G.R. No.

115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115525 October 30, 1995

JUAN T. DAVID, petitioner,

vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance; LIWAYWAY
VINZONS-CHATO, as Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR
REPRESENTATIVES, respondents.

G.R. No. 115543 October 30, 1995

RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,

vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF INTERNAL REVENUE
AND BUREAU OF CUSTOMS, respondents.

G.R. No. 115544 October 30, 1995

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING CORPORATION; PHILIPPINE
JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T. GUINGONA, JR., in his
capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115754 October 30, 1995

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 October 30, 1995

KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO,
EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO,
RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR BROTHERHOOD,
INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT COALITION, INC., and PHILIPPINE BIBLE SOCIETY,
INC. and WIGBERTO TAÑADA, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE and THE
COMMISSIONER OF CUSTOMS, respondents.

G.R. No. 115852 October 30, 1995

PHILIPPINE AIRLINES, INC., petitioner,

vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 October 30, 1995

COOPERATIVE UNION OF THE PHILIPPINES, petitioner,

vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON. TEOFISTO T. GUINGONA, JR., in
his capacity as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of
Finance, respondents.

G.R. No. 115931 October 30, 1995

PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF PHILIPPINE BOOK
SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the Commissioner of Internal
Revenue; and HON. GUILLERMO PARAYNO, JR., in his capacity as the Commissioner of Customs, respondents.

RESOLUTION

MENDOZA, J.:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the declaration of
unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The motions, of which there are 10 in
all, have been filed by the several petitioners in these cases, with the exception of the Philippine Educational Publishers Association,
Inc. and the Association of Philippine Booksellers, petitioners in G.R. No. 115931.

The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine Airlines, Inc., petitioner in
G.R. No. 115852, and the Philippine Press Institute, Inc., petitioner in G.R. No. 115544, and Juan T. David, petitioner in G.R. No.
115525, each filed a reply. In turn the Solicitor General filed on June 1, 1995 a rejoinder to the PPI's reply.

On June 27, 1995 the matter was submitted for resolution.

I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines
(PAL), Roco, and Chamber of Real Estate and Builders Association (CREBA)) reiterate previous claims made by them that R.A. No.
7716 did not "originate exclusively" in the House of Representatives as required by Art. VI, §24 of the Constitution. Although they admit
that H. No. 11197 was filed in the House of Representatives where it passed three readings and that afterward it was sent to the
Senate where after first reading it was referred to the Senate Ways and Means Committee, they complain that the Senate did not pass
it on second and third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it approved on May 24,
1994. Petitioner Tolentino adds that what the Senate committee should have done was to amend H. No. 11197 by striking out the text
of the bill and substituting it with the text of S. No. 1630. That way, it is said, "the bill remains a House bill and the Senate version just
becomes the text (only the text) of the House bill."

The contention has no merit.

The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a House revenue bill by
enacting its own version of a revenue bill. On at least two occasions during the Eighth Congress, the Senate passed its own version of
revenue bills, which, in consolidation with House bills earlier passed, became the enrolled bills. These were:

R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM FIVE (5) YEARS TO
TEN YEARS THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT) which was approved
by the President on April 10, 1992. This Act is actually a consolidation of H. No. 34254, which was approved by the House on January
29, 1992, and S. No. 1920, which was approved by the Senate on February 3, 1992.

R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY FILIPINO ATHLETE
WINNING A MEDAL IN OLYMPIC GAMES) which was approved by the President on May 22, 1992. This Act is a consolidation of H.
No. 22232, which was approved by the House of Representatives on August 2, 1989, and S. No. 807, which was approved by the
Senate on October 21, 1991.

On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of House and Senate bills.
These are the following, with indications of the dates on which the laws were approved by the President and dates the separate bills of
the two chambers of Congress were respectively passed:

1. R.A. NO. 7642

AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE PERTINENT
SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992).

House Bill No. 2165, October 5, 1992

Senate Bill No. 32, December 7, 1992

2. R.A. NO. 7643

AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE PAYMENT OF THE
VALUE-ADDED TAX EVERY MONTH AND TO ALLOW LOCAL GOVERNMENT UNITS TO SHARE IN VAT
REVENUE, AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE
CODE (December 28, 1992)

House Bill No. 1503, September 3, 1992

Senate Bill No. 968, December 7, 1992

3. R.A. NO. 7646

AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE PLACE FOR
PAYMENT OF INTERNAL REVENUE TAXES BY LARGE TAXPAYERS, AMENDING FOR THIS PURPOSE
CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED (February 24, 1993)

House Bill No. 1470, October 20, 1992

Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS, INSTRUMENTALITIES

OR AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCS) TO
DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE OF THREE PERCENT (3%) ON GROSS
PAYMENT FOR THE PURCHASE OF GOODS AND SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES
RENDERED BY CONTRACTORS (April 6, 1993)

House Bill No. 5260, January 26, 1993

Senate Bill No. 1141, March 30, 1993

5. R.A. NO. 7656

AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO DECLARE DIVIDENDS

UNDER CERTAIN CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR OTHER PURPOSES (November
9, 1993)

House Bill No. 11024, November 3, 1993

Senate Bill No. 1168, November 3, 1993

6. R.A. NO. 7660

AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE DOCUMENTARY

STAMP TAX, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR SPECIFIC PROGRAMS, AND FOR OTHER
PURPOSES (December 23, 1993)

House Bill No. 7789, May 31, 1993

Senate Bill No. 1330, November 18, 1993

7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK LISTED AND
TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC OFFERING, AMENDING
FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, BY INSERTING A NEW
SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF (May 5, 1994)

House Bill No. 9187, November 3, 1993

 Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to propose amendments to
bills required to originate in the House, passed its own version of a House revenue measure. It is noteworthy that, in the particular case
of S. No. 1630, petitioners Tolentino and Roco, as members of the Senate, voted to approve it on second and third readings.

On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere matter of form. Petitioner
has not shown what substantial difference it would make if, as the Senate actually did in this case, a separate bill like S. No. 1630 is
instead enacted as a substitute measure, "taking into Consideration . . . H.B. 11197."

Indeed, so far as pertinent, the Rules of the Senate only provide:

RULE XXIX

AMENDMENTS

xxx xxx xxx

§68. Not more than one amendment to the original amendment shall be considered.

No amendment by substitution shall be entertained unless the text thereof is submitted in writing.

Any of said amendments may be withdrawn before a vote is taken thereon.

§69. No amendment which seeks the inclusion of a legislative provision foreign to the subject matter of a bill (rider)
shall be entertained.

xxx xxx xxx

§70-A. A bill or resolution shall not be amended by substituting it with another which covers a subject distinct from
that proposed in the original bill or resolution. (emphasis added).

Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate possesses less power than the U.S.
Senate because of textual differences between constitutional provisions giving them the power to propose or concur with amendments.

Art. I, §7, cl. 1 of the U.S. Constitution reads:

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur
with amendments as on other Bills.

Art. VI, §24 of our Constitution reads:

All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and
private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with
amendments.

The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on other Bills" in the
American version, according to petitioners, shows the intention of the framers of our Constitution to restrict the Senate's power to
propose amendments to revenue bills. Petitioner Tolentino contends that the word "exclusively" was inserted to modify "originate" and
"the words 'as in any other bills' (sic) were eliminated so as to show that these bills were not to be like other bills but must be treated as
a special kind."

The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the relics of
an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935 Constitution originally provided for a
unicameral National Assembly. When it was decided in 1939 to change to a bicameral legislature, it became necessary to provide for
the procedure for lawmaking by the Senate and the House of Representatives. The work of proposing amendments to the Constitution
was done by the National Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assembly's
lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the following provision:

All bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills shall originate
exclusively in the Assembly, but the Senate may propose or concur with amendments. In case of disapproval by the
Senate of any such bills, the Assembly may repass the same by a two-thirds vote of all its members, and thereupon,
 the bill so repassed shall be deemed enacted and may be submitted to the President for corresponding action. In the
event that the Senate should fail to finally act on any such bills, the Assembly may, after thirty days from the opening
of the next regular session of the same legislative term, reapprove the same with a vote of two-thirds of all the
members of the Assembly. And upon such reapproval, the bill shall be deemed enacted and may be submitted to the
President for corresponding action.

The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted everything after the first
sentence. As rewritten, the proposal was approved by the National Assembly and embodied in Resolution No. 38, as amended by
Resolution No. 73. (J. ARUEGO, KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed amendment was submitted to the
people and ratified by them in the elections held on June 18, 1940.

This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present Constitution was derived. It explains
why the word "exclusively" was added to the American text from which the framers of the Philippine Constitution borrowed and why the
phrase "as on other Bills" was not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments
must be understood to be full, plenary and complete "as on other Bills." Thus, because revenue bills are required to originate
exclusively in the House of Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue
bill is passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same subject matter. This
follows from the coequality of the two chambers of Congress.

That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from the following
commentaries:

The power of the Senate to propose or concur with amendments is apparently without restriction. It would seem that
by virtue of this power, the Senate can practically re-write a bill required to come from the House and leave only a
trace of the original bill. For example, a general revenue bill passed by the lower house of the United States
Congress contained provisions for the imposition of an inheritance tax . This was changed by the Senate into a
corporation tax. The amending authority of the Senate was declared by the United States Supreme Court to be
sufficiently broad to enable it to make the alteration. [Flint v. Stone Tracy Company, 220 U.S. 107, 55 L. ed. 389].

(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))

The above-mentioned bills are supposed to be initiated by the House of Representatives because it is more
numerous in membership and therefore also more representative of the people. Moreover, its members are
presumed to be more familiar with the needs of the country in regard to the enactment of the legislation involved.

The Senate is, however, allowed much leeway in the exercise of its power to propose or concur with amendments to
the bills initiated by the House of Representatives. Thus, in one case, a bill introduced in the U.S. House of
Representatives was changed by the Senate to make a proposed inheritance tax a corporation tax. It is also
accepted practice for the Senate to introduce what is known as an amendment by substitution, which may entirely
replace the bill initiated in the House of Representatives.

(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).

In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may propose or
concur with amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. As
petitioner Tolentino states in a high school text, a committee to which a bill is referred may do any of the following:

(1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding sections or altering its
language; (3) to make and endorse an entirely new bill as a substitute, in which case it will be known as a committee
bill; or (4) to make no report at all.

(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))

To except from this procedure the amendment of bills which are required to originate in the House by prescribing that the number of the
House bill and its other parts up to the enacting clause must be preserved although the text of the Senate amendment may be
incorporated in place of the original body of the bill is to insist on a mere technicality. At any rate there is no rule prescribing this form.
S. No. 1630, as a substitute measure, is therefore as much an amendment of H. No. 11197 as any which the Senate could have made.

II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No. 1630 is an independent and
distinct bill. Hence their repeated references to its certification that it was passed by the Senate "in substitution of S.B. No. 1129, taking
into consideration P.S. Res. No. 734 and H.B. No. 11197," implying that there is something substantially different between the
reference to S. No. 1129 and the reference to H. No. 11197. From this premise, they conclude that R.A. No. 7716 originated both in the
House and in the Senate and that it is the product of two "half-baked bills because neither H. No. 11197 nor S. No. 1630 was passed by
both houses of Congress."

In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of the corresponding
provisions of H. No. 11197. The very tabular comparison of the provisions of H. No. 11197 and S. No. 1630 attached as Supplement A
to the basic petition of petitioner Tolentino, while showing differences between the two bills, at the same time indicates that the
provisions of the Senate bill were precisely intended to be amendments to the House bill.

Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere amendment of the House
bill, H. No. 11197 in its original form did not have to pass the Senate on second and three readings. It was enough that after it was
passed on first reading it was referred to the Senate Committee on Ways and Means. Neither was it required that S. No. 1630 be
passed by the House of Representatives before the two bills could be referred to the Conference Committee.

There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House bill and Senate bill,
which became R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were referred to a conference committee, the question
was raised whether the two bills could be the subject of such conference, considering that the bill from one house had not been passed
by the other and vice versa. As Congressman Duran put the question:

MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by the House but not
passed by the Senate, and a Senate bill of a similar nature is passed in the Senate but never passed in the House,
can the two bills be the subject of a conference, and can a law be enacted from these two bills? I understand that the
Senate bill in this particular instance does not refer to investments in government securities, whereas the bill in the
House, which was introduced by the Speaker, covers two subject matters: not only investigation of deposits in banks
but also investigation of investments in government securities. Now, since the two bills differ in their subject matter, I
believe that no law can be enacted.

Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:

THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like this where a
conference should be had. If the House bill had been approved by the Senate, there would have been no need of a
conference; but precisely because the Senate passed another bill on the same subject matter, the conference
committee had to be created, and we are now considering the report of that committee.

(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))

III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and unrelated measures also
accounts for the petitioners' (Kilosbayan's and PAL's) contention that because the President separately certified to the need for the
immediate enactment of these measures, his certification was ineffectual and void. The certification had to be made of the version of
the same revenue bill which at the moment was being considered. Otherwise, to follow petitioners' theory, it would be necessary for the
President to certify as many bills as are presented in a house of Congress even though the bills are merely versions of the bill he has
already certified. It is enough that he certifies the bill which, at the time he makes the certification, is under consideration. Since on
March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to be certified. For that matter on June 1, 1993 the
President had earlier certified H. No. 9210 for immediate enactment because it was the one which at that time was being considered by
the House. This bill was later substituted, together with other bills, by H. No. 11197.

