Constitutional Law II
Ichong v. Hernandez; G.R. L-7995
Labrador, J. ( May 31, 1957)
TL;DR
This case is between Ichong and Hernandez, Secretary
of Finance, on whether or not the act approved under
police power violates due process and equal protection.
The court ruled that police power is far-reaching in
scope, and it is almost impossible to limit its sweep,
especially is it so under a modern democratic
framework where the demands of society and of
nations have multiplied to almost unimaginable
proportions. What is necessary is a balancing
between the powers of the State and rights of the
people, and all done reasonably.
Facts: Within the field of economy it regulates, Congress
attempts to translate national aspirations for economic
independence and national security, rooted in the drive
and urge for national survival and welfare, into a concrete
and tangible measures designed to free the national
retailer from the competing dominance of the alien, so that
the country and the nation may be free from a supposed
economic dependence and bondage. With this as the
driving force, it enacted Act No. 1180 entitled “An Act to
Regulate the Retail Business.” The main provisions of the
Act, among others, are:
1. Prohibition against persons, not citizens of the
Philippines, and against associations, among others,
from engaging directly or indirectly in the retail
trade; and
2. Prohibition against the establishment or opening by
aliens actually engaged in the retail business of
additional stores or branches of retail business.
Lao H. Ichong, in his own behalf and on behalf of other
alien residents, corporations and partnerships adversely
affected by the said Act, brought an action to obtain a
judicial declaration, and to enjoin the Secretary of
Finance, Jaime Hernandez, and all other persons acting
under him, particularly city and municipal treasurers,
from enforcing its provisions. Petitioner attacked the
constitutionality of the Act, contending that:
1. It denies to alien residents the equal protection of
the laws and deprives of their liberty and property
without due process of law.
2. The Act violates international and treaty obligations
of the Republic of the Philippines.
Issues: (1) Whether or not the act in question approved in
the exercise of police power violated the constitutional
requirements of due process and equal protection of the
laws, and (2) whether or not the exclusion in the future of
aliens from the retail trade is unreasonable
Police Power (Group 2)
Ruling: (1) NO. While the equal protection of the law
clause is against undue favor and individual or class
privilege, it merely requires that all persons shall be
treated alike, under like circumstances and conditions
both as to privileges conferred and liabilities enforced.
The due process clause has to do with the reasonableness
of legislation enacted in pursuance of the police power. Is
the Act reasonably necessary for the accomplishment of
the legislature's purpose?
The balancing is the indispensable means for the
attainment of legitimate aspirations of any democratic
society. There can be no absolute power, whoever
exercise it, for that would be tyranny. Yet there can
neither be absolute liberty, for that would mean license
and anarchy. So, the State can deprive persons of life,
liberty and property, provided there is due process of law;
and persons may be classified into classes and groups,
provided everyone is given the equal protection of the
law. The test or standard, as always, is reason. The police
power legislation must be firmly grounded on public
interest and welfare, and a reasonable relation must
exist between purposes and means.
Police power is far-reaching in scope, and it is almost
impossible to limit its sweep. It derives its existence from
the very existence of the State itself, and does not need to
be expressed or defined in its scope. It is said to be co-
extensive with self-protection and survival, and as such it
is the most positive and active of all governmental
processes, the most essential, insistent and illimitable.
Especially is it so under a modern democratic framework
where the demands of society and of nations have
multiplied to almost unimaginable proportions; the field
and scope of police power has become almost boundless,
just as the fields of public interest and public welfare have
become almost all-embracing and have transcended
human foresight.
(2) NO. The law in question is deemed absolutely
necessary to bring about the desired legislative objective,
i.e., to free national economy from alien control and
dominance. It is not necessarily unreasonable because it
affects private rights and privileges. If political
independence is a legitimate aspiration of a people, then
economic independence is none the less legitimate. The
removal and eradication of the shackles of foreign
economic control and domination, is one of the noblest
motives that a national legislature may pursue.
Dispositive: The petition is hereby denied, with costs
against petitioner.
Constitutional Law II Police Power (Group 2)

