1
G.R. No. L-10405 December 29, 1960
WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-appellees.
Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.
Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for appellee.
CONCEPCION, J.:
Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal, dismissing
the above entitled case and dissolving the writ of preliminary injunction therein issued, without costs.
On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this action
for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act
Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a) thereof,
an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and improvement"
of Pasig feeder road terminals (Gen. Roxas — Gen. Araneta — Gen. Lucban — Gen. Capinpin — Gen.
Segundo — Gen. Delgado — Gen. Malvar — Gen. Lim)"; that, at the time of the passage and approval of
said Act, the aforementioned feeder roads were "nothing but projected and planned subdivision roads,
not yet constructed, . . . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the
tracings attached to the petition as Annexes A and B, near Shaw Boulevard, not far away from the
intersection between the latter and Highway 54), which projected feeder roads "do not connect any
government property or any important premises to the main highway"; that the aforementioned Antonio
Subdivision (as well as the lands on which said feeder roads were to be construed) were private
properties of respondent Jose C. Zulueta, who, at the time of the passage and approval of said Act, was
a member of the Senate of the Philippines; that on May, 1953, respondent Zulueta, addressed a letter
to the Municipal Council of Pasig, Rizal, offering to donate said projected feeder roads to the municipality
of Pasig, Rizal; that, on June 13, 1953, the offer was accepted by the council, subject to the condition
"that the donor would submit a plan of the said roads and agree to change the names of two of them";
that no deed of donation in favor of the municipality of Pasig was, however, executed; that on July 10,
1953, respondent Zulueta wrote another letter to said council, calling attention to the approval of
Republic Act. No. 920, and the sum of P85,000.00 appropriated therein for the construction of the
projected feeder roads in question; that the municipal council of Pasig endorsed said letter of respondent
Zulueta to the District Engineer of Rizal, who, up to the present "has not made any endorsement thereon"
that inasmuch as the projected feeder roads in question were private property at the time of the passage
and approval of Republic Act No. 920, the appropriation of P85,000.00 therein made, for the
construction, reconstruction, repair, extension and improvement of said projected feeder roads, was
illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress
because its members were made to believe that the projected feeder roads in question were "public
roads and not private streets of a private subdivision"'; that, "in order to give a semblance of legality,
when there is absolutely none, to the aforementioned appropriation", respondents Zulueta executed on
December 12, 1953, while he was a member of the Senate of the Philippines, an alleged deed of donation
— copy of which is annexed to the petition — of the four (4) parcels of land constituting said projected
feeder roads, in favor of the Government of the Republic of the Philippines; that said alleged deed of
donation was, on the same date, accepted by the then Executive Secretary; that being subject to an
onerous condition, said donation partook of the nature of a contract; that, such, said donation violated
the provision of our fundamental law prohibiting members of Congress from being directly or indirectly
financially interested in any contract with the Government, and, hence, is unconstitutional, as well as
null and void ab initio, for the construction of the projected feeder roads in question with public funds
would greatly enhance or increase the value of the aforementioned subdivision of respondent Zulueta,
"aside from relieving him from the burden of constructing his subdivision streets or roads at his own
expense"; that the construction of said projected feeder roads was then being undertaken by the Bureau
of Public Highways; and that, unless restrained by the court, the respondents would continue to execute,
comply with, follow and implement the aforementioned illegal provision of law, "to the irreparable
damage, detriment and prejudice not only to the petitioner but to the Filipino nation."
Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and void;
that the alleged deed of donation of the feeder roads in question be "declared unconstitutional and,
therefor, illegal"; that a writ of injunction be issued enjoining the Secretary of Public Works and
Communications, the Director of the Bureau of Public Works and Highways and Jose C. Zulueta from
ordering or allowing the continuance of the above-mentioned feeder roads project, and from making
and securing any new and further releases on the aforementioned item of Republic Act No. 920, and the
disbursing officers of the Department of Public Works and Highways from making any further payments
out of said funds provided for in Republic Act No. 920; and that pending final hearing on the merits, a
writ of preliminary injunction be issued enjoining the aforementioned parties respondent from making
and securing any new and further releases on the aforesaid item of Republic Act No. 920 and from making
any further payments out of said illegally appropriated funds.
Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to
sue", and that the petition did "not state a cause of action". In support to this motion, respondent Zulueta
alleged that the Provincial Fiscal of Rizal, not its provincial governor, should represent the Province of
Rizal, pursuant to section 1683 of the Revised Administrative Code; that said respondent is " not aware
of any law which makes illegal the appropriation of public funds for the improvements of . . . private
property"; and that, the constitutional provision invoked by petitioner is inapplicable to the donation in
question, the same being a pure act of liberality, not a contract. The other respondents, in turn,
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maintained that petitioner could not assail the appropriation in question because "there is no actual
bona fide case . . . in which the validity of Republic Act No. 920 is necessarily involved" and petitioner
"has not shown that he has a personal and substantial interest" in said Act "and that its enforcement has
caused or will cause him a direct injury."
