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Republic of the Philippines G.R. No.

206360
SUPREME COURT
Manila RADIO MINDANAO NETWORK, INC., Petitioner,
vs.
EN BANC COMMISSION ON ELECTIONS, Respondent.

G.R. No. 205357 September 2, 2014 DECISION

GMA NETWORK, INC., Petitioner, PERALTA, J.:


vs.
COMMISSION ON ELECTIONS, Respondent. "The clash of rights demands a delicate balancing of interests approach which is a
'fundamental postulate of constitutional law.'"1
SENATOR ALAN PETER "COMPAÑERO" S. CAYETANO,Petitioner-
Intervenor. Once again the Court is asked to draw a carefully drawn balance in the incessant
conflicts between rights and regulations, liberties and limitations, and competing
x-----------------------x demands of the different segments of society. Here, we are confronted with the need
to strike a workable and viable equilibrium between a constitutional mandate to
G.R. No. 205374 maintain free, orderly, honest, peaceful and credible elections, together with the aim
of ensuring equal opportunity, time and space, and the right to reply, including
reasonable, equal rates therefor, for public information campaigns and forums among
ABC DEVELOPMENT CORPORATION, Petitioner,
candidates,2 on one hand, and the imperatives of a republican and democratic
vs.
state,3 together with its guaranteed rights of suffrage,4 freedom of speech and of the
COMMISSION ON ELECTIONS, Respondent.
press,5 and the people's right to information,6 on the other.
x-----------------------x
In a nutshell, the present petitions may be seen as in search of the answer to the
question - how does the Charter of a republican and democratic State achieve a
G.R. No. 205592 viable and acceptable balance between liberty, without which, government becomes
an unbearable tyrant, and authority, without which, society becomes an intolerable
MANILA BROADCASTING COMPANY, INC. and NEWSOUNDS and dangerous arrangement?
BROADCASTING NETWORK, INC., Petitioner,
vs. Assailed in these petitions are certain regulations promulgated by the Commission on
COMMISSION ON ELECTIONS, Respondent. Elections (COMELEC) relative to the conduct of the 2013 national and local
elections dealing with political advertisements. Specifically, the petitions question
x-----------------------x the constitutionality of the limitations placed on aggregate airtime allowed to
candidates and political parties, as well as the requirements incident thereto, such as
G.R. No. 205852 the need to report the same, and the sanctions imposed for violations.

KAPISANAN NG MGA BRODKASTER NG PILIPINAS (KBP) and ABS-CBN The five (5) petitions before the Court put in issue the alleged unconstitutionality of
CORPORATION, Petitioners, Section 9 (a) of COMELEC Resolution No. 9615 (Resolution) limiting the broadcast
vs. and radio advertisements of candidates and political parties for national election
COMMISSION ON ELECTIONS, Respondent. positions to an aggregate total of one hundred twenty (120) minutes and one hundred
eighty (180) minutes, respectively. They contend that such restrictive regulation on
x-----------------------x allowable broadcast time violates freedom of the press, impairs the people's right to
suffrage as well as their right to information relative to the exercise of their right to
choose who to elect during the forth coming elections.
The heart of the controversy revolves upon the proper interpretation of the limitation Resolution No. 9615. Nevertheless, petitioners still found the provisions
on the number of minutes that candidates may use for television and radio objectionable and oppressive, hence, the present petitions.
advertisements, as provided in Section 6 of Republic Act No. 9006 (R.A. No. 9006),
otherwise known as the Fair Election Act. Pertinent portions of said provision state, All of the petitioners assail the following provisions of the Resolution:
thus:
a) Section 7 (d),8 which provides for a penalty of suspension or revocation
Sec. 6. Equal Access to Media Time and Space. - All registered parties and bona fide of an offender's franchise or permit, imposes criminal liability against
candidates shall have equal access to media time and space. The following guidelines broadcasting entities and their officers in the event they sell airtime in
may be amplified on by the COMELEC: excess of the size, duration, or frequency authorized in the new rules;

xxxx b) Section 9 (a),9 which provides for an "aggregate total" airtime instead of
the previous "per station" airtime for political campaigns or dvertisements,
6.2 (a) Each bona fide candidate or registered political party for a nationally elective and also required prior COMELEC approval for candidates' television and
office shall be entitled to not more than one hundred twenty (120) minutes of radio guestings and appearances; and
television advertisement and one hundred eighty (180) minutes of radio
advertisement whether by purchase or donation. c) Section 14,10 which provides for a candidate's "right to reply."

b. Each bona fide candidate or registered political party for a locally elective office In addition, petitioner ABC also questions Section 1 (4) 11 thereof, which defines the
shall be entitled to not more than sixty ( 60) minutes of television advertisement and term "political advertisement" or "election propaganda," while petitioner GMA
ninety (90) minutes of radio advertisement whether by purchase or donation. further assails Section 35, 12 which states that any violation of said Rules shall
constitute an election offense.
For this purpose, the COMELEC shall require any broadcast station or entity to
submit to the COMELEC a copy of its broadcast logs and certificates of performance On March 15, 2013, Senator Alan Peter S. Cayetano (Petitioner-Intervenor) filed a
for the review and verification of the frequency, date, time and duration of Motion for Leave to Intervene and to File and Admit the Petition-in-Intervention,
advertisements broadcast for any candidate or political party. which was granted by the Court per its Resolution dated March 19, 2013. Petitioner-
Intervenor also assails Section 9 (a) of the Resolution changing the interpretation of
During the previous elections of May 14, 2007 and May 10, 2010, COMELEC candidates' and political parties' airtime limitation for political campaigns or
issued Resolutions implementing and interpreting Section 6 of R.A. No. 9006, advertisements from a "per station" basis, to a "total aggregate" basis. Petitioners
regarding airtime limitations, to mean that a candidate is entitled to the aforestated allege that Resolutions No. 9615 and 9631, amending the earlier Resolution, are
number of minutes "per station."7 For the May 2013 elections, however, respondent unconstitutional and issued without jurisdiction or with grave abuse of discretion
COMELEC promulgated Resolution No. 9615 dated January 15, 2013, changing the amounting to lack or excess of jurisdiction, for the reasons set forth hereunder.
interpretation of said candidates' and political parties' airtime limitation for political
campaigns or advertisements from a "per station" basis, to a "total aggregate" basis. Petitioners posit that Section 9 (a) of the assailed Resolution provides for a very
restrictive aggregate airtime limit and a vague meaning for a proper computation of
Petitioners ABS-CBN Corporation (ABS-CBN), ABC Development Corporation "aggregate total" airtime, and violates the equal protection guarantee, thereby
(ABC), GMA Network, Incorporated ( GMA), Manila Broadcasting Company, Inc. defeating the intent and purpose of R.A. No. 9006.
(MBC), Newsounds Broadcasting Network, Inc. (NBN), and Radio Mindanao
Network, Inc. (RMN) are owners/operators of radio and television networks in the Petitioners contend that Section 9 (a), which imposes a notice requirement, is vague
Philippines, while petitioner Kapisanan ng mga Brodkaster ng Pilipinas (KBP) is the and infringes on the constitutionally protected freedom of speech, of the press and of
national organization of broadcasting companies in the Philippines representing expression, and on the right of people to be informed on matters of public concern
operators of radio and television stations and said stations themselves. They sent
their respective letters to the COMELEC questioning the provisions of the
Also, Section 9 (a) is a cruel and oppressive regulation as it imposes an unreasonable
aforementioned Resolution, thus, the COMELEC held public hearings. Thereafter,
and almost impossible burden on broadcast mass media of monitoring a candidate's
on February 1, 2013, respondent issued Resolution No. 9631 amending provisions of
or political party's aggregate airtime, otherwise, it may incur administrative and
criminal liability.
Further, petitioners claim that Section 7 (d) is null and void for unlawfully Sec. 4. The Commission may, during the election period, supervise or regulate the
criminalizing acts not prohibited and penalized as criminal offenses by R.A. No. enjoyment or utilization of all franchises or permits for the operation of
9006. transportation and other public utilities, media of communication or information, all
grants, special privileges, or concessions granted by the Government or any
Section 14 of Resolution No. 9615, providing for a candidate's or political party's subdivision, agency, or instrumentality thereof, including any government-owned or
"right to reply," is likewise assailed to be unconstitutional for being an improper controlled corporation or its subsidiary. Such supervision or regulation shall aim to
exercise of the COMELEC's regulatory powers; for constituting prior restraint and ensure equal opportunity, and equal rates therefor, for public information campaigns
infringing petitioners' freedom of expression, speech and the press; and for being and forums among candidates in connection with the objective of holding free,
violative of the equal protection guarantee. In addition to the foregoing, petitioner orderly, honest, peaceful, and credible elections.
GMA further argues that the Resolution was promulgated without public
consultations, in violation of petitioners' right to due process. Petitioner ABC also This being the case, then the Resolutions cannot be said to have been issued with
avers that the Resolution's definition of the terms "political advertisement" and grave abuse of discretion amounting to lack of jurisdiction.
"election propaganda" suffers from overbreadth, thereby producing a "chilling
effect," constituting prior restraint. Next, respondent claims that the provisions are not vague because the assailed
Resolutions have given clear and adequate mechanisms to protect broadcast stations
On the other hand, respondent posits in its Comment and Opposition13 dated March from potential liability arising from a candidate's or party's violation of airtime limits
8, 2013, that the petition should be denied based on the following reasons: by putting in the proviso that the station "may require buyer to warrant under oath
that such purchase [of airtime] is not in excess of size, duration or frequency
Respondent contends that the remedies of certiorari and prohibition are not available authorized by law or these rules." Furthermore, words should be understood in the
to petitioners, because the writ of certiorari is only available against the COMELEC's sense that they have in common usage, and should be given their ordinary meaning.
adjudicatory or quasi-judicial powers, while the writ of prohibition only lies against Thus, in the provision for the right to reply, "charges" against candidates or parties
the exercise of judicial, quasijudicial or ministerial functions. Said writs do not lie must be understood in the ordinary sense, referring to accusations or criticisms.
against the COMELEC's administrative or rule-making powers.
Respondent also sees no prior restraint in the provisions requiring notice to the
Respondent likewise alleges that petitioners do not have locus standi, as the COMELEC for appearances or guestings of candidates in bona fide news broadcasts.
constitutional rights and freedoms they enumerate are not personal to them, rather, It points out that the fact that notice may be given 24 hours after first broadcast only
they belong to candidates, political parties and the Filipino electorate in general, as proves that the mechanism is for monitoring purposes only, not for censorship.
the limitations are imposed on candidates, not on media outlets. It argues that Further, respondent argues, that for there to be prior restraint, official governmental
petitioners' alleged risk of exposure to criminal liability is insufficient to give them restrictions on the press or other forms of expression must be done in advance of
legal standing as said "fear of injury" is highly speculative and contingent on a future actual publication or dissemination. Moreover, petitioners are only required to
act. inform the COMELEC of candidates'/parties' guestings, but there is no regulation as
to the content of the news or the expressions in news interviews or news
documentaries. Respondent then emphasized that the Supreme Court has held that
Respondent then parries petitioners' attack on the alleged infirmities of the
freedom of speech and the press may be limited in light of the duty of the
Resolution's provisions.
COMELEC to ensure equal access to opportunities for public service.
Respondent maintains that the per candidate rule or total aggregate airtime limit is in
accordance with R.A. No. 9006 as this would truly give life to the constitutional With regard to the right to reply provision, respondent also does not consider it as
restrictive of the airing of bona fide news broadcasts. More importantly, it stressed,
objective to equalize access to media during elections. It sees this as a more effective
the right to reply is enshrined in the Constitution, and the assailed Resolutions
way of levelling the playing field between candidates/political parties with enormous
provide that said right can only be had after going through administrative due
resources and those without much. Moreover, the COMELEC's issuance of the
process. The provision was also merely lifted from Section 10 of R.A. No. 9006,
assailed Resolution is pursuant to Section 4, Article IX (C) of the Constitution which
hence, petitioner ABC is actually attacking the constitutionality of R.A. No. 9006,
vests on the COMELEC the power to supervise and regulate, during election periods,
which cannot be done through a collateral attack.
transportation and other public utilities, as well as mass media, to wit:
Next, respondent counters that there is no merit to ABC's claim that the Resolutions' ruling of the Commission" as mentioned in Section 1, Rule 37 of the COMELEC
definition of "political advertisement" or "election propaganda" suffers from Rules of Procedure which provides:
overbreadth, as the extent or scope of what falls under said terms is clearly stated in
Section 1 (4) of Resolution No. 9615. Section 1. Petition for Certiorari,· and Time to File. - Unless otherwise provided by
law, or by any specific provisions in these Rules, any decision, order or ruling of the
It is also respondent's view that the nationwide aggregate total airtime does not Commission may be brought to the Supreme Court on certiorari by the aggrieved
violate the equal protection clause, because it does not make any substantial party within thirty (30) days from its promulgation.
distinctions between national and regional and/or local broadcast stations, and even
without the aggregate total airtime rule, candidates and parties are likely to be more GMA further stressed that this case involves national interest, and the urgency of the
inclined to advertise in national broadcast stations. Respondent likewise sees no matter justifies its resort to the remedy of a petition for certiorari.
merit in petitioners' claim that the Resolutions amount to taking of private property
without just compensation. Respondent emphasizes that radio and television
Therefore, GMA disagrees with the COMELEC's position that the proper remedy is
broadcasting companies do not own the airwaves and frequencies through which
a petition for declaratory relief because such action only asks the court to make a
they transmit broadcast signals; they are merely given the temporary privilege to use
proper interpretation of the rights of parties under a statute or regulation. Such a
the same. Since they are merely enjoying a privilege, the same may be reasonably
petition does not nullify the assailed statute or regulation, or grant injunctive relief,
burdened with some form of public service, in this case, to provide candidates with
which petitioners are praying for in their petition. Thus, GMA maintains that a
the opportunity to reply to charges aired against them.
petition for certiorari is the proper remedy.

Lastly, respondent contends that the public consultation requirement does not apply
GMA further denies that it is making a collateral attack on the Fair Election Act, as it
to constitutional commissions such as the COMELEC, pursuant to Section 1,
is not attacking said law. GMA points out that it has stated in its petition that the law
Chapter I, Book VII of the Administrative Code of 1987. Indeed, Section 9, Chapter
in fact allows the sale or donation of airtime for political advertisements and does not
II, Book VII of said Code provides, thus: impose criminal liability against radio and television stations. What it is assailing is
the COMELEC's erroneous interpretation of the law's provisions by declaring such
Section 9. Public Participation. - (1) If not otherwise required by law, an sale and/or donation of airtime unlawful, which is contrary to the purpose of the Fair
agency shall, as far as practicable, publish or circulate notices of proposed Election Act.
rules and afford interested parties the opportunity to submit their views
prior to the adoption of any rule.
GMA then claims that it has legal standing to bring the present suit because:

However, Section 1, Chapter 1, Book VII of said Code clearly provides: x x x First, it has personally suffered a threatened injury in the form of risk of
criminal liability because of the alleged unconstitutional and unlawful conduct of
Section 1. Scope. -This Book shall be applicable to all agencies as defined respondent COMELEC in expanding what was provided for in R.A. No. 9006.
in the next succeeding section, except the Congress, the Judiciary, the Second, the injury is traceable to the challenged action of respondent COMELEC,
Constitutional Commissions, military establishments in all matters relating that is, the issuance of the assailed Resolutions. Third, the injury is likely to be
exclusively to Armed Forces personnel, the Board of Pardons and Parole, redressed by the remedy sought in petitioner GMA's Petition, among others, for the
and state universities and colleges. Honorable Court to nullify the challenged pertinent provisions of the assailed
Resolutions.15
Nevertheless, even if public participation is not required, respondent still conducted a
meeting with representatives of the KBP and various media outfits on December 26, On substantive issues, GMA first argues that the questioned Resolutions are contrary
2012, almost a month before the issuance of Resolution No. 9615. to the objective and purpose of the Fair Election Act. It points out that the Fair
Election Act even repealed the political ad ban found in the earlier law, R.A. No.
On April 2, 2013, petitioner GMA filed its Reply,14 where it advanced the following 6646. The Fair Election Act also speaks of "equal opportunity" and "equal access,''
counter-arguments: but said law never mentioned equalizing the economic station of the rich and the
poor, as a declared policy. Furthermore, in its opinion, the supposed correlation
According to GMA, a petition for certiorari is the proper remedy to question the between candidates' expenditures for TV ads and actually winning the elections, is a
herein assailed Resolutions, which should be considered as a "decision, order or mere illusion, as there are other various factors responsible for a candidate's winning
the election. GMA then cites portions of the deliberations of the Bicameral damage to it by disrupting and emasculating its mandate to provide television and
Conference Committee on the bills that led to the enactment of the Fair Election Act, radio services to the public, and by exposing it to the risk of incurring criminal and
and alleges that this shows the legislative intent that airtime allocation should be on a administrative liability by requiring it to perform the impossible task of surveillance
"per station" basis. Thus, GMA claims it was arbitrary and a grave abuse of and monitoring, or the broadcasts of other radio and television stations.
discretion for the COMELEC to issue the present Resolutions imposing airtime
limitations on an "aggregate total" basis. Thereafter, on April 4, 2013, the COMELEC, through the Office of the Solicitor
General (OSG), filed a Supplemental Comment and Opposition17 where it further
It is likewise insisted by GMA that the assailed Resolutions impose an expounded on the legislative intent behind the Fair Election Act, also quoting
unconstitutional burden on them, because their failure to strictly monitor the duration portions of the deliberations of the Bicameral Conference Committee, allegedly
of total airtime that each candidate has purchased even from other stations would adopting the Senate Bill version setting the computation of airtime limits on a per
expose their officials to criminal liability and risk losing the station's good reputation candidate, not per station, basis. Thus, as enacted into law, the wordings of Section 6
and goodwill, as well as its franchise. It argues that the wordings of the Resolutions of the Fair Election Act shows that the airtime limit is imposed on a per candidate
belie the COMELEC's claim that petitioners would only incur liability if they basis, rather than on a per station basis. Furthermore, the COMELEC states that
"knowingly" sell airtime beyond the limits imposed by the Resolutions, because the petitioner intervenor Senator Cayetano is wrong in arguing that there should be
element of knowledge is clearly absent from the provisions thereof. This makes the empirical data to support the need to change the computation of airtime limits from a
provisions have the nature of malum prohibitum. per station basis to a per candidate basis, because nothing in law obligates the
COMELEC to support its Resolutions with empirical data, as said airtime limit was a
Next, GMA also says that the application of the aggregate airtime limit constitutes policy decision dictated by the legislature itself, which had the necessary empirical
prior restraint and is unconstitutional, opining that "[t]he reviewing power of and other data upon which to base said policy decision.
respondent COMELEC and its sole judgment of a news event as a political
advertisement are so pervasive under the assailed Resolutions, and provoke the The COMELEC then points out that Section 2 (7),18 Article IX (C) of the
distastes or chilling effect of prior restraint"16 as even a legitimate exercise of a Constitution empowers it to recommend to Congress effective measures to minimize
constitutional right might expose it to legal sanction. Thus, the governmental interest election spending and in furtherance of such constitutional power, the COMELEC
of leveling the playing field between rich and poor candidates cannot justify the issued the questioned Resolutions, in faithful implementation of the legislative intent
restriction on the freedoms of expression, speech and of the press. and objectives of the Fair Election Act.

On the issue of lack of prior public participation, GMA cites Section 82 of the The COMELEC also dismisses Senator Cayetano's fears that unauthorized or
Omnibus Election Code, pertinent portions of which provide, thus: inadvertent inclusion of his name, initial, image, brand, logo, insignia and/or symbol
in tandem advertisements will be charged against his airtime limits by pointing out
Section 82. Lawful election propaganda. - Lawful election propaganda shall include: that what will be counted against a candidate's airtime and expenditures are those
advertisements that have been paid for or donated to them to which the candidate has
xxxx given consent.

With regard to the attack that the total aggregate airtime limit constitutes prior
All other forms of election propaganda not prohibited by this Code as the
restraint or undue abridgement of the freedom of speech and expression, the
Commission may authorize after due notice to all interested parties and hearing
where all the interested parties were given an equal opportunity to be heard: COMELEC counters that "the Resolutions enjoy constitutional and congressional
Provided, That the Commission's authorization shall be published in two newspapers imprimatur. It is the Constitution itself that imposes the restriction on the freedoms
of speech and expression, during election period, to promote an important and
of general circulation throughout the nation for at least twice within one week after
significant governmental interest, which is to equalize, as far as practicable, the
the authorization has been granted.
situation of rich and poor candidates by preventing the former from enjoying the
undue advantage offered by huge campaign 'war chests."'19
There having been no prior public consultation held, GMA contends that the
COMELEC is guilty of depriving petitioners of its right to due process of law.
Lastly, the COMELEC also emphasizes that there is no impairment of the people's
right to information on matters of public concern, because in this case, the
GMA then concludes that it is also entitled to a temporary restraining order, because COMELEC is not withholding access to any public record.
the implementation of the Resolutions in question will cause grave and irreparable
On April 16, 2013, this Court issued a Temporary Restraining Order20 (TRO) in view Moreover, respondent contends that the imposition of the penalty of suspension and
of the urgency involved and to prevent irreparable injury that may be caused to the revocation of franchise or permit for the sale or donation of airtime beyond the
petitioners if respondent COMELEC is not enjoined from implementing Resolution allowable limits is sanctioned by the Omnibus Election Code.
No. 9615.
Meanwhile, RMN filed its Petition on April 8, 2013. On June 4, 2013, the Court
On April 19, 2013 respondent filed an Urgent Motion to Lift Temporary Restraining issued a Resolution25 consolidating the case with the rest of the petitions and
Order and Motion for Early Resolution of the Consolidated Petitions.21 requiring respondent to comment thereon.

On May 8, 2013, petitioners ABS-CBN and the KBP filed its On October 10, 2013, respondent filed its Third Supplemental Comment and
Opposition/Comment22 to the said Motion. Not long after, ABC followed suit and Opposition.26 Therein, respondent stated that the petition filed by RMN repeats the
filed its own Opposition to the Motion23 filed by the respondent. issues that were raised in the previous petitions. Respondent, likewise, reiterated its
arguments that certiorari in not the proper remedy to question the assailed resolutions
In the interim, respondent filed a Second Supplemental Comment and and that RMN has no locus standi to file the present petition. Respondent maintains
Opposition24 dated April 8, 2013. that the arguments raised by RMN, like those raised by the other petitioners are
without merit and that RMN is not entitled to the injunctive relief sought.
In the Second Supplemental Comment and Opposition, respondent delved on points
which were not previously discussed in its earlier Comment and Supplemental The petition is partly meritorious.
Comment, particularly those raised in the petition filed by petitioner ABS-CBN and
KBP. At the outset, although the subject of the present petit10ns are Resolutions
promulgated by the COMELEC relative to the conduct of the 2013 national and local
Respondent maintains that certiorari in not the proper remedy to question the elections, nevertheless the issues raised by the petitioners have not been rendered
Constitutionality of the assailed Resolutions and that petitioners ABS-CBN and KBP moot and academic by the conclusion of the 2013 elections. Considering that the
have no locus standi to file the present petition. matters elevated to the Court for resolution are susceptible to repetition in the
conduct of future electoral exercises, these issues will be resolved in the present
Respondent posits that contrary to the contention of petitioners, the legislative action.
history of R.A. No. 9006 conclusively shows that congress intended the airtime
limits to be computed on a "per candidate" and not on a "per station" basis. In PROCEDURAL ASPECTS
addition, the legal duty of monitoring lies with the COMELEC. Broadcast stations
are merely required to submit certain documents to aid the COMELEC in ensuring Matters of procedure and technicalities normally take a backseat when issues of
that candidates are not sold airtime in excess of the allowed limits. substantial and transcendental importance are presented before the Court. So the
Court does again in this particular case.
Also, as discussed in the earlier Comment, the prior notice requirement is a
mechanism designed to inform the COMELEC of the appearances or guesting of Proper Remedy
candidates in bona fide news broadcasts. It is for monitoring purposes only, not
censorship. It does not control the subject matter of news broadcasts in anyway. Respondent claims that certiorari and prohibition are not the proper remedies that
Neither does it prevent media outlets from covering candidates in news interviews, petitioners have taken to question the assailed Resolutions of the COMELEC.
news events, and news documentaries, nor prevent the candidates from appearing Technically, respondent may have a point. However, considering the very important
thereon. and pivotal issues raised, and the limited time, such technicality should not deter the
Court from having to make the final and definitive pronouncement that everyone else
As for the right to reply, respondent insists that the right to reply provision cannot be depends for enlightenment and guidance. "[T]his Court has in the past seen fit to step
considered a prior restraint on the freedoms of expression, speech and the press, as it in and resolve petitions despite their being the subject of an improper remedy, in
does not in any way restrict the airing of bona fide new broadcasts. Media entities are view of the public importance of the tile issues raised therein.27
free to report any news event, even if it should turn out to be unfavourable to a
candidate or party. The assailed Resolutions merely give the candidate or party the It has been in the past, we do so again.
right to reply to such charges published or aired against them in news broadcasts.
Locus Standi Nonetheless, the general rules on standing admit of several exceptions such as the
overbreadth doctrine, taxpayer suits, third party standing and, especially in the
Every time a constitutional issue is brought before the Court, the issue of locus standi Philippines, the doctrine of transcendental importance.
is raised to question the personality of the parties invoking the Court's jurisdiction.
The Court has routinely made reference to a liberalized stance when it comes to For this particular set of facts, the concept of third party standing as an exception and
petitions raising issues of transcendental importance to the country. Invariably, after the overbreadth doctrine are appropriate. x x x
some discussions, the Court would eventually grant standing.28
xxxx
In this particular case, respondent also questions the standing of the petitioners. We
rule for the petitioners. For petitioner-intervenor Senator Cayetano, he undoubtedly American jurisprudence is replete with examples where parties-ininterest were
has standing since he is a candidate whose ability to reach out to the electorate is allowed standing to advocate or invoke the fundamental due process or equal
impacted by the assailed Resolutions. protection claims of other persons or classes of persons injured by state action. x x x

For the broadcast companies, they similarly have the standing in view of the direct xxxx
injury they may suffer relative to their ability to carry out their tasks of disseminating
information because of the burdens imposed on them. Nevertheless, even in regard to
Assuming arguendo that petitioners do not have a relationship with their patrons for
the broadcast companies invoking the injury that may be caused to their customers or
the former to assert the rights of the latter, the overbreadth doctrine comes into play.
the public - those who buy advertisements and the people who rely on their
In overbreadth analysis, challengers to government action are in effect permitted to
broadcasts - what the Court said in White Light Corporation v. City of Manila29 may
raise the rights of third parties. Generally applied to statutes infringing on the
dispose of the question. In that case, there was an issue as to whether owners of freedom of speech, the overbreadth doctrine applies when a statute needlessly
establishments offering "wash-up" rates may have the requisite standing on behalf of restrains even constitutionally guaranteed rights. In this case, the petitioners claim
their patrons' equal protection claims relative to an ordinance of the City of Manila
that the Ordinance makes a sweeping intrusion into the right to liberty of their
which prohibited "short-time" or "wash-up" accommodation in motels and similar
clients. We can see that based on the allegations in the petition, the Ordinance suffers
establishments. The Court essentially condensed the issue in this manner: "[T]he
from overbreadth.
crux of the matter is whether or not these establishments have the requisite standing
to plead for protection of their patrons' equal protection rights."30 The Court then
went on to hold: We thus recognize that the petitioners have a right to assert the constitutional rights
of their clients to patronize their establishments for a "wash-rate" time frame.31
Standing or locus standi is the ability of a party to demonstrate to the court sufficient
connection to and harm from the law or action challenged to support that party's If in regard to commercial undertakings, the owners may have the right to assert a
participation in the case. More importantly, the doctrine of standing is built on the constitutional right of their clients, with more reason should establishments which
principle of separation of powers, sparing as it does unnecessary interference or publish and broadcast have the standing to assert the constitutional freedom of
invalidation by the judicial branch of the actions rendered by its co-equal branches of speech of candidates and of the right to information of the public, not to speak of
government. their own freedom of the press. So, we uphold the standing of petitioners on that
basis.
The requirement of standing is a core component of the judicial system derived
directly from the Constitution. The constitutional component of standing doctrine SUBSTANTIVE ASPECTS
incorporates concepts which concededly are not susceptible of precise definition. In
this jurisdiction, the extancy of "a direct and personal interest" presents the most Aggregate Time Limits
obvious cause, as well as the standard test for a petitioner's standing. In a similar
vein, the United States Supreme Court reviewed and elaborated on the meaning of COMELEC Resolution No. 9615 introduced a radical departure from the previous
the three constitutional standing requirements of injury, causation, and redressability COMELEC resolutions relative to the airtime limitations on political advertisements.
in Allen v. Wright. This essentially consists in computing the airtime on an aggregate basis involving all
the media of broadcast communications compared to the past where it was done on a
per station basis. Thus, it becomes immediately obvious that there was effected a
drastic reduction of the allowable minutes within which candidates and political considered as their expenditures, regardless of whoever paid for the advertisements
parties would be able to campaign through the air. The question is accordingly or to whom the said advertisements were donated.
whether this is within the power of the COMELEC to do or not. The Court holds that
it is not within the power of the COMELEC to do so. x x x x37

a. Past elections and airtime limits Corollarily, petitioner-intervenor, Senator Cayetano, alleges:

The authority of the COMELEC to impose airtime limits directly flows from the Fair 6.15. The change in the implementation of Section 6 of R.A. 9006 was undertaken by
Election Act (R.A. No. 9006 [2001])32 - one hundred (120) minutes of television respondent Comelec without consultation with the candidates for the 2013 elections,
advertisement and one-hundred· eighty (180) minutes for radio advertisement. For affected parties such as media organizations, as well as the general public. Worse,
the 2004 elections, the respondent COMELEC promulgated Resolution No. said change was put into effect without explaining the basis therefor and without
652033 implementing the airtime limits by applying said limitation on a per station showing any data in support of such change. Respondent Comelec merely
basis.34 Such manner of determining airtime limits was likewise adopted for the 2007 maintained that such action "is meant to level the playing field between the moneyed
elections, through Resolution No. 7767.35 In the 2010 elections, under Resolution candidates and those who don i have enough resources," without particularizing the
No. 8758,36 the same was again adopted. But for the 2013 elections, the COMELEC, empirical data upon which such a sweeping statement was based. This was evident in
through Resolution No. 9615, as amended by Resolution No. 9631, chose to the public hearing held on 31 January 2013 where petitioner GMA, thru counsel,
aggregate the total broadcast time among the different broadcast media, thus: Section explained that no empirical data on he excesses or abuses of broadcast media were
9. Requirements and/or Limitations on the Use of Election Propaganda through Mass brought to the attention of the public by respondent Comelec, or even stated in the
Media. - All parties and bona fide candidates shall have equal access to media time Comelec
and space for their election propaganda during the campaign period subject to the
following requirements and/or limitations:
Resolution No. 9615. Thus –

a. Broadcast Election Propaganda


xxxx

The duration of an air time that a candidate, or party may use for their broadcast
Chairman Brillantes
advertisements or election propaganda shall be, as follows:
So if we can regulate and amplify, we may amplify meaning we can expand if we
For Candidates/Registered Not more than an aggregate total of one hundred want(120)
to. But the authority
minutes of the Commission is if we do not want to amplify and we
of television
Political parties for a National think that
advertising, whether appearing on national, regional, or the 120free
local, or 180 is okay we cannot be compelled to amplify. We think that
or cable
Elective Position television, and one hundred eighty (180) minutes120 of
or radio
180 isadvertising,
okay, is enough.
whether
airing on national, regional, or local radio, whether by purchase or donation
Atty. Lucila
For Candidates/Registered Not more than an aggregate total of sixty (60) minutes of television advertising,
Political parties for a Local whether appearing on national, regional, or local, free or
But with due cable television,
respect and I think the basis of the resolution is found in the
Your Honor,
Elective Position ninety (90) minutes of radio advertising, whether airing on national, regional,
law and the law has been enterpreted or (sic) before in 2010 to be 120 per station, so
local radio, whether by purchase or donation. why the change, your Honor?

In cases where two or more candidates or parties whose names, initials, images, Chairman Brillantes
brands, logos, insignias, color motifs, symbols, or forms of graphical representations
are displayed, exhibited, used, or mentioned together in the broadcast election No, the change is not there, the right to amplify is with the Commission on Elections.
propaganda or advertisements, the length of time during which they appear or are Nobody can encroach in our right to amplify. Now, if in 2010 the Commission felt
being mentioned or promoted will be counted against the airtime limits allotted for that per station or per network is the rule then that is the prerogative of the
the said candidates or parties and the cost of the said advertisement will likewise be Commission then they could amplify it to expand it. If the current Commission feels
that 120 is enough for the particular medium like TV and 180 for radio, that is our Was there in 2010 Your Honor, was there any data to support that there was an
prerogative. How can you encroach and what is unconstitutional about it? unlimited and abuse of a (sic) political ads in the mass media that became the basis
of this change in interpretation Your Honor? We would like to know about it Your
Atty. Lucila Honor.

We are not questioning the authority of the Honorable Commission to regulate Your Chairman Brillantes
Honor, we are just raising our concern on the manner of regulation because as it is
right now, there is a changing mode or sentiments of the Commission and the public What do you think there was no abuse in 201 O?
has the right to know, was there rampant overspending on political ads in 2010, we
were not informed Your Honor. Was there abuse of the media in 2010, we were not Atty. Lucila
informed Your Honor. So we would like to know what is the basis of the sudden
change in this limitation, Your Honor .. And law must have a consistent
As far as the network is concern, there was none Your Honor.
interpretation that [is]our position, Your Honor.
Chairman Brillantes
Chairman Brillantes
There was none ..... .
But my initial interpretation, this is personal to this representation counsel, is that if
the Constitution allows us to regulate and then it gives us the prerogative to amplify
then the prerogative to amplify you should leave this to the discretion of the Atty. Lucila
Commission. Which means if previous Commissions felt that expanding it should be
part of our authority that was a valid exercise if we reduce it to what is provided for I'm sorry, Your Honor ...
by law which is 120-180 per medium, TV, radio, that is also within the law and that
is still within our prerogative as provided for by the Constitution. If you say we have Chairman Brillantes
to expose the candidates to the public then I think the reaction should come, the
negative reaction should come from the candidates not from the media, unless you Yes, there was no abuse, okay, but there was some advantage given to those who
have some interest to protect directly. Is there any interest on the part of the media to took ... who had the more moneyed candidates took advantage of it.
expand it?
Atty. Lucila
Atty. Lucila
But that is the fact in life, Your Honor there are poor candidates, there are rich
Well, our interest Your Honor is to participate in this election Your Honor and we candidates. No amount of law or regulation can even level the playing filed (sic) as
have been constantly (sic) as the resolution says and even in the part involved far as the economic station in life of the candidates are concern (sic) our Honor.38
because you will be getting some affirmative action time coming from the media
itself and Comelec time coming from the media itself. So we could like to be both
Given the foregoing observations about what happened during the hearing,
involved in the whole process of the exercise of the freedom of suffrage Your Honor.
Petitioner-Intervenor went on to allege that:
Chairman Brillantes
6.16. Without any empirical data upon which to base the regulatory measures in
Section 9 (a), respondent Comelec arbitrarily changed the rule from per station basis
Yes, but the very essence of the Constitutional provision as well as the provision of to aggregate airtime basis. Indeed, no credence should be given to the cliched
9006 is actually to level the playing field. That should be the paramount explanation of respondent Comelec (i.e. leveling the playing field) in its published
consideration. If we allow everybody to make use of all their time and all radio time statements which in itself is a mere reiteration of the rationale for the enactment of
and TV time then there will be practically unlimited use of the mass media .... the political ad ban of Republic Act No. 6646, and which has likewise been foisted
when said political ad ban was lifted by R.A. 9006.39
Atty. Lucila
From the foregoing, it does appear that the COMELEC did not have any other basis the sake of clarity and intellectual honesty, that if an administrative agency decides
for coming up with a new manner of determining allowable time limits except its inconsistently with previous action, that it explain thoroughly why a different result
own idea as to what should be the maximum number of minutes based on its exercise is warranted, or ?f need be, why the previous standards should no longer apply or
of discretion as to how to level the playing field. The same could be encapsulized in should be overturned. Such explanation is warranted in order to sufficiently establish
the remark of the COMELEC Chairman that "if the Constitution allows us to a decision as having rational basis. Any inconsistent decision lacking thorough,
regulate and then it gives us the prerogative to amplify then the prerogative to ratiocination in support may be struck down as being arbitrary. And any decision
amplify you should leave this to the discretion of the Commission."40 with absolutely nothing to support it is a nullity.42

The Court could not agree with what appears as a nonchalant exercise of discretion, What the COMELEC came up with does not measure up to that level of requirement
as expounded anon. and accountability which elevates administrative rules to the level of respectability
and acceptability. Those governed by administrative regulations are entitled to a
b. COMELEC is duty bound to come up with reasonable basis for changing the reasonable and rational basis for any changes in those rules by which they are
interpretation and implementation of the airtime limits supposed to live by, especially if there is a radical departure from the previous ones.

There is no question that the COMELEC is the office constitutionally and statutorily c. The COMELEC went beyond the authority granted it by the law in adopting
authorized to enforce election laws but it cannot exercise its powers without "aggregate" basis in the determination of allowable airtime
limitations - or reasonable basis. It could not simply adopt measures or regulations
just because it feels that it is the right thing to do, in so far as it might be concerned. The law, which is the basis of the regulation subject of these petitions, pertinently
It does have discretion, but such discretion is something that must be exercised provides:
within the bounds and intent of the law. The COMELEC is not free to simply change
the rules especially if it has consistently interpreted a legal provision in a particular 6.2. (a) Each bona fide candidate or registered political party for a nationally elective
manner in the past. If ever it has to change the rules, the same must be properly office shall be entitled to not more than one hundred twenty (120) minutes of
explained with sufficient basis. television advertisement and one hundred eighty (180) minutes of radio
advertisement whether by purchase or donation.
Based on the transcripts of the hearing conducted by the COMELEC after it had
already promulgated the Resolution, the respondent did not fully explain or justify (b) Each bona fide candidate or registered political party for a locally elective office
the change in computing the airtime allowed candidates and political parties, except shall be entitled to not more than sixty (60) minutes of television advertisement and
to make reference to the need to "level the playing field." If the "per station" basis ninety (90) minutes of radio advertisement whether by purchase or donation; x x x
was deemed enough to comply with that objective in the past, why should it now be
suddenly inadequate? And, the short answer to that from the respondent, in a manner
The law, on its face, does not justify a conclusion that the maximum allowable
which smacks of overbearing exercise of discretion, is that it is within the discretion
airtime should be based on the totality of possible broadcast in all television or radio
of the COMELEC. As quoted in the transcript, "the right to amplify is with the
stations. Senator Cayetano has called our attention to the legislative intent relative to
COMELEC. Nobody can encroach in our right to amplify. Now, if in 2010 the
the airtime allowed - that it should be on a "per station" basis.43
Commission felt that per station or per network is the rule then that is the prerogative
of the Commission then they could amplify it to expand it. If the current Commission
feels that 120 is enough for the particular medium like TV and 180 for radio, that is This is further buttressed by the fact that the Fair Election Act (R.A. No. 9006)
our prerogative. How can you encroach and what is unconstitutional about it?"41 actually repealed the previous provision, Section ll(b) of Republic Act No.
6646,44 which prohibited direct political advertisements -the so-called "political ad
ban." If under the previous law, no candidate was allowed to directly buy or procure
There is something basically wrong with that manner of explaining changes in
on his own his broadcast or print campaign advertisements, and that he must get it
administrative rules. For one, it does not really provide a good basis for change. For
through the COMELEC Time or COMELEC Space, R.A. No. 9006 relieved him or
another, those affected by such rules must be given a better explanation why the her from that restriction and allowed him or her to broadcast time or print space
previous rules are no longer good enough. As the Court has said in one case: subject to the limitations set out in the law. Congress, in enacting R.A. No. 9006, felt
that the previous law was not an effective and efficient way of giving voice to the
While stability in the law, particularly in the business field, is desirable, there is no people. Noting the debilitating effects of the previous law on the right of suffrage
demand that the NTC slavishly follow precedent. However, we think it essential, for
and Philippine democracy, Congress decided to repeal such rule by enacting the Fair barangay centers and the like wherein candidates can post, display or exhibit election
Election Act. propaganda to announce or further their candidacy.

In regard to the enactment of the new law, taken in the context of the restrictive "Whenever feasible, common billboards may be installed by the Commission and/or
nature of the previous law, the sponsorship speech of Senator Raul Roco is non-partisan private or civic organizations which the Commission may authorize
enlightening: whenever available, after due notice and hearing, in strategic areas where it may
readily be seen or read, with the heaviest pedestrian and/or vehicular traffic in the
The bill seeks to repeal Section 85 of the Omnibus Election Code and Sections 10 city or municipality.
and 11 of RA 6646. In view of the importance of their appeal in connection with the
thrusts of the bill, I hereby quote these sections in full: The space in such common poster areas or billboards shall be allocated free of
charge, if feasible, equitably and impartially among the candidates in the province,
"SEC. 85. Prohibited forms of election propaganda. - It shall be unlawful: city or municipality. "SEC. 11. Prohibite,d Forms of Election Propaganda. - In
addition to the forms of election propaganda prohibited under Section 85 of Batas
Pambansa Blg. 881, it shall be unlawful: (a) to draw, paint, inscribe, write, post,
"(a) To print, publish, post or distribute any poster, pamphlet,
circular, handbill, or printed matter urging voters to vote for or display or puolicly exhibit any election propaganda in any place, whether private or
against any candidate unless they hear the names and addresses of public, except in common poster areas and/or billboards provided in the immediately
preceding section, at the candidate's own residence, or at the campaign headquarters
the printed and payor as required in Section 84 hereof;
of the candidate or political party: Provided, That such posters or election
propaganda shall in no case exceed two (2) feet by three (3) feet in area; Provided,
"(b) To erect, put up, make use of, attach, float or display any further, That at the site of and on the occasion of a public meeting or rally, streamers,
billboard, tinplate-poster, balloons and the like, of whatever size, not more than two (2) feet and not exceeding three (3) feet by eight (8) each may be
shape, form or kind, advertising for or against any candidate or displayed five (5) days before the date of the meeting or rally, and shall be removed
political party; within twenty-four (24) hours after said meeting or rally; and

"(c) To purchase, manufacture, request, distribute or accept "(b) For any newspapers, radio broadcasting or television station, or other mass
electoral propaganda gadgets, such as pens, lighters, fans of media, or any person making use of the mass media to sell or give for free of charge
whatever nature, flashlights, athletic goods or materials, wallets, print space or air time for campaign or other political purposes except to the
shirts, hats, bandannas, matches, cigarettes and the like, except that Commission as provided under Section 90 and 92 of Batas Pambansa Big. 881. Any
campaign supporters accompanying a candidate shall be allowed to mass media columnist, commentator, announcer or personality who is a candidate for
wear hats and/or shirts or T-shirts advertising a candidate; any elective public office shall take a leave of absence from his work as such during
the campaign."
"(d) To show or display publicly any advertisement or propaganda
for or against any candidate by means of cinematography, audio- The repeal of the provision on the Common Poster Area implements the strong
visual units or other screen projections except telecasts which may recommendations of the Commission on Elections during the hearings. It also seeks
be allowed as hereinafter provided; and to apply the doctrine enunciated by the Supreme Court in the case of Blo Umpar
Adiong vs. Commission on Elections, 207 SCRA 712, 31 March 1992. Here a
"(e) For any radio broadcasting or television station to sell or give unanimous Supreme Court ruled: The COMELEC's prohibition on the posting of
free of charge airtime for campaign and other political purposes decals and stickers on "mobile" places whether public or private except [in]
except as authorized in this Code under the rules and regulations designated areas provided for by the COMELEC itself is null and void on
promulgated by the Commission pursuant thereto; constitutional grounds.

"Any prohibited election propaganda gadget or advertisement shall be stopped, For the foregoing reasons, we commend to our colleagues the early passage of
confiscated or tom down by the representative of the Commission upon specific Senate Bill No. 1742. In so doing, we move one step towards further ensuring "free,
authority of the Commission." "SEC. 10. Common Poster Areas. - The Commission orderly, honest, peaceful and credible elections" as mandated by the Constitution.45
shall designate common poster areas in strategic public places such as markets,
Given the foregoing background, it is therefore ineluctable to conclude that Congress 2. The total airtime available for each registered party and bona fide candidate
intended to provide a more expansive and liberal means by which the candidates, whether by purchase or donation shall not exceed a total of one (1) minute per day
political parties, citizens and other stake holders in the periodic electoral exercise per television or radio station. (Emphasis supplied.)
may be given a chance to fully explain and expound on their candidacies and
platforms of governance, and for the electorate to be given a chance to know better As Section 6 of R.A. 9006 is presently worded, it can be clearly seen that the
the personalities behind the candidates. In this regard, the media is also given a very legislature intended the aggregate airtime limits to be computed on per candidate or
important part in that undertaking of providing the means by which the political party basis. Otherwise, if the legislature intended the computation to be on per
exercise becomes an interactive process. All of these would be undermined and station basis, it could have left the original "per day per station" formulation.46
frustrated with the kind of regulation that the respondent came up with.
The Court does not agree. It cannot bring itself to read the changes in the bill as
The respondent gave its own understanding of the import of the legislative disclosing an intent that the COMELEC wants this Court to put on the final language
deliberations on the adoption of R.A. No. 9006 as follows: of the law. If anything, the change in language meant that the computation must not
be based on a "per day" basis for each television or radio station. The same could not
The legislative history of R.A. 9006 clearly shows that Congress intended to impose therefore lend itself to an understanding that the total allowable time is to be done on
the per candidate or political party aggregate total airtime limits on political an aggregate basis for all television or radio stations. Clearly, the respondent in this
advertisements and election propaganda. This is evidenced by the dropping of the instance went beyond its legal mandate when it provided for rules beyond what was
"per day per station" language embodied in both versions of the House of contemplated by the law it is supposed to implement. As we held in Lakin, Jr. v.
Representatives and Senate bills in favour of the "each candidate" and "not more Commission on Elections:47
than" limitations now found in Section 6 of R.A. 9006.
The COMELEC, despite its role as the implementing arm of the Government in the
The pertinent portions of House Bill No. 9000 and Senate Bill No. 1742 read as enforcement and administration of all laws and regulations relative to the conduct of
follows: an election, has neither the authority nor the license to expand, extend, or add
anything to the law it seeks to implement thereby. The IRRs the COMELEC issued
House Bill No. 9000: for that purpose should always be in accord with the law to be implemented, and
should not override, supplant, or modify the law. It is basic that the IRRs should
remain consistent with the law they intend to carry out.
SEC. 4. Section 86 of the same Batas is hereby amended to read as follows:

Indeed, administrative IRRs adopted by a particular department of the Government


Sec. 86. Regulation of Election Propaganda Through Mass Media.
under legislative authority must be in harmony with the provisions of the law, and
should be for the sole purpose of carrying the law's general provisions into effect.
xxx xxx xxx The law itself cannot be expanded by such IRRs, because an administrative agency
cannot amend an act of Congress.48
A) The total airtime available to the candidate and political party, whether by
purchase or by donation, shall be limited to five (5) minutes per day in each In the case of Lakin, Jr., the COMELEC's explanation that the Resolution then in
television, cable television and radio stations during the applicable campaign period. question did not add anything but merely reworded and rephrased the statutory
provision did not persuade the Court. With more reason here since the COMELEC
Senate Bill No. 1742: not only reworded or rephrased the statutory provision - it practically replaced it with
its own idea of what the law should be, a matter that certainly is not within its
SEC. 5. Equal Access to Media Space and Time. -All registered parties and bona fide authority. As the Court said in Villegas v. Subido:49
candidates shall have equal access to media space and time. The following guidelines
may be amplified by the COMELEC. One last word. Nothing is better settled in the law than that a public official exercises
power, not rights. The government itself is merely an agency through which the will
xxx xxx xxx of the state is expressed and enforced. Its officers therefore are likewise agents
entrusted with the responsibility of discharging its functions. As such there is no
presumption that they are empowered to act. There must be a delegation of such
authority, either express or implied. In the absence of a valid grant, they are devoid The expenditure limitations contained in the Act represent substantial, rather than
of power. What they do suffers from a fatal infirmity. That principle cannot be merely theoretical restraints on the quantity and diversity of political speech. The
sufficiently stressed. In the appropriate language of Chief Justice Hughes: "It must be $1,000 ceiling on spending "relative to a clearly identified candidate," 18 U.S.C. §
conceded that departmental zeal may not be permitted to outrun the authority 608(e)(l) (1970 ed., Supp. IV), would appear to exclude all citizens and groups
conferred by statute." Neither the high dignity of the office nor the righteousness of except candidates, political parties, and the institutional press from any significant
the motive then is an acceptable substitute. Otherwise the rule of law becomes a use of the most effective modes of communication. Although the Act's limitations on
myth. Such an eventuality, we must take all pains to avoid.50 expenditures by campaign organizations and political parties provide substantially
greater room for discussion and debate, they would have required restrictions in the
So it was then. So does the rule still remains the same. scope of a number of past congressional and Presidential campaigns and would
operate to constrain campaigning by candidates who raise sums in excess of the
d. Section 9 (a) of COMELEC Resolution No. 9615 on airtime limits also goes spending ceiling.52
against the constitutional guaranty of freedom of expression, of speech and of the
press Section 9 (a) ofCOMELEC Resolution No. 9615 comes up with what is challenged
as being an unreasonable basis for determining the allowable air time that candidates
and political parties may avail of. Petitioner GMA came up with its analysis of the
The guaranty of freedom to speak is useless without the ability to communicate and
disseminate what is said. And where there is a need to reach a large audience, the practical effects of such a regulation:
need to access the means and media for such dissemination becomes critical. This is
where the press and broadcast media come along. At the same time, the right to 5.8. Given the reduction of a candidate's airtime minutes in the New Rules,
speak and to reach out would not be meaningful if it is just a token ability to be heard petitioner GMA estimates that a national candidate will only have 120
by a few. It must be coupled with substantially reasonable means by which the minutes to utilize for his political advertisements in television during the
communicator and the audience could effectively interact. Section 9 (a) of whole campaign period of 88 days, or will only have 81.81 seconds per day
COMELEC Resolution No. 9615, with its adoption of the "aggregate-based" airtime TV exposure allotment. If he chooses to place his political advertisements in
limits unreasonably restricts the guaranteed freedom of speech and of the press. the 3 major TV networks in equal allocation, he will only have 27.27
seconds of airtime per network per day. This barely translates to 1
Political speech is one of the most important expressions protected by the advertisement spot on a 30-second spot basis in television.
Fundamental Law. "[F]reedom of speech, of expression, and of the press are at the
core of civil liberties and have to be protected at all costs for the sake of 5.9. With a 20-hour programming per day and considering the limits of a
democracy."51 Accordingly, the same must remain unfettered unless otherwise station's coverage, it will be difficult for 1 advertising spot to make a
justified by a compelling state interest. sensible and feasible communication to the public, or in political
propaganda, to "make known [a candidate's] qualifications and stand on
In regard to limitations on political speech relative to other state interests, an public issues".
American case observed:
5.10 If a candidate loads all of his 81.81 seconds per day in one network,
this will translate to barely three 30-second advertising spots in television
A restriction on the amount of money a person or group can spend on political
communication during a campaign necessarily reduces the quantity of expression by on a daily basis using the same assumptions above.
restricting the number of issues discussed, the depth of their exploration, and the size
of the audience reached. This is because virtually every means of communicating 5.11 Based on the data from the 2012 Nielsen TV audience measurement in
ideas in today's mass society requires the expenditure of money. The distribution of Mega Manila, the commercial advertisements in television are viewed by
the humblest handbill or leaflet entails printing, paper, and circulation costs. only 39.2% of the average total day household audience if such
Speeches and rallies generally necessitate hiring a hall and publicizing the event. The advertisements are placed with petitioner GMA, the leading television
electorate's increasing dependence on television, radio, and other mass media for network nationwide and in Mega Manila. In effect, under the restrictive
news and information has made these expensive modes of communication aggregate airtime limits in the New Rules, the three 30-second political
indispensable instruments of effective political speech. advertisements of a candidate in petitioner GMA will only be
communicated to barely 40% of the viewing audience, not even the voting
population, but only in Mega Manila, which is defined by AGB Nielsen
Philippines to cover Metro Manila and certain urban areas in the provinces press would remain forever free to censure the Government. The press was protected
of Bulacan, Cavite, Laguna, Rizal, Batangas and Pampanga. Consequently, so that it could bare the secrets of government and inform the people. Only a free and
given the voting population distribution and the drastically reduced supply unrestrained press can effectively expose deception in government."55
of airtime as a result of the New Rules' aggregate airtime limits, a national
candidate will be forced to use all of his airtime for political advertisements In the ultimate analysis, when the press is silenced, or otherwise muffled in its
in television only in urban areas such as Mega Manila as a political undertaking of acting as a sounding board, the people ultimately would be the
campaign tool to achieve maximum exposure. victims.

5.12 To be sure, the people outside of Mega Manila or other urban areas e. Section 9 (a) of Resolution 9615 is violative of the people's right to suffrage
deserve to be informed of the candidates in the national elections, and the
said candidates also enjoy the right to be voted upon by these informed Fundamental to the idea of a democratic and republican state is the right of the
populace.53 people to determine their own destiny through the choice of leaders they may have in
government. Thus, the primordial importance of suffrage and the concomitant right
The Court agrees. The assailed rule on "aggregate-based" airtime limits is of the people to be adequately informed for the intelligent exercise of such birthright.
unreasonable and arbitrary as it unduly restricts and constrains the ability of It was said that:
candidates and political parties to reach out and communicate with the people. Here,
the adverted reason for imposing the "aggregate-based" airtime limits - leveling the
x x x As long as popular government is an end to be achieved and safeguarded,
playing field - does not constitute a compelling state interest which would justify
suffrage, whatever may be the modality and form devised, must continue to be the
such a substantial restriction on the freedom of candidates and political parties to
means by which the great reservoir of power must be emptied into the receptacular
communicate their ideas, philosophies, platforms and programs of government. And,
agencies wrought by the people through their Constitution in the interest of good
this is specially so in the absence of a clear-cut basis for the imposition of such a
government and the common weal. Republicanism, in so far as it implies the
prohibitive measure. In this particular instance, what the COMELEC has done is
adoption of a representative type of government, necessarily points to the
analogous to letting a bird fly after one has clipped its wings. enfranchised citizen as a particle of popular sovereignty and as the ultimate source of
the established authority. He has a voice in his Government and whenever possible it
It is also particularly unreasonable and whimsical to adopt the aggregate-based time is the solemn duty of the judiciary, when called upon to act in justifiable cases, to
limits on broadcast time when we consider that the Philippines is not only composed give it efficacy and not to stifle or frustrate it. This, fundamentally, is the reason for
of so many islands. There are also a lot of languages and dialects spoken among the the rule that ballots should be read and appreciated, if not with utmost, with
citizens across the country. Accordingly, for a national candidate to really reach out reasonable, liberality. x x x56 It has also been said that "[ c ]ompetition in ideas and
to as many of the electorates as possible, then it might also be necessary that he governmental policies is at the core of our electoral process and of the First
conveys his message through his advertisements in languages and dialects that the Amendment freedoms."57 Candidates and political parties need adequate breathing
people may more readily understand and relate to. To add all of these airtimes in space - including the means to disseminate their ideas. This could not be reasonably
different dialects would greatly hamper the ability of such candidate to express addressed by the very restrictive manner by which the respondent implemented the
himself - a form of suppression of his political speech. time limits in regard to political advertisements in the broadcast media.

Respondent itself states that "[t]elevision is arguably the most costeffective medium f. Resolution No. 9615 needs prior hearing before adoption
of dissemination. Even a slight increase in television exposure can significantly boost
a candidate's popularity, name recall and electability."54 If that be so, then drastically The COMELEC promulgated Resolution No. 9615 on January 15, 2013 then came
curtailing the ability of a candidate to effectively reach out to the electorate would
up with a public hearing on January 31, 2013 to explain what it had done,
unjustifiably curtail his freedom to speak as a means of connecting with the people. particularly on the aggregate-based air time limits. This circumstance also renders
the new regulation, particularly on the adoption of the aggregate-based airtime limit,
Finally on this matter, it is pertinent to quote what Justice Black wrote in his questionable. It must not be overlooked that the new Resolution introduced a radical
concurring opinion in the landmark Pentagon Papers case: "In the First Amendment, change in the manner in which the rules on airtime for political advertisements are to
the Founding Fathers gave the free press the protection it must have to fulfill its be reckoned. As such there is a need for adequate and effective means by which they
essential role in our democracy. The press was to serve the governed, not the may be adopted, disseminated and implemented. In this regard, it is not enough that
governors. The Government's power to censor the press was abolished so that the they be published - or explained - after they have been adopted.
While it is true that the COMELEC is an independent office and not a mere reasonably related to the purpose or objective of the government in a manner that
administrative agency under the Executive Department, rules which apply to the would not work unnecessary and unjustifiable burdens on the citizenry. Petitioner
latter must also be deemed to similarly apply to the former, not as a matter of GMA assails certain requirements imposed on broadcast stations as unreasonable. It
administrative convenience but as a dictate of due process. And this assumes greater explained:
significance considering the important and pivotal role that the COMELEC plays in
the life of the nation. Thus, whatever might have been said in Commissioner of 5.40 Petitioner GMA currently operates and monitors 21 FM and AM radio
Internal Revenue v. Court of Appeals,58 should also apply mutatis mutandis to the stations nationwide and 8 originating television stations (including its main
COMELEC when it comes to promulgating rules and regulations which adversely transmitter in Quezon City) which are authorized to dechain national
affect, or impose a heavy and substantial burden on, the citizenry in a matter that programs for airing and insertion of local content and advertisements.
implicates the very nature of government we have adopted:
5.41 In light of the New Rules wherein a candidate's airtime minutes are
It should be understandable that when an administrative rule is merely interpretative applied on an aggregate basis and considering that said Rules declare it
in nature, its applicability needs nothing further than its bare issuance for it gives no unlawful in Section 7( d) thereof for a radio, television station or other mass
real consequence more than what the law itself has already prescribed. When, upon media to sell or give for free airtime to a candidate in excess of that allowed
the other hand, the administrative rule goes beyond merely providing for the means by law or by said New Rules:
that can facilitate or render least cumbersome the implementation of the law but
substantially adds to or increases the burden of those governed, it behooves the
"Section 7. Prohibited Forms of Election Propaganda -During the campaign
agency to accord at least to those directly affected a chance to be heard, and
period, it is unlawful: x x x x x x x x x
thereafter to be duly informed, before that new issuance is given the force and effect
of law.
(d) for any newspaper or publication, radio, television or cable television
station, or other mass media, or any person making use of the mass media to
A reading of RMC 37-93, particularly considering the circumstances under which it
sell or to give free of charge print space or air time for campaign or election
has been issued, convinces us that the circular cannot be viewed simply as a
propaganda purposes to any candidate or party in excess of the size,
corrective measure (revoking in the process the previous holdings of past
duration or frequency authorized by law or these rules;
Commissioners) or merely as construing Section 142(c)(l) of the NIRC, as amended,
but has, in fact and most importantly, been made in order to place "Hope Luxury,"
"Premium More" and "Champion" within the classification of locally manufactured xxx xxx xxx
cigarettes bearing foreign brands and to thereby have them covered by RA 7654.
Specifically, the new law would have its amendatory provisions applied to locally (Emphasis supplied)
manufactured cigarettes which at the time of its effectivity were not so classified as
bearing foreign brands. x x x In so doing, the BIR not simply interpreted the law; petitioner GMA submits that compliance with the New Rules in order to
verily, it legislated under its quasi-legislative authority. The due observance of the avoid administrative or criminal liability would be unfair, cruel and
requirements of notice, of hearing, and of publication should not have been then oppressive.
ignored.59
x x x x.
For failing to conduct prior hearing before coming up with Resolution No. 9615, said
Resolution, specifically in regard to the new rule on aggregate airtime is declared 5.43 In the present situation wherein airtime minutes shall be shared by all
defective and ineffectual. television and radio stations, broadcast mass media organizations would
surely encounter insurmountable difficulties in monitoring the airtime
g. Resolution No. 9615 does not impose an unreasonable burden on the broadcast minutes spent by the numerous candidates for various elective positions, in
industry real time.

