exclusively used for charitable purposes. While portions of the hospital are
used for the treatment of patients and the dispensation of medical services to them, whether
paying or non-paying, other portions thereof are being leased to private individuals for their
clinics and a canteen. Further, a portion of the land is being leased to a private individual for her
business enterprise under the business name "Elliptical Orchids and Garden Center." Indeed, the
petitioners evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28
for 1992 from the said lessees.
Accordingly, we hold that the portions of the land leased to private entities as well as
those parts of the hospital leased to private individuals are not exempt from such taxes.45 On
the other hand, the portions of the land occupied by the hospital and portions of the hospital
used for its patients, whether paying or non-paying, are exempt from real property taxes.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent
Quezon City Assessor is hereby DIRECTED to determine, after due hearing, the precise portions
of the land and the area thereof which are leased to private persons, and to compute the real
property taxes due thereon as provided for by law. SO ORDERED.
Davide, Jr., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Corona, Carpio Morales, Azcuna, and Tinga, JJ., concur.
CASE DIGEST:
Lung Center of the Philippines vs Quezon City
Facts:
The petitioner, Lung Center of the Philippines is a non-stock and non-profit entity
established on January 16, 1981 by virtue of Presidential Decree No. 1823 located at Quezon
Avenue corner Elliptical Road, Central District, Quezon City. It is registered as the owner of said
parcel of land and the hospital building constructed in the middle. Some of the vacant spaces of
said lot were leased out to private parties and rents out portion of the hospital building to private
parties. As such, the city assessors office assessed the properties for property taxes. Eventually,
the petitioner filed a claim for exemption from property taxes predicated on the fact that they are
a charitable institution. The request was denied which in turn prompted petitioner to elevate the
matter to the Local Board of Assessment Appeals of Quezon City (QC-LBAA) for reversal of the
resolution of the City Assessor. As a result, the QC-LBAA rendered judgment dismissing the
petition and holding the petitioner liable for property taxes.
The Central Board of Assessment Appeals of Quezon City (CBAA) affirmed on appeal the
QC-LBAAs decision and the Court of Appeals upon appeal affirmed the CBAAs decision which
ruled that the petitioner was not a charitable institution and that its real properties were not
actually, directly and exclusively used for charitable purposes; hence, it was not entitled to real
property tax exemption under the constitution and the law. Thus, petitioner filed its petition to
the SC for resolution of the issues above.
Petitioners Contention:

10
The petitioner contends that it is a charitable institution under the context of Section 28
(3), Article VI of the 1987 Constitution and its character as such is not altered by the fact that it
admits paying patients, leases some of the vacant lot and rents out portions of the hospital
building to private parties for said income under such business undertaking is used for
operational expenses. It further contends that if PD 1823 does not exempt them from said tax, it
is not barred from seeking exemption within the purview the 1987 Constitution for, Moreover, it
contends that exclusivity does not necessarily mean solely.
Respondents Contention:
The respondent contends that petitioner is not exempt from the payment of the property
taxes for it failed to prove that it is a charitable entity and the said property is actually, directly
and exclusively used for charitable purposes.
Issue/s:
1. Whether or not petitioner is a charitable institution within the context of PD 1823 and the 1973
and 1987 Constitution and Section 234(b) of RA 7160.2. Whether or not petitioner, if considered
as charitable, is exempted from real property taxes.
Ruling:
1

Yes. The court held that the petitioner is a charitable institution within the context of 1973
and 1987 Constitution. The test whether an enterprise is a charitable institution is to
determine if it exist to carry out a purpose reorganized in law as charitable or carried out
for profit or private advantage. Under PD 1823, the petitioner is a non-profit and non-stock
corporation which, subject to the provisions of the decree, is to be administered by the
Office of the President with the Ministry of Health and the Ministry of Human Settlements.
The purpose for which it was created was to render medical services to the public in
general including those who are poor and also the rich, and become a subject of charity.
Under PD 1823, petitioner is entitled to receive donations, even if the gift or donation is in
the form of subsidies granted by the government. Its character as a charitable institution
is not lost simply because it derives income from paying patient, donations, subsidies
granted by the government so long as these proceeds are used altogether in furtherance
of the charitable object and no money inures to the benefit of a private person managing
the charitable entity.

Partly No. Under PD 1823, the lung center does not enjoy any property tax exemption
privileges for its real properties as well as the building constructed thereon. The property
tax exemption under Sec. 28(3), Art. VI of the Constitution of the property taxes only. This
provision was implanted by Sec.243 (b) of RA 7160.which provides that in order to be
entitled to the exemption, the lung center must be able to prove that: it is a charitable
institution and; its real properties are actually, directly and exclusively used for charitable
purpose. Petitioner failed to adduce evidence to prove the latter.
What is meant by actual, direct and exclusive as contemplated in the Constitution is the
direct, immediate and actual application of the property itself to the purpose of the
charitable institution and not the use of income from the real property to determine its
exemption from property taxes. Dominant or Principal use cannot be substituted with
used exclusively without violating the Constitution, therefore solely is synonymous with
exclusively in contrast with petitioners construction of the word.
Accordingly, the portions occupied by the hospital used for its patients are exempt from
real property taxes while those leased to private entities are not exempt from such taxes.

(2) Abra Valley College vs. Aquino (G.R. No. L-39086, June 15, 1988)
FULL CASE:
(G.R. No. L-39086 June 15, 1988)
ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner, vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA, Provincial

11
Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra; HEIRS OF PATERNO
MILLARE,respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision * of the defunct Court of First Instance of
Abra, Branch I, dated June 14, 1974, rendered in Civil Case No. 656, entitled "Abra Valley Junior
College, Inc., represented by Pedro V. Borgonia, plaintiff vs. Armin M. Cariaga as Provincial
Treasurer of Abra, Gaspar V. Bosque as Municipal Treasurer of Bangued, Abra and Paterno Millare,
defendants," the decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, the Court hereby declares:
That the distraint seizure and sale by the Municipal Treasurer of Bangued, Abra, the Provincial
Treasurer of said province against the lot and building of the Abra Valley Junior College, Inc.,
represented by Director Pedro Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from paying taxes, it should therefore pay all back taxes in
the amount of P5,140.31 and back taxes and penalties from the promulgation of this decision;
That the amount deposited by the plaintaff him the sum of P60,000.00 before the trial, be
confiscated to apply for the payment of the back taxes and for the redemption of the property in
question, if the amount is less than P6,000.00, the remainder must be returned to the Director of
Pedro Borgonia, who represents the plaintiff herein;
That the deposit of the Municipal Treasurer in the amount of P6,000.00 also before the trial must
be returned to said Municipal Treasurer of Bangued, Abra;
And finally the case is hereby ordered dismissed with costs against the plaintiff.
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of higher learning duly incorporated with
the Securities and Exchange Commission in 1948, filed a complaint (Annex "1" of Answer by the
respondents Heirs of Paterno Millare; Rollo, pp. 95-97) on July 10, 1972 in the court a quo to
annul and declare void the "Notice of Seizure' and the "Notice of Sale" of its lot and building
located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by Original Certificate
of Title No. Q-83 duly registered in the name of petitioner, plaintiff below, on July 6, 1972, by
respondents Municipal Treasurer and Provincial Treasurer, defendants below, was issued for the
satisfaction of the said taxes thereon. The "Notice of Sale" was caused to be served upon the
petitioner by the respondent treasurers on July 8, 1972 for the sale at public auction of said
college lot and building, which sale was held on the same date. Dr. Paterno Millare, then
Municipal Mayor of Bangued, Abra, offered the highest bid of P6,000.00 which was duly
accepted. The certificate of sale was correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now deceased) filed through counstel a
motion to dismiss the complaint.
On August 23, 1972, the respondent Provincial Treasurer and Municipal Treasurer, through then
Provincial Fiscal Loreto C. Roldan, filed their answer (Annex "2" of Answer by the respondents

12
Heirs of Patemo Millare; Rollo, pp. 98-100) to the complaint. This was followed by an amended
answer (Annex "3," ibid, Rollo, pp. 101-103) on August 31, 1972.
On September 1, 1972 the respondent Paterno Millare filed his answer (Annex "5," ibid; Rollo, pp.
106-108).
On October 12, 1972, with the aforesaid sale of the school premises at public auction, the
respondent Judge, Hon. Juan P. Aquino of the Court of First Instance of Abra, Branch I, ordered
(Annex "6," ibid; Rollo, pp. 109-110) the respondents provincial and municipal treasurers to
deliver to the Clerk of Court the proceeds of the auction sale. Hence, on December 14, 1972,
petitioner, through Director Borgonia, deposited with the trial court the sum of P6,000.00
evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and embodied by the
trial court in its questioned decision. Said Stipulations reads:
STIPULATION OF FACTS
COME NOW the parties, assisted by counsels, and to this Honorable Court respectfully enter into
the following agreed stipulation of facts:
1. That the personal circumstances of the parties as stated in paragraph 1 of the complaint is
admitted; but the particular person of Mr. Armin M. Cariaga is to be substituted, however, by
anyone who is actually holding the position of Provincial Treasurer of the Province of Abra;
2. That the plaintiff Abra Valley Junior College, Inc. is the owner of the lot and buildings thereon
located in Bangued, Abra under Original Certificate of Title No. 0-83;
3. That the defendant Gaspar V. Bosque, as Municipal treasurer of Bangued, Abra caused to be
served upon the Abra Valley Junior College, Inc. a Notice of Seizure on the property of said school
under Original Certificate of Title No. 0-83 for the satisfaction of real property taxes thereon,
amounting to P5,140.31; the Notice of Seizure being the one attached to the complaint as Exhibit
A;
4. That on June 8, 1972 the above properties of the Abra Valley Junior College, Inc. was sold at
public auction for the satisfaction of the unpaid real property taxes thereon and the same was
sold to defendant Paterno Millare who offered the highest bid of P6,000.00 and a Certificate of
Sale in his favor was issued by the defendant Municipal Treasurer.
5. That all other matters not particularly and specially covered by this stipulation of facts will be
the subject of evidence by the parties.
WHEREFORE, it is respectfully prayed of the Honorable Court to consider and admit this
stipulation of facts on the point agreed upon by the parties.
Bangued, Abra, April 12, 1973.
Sgd. Agripino Brillantes
Typ AGRIPINO BRILLANTES
Attorney for Plaintiff

Sgd. Loreto Roldan

Typ LORETO ROLDAN
Provincial Fiscal
Counsel for Defendants
Provincial Treasurer of

Abra and the Municipal

Treasurer of Bangued, Abra
Sgd. Demetrio V. Pre
Typ. DEMETRIO V. PRE

13
Attorney for Defendant

Paterno Millare (Rollo, pp.

17-18)

Aside from the Stipulation of Facts, the trial court among others, found the following: (a) that the
school is recognized by the government and is offering Primary, High School and College
Courses, and has a school population of more than one thousand students all in all; (b) that it is
located right in the heart of the town of Bangued, a few meters from the plaza and about 120
meters from the Court of First Instance building; (c) that the elementary pupils are housed in a
two-storey building across the street; (d) that the high school and college students are housed in
the main building; (e) that the Director with his family is in the second floor of the main building;
and (f) that the annual gross income of the school reaches more than one hundred thousand
pesos.
From all the foregoing, the only issue left for the Court to determine and as agreed by the
parties, is whether or not the lot and building in question are used exclusively for educational
purposes. (Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon. Eustaquio Z.
Montero, filed a Memorandum for the Government on March 25, 1974, and a Supplemental
Memorandum on May 7, 1974, wherein they opined "that based on the evidence, the laws
applicable, court decisions and jurisprudence, the school building and school lot used for
educational purposes of the Abra Valley College, Inc., are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).
Nonetheless, the trial court disagreed because of the use of the second floor by the Director of
petitioner school for residential purposes. He thus ruled for the government and rendered the
assailed decision.
After having been granted by the trial court ten (10) days from August 6, 1974 within which to
perfect its appeal (Per Order dated August 6, 1974; Annex "G" of Petition; Rollo, p. 57) petitioner
instead availed of the instant petition for review on certiorari with prayer for preliminary
injunction before this Court, which petition was filed on August 17, 1974 (Rollo, p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE COURSE to the petition
(Rollo, p. 58). Respondents were required to answer said petition (Rollo, p. 74).
Petitioner raised the following assignments of error:
I.
II.

III.

IV.

THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND SALE OF THE
COLLEGE LOT AND BUILDING USED FOR EDUCATIONAL PURPOSES OF THE PETITIONER.
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING OF
THE PETITIONER ARE NOT USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES MERELY
BECAUSE THE COLLEGE PRESIDENT RESIDES IN ONE ROOM OF THE COLLEGE
BUILDING.
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING OF
THE PETITIONER ARE NOT EXEMPT FROM PROPERTY TAXES AND IN ORDERING
PETITIONER TO PAY P5,140.31 AS REALTY TAXES.
THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE P6,000.00
DEPOSIT MADE IN THE COURT BY PETITIONER AS PAYMENT OF THE P5,140.31 REALTY
TAXES. (See Brief for the Petitioner, pp. 1-2)

The main issue in this case is the proper interpretation of the phrase "used exclusively for
educational purposes."