Lutz v. Araneta; G.R. L-7859 dismissed by the Court of First Instance, the plaintiffs
Reyes, J.B.L., J. (December 22, 1955) appealed the case directly to this Court (Judiciary Act,
section 17).
TL;DR
This case is between Walter Lutz and Antonio Araneta Issue: Whether or not the tax levied is constitutional.
on the power of the state to levy tax in aid and support
of the sugar industry and the power of the state to select Ruling: YES. The tax levied is regulatory in nature – it
what it will subject to taxation, wherein the tax levied provides a means for rehabilitating and stabilizing the
by the state by way of the Sugar Adjustment act is sugar industry. The act is a primarily an exercise of police
unconstitutional because in his opinion, it does not power, not simply an exercise of taxing power.
serve a public purpose. The court ruled that the tax is Sugar production being among the big industries of the
regulatory in nature and therefore valid, as in nation, its promotion, protection, and advancement can be
Johnson vs. State ex rel. Marey, 128 So. 857 where related to the general welfare of the people. As such, the
the act is primarily an exercise of police power and legislature saw it fit the industry should be provided with
is not a pure exercise of taxing power. aid in order to stabilize the industry and sustain its
benefits.
Facts: This case was initiated in the Court of First
Dispositive: The decision appealed from is affirmed, with
Instance of Negros Occidental to test the legality of the
costs against appellant.
taxes imposed by Commonwealth Act No. 567, otherwise
known as the Sugar Adjustment Act.
Valentin Tio v. VRB; G.R. 75697
Melencio-Herrera, J. (June 18, 1987)
Promulgated in 1940, the due to the threat to our industry
by the imminent imposition of export taxes upon sugar as
TL;DR
provided in the Tydings-McDuffie Act, and the "eventual
This case is between Valentin Tio and the Videogram
loss of its preferential position in the United States
Regulatory Board, on whether the tax imposed by the
market"; wherefore, the national policy was expressed "to
VRB in its supervision of the videogram industry is
obtain a readjustment of the benefits derived from the
oppressive in violation of the due process clause of the
sugar industry by the component elements thereof" and
Constitution. The court ruled that the tax imposed by
"to stabilize the sugar industry so as to prepare it for the
the PD 1987 is both a regulatory and revenue
eventuality of the loss of its preferential position in the
measure, with the levy for a public purpose. This
United States market and the imposition of the export
Taxation is an implementation of the State’s police
taxes."
power.
In section 2, Commonwealth Act 567 provides for an
increase of the existing tax on the manufacture of sugar,
Facts: On October 5, 1985, Presidential Decree No. 1987
on a graduated basis, on each picul of sugar manufactured;
entitled “An Act Creating the Videogram Regulatory
while section 3 levies on owners or persons in control of
Board” was approved and took effect on April 10, 1986.
lands devoted to the cultivation of sugar cane and ceded
On September 1, 1986, petitioner Valentin Tio,
to others for a consideration, on lease or otherwise a tax
purportedly on behalf of other videogram operators, filed
equivalent to the difference between the money value of
the case assailing the constitutionality of PD 1987 with
the rental or consideration collected and the amount
broad powers to regulate and supervise the videogram
representing 12 per centum of the assessed value of such
industry.
land.
Issue: Whether or not the tax imposed is harsh,
Plaintiff, Walter Lutz, in his capacity as Judicial
confiscatory, oppressive and/or in unlawful restraint of
Administrator of the Intestate Estate of Antonio Jayme
trade in violation of the due process clause of the
Ledesma, seeks to recover from the Collector of Internal
Constitution
Revenue the sum of P14,666.40 paid by the estate as
taxes, under section 3 of the Act, for the crop years 1948-
Ruling: NO. The tax imposed by the PD 1987 is not only
1949 and 1949-1950; alleging that such tax is
a regulatory but also a revenue measure prompted by the
unconstitutional and void, being levied for the aid and
realization that earnings of videogram establishments of
support of the sugar industry exclusively, which in
around P600 million per annum have not been subjected
plaintiff's opinion is not a public purpose for which a tax
to tax, thereby depriving the Government of an additional
may be constitutionally levied. The action having been
Constitutional Law II
source of revenue. It is an end-user tax, imposed on
retailers for every videogram they make available for
public viewing. It is similar to the 30% amusement tax
imposed or borne by the movie industry which the theater-
owners pay to the government, but which is passed on to
the entire cost of the admission ticket, thus shifting the tax
burden on the buying or the viewing public. It is a tax that