It is a basic postulate of due process, specifically in relation to its substantive 5.44 An inquiry with the National Telecommunications Commission (NTC)
component, that any governmental rule or regulation must be reasonable in its bears out that there are 372 television stations and 398 AM and 800 FM
operations and its impositions. Any restrictions, as well as sanctions, must be radio stations nationwide as of June 2012. In addition, there are 1, 113 cable
TV providers authorized by the NTC to operate within the country as of the acceptance, or other analogous record on specified dates (Section 9[d][3], Resolution
said date. No. 9615, in relation to Section 6.2, R.A. 9006; and (2) copies of all contract for
advertising, promoting or opposing any political party or the candidacy of any person
5.45 Given such numbers of broadcast entities and the necessity to monitor for public office within five (5) days after its signing (Section 6.3, R.A. 9006).
political advertisements pursuant to the New Rules, petitioner OMA
estimates that monitoring television broadcasts of all authorized television *****
station would involve 7,440 manhours per day. To aggravate matters, since
a candidate may also spend his/her broadcasting minutes on cable TV, [T]here is absolutely no duty on the broadcast stations to do monitoring, much less
additional 281,040 manhours per day would have to be spent in monitoring monitoring in real time. GMA grossly exaggerates when it claims that the non-
the various channels carried by cable TV throughout the Philippines. As far existent duty would require them to hire and train an astounding additional 39,055
as radio broadcasts (both AM and FM stations) are concerned, around personnel working on eight-hour shifts all over the country.61
23,960 manhours per day would have to be devoted by petitioner OMA to
obtain an accurate and timely determination of a political candidate's
The Court holds, accordingly, that, contrary to petitioners' contention, the Reporting
remaining airtime minutes. During the campaign period, petitioner OMA
Requirement for the COMELEC's monitoring is reasonable.
would have to spend an estimated 27,494,720 manhours in monitoring the
election campaign commercials of the different candidates in the
country.1âwphi1 Further, it is apropos to note that, pursuant to Resolution No. 9631,62 the respondent
revised the third paragraph of Section 9 (a). As revised, the provision now reads:
5.46 In order to carry-out the obligations imposed by the New Rules,
petitioner OMA further estimates that it would need to engage and train Appearance or guesting by a candidate on any bona fide newscast, bona fide news
39,055 additional persons on an eight-hour shift, and assign them all over interview, bona fide news documentary, if the appearance of the candidate is
the country to perform the required monitoring of radio, television and cable incidental to the presentation of the subject or subjects covered by the news
TV broadcasts. In addition, it would likewise need to allot radio, television, documentary, or on-the-spot coverage of bona fide news events, including but not
recording equipment and computers, as well as telecommunications limited to events sanctioned by the Commission on Elections, political conventions,
equipment, for this surveillance and monitoring exercise, thus imputing and similar activities, shall not be deemed to be broadcast election propaganda
additional costs to the company. Attached herewith are the computations within the meaning of this provision. For purposes of monitoring by the COMELEC
explaining how the afore-said figures were derived and the conservative and ensuring that parties and candidates were afforded equal opportunities to
assumptions made by petitioner OMA in reaching said figures, as Annex promote their candidacy, the media entity shall give prior notice to the COMELEC,
"H". through the appropriate Regional Election Director (RED), or in the case of the
National Capital Region (NCR), the Education and Information Department (EID). If
such prior notice is not feasible or practicable, the notice shall be sent within twenty-
5.47 Needless to say, such time, manpower requirements, expense and four (24) hours from the first broadcast or publication.1awp++i1 Nothing in the
effort would have to be replicated by each and every radio station to ensure foregoing sentence shall be construed as relieving broadcasters, in connection with
that they have properly monitored around 33 national and more than 40,000
the presentation of newscasts, news interviews, news documentaries, and on-the-spot
local candidates' airtime minutes and thus, prevent any risk of
coverage of news events, from the obligation imposed upon them under Sections 10
administrative and criminal liability.60
and 14 of these Rules."63

The Court cannot agree with the contentions of GMA. The apprehensions of the Further, the petitioner in G.R. No. 205374 assails the constitutionality of such
petitioner appear more to be the result of a misappreciation of the real import of the
monitoring requirement, contending, among others, that it constitutes prior restraint.
regulation rather than a real and present threat to its broadcast activities. The Court is
The Court finds otherwise. Such a requirement is a reasonable means adopted by the
more in agreement with the respondent when it explained that: COMELEC to ensure that parties and candidates are afforded equal opportunities to
promote their respective candidacies. Unlike the restrictive aggregate-based airtime
The legal duty of monitoring lies with the Comelec. Broadcast stations are merely limits, the directive to give prior notice is not unduly burdensome and unreasonable,
required to submit certain documents to aid the Comelec in ensuring that candidates much less could it be characterized as prior restraint since there is no restriction on
are not sold airtime in excess of the allowed limits. These documents include: (1) dissemination of information before broadcast. Additionally, it is relevant to point
certified true copies of broadcast logs, certificates of performance, and certificates of
out that in the original Resolution No. 9615, the paragraph in issue was worded in include a detailed enumeration of the circumstances and occurrences which warrant
this wise: the invocation of the right to reply and must be accompanied by supporting evidence,
such a copy of the publication or recording of the television or radio broadcast, as the
Appearance or guesting by a candidate on any bona fide newscast, bona fide news case may be. If the supporting evidence is not yet available due to circumstances
interview, bona fide news documentary, if the appearance of the candidate is beyond the power of the claimant, the latter shall supplement his claim as soon as the
incidental to the presentation of the subject or subjects covered by the news supporting evidence becomes available, without delay on the part of the claimant.
documentary, or on-the-spot coverage of bona fide news events, including but not The claimant must likewise furnish a copy of the verified claim and its attachments
limited to events sanctioned by the Commission on Elections, political conventions, to the media outlet concerned prior to the filing of the claim with the COMELEC.
and similar activities, shall not be deemed to be broadcast election propaganda
within the meaning of this provision. To determine whether the appearance or The COMELEC, through the RED, shall view the verified claim within forty-eight (
guesting in a program is bona fide, the broadcast stations or entities must show that 48) hours from receipt thereof, including supporting evidence, and if circumstances
(1) prior approval of the Commission was secured; and (2) candidates and parties warrant, give notice to the media outlet involved for appropriate action, which shall,
were afforded equal opportunities to promote their candidacy. Nothing in the within forty-eight ( 48) hours, submit its comment, answer or response to the RED,
foregoing sentence shall be construed as relieving broadcasters, in connection with explaining the action it has taken to address the claim. The media outlet must
the presentation of newscasts, news interviews, news documentaries, and on-the-spot likewise furnish a copy of the said comment, answer or response to the claimant
coverage of news events, from the obligation imposed upon them under Sections 10 invoking the right to reply.
and 14 of these Rules.64
Should the claimant insist that his/her right to reply was not addressed, he/she may
Comparing the original with the revised paragraph, one could readily appreciate what file the appropriate petition and/or complaint before the Commission on Elections or
the COMELEC had done - to modify the requirement from "prior approval" to "prior its field offices, which shall be endorsed to the Clerk of Court.
notice." While the former may be suggestive of a censorial tone, thus inviting a
charge of prior restraint, the latter is more in the nature of a content-neutral The attack on the validity of the "right to reply" provision is primarily anchored on
regulation designed to assist the poll body to undertake its job of ensuring fair the alleged ground of prior restraint, specifically in so far as such a requirement may
elections without having to undertake any chore of approving or disapproving certain have a chilling effect on speech or of the freedom of the press.
expressions.
Petitioner ABC states, inter alia:
Also, the right to reply provision is reasonable
5 .14 5. A "conscious and detailed consideration" of the interplay of the
In the same way that the Court finds the "prior notice" requirement as not relevant interests - the constitutional mandate granting candidates the right
constitutionally infirm, it similarly concludes that the "right to reply" provision is to reply and the inviolability of the constitutional freedom of expression,
reasonable and consistent with the constitutional mandate. speech, and the press - will show that the Right to Reply, as provided for in
the Assailed Resolution, is an impermissible restraint on these fundamental
Section 14 of Resolution No. 9615, as revised by Resolution No. 9631, provides: freedoms.

SECTION 14. Right to Reply. - All registered political parties, party-list groups or 5.146. An evaluation of the factors set forth in Soriano (for the balancing of
coalitions and bona fide candidates shall have the right to reply to charges published interests test) with respect to the present controversy will show that the
or aired against them. The reply shall be given publicity by the newspaper, Constitution does not tilt the balance in favor of the Right to Reply
television, and/or radio station which first printed or aired the charges with the same provision in the Assailed Resolution and the supposed governmental
prominence or in the same page or section or in the same time slot as the first interest it attempts to further.65
statement.
The Constitution itself provides as part of the means to ensure free, orderly, honest,
Registered political parties, party-list groups or coalitions and bona fide candidates fair and credible elections, a task addressed to the COMELEC to provide for a right
may invoke the right to reply by submitting within a nonextendible period of forty- to reply.66 Given that express constitutional mandate, it could be seen that the
eight hours from first broadcast or publication, a formal verified claim against the Fundamental Law itself has weighed in on the balance to be struck between the
media outlet to the COMELEC, through the appropriate RED. The claim shall freedom of the press and the right to reply. Accordingly, one is not merely to see the
equation as purely between the press and the right to reply. Instead, the Second, broadcasting is uniquely accessible to children, even those too young to
constitutionallymandated desiderata of free, orderly, honest, peaceful, and credible read. Although Cohen's written message might have been incomprehensible to a first
elections would necessarily have to be factored in trying to see where the balance lies grader, Pacifica's broadcast could have enlarged a child's vocabulary in an instant.
between press and the demands of a right-to-reply. Other forms of offensive expression may be withheld from the young without
restricting the expression at its source. Bookstores and motion picture theaters, for
Moreover, as already discussed by the Court in Telecommunications and Broadcast example, may be prohibited from making indecent material available to children. We
Attorneys of the Philippines, Inc. v. Commission on Elections.67 held in Ginsberg v. New York, 390 US 629, that the government's interest in the
"well-being of its youth" and in supporting "parents' claim to authority in their own
household" justified the regulation of otherwise protected expression. The ease with
In truth, radio and television broadcasting companies, which are given franchises, do
which children may obtain access to broadcast material, coupled with the concerns
not own the airwaves and frequencies through which they transmit broadcast signals
and images. They are merely given the temporary privilege of using them. Since a recognized in Ginsberg, amply justify special treatment of indecent broadcasting.69
franchise is a mere privilege, the exercise of the privilege may reasonably be
burdened with the performance by the grantee of some form of public service. x x x68 Given the foregoing considerations, the traditional notions of preferring speech and
the press over so many other values of society do not readily lend itself to this
particular matter. Instead, additional weight should be accorded on the constitutional
Relevant to this aspect are these passages from an American Supreme Court decision
directive to afford a right to reply. If there was no such mandate, then the
with regard to broadcasting, right to reply requirements, and the limitations on
submissions of petitioners may more easily commend themselves for this Court's
speech:
acceptance. But as noted above, this is not the case. Their arguments simplistically
provide minimal importance to that constitutional command to the point of
We have long recognized that each medium of expression presents special First marginalizing its importance in the equation.
Amendment problems. Joseph Burstyn, Inc. v. Wilson, 343 US 495, 502-503, 96 L
Ed 1098, 72 S Ct 777. And of all forms of communication, it is broadcasting that has
In fine, when it comes to election and the exercise of freedom of speech, of
received the most limited First Amendment protection. Thus, although other speakers
expression and of the press, the latter must be properly viewed in context as being
cannot be licensed except under laws that carefully define and narrow official
necessarily made to accommodate the imperatives of fairness by giving teeth and
discretion, a broadcaster may be deprived of his license and his forum if the
Commission decides that such an action would serve "the public interest, substance to the right to reply requirement.
convenience, and necessity." Similarly, although the First Amendment protects
newspaper publishers from being required to print the replies of those whom they WHEREFORE, premises considered, the petitions are PARTIALLY GRANTED,
criticize, Miami Herald Publishing Co. v. Tornillo, 418 US 241, 41 L Ed 2d 730, 94 Section 9 (a) of Resolution No. 9615, as amended by Resolution No. 9631, is
S Ct 2831, it affords no such protection to broadcasters; on the contrary, they must declared UNCONSTITUTIONAL and, therefore, NULL and VOID. The
give free time to the victims of their criticism. Red Lion Broadcasting Co. v. FCC, constitutionality of the remaining provisions of Resolution No. 9615, as amended by
395 US. 367, 23 L Ed 2d 371, 89 S Ct 1794. Resolution No. 9631, is upheld and remain in full force and effect.

The reasons for these distinctions are complex, but two have relevance to the present In view of this Decision, the Temporary Restraining Order issued by the Court on
case. First, the broadcast media have established a uniquely pervasive presence in the April 16, 2013 is hereby made PERMANENT.
lives of all Americans. Patently offensive, indecent material presented over the
airwaves confronts the citizen not only in public, but also in the privacy of the home, SO ORDERED.
where the individual's right to be left alone plainly outweighs the First Amendment
rights of an intruder. Rowan v. Post Office Dept., 397 US 728, 25 L Ed 2d 736, 90 S
Ct 1484. Because the broadcast audience is constantly tuning in and out, prior
warnings cannot completely protect the listener or viewer from unexpected program
content. To say that one may avoid further offense by turning off the radio when he
hears indecent language is like saying that the remedy for an assault is to run away
after the first blow. One may hang up on an indecent phone call, but that option does
not give the caller a constitutional immunity or avoid a harm that has already taken
place.
EN BANC DEPARTMENT OF HEALTH.
Respondent.

RODOLFO S. BELTRAN, doing G.R. No. 133640 x --------------------------------------------- x


business under the name and style,
OUR LADY OF FATIMA RODOLFO S. BELTRAN, doing G.R. No. 139147
BLOOD BANK, FELY G. business under the name and style,
MOSALE, doing business under OUR LADY
the name and style, MOTHER OF FATIMA BLOOD
SEATON BLOOD BANK; BANK, FELY G. MOSALE, doing Present:
PEOPLES BLOOD BANK, INC.; business under the name and style,
MARIA VICTORIA T. VITO, MOTHER SEATON BLOOD BANK; DAVIDE, JR., C.J.,
M.D., doing business under the PEOPLES BLOOD BANK, INC.; PUNO,
name and style, AVENUE BLOOD MARIA VICTORIA T. VITO, M.D., PANGANIBAN,
BANK; JESUS M. GARCIA, doing business under the name and QUISUMBING,
M.D., doing business under the style, AVENUE BLOOD BANK; YNARES-SANTIAGO,
name and style, HOLY JESUS M. GARCIA, M.D., doing SANDOVAL-GUTIERREZ,
REDEEMER BLOOD BANK, business under the name and style, CARPIO,
ALBERT L. LAPITAN, doing HOLY REDEEMER BLOOD BANK, AUSTRIA-MARTINEZ,
business under the name and style, ALBERT L. LAPITAN, doing CORONA,
BLUE CROSS BLOOD business under the name and style, CARPIO-MORALES,
TRANSFUSION SERVICES; BLUE CROSS BLOOD CALLEJO, SR.,
EDGARDO R. RODAS, M.D., TRANSFUSION SERVICES; AZCUNA,
doing business under the name and EDGARDO R. RODAS, M.D., doing TINGA,
style, RECORD BLOOD BANK, business under the name and style, CHIZO-NAZARIO,* and
in their individual capacities and RECORD BLOOD BANK, in their GARCIA, JJ.
for and in behalf of PHILIPPINE Individual capacities and for
ASSOCIATION OF BLOOD and in behalf of PHILIPPINE Promulgated:
BANKS, ASSOCIATION OF BLOOD BANKS,
Petitioners, Petitioners, November 25, 2005
- versus

- versus THE SECRETARY OF HEALTH,


Respondent.

THE SECRETARY OF HEALTH, x ---------------------------------------------------------------------------------------- x


Respondent.

x ------------------------------------------------ x DECISION

AZCUNA, J.:
DOCTORS BLOOD CENTER, G.R. No. 133661
Petitioner,
Before this Court are petitions assailing primarily the constitutionality of Section 7 of
- versus Republic Act No. 7719, otherwise known as the National Blood Services Act of
1994, and the validity of Administrative Order (A.O.) No. 9, series of 1995 or the Section 7 of R.A. 7719 [7] provides:
Rules and Regulations Implementing Republic Act No. 7719.
Section 7. Phase-out of Commercial Blood Banks - All
G.R. No. 133640,[1] entitled Rodolfo S. Beltran, doing business under the name and commercial blood banks shall be phased-out over a period of two
style, Our Lady of Fatima Blood Bank, et al., vs. The Secretary of Health and G.R. (2) years after the effectivity of this Act, extendable to a maximum
No. 133661,[2] entitled Doctors Blood Bank Center vs. Department of Health are period of two (2) years by the Secretary.
petitions for certiorari and mandamus, respectively, seeking the annulment of the
following: (1) Section 7 of Republic Act No. 7719; and, (2) Administrative Order
(A.O.) No. 9, series of 1995. Both petitions likewise pray for the issuance of a writ of Section 23 of Administrative Order No. 9 provides:
prohibitory injunction enjoining the Secretary of Health from implementing and
enforcing the aforementioned law and its Implementing Rules and Regulations; and, Section 23. Process of Phasing Out. -- The Department shall
for a mandatory injunction ordering and commanding the Secretary of Health to effect the phasing-out of all commercial blood banks over a period
grant, issue or renew petitioners license to operate free standing blood banks (FSBB). of two (2) years, extendible for a maximum period of two (2) years
after the effectivity of R.A. 7719. The decision to extend shall be
The above cases were consolidated in a resolution of the Court En Banc dated June based on the result of a careful study and review of the blood
2, 1998.[3] supply and demand and public safety.[8]

G.R. No. 139147,[4] entitled Rodolfo S. Beltran, doing business under the name and
style, Our Lady of Fatima Blood Bank, et al., vs. The Secretary of Health, on the Blood banking and blood transfusion services in the country have been arranged in
other hand, is a petition to show cause why respondent Secretary of Health should four (4) categories: blood centers run by the Philippine National Red Cross (PNRC),
not be held in contempt of court. government-run blood services, private hospital blood banks, and commercial blood
This case was originally assigned to the Third Division of this Court and services.
later consolidated with G.R. Nos. 133640 and 133661 in a resolution dated August 4,
1999.[5] Years prior to the passage of the National Blood Services Act of 1994,
Petitioners comprise the majority of the Board of Directors of the Philippine petitioners have already been operating commercial blood banks under Republic Act
Association of Blood Banks, a duly registered non-stock and non-profit association No. 1517, entitled An Act Regulating the Collection, Processing and Sale of Human
composed of free standing blood banks. Blood, and the Establishment and Operation of Blood Banks and Blood Processing
Laboratories. The law, which was enacted on June 16, 1956, allowed the
Public respondent Secretary of Health is being sued in his capacity as the public establishment and operation by licensed physicians of blood banks and blood
official directly involved and charged with the enforcement and implementation of processing laboratories. The Bureau of Research and Laboratories (BRL) was
the law in question. created in 1958 and was given the power to regulate clinical laboratories in 1966
under Republic Act No. 4688. In 1971, the Licensure Section was created within the
The facts of the case are as follows: BRL. It was given the duty to enforce the licensure requirements for blood banks as
well as clinical laboratories. Due to this development, Administrative Order No. 156,
Republic Act No. 7719 or the National Blood Services Act of 1994 was enacted into Series of 1971, was issued. The new rules and regulations triggered a stricter
law on April 2, 1994. The Act seeks to provide enforcement of the Blood Banking Law, which was characterized by frequent spot
checks, immediate suspension and communication of such suspensions to hospitals, a
an adequate supply of safe blood by promoting voluntary blood donation and by more systematic record-keeping and frequent communication with blood banks
regulating blood banks in the country. It was approved by then President Fidel V. through monthly information bulletins. Unfortunately, by the 1980s, financial
Ramos on May 15, 1994 and was subsequently published in the Official Gazette difficulties constrained the BRL to reduce the frequency of its supervisory visits to
on August 18, 1994. The law took effect on August 23, 1994. the blood banks.[9]

On April 28, 1995, Administrative Order No. 9, Series of 1995, constituting Meanwhile, in the international scene, concern for the safety of blood and blood
the Implementing Rules and Regulations of said law was promulgated by respondent products intensified when the dreaded disease Acute Immune Deficiency Syndrome
Secretary of the Department of Health (DOH).[6] (AIDS) was first described in 1979. In 1980, the International Society of Blood
Transfusion (ISBT) formulated the Code of Ethics for Blood Donation and
Transfusion. In 1982, the first case of transfusion-associated AIDS was described in It was further found, among other things, that blood sold by persons to blood
an infant. Hence, the ISBT drafted in 1984, a model for a national blood policy commercial banks are three times more likely to have any of the four (4) tested
outlining certain principles that should be taken into consideration. By 1985, the infections or blood transfusion transmissible diseases, namely, malaria, syphilis,
ISBT had disseminated guidelines requiring AIDS testing of blood and blood Hepatitis B and Acquired Immune Deficiency Syndrome (AIDS) than those donated
products for transfusion.[10] to PNRC.[15]
Commercial blood banks give paid donors varying rates around P50
In 1989, another revision of the Blood Banking Guidelines was made. The DOH to P150, and because of this arrangement, many of these donors are poor, and often
issued Administrative Order No. 57, Series of 1989, which classified banks into they are students, who need cash immediately. Since they need the money, these
primary, secondary and tertiary depending on the services they provided. The donors are not usually honest about their medical or social history. Thus, blood from
standards were adjusted according to this classification. For instance, floor area healthy, voluntary donors who give their true medical and social history are about
requirements varied according to classification level. The new guidelines likewise three times much safer than blood from paid donors.[16]
required Hepatitis B and HIV testing, and that the blood bank be headed by a
pathologist or a hematologist.[11] What the study also found alarming is that many Filipino doctors are not yet fully
trained on the specific indications for blood component transfusion. They are not
In 1992, the DOH issued Administrative Order No. 118-A institutionalizing the aware of the lack of blood supply and do not feel the need to adjust their practices
National Blood Services Program (NBSP). The BRL was designated as the central and use of blood and blood products. It also does not matter to them where the blood
office primarily responsible for the NBSP. The program paved the way for the comes from.[17]
creation of a committee that will implement the policies of the program and the On August 23, 1994, the National Blood Services Act providing for the phase out of
formation of the Regional Blood Councils. commercial blood banks took effect. On April 28, 1995, Administrative Order No. 9,
Series of 1995, constituting the Implementing Rules and Regulations of said law was
In August 1992, Senate Bill No. 1011, entitled An Act Promoting Voluntary Blood promulgated by DOH.
Donation, Providing for an Adequate Supply of Safe Blood, Regulating Blood Banks
and Providing Penalties for Violations Thereof, and for other Purposes was The phase-out period was extended for two years by the DOH pursuant to Section 7
introduced in the Senate.[12] of Republic Act No. 7719 and Section 23 of its Implementing Rules and Regulations.
Meanwhile, in the House of Representatives, House Bills No. 384, 546, 780 Pursuant to said Act, all commercial blood banks should have been phased out
and 1978 were being deliberated to address the issue of safety of the Philippine blood by May 28, 1998. Hence, petitioners were granted by the Secretary of Health their
bank system. Subsequently, the Senate and House Bills were referred to the licenses to open and operate a blood bank only until May 27, 1998.
appropriate committees and subsequently consolidated.[13]
In January of 1994, the New Tropical Medicine Foundation, with the On May 20, 1998, prior to the expiration of the licenses granted to
assistance of the U.S. Agency for International Development (USAID) released its petitioners, they filed a petition for certiorari with application for the issuance of a
final report of a study on the Philippine blood banking system entitled Project to writ of preliminary injunction or temporary restraining order under Rule 65 of the
Evaluate the Safety of the Philippine Blood Banking System. It was revealed that of Rules of Court assailing the constitutionality and validity of the aforementioned Act
the blood units collected in 1992, 64.4 % were supplied by commercial blood banks, and its Implementing Rules and Regulations. The case was entitled Rodolfo S.
14.5% by the PNRC, 13.7% by government hospital-based blood banks, and 7.4% by Beltran, doing business under the name and style, Our Lady of Fatima Blood Bank,
private hospital-based blood banks. During the time the study was made, there were docketed as G.R. No. 133640.
only twenty-four (24) registered or licensed free-standing or commercial blood banks
in the country. Hence, with these numbers in mind, the study deduced that each On June 1, 1998, petitioners filed an Amended Petition for Certiorari with
commercial blood bank produces five times more blood than the Red Cross and Prayer for Issuance of a Temporary Restraining Order, writ of preliminary
fifteen times more than the government-run blood banks. The study, therefore, mandatory injunction and/or status quo ante order.[18]
showed that the Philippines heavily relied on commercial sources of blood. The In the aforementioned petition, petitioners assail the constitutionality of the
study likewise revealed that 99.6% of the donors of commercial blood banks and questioned legal provisions, namely, Section 7 of Republic Act No. 7719 and Section
77.0% of the donors of private-hospital based blood banks are paid donors. Paid 23 of Administrative Order No. 9, Series of 1995, on the following grounds: [19]
donors are those who receive remuneration for donating their blood. Blood donors of
the PNRC and government-run hospitals, on the other hand, are mostly voluntary.[14] 1. The questioned legal provisions of the National Blood
Services Act and its Implementing Rules violate the equal
protection clause for irrationally discriminating against
free standing blood banks in a manner which is not On August 26, 1998, respondent Secretary of Health filed a Consolidated Comment
germane to the purpose of the law; on the petitions for certiorari and mandamus in G.R. Nos. 133640 and 133661, with
2. The questioned provisions of the National Blood opposition to the issuance of a temporary restraining order.[24]
Services Act and its Implementing Rules represent undue
delegation if not outright abdication of the police power In the Consolidated Comment, respondent Secretary of Health submitted that blood
of the state; and, from commercial blood banks is unsafe and therefore the State, in the exercise of its
police power, can close down commercial blood banks to protect the public. He cited
3. The questioned provisions of the National Blood the record of deliberations on Senate Bill No. 1101 which later became Republic Act
Services Act and its Implementing Rules are unwarranted No. 7719, and the sponsorship speech of Senator Orlando Mercado.
deprivation of personal liberty.
The rationale for the closure of these commercial blood banks can be found in the
deliberations of Senate Bill No. 1011, excerpts of which are quoted below:

On May 22, 1998, the Doctors Blood Center filed a similar petition for Senator Mercado: I am providing over a period of two years to
mandamus with a prayer for the issuance of a temporary restraining order, phase out all commercial blood banks. So that in the end, the new
preliminary prohibitory and mandatory injunction before this Court section would have a provision that states:
entitled Doctors Blood Center vs. Department of Health, docketed as G.R. No.
133661. [20] This was consolidated with G.R. No. 133640.[21] ALL COMMERCIAL BLOOD BANKS SHALL BE
PHASED OUT OVER A PERIOD OF TWO YEARS AFTER
Similarly, the petition attacked the constitutionality of Republic Act No. THE EFFECTIVITY OF THIS ACT. BLOOD SHALL BE
7719 and its implementing rules and regulations, thus, praying for the issuance of a COLLECTED FROM VOLUNTARY DONORS ONLY AND
license to operate commercial blood banks beyond May 27, 1998. Specifically, with THE SERVICE FEE TO BE CHARGED FOR EVERY BLOOD
regard to Republic Act No. 7719, the petition submitted the following PRODUCT ISSUED SHALL BE LIMITED TO THE
questions[22] for resolution: NECESSARY EXPENSES ENTAILED IN COLLECTING AND
PROCESSING OF BLOOD. THE SERVICE FEE SHALL BE
1. Was it passed in the exercise of police MADE UNIFORM THROUGH GUIDELINES TO BE SET BY
power, and was it a valid exercise of such power? THE DEPARTMENTOF HEALTH.
I am supporting Mr. President, the finding of a study
2. Does it not amount to deprivation of called Project to Evaluate the Safety of the Philippine Blood
property without due process? Banking System. This has been taken note of. This is a study done
with the assistance of the USAID by doctors under the New
3. Does it not unlawfully impair the Tropical Medicine Foundation in Alabang.
obligation of contracts? Part of the long-term measures proposed by this particular
study is to improve laws, outlaw buying and selling of blood and
4. With the commercial blood banks being abolished and with no legally define good manufacturing processes for blood. This goes
ready machinery to deliver the same supply and services, to the very heart of my amendment which seeks to put into law the
does R.A. 7719 truly serve the public welfare? principle that blood should not be subject of commerce of man.
The Presiding Officer [Senator Aquino]: What does the
On June 2, 1998, this Court issued a Resolution directing respondent DOH to file a sponsor say?
consolidated comment. In the same Resolution, the Court issued a temporary Senator Webb: Mr. President, just for clarity, I would
restraining order (TRO) for respondent to cease and desist from implementing and like to find out how the Gentleman defines a commercial blood
enforcing Section 7 of Republic Act No. 7719 and its implementing rules and bank. I am at a loss at times what a commercial blood bank really
regulations until further orders from the Court.[23] is.
Senator Mercado: We have a definition, I believe, in the
measure, Mr. President.
The Presiding Officer [Senator Aquino]: It is a business A blood bank owner expecting to gain profit from selling
where profit is considered. blood will also try his best to limit his expenses. Usually he tries to
increase his profit by buying cheaper reagents or test kits, hiring
Senator Mercado: If the Chairman of the Committee would cheaper manpower or skipping some tests altogether. He may also
accept it, we can put a provision on Section 3, a definition of a try to sell blood even though these have infections in them.
commercial blood bank, which, as defined in this law, exists for Because there is no existing system of counterchecking these, the
profit and engages in the buying and selling of blood or its blood bank owner can usually get away with many unethical
components. practices.
The experience of Germany, Mr. President is illustrative
Senator Webb: That is a good description, Mr. President. of this issue. The reason why contaminated blood was sold was
that there were corners cut by commercial blood banks in the
Senator Mercado: I refer, Mr. President, to a letter testing process. They were protecting their profits.[25]
written by Dr. Jaime Galvez-Tan, the Chief of Staff,
Undersecretary of Health, to the good Chairperson of the The sponsorship speech of Senator Mercado further elucidated his stand on the issue:
Committee on Health.
In recommendation No. 4, he says:
The need to phase out all commercial blood banks within Senator Mercado: Today, across the country, hundreds of
a two-year period will give the Department of Health enough time poverty-stricken, sickly and weak Filipinos, who, unemployed,
to build up governments capability to provide an adequate supply without hope and without money to buy the next meal, will walk
of blood for the needs of the nation...the use of blood for into a commercial blood bank, extend their arms and plead that
transfusion is a medical service and not a sale of commodity. their blood be bought. They will lie about their age, their medical
Taking into consideration the experience of the National history. They will lie about when they last sold their blood. For
Kidney Institute, which has succeeded in making the hospital 100 doing this, they will receive close to a hundred pesos. This may
percent dependent on voluntary blood donation, here is a success tide them over for the next few days. Of course, until the next
story of a hospital that does not buy blood. All those who are bloodletting.
operated on and need blood have to convince their relatives or have
to get volunteers who would donate blood This same blood will travel to the posh city hospitals and urbane
If we give the responsibility of the testing of blood to medical centers. This same blood will now be bought by the rich at
those commercial blood banks, they will cut corners because it will a price over 500% of the value for which it was sold. Between this
protect their profit. buying and selling, obviously, someone has made a very fast buck.
In the first place, the people who sell their blood are the
people who are normally in the high-risk category. So we should Every doctor has handled at least one transfusion-related disease in
stop the system of selling and buying blood so that we can go into an otherwise normal patient. Patients come in for minor surgery of
a national voluntary blood program. the hand or whatever and they leave with hepatitis B. A patient
It has been said here in this report, and I quote: comes in for an appendectomy and he leaves with malaria. The
Why is buying and selling of blood not safe? This is not worst nightmare: A patient comes in for a Caesarian section and
safe because a donor who expects payment for his blood will not leaves with AIDS.
tell the truth about his illnesses and will deny any risky social
behavior such as sexual promiscuity which increases the risk of We do not expect good blood from donors who sell their blood
having syphilis or AIDS or abuse of intravenous addictive drugs. because of poverty. The humane dimension of blood transfusion is
Laboratory tests are of limited value and will not detect early not in the act of receiving blood, but in the act of giving it
infections. Laboratory tests are required only for four diseases in
the Philippines. There are other blood transmissible diseases we do For years, our people have been at the mercy of commercial blood
not yet screen for and there could be others where there are no tests banks that lobby their interests among medical technologists,
available yet. hospital administrators and sometimes even physicians so that a
proactive system for collection of blood from healthy donors claimed that respondent Secretary of Health announced in a press conference during
becomes difficult, tedious and unrewarding. the Blood Donors Week that commercial blood banks are illegal and dangerous and
that they are at the moment protected by a restraining order on the basis that their
The Department of Health has never institutionalized a commercial interest is more important than the lives of the people. These were all
comprehensive national program for safe blood and for voluntary posted in bulletin boards and other conspicuous places in all government hospitals as
blood donation even if this is a serious public health concern and well as other medical and health centers.[31]
has fallen for the linen of commercial blood bankers, hook, line
and sinker because it is more convenient to tell the patient to buy In respondent Secretarys Comment to the Petition to Show Cause Why Public
blood. Respondent Should Not Be Held in Contempt of Court, dated January 3, 2000, it was
explained that nothing was issued by the department ordering the closure of
Commercial blood banks hold us hostage to their threat that if we commercial blood banks. The subject health advisory leaflets pertaining to said
are to close them down, there will be no blood supply. This is true closure pursuant to Republic Act No. 7719 were printed and circulated prior to the
if the Government does not step in to ensure that safe supply of Courts issuance of a temporary restraining order on June 21, 1998.[32]
blood. We cannot allow commercial interest groups to dictate Public respondent further claimed that the primary purpose of the
policy on what is and what should be a humanitarian effort. This information campaign was to promote the importance and safety of voluntary blood
cannot and will never work because their interest in blood donation donation and to educate the public about the hazards of patronizing blood supplies
is merely monetary. We cannot expect commercial blood banks to from commercial blood banks.[33] In doing so, he was merely performing his regular
take the lead in voluntary blood donation. Only the Government functions and duties as the Secretary of Health to protect the health and welfare of
can do it, and the Government must do it.[26] the public. Moreover, the DOH is the main proponent of the voluntary blood
On May 5, 1999, petitioners filed a Motion for Issuance of Expanded Temporary donation program espoused by Republic Act No. 7719, particularly Section 4 thereof
Restraining Order for the Court to order respondent Secretary of Health to cease and which provides that, in order to ensure the adequate supply of human blood,
desist from announcing the closure of commercial blood banks, compelling the voluntary blood donation shall be promoted through public education, promotion in
public to source the needed blood from voluntary donors only, and committing schools, professional education, establishment of blood services network,
similar acts that will ultimately cause the shutdown of petitioners blood banks.[27] and walking blood donors.
On July 8, 1999, respondent Secretary filed his Comment and/or Opposition Hence, by authority of the law, respondent Secretary contends that he has
to the above motion stating that he has not ordered the closure of commercial blood the duty to promote the program of voluntary blood donation. Certainly, his act of
banks on account of the Temporary Restraining Order (TRO) issued on June 2, 1998 encouraging the public to donate blood voluntarily and educating the people on the
by the Court. In compliance with the TRO, DOH had likewise ceased to distribute risks associated with blood coming from a paid donor promotes general health and
the health advisory leaflets, posters and flyers to the public which state that blood welfare and which should be given more importance than the commercial businesses
banks are closed or will be closed. According to respondent Secretary, the same were of petitioners.[34]
printed and circulated in anticipation of the closure of the commercial blood banks in
accordance with R.A. No. 7719, and were printed and circulated prior to the issuance On July 29, 1999, interposing personal and substantial interest in the case as
of the TRO.[28] taxpayers and citizens, a Petition-in-Intervention was filed interjecting the same
arguments and issues as laid down by petitioners in G.R. No. 133640 and 133661,
On July 15, 1999, petitioners in G.R. No. 133640 filed a Petition to Show namely, the unconstitutionality of the Acts, and, the issuance of a writ of prohibitory
Cause Why Public Respondent Should Not be Held in Contempt of Court, docketed injunction. The intervenors are the immediate relatives of individuals who had died
as G.R. No. 139147, citing public respondents willful disobedience of or resistance allegedly because of shortage of blood supply at a critical time.[35]
to the restraining order issued by the Court in the said case. Petitioners alleged that The intervenors contended that Republic Act No. 7719 constitutes undue
respondents act constitutes circumvention of the temporary restraining order and a delegation of legislative powers and unwarranted deprivation of personal liberty.[36]
mockery of the authority of the Court and the orderly administration of In a resolution, dated September 7, 1999, and without giving due course to
justice.[29] Petitioners added that despite the issuance of the temporary restraining the aforementioned petition, the Court granted the Motion for Intervention that was
order in G.R. No. 133640, respondent, in his effort to strike down the existence of filed by the above intervenors on August 9, 1999.
commercial blood banks, disseminated misleading information under the guise of
health advisories, press releases, leaflets, brochures and flyers stating, among others, In his Comment to the petition-in-intervention, respondent Secretary of
that this year [1998] all commercial blood banks will be closed by 27 May. Those Health stated that the sale of blood is contrary to the spirit and letter of the Act that
who need blood will have to rely on government blood banks.[30]Petitioners further blood donation is a humanitarian act and blood transfusion is a professional medical
service and not a sale of commodity (Section 2[a] and [b] of Republic Act No. 7719). of legislative power. According to petitioners, the Act was incomplete when it was
The act of selling blood or charging fees other than those allowed by law is even passed by the Legislature, and the latter failed to fix a standard to which the
penalized under Section 12.[37] Secretary of Health must conform in the performance of his functions. Petitioners
also contend that the two-year extension period that may be granted by the Secretary
Thus, in view of these, the Court is now tasked to pass upon the constitutionality of of Health for the phasing out of commercial blood banks pursuant to Section 7 of the
Section 7 of Republic Act No. 7719 or the National Blood Services Act of 1994 and Act constrained the Secretary to legislate, thus constituting undue delegation of
its Implementing Rules and Regulations. legislative power.
In resolving the controversy, this Court deems it necessary to address the In testing whether a statute constitutes an undue delegation of legislative
issues and/or questions raised by petitioners concerning the constitutionality of the power or not, it is usual to inquire whether the statute was complete in all its terms
aforesaid Act in G.R. No. 133640 and 133661 as summarized hereunder: and provisions when it left the hands of the Legislature so that nothing was left to the
judgment of the administrative body or any other appointee or delegate of the
I Legislature.[38] Except as to matters of detail that may be left to be filled in by rules
WHETHER OR NOT SECTION 7 OF R.A. 7719 and regulations to be adopted or promulgated by executive officers and
CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE administrative boards, an act of the Legislature, as a general rule, is incomplete and
POWER; hence invalid if it does not lay down any rule or definite standard by which the
administrative board may be guided in the exercise of the discretionary powers
II delegated to it.[39]
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND Republic Act No. 7719 or the National Blood Services Act of 1994 is
ITS IMPLEMENTING RULES AND REGULATIONS VIOLATE complete in itself. It is clear from the provisions of the Act that the Legislature
THE EQUAL PROTECTION CLAUSE; intended primarily to safeguard the health of the people and has mandated several
measures to attain this objective. One of these is the phase out of commercial blood
III banks in the country. The law has sufficiently provided a definite standard for the
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND guidance of the Secretary of Health in carrying out its provisions, that is, the
ITS IMPLEMENTING RULES AND REGULATIONS VIOLATE promotion of public health by providing a safe and adequate supply of blood through
THE NON-IMPAIRMENT CLAUSE; voluntary blood donation. By its provisions, it has conferred the power and authority
to the Secretary of Health as to its execution, to be exercised under and in pursuance
of the law.
Congress may validly delegate to administrative agencies the authority to
IV promulgate rules and regulations to implement a given legislation and effectuate its
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND policies.[40] The Secretary of Health has been given, under Republic Act No. 7719,
ITS IMPLEMENTING RULES AND REGULATIONS broad powers to execute the provisions of said Act. Section 11 of the Act states:
CONSTITUTE DEPRIVATION OF PERSONAL LIBERTY AND
PROPERTY; SEC. 11. Rules and Regulations. The implementation of the
provisions of the Act shall be in accordance with the rules and
V regulations to be promulgated by the Secretary, within sixty (60)
WHETHER OR NOT R.A. 7719 IS A VALID days from the approval hereof
EXERCISE OF POLICE POWER; and,
This is what respondent Secretary exactly did when DOH, by virtue of the
VI administrative bodys authority and expertise in the matter, came out with
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND Administrative Order No.9, series of 1995 or the Rules and Regulations
ITS IMPLEMENTING RULES AND REGULATIONS TRULY Implementing Republic Act No. 7719. Administrative Order. No. 9 effectively filled
SERVE PUBLIC WELFARE. in the details of the law for its proper implementation.

As to the first ground upon which the constitutionality of the Act is being challenged, Specifically, Section 23 of Administrative Order No. 9 provides that the
it is the contention of petitioners that the phase out of commercial or free standing phase-out period for commercial blood banks shall be extended for another two years
blood banks is unconstitutional because it is an improper and unwarranted delegation until May 28, 1998 based on the result of a careful study and review of the blood
supply and demand and public safety. This power to ascertain the existence of facts h) to provide for adequate assistance to institutions
and conditions upon which the Secretary may effect a period of extension for said promoting voluntary blood donation and providing
phase-out can be delegated by Congress. The true distinction between the power to non-profit blood services, either through a system of
make laws and discretion as to its execution is illustrated by the fact that the reimbursement for costs from patients who can afford
delegation of power to make the law, which necessarily involves a discretion as to to pay, or donations from governmental and non-
what it shall be, and conferring an authority or discretion as to its execution, to be governmental entities;
exercised under and in pursuance of the law. The first cannot be done; to the latter no
valid objection can be made.[41] i) to require all blood collection units and blood
banks/centers to operate on a non-profit basis;
In this regard, the Secretary did not go beyond the powers granted to him by
the Act when said phase-out period was extended in accordance with the Act as laid j) to establish scientific and professional standards
out in Section 2 thereof: for the operation of blood collection units and blood
SECTION 2. Declaration of Policy In order to promote banks/centers in the Philippines;
public health, it is hereby declared the policy of the state:
k) to regulate and ensure the safety of all activities
a) to promote and encourage voluntary blood related to the collection, storage and banking of
donation by the citizenry and to instill public blood; and,
consciousness of the principle that blood donation is
a humanitarian act; l) to require upgrading of blood banks/centers to
include preventive services and education to control
b) to lay down the legal principle that the provision spread of blood transfusion transmissible diseases.
of blood for transfusion is a medical service and not a
sale of commodity; Petitioners also assert that the law and its implementing rules and
c) to provide for adequate, safe, affordable and regulations violate the equal protection clause enshrined in the Constitution because
equitable distribution of blood supply and blood it unduly discriminates against commercial or free standing blood banks in a manner
products; that is not germane to the purpose of the law.[42]

d) to inform the public of the need for voluntary What may be regarded as a denial of the equal protection of the laws is a question
blood donation to curb the hazards caused by the not always easily determined. No rule that will cover every case can be formulated.
commercial sale of blood; Class legislation, discriminating against some and favoring others is prohibited but
classification on a reasonable basis and not made arbitrarily or capriciously is
e) to teach the benefits and rationale of voluntary permitted. The classification, however, to be reasonable: (a) must be based on
blood donation in the existing health subjects of the substantial distinctions which make real differences; (b) must be germane to the
formal education system in all public and private purpose of the law; (c) must not be limited to existing conditions only; and, (d) must
schools as well as the non-formal system; apply equally to each member of the class.[43]
Republic Act No. 7719 or The National Blood Services Act of 1994, was
f) to mobilize all sectors of the community to enacted for the promotion of public health and welfare. In the aforementioned study
participate in mechanisms for voluntary and non- conducted by the New Tropical Medicine Foundation, it was revealed that the
profit collection of blood; Philippine blood banking system is disturbingly primitive and unsafe, and with its
current condition, the spread of infectious diseases such as malaria, AIDS, Hepatitis
g) to mandate the Department of Health to establish B and syphilis chiefly from blood transfusion is unavoidable. The situation becomes
and organize a National Blood Transfusion Service more distressing as the study showed that almost 70% of the blood supply in the
Network in order to rationalize and improve the country is sourced from paid blood donors who are three times riskier than voluntary
provision of adequate and safe supply of blood; blood donors because they are unlikely to disclose their medical or social history
during the blood screening.[44]
The above study led to the passage of Republic Act No. 7719, to instill blood in the country through voluntary blood donation. Attaining this objective
public consciousness of the importance and benefits of voluntary blood donation, requires the interference of the State given the disturbing condition of the Philippine
safe blood supply and proper blood collection from healthy donors. To do this, the blood banking system.
Legislature decided to order the phase out of commercial blood banks to improve the In serving the interest of the public, and to give meaning to the purpose of
Philippine blood banking system, to regulate the supply and proper collection of safe the law, the Legislature deemed it necessary to phase out commercial blood banks.
blood, and so as not to derail the implementation of the voluntary blood donation This action may seriously affect the owners and operators, as well as the employees,
program of the government. In lieu of commercial blood banks, non-profit blood of commercial blood banks but their interests must give way to serve a higher end for
banks or blood centers, in strict adherence to professional and scientific standards to the interest of the public.
be established by the DOH, shall be set in place.[45]
Based on the foregoing, the Legislature never intended for the law to create The Court finds that the National Blood Services Act is a valid exercise of
a situation in which unjustifiable discrimination and inequality shall be allowed. To the States police power. Therefore, the Legislature, under the circumstances, adopted
effectuate its policy, a classification was made between nonprofit blood a course of action that is both necessary and reasonable for the common good. Police
banks/centers and commercial blood banks. power is the State authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare.[47]
We deem the classification to be valid and reasonable for the following It is in this regard that the Court finds the related grounds and/or issues raised by
reasons: petitioners, namely, deprivation of personal liberty and property, and violation of the
One, it was based on substantial distinctions. The former operates for purely non-impairment clause, to be unmeritorious.
humanitarian reasons and as a medical service while the latter is motivated by profit. Petitioners are of the opinion that the Act is unconstitutional and void
Also, while the former wholly encourages voluntary blood donation, the latter treats because it infringes on the freedom of choice of an individual in connection to what
blood as a sale of commodity. he wants to do with his blood which should be outside the domain of State
Two, the classification, and the consequent phase out of commercial blood intervention. Additionally, and in relation to the issue of classification, petitioners
banks is germane to the purpose of the law, that is, to provide the nation with an asseverate that, indeed, under the Civil Code, the human body and its organs like the
adequate supply of safe blood by promoting voluntary blood donation and treating heart, the kidney and the liver are outside the commerce of man but this cannot be
blood transfusion as a humanitarian or medical service rather than a commodity. This made to apply to human blood because the latter can be replenished by the body. To
necessarily involves the phase out of commercial blood banks based on the fact that treat human blood equally as the human organs would constitute invalid
they operate as a business enterprise, and they source their blood supply from paid classification.[48]
blood donors who are considered unsafe compared to voluntary blood donors as Petitioners likewise claim that the phase out of the commercial blood banks
shown by the USAID-sponsored study on the Philippine blood banking system. will be disadvantageous to them as it will affect their businesses and existing
Three, the Legislature intended for the general application of the law. Its contracts with hospitals and other health institutions, hence Section 7 of the Act
enactment was not solely to address the peculiar circumstances of the situation nor should be struck down because it violates the non-impairment clause provided by the
was it intended to apply only to the existing conditions. Constitution.
Lastly, the law applies equally to all commercial blood banks without As stated above, the State, in order to promote the general welfare, may
exception. interfere with personal liberty, with property, and with business and occupations.
Having said that, this Court comes to the inquiry as to whether or not Thus, persons may be subjected to certain kinds of restraints and burdens in order to
Republic Act No. 7719 constitutes a valid exercise of police power. secure the general welfare of the State and to this fundamental aim of government,
The promotion of public health is a fundamental obligation of the State. The health the rights of the individual may be subordinated.[49]
of the people is a primordial governmental concern. Basically, the National Blood
Services Act was enacted in the exercise of the States police power in order to Moreover, in the case of Philippine Association of Service Exporters, Inc. v.
promote and preserve public health and safety. Drilon,[50] settled is the rule that the non-impairment clause of the Constitution must
Police power of the state is validly exercised if (a) the interest of the public yield to the loftier purposes targeted by the government. The right granted by this
generally, as distinguished from those of a particular class, requires the interference provision must submit to the demands and necessities of the States power of
of the State; and, (b) the means employed are reasonably necessary to the attainment regulation. While the Court understands the grave implications of Section 7 of the
of the objective sought to be accomplished and not unduly oppressive upon law in question, the concern of the Government in this case, however, is not
individuals.[46] necessarily to maintain profits of business firms. In the ordinary sequence of events,
In the earlier discussion, the Court has mentioned of the avowed policy of it is profits that suffer as a result of government regulation.
the law for the protection of public health by ensuring an adequate supply of safe
Furthermore, the freedom to contract is not absolute; all contracts and all of constitutionality of the law. As to whether the Act constitutes a wise legislation,
rights are subject to the police power of the State and not only may regulations which considering the issues being raised by petitioners, is for Congress to determine.[57]
affect them be established by the State, but all such regulations must be subject to
change from time to time, as the general well-being of the community may require, WHEREFORE, premises considered, the Court renders judgment as follows:
or as the circumstances may change, or as experience may demonstrate the
necessity.[51] This doctrine was reiterated in the case of Vda. de Genuino v. Court of 1. In G.R. Nos. 133640 and 133661, the
Agrarian Relations[52] where the Court held that individual rights to contract and to Court UPHOLDS THE VALIDITY of Section 7 of Republic Act
property have to give way to police power exercised for public welfare. No. 7719, otherwise known as the National Blood Services Act of
1994, and Administrative Order No. 9, Series of 1995 or the Rules
As for determining whether or not the shutdown of commercial blood banks will and Regulations Implementing Republic Act No. 7719. The
truly serve the general public considering the shortage of blood supply in the country petitions are DISMISSED. Consequently, the Temporary
as proffered by petitioners, we maintain that the wisdom of the Legislature in the Restraining Order issued by this Court on June 2, 1998,
lawful exercise of its power to enact laws cannot be inquired into by the Court. is LIFTED.
Doing so would be in derogation of the principle of separation of powers.[53]
2. In G.R. No. 139147, the petition seeking to cite
That, under the circumstances, proper regulation of all blood banks without the Secretary of Health in contempt of court is DENIED for lack
distinction in order to achieve the objective of the law as contended by petitioners is, of merit.
of course, possible; but, this would be arguing on what the law may be or should
be and not what the law is. Between is and ought there is a far cry. The wisdom and No costs.
propriety of legislation is not for this Court to pass upon.[54]
SO ORDERED.
Finally, with regard to the petition for contempt in G.R. No. 139147, on the other
hand, the Court finds respondent Secretary of Healths explanation satisfactory. The
statements in the flyers and posters were not aimed at influencing or threatening the
Court in deciding in favor of the constitutionality of the law.

Contempt of court presupposes a contumacious attitude, a flouting or


arrogant belligerence in defiance of the court.[55] There is nothing contemptuous
about the statements and information contained in the health advisory that were
distributed by DOH before the TRO was issued by this Court ordering the former to
cease and desist from distributing the same.

In sum, the Court has been unable to find any constitutional infirmity in the
questioned provisions of the National Blood Services Act of 1994 and its
Implementing Rules and Regulations.
The fundamental criterion is that all reasonable doubts should be resolved in
favor of the constitutionality of a statute. Every law has in its favor the presumption
of constitutionality. For a law to be nullified, it must be shown that there is a clear
and unequivocal breach of the Constitution. The ground for nullity must be clear and
beyond reasonable doubt.[56] Those who petition this Court to declare a law, or parts
thereof, unconstitutional must clearly establish the basis therefor. Otherwise, the
petition must fail.

Based on the grounds raised by petitioners to challenge the constitutionality


of the National Blood Services Act of 1994 and its Implementing Rules and
Regulations, the Court finds that petitioners have failed to overcome the presumption
EN BANC regulations for the effective implementation of the law; and prosecute and revoke the
licenses of erring drugstore establishments.
CARLOS SUPERDRUG CORP., G.R. No. 166494
doing business under the name The antecedents are as follows:
and style Carlos Superdrug, Present:
ELSIE M. CANO, doing business On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432,[3] was
under the name and style Advance PUNO, C.J., signed into law by President Gloria Macapagal-Arroyo and it became effective
Drug, Dr. SIMPLICIO L. YAP, JR., QUISUMBING,* onMarch 21, 2004. Section 4(a) of the Act states:
doing business under the name and YNARES-SANTIAGO,
style City Pharmacy, MELVIN S. SANDOVAL-GUTIERREZ,** SEC. 4. Privileges for the Senior Citizens. The senior citizens shall
DELA SERNA, doing business under CARPIO, be entitled to the following:
the name and style Botica dela Serna, AUSTRIA-MARTINEZ,
and LEYTE SERV-WELL CORP., CORONA, (a) the grant of twenty percent (20%) discount from all
doing business under the name and CARPIO MORALES, establishments relative to the utilization of services in hotels and
style Leyte Serv-Well Drugstore, AZCUNA, similar lodging establishments, restaurants and recreation centers,
Petitioners, TINGA, and purchase of medicines in all establishments for the exclusive
CHICO-NAZARIO, use or enjoyment of senior citizens, including funeral and burial
- versus - GARCIA, services for the death of senior citizens;
VELASCO, JR., and
DEPARTMENT OF SOCIAL NACHURA, JJ. ...
WELFARE and DEVELOPMENT
(DSWD), DEPARTMENT OF Promulgated: The establishment may claim the discounts granted
HEALTH (DOH), DEPARTMENT under (a), (f), (g) and (h) as tax deduction based on the net cost of
OF FINANCE (DOF), DEPARTMENT June 29, 2007 the goods sold or services rendered: Provided, That the cost of the
OF JUSTICE (DOJ), and discount shall be allowed as deduction from gross income for the
DEPARTMENT OF INTERIOR and same taxable year that the discount is granted. Provided,
LOCAL GOVERNMENT (DILG), further, That the total amount of the claimed tax deduction net of
Respondents. value added tax if applicable, shall be included in their gross sales
x ---------------------------------------------------------------------------------------- x receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal
DECISION Revenue Code, as amended.[4]

AZCUNA, J.: On May 28, 2004, the DSWD approved and adopted the Implementing
This is a petition[1] for Prohibition with Prayer for Preliminary Injunction Rules and Regulations of R.A. No. 9257, Rule VI, Article 8 of which states:
assailing the constitutionality of Section 4(a) of Republic Act (R.A.) No.
9257,[2]otherwise known as the Expanded Senior Citizens Act of 2003. Article 8. Tax Deduction of Establishments. The
establishment may claim the discounts granted under Rule V,
Petitioners are domestic corporations and proprietors operating drugstores Section 4 Discounts for Establishments;[5] Section 9, Medical and
in the Philippines. Dental Services in Private Facilities[,][6] and Sections 10[7] and
11[8] Air, Sea and Land Transportation as tax deduction based
Public respondents, on the other hand, include the Department of Social Welfare and on the net cost of the goods sold or services rendered. Provided,
Development (DSWD), the Department of Health (DOH), the Department of Finance That the cost of the discount shall be allowed as deduction from
(DOF), the Department of Justice (DOJ), and the Department of Interior and Local gross income for the same taxable year that the discount is
Government (DILG) which have been specifically tasked to monitor the granted; Provided, further, That the total amount of the claimed tax
drugstores compliance with the law; promulgate the implementing rules and deduction net of value added tax if applicable, shall be included in
their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Under this scheme, the establishment concerned
Revenue Code, as amended; Provided, finally, that the is allowed to deduct from gross income, in computing for
implementation of the tax deduction shall be subject to the its tax liability, the amount of discounts granted to senior
Revenue Regulations to be issued by the Bureau of Internal citizens. Effectively, the government loses in terms of
Revenue (BIR) and approved by the Department of Finance foregone revenues an amount equivalent to the marginal
(DOF).[9] tax rate the said establishment is liable to pay the
On July 10, 2004, in reference to the query of the Drug Stores Association government. This will be an amount equivalent to 32% of
of the Philippines (DSAP) concerning the meaning of a tax deduction under the the twenty percent (20%) discounts so granted. The
Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B. establishment shoulders the remaining portion of the
Recente, clarified as follows: granted discounts.

1) The difference between the Tax Credit (under the Old It may be necessary to note that while the burden
Senior Citizens Act) and Tax Deduction (under the Expanded on [the] government is slightly diminished in terms of its
Senior Citizens Act). percentage share on the discounts granted to senior
citizens, the number of potential establishments that may
1.1. The provision of Section 4 of R.A. No. 7432 claim tax deductions, have however, been broadened.
(the old Senior Citizens Act) grants twenty percent (20%) Aside from the establishments that may claim tax
discount from all establishments relative to the utilization creditsunder the old law, more establishments were added
of transportation services, hotels and similar lodging under the new law such as: establishments providing
establishment, restaurants and recreation centers and medical and dental services, diagnostic and laboratory
purchase of medicines anywhere in the country, the costs services, including professional fees of attending doctors
of which may be claimed by the private establishments in all private hospitals and medical facilities, operators of
concerned as tax credit. domestic air and sea transport services, public railways
and skyways and bus transport services.
Effectively, a tax credit is a peso-for-peso
deduction from a taxpayers tax liability due to the A simple illustration might help amplify the
government of the amount of discounts such points discussed above, as follows:
establishment has granted to a senior citizen. The
establishment recovers the full amount of discount given Tax Deduction Tax
to a senior citizen and hence, the government shoulders Credit
100% of the discounts granted.
Gross Sales x x x x x x x x x x x x
It must be noted, however, that conceptually, Less : Cost of goods sold x x x x x x x x x x
a tax credit scheme under the Philippine tax system, Net Sales x x x x x x x x x x x x
necessitates that prior payments of taxes have been made Less: Operating Expenses:
and the taxpayer is attempting to recover this tax payment Tax Deduction on Discounts x x x x --
from his/her income tax due. The tax credit scheme under Other deductions: x x x x x x x x
R.A. No. 7432 is, therefore, inapplicable since no tax Net Taxable Income x x x x x x x x x x
payments have previously occurred. Tax Due x x x x x x
Less: Tax Credit -- ______x x
1.2. The provision under R.A. No. 9257, Net Tax Due -- x x
on the other hand, provides that the establishment As shown above, under a tax deduction scheme, the tax
concerned may claim the discounts under Section 4(a), deduction on discounts was subtracted from Net Sales together
(f), (g) and (h) as tax deduction from gross income, with other deductions which are considered as operating expenses
based on the net cost of goods sold or services rendered. before the Tax Due was computed based on the Net Taxable
Income. On the other hand, under a tax credit scheme, the amount Examining petitioners arguments, it is apparent that what petitioners are
of discounts which is the tax credit item, was deducted directly ultimately questioning is the validity of the tax deduction scheme as a reimbursement
from the tax due amount.[10] mechanism for the twenty percent (20%) discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens. This
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or is because the discount is treated as a deduction, a tax-deductible expense that is
the Policies and Guidelines to Implement the Relevant Provisions of Republic Act subtracted from the gross income and results in a lower taxable income. Stated
9257, otherwise known as the Expanded Senior Citizens Act of 2003[11] was issued by otherwise, it is an amount that is allowed by law[15] to reduce the income prior to the
the DOH, providing the grant of twenty percent (20%) discount in the purchase of application of the tax rate to compute the amount of tax which is due.[16]Being a tax
unbranded generic medicines from all establishments dispensing medicines for the deduction, the discount does not reduce taxes owed on a peso for peso basis but
exclusive use of the senior citizens. merely offers a fractional reduction in taxes owed.
On November 12, 2004, the DOH issued Administrative Order No 177[12] amending
A.O. No. 171. Under A.O. No. 177, the twenty percent discount shall not be limited Theoretically, the treatment of the discount as a deduction reduces the net
to the purchase of unbranded generic medicines only, but shall extend to both income of the private establishments concerned. The discounts given would have
prescription and non-prescription medicines whether branded or generic. Thus, it entered the coffers and formed part of the gross sales of the private establishments,
stated that [t]he grant of twenty percent (20%) discount shall be provided in the were it not for R.A. No. 9257.
purchase of medicines from all establishments dispensing medicines for the
exclusive use of the senior citizens.
The permanent reduction in their total revenues is a forced subsidy
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior corresponding to the taking of private property for public use or benefit.[17] This
Citizens Act based on the following grounds:[13] constitutes compensable taking for which petitioners would ordinarily become
entitled to a just compensation.
1) The law is confiscatory because it infringes Art. III,
Sec. 9 of the Constitution which provides that private Just compensation is defined as the full and fair equivalent of the property
property shall not be taken for public use without just taken from its owner by the expropriator. The measure is not the takers gain but the
compensation; owners loss. The word just is used to intensify the meaning of the
word compensation, and to convey the idea that the equivalent to be rendered for the
2) It violates the equal protection clause (Art. III, Sec. 1) property to be taken shall be real, substantial, full and ample.[18]
enshrined in our Constitution which states that no person
shall be deprived of life, liberty or property without due A tax deduction does not offer full reimbursement of the senior citizen
process of law, nor shall any person be denied of the discount. As such, it would not meet the definition of just compensation.[19]
equal protection of the laws; and
Having said that, this raises the question of whether the State, in promoting
3) The 20% discount on medicines violates the the health and welfare of a special group of citizens, can impose upon private
constitutional guarantee in Article XIII, Section 11 that establishments the burden of partly subsidizing a government program.
makes essential goods, health and other social services
available to all people at affordable cost.[14] The Court believes so.

Petitioners assert that Section 4(a) of the law is unconstitutional because it The Senior Citizens Act was enacted primarily to maximize the contribution
constitutes deprivation of private property. Compelling drugstore owners and of senior citizens to nation-building, and to grant benefits and privileges to them for
establishments to grant the discount will result in a loss of profit their improvement and well-being as the State considers them an integral part of our
society.[20]
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be The priority given to senior citizens finds its basis in the Constitution as set
justly compensated for the discount. forth in the law itself. Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read to be for the good and welfare of the commonwealth, and of the subjects of the
as follows: same.[24]

SECTION 1. Declaration of Policies and For this reason, when the conditions so demand as determined by the
Objectives. Pursuant to Article XV, Section 4 of the Constitution, it legislature, property rights must bow to the primacy of police power because
is the duty of the family to take care of its elderly members while property rights, though sheltered by due process, must yield to general welfare.[25]
the State may design programs of social security for them. In
addition to this, Section 10 in the Declaration of Principles and Police power as an attribute to promote the common good would be diluted
State Policies provides: The State shall provide social justice in all considerably if on the mere plea of petitioners that they will suffer loss of earnings
phases of national development. Further, Article XIII, Section 11, and capital, the questioned provision is invalidated. Moreover, in the absence of
provides: The State shall adopt an integrated and comprehensive evidence demonstrating the alleged confiscatory effect of the provision in question,
approach to health development which shall endeavor to make there is no basis for its nullification in view of the presumption of validity which
essential goods, health and other social services available to all the every law has in its favor.[26]
people at affordable cost. There shall be priority for the needs of
the underprivileged sick, elderly, disabled, women and children. Given these, it is incorrect for petitioners to insist that the grant of the senior
Consonant with these constitutional principles the following are citizen discount is unduly oppressive to their business, because petitioners have not
the declared policies of this Act: taken time to calculate correctly and come up with a financial report, so that they
have not been able to show properly whether or not the tax deduction scheme really
... works greatly to their disadvantage.[27]

(f) To recognize the important role of the private In treating the discount as a tax deduction, petitioners insist that they will
sector in the improvement of the welfare of senior citizens and incur losses because, referring to the DOF Opinion, for every P1.00 senior citizen
to actively seek their partnership.[21] discount that petitioners would give, P0.68 will be shouldered by them as only P0.32
will be refunded by the government by way of a tax deduction.

To implement the above policy, the law grants a twenty percent discount to senior To illustrate this point, petitioner Carlos Super Drug cited the anti-
citizens for medical and dental services, and diagnostic and laboratory fees; hypertensive maintenance drug Norvasc as an example. According to the latter, it
admission fees charged by theaters, concert halls, circuses, carnivals, and other acquires Norvasc from the distributors at P37.57 per tablet, and retails it at P39.60
similar places of culture, leisure and amusement; fares for domestic land, air and sea (or at a margin of 5%). If it grants a 20% discount to senior citizens or an amount
travel; utilization of services in hotels and similar lodging establishments, restaurants equivalent to P7.92, then it would have to sell Norvasc at P31.68 which translates to
and recreation centers; and purchases of medicines for the exclusive use or a loss from capital of P5.89 per tablet. Even if the government will allow a tax
enjoyment of senior citizens. As a form of reimbursement, the law provides that deduction, only P2.53 per tablet will be refunded and not the full amount of the
business establishments extending the twenty percent discount to senior citizens may discount which is P7.92. In short, only 32% of the 20% discount will be reimbursed
claim the discount as a tax deduction. to the drugstores.[28]

The law is a legitimate exercise of police power which, similar to the power of Petitioners computation is flawed. For purposes of reimbursement, the law
eminent domain, has general welfare for its object. Police power is not capable of an states that the cost of the discount shall be deducted from gross income,[29] the
exact definition, but has been purposely veiled in general terms to underscore its amount of income derived from all sources before deducting allowable expenses,
comprehensiveness to meet all exigencies and provide enough room for an efficient which will result in net income. Here, petitioners tried to show a loss on a per
and flexible response to conditions and circumstances, thus assuring the greatest transaction basis, which should not be the case. An income statement, showing an
benefits. [22] Accordingly, it has been described as the most essential, insistent and the accounting of petitioners sales, expenses, and net profit (or loss) for a given period
least limitable of powers, extending as it does to all the great public needs.[23] It is could have accurately reflected the effect of the discount on their income. Absent any
[t]he power vested in the legislature by the constitution to make, ordain, and financial statement, petitioners cannot substantiate their claim that they will be
establish all manner of wholesome and reasonable laws, statutes, and ordinances, operating at a loss should they give the discount. In addition, the computation was
either with penalties or without, not repugnant to the constitution, as they shall judge erroneously based on the assumption that their customers consisted wholly of senior
citizens. Lastly, the 32% tax rate is to be imposed on income, not on the amount of
the discount.

Furthermore, it is unfair for petitioners to criticize the law because they


cannot raise the prices of their medicines given the cutthroat nature of the players in
the industry. It is a business decision on the part of petitioners to peg the mark-up at
5%. Selling the medicines below acquisition cost, as alleged by petitioners, is merely
a result of this decision. Inasmuch as pricing is a property right, petitioners cannot
reproach the law for being oppressive, simply because they cannot afford to raise
their prices for fear of losing their customers to competition.