Petitioner contends that the primary use of the lot and building for educational purposes, and not
the incidental use thereof, determines and exemption from property taxes under Section 22 (3),
Article VI of the 1935 Constitution. Hence, the seizure and sale of subject college lot and
building, which are contrary thereto as well as to the provision of Commonwealth Act No. 470,
otherwise known as the Assessment Law, are without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and building in
question which were subjected to seizure and sale to answer for the unpaid tax are used: (1) for
the educational purposes of the college; (2) as the permanent residence of the President and
Director thereof, Mr. Pedro V. Borgonia, and his family including the in-laws and grandchildren;
and (3) for commercial purposes because the ground floor of the college building is being used
and rented by a commercial establishment, the Northern Marketing Corporation (See photograph
attached
as
Annex
"8"
(Comment;
Rollo,
p.
90]).
Due to its time frame, the constitutional provision which finds application in the case at
bar is Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, which
expressly grants exemption from realty taxes for "Cemeteries, churches and parsonages or
convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for
religious,
charitable
or
educational
purposes
...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as amended by
Republic
Act
No.
409,
otherwise
known
as
the
Assessment
Law,
provides:
The following are exempted from real property tax under the Assessment Law:
(c) churches and parsonages or convents appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable, scientific or educational purposes.
In this regard petitioner argues that the primary use of the school lot and building is the
basic and controlling guide, norm and standard to determine tax exemption, and not the mere
incidental
use
thereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217 [1916],
this Court ruled that while it may be true that the YMCA keeps a lodging and a boarding house
and maintains a restaurant for its members, still these do not constitute business in the ordinary
acceptance of the word, but an institution used exclusively for religious, charitable and
educational purposes, and as such, it is entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51 Phil. 352
[1972], this Court included in the exemption a vegetable garden in an adjacent lot and another
lot formerly used as a cemetery. It was clarified that the term "used exclusively" considers
incidental use also. Thus, the exemption from payment of land tax in favor of the convent
includes, not only the land actually occupied by the building but also the adjacent garden
devoted to the incidental use of the parish priest. The lot which is not used for commercial
purposes but serves solely as a sort of lodging place, also qualifies for exemption because this
constitutes
incidental
use
in
religious
functions.
The phrase "exclusively used for educational purposes" was further clarified by this Court
in the cases of Herrera vs. Quezon City Board of assessment Appeals, 3 SCRA 186 [1961]
and Commissioner of Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991 [1965],
thus

Moreover, the exemption in favor of property used exclusively for charitable or educational
purposes is 'not limited to property actually indispensable' therefor (Cooley on Taxation, Vol. 2, p.
1430), but extends to facilities which are incidental to and reasonably necessary for the
accomplishment of said purposes, such as in the case of hospitals, "a school for training nurses,
a nurses' home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for student
nurses, interns, and residents' (84 CJS 6621), such as "Athletic fields" including "a firm used for

the

inmates
of
the
institution.
(Cooley
on
Taxation,
Vol.
2,
p.
1430).
The test of exemption from taxation is the use of the property for purposes mentioned in
the Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 Phil, 547 [1941]).
It must be stressed however, that while this Court allows a more liberal and non-restrictive
interpretation of the phrase "exclusively used for educational purposes" as provided for in Article
VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always
been made that exemption extends to facilities which are incidental to and reasonably necessary
for the accomplishment of the main purposes. Otherwise stated, the use of the school building or
lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while
the use of the second floor of the main building in the case at bar for residential purposes of the
Director and his family, may find justification under the concept of incidental use, which is
complimentary to the main or primary purposeeducational, the lease of the first floor thereof to
the Northern Marketing Corporation cannot by any stretch of the imagination be considered
incidental
to
the
purpose
of
education.
It will be noted however that the aforementioned lease appears to have been raised for
the first time in this Court. That the matter was not taken up in the to court is really apparent in
the decision of respondent Judge. No mention thereof was made in the stipulation of facts, not
even in the description of the school building by the trial judge, both embodied in the decision
nor as one of the issues to resolve in order to determine whether or not said properly may be
exempted from payment of real estate taxes (Rollo, pp. 17-23). On the other hand, it is
noteworthy that such fact was not disputed even after it was raised in this Court.
Indeed, it is axiomatic that facts not raised in the lower court cannot be taken up for the
first time on appeal. Nonetheless, as an exception to the rule, this Court has held that although a
factual issue is not squarely raised below, still in the interest of substantial justice, this Court is
not prevented from considering a pivotal factual matter. "The Supreme Court is clothed with
ample authority to review palpable errors not assigned as such if it finds that their consideration
is necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127 SCRA 645 [1984]).
Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the
school building as well as the lot where it is built, should be taxed, not because the second floor
of the same is being used by the Director and his family for residential purposes, but because the
first floor thereof is being used for commercial purposes. However, since only a portion is used
for purposes of commerce, it is only fair that half of the assessed tax be returned to the school
involved.
PREMISES CONSIDERED, the decision of the Court of First Instance of Abra, Branch I, is
hereby AFFIRMED subject to the modification that half of the assessed tax be returned to the
petitioner. SO ORDERED.
Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.
CASE DIGEST:
ABRA VALLEY COLLEGE, INC. VS AQUINO
Facts: Petitioner, an educational corporation and institution of higher learning duly incorporated
with the Securities and Exchange Commission in 1948, filed a complaint to annul and declare
void the Notice of Seizure and the Notice of Sale of its lot and building located at Bangued,
Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31. Said Notice of
Seizure by respondents Municipal Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon.
The parties entered into a stipulation of facts adopted and embodied by the trial court in
its questioned decision. The trial court ruled for the government, holding that the second floor of

the building is being used by the director for residential purposes and that the ground floor used
and rented by Northern Marketing Corporation, a commercial establishment, and thus the
property is not being used exclusively for educational purposes. Instead of perfecting an appeal,
petitioner availed of the instant petition for review on certiorari with prayer for preliminary
injunction before the Supreme Court, by filing said petition on 17 August 1974.
Issue: Whether or not the lot and building in question are used exclusively for educational
purposes?
Ruling: NO. It must be stressed that while the court allows a more liberal and nonrestrictive interpretation of the phrase exclusively used for educationalpurposes as provided
for
in
the
Article
VI
Section22,
Paragraph
of
the
1935Philippine Constitution, reasonable emphasis has always been made that
exemption
extends to facilities which are incidental to and reasonably necessary for the accomplishment of
the main purpose. Otherwise stated, the use of the school building or lot for commercial
purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second
floor of the main building in the case at bar for residential purposes of the Director and his
family, may find justification under the concept of incidental use, which is complimentary to the
main or primary purpose educational, the lease of the first floor thereof to
theNorthern Marketing Corporation cannot by any stretch of the imagination be
considered
incidental
to
the
purposes
of
education.Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the
school building as well as the lot where it is built, should be taxed, not because the second floor
of the same is being used by the director and his family for residential purposes, but because the
first floor thereof is being used for commercial purposes. However, since only a portion is used
for purposes of commerce, it is only fair that half of the assessed tax be return to the school
involved.

SECTION 29. No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law.
No public money or property shall be appropriated, applied, paid, or employed, directly or
indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian
institution, or system of religion, or of any priest, preacher, minister, or other religious teacher, or
dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the
armed forces, or to any penal institution, or government orphanage or leprosarium.
All money collected on any tax levied for a special purpose shall be treated as a special
fund and paid out for such purpose only. If the purpose for which a special fund was created has
been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the

Government.
CASE
(1) Osmena vs. Orbos
(GR No. 99886, March 31, 1993)
(2) Aglipay vs. Ruiz
(G.R. No. 45459, March 13, 1937)
(1) Osmena vs. Orbos (GR No. 99886, March 31, 1993)
FULL CASE:
(G.R. No. 99886 March 31, 1993)
JOHN H. OSMEA, petitioner,
vs.
OSCAR ORBOS, in his capacity as Executive Secretary; JESUS ESTANISLAO, in his capacity as
Secretary of Finance; WENCESLAO DELA PAZ, in his capacity as Head of the Office of Energy
Affairs; REX V. TANTIONGCO, and the ENERGY REGULATORY BOARD, respondents.
Nachura & Sarmiento for petitioner.
The Solicitor General for public respondents.
NARVASA, C.J.:
The petitioner seeks the corrective, 1 prohibitive and coercive remedies provided by Rule
65 of the Rules of Court, 2 upon the following posited grounds, viz.: 3
1) the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry of Energy (now,
the Office of Energy Affairs), created pursuant to 8, paragraph 1, of P.D. No. 1956, as amended,
"said creation of a trust fund being contrary to Section 29 (3), Article VI of the . . Constitution; 4
2) the unconstitutionality of 8, paragraph 1 (c) of P.D. No. 1956, as amended by Executive
Order No. 137, for "being an undue and invalid delegation of legislative power . . to the Energy
Regulatory Board;" 5
3) the illegality of the reimbursements to oil companies, paid out of the Oil Price Stabilization
Fund, 6 because it contravenes 8, paragraph 2 (2) of
P. D. 1956, as amended; and
4) the consequent nullity of the Order dated December 10, 1990 and the necessity of a rollback
of the pump prices and petroleum products to the levels prevailing prior to the said Order.
It will be recalled that on October 10, 1984, President Ferdinand Marcos issued P.D. 1956
creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund
(OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and
imported petroleum products resulting from exchange rate adjustments and from increases in
the world market prices of crude oil.
Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O.
1024, and ordered released from the National Treasury to the Ministry of Energy. The same
Executive Order also authorized the investment of the fund in government securities, with the
earnings
from
such
placements
accruing
to
the
fund.
President Corazon C. Aquino, amended P.D. 1956. She promulgated Executive Order No.
7

137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for
possible cost underrecovery incurred as a result of the reduction of domestic prices of petroleum
products, the amount of the underrecovery being left for determination by the Ministry of
Finance.
Now, the petition alleges that the status of the OPSF as of March 31, 1991 showed a
"Terminal Fund Balance deficit" of some P12.877 billion; 8 that to abate the worsening deficit,
"the Energy Regulatory Board . . issued an Order on December 10, 1990, approving the increase
in pump prices of petroleum products," and at the rate of recoupment, the OPSF deficit should
have been fully covered in a span of six (6) months, but this notwithstanding, the respondents
Oscar Orbos, in his capacity as Executive Secretary; Jesus Estanislao, in his capacity as Secretary
of Finance; Wenceslao de la Paz, in his capacity as Head of the Office of Energy Affairs; Chairman
Rex V. Tantiongco and the Energy Regulatory Board "are poised to accept, process and pay
9
claims
not
authorized
under
P.D.
1956."
The petition further avers that the creation of the trust fund violates
29(3),
Article
VI
of
the
Constitution,
reading
as
follows:
(3) All money collected on any tax levied for a special purpose shall be treated as a
special fund and paid out for such purposes only. If the purpose for which a special fund
was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the
general
funds
of
the
Government.
The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended,
must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a
special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated
as a special fund' to be used only for the purpose indicated, and not channeled to another
government objective." 10 Petitioner further points out that since "a 'special fund' consists of
monies collected through the taxing power of a State, such amounts belong to the State,
although the use thereof is limited to the special purpose/objective for which it was created." 11
He also contends that the "delegation of legislative authority" to the ERB violates 28 (2).
Article
VI
of
the
Constitution,
viz.:
(2) The Congress may, by law, authorize the President to fix, within specified limits,
and subject to such limitations and restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts within the framework of
the
national
development
program
of
the
Government;
and, inasmuch as the delegation relates to the exercise of the power of taxation, "the
limits,
limitations and restrictions must be quantitative, that is, the law must not only
specify how to
tax, who (shall) be taxed (and) what the tax is for, but also impose a specific
12
limit on how much
to
tax."
The petitioner does not suggest that a "trust account" is illegal per se, but maintains that
the monies collected, which form part of the OPSF, should be maintained in a special account of
the general fund for the reason that the Constitution so provides, and because they are,
supposedly, taxes levied for a special purpose. He assumes that the Fund is formed from a tax
undoubtedly because a portion thereof is taken from collections of ad valorem taxes and the
increases
thereon.
It thus appears that the challenge posed by the petitioner is premised primarily on the
view that the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of
the taxation power of the State. The Solicitor General observes that the "argument rests on the
assumption that the OPSF is a form of revenue measure drawing from a special tax to be
expended for a special purpose." 13 The petitioner's perceptions are, in the Court's view, not
quite correct.

To address this critical misgiving in the position of the petitioner on these issues, the Court
recalls its holding in Valmonte v. Energy Regulatory Board, et al. 14
The foregoing arguments suggest the presence of misconceptions about the nature
and functions of the OPSF. The OPSF is a "Trust Account" which was established "for
the purpose of minimizing the frequent price changes brought about by exchange
rate adjustment and/or changes in world market prices of crude oil and imported
petroleum products." 15 Under P.D. No. 1956, as amended by Executive Order No.
137 dated 27 February 1987, this Trust Account may be funded from any of the
following sources:
a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum
products subject to tax under this Decree arising from exchange rate adjustment, as may be
determined by the Minister of Finance in consultation with the Board of Energy;
b) Any increase in the tax collection as a result of the lifting of tax exemptions of government
corporations, as may be determined by the Minister of Finance in consultation with the Board of
Energy:
c) Any additional amount to be imposed on petroleum products to augment the resources of the
Fund through an appropriate Order that may be issued by the Board of Energy requiring payment
of persons or companies engaged in the business of importing, manufacturing and/or marketing
petroleum products;
d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the
importation of crude oil and petroleum products is less than the peso costs computed using the
reference
foreign
exchange
rate
as
fixed
by
the
Board
of
Energy.
The fact that the world market prices of oil, measured by the spot market in Rotterdam,
vary from day to day is of judicial notice. Freight rates for hauling crude oil and petroleum
products from sources of supply to the Philippines may also vary from time to time. The
exchange rate of the peso vis-a-vis the U.S. dollar and other convertible foreign currencies also
changes from day to day. These fluctuations in world market prices and in tanker rates and
foreign exchange rates would in a completely free market translate into corresponding
adjustments in domestic prices of oil and petroleum products with sympathetic frequency. But
domestic prices which vary from day to day or even only from week to week would result in a
chaotic market with unpredictable effects upon the country's economy in general. The OPSF was
established precisely to protect local consumers from the adverse consequences that such
frequent oil price adjustments may have upon the economy. Thus, the OPSF serves as a pocket,
as it were, into which a portion of the purchase price of oil and petroleum products paid by
consumers as well as some tax revenues are inputted and from which amounts are drawn from
time to time to reimburse oil companies, when appropriate situations arise, for increases in, as
well as underrecovery of, costs of crude importation. The OPSF is thus a buffer mechanism
through which the domestic consumer prices of oil and petroleum products are stabilized,
instead of fluctuating every so often, and oil companies are allowed to recover those portions of
their costs which they would not otherwise recover given the level of domestic prices existing at
any given time. To the extent that some tax revenues are also put into it, the OPSF is in effect a
device through which the domestic prices of petroleum products are subsidized in part . It
appears to the Court that the establishment and maintenance of the OPSF is well within that
pervasive and non-waivable power and responsibility of the government to secure the physical

and economic survival and well-being of the community, that comprehensive sovereign authority
we designate as the police power of the State. The stabilization, and subsidy of domestic prices
of petroleum products and fuel oil clearly critical in importance considering, among other
things, the continuing high level of dependence of the country on imported crude oil are
appropriately
regarded
as
public
purposes.
Also of relevance is this Court's ruling in relation to the sugar stabilization fund the nature
of which is not far different from the OPSF. In Gaston v. Republic Planters Bank, 16 this Court
upheld the legality of the sugar stabilization fees and explained their nature and character, viz.:
The stabilization fees collected are in the nature of a tax, which is within the power
of the State to impose for the promotion of the sugar industry (Lutz v. Araneta, 98
Phil. 148). . . . The tax collected is not in a pure exercise of the taxing power. It is
levied with a regulatory purpose, to provide a means for the stabilization of the
sugar industry. The levy is primarily in the exercise of the police power of the State
(Lutz v. Araneta, supra).
The stabilization fees in question are levied by the State upon sugar millers,
planters and producers for a special purpose that of "financing the growth and
development of the sugar industry and all its components, stabilization of the
domestic market including the foreign market." The fact that the State has taken
possession of moneys pursuant to law is sufficient to constitute them state funds,
even though they are held for a special purpose (Lawrence v. American Surety Co.
263 Mich. 586, 249 ALR 535, cited in 42 Am Jur Sec. 2, p. 718). Having been levied
for a special purpose, the revenues collected are to be treated as a special fund, to
be, in the language of the statute, "administered in trust" for the purpose intended.
Once the purpose has been fulfilled or abandoned, the balance if any, is to be
transferred to the general funds of the Government. That is the essence of the trust
intended (SEE 1987 Constitution, Article VI, Sec. 29(3), lifted from the 1935
Constitution, Article VI, Sec. 23(1). 17
The character of the Stabilization Fund as a special kind of fund is emphasized by
the fact that the funds are deposited in the Philippine National Bank and not in the
Philippine Treasury, moneys from which may be paid out only in pursuance of an
appropriation made by law (1987) Constitution, Article VI, Sec. 29 (3), lifted from the
1935 Constitution, Article VI, Sec. 23(1). (Emphasis supplied).
Hence, it seems clear that while the funds collected may be referred to as taxes, they are
exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special
fund is plain from the special treatment given it by E.O. 137. It is segregated from the general
fund; and while it is placed in what the law refers to as a "trust liability account," the fund
nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that
these measures comply with the constitutional description of a "special fund." Indeed, the
practice is not without precedent.
With regard to the alleged undue delegation of legislative power, the Court finds that the
provision conferring the authority upon the ERB to impose additional amounts on petroleum
products provides a sufficient standard by which the authority must be exercised. In addition to
the general policy of the law to protect the local consumer by stabilizing and subsidizing