As to what Presidential certification can accomplish, we have already explained in the main decision that the phrase "except when the
President certifies to the necessity of its immediate enactment, etc." in Art. VI, §26 (2) qualifies not only the requirement that "printed
copies [of a bill] in its final form [must be] distributed to the members three days before its passage" but also the requirement that before
a bill can become a law it must have passed "three readings on separate days." There is not only textual support for such construction
but historical basis as well.

Art. VI, §21 (2) of the 1935 Constitution originally provided:

(2) No bill shall be passed by either House unless it shall have been printed and copies thereof in its final form
furnished its Members at least three calendar days prior to its passage, except when the President shall have
certified to the necessity of its immediate enactment. Upon the last reading of a bill, no amendment thereof shall be
allowed and the question upon its passage shall be taken immediately thereafter, and the yeas and nays entered on
the Journal.

When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):

(2) No bill shall become a law unless it has passed three readings on separate days, and printed copies thereof in its
final form have been distributed to the Members three days before its passage, except when the Prime Minister
certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of
 a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.

This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the present Constitution, thus:

(2) No bill passed by either House shall become a law unless it has passed three readings on separate days, and
printed copies thereof in its final form have been distributed to its Members three days before its passage, except
when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency.
Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken
immediately thereafter, and the yeas and nays entered in the Journal.

The exception is based on the prudential consideration that if in all cases three readings on separate days are required and a bill has to
be printed in final form before it can be passed, the need for a law may be rendered academic by the occurrence of the very emergency
or public calamity which it is meant to address.

Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the Philippines where budget
deficit is a chronic condition. Even if this were the case, an enormous budget deficit does not make the need for R.A. No. 7716 any less
urgent or the situation calling for its enactment any less an emergency.

Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there was an urgent need for
consideration of S. No. 1630, because they responded to the call of the President by voting on the bill on second and third readings on
the same day. While the judicial department is not bound by the Senate's acceptance of the President's certification, the respect due
coequal departments of the government in matters committed to them by the Constitution and the absence of a clear showing of grave
abuse of discretion caution a stay of the judicial hand.

At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was discussed for six days. Only
its distribution in advance in its final printed form was actually dispensed with by holding the voting on second and third readings on the
same day (March 24, 1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on second reading and
its approval on March 24, 1994 elapsed before it was finally voted on by the Senate on third reading.

The purpose for which three readings on separate days is required is said to be two-fold: (1) to inform the members of Congress of
what they must vote on and (2) to give them notice that a measure is progressing through the enacting process, thus enabling them and
others interested in the measure to prepare their positions with reference to it. (1 J. G. SUTHERLAND, STATUTES AND STATUTORY
CONSTRUCTION §10.04, p. 282 (1972)). These purposes were substantially achieved in the case of R.A. No. 7716.

IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of Attorneys for Brotherhood,
Integrity and Nationalism, Inc. (MABINI)) that in violation of the constitutional policy of full public disclosure and the people's right to
know (Art. II, §28 and Art. III, §7) the Conference Committee met for two days in executive session with only the conferees present.

As pointed out in our main decision, even in the United States it was customary to hold such sessions with only the conferees and their
staffs in attendance and it was only in 1975 when a new rule was adopted requiring open sessions. Unlike its American counterpart, the
Philippine Congress has not adopted a rule prescribing open hearings for conference committees.

It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff members were present. These
were staff members of the Senators and Congressmen, however, who may be presumed to be their confidential men, not
stenographers as in this case who on the last two days of the conference were excluded. There is no showing that the conferees
themselves did not take notes of their proceedings so as to give petitioner Kilosbayan basis for claiming that even in secret diplomatic
negotiations involving state interests, conferees keep notes of their meetings. Above all, the public's right to know was fully served
because the Conference Committee in this case submitted a report showing the changes made on the differing versions of the House
and the Senate.

Petitioners cite the rules of both houses which provide that conference committee reports must contain "a detailed, sufficiently explicit
statement of the changes in or other amendments." These changes are shown in the bill attached to the Conference Committee Report.
The members of both houses could thus ascertain what changes had been made in the original bills without the need of a statement
detailing the changes.

The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of 1955) was reported by
the Conference Committee. Congressman Bengzon raised a point of order. He said:

MR. BENGZON. My point of order is that it is out of order to consider the report of the conference committee
regarding House Bill No. 2557 by reason of the provision of Section 11, Article XII, of the Rules of this House which
provides specifically that the conference report must be accompanied by a detailed statement of the effects of the
amendment on the bill of the House. This conference committee report is not accompanied by that detailed
statement, Mr. Speaker. Therefore it is out of order to consider it.
Petitioner Tolentino, then the Majority Floor Leader, answered:

MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point of order raised by
the gentleman from Pangasinan.

There is no question about the provision of the Rule cited by the gentleman from Pangasinan, but this provision
applies to those cases where only portions of the bill have been amended. In this case before us an entire bill is
presented; therefore, it can be easily seen from the reading of the bill what the provisions are. Besides, this
procedure has been an established practice.

After some interruption, he continued:

MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the provisions of the Rules, and
the reason for the requirement in the provision cited by the gentleman from Pangasinan is when there are only certain
words or phrases inserted in or deleted from the provisions of the bill included in the conference report, and we
cannot understand what those words and phrases mean and their relation to the bill. In that case, it is necessary to
make a detailed statement on how those words and phrases will affect the bill as a whole; but when the entire bill
itself is copied verbatim in the conference report, that is not necessary. So when the reason for the Rule does not
exist, the Rule does not exist.

(2 CONG. REC. NO. 2, p. 4056. (emphasis added))

Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was upheld by viva
voce and when a division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)

Nor is there any doubt about the power of a conference committee to insert new provisions as long as these are germane to the subject
of the conference. As this Court held in Philippine Judges Association v. Prado, 227 SCRA 703 (1993), in an opinion written by then
Justice Cruz, the jurisdiction of the conference committee is not limited to resolving differences between the Senate and the House. It
may propose an entirely new provision. What is important is that its report is subsequently approved by the respective houses of
Congress. This Court ruled that it would not entertain allegations that, because new provisions had been added by the conference
committee, there was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no amendment thereto shall
be allowed."

Applying these principles, we shall decline to look into the petitioners' charges that an amendment was made upon
the last reading of the bill that eventually became R.A. No. 7354 and that copies thereof in its final form were not
distributed among the members of each House. Both the enrolled bill and the legislative journals certify that the
measure was duly enacted i.e., in accordance with Article VI, Sec. 26 (2) of the Constitution. We are bound by such
official assurances from a coordinate department of the government, to which we owe, at the very least, a becoming
courtesy.

(Id. at 710. (emphasis added))

It is interesting to note the following description of conference committees in the Philippines in a 1979 study:

Conference committees may be of two types: free or instructed. These committees may be given instructions by their
parent bodies or they may be left without instructions. Normally the conference committees are without instructions,
and this is why they are often critically referred to as "the little legislatures." Once bills have been sent to them, the
conferees have almost unlimited authority to change the clauses of the bills and in fact sometimes introduce new
measures that were not in the original legislation. No minutes are kept, and members' activities on conference
committees are difficult to determine. One congressman known for his idealism put it this way: "I killed a bill on export
incentives for my interest group [copra] in the conference committee but I could not have done so anywhere else."
The conference committee submits a report to both houses, and usually it is accepted. If the report is not accepted,
then the committee is discharged and new members are appointed.

(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A COMPARATIVE
ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).

In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that conference committees
here are no different from their counterparts in the United States whose vast powers we noted in Philippine Judges Association
v. Prado, supra. At all events, under Art. VI, §16(3) each house has the power "to determine the rules of its proceedings," including
those of its committees. Any meaningful change in the method and procedures of Congress or its committees must therefore be sought
in that body itself.
V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26 (1) of the Constitution which
provides that "Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof." PAL
contends that the amendment of its franchise by the withdrawal of its exemption from the VAT is not expressed in the title of the law.

Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all other taxes, duties, royalties,
registration, license and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed or collected
by any municipal, city, provincial or national authority or government agency, now or in the future."

PAL was exempted from the payment of the VAT along with other entities by §103 of the National Internal Revenue Code, which
provides as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws or international agreements to which the Philippines is a
signatory.

R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending §103, as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529,
972, 1491, 1590. . . .

The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND
ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES.

By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY] WIDENING ITS TAX BASE
AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT
PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER PURPOSES," Congress thereby
clearly expresses its intention to amend any provision of the NIRC which stands in the way of accomplishing the purpose of the law.

PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to P.D. No. 1590. It is
unnecessary to do this in order to comply with the constitutional requirement, since it is already stated in the title that the law seeks to
amend the pertinent provisions of the NIRC, among which is §103(q), in order to widen the base of the VAT. Actually, it is the bill which
becomes a law that is required to express in its title the subject of legislation. The titles of H. No. 11197 and S. No. 1630 in fact
specifically referred to §103 of the NIRC as among the provisions sought to be amended. We are satisfied that sufficient notice had
been given of the pendency of these bills in Congress before they were enacted into what is now R.A.
No. 7716.

In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected. R.A. No. 7354 is entitled
AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES,
PROVIDING FOR REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED THEREWITH. It contained a
provision repealing all franking privileges. It was contended that the withdrawal of franking privileges was not expressed in the title of
the law. In holding that there was sufficient description of the subject of the law in its title, including the repeal of franking privileges, this
Court held:

To require every end and means necessary for the accomplishment of the general objectives of the statute to be
expressed in its title would not only be unreasonable but would actually render legislation impossible. [Cooley,
Constitutional Limitations, 8th Ed., p. 297] As has been correctly explained:

The details of a legislative act need not be specifically stated in its title, but matter germane to the
subject as expressed in the title, and adopted to the accomplishment of the object in view, may
properly be included in the act. Thus, it is proper to create in the same act the machinery by which
the act is to be enforced, to prescribe the penalties for its infraction, and to remove obstacles in the
way of its execution. If such matters are properly connected with the subject as expressed in the
 title, it is unnecessary that they should also have special mention in the title. (Southern Pac. Co. v.
Bartine, 170 Fed. 725)

(227 SCRA at 707-708)

VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not exempt from the taxing
power of the State and that what the constitutional guarantee of free press prohibits are laws which single out the press or target a
group belonging to the press for special treatment or which in any way discriminate against the press on the basis of the content of the
publication, and R.A. No. 7716 is none of these.

Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining those granted to others, the
law discriminates against the press. At any rate, it is averred, "even nondiscriminatory taxation of constitutionally guaranteed freedom is
unconstitutional."

With respect to the first contention, it would suffice to say that since the law granted the press a privilege, the law could take back the
privilege anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever waive
the exercise of its sovereign prerogative.

Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long
ago been subject. It is thus different from the tax involved in the cases invoked by the PPI. The license tax in Grosjean v. American
Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be discriminatory because it was laid on the gross advertising receipts only
of newspapers whose weekly circulation was over 20,000, with the result that the tax applied only to 13 out of 124 publishers in
Louisiana. These large papers were critical of Senator Huey Long who controlled the state legislature which enacted the license tax.
The censorial motivation for the law was thus evident.

On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295 (1983), the tax
was found to be discriminatory because although it could have been made liable for the sales tax or, in lieu thereof, for the use tax on
the privilege of using, storing or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes. It
was, however, later made to pay a special use tax on the cost of paper and ink which made these items "the only items subject to the
use tax that were component of goods to be sold at retail." The U.S. Supreme Court held that the differential treatment of the press
"suggests that the goal of regulation is not related to suppression of expression, and such goal is presumptively unconstitutional." It
would therefore appear that even a law that favors the press is constitutionally suspect. (See the dissent of Rehnquist, J. in that case)

Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and unqualifiedly" by R.A. No.
7716. Other exemptions from the VAT, such as those previously granted to PAL, petroleum concessionaires, enterprises registered
with the Export Processing Zone Authority, and many more are likewise totally withdrawn, in addition to exemptions which are partially
withdrawn, in an effort to broaden the base of the tax.

The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are profit oriented,
continue to enjoy exemption under R.A. No. 7716. An enumeration of some of these transactions will suffice to show that by and large
this is not so and that the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are granted, in some
cases, to encourage agricultural production and, in other cases, for the personal benefit of the end-user rather than for profit. The
exempt transactions are:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton
seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and
goods or services to enhance agriculture (milling of palay, corn, sugar cane and raw sugar, livestock, poultry feeds,
fertilizer, ingredients used for the manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to the
Philippines) or for professional use, like professional instruments and implements, by persons coming to the
Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products
subject to excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-
employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

 (h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

The PPI asserts that it does not really matter that the law does not discriminate against the press because "even nondiscriminatory
taxation on constitutionally guaranteed freedom is unconstitutional." PPI cites in support of this assertion the following statement
in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the First Amendment is
not so restricted. A license tax certainly does not acquire constitutional validity because it classifies the privileges
protected by the First Amendment along with the wares and merchandise of hucksters and peddlers and treats them
all alike. Such equality in treatment does not save the ordinance. Freedom of press, freedom of speech, freedom of
religion are in preferred position.

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition on the press
is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others, such those
selling goods, is valid, its application to the press or to religious groups, such as the Jehovah's Witnesses, in connection with the latter's
sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income
or property of a preacher. It is quite another thing to exact a tax on him for delivering a sermon."