Acting upon said motions to dismiss, the lower court rendered the aforementioned decision, dated
October 29, 1953, holding that, since public interest is involved in this case, the Provincial Governor of
Rizal and the provincial fiscal thereof who represents him therein, "have the requisite personalities" to
question the constitutionality of the disputed item of Republic Act No. 920; that "the legislature is
without power appropriate public revenues for anything but a public purpose", that the instructions and
improvement of the feeder roads in question, if such roads where private property, would not be a public
purpose; that, being subject to the following condition:
The within donation is hereby made upon the condition that the Government of the Republic of the
Philippines will use the parcels of land hereby donated for street purposes only and for no other purposes
whatsoever; it being expressly understood that should the Government of the Republic of the Philippines
violate the condition hereby imposed upon it, the title to the land hereby donated shall, upon such
violation, ipso facto revert to the DONOR, JOSE C. ZULUETA. (Emphasis supplied.)
which is onerous, the donation in question is a contract; that said donation or contract is "absolutely
forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil Code of the
Philippines, declares in existence and void from the very beginning contracts "whose cause, objector
purpose is contrary to law, morals . . . or public policy"; that the legality of said donation may not be
contested, however, by petitioner herein, because his "interest are not directly affected" thereby; and
that, accordingly, the appropriation in question "should be upheld" and the case dismissed.
At the outset, it should be noted that we are concerned with a decision granting the aforementioned
motions to dismiss, which as much, are deemed to have admitted hypothetically the allegations of fact
made in the petition of appellant herein. According to said petition, respondent Zulueta is the owner of
several parcels of residential land situated in Pasig, Rizal, and known as the Antonio Subdivision, certain
portions of which had been reserved for the projected feeder roads aforementioned, which, admittedly,
were private property of said respondent when Republic Act No. 920, appropriating P85,000.00 for the
"construction, reconstruction, repair, extension and improvement" of said roads, was passed by
Congress, as well as when it was approved by the President on June 20, 1953. The petition further alleges
that the construction of said roads, to be undertaken with the aforementioned appropriation of
P85,000.00, would have the effect of relieving respondent Zulueta of the burden of constructing his
subdivision streets or roads at his own expenses, 1and would "greatly enhance or increase the value of
the subdivision" of said respondent. The lower court held that under these circumstances, the
appropriation in question was "clearly for a private, not a public purpose."
2
Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However, respondent
Zulueta contended, in his motion to dismiss that:
A law passed by Congress and approved by the President can never be illegal because Congress is the
source of all laws . . . Aside from the fact that movant is not aware of any law which makes illegal the
appropriation of public funds for the improvement of what we, in the meantime, may assume as private
property . . . (Record on Appeal, p. 33.)
The first proposition must be rejected most emphatically, it being inconsistent with the nature of the
Government established under the Constitution of the Republic of the Philippines and the system of
checks and balances underlying our political structure. Moreover, it is refuted by the decisions of this
Court invalidating legislative enactments deemed violative of the Constitution or organic laws. 3
As regards the legal feasibility of appropriating public funds for a public purpose, the principle according
to Ruling Case Law, is this:
It is a general rule that the legislature is without power to appropriate public revenue for anything but a
public purpose. . . . It is the essential character of the direct object of the expenditure which must
determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the
degree to which the general advantage of the community, and thus the public welfare, may be ultimately
benefited by their promotion. Incidental to the public or to the state, which results from the promotion
of private interest and the prosperity of private enterprises or business, does not justify their aid by the
use public money. (25 R.L.C. pp. 398-400; Emphasis supplied.)
The rule is set forth in Corpus Juris Secundum in the following language:
In accordance with the rule that the taxing power must be exercised for public purposes only, discussed
supra sec. 14, money raised by taxation can be expended only for public purposes and not for the
advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)
Explaining the reason underlying said rule, Corpus Juris Secundum states:
Generally, under the express or implied provisions of the constitution, public funds may be used only for
public purpose. The right of the legislature to appropriate funds is correlative with its right to tax, and,
under constitutional provisions against taxation except for public purposes and prohibiting the collection
of a tax for one purpose and the devotion thereof to another purpose, no appropriation of state funds
can be made for other than for a public purpose.
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The test of the constitutionality of a statute requiring the use of public funds is whether the statute is
designed to promote the public interest, as opposed to the furtherance of the advantage of individuals,
although each advantage to individuals might incidentally serve the public. (81 C.J.S. pp. 1147; emphasis
supplied.)
Needless to say, this Court is fully in accord with the foregoing views which, apart from being patently
sound, are a necessary corollary to our democratic system of government, which, as such, exists primarily
for the promotion of the general welfare. Besides, reflecting as they do, the established jurisprudence in
the United States, after whose constitutional system ours has been patterned, said views and
jurisprudence are, likewise, part and parcel of our own constitutional law.lawphil.net
This notwithstanding, the lower court felt constrained to uphold the appropriation in question, upon the
ground that petitioner may not contest the legality of the donation above referred to because the same
does not affect him directly. This conclusion is, presumably, based upon the following premises, namely:
(1) that, if valid, said donation cured the constitutional infirmity of the aforementioned appropriation;
(2) that the latter may not be annulled without a previous declaration of unconstitutionality of the said
donation; and (3) that the rule set forth in Article 1421 of the Civil Code is absolute, and admits of no
exception. We do not agree with these premises.