The Court is not oblivious of the retail side of the pharmaceutical industry
and the competitive pricing component of the business. While the Constitution
protects property rights, petitioners must accept the realities of business and the
State, in the exercise of police power, can intervene in the operations of a business
which may result in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII
of the Constitution provides the precept for the protection of property, various laws
and jurisprudence, particularly on agrarian reform and the regulation of contracts and
public utilities, continuously serve as a reminder that the right to property can be
relinquished upon the command of the State for the promotion of public good.[30]

Undeniably, the success of the senior citizens program rests largely on the
support imparted by petitioners and the other private establishments concerned. This
being the case, the means employed in invoking the active participation of the private
sector, in order to achieve the purpose or objective of the law, is reasonably and
directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a
legislative act.[31]
WHEREFORE, the petition is DISMISSED for lack of merit.

No costs.

SO ORDERED.
G.R. No. 158793 June 8, 2006 2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on
June 25, 1998 Department Order (DO) No. 215 declaring the Manila-Cavite
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON (Coastal Road) Toll Expressway as limited access facilities.
MOTORCYCLISTS FEDERATION, INC., Petitioners,
vs. 3. Accordingly, petitioners filed an Amended Petition on February 8, 2001
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL wherein petitioners sought the declaration of nullity of the aforesaid
REGULATORY BOARD, Respondents. administrative issuances. Moreover, petitioners prayed for the issuance of a
temporary restraining order and/or preliminary injunction to prevent the
DECISION enforcement of the total ban on motorcycles along the entire breadth of
North and South Luzon Expressways and the Manila-Cavite (Coastal Road)
CARPIO, J.: Toll Expressway under DO 215.

4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo
This petition for review on certiorari1 seeks to reverse the Decision dated 10 March
Guadiz, after due hearing, issued an order granting petitioners’ application
2003 of the Regional Trial Court, Branch 147, Makati City (RTC) in Civil Case No.
01-034, as well as the RTC’s Order dated 16 June 2003 which denied petitioners’ for preliminary injunction. On July 16, 2001, a writ of preliminary
Motion for Reconsideration. Petitioners assert that Department of Public Works and injunction was issued by the trial court, conditioned upon petitioners’ filing
of cash bond in the amount of P100,000.00, which petitioners subsequently
Highways’ (DPWH) Department Order No. 74 (DO 74), Department Order No. 215
(DO 215), and the Revised Rules and Regulations on Limited Access Facilities of the complied with.
Toll Regulatory Board (TRB) violate Republic Act No. 2000 (RA 2000) or the
Limited Access Highway Act. Petitioners also seek to declare Department Order No. 5. On July 18, 2001, the DPWH acting thru the TRB, issued Department
123 (DO 123) and Administrative Order No. 1 (AO 1)2 unconstitutional. Order No. 123 allowing motorcycles with engine displacement of 400 cubic
centimeters inside limited access facilities (toll ways).
Antecedent Facts
6. Upon the assumption of Honorable Presiding Judge Ma. Cristina
The facts are not in dispute. As summarized by the Solicitor General, the facts are as Cornejo, both the petitioners and respondents were required to file their
respective Memoranda. Petitioners likewise filed [their] Supplemental
follows:
Memorandum. Thereafter, the case was deemed submitted for decision.
1. On January 10, 2001, petitioners filed before the trial court a Petition for
Declaratory Judgment with Application for Temporary Restraining Order 7. Consequently, on March 10, 2003, the trial court issued the assailed
and Injunction docketed as Civil Case No. 01-034. The petition sought the decision dismissing the petition but declaring invalid DO 123. Petitioners
moved for a reconsideration of the dismissal of their petition; but it was
declaration of nullity of the following administrative issuances for being
inconsistent with the provisions of Republic Act 2000, entitled "Limited denied by the trial court in its Order dated June 16, 2003.3
Access Highway Act" enacted in 1957:
Hence, this petition.
a. DPWH Administrative Order No. 1, Series of 1968;
The RTC’s Ruling
b. DPWH Department Order No. 74, Series of 1993;
The dispositive portion of the RTC’s Decision dated 10 March 2003 reads:
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access
Facilities promulgated in 199[8] by the DPWH thru the Toll WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to
Regulatory Board (TRB). declare null and void ab initio DPWH Department Order No. 74, Series of 1993,
Administrative Order No. 1, and Art. II, Sec. 3(a) of the Revised Rules on Limited
Access Facilities promulgated by the DPWH thru the TRB, the presumed validity
thereof not having been overcome; but the petition is granted insofar as DPWH
Department Order No. 123 is concerned, declaring the same to be invalid for being ways. Petitioners assert that the DPWH’s regulatory authority is limited to acts like
violative of the equal protection clause of the Constitution. redesigning curbings or central dividing sections. They claim that the DPWH is only
allowed to re-design the physical structure of toll ways, and not to determine "who or
SO ORDERED.4 what can be qualified as toll way users."10

The Issues Section 4 of RA 200011 reads:

Petitioners seek a reversal and raise the following issues for resolution: SEC. 4. Design of limited access facility. — The Department of Public Works and
Communications is authorized to so design any limited access facility and to so
regulate, restrict, or prohibit access as to best serve the traffic for which such
1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BY RES
facility is intended; and its determination of such design shall be final. In this
JUDICATA;
connection, it is authorized to divide and separate any limited access facility into
separate roadways by the construction of raised curbings, central dividing sections,
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS or other physical separations, or by designating such separate roadways by signs,
CONTRAVENE RA 2000; AND markers, stripes, and the proper lane for such traffic by appropriate signs, markers,
stripes and other devices. No person, shall have any right of ingress or egress to,
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5 from or across limited access facilities to or from abutting lands, except at such
designated points at which access may be permitted, upon such terms and conditions
The Ruling of the Court as may be specified from time to time. (Emphasis supplied)

The petition is partly meritorious. On 19 February 1968, Secretary Antonio V. Raquiza of the Department of Public
Works and Communicationsissued AO 1, which, among others, prohibited
Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res Judicata motorcycles on limited access highways. The pertinent provisions of AO 1 read:

Petitioners rely on the RTC’s Order dated 28 June 2001, which granted their prayer SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
for a writ of preliminary injunction. Since respondents did not appeal from that
Order, petitioners argue that the Order became "a final judgment" on the issues. By virtue of the authority granted the Secretary [of] Public Works and
Petitioners conclude that the RTC erred when it subsequently dismissed their petition Communications under Section 3 of R.A. 2000, otherwise known as the Limited
in its Decision dated 10 March 2003. Access Highway Act, the following rules and regulations governing limited access
highways are hereby promulgated for the guidance of all concerned:
Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June 2001
was not an adjudication on the merits of the case that would trigger res judicata. A xxxx
preliminary injunction does not serve as a final determination of the issues. It is a
provisional remedy, which merely serves to preserve the status quo until the court Section 3 – On limited access highways, it is unlawful for any person or group of
could hear the merits of the case.6 Thus, Section 9 of Rule 58 of the 1997 Rules of persons to:
Civil Procedure requires the issuance of a final injunction to confirm the preliminary
injunction should the court during trial determine that the acts complained of deserve xxxx
to be permanently enjoined. A preliminary injunction is a mere adjunct, an ancillary
remedy which exists only as an incident of the main proceeding.7
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
Validity of DO 74, DO 215 and the TRB Regulations
x x x x12 (Emphasis supplied)
Petitioners claim that DO 74,8 DO 215,9 and the TRB’s Rules and Regulations issued
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public
under them violate the provisions of RA 2000. They contend that the two issuances
unduly expanded the power of the DPWH in Section 4 of RA 2000 to regulate toll Works and Highways issued DO 74:
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Tabang easement or only a limited right or easement of access, light, air or view by reason of
and the South Luzon Expressway from Nichols to Alabang as Limited Access the fact that their property abuts upon such limited access facility or for any other
Facilities reason. Such highways or streets may be parkways, from which trucks, buses, and
other commercial vehicles shall be excluded; or they may be free ways open to use
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined by all customary forms of street and highway traffic."
as "a highway or street especially designed for through traffic, and over, from, or to
which owners or occupants of abutting land or other persons have no right or Section 3 of the same Act authorizes the Department of Public Works and
easement or only a limited right or easement of access, light, air or view by reason of Communications (now Department of Public Works and Highways) "to plan,
the fact that their proper[t]y abuts upon such limited access facility or for any other designate, establish, regulate, vacate, alter, improve, maintain, and provide limited
reason. Such highways or streets may be parkways, from which trucks, buses, and access facilities for public use wherever it is of the opinion that traffic conditions,
other commerical [sic] vehicles shall be excluded; or they may be free ways open to present or future, will justify such special facilities."
use by all customary forms of street and highway traffic."
Therefore, by virtue of the authority granted above, the Department of Public Works
Section 3 of the same Act authorizes the Department of Public Works and and Highways hereby designates and declares the R-1 Expressway, C-5 Link
Communications (now Department of Public Works and Highways) "to plan, Expressway and the R-1 Extension Expressway Sections of the Manila Cavite Toll
designate, establish, regulate, vacate, alter, improve, maintain, and provide limited Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES subject to such
access facilities for public use wherever it is of the opinion that traffic conditions, rules and regulations that may be imposed by the DPWH thru the Toll Regulatory
present or future, will justify such special facilities." Board (TRB).

Therefore, by virtue of the authority granted above, the Department of Public Works In view thereof, the National Capital Region (NCR) of this Department is hereby
and Highways hereby designates and declares the Balintawak to Tabang Sections of ordered, after consultation with the TRB and in coordination with the Philippine
the North Luzon Expressway, and the Nichols to Alabang Sections of the South National Police (PNP), to close all illegal openings along the said Limited Access
Luzon Expressways, to be LIMITED ACCESS HIGHWAYS/FACILITIES subject Highways/Facilities. In this connection, the NCR is instructed to organize its own
to such rules and regulations that may be imposed by the DPWH thru the Toll enforcement and security group for the purpose of assuring the continued closure of
Regulatory Board (TRB). the right-of-way fences and the implementation of the rules and regulations that may
be imposed by the DPWH thru the TRB.
In view thereof, the National Capital Region (NCR) of this Department is hereby
ordered, after consultation with the TRB and in coordination with the Philippine This Order shall take effect immediately.14
National Police (PNP), to close all illegal openings along the said Limited Access
Highways/Facilities. In this connection, the NCR is instructed to organize its own The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to design
enforcement and security group for the purpose of assuring the continued closure of limited access facilities and to regulate, restrict, or prohibit access as to serve the
the right-of-way fences and the implementation of the rules and regulations that may traffic for which such facilities are intended. According to the RTC, such authority to
be imposed by the DPWH thru the TRB. regulate, restrict, or prohibit logically includes the determination of who and what
can and cannot be permitted entry or access into the limited access facilities. Thus,
This Order shall take effect immediately.13 the RTC concluded that AO 1, DO 74, and the Revised Rules and Regulations on
Limited Access Facilities, which ban motorcycles’ entry or access to the limited
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215: access facilities, are not inconsistent with RA 2000.

SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-5 RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22
Link Expressway, from Zapote to Noveleta, of the Manila Cavite Toll Expressway as June 1957. Section 4 of RA 2000 provides that "[t]he Department of Public Works
Limited Access Facility. and Communications is authorized to so design any limited access facility and to so
regulate, restrict, or prohibit access as to best serve the traffic for which such facility
is intended." The RTC construed this authorization to regulate, restrict, or prohibit
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined
access to limited access facilities to apply to the Department of Public Works and
as "a highway or street especially designed for through traffic, and over, from, or to
which owners or occupants of abutting land or other persons have no right or Highways (DPWH).
The RTC’s ruling is based on a wrong premise. The RTC assumed that the DPWH promotion, development, and regulation of a dependable and coordinated network of
derived its authority from its predecessor, the Department of Public Works and transportation and communication systems."19 The functions of the Ministry of
Communications, which is expressly authorized to regulate, restrict, or prohibit Transportation and Communications were:
access to limited access facilities under Section 4 of RA 2000. However, such
assumption fails to consider the evolution of the Department of Public Works and a. Coordinate and supervise all activities of the Ministry relative to
Communications. transportation and communications;

Under Act No. 2711, otherwise known as the Revised Administrative Code, b. Formulate and recommend national policies and guidelines for the
approved on 10 March 1917, there were only seven executive departments, namely: preparation and implementation of an integrated and comprehensive
the Department of the Interior, the Department of Finance, the Department of Justice, transportation and communications system at the national, regional
the Department of Agriculture and Commerce, the Department of Public Works and local levels;
and Communications, the Department of Public Instruction, and the Department of
Labor.15 On 20 June 1964, Republic Act No. 413616 created the Land Transportation
c. Establish and administer comprehensive and integrated programs for
Commission under the Department of Public Works and Communications. Later, the
transportation and communication, and for this purpose, may call on any
Department of Public Works and Communications was restructured into
agency, corporation, or organization, whether government or private, whose
the Department of Public Works, Transportation and Communications. development programs include transportation and communications as an
integral part to participate and assist in the preparation and implementation
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau of of such programs;
Public Highways from the Department of Public Works, Transportation and
Communications and created it as a department to be known as Department of Public
d. Regulate, whenever necessary, activities relative to transportation
Highways. Under Section 3 of PD 458, the Department of Public Highways is
and communications and prescribe and collect fees in the exercise of
"responsible for developing and implementing programs on the construction and
such power;
maintenance of roads, bridges and airport runways."
e. Assess, review and provide direction to transportation and
With the amendment of the 1973 Philippine Constitution in 1976, resulting in the
communications research and development programs of the government in
shift in the form of government, national agencies were renamed from Departments
coordination with other institutions concerned; and
to Ministries. Thus, the Department of Public Works, Transportation and
Communications became the Ministry of Public Works, Transportation and
Communications. f. Perform such other functions as may be necessary to carry into effect the
provisions of this Executive Order.20 (Emphasis supplied)
On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order No.
546 (EO 546), creating a Ministry of Public Works and a Ministry of On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO 710),
Transportation and Communications.17 Under Section 1 of EO 546, the Ministry which merged the Ministry of Public Works and the Ministry of Public Highways for
of Public Works assumed the public works functions of the Ministry of Public "greater simplicity and economy in operations."21 The restructured agency became
Works, Transportation and Communications. The functions of the Ministry of known as the Ministry of Public Works and Highways. Under Section 1 of EO 710
Public Works were the "construction, maintenance and repair of port works, harbor the functions of the Ministry of Public Works and the Ministry of Public
facilities, lighthouses, navigational aids, shore protection works, airport buildings Highways22 were transferred to the Ministry of Public Works and Highways.
and associated facilities, public buildings and school buildings, monuments and other
related structures, as well as undertaking harbor and river dredging works, Upon the ratification of the 1987 Constitution in February 1987, the former Ministry
reclamation of foreshore and swampland areas, water supply, and flood control and of Public Works and Highways became the Department of Public Works and
drainage works."18 Highways (DPWH) and the former Ministry of Transportation and Communications
became the Department of Transportation and Communications (DOTC).
On the other hand, the Ministry of Transportation and Communications became
the "primary policy, planning, programming, coordinating, implementing, regulating DPWH issued DO 74 and DO 215 declaring certain expressways as limited access
and administrative entity of the executive branch of the government in the facilities on 5 April 1993 and 25 June 1998, respectively. Later, the TRB, under the
DPWH, issued the Revised Rules and Regulations on Limited Access Facilities.
However, on 23 July 1979, long before these department orders and regulations were Act, the following revised rules and regulations governing limited access highways
issued, the Ministry of Public Works, Transportation and Communications was are hereby promulgated for the guidance of all concerned:
divided into two agencies – the Ministry of Public Works and the Ministry of
Transportation and Communications – by virtue of EO 546. The question 1. Administrative Order No. 1 dated February 19, 1968, issued by the Secretary of
is, which of these two agencies is now authorized to regulate, restrict, or prohibit the then Department of Public Works and Communications, is hereby amended by
access to limited access facilities?23 deleting the word "motorcycles" mentioned in Section 3(h) thereof.
Therefore, motorcycles are hereby allowed to operate inside the toll roads and
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed limited access highways, subject to the following:
the public works functions of the Ministry of Public Works, Transportation and
Communications. On the other hand, among the functions of the Ministry of a. Motorcycles shall have an engine displacement of at least 400 cubic
Transportation and Communications (now Department of Transportation and centimeters (cc) provided that:
Communications [DOTC]) were to (1) formulate and recommend national policies
and guidelines for the preparation and implementation of an integrated and
x x x x28 (Emphasis supplied)
comprehensive transportation and communications systems at the national, regional,
and local levels; and (2) regulate, whenever necessary, activities relative to
transportation and communications and prescribe and collect fees in the exercise of The RTC’s Decision dated 10 March 2003 declared DO 123 unconstitutional on the
such power. Clearly, under EO 546, it is the DOTC, not the DPWH, which has ground that it violates the equal protection clause by allowing only motorcycles with
authority to regulate, restrict, or prohibit access to limited access facilities. at least 400 cubic centimeters engine displacement to use the toll ways. The RTC
reasoned that the creation of a distinction within the class of motorcycles was not
based on real differences.
Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-A
(EO 125-A),25 which further reorganized the DOTC, the authority to administer and
enforce all laws, rules and regulations relative to transportation is clearly with the We need not pass upon the constitutionality of the classification of motorcycles
DOTC.26 under DO 123. As previously discussed, the DPWH has no authority to regulate
limited access highways since EO 546 has devolved this function to the DOTC.
Thus, DO 123 is void for want of authority of the DPWH to promulgate it.
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare
certain expressways as limited access facilities. Under the law, it is the DOTC which
is authorized to administer and enforce all laws, rules and regulations in the field of On the other hand, the assailed portion of AO 1 states:
transportation and to regulate related activities.
Section 3. On limited access highways, it is unlawful for any person or group of
Since the DPWH has no authority to regulate activities relative to transportation, the persons to:
TRB27 cannot derive its power from the DPWH to issue regulations governing
limited access facilities. The DPWH cannot delegate a power or function which it xxxx
does not possess in the first place. Since DO 74 and DO 215 are void, it follows that
the rules implementing them are likewise void. (h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);

Whether AO 1 and DO 123 are Unconstitutional xxxx

DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO 123 Petitioners assail the DPWH’s failure to provide "scientific" and "objective" data on
reads in part: the danger of having motorcycles plying our highways. They attack this exercise of
police power as baseless and unwarranted. Petitioners belabor the fact that there are
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways studies that provide proof that motorcycles are safe modes of transport. They also
claim that AO 1 introduces an unreasonable classification by singling-out
By virtue of the authority granted the Secretary of Public Works and Highways motorcycles from other motorized modes of transport. Finally, petitioners argue that
under Section 3 of R.A. 2000, otherwise known as the Limited Access Highway AO 1 violates their right to travel.
Petitioners’ arguments do not convince us. None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The
DPWH, through the Solicitor General, maintains that the toll ways were not designed
We emphasize that the Secretary of the Department of Public Works and to accommodate motorcycles and that their presence in the toll ways will
Communications issued AO 1 on 19 February 1968. compromise safety and traffic considerations. The DPWH points out that the same
study the petitioners rely on cites that the inability of other drivers to detect
Section 3 of RA 200029 authorized the issuance of the guidelines. In motorcycles is the predominant cause of accidents.39 Arguably, prohibiting the use of
motorcycles in toll ways may not be the "best" measure to ensure the safety and
contrast, DPWH issued DO 74, DO 215 and DO 123 after EO 546 devolved to
comfort of those who ply the toll ways.
the DOTC the authority to regulate limited access highways.

We now discuss the constitutionality of AO 1. Administrative issuances have the However, the means by which the government chooses to act is not judged in terms
force and effect of law.30 They benefit from the same presumption of validity and of what is "best," rather, on simply whether the act is reasonable. The validity of a
police power measure does not depend upon the absolute assurance that the purpose
constitutionality enjoyed by statutes.31 These two precepts place a heavy burden
desired can in fact be probably fully accomplished, or upon the certainty that it will
upon any party assailing governmental regulations. The burden of proving
best serve the purpose intended.40 Reason, not scientific exactitude, is the measure of
unconstitutionality rests on such party.32 The burden becomes heavier when the
the validity of the governmental regulation. Arguments based on what is "best" are
police power is at issue.
arguments reserved for the Legislature’s discussion. Judicial intervention in such
matters will only be warranted if the assailed regulation is patently whimsical. We do
The use of public highways by motor vehicles is subject to regulation as an exercise not find the situation in this case to be so.
of the police power of the state.33 The police power is far-reaching in scope and is the
"most essential, insistent and illimitable" of all government powers.34 The tendency
Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right
is to extend rather than to restrict the use of police power. The sole standard in
to use the limited access facility. They are merely being required, just like the rest of
measuring its exercise is reasonableness.35 What is "reasonable" is not subject to
the public, to adhere to the rules on how to use the facility. AO 1 does not infringe
exact definition or scientific formulation. No all-embracing test of reasonableness
upon petitioners’ right to travel but merely bars motorcycles, bicycles, tricycles,
exists,36 for its determination rests upon human judgment applied to the facts and
pedicabs, and any non-
circumstances of each particular case.37

motorized vehicles as the mode of traveling along limited access highways.41 Several
We find that AO 1 does not impose unreasonable restrictions. It merely outlines
cheap, accessible and practical alternative modes of transport are open to petitioners.
several precautionary measures, to which toll way users must adhere. These rules
There is nothing oppressive in being required to take a bus or drive a car instead of
were designed to ensure public safety and the uninhibited flow of traffic within
limited access facilities. They cover several subjects, from what lanes should be used one’s scooter, bicycle, calesa, or motorcycle upon using a toll way.
by a certain vehicle, to maximum vehicle height. The prohibition of certain types of
vehicles is but one of these. None of these rules violates reason. The purpose of these Petitioners’ reliance on the studies they gathered is misplaced. Police power does not
rules and the logic behind them are quite evident. A toll way is not an ordinary road. rely upon the existence of definitive studies to support its use. Indeed, no
The special purpose for which a toll way is constructed necessitates the imposition of requirement exists that the exercise of police power must first be conclusively
guidelines in the manner of its use and operation. Inevitably, such rules will restrict justified by research. The yardstick has always been simply whether the
certain rights. But the mere fact that certain rights are restricted does not invalidate government’s act is reasonable and not oppressive.42 The use of "reason" in this
the rules. sense is simply meant to guard against arbitrary and capricious government action.
Scientific certainty and conclusiveness, though desirable, may not be demanded in
every situation. Otherwise, no government will be able to act in situations demanding
Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll
ways.38 The regulation affects the right to peaceably assemble. The exercise of police the exercise of its residual powers because it will be tied up conducting studies.
power involves restriction, restriction being implicit in the power itself. Thus, the test
of constitutionality of a police power measure is limited to an inquiry on whether the A police power measure may be assailed upon proof that it unduly violates
restriction imposed on constitutional rights is reasonable, and not whether it imposes constitutional limitations like due process and equal protection of the
a restriction on those rights. law.43 Petitioners’ attempt to seek redress from the motorcycle ban under the aegis of
equal protection must fail. Petitioners’ contention that AO 1 unreasonably singles out
motorcycles is specious. To begin with, classification by itself is not prohibited.44
A classification can only be assailed if it is deemed invidious, that is, it is not based A toll way is not an ordinary road. As a facility designed to promote the fastest
on real or substantial differences. As explained by Chief Justice Fernando in Bautista access to certain destinations, its use, operation, and maintenance require close
v. Juinio:45 regulation. Public interest and safety require the imposition of certain restrictions on
toll ways that do not apply to ordinary roads. As a special kind of road, it is but
x x x To assure that the general welfare be promoted, which is the end of law, a reasonable that not all forms of transport could use it.
regulatory measure may cut into the rights to liberty and property. Those adversely
affected may under such circumstances invoked the equal protection clause only if The right to travel does not mean the right to choose any vehicle in traversing a toll
they can show that the governmental act assailed, far from being inspired by the way. The right to travel refers to the right to move from one place to another.
attainment of the common weal was prompted by the spirit of hostility, or at the very Petitioners can traverse the toll way any time they choose using private or public
least, discrimination that finds no support in reason. It suffices then that the laws four-wheeled vehicles. Petitioners are not denied the right to move from Point A to
operate equally and uniformly on all persons under similar circumstances or that all Point B along the toll way. Petitioners are free to access the toll way, much as the
persons must be treated in the same manner, the conditions not being different, both rest of the public can. The mode by which petitioners wish to travel pertains to the
in the privileges conferred and the liabilities imposed. Favoritism and undue manner of using the toll way, a subject that can be validly limited by regulation.
preference cannot be allowed. For the principle is that equal protection and security
shall be given to every person under circumstances, which if not identical is Petitioners themselves admit that alternative routes are available to them. Their
analogous. If law be looked upon in terms of burden or charges, those that fall within complaint is that these routes are not the safest and most convenient. Even if their
a class should be treated in the same fashion, whatever restrictions cast on some in claim is true, it hardly qualifies as an undue curtailment of their freedom of
the group equally binding the rest. movement and travel. The right to travel does not entitle a person to the best form of
transport or to the most convenient route to his destination. The obstructions found in
We find that it is neither warranted nor reasonable for petitioners to say that the only normal streets, which petitioners complain of (i.e., potholes, manholes, construction
justifiable classification among modes of transport is the motorized against the non- barriers, etc.), are not suffered by them alone.
motorized. Not all motorized vehicles are created equal. A 16-wheeler truck is
substantially different from other light vehicles. The first may be denied access to Finally, petitioners assert that their possession of a driver’s license from the Land
some roads where the latter are free to drive. Old vehicles may be reasonably Transportation Office (LTO) and the fact that their vehicles are registered with that
differentiated from newer models.46 We find that real and substantial differences office entitle them to use all kinds of roads in the country. Again, petitioners are
exist between a motorcycle and other forms of transport sufficient to justify its mistaken. There exists no absolute right to drive. On the contrary, this privilege, is
classification among those prohibited from plying the toll ways. Amongst all types of heavily regulated. Only a qualified group is allowed to drive motor vehicles: those
motorized transport, it is obvious, even to a child, that a motorcycle is quite different who pass the tests administered by the LTO. A driver’s license issued by the LTO
from a car, a bus or a truck. The most obvious and troubling difference would be that merely allows one to drive a particular mode of transport. It is not a license to drive
a two-wheeled vehicle is less stable and more easily overturned than a four-wheeled or operate any form of transportation on any type of road. Vehicle registration in the
vehicle. LTO on the other hand merely signifies the roadworthiness of a vehicle. This does
not preclude the government from prescribing which roads are accessible to certain
A classification based on practical convenience and common knowledge is not vehicles.
unconstitutional simply because it may lack purely theoretical or scientific
uniformity. Moreover, we take note that the Philippines is home to a host of unique WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision
motorized modes of transport ranging from modified hand-carts (kuliglig) to bicycle dated 10 March 2003 of the Regional Trial Court, Branch 147, Makati City and its
"sidecars" outfitted with a motor. To follow petitioners’ argument to its logical Order dated 16 June 2003 in Civil Case No. 01-034. We declare VOID Department
conclusion would open up toll ways to all these contraptions. Both safety and traffic Order Nos. 74, 215, and 123 of the Department of Public Works and Highways, and
considerations militate against any ruling that would bring about such a nightmare. the Revised Rules and Regulations on Limited Access Facilities of the Toll
Regulatory Board. We declare VALID Administrative Order No. 1 of the
Petitioners complain that the prohibition on the use of motorcycles in toll ways Department of Public Works and Communications.
unduly deprive them of their right to travel.
SO ORDERED.
We are not persuaded.
G.R. No. 187836 plan and relocation schedule, which relocation shall be completed not later than six
(6) months from the date the required documents are submitted. The presiding judge
SOCIAL JUSTICE SOCIETY (SJS) OFFICERS, namely, SAMSON S. of Branch 39 shall monitor the strict enforcement of this Decision.3
ALCANTARA, and VLADIMIR ALARIQUE T. CABIGAO, Petitioners,
vs. Now before us are the following submissions of the intervenor oil companies, to wit:
ALFREDO S. LIM, in his capacity as mayor of the City of Manila, Respondent. (1) Motion for Reconsideration4of the Decision dated 25 November 2014 filed by
intervenor Pilipinas Shell Petroleum Corporation (Shell); (2) Motion for
x-----------------------x Clarification5 filed by intervenor Chevron Philippines, Inc. (Chevron); and (3)
Manifestation of Understanding of the Dispositive Portion of the Decision of 15
December 20146 (the correct date of promulgation is 25 November 2014) filed by
G.R. No. 187916
intervenor Petron Corporation (Petron).
JOSE L. ATIENZA, JR., BIENVINIDO M. ABANTE, MA. LOURDES M.
ISIP-GARCIA, RAFAEL P. BORROMEO, JOCELYN DAWIS-ASUNCION, I
minors MARIAN REGINA B. TARAN, MACAILA RICCI B. TARAN,
RICHARD KENNETH B. TARAN, represented and joined by their parents Shell seeks reconsideration of the Decision based on the following grounds:
RICHARD and MARITES TARAN, minors CZARINA ALYSANDRA C.
RAMOS, CEZARAH ADRIANNA C. RAMOS, and CRISTEN AIDAN C. 1.Erroneous reliance on the factual pronouncements in G.R. No. 156052 entitled
RAMOS represented and joined by their mother DONNA C. RAMOS, minors "Social Justice Society v. Atienza," which, it argues, were completely unsupported
JAZMIN SYLLITA T. VILA and ANTONIO T. CRUZ IV, represented and by competent evidence;
joined by their mother MAUREEN C. TOLENTINO, Petitioners,
vs. 2.Adoption of "imagined fears, causes, surmises and conjectures interposed by the
MAYOR ALFREDO S. LIM, VICE MAYOR FRANCISCO DOMAGOSO, petitioners," which it also raises as totally unsupported by evidence because the
COUNCILORS ARLENE W. KOA, MOISES T. LIM, JESUS FAJARDO petitions, which involve factual issues, were wrongfully filed with this Court;
LOUISITO N. CHUA, VICTORIANO A. MELENDEZ, JOHN MARVIN C.
NIETO, ROLANDO M. VALERIANO, RAYMUNDO R. YUPANGCO, 3.Conclusion that there is no substantial difference between the conditions in 2001
EDWARD VP MACEDA, RODERICK D. V ALBUENA, JOSEFINA M.
and the present setup with respect to the oil depots operations; and
SISCAR, SALVADOR PHILLIP .H. LACUNA, LUCIANO M. VELOSO,
CARLO V. LOPEZ, ERNESTO F. RIVERA, DANILO VICTOR H. LACUNA,
JR., ERNESTO G. ISIP, HONEY H. LACUNA-PANGAN, ERNESTO M. 4.Failure to dismiss the petitions despite the enactment of Ordinance No. 8187,
DIONISO, JR. and ERICK IAN 0. NIEVA, Respondents, which, it maintains, has rendered the cases moot and academic.7
CHEVRON PHILIPPINES INC., PETRON CORPORATION AND
PILIPINAS SHELL PETROLEUM CORPORATION, Intervenors. The Motion for Reconsideration must be denied.

RESOLUTION It bears stressing that these cases were called in session several times to give the
members of the Court time to study and present their respective positions. Before the
PEREZ, J.: Decision was finally promulgated, the Court had thoroughly deliberated on the
arguments of the parties, including the basic issues herein raised - the rationale for
upholding the position of the Court in G.R. No. 156052, on one hand, and the safety
In the Decision2 promulgated on 25 November 2014, this Court declared Ordinance
measures adopted by the intervenors, including the alleged "imagined fears, causes,
No. 8187 UNCONSTITUTIONAL and INVALID with respect to the continued stay surmises and conjectures interposed by the petitioners," on the other; the argument of
of the Pandacan Oil Terminals. The following timelines were set for the relocation whether or not the petition should have been filed with the trial court or at least
and transfer of the terminals: referred to the Court of Appeals to receive evidence; and the issue on whether or not
the enactment of Ordinance No. 8283 has rendered the instant petitions moot and
[T]he intervenors Chevron Philippines, Inc., Pilipinas Shell Petroleum Corporation, academic. And for failure to reconcile diverse views on several issues, a Concurring
and Petron Corporation shall, within a non- extendible period of forty-five (45) days, and Dissenting Opinion was written.
submit to the Regional Trial Court, Branch 39, Manila an updated comprehensive
The grounds relied on being mere reiterations of the issues already passed upon by between CHEVRON, Petron and PSPC. Notwithstanding CHEVRON's ceasing to
the Court, there is no need to "cut and paste" pertinent portions of the Decision or re- use the facility, Petron and PSPC continue to use the Pandacan terminals for their
write the ponencia in accordance with the outline of the instant motion. own commercial fuel and lubricant operation. This joint venture continues to exist
until terminated and dissolved by the mutual agreement of CHEVRON, Petron, and
As succinctly put by then Chief Justice Andres R. Narvasa in Ortigas and Co. Ltd. PSP or as provided for in the agreements of the parties.11
Partnership v. Judge Velasco8 on the effect and disposition of a motion for
reconsideration: With the withdrawal of its products from the Pandacan terminals yet with the
continued operation of the PDSI, Chevron now pleads that this Court review and
The filing of a motion for reconsideration, authorized by Rule 52 of the Rules of clarify a portion of the Decision concerning what it understands as an unqualified
Court, does not impose on the Court the obligation to deal individually and statement that "all oil depots, in general, even those outside of Pandacan, have no
specifically with the grounds relied upon therefor, in much the same way that the place in any densely populated area."12 The exact wordings in the Decision sought to
Court does in its judgment or final order as regards the issues raised and submitted be clarified read:
for decision. This would be a useless formality or ritual invariably involving merely
a reiteration of the reasons already set forth in the judgment or final order for Even assuming that the respondents and intervenors were correct, the very nature of
rejecting the arguments advanced by the movant; and it would be a needless act, too, the depots where millions of liters of highly flammable and highly volatile products
with respect to issues raised for the first time, these being, as above stated, deemed [are stored], regardless of whether or not the composition may cause explosions, has
waived because not asserted at the first opportunity. It suffices for the Court to deal no place in a densely populated area. Surely, any untoward incident in the oil depots,
generally and summarily with the motion for reconsideration, and merely state a be it related to terrorism of whatever origin or otherwise, would definitely cause not
legal ground for its denial (Sec. 14, Art. VIII, Constitution); i.e., the motion contains only destruction to properties within and among the neighboring communities but
merely a reiteration or rehash of arguments already submitted to and pronounced certainly mass deaths and injuries.13
without merit by the Court in its judgment, or the basic issues have already been
passed upon, or the motion discloses no substantial argument or cogent reason to Stressing that a judgment should be confined to the lis mota of the case, Chevron
warrant reconsideration or modification of the judgment or final order; or the posits that the paragraph sought to be clarified was a sweeping and categorical
arguments in the motion are too unsubstantial to require consideration, etc.9 pronouncement sans factual basis or evidence against all oil depots inasmuch as the
prevailing circumstances, types of products stored or the safety measures in place
II vary from one depot to another. If such is left as is, it claims that it would be
tantamount to interference with the policy making of the political departments of the
Chevron, in its Motion for Clarification,10 manifests that it has already ceased using government.
the Pandacan terminals since June 2014. However, the Pandacan Depot Services,
Inc. (PDSI), an incorporated joint venture of Chevron, Petron and Shell, and of We differ.
which Chevron continues to be a shareholder, still maintains the operations through
Petron and Shell. Thus: There are overwhelming reasons stated in the Decision to support the Court's
pronouncement that the very nature of depots has no place in a densely populated
2.At the outset, CHEVRON respectfully manifests that it has already completed the area, among others, the very history of the Pandacan terminals where flames spread
relocation of its depot and terminal operations from the Pandacan area, as it ceased over the entire City of Manila when fuel storage dumps were set on fire in December
using the Pandacan terminals for its fuel and lubricants operations last June 2014. 194114and the other incident of explosion,15 which were both considered in G.R. No.
CHEVRON currently has zero volume of lubricants and fuel products for 156052.
commercial use stored at the Pandacan terminals and the supply requirements of its
customers are being withdrawn from the other supply facilities available to Indeed, the bases of the assailed paragraph were confined to the lis mota of these
CHEVRON. cases, and no other depots were considered. But would the situation be different if,
given the same composition of flammable and volatile products, the depots are
3.While CHEVRON has ceased using the Pandacan terminals, it continues to be a placed in another densely populated area?
shareholder as well as hold a governance role in Pandacan Depot Services Inc.
("PDSI"), the operator of the Pandacan terminals for fuels products operations. PDSI The answer was well explained in the Decision. Thus:
is an incorporated joint venture established pursuant to the joint venture agreements
For, given that the threat sought to be prevented may strike at one point or another, particularly described therein whereas Ordinance No. 8119 is applicable to the entire
no matter how remote it is as perceived by one or some, we cannot allow the right to City of Manila.19
life to be dependent on the unlikelihood of an event. Statistics and theories of
probability have no place in situations where the very life of not just an individual At first blush, the clause "cease and desist" appears to specifically refer only to the
but of residents of big neighborhoods is at stake.16 operations, considering that Sec. 3 of Ordinance No. 8027 provides for a period of
six (6) months from the date of its effectivity "within which to cease and desist from
Moreover, the Decision should be taken as a whole and considered in its entirety. the operations of businesses."20
The Decision is clear - it is the City's Ordinance No. 8187 that has been declared
unconstitutional and invalid insofar as the continued stay of the Pandacan Oil However, in the Decision dated 7 March 2007 in G.R. No. 156052, the Court granted
Terminals is concerned. the petition21 which sought the enforcement of Ordinance No. 8027 and the
immediate removal of the terminals of the oil companies. By so granting the petition,
For the same reasons, the allegation of encroachment on the policy making power of it necessarily follows that the relocation and transfer it ordered contemplates the
the political departments of the government is bereft of merit. complete removal of the facilities.

The prayer that the submission of an updated comprehensive plan and relocation These cases being a mere sequel to the earlier petition, we so hold that the relocation
schedule, including the period for relocation, be deferred until after the Motion is and transfer contemplated therein include the removal of the facilities, especially so
resolved with finality is denied. The compliance period prescribed in the Decision when the city plans on building commercial establishments to replace the Pandacan
shall remain. terminals and provide a source of employment for displaced employees.
Accordingly, the comprehensive plan to be submitted within forty-five (45) days
III from receipt of the Decision shall also include the removal of the facilities.

In its Manifestation of Understanding of the Dispositive Portion of the Decision of On the matter of the enforcement of the assailed Decision in these cases, Petron
15 December 2014,17 (the correct date of promulgation is 25 November 2014) Petron further posits that its first theory, that is, that the removal of the facilities is excluded
seeks to clarify whether the dispositive portion thereof on the submission of "updated from the comprehensive plan to be submitted to the Regional Trial Court, would be
comprehensive plan and relocation schedule" within forty-five (45) days is limited to in accord with its "Manifestation" dated 30 November 2010, which it emphasized,
the operation itself and does not include the removal of the facilities. It ratiocinates the Court noted in the Decision and quoted as follows:
that it is the operation, and not the presence of the facilities, that runs contrary to
Ordinance No. 8119 (Manila Comprehensive Land Use Plan and Zoning Ordinance 2. Without prejudice to its position in the instant case as elucidated in its
of 2006).18 Memorandum, Petron files this Manifestation to inform this Honorable Court that in
accordance with its agreement with and to honor its commitment to the City of
Petron should have cited Ordinance No. 8027, the ordinance ordered to be enforced Manila, Petron has decided to cease operation of its petroleum product storage
in G.R. No. 156052, instead of Ordinance No. 8119. facilities in Pandacan, Manila within five (5) years or not later than January 2016 for
the following reasons, x x x.22 (Emphasis in the Manifestation of Understanding x x
To recall, the Court, in G.R. No. 156052, ruled that Ordinance No. 8027 was not x)
impliedly repealed by Ordinance No. 8119. It explained:
Let Petron be reminded that the Court did not, by noting its "Manifestation" dated 30
November 2010, consent to consider January 2016 as a separate deadline for
x x x The repealing clause of Ordinance No. 8119 cannot be taken to indicate the
compliance with our Decision, which, to repeat, includes the removal of facilities
legislative intent to repeal all prior inconsistent laws on the subject matter, including
after cessation of operations. The timelines prescribed in the assailed Decision shall
Ordinance No. 8027, a special enactment, since the aforequoted minutes (an official
record of the discussions in the Sanggunian) actually indicated the clear intent to be observed to the letter.1âwphi1
preserve the provisions of Ordinance No. 8027.
WHEREFORE, the Court hereby resolves to:
To summarize, the conflict between the two ordinances is more apparent than real.
The two ordinances can be reconciled. Ordinance No. 8027 is applicable to the area 1.DENY Shell's Motion for Reconsideration of the Decision dated 25 November
2014;
2.DENY the prayers in the Motion for Clarification of Chevron that:

a)the wordings "the very nature of the depots where millions of liter[s] of highly
flammable and highly volatile products x x x [have] no place in a densely populated
area" be removed from the Decision dated 25 November 2014; and b) the submission
of an updated comprehensive plan and relocation schedule, including the period for
relocation, be deferred until after the Motion is resolved with finality;

3.CLARIFY that the relocation and transfer necessarily include the complete
removal of the facilities from the Pandacan terminals and should be made part of the
required comprehensive plan and relocation schedule; and

4. REMIND Petron that the Court did not, by noting its "Manifestation" dated 30
November 2010, consent to consider January 2016 as a separate deadline for
compliance with our Decision, which, to repeat,

·includes the removal of facilities after cessation of operations. The timelines


prescribed in the assailed Decision shall be observed to the letter.

In anticipation of further attempts to delay the enforcement of this Court's Decision


dated 25 November 2014, the parties to these cases are hereby REMINDED of the
pronouncements in Ortigas and Co. Ltd. Partnership v. Judge Velasco23 on the import
of the denial of a motion for reconsideration. Thus:

The denial of a motion for reconsideration signifies that the grounds relied upon have
been found, upon due deliberation, to be without merit, as not being of sufficient
weight to warrant a modification of the judgment or final order. It means not only
that the grounds relied upon are lacking in merit but also that any other, not so raised,
is deemed waived and may no longer be set up in a subsequent motion or application
to overturn the judgment; and this is true, whatever may be the title given to such
motion or application, whether it be "second motion for reconsideration" or "motion
for clarification" or "plea for due process" or "prayer for a second look," or "motion
to defer, or set aside, entry of judgment," or xxx, etc..24 (Emphasis supplied)

This Resolution is final. Under pain of contempt, no further pleadings, motions or


papers in the guise of the above-enumerated submissions shall, thus, be entertained
in these cases.

SO ORDERED.
G.R. No. 194561, September 14, 2016 On April 30, 2007, Republic Act No. 94427 was enacted amending R.A. No. 7277.
The Title of R.A. No. 7277 was amended to read as "Magna Carta for Persons with
DRUGSTORES ASSOCIATION OF THE PHILIPPINES, INC. AND Disability" and all references on the law to "disabled persons" were amended to read
NORTHERN LUZON DRUG CORPORATION, Petitioners, v. NATIONAL as "persons with disability" (PWD).8 Specifically, R.A. No. 9442 granted the PWDs
COUNCIL ON DISABILITY AFFAIRS; DEPARTMENT OF HEALTH; a twenty (20) percent discount on the purchase of medicine, and a tax deduction
DEPARTMENT OF FINANCE; BUREAU OF INTERNAL REVENUE; scheme was adopted wherein covered establishments may deduct the discount
DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT; AND granted from gross income based on the net cost of goods sold or services
DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT, Respondent. rendered:ChanRoblesVirtualawlibrary
CHAPTER 8. Other Privileges and Incentives. SEC. 32. Persons with disability shall
be entitled to the following:
DECISION
chanRoblesvirtualLawlibraryx x x x
PERALTA, J.:

Before us is a Petition for Review on Certiorari1 with a Prayer for a Temporary (d) At least twenty percent (20%) discount for the purchase of medicines in
Restraining Order and/or Writ of Preliminary Injunction which seeks to annul and set all drugstores for the exclusive use or enjoyment of persons with
aside the Decision2 dated July 26, 2010, and the Resolution3 dated November 19, disability;
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 109903. The CA dismissed
petitioners' Petition for Prohibition4 and upheld the constitutionality of the mandatory
twenty percent (20%) discount on the purchase of medicine by persons with xxxx
disability (PWD).
The abovementioned privileges are available only to persons with disability who are
The antecedents are as follows: Filipino citizens upon submission of any of the following as proof of his/her
entitlement thereto:
chanRoblesvirtualLawlibraryOn March 24, 1992, Republic Act (R.A.) No. 7277,
entitled "An Act Providing for the Rehabilitation, Self-Development and Self- chanRoblesvirtualLawlibrary
Reliance of Disabled Persons and their Integration into the Mainstream of Society
and for Other Purposes," otherwise known as the "Magna Carta for Disabled (i) An identification card issued by the city or municipal mayor or the
Persons," was passed into law.5 The law defines "disabled persons", "impairment" barangay captain of the place where the person with disability resides;
and "disability" as follows:ChanRoblesVirtualawlibrary

SECTION 4. Definition of Terms. - For purposes of this Act, these terms are defined
as follows: (ii) The passport of the person with disability concerned; or

chanRoblesvirtualLawlibrary(a) Disabled Persons are those suffering from


restriction of different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in the manner or within the range considered
normal for a human being; (ii) Transportation discount fare Identification Card (ID) issued by the
National Council for the Welfare of Disabled Persons (NCWDP).
(b) Impairment is any loss, diminution or aberration of psychological, physiological,
or anatomical structure of function;
xxxx
(c) Disability shall mean (1) a physical or mental impairment that substantially limits
one or more psychological, physiological or anatomical function of an individual or The establishments may claim the discounts granted in subsections (a), (b), (c), (f)
activities of such individual; (2) a record of such an impairment; or (3) being and (g) as tax deductions based on the net cost of the goods sold or services
regarded as having such an impairment.6chanroblesvirtuallawlibrary rendered: Provided, however, That the cost of the discount shall be allowed as
deduction from gross income for the same taxable year that the discount is
granted: Provided, further, That the total amount of the claimed tax deduction net of entitlement thereto subject to the guidelines issued by the NCWDP in coordination
value-added tax if applicable, shall be included in their gross sales receipts for tax with DSWD, DOH and DILG.
purposes and shall be subject to proper documentation and to the provisions of the 6.11.1 An identification card issued by the city or municipal mayor or the barangay
National Internal Revenue Code (NIRC), as amended.9chanroblesvirtuallawlibrary captain of the place where the person with disability resides;
The Implementing Rules and Regulations (IRR) of R.A. No. 944210 was jointly
promulgated by the Department of Social Welfare and Development (DSWD), 6.11.2 The passport of the persons with disability concerned; or
Department of Education, Department of Finance (DOF), Department of Tourism,
Department of Transportation and Communication, Department of the Interior and 6.11.3 Transportation discount fare Identification Card (ID) issued by the National
Local Government (DILG) and Department of Agriculture. Insofar as pertinent to Council for the Welfare of Disabled Persons (NCWDP). However, upon effectivity
this petition, the salient portions of the IRR are hereunder quoted:11 of this Implementing Rules and Regulations, NCWDP will already adopt the
RULE III. DEFINITION OF TERMS Identification Card issued by the Local Government Unit for purposes of uniformity
in the implementation. NCWDP will provide the design and specification of the
Section 5. Definition of Terms. For purposes of these Rules and Regulations, these identification card that will be issued by the Local Government
terms are defined as follows: Units.13chanroblesvirtuallawlibrary
6.14. Availmenl of Tax Deductions by Establishment Granting Twenty Percent. 20%
chanRoblesvirtualLawlibrary5.1. Persons with Disability - are those individuals Discount - The establishments may claim the discounts granted in sub-sections (6.1),
defined under Section 4 of RA 7277 "An Act Providing for the Rehabilitation, Self- (6.2), (6.4), (6.5) and (6.6) as tax deductions based on the net cost of the goods sold
Development and Self-Reliance of Persons with Disability as amended and their or services rendered: Provided, however, that the cost of the discount shall be
integration into the Mainstream of Society and for Other Purposes". This is defined allowed as deduction from gross income for the same taxable year that the discount
as a person suffering from restriction or different abilities, as a result of a mental, is granted: Provided, further, That the total amount of the claimed tax deduction net
physical or sensory impairment, to perform an activity in a manner or within the of value-added tax if applicable, shall be included in their gross sales receipts for tax
range considered normal for human being. Disability shall mean (1) a physical or purposes and shall be subject to proper documentation and to the provisions of the
mental impairment that substantially limits one or more psychological, physiological National Internal Revenue Code, as amended.
or anatomical function of an individual or activities of such individual; (2) a record On April 23, 2008, the National Council on Disability Affairs (NCDA)14 issued
of such an impairment; or (3) being regarded as having such an impairment. Administrative Order (A.O.) No. 1, Series of 2008,15 prescribing guidelines which
should serve as a mechanism for the issuance of a PWD Identification Card (IDC)
xxxx which shall be the basis for providing privileges and discounts to bona fidePWDs in
accordance with R.A. 9442:ChanRoblesVirtualawlibrary
RULE IV. PRIVILEGES AND INCENTIVES FOR THE PERSONS WITH IV. INSTITUTIONAL ARRANGEMENTS
DISABILITY
A. The Local Government Unit of the City or Municipal Office shall
Section 6. Other Privileges and Incentives. Persons with disability shall be entitled to implement these guidelines in the issuance of the PWD-IDC
the following:
xxxx
chanRoblesvirtualLawlibraryx x x x
D. Issuance of the appropriate document to confirm the medical condition of the
6.1.d. Purchase of Medicine - at least twenty percent (20%) discount on the purchase
applicant is as follows:ChanRoblesVirtualawlibrary
of medicine for the exclusive use and enjoyment of persons with disability. All
drugstores, hospital, pharmacies, clinics and other similar establishments selling Disability Document Issuing Entity
medicines are required to provide at least twenty percent (20%) discount subject to
the guidelines issued by DOH and PHILHEALTH.12chanrobleslaw
Apparent Medical Licensed Private or Government
xxxx Disability Certificate Physician

6.11 The abovementioned privileges are available only to persons with disability School Licensed Teacher duly signed by the
who are Filipino citizens upon submission of any of the following as proof of his/her Assessment School Principal
1) Section 32 of R.A. No. 7277 as amended by R.A. No. 9442;
Certificate of Head of the Business Establishment or
Disability Head of Non-Government Organization 2) Section 6, Rule IV of the Implementing Rules and Regulations of R.A. No. 9442;

Non-Apparent Medical Licensed Private or Government 3) NCDA A.O. No. 1;


Disability Certificate Physician
4) DOF Revenue Regulation No. 1-2009;
E. PWD Registration Forms and ID Cards shall be issued and signed by the City or
Municipal Mayor, or Barangay Captain. 5) DOH A.O. No. 2009-0011.
On July 26, 2010, the CA rendered a Decision upholding the constitutionality of
xxxx R.A. 7277 as amended, as well as the assailed administrative issuances. However,
V. IMPLEMENTING GUIDELINES AND PROCEDURES the CA suspended the effectivity of NCDA A.O. No. 1 pending proof of respondent
Any bonafide person with permanent disability can apply for the issuance of the NCDA's compliance with filing of said administrative order with the Office of the
PWD-IDC. His/her caregiver can assist in the application process. Procedures for the National Administrative Register (ONAR) and its publication in a newspaper of
issuance of the ID Cards are as follows: general circulation. The dispositive portion of the Decision
states:ChanRoblesVirtualawlibrary
chanRoblesvirtualLawlibraryA. Completion of the Requirements. Complete and/or WHEREFORE, the petition is PARTLY GRANTED. The effectivity of NCDA
make available the following requirements:ChanRoblesVirtualawlibrary Administrative Order No. 1 is hereby SUSPENDED pending Respondent's
compliance with the proof of filing of NCDA Administrative Order No. 1 with the
1. Two "1x1" recent ID pictures with the names, and Office of the National Administrative Register and its publication in a newspaper of
signatures or thumbmarks at the back of the picture general circulation.
Respondent NCDA filed a motion for reconsideration before the CA to lift the
2. One (1) Valid ID suspension of the implementation of NCDA A.O. No. 1 attaching thereto proof of its
publication in the Philippine Star and Daily Tribune on August 12, 2010, as well as a
3. Document to confirm the medical or disability condition certification from the ONAR showing that the same was filed with the said office on
(See Section IV, D for the required document). October 22, 2009.22 Likewise, petitioners filed a motion for reconsideration of the
CA Decision.
On December 9, 2008, the DOF issued Revenue Regulations No. 1-
200916 prescribing rules and regulations to implement R.A. 9442 relative to the tax In a Resolution dated November 19, 2010, the CA dismissed petitioners' motion for
privileges of PWDs and tax incentives for establishments granting the discount. reconsideration and lifted the suspension of the effectivity of NCDA A.O. No. 1
Section 4 of Revenue Regulations No. 001-09 states that drugstores can only deduct considering the filing of the same with ONAR and its publication in a newspaper of
the 20% discount from their gross income subject to some general circulation.
conditions.17chanrobleslaw
Hence, the instant petition raising the following issues:ChanRoblesVirtualawlibrary
18
On May 20, 2009, the DOH issued A.O. No. 2009-0011 specifically stating that the I. THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT
grant of 20% discount shall be provided in the purchase of branded medicines and RULED THAT THE MANDATED PWD DISCOUNT IS A VALID EXERCISE OF
unbranded generic medicines from all establishments dispensing medicines for the POLICE POWER. ON THE CONTRARY, IT IS AN INVALID EXERCISE OF
exclusive use of the PWDs.19 It also detailed the guidelines for the provision of THE POWER OF EMINENT DOMAIN BECAUSE IT FAILS TO PROVIDE JUST
medical and related discounts and special privileges to PWDs pursuant to R.A. COMPENSATION TO PETITIONERS AND OTHER SIMILARLY SITUATED
9442.20chanrobleslaw DRUGSTORES;

On July 28, 2009, petitioners filed a Petition for Prohibition with application for a II. THE CA SERIOUSLY ERRED WHEN IT RULED THAT SECTION 32 OF RA
Temporary Restraining Order and/or a Writ of Preliminary Injunction21 before the 7277 AS AMENDED BY RA 9442, NCDA AO 1 AND THE OTHER
Court of Appeals to annul and enjoin the implementation of the following IMPLEMENTING REGULATIONS DID NOT VIOLATE THE DUE PROCESS
laws:ChanRoblesVirtualawlibrary CLAUSE;
III. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE DEFINITIONS power requires the concurrence of a lawful subject and a lawful method. In more
OF DISABILITIES UNDER SECTION 4(A), SECTION 4(B) AND SECTION 4(C) familiar words, (a) the interests of the public generally, as distinguished from those
OF RA 7277 AS AMENDED BY RA 9442, RULE 1 OF THE IMPLEMENTING of a particular class, should justify the interference of the state; and (b) the means
RULES AND REGULATIONS23 OF RA 7277, SECTION 5.1 OF THE employed are reasonably necessary for the accomplishment of the purpose and not
IMPLEMENTING RULES AND REGULATIONS OF RA 9442, NCDA AO 1 unduly oppressive upon individuals.31chanrobleslaw
AND DOH AO 2009-11 ARE NOT VAGUE, AMBIGUOUS AND
UNCONSTITUTIONAL; R.A. No. 7277 was enacted primarily to provide full support to the improvement of
the total well-being of PWDs and their integration into the mainstream of society.
IV. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE MANDATED The priority given to PWDs finds its basis in the
PWD DISCOUNT DOES NOT VIOLATE THE EQUAL PROTECTION CLAUSE. Constitution:ChanRoblesVirtualawlibrary
We deny the petition. ARTICLE XII

The CA is correct when it applied by analogy the case of Carlos Superdrug NATIONAL ECONOMY AND PATRIMONY
Corporation et al. v. DSWD, et al.24 wherein We pronouced that Section 4 of R.A.
No. 9257 which grants 20% discount on the purchase of medicine of senior citizens xxxx
is a legitimate exercise of police power:ChanRoblesVirtualawlibrary
The law is a legitimate exercise of police power which, similar to the power of Section 6. The use of property bears a social function, and all economic agents shall
eminent domain, has general welfare for its object. Police power is not capable of an contribute to the common good. Individuals and private groups, including
exact definition, but has been purposely veiled in general terms to underscore its corporations, cooperatives, and similar collective organizations, shall have the right
comprehensiveness to meet all exigencies and provide enough room for an efficient to own, establish, and operate economic enterprises, subject to the duty of the State
and flexible response to conditions and circumstances, thus assuring the greatest to promote distributive justice and to intervene when the common good so
benefits.25cralawredAccordingly, it has been described as the most essential, insistent demands.32chanrobleslaw
and the least limitable of powers, extending as it does to all the great public
needs.26 It is [t]he power vested in the legislature by the constitution to make, ordain, ARTICLE XIII
and establish all manner of wholesome and reasonable laws, statutes, and ordinances,
either with penalties or without, not repugnant to the constitution, as they shall judge SOCIAL JUSTICE AND HUMAN RIGHTS
to be for the good and welfare of the commonwealth, and of the subjects of the
same.27chanrobleslaw xxxx

For this reason, when the conditions so demand as determined by the legislature, Section 11. The State shall adopt an integrated and comprehensive approach
property rights must bow to the primacy of police power because property rights, to health development which shall endeavor to make essential goods, health and
though sheltered by due process, must yield to general welfare.28chanrobleslaw other social services available to all the people at affordable cost. There shall
be priority for the needsof the underprivileged, sick, elderly, disabled, women, and
Police power as an attribute to promote the common good would be diluted children. The State shall endeavor to provide free medical care to
considerably if on the mere plea of petitioners that they will suffer loss of earnings paupers.33chanroblesvirtuallawlibrary
and capital, the questioned provision is invalidated. Moreover, in the absence of Thus, R.A. No. 7277 provides:ChanRoblesVirtualawlibrary
evidence demonstrating the alleged confiscatory effect of the provision in question, SECTION 2. Declaration of Policy. The grant of the rights and privileges for
there is no basis for its nullification in view of the presumption of validity which disabled persons shall be guided by the following principles:
every law has in its favor.29chanroblesvirtuallawlibrary
Police power is the power of the state to promote public welfare by restraining and chanRoblesvirtualLawlibrary(a). Disabled persons are part of the Philippine society,
regulating the use of liberty and property. On the other hand, the power of eminent thus the Senate shall give full support to the improvement of the total well-being of
domain is the inherent right of the state (and of those entities to which the power has disabled persons and their integration into the mainstream of society.
been lawfully delegated) to condemn private property to public use upon payment of
just compensation. In the exercise of police power, property rights of private Toward this end, the State shall adopt policies ensuring the rehabilitation, self-
individuals are subjected to restraints and burdens in order to secure the general development and self-reliance of disabled persons.
comfort, health, and prosperity of the state.30 A legislative act based on the police
It shall develop their skills and potentials to enable them to compete favorably for as allowable tax deductions pursuant to Section 32 of R.A. No. 9442 as implemented
available opportunities. in Section 4 of DOF Revenue Regulations No. 1-2009. Otherwise stated, the
discount reduces taxable income upon which the tax liability of the establishments is
(b). Disabled persons have the same rights as other people to take their proper place computed.
in society. They should be able to live freely and as independently as possible. This
must be the concern of everyone - the family, community and all government and Further, petitioners aver that Section 32 of R.A. No. 7277 as amended by R.A. No.
non-government organizations. 9442 is unconstitutional and void for violating the due process clause of the
Constitution since entitlement to the 20% discount is allegedly merely based on any
Disabled person's rights must never be perceived as welfare services by the of the three documents mentioned in the provision, namely: (i) an identification card
Government. issued by the city or municipal mayor or the barangay captain of the place where the
xxxx PWD resides; (ii) the passport of the PWD; or (iii) transportation discount fare
identification card issued by NCDA. Petitioners, thus, maintain that none of the said
(d). The State also recognizes the role of the private sector in promoting the welfare documents has any relation to a medical finding of disability, and the grant of the
of disabled persons and shall encourage partnership in programs that address their discount is allegedly without any process for the determination of a PWD in
needs and concerns.34chanroblesvirtuallawlibrary accordance with law.
To implement the above policies, R.A. No. 9442 which amended R.A. No. 7277
grants incentives and benefits including a twenty percent (20%) discount to PWDs in Section 32 of R.A. No. 7277, as amended by R.A. No. 9442, must be read with its
the purchase of medicines; fares for domestic air, sea and land travels including IRR which stated that upon its effectivity, NCWDP (which is the government agency
public railways and skyways; recreation and amusement centers including theaters, tasked to ensure the implementation of RA 7277), would adopt the IDC issued by the
food chains and restaurants.35 This is specifically stated in Section 4 of the IRR of local government units for purposes of uniformity in the implementation.39 Thus,
R.A. No. 9442:ChanRoblesVirtualawlibrary NCDA A.O. No. 1 provides the reasonable guidelines in the issuance of IDCs to
Section 4. Policies and Objectives - It is the objective of Republic Act No. 9442 to PWDs as proof of their entitlement to the privileges and incentives under the
provide persons with disability, the opportunity to participate fully into the law40 and fills the details in the implementation of the law.
mainstream of society by granting them at least twenty percent (20%) discount
in all basic services. It is a declared policy of RA 7277 that persons with disability As stated in NCDA A.O. No. 1, before an IDC is issued by the city or municipal
are part of Philippine society, and thus the State shall give full support to the mayor or the barangay captain,41 or the Chairman of the NCDA,42 the applicant must
improvement of their total wellbeing and their integration into the mainstream first secure a medical certificate issued by a licensed private or government physician
of society. They have the same rights as other people to take their proper place in that will confirm his medical or disability condition. If an applicant is an employee
society. They should be able to live freely and as independently as possible. This with apparent disability, a "certificate of disability" issued by the head of the
must be the concern of everyone the family, community and all government and non- business establishment or the head of the non-governmental organization is needed
government organizations. Rights of persons with disability must never be perceived for him to be issued a PWD-IDC. For a student with apparent disability, the "school
as welfare services. Prohibitions on verbal, non-verbal ridicule and vilification assessment" issued by the teacher and signed by the school principal should be
against persons with disability shall always be observed at all presented to avail of a PWD-ID.
times.36chanroblesvirtuallawlibrary
Hence, the PWD mandatory discount on the purchase of medicine is supported by a Petitioners' insistence that Part IV (D) of NCDA Administrative Order No. 1 is void
valid objective or purpose as aforementioned. It has a valid subject considering that because it allows allegedly non-competent persons like teachers, head of
the concept of public use is no longer confined to the traditional notion of use by the establishments and heads of Non-Governmental Organizations (NGOs) to confirm
public, but held synonymous with public interest, public benefit, public welfare, the medical condition of the applicant is misplaced. It must be stressed that only for
and public convenience. As in the case of senior citizens,37 the discount privilege to apparent disabilities can the teacher or head of a business establishment validly issue
which the PWDs are entitled is actually a benefit enjoyed by the general public to the mentioned required document because, obviously, the disability is easily seen or
which these citizens belong. The means employed in invoking the active clearly visible. It is, therefore, not an unqualified grant of authority for the said non-
participation of the private sector, in order to achieve the purpose or objective of the medical persons as it is simply limited to apparent disabilities. For a non-apparent
law, is reasonably and directly related.38 Also, the means employed to provide a fair, disability or a disability condition that is not easily seen or clearly visible, the
just and quality health care to PWDs are reasonably related to its accomplishment, disability can only be validated by a licensed private or government physician, and a
and are not oppressive, considering that as a form of reimbursement, the discount medical certificate has to be presented in the procurement of an IDC. Relative to this
extended to PWDs in the purchase of medicine can be claimed by the establishments issue, the CA validly ruled, thus:ChanRoblesVirtualawlibrary
We agree with the Office of the Solicitor General's (OSG) ratiocination that teachers, (7) different categories of disability, which include the following: (1) Psychological
heads of business establishments and heads of NGOs can validly confirm the medical and behavioral disabilities (2) Chronic illness with disabilities (3)Learning(cognitive
condition of their students/employees with apparent disability for obvious reasons as or intellectual) disabilities (4) Mental disabilities (5) Visual/seeing disabilities (6)
compared to non-apparent disability which can only be determined by licensed Orthopedic/moving, and (7) communication deficits.46chanroblesvirtuallawlibrary
physicians. Under the Labor Code, disabled persons are eligible as apprentices or Elementary is the rule that when laws or rules are clear, when the law is
learners provided that their handicap are not as much as to effectively impede the unambiguous and unequivocal, application not interpretation thereof is imperative.
performance of their job. We find that heads of business establishments can validly However, where the language of a statute is vague and ambiguous, an interpretation
issue certificates of disability of their employees because aside from the fact that thereof is resorted to. A law is deemed ambiguous when it is capable of being
they can obviously validate the disability, they also have medical records of the understood by reasonably well-informed persons in either of two or more senses. The
employees as a pre-requisite in the hiring of employees. Hence, Part IV (D) of fact that a law admits of different interpretations is the best evidence that it is vague
NCDA AO No. 1 is logical and valid.43chanroblesvirtuallawlibrary and ambiguous.47chanrobleslaw
Furthermore, DOH A.O. No. 2009-11 prescribes additional guidelines for the 20%
discount in the purchase of all medicines for the exclusive use of PWD.44 To avail of In the instant case, We do not find the aforestated definition of terms as vague and
the discount, the PWD must not only present his I.D. but also the doctor's ambiguous. Settled is the rule that courts will not interfere in matters which are
prescription stating, among others, the generic name of the medicine, the physician's addressed to the sound discretion of the government agency entrusted with the
address, contact number and professional license number, professional tax receipt regulation of activities coming under the special and technical training and
number and narcotic license number, if applicable. A purchase booklet issued by the knowledge of such agency.48 As a matter of policy, We accord great respect to the
local social/health office is also required in the purchase of over-the-counter decisions and/or actions of administrative authorities not only because of the doctrine
medicines. Likewise, any single dispensing of medicine must be in accordance with of separation of powers but also for their presumed knowledge, ability, and expertise
the prescription issued by the physician and should not exceed a one (1) month in the enforcement of laws and regulations entrusted to their jurisdiction. The
supply. Therefore, as correctly argued by the respondents, Section 32 of R.A. No. rationale for this rule relates not only to the emergence of the multifarious needs of a
7277 as amended by R.A. No. 9442 complies with the standards of substantive due modern or modernizing society and the establishment of diverse administrative
process. agencies for addressing and satisfying those needs; it also relates to the accumulation
of experience and growth of specialized capabilities by the administrative agency
We are likewise not persuaded by the argument of petitioners that the definition of charged with implementing a particular statute.49chanrobleslaw
"disabilities" under the subject laws is vague and ambiguous because it is allegedly
so general and broad that the person tasked with implementing the law will Lastly, petitioners contend that R.A. No. 7227, as amended by R.A. No. 9442,
undoubtedly arrive at different interpretations and applications of the law. Aside violates the equal protection clause of the Constitution because it fairly singles out
from the definitions of a "person with disability" or "disabled persons" under Section drugstores to bear the burden of the discount, and that it can hardly be said to
4 of R.A. No. 7277 as amended by R.A. No. 9442 and in the IRR of RA 9442, "rationally" meet a legitimate government objective which is the purpose of the law.
NCDA A.O. No. 1 also provides:ChanRoblesVirtualawlibrary The law allegedly targets only retailers such as petitioners, and that the other
enterprises in the drug industry are not imposed with similar burden. This same
4. Identification Cards shall be issued to any bonafide PWD with argument had been raised in the case of Carlos Superdrug Corp., et al. v. DSWD, et
permanent disabilities due to any one or more of the following al.,50 and We reaffirm and apply the ruling therein in the case at
conditions: psychosocial, chronic illness, learning, mental, visual, bar:ChanRoblesVirtualawlibrary
orthopedic, speech and hearing conditions. This includes persons The Court is not oblivious of the retail side of the pharmaceutical industry and the
suffering from disabling diseases resulting to the person's competitive pricing component of the business. While the Constitution protects
limitations to do day to day activities as normally as possible such property rights, petitioners must accept the realities of business and the State, in the
as but not limited to those undergoing dialysis, heart disorders, exercise of police power, can intervene in the operations of a business which may
severe cancer cases and such other similar cases resulting to result in an impairment of property rights in the process.
temporary or permanent disability.45
Moreover, the right to property has a social dimension. While Article XIII of the
Constitution provides the precept for the protection of property, various laws and
Similarly, DOH A.O. No. 2009-0011 defines the different categories of disability as
jurisprudence, particularly on agrarian reform and the regulation of contracts and
follows:ChanRoblesVirtualawlibrary
public utilities, continuously serve as a reminder that the right to property can be
Rule IV, Section 4, Paragraph B of the Implementing Rules and Regulations (IRR)
of this Act required the Department of Health to address the health concerns of seven
relinquished upon the command of the State for the promotion of public guaranty does not preclude the legislature from recognizing degrees of evil or harm,
good.51chanroblesvirtuallawlibrary and legislation is addressed to evils as they may appear.
Under the equal protection clause, all persons or things similarly situated must be The equal protection clause recognizes a valid classification, that is, a classification
treated alike, both in the privileges conferred and the obligations imposed. that has a reasonable foundation or rational basis and not arbitrary.54 With respect to
Conversely, all persons or things differently situated should be treated R.A. No. 9442, its expressed public policy is the rehabilitation, self-development and
differently.52 In the case of ABAKADA Guro Party List, et al. v. Hon. Purisima, et self-reliance of PWDs. Persons with disability form a class separate and distinct from
al.,53 We held:ChanRoblesVirtualawlibrary the other citizens of the country. Indubitably, such substantial distinction is germane
Equality guaranteed under the equal protection clause is equality under the same and intimately related to the purpose of the law. Hence, the classification and
conditions and among persons similarly situated; it is equality among equals, not treatment accorded to the PWDs fully satisfy the demands of equal protection. Thus,
similarity of treatment of persons who are classified based on substantial differences Congress may pass a law providing for a different treatment to persons with
in relation to the object to be accomplished. When things or persons are different in disability apart from the other citizens of the country.
fact or circumstance, they may be treated in law differently. In Victoriano v. Elizalde
Rope Workers' Union, this Court declared:ChanRoblesVirtualawlibrary Subject to the determination of the courts as to what is a proper exercise of police
The guaranty of equal protection of the laws is not a guaranty of equality in the power using the due process clause and the equal protection clause as yardsticks, the
application of the laws upon all citizens of the State. It is not, therefore, a State may interfere wherever the public interests demand it, and in this particular, a
requirement, in order to avoid the constitutional prohibition against inequality, that large discretion is necessarily vested in the legislature to determine, not only what
every man, woman and child should be affected alike by a statute. Equality of interests of the public require, but what measures are necessary for the protection of
operation of statutes does not mean indiscriminate operation on persons merely as such interests.55 Thus, We are mindful of the fundamental criteria in cases of this
such, but on persons according to the circumstances surrounding them. It guarantees nature that all reasonable doubts should be resolved in favor of the constitutionality
equality, not identity of rights. The Constitution does not require that things of a statute.56 The burden of proof is on him who claims that a statute is
which are different in fact be treated in law as though they were the same. The unconstitutional. Petitioners failed to discharge such burden of proof.
equal protection clause does not forbid discrimination as to things that are
different. It does not prohibit legislation which is limited either in the object to WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals
which it is directed or by the territory within which it is to operate. dated July 26, 2010, and the Resolution dated November 19, 2010, in CA-G.R. SP
No. 109903 are AFFIRMED.
The equal protection of the laws clause of the Constitution allows classification.
Classification in law, as in the other departments of knowledge or practice, is the SO ORDERED.chanRoblesvirtualLawlibrary
grouping of things in speculation or practice because they agree with one another in
certain particulars. A law is not invalid because of simple inequality. The very idea
of classification is that of inequality, so that it goes without saying that the mere fact
of inequality in no manner determines the matter of constitutionality. All that is
required of a valid classification is that it be reasonable, which means that the
classification should be based on substantial distinctions which make for real
differences, that it must be germane to the purpose of the law; that it must not
be limited to existing conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable foundation or rational basis
and is not palpably arbitrary.