A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which invalidated a city
ordinance requiring a business license fee on those engaged in the sale of general merchandise. It was held that the tax could not be
imposed on the sale of bibles by the American Bible Society without restraining the free exercise of its right to propagate.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is
imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties
purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the
press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution.

Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the sales are used to
subsidize the cost of printing copies which are given free to those who cannot afford to pay so that to tax the sales would be to increase
the price, while reducing the volume of sale. Granting that to be the case, the resulting burden on the exercise of religious freedom is so
incidental as to make it difficult to differentiate it from any other economic imposition that might make the right to disseminate religious
doctrines costly. Otherwise, to follow the petitioner's argument, to increase the tax on the sale of vestments would be to lay an
impermissible burden on the right of the preacher to make a sermon.

On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No. 7716, although fixed
in amount, is really just to pay for the expenses of registration and enforcement of provisions such as those relating to accounting in
§108 of the NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it from the payment of
this fee because it also sells some copies. At any rate whether the PBS is liable for the VAT must be decided in concrete cases, in the
event it is assessed this tax by the Commissioner of Internal Revenue.

VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation. CREBA asserts that R.A. No.
7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or exempt without reasonable basis and (3) violates
the rule that taxes should be uniform and equitable and that Congress shall "evolve a progressive system of taxation."

With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of real property by
installment or on deferred payment basis would result in substantial increases in the monthly amortizations to be paid because of the
10% VAT. The additional amount, it is pointed out, is something that the buyer did not anticipate at the time he entered into the
contract.

The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources are cited by the plaintiffs,
but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its
obligation, within the meaning of the Constitution. Even though such taxation may affect particular contracts, as it may increase the debt
of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of
another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing
contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)). Indeed not only
existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into contracts as a postulate of the legal
order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147 (1968)) Contracts must be understood as having been
made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to the
defeat of that authority. (Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).

It is next pointed out that while §4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products, food items,
petroleum, and medical and veterinary services, it grants no exemption on the sale of real property which is equally essential. The sale
of real property for socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate transactions of "the
less poor," i.e., the middle class, who are equally homeless, should likewise be exempted.

The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services was already exempt
under §103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716
granted exemption to these transactions, while subjecting those of petitioner to the payment of the VAT. Moreover, there is a difference
between the "homeless poor" and the "homeless less poor" in the example given by petitioner, because the second group or middle
class can afford to rent houses in the meantime that they cannot yet buy their own homes. The two social classes are thus differently
situated in life. "It is inherent in the power to tax that the State be free to select the subjects of taxation, and it has been repeatedly held
that 'inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.'"
(Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA
654, 663 (1984); Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).

Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1) which provides that "The rule of
taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation."

Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed at the same rate. The
taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement it is
enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar situation. (City of Baguio v.
De Leon, supra; Sison, Jr. v. Ancheta, supra)

Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716 merely expands the
base of the tax. The validity of the original VAT Law was questioned in Kapatiran ng Naglilingkod sa Pamahalaan ng Pilipinas,
Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made in these cases, namely, that the law was "oppressive,
discriminatory, unjust and regressive in violation of Art. VI, §28(1) of the Constitution." (At 382) Rejecting the challenge to the law, this
Court held:

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .

The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public, which are not
exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engaged in
business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are
consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products, so
that the costs of basic food and other necessities, spared as they are from the incidence of the VAT, are expected to
be relatively lower and within the reach of the general public.

(At 382-383)

The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the Philippines, Inc. (CUP), while
petitioner Juan T. David argues that the law contravenes the mandate of Congress to provide for a progressive system of taxation
because the law imposes a flat rate of 10% and thus places the tax burden on all taxpayers without regard to their ability to pay.

The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is
that Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted to mean simply that
"direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized." (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a
progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with
the proclamation of Art. VIII, §17(1) of the 1973 Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are also
regressive.

Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing
such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition
by providing for zero rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while granting exemptions to
other transactions. (R.A. No. 7716, §4, amending §103 of the NIRC).

Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton
seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and
goods or services to enhance agriculture (milling of palay, corn sugar cane and raw sugar, livestock, poultry feeds,
fertilizer, ingredients used for the manufacture of feeds).
 (b) Goods used for personal consumption or use (household and personal effects of citizens returning to the
Philippines) and or professional use, like professional instruments and implements, by persons coming to the
Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products
subject to excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-
employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

On the other hand, the transactions which are subject to the VAT are those which involve goods and services which are used or availed
of mainly by higher income groups. These include real properties held primarily for sale to customers or for lease in the ordinary course
of trade or business, the right or privilege to use patent, copyright, and other similar property or right, the right or privilege to use
industrial, commercial or scientific equipment, motion picture films, tapes and discs, radio, television, satellite transmission and cable
television time, hotels, restaurants and similar places, securities, lending investments, taxicabs, utility cars for rent, tourist buses, and
other common carriers, services of franchise grantees of telephone and telegraph.

The problem with CREBA's petition is that it presents broad claims of constitutional violations by tendering issues not at retail but at
wholesale and in the abstract. There is no fully developed record which can impart to adjudication the impact of actuality. There is no
factual foundation to show in the concrete the application of the law to actual contracts and exemplify its effect on property rights. For
the fact is that petitioner's members have not even been assessed the VAT. Petitioner's case is not made concrete by a series of
hypothetical questions asked which are no different from those dealt with in advisory opinions.

The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here, does not
suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would
condemn such a provision as void on its face, he has not made out a case. This is merely to adhere to the
authoritative doctrine that where the due process and equal protection clauses are invoked, considering that they are
not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to
such a conclusion. Absent such a showing, the presumption of validity must prevail.

(Sison, Jr. v. Ancheta, 130 SCRA at 661)

Adjudication of these broad claims must await the development of a concrete case. It may be that postponement of adjudication would
result in a multiplicity of suits. This need not be the case, however. Enforcement of the law may give rise to such a case. A test case,
provided it is an actual case and not an abstract or hypothetical one, may thus be presented.

Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no
different from the giving of advisory opinion that does not really settle legal issues.

We are told that it is our duty under Art. VIII, §1, ¶2 to decide whenever a claim is made that "there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government." This duty can only
arise if an actual case or controversy is before us. Under Art . VIII, §5 our jurisdiction is defined in terms of "cases" and all that Art. VIII,
§1, ¶2 can plausibly mean is that in the exercise of that jurisdiction we have the judicial power to determine questions of grave abuse of
discretion by any branch or instrumentality of the government.

Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial power," which is "the power of a court to hear and decide cases
pending between parties who have the right to sue and be sued in the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456, 559
(1912)), as distinguished from legislative and executive power. This power cannot be directly appropriated until it is apportioned among
several courts either by the Constitution, as in the case of Art. VIII, §5, or by statute, as in the case of the Judiciary Act of 1948 (R.A.
No. 296) and the Judiciary Reorganization Act of 1980 (B.P. Blg. 129). The power thus apportioned constitutes the court's "jurisdiction,"
defined as "the power conferred by law upon a court or judge to take cognizance of a case, to the exclusion of all others." (United
States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this Court cannot inquire into any allegation of
grave abuse of discretion by the other departments of the government.
VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of the Philippines (CUP), after briefly
surveying the course of legislation, argues that it was to adopt a definite policy of granting tax exemption to cooperatives that the
present Constitution embodies provisions on cooperatives. To subject cooperatives to the VAT would therefore be to infringe a
constitutional policy. Petitioner claims that in 1973, P.D. No. 175 was promulgated exempting cooperatives from the payment of income
taxes and sales taxes but in 1984, because of the crisis which menaced the national economy, this exemption was withdrawn by P.D.
No. 1955; that in 1986, P.D. No. 2008 again granted cooperatives exemption from income and sales taxes until December 31, 1991,
but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the framers of the Constitution "repudiated the
previous actions of the government adverse to the interests of the cooperatives, that is, the repeated revocation of the tax exemption to
cooperatives and instead upheld the policy of strengthening the cooperatives by way of the grant of tax exemptions," by providing the
following in Art. XII:

§1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and natural resources, and which are competitive
in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign
competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum
opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations,
shall be encouraged to broaden the base of their ownership.

§15. The Congress shall create an agency to promote the viability and growth of cooperatives as instruments for
social justice and economic development.

Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out cooperatives by withdrawing their
exemption from income and sales taxes under P.D. No. 175, §5. What P.D. No. 1955, §1 did was to withdraw the exemptions and
preferential treatments theretofore granted to private business enterprises in general, in view of the economic crisis which then beset
the nation. It is true that after P.D. No. 2008, §2 had restored the tax exemptions of cooperatives in 1986, the exemption was again
repealed by E.O. No. 93, §1, but then again cooperatives were not the only ones whose exemptions were withdrawn. The withdrawal of
tax incentives applied to all, including government and private entities. In the second place, the Constitution does not really require that
cooperatives be granted tax exemptions in order to promote their growth and viability. Hence, there is no basis for petitioner's assertion
that the government's policy toward cooperatives had been one of vacillation, as far as the grant of tax privileges was concerned, and
that it was to put an end to this indecision that the constitutional provisions cited were adopted. Perhaps as a matter of policy
cooperatives should be granted tax exemptions, but that is left to the discretion of Congress. If Congress does not grant exemption and
there is no discrimination to cooperatives, no violation of any constitutional policy can be charged.

Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt from taxation. Such theory is contrary
to the Constitution under which only the following are exempt from taxation: charitable institutions, churches and parsonages, by reason
of Art. VI, §28 (3), and non-stock, non-profit educational institutions by reason of Art. XIV, §4 (3).

CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the equal protection of the law because
electric cooperatives are exempted from the VAT. The classification between electric and other cooperatives (farmers cooperatives,
producers cooperatives, marketing cooperatives, etc.) apparently rests on a congressional determination that there is greater need to
provide cheaper electric power to as many people as possible, especially those living in the rural areas, than there is to provide them
with other necessities in life. We cannot say that such classification is unreasonable.

We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have in fact taken the
extraordinary step of enjoining its enforcement pending resolution of these cases. We have now come to the conclusion that the law
suffers from none of the infirmities attributed to it by petitioners and that its enactment by the other branches of the government does
not constitute a grave abuse of discretion. Any question as to its necessity, desirability or expediency must be addressed to Congress
as the body which is electorally responsible, remembering that, as Justice Holmes has said, "legislators are the ultimate guardians of
the liberties and welfare of the people in quite as great a degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v. May, 194
U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in arguing that we should enforce the
public accountability of legislators, that those who took part in passing the law in question by voting for it in Congress should later thrust
to the courts the burden of reviewing measures in the flush of enactment. This Court does not sit as a third branch of the legislature,
much less exercise a veto power over legislation.

WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining order previously issued is hereby
lifted.

SO ORDERED.
 G.R. No. 191667, April 22, 2015

LAND BANK OF THE PHILIPPINES, Petitioner, v. EDUARDO M. CACAYURAN, Respondent,

MUNICIPALITY OF AGOO, LA UNION, Intervenor.

AMENDED DECISION

PERLAS-BERNABE, J.:

Before the Court are the following motions: (a) the Motion for Reconsideration1 dated May 22, 2013, filed by petitioner Land
Bank of the Philippines (LBP) assailing the Decision2 dated April 17, 2013 of the Court (April 17, 2013 Decision), which
upheld the Decision3 dated March 26, 2010 of the Court of Appeals (CA) in CA-G.R. CV. No. 89732 affirming with
modification the Decision4 dated April 10, 2007 of the Regional Trial Court of Agoo, La Union, Branch 31 in Civil Case No. A-
2473; (b) the Motion for Leave to Intervene with Pleading-in-Intervention Attached 5 dated July 8, 2013, filed by the
Municipality of Agoo, La Union (Municipality) praying that it be allowed to intervene in this case; and (c) the Motion for
Reconsideration-in-Intervention6 dated July 8, 2013, filed by the Municipality seeking that the Court set aside its April 17,
2013 Decision and promulgate a new one in its stead dismissing the case (subject motions).