The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not
upon events occurring, or acts performed, subsequently thereto, unless the latter consists of an
amendment of the organic law, removing, with retrospective operation, the constitutional limitation
infringed by said statute. Referring to the P85,000.00 appropriation for the projected feeder roads in
question, the legality thereof depended upon whether said roads were public or private property when
the bill, which, latter on, became Republic Act 920, was passed by Congress, or, when said bill was
approved by the President and the disbursement of said sum became effective, or on June 20, 1953 (see
section 13 of said Act). Inasmuch as the land on which the projected feeder roads were to be constructed
belonged then to respondent Zulueta, the result is that said appropriation sought a private purpose, and
hence, was null and void. 4 The donation to the Government, over five (5) months after the approval and
effectivity of said Act, made, according to the petition, for the purpose of giving a "semblance of legality",
or legalizing, the appropriation in question, did not cure its aforementioned basic defect. Consequently,
a judicial nullification of said donation need not precede the declaration of unconstitutionality of said
appropriation.
Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to exceptions. For
instance, the creditors of a party to an illegal contract may, under the conditions set forth in Article 1177
of said Code, exercise the rights and actions of the latter, except only those which are inherent in his
person, including therefore, his right to the annulment of said contract, even though such creditors are
not affected by the same, except indirectly, in the manner indicated in said legal provision.
3
Again, it is well-stated that the validity of a statute may be contested only by one who will sustain a direct
injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the instance of
taxpayers, laws providing for the disbursement of public funds, 5upon the theory that "the expenditure
of public funds by an officer of the State for the purpose of administering an unconstitutional act
constitutes a misapplication of such funds," which may be enjoined at the request of a taxpayer.
6Although there are some decisions to the contrary, 7the prevailing view in the United States is stated
in the American Jurisprudence as follows:
In the determination of the degree of interest essential to give the requisite standing to attack the
constitutionality of a statute, the general rule is that not only persons individually affected, but also
taxpayers, have sufficient interest in preventing the illegal expenditure of moneys raised by taxation and
may therefore question the constitutionality of statutes requiring expenditure of public moneys. (11 Am.
Jur. 761; emphasis supplied.)
However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs. Mellon (262
U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a taxpayer of
the U.S. to its Federal Government is different from that of a taxpayer of a municipal corporation to its
government. Indeed, under the composite system of government existing in the U.S., the states of the
Union are integral part of the Federation from an international viewpoint, but, each state enjoys
internally a substantial measure of sovereignty, subject to the limitations imposed by the Federal
Constitution. In fact, the same was made by representatives of each state of the Union, not of the people
of the U.S., except insofar as the former represented the people of the respective States, and the people
of each State has, independently of that of the others, ratified said Constitution. In other words, the
Federal Constitution and the Federal statutes have become binding upon the people of the U.S. in
consequence of an act of, and, in this sense, through the respective states of the Union of which they
are citizens. The peculiar nature of the relation between said people and the Federal Government of the
U.S. is reflected in the election of its President, who is chosen directly, not by the people of the U.S., but
by electors chosen by each State, in such manner as the legislature thereof may direct (Article II, section
2, of the Federal Constitution).lawphi1.net
The relation between the people of the Philippines and its taxpayers, on the other hand, and the Republic
of the Philippines, on the other, is not identical to that obtaining between the people and taxpayers of
the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to that existing between the
people and taxpayers of each state and the government thereof, except that the authority of the
Republic of the Philippines over the people of the Philippines is more fully direct than that of the states
of the Union, insofar as the simple and unitary type of our national government is not subject to
limitations analogous to those imposed by the Federal Constitution upon the states of the Union, and
those imposed upon the Federal Government in the interest of the Union. For this reason, the rule
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recognizing the right of taxpayers to assail the constitutionality of a legislation appropriating local or state
public funds — which has been upheld by the Federal Supreme Court (Crampton vs. Zabriskie, 101 U.S.
601) — has greater application in the Philippines than that adopted with respect to acts of Congress of
the United States appropriating federal funds.
Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land by the
Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose of contesting
the price being paid to the owner thereof, as unduly exorbitant. It is true that in Custodio vs. President
of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the Government was not permitted to
question the constitutionality of an appropriation for backpay of members of Congress. However, in
Rodriguez vs. Treasurer of the Philippines and Barredo vs. Commission on Elections (84 Phil., 368; 45 Off.
Gaz., 4411), we entertained the action of taxpayers impugning the validity of certain appropriations of
public funds, and invalidated the same. Moreover, the reason that impelled this Court to take such
position in said two (2) cases — the importance of the issues therein raised — is present in the case at
bar. Again, like the petitioners in the Rodriguez and Barredo cases, petitioner herein is not merely a
taxpayer. The Province of Rizal, which he represents officially as its Provincial Governor, is our most
populated political subdivision, 8and, the taxpayers therein bear a substantial portion of the burden of
taxation, in the Philippines.
Hence, it is our considered opinion that the circumstances surrounding this case sufficiently justify
petitioners action in contesting the appropriation and donation in question; that this action should not
have been dismissed by the lower court; and that the writ of preliminary injunction should have been
maintained.
Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the lower
court for further proceedings not inconsistent with this decision, with the costs of this instance against
respondent Jose C. Zulueta. It is so ordered.
G.R. No. L-33713 July 30, 1975
EUSEBIO B. GARCIA, petitioner-appellant,
vs.
HON. ERNESTO S. MATA, Secretary of National Defense, and GENERAL MANUEL T. YAN, Chief of Staff,
Armed Forces of the Philippines, respondents-appellees.
Emilio Purugganan for petitioner-appellant.