In the exercise of its power to make classifications for the purpose of enacting laws
over matters within its jurisdiction, the state is recognized as enjoying a wide range
of discretion. It is not necessary that the classification be based on scientific or
marked differences of things or in their relation. Neither is it necessary that the
classification be made with mathematical nicety. Hence, legislative classification
may in many cases properly rest on narrow distinctions, for the equal protection
G.R. No. 207132, December 06, 2016 suspending the referral decking system in AO No. 159, Series of 2004.7

ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning
INC., (AMCOW), REPRESENTED HEREIN BY ITS PRESIDENT, DR. that the referral decking system did not guarantee the migrant workers' right to safe
ROLANDO VILLOTE, Petitioner, v. GCC APPROVED MEDICAL CENTERS and quality health service. AO 167-04 pertinently reads:
ASSOCIATION, INC. AND CHRISTIAN CANGCO, Respondents. WHEREAS, after a meticulous and deliberate study, examination, and consultation
about the GAMCA referral decking system, the DOH believes that its mandate is to
G.R. No. 207205 protect and promote the health of the Filipino people by ensuring the rights to safe
and quality health service and reliable medical examination results through the
HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE stricter regulation of medical clinics and other health facilities, which the referral
DEPARTMENT OF HEALTH, Petitioner, v. GCC APPROVED MEDICAL decking system neither assures nor guarantees.
CENTERS ASSOCIATION, INC. AND CHRISTIAN E.
CANGCO, Respondents. NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby
withdraws, repeals and/or revokes Administrative Order No. 5, series of 2001,
concerning the referral decking system. Hence, all other administrative issuances,
DECISION
bureau circulars and memoranda related to A.O. No. 5, series of 2001, are hereby
withdrawn, repealed and/revoked accordingly.
BRION, J.: In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then
DOH Secretary Francisco T. Duque III expressed his concern about the continued
In these consolidated petitions for review on certiorari1 filed under Rule 45 of the implementation of the referral decking system despite the DOH's prior suspension
Rules of Court, by the Association of Medical Clinics for Overseas Workers, Inc. directives. The DOH directed the "OFW clinics, duly accredited/licensed by the
(AMCOW) in GR No. 207132, and by Secretary Enrique T. Ona (Secretary Ona) of DOH and/or by the Philippine Health Insurance Corporation (PHILHEALTH)
the Department of Health (DOH) in GR No. 207205, we resolve the challenge to belonging to and identified with GAMCA x x x to forthwith stop, terminate,
the August 10, 2012 decision2 and the April 12, 2013 order3 of the Regional Trial withdraw or otherwise end the x x x 'referral decking system.'"10
Court (RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-
CV.4 GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of
the President (OP). In a decision11 dated January 14, 2010, the OP nullified
The August 10, 2012 decision and April 12, 2013 order declared null and void ab Memorandum No. 2008-0210.
initio the August 23, 2010 and November 2, 2010 orders issued by the DOH
directing respondent GCC Approved Medical Centers Association, Inc. (GAMCA) to On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the
cease and desist from implementing the referral decking system (these orders shall be President's signature. Section 16 of RA No. 10022 amended Section 23 of RA No.
alternately referred to as DOH CDO letters). 8042, adding two new paragraphs - paragraphs (c) and (d). The pertinent portions of
the amendatory provisions read:
I. The Antecedents Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new
paragraphs (c) and (d) with their corresponding subparagraphs to read as follows:
On March 8, 2001, the DOH issued Administrative Order No. 5, Series of
20015(AO 5-01) which directed the decking or equal distribution of migrant (c) Department of Health. - The Department of Health (DOH) shall regulate the
workers among the several clinics who are members of GAMCA. activities and operations of all clinics which conduct medical, physical, optical,
dental, psychological and other similar examinations, hereinafter referred to as
AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States' health examinations, on Filipino migrant workers as requirement for their
requirement that only GCC-accredited medical clinics/hospitals' examination results overseas employment. Pursuant to this, the DOH shall ensure that:
will be honored by the GCC States' respective embassies. It required an OFW
applicant to first go to a GAMCA Center which, in turn, will refer the applicant to a (c.1) The fees for the health examinations are regulated, regularly monitored and
GAMCA clinic or hospital. duly published to ensure that the said fees are reasonable and not exorbitant;

Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance the (c.2) The Filipino migrant worker shall only be required to undergo health
implementation of the referral decking system. The DOH reiterated its directive
examinations when there is reasonable certainty that he or she will be hired and Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010
deployed to the jobsite and only those health examinations which are absolutely letter-order,14directed GAMCA to cease and desist from implementing the referral
necessary for the type of job applied for or those specifically required by the foreign decking system and to wrap up their operations within three (3) days from receipt
employer shall be conducted; thereof. GAMCA received its copy of the August 23, 2010 letter-order on August 25,
2010.
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively
conducting health examinations on migrant workers for certain receiving On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition
countries; for certiorari and prohibition with prayer for a writ of preliminary injunction and/or
temporary restraining order (GAMCA's petition).15 It assailed: (1) the DOH's August
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the 23, 2010 letter-order on the ground of grave abuse of discretion; and (2) paragraphs
DOH-accredited or DOH-operated clinics that will conduct his/her health c.3 and c.4, Section 16 of RA No. 10022, as well as Section 1 (c) and (d), Rule XI of
examinations and that his or her rights as a patient are respected. The decking the IRR, as unconstitutional.
practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall not Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive
be allowed; that GAMCA cease and desist from implementing the referral decking system.16

(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and
regional and/or provincial hospitals shall establish and operate clinics that can serve to file an opposition-in-intervention, attaching its opposition-in-intervention to its
the health examination requirements of Filipino migrant workers to provide them motion.17 In the hearing conducted the following day, November 24, 2010, the RTC
easy access to such clinics all over the country and lessen their transportation and granted AMCOW's intervention; DOH and GAMCA did not oppose AMCOW's
lodging expenses; and motion.18 AMCOW subsequently paid the docket fees and submitted its
memorandum.19
(c.6) All DOH-accredited medical clinics, including the DOH operated clinics,
conducting health examinations for Filipino migrant workers shall observe the same In an order20 dated August 1, 2011, the RTC issued a writ of preliminary
standard operating procedures and shall comply with internationally accepted injunction21 directing the DOH to cease and desist from implementing its August 23,
standards in their operations to conform with the requirements of receiving countries 2010 and November 2, 2010 orders. The RTC likewise issued an order denying the
or of foreign employers/principals. motion for inhibition/disqualification filed by AMCOW.

Any Foreign employer who does not honor the results of valid health examinations On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011
conducted by a DOH-accredited or DOH-operated clinic shall be temporarily order.
disqualified from participating in the overseas employment program, pursuant to
POEA rules and regulations. The assailed RTC rulings

In case an overseas Filipino worker is found to be not medically fit upon his/her In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and
immediate arrival in the country of destination, the medical clinic that conducted the declared null and void ab initio the DOH CDO letters. It also issued a writ of
health examinations of such overseas Filipino worker shall pay for his or her prohibition directing "the DOH Secretary and all persons acting on his behalf to
repatriation back to the Philippines and the cost of deployment of such worker. cease and desist from implementing the assailed Orders against the [GAMCA]."

Any government official or employee who violates any provision of this subsection The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending
shall be removed or dismissed from service with disqualification to hold any Section 23 of RA No. 8042, but ruled that Section 16 of RA No. 10022 does not
appointive public office for five (5) years. Such penalty is without prejudice to any apply to GAMCA.
other liability which he or she may have incurred under existing laws, rules or
regulations. [emphases and underscoring supplied] The RTC reasoned out that the prohibition against the referral decking system under
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No. Section 16 of RA No. 10022 must be interpreted as applying only to clinics that
8042, as amended by RA No. 10022, took effect. conduct health examination on migrant workers bound for countries that do not
require the referral decking system for the issuance of visas to job applicants.
Third, whether the application of Section 16 of Republic Act No.10022 to the
It noted that the referral decking system is part of the application procedure in GAMCA violates the international customary principles of sovereign independence
obtaining visas to enter the GCC States, a procedure made in the exercise of the and equality.
sovereign power of the GCC States to protect their nationals from health hazards,
and of their diplomatic power to regulate and screen entrants to their territories. III. Our Ruling
Under the principle of sovereign equality and independence of States, the Philippines
cannot interfere with this system and, in fact, must respect the visa-granting A. The RTC legally erred when it gave due course to GAMCA's petition
procedures of foreign states in the same way that they respect our immigration for certiorari and prohibition.
procedures.
The present case reached us through an appeal by certiorari (pursuant to Rule 45) of
Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC an RTC ruling, assailing the decision based solely on questions of law. The RTC
States, is to restrain the GCC States themselves. To the RTC, the Congress was decision, on the other hand, involves the grant of the petitions for certiorari and
aware of this limitation, pursuant to the generally accepted principles of international prohibition (pursuant to Rule 65) assailing the DOH CDO letters for grave abuse of
law under Article II, Section 2 of the 1987 Constitution, when it enacted Section 16 discretion.
of RA No. 10022.
The question before us asks whether the RTC made a reversible error of law
The DOH and AMCOW separately sought reconsideration of the RTC's August 10, when it issued writs of certiorari and prohibition against the DOH CDO letters.
2012 decision, which motions the RTC denied.23 The DOH and AMCOW separately
filed the present Rule 45 petitions. AMCOW questions the means by which GAMCA raised the issue of the legality of
RA No. 10022 before the RTC. AMCOW posits that GAMCA availed of an
On August 24, 2013, AMCOW filed a motion for consolidation24 of the two improper remedy, as certiorari and prohibition lie only against quasi-judicial acts,
petitions; the Court granted this motion and ordered the consolidation of the two and quasi-judicial and ministerial acts, respectively. Since the disputed cease and
petitions in a resolution dated September 17, 2013.25cralawred desist order is neither, the RTC should have dismissed the petition outright for being
an improper remedy.
In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent
motion for issuance of temporary restraining order/writ of preliminary We agree with the petitioners' assertion that the RTC erred when it gave due course
injunction/status quo ante order (with request for immediate inclusion in the to GAMCA's petition for certiorari and prohibition, but we do so for different
Honorable Court's agenda of March 3, 2015, its motion dated March 2, 2015);27 and reasons.
(2) the most urgent reiterating motion for issuance of temporary restraining
order/writ of preliminary injunction/status quo ante order dated March 11, 2015.28 1. Certiorari under Rules of Court and under the courts' expanded jurisdiction
under Art VIII, Section 1 of the Constitution, as recognized by jurisprudence.
The Court also suspended the implementation of the permanent injunction issued by
the RTC of Pasay City, Branch 108 in its August 10, 2012 decision. A.1.a. The Current Certiorari Situation

II. The Issues The use of petitions for certiorari and prohibition under Rule 65 is a remedy that
judiciaries have used long before our Rules of Court existed.29 As footnoted below,
The consolidated cases before us present the following issues: these writs - now recognized and regulated as remedies under Rule 65 of our Rules
of Court - have been characterized a "supervisory writs" used by superior courts to
First, whether the Regional Trial Court legally erred in giving due course to the keep lower courts within the confines of their granted jurisdictions, thereby ensuring
petition for certiorari and prohibition against the DOH CDO letters; orderliness in lower courts' rulings.

Second, whether the DOH CDO letters prohibiting GAMCA from implementing the We confirmed this characterization in Madrigal Transport v. Lapanday Holdings
referral decking system embodied under Section 16 of Republic Act No. 10022 Corporation,30 when we held that a writ is founded on the supervisory jurisdiction of
violates Section 3, Article II of the 1987 Constitution for being an undue taking of appellate courts over inferior courts, and is issued to keep the latter within the
property; bounds of their jurisdiction. Thus, the writ corrects only errors of jurisdiction of
judicial and quasi-judicial bodies, and cannot be used to correct errors of law or fact.
For these mistakes of judgment, the appropriate remedy is an appeal.31 but it, in effect, encouraged further violations thereof during the martial law regime.
xxx
This situation changed after 1987 when the new Constitution "expanded" the scope
of judicial power by providing that - xxxx
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to Briefly stated, courts of justice determine the limits of power of the agencies and
determine whether or not there has been a grave abuse of discretion amounting to offices of the government as well as those of its officers. In other words, the
lack or excess of jurisdiction on the part of any branch or instrumentality of the judiciary is the final arbiter on the question whether or not a branch of government or
Government. (italics supplied)32 any of its officials has acted without jurisdiction or in excess of jurisdiction, or so
In Francisco v. The House of Representatives,33 we recognized that this expanded capriciously as to constitute an abuse of discretion amounting to excess of
jurisdiction was meant "to ensure the potency of the power of judicial review to curb jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass
grave abuse of discretion by 'any branch or instrumentalities of government.'" Thus, judgment on matters of this nature.
the second paragraph of Article VIII, Section 1 engraves, for the first time in its
history, into black letter law the "expanded certiorari jurisdiction" of this Court, This is the background of paragraph 2 of Section 1, which means that the courts
whose nature and purpose had been provided in the sponsorship speech of its cannot hereafter evade the duty to settle matters of this nature, by claiming that such
proponent, former Chief Justice Constitutional Commissioner Roberto Concepcion: matters constitute a political question.34 (italics in the original; emphasis and
xxxx underscoring supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this
The first section starts with a sentence copied from former "expanded" constitutional definition of judicial power and because of the
commonality of "grave abuse of discretion" as a ground for review under Rule 65
Constitutions. It says: and the courts expanded jurisdiction, the Supreme Court based on its power to relax
its rules35 allowed Rule 65 to be used as the medium for petitions invoking the
The judicial power shall be vested in one Supreme Court and in such lower courts as courts' expanded jurisdiction based on its power to relax its Rules.36 This is however
may be established by law. an ad hoc approach that does not fully consider the accompanying implications,
among them, that Rule 65 is an essentially distinct remedy that cannot simply be
I suppose nobody can question it. bodily lifted for application under the judicial power's expanded mode. The terms of
Rule 65, too, are not fully aligned with what the Court's expanded jurisdiction
The next provision is new in our constitutional law. I will read it first and explain. signifies and requires.37

Judicial power includes the duty of the courts of justice to settle actual controversies On the basis of almost thirty years' experience with the courts' expanded jurisdiction,
involving rights which are legally demandable and enforceable, and to determine the Court should now fully recognize the attendant distinctions and should be aware
whether or not there has been a grave abuse of discretion amounting to lack or excess that the continued use of Rule 65 on an ad hoc basis as the operational remedy in
of jurisdiction on the part of any branch or instrumentality of the government. implementing its expanded jurisdiction may, in the longer term, result in problems of
uneven, misguided, or even incorrect application of the courts' expanded mandate.
Fellow Members of this Commission, this is actually a product of our experience
during martial law. As a matter of fact, it has some antecedents in the past, but the The present case is a prime example of the misguided reading that may take place in
role of the judiciary during the deposed regime was marred considerably by the constitutional litigation: the procedural issues raised apparently spring from the lack
circumstance that in a number of cases against the government, which then had no of proper understanding of what a petition for certiorari assails under the traditional
legal defense at all, the solicitor general set up the defense of political question and and expanded modes, and the impact of these distinctions in complying with the
got away with it. As a consequence, certain principles concerning particularly the procedural requirements for a valid petition.
writ of habeas corpus, that is, the authority of courts to order the release of political
detainees, and other matters related to the operation and effect of martial law failed 2. The Basic Distinctions
because the government set up the defense of political question. And the Supreme
Court said: "Well, since it is political, we have no authority to pass upon it." The A.2.a. Actual Case or Controversy
Committee on the Judiciary feels that this was not a proper solution of the questions
involved. It did not merely request an encroachment upon the rights of the people, Basic in the exercise of judicial power whether under the traditional or in the
expanded setting - is the presence of an actual case or controversy. For a dispute to This distinction is apparently not legally significant when it is considered that action
be justiciable, a legally demandable and enforceable right must exist as basis, and outside of or in excess of the granted authority necessarily involves action with grave
must be shown to have been violated.38 abuse of discretion: no discretion is allowed in areas outside of an agency's granted
authority so that any such action would be a gravely abusive exercise of power. The
Whether a case actually exists depends on the pleaded allegations, as affected by the constitutional grant of power, too, pointedly addresses grave abuse of
elements of standing (translated in civil actions as the status of being a "real- discretion when it amounts to lack or excess of jurisdiction,42 thus establishing that
party-in-interest," in criminal actions as "offended party" and in special the presence of jurisdiction is the critical element; failure to comply with this
proceedings as "interested party"),39ripeness,40prematurity, and the moot and requirement necessarily leads to the certiorari petition's immediate dismissal.43
academic principle that likewise interact with one another. These elements and their
interactions are discussed m greater detail below. As an added observation on a point that our jurisprudence has not fully explored, the
result of the action by a governmental entity (e.g., a law or an executive order) can
The Court's expanded jurisdiction - itself an exercise of judicial power - does not do be distinguished from the perspective of its legality as tested against the terms of the
away with the actual case or controversy requirement in presenting a constitutional Constitution or of another law (where subordinate action like an executive order is
issue, but effectively simplifies this requirement by merely requiring a prima involved), vis-a-vis the legality of the resulting action where grave abuse of
facie showing of grave abuse of discretion in the assailed governmental act. discretion attended the governmental action or the exercise of the governmental
function.
A.2.b. Actions Correctable by Certiorari
In the former, the conclusion may be plain illegality or legal error that characterized
A basic feature of the expanded jurisdiction under the constitutional definition of the law or exec order (as tested, for example, under the established rules of
judicial power, is the authority and command for the courts to act on petitions interpretation); no consideration is made of how the governmental entity exercised
involving the commission by any branch or instrumentality of government of grave its function. In the latter case, on the other hand, it is the governmental entity's
abuse of discretion amounting to lack or excess of jurisdiction. exercise of its function that is examined and adjudged independently of the result,
with impact on the legality of the result of the gravely abusive action.
This command distinctly contrasts with the terms of Rule 65 which confines
court certiorari action solely to the review of judicial and quasi-judicial acts.41 These Where the dispute in a case relates to plain legal error, ordinary court action and
differing features create very basic distinctions that must necessarily result in traditional mode are called for and this must be filed in the lower courts based on
differences in the application of remedies. rules of jurisdiction while observing the hierarchy of courts.

While actions by lower courts do not pose a significant problem because they are Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction
necessarily acting judicially when they adjudicate, a critical question comes up for is brought into play based on the express wording of the Constitution and
the court acting on certiorari petitions when governmental agencies are involved constitutional implications may be involved (such as grave abuse of discretion
- under what capacity does the agency act? because of plain oppression or discrimination), but this must likewise be filed with
the lowest court of concurrent jurisdiction, unless the court highest in the hierarchy
This is a critical question as the circumstances of the present case show. When the grants exemption. Note that in the absence of express rules, it is only the highest
government entity acts quasi-judicially, the petition for certiorari challenging the court, the Supreme Court, that can only grant exemptions.
action falls under Rule 65; in other instances, the petition must be filed based on the
courts' expanded jurisdiction. From these perspectives, the use of grave abuse of discretion can spell the difference
in deciding whether a case filed directly with the Supreme Court has been properly
A.2.c. Grave Abuse of Discretion filed.

Another distinction, a seeming one as explained below, relates to the cited ground of A.2.d. Exhaustion of Available Remedies
a certiorari petition under Rule 65 which speaks of lack or excess of jurisdiction or
grave abuse of discretion amounting to lack or excess of jurisdiction, as against the A basic requirement under Rule 65 is that there be "no other plain, speedy and
remedy under the courts' expanded jurisdiction which expressly only mentions grave adequate remedy found in law,"44 which requirement the expanded jurisdiction
abuse of discretion amounting to lack or excess of jurisdiction. provision does not expressly carry. Nevertheless, this requirement is not a significant
distinction in using the remedy of certiorari under the traditional and the expanded
modes. The doctrine of exhaustion of administrative remedies applies to a petition petitioner must allege the existence of an immediate or threatened injury to itself as a
for certiorari, regardless of the act of the administrative agency concerned, i.e., result of the challenged action.
whether the act concerns a quasi-judicial, or quasi-legislative function, or is purely
regulatory.45 In these lights, a constitutional challenge, whether presented through the traditional
route or through the Court's expanded jurisdiction, requires compliance with the
Consider in this regard that once an administrative agency has been empowered by ripeness requirement. In the case of administrative acts, ripeness manifests itself
Congress to undertake a sovereign function, the agency should be allowed to perform through compliance with the doctrine of exhaustion of administrative remedies.
its function to the full extent that the law grants. This full extent covers the authority
of superior officers in the administrative agencies to correct the actions of In like manner, an issue that was once ripe for resolution but whose resolution, since
subordinates, or for collegial bodies to reconsider their own decisions on a motion then, has been rendered unnecessary, needs no resolution from the Court, as it
for reconsideration. Premature judicial intervention would interfere with this presents no actual case or controversy and likewise merely presents a hypothetical
administrative mandate, leaving administrative action incomplete; if allowed, such problem. In simpler terms, a case is moot and academic when an event supervenes to
premature judicial action through a writ of certiorari, would be a usurpation that render a judgment over the issues unnecessary and superfluous.
violates the separation of powers principle that underlies our Constitution.46
Without the element of ripeness or a showing that the presented issue is moot and
In every case, remedies within the agency's administrative process must be exhausted academic, petitions challenging the constitutionality of a law or governmental act are
before external remedies can be applied. Thus, even if a governmental entity may vulnerable to dismissal.
have committed a grave abuse of discretion, litigants should, as a rule, first ask
reconsideration from the body itself, or a review thereof before the agency Not to be forgotten is that jurisprudence also prohibits litigants from immediately
concerned. This step ensures that by the time the grave abuse of discretion issue seeking judicial relief without first exhausting the available administrative remedies
reaches the court, the administrative agency concerned would have fully exercised its for practical reasons.49
jurisdiction and the court can focus its attention on the questions of law presented
before it. From the perspective of practicality, immediate resort to the courts on issues that are
within the competence of administrative agencies to resolve, would unnecessarily
Additionally, the failure to exhaust administrative remedies affects the ripeness to clog the courts' dockets. These issues, too, usually involve technical considerations
adjudicate the constitutionality of a governmental act, which in turn affects the that are within the agency's specific competence and which, for the courts, would
existence of the need for an actual case or controversy for the courts to exercise require additional time and resources to study and consider.50 Of course, the Supreme
their power of judicial review.47 The need for ripeness - an aspect of the timing of a Court cannot really avoid the issues that a petition for certiorari, filed with the lower
case or controversy does not change regardless of whether the issue of courts may present; the case may be bound ultimately to reach the Court, albeit as an
constitutionality reaches the Court through the traditional means, or through the appeal from the rulings of the lower courts.
Court's expanded jurisdiction. In fact, separately from ripeness, one other concept
pertaining to judicial review is intrinsically connected to it; the concept of a case 3. Situations Where a Petition for Certiorari May Be Used
being moot and academic.48
There are two distinct situations where a writ of certiorari or prohibition may be
Both these concepts relate to the timing of the presentation of a controversy before sought. Each situation carries requirements, peculiar to the nature of each situation,
the Court ripeness relates to its prematurity, while mootness relates to a belated or that lead to distinctions that should be recognized in the use of certiorari under Rule
unnecessary judgment on the issues. The Court cannot preempt the actions of the 65 and under the courts' expanded jurisdiction.
parties, and neither should it (as a rule) render judgment after the issue has already
been resolved by or through external developments. The two situations differ in the type of questions raised. The first is
the constitutional situation where the constitutionality of acts are questioned. The
The importance of timing in the exercise of judicial review highlights and reinforces second is the non-constitutional situation where acts amounting to grave abuse of
the need for an actual case or controversy an act that may violate a party's right. discretion are challenged without raising constitutional questions or violations.
Without any completed action or a concrete threat of injury to the petitioning party,
the act is not yet ripe for adjudication. It is merely a hypothetical problem. The The process of questioning the constitutionality of a governmental action provides a
challenged act must have been accomplished or performed by either branch or notable area of comparison between the use of certiorari in the traditional and the
instrumentality of government before a court may come into the picture, and the expanded modes.
Under the traditional mode, plaintiffs question the constitutionality of a (3) the question of constitutionality must be raised at the earliest possible
governmental action through the cases they file before the lower courts; the opportunity; and
defendants may likewise do so when they interpose the defense of unconstitutionality
of the law under which they are being sued. A petition for declaratory relief may also
be used to question the constitutionality or application of a legislative (or quasi-
legislative) act before the court.51 (4) the issue of constitutionality must be the very lis mota of the case.56

For quasi-judicial actions, on the other hand, certiorari is an available remedy, as The lower court's decision under the constitutional situation reaches the Supreme
acts or exercise of functions that violate the Constitution are necessarily committed Court through the appeal process, interestingly, through a petition for review
with grave abuse of discretion for being acts undertaken outside the contemplation of on certiorari under Rule 45 of the Rules of Court.
the Constitution. Under both remedies, the petitioners should comply with the
traditional requirements of judicial review, discussed below.52 In both cases, the In the non-constitutional situation, the same requirements essentially apply, less the
decisions of these courts reach the Court through an appeal by certiorari under Rule requirements specific to the constitutional issues. In particular, there must be an
45. actual case or controversy and the compliance with requirements of standing, as
affected by the hierarchy of courts, exhaustion of remedies, ripeness, prematurity,
In contrast, existing Court rulings in the exercise of its expanded jurisdiction have and the moot and academic principles.
allowed the direct filing of petitions for certiorari and prohibition with the Court to
question, for grave abuse of discretion, actions or the exercise of a function that A.3.a. The "Standing" Requirement
violate the Constitution.53 The governmental action may be questioned regardless of
whether it is quasi-judicial, quasi-legislative, or administrative in nature. The Court's Under both situations, the party bringing suit must have the necessary "standing."
expanded jurisdiction does not do away with the actual case or controversy This means that this party has, in its favor, the demandable and enforceable right or
requirement for presenting a constitutional issue, but effectively simplifies this interest giving rise to a justiciable controversy after the right is violated by the
requirement by merely requiring a prima facie showing of grave abuse of discretion offending party.
in the exercise of the governmental act.54
The necessity of a person's standing to sue derives from the very definition of
To return to judicial review heretofore mentioned, in constitutional cases where the judicial power. Judicial power includes the duty of the courts to settle actual
question of constitutionality of a governmental action is raised, the judicial power the controversies involving rights which are legally demandable and
courts exercise is likewise identified as the power of judicial review - the power to enforceable. Necessarily, the person availing of a judicial remedy must show that he
review the constitutionality of the actions of other branches of government.55 As a possesses a legal interest or right to it, otherwise, the issue presented would be
rule, as required by the hierarchy of courts principle, these cases are filed with the purely hypothetical and academic. This concept has been translated into the
lowest court with jurisdiction over the matter. The judicial review that the courts requirement to have "standing" in judicial review,57or to be considered as a "real-
undertake requires: party-in-interest" in civil actions,58 as the "offended party" in criminal actions59 and
the "interested party" in special proceedings.60
1) there be an actual case or controversy calling for the exercise of judicial
power; While the Court follows these terms closely in both non-constitutional cases and
constitutional cases under the traditional mode, it has relaxed the rule in
constitutional cases harrdled under the expanded jurisdiction mode. in the latter case,
a prima facie showing that the questioned governmental act violated the
(2) the person challenging the act must have "Standing" to challenge; he Constitution, effectively disputably shows an injury to the sovereign Filipino nation
must have a personal and substantial interest in the case such that he has who approved the Constitution and endowed it with authority, such that the
sustained, or will sustain, direct injury as a result of its enforcement; challenged act may be questioned by any Philippine citizen before the Supreme
Court.61 In this manner, the "standing" requirement is relaxed compared with the
standard of personal stake or injury that the traditional petition requires.

The relaxation of the standing requirement has likewise been achieved through the
application of the "transcendental importance doctrine" under the traditional mode they are established under the Constitution and by law, their ranking and effect of
for constitutional cases.62 (Under the traditional mode, "transcendental importance" their rulings in relation with one another, and how these different levels of court
not only relaxes the standing requirement, but also allows immediate access to this interact with one another.69 Since courts are established and given their defined
Court, thus exempting the petitioner from complying with the hierarchy of courts jurisdictions by law, the hierarchy of the different levels of courts should leave very
requirement.)63 little opening for flexibility (and potential legal questions), but for the fact that the
law creates courts at different and defined levels but with concurrent jurisdictions.
More importantly perhaps, the prima facie showing of grave abuse of discretion in
constitutional cases also implies that the injury alleged is actual or imminent, and not The Constitution itself has partially determined the judicial hierarchy in the
merely hypothetical. Philippine legal system by designating the Supreme Court as the highest court with
irreducible powers; its rulings serve as precedents that other courts must
Through this approach, the Court's attention is directed towards the existence of an follow70 because they form part of the law of the land.71 As a rule, the Supreme
actual case or controversy - that is, whether the government indeed violated the Court is not a trial court and rules only on questions of law, in contrast with the
Constitution to the detriment of the Filipino people without the distractions of Court of Appeals and other intermediate courts72 which rule on both questions of law
determining the existence of transcendental importance indicators unrelated to the and of fact. At the lowest level of courts are the municipal and the regional trial
dispute and which do not at all determine whether the Court properly exercises its courts which handle questions of fact and law at the first instance according to the
power of judicial review. jurisdiction granted to them by law.

Parenthetically, in the traditional mode, the determination of the transcendental Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the
importance of the issue presented,64 aside from simply relaxing the standing regional trial courts and the higher courts, all the way up to the Supreme Court. As a
requirement, may result in the dilution of the actual case or controversy element general rule, under the hierarchy of courts principle, the petition must be brought to
because of the inextricable link between standing and the existence of an actual case the lowest court with jurisdiction;73 the petition brought to the higher courts may be
or controversy. dismissed based on the hierarchy principle. Cases, of course, may ultimately reach
the Supreme Court through the medium of an appeal.
Consider, in this regard, that an actual case or controversy that calls for the exercise
of judicial power necessarily requires that the party presenting it possesses the The recognition of exceptions to the general rule is provided by the Supreme Court
standing to mount a challenge to a governmental act. A case or controversy exists through jurisprudence, i.e., through the cases that recognized the propriety of filing
when there is an actual dispute between parties over their legal rights, which remains cases directly with the Supreme Court. This is possible as the Supreme Court has the
in conflict at the time the dispute is presented before the court.65Standing, on the authority to relax the application of its own rules.74
other hand, involves a personal and substantial interest in the case because the
petitioner has sustained, or will sustain, direct injury as a result of the violation of its As observed above, this relaxation waters down other principles affecting the remedy
right.66 of certiorari. While the relaxation may result in greater and closer supervision by the
Court over the lower courts and quasi-judicial bodies under Rule 65, the effect may
With the element of "standing" (or the petitioner's personal or substantial stake or not always be salutary in the long term when it is considered that this may affect the
interest in the case) relaxed, the practical effect is to dilute the need to show that an constitutional standards for the exercise of judicial power, particularly the existence
immediate actual dispute over legal rights did indeed take place and is now the of an actual case or controversy.
subject of the action before the court.67
The "transcendental importance" standard, in particular, is vague, open-ended and
In both the traditional and the expanded modes, this relaxation carries a ripple effect value-laden, and should be limited in its use to exemptions from the application of
under established jurisprudential rulings,68 affecting not only the actual case or the hierarchy of courts principle. It should not carry any ripple effect on the
controversy requirement, but compliance with the doctrine of hierarchy of courts, constitutional requirement for the presence of an actual case or controversy.
discussed in greater detail below.
4. The petition for certiorari and prohibition against the DOH Letter was filed
A.3.b. The Hierarchy of Courts Principle before the wrong court.

Another requirement that a certiorari petition carries, springs from the principle of In the present case, the act alleged to be unconstitutional refers to the cease and
"hierarchy of courts" which recognizes the various levels of courts in the country as desist order that the DOH issued against GAMCA's referral decking system. Its
constitutionality was questioned through a petition for certiorari and prohibition referral decking system practice.
before the RTC. The case reached this Court through a Rule 45 appeal
by certiorari under the traditional route. Notably, cease and desist orders have been described and treated as quasi-judicial
acts in past cases, and had even been described as similar to the remedy of injunction
In using a petition for certiorari and prohibition to assail the DOHCDO letters, granted by the courts.79
GAMCA committed several procedural lapses that rendered its petition readily
dismissible by the RTC. Not only did the petitioner present a premature A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters
challenge against an administrative act; it also committed the grave jurisdictional fall within the jurisdiction of the Court of Appeals.
error of filing the petition before the wrong court.
Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA
A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi- assailed it before the courts of law had been erroneous; the RTC should not have
judicial functions, and could be assailed through Rule 65 on certiorari and entertained GAMCA's petition.
prohibition.
First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy
A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to involves a Rule 43 appeal or a Rule 65 petition for certiorari, is cognizable by the
an individual or group within the coverage of the law containing the policy. Court of Appeals. In particular, Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than
The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of sixty (60) days from notice of the judgment, order or resolution. In case a motion for
Batangas,75 recognized the difficulty of d fining the precise demarcation line reconsideration or new trial is timely filed, whether such motion is required or not,
between what are judicial and what are administrative or ministerial functions, as the the sixty (60) day period shall be counted from notice of the denial of said motion.
exercise of judicial functions may involve the performance of legislative or
administrative duties, and the performance of administrative or ministerial duties The petition shall be filed in the Supreme Court or, if it relates to the acts or
may, to some extent, involve the exercise of functions judicial in character. Thus, the omissions of a lower court or of a corporation, board, officer or person, in the
Court held that the nature of the act to be performed, rather than of the office, Regional Trial Court exercising jurisdiction over the territorial area as defined by the
board, or body which performs it, should determine whether or not an action is in Supreme Court. It may also be filed in the Court of Appeals whether or not the same
the discharge of a judicial or a quasi-judicial function.76 is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its
appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
Generally, the exercise of judicial functions involves the determination of what the unless otherwise provided by law or these Rules, the petition shall be filed in and
law is, and what the legal rights of parties are under this law with respect to a matter cognizable only by the Court of Appeals. (emphasis, italics, and underscoring
in controversy. Whenever an officer is clothed with this authority and undertakes to supplied)
determine those questions, he acts judicially.77 Since the DOH is part of the Executive Department and has acted in its quasi-judicial
capacity, the petition challenging its CDO letter should have been filed before the
In the administrative realm, a government officer or body exercises a quasi-judicial Court of Appeals. The RTC thus did not have jurisdiction over the subject matter of
function when it hears and determines questions of fact to which the legislative the petitions and erred in giving due course to the petition for certiorari and
policy is to apply, and decide, based on the law's standards, matters relating to the prohibition against the DOH CDO letters. In procedural terms, petitions
enforcement and administration of the law.78 for certiorari and prohibition against a government agency are remedies avaiJable to
assail its quasi-judicial acts, and should thus have been filed before the CA.
The DOH CDO letter directed GAMCA to cease and desist from engaging in the
referral decking system practice within three days from receipt of the letter. By The provision in Section 4, Rule 65 requiring that certiorari petitions challenging
issuing this CDO letter implementing Section 16 of RA No. 10022, the DOH (1) quasi-judicial acts to be filed with the CA is in full accord with Section 9 of Batas
made the finding of fact that GAMCA implements the referral decking system, and Pambansa Blg. 12980 on the same point. Section 9 provides:
(2) applied Section 16 of RA No. 10022, to conclude that GAMCA's practice is Section 9. Jurisdiction.- The Court of Appeals shall exercise:
prohibited by law and should be stopped.
1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas
From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
determined a question of fact, and applied the legislative policy prohibiting the its appellate jurisdiction;
xxxx appealed the DOH's unfavorable decision with the Office of the President. The OP
then reversed Memorandum Order No. 2008-0210 and allowed the referral decking
3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or system to continue.
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities,
boards or commission, including the Securities and Exchange Commission, the That GAMCA had earlier taken this course indicates that it was not unaware of the
Social Security Commission, the Employees Compensation Commission and the administrative remedies available to it; it simply opted to disregard the doctrine of
Civil Service Commission, except those falling within the appellate jurisdiction of exhaustion of administrative remedies and the requirement that there be no other
the Supreme Court in accordance with the Constitution, the Labor Code of the plain, speedy, and adequate remedy in law when it immediately filed its petition
Philippines under Presidential Decree No. 442, as amended, the provisions of this for certiorari with the RTC.
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. This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition
outside the exceptions that we recognized in the past in relaxing strict compliance
xxxx with the exhaustion of administrative remedies requirement.

(emphases, italics, and underscoring supplied) Jurisprudence84 shows that this Court never hesitated in the past in relaxing the
Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive application of the rules of procedure to accommodate exceptional circumstances
original jurisdiction to entertain petitions for certiorari and prohibition against quasi- when their strict application would result in injustice. These instances, founded as
judicial agencies. In short, GAMCA filed its remedy with the wrong court. they are on equitable considerations, do not include the undue disreiard of
administrative remedies, particularly when they are readily available.85
A.4.c The petitions for certiorari and prohibition against the DOH CDO letters
were premature challenges - they failed to comply with the requirement that there A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters
be "no other plain, speedy and adequate remedy" and with the doctrine of should have been dismissed outright, as Rule 65 Petitions for Certiorari and
exhaustion of administrative remedies. Prohibition are extraordinary remedies given due course only upon compliance
with the formal and substantive requirements.
Second, the Regional Trial Court of Pasay City unduly disregarded the requirements
that there be "no other plain, speedy and adequate remedy at law" and the doctrine Note, at this point, that Rule 65 petitions for certiorari and prohibition are
of exhaustion of administrative remedies, when it gave due course to discretionary writs, and that the handling court possesses the authority to dismiss
the certiorari and prohibition petition against the DOH's CDO. them outright for failure to comply with the form and substance requirements.
Section 6, Rule 65 of the Rules of Court in this regard provides:
Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the Section 6. Order to comment. - If the petition is sufficient in form and substance to
DOH Secretary "shall have supervision and control over the bureaus, offices, and justify suclr process, the court shall issue an order requiring the respondent or
agencies under him"82 and "shall have authority over and responsibility for x x x respondents to comment on the petition within ten (10) days from receipt of a copy
operation" of the Department. thereof. Such order shall be served on the respondents in such manner as the court
may direct together with a copy of the petition and any annexes thereto. (emphasis,
Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, italics, and underscoring supplied)
Sections 1 and 17 of the Constitution,83 on the other hand, provides that the Thus, even before requiring the DOH to comment, the RTC could have assessed the
"President shall have control of all the executive departments, bureaus, and offices." petition for certiorariand prohibition for its compliance with the Rule 65
requirements. At that point, the petition for certiorariand prohibition should have
These provisions both signify that remedies internal to the Executive Branch exist been dismissed outright, for failing to comply with Section 1 and Section 4 of Rule
before resorting to judicial remedies: GAMCA could ask the DOH Secretary to 65. When the court instead took cognizance of the petition, it acted on a matter
reconsider or clarify its letter-order, after which it could appeal, should the ruling be outside its jurisdiction.
unfavorable, to the Office of the President.
Consequently, the RTC's resulting judgment is void and carries no legal effect. The
Significantly, this was what GAMCA did in the past when the DOH issued decision exempting GAMCA from the application of the referral decking system
Memorandum Order No. 2008-0210 that prohibited the referral decking system. should equally have no legal effect.
GAMCA then asked for the DOH Secretary's reconsideration, and subsequently
Noncompliance with the Section 1, Rule 65 requirement that there be no other plain,
speedy, and adequate remedy in law, on the other hand, is more than just a pro-forma AMCOW responded to these claims with the argument that the DOH CDO letters
requirement in the present case. Since the petitions for certiorari and prohibition implementing RA No. 10022 are consistent with the State's exercise of the police
challenge a governmental act - i.e. action under the DOH CDO letters, as well as the power to prescribe regulations to promote the health, safety, and general welfare of
validity of the instruments under which these letters were issued - compliance with the people. Public interest justifies the State's interference in health matters, since the
Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that welfare of migrant workers is a legitimate public concern. The DOH thus merely
judicial review requires is also mandatory. To recall a previous discussion, the performed its duty of upholding the migrant workers' freedom to consult their chosen
exhaustion of administrative remedies is also an aspect of ripeness in deciding a clinics for the conduct of health examinations.
constitutional issue.
We agree with AMCOW.
Thus, GAMCA's disregard of the Rules of Court not only renders the petition
dismissible for failure to first exhaust administrative remedies; the constitutional The State's police power86 is vast and plenary87 and the operation of a
issues GAMCA posed before the RTC were not also ripe for adjudication. business,88 especially one that is imbued with public interest (such as healthcare
services),89 falls within the scope of governmental exercise of police power through
5. The Regional Trial Court erred in finding grave abuse of discretion on the part regulation.
of the DOH's issuance of the DOH CDO letters.
As defined, police power includes (1) the imposition of restraint on liberty or
On the merits, we find that the RTC of Pasay reversibly erred in law when it held property, (2) in order to foster the common good.90 The exercise of police power
that the DOH acted with grave abuse of discretion m prohibiting GAMCA from involves the "state authority to enact legislation that may interfere with personal
implementing the referral decking system. liberty or property in order to promote the general welfare."91

In exempting GAMCA from the referral decking system that RA No. 10022 By its very nature, the exercise of the State's police power limits individual rights
prohibits, the RTC of Pasay City noted that the regulation per se was not and liberties, and subjects them to the "far more overriding demands and
unconstitutional, but its application to GAMCA would violate the principle of requirements of the greater number."92 Though vast and plenary, this State power
sovereign equality and independence. also carries limitations, specifically, it may not be exercised arbitrarily or
unreasonably. Otherwise, it defeats the purpose for which it is exercised, that is, the
While we agree with the RTC's ultimate conclusion upholding the constitutionality advancement of the public good.93
of the prohibition against the referral decking system under RA No. 10022, our
agreement proceeds from another reason; we disagree that the prohibition does not To be considered reasonable, the government's exercise of police power must satisfy
apply to GAMCA and with the consequent ruling nullifying the DOH's CDO Letter. the "valid object and valid means" method of analysis: first, the interest of the public
generally, as distinguished from those of a particular class, requires interference;
A.5.a. The prohibition against the referral decking system under Section 16, RA and second, the means employed are reasonably necessary to attain the objective
No. 10022, is a valid exercise of police power. sought and not unduly oppressive upon individuals.94

In its comment, GAMCA asserts that implementing the prohibition against the These two elements of reasonableness are undeniably present in Section 16 of RA
referral decking system would amount to an undue taking of property that violates No. 10022. The prohibition against the referral decking system is consistent with the
Article II, Section 2 of the 1987 Constitution. State's exercise of the police power to prescribe regulations to promote the health,
safety, and general welfare of the people. Public interest demands State interference
It submits that the Securities and Exchange Commission had in fact approved its on health matters, since the welfare of migrant workers is a legitimate public
Articles of Incorporation and Bylaws that embody the referral decking system; thus, concern.
the DOH cannot validly prohibit the implementation of this system.
We note that RA No. 10022 expressly reflects the declared State policies to "uphold
GAMCA further claims that its members made substantial investments to upgrade the dignity of its citizens whether in the country or overseas, in general, and Filipino
their facilities and equipment. From this perspective, the August 23, 2010 order migrant workers," and to "afford full protection to labor, local and overseas,
constitutes taking of property without due process of law as its implementation organized and unorganized, and promote full employment and equality of
would deprive GAMCA members of their property. employment opportunities for all. Towards this end, the State shall provide adequate
and timely social, economic and legal services to Filipino migrant workers." The suspend, revoke, or refuse to renew the license of these hospitals upon the finding
prohibition against the referral decking system in Section 16 of RA No. 10022 is an that they violated any provision of law (whether those found in RA No. 4226 or in
expression and implementation of these state policies. RA No. 10022), it follows- as a necessarily included lesser power - that the DOH can
likewise order these clinics and their association to cease and desist from practices
The guarantee under Section 16 for OFWs to be given the option to choose a quality that the law deems to be undesirable.
healthcare service provider as expressed in Section 16 (c)95 of RA No. 10022 is
guaranteed by the prohibition against the decking practice and against monopoly A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH
practices in OFW health examinations.96 CDO letters.

Section 16 likewise requires employers to accept health examinations from any As discussed above, the letter-order implementing the prohibition against the referral
DOH-accredited health facility; a refusal could lead to their temporary decking system is quasi-judicial in nature. This characteristic requires that procedural
disqualification under pertinent rules to be formulated by the Philippine Overseas due process be observed - that is, that the clinics concerned be given the opportunity
Employment Authority (POEA).97 to be heard before the standard found in the law can be applied to them.

These rules are part of the larger legal framework to ensure the Overseas Filipino Thus, prior to the issuance of the disputed CDO letter, the DOH should have given
Workers' (OFW) access to quality healthcare services, and to curb existing practices GAMCA the opportunity to be heard on whether the prohibition applies to it. Lest
that limit their choices to specific clinics and facilities. this opportunity to be heard be misunderstood, this DOH obligation raises an issue
different from the question of whether Congress can, under the exercise of police
Separately from the Section 16 prohibition against the referral decking system, RA power, prohibit the referral decking system; this latter issue lies outside the scope of
No. 10022 also prohibits and penalizes the imposition of a compulsory exclusive the DOH to pass upon. The required hearing before the DOH relates solely to
arrangement requiring OFWs to undergo health examinations only from specifically whether it properly implemented, based on the given standards under the law, the
designated medical clinics, institutions, entities or persons. Section 5, in relation to prohibition that Congress decreed under RA No. 10022.
Section 6 of RA No. 10022, penalizes compulsory, exclusive arrangements98 by
imprisonment and fine and by the automatic revocation of the participating medical Under normal circumstances, the issuance of a CDO without a prior hearing would
clinic's license. violate GAMCA's procedural due process rights, and would amount to more than a
legal error, i.e., an error equivalent to action without jurisdiction. Rendering a
The DOH's role under this framework is to regulate the activities and operations of decision quasi-judicial in nature without providing the opportunity to be heard
all clinics conducting health examinations on Filipino migrant workers as a amounts to a grave abuse of discretion that divests a quasi-judicial agency of its
requirement for their overseas employment. The DOH is tasked to ensure that: jurisdiction.
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively
conducting health examinations on migrant workers for certain receiving countries; Factual circumstances unique to the present case, however, lead us to conclude that
while it was an error of law for the DOH to issue a CDO without complying with the
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the requirements of procedural due process, its action did not amount to a grave abuse of
DOH-accredited or DOH-operated clinics that will conduct his/her health discretion.
examinations and that his or her rights as a patient are respected. The decking
practice, which requires an overseas Filipino worker to go first to an office for Grave abuse of discretion amounts to more than an error of law; it refers to an act
registration and then farmed out to a medical clinic located elsewhere, shall not be that is so capricious, arbitrary, and whimsical that it amounts to a clear evasion of a
allowed;99 positive duty or a virtual refusal to perform a duty enjoined by law, as where the
While Section 16 of RA No. 10022 does not specifically define the consequences of power is exercised in an arbitrary and despotic manner because of passion or
violating the prohibition against the referral decking system, Republic Act No. 4226 hostility.101
(Hospital Licensure Act), which governs the licensure and regulation of hospitals and
health facilities, authorizes the DOH to suspend, revoke, or refuse to renew the Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to
license of hospitals and clinics violating the law.100 determine that GAMCA practices the prohibited referral decking system under RA
No. 10022. Notably, the DOH had earlier allowed and recognized the referral
These consequences cannot but apply to the violation of the prohibition against the decking system that GAMCA practiced through AO 5-01. This recognition was
referral decking system under RA No. 10022. If, under the law, the DOH can made with GAMCA's practice in mind. The subsequent administrative orders and
department memorandum suspending and terminating the referral decking system, Filipino seafarers' access to quality and affordable healthcare in its A.O. No. 106,
respectively, all pertain to the practice that the DOH had authorized under AO 5-01. series of 2002.
Even the subject matter of these issuances do not just pertain to any other referral
decking system, but to the "GAMCA referral decking system." These circumstances further mitigate whatever legal error the DOH has committed
and render the conclusion that grave abuse of discretion had taken place misplaced.
GAMCA likewise had more than several opportunities to contest the suspension and
eventual revocation of the referral decking system initially pe1mitted under AO 5-01. Since the writs of certiorari and prohibition do not issue against legal errors, but to
Its appeal even reached the Office of the President, which overturned the DOH acts of grave abuse of discretion, the RTC erred in issuing these writs against the
Memorandum Order terminating the referral decking system. DOH CDO letters.

That the referral decking system had been subsequently prohibited by law shows the 6. The prohibition against the referral decking system against GAMCA does not
intent of Congress to prevent and prohibit the practice that GAMCA initiated and violate the principle of sovereign equality and independence.
which the President had allowed. The President's duty under our political system is to
implement the law; hence, when Congress subsequently prohibited the practice that The RTC based its decision to grant the writs of certiorari and prohibition against
GAMCA initiated, the Executive - including the President -has no choice but to the DOH letter-order on the principle of sovereign equality and independence;
implement it. applying the referral decking system prohibition against GAMCA violates this
principle.
Based on these circumstances, while the DOH erred when it issued its CDO letters
without first giving GAMCA the opportunity to prove whether the practice The RTC reasoned out that the prohibition against the referral decking system under
conducted by GAMCA is the same practice prohibited under RA No. 10022, the Section 16 of RA No. 10022 must be interpreted to apply only to clinics conducting
DOH conclusion to so act, in our view, did not constitute grave abuse of discretion health examinations on migrant workers bound for countries that do not require the
that would have divested it of jurisdiction. referral decking system for the issuance of visas to job applicants.

We note that the DOH had sufficient basis when it determined that the referral The RTC observed, too, that the refer al decking system is part of the application
decking system prohibited under RA No. 10022 was the same decking system procedure in obtaining visas to enter the GCC States, a procedure made in the
practiced by GAMCA. To reiterate, the referral decking system was not something exercise of the sovereign power of the GCC States to protect their nationals from
new; it was an old system that GAMCA practiced and was known to all in its scope health hazards, and of their diplomatic power to regulate and screen entrants to their
and operating details. That GAMCA had previously questioned the DOH prohibition territories.
and had been given ample opportunity to be heard when it filed an appeal before the
OP, negate the conclusion that GAMCA had been aggrieved by precipitate and It also reasoned out that under the principle of sovereign equality and independence
unfair DOH action. of States, the Philippines cannot interfere with this system and in fact must respect
the visa-granting procedures of foreign states in the same way that they respect our
To be sure, these factual circumstances do not make the CDO letter compliant with immigration procedures. Moreover, to restrain GAMCA which is a mere adjunct of
procedural due process. They mitigate, however, the error committed and render it HMC (an agent of GCC States) is to restrain the GCC States themselves.
less than the capricious, arbitrary, and patent refusal to comply with a positive legal
duty that characterizes an act committed with grave abuse of discretion. AMCOW contests the RTC's conclusion, arguing that the principles of sovereign
equality and independence of States do not apply to the present case. According to
The Court furthermore, in several instances,102 has recognized that an administrative AMCOW, the subject matter of this case pertains to a domestic concern as the law
agency may issue an ex parte cease and desist order, where vital public interests and the regulations that GAMCA assails relate to the operation of medical clinics in
outweigh the need for procedural due process." In these instances, the Court noted the Philippines.
that the affected establishment may contest the ex parteorder, upon which the
administrative agency concerned must conduct a hearing and allow the establishment It points out that the Philippines gave GAMCA and its members the privilege of
to be heard. While jurisprudence has so far used the "vital public interests" standard conducting their businesses domestically; hence, their operations are governed by
to pollution cases, it had not been a grave abuse of discretion on the part of the DOH Philippine laws, specifically by RA No. 10022 which serves as one of the limitations
to consider that GAMCA's referral decking practice falls within this category. The on the privilege granted to them. GAMCA's right to engage in business should yield
DOH has long made the factual finding that the referral decking system hinders our to the State's exercise of police power. In legal contemplation, therefore, the DOH
CDO letters did not prejudice GAMCA's right to engage in business; nor did they International law is founded largely upon the principles of reciprocity, comity,
hamper the GAMCA members' business operations. independence, and equality of States which were adopted as part of the law of our
land under Article II, Section 2 of the 1987 Constitution. The rule that a State may
AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are not be sued without its consent is a necessary consequence of the principles of
consistent with the State's exercise of the police power to prescribe regulations to independence and equality of States. As enunciated in Sanders v. Veridiano II, the
promote the health, safety, and general welfare of the people. Public interest practical justification for the doctrine of sovereign immunity is that there can be no
demands State interference on health matters, since the welfare of migrant workers is legal right against the authority that makes the law on which the right depends. In the
a legitimate public concern. The DOH thus merely performed its duty of upholding case of foreign States, the rule is derived from the principle of the sovereign equality
the migrant workers' freedom to choose any of its accredited or operated clinics that of States, as expressed in the maxim par in parem non habet imperium. All states are
will conduct health examinations. sovereign equals and cannot assert jurisdiction over one another. A contrary attitude
would "unduly vex the peace of nations."
The DOH, for its part, adds that the implementation of RA No. 10022 cannot be Our recognition of sovereign immunity, however, has never been unqualified. While
defeated by agreements entered into by GAMCA with the GCC States. The GCC we recognized the principles of independence and equality of States to justify a
States, the DOH points out, are not empowered to determine the Philippines' courses State's sovereign immunity from suit, we also restricted state immunity to acts jus
of action with respect to the operation, within Philippine territory, of medical clinics; imperii, or public acts. We said that once a State enters into commercial transactions
the conduct of health examinations; and the freedom of choice of Filipino migrant (jus gestionis), then it descends to the level of a private individual, and is thus not
workers. immune from the resulting liability and consequences of its actions.104

GAMCA responds to these arguments by asserting that the referral decking system is By this recognition, we acknowledge that a foreign government acting in its jus
a part of the application procedure for obtaining visas to enter the GCC States. imperii function cannot be held liable in a Philippine court. Philippine courts, as part
Hence, it is an exercise of the sovereign power of the GCC States to protect their of the Philippine government, cannot and should not take jurisdiction over cases
nationals from health hazards, and their diplomatic power to regulate and screen involving the public acts of a foreign government. Taking jurisdiction would amount
entrants to their territories. To restrain an agent of the GCC States under the control to authority over a foreign government, and would thus violate the principle of
and acting in accordance with the direction of these GCC States, restrains the GCC sovereign independence and equality.105
States.
This recognition is altogether different from exempting governments whose agents
GAMCA also points out that the OFWs would suffer grave and irreparable damage are in the Philippines from complying with our domestic laws.106 We have yet to
and injury if the DOH CDO letters would be implemented as the GCC States would declare in a case that the principle of sovereign independence and equality exempts
not issue working visas without the GAMCA seal attesting that the OFWs had been agents of foreign governments from compliance with the application of Philippine
medically examined by GAMCA member clinics. domestic law.

After considering all these arguments, we find that the RTC's decision misapplied the In the present case, GAMCA has not adduced any evidence in the court below, nor
principle of sovereign independence and equality to the present case. While the has it presented any argument before us showing that the principle of sovereign
principles of sovereign independence and equality have been recognized in equality and independence has developed into an international custom shielding state
Philippine jurisprudence, our recogmtmn of this principle does not extend to the agents from compliance with another state's domestic laws. Under this situation, the
exemption of States and their affiliates from compliance with Philippine regulatory Court is in no position to determine whether the practice that GAMCA alleges has
laws. indeed crystallized into an international custom.