is imposed uniformly on all videogram operators. The
levy of the 30% tax is for a public purpose. It was imposed
primarily to answer the need for regulating the video
industry.
It is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly
held that “inequities which result from a singling out of
one particular class for taxation or exemption infringe no
constitutional limitation.”
Dispositive: Petition dismissed.
Gaston v. Republic Planters Bank; G.R. 77194
Melencio-Herrera, J. (March 15, 1988)
TL;DR
This case is between sugar producers and the Sugar
Regulatory Administration, on whether the
stabilization fees collected pursuant to PD 388 are
funds in trust for the planters, or serve as public funds.
The court ruled that the stabilization fees collected
are in the nature of a tax and in the exercise of police
power, for the regulatory purpose of stabilizing the
sugar industry.
Facts: Respondent Philippine Sugar Commission
(PHILSUCOM), now Sugar Regulatory Administration
(SRA), is the government office tasked with regulating
and supervising the sugar industry.
Petitioners are sugar producers, planters and millers. In
their individual capacities and in representation of others
sugar producers, planters, and millers filed the petition for
a Writ of Mandamus to command respondents: “to
implement the privatization of Republic Planters Bank by
the distribution of the shares of stock in the Bank, now
held by and still carried in the name of PHILSUCOM, to
the sugar producers, planters, and millers, who are the true
beneficial owners of the common and preferred shares
with a total investment of P290,972,224.72, the said
investment funded by the deduction of P1.00 per picul
from sugar proceeds of the sugar producers commencing
the year 1978-79 until the present as stabilization fund
pursuant to P.D. No. 388”.
Police Power (Group 2)
However, respondents PHILSUCOM and SRA argue
that: (1) there are no trust results from Section 7 of P.D.
No. 388, (2) that the stabilization fees collected are
considered government funds under the Government
Auditing Code, (3) that the transfer of shares of stock
from PHILSUCOM to the sugar producers would be
irregular, if not illegal, (4) and that the suit is barred by
laches.
Issue: Whether the stabilization fees collected pursuant to
PD 388 are funds in trust for them
Ruling: NO. 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. The tax
collected is not in a pure exercise of the taxing power. It
is levied with a regulatory purpose, to provide means for
the stabilization of the sugar industry. The levy is
primarily in the exercise of the police power of the State.
The protection of a large industry constituting one of the
great sources of the state's wealth and therefore directly or
indirectly affecting the welfare of so great a portion of the
population of the State is affected to such an extent by
public interests as to be within the police power of the
sovereign.
Dispositive: Petition dismissed.
Assn. of Small Landowners v. Juico; G.R. No. 78742
Cruz, J. (July 14, 1989)
TL;DR
This case is between Assn. of Small Landowners and
the secretary of agrarian reform, on whether or not (in
a number of laws enacted to address the imbalance in
distribution of land) the case involves a traditional
exercise of the power of eminent domain where only a
specific property of relatively limited area is sought to
be taken by the State from its owner for a specific and
perhaps local purpose. The court clarified that the case
at bar deals with a revolutionary kind of
expropriation. Such expropriation affects all private
agricultural lands whenever found and of whatever
kind as long as they are in excess of the maximum
retention limits allowed their owners. It is intended to
benefit not only a particular community or of a
small segment of the population but of the entire
Filipino nation
Facts: Recognizing the need to address the imbalance in
the distribution of land among the people, The State
enacted the following laws:
o R.A. No. 3844, the Agricultural Land Reform Code
Constitutional Law II
o P.D. No. 27, which provided for the compulsory
acquisition of private lands for distribution among
tenant-farmers & to specify maximum retention
limits for landowners.
o E.O. No. 228, which declared full landownership in
favor of beneficiaries of PD 27, & provided the
valuation of still unvalued lands covered by the
decree as well as the manner of payment.
o P.P. No. 131, which instituted a comprehensive
agrarian reform.
o E.O. No. 229, which provided the mechanics for its
implementation.
o R.A. No. 6657, the Comprehensive Agrarian
Reform Law.
G.R. 79777
o This petition raises the constitutionality of PD 27, EO
228, EO 229 & RA 6657. The case involved a 9-ha
riceland worked by 4 tenants & owned by petitioner
Manaay; & a 5-ha riceland worked by 4 tenants &
owned by petitioner Hermano. The said tenants were
declared full owners of the lands by virtue of EO 228,
as qualified farmers under PD 27. Petitioners are
questioning the aforementioned statutes on grounds of