Office of the Solicitor General Estelito P. Mendoza, Assistant Solicitor General Rosalio A. de Leon and
Solicitor Eulogio Raquel-Santos for respondents-appellees.
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CASTRO, J.:
This is a petition for certiorari to review the decision of the Court of First Instance of Quezon City, Branch
IX, in civil case Q-13466, entitled "Eusebio B. Garcia, petitioner, versus Hon. Ernesto Mata (Juan Ponce
Enrile), et al., respondents," declaring paragraph 11 of the "Special Provisions for the Armed Forces of
the Philippines" of Republic Act No. 16001 unconstitutional and therefore invalid and inoperative.
We affirm the judgment a quo.
The facts material to this case are embodied in the following stipulation submitted jointly by both parties
to the lower court:
Petitioner was a reserve officer on active duty with the Armed Forces of the Philippines until his reversion
to inactive status on 15 November 1960, pursuant to the provisions of Republic Act No. 2332. At the time
of reversion, Petitioner held the rank of Captain with a monthly emolument of P478.00, comprising his
base and longevity pay, quarters and subsistence allowances;
On June 18, 1955, the date when Republic Act No. 1382 took effect, petitioner had a total of 9 years, 4
months and 12 days of accumulated active commissioned service in the Armed Forces of the Philippines;
On July 11, 1956, the date when Republic Act 1600 took effect, petitioner had an accumulated active
commissioned service of 10 years, 5 months and 5 days in the Armed Forces of the Philippines;
Petitioner's reversion to inactive status on 15 November 1960 was pursuant to the provisions of Republic
Act 2334, and such reversion was neither for cause, at his own request, nor after court-martial
proceedings;
From 15 November 1960 up to the present, petitioner has been on inactive status and as such, he has
neither received any emoluments from the Armed Forces of the Philippines, nor was he ever employed
in the Government in any capacity;
As a consequence of his reversion to inactive status, petitioner filed the necessary petitions with the
offices of the AFP Chief of Staff, the Secretary of National Defense, and the President, respectively, but
received reply only from the Chief of Staff through the AFP Adjutant General.
On September 17, 1969 the petitioner brought an action for "Mandamus and Recovery of a Sum of
Money" in the court a quo to compel the respondents Secretary of National Defense and Chief of Staff
of the Armed Forces of the Philippines2 to reinstate him in the active commissioned service of the Armed
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Forces of the Philippines, to readjust his rank, and to pay all the emoluments and allowances due to him
from the time of his reversion to inactive status. On December 2, 1970 the trial court dismissed the
petition. The court ruled that paragraph 11 of the "Special Provisions for the Armed Forces of the
Philippines" in Republic Act 1600 is "invalid, unconstitutional and inoperative."
The petitioner had a total of 9 years, 4 months and 12 days of accumulated active commissioned service
in the AFP when Republic Act 1382 took effect on June 18, 1955. Section I of this law provided:
Reserve officers with at least ten years of active accumulated commissioned service who are still on
active duty at the time of the approval of this Act shall not be reverted into inactive status except for
cause after proper court-martial proceedings or upon their own request: Provided, That for purposes of
computing the length of service, six months or more of active service shall be considered one year.
(emphasis supplied)
The petitioner's accumulated active commissioned service was thus short of the minimum service
requirement prescribed in the aforequoted provision of R.A. 1382.
On July 11, 1956,3 while the petitioner was yet in the active service, Republic Act 1600 was enacted into
law. Paragraph 11 of the SPECIAL PROVISIONS FOR THE ARMED FORCES OF THE PHILIPPINES (on page
892 of the Act) provided as follows:
11. After the approval of this Act, and when there is no emergency, no reserve officer of the Armed
Forces of the Philippines may be called to a tour of active duty for more than two years during any period
of five consecutive years: PROVIDED, That hereafter reserve officers of the Armed Forces of the
Philippines on active duty for more than two years on the date of the approval of this Act except those
whose military and educational training, experience and qualifications are deemed essential to the needs
of the service, shall be reverted to inactive status within one year from the approval of this Act:
PROVIDED, FURTHER, That reserve officers with at least ten years of active accumulated commissioned
service who are still on active duty at the time of the approval of this Act shall not be reverted to inactive
status except for cause after proper court-martial proceedings or upon their request; PROVIDED,
FURTHER, That any such reserve officer reverted to inactive status who has at least five of active
commissioned service shall be entitled to a gratuity equivalent to one month's authorized base and
longevity pay in the rank held at the time of such reversion for every year of active commissioned service;
PROVIDED, FURTHER, That any reserve officer who receives a gratuity under the provisions of this Act
shall not except during a National emergency or mobilization, be called to a tour of active duty within
five years from the date of reversion: PROVIDED, FURTHER, That the Secretary of National Defense is
authorized to extend the tour of active duty of reserve officers who are qualified military pilots and
doctors; PROVIDED, FURTHER, That any savings in the appropriations authorized in this Act for the
Department of National Defense notwithstanding any provision of this Act to the contrary and any
5
unexpended balance of certification to accounts payable since 1 July 1949 regardless of purpose of the
appropriation shall be made available for the purpose of this paragraph: AND PROVIDED, FINALLY, That
the Secretary of National Defense shall render a quarterly report to Congress as to the implementation
of the provisions of this paragraph. ( pp. 892-893, RA 1600) (emphasis supplied)
The petitioner consequently argues that his reversion to inactive status on November 15, 1960 was in
violation of the abovequoted provision which prohibits the reversion to inactive status of reserve officers
on active duty with at least ten years of accumulated active commissioned service.