domestic pump rates, 8(c) of P.D. 1956 18 expressly authorizes the ERB to impose additional
amounts to augment the resources of the Fund.
What petitioner would wish is the fixing of some definite, quantitative restriction, or "a
specific limit on how much to tax." 19 The Court is cited to this requirement by the petitioner on
the premise that what is involved here is the power of taxation; but as already discussed, this is
not the case. What is here involved is not so much the power of taxation as police power.
Although the provision authorizing the ERB to impose additional amounts could be construed to
refer to the power of taxation, it cannot be overlooked that the overriding consideration is to
enable the delegate to act with expediency in carrying out the objectives of the law which are
embraced by the police power of the State.
The interplay and constant fluctuation of the various factors involved in the determination
of the price of oil and petroleum products, and the frequently shifting need to either augment or
exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law
as proposed by the petitioner. To do so would render the ERB unable to respond effectively so as
to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as it is
expressed, suffices to guide the delegate in the exercise of the delegated power, taking account
of the circumstances under which it is to be exercised.
For a valid delegation of power, it is essential that the law delegating the power must be (1)
complete in itself, that is it must set forth the policy to be executed by the delegate and (2) it
must
fix
a
standard

limits
of
which
20
are sufficiently determinate or determinable to which the delegate must conform.
. . . As pointed out in Edu v. Ericta: "To avoid the taint of unlawful delegation, there
must be a standard, which implies at the very least that the legislature itself
determines matters of principle and lays down fundamental policy. Otherwise, the
charge of complete abdication may be hard to repel. A standard thus defines
legislative policy, marks its limits, maps out its boundaries and specifies the public
agency to apply it. It indicates the circumstances under which the legislative
command is to be effected. It is the criterion by which the legislative purpose may
be carried out. Thereafter, the executive or administrative office designated may in
pursuance of the above guidelines promulgate supplemental rules and regulations.
The standard may either be express or implied. If the former, the non-delegation
objection is easily met. The standard though does not have to be spelled out
specifically. It could be implied from the policy and purpose of the act considered as
a whole. 21
It would seem that from the above-quoted ruling, the petition for prohibition should fail.
The standard, as the Court has already stated, may even be implied. In that light, there
can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a
determinable standard which guides the exercise of the power granted to the ERB. By the same
token, the proper exercise of the delegated power may be tested with ease. It seems obvious
that what the law intended was to permit the additional imposts for as long as there exists a
need to protect the general public and the petroleum industry from the adverse consequences of
pump rate fluctuations. "Where the standards set up for the guidance of an administrative officer
and the action taken are in fact recorded in the orders of such officer, so that Congress, the

courts and the public are assured that the orders in the judgment of such officer conform to the
legislative standard, there is no failure in the performance of the legislative functions." 22
This Court thus finds no serious impediment to sustaining the validity of the legislation;
the express purpose for which the imposts are permitted and the general objectives and
purposes of the fund are readily discernible, and they constitute a sufficient standard upon which
the delegation of power may be justified.
In relation to the third question respecting the illegality of the reimbursements to oil
companies, paid out of the Oil Price Stabilization Fund, because allegedly in contravention of 8,
paragraph 2 (2) of P.D. 1956, amended 23 the Court finds for the petitioner.
The petition assails the payment of certain items or accounts in favor of the petroleum
companies (i.e., inventory losses, financing charges, fuel oil sales to the National Power
Corporation, etc.) because not authorized by law. Petitioner contends that "these claims are not
embraced in the enumeration in 8 of P.D. 1956 . . since none of them was incurred 'as a result
of the reduction of domestic prices of petroleum products,'" 24 and since these items are
reimbursements for which the OPSF should not have responded, the amount of the P12.877
billion deficit "should be reduced by P5,277.2 million." 25 It is argued "that under the principle of
ejusdem generis . . . the term 'other factors' (as used in 8 of P.D. 1956) . . can only include such
'other factors' which necessarily result in the reduction of domestic prices of petroleum
products." 26
The Solicitor General, for his part, contends that "(t)o place said (term) within the restrictive
confines of the rule of ejusdem generis would reduce (E.O. 137) to a meaningless provision."
This Court, in Caltex Philippines, Inc. v. The Honorable Commissioner on Audit, et al.,
passed upon the application of ejusdem generis to paragraph 2 of 8 of P.D. 1956, viz.:

27

The rule of ejusdem generis states that "[w]here words follow an enumeration of
persons or things, by words of a particular and specific meaning, such general
words are not to be construed in their widest extent, but are held to be as applying
only to persons or things of the same kind or class as those specifically mentioned."
28
A reading of subparagraphs (i) and (ii) easily discloses that they do not have a
common characteristic. The first relates to price reduction as directed by the Board
of Energy while the second refers to reduction in internal ad valorem taxes.
Therefore, subparagraph (iii) cannot be limited by the enumeration in these
subparagraphs. What should be considered for purposes of determining the "other
factors" in subparagraph (iii) is the first sentence of paragraph (2) of the Section
which explicitly allows the cost underrecovery only if such were incurred as a result
of the reduction of domestic prices of petroleum products.
The Court thus holds, that the reimbursement of financing charges is not authorized by
paragraph 2 of 8 of P.D. 1956, for the reason that they were not incurred as a result of the
reduction of domestic prices of petroleum products. Under the same provision, however, the
payment of inventory losses is upheld as valid, being clearly a result of domestic price reduction,
when oil companies incur a cost underrecovery for yet unsold stocks of oil in inventory acquired
at a higher price.

Reimbursement for cost underrecovery from the sales of oil to the National Power
Corporation is equally permissible, not as coming within the provisions of P.D. 1956, but in virtue
of other laws and regulations as held in Caltex 29 and which have been pointed to by the Solicitor
General. At any rate, doubts about the propriety of such reimbursements have been dispelled by
the enactment of R.A. 6952, establishing the Petroleum Price Standby Fund, 2 of which
specifically authorizes the reimbursement of "cost underrecovery incurred as a result of fuel oil
sales to the National Power Corporation."
Anent the overpayment refunds mentioned by the petitioner, no substantive discussion
has been presented to show how this is prohibited by P.D. 1956. Nor has the Solicitor General
taken any effort to defend the propriety of this refund. In fine, neither of the parties, beyond the
mere mention of overpayment refunds, has at all bothered to discuss the arguments for or
against the legality of the so-called overpayment refunds. To be sure, the absence of any
argument for or against the validity of the refund cannot result in its disallowance by the Court.
Unless the impropriety or illegality of the overpayment refund has been clearly and specifically
shown, there can be no basis upon which to nullify the same.
Finally, the Court finds no necessity to rule on the remaining issue, the same having been
rendered moot and academic. As of date hereof, the pump rates of gasoline have been reduced
to levels below even those prayed for in the petition.
WHEREFORE, the petition is GRANTED insofar as it prays for the nullification of the
reimbursement of financing charges, paid pursuant to E.O. 137, and DISMISSED in all other
respects.
SO ORDERED.
CASE DIGEST:
OSMEA v. ORBOS, 220 SCRA 703
Facts: On October 10, 1984, Pres. Marcos issued P.D. 1956 creating a Special Account in the
General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to
reimburse oil companies for cost increases in crude oil and imported petroleum products
resulting from exchange rate adjustments and from increases in the world market prices of crude
oil.
Subsequently, the OPSF was reclassified into a "trust liability account," in virtue of E.O.
1024, and ordered released from the National Treasury to the Ministry of Energy.
Pres. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February
27, 1987, expanding the grounds for reimbursement to oil companies for possible cost under
recovery incurred as a result of the reduction of domestic prices of petroleum products, the
amount of the under recovery being left for determination by the Ministry of Finance.
The petition avers that the creation of the trust fund violates 29(3), Article VI of the
Constitution,
reading
as
follows:
(3) All money collected on any levied for a special purpose shall be treated as a special
fund and paid out for such purposes only. If the purpose tax for which a special fund was created
has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of
the
Government.

`
The petitioner argues that "the monies collected pursuant to . . P.D. 1956, as amended,
must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a 'trust fund,' and that "if a
special tax is collected for a specific purpose, the revenue generated therefrom shall 'be treated
as a special fund' to be used only for the purpose indicated, and not channeled to another
government objective." Petitioner further points out that since "a 'special fund' consists of
monies collected through the taxing power of a State, such amounts belong to the State,
although the use thereof is limited to the special purpose/objective for which it was created."
He also contends that the "delegation of legislative authority" to the ERB violates 28 (2).
Article
VI
of
the
Constitution,
viz.:
(2) The Congress may, by law, authorize the President to fix, within specified limits, and subject
to such limitations and restrictions as it may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the framework of the national
development
program
of
the
Government;
and, inasmuch as the delegation relates to the exercise of the power of taxation, "the limits,
limitations and restrictions must be quantitative, that is, the law must not only specify how to
tax, who (shall) be taxed (and) what the tax is for, but also impose a specific limit on how much
to
tax.
Issues:
(1) Whether or Not the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry
of Energy (now, the Office of Energy Affairs), created pursuant to 8, paragraph 1, of P.D. No.
1956, as amended, "said creation of a trust fund being contrary to Section 29 (3), Article VI of the
Constitution.
(2) Whether or Not the unconstitutionality of 8, paragraph 1 (c) of P.D. No. 1956, as amended by
Executive Order No. 137, for "being an undue and invalid delegation of legislative power to the
Energy
Regulatory
Board.
Ruling: The OPSF is a "Trust Account" which was established "for the purpose of minimizing the
frequent price changes brought about by exchange rate adjustment and/or changes in world
market prices of crude oil and imported petroleum products." Under P.D. No. 1956, as amended
by Executive Order No. 137 dated 27 February 1987, this Trust Account may be funded from any
of
the
following:
sources:
a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum
products subject to tax under this Decree arising from exchange rate adjustment, as may be
determined by the Minister of Finance in consultation with the Board of Energy;
b) Any increase in the tax collection as a result of the lifting of tax exemptions of government
corporations, as may be determined by the Minister of Finance in consultation with the Board of
Energy;
c) Any additional amount to be imposed on petroleum products to augment the resources of the
Fund through an appropriate Order that may be issued by the Board of Energy requiring payment
of persons or companies engaged in the business of importing, manufacturing and/or marketing
petroleum
products;
d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the
importation of crude oil and petroleum products is less than the peso costs computed using the
reference
foreign
exchange
rate
as
fixed
by
the
Board
of
Energy.
Hence, it seems clear that while the funds collected may be referred to as taxes, they are
exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special
fund is plain from the special treatment given it by E.O. 137. It is segregated from the general
fund; and while it is placed in what the law refers to as a "trust liability account," the fund
nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that

these measures comply with the constitutional description of a "special fund." Indeed, the
practice
is
not
without
precedent.
With regard to the alleged undue delegation of legislative power, the Court finds that the
provision conferring the authority upon the ERB to impose additional amounts on petroleum
products provides a sufficient standard by which the authority must be exercised. In addition to
the general policy of the law to protect the local consumer by stabilizing and subsidizing
domestic pump rates, 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional
amounts
to
augment
the
resources
of
the
Fund.
What petitioner would wish is the fixing of some definite, quantitative restriction, or "a
specific limit on how much to tax." The Court is cited to this requirement by the petitioner on the
premise that what is involved here is the power of taxation; but as already discussed, this is not
the case. What is here involved is not so much the power of taxation as police power. Although
the provision authorizing the ERB to impose additional amounts could be construed to refer to
the power of taxation, it cannot be overlooked that the overriding consideration is to enable the
delegate to act with expediency in carrying out the objectives of the law which are embraced by
the
police
power
of
the
State.
The interplay and constant fluctuation of the various factors involved in the determination
of the price of oil and petroleum products, and the frequently shifting need to either augment or
exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law
as proposed by the petitioner. To do so would render the ERB unable to respond effectively so as
to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as it is
expressed suffices to guide the delegate in the exercise of the delegated power, taking account
of the circumstances under which it is to be exercised.
(2) Aglipay vs. Ruiz (G.R. No. 45459, March 13, 1937)
(G.R. No. L-45459

March 13, 1937)

GREGORIO AGLIPAY, petitioner, vs. JUAN RUIZ, respondent.

Vicente Sotto for petitioner.
Office of the Solicitor-General Tuason for respondent.
LAUREL, J.:
The petitioner, Mons. Gregorio Aglipay, Supreme Head of the Philippine Independent Church,
seeks the issuance from this court of a writ of prohibition to prevent the respondent Director of
Posts from issuing and selling postage stamps commemorative of the Thirty-third International
Eucharistic Congress.
In May, 1936, the Director of Posts announced in the dailies of Manila that he would order the
issues of postage stamps commemorating the celebration in the City of Manila of the Thirty-third
international Eucharistic Congress, organized by the Roman Catholic Church. The petitioner, in
the fulfillment of what he considers to be a civic duty, requested Vicente Sotto, Esq., member of
the Philippine Bar, to denounce the matter to the President of the Philippines. In spite of the
protest of the petitioner's attorney, the respondent publicly announced having sent to the United
States the designs of the postage stamps for printing as follows:
"In the center is chalice, with grape vine and stalks of wheat as border design. The stamps are
blue, green, brown, cardinal red, violet and orange, 1 inch by 1,094 inches. The denominations
are for 2, 6, 16, 20, 36 and 50 centavos." The said stamps were actually issued and sold though
the greater part thereof, to this day, remains unsold. The further sale of the stamps is sought to
be prevented by the petitioner herein.