A.6. The principle of sovereign equality and independence of states does not GAMCA has never proven in this case, too, that the GCC has extended its sovereign
exempt GAMCAfrom the referral decking system prohibition under RA No. 10022. immunity to GAMCA. Sovereign immunity belongs to the State, and it must first be
extended to its agents before the latter may be considered to possess sovereign
In Republic of Indonesia v. Vinzon,103 we recognized the principle of sovereign immunity.
independence and equality as part of the law of the land. We used this principle to
justify the recognition of the principle of sovereign immunity which exempts the Significantly, the Court has even adopted a restrictive approach in recognizing state
State - both our Government and foreign governments - from suit. We held: immunity, by distinguishing between a State's jus imperii and jus gestionis. It is only
when a State acts in its jus imperii function that we recognize state immunity.107
We point out furthermore that the prohibition against the referral decking system
applies to hospitals and clinics, as well as to OFW employers, and does not seek to
interfere with the GCC's visa requirement processes. RA 10022 prohibits hospitals
and clinics in the Philippines from practicing the referral decking system, and
employers from requiring OFWs to procure their medical examinations from
hospitals and clinics practicing the referral decking system.

The regulation applies to Philippine hospitals and clinics, as well as to employers of


OFWs. It does not apply to the GCCs and their visa processes. That the regulation
could affect the OFWs' compliance with the visa requirements imposed by GCCs
does not place it outside the regulatory powers of the Philippine government.

In the same manner, GCC states continue to possess the prerogative to apply their
visa requirements to any foreign national, including our OFWs, who seeks to enter
their territory; they may refuse to grant them entry for failure to comply with the
referral decking system, or they may adjust to the prohibition against the referral
decking system that we have imposed. These prerogatives lie with the GCC member-
states and do not affect at all the legality of the prohibition against the referral
decking system.

Lastly, the effect of the prohibition against the referral decking system is beyond the
authority of this Court to consider. The wisdom of this prohibition has been decided
by Congress, through the enactment of RA No. 10022. Our role in this case is merely
to determine whether our government has the authority to enact the law's prohibition
against the referral decking system, and whether this prohibition is being
implemented legally. Beyond these lies the realm of policy that, under our
Constitution's separation of powers, this Court cannot cross.

WHEREFORE, in the light of these considerations, we hereby GRANT the


petitions. Accordingly, we REVERSE and SET ASIDE the orders dated August 10,
2012 and April 12, 2013 of the Regional Trial Court of Pasay City, Branch 108, in
Sp. Civil Action No. R-PSY-10-04391-CV.

Costs against respondent GAMCA.

SO ORDERED. cralawlawlibrary
G.R. No. 161107 March 12, 2013 ORDINANCE REGULATING THE CONSTRUCTION OF FENCES AND
WALLS IN THE MUNICIPALITY OF MARIKINA
HON. MA. LOURDES C. FERNANDO, in her capacity as City Mayor of
Marikina City, JOSEPHINE C. EVANGELIST A, in her capacity as Chief, WHEREAS, under Section 447.2 of Republic Act No. 7160 otherwise known as the
Permit Division, Office of the City Engineer, and ALFONSO ESPIRITU, in his Local Government Code of 1991 empowers the Sangguniang Bayan as the local
capacity as City Engineer of Marikina City, Petitioners, legislative body of the municipality to "x x x Prescribe reasonable limits and
vs. restraints on the use of property within the jurisdiction of the municipality, x x x";
ST. SCHOLASTICA'S COLLEGE and ST. SCHOLASTICA'S ACADEMY-
MARIKINA, INC., Respondents. WHEREAS the effort of the municipality to accelerate its economic and physical
development, coupled with urbanization and modernization, makes imperative the
DECISION adoption of an ordinance which shall embody up-to-date and modern technical
design in the construction of fences of residential, commercial and industrial
MENDOZA, J.: buildings;

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of WHEREAS, Presidential Decree No. 1096, otherwise known as the National
Court, which seeks to set aside the December 1, 2003 Decision1 of the Court of Building Code of the Philippines, does not adequately provide technical guidelines
Appeals (CA) in CA-G.R. SP No. 75691. for the construction of fences, in terms of design, construction, and criteria;

The Facts WHEREAS, the adoption of such technical standards shall provide more efficient
and effective enforcement of laws on public safety and security;
Respondents St. Scholastica’s College (SSC) and St. Scholastica’s Academy-
Marikina, Inc. (SSA-Marikina) are educational institutions organized under the laws WHEREAS, it has occurred in not just a few occasions that high fences or walls did
of the Republic of the Philippines, with principal offices and business addresses at not actually discourage but, in fact, even protected burglars, robbers, and other
Leon Guinto Street, Malate, Manila, and at West Drive, Marikina Heights, Marikina lawless elements from the view of outsiders once they have gained ingress into these
City, respectively.2 walls, hence, fences not necessarily providing security, but becomes itself a "security
problem";
Respondent SSC is the owner of four (4) parcels of land measuring a total of
56,306.80 square meters, located in Marikina Heights and covered by Transfer WHEREAS, to discourage, suppress or prevent the concealment of prohibited or
Certificate Title (TCT) No. 91537. Located within the property are SSA-Marikina, unlawful acts earlier enumerated, and as guardian of the people of Marikina, the
the residence of the sisters of the Benedictine Order, the formation house of the municipal government seeks to enact and implement rules and ordinances to protect
novices, and the retirement house for the elderly sisters. The property is enclosed by and promote the health, safety and morals of its constituents;
a tall concrete perimeter fence built some thirty (30) years ago. Abutting the fence
along the West Drive are buildings, facilities, and other improvements.3 WHEREAS, consistent too, with the "Clean and Green Program" of the government,
lowering of fences and walls shall encourage people to plant more trees and
The petitioners are the officials of the City Government of Marikina. On September ornamental plants in their yards, and when visible, such trees and ornamental plants
30, 1994, the Sangguniang Panlungsod of Marikina City enacted Ordinance No. are expected to create an aura of a clean, green and beautiful environment for
192,4 entitled "Regulating the Construction of Fences and Walls in the Municipality Marikeños;
of Marikina." In 1995 and 1998, Ordinance Nos. 2175 and 2006 were enacted to
amend Sections 7 and 5, respectively. Ordinance No. 192, as amended, is reproduced WHEREAS, high fences are unsightly that, in the past, people planted on sidewalks
hereunder, as follows: to "beautify" the façade of their residences but, however, become hazards and
obstructions to pedestrians;
ORDINANCE No. 192
Series of 1994 WHEREAS, high and solid walls as fences are considered "un-neighborly"
preventing community members to easily communicate and socialize and deemed to
create "boxed-in" mentality among the populace;
WHEREAS, to gather as wide-range of opinions and comments on this proposal, and Section 4. No fence of any kind shall be allowed in areas specifically reserved or
as a requirement of the Local Government Code of 1991 (R.A. 7160), the classified as parks.
Sangguniang Bayan of Marikina invited presidents or officers of homeowners
associations, and commercial and industrial establishments in Marikina to two public Section 5. In no case shall walls and fences be built within the five (5) meter parking
hearings held on July 28, 1994 and August 25, 1994; area allowance located between the front monument line and the building line of
commercial and industrial establishments and educational and religious institutions.7
WHEREAS, the rationale and mechanics of the proposed ordinance were fully
presented to the attendees and no vehement objection was presented to the municipal Section 6. Exemption.
government;
(1) The Ordinance does not cover perimeter walls of residential
NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUINANG BAYAN OF subdivisions.
MARIKINA IN SESSION DULY ASSEMBLED:
(2) When public safety or public welfare requires, the Sangguniang
Section 1. Coverage: This Ordinance regulates the construction of all fences, walls Bayan may allow the construction and/or maintenance of walls
and gates on lots classified or used for residential, commercial, industrial, or special higher than as prescribed herein and shall issue a special permit or
purposes. exemption.

Section 2. Definition of Terms: Section 7. Transitory Provision. Real property owners whose existing fences and
walls do not conform to the specifications herein are allowed adequate period of time
a. Front Yard – refers to the area of the lot fronting a street, alley or from the passage of this Ordinance within which to conform, as follows:
public thoroughfare.
(1) Residential houses – eight (8) years
b. Back Yard – the part of the lot at the rear of the structure
constructed therein. (2) Commercial establishments – five (5) years

c. Open fence – type of fence which allows a view of "thru-see" of (3) Industrial establishments – three (3) years
the inner yard and the improvements therein. (Examples: wrought
iron, wooden lattice, cyclone wire) (4) Educational institutions – five (5) years8 (public and privately
owned)
d. Front gate – refers to the gate which serves as a passage of
persons or vehicles fronting a street, alley, or public thoroughfare. Section 8. Penalty. Walls found not conforming to the provisions of this Ordinance
shall be demolished by the municipal government at the expense of the owner of the
Section 3. The standard height of fences or walls allowed under this ordinance are as lot or structure.
follows:
Section 9. The Municipal Engineering Office is tasked to strictly implement this
(1) Fences on the front yard – shall be no more than one (1) meter ordinance, including the issuance of the necessary implementing guidelines, issuance
in height. Fences in excess of one (1) meter shall be of an open of building and fencing permits, and demolition of non-conforming walls at the lapse
fence type, at least eighty percent (80%) see-thru; and of the grace period herein provided.

(2) Fences on the side and back yard – shall be in accordance with Section 10. Repealing Clause. All existing Ordinances and Resolutions, Rules and
the provisions of P.D. 1096 otherwise known as the National Regulations inconsistent with the foregoing provisions are hereby repealed, amended
Building Code. or modified.
Section 11. Separability Clause. If for any reason or reasons, local executive orders, On June 30, 2000, the RTC issued a writ of preliminary injunction, enjoining the
rules and regulations or parts thereof in conflict with this Ordinance are hereby petitioners from implementing the demolition of the fence at SSC’s Marikina
repealed and/or modified accordingly. property.14

Section 12. Effectivity. This ordinance takes effect after publication. Ruling of the RTC

APPROVED: September 30, 1994 On the merits, the RTC rendered a Decision,15 dated October 2, 2002, granting the
petition and ordering the issuance of a writ of prohibition commanding the
(Emphases supplied) petitioners to permanently desist from enforcing or implementing Ordinance No. 192
on the respondents’ property.
On April 2, 2000, the City Government of Marikina sent a letter to the respondents
ordering them to demolish and replace the fence of their Marikina property to make The RTC agreed with the respondents that the order of the petitioners to demolish the
it 80% see-thru, and, at the same time, to move it back about six (6) meters to fence at the SSC property in Marikina and to move it back six (6) meters would
provide parking space for vehicles to park.9 On April 26, 2000, the respondents amount to an appropriation of property which could only be done through the
requested for an extension of time to comply with the directive.10 In response, the exercise of eminent domain. It held that the petitioners could not take the
petitioners, through then City Mayor Bayani F. Fernando, insisted on the respondents’ property under the guise of police power to evade the payment of just
enforcement of the subject ordinance. compensation.

Not in conformity, the respondents filed a petition for prohibition with an application It did not give weight to the petitioners’ contention that the parking space was for the
for a writ of preliminary injunction and temporary restraining order before the benefit of the students and patrons of SSA-Marikina, considering that the
Regional Trial Court, Marikina, Branch 273 (RTC), docketed as SCA Case No. respondents were already providing for sufficient parking in compliance with the
2000-381-MK.11 standards under Rule XIX of the National Building Code.

The respondents argued that the petitioners were acting in excess of jurisdiction in It further found that the 80% see-thru fence requirement could run counter to the
enforcing Ordinance No. 192, asserting that such contravenes Section 1, Article III respondents’ right to privacy, considering that the property also served as a residence
of the 1987 Constitution. That demolishing their fence and constructing it six (6) of the Benedictine sisters, who were entitled to some sense of privacy in their affairs.
meters back would result in the loss of at least 1,808.34 square meters, worth about It also found that the respondents were able to prove that the danger to security had
₱9,041,700.00, along West Drive, and at least 1,954.02 square meters, worth roughly no basis in their case. Moreover, it held that the purpose of beautification could not
₱9,770,100.00, along East Drive. It would also result in the destruction of the be used to justify the exercise of police power.
garbage house, covered walk, electric house, storage house, comfort rooms, guards’
room, guards’ post, waiting area for visitors, waiting area for students, Blessed It also observed that Section 7 of Ordinance No. 192, as amended, provided for
Virgin Shrine, P.E. area, and the multi-purpose hall, resulting in the permanent loss retroactive application. It held, however, that such retroactive effect should not
of their beneficial use. The respondents, thus, asserted that the implementation of the impair the respondents’ vested substantive rights over the perimeter walls, the six-
ordinance on their property would be tantamount to an appropriation of property meter strips of land along the walls, and the building, structures, facilities, and
without due process of law; and that the petitioners could only appropriate a portion improvements, which would be destroyed by the demolition of the walls and the
of their property through eminent domain. They also pointed out that the goal of the seizure of the strips of land.
provisions to deter lawless elements and criminality did not exist as the solid
concrete walls of the school had served as sufficient protection for many years.12 The RTC also found untenable the petitioners’ argument that Ordinance No. 192 was
a remedial or curative statute intended to correct the defects of buildings and
The petitioners, on the other hand, countered that the ordinance was a valid exercise structures, which were brought about by the absence or insufficiency of laws. It ruled
of police power, by virtue of which, they could restrain property rights for the that the assailed ordinance was neither remedial nor curative in nature, considering
protection of public safety, health, morals, or the promotion of public convenience that at the time the respondents’ perimeter wall was built, the same was valid and
and general prosperity.13 legal, and the ordinance did not refer to any previous legislation that it sought to
correct.
The RTC noted that the petitioners could still take action to expropriate the subject provisions of the National Building Code that required correction or cure. It noted
property through eminent domain. that any correction in the Code should be properly undertaken by the Congress and
not by the City Council of Marikina through an ordinance.
The RTC, thus, disposed:
The CA, thus, disposed:
WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued
commanding the respondents to permanently desist from enforcing or implementing WHEREFORE, all foregoing premises considered, the instant appeal is
Ordinance No. 192, Series of 1994, as amended, on petitioners’ property in question DENIED.1âwphi1 The October 2, 2002 Decision and the January 13, 2003 Order of
located at Marikina Heights, Marikina, Metro Manila. the Regional Trial Court (RTC) of Marikina City, Branch 273, granting petitioners-
appellees’ petition for Prohibition in SCA Case No. 2000-381-MK are hereby
No pronouncement as to costs. AFFIRMED.

SO ORDERED.16 SO ORDERED.18

Ruling of the CA Aggrieved by the decision of the CA, the petitioners are now before this Court
presenting the following
In its December 1, 2003 Decision, the CA dismissed the petitioners’ appeal and
affirmed the RTC decision. ASSIGNMENT OF ERRORS

The CA reasoned out that the objectives stated in Ordinance No. 192 did not justify 1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
the exercise of police power, as it did not only seek to regulate, but also involved the ERRED IN DECLARING THAT CITY ORDINANCE NO. 192, SERIES
taking of the respondents’ property without due process of law. The respondents OF 1994 IS NOT A VALID EXERCISE OF POLICE POWER;
were bound to lose an unquantifiable sense of security, the beneficial use of their
structures, and a total of 3,762.36 square meters of property. It, thus, ruled that the 2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
assailed ordinance could not be upheld as valid as it clearly invaded the personal and ERRED IN RULING THAT THE AFOREMENTIONED ORDINANCE IS
property rights of the respondents and "[f]or being unreasonable, and undue restraint AN EXERCISE OF THE CITY OF THE POWER OF EMINENT
of trade."17 DOMAIN;

It noted that although the petitioners complied with procedural due process in 3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
enacting Ordinance No. 192, they failed to comply with substantive due process. ERRED IN DECLARING THAT THE CITY VIOLATED THE DUE
Hence, the failure of the respondents to attend the public hearings in order to raise PROCESS CLAUSE IN IMPLEMENTING ORDINANCE NO. 192,
objections did not amount to a waiver of their right to question the validity of the SERIES OF 1994; AND
ordinance.
4. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
The CA also shot down the argument that the five-meter setback provision for ERRED IN RULING THAT THE ABOVE-MENTIONED ORDINANCE
parking was a legal easement, the use and ownership of which would remain with, CANNOT BE GIVEN RETROACTIVE APPLICATION.19
and inure to, the benefit of the respondents for whom the easement was primarily
intended. It found that the real intent of the setback provision was to make the In this case, the petitioners admit that Section 5 of the assailed ordinance, pertaining
parking space free for use by the public, considering that such would cease to be for to the five-meter setback requirement is, as held by the lower courts,
the exclusive use of the school and its students as it would be situated outside school invalid.20 Nonetheless, the petitioners argue that such invalidity was subsequently
premises and beyond the school administration’s control. cured by Zoning Ordinance No. 303, series of 2000. They also contend that Section
3, relating to the 80% see-thru fence requirement, must be complied with, as it
In affirming the RTC ruling that the ordinance was not a curative statute, the CA remains to be valid.
found that the petitioner failed to point out any irregularity or invalidity in the
Ruling of the Court Even without going to a discussion of the strict scrutiny test, Ordinance No. 192,
series of 1994 must be struck down for not being reasonably necessary to accomplish
The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance the City’s purpose. More importantly, it is oppressive of private rights.
No. 192 are valid exercises of police power by the City Government of Marikina.
Under the rational relationship test, an ordinance must pass the following requisites
"Police power is the plenary power vested in the legislature to make statutes and as discussed in Social Justice Society (SJS) v. Atienza, Jr.:28
ordinances to promote the health, morals, peace, education, good order or safety and
general welfare of the people."21 The State, through the legislature, has delegated the As with the State, local governments may be considered as having properly exercised
exercise of police power to local government units, as agencies of the State. This their police power only if the following requisites are met: (1) the interests of the
delegation of police power is embodied in Section 1622 of the Local Government public generally, as distinguished from those of a particular class, require its exercise
Code of 1991 (R.A. No. 7160), known as the General Welfare Clause,23 which has and (2) the means employed are reasonably necessary for the accomplishment of the
two branches. "The first, known as the general legislative power, authorizes the purpose and not unduly oppressive upon individuals. In short, there must be a
municipal council to enact ordinances and make regulations not repugnant to law, as concurrence of a lawful subject and lawful method.29
may be necessary to carry into effect and discharge the powers and duties conferred
upon the municipal council by law. The second, known as the police power proper, Lacking a concurrence of these two requisites, the police power measure shall be
authorizes the municipality to enact ordinances as may be necessary and proper for struck down as an arbitrary intrusion into private rights and a violation of the due
the health and safety, prosperity, morals, peace, good order, comfort, and process clause.30
convenience of the municipality and its inhabitants, and for the protection of their
property."24
Section 3.1 and 5 of the assailed ordinance are pertinent to the issue at hand, to wit:

White Light Corporation v. City of Manila,25 discusses the test of a valid ordinance: Section 3. The standard height of fences of walls allowed under this ordinance are as
follows:
The test of a valid ordinance is well established. A long line of decisions including
City of Manila has held that for an ordinance to be valid, it must not only be within
(1) Fences on the front yard – shall be no more than one (1) meter in height. Fences
the corporate powers of the local government unit to enact and pass according to the in excess of one (1) meter shall be an open fence type, at least eighty percent (80%)
procedure prescribed by law, it must also conform to the following substantive
see-thru;
requirements: (1) must not contravene the
xxx xxx xxx
Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be
partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be
general and consistent with public policy; and (6) must not be unreasonable.26 Section 5. In no case shall walls and fences be built within the five (5) meter parking
area allowance located between the front monument line and the building line of
commercial and industrial establishments and educational and religious institutions.
Ordinance No. 192 was passed by the City Council of Marikina in the apparent
exercise of its police power. To successfully invoke the exercise of police power as
the rationale for the enactment of an ordinance and to free it from the imputation of The respondents, thus, sought to prohibit the petitioners from requiring them to (1)
constitutional infirmity, two tests have been used by the Court – the rational demolish their existing concrete wall, (2) build a fence (in excess of one meter)
relationship test and the strict scrutiny test: which must be 80% see-thru, and (3) build the said fence six meters back in order to
provide a parking area.
We ourselves have often applied the rational basis test mainly in analysis of equal
protection challenges. Using the rational basis examination, laws or ordinances are Setback Requirement
upheld if they rationally further a legitimate governmental interest. Under
intermediate review, governmental interest is extensively examined and the The Court first turns its attention to Section 5 which requires the five-meter setback
availability of less restrictive measures is considered. Applying strict scrutiny, the of the fence to provide for a parking area. The petitioners initially argued that the
focus is on the presence of compelling, rather than substantial, governmental interest ownership of the parking area to be created would remain with the respondents as it
and on the absence of less restrictive means for achieving that interest.27 would primarily be for the use of its students and faculty, and that its use by the
public on non-school days would only be incidental. In their Reply, however, the The Court notes with displeasure that this argument was only raised for the first time
petitioners admitted that Section 5 was, in fact, invalid for being repugnant to the on appeal in this Court in the petitioners’ Reply. Considering that Ordinance No. 303
Constitution.31 was enacted on December 20, 2000, the petitioners could very well have raised it in
their defense before the RTC in 2002. The settled rule in this jurisdiction is that a
The Court agrees with the latter position. party cannot change the legal theory of this case under which the controversy was
heard and decided in the trial court. It should be the same theory under which the
review on appeal is conducted. Points of law, theories, issues, and arguments not
The Court joins the CA in finding that the real intent of the setback requirement was
adequately brought to the attention of the lower court will not be ordinarily
to make the parking space free for use by the public, considering that it would no
considered by a reviewing court, inasmuch as they cannot be raised for the first time
longer be for the exclusive use of the respondents as it would also be available for
on appeal. This will be offensive to the basic rules of fair play, justice, and due
use by the general public. Section 9 of Article III of the 1987 Constitution, a
provision on eminent domain, provides that private property shall not be taken for process.35
public use without just compensation.
Furthermore, the two ordinances have completely different purposes and subjects.
Ordinance No. 192 aims to regulate the construction of fences, while Ordinance No.
The petitioners cannot justify the setback by arguing that the ownership of the
303 is a zoning ordinance which classifies the city into specific land uses. In fact, the
property will continue to remain with the respondents. It is a settled rule that neither
five-meter setback required by Ordinance No. 303 does not even appear to be for the
the acquisition of title nor the total destruction of value is essential to taking. In fact,
it is usually in cases where the title remains with the private owner that inquiry purpose of providing a parking area.
should be made to determine whether the impairment of a property is merely
regulated or amounts to a compensable taking.32 The Court is of the view that the By no stretch of the imagination, therefore, can Ordinance No. 303, "cure" Section 5
implementation of the setback requirement would be tantamount to a taking of a total of Ordinance No. 192.
of 3,762.36 square meters of the respondents’ private property for public use without
just compensation, in contravention to the Constitution. In any case, the clear subject of the petition for prohibition filed by the respondents is
Ordinance No. 192 and, as such, the precise issue to be determined is whether the
Anent the objectives of prevention of concealment of unlawful acts and "un- petitioners can be prohibited from enforcing the said ordinance, and no other, against
neighborliness," it is obvious that providing for a parking area has no logical the respondents.
connection to, and is not reasonably necessary for, the accomplishment of these
goals. 80% See-Thru Fence Requirement

Regarding the beautification purpose of the setback requirement, it has long been The petitioners argue that while Section 5 of Ordinance No. 192 may be invalid,
settled that the State may not, under the guise of police power, permanently divest Section 3.1 limiting the height of fences to one meter and requiring fences in excess
owners of the beneficial use of their property solely to preserve or enhance the of one meter to be at least 80% see-thru, should remain valid and enforceable against
aesthetic appearance of the community.33 The Court, thus, finds Section 5 to be the respondents.
unreasonable and oppressive as it will substantially divest the respondents of the
beneficial use of their property solely for aesthetic purposes. Accordingly, Section 5 The Court cannot accommodate the petitioner.
of Ordinance No. 192 is invalid.
For Section 3.1 to pass the rational relationship test, the petitioners must show the
The petitioners, however, argue that the invalidity of Section 5 was properly cured reasonable relation between the purpose of the police power measure and the means
by Zoning Ordinance No. 303,34Series of 2000, which classified the respondents’ employed for its accomplishment, for even under the guise of protecting the public
property to be within an institutional zone, under which a five-meter setback has interest, personal rights and those pertaining to private property will not be permitted
been required. to be arbitrarily invaded.36

The petitioners are mistaken. Ordinance No. 303, Series of 2000, has no bearing to The principal purpose of Section 3.1 is "to discourage, suppress or prevent the
the case at hand. concealment of prohibited or unlawful acts." The ultimate goal of this objective is
clearly the prevention of crime to ensure public safety and security. The means
employed by the petitioners, however, is not reasonably necessary for the
accomplishment of this purpose and is unduly oppressive to private rights. The "Curative statutes are enacted to cure defects in a prior law or to validate legal
petitioners have not adequately shown, and it does not appear obvious to this Court, proceedings which would otherwise be void for want of conformity with certain legal
that an 80% see-thru fence would provide better protection and a higher level of requirements. They are intended to supply defects, abridge superfluities and curb
security, or serve as a more satisfactory criminal deterrent, than a tall solid concrete certain evils. They are intended to enable persons to carry into effect that which they
wall. It may even be argued that such exposed premises could entice and tempt have designed or intended, but has failed of expected legal consequence by reason of
would-be criminals to the property, and that a see-thru fence would be easier to some statutory disability or irregularity in their own action. They make valid that
bypass and breach. It also appears that the respondents’ concrete wall has served as which, before the enactment of the statute was invalid. Their purpose is to give
more than sufficient protection over the last 40 years. ` validity to acts done that would have been invalid under existing laws, as if existing
laws have been complied with. Curative statutes, therefore, by their very essence, are
As to the beautification purpose of the assailed ordinance, as previously discussed, retroactive."41
the State may not, under the guise of police power, infringe on private rights solely
for the sake of the aesthetic appearance of the community. Similarly, the Court The petitioners argue that Ordinance No. 192 is a curative statute as it aims to correct
cannot perceive how a see-thru fence will foster "neighborliness" between members or cure a defect in the National Building Code, namely, its failure to provide for
of a community. adequate guidelines for the construction of fences. They ultimately seek to remedy
an insufficiency in the law. In aiming to cure this insufficiency, the petitioners
Compelling the respondents to construct their fence in accordance with the assailed attempt to add lacking provisions to the National Building Code. This is not what is
ordinance is, thus, a clear encroachment on their right to property, which necessarily contemplated by curative statutes, which intend to correct irregularities or invalidity
includes their right to decide how best to protect their property. in the law. The petitioners fail to point out any irregular or invalid provision. As
such, the assailed ordinance cannot qualify as curative and retroactive in nature.
It also appears that requiring the exposure of their property via a see-thru fence is
violative of their right to privacy, considering that the residence of the Benedictine At any rate, there appears to be no insufficiency in the National Building Code with
nuns is also located within the property. The right to privacy has long been respect to parking provisions in relation to the issue of the respondents. Paragraph
considered a fundamental right guaranteed by the Constitution that must be protected 1.16.1, Rule XIX of the Rules and Regulations of the said code requires an
from intrusion or constraint. The right to privacy is essentially the right to be let educational institution to provide one parking slot for every ten classrooms. As found
alone,37 as governmental powers should stop short of certain intrusions into the by the lower courts, the respondents provide a total of 76 parking slots for their 80
personal life of its citizens.38 It is inherent in the concept of liberty, enshrined in the classrooms and, thus, had more than sufficiently complied with the law.
Bill of Rights (Article III) in Sections 1, 2, 3(1), 6, 8, and 17, Article III of the 1987
Constitution.39 Ordinance No. 192, as amended, is, therefore, not a curative statute which may be
applied retroactively.
The enforcement of Section 3.1 would, therefore, result in an undue interference with
the respondents’ rights to property and privacy. Section 3.1 of Ordinance No. 192 is, Separability
thus, also invalid and cannot be enforced against the respondents.
Sections 3.1 and 5 of Ordinance No. 192, as amended, are, thus, invalid and cannot
No Retroactivity be enforced against the respondents. Nonetheless, "the general rule is that where part
of a statute is void as repugnant to the Constitution, while another part is valid, the
Ordinance No. 217 amended Section 7 of Ordinance No. 192 by including the valid portion, if susceptible to being separated from the invalid, may stand and be
regulation of educational institutions which was unintentionally omitted, and giving enforced."42 Thus, the other sections of the assailed ordinance remain valid and
said educational institutions five (5) years from the passage of Ordinance No. 192 enforceable.
(and not Ordinance No. 217) to conform to its provisions.40 The petitioners argued
that the amendment could be retroactively applied because the assailed ordinance is a Conclusion
curative statute which is retroactive in nature.
Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were
Considering that Sections 3.1 and 5 of Ordinance No. 192 cannot be enforced against acting in excess of their jurisdiction in enforcing Ordinance No. 192 against the
the respondents, it is no longer necessary to rule on the issue of retroactivity. The respondents. The CA was correct in affirming the decision of the RTC in issuing the
Court shall, nevertheless, pass upon the issue for the sake of clarity.
writ of prohibition. The petitioners must permanently desist from enforcing Sections
3.1 and 5 of the assailed ordinance on the respondents' property in Marikina City.

WHEREFORE, the petition is DENIED. The October 2, 2002 Decision of the


Regional Trial Court in SCA Case No. 2000-381-MK is AFFIRMED but
MODIFIED to read as follows:

WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued


commanding the respondents to permanently desist from enforcing or implementing
Sections 3.1 and 5 of Ordinance No. 192, Series of 1994, as amended, on the
petitioners' property in question located in Marikina Heights, Marikina, Metro
Manila.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 91649 May 14, 1991 expressed in the 1987 Constitution. The decree is said to have a "gambling objective"
and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES and Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second Amended
MARANAN AND LORENZO SANCHEZ,petitioners, Petition; p. 21, Rollo).
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION The procedural issue is whether petitioners, as taxpayers and practicing lawyers
(PAGCOR), respondent. (petitioner Basco being also the Chairman of the Committee on Laws of the City
Council of Manila), can question and seek the annulment of PD 1869 on the alleged
H.B. Basco & Associates for petitioners. grounds mentioned above.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR. The Philippine Amusements and Gaming Corporation (PAGCOR) was created by
virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D.
1067-B also dated January 1, 1977 "to establish, operate and maintain gambling
PARAS, J.: casinos on land or water within the territorial jurisdiction of the Philippines." Its
operation was originally conducted in the well known floating casino "Philippine
A TV ad proudly announces: Tourist." The operation was considered a success for it proved to be a potential
source of revenue to fund infrastructure and socio-economic projects, thus, P.D.
1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective.
"The new PAGCOR — responding through responsible gaming."
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the
But the petitioners think otherwise, that is why, they filed the instant petition seeking Government to regulate and centralize all games of chance authorized by existing
to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter — franchise or permitted by law, under the following declared policy —
PD 1869, because it is allegedly contrary to morals, public policy and order, and
because —
Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of the
State to centralize and integrate all games of chance not heretofore
A. It constitutes a waiver of a right prejudicial to a third person with a right authorized by existing franchises or permitted by law in order to attain the
recognized by law. It waived the Manila City government's right to impose following objectives:
taxes and license fees, which is recognized by law;
(a) To centralize and integrate the right and authority to operate and conduct
B. For the same reason stated in the immediately preceding paragraph, the games of chance into one corporate entity to be controlled, administered and
law has intruded into the local government's right to impose local taxes and supervised by the Government.
license fees. This, in contravention of the constitutionally enshrined
principle of local autonomy;
(b) To establish and operate clubs and casinos, for amusement and
recreation, including sports gaming pools, (basketball, football, lotteries,
C. It violates the equal protection clause of the constitution in that it etc.) and such other forms of amusement and recreation including games of
legalizes PAGCOR — conducted gambling, while most other forms of chance, which may be allowed by law within the territorial jurisdiction of
gambling are outlawed, together with prostitution, drug trafficking and the Philippines and which will: (1) generate sources of additional revenue to
other vices; fund infrastructure and socio-civic projects, such as flood control programs,
beautification, sewerage and sewage projects, Tulungan ng Bayan Centers,
D. It violates the avowed trend of the Cory government away from Nutritional Programs, Population Control and such other essential public
monopolistic and crony economy, and toward free enterprise and services; (2) create recreation and integrated facilities which will expand
privatization. (p. 2, Amended Petition; p. 7, Rollo) and improve the country's existing tourist attractions; and (3) minimize, if
not totally eradicate, all the evils, malpractices and corruptions that are
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to normally prevalent on the conduct and operation of gambling clubs and
the declared national policy of the "new restored democracy" and the people's will as casinos without direct government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the involved. All presumptions are indulged in favor of constitutionality; one
Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders, who attacks a statute alleging unconstitutionality must prove its invalidity
rules and regulations, inconsistent therewith, are accordingly repealed, amended or beyond a reasonable doubt; that a law may work hardship does not render it
modified. unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate all
It is reported that PAGCOR is the third largest source of government revenue, next possible basis; that the courts are not concerned with the wisdom, justice,
to the Bureau of Internal Revenue and the Bureau of Customs. In 1989 alone, policy or expediency of a statute and that a liberal interpretation of the
PAGCOR earned P3.43 Billion, and directly remitted to the National Government a constitution in favor of the constitutionality of legislation should be
total of P2.5 Billion in form of franchise tax, government's income share, the adopted. (Danner v. Hass, 194 N.W. 2nd534, 539; Spurbeck v. Statton, 106
President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA
other socio-cultural and charitable projects on its own or in cooperation with various 734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55
governmental agencies, and other private associations and organizations. In its 3 1/2 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983]
years of operation under the present administration, PAGCOR remitted to the cited in Citizens Alliance for Consumer Protection v. Energy Regulatory
government a total of P6.2 Billion. As of December 31, 1989, PAGCOR was Board, 162 SCRA 521, 540)
employing 4,494 employees in its nine (9) casinos nationwide, directly supporting
the livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families. Of course, there is first, the procedural issue. The respondents are questioning the
legal personality of petitioners to file the instant petition.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that
the same is "null and void" for being "contrary to morals, public policy and public Considering however the importance to the public of the case at bar, and in keeping
order," monopolistic and tends toward "crony economy", and is violative of the equal with the Court's duty, under the 1987 Constitution, to determine whether or not the
protection clause and local autonomy as well as for running counter to the state other branches of government have kept themselves within the limits of the
policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12 Constitution and the laws and that they have not abused the discretion given to them,
(Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article the Court has brushed aside technicalities of procedure and has taken cognizance of
XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution. this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v.
Tan, 163 SCRA 371)
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the
most deliberate consideration by the Court, involving as it does the exercise of what With particular regard to the requirement of proper party as applied in the
has been described as "the highest and most delicate function which belongs to the cases before us, We hold that the same is satisfied by the petitioners and
judicial department of the government." (State v. Manuel, 20 N.C. 144; Lozano v. intervenors because each of them has sustained or is in danger of sustaining
Martinez, 146 SCRA 323). an immediate injury as a result of the acts or measures complained of. And
even if, strictly speaking they are not covered by the definition, it is still
As We enter upon the task of passing on the validity of an act of a co-equal and within the wide discretion of the Court to waive the requirement and so
coordinate branch of the government We need not be reminded of the time-honored remove the impediment to its addressing and resolving the serious
principle, deeply ingrained in our jurisprudence, that a statute is presumed to be constitutional questions raised.
valid. Every presumption must be indulged in favor of its constitutionality. This is
not to say that We approach Our task with diffidence or timidity. Where it is clear In the first Emergency Powers Cases, ordinary citizens and taxpayers were
that the legislature or the executive for that matter, has over-stepped the limits of its allowed to question the constitutionality of several executive orders issued
authority under the constitution, We should not hesitate to wield the axe and let it fall by President Quirino although they were involving only an indirect and
heavily, as fall it must, on the offending statute (Lozano v. Martinez, supra). general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the transcendental
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru importance to the public of these cases demands that they be settled
Mr. Justice Zaldivar underscored the — promptly and definitely, brushing aside, if we must technicalities of
procedure." We have since then applied the exception in many other cases.
(Association of Small Landowners in the Philippines, Inc. v. Sec. of
. . . thoroughly established principle which must be followed in all cases
where questions of constitutionality as obtain in the instant cases are Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues totally eradicated. Public welfare, then, lies at the bottom of the enactment of PD
raised. 1896.

Gambling in all its forms, unless allowed by law, is generally prohibited. But the Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of
prohibition of gambling does not mean that the Government cannot regulate it in the Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is
exercise of its police power. violative of the principle of local autonomy. They must be referring to Section 13
par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying
The concept of police power is well-established in this jurisdiction. It has been any "tax of any kind or form, income or otherwise, as well as fees, charges or levies
defined as the "state authority to enact legislation that may interfere with personal of whatever nature, whether National or Local."
liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA
481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or (2) Income and other taxes. — a) Franchise Holder: No tax of any kind or
property, (2) in order to foster the common good. It is not capable of an exact form, income or otherwise as well as fees, charges or levies of whatever
definition but has been, purposely, veiled in general terms to underscore its all- nature, whether National or Local, shall be assessed and collected under this
comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, franchise from the Corporation; nor shall any form or tax or charge attach in
163 SCRA 386). any way to the earnings of the Corporation, except a franchise tax of five
(5%) percent of the gross revenues or earnings derived by the Corporation
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the from its operations under this franchise. Such tax shall be due and payable
future where it could be done, provides enough room for an efficient and flexible quarterly to the National Government and shall be in lieu of all kinds of
response to conditions and circumstances thus assuming the greatest benefits. (Edu v. taxes, levies, fees or assessments of any kind, nature or description, levied,
Ericta, supra) established or collected by any municipal, provincial or national
government authority (Section 13 [2]).
It finds no specific Constitutional grant for the plain reason that it does not owe its
origin to the charter. Along with the taxing power and eminent domain, it is inborn in Their contention stated hereinabove is without merit for the following reasons:
the very fact of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital functions of governance. (a) The City of Manila, being a mere Municipal corporation has no inherent right to
Marshall, to whom the expression has been credited, refers to it succinctly as the impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105
plenary power of the state "to govern its citizens". (Tribe, American Constitutional Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or
Law, 323, 1978). The police power of the State is a power co-extensive with self- statute must plainly show an intent to confer that power or the municipality cannot
protection and is most aptly termed the "law of overwhelming necessity." (Rubi v. assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore
Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most essential, insistent, must always yield to a legislative act which is superior having been passed upon by
and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a the state itself which has the "inherent power to tax" (Bernas, the Revised [1973]
dynamic force that enables the state to meet the agencies of the winds of change. Philippine Constitution, Vol. 1, 1983 ed. p. 445).

What was the reason behind the enactment of P.D. 1869? (b) The Charter of the City of Manila is subject to control by Congress. It should be
stressed that "municipal corporations are mere creatures of Congress" (Unson v.
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and
centralize thru an appropriate institution all games of chance authorized by existing abolish municipal corporations" due to its "general legislative powers" (Asuncion v.
franchise or permitted by law" (1st whereas clause, PD 1869). As was subsequently Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has
proved, regulating and centralizing gambling operations in one corporate entity — the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July
the PAGCOR, was beneficial not just to the Government but to society in general. It 2, 1950). And if Congress can grant the City of Manila the power to tax certain
is a reliable source of much needed revenue for the cash strapped Government. It matters, it can also provide for exemptions or even take back the power.
provided funds for social impact projects and subjected gambling to "close scrutiny,
regulation, supervision and control of the Government" (4th Whereas Clause, PD (c) The City of Manila's power to impose license fees on gambling, has long been
1869). With the creation of PAGCOR and the direct intervention of the Government, revoked. As early as 1975, the power of local governments to regulate gambling thru
the evil practices and corruptions that go with gambling will be minimized if not
the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was This doctrine emanates from the "supremacy" of the National Government over local
vested exclusively on the National Government, thus: governments.

Sec. 1. Any provision of law to the contrary notwithstanding, the authority Justice Holmes, speaking for the Supreme Court, made reference to the
of chartered cities and other local governments to issue license, permit or entire absence of power on the part of the States to touch, in that way
other form of franchise to operate, maintain and establish horse and dog (taxation) at least, the instrumentalities of the United States (Johnson v.
race tracks, jai-alai and other forms of gambling is hereby revoked. Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
Sec. 2. Hereafter, all permits or franchises to operate, maintain and prevent it from consummating its federal responsibilities, or even to
establish, horse and dog race tracks, jai-alai and other forms of gambling seriously burden it in the accomplishment of them. (Antieau, Modern
shall be issued by the national government upon proper application and Constitutional Law, Vol. 2, p. 140, emphasis supplied)
verification of the qualification of the applicant . . .
Otherwise, mere creatures of the State can defeat National policies thru
Therefore, only the National Government has the power to issue "licenses or extermination of what local authorities may perceive to be undesirable activities or
permits" for the operation of gambling. Necessarily, the power to demand or collect enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US
license fees which is a consequence of the issuance of "licenses or permits" is no 42).
longer vested in the City of Manila.
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc
(d) Local governments have no power to tax instrumentalities of the National Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or
Government. PAGCOR is a government owned or controlled corporation with an creation of the very entity which has the inherent power to wield it.
original charter, PD 1869. All of its shares of stocks are owned by the National
Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also (e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be
exercises regulatory powers thus: violated by P.D. 1869. This is a pointless argument. Article X of the 1987
Constitution (on Local Autonomy) provides:
Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of
the affiliated entities, and shall exercise all the powers, authority and the Sec. 5. Each local government unit shall have the power to create its own
responsibilities vested in the Securities and Exchange Commission over source of revenue and to levy taxes, fees, and other charges subject to such
such affiliating entities mentioned under the preceding section, including, guidelines and limitation as the congress may provide, consistent with the
but not limited to amendments of Articles of Incorporation and By-Laws, basic policy on local autonomy. Such taxes, fees and charges shall accrue
changes in corporate term, structure, capitalization and other matters exclusively to the local government. (emphasis supplied)
concerning the operation of the affiliated entities, the provisions of the
Corporation Code of the Philippines to the contrary notwithstanding, except The power of local government to "impose taxes and fees" is always subject to
only with respect to original incorporation. "limitations" which Congress may provide by law. Since PD 1869 remains an
"operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role Constitution), its "exemption clause" remains as an exception to the exercise of the
is governmental, which places it in the category of an agency or instrumentality of power of local governments to impose taxes and fees. It cannot therefore be violative
the Government. Being an instrumentality of the Government, PAGCOR should be but rather is consistent with the principle of local autonomy.
and actually is exempt from local taxes. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government. Besides, the principle of local autonomy under the 1987 Constitution simply means
"decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436,
The states have no power by taxation or otherwise, to retard, impede, as cited in Bernas, The Constitution of the Republic of the Philippines, Vol. II, First
burden or in any manner control the operation of constitutional laws enacted Ed., 1988, p. 374). It does not make local governments sovereign within the state or
by Congress to carry into execution the powers vested in the federal an "imperium in imperio."
government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
Local Government has been described as a political subdivision of a nation Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the
or state which is constituted by law and has substantial control of local equal protection is not clearly explained in the petition. The mere fact that some
affairs. In a unitary system of government, such as the government under gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as amended
the Philippine Constitution, local governments can only be an intra by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are
sovereign subdivision of one sovereign nation, it cannot be legalized under certain conditions, while others are prohibited, does not render the
an imperium in imperio. Local government in such a system can only mean applicable laws, P.D. 1869 for one, unconstitutional.
a measure of decentralization of the function of government. (emphasis
supplied) If the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been
As to what state powers should be "decentralized" and what may be delegated to applied. (Gomez v. Palomar, 25 SCRA 827)
local government units remains a matter of policy, which concerns wisdom. It is
therefore a political question. (Citizens Alliance for Consumer Protection v. Energy The equal protection clause of the 14th Amendment does not mean that all
Regulatory Board, 162 SCRA 539). occupations called by the same name must be treated the same way; the
state may do what it can to prevent which is deemed as evil and stop short
What is settled is that the matter of regulating, taxing or otherwise dealing with of those cases in which harm to the few concerned is not less than the harm
gambling is a State concern and hence, it is the sole prerogative of the State to retain to the public that would insure if the rule laid down were made
it or delegate it to local governments. mathematically exact. (Dominican Hotel v. Arizona, 249 US 2651).

As gambling is usually an offense against the State, legislative grant or Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory
express charter power is generally necessary to empower the local Government away from monopolies and crony economy and toward free enterprise
corporation to deal with the subject. . . . In the absence of express grant of and privatization" suffice it to state that this is not a ground for this Court to nullify
power to enact, ordinance provisions on this subject which are inconsistent P.D. 1869. If, indeed, PD 1869 runs counter to the government's policies then it is for
with the state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex- the Executive Department to recommend to Congress its repeal or amendment.
Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal.
99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan The judiciary does not settle policy issues. The Court can only declare what
Vol. 3 Ibid, p. 548, emphasis supplied) the law is and not what the law should be.1âwphi1 Under our system of
government, policy issues are within the domain of the political branches of
Petitioners next contend that P.D. 1869 violates the equal protection clause of the government and of the people themselves as the repository of all state
Constitution, because "it legalized PAGCOR — conducted gambling, while most power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).
gambling are outlawed together with prostitution, drug trafficking and other vices"
(p. 82, Rollo). On the issue of "monopoly," however, the Constitution provides that:

We, likewise, find no valid ground to sustain this contention. The petitioners' posture Sec. 19. The State shall regulate or prohibit monopolies when public
ignores the well-accepted meaning of the clause "equal protection of the laws." The interest so requires. No combinations in restraint of trade or unfair
clause does not preclude classification of individuals who may be accorded different competition shall be allowed. (Art. XII, National Economy and Patrimony)
treatment under the law as long as the classification is not unreasonable or arbitrary
(Itchong v. Hernandez, 101 Phil. 1155). A law does not have to operate in equal
It should be noted that, as the provision is worded, monopolies are not necessarily
force on all persons or things to be conformable to Article III, Section 1 of the
prohibited by the Constitution. The state must still decide whether public interest
Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989). demands that monopolies be regulated or prohibited. Again, this is a matter of policy
for the Legislature to decide.
The "equal protection clause" does not prohibit the Legislature from establishing
classes of individuals or objects upon which different rules shall operate (Laurel v.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity)
Misa, 43 O.G. 2847). The Constitution does not require situations which are different
12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of
in fact or opinion to be treated in law as though they were the same (Gomez v.
Article XIII and Section 2 (Educational Values) of Article XIV of the 1987
Palomar, 25 SCRA 827). Constitution, suffice it to state also that these are merely statements of principles and,
policies. As such, they are basically not self-executing, meaning a law should be but also on his mental, social, and spiritual outlook on life. However, the mere fact
passed by Congress to clearly define and effectuate such principles. that some persons may have lost their material fortunes, mental control, physical
health, or even their lives does not necessarily mean that the same are directly
In general, therefore, the 1935 provisions were not intended to be self- attributable to gambling. Gambling may have been the antecedent, but certainly not
executing principles ready for enforcement through the courts. They were necessarily the cause. For the same consequences could have been preceded by an
rather directives addressed to the executive and the legislature. If the overdose of food, drink, exercise, work, and even sex.
executive and the legislature failed to heed the directives of the articles the
available remedy was not judicial or political. The electorate could express WHEREFORE, the petition is DISMISSED for lack of merit.
their displeasure with the failure of the executive and the legislature through
the language of the ballot. (Bernas, Vol. II, p. 2) SO ORDERED.

Every law has in its favor the presumption of constitutionality (Yu Cong Eng v.
Trinidad, 47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82
SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be
nullified, it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one. In other words, the grounds
for nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra)
Those who petition this Court to declare a law, or parts thereof, unconstitutional
must clearly establish the basis for such a declaration. Otherwise, their petition must
fail. Based on the grounds raised by petitioners to challenge the constitutionality of
P.D. 1869, the Court finds that petitioners have failed to overcome the presumption.
The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869
remains a wise legislation considering the issues of "morality, monopoly, trend to
free enterprise, privatization as well as the state principles on social justice, role of
youth and educational values" being raised, is up for Congress to determine.

As this Court held in Citizens' Alliance for Consumer Protection v. Energy


Regulatory Board, 162 SCRA 521 —

Presidential Decree No. 1956, as amended by Executive Order No. 137 has,
in any case, in its favor the presumption of validity and constitutionality
which petitioners Valmonte and the KMU have not overturned. Petitioners
have not undertaken to identify the provisions in the Constitution which
they claim to have been violated by that statute. This Court, however, is not
compelled to speculate and to imagine how the assailed legislation may
possibly offend some provision of the Constitution. The Court notes,
further, in this respect that petitioners have in the main put in question the
wisdom, justice and expediency of the establishment of the OPSF, issues
which are not properly addressed to this Court and which this Court may
not constitutionally pass upon. Those issues should be addressed rather to
the political departments of government: the President and the Congress.

Parenthetically, We wish to state that gambling is generally immoral, and this is


precisely so when the gambling resorted to is excessive. This excessiveness
necessarily depends not only on the financial resources of the gambler and his family
G.R. No. L-34915 June 24, 1983 Pursuant to this petition, the Quezon City Engineer notified respondent Himlayang
Pilipino, Inc. in writing that Section 9 of Ordinance No. 6118, S-64 would be
CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF enforced
QUEZON CITY, petitioners,
vs. Respondent Himlayang Pilipino reacted by filing with the Court of First Instance of
HON. JUDGE VICENTE G. ERICTA as Judge of the Court of First Instance of Rizal Branch XVIII at Quezon City, a petition for declaratory relief, prohibition and
Rizal, Quezon City, Branch XVIII; HIMLAYANG PILIPINO, mandamus with preliminary injunction (Sp. Proc. No. Q-16002) seeking to annul
INC., respondents. Section 9 of the Ordinance in question The respondent alleged that the same is
contrary to the Constitution, the Quezon City Charter, the Local Autonomy Act, and
City Fiscal for petitioners. the Revised Administrative Code.

Manuel Villaruel, Jr. and Feliciano Tumale for respondents. There being no issue of fact and the questions raised being purely legal both
petitioners and respondent agreed to the rendition of a judgment on the pleadings.
The respondent court, therefore, rendered the decision declaring Section 9 of
Ordinance No. 6118, S-64 null and void.
GUTIERREZ, JR., J.:
A motion for reconsideration having been denied, the City Government and City
Council filed the instant petition.
This is a petition for review which seeks the reversal of the decision of the Court of
First Instance of Rizal, Branch XVIII declaring Section 9 of Ordinance No. 6118, S-
Petitioners argue that the taking of the respondent's property is a valid and reasonable
64, of the Quezon City Council null and void.
exercise of police power and that the land is taken for a public use as it is intended
for the burial ground of paupers. They further argue that the Quezon City Council is
Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE REGULATING authorized under its charter, in the exercise of local police power, " to make such
THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE further ordinances and resolutions not repugnant to law as may be necessary to carry
MEMORIAL TYPE CEMETERY OR BURIAL GROUND WITHIN THE into effect and discharge the powers and duties conferred by this Act and such as it
JURISDICTION OF QUEZON CITY AND PROVIDING PENALTIES FOR THE shall deem necessary and proper to provide for the health and safety, promote the
VIOLATION THEREOF" provides: prosperity, improve the morals, peace, good order, comfort and convenience of the
city and the inhabitants thereof, and for the protection of property therein."
Sec. 9. At least six (6) percent of the total area of the memorial
park cemetery shall be set aside for charity burial of deceased On the other hand, respondent Himlayang Pilipino, Inc. contends that the taking or
persons who are paupers and have been residents of Quezon City confiscation of property is obvious because the questioned ordinance permanently
for at least 5 years prior to their death, to be determined by restricts the use of the property such that it cannot be used for any reasonable
competent City Authorities. The area so designated shall purpose and deprives the owner of all beneficial use of his property.
immediately be developed and should be open for operation not
later than six months from the date of approval of the application.
The respondent also stresses that the general welfare clause is not available as a
source of power for the taking of the property in this case because it refers to "the
For several years, the aforequoted section of the Ordinance was not enforced by city power of promoting the public welfare by restraining and regulating the use of
authorities but seven years after the enactment of the ordinance, the Quezon City liberty and property." The respondent points out that if an owner is deprived of his
Council passed the following resolution: property outright under the State's police power, the property is generally not taken
for public use but is urgently and summarily destroyed in order to promote the
RESOLVED by the council of Quezon assembled, to request, as it general welfare. The respondent cites the case of a nuisance per se or the destruction
does hereby request the City Engineer, Quezon City, to stop any of a house to prevent the spread of a conflagration.
further selling and/or transaction of memorial park lots in Quezon
City where the owners thereof have failed to donate the required
6% space intended for paupers burial.
We find the stand of the private respondent as well as the decision of the respondent police power of Quezon City is defined in sub-section 00, Sec. 12,
Judge to be well-founded. We quote with approval the lower court's ruling which Rep. Act 537 which reads as follows:
declared null and void Section 9 of the questioned city ordinance:
(00) To make such further ordinance and
The issue is: Is Section 9 of the ordinance in question a valid regulations not repugnant to law as may be
exercise of the police power? necessary to carry into effect and discharge the
powers and duties conferred by this act and such
An examination of the Charter of Quezon City (Rep. Act No. 537), as it shall deem necessary and proper to provide
does not reveal any provision that would justify the ordinance in for the health and safety, promote, the prosperity,
question except the provision granting police power to the City. improve the morals, peace, good order, comfort
Section 9 cannot be justified under the power granted to Quezon and convenience of the city and the inhabitants
City to tax, fix the license fee, and regulate such other business, thereof, and for the protection of property
trades, and occupation as may be established or practised in the therein; and enforce obedience thereto with such
City.' (Subsections 'C', Sec. 12, R.A. 537). lawful fines or penalties as the City Council may
prescribe under the provisions of subsection (jj)
The power to regulate does not include the power to prohibit of this section.
(People vs. Esguerra, 81 PhiL 33, Vega vs. Municipal Board of
Iloilo, L-6765, May 12, 1954; 39 N.J. Law, 70, Mich. 396). A We start the discussion with a restatement of certain basic
fortiori, the power to regulate does not include the power to principles. Occupying the forefront in the bill of rights is the
confiscate. The ordinance in question not only confiscates but also provision which states that 'no person shall be deprived of life,
prohibits the operation of a memorial park cemetery, because liberty or property without due process of law' (Art. Ill, Section 1
under Section 13 of said ordinance, 'Violation of the provision subparagraph 1, Constitution).
thereof is punishable with a fine and/or imprisonment and that
upon conviction thereof the permit to operate and maintain a On the other hand, there are three inherent powers of government
private cemetery shall be revoked or cancelled.' The confiscatory by which the state interferes with the property rights, namely-. (1)
clause and the penal provision in effect deter one from operating a police power, (2) eminent domain, (3) taxation. These are said to
memorial park cemetery. Neither can the ordinance in question be exist independently of the Constitution as necessary attributes of
justified under sub- section "t", Section 12 of Republic Act 537 sovereignty.
which authorizes the City Council to-
Police power is defined by Freund as 'the power of promoting the
'prohibit the burial of the dead within the center public welfare by restraining and regulating the use of liberty and
of population of the city and provide for their property' (Quoted in Political Law by Tanada and Carreon, V-11,
burial in such proper place and in such manner as p. 50). It is usually exerted in order to merely regulate the use and
the council may determine, subject to the enjoyment of property of the owner. If he is deprived of his
provisions of the general law regulating burial property outright, it is not taken for public use but rather to destroy
grounds and cemeteries and governing funerals in order to promote the general welfare. In police power, the owner
and disposal of the dead.' (Sub-sec. (t), Sec. 12, does not recover from the government for injury sustained in
Rep. Act No. 537). consequence thereof (12 C.J. 623). It has been said that police
power is the most essential of government powers, at times the
There is nothing in the above provision which authorizes most insistent, and always one of the least limitable of the powers
confiscation or as euphemistically termed by the respondents, of government (Ruby vs. Provincial Board, 39 PhiL 660; Ichong
'donation' vs. Hernandez, 1,7995, May 31, 1957). This power embraces the
whole system of public regulation (U.S. vs. Linsuya Fan, 10 PhiL
104). The Supreme Court has said that police power is so far-
We now come to the question whether or not Section 9 of the
reaching in scope that it has almost become impossible to limit its
ordinance in question is a valid exercise of police power. The
sweep. As it derives its existence from the very existence of the
state itself, it does not need to be expressed or defined in its scope. In the leading case of Ermita-Malate Hotel and Motel Operators Association Inc. v.
Being coextensive with self-preservation and survival itself, it is City Mayor of Manila (20 SCRA 849) the Court speaking through the then Associate
the most positive and active of all governmental processes, the Justice and now Chief Justice Enrique M. Fernando stated
most essential insistent and illimitable Especially it is so under the
modern democratic framework where the demands of society and Primarily what calls for a reversal of such a decision is the a of any
nations have multiplied to almost unimaginable proportions. The evidence to offset the presumption of validity that attaches to a
field and scope of police power have become almost boundless, statute or ordinance. As was expressed categorically by Justice
just as the fields of public interest and public welfare have become Malcolm 'The presumption is all in favor of validity. ... The action
almost all embracing and have transcended human foresight. Since of the elected representatives of the people cannot be lightly set
the Courts cannot foresee the needs and demands of public interest aside. The councilors must, in the very nature of things, be familiar
and welfare, they cannot delimit beforehand the extent or scope of with the necessities of their particular ... municipality and with all
the police power by which and through which the state seeks to the facts and lances which surround the subject and necessitate
attain or achieve public interest and welfare. (Ichong vs. action. The local legislative body, by enacting the ordinance, has in
Hernandez, L-7995, May 31, 1957). effect given notice that the regulations are essential to the well-
being of the people. ... The Judiciary should not lightly set aside
The police power being the most active power of the government legislative action when there is not a clear invasion of personal or
and the due process clause being the broadest station on property rights under the guise of police regulation. (U.S. v.
governmental power, the conflict between this power of Salaveria (1918], 39 Phil. 102, at p. 111. There was an affirmation
government and the due process clause of the Constitution is of the presumption of validity of municipal ordinance as
oftentimes inevitable. announced in the leading Salaveria decision in Ebona v. Daet,
[1950]85 Phil. 369.)
It will be seen from the foregoing authorities that police power is
usually exercised in the form of mere regulation or restriction in We have likewise considered the principles earlier stated in Case v.
the use of liberty or property for the promotion of the general Board of Health supra :
welfare. It does not involve the taking or confiscation of property
with the exception of a few cases where there is a necessity to ... Under the provisions of municipal charters which are known as
confiscate private property in order to destroy it for the purpose of the general welfare clauses, a city, by virtue of its police power,
protecting the peace and order and of promoting the general may adopt ordinances to the peace, safety, health, morals and the
welfare as for instance, the confiscation of an illegally possessed best and highest interests of the municipality. It is a well-settled
article, such as opium and firearms. principle, growing out of the nature of well-ordered and society,
that every holder of property, however absolute and may be his
It seems to the court that Section 9 of Ordinance No. 6118, Series title, holds it under the implied liability that his use of it shall not
of 1964 of Quezon City is not a mere police regulation but an be injurious to the equal enjoyment of others having an equal right
outright confiscation. It deprives a person of his private property to the enjoyment of their property, nor injurious to the rights of the
without due process of law, nay, even without compensation. community. An property in the state is held subject to its general
regulations, which are necessary to the common good and general
In sustaining the decision of the respondent court, we are not unmindful of the heavy welfare. Rights of property, like all other social and conventional
burden shouldered by whoever challenges the validity of duly enacted legislation rights, are subject to such reasonable limitations in their enjoyment
whether national or local As early as 1913, this Court ruled in Case v. Board of as shall prevent them from being injurious, and to such reasonable
Health (24 PhiL 250) that the courts resolve every presumption in favor of validity restraints and regulations, established by law, as the legislature,
and, more so, where the ma corporation asserts that the ordinance was enacted to under the governing and controlling power vested in them by the
promote the common good and general welfare. constitution, may think necessary and expedient. The state, under
the police power, is possessed with plenary power to deal with all
matters relating to the general health, morals, and safety of the
people, so long as it does not contravene any positive inhibition of
the organic law and providing that such power is not exercised in
such a manner as to justify the interference of the courts to prevent SO ORDERED.
positive wrong and oppression.

but find them not applicable to the facts of this case.

There is no reasonable relation between the setting aside of at least six (6) percent of
the total area of an private cemeteries for charity burial grounds of deceased paupers
and the promotion of health, morals, good order, safety, or the general welfare of the
people. The ordinance is actually a taking without compensation of a certain area
from a private cemetery to benefit paupers who are charges of the municipal
corporation. Instead of building or maintaining a public cemetery for this purpose,
the city passes the burden to private cemeteries.

The expropriation without compensation of a portion of private cemeteries is not


covered by Section 12(t) of Republic Act 537, the Revised Charter of Quezon City
which empowers the city council to prohibit the burial of the dead within the center
of population of the city and to provide for their burial in a proper place subject to
the provisions of general law regulating burial grounds and cemeteries. When the
Local Government Code, Batas Pambansa Blg. 337 provides in Section 177 (q) that a
Sangguniang panlungsod may "provide for the burial of the dead in such place and in
such manner as prescribed by law or ordinance" it simply authorizes the city to
provide its own city owned land or to buy or expropriate private properties to
construct public cemeteries. This has been the law and practise in the past. It
continues to the present. Expropriation, however, requires payment of just
compensation. The questioned ordinance is different from laws and regulations
requiring owners of subdivisions to set aside certain areas for streets, parks,
playgrounds, and other public facilities from the land they sell to buyers of
subdivision lots. The necessities of public safety, health, and convenience are very
clear from said requirements which are intended to insure the development of
communities with salubrious and wholesome environments. The beneficiaries of the
regulation, in turn, are made to pay by the subdivision developer when individual
lots are sold to home-owners.

As a matter of fact, the petitioners rely solely on the general welfare clause or on
implied powers of the municipal corporation, not on any express provision of law as
statutory basis of their exercise of power. The clause has always received broad and
liberal interpretation but we cannot stretch it to cover this particular taking.
Moreover, the questioned ordinance was passed after Himlayang Pilipino, Inc. had
incorporated. received necessary licenses and permits and commenced operating.
The sequestration of six percent of the cemetery cannot even be considered as having
been impliedly acknowledged by the private respondent when it accepted the permits
to commence operations.

WHEREFORE, the petition for review is hereby DISMISSED. The decision of the
respondent court is affirmed.
G.R. No. 206484, June 29, 2016 the DOTC pursuant to their FLA.

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS On April 29, 2003, the respondent spouses sent a final demand letter to both the
(DOTC), Petitioner, v. SPOUSES VICENTE ABECINA AND MARIA CLEOFE DOTC and Digitel to vacate the premises and to pay unpaid rent/damages in the
ABECINA, Respondents. amount of one million two hundred thousand pesos (P1,200,000.00). Neither the
DOTC nor Digitel complied with the demand.
DECISION
On September 3, 2003, the respondent spouses filed an accion
publiciana complaint6 against the DOTC and Digitel for recovery of possession and
BRION, J.: damages. The complaint was docketed as Civil Case No. 7355.