On the other hand, the respondents contend that the said provision has no relevance or pertinence
whatsoever to the budget in question or to any appropriation item contained therein, and is therefore
proscribed by Art. VI, Sec. 19, par. 24 of the 1935 Constitution of the Philippines, which reads:
No provision or enactment shall be embraced in the general appropriation bill unless it relates specifically
to some particular appropriation therein; and any such provision or enactment shall be limited in its
operation to such appropriation.
A perusal of the challenged provision of R.A. 1600 fails to disclose its relevance or relation to any
appropriation item therein, or to the Appropriation Act as a whole. From the very first clause of
paragraph 11 itself, which reads,
After the approval of this Act, and when there is no emergency, no reserve officer of the Armed Forces
of the Philippines may be called to a tour of active duty for more than two years during any period of five
consecutive years:
the incongruity and irrelevancy are already evident. While R.A. 1600 appropriated money for the
operation of the Government for the fiscal year 1956-1957, the said paragraph 11 refers to the
fundamental government policy matters of the calling to active duty and the reversion to inactive status
of reserve officers in the AFP. The incongruity and irrelevancy continue throughout the entire paragraph.
In the language of the respondents-appellees, "it was indeed a non-appropriation item inserted in an
appropriation measure in violation of the constitutional inhibition against "riders" to the general
appropriation act." It was indeed a new and completely unrelated provision attached to the
Appropriation Act.
The paragraph in question also violated Art. VI, Sec. 21, par. 15 of the 1935 Constitution of the Philippines
which provided that "No bill which may be enacted into law shall embrace more than one subject which
shall be expressed in the title of the bill." This constitutional requirement nullified and rendered
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inoperative any provision contained in the body of an act that was not fairly included in the subject
expressed in the title or was not germane to or properly connected with that subject.
In determining whether a provision contained in an act is embraced in the subject and is properly
connected therewith, the subject to be considered is the one expressed in the title of the act, and every
fair intendment and reasonable doubt should be indulged in favor of the validity of the legislative
enactment. But when an act contains provisions which are clearly not embraced in the subject of the act,
as expressed in the title, such provisions are inoperative and without effect.
We are mindful that the title of an act is not required to be an index to the body of the act. Thus, in
Sumulong vs. Comelec, 73 Phil. 288, 291, this Court held that it is "a sufficient compliance with such
requirement if the title expresses the general subject and all the provisions of the statute are germane
to that general subject." The constitutional provision was intended to preclude the insertion of riders in
legislation, a rider being a provision not germane to the subject-matter of the bill.6
The subject of R.A. 1600, as expressed in its title, is restricted to "appropriating funds for the operation
of the government." Any provision contained in the body of the act that is fairly included in this restricted
subject or any matter properly connected therewith is valid and operative. But, if a provision in the body
of the act is not fairly included in this restricted subject, like the provision relating to the policy matters
of calling to active duty and reversion to inactive duty of reserve officers of the AFP, such provision is
inoperative and of no effect.
To quote the respondents-appellees on this point:
It is obvious that the statutory provision in question refers to security of reserve officers from reversion
to inactive status, whereas the subject or title of the statute from which it derives its existence refers to
appropriations. Verily, it runs contrary to or is repugnant to the above-quoted injunctive provision of the
Constitution. Where a conflict arises between a statute and the Constitution, the latter prevails. It should
be emphasized that a Constitution is superior to a statute and is precisely called the "supreme law of the
land" because it is the fundamental or organic law which states the general principles and builds the
substantial foundation and general framework of law and government, and for that reason a statute
contrary to or in violation of the Constitution is null and void (Talabon vs. Iloilo Provincial Warden, 78
Phil. 599).1äwphï1.ñët If a law, therefore, happens to infringe upon or violate the fundamental law,
courts of justice may step in to nullify its effectiveness (Mabanag vs. Lopez Vito, 78 Phil. 1).
Upon the foregoing dissertation, we declare Paragraph 11 of the SPECIAL PROVISIONS FOR THE ARMED
FORCES OF THE PHILIPPINES as unconstitutional, invalid and inoperative. Being unconstitutional, it
confers no right and affords no protection. In legal contemplation it is as though it has never been
passed.7
6
Verily, not having shown a clear legal right to the position to which he desires to be restored, the
petitioner cannot compel the respondents to reinstate and/or call him to active duty, promote or
readjust his rank, much less pay him back emoluments and allowances.
ACCORDINGLY, the instant petition is denied, and the decision of the lower court dismissing the
complaint is hereby affirmed. No pronouncement as to costs.
[G.R. No. 144104. June 29, 2004]
LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his
capacity as City Assessor of Quezon City, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the
Decision[1] dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which affirmed the
decision of the Central Board of Assessment Appeals holding that the lot owned by the petitioner and its
hospital building constructed thereon are subject to assessment for purposes of real property tax.
The Antecedents
The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January
16, 1981 by virtue of Presidential Decree No. 1823.[2] It is the registered owner of a parcel of land,
particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner
Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered
by Transfer Certificate of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected in the
middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the
ground floor is being leased to private parties, for canteen and small store spaces, and to medical or
professional practitioners who use the same as their private clinics for their patients whom they charge
for their professional services. Almost one-half of the entire area on the left side of the building along
Quezon Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue
and Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical
Orchids and Garden Center.