The Solicitor-General contends that the writ of prohibition is not the proper legal remedy in the
instant case, although he admits that the writ may properly restrain ministerial functions. While,
generally, prohibition as an extraordinary legal writ will not issue to restrain or control the
performance of other than judicial or quasi-judicial functions (50 C. J., 6580, its issuance and
enforcement are regulated by statute and in this jurisdiction may issue to . . . inferior tribunals,
corporations, boards, or persons, whether excercising functions judicial or ministerial, which are
without or in excess of the jurisdiction of such tribunal, corporation, board, or person, . . . ."
(Secs. 516 and 226, Code of Civil Procedure.) The terms "judicial" and "ministerial" used with
reference to "functions" in the statute are undoubtedly comprehensive and include the
challenged act of the respondent Director of Posts in the present case, which act because alleged
to be violative of the Constitution is a fortiorari "without or in excess of . . . jurisdiction." The
statutory rule, therefore, in the jurisdiction is that the writ of prohibition is not confined
exclusively to courts or tribunals to keep them within the limits of their own jurisdiction and to
prevent them from encroaching upon the jurisdiction of other tribunals, but will issue, in
appropriate cases, to an officer or person whose acts are without or in excess of his authority. Not
infrequently, "the writ is granted, where it is necessary for the orderly administration of justice,
or to prevent the use of the strong arm of the law in an oppressive or vindictive manner, or a
multiplicity of actions." (Dimayuga and Fajardo vs. Fernandez [1923], 43 Phil., 304, 307.)
The more important question raised refers to the alleged violation of the Constitution by the
respondent in issuing and selling postage stamps commemorative of the Thirty-third
International Eucharistic Congress. It is alleged that this action of the respondent is violative of
the provisions of section 23, subsection 3, Article VI, of the Constitution of the Philippines, which
provides as follows:
No public money or property shall ever be appropriated, applied, or used, directly or
indirectly, for the use, benefit, or support of any sect, church, denomination, secretarian,
institution, or system of religion, or for the use, benefit, or support of any priest, preacher,
minister, or other religious teacher or dignitary as such, except when such priest,
preacher, minister, or dignitary is assigned to the armed forces or to any penal institution,
orphanage, or leprosarium.
The prohibition herein expressed is a direct corollary of the principle of separation of church and
state. Without the necessity of adverting to the historical background of this principle in our
country, it is sufficient to say that our history, not to speak of the history of mankind, has taught
us that the union of church and state is prejudicial to both, for ocassions might arise when the
estate will use the church, and the church the state, as a weapon in the furtherance of their
recognized this principle of separation of church and state in the early stages of our
constitutional development; it was inserted in the Treaty of Paris between the United States and
Spain of December 10, 1898, reiterated in President McKinley's Instructions of the Philippine
Commission, reaffirmed in the Philippine Bill of 1902 and in the autonomy Act of August 29,
1916, and finally embodied in the constitution of the Philippines as the supreme expression of
the Filipino people. It is almost trite to say now that in this country we enjoy both religious and
civil freedom. All the officers of the Government, from the highest to the lowest, in taking their
oath to support and defend the constitution, bind themselves to recognize and respect the
constitutional guarantee of religious freedom, with its inherent limitations and recognized
implications. It should be stated that what is guaranteed by our Constitution is religious liberty,
not mere religious toleration.
Religious freedom, however, as a constitutional mandate is not inhibition of profound reverence
for religion and is not denial of its influence in human affairs. Religion as a profession of faith to
an active power that binds and elevates man to his Creator is recognized. And, in so far as it
instills into the minds the purest principles of morality, its influence is deeply felt and highly
appreciated. When the Filipino people, in the preamble of their Constitution, implored "the aid
of Divine Providence, in order to establish a government that shall embody their ideals, conserve

and develop the patrimony of the nation, promote the general welfare, and secure to themselves
and their posterity the blessings of independence under a regime of justice, liberty and
democracy," they thereby manifested reliance upon Him who guides the destinies of men and
nations. The elevating influence of religion in human society is recognized here as elsewhere. In
fact, certain general concessions are indiscriminately accorded to religious sects and
denominations. Our Constitution and laws exempt from taxation properties devoted exclusively
to religious purposes (sec. 14, subsec. 3, Art. VI, Constitution of the Philippines and sec. 1,
subsec. 4, Ordinance appended thereto; Assessment Law, sec. 344, par. [c]. Adm. Code).
Sectarian aid is not prohibited when a priest, preacher, minister or other religious teacher or
dignitary as such is assigned to the armed forces or to any penal institution, orphanage or
leprosarium 9 sec. 13, subsec. 3, Art. VI, Constitution of the Philippines). Optional religious
instruction in the public schools is by constitutional mandate allowed (sec. 5, Art. XIII,
Constitution of the Philippines, in relation to sec. 928, Adm. Code). Thursday and Friday of Holy
Week, Thanksgiving Day, Christmas Day, and Sundays and made legal holidays (sec. 29, Adm.
Code) because of the secular idea that their observance is conclusive to beneficial moral results.
The law allows divorce but punishes polygamy and bigamy; and certain crimes against religious
worship are considered crimes against the fundamental laws of the state (see arts. 132 and 133,
Revised Penal Code).
In the case at bar, it appears that the respondent Director of Posts issued the postage
stamps in question under the provisions of Act No. 4052 of the Philippine Legislature. This Act is
as follows:
No. 4052. AN ACT APPROPRIATING THE SUM OF SIXTY THOUSAND PESOS AND MAKING
THE SAME AVAILABLE OUT OF ANY FUNDS IN THE INSULAR TREASURY NOT OTHERWISE
APPROPRIATED FOR THE COST OF PLATES AND PRINTING OF POSTAGE STAMPS WITH NEW
DESIGNS, AND FOR OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines in Legislature
assembled and by the authority of the same:
SECTION 1. The sum of sixty thousand pesos is hereby appropriated and made immediately
available out of any funds in the Insular Treasury not otherwise appropriated, for the costs of
plates and printing of postage stamps with new designs, and other expenses incident thereto.
SEC. 2. The Director of Posts, with the approval of the Secretary of Public Works and
Communications, is hereby authorized to dispose of the whole or any portion of the amount
herein appropriated in the manner indicated and as often as may be deemed advantageous to
the Government.
SEC. 3. This amount or any portion thereof not otherwise expended shall not revert to the
Treasury.
SEC. 4. This act shall take effect on its approval.
Approved,
February
21,
1933.
It will be seen that the Act appropriates the sum of sixty thousand pesos for the costs of
plates and printing of postage stamps with new designs and other expenses incident thereto,
and authorizes the Director of Posts, with the approval of the Secretary of Public Works and
Communications, to dispose of the amount appropriated in the manner indicated and "as often
as may be deemed advantageous to the Government". The printing and issuance of the postage
stamps in question appears to have been approved by authority of the President of the
Philippines in a letter dated September 1, 1936, made part of the respondent's memorandum as
Exhibit A. The respondent alleges that the Government of the Philippines would suffer losses if
the writ prayed for is granted. He estimates the revenue to be derived from the sale of the
postage stamps in question at P1,618,17.10 and states that there still remain to be sold stamps
worth
P1,402,279.02.
Act No. 4052 contemplates no religious purpose in view. What it gives the Director of Posts
is the discretionary power to determine when the issuance of special postage stamps would be
"advantageous to the Government." Of course, the phrase "advantageous to the Government"
does not authorize the violation of the Constitution. It does not authorize the appropriation, use
or application of public money or property for the use, benefit or support of a particular sect or
church. In the present case, however, the issuance of the postage stamps in question by the
Director of Posts and the Secretary of Public Works and Communications was not inspired by any

sectarian denomination. The stamps were not issue and sold for the benefit of the Roman
Catholic Church. Nor were money derived from the sale of the stamps given to that church. On
the contrary, it appears from the latter of the Director of Posts of June 5, 1936, incorporated on
page 2 of the petitioner's complaint, that the only purpose in issuing and selling the stamps was
"to advertise the Philippines and attract more tourist to this country." The officials concerned
merely, took advantage of an event considered of international importance "to give publicity to
the Philippines and its people" (Letter of the Undersecretary of Public Works and Communications
to the President of the Philippines, June 9, 1936; p. 3, petitioner's complaint). It is significant to
note that the stamps as actually designed and printed (Exhibit 2), instead of showing a Catholic
Church chalice as originally planned, contains a map of the Philippines and the location of the
City of Manila, and an inscription as follows: "Seat XXXIII International Eucharistic Congress, Feb.
3-7,1937." What is emphasized is not the Eucharistic Congress itself but Manila, the capital of the
Philippines, as the seat of that congress. It is obvious that while the issuance and sale of the
stamps in question may be said to be inseparably linked with an event of a religious character,
the resulting propaganda, if any, received by the Roman Catholic Church, was not the aim and
purpose of the Government. We are of the opinion that the Government should not be
embarassed in its activities simply because of incidental results, more or less religious in
character, if the purpose had in view is one which could legitimately be undertaken by
appropriate legislation. The main purpose should not be frustrated by its subordinate to mere
incidental results not contemplated. (Vide Bradfield vs. Roberts, 175 U. S., 295; 20 Sup. Ct. Rep.,
121; 44 Law. ed., 168.)
We are much impressed with the vehement appeal of counsel for the petitioner to
maintain inviolate the complete separation of church and state and curb any attempt to infringe
by indirection a constitutional inhibition. Indeed, in the Philippines, once the scene of religious
intolerance and prescription, care should be taken that at this stage of our political development
nothing is done by the Government or its officials that may lead to the belief that the
Government is taking sides or favoring a particular religious sect or institution. But, upon very
serious reflection, examination of Act No. 4052, and scrutiny of the attending circumstances, we
have come to the conclusion that there has been no constitutional infraction in the case at bar,
Act No. 4052 grants the Director of Posts, with the approval of the Secretary of Public Works and
Communications, discretion to misuse postage stamps with new designs "as often as may be
deemed advantageous to the Government." Even if we were to assume that these officials made
use of a poor judgment in issuing and selling the postage stamps in question still, the case of the
petitioner would fail to take in weight. Between the exercise of a poor judgment and the
unconstitutionality of the step taken, a gap exists which is yet to be filled to justify the court in
setting aside the official act assailed as coming within a constitutional inhibition.
The petition for a writ of prohibition is hereby denied, without pronouncement as to costs. So
ordered.
Avancea, C.J., Villa-Real, Abad Santos, Imperial, Diaz and Concepcion, JJ., concur.
CASE DIGEST:
Aglipay vs. Ruiz
Facts:
1. In May 1936, the Director of Posts announced in the dailies of Manila that he would order the
issuance of postage stamps commemorating the celebration in the City of Manila of the 33rd
International Eucharistic Congress, organized by the Roman Catholic Church.
2. The petitioner, Mons. Gregorio Aglipay, Supreme Head of the Philippine Independent Church,
in the fulfilment of what he considers to be a civic duty, requested Vicente Sotto, a member of
the Philippine Bar, to denounce the matter to the President. In spite of the protest of the
petitioners attorney, the Director of Posts publicly announced having sent to the United States

the designs of the postage for printing. The said stamps were actually issued and sold though the
greater part remained unsold.
3. The further sale was sought to be prevented by the petitioner. He alleged that the provisions
of Section 23, Subsection 3, Article VI, of the Constitution were violated in the issuance and
selling of the commemorative postage stamps. It was provided therein that, No public money or
property shall ever be appropriated, applied, or used, directly or indirectly, for the use, benefit, or
support of any sect, church, denomination, sectarian, institution, or system of religion, or for the
use, benefit, or support of any priest, preacher, minister, or other religious teacher or dignitary
as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces
or to any penal institution, orphanage, or leprosarium.
Issue: Whether or not the issuance of stamps was in violation of the principle of separation of
church and state
Ruling:
NO.
1. Religious freedom, as a constitutional mandate, is not inhibition of profound reverence for
religion and is not denial of its influence in human affairs. Religion as a profession of faith to an
active power that binds and elevates man to his Creator is recognized. In so far as it instils into
the minds the purest principles of morality, its influence is deeply felt and highly appreciated.
2. When the Filipino people, in the preamble of the Constitution, implored "the aid of Divine
Providence, in order to establish a government that shall embody their ideals, conserve and
develop the patrimony of the nation, promote the general welfare, and secure to themselves and
their posterity the blessings of independence under a regime of justice, liberty and democracy,"
they thereby manifested reliance upon Him who guides the destinies of men and nations. The
elevating influence of religion in human society is recognized here as elsewhere. In fact, certain
general concessions are indiscriminately accorded to religious sects and denominations.
3. There has been no constitutional infraction in this case. Act No. 4052 granted the Director of
Posts, with the approval of the Sec. of Public Works and Communications, discretion to issue
postage stamps with new designs. Even if we were to assume that these officials made use of a
poor judgment in issuing and selling the postage stamps in question, still, the case of the
petitioner would fail to take in weight. Between the exercise of a poor judgment and the
unconstitutionality of the step taken, a gap exists which is yet to be filled to justify the court in
setting aside the official act assailed as coming within a constitutional inhibition. The court
resolved to deny the petition for a writ of prohibition.

SECTION 30. No law shall be passed increasing the appellate jurisdiction of the Supreme Court
as provided in this Constitution without its advice and concurrence.
CASE
(1) Diaz vs. CA
(G.R. No. 109698, December 5, 1994)
(2) First Lepanto Ceramics, Inc.
vs. CA (G.R. No. 110571, March 10,
1994)
(1) Diaz vs. CA (G.R. No. 109698, December 5, 1994)
FULL CASE:
(G.R. No. 109698, December 5,1994)

ANTONIO DIAZ AND KOSUMO DABAW, petitioners,

vs.
COURT OF APPEALS, ENERGY REGULATORY BOARD AND DAVAO LIGHT AND POWER CO.,
INC.,respondents.
RESOLUTION
BELLOSILLO, J.:
On 23 January 1991, Davao Light and Power Company, Inc. (DLPC) filed with the Energy
Regulatory Board (ERB) an application for the approval of the sound value appraisal of its
property in service.
The Asian Appraisal Company valued the property and equipment of DLPC as of 12 March
1990 at One Billion One Hundred Forty One Million Seven Hundred Seventy Four Thousand Pesos
(P1,141,774,000.00).
On 6 December 1992, ERB approved the application of DLPC after deducting Fourteen
Million Eight Hundred Thousand Pesos (P14,800,000.00) worth of property and equipment which
were not used by DLPC in its operation.
On 6 July 1992, petitioners filed a petition for review on certiorari before this Court
assailing the decision of ERB on the ground of lack of jurisdiction and/or grave abuse of discretion
amounting to lack of jurisdiction.
In our resolution of 8 September 1992, we referred the case for proper disposition to the
Court of Appeals which subsequently dismissed the petition on the ground that (1) the filing of
the petition for review with the Supreme Court was a wrong mode of appeal, and (2) the petition
did not comply with the provisions of Supreme Court Circular 1-88 in that (a) it did not state the
date when the petitioners received notice of the ERB decision, (b) it did not state the date when
the petitioners filed a motion for reconsideration, and (c) it inconsistently alleged different dates
when petitioners supposedly received the denial of their motion by ERB.
On 18 December 1992, petitioners filed a motion for reconsideration contending that our
resolution of 8 September 1992 was a directive for the Court of Appeals to disregard the above
circular.
In its resolution of 24 March 1993, the Court of Appeals denied the motion for
reconsideration for lack of merit. Hence, the instant recourse.
We deny the petition. The predecessor of the Energy Regulatory Board was the Board of
Energy created under P.D. No. 1206. Thereunder, appeals from the decisions of the Board of
Energy were appealable to the Office of the President. However, under the Interim Rules
Implementing the Judiciary Reorganization Act of 1980, final decisions, orders, awards or
resolutions of the Board of Energy were made appealable to the Intermediate Appellate Court
(Sec. 9).
On 2 February 1987, the New Constitution took effect. Sec. 30, Art. VI, thereof provides:
"No law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in