This petition for review on certiorari seeks to reverse and set aside the March 20, In its answer, the DOTC claimed immunity from suit and ownership over the subject
2013 decision of the Court of Appeals (CA) in CA-G.R. CV No. 937951 affirming properties.7Nevertheless, during the pre-trial conference, the DOTC admitted that the
the decision of the Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39, Abecinas were the rightful owners of the properties and opted to rely instead on state
in Civil Case No. 7355.2 The RTC ordered the Department of Transportation and immunity from suit.8chanrobleslaw
Communications (DOTC) to vacate the respondents' properties and to pay them
actual and moral damages. On March 12, 2007, the respondent spouses and Digitel executed a Compromise
Agreement and entered into a Contract of Lease. The RTC rendered a partial
ANTECEDENTS decision and approved the Compromise Agreement on March 22,
2007.9chanrobleslaw
Respondent spouses Vicente and Maria Cleofe Abecina (respondents/spouses
Abecina) are the registered owners of five parcels of land in Sitio Paltik, Barrio Sta. On May 20, 2009, the RTC rendered its decision against the DOTC.10 It brushed
Rosa, Jose Panganiban, Camarines Norte. The properties are covered by Transfer aside the defense of state immunity. Citing Ministerio v. Court of First
Certificates of Title (TCT) Nos. T-25094, T-25095, T-25096, T-25097, and T- Instance11 and Amigable v. Cuenca,12 it held that government immunity from suit
25098.3chanrobleslaw could not be used as an instrument to perpetuate an injustice on a
citizen.13chanrobleslaw
In February 1993, the DOTC awarded Digitel Telecommunications Philippines, Inc.
(Digitel) a contract for the management, operation, maintenance, and development of The RTC held that as the lawful owners of the properties, the respondent spouses
a Regional Telecommunications Development Project (RTDP) under the National enjoyed the right to use and to possess them - rights that were violated by the
Telephone Program, Phase I, Tranche 1 (NTPI-1)4chanrobleslaw DOTC's unauthorized entry, construction, and refusal to vacate. The RTC (1) ordered
the Department - as a builder in bad faith -to forfeit the improvements and vacate the
The DOTC and Digitel subsequently entered into several Facilities Management properties; and (2) awarded the spouses with P1,200,000.00 as actual damages,
Agreements (FMA) for Digitel to manage, operate, maintain, and develop the RTDP P200,000.00 as moral damages, and P200,000.00 as exemplary damages plus
and NTPI-1 facilities comprising local telephone exchange lines in various attorney's fees and costs of suit.
municipalities in Luzon. The FMAs were later converted into Financial Lease
Agreements (FLA) in 1995. The DOTC elevated the case to the CA arguing: (1) that the RTC never acquired
jurisdiction over it due to state immunity from suit; (2) that the suit against it should
Later on, the municipality of Jose Panganiban, Camarines Norte, donated a one have been dismissed after the spouses Abecina and Digitel executed a compromise
thousand two hundred (1,200) square-meter parcel of land to the DOTC for the agreement; and (3) that the RTC erred in awarding actual, moral, and exemplary
implementation of the RDTP in the municipality. However, the municipality damages against it.14 The appeal was docketed as CA-G.R. CV No. 93795.
erroneously included portions of the respondents' property in the donation. Pursuant
to the FLAs, Digitel constructed a telephone exchange on the property which On March 20, 2013, the CA affirmed the RTC's decision but deleted the award of
encroached on the properties of the respondent spouses.5chanrobleslaw exemplary damages. The CA upheld the RTC's jurisdiction over cases for accion
publiciana where the assessed value exceeds P20,000.00.15 It likewise denied the
Sometime in the mid-1990s, the spouses Abecina discovered Digitel's occupation DOTC's claim of state immunity from suit, reasoning that the DOTC removed its
over portions of their properties. They required Digitel to vacate their properties and cloak of immunity after entering into a proprietary contract - the Financial Lease
pay damages, but the latter refused, insisting that it was occupying the property of
Agreement with Digitel.16 It also adopted the RTC's position that state immunity implication.
cannot be used to defeat a valid claim for compensation arising from an unlawful
taking without the proper expropriation proceedings.17The CA affirmed the award of Over the years, the State's participation in economic and commercial activities
actual and moral damages due to the DOTC's neglect to verify the perimeter of the gradually expanded beyond its sovereign function as regulator and governor. The
telephone exchange construction but found no valid justification for the award of evolution of the State's activities and degree of participation in commerce demanded
exemplary damages.18chanrobleslaw a parallel evolution in the traditional rule of state immunity. Thus, it became
necessary to distinguish between the State's sovereign and governmental acts (jure
On April 16, 2013, the DOTC filed the present petition for review on certiorari. imperii) and its private, commercial, and proprietary acts (jure gestionis). Presently,
state immunity restrictively extends only to acts jure imperii while acts jure
THE PARTIES' ARGUMENTS gestionis are considered as a waiver of immunity.29chanrobleslaw

The DOTC asserts that its Financial Lease Agreement with Digitel was entered into The Philippines recognizes the vital role of information and communication in nation
in pursuit of its governmental functions to promote and develop networks of building.30 As a consequence, we have adopted a policy environment that aspires for
communication systems.19 Therefore, it cannot be interpreted as a waiver of state the full development of communications infrastructure to facilitate the flow of
immunity. information into, out of, and across the country.31To this end, the DOTC has been
mandated with the promotion, development, and regulation of dependable and
The DOTC also maintains that while it was regrettable that the construction of the coordinated networks of communication.32chanrobleslaw
telephone exchange erroneously encroached on portions of the respondent's
properties, the RTC erred in ordering the return of the property.20 It argues that while The DOTC encroached on the respondents' properties when it constructed the local
the DOTC, in good faith and in the performance of its mandate, took private property telephone exchange in Daet, Camarines Norte. The exchange was part of the RTDP
without formal expropriation proceedings, the taking was nevertheless an exercise of pursuant to the National Telephone Program. We have no doubt that when the DOTC
eminent domain.21chanrobleslaw constructed the encroaching structures and subsequently entered into the FLA with
Digitel for their maintenance, it was carrying out a sovereign function. Therefore, we
Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office agree with the DOTC's contention that these are acts jure imperii that fall within the
(ATO),22 the Department prays that instead of allowing recovery of the property, the cloak of state immunity.
case should be remanded to the RTC for determination of just compensation.
However, as the respondents repeatedly pointed out, this Court has long established
On the other hand, the respondents counter that the state immunity cannot be invoked in Ministerio v CFI,33Amigable v. Cuenca,34 the 2010 case Heirs of Pidacan v.
to perpetrate an injustice against its citizens.23 They also maintain that because the ATO,35 and more recently in Vigilar v. Aquino36 that the doctrine of state immunity
subject properties are titled, the DOTC is a builder in bad faith who is deemed to cannot serve as an instrument for perpetrating an injustice to a citizen.
have lost the improvements it introduced.24 Finally, they differentiate their case
from Heirs of Mateo Pidacan v. ATO because Pidacan originated from a complaint The Constitution identifies the limitations to the awesome and near-limitless powers
for payment of the value of the property and rentals while their case originated from of the State. Chief among these limitations are the principles that no person shall be
a complaint for recovery of possession and damages.25cralawredchanrobleslaw deprived of life, liberty, or property without due process of law and that private
property shall not be taken for public use without just compensation.37 These
OUR RULING limitations are enshrined in no less than the Bill of Rights that guarantees the citizen
protection from abuse by the State.
We find no merit in the petition.
Consequently, our laws38 require that the State's power of eminent domain shall be
26
The State may not be sued without its consent. This fundamental doctrine stems exercised through expropriation proceedings in court. Whenever private property is
from the principle that there can be no legal right against the authority which makes taken for public use, it becomes the ministerial duty of the concerned office or
the law on which the right depends.27This generally accepted principle of law has agency to initiate expropriation proceedings. By necessary implication, the filing of a
been explicitly expressed in both the 197328 and the present Constitutions. complaint for expropriation is a waiver of State immunity.

But as the principle itself implies, the doctrine of state immunity is not absolute. The If the DOTC had correctly followed the regular procedure upon discovering that it
State may waive its cloak of immunity and the waiver may be made expressly or by had encroached on the respondents' property, it would have initiated expropriation
proceedings instead of insisting on its immunity from suit. The petitioners would not Article 52743 of the Civil Code presumes good faith. Without proof that the
have had to resort to filing its complaint for reconveyance. As this Court said Department's mistake was made in bad faith, its construction is presumed to have
in Ministerio:ChanRoblesVirtualawlibrary been made in good faith. Therefore, the forfeiture of the improvements in favor of
It is unthinkable then that precisely because there was a failure to abide by what the the respondent spouses is unwarranted.
law requires, the government would stand to benefit. It is just as important, if not
more so, that there be fidelity to legal norms on the part of officialdom if the rule of WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009
law were to be maintained. It is not too much to say that when the government decision of the Regional Trial Court in Civil Case No. 7355, as modified by the
takes any property for public use, which is conditioned upon the payment of March 20, 2013 decision of the Court of Appeals in CA-G.R. CV No. 93795,
just compensation, to be judicially ascertained, it makes manifest that it submits is AFFIRMED with further MODIFICATION that the forfeiture of the
to the jurisdiction of a court. There is no thought then that the doctrine of immunity improvements made by the DOTC in favor of the respondents is DELETED. No
from suit could still be appropriately invoked.39 [Emphasis supplied] costs.
We hold, therefore, that the Department's entry into and taking of possession of the
respondents' property amounted to an implied waiver of its governmental immunity SO ORDERED.chanRoblesvirtualLawlibrary
from suit.

We also find no merit in the DOTC's contention that the RTC should not have
ordered the reconveyance of the respondent spouses' property because the property is
being used for a vital governmental function, that is, the operation and maintenance
of a safe and efficient communication system.40chanrobleslaw

The exercise of eminent domain requires a genuine necessity to take the property for
public use and the consequent payment of just compensation. The property is
evidently being used for a public purpose. However, we also note that the respondent
spouses willingly entered into a lease agreement with Digitel for the use of the
subject properties.

If in the future the factual circumstances should change and the respondents refuse to
continue the lease, then the DOTC may initiate expropriation proceedings. But as
matters now stand, the respondents are clearly willing to lease the property.
Therefore, we find no genuine necessity for the DOTC to actually take the property
at this point.

Lastly, we find that the CA erred when it affirmed the RTC's decision without
deleting the forfeiture of the improvements made by the DOTC through Digitel.
Contrary to the RTC's findings, the DOTC was not a builder in bad faith when the
improvements were constructed. The CA itself found that the Department's
encroachment over the respondents' properties was a result of a mistaken
implementation of the donation from the municipality of Jose
Panganiban.41chanrobleslaw

Good faith consists in the belief of the builder that the land he is building on is his
and [of] his ignorance of any defect or flaw in his title.42 While the DOTC later
realized its error and admitted its encroachment over the respondents' property, there
is no evidence that it acted maliciously or in bad faith when the construction was
done.
G.R. No. 175356 December 3, 2013 c) exemption from the payment of individual income taxes: Provided, That
their annual taxable income does not exceed the property level as
MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, determined by the National Economic and Development Authority (NEDA)
INC., Petitioners, for that year;
vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND d) exemption from training fees for socioeconomic programs undertaken by
DEVELOPMENT and THE SECRETARY OF THE DEPARTMENT OF the OSCA as part of its work;
FINANCE, Respondents.
e) free medical and dental services in government establishment[s]
DECISION anywhere in the country, subject to guidelines to be issued by the
Department of Health, the Government Service Insurance System and the
DEL CASTILLO, J.: Social Security System;

When a party challeges the constitutionality of a law, the burden of proof rests upon f) to the extent practicable and feasible, the continuance of the same benefits
him. and privileges given by the Government Service Insurance System (GSIS),
Social Security System (SSS) and PAG-IBIG, as the case may be, as are
Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by enjoyed by those in actual service.
petitioners Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic
corporations engaged in the business of providing funeral and burial services, against On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement
public respondents Secretaries of the Department of Social Welfare and RA 7432. Sections 2(i) and 4 of RR No. 02-94 provide:
Development (DSWD) and the Department of Finance (DOF).
Sec. 2. DEFINITIONS. – For purposes of these regulations: i. Tax Credit – refers to
Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. the amount representing the 20% discount granted to a qualified senior citizen by all
7432,3 as amended by RA 9257,4 and the implementing rules and regulations issued establishments relative to their utilization of transportation services, hotels and
by the DSWD and DOF insofar as these allow business establishments to claim the similar lodging establishments, restaurants, drugstores, recreation centers, theaters,
20% discount given to senior citizens as a tax deduction. cinema houses, concert halls, circuses, carnivals and other similar places of culture,
leisure and amusement, which discount shall be deducted by the said establishments
from their gross income for income tax purposes and from their gross sales for value-
Factual Antecedents
added tax or other percentage tax purposes. x x x x Sec. 4.
RECORDING/BOOKKEEPING REQUIREMENTS FOR PRIVATE
On April 23, 1992, RA 7432 was passed into law, granting senior citizens the ESTABLISHMENTS. – Private establishments, i.e., transport services, hotels and
following privileges: similar lodging establishments, restaurants, recreation centers, drugstores, theaters,
cinema houses, concert halls, circuses, carnivals and other similar places of culture[,]
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled leisure and amusement, giving 20% discounts to qualified senior citizens are required
to the following: to keep separate and accurate record[s] of sales made to senior citizens, which shall
include the name, identification number, gross sales/receipts, discounts, dates of
a) the grant of twenty percent (20%) discount from all establishments transactions and invoice number for every transaction. The amount of 20% discount
relative to utilization of transportation services, hotels and similar lodging shall be deducted from the gross income for income tax purposes and from gross
establishment[s], restaurants and recreation centers and purchase of sales of the business enterprise concerned for purposes of the VAT and other
medicine anywhere in the country: Provided, That private establishments percentage taxes.
may claim the cost as tax credit;
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court
b) a minimum of twenty percent (20%) discount on admission fees charged declared Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene
by theaters, cinema houses and concert halls, circuses, carnivals and other RA 7432,6 thus:
similar places of culture, leisure, and amusement;
RA 7432 specifically allows private establishments to claim as tax credit the amount present case, the tax authorities have given the term tax credit in Sections 2.i and 4 of
of discounts they grant. In turn, the Implementing Rules and Regulations, issued RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation
pursuant thereto, provide the procedures for its availment. To deny such credit, has muddled x x x the intent of Congress in granting a mere discount privilege, not a
despite the plain mandate of the law and the regulations carrying out that mandate, is sales discount. The administrative agency issuing these regulations may not enlarge,
indefensible. First, the definition given by petitioner is erroneous. It refers to tax alter or restrict the provisions of the law it administers; it cannot engraft additional
credit as the amount representing the 20 percent discount that "shall be deducted by requirements not contemplated by the legislature.
the said establishments from their gross income for income tax purposes and from
their gross sales for value-added tax or other percentage tax purposes." In ordinary In case of conflict, the law must prevail. A "regulation adopted pursuant to law is
business language, the tax credit represents the amount of such discount. However, law." Conversely, a regulation or any portion thereof not adopted pursuant to law is
the manner by which the discount shall be credited against taxes has not been no law and has neither the force nor the effect of law.7
clarified by the revenue regulations. By ordinary acceptation, a discount is an
"abatement or reduction made from the gross amount or value of anything." To be
On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
more precise, it is in business parlance "a deduction or lowering of an amount of
money;" or "a reduction from the full amount or value of something, especially a
price." In business there are many kinds of discount, the most common of which is SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled
that affecting the income statement or financial report upon which the income tax is to the following:
based.
(a) the grant of twenty percent (20%) discount from all establishments relative to the
xxxx utilization of services in hotels and similar lodging establishments, restaurants and
recreation centers, and purchase of medicines in all establishments for the exclusive
use or enjoyment of senior citizens, including funeral and burial services for the
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20
death of senior citizens;
percent discount deductible from gross income for income tax purposes, or from
gross sales for VAT or other percentage tax purposes. In effect, the tax credit benefit
under RA 7432 is related to a sales discount. This contrived definition is improper, xxxx
considering that the latter has to be deducted from gross sales in order to compute the
gross income in the income statement and cannot be deducted again, even for The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax
purposes of computing the income tax. When the law says that the cost of the deduction based on the net cost of the goods sold or services rendered: Provided,
discount may be claimed as a tax credit, it means that the amount — when claimed That the cost of the discount shall be allowed as deduction from gross income for the
— shall be treated as a reduction from any tax liability, plain and simple. The option same taxable year that the discount is granted. Provided, further, That the total
to avail of the tax credit benefit depends upon the existence of a tax liability, but to amount of the claimed tax deduction net of value added tax if applicable, shall be
limit the benefit to a sales discount — which is not even identical to the discount included in their gross sales receipts for tax purposes and shall be subject to proper
privilege that is granted by law — does not define it at all and serves no useful documentation and to the provisions of the National Internal Revenue Code, as
purpose. The definition must, therefore, be stricken down. amended.

Laws Not Amended by Regulations To implement the tax provisions of RA 9257, the Secretary of Finance issued RR
No. 4-2006, the pertinent provision of which provides:
Second, the law cannot be amended by a mere regulation. In fact, a regulation that
"operates to create a rule out of harmony with the statute is a mere nullity;" it cannot SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS
prevail. It is a cardinal rule that courts "will and should respect the contemporaneous DEDUCTION FROM GROSS INCOME. – Establishments enumerated in
construction placed upon a statute by the executive officers whose duty it is to subparagraph (6) hereunder granting sales discounts to senior citizens on the sale of
enforce it x x x." In the scheme of judicial tax administration, the need for certainty goods and/or services specified thereunder are entitled to deduct the said discount
and predictability in the implementation of tax laws is crucial. Our tax authorities fill from gross income subject to the following conditions:
in the details that "Congress may not have the opportunity or competence to
provide." The regulations these authorities issue are relied upon by taxpayers, who (1) Only that portion of the gross sales EXCLUSIVELY USED,
are certain that these will be followed by the courts. Courts, however, will not uphold CONSUMED OR ENJOYED BY THE SENIOR CITIZEN shall be eligible
these authorities’ interpretations when clearly absurd, erroneous or improper. In the for the deductible sales discount.
(2) The gross selling price and the sales discount MUST BE Provided, That the cost of the discount shall be allowed as deduction from gross
SEPARATELY INDICATED IN THE OFFICIAL RECEIPT OR SALES income for the same taxable year that the discount is granted; Provided, further, That
INVOICE issued by the establishment for the sale of goods or services to the total amount of the claimed tax deduction net of value added tax if applicable,
the senior citizen. shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code,
(3) Only the actual amount of the discount granted or a sales discount not as amended; Provided, finally, that the implementation of the tax deduction shall be
exceeding 20% of the gross selling price can be deducted from the gross subject to the Revenue Regulations to be issued by the Bureau of Internal Revenue
income, net of value added tax, if applicable, for income tax purposes, and (BIR) and approved by the Department of Finance (DOF).
from gross sales or gross receipts of the business enterprise concerned, for
VAT or other percentage tax purposes. Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse,
praying that Section 4 of RA 7432, as amended by RA 9257, and the implementing
(4) The discount can only be allowed as deduction from gross income for rules and regulations issued by the DSWD and the DOF be declared unconstitutional
the same taxable year that the discount is granted. insofar as these allow business establishments to claim the 20% discount given to
senior citizens as a tax deduction; that the DSWD and the DOF be prohibited from
enforcing the same; and that the tax credit treatment of the 20% discount under the
(5) The business establishment giving sales discounts to qualified senior
citizens is required to keep separate and accurate record[s] of sales, which former Section 4 (a) of RA 7432 be reinstated.
shall include the name of the senior citizen, TIN, OSCA ID, gross
sales/receipts, sales discount granted, [date] of [transaction] and invoice Issues
number for every sale transaction to senior citizen.
Petitioners raise the following issues:
(6) Only the following business establishments which granted sales discount
to senior citizens on their sale of goods and/or services may claim the said A.
discount granted as deduction from gross income, namely:
WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR
xxxx CONTROVERSY.

(i) Funeral parlors and similar establishments – The beneficiary or any person who B.
shall shoulder the funeral and burial expenses of the deceased senior citizen shall
claim the discount, such as casket, embalmment, cremation cost and other related WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS
services for the senior citizen upon payment and presentation of [his] death IMPLEMENTING RULES AND REGULATIONS, INSOFAR AS THEY
certificate. PROVIDE THAT THE TWENTY PERCENT (20%) DISCOUNT TO SENIOR
CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE PRIVATE
The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, ESTABLISHMENTS, ARE INVALID AND UNCONSTITUTIONAL.9
to wit:
Petitioners’ Arguments
RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS
Petitioners emphasize that they are not questioning the 20% discount granted to
Article 8. Tax Deduction of Establishments. – The establishment may claim the senior citizens but are only assailing the constitutionality of the tax deduction scheme
discounts granted under Rule V, Section 4 – Discounts for Establishments, Section 9, prescribed under RA 9257 and the implementing rules and regulations issued by the
Medical and Dental Services in Private Facilities and Sections 10 and 11 – Air, Sea DSWD and the DOF.10
and Land Transportation as tax deduction based on the net cost of the goods sold or
services rendered. Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of
the Constitution, which provides that: "[p]rivate property shall not be taken for
public use without just compensation."11
In support of their position, petitioners cite Central Luzon Drug Corporation,12 where As to the constitutionality of RA 9257 and its implementing rules and regulations,
it was ruled that the 20% discount privilege constitutes taking of private property for respondents contend that petitioners failed to overturn its presumption of
public use which requires the payment of just compensation,13 and Carlos Superdrug constitutionality.30
Corporation v. Department of Social Welfare and Development,14 where it was
acknowledged that the tax deduction scheme does not meet the definition of just More important, respondents maintain that the tax deduction scheme is a legitimate
compensation.15 exercise of the State’s police power.31

Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Our Ruling
Corporation16 that the tax deduction scheme adopted by the government is justified
by police power.17 The Petition lacks merit.

They assert that "[a]lthough both police power and the power of eminent domain
There exists an actual case or controversy.
have the general welfare for their object, there are still traditional distinctions
between the two"18 and that "eminent domain cannot be made less supreme than
police power."19 We shall first resolve the procedural issue. When the constitutionality of a law is put
in issue, judicial review may be availed of only if the following requisites concur:
"(1) the existence of an actual and appropriate case; (2) the existence of personal and
Petitioners further claim that the legislature, in amending RA 7432, relied on an
substantial interest on the part of the party raising the [question of constitutionality];
erroneous contemporaneous construction that prior payment of taxes is required for
(3) recourse to judicial review is made at the earliest opportunity; and (4) the
tax credit.20
[question of constitutionality] is the lis mota of the case."32

Petitioners also contend that the tax deduction scheme violates Article XV, Section
In this case, petitioners are challenging the constitutionality of the tax deduction
421 and Article XIII, Section 1122of the Constitution because it shifts the State’s
scheme provided in RA 9257 and the implementing rules and regulations issued by
constitutional mandate or duty of improving the welfare of the elderly to the private
the DSWD and the DOF. Respondents, however, oppose the Petition on the ground
sector.23 that there is no actual case or controversy. We do not agree with respondents. An
actual case or controversy exists when there is "a conflict of legal rights" or "an
Under the tax deduction scheme, the private sector shoulders 65% of the discount assertion of opposite legal claims susceptible of judicial resolution."33
because only 35%24 of it is actually returned by the government.25
The Petition must therefore show that "the governmental act being challenged has a
Consequently, the implementation of the tax deduction scheme prescribed under direct adverse effect on the individual challenging it."34
Section 4 of RA 9257 affects the businesses of petitioners.26
In this case, the tax deduction scheme challenged by petitioners has a direct adverse
Thus, there exists an actual case or controversy of transcendental importance which effect on them. Thus, it cannot be denied that there exists an actual case or
deserves judicious disposition on the merits by the highest court of the land.27 controversy.

Respondents’ Arguments The validity of the 20% senior citizen discount and tax deduction scheme under
RA 9257, as an exercise of police power of the State, has already been settled in
Respondents, on the other hand, question the filing of the instant Petition directly Carlos Superdrug Corporation.
with the Supreme Court as this disregards the hierarchy of courts.28
Petitioners posit that the resolution of this case lies in the determination of whether
They likewise assert that there is no justiciable controversy as petitioners failed to the legally mandated 20% senior citizen discount is an exercise of police power or
prove that the tax deduction treatment is not a "fair and full equivalent of the loss eminent domain. If it is police power, no just compensation is warranted. But if it is
sustained" by them.29 eminent domain, the tax deduction scheme is unconstitutional because it is not a peso
for peso reimbursement of the 20% discount given to senior citizens. Thus, it
constitutes taking of private property without payment of just compensation. At the members while the State may design programs of social security for them. In
outset, we note that this question has been settled in Carlos Superdrug Corporation.35 addition to this, Section 10 in the Declaration of Principles and State Policies
provides: "The State shall provide social justice in all phases of national
In that case, we ruled: development." Further, Article XIII, Section 11, provides: "The State shall adopt an
integrated and comprehensive approach to health development which shall endeavor
Petitioners assert that Section 4(a) of the law is unconstitutional because it to make essential goods, health and other social services available to all the people at
affordable cost. There shall be priority for the needs of the underprivileged sick,
constitutes deprivation of private property. Compelling drugstore owners and
elderly, disabled, women and children." Consonant with these constitutional
establishments to grant the discount will result in a loss of profit and capital because
1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the principles the following are the declared policies of this Act:
law failed to provide a scheme whereby drugstores will be justly compensated for the
discount. Examining petitioners’ arguments, it is apparent that what petitioners are xxx xxx xxx
ultimately questioning is the validity of the tax deduction scheme as a reimbursement
mechanism for the twenty percent (20%) discount that they extend to senior citizens. (f) To recognize the important role of the private sector in the improvement of the
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully welfare of senior citizens and to actively seek their partnership.
reimburse petitioners for the discount privilege accorded to senior citizens. This is
because the discount is treated as a deduction, a tax-deductible expense that is To implement the above policy, the law grants a twenty percent discount to senior
subtracted from the gross income and results in a lower taxable income. Stated citizens for medical and dental services, and diagnostic and laboratory fees;
otherwise, it is an amount that is allowed by law to reduce the income prior to the admission fees charged by theaters, concert halls, circuses, carnivals, and other
application of the tax rate to compute the amount of tax which is due. Being a tax similar places of culture, leisure and amusement; fares for domestic land, air and sea
deduction, the discount does not reduce taxes owed on a peso for peso basis but travel; utilization of services in hotels and similar lodging establishments, restaurants
merely offers a fractional reduction in taxes owed. Theoretically, the treatment of the and recreation centers; and purchases of medicines for the exclusive use or
discount as a deduction reduces the net income of the private establishments enjoyment of senior citizens. As a form of reimbursement, the law provides that
concerned. The discounts given would have entered the coffers and formed part of business establishments extending the twenty percent discount to senior citizens may
the gross sales of the private establishments, were it not for R.A. No. 9257. The claim the discount as a tax deduction. The law is a legitimate exercise of police
permanent reduction in their total revenues is a forced subsidy corresponding to the power which, similar to the power of eminent domain, has general welfare for its
taking of private property for public use or benefit. This constitutes compensable object. Police power is not capable of an exact definition, but has been purposely
taking for which petitioners would ordinarily become entitled to a just compensation. veiled in general terms to underscore its comprehensiveness to meet all exigencies
Just compensation is defined as the full and fair equivalent of the property taken and provide enough room for an efficient and flexible response to conditions and
from its owner by the expropriator. The measure is not the taker’s gain but the circumstances, thus assuring the greatest benefits. Accordingly, it has been described
owner’s loss. The word just is used to intensify the meaning of the word as "the most essential, insistent and the least limitable of powers, extending as it does
compensation, and to convey the idea that the equivalent to be rendered for the to all the great public needs." It is "[t]he power vested in the legislature by the
property to be taken shall be real, substantial, full and ample. A tax deduction does constitution to make, ordain, and establish all manner of wholesome and reasonable
not offer full reimbursement of the senior citizen discount. As such, it would not laws, statutes, and ordinances, either with penalties or without, not repugnant to the
meet the definition of just compensation. Having said that, this raises the question of constitution, as they shall judge to be for the good and welfare of the commonwealth,
whether the State, in promoting the health and welfare of a special group of citizens, and of the subjects of the same." For this reason, when the conditions so demand as
can impose upon private establishments the burden of partly subsidizing a determined by the legislature, property rights must bow to the primacy of police
government program. The Court believes so. The Senior Citizens Act was enacted power because property rights, though sheltered by due process, must yield to
primarily to maximize the contribution of senior citizens to nation-building, and to general welfare. Police power as an attribute to promote the common good would be
grant benefits and privileges to them for their improvement and well-being as the diluted considerably if on the mere plea of petitioners that they will suffer loss of
State considers them an integral part of our society. The priority given to senior earnings and capital, the questioned provision is invalidated. Moreover, in the
citizens finds its basis in the Constitution as set forth in the law itself.1âwphi1 Thus, absence of evidence demonstrating the alleged confiscatory effect of the provision in
the Act provides: SEC. 2. Republic Act No. 7432 is hereby amended to read as question, there is no basis for its nullification in view of the presumption of validity
follows: which every law has in its favor. Given these, it is incorrect for petitioners to insist
that the grant of the senior citizen discount is unduly oppressive to their business,
SECTION 1. Declaration of Policies and Objectives. — Pursuant to Article XV, because petitioners have not taken time to calculate correctly and come up with a
Section 4 of the Constitution, it is the duty of the family to take care of its elderly financial report, so that they have not been able to show properly whether or not the
tax deduction scheme really works greatly to their disadvantage. In treating the sector, in order to achieve the purpose or objective of the law, is reasonably and
discount as a tax deduction, petitioners insist that they will incur losses because, directly related. Without sufficient proof that Section 4 (a) of R.A. No. 9257 is
referring to the DOF Opinion, for every ₱1.00 senior citizen discount that petitioners arbitrary, and that the continued implementation of the same would be
would give, P0.68 will be shouldered by them as only P0.32 will be refunded by the unconscionably detrimental to petitioners, the Court will refrain from quashing a
government by way of a tax deduction. To illustrate this point, petitioner Carlos legislative act.36 (Bold in the original; underline supplied)
Super Drug cited the anti-hypertensive maintenance drug Norvasc as an example.
According to the latter, it acquires Norvasc from the distributors at ₱37.57 per tablet, We, thus, found that the 20% discount as well as the tax deduction scheme is a valid
and retails it at ₱39.60 (or at a margin of 5%). If it grants a 20% discount to senior exercise of the police power of the State.
citizens or an amount equivalent to ₱7.92, then it would have to sell Norvasc at
₱31.68 which translates to a loss from capital of ₱5.89 per tablet. Even if the
No compelling reason has been proffered to overturn, modify or abandon the
government will allow a tax deduction, only ₱2.53 per tablet will be refunded and
ruling in Carlos Superdrug Corporation.
not the full amount of the discount which is ₱7.92. In short, only 32% of the 20%
discount will be reimbursed to the drugstores. Petitioners’ computation is flawed. For
purposes of reimbursement, the law states that the cost of the discount shall be Petitioners argue that we have previously ruled in Central Luzon Drug
deducted from gross income, the amount of income derived from all sources before Corporation37 that the 20% discount is an exercise of the power of eminent domain,
deducting allowable expenses, which will result in net income. Here, petitioners tried thus, requiring the payment of just compensation. They urge us to re-examine our
to show a loss on a per transaction basis, which should not be the case. An income ruling in Carlos Superdrug Corporation38 which allegedly reversed the ruling in
statement, showing an accounting of petitioners' sales, expenses, and net profit (or Central Luzon Drug Corporation.39
loss) for a given period could have accurately reflected the effect of the discount on
their income. Absent any financial statement, petitioners cannot substantiate their They also point out that Carlos Superdrug Corporation40 recognized that the tax
claim that they will be operating at a loss should they give the discount. In addition, deduction scheme under the assailed law does not provide for sufficient just
the computation was erroneously based on the assumption that their customers compensation. We agree with petitioners’ observation that there are statements in
consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on Central Luzon Drug Corporation41 describing the 20% discount as an exercise of the
income, not on the amount of the discount. power of eminent domain, viz.:

Furthermore, it is unfair for petitioners to criticize the law because they cannot raise [T]he privilege enjoyed by senior citizens does not come directly from the State, but
the prices of their medicines given the cutthroat nature of the players in the industry. rather from the private establishments concerned. Accordingly, the tax credit benefit
It is a business decision on the part of petitioners to peg the mark-up at 5%. Selling granted to these establishments can be deemed as their just compensation for private
the medicines below acquisition cost, as alleged by petitioners, is merely a result of property taken by the State for public use. The concept of public use is no longer
this decision. Inasmuch as pricing is a property right, petitioners cannot reproach the confined to the traditional notion of use by the public, but held synonymous with
law for being oppressive, simply because they cannot afford to raise their prices for public interest, public benefit, public welfare, and public convenience. The discount
fear of losing their customers to competition. The Court is not oblivious of the retail privilege to which our senior citizens are entitled is actually a benefit enjoyed by the
side of the pharmaceutical industry and the competitive pricing component of the general public to which these citizens belong. The discounts given would have
business. While the Constitution protects property rights, petitioners must accept the entered the coffers and formed part of the gross sales of the private establishments
realities of business and the State, in the exercise of police power, can intervene in concerned, were it not for RA 7432. The permanent reduction in their total revenues
the operations of a business which may result in an impairment of property rights in is a forced subsidy corresponding to the taking of private property for public use or
the process. benefit. As a result of the 20 percent discount imposed by RA 7432, respondent
becomes entitled to a just compensation. This term refers not only to the issuance of
Moreover, the right to property has a social dimension. While Article XIII of the a tax credit certificate indicating the correct amount of the discounts given, but also
Constitution provides the precept for the protection of property, various laws and to the promptness in its release. Equivalent to the payment of property taken by the
jurisprudence, particularly on agrarian reform and the regulation of contracts and State, such issuance — when not done within a reasonable time from the grant of the
public utilities, continuously serve as x x x reminder[s] that the right to property can discounts — cannot be considered as just compensation. In effect, respondent is
be relinquished upon the command of the State for the promotion of public good. made to suffer the consequences of being immediately deprived of its revenues while
Undeniably, the success of the senior citizens program rests largely on the support awaiting actual receipt, through the certificate, of the equivalent amount it needs to
imparted by petitioners and the other private establishments concerned. This being cope with the reduction in its revenues. Besides, the taxation power can also be used
the case, the means employed in invoking the active participation of the private as an implement for the exercise of the power of eminent domain. Tax measures are
but "enforced contributions exacted on pain of penal sanctions" and "clearly imposed taking for which petitioners would ordinarily become entitled to a just compensation.
for a public purpose." In recent years, the power to tax has indeed become a most Just compensation is defined as the full and fair equivalent of the property taken
effective tool to realize social justice, public welfare, and the equitable distribution of from its owner by the expropriator. The measure is not the taker’s gain but the
wealth. While it is a declared commitment under Section 1 of RA 7432, social justice owner’s loss. The word just is used to intensify the meaning of the word
"cannot be invoked to trample on the rights of property owners who under our compensation, and to convey the idea that the equivalent to be rendered for the
Constitution and laws are also entitled to protection. The social justice consecrated in property to be taken shall be real, substantial, full and ample. A tax deduction does
our [C]onstitution [is] not intended to take away rights from a person and give them not offer full reimbursement of the senior citizen discount. As such, it would not
to another who is not entitled thereto." For this reason, a just compensation for meet the definition of just compensation. Having said that, this raises the question of
income that is taken away from respondent becomes necessary. It is in the tax credit whether the State, in promoting the health and welfare of a special group of citizens,
that our legislators find support to realize social justice, and no administrative body can impose upon private establishments the burden of partly subsidizing a
can alter that fact. To put it differently, a private establishment that merely breaks government program. The Court believes so.44
even — without the discounts yet — will surely start to incur losses because of such
discounts. The same effect is expected if its mark-up is less than 20 percent, and if all This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the
its sales come from retail purchases by senior citizens. Aside from the observation 20% discount and tax deduction scheme is a valid exercise of the police power of the
we have already raised earlier, it will also be grossly unfair to an establishment if the State. The present case, thus, affords an opportunity for us to clarify the above-
discounts will be treated merely as deductions from either its gross income or its quoted statements in Central Luzon Drug Corporation46 and Carlos Superdrug
gross sales.1âwphi1 Operating at a loss through no fault of its own, it will realize that Corporation.47
the tax credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-
generating businesses will be put in a better position if they avail themselves of tax
First, we note that the above-quoted disquisition on eminent domain in Central
credits denied those that are losing, because no taxes are due from the latter.42 (Italics
Luzon Drug Corporation48 is obiter dicta and, thus, not binding precedent. As stated
in the original; emphasis supplied) earlier, in Central Luzon Drug Corporation,49 we ruled that the BIR acted ultra
vires when it effectively treated the 20% discount as a tax deduction, under Sections
The above was partly incorporated in our ruling in Carlos Superdrug 2.i and 4 of RR No. 2-94, despite the clear wording of the previous law that the same
Corporation43 when we stated preliminarily that— should be treated as a tax credit. We were, therefore, not confronted in that case with
the issue as to whether the 20% discount is an exercise of police power or eminent
Petitioners assert that Section 4(a) of the law is unconstitutional because it domain. Second, although we adverted to Central Luzon Drug Corporation50 in our
constitutes deprivation of private property. Compelling drugstore owners and ruling in Carlos Superdrug Corporation,51 this referred only to preliminary matters. A
establishments to grant the discount will result in a loss of profit and capital because fair reading of Carlos Superdrug Corporation52would show that we categorically
1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the ruled therein that the 20% discount is a valid exercise of police power. Thus, even if
law failed to provide a scheme whereby drugstores will be justly compensated for the the current law, through its tax deduction scheme (which abandoned the tax credit
discount. Examining petitioners’ arguments, it is apparent that what petitioners are scheme under the previous law), does not provide for a peso for peso reimbursement
ultimately questioning is the validity of the tax deduction scheme as a reimbursement of the 20% discount given by private establishments, no constitutional infirmity
mechanism for the twenty percent (20%) discount that they extend to senior citizens. obtains because, being a valid exercise of police power, payment of just
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully compensation is not warranted. We have carefully reviewed the basis of our ruling in
reimburse petitioners for the discount privilege accorded to senior citizens. This is Carlos Superdrug Corporation53 and we find no cogent reason to overturn, modify or
because the discount is treated as a deduction, a tax-deductible expense that is abandon it. We also note that petitioners’ arguments are a mere reiteration of those
subtracted from the gross income and results in a lower taxable income. Stated raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos
otherwise, it is an amount that is allowed by law to reduce the income prior to the Superdrug Corporation.55
application of the tax rate to compute the amount of tax which is due. Being a tax
deduction, the discount does not reduce taxes owed on a peso for peso basis but Nonetheless, we deem it proper, in what follows, to amplify our explanation in
merely offers a fractional reduction in taxes owed. Theoretically, the treatment of the Carlos Superdrug Corporation56 as to why the 20% discount is a valid exercise of
discount as a deduction reduces the net income of the private establishments police power and why it may not, under the specific circumstances of this case, be
concerned. The discounts given would have entered the coffers and formed part of considered as an exercise of the power of eminent domain contrary to the obiter in
the gross sales of the private establishments, were it not for R.A. No. 9257. The Central Luzon Drug Corporation.57
permanent reduction in their total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit. This constitutes compensable
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain the use of destruction of the property is not essential for "taking" under the power of eminent
liberty and property for public welfare.58 domain to be present.70

The only limitation is that the restriction imposed should be reasonable, not Examples of these include establishment of easements such as where the land owner
oppressive.59 is perpetually deprived of his proprietary rights because of the hazards posed by
electric transmission lines constructed above his property71 or the compelled
In other words, to be a valid exercise of police power, it must have a lawful subject interconnection of the telephone system between the government and a private
or objective and a lawful method of accomplishing the goal.60 company.72

Under the police power of the State, "property rights of individuals may be subjected In these cases, although the private property owner is not divested of ownership or
to restraints and burdens in order to fulfill the objectives of the government."61 possession, payment of just compensation is warranted because of the burden placed
on the property for the use or benefit of the public.
The State "may interfere with personal liberty, property, lawful businesses and
occupations to promote the general welfare [as long as] the interference [is] The 20% senior citizen discount is an exercise of police power.
reasonable and not arbitrary."62
It may not always be easy to determine whether a challenged governmental act is an
Eminent domain, on the other hand, is the inherent power of the State to take or exercise of police power or eminent domain. The very nature of police power as
appropriate private property for public use.63 elastic and responsive to various social conditions73 as well as the evolving meaning
and scope of public use74 and just compensation75 in eminent domain evinces that
these are not static concepts. Because of the exigencies of rapidly changing times,
The Constitution, however, requires that private property shall not be taken without
Congress may be compelled to adopt or experiment with different measures to
due process of law and the payment of just compensation.64
promote the general welfare which may not fall squarely within the traditionally
recognized categories of police power and eminent domain. The judicious approach,
Traditional distinctions exist between police power and eminent domain. In the therefore, is to look at the nature and effects of the challenged governmental act and
exercise of police power, a property right is impaired by regulation,65 or the use of decide, on the basis thereof, whether the act is the exercise of police power or
property is merely prohibited, regulated or restricted66 to promote public welfare. In eminent domain. Thus, we now look at the nature and effects of the 20% discount to
such cases, there is no compensable taking, hence, payment of just compensation is determine if it constitutes an exercise of police power or eminent domain. The 20%
not required. Examples of these regulations are property condemned for being discount is intended to improve the welfare of senior citizens who, at their age, are
noxious or intended for noxious purposes (e.g., a building on the verge of collapse to less likely to be gainfully employed, more prone to illnesses and other disabilities,
be demolished for public safety, or obscene materials to be destroyed in the interest and, thus, in need of subsidy in purchasing basic commodities. It may not be amiss to
of public morals)67 as well as zoning ordinances prohibiting the use of property for mention also that the discount serves to honor senior citizens who presumably spent
purposes injurious to the health, morals or safety of the community (e.g., dividing a the productive years of their lives on contributing to the development and progress of
city’s territory into residential and industrial areas).68 the nation. This distinct cultural Filipino practice of honoring the elderly is an
integral part of this law. As to its nature and effects, the 20% discount is a regulation
It has, thus, been observed that, in the exercise of police power (as distinguished affecting the ability of private establishments to price their products and services
from eminent domain), although the regulation affects the right of ownership, none relative to a special class of individuals, senior citizens, for which the Constitution
of the bundle of rights which constitute ownership is appropriated for use by or for affords preferential concern.76
the benefit of the public.69
In turn, this affects the amount of profits or income/gross sales that a private
On the other hand, in the exercise of the power of eminent domain, property interests establishment can derive from senior citizens. In other words, the subject regulation
are appropriated and applied to some public purpose which necessitates the payment affects the pricing, and, hence, the profitability of a private establishment. However,
of just compensation therefor. Normally, the title to and possession of the property it does not purport to appropriate or burden specific properties, used in the operation
are transferred to the expropriating authority. Examples include the acquisition of or conduct of the business of private establishments, for the use or benefit of the
lands for the construction of public highways as well as agricultural lands acquired public, or senior citizens for that matter, but merely regulates the pricing of goods
by the government under the agrarian reform law for redistribution to qualified and services relative to, and the amount of profits or income/gross sales that such
farmer beneficiaries. However, it is a settled rule that the acquisition of title or total
private establishments may derive from, senior citizens. The subject regulation may propositions." On many other occasions as well, the U.S. Supreme Court has said
be said to be similar to, but with substantial distinctions from, price control or rate of that the issue of when regulation constitutes a taking is a matter of considering the
return on investment control laws which are traditionally regarded as police power facts in each case. The Court asks whether justice and fairness require that the
measures.77 economic loss caused by public action must be compensated by the government and
thus borne by the public as a whole, or whether the loss should remain concentrated
These laws generally regulate public utilities or industries/enterprises imbued with on those few persons subject to the public action.81
public interest in order to protect consumers from exorbitant or unreasonable pricing
as well as temper corporate greed by controlling the rate of return on investment of The impact or effect of a regulation, such as the one under consideration, must, thus,
these corporations considering that they have a monopoly over the goods or services be determined on a case-to-case basis. Whether that line between permissible
that they provide to the general public. The subject regulation differs therefrom in regulation under police power and "taking" under eminent domain has been crossed
that (1) the discount does not prevent the establishments from adjusting the level of must, under the specific circumstances of this case, be subject to proof and the one
prices of their goods and services, and (2) the discount does not apply to all assailing the constitutionality of the regulation carries the heavy burden of proving
customers of a given establishment but only to the class of senior citizens. that the measure is unreasonable, oppressive or confiscatory. The time-honored rule
Nonetheless, to the degree material to the resolution of this case, the 20% discount is that the burden of proving the unconstitutionality of a law rests upon the one
may be properly viewed as belonging to the category of price regulatory measures assailing it and "the burden becomes heavier when police power is at issue."82
which affect the profitability of establishments subjected thereto. On its face,
therefore, the subject regulation is a police power measure. The obiter in Central The 20% senior citizen discount has not been shown to be unreasonable, oppressive
Luzon Drug Corporation,78 however, describes the 20% discount as an exercise of or confiscatory.
the power of eminent domain and the tax credit, under the previous law, equivalent
to the amount of discount given as the just compensation therefor. The reason is that
In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders
(1) the discount would have formed part of the gross sales of the establishment were
of electric plants, challenged the validity of a law limiting their allowable net profits
it not for the law prescribing the 20% discount, and (2) the permanent reduction in to no more than 12% per annum of their investments plus two-month operating
total revenues is a forced subsidy corresponding to the taking of private property for
expenses. In rejecting their plea, we ruled that, in an earlier case, it was found that
public use or benefit. The flaw in this reasoning is in its premise. It presupposes that
12% is a reasonable rate of return and that petitioners failed to prove that the
the subject regulation, which impacts the pricing and, hence, the profitability of a
aforesaid rate is confiscatory in view of the presumption of constitutionality.84
private establishment, automatically amounts to a deprivation of property without
due process of law. If this were so, then all price and rate of return on investment
control laws would have to be invalidated because they impact, at some level, the We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we
regulated establishment’s profits or income/gross sales, yet there is no provision for ruled that petitioners therein failed to prove that the 20% discount is arbitrary,
payment of just compensation. It would also mean that overnment cannot set price or oppressive or confiscatory. We noted that no evidence, such as a financial report, to
rate of return on investment limits, which reduce the profits or income/gross sales of establish the impact of the 20% discount on the overall profitability of petitioners
private establishments, if no just compensation is paid even if the measure is not was presented in order to show that they would be operating at a loss due to the
confiscatory. The obiter is, thus, at odds with the settled octrine that the State can subject regulation or that the continued implementation of the law would be
employ police power measures to regulate the pricing of goods and services, and, unconscionably detrimental to the business operations of petitioners. In the case at
hence, the profitability of business establishments in order to pursue legitimate State bar, petitioners proceeded with a hypothetical computation of the alleged loss that
objectives for the common good, provided that the regulation does not go too far as they will suffer similar to what the petitioners in Carlos Superdrug Corporation86 did.
to amount to "taking."79 Petitioners went directly to this Court without first establishing the factual bases of
their claims. Hence, the present recourse must, likewise, fail. Because all laws enjoy
the presumption of constitutionality, courts will uphold a law’s validity if any set of
In City of Manila v. Laguio, Jr.,80 we recognized that— x x x a taking also could be
facts may be conceived to sustain it.87
found if government regulation of the use of property went "too far." When
regulation reaches a certain magnitude, in most if not in all cases there must be an
exercise of eminent domain and compensation to support the act. While property On its face, we find that there are at least two conceivable bases to sustain the subject
may be regulated to a certain extent, if regulation goes too far it will be recognized as regulation’s validity absent clear and convincing proof that it is unreasonable,
a taking. No formula or rule can be devised to answer the questions of what is too far oppressive or confiscatory. Congress may have legitimately concluded that business
and when regulation becomes a taking. In Mahon, Justice Holmes recognized that it establishments have the capacity to absorb a decrease in profits or income/gross sales
was "a question of degree and therefore cannot be disposed of by general due to the 20% discount without substantially affecting the reasonable rate of return
on their investments considering (1) not all customers of a business establishment are revenue, arising from the mandatory discount, is a taking of private property for
senior citizens and (2) the level of its profit margins on goods and services offered to public use or benefit, hence, an exercise of the power of eminent domain requiring
the general public. Concurrently, Congress may have, likewise, legitimately the payment of just compensation. I We maintain that the discussion on eminent
concluded that the establishments, which will be required to extend the 20% domain in Central Luzon Drug Corporation91 is obiter dicta. As previously discussed,
discount, have the capacity to revise their pricing strategy so that whatever reduction in Central Luzon Drug Corporation,92 the BIR, pursuant to Sections 2.i and 4 of RR
in profits or income/gross sales that they may sustain because of sales to senior No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax
citizens, can be recouped through higher mark-ups or from other products not subject deduction instead of a tax credit despite the clear provision in that law which stated –
of discounts. As a result, the discounts resulting from sales to senior citizens will not
be confiscatory or unduly oppressive. In sum, we sustain our ruling in Carlos SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled
Superdrug Corporation88 that the 20% senior citizen discount and tax deduction to the following:
scheme are valid exercises of police power of the State absent a clear showing that it
is arbitrary, oppressive or confiscatory. a) The grant of twenty percent (20%) discount from all establishments
relative to utilization of transportation services, hotels and similar lodging
Conclusion establishment, restaurants and recreation centers and purchase of medicines
anywhere in the country: Provided, That private establishments may claim
In closing, we note that petitioners hypothesize, consistent with our previous the cost as tax credit; (Emphasis supplied)
ratiocinations, that the discount will force establishments to raise their prices in order
to compensate for its impact on overall profits or income/gross sales. The general Thus, the Court ruled that the subject revenue regulation violated the law, viz:
public, or those not belonging to the senior citizen class, are, thus, made to
effectively shoulder the subsidy for senior citizens. This, in petitioners’ view, is
The 20 percent discount required by the law to be given to senior citizens is a tax
unfair. credit, not merely a tax deduction from the gross income or gross sale of the
establishment concerned. A tax credit is used by a private establishment only after
As already mentioned, Congress may be reasonably assumed to have foreseen this the tax has been computed; a tax deduction, before the tax is computed. RA 7432
eventuality. But, more importantly, this goes into the wisdom, efficacy and unconditionally grants a tax credit to all covered entities. Thus, the provisions of the
expediency of the subject law which is not proper for judicial review. In a way, this revenue regulation that withdraw or modify such grant are void. Basic is the rule that
law pursues its social equity objective in a non-traditional manner unlike past and administrative regulations cannot amend or revoke the law.93
existing direct subsidy programs of the government for the poor and marginalized
sectors of our society. Verily, Congress must be given sufficient leeway in
As can be readily seen, the discussion on eminent domain was not necessary in order
formulating welfare legislations given the enormous challenges that the government
to arrive at this conclusion. All that was needed was to point out that the revenue
faces relative to, among others, resource adequacy and administrative capability in
regulation contravened the law which it sought to implement. And, precisely, this
implementing social reform measures which aim to protect and uphold the interests was done in Central Luzon Drug Corporation94 by comparing the wording of the
of those most vulnerable in our society. In the process, the individual, who enjoys the previous law vis-à-vis the revenue regulation; employing the rules of statutory
rights, benefits and privileges of living in a democratic polity, must bear his share in
construction; and applying the settled principle that a regulation cannot amend the
supporting measures intended for the common good. This is only fair. In fine,
law it seeks to implement. A close reading of Central Luzon Drug
without the requisite showing of a clear and unequivocal breach of the Constitution,
Corporation95 would show that the Court went on to state that the tax credit "can be
the validity of the assailed law must be sustained. deemed" as just compensation only to explain why the previous law provides for a
tax credit instead of a tax deduction. The Court surmised that the tax credit was a
Refutation of the Dissent form of just compensation given to the establishments covered by the 20% discount.
However, the reason why the previous law provided for a tax credit and not a tax
The main points of Justice Carpio’s Dissent may be summarized as follows: (1) the deduction was not necessary to resolve the issue as to whether the revenue regulation
discussion on eminent domain in Central Luzon Drug Corporation89 is not obiter contravenes the law. Hence, the discussion on eminent domain is obiter dicta.
dicta ; (2) allowable taking, in police power, is limited to property that is destroyed
or placed outside the commerce of man for public welfare; (3) the amount of A court, in resolving cases before it, may look into the possible purposes or reasons
mandatory discount is private property within the ambit of Article III, Section 990 of that impelled the enactment of a particular statute or legal provision. However,
the Constitution; and (4) the permanent reduction in a private establishment’s total statements made relative thereto are not always necessary in resolving the actual
controversies presented before it. This was the case in Central Luzon Drug by mandating a 20% discount. Thus, if a product is sold at ₱10.00 to the general
Corporation96resulting in that unfortunate statement that the tax credit "can be public, then it shall be sold at ₱8.00 ( i.e., ₱10.00 less 20%) to senior citizens. Note
deemed" as just compensation. This, in turn, led to the erroneous conclusion, by that the law does not impose at what specific price the product shall be sold, only
deductive reasoning, that the 20% discount is an exercise of the power of eminent that a 20% discount shall be given to senior citizens based on the price set by the
domain. The Dissent essentially adopts this theory and reasoning which, as will be business establishment. A business establishment is, thus, free to adjust the prices of
shown below, is contrary to settled principles in police power and eminent domain the goods or services it provides to the general public. Accordingly, it can increase
analysis. II The Dissent discusses at length the doctrine on "taking" in police power the price of the above product to ₱20.00 but is required to sell it at ₱16.00 (i.e. ,
which occurs when private property is destroyed or placed outside the commerce of ₱20.00 less 20%) to senior citizens. Third, because the law impacts the prices of the
man. Indeed, there is a whole class of police power measures which justify the goods or services of a particular establishment relative to its sales to senior citizens,
destruction of private property in order to preserve public health, morals, safety or its profits or income/gross sales are affected. The extent of the impact would,
welfare. As earlier mentioned, these would include a building on the verge of however, depend on the profit margin of the business establishment on a particular
collapse or confiscated obscene materials as well as those mentioned by the Dissent good or service. If a product costs ₱5.00 to produce and is sold at ₱10.00, then the
with regard to property used in violating a criminal statute or one which constitutes a profit98 is ₱5.0099 or a profit margin100 of 50%.101
nuisance. In such cases, no compensation is required. However, it is equally true that
there is another class of police power measures which do not involve the destruction Under the assailed law, the aforesaid product would have to be sold at ₱8.00 to
of private property but merely regulate its use. The minimum wage law, zoning senior citizens yet the business would still earn ₱3.00102 or a 30%103 profit margin.
ordinances, price control laws, laws regulating the operation of motels and hotels, On the other hand, if the product costs ₱9.00 to produce and is required to be sold at
laws limiting the working hours to eight, and the like would fall under this category. ₱8.00 to senior citizens, then the business would experience a loss of ₱1.00.104
The examples cited by the Dissent, likewise, fall under this category: Article 157 of
the Labor Code, Sections 19 and 18 of the Social Security Law, and Section 7 of the
But note that since not all customers of a business establishment are senior citizens,
Pag-IBIG Fund Law. These laws merely regulate or, to use the term of the Dissent,
the business establishment may continue to earn ₱1.00 from non-senior citizens
burden the conduct of the affairs of business establishments. In such cases, payment
which, in turn, can offset any loss arising from sales to senior citizens.
of just compensation is not required because they fall within the sphere of
permissible police power measures. The senior citizen discount law falls under this
latter category. III The Dissent proceeds from the theory that the permanent Fourth, when the law imposes the 20% discount in favor of senior citizens, it does
reduction of profits or income/gross sales, due to the 20% discount, is a "taking" of not prevent the business establishment from revising its pricing strategy.
private property for public purpose without payment of just compensation. At the
outset, it must be emphasized that petitioners never presented any evidence to By revising its pricing strategy, a business establishment can recoup any reduction of
establish that they were forced to suffer enormous losses or operate at a loss due to profits or income/gross sales which would otherwise arise from the giving of the
the effects of the assailed law. They came directly to this Court and provided a 20% discount. To illustrate, suppose A has two customers: X, a senior citizen, and Y,
hypothetical computation of the loss they would allegedly suffer due to the operation a non-senior citizen. Prior to the law, A sells his products at ₱10.00 a piece to X and
of the assailed law. The central premise of the Dissent’s argument that the 20% Y resulting in income/gross sales of ₱20.00 (₱10.00 + ₱10.00). With the passage of
discount results in a permanent reduction in profits or income/gross sales, or forces a the law, A must now sell his product to X at ₱8.00 (i.e., ₱10.00 less 20%) so that his
business establishment to operate at a loss is, thus, wholly unsupported by competent income/gross sales would be ₱18.00 (₱8.00 + ₱10.00) or lower by ₱2.00. To prevent
evidence. To be sure, the Court can invalidate a law which, on its face, is arbitrary, this from happening, A decides to increase the price of his products to ₱11.11 per
oppressive or confiscatory.97 piece. Thus, he sells his product to X at ₱8.89 (i.e. , ₱11.11 less 20%) and to Y at
₱11.11. As a result, his income/gross sales would still be ₱20.00105 (₱8.89 + ₱11.11).
But this is not the case here. The capacity, then, of business establishments to revise their pricing strategy makes
it possible for them not to suffer any reduction in profits or income/gross sales, or, in
the alternative, mitigate the reduction of their profits or income/gross sales even after
In the case at bar, evidence is indispensable before a determination of a constitutional
the passage of the law. In other words, business establishments have the capacity to
violation can be made because of the following reasons. First, the assailed law, by
adjust their prices so that they may remain profitable even under the operation of the
imposing the senior citizen discount, does not take any of the properties used by a
assailed law.
business establishment like, say, the land on which a manufacturing plant is
constructed or the equipment being used to produce goods or services. Second, rather
than taking specific properties of a business establishment, the senior citizen discount The Dissent, however, states that – The explanation by the majority that private
law merely regulates the prices of the goods or services being sold to senior citizens establishments can always increase their prices to recover the mandatory discount
will only encourage private establishments to adjust their prices upwards to the prevent or mitigate any reduction in profits or income/gross sales as illustrated
prejudice of customers who do not enjoy the 20% discount. It was likewise suggested above),108 and not all private establishments make a 20% profit margin (which
that if a company increases its prices, despite the application of the 20% discount, the conversely implies that there are those who make more and, thus, would not be
establishment becomes more profitable than it was before the implementation of greatly affected by this regulation).109
R.A. 7432. Such an economic justification is self-defeating, for more consumers will
suffer from the price increase than will benefit from the 20% discount. Even then, In fine, because of the possible scenarios discussed above, we cannot assume that the
such ability to increase prices cannot legally validate a violation of the eminent 20% discount results in a permanent reduction in profits or income/gross sales, much
domain clause.106 less that business establishments are forced to operate at a loss under the assailed
law. And, even if we gratuitously assume that the 20% discount results in some
But, if it is possible that the business establishment, by adjusting its prices, will degree of reduction in profits or income/gross sales, we cannot assume that such
suffer no reduction in its profits or income/gross sales (or suffer some reduction but reduction is arbitrary, oppressive or confiscatory. To repeat, there is no actual proof
continue to operate profitably) despite giving the discount, what would be the basis to back up this claim, and it could be that the loss suffered by a business
to strike down the law? If it is possible that the business establishment, by adjusting establishment was occasioned through its fault or negligence in not adapting to the
its prices, will not be unduly burdened, how can there be a finding that the assailed effects of the assailed law. The law uniformly applies to all business establishments
law is an unconstitutional exercise of police power or eminent domain? That there covered thereunder. There is, therefore, no unjust discrimination as the aforesaid
may be a burden placed on business establishments or the consuming public as a business establishments are faced with the same constraints. The necessity of proof is
result of the operation of the assailed law is not, by itself, a ground to declare it all the more pertinent in this case because, as similarly observed by Justice Velasco
unconstitutional for this goes into the wisdom and expediency of the law. in his Concurring Opinion, the law has been in operation for over nine years now.
However, the grim picture painted by petitioners on the unconscionable losses to be
The cost of most, if not all, regulatory measures of the government on business indiscriminately suffered by business establishments, which should have led to the
establishments is ultimately passed on to the consumers but that, by itself, does not closure of numerous business establishments, has not come to pass. Verily, we
justify the wholesale nullification of these measures. It is a basic postulate of our cannot invalidate the assailed law based on assumptions and conjectures. Without
democratic system of government that the Constitution is a social contract whereby adequate proof, the presumption of constitutionality must prevail. IV At this
the people have surrendered their sovereign powers to the State for the common juncture, we note that the Dissent modified its original arguments by including a new
good.107 paragraph, to wit:

All persons may be burdened by regulatory measures intended for the common good Section 9, Article III of the 1987 Constitution speaks of private property without any
or to serve some important governmental interest, such as protecting or improving distinction. It does not state that there should be profit before the taking of property
the welfare of a special class of people for which the Constitution affords preferential is subject to just compensation. The private property referred to for purposes of
concern. Indubitably, the one assailing the law has the heavy burden of proving that taking could be inherited, donated, purchased, mortgaged, or as in this case, part of
the regulation is unreasonable, oppressive or confiscatory, or has gone "too far" as to the gross sales of private establishments. They are all private property and any taking
amount to a "taking." Yet, here, the Dissent would have this Court nullify the law should be attended by corresponding payment of just compensation. The 20%
without any proof of such nature. discount granted to senior citizens belong to private establishments, whether these
establishments make a profit or suffer a loss. In fact, the 20% discount applies to
non-profit establishments like country, social, or golf clubs which are open to the
Further, this Court is not the proper forum to debate the economic theories or
public and not only for exclusive membership. The issue of profit or loss to the
realities that impelled Congress to shift from the tax credit to the tax deduction
scheme. It is not within our power or competence to judge which scheme is more or establishments is immaterial.110
less burdensome to business establishments or the consuming public and, thereafter,
to choose which scheme the State should use or pursue. The shift from the tax credit Two things may be said of this argument. First, it contradicts the rest of the
to tax deduction scheme is a policy determination by Congress and the Court will arguments of the Dissent. After it states that the issue of profit or loss is immaterial,
respect it for as long as there is no showing, as here, that the subject regulation has the Dissent proceeds to argue that the 20% discount is not a minimal loss111 and that
transgressed constitutional limitations. Unavoidably, the lack of evidence constrains the 20% discount forces business establishments to operate at a loss.112
the Dissent to rely on speculative and hypothetical argumentation when it states that
the 20% discount is a significant amount and not a minimal loss (which erroneously Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially
assumes that the discount automatically results in a loss when it is possible that the adopts and relies on, is premised on the permanent reduction of total revenues and
profit margin is greater than 20% and/or the pricing strategy can be revised to the loss that business establishments will be forced to suffer in arguing that the 20%
discount constitutes a "taking" under the power of eminent domain. Thus, when the has a right to profits. The Constitution adverts to it as the right of an enterprise to a
Dissent now argues that the issue of profit or loss is immaterial, it contradicts itself reasonable return on investment.115
because it later argues, in order to justify that there is a "taking" under the power of
eminent domain in this case, that the 20% discount forces business establishments to Undeniably, this right, like any other right, may be regulated under the police power
suffer a significant loss or to operate at a loss. Second, this argument suffers from the of the State to achieve important governmental objectives like protecting the interests
same flaw as the Dissent's original arguments. It is an erroneous characterization of and improving the welfare of senior citizens. It should be noted though that potential
the 20% discount. According to the Dissent, the 20% discount is part of the gross profits or income/gross sales are relevant in police power and eminent domain
sales and, hence, private property belonging to business establishments. However, as analyses because they may, in appropriate cases, serve as an indicia when a
previously discussed, the 20% discount is not private property actually owned and/or regulation has gone "too far" as to amount to a "taking" under the power of eminent
used by the business establishment. It should be distinguished from properties like domain. When the deprivation or reduction of profits or income/gross sales is shown
lands or buildings actually used in the operation of a business establishment which, if to be unreasonable, oppressive or confiscatory, then the challenged governmental
appropriated for public use, would amount to a "taking" under the power of eminent regulation may be nullified for being a "taking" under the power of eminent domain.
domain. Instead, the 20% discount is a regulatory measure which impacts the pricing In such a case, it is not profits or income/gross sales which are actually taken and
and, hence, the profitability of business establishments. At the time the discount is appropriated for public use. Rather, when the regulation causes an establishment to
imposed, no particular property of the business establishment can be said to be incur losses in an unreasonable, oppressive or confiscatory manner, what is actually
"taken." That is, the State does not acquire or take anything from the business taken is capital and the right of the business establishment to a reasonable return on
establishment in the way that it takes a piece of private land to build a public road. investment. If the business losses are not halted because of the continued operation
While the 20% discount may form part of the potential profits or income/gross of the regulation, this eventually leads to the destruction of the business and the total
sales114 of the business establishment, as similarly characterized by Justice Bersamin loss of the capital invested therein. But, again, petitioners in this case failed to prove
in his Concurring Opinion, potential profits or income/gross sales are not private that the subject regulation is unreasonable, oppressive or confiscatory.
property, specifically cash or money, already belonging to the business
establishment. They are a mere expectancy because they are potential fruits of the
V.
successful conduct of the business. Prior to the sale of goods or services, a business
establishment may be subject to State regulations, such as the 20% senior citizen
discount, which may impact the level or amount of profits or income/gross sales that The Dissent further argues that we erroneously used price and rate of return on
can be generated by such establishment. For this reason, the validity of the discount investment control laws to justify the senior citizen discount law. According to the
is to be determined based on its overall effects on the operations of the business Dissent, only profits from industries imbued with public interest may be regulated
establishment. because this is a condition of their franchises. Profits of establishments without
franchises cannot be regulated permanently because there is no law regulating their
profits. The Dissent concludes that the permanent reduction of total revenues or
Again, as previously discussed, the 20% discount does not automatically result in a
gross sales of business establishments without franchises is a taking of private
20% reduction in profits, or, to align it with the term used by the Dissent, the 20%
property under the power of eminent domain. In making this argument, it is
discount does not mean that a 20% reduction in gross sales necessarily results.
unfortunate that the Dissent quotes only a portion of the ponencia – The subject
Because (1) the profit margin of a product is not necessarily less than 20%, (2) not regulation may be said to be similar to, but with substantial distinctions from, price
all customers of a business establishment are senior citizens, and (3) the control or rate of return on investment control laws which are traditionally regarded
establishment may revise its pricing strategy, such reduction in profits or
as police power measures. These laws generally regulate public utilities or
income/gross sales may be prevented or, in the alternative, mitigated so that the
industries/enterprises imbued with public interest in order to protect consumers from
business establishment continues to operate profitably. Thus, even if we gratuitously
exorbitant or unreasonable pricing as well as temper corporate greed by controlling
assume that some degree of reduction in profits or income/gross sales occurs because
the rate of return on investment of these corporations considering that they have a
of the 20% discount, it does not follow that the regulation is unreasonable,
monopoly over the goods or services that they provide to the general public. The
oppressive or confiscatory because the business establishment may make the
subject regulation differs therefrom in that (1) the discount does not prevent the
necessary adjustments to continue to operate profitably. No evidence was presented
establishments from adjusting the level of prices of their goods and services, and (2)
by petitioners to show otherwise. In fact, no evidence was presented by petitioners at
the discount does not apply to all customers of a given establishment but only to the
all. Justice Leonen, in his Concurring and Dissenting Opinion, characterizes "profits"
class of senior citizens. x x x116
(or income/gross sales) as an inchoate right. Another way to view it, as stated by
Justice Velasco in his Concurring Opinion, is that the business establishment merely
The above paragraph, in full, states –
The subject regulation may be said to be similar to, but with substantial distinctions groups in our society provided that the regulation is not arbitrary, oppressive or
from, price control or rate of return on investment control laws which are confiscatory, or is not in breach of some specific constitutional limitation. When the
traditionally regarded as police power measures. These laws generally regulate Dissent, therefore, states that the "profits of private establishments which are non-
public utilities or industries/enterprises imbued with public interest in order to franchisees cannot be regulated permanently, and there is no such law regulating
protect consumers from exorbitant or unreasonable pricing as well as temper their profits permanently,"119 it is assuming what it ought to prove. First, there are
corporate greed by controlling the rate of return on investment of these corporations laws which, in effect, permanently regulate profits or income/gross sales of
considering that they have a monopoly over the goods or services that they provide establishments without franchises, and RA 9257 is one such law. And, second,
to the general public. The subject regulation differs therefrom in that (1) the discount Congress can regulate such profits or income/gross sales because, as previously
does not prevent the establishments from adjusting the level of prices of their goods noted, there is nothing in the Constitution to prevent it from doing so. Here, again, it
and services, and (2) the discount does not apply to all customers of a given must be emphasized that petitioners failed to present any proof to show that the
establishment but only to the class of senior citizens. effects of the assailed law on their operations has been unreasonable, oppressive or
confiscatory. The permanent regulation of profits or income/gross sales of business
Nonetheless, to the degree material to the resolution of this case, the 20% discount establishments, even those without franchises, is not as uncommon as the Dissent
may be properly viewed as belonging to the category of price regulatory measures depicts it to be. For instance, the minimum wage law allows the State to set the
which affects the profitability of establishments subjected thereto. (Emphasis minimum wage of employees in a given region or geographical area. Because of the
supplied) added labor costs arising from the minimum wage, a permanent reduction of profits
or income/gross sales would result, assuming that the employer does not increase the
The point of this paragraph is to simply show that the State has, in the past, regulated prices of his goods or services. To illustrate, suppose it costs a company ₱5.00 to
produce a product and it sells the same at ₱10.00 with a 50% profit margin. Later,
prices and profits of business establishments. In other words, this type of regulatory
the State increases the minimum wage. As a result, the company incurs greater labor
measures is traditionally recognized as police power measures so that the senior
costs so that it now costs ₱7.00 to produce the same product. The profit per product
citizen discount may be considered as a police power measure as well. What is more,
of the company would be reduced to ₱3.00 with a profit margin of 30%. The net
the substantial distinctions between price and rate of return on investment control
effect would be the same as in the earlier example of granting a 20% senior citizen
laws vis-à-vis the senior citizen discount law provide greater reason to uphold the
discount. As can be seen, the minimum wage law could, likewise, lead to a
validity of the senior citizen discount law. As previously discussed, the ability to
permanent reduction of profits. Does this mean that the minimum wage law should,
adjust prices allows the establishment subject to the senior citizen discount to prevent
likewise, be declared unconstitutional on the mere plea that it results in a permanent
or mitigate any reduction of profits or income/gross sales arising from the giving of
reduction of profits? Taking it a step further, suppose the company decides to
the discount. In contrast, establishments subject to price and rate of return on
investment control laws cannot adjust prices accordingly. Certainly, there is no increase the price of its product in order to offset the effects of the increase in labor
intention to say that price and rate of return on investment control laws are the cost; does this mean that the minimum wage law, following the reasoning of the
Dissent, is unconstitutional because the consuming public is effectively made to
justification for the senior citizen discount law. Not at all. The justification for the
subsidize the wage of a group of laborers, i.e., minimum wage earners? The same
senior citizen discount law is the plenary powers of Congress. The legislative power
reasoning can be adopted relative to the examples cited by the Dissent which,
to regulate business establishments is broad and covers a wide array of areas and
according to it, are valid police power regulations. Article 157 of the Labor Code,
subjects. It is well within Congress’ legislative powers to regulate the profits or
Sections 19 and 18 of the Social Security Law, and Section 7 of the Pag-IBIG Fund
income/gross sales of industries and enterprises, even those without franchises. For
Law would effectively increase the labor cost of a business
what are franchises but mere legislative enactments? There is nothing in the
establishment.1âwphi1 This would, in turn, be integrated as part of the cost of its
Constitution that prohibits Congress from regulating the profits or income/gross sales
goods or services. Again, if the establishment does not increase its prices, the net
of industries and enterprises without franchises. On the contrary, the social justice
effect would be a permanent reduction in its profits or income/gross sales. Following
provisions of the Constitution enjoin the State to regulate the "acquisition,
the reasoning of the Dissent that "any form of permanent taking of private property
ownership, use, and disposition" of property and its increments.117
(including profits or income/gross sales)120 is an exercise of eminent domain that
requires the State to pay just compensation,"121 then these statutory provisions
This may cover the regulation of profits or income/gross sales of all businesses, would, likewise, have to be declared unconstitutional. It does not matter that these
without qualification, to attain the objective of diffusing wealth in order to protect benefits are deemed part of the employees’ legislated wages because the net effect is
and enhance the right of all the people to human dignity.118 the same, that is, it leads to higher labor costs and a permanent reduction in the
profits or income/gross sales of the business establishments.122
Thus, under the social justice policy of the Constitution, business establishments may
be compelled to contribute to uplifting the plight of vulnerable or marginalized
The point then is this – most, if not all, regulatory measures imposed by the State on or confiscatory. Under the specific circumstances of this case, such determination
business establishments impact, at some level, the latter’s prices and/or profits or can only be made upon the presentation of competent proof which petitioners failed
income/gross sales.123 to do. A law, which has been in operation for many years and promotes the welfare
of a group accorded special concern by the Constitution, cannot and should not be
If the Court were to sustain the Dissent’s theory, then a wholesale nullification of summarily invalidated on a mere allegation that it reduces the profits or income/gross
such measures would inevitably result. The police power of the State and the social sales of business establishments.
justice provisions of the Constitution would, thus, be rendered nugatory. There is
nothing sacrosanct about profits or income/gross sales. This, we made clear in Carlos WHEREFORE, the Petition is hereby DISMISSED for lack of merit.
Superdrug Corporation:124
SO ORDERED.
Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of earnings
and capital, the questioned provision is invalidated. Moreover, in the absence of
evidence demonstrating the alleged confiscatory effect of the provision in question,
there is no basis for its nullification in view of the presumption of validity which
every law has in its favor.

xxxx

The Court is not oblivious of the retail side of the pharmaceutical industry and the
competitive pricing component of the business. While the Constitution protects
property rights petitioners must the realities of business and the State, in the exercise
of police power, can intervene in the operations of a business which may result in an
impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII of the
Constitution provides the percept for the protection of property, various laws and
jurisprudence, particularly on agrarian reform and the regulation of contracts and
public utilities, continously serve as a reminder for the promotion of public good.