The Facts

The instant case arose from two (2) loans (Subject Loans) entered into by the Municipality with LBP in order to finance the
Redevelopment Plan of the Agoo Public Plaza (Public Plaza). Through Resolution Nos. 68-20057 and 139-
2005,8 the Sangguniang Bayan of the Municipality (Sangguniang Bayan) authorized its then-Mayor Eufranio Eriguel (Mayor
Eriguel) to enter into a P4,000,000.00-loan with LBP, the proceeds of which were used to construct ten (10) kiosks at the
Public Plaza. Around a year later, the SB issued Resolution Nos. 58-20069 and 128-2006,10 this time authorizing Mayor
Eriguel to obtain a P28,000,000.00-loan from LBP for the construction of a commercial center named "Agoo People's Center"
within the premises of the Public Plaza. In order to secure the Subject Loans, the Municipality used as collateral, among
others, a 2,323.75-square meter lot situated at the south eastern portion of the Public Plaza (Plaza Lot).11

However, a group of residents, led by respondent Eduardo M. Cacayuran (Cacayuran), opposed the redevelopment of the
Public Plaza, as well as the funding therefor thru the Subject Loans, claiming that these were "highly irregular, violative of
the law, and detrimental to public interests, and will result to wanton desecration of the [Public Plaza]."12 Further, Cacayuran
requested the municipal officers to furnish him with the various documents relating to the Public Plaza's redevelopment,
which, however, went unheeded.13 Thus, Cacayuran, invoking his right as a taxpayer, filed a complaint14 against LBP and
various officers of the Municipality, including Mayor Eriguel (but excluding the Municipality itself as party-defendant),
assailing the validity of the aforesaid loan agreements and praying that the commercialization of the Public Plaza be
enjoined.15

Initially, the municipal officers moved for the outright dismissal of the complaint, which was denied, thus constraining them
to file their respective answers. For its part, LBP asserted, inter alia, that Cacayuran did not have any cause of action since
he was not privy to the loan agreements entered into by LBP and the Municipality.16

During the pendency of the proceedings, the construction of the Agoo People's Center was completed. Later on,
the Sangguniang Bayan passed Municipal Ordinance No. 02-200717 declaring the area where such building stood as
patrimonial property of the Municipality.18

The RTC Ruling

In a Decision19 dated April 10, 2007, the RTC declared the Subject Loans null and void, finding that the resolutions approving
the procurement of the same were passed in a highly irregular manner and thus, ultra vires. As such, it pronounced that the
Municipality was not bound by the Subject Loans and that the municipal officers should, instead, be held personally liable for
the same. Further, it ruled that since the Plaza Lot is a property for public use, it cannot be used as collateral for the Subject
Loans.20

Aggrieved, LBP and the municipal officers appealed21 to the CA. However, the appeal of the municipal officers was deemed
abandoned and dismissed for their failure to file an appellants' brief despite due notice.22 Thus, only LBP's appeal was given
due course by the CA.23

The CA Ruling

In a Decision24 dated March 26, 2010, the CA affirmed the ruling of the RTC, with modification excluding then-Vice Mayor
Antonio Eslao from personal liability arising from the Subject Loans. It held that: (a) Cacayuran had locus standi to file the
instant complaint, considering that he is a resident of the Municipality and the issue at hand involved public interest of
transcendental importance; (b) Resolution Nos. 68-2005, 138-2005, 58-2006, 126-2006 were invalidly passed due to non-
compliance with certain provisions of Republic Act No. 7160,25 otherwise known as the Local Government Code of 1991
(LGC); (c) the Plaza Lot is property of public dominion, and thus, cannot be used as collateral; and (d) the procurement of
the Subject Loans were ultra vires acts for having been entered into without proper authority and that the collaterals used
therefor constituted improper disbursement of public funds.26

Dissatisfied, LBP filed a petition for review on certiorari27 before this Court.

Proceedings Before the Court

In a Decision28 dated April 17, 2013 the Court denied LBP's petition, and accordingly, affirmed the ruling of the CA. Agreeing
with the CA, the Court held that: (a) Cacayuran had legal standing to institute a taxpayer's suit;29 (b) Resolution Nos. 68-
2005, 139-2005, 58-2006, 126-2006 cannot be relied upon to validate the Subject Loans, as the LGC requires the passing of
an ordinance in order for any loan agreement to be valid;30 and (c) the procurement of the Subject Loans are ultra vires acts
of the municipal officers who approved the same, and thus, liability therefor shall devolve upon them.31

Undaunted, LBP moved for reconsideration, basically reiterating its earlier position that Cacayuran had no legal standing to
sue, and that Resolution Nos. 68-2005, 139-2005, 58-2006, and 126-2006 may be relied upon in validating the Subject
Loans.32

Meanwhile, the Municipality filed a Motion for Leave to Intervene with Pleading-In-Intervention Attached33 dated July 8, 2013
and a Motion for Reconsideration in-Intervention34 of even date, praying that it be included as a party-litigant to the instant
case. It contends that as a contracting party to the Subject Loans, it is an indispensable party to the action filed by
Cacayuran. As such, there cannot be any "real disposition" of the instant suit by reason of its exclusion from the same.

In opposition,35 Cacayuran maintains that LBP did not raise any new matter to warrant reconsideration of the April 17, 2013
Decision. Anent the Municipality's motion to intervene, Cacayuran insists that the Municipality is not a real party-in-interest
to the instant case as his complaint is against the municipal officers in their personal capacity for their ultra vires acts which
are not binding on the Municipality.

Finally, in its Comment on the Motion for Leave to Intervene and Motion for Reconsideration-in-Intervention36 dated May 6,
2014, LBP agrees with the Municipality that the latter is an indispensable party to the instant case and as such, should be
included herein.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the Municipality should be deemed as an indispensable party to the
instant case, and thus, be ordered impleaded herein.

The Court's Ruling

The Court rules in the affirmative.

Section 7, Rule 3 of the Rules of Court mandates that all indispensable parties should be joined in a suit, viz.:

SEC. 7. Compulsory joinder of indispensable parties. - Parties-in-interest without whom no final determination can be had of
an action shall be joined either as plaintiffs or defendants.

"An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no
final determination of the case can be had. The party's interest in the subject matter of the suit and in the relief sought are
so inextricably intertwined with the other parties' that his legal presence as a party to the proceeding is an absolute
necessity. In his absence, there cannot be a resolution of the dispute of the parties before the court which is effective,
complete, or equitable."37Thus, the absence of an indispensable party renders all subsequent actions of the court null and
void, for want of authority to act, not only as to the absent parties but even as to those present.38

Nevertheless, it must be stressed that the failure to implead any indispensable party to a suit does not necessarily result in
the outright dismissal of the complaint. In Heirs of Mesina v. Heirs of Fian, Sr.39 the Court definitively explained that in
instances of non-joinder of indispensable parties, the proper remedy is to implead them and not to dismiss the case:

The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any stage of a judicial
proceeding and/or at such times as are just, parties may be added on the motion of a party or on the initiative of the tribunal
concerned. If the plaintiff refuses to implead an indispensable party despite the order of the court, that court may dismiss
the complaint for the plaintiffs failure to comply with the order. The remedy is to implead the non-party claimed to be
indispensable.40 (Emphases and underscoring supplied)

In this case, a judicious review of the records reveals that Cacayuran's complaint against LBP and the municipal officers
primarily prays that the commercialization of the Public Plaza be enjoined and also, that the Subject Loans be declared null
and void for having been unlawfully entered into by the said officers. However, Cacayuran failed to implead in his complaint
the Municipality, a real party-in-interest41and an indispensable party that stands to be directly affected by any judicial
resolution on the case, considering that: (a) the contracting parties to the Subject Loans are LBP and the Municipality; and
(b) the Municipality owns the Public Plaza as well as the improvements constructed thereon, including the Agoo People's
Center. As the Municipality aptly points out:42
3. To recapitulate: The case had its beginnings in the two (2) Loans obtained by [the Municipality] from [LBP] and by
the Board Resolutions passed and adopted by the Sangguniang Bayan of Agoo, La Union, together with the Mayor and Vice-
Mayor of the Municipality.

xxxx

3d. The two (2) Loans were covered and evidenced by separate Loan Agreements and Mortgage/Assignment
Documents. The parties which entered into and executed the covering documents were [LBP] as lender and [the
Municipality] as borrower.

3e. When the construction was about 40% complete, [Cacayuran] as a taxpayer filed the case against the: (i) Mayor; (ii)
Vice-Mayor; and (iii) Ten (10) Members [of] the Sangguniang Bayan [of] Agoo, La Union, as defendants. [The Municipality]
was excluded, and was not impleaded as a defendant in the case.

xxxx

Indeed, [the Municipality! Ion whose lands stands and is found the Agoo Public Plaza, where the Kiosks and
Commercial Building were under construction and which constructions were sought to be restrained] stands to
be benefited or injured by the judgment in the case so filed or the party entitled to the avails of the case and is,
therefore, the real party-in-interest.

xxxx

3k. Without having to say so, the RTC dispositions as affirmed with modification by the CA Decision which, in
turn was affirmed by the SC Decision must not be binding upon [the Municipality], the real party-in-interest, the
indispensable party in fact, not impleaded as defendant in this case. 43 (Emphases and underscoring supplied).

The Court observes that it is only now that the issue of the Municipality's exclusion from the instant case, despite its status
as an indispensable party, became apparent. This recent finding may be credited to the fact that the initial parties before the
Court, i.e., LBP and Cacayuran, have dissimilar interests from that of the Municipality, and, hence, had no incentive to raise
the issue of the latter's status as an indispensable party. On the one hand, Cacayuran's interest to the case is centered on
the declaration of nullity of the Subject Loans, as well as the enjoinment of the commercialization of the Public Plaza; and on
the other hand, LBP's interest to the case is anchored on its capacity as creditor to the Subject Loans. To the mind of the
Court, the municipal officers would have been in the best position to raise this issue; however, they were unable to do so
because their appeal before the CA was deemed abandoned for their failure to file an appellants' brief on time.

Be that as it may, the Court is not precluded from taking cognizance of the Municipality's status as an indispensable party
even at this stage of the proceedings. Indeed, the presence of indispensable parties is necessary to vest the court with
jurisdiction44 and, corollarily, the issue on jurisdiction may be raised at any stage of the proceedings.45 Thus, as it has now
come to the fore that any resolution of this case would not be possible and, hence, not attain any real finality due to the non-
joinder of the Municipality, the Court is constrained to set aside all subsequent actuations of the courts a quo in this case,
including that of the Court's, and remand the case all the way back to the RTC for the inclusion of all indispensable parties to
the case and its immediate disposition on the merits.46 With this, the propriety of the Municipality's present intervention is
now mooted.

WHEREFORE, the subject motions are PARTLY GRANTED. The Decision dated April 17, 2013 of the Court, which upheld
the Decision dated March 26, 2010 of the Court of Appeals in CA-G.R. CV. No. 89732 affirming with modification the Decision
dated April 10, 2007 of the Regional Trial Court of Agoo, La Union, Branch 31 in Civil Case No. A-2473 is hereby SET ASIDE.
Accordingly, the instant case is REMANDED to the court a quo, which is hereby DIRECTED to order respondent Eduardo M.
Cacayuran to implead all indispensable parties and thereafter, PROCEED with the resolution of the case on the merits WITH
DISPATCH.

SO ORDERED.
G.R. No. 166006 March 14, 2008

PLANTERS PRODUCTS, INC., Petitioner,

vs.
FERTIPHIL CORPORATION, Respondent.

DECISION

REYES, R.T., J.:

THE Regional Trial Courts (RTC) have the authority and jurisdiction to consider the constitutionality of statutes, executive orders, presidential decrees
and other issuances. The Constitution vests that power not only in the Supreme Court but in all Regional Trial Courts.

The principle is relevant in this petition for review on certiorari of the Decision1 of the Court of Appeals (CA) affirming with modification that of the RTC in
Makati City,2 finding petitioner Planters Products, Inc. (PPI) liable to private respondent Fertiphil Corporation (Fertiphil) for the levies it paid under Letter
of Instruction (LOI) No. 1465.

The Facts

Petitioner PPI and private respondent Fertiphil are private corporations incorporated under Philippine laws. 3 They are both engaged in the importation
and distribution of fertilizers, pesticides and agricultural chemicals.

On June 3, 1985, then President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among others, for the
imposition of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers in the Philippines. 4 The LOI provides:

3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing formula a capital contribution component of not less than ₱10 per
bag. This capital contribution shall be collected until adequate capital is raised to make PPI viable. Such capital contribution shall be applied by FPA to
all domestic sales of fertilizers in the Philippines. 5 (Underscoring supplied)

Pursuant to the LOI, Fertiphil paid ₱10 for every bag of fertilizer it sold in the domestic market to the Fertilizer and Pesticide Authority (FPA). FPA then
remitted the amount collected to the Far East Bank and Trust Company, the depositary bank of PPI. Fertiphil paid ₱6,689,144 to FPA from July 8, 1985
to January 24, 1986.6

After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the ₱10 levy. With the return of democracy, Fertiphil demanded from PPI a
refund of the amounts it paid under LOI No. 1465, but PPI refused to accede to the demand. 7

Fertiphil filed a complaint for collection and damages8 against FPA and PPI with the RTC in Makati. It questioned the constitutionality of LOI No. 1465 for
being unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due process of law. 9 Fertiphil alleged that the
LOI solely favored PPI, a privately owned corporation, which used the proceeds to maintain its monopoly of the fertilizer industry.

In its Answer,10 FPA, through the Solicitor General, countered that the issuance of LOI No. 1465 was a valid exercise of the police power of the State in
ensuring the stability of the fertilizer industry in the country. It also averred that Fertiphil did not sustain any damage from the LOI because the burden
imposed by the levy fell on the ultimate consumer, not the seller.

RTC Disposition

On November 20, 1991, the RTC rendered judgment in favor of Fertiphil, disposing as follows:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against the defendant Planters Product, Inc.,
ordering the latter to pay the former:

1) the sum of ₱6,698,144.00 with interest at 12% from the time of judicial demand;

2) the sum of ₱100,000 as attorney’s fees;

3) the cost of suit.