this

Constitution
without
its
advice
and
concurrence."
On 8 May 1987, the President promulgated E.O. No. 172 creating the Energy Regulatory
Board to replace the Board of Energy. Under Sec. 10 thereof, "[a] party adversely affected by a
decision, order or ruling of the Board . . . may file a petition to be known as petition for review
with the Supreme Court."
On
27
February
1991,
the
Supreme
Court
promulgated
Circular
No.
1-91, par. (1) of which specifically provides that the proper mode of appeal from any quasijudicial agency, including ERB, is by way of a petition for review with the Court of Appeals.
It is very patent that since Sec. 10 of E.O. No. 172 was enacted without the advice and
concurrence of this Court, this provision never became effective, with the result that it cannot be
deemed to have amended the Judiciary Reorganization Act of 1980. Consequently, the authority
of the Court of Appeals to decide cases from the Board of Energy, now ERB, remains (Cf. First
Lepanto Ceramics, Inc. v. Court of Appeals, G.R. No. 110571, 7 October 1994).
If the appeal is brought to either Court (Supreme Court or Court of Appeals) by the wrong
procedure, the only course of action open to it is to dismiss the appeal. There is no longer any
justification for allowing transfers of erroneous appeals from one court to another (Quesada v.
Court of Appeals, G.R. No. 93869, 12 November 1990).
Prior to Circular No. 1-91, the Supreme Court promulgated Circular No. 2-90 dated 9 March
1990, Item No. 4 of which states that "[a]n appeal taken to either the Supreme Court or the Court
of Appeals by the wrong or inappropriate mode shall be dismissed".
Paragraph (d) of said Circular No. 2-90 also provides that "[n]o transfer of appeals
erroneously taken to the Supreme Court or to the Court of Appeals to whichever of these
Tribunals has appropriate appellate jurisdiction will be allowed; continued ignorance or willful
disregard of the law on appeals will not be tolerated."
Consequently, the Court of Appeals was correct when it held
Contrary to petitioners' stand, the Supreme Court's Resolution dated September 8,
1992, referring "this case to the Court of Appeals for further disposition" was not a
directive for this court to disregard the above circulars and precedents. Rather the
said SC resolution could mean only that this court should dispose of the subject
petition in conformity with, and not in violation of, those circulars and precedents
(Rollo, p. 26).
Both Circulars Nos. 1-88 and 2-90 were duly published in newspapers of general circulation
in the Philippines. Hence, lawyers are expected to keep themselves abreast with the decisions of
this Court and with its Circulars and other issuances relating to procedure or affecting their
duties and responsibilities as officers of the court (Teehankee, Jr. v. Hon. Madayag, G.R. No.
102717, 12 December 1992).
SC Circular No. 1-88, which took effect on 1 January 1989, was not adopted and approved
by this Court for childish, flimsy or petty reasons, nor for pure love of technicalities, but to
compel the strict observance of the Revised Rules of Court in order that proceedings before this
Court may not be needlessly delayed (Gallardo v. Quintus, A.M. No. RTJ-90-577, 18 April 1991).

WHEREFORE, the instant petition is DISMISSED.

CASE DIGEST:
Diaz vs. CA
Facts:
On 23 January 1991, Davao Light and Power Company, Inc. (DLPC) filed with the
Energy Regulatory Board (ERB) an application for the approval of the sound value appraisal of its
property in service.
The Asian Appraisal Company valued the property and equipment of DLPC as of 12
March 1990 at One Billion One Hundred Forty One Million Seven Hundred Seventy Four Thousand
Pesos (P1,141,774,000.00).
On 6 December 1992, ERB approved the application of DLPC after deducting Fourteen
Million Eight Hundred Thousand Pesos (P14,800,000.00) worth of property and equipment which
were not used by DLPC in its operation.
On 6 July 1992, petitioners filed a petition for review on certiorari before the Supreme
Court assailing the decision of ERB on the ground of lack of jurisdiction and/or grave abuse of
discretion amounting to lack of jurisdiction.
In our resolution of 8 September 1992, the Supreme Court referred the case for proper
disposition to the Court of Appeals which subsequently dismissed the petition on the ground that
(1) the filing of the petition for review with the Supreme Court was a wrong mode of appeal, and
(2) the petition did not comply with the provisions of Supreme Court Circular 1-88 in that (a) it
did not state the date when the petitioners received notice of the ERB decision, (b) it did not
state the date when the petitioners filed a motion for reconsideration, and (c) it inconsistently
alleged different dates when petitioners supposedly received the denial of their motion by ERB.
On 18 December 1992, petitioners filed a motion for reconsideration contending that
our resolution of 8 September 1992 was a directive for the Court of Appeals to disregard the
above circular.
In its resolution of 24 March 1993, the Court of Appeals denied the motion for
reconsideration for lack of merit.
Issue: Whether or not E.O. No. 172 is violative of Section 30, Article VI of the Constitution
Ruling: Yes. Since Sec. 10 of E.O. No. 172 was enacted without the advice and concurrence of
the Supreme Court, this provision never became effective, with the result that it cannot be
deemed to have amended the Judiciary Reorganization Act of 1980. Consequently, the authority
of the Court of Appeals to decide cases from the Board of Energy, now ERB, remains.
(2) FIRST LEPNTO CERAMICS, INC. vs. CA (G.R. No. 110571 March 10, 1994)

(G.R. No. 110571 March 10, 1994)

FIRST LEPANTO CERAMICS, INC., petitioner, vs.
THE COURT OF APPEALS and MARIWASA MANUFACTURING, INC.,respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
De Borja, Medialdea, Ata, Bello, Guevarra & Serapio for private respondent.
NOCON, J.:

Brought to fore in this petition for certiorari and prohibition with application for preliminary
injunction is the novel question of where and in what manner appeals from decisions of the
Board of Investments (BOI) should be filed. A thorough scrutiny of the conflicting provisions of
Batas Pambansa Bilang 129, otherwise known as the "Judiciary Reorganization Act of 1980,"
Executive Order No. 226, also known as the Omnibus Investments Code of 1987 and Supreme
Court
Circular
No.
1-91
is,
thus,
called
for.
Briefly, this question of law arose when BOI, in its decision dated December 10, 1992 in
BOI Case No. 92-005 granted petitioner First Lepanto Ceramics, Inc.'s application to amend its
BOI certificate of registration by changing the scope of its registered product from "glazed floor
tiles" to "ceramic tiles." Eventually, oppositor Mariwasa filed a motion for reconsideration of the
said BOI decision while oppositor Fil-Hispano Ceramics, Inc. did not move to reconsider the same
nor appeal therefrom. Soon rebuffed in its bid for reconsideration, Mariwasa filed a petition for
review
with
respondent
Court
of
Appeals
pursuant
to
Circular
1-91.
Acting on the petition, respondent court required the BOI and petitioner to comment on
Mariwasa's petition and to show cause why no injunction should issue. On February 17, 1993,
respondent court temporarily restrained the BOI from implementing its decision. This temporary
restraining order lapsed by its own terms on March 9, 1993, twenty (20) days after its issuance,
without
respondent
court
issuing
any
preliminary
injunction.
On February 24, 1993, petitioner filed a "Motion to Dismiss Petition and to Lift Restraining
Order" on the ground that respondent court has no appellate jurisdiction over BOI Case No. 92005, the same being exclusively vested with the Supreme Court pursuant to Article 82 of the
Omnibus
Investments
Code
of
1987.
On May 25, 1993, respondent court denied petitioner's motion to dismiss, the dispositive
portion of which reads as follows:
WHEREFORE, private respondent's motion to dismiss the petition is hereby DENIED,
for lack of merit.
Private respondent is hereby given an inextendible period of ten (10) days from
receipt hereof within which to file its comment to the petition. 1
Upon receipt of a copy of the above resolution on June 4, 1993, petitioner decided not to
file any motion for reconsideration as the question involved is essentially legal in nature and
immediately filed a petition for certiorari and prohibition before this Court.
Petitioner posits the view that respondent court acted without or in excess of its
jurisdiction in issuing the questioned resolution of May 25, 1993, for the following reasons:
I. Respondent court has no jurisdiction to entertain Mariwasa's appeal from the BOI's
decision in BOI Case No. 92-005, which has become final.
II. The appellate jurisdiction conferred by statute upon this Honorable Court cannot
be amended or superseded by Circular No. 1-91. 2
Petitioner then concludes that:
III. Mariwasa has lost it right to appeal . . . in this case. 3

Petitioner argues that the Judiciary Reorganization Act of 1980 or Batas Pambansa Bilang 129
and Circular 1-91, "Prescribing the Rules Governing Appeals to the Court of Appeals from a Final
Order or Decision of the Court of Tax Appeals and Quasi-Judicial Agencies" cannot be the basis of
Mariwasa's appeal to respondent court because the procedure for appeal laid down therein runs
contrary to Article 82 of E.O. 226, which provides that appeals from decisions or orders of the BOI
shall be filed directly with this Court, to wit:
Judicial
relief.

All
orders
or
decisions
of
the
Board
(of Investments) in cases involving the provisions of this Code shall immediately be
executory. No appeal from the order or decision of the Board by the party adversely
affected shall stay such an order or decision; Provided, that all appeals shall be filed
directly with the Supreme Court within thirty (30) days from receipt of the order or
decision.
On the other hand, Mariwasa maintains that whatever "obvious inconsistency" or "irreconcilable
repugnancy" there may have been between B.P. 129 and Article 82 of E.O. 226 on the question of
venue for appeal has already been resolved by Circular 1-91 of the Supreme Court, which was
promulgated on February 27, 1991 or four (4) years after E.O. 226 was enacted.
Sections 1, 2 and 3 of Circular 1-91, is herein quoted below:
1. Scope. These rules shall apply to appeals from final orders or decisions of the
Court of Tax Appeals. They shall also apply to appeals from final orders or decisions
of any quasi-judicial agency from which an appeal is now allowed by statute to the
Court of Appeals or the Supreme Court. Among these agencies are the Securities
and Exchange Commission, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology
Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Secretary of Agrarian Reform and Special
Agrarian Courts under RA 6657, Government Service Insurance System, Employees
Compensation Commission, Agricultural Inventions Board, Insurance Commission
and Philippine Atomic Energy Commission.
2. Cases not covered. These rules shall not apply to decisions and interlocutory
orders of the National Labor Relations Commission or the Secretary of Labor and
Employment under the Labor Code of the Philippines, the Central Board of
Assessment Appeals, and other quasi-judicial agencies from which no appeal to the
courts is prescribed or allowed by statute.
3. Who may appeal and where to appeal. The appeal of a party affected by a final
order, decision, or judgment of the Court of Tax Appeals or of a quasi-judicial agency
shall be taken to the Court of Appeals within the period and in the manner herein
provided, whether the appeal involves questions of fact or of law or mixed questions
of fact and law. From final judgments or decisions of the Court of Appeals, the
aggrieved party may appeal by certiorari to the Supreme Court as provided in Rule
45 of the Rules of Court.
It may be called that Section 9(3) of B.P. 129 vests appellate jurisdiction over all final judgments,
decisions, resolutions, orders or awards of quasi-judicial agencies on the Court of Appeals, to wit:

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders,
awards
of
Regional
Trial
Courts
and
quasi-judicial agencies, instrumentalities, boards or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948.
The Intermediate Appellate Court shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary to resolve
factual issues raised in cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or further proceedings.
These provisions shall not apply to decisions and interlocutory orders issued under
the Labor Code of the Philippines and by the Central Board of Assessment Appeals.
Clearly evident in the aforequoted provision of B.P. 129 is the laudable objective of providing a
uniform procedure of appeal from decisions of all quasi-judicial agencies for the benefit of the
bench and the bar. Equally laudable is the twin objective of B.P. 129 of unclogging the docket of
this Court to enable it to attend to more important tasks, which in the words of Dean Vicente G.
Sinco, as quoted in our decision in Conde v. Intermediate Appellate Court 4 is "less concerned
with the decisions of cases that begin and end with the transient rights and obligations of
particular individuals but is more intertwined with the direction of national policies, momentous
economic and social problems, the delimitation of governmental authority and its impact upon
fundamental rights.
In Development Bank of the Philippines vs. Court of Appeals, 5 this Court noted that B.P. 129 did
not deal only with "changes in the rules on procedures" and that not only was the Court of
Appeals reorganized, but its jurisdiction and powers were also broadened by Section 9 thereof.
Explaining the changes, this Court said:
.
.
.
Its
original
jurisdiction
to
issue
writs
of mandamus,
prohibition, certiorari and habeas corpus, which theretofore could be exercised only
in aid of its appellate jurisdiction, was expanded by (1) extending it so as to include
the writ of quo warranto, and also (2) empowering it to issue all said extraordinary
writs "whether or not in aid of its appellate jurisdiction." Its appellate jurisdiction
was also extended to cover not only final judgments of Regional Trial Courts, but
also "all final judgments, decisions, resolutions, orders or awards of . . . quasijudicial agencies, instrumentalities, boards or commissions, except those falling
within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of this Act, and of sub-paragraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948," it being noteworthy in this connection that the text of the law
is broad and comprehensive, and the explicitly stated exceptions have no reference
whatever to the Court of Tax Appeals. Indeed, the intention to expand the original
and appellate jurisdiction of the Court of Appeals over quasi-judicial agencies,
instrumentalities, boards, or commissions, is further stressed by the last paragraph
of Section 9 which excludes from its provisions, only the "decisions and interlocutory

orders issued under the Labor Code of the Philippines and by the Central Board of
Assessment Appeals." 6
However, it cannot be denied that the lawmaking system of the country is far from perfect.
During the transitional period after the country emerged from the Marcos regime, the lawmaking
power was lodged on the Executive Department. The obvious lack of deliberation in the drafting
of our laws could perhaps explain the deviation of some of our laws from the goal of uniform
procedure which B.P. 129 sought to promote.
In exempli gratia, Executive Order No. 226 or the Omnibus Investments Code of 1987 provides
that all appeals shall be filed directly with the Supreme Court within thirty (30) days from receipt
of the order or decision.
Noteworthy is the fact that presently, the Supreme Court entertains ordinary appeals only from
decisions of the Regional Trial Courts in criminal cases where the penalty imposed is reclusion
perpetua or higher. Judgments of regional trial courts may be appealed to the Supreme Court
only by petition for review on certiorari within fifteen (15) days from notice of judgment in
accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of
1948, as amended, this being the clear intendment of the provision of the Interim Rules that
"(a)ppeals to the Supreme Court shall be taken by petition for certiorariwhich shall be governed
by Rule 45 of the Rules of Court." Thus, the right of appeal provided in E.O. 226 within thirty (30)
days from receipt of the order or decision is clearly not in consonance with the present procedure
before this Court. Only decisions, orders or rulings of a Constitutional Commission (Civil Service
Commission, Commission on Elections or Commission on Audit), may be brought to the Supreme
Court on original petitions for certiorari under Rule 65 by the aggrieved party within thirty (30)
days form receipt of a copy thereof. 7
Under this contextual backdrop, this Court, pursuant to its Constitutional power under Section
5(5), Article VIII of the 1987 Constitution to promulgate rules concerning pleading, practice and
procedure in all courts, and by way of implementation of B.P. 129, issued Circular 1-91
prescribing the rules governing appeals to the Court of Appeals from final orders or decisions of
the Court of Tax Appeals and quasi-judicial agencies to eliminate unnecessary contradictions and
confusing rules of procedure.
Contrary to petitioner's contention, although a circular is not strictly a statute or law, it has,
however, the force and effect of law according to settled jurisprudence. 8 In Inciong v. de Guia, 9 a
circular of this Court was treated as law. In adopting the recommendation of the Investigating
Judge to impose a sanction on a judge who violated Circular No. 7 of this Court dated
September 23, 1974, as amended by Circular No. 3 dated April 24, 1975 and Circular No. 20
dated October 4, 1979, requiring raffling of cases, this Court quoted the ratiocination of the
Investigating Judge, brushing aside the contention of respondent judge that assigning cases
instead of raffling is a common practice and holding that respondent could not go against the
circular of this Court until it is repealed or otherwise modified, as "(L)aws are repealed only by
subsequent ones, and their violation or non-observance shall not be excused by disuse, or
customs or practice to the contrary." 10
The argument that Article 82 of E.O. 226 cannot be validly repealed by Circular 1-91 because the
former grants a substantive right which, under the Constitution cannot be modified, diminished
or increased by this Court in the exercise of its rule-making powers is not entirely defensible as it