6

The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients,
both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual
subsidies from the government.
On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property
taxes in the amount of P4,554,860 by the City Assessor of Quezon City.[3] Accordingly, Tax Declaration
Nos. C-021-01226 (16-2518) and C-021-01231 (15-2518-A) were issued for the land and the hospital
building, respectively.[4] On August 25, 1993, the petitioner filed a Claim for Exemption[5] from real
property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The
petitioners request was denied, and a petition was, thereafter, filed before the Local Board of
Assessment Appeals of Quezon City (QC-LBAA, for brevity) for the reversal of the resolution of the City
Assessor. The petitioner alleged that under Section 28, paragraph 3 of the 1987 Constitution, the
property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are
exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity
patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real
property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the petitioner liable
for real property taxes.[6]
The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of
Quezon City (CBAA, for brevity)[7] which ruled that the petitioner was not a charitable institution and
that its real properties were not actually, directly and exclusively used for charitable purposes; hence, it
was not entitled to real property tax exemption under the constitution and the law. The petitioner sought
relief from the Court of Appeals, which rendered judgment affirming the decision of the CBAA.[8]
Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX EXEMPTIONS
ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF ASSESSMENT, ARE NOT
ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS CHARTER, PD 1823,
SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION.
The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the
1987 Constitution. It asserts that its character as a charitable institution is not altered by the fact that it
admits paying patients and renders medical services to them, leases portions of the land to private
parties, and rents out portions of the hospital to private medical practitioners from which it derives
income to be used for operational expenses. The petitioner points out that for the years 1995 to 1999,
100% of its out-patients were charity patients and of the hospitals 282-bed capacity, 60% thereof, or 170
7
beds, is allotted to charity patients. It asserts that the fact that it receives subsidies from the government
attests to its character as a charitable institution. It contends that the exclusivity required in the
Constitution does not necessarily mean solely. Hence, even if a portion of its real estate is leased out to
private individuals from whom it derives income, it does not lose its character as a charitable institution,
and its exemption from the payment of real estate taxes on its real property. The petitioner cited our
ruling in Herrera v. QC-BAA[9] to bolster its pose. The petitioner further contends that even if P.D. No.
1823 does not exempt it from the payment of real estate taxes, it is not precluded from seeking tax
exemption under the 1987 Constitution.
In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The
petitioners real property is not exempt from the payment of real estate taxes under P.D. No. 1823 and
even under the 1987 Constitution because it failed to prove that it is a charitable institution and that the
said property is actually, directly and exclusively used for charitable purposes. The respondents noted
that in a newspaper report, it appears that graft charges were filed with the Sandiganbayan against the
director of the petitioner, its administrative officer, and Zenaida Rivera, the proprietress of the Elliptical
Orchids and Garden Center, for entering into a lease contract over 7,663.13 square meters of the
property in 1990 for only P20,000 a month, when the monthly rental should be P357,000 a month as
determined by the Commission on Audit; and that instead of complying with the directive of the COA for
the cancellation of the contract for being grossly prejudicial to the government, the petitioner renewed
the same on March 13, 1995 for a monthly rental of only P24,000. They assert that the petitioner uses
the subsidies granted by the government for charity patients and uses the rest of its income from the
property for the benefit of paying patients, among other purposes. They aver that the petitioner failed
to adduce substantial evidence that 100% of its out-patients and 170 beds in the hospital are reserved
for indigent patients. The respondents further assert, thus:
13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That before
a patient is admitted for treatment in the Center, first impression is that it is pay-patient and required to
pay a certain amount as deposit. That even if a patient is living below the poverty line, he is charged with
high hospital bills. And, without these bills being first settled, the poor patient cannot be allowed to leave
the hospital or be discharged without first paying the hospital bills or issue a promissory note guaranteed
and indorsed by an influential agency or person known only to the Center; that even the remains of
deceased poor patients suffered the same fate. Moreover, before a patient is admitted for treatment as
free or charity patient, one must undergo a series of interviews and must submit all the requirements
needed by the Center, usually accompanied by endorsement by an influential agency or person known
only to the Center. These facts were heard and admitted by the Petitioner LCP during the hearings before
the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients, instead of
seeking treatment with the Center, they prefer to be treated at the Quezon Institute. Can such practice
by the Center be called charitable?[10]
7

The Issues
The issues for resolution are the following: (a) whether the petitioner is a charitable institution within
the context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of
Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real
property taxes.