SO ORDERED.11

Ruling that the imposition of the ₱10 CRC was an exercise of the State’s inherent power of taxation, the RTC invalidated the levy for violating the basic
principle that taxes can only be levied for public purpose, viz.:

It is apparent that the imposition of ₱10 per fertilizer bag sold in the country by LOI 1465 is purportedly in the exercise of the power of taxation. It is a
settled principle that the power of taxation by the state is plenary. Comprehensive and supreme, the principal check upon its abuse resting in the
responsibility of the members of the legislature to their constituents. However, there are two kinds of limitations on the power of taxation: the inherent
limitations and the constitutional limitations.
One of the inherent limitations is that a tax may be levied only for public purposes:

The power to tax can be resorted to only for a constitutionally valid public purpose. By the same token, taxes may not be levied for purely private
purposes, for building up of private fortunes, or for the redress of private wrongs. They cannot be levied for the improvement of private property, or for
the benefit, and promotion of private enterprises, except where the aid is incident to the public benefit. It is well-settled principle of constitutional law that
no general tax can be levied except for the purpose of raising money which is to be expended for public use. Funds cannot be exacted under the guise
of taxation to promote a purpose that is not of public interest. Without such limitation, the power to tax could be exercised or employed as an authority to
destroy the economy of the people. A tax, however, is not held void on the ground of want of public interest unless the want of such interest is clear. (71
Am. Jur. pp. 371-372)

In the case at bar, the plaintiff paid the amount of ₱6,698,144.00 to the Fertilizer and Pesticide Authority pursuant to the ₱10 per bag of fertilizer sold
imposition under LOI 1465 which, in turn, remitted the amount to the defendant Planters Products, Inc. thru the latter’s depository bank, Far East Bank
and Trust Co. Thus, by virtue of LOI 1465 the plaintiff, Fertiphil Corporation, which is a private domestic corporation, became poorer by the amount of
₱6,698,144.00 and the defendant, Planters Product, Inc., another private domestic corporation, became richer by the amount of ₱6,698,144.00.

Tested by the standards of constitutionality as set forth in the afore-quoted jurisprudence, it is quite evident that LOI 1465 insofar as it imposes the
amount of ₱10 per fertilizer bag sold in the country and orders that the said amount should go to the defendant Planters Product, Inc. is unlawful
because it violates the mandate that a tax can be levied only for a public purpose and not to benefit, aid and promote a private enterprise such as
Planters Product, Inc.12

PPI moved for reconsideration but its motion was denied.13 PPI then filed a notice of appeal with the RTC but it failed to pay the requisite appeal docket
fee. In a separate but related proceeding, this Court14 allowed the appeal of PPI and remanded the case to the CA for proper disposition.

CA Decision

On November 28, 2003, the CA handed down its decision affirming with modification that of the RTC, with the following fallo:

IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby AFFIRMED, subject to the MODIFICATION that the award of attorney’s fees
is hereby DELETED.15

In affirming the RTC decision, the CA ruled that the lis mota of the complaint for collection was the constitutionality of LOI No. 1465, thus:

The question then is whether it was proper for the trial court to exercise its power to judicially determine the constitutionality of the subject statute in the
instant case.

As a rule, where the controversy can be settled on other grounds, the courts will not resolve the constitutionality of a law (Lim v. Pacquing, 240 SCRA
649 [1995]). The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of political departments are valid, absent a
clear and unmistakable showing to the contrary.

However, the courts are not precluded from exercising such power when the following requisites are obtaining in a controversy before it: First, there
must be before the court an actual case calling for the exercise of judicial review. Second, the question must be ripe for adjudication. Third, the person
challenging the validity of the act must have standing to challenge. Fourth, the question of constitutionality must have been raised at the earliest
opportunity; and lastly, the issue of constitutionality must be the very lis mota of the case (Integrated Bar of the Philippines v. Zamora, 338 SCRA 81
[2000]).

Indisputably, the present case was primarily instituted for collection and damages. However, a perusal of the complaint also reveals that the instant
action is founded on the claim that the levy imposed was an unlawful and unconstitutional special assessment. Consequently, the requisite that the
constitutionality of the law in question be the very lis mota of the case is present, making it proper for the trial court to rule on the constitutionality of LOI
1465.16

The CA held that even on the assumption that LOI No. 1465 was issued under the police power of the state, it is still unconstitutional because it did not
promote public welfare. The CA explained:

In declaring LOI 1465 unconstitutional, the trial court held that the levy imposed under the said law was an invalid exercise of the State’s power of
taxation inasmuch as it violated the inherent and constitutional prescription that taxes be levied only for public purposes. It reasoned out that the amount
collected under the levy was remitted to the depository bank of PPI, which the latter used to advance its private interest.

On the other hand, appellant submits that the subject statute’s passage was a valid exercise of police power. In addition, it disputes the court a quo’s
findings arguing that the collections under LOI 1465 was for the benefit of Planters Foundation, Incorporated (PFI), a foundation created by law to hold in
trust for millions of farmers, the stock ownership of PPI.

Of the three fundamental powers of the State, the exercise of police power has been characterized as the most essential, insistent and the least limitable
of powers, extending as it does to all the great public needs. It may be exercised as long as the activity or the property sought to be regulated has some
relevance to public welfare (Constitutional Law, by Isagani A. Cruz, p. 38, 1995 Edition).

Vast as the power is, however, it must be exercised within the limits set by the Constitution, which requires the concurrence of a lawful subject and a
lawful method. Thus, our courts have laid down the test to determine the validity of a police measure as follows: (1) the interests of the public generally,
as distinguished from those of a particular class, requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of
the purpose and not unduly oppressive upon individuals (National Development Company v. Philippine Veterans Bank, 192 SCRA 257 [1990]).
It is upon applying this established tests that We sustain the trial court’s holding LOI 1465 unconstitutional. To be sure, ensuring the continued supply
and distribution of fertilizer in the country is an undertaking imbued with public interest. However, the method by which LOI 1465 sought to achieve this is
by no means a measure that will promote the public welfare. The government’s commitment to support the successful rehabilitation and continued
viability of PPI, a private corporation, is an unmistakable attempt to mask the subject statute’s impartiality. There is no way to treat the self-interest of a
favored entity, like PPI, as identical with the general interest of the country’s farmers or even the Filipino people in general. Well to stress, substantive
due process exacts fairness and equal protection disallows distinction where none is needed. When a statute’s public purpose is spoiled by private
interest, the use of police power becomes a travesty which must be struck down for being an arbitrary exercise of government power. To rule in favor of
appellant would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit
of private individuals.17

The CA did not accept PPI’s claim that the levy imposed under LOI No. 1465 was for the benefit of Planters Foundation, Inc., a foundation created to
hold in trust the stock ownership of PPI. The CA stated:

Appellant next claims that the collections under LOI 1465 was for the benefit of Planters Foundation, Incorporated (PFI), a foundation created by law to
hold in trust for millions of farmers, the stock ownership of PFI on the strength of Letter of Undertaking (LOU) issued by then Prime Minister Cesar Virata
on April 18, 1985 and affirmed by the Secretary of Justice in an Opinion dated October 12, 1987, to wit:

"2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to include in its fertilizer pricing formula a capital recovery
component, the proceeds of which will be used initially for the purpose of funding the unpaid portion of the outstanding capital stock of Planters presently
held in trust by Planters Foundation, Inc. (Planters Foundation), which unpaid capital is estimated at approximately ₱206 million (subject to validation by
Planters and Planters Foundation) (such unpaid portion of the outstanding capital stock of Planters being hereafter referred to as the ‘Unpaid Capital’),
and subsequently for such capital increases as may be required for the continuing viability of Planters.

The capital recovery component shall be in the minimum amount of ₱10 per bag, which will be added to the price of all domestic sales of fertilizer in the
Philippines by any importer and/or fertilizer mother company. In this connection, the Republic hereby acknowledges that the advances by Planters to
Planters Foundation which were applied to the payment of the Planters shares now held in trust by Planters Foundation, have been assigned to, among
others, the Creditors. Accordingly, the Republic, through FPA, hereby agrees to deposit the proceeds of the capital recovery component in the special
trust account designated in the notice dated April 2, 1985, addressed by counsel for the Creditors to Planters Foundation. Such proceeds shall be
deposited by FPA on or before the 15th day of each month.

The capital recovery component shall continue to be charged and collected until payment in full of (a) the Unpaid Capital and/or (b) any shortfall in the
payment of the Subsidy Receivables, (c) any carrying cost accruing from the date hereof on the amounts which may be outstanding from time to time of
the Unpaid Capital and/or the Subsidy Receivables and (d) the capital increases contemplated in paragraph 2 hereof. For the purpose of the foregoing
clause (c), the ‘carrying cost’ shall be at such rate as will represent the full and reasonable cost to Planters of servicing its debts, taking into account both
its peso and foreign currency-denominated obligations." (Records, pp. 42-43)

Appellant’s proposition is open to question, to say the least. The LOU issued by then Prime Minister Virata taken together with the Justice Secretary’s
Opinion does not preponderantly demonstrate that the collections made were held in trust in favor of millions of farmers. Unfortunately for appellant, in
the absence of sufficient evidence to establish its claims, this Court is constrained to rely on what is explicitly provided in LOI 1465 – that one of the
primary aims in imposing the levy is to support the successful rehabilitation and continued viability of PPI. 18

PPI moved for reconsideration but its motion was denied.19 It then filed the present petition with this Court.

Issues

Petitioner PPI raises four issues for Our consideration, viz.:

THE CONSTITUTIONALITY OF LOI 1465 CANNOT BE COLLATERALLY ATTACKED AND BE DECREED VIA A DEFAULT JUDGMENT IN A CASE
FILED FOR COLLECTION AND DAMAGES WHERE THE ISSUE OF CONSTITUTIONALITY IS NOT THE VERY LIS MOTA OF THE CASE. NEITHER
CAN LOI 1465 BE CHALLENGED BY ANY PERSON OR ENTITY WHICH HAS NO STANDING TO DO SO.

II

LOI 1465, BEING A LAW IMPLEMENTED FOR THE PURPOSE OF ASSURING THE FERTILIZER SUPPLY AND DISTRIBUTION IN THE COUNTRY,
AND FOR BENEFITING A FOUNDATION CREATED BY LAW TO HOLD IN TRUST FOR MILLIONS OF FARMERS THEIR STOCK OWNERSHIP IN
PPI CONSTITUTES A VALID LEGISLATION PURSUANT TO THE EXERCISE OF TAXATION AND POLICE POWER FOR PUBLIC PURPOSES.

III

THE AMOUNT COLLECTED UNDER THE CAPITAL RECOVERY COMPONENT WAS REMITTED TO THE GOVERNMENT, AND BECAME
GOVERNMENT FUNDS PURSUANT TO AN EFFECTIVE AND VALIDLY ENACTED LAW WHICH IMPOSED DUTIES AND CONFERRED RIGHTS BY
VIRTUE OF THE PRINCIPLE OF "OPERATIVE FACT" PRIOR TO ANY DECLARATION OF UNCONSTITUTIONALITY OF LOI 1465.

IV

THE PRINCIPLE OF UNJUST VEXATION (SHOULD BE ENRICHMENT) FINDS NO APPLICATION IN THE INSTANT CASE.20 (Underscoring supplied)
 Our Ruling

We shall first tackle the procedural issues of locus standi and the jurisdiction of the RTC to resolve constitutional issues.

Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere procedural technicality which may be waived.

PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No. 1465 because it does not have a "personal and substantial
interest in the case or will sustain direct injury as a result of its enforcement."21 It asserts that Fertiphil did not suffer any damage from the CRC
imposition because "incidence of the levy fell on the ultimate consumer or the farmers themselves, not on the seller fertilizer company." 22

We cannot agree. The doctrine of locus standi or the right of appearance in a court of justice has been adequately discussed by this Court in a catena of
cases. Succinctly put, the doctrine requires a litigant to have a material interest in the outcome of a case. In private suits, locus standi requires a litigant
to be a "real party in interest," which is defined as "the party who stands to be benefited or injured by the judgment in the suit or the party entitled to the
avails of the suit."23

In public suits, this Court recognizes the difficulty of applying the doctrine especially when plaintiff asserts a public right on behalf of the general public
because of conflicting public policy issues. 24 On one end, there is the right of the ordinary citizen to petition the courts to be freed from unlawful
government intrusion and illegal official action. At the other end, there is the public policy precluding excessive judicial interference in official acts, which
may unnecessarily hinder the delivery of basic public services.

In this jurisdiction, We have adopted the "direct injury test" to determine locus standi in public suits. In People v. Vera, 25 it was held that a person who
impugns the validity of a statute must have "a personal and substantial interest in the case such that he has sustained, or will sustain direct injury as a
result." The "direct injury test" in public suits is similar to the "real party in interest" rule for private suits under Section 2, Rule 3 of the 1997 Rules of Civil
Procedure.26

Recognizing that a strict application of the "direct injury" test may hamper public interest, this Court relaxed the requirement in cases of "transcendental
importance" or with "far reaching implications." Being a mere procedural technicality, it has also been held that locus standi may be waived in the public
interest.27

Whether or not the complaint for collection is characterized as a private or public suit, Fertiphil has locus standi to file it. Fertiphil suffered a direct injury
from the enforcement of LOI No. 1465. It was required, and it did pay, the ₱10 levy imposed for every bag of fertilizer sold on the domestic market. It
may be true that Fertiphil has passed some or all of the levy to the ultimate consumer, but that does not disqualify it from attacking the constitutionality of
the LOI or from seeking a refund. As seller, it bore the ultimate burden of paying the levy. It faced the possibility of severe sanctions for failure to pay the
levy. The fact of payment is sufficient injury to Fertiphil.

Moreover, Fertiphil suffered harm from the enforcement of the LOI because it was compelled to factor in its product the levy. The levy certainly rendered
the fertilizer products of Fertiphil and other domestic sellers much more expensive. The harm to their business consists not only in fewer clients because
of the increased price, but also in adopting alternative corporate strategies to meet the demands of LOI No. 1465. Fertiphil and other fertilizer sellers
may have shouldered all or part of the levy just to be competitive in the market. The harm occasioned on the business of Fertiphil is sufficient injury for
purposes of locus standi.