Undeniably, the success of the senior citizens program rests largely on the support
imparted by petitioners and the other private establishments concerned. This being
the case, the means employed in invoking the active participation of the private
sector, in order to achieve the purpose or objective of the law, is reasonably and
directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain form quashing a
legislative act.125

In conclusion, we maintain that the correct rule in determining whether the subject
regulatory measure has amounted to a "taking" under the power of eminent domain is
the one laid down in Alalayan v. National Power Corporation126 and followed
in Carlos Superdurg Corporation127 consistent with long standing principles in
police power and eminent domain analysis. Thus, the deprivation or reduction of
profits or income. Gross sales must be clearly shown to be unreasonable, oppressive
G.R. Nos. L-49839-46 April 26, 1991 of Manila re-classified and reassessed the value of the subject properties based on the
schedule of market values duly reviewed by the Secretary of Finance. The revision,
JOSE B. L. REYES and EDMUNDO A. REYES, petitioners, as expected, entailed an increase in the corresponding tax rates prompting petitioners
vs. to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their They averred that the reassessments made were "excessive, unwarranted, inequitable,
capacities as appointed and Acting Members of the CENTRAL BOARD OF confiscatory and unconstitutional" considering that the taxes imposed upon them
ASSESSMENT APPEALS; TERESITA H. NOBLEJAS, ROMULO M. DEL greatly exceeded the annual income derived from their properties. They argued that
ROSARIO, RAUL C. FLORES, in their capacities as appointed and Acting the income approach should have been used in determining the land values instead of
Members of the BOARD OF ASSESSMENT APPEALS of Manila; and the comparable sales approach which the City Assessor adopted (Rollo, pp. 9-10-A).
NICOLAS CATIIL in his capacity as City Assessor of Manila,respondents. The Board of Tax Assessment Appeals, however, considered the assessments valid,
holding thus:
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.
WHEREFORE, and considering that the appellants have failed to submit
concrete evidence which could overcome the presumptive regularity of the
classification and assessments appear to be in accordance with the base
schedule of market values and of the base schedule of building unit values,
as approved by the Secretary of Finance, the cases should be, as they are
PARAS, J.: hereby, upheld.

This is a petition for review on certiorari to reverse the June 10, 1977 decision of the SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo,
Central Board of Assessment Appeals1 in CBAA Cases Nos. 72-79 entitled "J.B.L. p. 22).
Reyes, Edmundo Reyes, et al. v. Board of Assessment Appeals of Manila and City
Assessor of Manila" which affirmed the March 29, 1976 decision of the Board of
The Reyeses appealed to the Central Board of Assessment Appeals.1âwphi1 They
Tax Assessment Appeals2 in BTAA Cases Nos. 614, 614-A-J, 615, 615-A, B, E,
submitted, among others, the summary of the yearly rentals to show the income
"Jose Reyes, et al. v. City Assessor of Manila" and "Edmundo Reyes and Milagros
derived from the properties. Respondent City Assessor, on the other hand, submitted
Reyes v. City Assessor of Manila" upholding the classification and assessments
three (3) deeds of sale showing the different market values of the real property
made by the City Assessor of Manila.
situated in the same vicinity where the subject properties of petitioners are located.
To better appreciate the locational and physical features of the land, the Board of
The facts of the case are as follows: Hearing Commissioners conducted an ocular inspection with the presence of two
representatives of the City Assessor prior to the healing of the case. Neither the
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land owners nor their authorized representatives were present during the said ocular
situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and inspection despite proper notices served them. It was found that certain parcels of
entirely occupied as dwelling sites by tenants. Said tenants were paying monthly land were below street level and were affected by the tides (Rollo, pp. 24-25).
rentals not exceeding three hundred pesos (P300.00) in July, 1971. On July 14, 1971,
the National Legislature enacted Republic Act No. 6359 prohibiting for one year On June 10, 1977, the Central Board of Assessment Appeals rendered its decision,
from its effectivity, an increase in monthly rentals of dwelling units or of lands on the dispositive portion of which reads:
which another's dwelling is located, where such rentals do not exceed three hundred
pesos (P300.00) a month but allowing an increase in rent by not more than 10%
WHEREFORE, the appealed decision insofar as the valuation and
thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil
assessment of the lots covered by Tax Declaration Nos. (5835) PD-5847,
Code for two years from its effectivity thereby disallowing the ejectment of lessees
upon the expiration of the usual legal period of lease. On October 12, 1972, (5839), (5831) PD-5844 and PD-3824 is affirmed.
Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the
prohibition to increase monthly rentals below P300.00 and by indefinitely For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509,
suspending the aforementioned provision of the Civil Code, excepting leases with a 146 and (1) PD-266, the appealed Decision is modified by allowing a 20%
definite period. Consequently, the Reyeses, petitioners herein, were precluded from reduction in their respective market values and applying therein the
raising the rentals and from ejecting the tenants. In 1973, respondent City Assessor assessment level of 30% to arrive at the corresponding assessed value.
SO ORDERED. (Decision of the Central Board of Assessment Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of
Appeals, Rollo, p. 27) taxation must not only be uniform, but must also be equitable and progressive.

Petitioner's subsequent motion for reconsideration was denied, hence, this petition. Uniformity has been defined as that principle by which all taxable articles or kinds of
property of the same class shall be taxed at the same rate (Churchill v. Concepcion,
The Reyeses assigned the following error: 34 Phil. 969 [1916]).

THE HONORABLE BOARD ERRED IN ADOPTING THE Notably in the 1935 Constitution, there was no mention of the equitable or
"COMPARABLE SALES APPROACH" METHOD IN FIXING THE progressive aspects of taxation required in the 1973 Charter (Fernando "The
ASSESSED VALUE OF APPELLANTS' PROPERTIES. Constitution of the Philippines", p. 221, Second Edition). Thus, the need to examine
closely and determine the specific mandate of the Constitution.
The petition is impressed with merit.
Taxation is said to be equitable when its burden falls on those better able to pay.
Taxation is progressive when its rate goes up depending on the resources of the
The crux of the controversy is in the method used in tax assessment of the properties
in question. Petitioners maintain that the "Income Approach" method would have person affected (Ibid.).
been more realistic for in disregarding the effect of the restrictions imposed by P.D.
20 on the market value of the properties affected, respondent Assessor of the City of The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the
Manila unlawfully and unjustifiably set increased new assessed values at levels so powers of government. But for all its plenitude the power to tax is not unconfined as
high and successive that the resulting annual real estate taxes would admittedly there are restrictions. Adversely effecting as it does property rights, both the due
exceed the sum total of the yearly rentals paid or payable by the dweller tenants process and equal protection clauses of the Constitution may properly be invoked to
under P.D. 20. Hence, petitioners protested against the levels of the values assigned invalidate in appropriate cases a revenue measure. If it were otherwise, there would
to their properties as revised and increased on the ground that they were arbitrarily be truth to the 1903 dictum of Chief Justice Marshall that "the power to tax involves
excessive, unwarranted, inequitable, confiscatory and unconstitutional (Rollo, p. 10- the power to destroy." The web or unreality spun from Marshall's famous dictum was
A). brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is
not the power to destroy while this Court sits. So it is in the Philippines " (Sison, Jr.
v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v. Commissioner of Internal
On the other hand, while respondent Board of Tax Assessment Appeals admits in its
decision that the income approach is used in determining land values in some Revenue, 139 SCRA 439 [1985]).
vicinities, it maintains that when income is affected by some sort of price control, the
same is rejected in the consideration and study of land values as in the case of In the same vein, the due process clause may be invoked where a taxing statute is so
properties affected by the Rent Control Law for they do not project the true market arbitrary that it finds no support in the Constitution. An obvious example is where it
value in the open market (Rollo, p. 21). Thus, respondents opted instead for the can be shown to amount to confiscation of property. That would be a clear abuse of
"Comparable Sales Approach" on the ground that the value estimate of the properties power (Sison v. Ancheta, supra).
predicated upon prices paid in actual, market transactions would be a uniform and a
more credible standards to use especially in case of mass appraisal of properties The taxing power has the authority to make a reasonable and natural classification
(Ibid.). Otherwise stated, public respondents would have this Court completely for purposes of taxation but the government's act must not be prompted by a spirit of
ignore the effects of the restrictions of P.D. No. 20 on the market value of properties hostility, or at the very least discrimination that finds no support in reason. It suffices
within its coverage. In any event, it is unquestionable that both the "Comparable then that the laws operate equally and uniformly on all persons under similar
Sales Approach" and the "Income Approach" are generally acceptable methods of circumstances or that all persons must be treated in the same manner, the conditions
appraisal for taxation purposes (The Law on Transfer and Business Taxation by not being different both in the privileges conferred and the liabilities imposed (Ibid.,
Hector S. De Leon, 1988 Edition). However, it is conceded that the propriety of one p. 662).
as against the other would of course depend on several factors. Hence, as early as
1923 in the case of Army & Navy Club, Manila v. Wenceslao Trinidad, G.R. No. Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that
19297 (44 Phil. 383), it has been stressed that the assessors, in finding the value of the first Fundamental Principle to guide the appraisal and assessment of real property
the property, have to consider all the circumstances and elements of value and must for taxation purposes is that the property must be "appraised at its current and fair
exercise a prudent discretion in reaching conclusions. market value."
By no strength of the imagination can the market value of properties covered by P.D.
No. 20 be equated with the market value of properties not so covered. The former
has naturally a much lesser market value in view of the rental restrictions.

Ironically, in the case at bar, not even the factors determinant of the assessed value of
subject properties under the "comparable sales approach" were presented by the
public respondents, namely: (1) that the sale must represent a bonafide arm's length
transaction between a willing seller and a willing buyer and (2) the property must be
comparable property (Rollo, p. 27). Nothing can justify or support their view as it is
of judicial notice that for properties covered by P.D. 20 especially during the time in
question, there were hardly any willing buyers. As a general rule, there were no
takers so that there can be no reasonable basis for the conclusion that these properties
were comparable with other residential properties not burdened by P.D. 20. Neither
can the given circumstances be nonchalantly dismissed by public respondents as
imposed under distressed conditions clearly implying that the same were merely
temporary in character. At this point in time, the falsity of such premises cannot be
more convincingly demonstrated by the fact that the law has existed for around
twenty (20) years with no end to it in sight.

Verily, taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. However, such collection should be made in accordance with
law as any arbitrariness will negate the very reason for government itself It is
therefore necessary to reconcile the apparently conflicting interests of the authorities
and the taxpayers so that the real purpose of taxations, which is the promotion of the
common good, may be achieved (Commissioner of Internal Revenue v. Algue Inc.,
et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are
burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and
P.D. 20) under the principle of social justice should not now be penalized by the
same government by the imposition of excessive taxes petitioners can ill afford and
eventually result in the forfeiture of their properties.

By the public respondents' own computation the assessment by income approach


would amount to only P10.00 per sq. meter at the time in question.

PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed


decisions of public respondents are REVERSED and SET ASIDE; and (e) the
respondent Board of Assessment Appeals of Manila and the City Assessor of Manila
are ordered to make a new assessment by the income approach method to guarantee a
fairer and more realistic basis of computation (Rollo, p. 71).

SO ORDERED.
G.R. No. 167330 September 18, 2009 On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent
petitioner a formal demand letter and the corresponding assessment notices
PHILIPPINE HEALTH CARE PROVIDERS, INC., Petitioner, demanding the payment of deficiency taxes, including surcharges and interest, for
vs. the taxable years 1996 and 1997 in the total amount of ₱224,702,641.18. xxxx
COMMISSIONER OF INTERNAL REVENUE, Respondent.
The deficiency [documentary stamp tax (DST)] assessment was imposed on
RESOLUTION petitioner’s health care agreement with the members of its health care program
pursuant to Section 185 of the 1997 Tax Code xxxx
CORONA, J.:
xxx xxx xxx
ARTICLE II
Declaration of Principles and State Policies Petitioner protested the assessment in a letter dated February 23, 2000. As
respondent did not act on the protest, petitioner filed a petition for review in the
Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and
Section 15. The State shall protect and promote the right to health of the people and
DST assessments.
instill health consciousness among them.

On April 5, 2002, the CTA rendered a decision, the dispositive portion of which
ARTICLE XIII
read:
Social Justice and Human Rights

WHEREFORE, in view of the foregoing, the instant Petition for Review is


Section 11. The State shall adopt an integrated and comprehensive approach to
PARTIALLY GRANTED. Petitioner is hereby ORDERED to PAY the deficiency
health development which shall endeavor to make essential goods, health and other
VAT amounting to ₱22,054,831.75 inclusive of 25% surcharge plus 20% interest
social services available to all the people at affordable cost. There shall be priority
from January 20, 1997 until fully paid for the 1996 VAT deficiency and
for the needs of the underprivileged sick, elderly, disabled, women, and children.
₱31,094,163.87 inclusive of 25% surcharge plus 20% interest from January 20, 1998
The State shall endeavor to provide free medical care to paupers.1
until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No. [231]-
88 is declared void and without force and effect. The 1996 and 1997 deficiency DST
For resolution are a motion for reconsideration and supplemental motion for assessment against petitioner is hereby CANCELLED AND SET ASIDE.
reconsideration dated July 10, 2008 and July 14, 2008, respectively, filed by Respondent is ORDERED to DESIST from collecting the said DST deficiency tax.
petitioner Philippine Health Care Providers, Inc.2
SO ORDERED.
We recall the facts of this case, as follows:
Respondent appealed the CTA decision to the [Court of Appeals (CA)] insofar as it
Petitioner is a domestic corporation whose primary purpose is "[t]o establish, cancelled the DST assessment. He claimed that petitioner’s health care agreement
maintain, conduct and operate a prepaid group practice health care delivery system was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code.
or a health maintenance organization to take care of the sick and disabled persons
enrolled in the health care plan and to provide for the administrative, legal, and
On August 16, 2004, the CA rendered its decision. It held that petitioner’s health
financial responsibilities of the organization." Individuals enrolled in its health care
programs pay an annual membership fee and are entitled to various preventive, care agreement was in the nature of a non-life insurance contract subject to DST.
diagnostic and curative medical services provided by its duly licensed physicians,
specialists and other professional technical staff participating in the group practice WHEREFORE, the petition for review is GRANTED. The Decision of the Court of
health delivery system at a hospital or clinic owned, operated or accredited by it. Tax Appeals, insofar as it cancelled and set aside the 1996 and 1997 deficiency
documentary stamp tax assessment and ordered petitioner to desist from collecting
the same is REVERSED and SET ASIDE.
xxx xxx xxx
Respondent is ordered to pay the amounts of ₱55,746,352.19 and ₱68,450,258.73 as (f) Assuming arguendo that petitioner’s agreements are akin to health
deficiency Documentary Stamp Tax for 1996 and 1997, respectively, plus 25% insurance, health insurance is not covered by Section 185.
surcharge for late payment and 20% interest per annum from January 27, 2000,
pursuant to Sections 248 and 249 of the Tax Code, until the same shall have been (g) The agreements do not fall under the phrase "other branch of insurance"
fully paid. mentioned in Section 185.

SO ORDERED. (h) The June 12, 2008 decision should only apply prospectively.

Petitioner moved for reconsideration but the CA denied it. Hence, petitioner filed this (i) Petitioner availed of the tax amnesty benefits under RA5 9480 for the
case. taxable year 2005 and all prior years. Therefore, the questioned assessments
on the DST are now rendered moot and academic.6
xxx xxx xxx
Oral arguments were held in Baguio City on April 22, 2009. The parties submitted
In a decision dated June 12, 2008, the Court denied the petition and affirmed the their memoranda on June 8, 2009.
CA’s decision. We held that petitioner’s health care agreement during the pertinent
period was in the nature of non-life insurance which is a contract of indemnity, In its motion for reconsideration, petitioner reveals for the first time that it availed of
citing Blue Cross Healthcare, Inc. v. Olivares3 and Philamcare Health Systems, Inc. a tax amnesty under RA 94807(also known as the "Tax Amnesty Act of 2007") by
v. CA.4We also ruled that petitioner’s contention that it is a health maintenance fully paying the amount of ₱5,127,149.08 representing 5% of its net worth as of the
organization (HMO) and not an insurance company is irrelevant because contracts year ending December 31, 2005.8
between companies like petitioner and the beneficiaries under their plans are treated
as insurance contracts. Moreover, DST is not a tax on the business transacted but an
We find merit in petitioner’s motion for reconsideration.
excise on the privilege, opportunity or facility offered at exchanges for the
transaction of the business.
Petitioner was formally registered and incorporated with the Securities and Exchange
Commission on June 30, 1987.9 It is engaged in the dispensation of the following
Unable to accept our verdict, petitioner filed the present motion for reconsideration
medical services to individuals who enter into health care agreements with it:
and supplemental motion for reconsideration, asserting the following arguments:
Preventive medical services such as periodic monitoring of health problems, family
(a) The DST under Section 185 of the National Internal Revenue of 1997 is
planning counseling, consultation and advices on diet, exercise and other healthy
imposed only on a company engaged in the business of fidelity bonds and
habits, and immunization;
other insurance policies. Petitioner, as an HMO, is a service provider, not an
insurance company.
Diagnostic medical services such as routine physical examinations, x-rays,
urinalysis, fecalysis, complete blood count, and the like and
(b) The Court, in dismissing the appeal in CIR v. Philippine National Bank,
affirmed in effect the CA’s disposition that health care services are not in
the nature of an insurance business. Curative medical services which pertain to the performing of other remedial and
therapeutic processes in the event of an injury or sickness on the part of the enrolled
member.10
(c) Section 185 should be strictly construed.
Individuals enrolled in its health care program pay an annual membership fee.
(d) Legislative intent to exclude health care agreements from items subject
Membership is on a year-to-year basis. The medical services are dispensed to
to DST is clear, especially in the light of the amendments made in the DST
enrolled members in a hospital or clinic owned, operated or accredited by petitioner,
law in 2002. through physicians, medical and dental practitioners under contract with it. It
negotiates with such health care practitioners regarding payment schemes, financing
(e) Assuming arguendo that petitioner’s agreements are contracts of and other procedures for the delivery of health services. Except in cases of
indemnity, they are not those contemplated under Section 185. emergency, the professional services are to be provided only by petitioner's
physicians, i.e. those directly employed by it11 or whose services are contracted by corporation, there shall be collected a documentary stamp tax of fifty centavos
it.12 Petitioner also provides hospital services such as room and board (₱0.50) on each four pesos (₱4.00), or fractional part thereof, of the premium
accommodation, laboratory services, operating rooms, x-ray facilities and general charged. (Emphasis supplied)
nursing care.13 If and when a member avails of the benefits under the agreement,
petitioner pays the participating physicians and other health care providers for the It is a cardinal rule in statutory construction that no word, clause, sentence, provision
services rendered, at pre-agreed rates.14 or part of a statute shall be considered surplusage or superfluous, meaningless, void
and insignificant. To this end, a construction which renders every word operative is
To avail of petitioner’s health care programs, the individual members are required to preferred over that which makes some words idle and nugatory.17 This principle is
sign and execute a standard health care agreement embodying the terms and expressed in the maxim Ut magis valeat quam pereat, that is, we choose the
conditions for the provision of the health care services. The same agreement contains interpretation which gives effect to the whole of the statute – its every word.18
the various health care services that can be engaged by the enrolled member, i.e.,
preventive, diagnostic and curative medical services. Except for the curative aspect From the language of Section 185, it is evident that two requisites must concur
of the medical service offered, the enrolled member may actually make use of the before the DST can apply, namely: (1) the document must be a policy of insurance
health care services being offered by petitioner at any time. or an obligation in the nature of indemnity and (2) the maker should be
transacting the business of accident, fidelity, employer’s liability, plate, glass,
Health Maintenance Organizations Are Not Engaged In The Insurance Business steam boiler, burglar, elevator, automatic sprinkler, or other branch
of insurance (except life, marine, inland, and fire insurance).
We said in our June 12, 2008 decision that it is irrelevant that petitioner is an HMO
and not an insurer because its agreements are treated as insurance contracts and the Petitioner is admittedly an HMO. Under RA 7875 (or "The National Health
DST is not a tax on the business but an excise on the privilege, opportunity or facility Insurance Act of 1995"), an HMO is "an entity that provides, offers or arranges for
used in the transaction of the business.15 coverage of designated health services needed by plan members for a fixed prepaid
premium."19 The payments do not vary with the extent, frequency or type of services
Petitioner, however, submits that it is of critical importance to characterize the provided.
business it is engaged in, that is, to determine whether it is an HMO or an insurance
company, as this distinction is indispensable in turn to the issue of whether or not it The question is: was petitioner, as an HMO, engaged in the business of insurance
is liable for DST on its health care agreements.16 during the pertinent taxable years? We rule that it was not.

A second hard look at the relevant law and jurisprudence convinces the Court that Section 2 (2) of PD20 1460 (otherwise known as the Insurance Code) enumerates
the arguments of petitioner are meritorious. what constitutes "doing an insurance business" or "transacting an insurance
business:"
Section 185 of the National Internal Revenue Code of 1997 (NIRC of 1997)
provides: a) making or proposing to make, as insurer, any insurance contract;

Section 185. Stamp tax on fidelity bonds and other insurance policies. – On all b) making or proposing to make, as surety, any contract of suretyship as a
policies of insurance or bonds or obligations of the nature of indemnity for loss, vocation and not as merely incidental to any other legitimate business or
damage, or liability made or renewed by any person, association or company or activity of the surety;
corporation transacting the business of accident, fidelity, employer’s liability,
plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of c) doing any kind of business, including a reinsurance business, specifically
insurance (except life, marine, inland, and fire insurance), and all bonds, recognized as constituting the doing of an insurance business within the
undertakings, or recognizances, conditioned for the performance of the duties of any meaning of this Code;
office or position, for the doing or not doing of anything therein specified, and on all
obligations guaranteeing the validity or legality of any bond or other obligations
d) doing or proposing to do any business in substance equivalent to any of
issued by any province, city, municipality, or other public body or organization, and
the foregoing in a manner designed to evade the provisions of this Code.
on all obligations guaranteeing the title to any real estate, or guaranteeing any
mercantile credits, which may be made or renewed by any such person, company or
In the application of the provisions of this Code, the fact that no profit is derived regularization of service as well as payment, the substantial reduction in cost by
from the making of insurance contracts, agreements or transactions or that no quantity purchasing in short, getting the medical job done and paid for; not,
separate or direct consideration is received therefore, shall not be deemed conclusive except incidentally to these features, the indemnification for cost after the
to show that the making thereof does not constitute the doing or transacting of an services is rendered. Except the last, these are not distinctive or generally
insurance business. characteristic of the insurance arrangement. There is, therefore, a substantial
difference between contracting in this way for the rendering of service, even on the
Various courts in the United States, whose jurisprudence has a persuasive effect on contingency that it be needed, and contracting merely to stand its cost when or after
our decisions,21 have determined that HMOs are not in the insurance business. One it is rendered.
test that they have applied is whether the assumption of risk and indemnification of
loss (which are elements of an insurance business) are the principal object and That an incidental element of risk distribution or assumption may be present should
purpose of the organization or whether they are merely incidental to its business. If not outweigh all other factors. If attention is focused only on that feature, the line
these are the principal objectives, the business is that of insurance. But if they are between insurance or indemnity and other types of legal arrangement and economic
merely incidental and service is the principal purpose, then the business is not function becomes faint, if not extinct. This is especially true when the contract is for
insurance. the sale of goods or services on contingency. But obviously it was not the purpose of
the insurance statutes to regulate all arrangements for assumption or distribution of
Applying the "principal object and purpose test,"22 there is significant American case risk. That view would cause them to engulf practically all contracts, particularly
law supporting the argument that a corporation (such as an HMO, whether or not conditional sales and contingent service agreements. The fallacy is in looking only
organized for profit), whose main object is to provide the members of a group with at the risk element, to the exclusion of all others present or their subordination
health services, is not engaged in the insurance business. to it. The question turns, not on whether risk is involved or assumed, but on
whether that or something else to which it is related in the particular plan is its
The rule was enunciated in Jordan v. Group Health Association23 wherein the Court principal object purpose.24 (Emphasis supplied)
of Appeals of the District of Columbia Circuit held that Group Health Association
should not be considered as engaged in insurance activities since it was created In California Physicians’ Service v. Garrison,25 the California court felt that, after
primarily for the distribution of health care services rather than the assumption of scrutinizing the plan of operation as a whole of the corporation, it was service rather
insurance risk. than indemnity which stood as its principal purpose.

xxx Although Group Health’s activities may be considered in one aspect as creating There is another and more compelling reason for holding that the service is not
security against loss from illness or accident more truly they constitute the quantity engaged in the insurance business. Absence or presence of assumption of risk or
purchase of well-rounded, continuous medical service by its members. xxx The peril is not the sole test to be applied in determining its status. The question,
functions of such an organization are not identical with those of insurance or more broadly, is whether, looking at the plan of operation as a whole, ‘service’
indemnity companies. The latter are concerned primarily, if not exclusively, with rather than ‘indemnity’ is its principal object and purpose. Certainly the objects
risk and the consequences of its descent, not with service, or its extension in kind, and purposes of the corporation organized and maintained by the California
quantity or distribution; with the unusual occurrence, not the daily routine of living. physicians have a wide scope in the field of social service. Probably there is no
Hazard is predominant. On the other hand, the cooperative is concerned more impelling need than that of adequate medical care on a voluntary, low-
principally with getting service rendered to its members and doing so at lower cost basis for persons of small income. The medical profession unitedly is
prices made possible by quantity purchasing and economies in operation. Its endeavoring to meet that need. Unquestionably this is ‘service’ of a high order
primary purpose is to reduce the cost rather than the risk of medical care; to and not ‘indemnity.’26 (Emphasis supplied)
broaden the service to the individual in kind and quantity; to enlarge the
number receiving it; to regularize it as an everyday incident of living, like American courts have pointed out that the main difference between an HMO and an
purchasing food and clothing or oil and gas, rather than merely protecting insurance company is that HMOs undertake to provide or arrange for the provision
against the financial loss caused by extraordinary and unusual occurrences, of medical services through participating physicians while insurance companies
such as death, disaster at sea, fire and tornado. It is, in this instance, to take care simply undertake to indemnify the insured for medical expenses incurred up to a pre-
of colds, ordinary aches and pains, minor ills and all the temporary bodily agreed limit. Somerset Orthopedic Associates, P.A. v. Horizon Blue Cross and Blue
discomforts as well as the more serious and unusual illness. To summarize, the Shield of New Jersey27 is clear on this point:
distinctive features of the cooperative are the rendering of service, its extension,
the bringing of physician and patient together, the preventive features, the
The basic distinction between medical service corporations and ordinary health and Overall, petitioner appears to provide insurance-type benefits to its members (with
accident insurers is that the former undertake to provide prepaid medical respect to its curative medical services), but these are incidental to the principal
services through participating physicians, thus relieving subscribers of any further activity of providing them medical care. The "insurance-like" aspect of petitioner’s
financial burden, while the latter only undertake to indemnify an insured for medical business is miniscule compared to its noninsurance activities. Therefore, since it
expenses up to, but not beyond, the schedule of rates contained in the policy. substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.
xxx xxx xxx
It is important to emphasize that, in adopting the "principal purpose test" used in the
The primary purpose of a medical service corporation, however, is an undertaking to above-quoted U.S. cases, we are not saying that petitioner’s operations are identical
provide physicians who will render services to subscribers on a prepaid basis. Hence, in every respect to those of the HMOs or health providers which were parties to
if there are no physicians participating in the medical service corporation’s those cases. What we are stating is that, for the purpose of determining what "doing
plan, not only will the subscribers be deprived of the protection which they an insurance business" means, we have to scrutinize the operations of the business as
might reasonably have expected would be provided, but the corporation will, in a whole and not its mere components. This is of course only prudent and appropriate,
effect, be doing business solely as a health and accident indemnity taking into account the burdensome and strict laws, rules and regulations applicable
insurer without having qualified as such and rendering itself subject to the more to insurers and other entities engaged in the insurance business. Moreover, we are
stringent financial requirements of the General Insurance Laws…. also not unmindful that there are other American authorities who have found
particular HMOs to be actually engaged in insurance activities.32
A participating provider of health care services is one who agrees in writing to render
health care services to or for persons covered by a contract issued by health service Lastly, it is significant that petitioner, as an HMO, is not part of the insurance
corporation in return for which the health service corporation agrees to make industry. This is evident from the fact that it is not supervised by the Insurance
payment directly to the participating provider.28 (Emphasis supplied) Commission but by the Department of Health.33 In fact, in a letter dated September 3,
2000, the Insurance Commissioner confirmed that petitioner is not engaged in the
insurance business. This determination of the commissioner must be accorded great
Consequently, the mere presence of risk would be insufficient to override the
weight. It is well-settled that the interpretation of an administrative agency which is
primary purpose of the business to provide medical services as needed, with payment
tasked to implement a statute is accorded great respect and ordinarily controls the
made directly to the provider of these services.29 In short, even if petitioner assumes
the risk of paying the cost of these services even if significantly more than what the interpretation of laws by the courts. The reason behind this rule was explained
member has prepaid, it nevertheless cannot be considered as being engaged in the in Nestle Philippines, Inc. v. Court of Appeals:34
insurance business.
The rationale for this rule relates not only to the emergence of the multifarious needs
of a modern or modernizing society and the establishment of diverse administrative
By the same token, any indemnification resulting from the payment for services
rendered in case of emergency by non-participating health providers would still be agencies for addressing and satisfying those needs; it also relates to the accumulation
incidental to petitioner’s purpose of providing and arranging for health care services of experience and growth of specialized capabilities by the administrative agency
charged with implementing a particular statute. In Asturias Sugar Central, Inc. vs.
and does not transform it into an insurer. To fulfill its obligations to its members
Commissioner of Customs,35 the Court stressed that executive officials are presumed
under the agreements, petitioner is required to set up a system and the facilities for
to have familiarized themselves with all the considerations pertinent to the meaning
the delivery of such medical services. This indubitably shows that indemnification is
and purpose of the law, and to have formed an independent, conscientious and
not its sole object.
competent expert opinion thereon. The courts give much weight to the government
agency officials charged with the implementation of the law, their competence,
In fact, a substantial portion of petitioner’s services covers preventive and diagnostic expertness, experience and informed judgment, and the fact that they frequently are
medical services intended to keep members from developing medical conditions or the drafters of the law they interpret.36
diseases.30 As an HMO, it is its obligation to maintain the good health of its
members. Accordingly, its health care programs are designed to prevent or to
A Health Care Agreement Is Not An Insurance Contract Contemplated Under
minimize thepossibility of any assumption of risk on its part. Thus, its
undertaking under its agreements is not to indemnify its members against any loss or Section 185 Of The NIRC of 1997
damage arising from a medical condition but, on the contrary, to provide the health
and medical services needed to prevent such loss or damage.31
Section 185 states that DST is imposed on "all policies of insurance… or obligations We are aware that, in Blue Cross and Philamcare, the Court pronounced that a health
of the nature of indemnity for loss, damage, or liability…." In our decision dated care agreement is in the nature of non-life insurance, which is primarily a contract of
June 12, 2008, we ruled that petitioner’s health care agreements are contracts of indemnity. However, those cases did not involve the interpretation of a tax provision.
indemnity and are therefore insurance contracts: Instead, they dealt with the liability of a health service provider to a member under
the terms of their health care agreement. Such contracts, as contracts of adhesion, are
It is … incorrect to say that the health care agreement is not based on loss or damage liberally interpreted in favor of the member and strictly against the HMO. For this
because, under the said agreement, petitioner assumes the liability and indemnifies reason, we reconsider our ruling that Blue Cross and Philamcare are applicable here.
its member for hospital, medical and related expenses (such as professional fees of
physicians). The term "loss or damage" is broad enough to cover the monetary Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement
expense or liability a member will incur in case of illness or injury. whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event. An insurance
Under the health care agreement, the rendition of hospital, medical and professional contract exists where the following elements concur:
services to the member in case of sickness, injury or emergency or his availment of
so-called "out-patient services" (including physical examination, x-ray and 1. The insured has an insurable interest;
laboratory tests, medical consultations, vaccine administration and family planning
counseling) is the contingent event which gives rise to liability on the part of the 2. The insured is subject to a risk of loss by the happening of the designed
member. In case of exposure of the member to liability, he would be entitled to peril;
indemnification by petitioner.
3. The insurer assumes the risk;
Furthermore, the fact that petitioner must relieve its member from liability by paying
for expenses arising from the stipulated contingencies belies its claim that its services 4. Such assumption of risk is part of a general scheme to distribute actual
are prepaid. The expenses to be incurred by each member cannot be predicted
losses among a large group of persons bearing a similar risk and
beforehand, if they can be predicted at all. Petitioner assumes the risk of paying for
the costs of the services even if they are significantly and substantially more than
what the member has "prepaid." Petitioner does not bear the costs alone but 5. In consideration of the insurer’s promise, the insured pays a premium.41
distributes or spreads them out among a large group of persons bearing a similar risk,
that is, among all the other members of the health care program. This is insurance.37 Do the agreements between petitioner and its members possess all these elements?
They do not.
We reconsider. We shall quote once again the pertinent portion of Section 185:
First. In our jurisdiction, a commentator of our insurance laws has pointed out that,
Section 185. Stamp tax on fidelity bonds and other insurance policies. – On all even if a contract contains all the elements of an insurance contract, if its primary
policies of insurance or bonds or obligations of the nature of indemnity for loss, purpose is the rendering of service, it is not a contract of insurance:
damage, or liability made or renewed by any person, association or company or
corporation transacting the business of accident, fidelity, employer’s liability, plate, It does not necessarily follow however, that a contract containing all the four
glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of elements mentioned above would be an insurance contract. The primary purpose of
insurance (except life, marine, inland, and fire insurance), xxxx (Emphasis supplied) the parties in making the contract may negate the existence of an insurance
contract. For example, a law firm which enters into contracts with clients whereby
In construing this provision, we should be guided by the principle that tax statutes in consideration of periodical payments, it promises to represent such clients in all
are strictly construed against the taxing authority.38 This is because taxation is a suits for or against them, is not engaged in the insurance business. Its contracts are
destructive power which interferes with the personal and property rights of the simply for the purpose of rendering personal services. On the other hand, a contract
people and takes from them a portion of their property for the support of the by which a corporation, in consideration of a stipulated amount, agrees at its own
government.39 Hence, tax laws may not be extended by implication beyond the clear expense to defend a physician against all suits for damages for malpractice is one of
import of their language, nor their operation enlarged so as to embrace matters not insurance, and the corporation will be deemed as engaged in the business of
specifically provided.40 insurance. Unlike the lawyer’s retainer contract, the essential purpose of such a
contract is not to render personal services, but to indemnify against loss and damage
resulting from the defense of actions for malpractice.42 (Emphasis supplied)
Second. Not all the necessary elements of a contract of insurance are present in Indeed, petitioner, as an HMO, undertakes a business risk when it offers to provide
petitioner’s agreements. To begin with, there is no loss, damage or liability on the health services: the risk that it might fail to earn a reasonable return on its
part of the member that should be indemnified by petitioner as an HMO. Under the investment. But it is not the risk of the type peculiar only to insurance companies.
agreement, the member pays petitioner a predetermined consideration in exchange Insurance risk, also known as actuarial risk, is the risk that the cost of insurance
for the hospital, medical and professional services rendered by the petitioner’s claims might be higher than the premiums paid. The amount of premium is
physician or affiliated physician to him. In case of availment by a member of the calculated on the basis of assumptions made relative to the insured.45
benefits under the agreement, petitioner does not reimburse or indemnify the member
as the latter does not pay any third party. Instead, it is the petitioner who pays the However, assuming that petitioner’s commitment to provide medical services to its
participating physicians and other health care providers for the services rendered at members can be construed as an acceptance of the risk that it will shell out more than
pre-agreed rates. The member does not make any such payment. the prepaid fees, it still will not qualify as an insurance contract because petitioner’s
objective is to provide medical services at reduced cost, not to distribute risk like an
In other words, there is nothing in petitioner's agreements that gives rise to a insurer.
monetary liability on the part of the member to any third party-provider of medical
services which might in turn necessitate indemnification from petitioner. The terms In sum, an examination of petitioner’s agreements with its members leads us to
"indemnify" or "indemnity" presuppose that a liability or claim has already been conclude that it is not an insurance contract within the context of our Insurance
incurred. There is no indemnity precisely because the member merely avails of Code.
medical services to be paid or already paid in advance at a pre-agreed price under the
agreements. There Was No Legislative Intent To Impose DST On Health Care Agreements
Of HMOs
Third. According to the agreement, a member can take advantage of the bulk of the
benefits anytime, e.g. laboratory services, x-ray, routine annual physical examination
Furthermore, militating in convincing fashion against the imposition of DST on
and consultations, vaccine administration as well as family planning counseling,
petitioner’s health care agreements under Section 185 of the NIRC of 1997 is the
even in the absence of any peril, loss or damage on his or her part. provision’s legislative history. The text of Section 185 came into U.S. law as early as
1904 when HMOs and health care agreements were not even in existence in this
Fourth. In case of emergency, petitioner is obliged to reimburse the member who jurisdiction. It was imposed under Section 116, Article XI of Act No. 1189
receives care from a non-participating physician or hospital. However, this is only a (otherwise known as the "Internal Revenue Law of 1904")46enacted on July 2, 1904
very minor part of the list of services available. The assumption of the expense by and became effective on August 1, 1904. Except for the rate of tax, Section 185 of
petitioner is not confined to the happening of a contingency but includes incidents the NIRC of 1997 is a verbatim reproduction of the pertinent portion of Section 116,
even in the absence of illness or injury. to wit:

In Michigan Podiatric Medical Association v. National Foot Care Program, ARTICLE XI


Inc.,43 although the health care contracts called for the defendant to partially Stamp Taxes on Specified Objects
reimburse a subscriber for treatment received from a non-designated doctor, this did
not make defendant an insurer. Citing Jordan, the Court determined that "the
Section 116. There shall be levied, collected, and paid for and in respect to the
primary activity of the defendant (was) the provision of podiatric services to
several bonds, debentures, or certificates of stock and indebtedness, and other
subscribers in consideration of prepayment for such services."44 Since indemnity of documents, instruments, matters, and things mentioned and described in this section,
the insured was not the focal point of the agreement but the extension of medical or for or in respect to the vellum, parchment, or paper upon which such instrument,
services to the member at an affordable cost, it did not partake of the nature of a
matters, or things or any of them shall be written or printed by any person or persons
contract of insurance. who shall make, sign, or issue the same, on and after January first, nineteen hundred
and five, the several taxes following:
Fifth. Although risk is a primary element of an insurance contract, it is not
necessarily true that risk alone is sufficient to establish it. Almost anyone who
xxx xxx xxx
undertakes a contractual obligation always bears a certain degree of financial risk.
Consequently, there is a need to distinguish prepaid service contracts (like those of
petitioner) from the usual insurance contracts. Third xxx (c) on all policies of insurance or bond or obligation of the nature of
indemnity for loss, damage, or liability made or renewed by any person,
association, company, or corporation transacting the business of accident, formally incorporated in 1991. Afterwards, HMOs proliferated quickly and currently,
fidelity, employer’s liability, plate glass, steam boiler, burglar, elevator, there are 36 registered HMOs with a total enrollment of more than 2 million.49
automatic sprinkle, or other branch of insurance (except life, marine, inland,
and fire insurance) xxxx (Emphasis supplied) We can clearly see from these two histories (of the DST on the one hand and HMOs
on the other) that when the law imposing the DST was first passed, HMOs were yet
On February 27, 1914, Act No. 2339 (the Internal Revenue Law of 1914) was unknown in the Philippines. However, when the various amendments to the DST law
enacted revising and consolidating the laws relating to internal revenue. The were enacted, they were already in existence in the Philippines and the term had in
aforecited pertinent portion of Section 116, Article XI of Act No. 1189 was fact already been defined by RA 7875. If it had been the intent of the legislature to
completely reproduced as Section 30 (l), Article III of Act No. 2339. The very impose DST on health care agreements, it could have done so in clear and
detailed and exclusive enumeration of items subject to DST was thus retained. categorical terms. It had many opportunities to do so. But it did not. The fact that the
NIRC contained no specific provision on the DST liability of health care agreements
On December 31, 1916, Section 30 (l), Article III of Act No. 2339 was again of HMOs at a time they were already known as such, belies any legislative intent to
reproduced as Section 1604 (l), Article IV of Act No. 2657 (Administrative Code). impose it on them. As a matter of fact, petitioner was assessed its DST liability
Upon its amendment on March 10, 1917, the pertinent DST provision became only on January 27, 2000, after more than a decade in the business as an
Section 1449 (l) of Act No. 2711, otherwise known as the Administrative Code of HMO.50
1917.
Considering that Section 185 did not change since 1904 (except for the rate of tax), it
Section 1449 (1) eventually became Sec. 222 of Commonwealth Act No. 466 (the would be safe to say that health care agreements were never, at any time, recognized
NIRC of 1939), which codified all the internal revenue laws of the Philippines. In an as insurance contracts or deemed engaged in the business of insurance within the
amendment introduced by RA 40 on October 1, 1946, the DST rate was increased context of the provision.
but the provision remained substantially the same.
The Power To Tax Is Not The Power To Destroy
Thereafter, on June 3, 1977, the same provision with the same DST rate was
reproduced in PD 1158 (NIRC of 1977) as Section 234. Under PDs 1457 and 1959, As a general rule, the power to tax is an incident of sovereignty and is unlimited in
enacted on June 11, 1978 and October 10, 1984 respectively, the DST rate was again its range, acknowledging in its very nature no limits, so that security against its abuse
increased.1avvphi1 is to be found only in the responsibility of the legislature which imposes the tax on
the constituency who is to pay it.51 So potent indeed is the power that it was once
Effective January 1, 1986, pursuant to Section 45 of PD 1994, Section 234 of the opined that "the power to tax involves the power to destroy."52
NIRC of 1977 was renumbered as Section 198. And under Section 23 of EO47 273
dated July 25, 1987, it was again renumbered and became Section 185. Petitioner claims that the assessed DST to date which amounts to ₱376 million53 is
way beyond its net worth of ₱259 million.54 Respondent never disputed these
On December 23, 1993, under RA 7660, Section 185 was amended but, again, only assertions. Given the realities on the ground, imposing the DST on petitioner would
with respect to the rate of tax. be highly oppressive. It is not the purpose of the government to throttle private
business. On the contrary, the government ought to encourage private
enterprise.55 Petitioner, just like any concern organized for a lawful economic
Notwithstanding the comprehensive amendment of the NIRC of 1977 by RA 8424
activity, has a right to maintain a legitimate business.56 As aptly held in Roxas, et al.
(or the NIRC of 1997), the subject legal provision was retained as the present Section
185. In 2004, amendments to the DST provisions were introduced by RA 924348 but v. CTA, et al.:57
Section 185 was untouched.
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
On the other hand, the concept of an HMO was introduced in the Philippines with the
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
formation of Bancom Health Care Corporation in 1974. The same pioneer HMO was
later reorganized and renamed Integrated Health Care Services, Inc. (or Intercare). the "hen that lays the golden egg."58
However, there are those who claim that Health Maintenance, Inc. is the HMO
industry pioneer, having set foot in the Philippines as early as 1965 and having been Legitimate enterprises enjoy the constitutional protection not to be taxed out of
existence. Incurring losses because of a tax imposition may be an acceptable
consequence but killing the business of an entity is another matter and should not be resolution was a judgment on the merits; hence, the Court should apply the CA
allowed. It is counter-productive and ultimately subversive of the nation’s thrust ruling there that a health care agreement is not an insurance contract.
towards a better economy which will ultimately benefit the majority of our people.59
It is true that, although contained in a minute resolution, our dismissal of the petition
Petitioner’s Tax Liability Was Extinguished Under The Provisions Of RA 9840 was a disposition of the merits of the case. When we dismissed the petition, we
effectively affirmed the CA ruling being questioned. As a result, our ruling in that
Petitioner asserts that, regardless of the arguments, the DST assessment for taxable case has already become final.67 When a minute resolution denies or dismisses a
years 1996 and 1997 became moot and academic60 when it availed of the tax petition for failure to comply with formal and substantive requirements, the
amnesty under RA 9480 on December 10, 2007. It paid ₱5,127,149.08 representing challenged decision, together with its findings of fact and legal conclusions, are
5% of its net worth as of the year ended December 31, 2005 and complied with all deemed sustained.68 But what is its effect on other cases?
requirements of the tax amnesty. Under Section 6(a) of RA 9480, it is entitled to
immunity from payment of taxes as well as additions thereto, and the appurtenant With respect to the same subject matter and the same issues concerning the same
civil, criminal or administrative penalties under the 1997 NIRC, as amended, arising parties, it constitutes res judicata.69 However, if other parties or another subject
from the failure to pay any and all internal revenue taxes for taxable year 2005 and matter (even with the same parties and issues) is involved, the minute resolution is
prior years.61 not binding precedent. Thus, in CIR v. Baier-Nickel,70 the Court noted that a previous
case, CIR v. Baier-Nickel71 involving the same parties and the same issues, was
Far from disagreeing with petitioner, respondent manifested in its memorandum: previously disposed of by the Court thru a minute resolution dated February 17, 2003
sustaining the ruling of the CA. Nonetheless, the Court ruled that the previous case
"ha(d) no bearing" on the latter case because the two cases involved different
Section 6 of [RA 9840] provides that availment of tax amnesty entitles a taxpayer to
subject matters as they were concerned with the taxable income of different taxable
immunity from payment of the tax involved, including the civil, criminal, or
administrative penalties provided under the 1997 [NIRC], for tax liabilities arising in years.72
2005 and the preceding years.
Besides, there are substantial, not simply formal, distinctions between a minute
resolution and a decision. The constitutional requirement under the first paragraph of
In view of petitioner’s availment of the benefits of [RA 9840], and without
Section 14, Article VIII of the Constitution that the facts and the law on which the
conceding the merits of this case as discussed above, respondent concedes that
judgment is based must be expressed clearly and distinctly applies only to decisions,
such tax amnesty extinguishes the tax liabilities of petitioner. This admission,
not to minute resolutions. A minute resolution is signed only by the clerk of court by
however, is not meant to preclude a revocation of the amnesty granted in case it is
authority of the justices, unlike a decision. It does not require the certification of the
found to have been granted under circumstances amounting to tax fraud under
Chief Justice. Moreover, unlike decisions, minute resolutions are not published in the
Section 10 of said amnesty law.62 (Emphasis supplied)
Philippine Reports. Finally, the proviso of Section 4(3) of Article VIII speaks of a
decision.73Indeed, as a rule, this Court lays down doctrines or principles of law
Furthermore, we held in a recent case that DST is one of the taxes covered by the tax which constitute binding precedent in a decision duly signed by the members of the
amnesty program under RA 9480.63 There is no other conclusion to draw than that Court and certified by the Chief Justice.
petitioner’s liability for DST for the taxable years 1996 and 1997 was totally
extinguished by its availment of the tax amnesty under RA 9480.
Accordingly, since petitioner was not a party in G.R. No. 148680 and since
petitioner’s liability for DST on its health care agreement was not the subject matter
Is The Court Bound By A Minute Resolution In Another Case? of G.R. No. 148680, petitioner cannot successfully invoke the minute resolution in
that case (which is not even binding precedent) in its favor. Nonetheless, in view of
Petitioner raises another interesting issue in its motion for reconsideration: whether the reasons already discussed, this does not detract in any way from the fact that
this Court is bound by the ruling of the CA64 in CIR v. Philippine National petitioner’s health care agreements are not subject to DST.
Bank65 that a health care agreement of Philamcare Health Systems is not an insurance
contract for purposes of the DST. A Final Note

In support of its argument, petitioner cites the August 29, 2001 minute resolution of Taking into account that health care agreements are clearly not within the ambit of
this Court dismissing the appeal in Philippine National Bank (G.R. No. Section 185 of the NIRC and there was never any legislative intent to impose the
148680).66 Petitioner argues that the dismissal of G.R. No. 148680 by minute
same on HMOs like petitioner, the same should not be arbitrarily and unjustly
included in its coverage.

It is a matter of common knowledge that there is a great social need for adequate
medical services at a cost which the average wage earner can afford. HMOs arrange,
organize and manage health care treatment in the furtherance of the goal of providing
a more efficient and inexpensive health care system made possible by quantity
purchasing of services and economies of scale. They offer advantages over the pay-
for-service system (wherein individuals are charged a fee each time they receive
medical services), including the ability to control costs. They protect their members
from exposure to the high cost of hospitalization and other medical expenses brought
about by a fluctuating economy. Accordingly, they play an important role in society
as partners of the State in achieving its constitutional mandate of providing its
citizens with affordable health services.

The rate of DST under Section 185 is equivalent to 12.5% of the premium
charged.74 Its imposition will elevate the cost of health care services. This will in turn
necessitate an increase in the membership fees, resulting in either placing health
services beyond the reach of the ordinary wage earner or driving the industry to the
ground. At the end of the day, neither side wins, considering the indispensability of
the services offered by HMOs.

WHEREFORE, the motion for reconsideration is GRANTED. The August 16,


2004 decision of the Court of Appeals in CA-G.R. SP
No. 70479 is REVERSED and SET ASIDE. The 1996 and 1997 deficiency DST
assessment against petitioner is hereby CANCELLED and SET
ASIDE. Respondent is ordered to desist from collecting the said tax.

No costs.