separation of powers, due process, equal protection &
the constitutional limitation that no private property
shall be taken for public use without just
compensation.
G.R. 79310
o This petition seeks to prohibit the implementation of
PP 131 & EO 229. Petitioners herein are landowners
& sugar planters in the Victorias Mill District; while
co-petitioner Planter’s Committee, Inc. is an
organization composed of planter-members.
Petitioners claim that the power to provide for a CARP
as decreed by the Constitution belongs to Congress &
not the President.
G.R. 79744
o Petitioner alleges that his rights to due process and just
compensation were violated when his landholding was
placed under the coverage of Operation Land Transfer.
When he filed a protest for the error, his petition was
denied without hearing. Petitioner contends that the
issuance of EO 228 and EO 229 shortly before
Congress convened is anomalous and arbitrary,
besides violating the doctrine of separation of powers.
G.R. 78742
o Petitioners in this case invoke the right of retention
granted by PD 27 to owners of rice & corn lands not
exceeding 7-ha as long as they are cultivating or intend
to cultivate the same. Their lands do not exceed the
statutory limit but are occupied by tenants who are
actually cultivating such lands. PD 316, promulgated
Police Power (Group 2)
in implementation of PD 27, provides that no tenant-
farmer in agricultural lands primarily devoted to rice
and corn shall be ejected or removed until the rights of
tenant-farmers and landowners have been determined.
Petitioners contend that they cannot eject their tenants
since the Dept. of Agrarian Reform have yet to issue
the implementing rules. Hence, they are requesting
that the Court issue a writ of mandamus to compel the
public respondent to issue the said rules.
Issue: Whether or not the case involves a traditional
exercise of the power of eminent domain where only a
specific property of relatively limited area is sought to be
taken by the State from its owner for a specific and
perhaps local purpose.
Ruling: NO. The Supreme Court clarified that the case at
bar deals with a revolutionary kind of expropriation. Such
expropriation affects all private agricultural lands
whenever found and of whatever kind as long as they are
in excess of the maximum retention limits allowed their
owners.
It is intended to benefit not only a particular community
or of a small segment of the population but of the entire
Filipino nation, from all levels of our society, from the
impoverished farmer to the land-glutted owner. Such a
program will involve not mere millions of pesos.
Considering the vast areas of land subject to expropriation
under the laws before us, hundreds of billions of pesos
will be needed, far more indeed than the amount of P50
billion initially appropriated.
The Court assumed that the framers of the Constitution
were aware of this difficulty when they called for agrarian
reform as a top priority project of the government. It is a
part of this assumption that when they envisioned the
expropriation that would be needed, they also intended
that the just compensation would have to be paid not in
the orthodox way but a less conventional if more practical
method. Consequently, their intention was to allow such
manner of payment as is now provided for by the CARP
Law, particularly the payment of the balance (if the owner
cannot be paid fully with money), or indeed of the entire
amount of the just compensation, with other things of
value.
Dispositive: Petitions dismissed.
Constitutional Law II
PNB v. Office of the President; 252 SCRA 5
Panganiban, J. (January 18, 1996)
TL;DR
This case is between Phil. National Bank and a group
of small lot buyers who were unaware of the mortgage
made between such bank and the subdivision developer
(which later defaulted), on whether P.D. 957 applies
(retroactively) to the case, despite the impairment
clause. The court ruled that if the law is a proper
exercise of the police power (for protecting public
welfare), it will prevail over the contract and
impairment clause of the Constitution.
Impairment Clause: "No law impairing the obligation
of contracts shall be passed." (Const. Art. III, Sec. 10)
Facts: Private respondents* were buyers on installment
of subdivision lots from Marikina Village, Inc. Despite
the land purchase agreements executed over said lots, the
subdivision developer mortgaged the lots in favor of the
petitioner, Philippine National Bank. Unaware of this
mortgage, private respondents duly complied with their
obligations as lot buyers and constructed their houses on
the lots. Subsequently, the subdivision developer
defaulted and PNB foreclosed on the mortgage. As
highest bidder at the foreclosure sale, the bank became
owner of the lots.
*Private Respondents: Alfonso Maglaya, Angelina Maglaya
P. Reyes, Jorge C. Bernardino, Corazon De Leon, Victoriano
Acaya, Florencia Cultura, Maria Campos, Ernesto
Sarmiento, Santiago Tamonan, Apolonia Tadiaque, Simeon