Even assuming arguendo that there is no direct injury, We find that the liberal policy consistently adopted by this Court on locus standi must apply. The
issues raised by Fertiphil are of paramount public importance. It involves not only the constitutionality of a tax law but, more importantly, the use of taxes
for public purpose. Former President Marcos issued LOI No. 1465 with the intention of rehabilitating an ailing private company. This is clear from the text
of the LOI. PPI is expressly named in the LOI as the direct beneficiary of the levy. Worse, the levy was made dependent and conditional upon PPI
becoming financially viable. The LOI provided that "the capital contribution shall be collected until adequate capital is raised to make PPI viable."

The constitutionality of the levy is already in doubt on a plain reading of the statute. It is Our constitutional duty to squarely resolve the issue as the final
arbiter of all justiciable controversies. The doctrine of standing, being a mere procedural technicality, should be waived, if at all, to adequately thresh out
an important constitutional issue.

RTC may resolve constitutional issues; the constitutional issue was adequately raised in the complaint; it is the lis mota of the case.

PPI insists that the RTC and the CA erred in ruling on the constitutionality of the LOI. It asserts that the constitutionality of the LOI cannot be collaterally
attacked in a complaint for collection.28 Alternatively, the resolution of the constitutional issue is not necessary for a determination of the complaint for
collection.29

Fertiphil counters that the constitutionality of the LOI was adequately pleaded in its complaint. It claims that the constitutionality of LOI No. 1465 is the
very lis mota of the case because the trial court cannot determine its claim without resolving the issue.30

It is settled that the RTC has jurisdiction to resolve the constitutionality of a statute, presidential decree or an executive order. This is clear from Section
5, Article VIII of the 1987 Constitution, which provides:

SECTION 5. The Supreme Court shall have the following powers:

xxxx
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower
courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question. (Underscoring supplied)

In Mirasol v. Court of Appeals,31 this Court recognized the power of the RTC to resolve constitutional issues, thus:

On the first issue. It is settled that Regional Trial Courts have the authority and jurisdiction to consider the constitutionality of a statute, presidential
decree, or executive order. The Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation not only in this Court, but in all Regional Trial Courts.32

In the recent case of Equi-Asia Placement, Inc. v. Department of Foreign Affairs,33 this Court reiterated:

There is no denying that regular courts have jurisdiction over cases involving the validity or constitutionality of a rule or regulation issued by
administrative agencies. Such jurisdiction, however, is not limited to the Court of Appeals or to this Court alone for even the regional trial courts can take
cognizance of actions assailing a specific rule or set of rules promulgated by administrative bodies. Indeed, the Constitution vests the power of judicial
review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the
courts, including the regional trial courts.34

Judicial review of official acts on the ground of unconstitutionality may be sought or availed of through any of the actions cognizable by courts of justice,
not necessarily in a suit for declaratory relief. Such review may be had in criminal actions, as in People v. Ferrer 35 involving the constitutionality of the
now defunct Anti-Subversion law, or in ordinary actions, as in Krivenko v. Register of Deeds 36 involving the constitutionality of laws prohibiting aliens
from acquiring public lands. The constitutional issue, however, (a) must be properly raised and presented in the case, and (b) its resolution is necessary
to a determination of the case, i.e., the issue of constitutionality must be the very lis mota presented. 37

Contrary to PPI’s claim, the constitutionality of LOI No. 1465 was properly and adequately raised in the complaint for collection filed with the RTC. The
pertinent portions of the complaint allege:

6. The CRC of ₱10 per bag levied under LOI 1465 on domestic sales of all grades of fertilizer in the Philippines, is unlawful, unjust, uncalled for,
unreasonable, inequitable and oppressive because:

xxxx

(c) It favors only one private domestic corporation, i.e., defendant PPPI, and imposed at the expense and disadvantage of the other fertilizer
importers/distributors who were themselves in tight business situation and were then exerting all efforts and maximizing management and marketing
skills to remain viable;

xxxx

(e) It was a glaring example of crony capitalism, a forced program through which the PPI, having been presumptuously masqueraded as "the" fertilizer
industry itself, was the sole and anointed beneficiary;

7. The CRC was an unlawful; and unconstitutional special assessment and its imposition is tantamount to illegal exaction amounting to a denial of due
process since the persons of entities which had to bear the burden of paying the CRC derived no benefit therefrom; that on the contrary it was used by
PPI in trying to regain its former despicable monopoly of the fertilizer industry to the detriment of other distributors and importers.38 (Underscoring
supplied)

The constitutionality of LOI No. 1465 is also the very lis mota of the complaint for collection. Fertiphil filed the complaint to compel PPI to refund the
levies paid under the statute on the ground that the law imposing the levy is unconstitutional. The thesis is that an unconstitutional law is void. It has no
legal effect. Being void, Fertiphil had no legal obligation to pay the levy. Necessarily, all levies duly paid pursuant to an unconstitutional law should be
refunded under the civil code principle against unjust enrichment. The refund is a mere consequence of the law being declared unconstitutional. The
RTC surely cannot order PPI to refund Fertiphil if it does not declare the LOI unconstitutional. It is the unconstitutionality of the LOI which triggers the
refund. The issue of constitutionality is the very lis mota of the complaint with the RTC.

The ₱10 levy under LOI No. 1465 is an exercise of the power of taxation.

At any rate, the Court holds that the RTC and the CA did not err in ruling against the constitutionality of the LOI.

PPI insists that LOI No. 1465 is a valid exercise either of the police power or the power of taxation. It claims that the LOI was implemented for the
purpose of assuring the fertilizer supply and distribution in the country and for benefiting a foundation created by law to hold in trust for millions of
farmers their stock ownership in PPI.

Fertiphil counters that the LOI is unconstitutional because it was enacted to give benefit to a private company. The levy was imposed to pay the
corporate debt of PPI. Fertiphil also argues that, even if the LOI is enacted under the police power, it is still unconstitutional because it did not promote
the general welfare of the people or public interest.
Police power and the power of taxation are inherent powers of the State. These powers are distinct and have different tests for validity. Police power is
the power of the State to enact legislation that may interfere with personal liberty or property in order to promote the general welfare,39 while the power of
taxation is the power to levy taxes to be used for public purpose. The main purpose of police power is the regulation of a behavior or conduct, while
taxation is revenue generation. The "lawful subjects" and "lawful means" tests are used to determine the validity of a law enacted under the police
power.40 The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.

We agree with the RTC that the imposition of the levy was an exercise by the State of its taxation power. While it is true that the power of taxation can be
used as an implement of police power,41 the primary purpose of the levy is revenue generation. If the purpose is primarily revenue, or if revenue is, at
least, one of the real and substantial purposes, then the exaction is properly called a tax.42

In Philippine Airlines, Inc. v. Edu,43 it was held that the imposition of a vehicle registration fee is not an exercise by the State of its police power, but of its
taxation power, thus:

It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61 of the Land Transportation and Traffic Code that the legislative
intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance
of highways and to a much lesser degree, pay for the operating expenses of the administering agency. x x x Fees may be properly regarded as taxes
even though they also serve as an instrument of regulation.

Taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148). If the purpose is primarily revenue, or if revenue is, at
least, one of the real and substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle registration fees. The same
provision appears as Section 59(b) in the Land Transportation Code. It is patent therefrom that the legislators had in mind a regulatory tax as the law
refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." x x x Simply put, if the exaction under Rep. Act
4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as
the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be
understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like
the motor vehicle registration fee and chauffeurs’ license fee. Such fees are to go into the expenditures of the Land Transportation Commission as
provided for in the last proviso of Sec. 61.44 (Underscoring supplied)

The ₱10 levy under LOI No. 1465 is too excessive to serve a mere regulatory purpose. The levy, no doubt, was a big burden on the seller or the ultimate
consumer. It increased the price of a bag of fertilizer by as much as five percent. 45 A plain reading of the LOI also supports the conclusion that the levy
was for revenue generation. The LOI expressly provided that the levy was imposed "until adequate capital is raised to make PPI viable."

Taxes are exacted only for a public purpose. The ₱10 levy is unconstitutional because it was not for a public purpose. The levy was imposed to give
undue benefit to PPI.

An inherent limitation on the power of taxation is public purpose. Taxes are exacted only for a public purpose. They cannot be used for purely private
purposes or for the exclusive benefit of private persons. 46 The reason for this is simple. The power to tax exists for the general welfare; hence, implicit in
its power is the limitation that it should be used only for a public purpose. It would be a robbery for the State to tax its citizens and use the funds
generated for a private purpose. As an old United States case bluntly put it: "To lay with one hand, the power of the government on the property of the
citizen, and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes, is nonetheless a robbery because
it is done under the forms of law and is called taxation."47

The term "public purpose" is not defined. It is an elastic concept that can be hammered to fit modern standards. Jurisprudence states that "public
purpose" should be given a broad interpretation. It does not only pertain to those purposes which are traditionally viewed as essentially government
functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice. Thus, public
money may now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.

While the categories of what may constitute a public purpose are continually expanding in light of the expansion of government functions, the inherent
requirement that taxes can only be exacted for a public purpose still stands. Public purpose is the heart of a tax law. When a tax law is only a mask to
exact funds from the public when its true intent is to give undue benefit and advantage to a private enterprise, that law will not satisfy the requirement of
"public purpose."

The purpose of a law is evident from its text or inferable from other secondary sources. Here, We agree with the RTC and that CA that the levy imposed
under LOI No. 1465 was not for a public purpose.

First, the LOI expressly provided that the levy be imposed to benefit PPI, a private company. The purpose is explicit from Clause 3 of the law, thus:

3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing formula a capital contribution component of not less than ₱10 per
bag. This capital contribution shall be collected until adequate capital is raised to make PPI viable. Such capital contribution shall be applied by FPA to
all domestic sales of fertilizers in the Philippines. 48 (Underscoring supplied)

It is a basic rule of statutory construction that the text of a statute should be given a literal meaning. In this case, the text of the LOI is plain that the levy
was imposed in order to raise capital for PPI. The framers of the LOI did not even hide the insidious purpose of the law. They were cavalier enough to
name PPI as the ultimate beneficiary of the taxes levied under the LOI. We find it utterly repulsive that a tax law would expressly name a private
company as the ultimate beneficiary of the taxes to be levied from the public. This is a clear case of crony capitalism.

Second, the LOI provides that the imposition of the ₱10 levy was conditional and dependent upon PPI becoming financially "viable." This suggests that
the levy was actually imposed to benefit PPI. The LOI notably does not fix a maximum amount when PPI is deemed financially "viable." Worse, the
liability of Fertiphil and other domestic sellers of fertilizer to pay the levy is made indefinite. They are required to continuously pay the levy until adequate
capital is raised for PPI.
Third, the RTC and the CA held that the levies paid under the LOI were directly remitted and deposited by FPA to Far East Bank and Trust Company,
the depositary bank of PPI.49 This proves that PPI benefited from the LOI. It is also proves that the main purpose of the law was to give undue benefit
and advantage to PPI.

Fourth, the levy was used to pay the corporate debts of PPI. A reading of the Letter of Understanding50 dated May 18, 1985 signed by then Prime
Minister Cesar Virata reveals that PPI was in deep financial problem because of its huge corporate debts. There were pending petitions for rehabilitation
against PPI before the Securities and Exchange Commission. The government guaranteed payment of PPI’s debts to its foreign creditors. To fund the
payment, President Marcos issued LOI No. 1465. The pertinent portions of the letter of understanding read:

Republic of the Philippines

Office of the Prime Minister
Manila

LETTER OF UNDERTAKING

May 18, 1985

TO: THE BANKING AND FINANCIAL INSTITUTIONS

LISTED IN ANNEX A HERETO WHICH ARE
CREDITORS (COLLECTIVELY, THE "CREDITORS")
OF PLANTERS PRODUCTS, INC. ("PLANTERS")

Gentlemen:

This has reference to Planters which is the principal importer and distributor of fertilizer, pesticides and agricultural chemicals in the Philippines. As
regards Planters, the Philippine Government confirms its awareness of the following: (1) that Planters has outstanding obligations in foreign currency
and/or pesos, to the Creditors, (2) that Planters is currently experiencing financial difficulties, and (3) that there are presently pending with the Securities
and Exchange Commission of the Philippines a petition filed at Planters’ own behest for the suspension of payment of all its obligations, and a separate
petition filed by Manufacturers Hanover Trust Company, Manila Offshore Branch for the appointment of a rehabilitation receiver for Planters.