seems. Respondent correctly argued that Article 82 of E.O. 226 grants the right of appeal from
decisions or final orders of the BOI and in granting such right, it also provided where and in what
manner such appeal can be brought. These latter portions simply deal with procedural aspects
which this Court has the power to regulate by virtue of its constitutional rule-making powers.
The case of Bustos v. Lucero 11 distinguished between rights created by a substantive law and
those arising from procedural law:
Substantive law creates substantive rights . . . . Substantive rights is a term which
includes those rights which one enjoys under the legal system prior to the
disturbance of normal relations (60 C.J., 980). Substantive law is that part of the law
which creates, defines and regulates rights, or which regulates rights and duties
which give rise to a cause of action, as oppossed to adjective or remedial law, which
prescribes the method of enforcing rights or obtains a redress for their invasion. 12
Indeed, the question of where and in what manner appeals from decisions of the BOI should be
brought pertains only to procedure or the method of enforcing the substantive right to appeal
granted by E.O. 226. In other words, the right to appeal from decisions or final orders of the BOI
under E.O. 226 remains and continues to be respected. Circular 1-91 simply transferred the
venue of appeals from decisions of this agency to respondent Court of Appeals and provided a
different period of appeal, i.e., fifteen (15) days from notice. It did not make an incursion into the
substantive right to appeal.
The fact that BOI is not expressly included in the list of quasi-judicial agencies found in the third
sentence of Section 1 of Circular 1-91 does not mean that said circular does not apply to appeals
from final orders or decision of the BOI. The second sentence of Section 1 thereof expressly
states that "(T)hey shall also apply to appeals from final orders or decisions of any quasi-judicial
agency from which an appeal is now allowed by statute to the Court of Appeals or the Supreme
Court." E.O. 266 is one such statute. Besides, the enumeration is preceded by the words
"(A)mong these agencies are . . . ," strongly implying that there are other quasi-judicial agencies
which are covered by the Circular but which have not been expressly listed therein. More
importantly, BOI does not fall within the purview of the exclusions listed in Section 2 of the
circular. Only the following final decisions and interlocutory orders are expressly excluded from
the circular, namely, those of: (1) the National Labor Relations Commission; (2) the Secretary of
Labor and Employment; (3) the Central Board of Assessment Appeals and (4) other quasi-judicial
agencies from which no appeal to the courts is prescribed or allowed by statute. Since in DBP
v. CA 13 we upheld the appellate jurisdiction of the Court of Appeals over the Court of Tax Appeals
despite the fact that the same is not among the agencies reorganized by B.P. 129, on the ground
that B.P. 129 is broad and comprehensive, there is no reason why BOI should be excluded from
Circular 1-91, which is but implementary of said law.
Clearly, Circular 1-91 effectively repealed or superseded Article 82 of E.O. 226 insofar as the
manner and method of enforcing the right to appeal from decisions of the BOI are concerned.
Appeals from decisions of the BOI, which by statute was previously allowed to be filed directly
with the Supreme Court, should now be brought to the Court of Appeals.
WHEREFORE, in view of the foregoing reasons, the instant petition forcertiorari and
prohibition with application for temporary restraining order and preliminary injunction is hereby
DISMISSED for lack of merit. The Temporary Restraining Order issued on July 19, 1993 is hereby
LIFTED.SO ORDERED.

CASE DIGEST:
First Lepanto Ceramics, Inc. vs. CA
Facts: Petitioner assailed the conflicting provisions of B.P. 129, EO 226 (Art. 82) and a circular, 191 issued by the Supreme Court which deals with the jurisdiction of courts for appeal of cases
decided by quasi-judicial agencies such as the Board of Investments (BOI).
BOI granted petitioner First Lepanto Ceramics, Inc.'s application to amend its BOI
certificate of registration by changing the scope of its registered product from &glazed floor
tiles& to &ceramic tiles.& Oppositor Mariwasa filed a motion for reconsideration of the said BOI
decision while oppositor Fil-Hispano Ceramics, Inc. did not move to reconsider the same nor
appeal therefrom. Soon rebuffed in its bid for reconsideration, Mariwasa filed a petition for review
with
CA.
CA temporarily restrained the BOI from implementing its decision. The TRO lapsed by its
own terms twenty (20) days after its issuance, without respondent court issuing any preliminary
injunction.
Petitioner filed a motion to dismiss and to lift the restraining order contending that CA
does not have jurisdiction over the BOI case, since the same is exclusively vested with the
Supreme Court pursuant to Article 82 of the Omnibus Investments Code of 1987.
Petitioner argued that the Judiciary Reorganization Act of 1980 or B.P. 129 and Circular 191, &Prescribing the Rules Governing Appeals to the Court of Appeals from a Final Order or
Decision of the Court of Tax Appeals and Quasi-Judicial Agencies& cannot be the basis of
Mariwasa's appeal to respondent court because the procedure for appeal laid down therein runs
contrary to Article 82 of E.O. 226, which provides that appeals from decisions or orders of the BOI
shall
be
filed
directly
with
the
Supreme
Court.
While Mariwasa maintains that whatever inconsistency there may have been between B.P.
129 and Article 82 of E.O. 226 on the question of venue for appeal, has already been resolved by
Circular 1-91 of the Supreme Court, which was promulgated on February 27, 1991 or four (4)
years
after
E.O.
226
was
enacted.
Issue:
Whether
or
not
the
CA
has
jurisdiction
over
the
case?
Ruling: YES. Circular 1-91 effectively repealed or superseded Article 82 of E.O. 226 insofar as
the manner and method of enforcing the right to appeal from decisions of the BOI are concerned.
Appeals from decisions of the BOI, which by statute was previously allowed to be filed directly
with the Supreme Court, should now be brought to the Court of Appeals.
In exempli gratia, Executive Order No. 226 or the Omnibus Investments Code of 1987
provides that all appeals shall be filed directly with the Supreme Court within thirty (30) days
from receipt of the order or decision.
Noteworthy is the fact that presently, the Supreme Court entertains ordinary appeals only from
decisions of the Regional Trial Courts in criminal cases where the penalty imposed is reclusion
perpetua or higher. Judgments of regional trial courts may be appealed to the Supreme Court
only by petition for review on certiorari within fifteen (15) days from notice of judgment in
accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of
1948, as amended, this being the clear intendment of the provision of the Interim Rules that
&(a)ppeals to the Supreme Court shall be taken by petition for certiorari which shall be governed
by
Rule
45
of
the
Rules
of
Court.&
Thus, the right of appeal provided in E.O. 226 within thirty (30) days from receipt of the
order or decision is clearly not in consonance with the present procedure before this Court. Only
decisions, orders or rulings of a Constitutional Commission (Civil Service Commission,
Commission on Elections or Commission on Audit), may be brought to the Supreme Court on
original petitions for certiorari under Rule 65 by the aggrieved party within thirty (30) days form
receipt
of
a
copy
thereof. 7
Under this contextual backdrop, this Court, pursuant to its Constitutional power under

Section 5(5), Article VIII of the 1987 Constitution to promulgate rules concerning pleading,
practice and procedure in all courts, and by way of implementation of B.P. 129, issued Circular 191 prescribing the rules governing appeals to the Court of Appeals from final orders or decisions
of the Court of Tax Appeals and quasi-judicial agencies to eliminate unnecessary contradictions
and
confusing
rules
of
procedure.
Contrary to petitioner's contention, although a circular is not strictly a statute or law, it
has, however, the force and effect of law according to settled jurisprudence.
Indeed, the question of where and in what manner appeals from decisions of the BOI
should be brought pertains only to procedure or the method of enforcing the substantive right to
appeal granted by E.O. 226. In other words, the right to appeal from decisions or final orders of
the BOI under E.O. 226 remains and continues to be respected. Circular 1-91 simply transferred
the venue of appeals from decisions of this agency to respondent Court of Appeals and provided
a different period of appeal, i.e., fifteen (15) days from notice. It did not make an incursion into
the
substantive
right
to
appeal.
The fact that BOI is not expressly included in the list of quasi-judicial agencies found in the
third sentence of Section 1 of Circular 1-91 does not mean that said circular does not apply to
appeals from final orders or decision of the BOI.

SECTION 32. The Congress shall, as early as possible, provide for a system of initiative and
referendum, and the exceptions therefrom, whereby the people can directly propose and enact
laws or approve or reject any act or law or part thereof passed by the Congress or local
legislative body after the registration of a petition therefor signed by at least ten per centum of
the total number of registered voters, of which every legislative district must be represented by
at least three per centum of the registered voters thereof.
CASE
Subic Bay Metropolitan Authority vs.
COMELEC
(G.R. No. 125416, September 26, 1996)

FULL CASE:
[G.R. No. 125416. September 26, 1996]
SUBIC BAY METROPOLITAN AUTHORITY, petitioner, vs. COMMISSION ON ELECTIONS, ENRIQUE T.
GARCIA and CATALINO A. CALIMBAS, respondents.
DECISION
PANGANIBAN, J.:
The 1987 Constitution is unique in many ways. For one thing, it institutionalized people
power in law-making. Learning from the bitter lesson of completely surrendering to Congress the
sole authority to make, amend or repeal laws, the present Constitution concurrently vested such
prerogatives in the electorate by expressly recognizing their residual and sovereign authority to
ordain legislation directly through the concepts and processes of initiative and of referendum.
In this Decision, this Court distinguishes referendum from initiative and discusses the
practical and legal implications of such differences. It also sets down some guidelines in the
conduct and implementation of these two novel and vital features of popular democracy, as well
as settles some relevant questions on jurisdiction -- all with the purpose of nurturing, protecting
and promoting the people's exercise of direct democracy.
In this action for certiorari and prohibition, petitioner seeks to nullify the respondent
Commission on Elections' Ruling dated April 17, 1996 and Resolution No. 2848 promulgated on
June 27, 1996[1] denying petitioner's plea to stop the holding of a local initiative and referendum
on the proposition to recall Pambayang Kapasyahan Blg. 10, Serye 1993, of the Sangguniang
Bayan of Morong, Bataan.
The Facts
On March 13, 1992, Congress enacted Republic Act No. 7227 (The Bases Conversion and
Development Act of 1992), which among others, provided for the creation of the Subic Special
Economic Zone, thus:
"Sec. 12. Subic Special Economic Zone. - Subject to the concurrence by resolution of the
Sangguniang Panlungsod of the City of Olongapo and the Sangguniang Bayan of the
Municipalities of Subic, Morong and Hermosa, there is hereby created a Special Economic and
Free-port Zone consisting of the City of Olongapo and the Municipality of Subic, Province of
Zambales, the lands occupied by the Subic Naval Base and its contiguous extensions as
embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines
and the United States of America as amended, and within the territorial jurisdiction of the
Municipalities of Morong and Hermosa, Province of Bataan, hereinafter referred to as the Subic
Special Economic Zone whose metes and bounds shall be delineated in a proclamation to be
issued by the President of the Philippines. Within thirty (30) days after the approval of this Act,
each local government unit shall submit its resolution of concurrence to join the Subic Special
Economic Zone to the Office of the President. Thereafter, the President of the Philippinesshall
issue a proclamation defining the metes and bounds of the zone as provided herein."
(Underscoring supplied)
RA 7227 likewise created petitioner to implement the declared national policy of converting
the Subic military reservation into alternative productive uses. [2] Petitioner was organized with an
authorized capital stock of P20 billion which was fully subscribed and fully paid up by the
Republic of the Philippines with, among other assets, "(a)ll lands embraced, covered and defined
in Section 12 hereof, as well as permanent improvements and fixtures upon proper inventory not
otherwise alienated, conveyed, or transferred to another government agency. [3]
On November 24, 1992, the American navy turned over the Subic military reservation to the
Philippine government. Immediately, petitioner commenced the implementation of its task,
particularly the preservation of the seaports, airports, buildings, houses and other installations
left by the American navy.
In April 1993, the Sangguniang Bayan of Morong, Bataan passed a Pambayang Kapasyahan
Bilang 10, Serye 1993, expressing therein its absolute concurrence, as required by said Sec. 12
of RA 7227, to join the Subic Special Economic Zone. On September 5, 1993, theSangguniang
Bayan of Morong submitted Pambayang Kapasyahan Bilang 10, Serye 1993 to the Office of the
President.