SO ORDERED.
G.R. No. L-24693 July 31, 1967 manager, keeper or duly authorized representative of a hotel, motel, or lodging house
to refrain from entertaining or accepting any guest or customer or letting any room or
ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION, other quarter to any person or persons without his filling up the prescribed form in a
INC., HOTEL DEL MAR INC. and GO CHIU, petitioners-appellees, lobby open to public view at all times and in his presence, wherein the surname,
vs. given name and middle name, the date of birth, the address, the occupation, the sex,
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant. the nationality, the length of stay and the number of companions in the room, if any,
VICTOR ALABANZA, intervenor-appellee. with the name, relationship, age and sex would be specified, with data furnished as to
his residence certificate as well as his passport number, if any, coupled with a
certification that a person signing such form has personally filled it up and affixed
Panganiban, Abad and Associates Law Office for respondent-appellant.
his signature in the presence of such owner, manager, keeper or duly authorized
J. M. Aruego, Tenchavez and Associates for intervenor-appellee.
representative, with such registration forms and records kept and bound together, it
also being provided that the premises and facilities of such hotels, motels and
FERNANDO, J.: lodging houses would be open for inspection either by the City Mayor, or the Chief
of Police, or their duly authorized representatives is unconstitutional and void again
The principal question in this appeal from a judgment of the lower court in an action on due process grounds, not only for being arbitrary, unreasonable or oppressive but
for prohibition is whether Ordinance No. 4760 of the City of Manila is violative of also for being vague, indefinite and uncertain, and likewise for the alleged invasion
the due process clause. The lower court held that it is and adjudged it of the right to privacy and the guaranty against self-incrimination; that Section 2 of
"unconstitutional, and, therefore, null and void." For reasons to be more specifically the challenged ordinance classifying motels into two classes and requiring the
set forth, such judgment must be reversed, there being a failure of the requisite maintenance of certain minimum facilities in first class motels such as a telephone in
showing to sustain an attack against its validity. each room, a dining room or, restaurant and laundry similarly offends against the due
process clause for being arbitrary, unreasonable and oppressive, a conclusion which
The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by applies to the portion of the ordinance requiring second class motels to have a dining
the petitioners, Ermita-Malate Hotel and Motel Operators Association, one of its room; that the provision of Section 2 of the challenged ordinance prohibiting a
members, Hotel del Mar Inc., and a certain Go Chiu, who is "the president and person less than 18 years old from being accepted in such hotels, motels, lodging
general manager of the second petitioner" against the respondent Mayor of the City houses, tavern or common inn unless accompanied by parents or a lawful guardian
of Manila who was sued in his capacity as such "charged with the general power and and making it unlawful for the owner, manager, keeper or duly authorized
duty to enforce ordinances of the City of Manila and to give the necessary orders for representative of such establishments to lease any room or portion thereof more than
the faithful execution and enforcement of such ordinances." (par. 1). It was alleged twice every 24 hours, runs counter to the due process guaranty for lack of certainty
that the petitioner non-stock corporation is dedicated to the promotion and protection and for its unreasonable, arbitrary and oppressive character; and that insofar as the
of the interest of its eighteen (18) members "operating hotels and motels, penalty provided for in Section 4 of the challenged ordinance for a subsequent
characterized as legitimate businesses duly licensed by both national and city conviction would, cause the automatic cancellation of the license of the offended
authorities, regularly paying taxes, employing and giving livelihood to not less than party, in effect causing the destruction of the business and loss of its investments,
2,500 person and representing an investment of more than P3 million."1 (par. 2). It there is once again a transgression of the due process clause.
was then alleged that on June 13, 1963, the Municipal Board of the City of Manila
enacted Ordinance No. 4760, approved on June 14, 1963 by the then Vice-Mayor There was a plea for the issuance of preliminary injunction and for a final judgment
Herminio Astorga, who was at the time acting as Mayor of the City of Manila. (par. declaring the above ordinance null and void and unenforceable. The lower court on
3). July 6, 1963 issued a writ of preliminary injunction ordering respondent Mayor to
refrain from enforcing said Ordinance No. 4760 from and after July 8, 1963.
After which the alleged grievances against the ordinance were set forth in detail.
There was the assertion of its being beyond the powers of the Municipal Board of the In the a answer filed on August 3, 1963, there was an admission of the personal
City of Manila to enact insofar as it would regulate motels, on the ground that in the circumstances regarding the respondent Mayor and of the fact that petitioners are
revised charter of the City of Manila or in any other law, no reference is made to licensed to engage in the hotel or motel business in the City of Manila, of the
motels; that Section 1 of the challenged ordinance is unconstitutional and void for provisions of the cited Ordinance but a denial of its alleged nullity, whether on
being unreasonable and violative of due process insofar as it would impose statutory or constitutional grounds. After setting forth that the petition did fail to state
P6,000.00 fee per annum for first class motels and P4,500.00 for second class a cause of action and that the challenged ordinance bears a reasonable relation, to a
motels; that the provision in the same section which would require the owner, proper purpose, which is to curb immorality, a valid and proper exercise of the police
power and that only the guests or customers not before the court could complain of it, citing not only U.S. v. Salaveria, but likewise applicable American authorities.
the alleged invasion of the right to privacy and the guaranty against self Such a memorandum likewise refuted point by point the arguments advanced by
incrimination, with the assertion that the issuance of the preliminary injunction ex petitioners against its validity. Then barely two weeks later, on February 4, 1965, the
parte was contrary to law, respondent Mayor prayed for, its dissolution and the memorandum for petitioners was filed reiterating in detail what was set forth in the
dismissal of the petition. petition, with citations of what they considered to be applicable American authorities
and praying for a judgment declaring the challenged ordinance "null and void and
Instead of evidence being offered by both parties, there was submitted a stipulation unenforceable" and making permanent the writ of preliminary injunction issued.
of facts dated September 28, 1964, which reads:
After referring to the motels and hotels, which are members of the petitioners
1. That the petitioners Ermita-Malate Hotel and Motel Operators association, and referring to the alleged constitutional questions raised by the party,
Association, Inc. and Hotel del Mar Inc. are duly organized and existing the lower court observed: "The only remaining issue here being purely a question of
under the laws of the Philippines, both with offices in the City of Manila, law, the parties, with the nod of the Court, agreed to file memoranda and thereafter,
while the petitioner Go Chin is the president and general manager of Hotel to submit the case for decision of the Court." It does appear obvious then that
del Mar Inc., and the intervenor Victor Alabanza is a resident of Baguio without any evidence submitted by the parties, the decision passed upon the alleged
City, all having the capacity to sue and be sued; infirmity on constitutional grounds of the challenged ordinance, dismissing as is
undoubtedly right and proper the untenable objection on the alleged lack of authority
of the City of Manila to regulate motels, and came to the conclusion that "the
2. That the respondent Mayor is the duly elected and incumbent City Mayor
challenged Ordinance No. 4760 of the City of Manila, would be unconstitutional
and chief executive of the City of Manila charged with the general power
and, therefore, null and void." It made permanent the preliminary injunction issued
and duty to enforce ordinances of the City of Manila and to give the
against respondent Mayor and his agents "to restrain him from enforcing the
necessary orders for the faithful execution and enforcement of such
ordinance in question." Hence this appeal.
ordinances;

As noted at the outset, the judgment must be reversed. A decent regard for
3. That the petitioners are duly licensed to engage in the business of
constitutional doctrines of a fundamental character ought to have admonished the
operating hotels and motels in Malate and Ermita districts in Manila;
lower court against such a sweeping condemnation of the challenged ordinance. Its
decision cannot be allowed to stand, consistently with what has hitherto been the
4. That on June 13, 1963, the Municipal Board of the City of Manila accepted standards of constitutional adjudication, in both procedural and substantive
enacted Ordinance No. 4760, which was approved on June 14, 1963, by aspects.
Vice-Mayor Herminio Astorga, then the acting City Mayor of Manila, in the
absence of the respondent regular City Mayor, amending sections 661, 662,
Primarily what calls for a reversal of such a decision is the absence of any evidence
668-a, 668-b and 669 of the compilation of the ordinances of the City of
Manila besides inserting therein three new sections. This ordinance is to offset the presumption of validity that attaches to a challenged statute or
similar to the one vetoed by the respondent Mayor (Annex A) for the ordinance. As was expressed categorically by Justice Malcolm: "The presumption is
all in favor of validity x x x . The action of the elected representatives of the people
reasons stated in its 4th Indorsement dated February 15, 1963 (Annex B);
cannot be lightly set aside. The councilors must, in the very nature of things, be
familiar with the necessities of their particular municipality and with all the facts and
5. That the explanatory note signed by then Councilor Herminio Astorga circumstances which surround the subject and necessitate action. The local
was submitted with the proposed ordinance (now Ordinance 4760) to the legislative body, by enacting the ordinance, has in effect given notice that the
Municipal Board, copy of which is attached hereto as Annex C; regulations are essential to the well being of the people x x x . The Judiciary should
not lightly set aside legislative action when there is not a clear invasion of personal
6. That the City of Manila derived in 1963 an annual income of or property rights under the guise of police regulation.2
P101,904.05 from license fees paid by the 105 hotels and motels (including
herein petitioners) operating in the City of Manila.1äwphï1.ñët It admits of no doubt therefore that there being a presumption of validity, the
necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is
Thereafter came a memorandum for respondent on January 22, 1965, wherein stress void on its face which is not the case here. The principle has been nowhere better
was laid on the presumption of the validity of the challenged ordinance, the burden expressed than in the leading case of O'Gorman & Young v. Hartford Fire Insurance
of showing its lack of conformity to the Constitution resting on the party who assails Co.,3 where the American Supreme Court through Justice Brandeis tersely and
succinctly summed up the matter thus: The statute here questioned deals with a public dance halls;9 prohibiting gambling;10 prohibiting jueteng;11 and
subject clearly within the scope of the police power. We are asked to declare it void monte;12 prohibiting playing of panguingui on days other than Sundays or legal
on the ground that the specific method of regulation prescribed is unreasonable and holidays;13 prohibiting the operation of pinball machines;14 and prohibiting any
hence deprives the plaintiff of due process of law. As underlying questions of fact person from keeping, conducting or maintaining an opium joint or visiting a place
may condition the constitutionality of legislation of this character, the resumption of where opium is smoked or otherwise used,15 all of which are intended to protect
constitutionality must prevail in the absence of some factual foundation of record for public morals.
overthrowing the statute." No such factual foundation being laid in the present case,
the lower court deciding the matter on the pleadings and the stipulation of facts, the On the legislative organs of the government, whether national or local, primarily rest
presumption of validity must prevail and the judgment against the ordinance set the exercise of the police power, which, it cannot be too often emphasized, is the
aside. power to prescribe regulations to promote the health, morals, peace, good order,
safety and general welfare of the people. In view of the requirements of due process,
Nor may petitioners assert with plausibility that on its face the ordinance is fatally equal protection and other applicable constitutional guaranties however, the exercise
defective as being repugnant to the due process clause of the Constitution. The of such police power insofar as it may affect the life, liberty or property of any
mantle of protection associated with the due process guaranty does not cover person is subject to judicial inquiry. Where such exercise of police power may be
petitioners. This particular manifestation of a police power measure being considered as either capricious, whimsical, unjust or unreasonable, a denial of due
specifically aimed to safeguard public morals is immune from such imputation of process or a violation of any other applicable constitutional guaranty may call for
nullity resting purely on conjecture and unsupported by anything of substance. To correction by the courts.
hold otherwise would be to unduly restrict and narrow the scope of police power
which has been properly characterized as the most essential, insistent and the least We are thus led to considering the insistent, almost shrill tone, in which the objection
limitable of powers,4 extending as it does "to all the great public needs."5 It would is raised to the question of due process.16 There is no controlling and precise
be, to paraphrase another leading decision, to destroy the very purpose of the state if definition of due process. It furnishes though a standard to which the governmental
it could be deprived or allowed itself to be deprived of its competence to promote action should conform in order that deprivation of life, liberty or property, in each
public health, public morals, public safety and the genera welfare.6 Negatively put, appropriate case, be valid. What then is the standard of due process which must exist
police power is "that inherent and plenary power in the State which enables it to both as a procedural and a substantive requisite to free the challenged ordinance, or
prohibit all that is hurt full to the comfort, safety, and welfare of society.7 any governmental action for that matter, from the imputation of legal infirmity
sufficient to spell its doom? It is responsiveness to the supremacy of reason,
There is no question but that the challenged ordinance was precisely enacted to obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and
minimize certain practices hurtful to public morals. The explanatory note of the unfairness avoided. To satisfy the due process requirement, official action, to
Councilor Herminio Astorga included as annex to the stipulation of facts, speaks of paraphrase Cardozo, must not outrun the bounds of reason and result in sheer
the alarming increase in the rate of prostitution, adultery and fornication in Manila oppression. Due process is thus hostile to any official action marred by lack of
traceable in great part to the existence of motels, which "provide a necessary reasonableness. Correctly it has been identified as freedom from arbitrariness. It is
atmosphere for clandestine entry, presence and exit" and thus become the "ideal the embodiment of the sporting idea of fair play.17 It exacts fealty "to those strivings
haven for prostitutes and thrill-seekers." The challenged ordinance then proposes to for justice" and judges the act of officialdom of whatever branch "in the light of
check the clandestine harboring of transients and guests of these establishments by reason drawn from considerations of fairness that reflect [democratic] traditions of
requiring these transients and guests to fill up a registration form, prepared for the legal and political thought."18 It is not a narrow or "technical conception with fixed
purpose, in a lobby open to public view at all times, and by introducing several other content unrelated to time, place and circumstances,"19 decisions based on such a
amendatory provisions calculated to shatter the privacy that characterizes the clause requiring a "close and perceptive inquiry into fundamental principles of our
registration of transients and guests." Moreover, the increase in the licensed fees was society."20 Questions of due process are not to be treated narrowly or pedantically in
intended to discourage "establishments of the kind from operating for purpose other slavery to form or phrases.21
than legal" and at the same time, to increase "the income of the city government." It
would appear therefore that the stipulation of facts, far from sustaining any attack It would thus be an affront to reason to stigmatize an ordinance enacted precisely to
against the validity of the ordinance, argues eloquently for it. meet what a municipal lawmaking body considers an evil of rather serious proportion
an arbitrary and capricious exercise of authority. It would seem that what should be
It is a fact worth noting that this Court has invariably stamped with the seal of its deemed unreasonable and what would amount to an abdication of the power to
approval, ordinances punishing vagrancy and classifying a pimp or procurer as a govern is inaction in the face of an admitted deterioration of the state of public
vagrant;8 provide a license tax for and regulating the maintenance or operation of morals. To be more specific, the Municipal Board of the City of Manila felt the need
for a remedial measure. It provided it with the enactment of the challenged stalls in the public markets. But it appears that plaintiffs are also dealers in
ordinance. A strong case must be found in the records, and, as has been set forth, refrigerated or cold storage meat, the sale of which outside the city markets under
none is even attempted here to attach to an ordinance of such character the taint of certain conditions is permitted x x x . And surely, the mere fact, that some
nullity for an alleged failure to meet the due process requirement. Nor does it lend individuals in the community may be deprived of their present business or a
any semblance even of deceptive plausibility to petitioners' indictment of Ordinance particular mode of earning a living cannot prevent the exercise of the police power.
No. 4760 on due process grounds to single out such features as the increased fees for As was said in a case, persons licensed to pursue occupations which may in the
motels and hotels, the curtailment of the area of freedom to contract, and, in certain public need and interest be affected by the exercise of the police power embark in
particulars, its alleged vagueness. these occupations subject to the disadvantages which may result from the legal
exercise of that power."27
Admittedly there was a decided increase of the annual license fees provided for by
the challenged ordinance for hotels and motels, 150% for the former and over 200% Nor does the restriction on the freedom to contract, insofar as the challenged
for the latter, first-class motels being required to pay a P6,000 annual fee and second- ordinance makes it unlawful for the owner, manager, keeper or duly authorized
class motels, P4,500 yearly. It has been the settled law however, as far back as 1922 representative of any hotel, motel, lodging house, tavern, common inn or the like, to
that municipal license fees could be classified into those imposed for regulating lease or rent room or portion thereof more than twice every 24 hours, with a proviso
occupations or regular enterprises, for the regulation or restriction of non-useful that in all cases full payment shall be charged, call for a different conclusion. Again,
occupations or enterprises and for revenue purposes only.22 As was explained more such a limitation cannot be viewed as a transgression against the command of due
in detail in the above Cu Unjieng case: (2) Licenses for non-useful occupations are process. It is neither unreasonable nor arbitrary. Precisely it was intended to curb the
also incidental to the police power and the right to exact a fee may be implied from opportunity for the immoral or illegitimate use to which such premises could be, and,
the power to license and regulate, but in fixing amount of the license fees the according to the explanatory note, are being devoted. How could it then be arbitrary
municipal corporations are allowed a much wider discretion in this class of cases or oppressive when there appears a correspondence between the undeniable existence
than in the former, and aside from applying the well-known legal principle that of an undesirable situation and the legislative attempt at correction. Moreover,
municipal ordinances must not be unreasonable, oppressive, or tyrannical, courts petitioners cannot be unaware that every regulation of conduct amounts to
have, as a general rule, declined to interfere with such discretion. The desirability of curtailment of liberty which as pointed out by Justice Malcolm cannot be absolute.
imposing restraint upon the number of persons who might otherwise engage in non- Thus: "One thought which runs through all these different conceptions of liberty is
useful enterprises is, of course, generally an important factor in the determination of plainly apparent. It is this: 'Liberty' as understood in democracies, is not license; it is
the amount of this kind of license fee. Hence license fees clearly in the nature of 'liberty regulated by law.' Implied in the term is restraint by law for the good of the
privilege taxes for revenue have frequently been upheld, especially in of licenses for individual and for the greater good of the peace and order of society and the general
the sale of liquors. In fact, in the latter cases the fees have rarely been declared well-being. No man can do exactly as he pleases. Every man must renounce
unreasonable.23 unbridled license. The right of the individual is necessarily subject to reasonable
restraint by general law for the common good x x x The liberty of the citizen may be
Moreover in the equally leading case of Lutz v. Araneta24 this Court affirmed the restrained in the interest of the public health, or of the public order and safety, or
doctrine earlier announced by the American Supreme Court that taxation may be otherwise within the proper scope of the police power."28
made to implement the state's police power. Only the other day, this Court had
occasion to affirm that the broad taxing authority conferred by the Local Autonomy A similar observation was made by Justice Laurel: "Public welfare, then, lies at the
Act of 1959 to cities and municipalities is sufficiently plenary to cover a wide range bottom of the enactment of said law, and the state in order to promote the general
of subjects with the only limitation that the tax so levied is for public purposes, just welfare may interfere with personal liberty, with property, and with business and
and uniform.25 occupations. Persons and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of the state x x
As a matter of fact, even without reference to the wide latitude enjoyed by the City x To this fundamental aim of our Government the rights of the individual are
of Manila in imposing licenses for revenue, it has been explicitly held in one case subordinated. Liberty is a blessing without which life is a misery, but liberty should
that "much discretion is given to municipal corporations in determining the amount," not be made to prevail over authority because then society will fall into anarchy.
here the license fee of the operator of a massage clinic, even if it were viewed purely Neither should authority be made to prevail over liberty because then the individual
as a police power measure.26 The discussion of this particular matter may fitly close will fall into slavery. The citizen should achieve the required balance of liberty and
with this pertinent citation from another decision of significance: "It is urged on authority in his mind through education and personal discipline, so that there may be
behalf of the plaintiffs-appellees that the enforcement of the ordinance could deprive established the resultant equilibrium, which means peace and order and happiness for
them of their lawful occupation and means of livelihood because they can not rent all.29
It is noteworthy that the only decision of this Court nullifying legislation because of
undue deprivation of freedom to contract, People v. Pomar,30 no longer "retains its
virtuality as a living principle. The policy of laissez faire has to some extent given
way to the assumption by the government of the right of intervention even in
contractual relations affected with public interest.31 What may be stressed
sufficiently is that if the liberty involved were freedom of the mind or the person, the
standard for the validity of governmental acts is much more rigorous and exacting,
but where the liberty curtailed affects at the most rights of property, the permissible
scope of regulatory measure is wider.32 How justify then the allegation of a denial of
due process?

Lastly, there is the attempt to impugn the ordinance on another due process ground
by invoking the principles of vagueness or uncertainty. It would appear from a recital
in the petition itself that what seems to be the gravamen of the alleged grievance is
that the provisions are too detailed and specific rather than vague or uncertain.
Petitioners, however, point to the requirement that a guest should give the name,
relationship, age and sex of the companion or companions as indefinite and uncertain
in view of the necessity for determining whether the companion or companions
referred to are those arriving with the customer or guest at the time of the registry or
entering the room With him at about the same time or coming at any indefinite time
later to join him; a proviso in one of its sections which cast doubt as to whether the
maintenance of a restaurant in a motel is dependent upon the discretion of its owners
or operators; another proviso which from their standpoint would require a guess as to
whether the "full rate of payment" to be charged for every such lease thereof means a
full day's or merely a half-day's rate. It may be asked, do these allegations suffice to
render the ordinance void on its face for alleged vagueness or uncertainty? To ask the
question is to answer it. From Connally v. General Construction Co.33 to Adderley v.
Florida,34 the principle has been consistently upheld that what makes a statute
susceptible to such a charge is an enactment either forbidding or requiring the doing
of an act that men of common intelligence must necessarily guess at its meaning and
differ as to its application. Is this the situation before us? A citation from Justice
Holmes would prove illuminating: "We agree to all the generalities about not
supplying criminal laws with what they omit but there is no canon against using
common sense in construing laws as saying what they obviously mean."35

That is all then that this case presents. As it stands, with all due allowance for the
arguments pressed with such vigor and determination, the attack against the validity
of the challenged ordinance cannot be considered a success. Far from it. Respect for
constitutional law principles so uniformly held and so uninterruptedly adhered to by
this Court compels a reversal of the appealed decision.

Wherefore, the judgment of the lower court is reversed and the injunction issued
lifted forthwith. With costs.
COMMISSIONER OF INTERNAL G.R. No. 159647
REVENUE, The CA narrated the antecedent facts as follows:
Petitioner, Present:
Panganiban, Respondent is a domestic corporation primarily engaged in
J., retailing of medicines and other pharmaceutical products. In 1996,
Chairman, it operated six (6) drugstores under the business name and style
Sandoval-Gutierrez, Mercury Drug.
- versus - Corona,
Carpio Morales, and From January to December 1996, respondent granted twenty (20%)
Garcia, JJ percent sales discount to qualified senior citizens on their
CENTRAL LUZON DRUG Promulgated: purchases of medicines pursuant to Republic Act No. [R.A.] 7432
CORPORATION, and its Implementing Rules and Regulations. For the said period,
Respondent. April 15, 2005 the amount allegedly representing the 20% sales discount granted
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x by respondent to qualified senior citizens totaled P904,769.00.

On April 15, 1997, respondent filed its Annual Income Tax Return
DECISION for taxable year 1996 declaring therein that it incurred net losses
from its operations.

PANGANIBAN, J.: On January 16, 1998, respondent filed with petitioner a claim for
tax refund/credit in the amount of P904,769.00 allegedly arising
from the 20% sales discount granted by respondent to qualified
T he 20 percent discount required by the law to be given to senior citizens is senior citizens in compliance with [R.A.] 7432. Unable to obtain
a tax credit, not merely a tax deduction from the gross income or gross sale of the affirmative response from petitioner, respondent elevated its claim
establishment concerned. A tax credit is used by a private establishment only after to the Court of Tax Appeals [(CTA or Tax Court)] via a Petition
the tax has been computed; a tax deduction, before the tax is computed. RA 7432 for Review.
unconditionally grants a tax credit to all covered entities. Thus, the provisions of the
revenue regulation that withdraw or modify such grant are void. Basic is the rule that On February 12, 2001, the Tax Court rendered
administrative regulations cannot amend or revoke the law. a Decision[5] dismissing respondents Petition for lack of merit. In
said decision, the [CTA] justified its ruling with the following
The Case ratiocination:

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, x x x, if no tax has been paid to the government,
seeking to set aside the August 29, 2002 Decision[2] and the August 11, 2003 erroneously or illegally, or if no amount is due
Resolution[3] of the Court of Appeals (CA) in CA-GR SP No. 67439. The assailed and collectible from the taxpayer, tax refund or
Decision reads as follows: tax credit is unavailing. Moreover, whether the
recovery of the tax is made by means of a claim
WHEREFORE, premises considered, the Resolution for refund or tax credit, before recovery is
appealed from is AFFIRMED in toto. No costs.[4] allowed[,] it must be first established that there
was an actual collection and receipt by the
government of the tax sought to be recovered. x
The assailed Resolution denied petitioners Motion for Reconsideration. x x.
xxxxxxxxx

Prescinding from the above, it could logically be


The Facts deduced that tax credit is premised on the
existence of tax liability on the part of taxpayer. The CA affirmed in toto the Resolution of the Court of Tax Appeals (CTA) ordering
In other words, if there is no tax liability, tax petitioner to issue a tax credit certificate in favor of respondent in the reduced
credit is not available. amount of P903,038.39. It reasoned that Republic Act No. (RA) 7432 required
neither a tax liability nor a payment of taxes by private establishments prior to the
Respondent lodged a Motion for Reconsideration. The [CTA], in availment of a tax credit. Moreover, such credit is not tantamount to an unintended
its assailed resolution,[6] granted respondents motion for benefit from the law, but rather a just compensation for the taking of private property
reconsideration and ordered herein petitioner to issue a Tax Credit for public use.
Certificate in favor of respondent citing the decision of the then
Special Fourth Division of [the CA] in CA G.R. SP No. 60057 Hence this Petition.[8]
entitled Central [Luzon] Drug Corporation vs. Commissioner of
Internal Revenue promulgated on May 31, 2001, to wit: The Issues

However, Sec. 229 clearly does not apply in the


instant case because the tax sought to be Petitioner raises the following issues for our consideration:
refunded or credited by petitioner was not
erroneously paid or illegally collected. We take Whether the Court of Appeals erred in holding that respondent
exception to the CTAs sweeping but unfounded may claim the 20% sales discount as a tax credit instead of as a
statement that both tax refund and tax credit are deduction from gross income or gross sales.
modes of recovering taxes which are either
erroneously or illegally paid to the government. Whether the Court of Appeals erred in holding that respondent is
Tax refunds or credits do not exclusively pertain entitled to a refund.[9]
to illegally collected or erroneously paid taxes as
they may be other circumstances where a refund
is warranted. The tax refund provided under These two issues may be summed up in only one: whether respondent, despite
Section 229 deals exclusively with illegally incurring a net loss, may still claim the 20 percent sales discount as a tax credit.
collected or erroneously paid taxes but there are
other possible situations, such as the refund of The Courts Ruling
excess estimated corporate quarterly income tax
paid, or that of excess input tax paid by a VAT- The Petition is not meritorious.
registered person, or that of excise tax paid on
goods locally produced or manufactured but
actually exported. The standards and mechanics Sole Issue:
for the grant of a refund or credit under these Claim of 20 Percent Sales Discount
situations are different from that under Sec. 229. as Tax Credit Despite Net Loss
Sec. 4[.a)] of R.A. 7432, is yet another instance
of a tax credit and it does not in any way refer to
illegally collected or erroneously paid taxes, x x Section 4a) of RA 7432[10] grants to senior citizens the privilege of obtaining a 20
x.[7] percent discount on their purchase of medicine from any private establishment in the
country.[11] The latter may then claim the cost of the discount as a tax credit.[12] But
can such credit be claimed, even though an establishment operates at a loss?

We answer in the affirmative.


Ruling of the Court of Appeals
Tax Credit versus
Tax Deduction
Although the term is not specifically defined in our Tax Code,[13] tax credit generally Required for Tax Credit
refers to an amount that is subtracted directly from ones total tax liability.[14] It is an
allowance against the tax itself[15] or a deduction from what is owed[16] by a taxpayer While a tax liability is essential to the availment or use of any tax credit, prior tax
to the government. Examples of tax credits are withheld taxes, payments of payments are not. On the contrary, for the existence or grantsolely of such credit,
estimated tax, and investment tax credits.[17] neither a tax liability nor a prior tax payment is needed. The Tax Code is in fact
replete with provisions granting or allowing tax credits, even though no taxes have
Tax credit should be understood in relation to other tax concepts. One of these is tax been previously paid.
deduction -- defined as a subtraction from income for tax purposes,[18] or an amount
that is allowed by law to reduce income prior to [the] application of the tax rate to For example, in computing the estate tax due, Section 86(E) allows a tax credit --
compute the amount of tax which is due.[19] An example of a tax deduction is any of subject to certain limitations -- for estate taxes paid to a foreign country. Also found
the allowable deductions enumerated in Section 34[20] of the Tax Code. in Section 101(C) is a similar provision for donors taxes -- again when paid to a
foreign country -- in computing for the donors tax due. The tax credits in both
A tax credit differs from a tax deduction. On the one hand, a tax credit reduces the instances allude to the prior payment of taxes, even if not made to our government.
tax due, including -- whenever applicable -- the income taxthat is determined after
applying the corresponding tax rates to taxable income.[21] A tax deduction, on the Under Section 110, a VAT (Value-Added Tax)- registered person engaging in
other, reduces the income that is subject to tax[22] in order to arrive at taxable transactions -- whether or not subject to the VAT -- is also allowed a tax credit that
income.[23] To think of the former as the latter is to avoid, if not entirely confuse, the includes a ratable portion of any input tax not directly attributable to either activity.
issue. A tax credit is used only after the tax has been computed; a tax This input tax may either be the VAT on the purchase or importation of goods or
deduction, before. services that is merely due from -- not necessarily paid by -- such VAT-registered
person in the course of trade or business; or the transitional input tax determined in
Tax Liability Required accordance with Section 111(A). The latter type may in fact be an amount equivalent
for Tax Credit to only eight percent of the value of a VAT-registered persons beginning inventory
of goods, materials and supplies, when such amount -- as computed -- is higher than
Since a tax credit is used to reduce directly the tax that is due, there ought to be a tax the actual VAT paid on the said items.[25] Clearly from this provision, the tax
liability before the tax credit can be applied. Without that liability, any tax credit refers to an input tax that is either due only or given a value by mere
credit application will be useless. There will be no reason for deducting the latter comparison with the VAT actually paid -- then later prorated. No tax is actually paid
when there is, to begin with, no existing obligation to the government. However, as prior to the availment of such credit.
will be presented shortly, the existence of a tax credit or its grant by law is not the
same as the availment or use of such credit. While the grant is mandatory, the In Section 111(B), a one and a half percent input tax credit that is merely
availment or use is not. presumptive is allowed. For the purchase of primary agricultural products used as
inputs -- either in the processing of sardines, mackerel and milk, or in the
If a net loss is reported by, and no other taxes are currently due from, a business manufacture of refined sugar and cooking oil -- and for the contract price of public
establishment, there will obviously be no tax liability against which any tax work contracts entered into with the government, again, no prior tax payments are
credit can be applied.[24] For the establishment to choose the immediate availment of needed for the use of the tax credit.
a tax credit will be premature and impracticable. Nevertheless, the irrefutable fact
remains that, under RA 7432, Congress has granted without conditions a tax More important, a VAT-registered person whose sales are zero-rated or effectively
credit benefit to all covered establishments. zero-rated may, under Section 112(A), apply for the issuance of a tax
credit certificate for the amount of creditable input taxes merely due -- again not
Although this tax credit benefit is available, it need not be used by losing ventures, necessarily paid to -- the government and attributable to such sales, to the extent that
since there is no tax liability that calls for its application. Neither can it be reduced to the input taxes have not been applied against output taxes.[26] Where a taxpayer
nil by the quick yet callow stroke of an administrative pen, simply because no is engaged in zero-rated or effectively zero-rated sales and also in taxable or exempt
reduction of taxes can instantly be effected. By its nature, the tax credit may still be sales, the amount of creditable input taxes due that are not directly and entirely
deducted from a future, not a present, tax liability, without which it does not have attributable to any one of these transactions shall be proportionately allocated on the
any use. In the meantime, it need not move. But it breathes. basis of the volume of sales. Indeed, in availing of such tax credit for VAT purposes,
this provision -- as well as the one earlier mentioned -- shows that the prior payment
Prior Tax Payments Not of taxes is not a requisite.
and even their application against internal revenue taxes, did not necessitate the
It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration of existence of a tax liability.
a tax credit allowed, even though no prior tax payments are not required.
Specifically, in this provision, the imposition of a final withholding tax rate on cash The examples above show that a tax liability is certainly important in the availment
and/or property dividends received by a nonresident foreign corporation from a or use, not the existence or grant, of a tax credit. Regarding this matter, a private
domestic corporation is subjected to the condition that a foreign tax credit will be establishment reporting a net loss in its financial statements is no different from
given by the domiciliary country in an amount equivalent to taxes that are merely another that presents a net income. Both are entitled to the tax credit provided for
deemed paid.[27] Although true, this provision actually refers to the tax credit as under RA 7432, since the law itself accords that unconditional benefit. However, for
a condition only for the imposition of a lower tax rate, not as a deduction from the the losing establishment to immediately apply such credit, where no tax is due, will
corresponding tax liability. Besides, it is not our government but the domiciliary be an improvident usance.
country that credits against the income tax payable to the latter by the foreign
corporation, the tax to be foregone or spared.[28] Sections 2.i and 4 of Revenue
Regulations No. 2-94 Erroneous
In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically allows
as credits, against the income tax imposable under Title II, the amount of income RA 7432 specifically allows private establishments to claim as tax credit the amount
taxes merely incurred -- not necessarily paid -- by a domestic corporation during a of discounts they grant.[33] In turn, the Implementing Rules and Regulations, issued
taxable year in any foreign country. Moreover, Section 34(C)(5) provides that for pursuant thereto, provide the procedures for its availment.[34] To deny such credit,
such taxes incurred but not paid, a tax credit may be allowed, subject to the condition despite the plain mandate of the law and the regulations carrying out that mandate, is
precedent that the taxpayer shall simply give a bond with sureties satisfactory to and indefensible.
approved by petitioner, in such sum as may be required; and further conditioned
upon payment by the taxpayer of any tax found due, upon petitioners redetermination First, the definition given by petitioner is erroneous. It refers to tax credit as the
of it. amount representing the 20 percent discount that shall be deducted by the said
establishments from their gross income for income tax purposes and from their gross
In addition to the above-cited provisions in the Tax Code, there are also tax treaties sales for value-added tax or other percentage tax purposes.[35] In ordinary business
and special laws that grant or allow tax credits, even though no prior tax payments language, the tax credit represents the amount of such discount. However, the
have been made. manner by which the discount shall be credited against taxes has not been clarified
by the revenue regulations.
Under the treaties in which the tax credit method is used as a relief to avoid double
taxation, income that is taxed in the state of source is also taxable in the state of By ordinary acceptation, a discount is an abatement or reduction made from the gross
residence, but the tax paid in the former is merely allowed as a credit against the tax amount or value of anything.[36] To be more precise, it is in business parlance a
levied in the latter.[29] Apparently, payment is made to the state of source, not deduction or lowering of an amount of money;[37] or a reduction from the full amount
the state of residence. No tax, therefore, has been previously paid to the latter. or value of something, especially a price.[38] In business there are many kinds of
discount, the most common of which is that affecting the income statement[39] or
Under special laws that particularly affect businesses, there can also be tax financial report upon which the income tax is based.
credit incentives. To illustrate, the incentives provided for in Article 48 of
Presidential Decree No. (PD) 1789, as amended by Batas Pambansa Blg. (BP) 391, Business Discounts
include tax credits equivalent to either five percent of the net value earned, or five or Deducted from Gross Sales
ten percent of the net local content of exports.[30] In order to avail of such credits
under the said law and still achieve its objectives, no prior tax payments are A cash discount, for example, is one granted by business establishments to credit
necessary. customers for their prompt payment.[40] It is a reduction in price offered to the
purchaser if payment is made within a shorter period of time than the maximum time
From all the foregoing instances, it is evident that prior tax payments are not specified.[41] Also referred to as a sales discount on the part of the seller and
indispensable to the availment of a tax credit. Thus, the CA correctly held that the a purchase discount on the part of the buyer, it may be expressed in such
availment under RA 7432 did not require prior tax payments by private terms as 5/10, n/30.[42]
establishments concerned.[31] However, we do not agree with its finding[32] that the
carry-over of tax credits under the said special law to succeeding taxable periods,
A quantity discount, however, is a reduction in price allowed for purchases made in
large quantities, justified by savings in packaging, shipping, and handling.[43] It is Reason for the Senior Citizen Discount:
also called a volume or bulk discount.[44] The Law, Not Prompt Payment

A percentage reduction from the list price x x x allowed by manufacturers to A distinguishing feature of the implementing rules of RA 7432 is the private
wholesalers and by wholesalers to retailers[45] is known as a trade discount. No entry establishments outright deduction of the discount from the invoice price of the
for it need be made in the manual or computerized books of accounts, since the medicine sold to the senior citizen.[60] It is, therefore, expected that for each retail
purchase or sale is already valued at the net price actually charged the buyer.[46] The sale made under this law, the discount period lasts no more than a day, because such
purpose for the discount is to encourage trading or increase sales, and the prices at discount is given -- and the net amount thereof collected -- immediately upon
which the purchased goods may be resold are also suggested.[47] Even a chain perfection of the sale.[61]Although prompt payment is made for an arms-length
discount -- a series of discounts from one list price -- is recorded at net.[48] transaction by the senior citizen, the real and compelling reason for the private
establishment giving the discount is that the law itself makes it mandatory.
Finally, akin to a trade discount is a functional discount. It is a suppliers price
discount given to a purchaser based on the [latters] role in the [formers] distribution What RA 7432 grants the senior citizen is a mere discount privilege, not a sales
system.[49] This role usually involves warehousing or advertising. discount or any of the above discounts in particular. Prompt payment is not the
reason for (although a necessary consequence of) such grant. To be sure, the
Based on this discussion, we find that the nature of a sales discount is peculiar. privilege enjoyed by the senior citizen must be equivalent to the tax credit benefit
Applying generally accepted accounting principles (GAAP) in the country, this type enjoyed by the private establishment granting the discount. Yet, under the revenue
of discount is reflected in the income statement[50] as a line item deducted -- along regulations promulgated by our tax authorities, this benefit has been erroneously
with returns, allowances, rebates and other similar expenses -- from gross sales to likened and confined to a sales discount.
arrive at net sales.[51] This type of presentation is resorted to, because the accounts
receivable and sales figures that arise from sales discounts, -- as well as To a senior citizen, the monetary effect of the privilege may be the same as that
from quantity, volume or bulk discounts -- are recorded in the manual and resulting from a sales discount. However, to a private establishment, the effect is
computerized books of accounts and reflected in the financial statements at the gross different from a simple reduction in price that results from such discount. In other
amounts of the invoices.[52] This manner of recording credit sales -- known as words, the tax credit benefit is not the same as a sales discount. To repeat from our
the gross method -- is most widely used, because it is simple, more convenient to earlier discourse, this benefit cannot and should not be treated as a tax deduction.
apply than the net method, and produces no material errors over time.[53]
To stress, the effect of a sales discount on the income statement and income tax
However, under the net method used in recording trade, chain or functional return of an establishment covered by RA 7432 is different from that resulting from
discounts, only the net amounts of the invoices -- after the discounts have been the availment or use of its tax credit benefit. While the former is a deduction before,
deducted -- are recorded in the books of accounts[54] and reflected in the financial the latter is a deduction after, the income tax is computed. As mentioned earlier, a
statements. A separate line item cannot be shown,[55] because the transactions discount is not necessarily a sales discount, and a tax credit for a simple discount
themselves involving both accounts receivable and sales have already been entered privilege should not be automatically treated like a sales discount. Ubi lex non
into, net of the said discounts. distinguit, nec nos distinguere debemus. Where the law does not distinguish, we
ought not to distinguish.
The term sales discounts is not expressly defined in the Tax Code, but one provision
adverts to amounts whose sum -- along with sales returns, allowances and cost of Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20
goods sold[56] -- is deducted from gross sales to come up with the gross percent discount deductible from gross income for income tax purposes, or
income, profit or margin[57] derived from business.[58] In another provision from gross sales for VAT or other percentage tax purposes. In effect, the tax
therein, sales discounts that are granted and indicated in the invoices at the time of credit benefit under RA 7432 is related to a sales discount. This contrived definition
sale -- and that do not depend upon the happening of any future event -- may be is improper, considering that the latter has to be deducted from gross sales in order to
excluded from the gross sales within the same quarter they were given.[59] While compute the gross income in the income statement and cannot be deducted again,
determinative only of the VAT, the latter provision also appears as a suitable even for purposes of computing the income tax.
reference point for income tax purposes already embraced in the former. After all,
these two provisions affirm that sales discounts are amounts that are always When the law says that the cost of the discount may be claimed as a tax credit, it
deductible from gross sales. means that the amount -- when claimed -- shall be treated as a reduction from any tax
liability, plain and simple. The option to avail of the tax credit benefit depends upon What Section 4.a of RA 7432 means is that the tax credit benefit is merely
the existence of a tax liability, but to limit the benefit to a sales discount -- which is permissive, not imperative. Respondent is given two options -- either to claim or not
not even identical to the discount privilege that is granted by law -- does not define it to claim the cost of the discounts as a tax credit. In fact, it may even ignore the credit
at all and serves no useful purpose. The definition must, therefore, be stricken down. and simply consider the gesture as an act of beneficence, an expression of its social
conscience.
Laws Not Amended
by Regulations
Granting that there is a tax liability and respondent claims such cost as a tax credit,
Second, the law cannot be amended by a mere regulation. In fact, a regulation that then the tax credit can easily be applied. If there is none, the credit cannot be used
operates to create a rule out of harmony with and will just have to be carried over and revalidated[75] accordingly. If, however, the
the statute is a mere nullity;[62] it cannot prevail. business continues to operate at a loss and no other taxes are due, thus compelling it
to close shop, the credit can never be applied and will be lost altogether.
It is a cardinal rule that courts will and should respect the contemporaneous
construction placed upon a statute by the executive officers whose duty it is to In other words, it is the existence or the lack of a tax liability that determines whether
enforce it x x x.[63] In the scheme of judicial tax administration, the need for certainty the cost of the discounts can be used as a tax credit. RA 7432 does not give
and predictability in the implementation of tax laws is crucial.[64] Our tax authorities respondent the unfettered right to avail itself of the credit whenever it pleases.
fill in the details that Congress may not have the opportunity or competence to Neither does it allow our tax administrators to expand or contract the legislative
provide.[65] The regulations these authorities issue are relied upon by taxpayers, who mandate. The plain meaning rule or verba legis in statutory construction is thus
are certain that these will be followed by the courts.[66] Courts, however, will not applicable x x x. Where the words of a statute are clear, plain and free from
uphold these authorities interpretations when clearly absurd, erroneous or improper. ambiguity, it must be given its literal meaning and applied without attempted
interpretation.[76]
In the present case, the tax authorities have given the term tax credit in Sections 2.i
and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their
interpretation has muddled up the intent of Congress in granting a mere discount
privilege, not a sales discount. The administrative agency issuing these regulations Tax Credit Benefit
may not enlarge, alter or restrict the provisions of the law it administers; it cannot Deemed Just Compensation
engraft additional requirements not contemplated by the legislature.[67]
Fourth, Sections 2.i and 4 of RR 2-94 deny the exercise by the State of its power of
In case of conflict, the law must prevail.[68] A regulation adopted pursuant to law is eminent domain. Be it stressed that the privilege enjoyed by senior citizens does not
law.[69] Conversely, a regulation or any portion thereof not adopted pursuant to law is come directly from the State, but rather from the private establishments concerned.
no law and has neither the force nor the effect of law.[70] Accordingly, the tax credit benefit granted to these establishments can be deemed as
their just compensation for private property taken by the State for public use.[77]
Availment of Tax
Credit Voluntary The concept of public use is no longer confined to the traditional notion of use by the
public, but held synonymous with public interest, public benefit, public welfare,
Third, the word may in the text of the statute[71] implies that the and public convenience.[78] The discount privilege to which our senior citizens are
availability of the tax credit benefit is neither unrestricted nor mandatory.[72] There is entitled is actually a benefit enjoyed by the general public to which these citizens
no absolute right conferred upon respondent, or any similar taxpayer, to avail itself belong. The discounts given would have entered the coffers and formed part of
of the tax credit remedy whenever it chooses; neither does it impose a duty on the the gross sales of the private establishments concerned, were it not for RA 7432. The
part of the government to sit back and allow an important facet of tax collection to be permanent reduction in their total revenues is a forced subsidy corresponding to the
at the sole control and discretion of the taxpayer.[73] For the tax authorities to compel taking of private property for public use or benefit.
respondent to deduct the 20 percent discount from either its gross income or its gross
sales[74] is, therefore, not only to make an imposition without basis in law, but also to As a result of the 20 percent discount imposed by RA 7432, respondent becomes
blatantly contravene the law itself. entitled to a just compensation. This term refers not only to the issuance of a tax
credit certificate indicating the correct amount of the discounts given, but also to the
promptness in its release. Equivalent to the payment of property taken by the State,
such issuance -- when not done within a reasonable time from the grant of the 7432, disclose the true intent of our legislators to treat the sales discounts as a tax
discounts -- cannot be considered as just compensation. In effect, respondent is made credit, rather than as a deduction from gross income. We quote from those
to suffer the consequences of being immediately deprived of its revenues while deliberations as follows:
awaiting actual receipt, through the certificate, of the equivalent amount it needs to
cope with the reduction in its revenues.[79] "THE CHAIRMAN (Rep. Unico). By the way, before that ano,
about deductions from taxable income. I
Besides, the taxation power can also be used as an implement for the exercise of the think we incorporated there a provision
power of eminent domain.[80] Tax measures are but enforced contributions exacted na - on the responsibility of the private
on pain of penal sanctions[81] and clearly imposed for a public purpose.[82] In recent hospitals and drugstores, hindi ba?
years, the power to tax has indeed become a most effective tool to realize social
justice, public welfare, and the equitable distribution of wealth.[83] SEN. ANGARA. Oo.

While it is a declared commitment under Section 1 of RA 7432, social justice cannot THE CHAIRMAN. (Rep. Unico), So, I think we have to put in
be invoked to trample on the rights of property owners who under our Constitution also a provision here about the
and laws are also entitled to protection. The social justice consecrated in our deductions from taxable income of that
[C]onstitution [is] not intended to take away rights from a person and give them to private hospitals, di ba ganon 'yan?
another who is not entitled thereto.[84] For this reason, a just compensation for
income that is taken away from respondent becomes necessary. It is in the tax MS. ADVENTO. Kaya lang po sir, and mga discounts po nila
credit that our legislators find support to realize social justice, and no administrative affecting government and public
body can alter that fact. institutions, so, puwede na po nating
hindi isama yung mga less deductions
To put it differently, a private establishment that merely breaks even[85] -- without the ng taxable income.
discounts yet -- will surely start to incur losses because of such discounts. The same
effect is expected if its mark-up is less than 20 percent, and if all its sales come from THE CHAIRMAN. (Rep. Unico). Puwede na. Yung about the
retail purchases by senior citizens. Aside from the observation we have already private hospitals. Yung isiningit natin?
raised earlier, it will also be grossly unfair to an establishment if the discounts will be
treated merely as deductions from either its gross income or its gross sales. MS. ADVENTO. Singit na po ba yung 15% on credit.
Operating at a loss through no fault of its own, it will realize that the tax (inaudible/did not use the microphone).
credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-generating
businesses will be put in a better position if they avail themselves of tax SEN. ANGARA. Hindi pa, hindi pa.
credits denied those that are losing, because no taxes are due from the latter.
THE CHAIRMAN. (Rep. Unico) Ah, 'di pa ba naisama natin?
Grant of Tax Credit
Intended by the Legislature SEN. ANGARA. Oo. You want to insert that?

Fifth, RA 7432 itself seeks to adopt measures whereby senior citizens are assisted by THE CHAIRMAN (Rep. Unico). Yung ang proposal ni Senator
the community as a whole and to establish a program beneficial to them.[86] These Shahani, e.
objectives are consonant with the constitutional policy of making health x x x
services available to all the people at affordable cost[87] and of giving priority for the SEN. ANGARA. In the case of private hospitals they got the grant
needs of the x x x elderly.[88] Sections 2.i and 4 of RR 2-94, however, contradict of 15% discount, provided that, the
these constitutional policies and statutory objectives. private hospitals can claim the expense
as a tax credit.
Furthermore, Congress has allowed all private establishments a simple tax credit, not
a deduction. In fact, no cash outlay is required from the government for REP. AQUINO. Yah could be allowed as deductions in the
the availment or use of such credit. The deliberations on February 5, 1992 of the perpetrations of (inaudible) income.
Bicameral Conference Committee Meeting on Social Justice, which finalized RA
SEN. ANGARA. I-tax credit na lang natin para walang cash-out Over General Law
ano?
Sixth and last, RA 7432 is a special law that should prevail over the Tax Code -- a
REP. AQUINO. Oo, tax credit. Tama, Okay. Hospitals ba o lahat general law. x x x [T]he rule is that on a specific matter the special law shall prevail
ng establishments na covered. over the general law, which shall
be resorted to only to supply deficiencies in the former.[90] In addition, [w]here there
THE CHAIRMAN. (Rep. Unico). Sa kuwan lang yon, as private are two statutes, the earlier special and the later general -- the terms of the general
hospitals lang. broad enough to include the matter provided for in the special -- the fact that one is
special and the other is general creates a presumption that the special is to be
REP. AQUINO. Ano ba yung establishments na covered? considered as remaining an exception to the general,[91] one as a general law of the
land, the other as the law of a particular case.[92] It is a canon of statutory
SEN. ANGARA. Restaurant lodging houses, recreation centers. construction that a later statute, general in its terms and not expressly repealing
a prior special statute, will ordinarily not affect the special provisions of such earlier
REP. AQUINO. All establishments covered siguro? statute.[93]

SEN. ANGARA. From all establishments. Alisin na natin 'Yung RA 7432 is an earlier law not expressly repealed by, and therefore remains an
kuwan kung ganon. Can we go back to exception to, the Tax Code -- a later law. When the former states that a tax
Section 4 ha? credit may be claimed, then the requirement of prior tax payments under certain
provisions of the latter, as discussed above, cannot be made to apply. Neither can the
REP. AQUINO. Oho. instances of or references to a tax deduction under the Tax Code[94] be made to
restrict RA 7432. No provision of any revenue regulation can supplant or modify the
SEN. ANGARA. Letter A. To capture that thought, we'll say the acts of Congress.
grant of 20% discount from all
establishments et cetera, et cetera, WHEREFORE, the Petition is hereby DENIED. The assailed Decision and
provided that said establishments - Resolution of the Court of Appeals AFFIRMED. No pronouncement as to costs.
provided that private establishments
may claim the cost as a tax credit. SO ORDERED.
Ganon ba 'yon?

REP. AQUINO. Yah.

SEN. ANGARA. Dahil kung government, they don't need to claim


it.

THE CHAIRMAN. (Rep. Unico). Tax credit.

SEN. ANGARA. As a tax credit [rather] than a kuwan -


deduction, Okay.

REP. AQUINO Okay.

SEN. ANGARA. Sige Okay. Di subject to style na lang sa Letter


A".[89]

Special Law
G.R. No. 81561 January 18, 1991 inspection. When he opened appellant's box, a peculiar odor emitted
therefrom. His curiousity aroused, he squeezed one of the bundles allegedly
PEOPLE OF THE PHILIPPINES, plaintiff-appellee containing gloves and felt dried leaves inside. Opening one of the bundles,
vs. he pulled out a cellophane wrapper protruding from the opening of one of
ANDRE MARTI, accused-appellant. the gloves. He made an opening on one of the cellophane wrappers and
took several grams of the contents thereof (tsn, pp. 29-30, October 6, 1987;
The Solicitor General for plaintiff-appellee. Emphasis supplied).
Reynaldo B. Tatoy and Abelardo E. Rogacion for accused-appellant.
Job Reyes forthwith prepared a letter reporting the shipment to the NBI and
requesting a laboratory examination of the samples he extracted from the
cellophane wrapper (tsn, pp. 5-6, October 6, 1987).

He brought the letter and a sample of appellant's shipment to the Narcotics


BIDIN, J.:
Section of the National Bureau of Investigation (NBI), at about 1:30 o'clock
in the afternoon of that date, i.e., August 14, 1987. He was interviewed by
This is an appeal from a decision * rendered by the Special Criminal Court of Manila the Chief of Narcotics Section. Job Reyes informed the NBI that the rest of
(Regional Trial Court, Branch XLIX) convicting accused-appellant of violation of the shipment was still in his office. Therefore, Job Reyes and three (3) NBI
Section 21 (b), Article IV in relation to Section 4, Article 11 and Section 2 (e) (i), agents, and a photographer, went to the Reyes' office at Ermita, Manila (tsn,
Article 1 of Republic Act 6425, as amended, otherwise known as the Dangerous p. 30, October 6, 1987).
Drugs Act.
Job Reyes brought out the box in which appellant's packages were placed
The facts as summarized in the brief of the prosecution are as follows: and, in the presence of the NBI agents, opened the top flaps, removed the
styro-foam and took out the cellophane wrappers from inside the
On August 14, 1987, between 10:00 and 11:00 a.m., the appellant and his gloves. Dried marijuana leaves were found to have been contained inside
common-law wife, Shirley Reyes, went to the booth of the "Manila Packing the cellophane wrappers (tsn, p. 38, October 6, 1987; Emphasis supplied).
and Export Forwarders" in the Pistang Pilipino Complex, Ermita, Manila,
carrying with them four (4) gift wrapped packages. Anita Reyes (the The package which allegedly contained books was likewise opened by Job
proprietress and no relation to Shirley Reyes) attended to them. The Reyes. He discovered that the package contained bricks or cake-like dried
appellant informed Anita Reyes that he was sending the packages to a friend marijuana leaves. The package which allegedly contained tabacalera cigars
in Zurich, Switzerland. Appellant filled up the contract necessary for the was also opened. It turned out that dried marijuana leaves were neatly
transaction, writing therein his name, passport number, the date of shipment stocked underneath the cigars (tsn, p. 39, October 6, 1987).
and the name and address of the consignee, namely, "WALTER FIERZ,
Mattacketr II, 8052 Zurich, Switzerland" (Decision, p. 6)
The NBI agents made an inventory and took charge of the box and of the
contents thereof, after signing a "Receipt" acknowledging custody of the
Anita Reyes then asked the appellant if she could examine and inspect the said effects (tsn, pp. 2-3, October 7, 1987).
packages. Appellant, however, refused, assuring her that the packages
simply contained books, cigars, and gloves and were gifts to his friend in
Thereupon, the NBI agents tried to locate appellant but to no avail. Appellant's stated
Zurich. In view of appellant's representation, Anita Reyes no longer insisted
address in his passport being the Manila Central Post Office, the agents requested
on inspecting the packages. The four (4) packages were then placed inside a
assistance from the latter's Chief Security. On August 27, 1987, appellant, while
brown corrugated box one by two feet in size (1' x 2'). Styro-foam was
claiming his mail at the Central Post Office, was invited by the NBI to shed light on
placed at the bottom and on top of the packages before the box was sealed
the attempted shipment of the seized dried leaves. On the same day the Narcotics
with masking tape, thus making the box ready for shipment (Decision, p. 8).
Section of the NBI submitted the dried leaves to the Forensic Chemistry Section for
laboratory examination. It turned out that the dried leaves were marijuana flowering
Before delivery of appellant's box to the Bureau of Customs and/or Bureau tops as certified by the forensic chemist. (Appellee's Brief, pp. 9-11, Rollo, pp. 132-
of Posts, Mr. Job Reyes (proprietor) and husband of Anita (Reyes), 134).
following standard operating procedure, opened the boxes for final
Thereafter, an Information was filed against appellant for violation of RA 6425, Our present constitutional provision on the guarantee against unreasonable search
otherwise known as the Dangerous Drugs Act. and seizure had its origin in the 1935 Charter which, worded as follows:

After trial, the court a quo rendered the assailed decision. The right of the people to be secure in their persons, houses, papers and
effects against unreasonable searches and seizures shall not be violated, and
In this appeal, accused/appellant assigns the following errors, to wit: no warrants shall issue but upon probable cause, to be determined by the
judge after examination under oath or affirmation of the complainant and
the witnesses he may produce, and particularly describing the place to be
THE LOWER COURT ERRED IN ADMITTING IN EVIDENCE THE
ILLEGALLY SEARCHED AND SEIZED OBJECTS CONTAINED IN searched, and the persons or things to be seized. (Sec. 1 [3], Article III)
THE FOUR PARCELS.
was in turn derived almost verbatim from the Fourth Amendment ** to the United
States Constitution. As such, the Court may turn to the pronouncements of the
THE LOWER COURT ERRED IN CONVICTING APPELLANT
United States Federal Supreme Court and State Appellate Courts which are
DESPITE THE UNDISPUTED FACT THAT HIS RIGHTS UNDER THE
CONSTITUTION WHILE UNDER CUSTODIAL PROCEEDINGS considered doctrinal in this jurisdiction.
WERE NOT OBSERVED.
Thus, following the exclusionary rule laid down in Mapp v. Ohio by the US Federal
Supreme Court (367 US 643, 81 S.Ct. 1684, 6 L.Ed. 1081 [1961]), this Court,
THE LOWER COURT ERRED IN NOT GIVING CREDENCE TO THE
in Stonehill v. Diokno (20 SCRA 383 [1967]), declared as inadmissible any evidence
EXPLANATION OF THE APPELLANT ON HOW THE FOUR
obtained by virtue of a defective search and seizure warrant, abandoning in the
PARCELS CAME INTO HIS POSSESSION (Appellant's Brief, p. 1; Rollo,
process the ruling earlier adopted in Moncado v. People's Court (80 Phil. 1 [1948])
p. 55)
wherein the admissibility of evidence was not affected by the illegality of its seizure.
The 1973 Charter (Sec. 4 [2], Art. IV) constitutionalized the Stonehill ruling and is
1. Appellant contends that the evidence subject of the imputed offense had been carried over up to the present with the advent of the 1987 Constitution.
obtained in violation of his constitutional rights against unreasonable search and
seizure and privacy of communication (Sec. 2 and 3, Art. III, Constitution) and
therefore argues that the same should be held inadmissible in evidence (Sec. 3 (2), In a number of cases, the Court strictly adhered to the exclusionary rule and has
struck down the admissibility of evidence obtained in violation of the constitutional
Art. III).
safeguard against unreasonable searches and seizures. (Bache & Co., (Phil.), Inc., v.
Ruiz, 37 SCRA 823 [1971]; Lim v. Ponce de Leon, 66 SCRA 299 [1975]; People v.
Sections 2 and 3, Article III of the Constitution provide: Burgos, 144 SCRA 1 [1986]; Roan v. Gonzales, 145 SCRA 687 [1987]; See
also Salazar v. Hon. Achacoso, et al., GR No. 81510, March 14, 1990).
Sec. 2. The right of the people to be secure in their persons, houses, papers
and effects against unreasonable searches and seizures of whatever nature It must be noted, however, that in all those cases adverted to, the evidence so
and for any purpose shall be inviolable, and no search warrant or warrant of obtained were invariably procured by the State acting through the medium of its law
arrest shall issue except upon probable cause to be determined personally by enforcers or other authorized government agencies.
the judge after examination under oath or affirmation of the complainant
and the witnesses he may produce, and particularly describing the place to
On the other hand, the case at bar assumes a peculiar character since the evidence
be searched and the persons or things to be seized.
sought to be excluded was primarily discovered and obtained by a private person,
acting in a private capacity and without the intervention and participation of State
Sec. 3. (1) The privacy of communication and correspondence shall be authorities. Under the circumstances, can accused/appellant validly claim that his
inviolable except upon lawful order of the court, or when public safety or constitutional right against unreasonable searches and seizure has been violated?
order requires otherwise as prescribed by law. Stated otherwise, may an act of a private individual, allegedly in violation of
appellant's constitutional rights, be invoked against the State?
(2) Any evidence obtained in violation of this or the preceding section shall
be inadmissible for any purpose in any proceeding. We hold in the negative. In the absence of governmental interference, the liberties
guaranteed by the Constitution cannot be invoked against the State.
As this Court held in Villanueva v. Querubin (48 SCRA 345 [1972]: which he left behind a travel case containing the evidence***complained of.
The search was made on the motel owner's own initiative. Because of it, he
1. This constitutional right (against unreasonable search and seizure) refers became suspicious, called the local police, informed them of the bag's
to the immunity of one's person, whether citizen or alien, from interference contents, and made it available to the authorities.
by government, included in which is his residence, his papers, and other
possessions. . . . The fourth amendment and the case law applying it do not require exclusion
of evidence obtained through a search by a private citizen. Rather, the
. . . There the state, however powerful, does not as such have the access amendment only proscribes governmental action."
except under the circumstances above noted, for in the traditional
formulation, his house, however humble, is his castle. Thus is outlawed any The contraband in the case at bar having come into possession of the Government
unwarranted intrusion by government, which is called upon to refrain from without the latter transgressing appellant's rights against unreasonable search and
any invasion of his dwelling and to respect the privacies of his life. . . . (Cf. seizure, the Court sees no cogent reason why the same should not be admitted
Schermerber v. California, 384 US 757 [1966] and Boyd v. United States, against him in the prosecution of the offense charged.
116 US 616 [1886]; Emphasis supplied).
Appellant, however, would like this court to believe that NBI agents made an illegal
In Burdeau v. McDowell (256 US 465 (1921), 41 S Ct. 547; 65 L.Ed. 1048), the search and seizure of the evidence later on used in prosecuting the case which
Court there in construing the right against unreasonable searches and seizures resulted in his conviction.
declared that:
The postulate advanced by accused/appellant needs to be clarified in two days. In
(t)he Fourth Amendment gives protection against unlawful searches and both instances, the argument stands to fall on its own weight, or the lack of it.
seizures, and as shown in previous cases, its protection applies to
governmental action. Its origin and history clearly show that it was intended First, the factual considerations of the case at bar readily foreclose the proposition
as a restraint upon the activities of sovereign authority, and was not that NBI agents conducted an illegal search and seizure of the prohibited
intended to be a limitation upon other than governmental agencies; as merchandise. Records of the case clearly indicate that it was Mr. Job Reyes, the
against such authority it was the purpose of the Fourth Amendment to proprietor of the forwarding agency, who made search/inspection of the packages.
secure the citizen in the right of unmolested occupation of his dwelling and Said inspection was reasonable and a standard operating procedure on the part of Mr.
the possession of his property, subject to the right of seizure by process duly Reyes as a precautionary measure before delivery of packages to the Bureau of
served. Customs or the Bureau of Posts (TSN, October 6 & 7, 1987, pp. 15-18; pp. 7-8;
Original Records, pp. 119-122; 167-168).
The above ruling was reiterated in State v. Bryan (457 P.2d 661 [1968]) where a
parking attendant who searched the automobile to ascertain the owner thereof found It will be recalled that after Reyes opened the box containing the illicit cargo, he took
marijuana instead, without the knowledge and participation of police authorities, was samples of the same to the NBI and later summoned the agents to his place of
declared admissible in prosecution for illegal possession of narcotics. business. Thereafter, he opened the parcel containing the rest of the shipment and
entrusted the care and custody thereof to the NBI agents. Clearly, the NBI agents
And again in the 1969 case of Walker v. State (429 S.W.2d 121), it was held that the made no search and seizure, much less an illegal one, contrary to the postulate of
search and seizure clauses are restraints upon the government and its agents, not accused/appellant.
upon private individuals (citing People v. Potter, 240 Cal. App.2d 621, 49 Cap. Rptr,
892 (1966); State v. Brown, Mo., 391 S.W.2d 903 (1965); State v. Olsen, Or., 317 Second, the mere presence of the NBI agents did not convert the reasonable search
P.2d 938 (1957). effected by Reyes into a warrantless search and seizure proscribed by the
Constitution. Merely to observe and look at that which is in plain sight is not a
Likewise appropos is the case of Bernas v. US (373 F.2d 517 (1967). The Court there search. Having observed that which is open, where no trespass has been committed
said: in aid thereof, is not search (Chadwick v. State, 429 SW2d 135). Where the
contraband articles are identified without a trespass on the part of the arresting
The search of which appellant complains, however, was made by a private officer, there is not the search that is prohibited by the constitution (US v. Lee 274
citizen — the owner of a motel in which appellant stayed overnight and in
US 559, 71 L.Ed. 1202 [1927]; Ker v. State of California 374 US 23, 10 L.Ed.2d. procured by police authorities or private individuals (Appellant's Brief, p. 8, Rollo, p.
726 [1963]; Moore v. State, 429 SW2d 122 [1968]). 62).

In Gandy v. Watkins (237 F. Supp. 266 [1964]), it was likewise held that where the The argument is untenable. For one thing, the constitution, in laying down the
property was taken into custody of the police at the specific request of the manager principles of the government and fundamental liberties of the people, does not
and where the search was initially made by the owner there is no unreasonable search govern relationships between individuals. Moreover, it must be emphasized that the
and seizure within the constitutional meaning of the term. modifications introduced in the 1987 Constitution (re: Sec. 2, Art. III) relate to the
issuance of either a search warrant or warrant of arrest vis-a-vis the responsibility of
That the Bill of Rights embodied in the Constitution is not meant to be invoked the judge in the issuance thereof (SeeSoliven v. Makasiar, 167 SCRA 393 [1988];
against acts of private individuals finds support in the deliberations of the Circular No. 13 [October 1, 1985] and Circular No. 12 [June 30, 1987]. The
Constitutional Commission. True, the liberties guaranteed by the fundamental law of modifications introduced deviate in no manner as to whom the restriction or
the land must always be subject to protection. But protection against whom? inhibition against unreasonable search and seizure is directed against. The restraint
Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the stayed with the State and did not shift to anyone else.
query which he himself posed, as follows:
Corolarilly, alleged violations against unreasonable search and seizure may only be
First, the general reflections. The protection of fundamental liberties in the invoked against the State by an individual unjustly traduced by the exercise of
essence of constitutional democracy. Protection against whom? Protection sovereign authority. To agree with appellant that an act of a private individual in
against the state. The Bill of Rights governs the relationship between the violation of the Bill of Rights should also be construed as an act of the State would
individual and the state. Its concern is not the relation between individuals, result in serious legal complications and an absurd interpretation of the constitution.
between a private individual and other individuals. What the Bill of Rights
does is to declare some forbidden zones in the private sphere inaccessible to Similarly, the admissibility of the evidence procured by an individual effected
any power holder. (Sponsorship Speech of Commissioner Bernas , Record through private seizure equally applies, in pari passu, to the alleged violation, non-
of the Constitutional Commission, Vol. 1, p. 674; July 17, 1986; Emphasis governmental as it is, of appellant's constitutional rights to privacy and
supplied) communication.

The constitutional proscription against unlawful searches and seizures therefore 2. In his second assignment of error, appellant contends that the lower court erred in
applies as a restraint directed only against the government and its agencies tasked convicting him despite the undisputed fact that his rights under the constitution while
with the enforcement of the law. Thus, it could only be invoked against the State to under custodial investigation were not observed.
whom the restraint against arbitrary and unreasonable exercise of power is imposed.
Again, the contention is without merit, We have carefully examined the records of
If the search is made upon the request of law enforcers, a warrant must generally be the case and found nothing to indicate, as an "undisputed fact", that appellant was not
first secured if it is to pass the test of constitutionality. However, if the search is informed of his constitutional rights or that he gave statements without the assistance
made at the behest or initiative of the proprietor of a private establishment for its of counsel. The law enforcers testified that accused/appellant was informed of his
own and private purposes, as in the case at bar, and without the intervention of police constitutional rights. It is presumed that they have regularly performed their duties
authorities, the right against unreasonable search and seizure cannot be invoked for (See. 5(m), Rule 131) and their testimonies should be given full faith and credence,
only the act of private individual, not the law enforcers, is involved. In sum, the there being no evidence to the contrary. What is clear from the records, on the other
protection against unreasonable searches and seizures cannot be extended to acts hand, is that appellant refused to give any written statement while under
committed by private individuals so as to bring it within the ambit of alleged investigation as testified by Atty. Lastimoso of the NBI, Thus:
unlawful intrusion by the government.
Fiscal Formoso:
Appellant argues, however, that since the provisions of the 1935 Constitution has
been modified by the present phraseology found in the 1987 Charter, expressly You said that you investigated Mr. and Mrs. Job Reyes. What about the
declaring as inadmissible any evidence obtained in violation of the constitutional accused here, did you investigate the accused together with the girl?
prohibition against illegal search and seizure, it matters not whether the evidence was
WITNESS:
Yes, we have interviewed the accused together with the girl but the accused Evidence to be believed, must not only proceed from the mouth of a credible witness,
availed of his constitutional right not to give any written statement, sir. but it must be credible in itself such as the common experience and observation of
(TSN, October 8, 1987, p. 62; Original Records, p. 240) mankind can approve as probable under the circumstances (People v. Alto, 26 SCRA