De Leon, Natividad J. Cruz, Natividad B. Loresco, Felicidad
Garcia, Ana Anita Tan, Lucas Servillion, and Jose Narawal
Acting on suits brought by private respondents, the
Housing and Land Use Regulatory Board Office of
Appeals, Adjudication and Legal Affairs (OAALA) in a
decision ruled and affirmed that PNB may collect from
private respondents only the remaining amortizations, in
accordance with the land purchase agreements they had
previously entered into with Marikina Village, Inc., and
cannot compel private respondents to pay all over again
for the lots they had already bought from said subdivision
developer. The Office of the President, invoking
P.D. 957, likewise concurred. Hence, this case.
PNB raised the following issues:
1. The Office of the President erred in applying
P.D. 957 because said law was enacted only on
July 12, 1976, while the subject mortgage was
executed on December 18, 1975; and
Police Power (Group 2)
2. Petitioner Bank is not privy to the contracts
between private respondents and mortgagor-
subdivision developer, hence, the Office of the
President erred in ordering petitioner Bank to
accept private respondents remaining
amortizations and issue the corresponding titles
after payment thereof.
Issue: Whether or not P.D. 957 applies (retroactively) to
the case, despite the impairment clause of the Constitution
Ruling: YES. It is clear to the Court that P.D. 957 was
intended to cover real estate mortgages, as presented in its
preamble:
WHEREAS, numerous reports reveal that many real estate
subdivision owners, developers, operators, and/or sellers
have reneged on their representations and obligations to
provide and maintain properly subdivision roads, drainage,
sewerage, water systems, lighting systems, and other similar
basic requirements, thus endangering the health and safety
of home and lot buyers
The intent of the law is to protect innocent lot buyers from
scheming subdivision developers. As between these small
lot buyers and the gigantic financial institutions which the
developers deal with, it is obvious that the law (as an
instrument of social justice) must favor the weak.
PNB had at its disposal vast resources with which it could
adequately protect its loan activities. It could not have
been unaware that the property had been built on by small
lot buyers. The private respondents obviously were
powerless to discover the attempt of the land developer to
hypothecate the property being sold to them.
The Court cannot allow the injustice that will be wrought
by a strictly prospective application of the law.
Despite the impairment clause, a contract valid at the time
of its execution may be legally modified or even
completely invalidated by a subsequent law. If the law is
a proper exercise of the police power, it will prevail over
the contract. Into each contract are read the provisions of
existing law and, always, a reservation of the police power
as long as the agreement deals with a matter affecting the
public welfare. Such a contract, it has been held, suffers a
congenital infirmity, and this is its susceptibility to change
by the legislature as a postulate of the legal order.
As long as the contract affects the public welfare one way
or another so as to require the interference of the State,
then must the police power be asserted, and prevail, over
the impairment clause.
Dispositive: Petition dismissed
Constitutional Law II Police Power (Group 2)

Notes: Likewise noteworthy are certain provisions of

P.D. 957, which themselves constitute strong arguments
in favor of the retroactivity of PD. 957 as a whole.

SEC. 20. Time of Completion. - Every owner or developer

shall construct and provide the facilities, improvements,
infrastructures and other forms of development, including
water supply and lighting facilities, which are offered and
indicated in the approved subdivision or condominium
plans, brochures, prospectus, printed matters, letters or in
any form of advertisement, within one year from the date of
the issuance of the license for the subdivision or
condominium project or such other period of time as may be
fixed by the Authority.

SEC. 21. Sales Prior to Decree. - In cases of subdivision lots

or condominium units sold or disposed of prior to the
effectivity of this Decree, it shall be incumbent upon the
owner or developer of the subdivision or condominium
project to complete compliance with his or its obligations as
provided in the preceding section within two years from the
date of this Decree unless otherwise extended by the
Authority or unless an adequate performance bond is filed in
accordance with Section 6 hereof.

SEC. 23. Non-Forfeiture of Payments. -No installment

payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer,
after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer
to develop the subdivision or condominium project
according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization
interests but excluding delinquency interests, with interest
thereon at the legal rate.