On May 24, 1993, respondents Garcia, Calimbas and their companions filed a petition with
the Sangguniang Bayan of Morong to annulPambayang Kapasyahan Blg. 10, Serye 1993. The
petition prayed for the following:
"I. Bawiin, nulipikahin at pawalang-bisa ang Pambayang Kapasyahan Blg. 10 Serye 1993 ng
Sangguniang Bayan para sa pag-anib ng Morong sa SSEFZ na walang kundisyon.
II. Palitan ito ng isang Pambayang kapasiyahan na aanib lamang ang Morong sa SSEFZ kung ang
mga sumusunod na kondisyones ay ipagkakaloob, ipatutupad at isasagawa para sa kapakanan at
interes ng Morong at Bataan:
(A) Ibalik sa Bataan ang 'Virgin Forests' -- isang bundok na hindi nagagalaw at punong-puno ng
malalaking punong-kahoy at iba't-ibang halaman.
(B) Ihiwalay ang Grande Island sa SSEFZ at ibalik ito sa Bataan.
(K) Isama ang mga lupain ng Bataan na nakapaloob sa SBMA sa pagkukuenta ng salaping
ipinagkaloob ng pamahalaang national o 'Internal Revenue Allotment' (IRA) sa Morong, Hermosa
at sa Lalawigan.
(D) Payagang magtatag rin ng sariling 'special economic zones' ang bawat bayan ng Morong,
Hermosa at Dinalupihan.
(E) Ibase sa laki ng kanya-kanyang lupa ang pamamahagi ng kikitain ng SBMA.
(G) Ibase rin ang alokasyon ng pagbibigay ng trabaho sa laki ng nasabing mga lupa.
(H) Pabayaang bukas ang pinto ng SBMA na nasa Morong ng 24 na oras at bukod dito sa
magbukas pa ng pinto sa hangganan naman ng Morong at Hermosa upang magkaroon ng
pagkakataong umunlad rin ang mga nasabing bayan, pati na rin ng iba pang bayan ng Bataan.
(I) Tapusin ang pagkokonkreto ng mga daang Morong-Tala-Orani at Morong-Tasig-Dinalupihan
para sa kabutihan ng mga taga-Bataan at tuloy makatulong sa pangangalaga ng mga
kabundukan.
(J) Magkakaroon ng sapat na representasyon sa pamunuan ng SBMA ang Morong, Hermosa
atBataan."
The Sangguniang Bayan of Morong acted upon the petition of respondents Garcia, Calimbas,
et al. by promulgating Pambayang Kapasyahan Blg. 18, Serye 1993, requesting Congress of the
Philippines to amend certain provisions of R.A. No. 7227, particularly those concerning the
matters cited in items (A), (B), (K), (E) and (G) of private respondents' petition. The Sangguniang
Bayan of Morong also informed respondents that items (D) and (H) had already been referred to
and favorably acted upon by the government agencies concerned, such as the Bases Conversion
Development Authority and the Office of the President.
Not satisfied, and within 30 days from submission of their petition, herein respondents
resorted to their power of initiative under the Local Government Code of 1991, [4] Sec. 122
paragraph (b) of which provides as follows:
"Sec. 122. Procedure in Local Initiative. xxxxxxxxx
(b) If no favorable action thereon is taken by the sanggunian concerned, the proponents, through
their duly authorized and registered representatives, may invoke their power of initiative, giving
notice thereof to the sanggunian concerned.
x x x x x x x x x."
On July 6, 1993, respondent Commission En Banc in COMELEC Resolution No. 93-1623 denied
the petition for local initiative by herein private respondents on the ground that the subject
thereof was merely a resolution (pambayang kapasyahan) and not an ordinance. On July 13,
1993, public respondent COMELEC En Banc (thru COMELEC Resolution no. 93-1676) further
directed its Provincial Election Supervisor to hold action on the authentication of signatures being
solicited by private respondents.
On
August
15,
1993,
private
respondents
instituted
a
petition
for certiorari and mandamus[5] before this Court against the Commission on Elections and
the Sangguniang Bayan of Morong, Bataan, to set aside COMELEC Resolution No. 93-1623 insofar
as it disallowed the conduct of a local initiative to annul Pambayang Kapasyahan Bilang 10,
Serye 1993, and COMELEC Resolution No. 93-1676 insofar as it prevented the Provincial Election
Supervisor of Bataan from proceeding with the authentication of the required number of
signatures in support of the initiative and the gathering of signatures.

On February 1, 1995, pursuant to Sec. 12 of RA 7227, the President of the Philippines issued
proclamation No. 532 defining the metes and bounds of the SSEZ. Said proclamation included in
the SSEZ all the lands within the former Subic Naval Base, including Grande Islandand that
portion of the former naval base within the territorial jurisdiction of the Municipality of Morong.
On June 18, 1996, respondent COMELEC issued Resolution No. 2845, adopting therein a
"Calendar of Activities for local referendum on certain municipal ordinance passed by the
Sangguniang Bayan of Morong, Bataan", and which indicated, among others, the scheduled
referendum Day (July 27, 1996, Saturday). On June 27, 1996, the COMELEC promulgated the
assailed Resolution No. 2848 providing for "the rules and guidelines to govern the conduct of the
referendum proposing to annul or repeal Kapasyahan Blg. 10, Serye 1993 of theSangguniang
Bayan of Morong, Bataan".
On July 10, 1996, petitioner instituted the present petition for certiorari and prohibition
contesting the validity of Resolution No. 2848 and alleging, inter alia, that public respondent "is
intent on proceeding with a local initiative that proposes an amendment of a national law. x x x"
The Issues
The petition[6] presents the following "argument":
"Respondent Commission on Elections committed grave abuse of discretion amounting to lack of
jurisdiction in scheduling a local initiative which seeks the amendment of a national law."
In his Comment, private respondent Garcia claims that (1) petitioner has failed to show the
existence of an actual case or controversy; (2) x x x petitioner seeks to overturn a
decision/judgment which has long become final and executory; (3) x x x public respondent has
not abused its discretion and has in fact acted within its jurisdiction; (and) (4) x x x the
concurrence of local government units is required for the establishment of the Subic Special
Economic Zone."
Private respondent Calimbas, now the incumbent Mayor of Morong, in his Reply (should be
Comment) joined petitioner's cause because "(a)fter several meetings with petitioner's Chairman
and staff and after consultation with legal counsel, respondent Calimbas discovered that the
demands in the petition for a local initiative/referendum were not legally feasible." [7]
The Solicitor General, as counsel for public respondent, identified two issues, as follows:
"1. Whether or not the COMELEC can be enjoined from scheduling/conducting the local intiative
proposing to annul Pambayang Kapasyahan Blg. 10, Serye 1993 of the Sangguniang Bayan of
Morong,Bataan.
2. Whether or not the COMELEC committed grave abuse of discretion in denying the request of
petitioner SBMA to stop the local initiative."
On July 23, 1996, the Court heard oral argument by the parties, after which, it issued the
following resolution:
"The Court Resolved to (1) GRANT the Motion to Admit the Attached Comment filed by counsel
for private respondent Enrique T. Garcia, dated July 22, 1996 and (2) NOTE the: (a) Reply (should
be comment) to the petition for certiorari and prohibition with prayer for temporary restraining
order and/or writ of preliminary injunctiom, filed by counsel for respondent Catalino Calimbas,
dated July 22, 1996; (b) Separate Comments on the petition, filed by: (b-1) the Solicitor General
for respondent Commission on Elections dated July 19, 1996 and (b-2) counsel for private
respondent Enrique T. Garcia, dated July 22, 1996 and (c) Manifestation filed by counsel for
petitioner dated July 22, 1996.
At the hearing of this case this morning, Atty. Rodolfo O. Reyes appeared and argued for
petitioner Subic Bay Metropolitan Authority (SBMA) while Atty. Sixto Brillantes for private
respondent Enrique T. Garcia, and Atty. Oscar L. Karaan for respondent Catalino
Calimbas. Solicitor General Raul Goco, Assistant Solicitor General Cecilio O. Estoesta and Solicitor
Zenaida Hernandez-Perez appeared for respondent Commission on Elections with Solicitor
General Goco arguing.
Before the Court adjourned, the Court directed the counsel for both parties to INFORM this Court
by Friday, July 26, 1996, whether or not Commission on Elections would push through with the
initiative/referendum this Saturday, July 27, 1996.
Thereafter, the case shall be considered SUBMITTED for resolution.
At 2:50 p.m. July 23, 1996, the Court received by facsimile transmission an Order dated also on
July 23, 1996 from the respondent Commission on Elections En Banc inter alia 'to hold in

abeyance the scheduled referendum (initiative) on July 27, 1996 pending resolution of G.R. No.
125416.' In view of this Order, the petitioner's application for a temporary restraining order
and/or writ of preliminary injunction has become moot and academic and will thus not be passed
upon by this Court at this time.Puno, J., no part due to relationship. Bellosillo, J., is on leave."
After careful study of and judicious deliberation on the submissions and arguments of the
parties, the Court believes that the issues may be restated as follows:
(1) Whether this petition "seeks to overturn a decision/judgment which has long become final
and executory"; namely G.R. No. 111230, Enrique Garcia, et al. vs. Commission on Elections, et
al.;
(2) Whether the respondent COMELEC committed grave abuse of discretion in promulgating and
implementing its Resolution No. 2848 which "govern(s) the conduct of the referendum proposing
to annul or repeal Pambayang Kapasyahan Blg. 10, Serye 1993 of the Sangguniang Bayan of
Morong, Bataan;" and
(3) Whether the questioned local initiative covers a subject within the powers of the people of
Morong to enact; i.e., whether such initiative "seeks the amendment of a national law."
First Issue: Bar by Final Judgment
Respondent Garcia contends that this Court had already ruled with finality in Enrique T.
Garcia, et al. vs. Commission on Elections, et. al.[8] on "the very issue raised in (the)
petition: whether or not there can be an initiative by the people of Morong, Bataan on the subject
proposition -- the very same proposition, it bears emphasizing, the submission of which to the
people of Morong, Bataan is now sought to be enjoined by petitioner x x x".
We disagree. The only issue resolved in the earlier Garcia case is whether a municipal
resolution as contra-distinguished from an ordinance may be the proper subject of an initiative
and/or referendum. We quote from our said Decision: [9]
"In light of this legal backdrop, the essential issue to be resolved in the case at bench is whether
Pambayang Kapasyahan Blg. 10, serye 1993 of the Sangguniang Bayan of Morong, Bataan is the
proper subject of an initiative. Respondents take the negative stance as they contend that under
the Local Government Code of 1991 only an ordinance can be the subject of initiative. They rely
on Section 120, Chapter 2, Title XI, Book I of the Local Government Code of 1991 which provides:
'Local Initiative Defined. -- Local initiative is the legal process whereby the registered voters of a
local government unit may directly propose, enact, or amend any ordinance.'
We reject respondent's narrow and literal reading of the above provision for it will collide with the
Constitution and will subvert the intent of the lawmakers in enacting the provisions of the Local
Government of 1991 on initiative and referendum.
The Constitution clearly includes not only ordinances but resolutions as appropriate subjects of a
local initiative. Section 32 of Article VI provides in luminous language: 'The Congress shall, as
early as possible, provide for a system of initiative and referendum, and the exceptions
therefrom, whereby the people can directly propose and enact laws or approve or reject any
act or law or part thereof passed by the Congress, or local legislative body x x x'. An act includes
a resolution. Black defines an acts 'an expression of will or purpose . . . it may denote something
done . . . as a legislature, including not merely physical acts, but also decrees, edicts, laws,
judgement, resolves, awards and determination x x x.' It is basic that a law should be construed
in harmony with and not in violation of the Constitution.In line with this postulates, we held in In
Re Guarina that if there is doubt or uncertainly as to the meaning of the legislative, if the words
or provisions are obscure, or if the enactment is fairly susceptible of two or more construction,
that interpretations will be adopted which will avoid the effect of unconstitutionality, even though
it may be necessary, for this purpose, to disregard the more usual or apparent import of the
language used.' "
Moreover, we reviewed our rollo in said G.R. No. 111230 and we found that the sole issue
presented by the pleadings was the question of "whether or not a Sangguniang Bayan Resolution
can be the subject of a valid initiative or referendum".[10]
In the present case, petitioner is not contesting the propriety of municipal resolution as the
form by which these two new constitutional prerogatives of the people may validly
exercised. What is at issue here is whether Pambayang Kapasyahan Blg. 10, Serye 1993, as
worded, is sufficient in form and substance for submission to the people for their approval; in

fine, whether the COMELEC acted properly and juridically in promulgating and implementing
Resolution No. 2848.
Second Issue: Sufficiency of COMELEC Resolution No. 2848
The main issue in this case may be re-started thus: Did respondent COMELEC commit grave
abuse of discretion in promulgating and implementing Resolution No. 2848?
We answer the question in the affirmative.
To begin with, the process started by private respondents was an INITIATIVE but respondent
COMELEC made preparations for a REFERENDUM only. In fact, in the body of the Resolution [11] as
reproduced in the footnote below the word "referendum" is repeated at least 27 times, but
"initiative" is not mentioned at all. The COMELEC labeled the exercise as a "Referendum"; the
counting of votes was entrusted to a "Referendum Committee"; the documents were called
"referendum returns"; the canvassers, "Referendum Board of Canvassers" and the ballots
themselves bore the description "referendum". To repeat, not once was the word "initiative" used
in said body of Resolution No. 2848. And yet, this exercise is unquestionably an INITIATIVE.
There are statutory and conceptual demarcations between a referendum and an initiative. In
enacting the "Initiative and Referendum Act,[12] Congress differentiated one term from the other,
thus:
(a) "Initiative" is the power of the people to propose amendments to the Constitution or to
propose and enact legislations through an election called for the purpose.
There are three (3) systems of initiative, namely:
a.1. Initiative on the Constitution which refers to a petition proposing amendments to the
Constitution;
a.2. Initiative on statutes which refers to a petition proposing to enact a national
legislation; and
a.3. Initiative on local legislation which refers to a petition proposing to enact a regional,
provincial, city, municipal, or barangay law, resolution or ordinance.
(b) "Indirect initiative" is exercise of initiative by the people through a proposition sent to
Congress or the local legislative body for action.
(c) "Referendum" is the power of the electorate to approve or reject a legislation through an
election called for the purpose. It may be of two classes, namely:
c.1. Referendum on statutes which refers to a petition to approve or reject an act or law,
or part thereof, passed by Congress; and
c.2. Referendum on local law which refers to a petition to approve or reject a law,
resolution or ordinance enacted by regional assemblies and local legislative bodies.
Along these statutory definitions, Justice Isagani A. Cruz [13] defines initiative as the "power of
the people to propose bills and laws, and to enact or reject them at the polls independent of the
legislative assembly." On the other hand, he explains that referendum "is the right reserved to
the people to adopt or reject any act or measure which has been passed by a legislative body
and which in most cases would without action on the part of electors become a law." The
foregoing definitions, which are based on Black's [14] and other leading American authorities, are
echoed in the Local Government Code (RA 7160) substantially as follows:
"SEC. 120. Local Initiative Defined. -- Local Initiative is the legal process whereby the registered
voters of a local government unit may directly propose, enact, or amend any ordinance.
"SEC. 126. Local Referendum Defined. -- Local referendum is the legal process whereby the
registered voters of the local government units may approve, amend or reject any ordinance
enacted by the sanggunian.
The local referendum shall be held under the control and direction of the COMELEC within sixty
(60) days in case of provinces and cities, forty-five (45) days in case of municipalities and thirty
(30) days in case of barangays.
The COMELEC shall certify and proclaim the results of the said referendum."
Prescinding from these definitions, we gather that initiative is resorted to (or initiated) by the
people directly either because the law-making body fails or refuses to enact the law, ordinance,
resolution or act that they desire or because they want to amend or modify one already
existing. Under Sec. 13 of R.A. 6735, the local legislative body is given the opportunity to enact
the proposal. If its refuses/neglects to do so within thirty (30) days from its presentation, the
proponents through their duly-authorized and registered representatives may invoke their power