In connection with the foregoing, the Republic of the Philippines (the "Republic") confirms that it considers and continues to consider Planters as a major
fertilizer distributor. Accordingly, for and in consideration of your expressed willingness to consider and participate in the effort to rehabilitate
Planters, the Republic hereby manifests its full and unqualified support of the successful rehabilitation and continuing viability of Planters, and to that
end, hereby binds and obligates itself to the creditors and Planters, as follows:

xxxx

2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to include in its fertilizer pricing formula a capital recovery
component, the proceeds of which will be used initially for the purpose of funding the unpaid portion of the outstanding capital stock of Planters presently
held in trust by Planters Foundation, Inc. ("Planters Foundation"), which unpaid capital is estimated at approximately ₱206 million (subject to validation
by Planters and Planters Foundation) such unpaid portion of the outstanding capital stock of Planters being hereafter referred to as the "Unpaid
Capital"), and subsequently for such capital increases as may be required for the continuing viability of Planters.

xxxx

The capital recovery component shall continue to be charged and collected until payment in full of (a) the Unpaid Capital and/or (b) any shortfall in the
payment of the Subsidy Receivables, (c) any carrying cost accruing from the date hereof on the amounts which may be outstanding from time to time of
the Unpaid Capital and/or the Subsidy Receivables, and (d) the capital increases contemplated in paragraph 2 hereof. For the purpose of the foregoing
clause (c), the "carrying cost" shall be at such rate as will represent the full and reasonable cost to Planters of servicing its debts, taking into account
both its peso and foreign currency-denominated obligations.

REPUBLIC OF THE PHILIPPINES

By:

(signed)
CESAR E. A. VIRATA
Prime Minister and Minister of Finance51

It is clear from the Letter of Understanding that the levy was imposed precisely to pay the corporate debts of PPI. We cannot agree with PPI that the levy
was imposed to ensure the stability of the fertilizer industry in the country. The letter of understanding and the plain text of the LOI clearly indicate that
the levy was exacted for the benefit of a private corporation.

All told, the RTC and the CA did not err in holding that the levy imposed under LOI No. 1465 was not for a public purpose. LOI No. 1465 failed to comply
with the public purpose requirement for tax laws.

The LOI is still unconstitutional even if enacted under the police power; it did not promote public interest.
Even if We consider LOI No. 1695 enacted under the police power of the State, it would still be invalid for failing to comply with the test of "lawful
subjects" and "lawful means." Jurisprudence states the test as follows: (1) the interest of the public generally, as distinguished from those of particular
class, requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals.52

For the same reasons as discussed, LOI No. 1695 is invalid because it did not promote public interest. The law was enacted to give undue advantage to
a private corporation. We quote with approval the CA ratiocination on this point, thus:

It is upon applying this established tests that We sustain the trial court’s holding LOI 1465 unconstitutional.1awphil To be sure, ensuring the continued
supply and distribution of fertilizer in the country is an undertaking imbued with public interest. However, the method by which LOI 1465 sought to
achieve this is by no means a measure that will promote the public welfare. The government’s commitment to support the successful rehabilitation and
continued viability of PPI, a private corporation, is an unmistakable attempt to mask the subject statute’s impartiality. There is no way to treat the self-
interest of a favored entity, like PPI, as identical with the general interest of the country’s farmers or even the Filipino people in general. Well to stress,
substantive due process exacts fairness and equal protection disallows distinction where none is needed. When a statute’s public purpose is spoiled by
private interest, the use of police power becomes a travesty which must be struck down for being an arbitrary exercise of government power.To rule in
favor of appellant would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the
exclusive benefit of private individuals. (Underscoring supplied)

The general rule is that an unconstitutional law is void; the doctrine of operative fact is inapplicable.

PPI also argues that Fertiphil cannot seek a refund even if LOI No. 1465 is declared unconstitutional. It banks on the doctrine of operative fact, which
provides that an unconstitutional law has an effect before being declared unconstitutional. PPI wants to retain the levies paid under LOI No. 1465 even if
it is subsequently declared to be unconstitutional.

We cannot agree. It is settled that no question, issue or argument will be entertained on appeal, unless it has been raised in the court a quo.53 PPI did
not raise the applicability of the doctrine of operative fact with the RTC and the CA. It cannot belatedly raise the issue with Us in order to extricate itself
from the dire effects of an unconstitutional law.

At any rate, We find the doctrine inapplicable. The general rule is that an unconstitutional law is void. It produces no rights, imposes no duties and
affords no protection. It has no legal effect. It is, in legal contemplation, inoperative as if it has not been passed. 54 Being void, Fertiphil is not required to
pay the levy. All levies paid should be refunded in accordance with the general civil code principle against unjust enrichment. The general rule is
supported by Article 7 of the Civil Code, which provides:

ART. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the
contrary.

When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.

The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play.55It nullifies the effects of an
unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. 56

The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it
was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy57 or would put in limbo the acts done
by a municipality in reliance upon a law creating it.58

Here, We do not find anything iniquitous in ordering PPI to refund the amounts paid by Fertiphil under LOI No. 1465. It unduly benefited from the levy. It
was proven during the trial that the levies paid were remitted and deposited to its bank account. Quite the reverse, it would be inequitable and unjust not
to order a refund. To do so would unjustly enrich PPI at the expense of Fertiphil. Article 22 of the Civil Code explicitly provides that "every person who,
through an act of performance by another comes into possession of something at the expense of the latter without just or legal ground shall return the
same to him." We cannot allow PPI to profit from an unconstitutional law. Justice and equity dictate that PPI must refund the amounts paid by Fertiphil.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated November 28, 2003 is AFFIRMED.

SO ORDERED.
G.R. No. 189999 June 27, 2012

ANGELES UNIVERSITY FOUNDATION, Petitioner,

vs.
CITY OF ANGELES, JULIET G. QUINSAAT, in her capacity as Treasurer of Angeles City and ENGR. DONATO N. DIZON, in his
capacity as Acting Angeles City Building Official, Respondents.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, which seeks to reverse
and set aside the Decision1 dated July 28, 2009 and Resolution2 dated October 12, 2009 of the Court of Appeals (CA) in CA-G.R. CV
No. 90591. The CA reversed the Decision3 dated September 21, 2007 of the Regional Trial Court of Angeles City, Branch 57 in Civil
Case No. 12995 declaring petitioner exempt from the payment of building permit and other fees and ordering respondents to refund the
same with interest at the legal rate.

The factual antecedents:

Petitioner Angeles University Foundation (AUF) is an educational institution established on May 25, 1962 and was converted into a
non-stock, non-profit education foundation under the provisions of Republic Act (R.A.) No. 6055 4 on December 4, 1975.

Sometime in August 2005, petitioner filed with the Office of the City Building Official an application for a building permit for the
construction of an 11-storey building of the Angeles University Foundation Medical Center in its main campus located at MacArthur
Highway, Angeles City, Pampanga. Said office issued a Building Permit Fee Assessment in the amount of P126,839.20. An Order of
Payment was also issued by the City Planning and Development Office, Zoning Administration Unit requiring petitioner to pay the sum
of P238,741.64 as Locational Clearance Fee.5

In separate letters dated November 15, 2005 addressed to respondents City Treasurer Juliet G. Quinsaat and Acting City Building
Official Donato N. Dizon, petitioner claimed that it is exempt from the payment of the building permit and locational clearance fees,
citing legal opinions rendered by the Department of Justice (DOJ). Petitioner also reminded the respondents that they have previously
issued building permits acknowledging such exemption from payment of building permit fees on the construction of petitioner’s 4-storey
AUF Information Technology Center building and the AUF Professional Schools building on July 27, 2000 and March 15, 2004,
respectively.6

Respondent City Treasurer referred the matter to the Bureau of Local Government Finance (BLGF) of the Department of Finance,
which in turn endorsed the query to the DOJ. Then Justice Secretary Raul M. Gonzalez, in his letter-reply dated December 6, 2005,
cited previous issuances of his office (Opinion No. 157, s. 1981 and Opinion No. 147, s. 1982) declaring petitioner to be exempt from
the payment of building permit fees. Under the 1st Indorsement dated January 6, 2006, BLGF reiterated the aforesaid opinion of the
DOJ stating further that "xxx the Department of Finance, thru this Bureau, has no authority to review the resolution or the decision of the
DOJ."7

Petitioner wrote the respondents reiterating its request to reverse the disputed assessments and invoking the DOJ legal opinions which
have been affirmed by Secretary Gonzalez. Despite petitioner’s plea, however, respondents refused to issue the building permits for the
construction of the AUF Medical Center in the main campus and renovation of a school building located at Marisol Village. Petitioner
then appealed the matter to City Mayor Carmelo F. Lazatin but no written response was received by petitioner. 8

Consequently, petitioner paid under protest9 the following:

Medical Center (new construction)

Building Permit and Electrical Fee P 217,475.20

Locational Clearance Fee 283,741.64
Fire Code Fee 144,690.00
Total - P 645,906.84

School Building (renovation)

Building Permit and Electrical Fee P 37,857.20

Locational Clearance Fee 6,000.57
Fire Code Fee 5,967.74
Total - P 49,825.51
Petitioner likewise paid the following sums as required by the City Assessor’s Office:

Real Property Tax – Basic Fee P 86,531.10

SEF 43,274.54
Locational Clearance Fee 1,125.00
Total – P1
[GRAND TOTAL - P 8

By reason of the above payments, petitioner was issued the corresponding Building Permit, Wiring Permit, Electrical Permit and
Sanitary Building Permit. On June 9, 2006, petitioner formally requested the respondents to refund the fees it paid under protest. Under
letters dated June 15, 2006 and August 7, 2006, respondent City Treasurer denied the claim for refund. 11

On August 31, 2006, petitioner filed a Complaint12 before the trial court seeking the refund of P826,662.99 plus interest at the rate of
12% per annum, and also praying for the award of attorney’s fees in the amount of P300,000.00 and litigation expenses.

In its Answer,13 respondents asserted that the claim of petitioner cannot be granted because its structures are not among those
mentioned in Sec. 209 of the National Building Code as exempted from the building permit fee. Respondents argued that R.A. No. 6055
should be considered repealed on the basis of Sec. 2104 of the National Building Code. Since the disputed assessments are regulatory
in nature, they are not taxes from which petitioner is exempt. As to the real property taxes imposed on petitioner’s property located in
Marisol Village, respondents pointed out that said premises will be used as a school dormitory which cannot be considered as a use
exclusively for educational activities.

Petitioner countered that the subject building permit are being collected on the basis of Art. 244 of the Implementing Rules and
Regulations of the Local Government Code, which impositions are really taxes considering that they are provided under the chapter on
"Local Government Taxation" in reference to the "revenue raising power" of local government units (LGUs). Moreover, petitioner
contended that, as held in Philippine Airlines, Inc. v. Edu, 14 fees may be regarded as taxes depending on the purpose of its exaction. In
any case, petitioner pointed out that the Local Government Code of 1991 provides in Sec. 193 that non-stock and non-profit educational
institutions like petitioner retained the tax exemptions or incentives which have been granted to them. Under Sec. 8 of R.A. No. 6055
and applicable jurisprudence and DOJ rulings, petitioner is clearly exempt from the payment of building permit fees. 15

On September 21, 2007, the trial court rendered judgment in favor of the petitioner and against the respondents. The dispositive portion
of the trial court’s decision16 reads:

WHEREFORE, premises considered, judgment is rendered as follows:

a. Plaintiff is exempt from the payment of building permit and other fees Ordering the Defendants to refund the total amount of
Eight Hundred Twenty Six Thousand Six Hundred Sixty Two Pesos and 99/100 Centavos (P826,662.99) plus legal interest
thereon at the rate of twelve percent (12%) per annum commencing on the date of extra-judicial demand or June 14, 2006,
until the aforesaid amount is fully paid.

b. Finding the Defendants liable for attorney’s fees in the amount of Seventy Thousand Pesos (Php70,000.00), plus litigation
expenses.

c. Ordering the Defendants to pay the costs of the suit.

SO ORDERED.17

Respondents appealed to the CA which reversed the trial court, holding that while petitioner is a tax-free entity, it is not exempt from the
payment of regulatory fees. The CA noted that under R.A. No. 6055, petitioner was granted exemption only from income tax derived
from its educational activities and real property used exclusively for educational purposes. Regardless of the repealing clause in
the National Building Code, the CA held that petitioner is still not exempt because a building permit cannot be considered as the other
"charges" mentioned in Sec. 8 of R.A. No. 6055 which refers to impositions in the nature of tax, import duties, assessments and other
collections for revenue purposes, following the ejusdem generisrule. The CA further stated that petitioner has not shown that the fees
collected were excessive and more than the cost of surveillance, inspection and regulation. And while petitioner may be exempt from
the payment of real property tax, petitioner in this case merely alleged that "the subject property is to be used actually, directly and
exclusively for educational purposes," declaring merely that such premises is intended to house the sports and other facilities of the
university but by reason of the occupancy of informal settlers on the area, it cannot yet utilize the same for its intended use. Thus, the
CA concluded that petitioner is not entitled to the refund of building permit and related fees, as well as real property tax it paid under
protest.

Petitioner filed a motion for reconsideration which was denied by the CA.
Hence, this petition raising the following grounds:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE COURT AND HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS NECESSITATING THE HONORABLE COURT’S EXERCISE OF
ITS POWER OF SUPERVISION CONSIDERING THAT:

I. IN REVERSING THE TRIAL COURT’S DECISION DATED 21 SEPTEMBER 2007, THE COURT OF APPEALS EFFECTIVELY
WITHDREW THE PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-PROFIT EDUCATIONAL FOUNDATIONS BY
VIRTUE OF RA 6055 WHICH WITHDRAWAL IS BEYOND THE AUTHORITY OF THE COURT OF APPEALS TO DO.

A. INDEED, RA 6055 REMAINS VALID AND IS IN FULL FORCE AND EFFECT. HENCE, THE COURT OF
APPEALS ERRED WHEN IT RULED IN THE QUESTIONED DECISION THAT NON-STOCK, NON-PROFIT
EDUCATIONAL FOUNDATIONS ARE NOT EXEMPT.

B. THE COURT OF APPEALS’ APPLICATION OF THE PRINCIPLE OF EJUSDEM GENERIS IN RULING IN THE
QUESTIONED DECISION THAT THE TERM "OTHER CHARGES IMPOSED BY THE GOVERNMENT" UNDER
SECTION 8 OF RA 6055 DOES NOT INCLUDE BUILDING PERMIT AND OTHER RELATED FEES AND/OR
CHARGES IS BASED ON ITS ERRONEOUS AND UNWARRANTED ASSUMPTION THAT THE TAXES, IMPORT
DUTIES AND ASSESSMENTS AS PART OF THE PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-
PROFIT EDUCATIONAL FOUNDATIONS ARE LIMITED TO COLLECTIONS FOR REVENUE PURPOSES.

C. EVEN ASSUMING THAT THE BUILDING PERMIT AND OTHER RELATED FEES AND/OR CHARGES ARE NOT
INCLUDED IN THE TERM "OTHER CHARGES IMPOSED BY THE GOVERNMENT" UNDER SECTION 8 OF RA
6055, ITS IMPOSITION IS GENERALLY A TAX MEASURE AND THEREFORE, STILL COVERED UNDER THE
PRIVILEGE OF EXEMPTION.

II. THE COURT OF APPEALS’ DENIAL OF PETITIONER AUF’S EXEMPTION FROM REAL PROPERTY TAXES CONTAINED IN ITS
QUESTIONED DECISION AND QUESTIONED RESOLUTION IS CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE.18

Petitioner stresses that the tax exemption granted to educational stock corporations which have converted into non-profit foundations
was broadened to include any other charges imposed by the Government as one of the incentives for such conversion. These
incentives necessarily included exemption from payment of building permit and related fees as otherwise there would have been no
incentives for educational foundations if the privilege were only limited to exemption from taxation, which is already provided under
the Constitution.

Petitioner further contends that this Court has consistently held in several cases that the primary purpose of the exaction determines its
nature. Thus, a charge of a fixed sum which bears no relation to the cost of inspection and which is payable into the general revenue of
the state is a tax rather than an exercise of the police power. The standard set by law in the determination of the amount that may be
imposed as license fees is such that is commensurate with the cost of regulation, inspection and licensing. But in this case, the amount
representing the building permit and related fees and/or charges is such an exorbitant amount as to warrant a valid imposition; such
amount exceeds the probable cost of regulation. Even with the alleged criteria submitted by the respondents (e.g., character of
occupancy or use of building/structure, cost of construction, floor area and height), and the construction by petitioner of an 11-storey
building, the costs of inspection will not amount to P645,906.84, presumably for the salary of inspectors or employees, the expenses of
transportation for inspection and the preparation and reproduction of documents. Petitioner thus concludes that the disputed fees are
substantially and mainly for purposes of revenue rather than regulation, so that even these fees cannot be deemed "charges"
mentioned in Sec. 8 of R.A. No. 6055, they should properly be treated as tax from which petitioner is exempt.

In their Comment, respondents maintain that petitioner is not exempt from the payment of building permit and related fees since the
only exemptions provided in the National Building Code are public buildings and traditional indigenous family dwellings. Inclusio unius
est exclusio alterius. Because the law did not include petitioner’s buildings from those structures exempt from the payment of building
permit fee, it is therefore subject to the regulatory fees imposed under the National Building Code.

Respondents assert that the CA correctly distinguished a building permit fee from those "other charges" mentioned in Sec. 8 of R.A.
No. 6055. As stated by petitioner itself, charges refer to pecuniary liability, as rents, and fees against persons or property. Respondents
point out that a building permit is classified under the term "fee." A fee is generally imposed to cover the cost of regulation as activity or
privilege and is essentially derived from the exercise of police power; on the other hand, impositions for services rendered by the local
government units or for conveniences furnished, are referred to as "service charges".

Respondents also disagreed with petitioner’s contention that the fees imposed and collected are exorbitant and exceeded the probable
expenses of regulation. These fees are based on computations and assessments made by the responsible officials of the City
Engineer’s Office in accordance with the Schedule of Fees and criteria provided in the National Building Code. The bases of
assessment cited by petitioner (e.g. salary of employees, expenses of transportation and preparation and reproduction of documents)
refer to charges and fees on business and occupation under Sec. 147 of the Local Government Code, which do not apply to building
permit fees. The parameters set by the National Building Code can be considered as complying with the reasonable cost of regulation
in the assessment and collection of building permit fees. Respondents likewise contend that the presumption of regularity in the
performance of official duty applies in this case. Petitioner should have presented evidence to prove its allegations that the amounts
collected are exorbitant or unreasonable.

For resolution are the following issues: (1) whether petitioner is exempt from the payment of building permit and related fees imposed
under the National Building Code; and (2) whether the parcel of land owned by petitioner which has been assessed for real property tax
is likewise exempt.

R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-stock, non-profit educational
foundations. Section 8 of said law provides:

SECTION 8. The Foundation shall be exempt from the payment of all taxes, import duties, assessments, and other charges imposed by
the Government onall income derived from or property, real or personal, used exclusively for the educational activities of the
Foundation.(Emphasis supplied.)

On February 19, 1977, Presidential Decree (P.D.) No. 1096 was issued adopting the National Building Code of the Philippines. The
said Code requires every person, firm or corporation, including any agency or instrumentality of the government to obtain a building
permit for any construction, alteration or repair of any building or structure. 19Building permit refers to "a document issued by the Building
Official x x x to an owner/applicant to proceed with the construction, installation, addition, alteration, renovation, conversion, repair,
moving, demolition or other work activity of a specific project/building/structure or portions thereof after the accompanying principal
plans, specifications and other pertinent documents with the duly notarized application are found satisfactory and substantially
conforming with the National Building Code of the Philippines x x x and its Implementing Rules and Regulations (IRR)." 20Building permit
fees refers to the basic permit fee and other charges imposed under the National Building Code.

Exempted from the payment of building permit fees are: (1) public buildings and (2) traditional indigenous family dwellings. 21 Not being
expressly included in the enumeration of structures to which the building permit fees do not apply, petitioner’s claim for exemption rests
solely on its interpretation of the term "other charges imposed by the National Government" in the tax exemption clause of R.A. No.
6055.

A "charge" is broadly defined as the "price of, or rate for, something," while the word "fee" pertains to a "charge fixed by law for services
of public officers or for use of a privilege under control of government." 22 As used in the Local Government Code of 1991 (R.A. No.
7160), charges refers to pecuniary liability, as rents or fees against persons or property, while fee means a charge fixed by law or
ordinance for the regulation or inspection of a business or activity. 23

That "charges" in its ordinary meaning appears to be a general term which could cover a specific "fee" does not support petitioner’s
position that building permit fees are among those "other charges" from which it was expressly exempted. Note that the "other charges"
mentioned in Sec. 8 of R.A. No. 6055 is qualified by the words "imposed by the Government on all x x x property used exclusively for
the educational activities of the foundation." Building permit fees are not impositions on property but on the activity subject of
government regulation. While it may be argued that the fees relate to particular properties, i.e., buildings and structures, they are
actually imposed on certain activities the owner may conduct either to build such structures or to repair, alter, renovate or demolish the
same. This is evident from the following provisions of the National Building Code:

Section 102. Declaration of Policy

It is hereby declared to be the policy of the State to safeguard life, health, property, and public welfare, consistent with theprinciples of
sound environmental management and control; and tothis end, make it the purpose of this Code to provide for allbuildings and
structures, a framework of minimum standards and requirements to regulate and control their location, site, design quality of materials,
construction, use, occupancy, and maintenance.

Section 103. Scope and Application

(a) The provisions of this Code shall apply to the design,location, sitting, construction, alteration, repair,conversion, use, occupancy,
maintenance, moving, demolitionof, and addition to public and private buildings andstructures, except traditional indigenous family
dwellingsas defined herein.

xxxx

Section 301. Building Permits

No person, firm or corporation, including any agency orinstrumentality of the government shall erect, construct, alter, repair, move,
convert or demolish any building or structure or causethe same to be done without first obtaining a building permittherefor from the
Building Official assigned in the place where thesubject building is located or the building work is to be done. (Italics supplied.)
That a building permit fee is a regulatory imposition is highlighted by the fact that in processing an application for a building permit, the
Building Official shall see to it that the applicant satisfies and conforms with approved standard requirements on zoning and land use,
lines and grades, structural design, sanitary and sewerage, environmental health, electrical and mechanical safety as well as with other
rules and regulations implementing the National Building Code. 24 Thus, ancillary permits such as electrical permit, sanitary permit and
zoning clearance must also be secured and the corresponding fees paid before a building permit may be issued. And as can be
gleaned from the implementing rules and regulations of the National Building Code, clearances from various government authorities
exercising and enforcing regulatory functions affecting buildings/structures, like local government units, may be further required before
a building permit may be issued.25

Since building permit fees are not charges on property, they are not impositions from which petitioner is exempt.

As to petitioner’s argument that the building permit fees collected by respondents are in reality taxes because the primary purpose is to
raise revenues for the local government unit, the same does not hold water.

A charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an
exercise of the police power.26 In this case, the Secretary of Public Works and Highways who is mandated to prescribe and fix the
amount of fees and other charges that the Building Official shall collect in connection with the performance of regulatory functions,27 has
promulgated and issued the Implementing Rules and Regulations 28 which provide for the bases of assessment of such fees, as follows:

1. Character of occupancy or use of building

2. Cost of construction " 10,000/sq.m (A,B,C,D,E,G,H,I), 8,000 (F), 6,000 (J)

3. Floor area

4. Height

Petitioner failed to demonstrate that the above bases of assessment were arbitrarily determined or unrelated to the activity being
regulated. Neither has petitioner adduced evidence to show that the rates of building permit fees imposed and collected by the
respondents were unreasonable or in excess of the cost of regulation and inspection.

In Chevron Philippines, Inc. v. Bases Conversion Development Authority,29 this Court explained:

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the
purpose is primarily to raise revenue, then it will be deemed a tax even though the measure results in some form of regulation. On the
other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even
though incidentally, revenue is generated. Thus, in Gerochi v. Department of Energy, the Court stated:

"The conservative and pivotal distinction between these two (2) powers rests in the purpose for which the charge is made. If generation
of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the
fact that revenue is incidentally raised does not make the imposition a tax." 30(Emphasis supplied.)

Concededly, in the case of building permit fees imposed by the National Government under the National Building Code, revenue is
incidentally generated for the benefit of local government units. Thus:

Section 208. Fees

Every Building Official shall keep a permanent record and accurate account of all fees and other charges fixed and authorized by the
Secretary to be collected and received under this Code.

Subject to existing budgetary, accounting and auditing rules and regulations, the Building Official is hereby authorized to retain not
more than twenty percent of his collection for the operating expenses of his office.

The remaining eighty percent shall be deposited with the provincial, city or municipal treasurer and shall accrue to the General Fund of
the province, city or municipality concerned.

Petitioner’s reliance on Sec. 193 of the Local Government Code of 1991 is likewise misplaced. Said provision states:

SECTION 193. Withdrawal of Tax Exemption Privileges. -- Unless otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied.)
Considering that exemption from payment of regulatory fees was not among those "incentives" granted to petitioner under R.A. No.
6055, there is no such incentive that is retained under the Local Government Code of 1991. Consequently, no reversible error was
committed by the CA in ruling that petitioner is liable to pay the subject building permit and related fees.

Now, on petitioner’s claim that it is exempted from the payment of real property tax assessed against its real property presently
occupied by informal settlers.

Section 28(3), Article VI of the 1987 Constitution provides:

xxxx

(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt
from taxation.

x x x x (Emphasis supplied.)

Section 234(b) of the Local Government Code of 1991 implements the foregoing constitutional provision by declaring that --

SECTION 234. Exemptions from Real Property Tax.– The following are exempted from payment of the real property tax:

xxxx

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all
lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

x x x x (Emphasis supplied.)

In Lung Center of the Philippines v. Quezon City, 31 this Court held that only portions of the hospital actually, directly and exclusively
used for charitable purposes are exempt from real property taxes, while those portions leased to private entities and individuals are not
exempt from such taxes. We explained the condition for the tax exemption privilege of charitable and educational institutions, as
follows:

Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the petitioner is burdened to
prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real properties
are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. "Exclusive" is defined as possessed and enjoyed to the
exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a
privilege exclusively." If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes
but is subject to taxation. The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without
doing violence to the Constitutions and the law. Solely is synonymous with exclusively.1âwphi1

What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual
application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the
real property that is determinative of whether the property is used for tax-exempt purposes.32 (Emphasis and underscoring supplied.)

Petitioner failed to discharge its burden to prove that its real property is actually, directly and exclusively used for educational purposes.
While there is no allegation or proof that petitioner leases the land to its present occupants, still there is no compliance with the
constitutional and statutory requirement that said real property is actually, directly and exclusively used for educational purposes. The
respondents correctly assessed the land for real property taxes for the taxable period during which the land is not being devoted solely
to petitioner’s educational activities. Accordingly, the CA did not err in ruling that petitioner is likewise not entitled to a refund of the real
property tax it paid under protest.

WHEREFORE, the petition is DENIED. The Decision dated July 28, 2009 and Resolution dated October 12, 2009 of the Court of
Appeals in CA-G.R. CV No. 90591 are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.