of initiative, giving notice thereof to the local legislative body concerned. Should the proponents
be able to collect the number of signed conformities within the period granted by said statute,
the Commission on Elections "shall then set a date for the initiative (not referendum) at which
the proposition shall be submitted to the registered voters in the local government unit
concerned x x x".
On the other hand, in a local referendum, the law-making body submits to the registered
voters of its territorial jurisdiction, for approval or rejection, any ordinance or resolution which is
duly enacted or approved by such law-making authority. Said referendum shall be conducted also
under the control and direction of the Commission on Elections. [15]
In other words, while initiative is entirely the work of the electorate, referendum is begun and
consented to by the law-making body.Initiative is a process of law-making by the people
themselves without the participation and against the wishes of their elected representatives,
while referendum consists merely of the electorate approving or rejecting what has been drawn
up or enacted by a legislative body. Hence, the process and the voting in an initiative are
understandably more complex than in a referendum where expectedly the voters will simply
write either "Yes" or "No" in the ballot.
[Note: While the above quoted laws variously refer to initiative and referendum as "powers"
or "legal processes", these can also be "rights", as Justice Cruz terms them, or "concepts", or
"the proposal" itself (in the case of initiative) being referred to in this Decision.]
From the above differentiation, it follows that there is need for the COMELEC to supervise an
initiative more closely, its authority thereon extending not only to the counting and canvassing of
votes but also to seeing to it that the matter or act submitted to the people is in the proper form
and language so it may be easily understood and voted upon by the electorate. This is especially
true where the proposed legislation is lengthy and complicated, and should thus be broken down
into several autonomous parts, each such part to be voted upon separately. Care must also be
exercised that "(n)o petition embracing more than one subject shall be submitted to the
electorate,"[16]although "two or more propositions may be submitted in an initiative". [17]
It should be noted that under Sec. 13 (c) of RA 6735, the "Secretary of Local Government or
his designated representative shall extend assistance in the formulation of the proposition."
In initiative and referendum, the COMELEC exercises administration and supervision of the
process itself, akin to its powers over the conduct of elections. These law-making powers belong
to the people, hence the respondent Commission cannot control or change the substance or the
content of legislation. In the exercise of its authority, it may (in fact it should have done so
already) issue relevant and adequate guidelines and rules for the orderly exercise of these
"people-power" features of our Constitution.
Third Issue: Withdrawal of Adherence and Imposition of Conditionalities -- Ultra Vires?
Petitioner maintains that the proposition sought to be submitted in the plebiscite,
namely, Pambayang Kapasyahan Blg. 10, Serye 1993, is ultra vires or beyond the powers of the
Sangguniang Bayan to enact, [18] stressing that under Sec. 124 (b) of RA 7160 (the Local
Government Code), "local initiative shall cover only such subjects or matters as are within the
legal powers of the sanggunians to enact." Elsewise stated, a local initiative may enact only such
ordinances or resolutions as the municipal council itself could, if it decided to so enact.[19] After
the Sangguniang Bayan of Morong and the other municipalities concerned (Olongapo, Subic and
Hermosa) gave their resolutions of concurrence, and by reason of which the SSEZ had been
created, whose metes and bounds had already been delineated by Proclamation No. 532 issued
on February 1, 1995 in accordance with Section 12 of R.A. No. 7227, the power to withdraw such
concurrence and/or to substitute therefor a conditional concurrence is no longer within the
authority and competence of the Municipal Council of Morong to legislate. Furthermore,
petitioner adds, the specific conditionalities included in the questioned municipal resolution are
beyond the powers of the Council to impose. Hence, such withdrawal can no longer be enacted
or conditionalities imposed by initiative. In other words, petitioner insists, the creation of SSEZ is
now a fait accompli for the benefit of the entire nation. Thus, Morong cannot unilaterally
withdraw its concurrence or impose new conditions for such concurrence as this would effectively
render nugatory the creation by (national) law of the SSEZ and would deprive the entire nation of
the benefits to be derived therefrom. Once created, SSEZ has ceased to be a local concern. It has
become a national project.

On the other hand, private respondent Garcia counters that such argument is premature and
conjectural because at this point, the resolution is just a proposal. If the people should reject it
during the referendum, then there is nothing to declare as illegal.
Deliberating on this issue, the Court agrees with private respondent Garcia that indeed, the
municipal resolution is still in the proposal stage. It is not yet an approved law. Should the people
reject it, then there would be nothing to contest and to adjudicate. It is only when the people
have voted for it and it has become an approved ordinance or resolution that rights and
obligations can be enforced or implemented thereunder. At this point, it is merely a proposal and
the writ of prohibition cannot issue upon a mere conjecture or possibility.Constitutionally
speaking, courts may decide only actual controversies, not hypothetical questions or cases. [20]
We also note that the Initiative and Referendum Act itself provides [21] that "(n)othing in this
Act shall prevent or preclude the proper courts from declaring null and void any
proposition approved pursuant to this Act x x x."
So too, the Supreme Court is basically a review court. [22] It passes upon errors of law (and
sometimes of fact, as in the case of mandatory appeals of capital offenses) of lower courts as
well as determines whether there had been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any "branch or instrumentality" of government. In the
present case, it is quite clear that the Court has authority to review COMELEC Resolution No.
2848 to determine the commission of grave abuse of discretion. However, it does not have the
same authority in regard to the proposed initiative since it has not been promulgated or
approved, or passed upon by any "branch or instrumentality" or lower court, for that matter. The
Commission on Elections itself has made no reviewable pronouncements about the issues
brought by the pleadings. The COMELEC simply included verbatim the proposal in its questioned
Resolution No. 2848. Hence, there is really no decision or action made by a branch,
instrumentality or court which this Court could take cognizance of and acquire jurisdiction over,
in the exercise of its review powers.
Having said that, we are in no wise suggesting that the COMELEC itself has no power to pass
upon proposed resolutions in an initiative.Quite the contrary, we are ruling that these matters are
in fact within the initiatory jurisdiction of the Commission -- to which then the herein basic
questions ought to have been addressed, and by which the same should have been decided in
the first instance. In other words, while regular courts may take jurisdiction over
"approved propositions" per said Sec. 18 of R.A. 6735, the COMELEC in the exercise of its quasijudicial and administrative powers may adjudicate and pass upon such proposals insofar as their
form and language are concerned, as discussed earlier; and it may be added, even as to content,
where the proposals or parts thereof are patently and clearly outside the "capacity of the local
legislative body to enact."[23] Accordingly, the question of whether the subject of this initiative is
within the capacity of the Municipal Council of Morong to enact may be ruled upon by the
COMELEC upon remand and after hearing the parties thereon.
While on the subject of capacity of the local lawmaking body, it would be fruitful for the
parties and the COMELEC to plead and adjudicate, respectively, the question of whether Grande
Island and the "virgin forests" mentioned in the proposed initiative belong to the national
government and thus cannot be segregated from the Zone and "returned to Bataan" by the
simple expedient of passing a municipal resolution. We note that Sec. 13 (e) of R.A. 7227 speaks
of the full subscription and payment of the P20 billion authorized capital stock of the Subic
Authority by the Republic, with, aside from cash and other assets, the "... lands, embraced,
covered and defined in Section 12 hereof, ..." which includes said island and forests. The
ownership of said lands is a question of fact that may be taken up in the proper forum -- the
Commission on Elections.
Another question which the parties may wish to submit to the COMELEC upon remand of the
initiative is whether the proposal, assuming it is within the capacity of the Municipal Council to
enact, may be divided into several parts for purposes of voting. Item "I" is a proposal to recall,
nullify and render without effect (bawiin, nulipikahin at pawalangbisa) Municipal Resolution No.
10, Series of 1993. On the other hand, Item "II" proposes to change or replace (palitan) said
resolution with another municipal resolution of concurrence provided certain conditions
enumerated thereunder would be granted, obeyed and implemented (ipagkakaloob, ipatutupad
at isasagawa) for the benefit and interest of Morong and Bataan. A voter may favor Item I -- i.e.,

he may want a total dismemberment of Morong from the Authority -- but may not agree
with any of the conditions set forth in Item II. Should the proposal then be divided and be voted
upon separately and independently?
All told, we shall not pass upon the third issue of ultra vires on the ground of prematurity.
Epilogue
In sum, we hold that (i) our decision in the earlier Garcia case is not a bar to the present
controversy as the issue raised and decided therein is different from the questions involved here;
(ii) the respondent Commission should be given an opportunity to review and correct its errors in
promulgating its Resolution No. 2848 and in preparing -- if necessary -- for the plebiscite; and (iii)
that the said Commission has administrative and initiatory quasi-judicial jurisdiction to pass upon
the question of whether the proposal is sufficient in form and language and whether such
proposal or part or parts thereof are clearly and patently outside the powers of the municipal
council of Morong to enact, and therefore violative of law.
In deciding this case, the Court realizes that initiative and referendum, as concepts and
processes, are new in our country. We are remanding the matter to the COMELEC so that proper
corrective measures, as above discussed, may be undertaken, with a view to helping fulfill our
people's aspirations for the actualization of effective direct sovereignty. Indeed we recognize that
"(p)rovisions for initiative and referendum are liberally construed to effectuate their purposes, to
facilitate and not to hamper the exercise by the voters of the rights granted thereby." [24] In his
authoritative treatise on the Constitution, Fr. Joaquin G. Bernas, S.J. treasures these "instruments
which can be used should the legislature show itself indifferent to the needs of the
people."[25] Impelled by a sense of urgency, Congress enacted Republic Act No. 6735 to give life
and form to the constitutional mandate. Congress also interphased initiative and referendum into
the workings of local governments by including a chapter on this subject in the local Government
Code of 1991.[26] And the Commission on Elections can do no less by seasonably and judiciously
promulgating guidelines and rules, for both national and local use, in implementation of these
laws. For its part, this Court early on expressly recognized the revolutionary import of reserving
people power in the process of law-making. [27]
Like elections, initiative and referendum are powerful and valuable modes of expressing
popular sovereignty. And this Court as a matter of policy and doctrine will exert every effort to
nurture, protect and promote their legitimate exercise. For it is but sound public policy to enable
the electorate to express their free and untrammeled will, not only in the election of their
anointed lawmakers and executives, but also in the formulation of the very rules and laws by
which our society shall be governed and managed.
WHEREFORE the petition is GRANTED. Resolution No. 2848 is ANNULLED and SET ASIDE. The
initiative on Pambayang Kapasyahan Blg. 10, Serye 1993 is REMANDED to the Commission on
Elections for further proceedings consistent with the foregoing discussion. No costs.
IT IS SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Bellosillo, Melo, Vitug, Kapunan,
Francisco, and Hermosisima, Jr., JJ., concur.
Romero, and Mendoza, JJ., on official leave.
Puno, J., no part due to relationship.
CASE DIGEST:
SUBIC BAY METROPOLITAN AUTHORITY vs. COMELEC

Facts:

On March 13, 1992, Congress enacted RA. 7227 (The Bases Conversion and Development Act
of 1992), which created the Subic Economic Zone. RA 7227 likewise created SBMA to

implement the declared national policy of converting the Subic military reservation into
alternative productive uses.

On November 24, 1992, the American navy turned over the Subic military reservation to the
Philippines government. Immediately, petitioner commenced the implementation of its task,
particularly the preservation of the sea-ports, airport, buildings, houses and other installations
left by the American navy.

On April 1993, the Sangguniang Bayan of Morong, Bataan passed Pambayang Kapasyahan
Bilang 10, Serye 1993, expressing therein its absolute concurrence, as required by said Sec.
12 of RA 7227, to join the Subic Special Economic Zone and submitted such to the Office of
the President.

On May 24, 1993, respondents Garcia filed a petition with the Sangguniang Bayan of Morong
to annul Pambayang Kapasyahan Blg. 10, Serye 1993.

The petition prayed for the following: a) to nullify Pambayang Kapasyang Blg. 10 for Morong
to join the Subic Special Economi Zone, b) to allow Morong to join provided conditions are
met.

The Sangguniang Bayan ng Morong acted upon the petition by promulgating Pambayang
Kapasyahan Blg. 18, Serye 1993, requesting Congress of the Philippines so amend certain
provisions of RA 7227.

Not satisfied, respondents resorted to their power initiative under the LGC of 1991.

On July 6, 1993, COMELEC denied the petition for local initiative on the ground that the
subject thereof was merely a resolution and not an ordinance.

On February 1, 1995, the President issued Proclamation No. 532 defining the metes and
bounds of the SSEZ including therein the portion of the former naval base within the territorial
jurisdiction of the Municipality of Morong.

On June 18, 19956, respondent COMELEC issued Resolution No. 2845 and 2848, adopting a
"Calendar of Activities for local referendum and providing for "the rules and guidelines to
govern the conduct of the referendum

On July 10, 1996, SBMA instituted a petition for certiorari contesting the validity of Resolution
No. 2848 alleging that public respondent is intent on proceeding with a local initiative that
proposes an amendment of a national law

Issues:
1. WON COMELEC committed grave abuse of discretion in promulgating Resolution No. 2848
which governs the conduct of the referendum proposing to annul or repeal Pambayang
Kapasyahan Blg. 10

2. WON the questioned local initiative covers a subject within the powers of the people of
Morong to enact; i.e., whether such initiative "seeks the amendment of a national law."
Ruling:
1. YES. COMELEC committed grave abuse of discretion.
FIRST. The process started by private respondents was an INITIATIVE but respondent COMELEC
made preparations for a REFERENDUM only.
In fact, in the body of the Resolution as reproduced in the footnote below, the word "referendum"
is repeated at least 27 times, but "initiative" is not mentioned at all. The COMELEC labeled the
exercise as a "Referendum"; the counting of votes was entrusted to a "Referendum Committee";
the documents were called "referendum returns"; the canvassers, "Referendum Board of
Canvassers" and the ballots themselves bore the description "referendum". To repeat, not once
was the word "initiative" used in said body of Resolution No. 2848. And yet, this exercise is
unquestionably an INITIATIVE.
As defined, Initiative is the power of the people to propose bills and laws, and to enact or reject
them at the polls independent of the legislative assembly. On the other hand, referendum is the
right reserved to the people to adopt or reject any act or measure which has been passed by a
legislative body and which in most cases would without action on the part of electors become a
law.
In initiative and referendum, the COMELEC exercises administration and supervision of the
process itself, akin to its powers over the conduct of elections. These law-making powers belong
to the people, hence the respondent Commission cannot control or change the substance or the
content of legislation.
2. The local initiative is NOT ultra vires because the municipal resolution is still in the proposal
stage and not yet an approved law.

The municipal resolution is still in the proposal stage. It is not yet an approved law. Should
the people reject it, then there would be nothing to contest and to adjudicate. It is only when the
people have voted for it and it has become an approved ordinance or resolution that rights and
obligations can be enforced or implemented thereunder. At this point, it is merely a proposal and
the writ or prohibition cannot issue upon a mere conjecture or possibility. Constitutionally
speaking, courts may decide only actual controversies, not hypothetical questions or cases.
In the present case, it is quite clear that the Court has authority to review COMELEC
Resolution No. 2848 to determine the commission of grave abuse of discretion. However, it does
not have the same authority in regard to the proposed initiative since it has not been
promulgated or approved, or passed upon by any "branch or instrumentality" or lower court, for
that matter. The Commission on Elections itself has made no reviewable pronouncements about
the issues brought by the pleadings. The COMELEC simply included verbatim the proposal in its
questioned Resolution No. 2848. Hence, there is really no decision or action made by a branch,

instrumentality or court which this Court could take cognizance of and acquire jurisdiction over,
in the exercise of its review powers.