The Courts Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973
and 1987 Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the
elements which should be considered include the statute creating the enterprise, its corporate purposes,
its constitution and by-laws, the methods of administration, the nature of the actual work performed,
the character of the services rendered, the indefiniteness of the beneficiaries, and the use and
occupation of the properties.[11]
In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws,
for the benefit of an indefinite number of persons, either by bringing their minds and hearts under the
influence of education or religion, by assisting them to establish themselves in life or otherwise lessening
the burden of government.[12] It may be applied to almost anything that tend to promote the well-doing
and well-being of social man. It embraces the improvement and promotion of the happiness of man.[13]
The word charitable is not restricted to relief of the poor or sick.[14] The test of a charity and a charitable
organization are in law the same. The test whether an enterprise is charitable or not is whether it exists
to carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or
private advantage.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the
provisions of the decree, is to be administered by the Office of the President of the Philippines with the
Ministry of Health and the Ministry of Human Settlements. It was organized for the welfare and benefit
of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in
the Philippines. The raison detre for the creation of the petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause
of illness and death in the Philippines, comprising more than 45% of the total annual deaths from all
causes, thus, exacting a tremendous toll on human resources, which ailments are likely to increase and
degenerate into serious lung diseases on account of unabated pollution, industrialization and unchecked
cigarette smoking in the country;
8
Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early
and adequate medical care, immunization and through prompt and intensive prevention and health
education programs;
Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts
at preventing, treating and rehabilitating people affected by lung diseases, and to undertake research
and training on the cure and prevention of lung diseases, through a Lung Center which will house and
nurture the above and related activities and provide tertiary-level care for more difficult and
problematical cases;
Whereas, to achieve this purpose, the Government intends to provide material and financial support
towards the establishment and maintenance of a Lung Center for the welfare and benefit of the Filipino
people.[15]
The purposes for which the petitioner was created are spelled out in its Articles of Incorporation, thus:
SECOND: That the purposes for which such corporation is formed are as follows:
1. To construct, establish, equip, maintain, administer and conduct an integrated medical institution
which shall specialize in the treatment, care, rehabilitation and/or relief of lung and allied diseases in line
with the concern of the government to assist and provide material and financial support in the
establishment and maintenance of a lung center primarily to benefit the people of the Philippines and in
pursuance of the policy of the State to secure the well-being of the people by providing them specialized
health and medical services and by minimizing the incidence of lung diseases in the country and
elsewhere.
2. To promote the noble undertaking of scientific research related to the prevention of lung or pulmonary
ailments and the care of lung patients, including the holding of a series of relevant congresses,
conventions, seminars and conferences;
3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic,
social, economic, eugenic and physiological aspects of lung or pulmonary diseases and their control; and
to collect and publish the findings of such research for public consumption;
4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or
awareness, and the development of fact-finding, information and reporting facilities for and in aid of the
general purposes or objects aforesaid, especially in human lung requirements, general health and
physical fitness, and other relevant or related fields;
8

5. To encourage the training of physicians, nurses, health officers, social workers and medical and
technical personnel in the practical and scientific implementation of services to lung patients;
6. To assist universities and research institutions in their studies about lung diseases, to encourage
advanced training in matters of the lung and related fields and to support educational programs of value
to general health;
7. To encourage the formation of other organizations on the national, provincial and/or city and local
levels; and to coordinate their various efforts and activities for the purpose of achieving a more effective
programmatic approach on the common problems relative to the objectives enumerated herein;
8. To seek and obtain assistance in any form from both international and local foundations and
organizations; and to administer grants and funds that may be given to the organization;
9. To extend, whenever possible and expedient, medical services to the public and, in general, to
promote and protect the health of the masses of our people, which has long been recognized as an
economic asset and a social blessing;
10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in
any and all walks of life, including those who are poor and needy, all without regard to or discrimination,
because of race, creed, color or political belief of the persons helped; and to enable them to obtain
treatment when such disorders occur;
11. To participate, as circumstances may warrant, in any activity designed and carried on to promote the
general health of the community;
12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and
supplies by purchase, donation, or otherwise and to dispose of and distribute the same in such manner,
and, on such basis as the Center shall, from time to time, deem proper and best, under the particular
circumstances, to serve its general and non-profit purposes and objectives;
13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties,
whether real or personal, for purposes herein mentioned; and
14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the
powers herein set forth and to do every other act and thing incidental thereto or connected
therewith.[16]
9
Hence, the medical services of the petitioner are to be rendered to the public in general in any and all
walks of life including those who are poor and the needy without discrimination. After all, any person,
the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity.[17]
As a general principle, a charitable institution does not lose its character as such and its exemption from
taxes simply because it derives income from paying patients, whether out-patient, or confined in the
hospital, or receives subsidies from the government, so long as the money received is devoted or used
altogether to the charitable object which it is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution.[18] In Congregational Sunday School, etc.
v. Board of Review,[19] the State Supreme Court of Illinois held, thus:
[A]n institution does not lose its charitable character, and consequent exemption from taxation, by
reason of the fact that those recipients of its benefits who are able to pay are required to do so, where
no profit is made by the institution and the amounts so received are applied in furthering its charitable
purposes, and those benefits are refused to none on account of inability to pay therefor. The
fundamental ground upon which all exemptions in favor of charitable institutions are based is the benefit
conferred upon the public by them, and a consequent relief, to some extent, of the burden upon the
state to care for and advance the interests of its citizens.[20]
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South
Dakota v. Baker:[21]
[T]he fact that paying patients are taken, the profits derived from attendance upon these patients being
exclusively devoted to the maintenance of the charity, seems rather to enhance the usefulness of the
institution to the poor; for it is a matter of common observation amongst those who have gone about at
all amongst the suffering classes, that the deserving poor can with difficulty be persuaded to enter an
asylum of any kind confined to the reception of objects of charity; and that their honest pride is much
less wounded by being placed in an institution in which paying patients are also received. The fact of
receiving money from some of the patients does not, we think, at all impair the character of the charity,
so long as the money thus received is devoted altogether to the charitable object which the institution
is intended to further.[22]
The money received by the petitioner becomes a part of the trust fund and must be devoted to public
trust purposes and cannot be diverted to private profit or benefit.[23]
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its
character as a charitable institution simply because the gift or donation is in the form of subsidies granted
by the government. As held by the State Supreme Court of Utah in Yorgason v. County Board of
Equalization of Salt Lake County:[24]
9

Second, the government subsidy payments are provided to the project. Thus, those payments are like a
gift or donation of any other kind except they come from the government. In both Intermountain Health
Care and the present case, the crux is the presence or absence of material reciprocity. It is entirely
irrelevant to this analysis that the government, rather than a private benefactor, chose to make up the
deficit resulting from the exchange between St. Marks Tower and the tenants by making a contribution
to the landlord, just as it would have been irrelevant in Intermountain Health Care if the patients income
supplements had come from private individuals rather than the government.
Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government
rather than private charitable contributions does not dictate the denial of a charitable exemption if the
facts otherwise support such an exemption, as they do here.[25]
In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies
from the government for 1991 and 1992 for its patients and for the operation of the hospital. It even
incurred a net loss in 1991 and 1992 from its operations.
Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those
portions of its real property that are leased to private entities are not exempt from real property taxes
as these are not actually, directly and exclusively used for charitable purposes.
The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is
the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption
from tax payments must be clearly shown and based on language in the law too plain to be mistaken.[26]
As held in Salvation Army v. Hoehn:[27]
An intention on the part of the legislature to grant an exemption from the taxing power of the state will
never be implied from language which will admit of any other reasonable construction. Such an intention
must be expressed in clear and unmistakable terms, or must appear by necessary implication from the
language used, for it is a well settled principle that, when a special privilege or exemption is claimed
under a statute, charter or act of incorporation, it is to be construed strictly against the property owner
and in favor of the public. This principle applies with peculiar force to a claim of exemption from taxation .
[28]
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the
petitioner shall enjoy the tax exemptions and privileges:
10
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation organized primarily
to help combat the high incidence of lung and pulmonary diseases in the Philippines, all donations,
contributions, endowments and equipment and supplies to be imported by authorized entities or
persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and
benefit of the Lung Center, shall be exempt from income and gift taxes, the same further deductible in
full for the purpose of determining the maximum deductible amount under Section 30, paragraph (h), of
the National Internal Revenue Code, as amended.
The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed
by the Government or any political subdivision or instrumentality thereof with respect to equipment
purchases made by, or for the Lung Center.[29]
It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption
privileges for its real properties as well as the building constructed thereon. If the intentions were
otherwise, the same should have been among the enumeration of tax exempt privileges under Section
2:
It is a settled rule of statutory construction that the express mention of one person, thing, or
consequence implies the exclusion of all others. The rule is expressed in the familiar maxim, expressio
unius est exclusio alterius.
The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the
rule is principle that what is expressed puts an end to that which is implied. Expressium facit cessare
tacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may not, by
interpretation or construction, be extended to other matters.
The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation.
They are based on the rules of logic and the natural workings of the human mind. They are predicated
upon ones own voluntary act and not upon that of others. They proceed from the premise that the
legislature would not have made specified enumeration in a statute had the intention been not to restrict
its meaning and confine its terms to those expressly mentioned.[30]
The exemption must not be so enlarged by construction since the reasonable presumption is that the
State has granted in express terms all it intended to grant at all, and that unless the privilege is limited
to the very terms of the statute the favor would be intended beyond what was meant.[31]
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:
10

(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-
profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used for
religious, charitable or educational purposes shall be exempt from taxation.[32]
The tax exemption under this constitutional provision covers property taxes only.[33] As Chief Justice
Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: . . . what is
exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational
purposes.[34]
Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160
(otherwise known as the Local Government Code of 1991) as follows:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real
property tax:
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit
or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used
for religious, charitable or educational purposes.[35]
We note that under the 1935 Constitution, ... all lands, buildings, and improvements used exclusively for
charitable purposes shall be exempt from taxation.[36] However, under the 1973 and the present
Constitutions, for lands, buildings, and improvements of the charitable institution to be considered
exempt, the same should not only be exclusively used for charitable purposes; it is required that such
property be used actually and directly for such purposes.[37]
In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling
in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961
before the 1973 and 1987 Constitutions took effect.[38] As this Court held in Province of Abra v.
Hernando:[39]
Under the 1935 Constitution: Cemeteries, churches, and parsonages or convents appurtenant thereto,
and all lands, buildings, and improvements used exclusively for religious, charitable, or educational
purposes shall be exempt from taxation. The present Constitution added charitable institutions,
mosques, and non-profit cemeteries and required that for the exemption of lands, buildings, and
improvements, they should not only be exclusively but also actually and directly used for religious or
charitable purposes. The Constitution is worded differently. The change should not be ignored. It must
be duly taken into consideration. Reliance on past decisions would have sufficed were the words actually
11
as well as directly not added. There must be proof therefore of the actual and direct use of the lands,
buildings, and improvements for religious or charitable purposes to be exempt from taxation.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption,
the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution;
and (b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.
Exclusive is defined as possessed and enjoyed to the exclusion of others; debarred from participation or
enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a privilege exclusively.[40] If
real property is used for one or more commercial purposes, it is not exclusively used for the exempted
purposes but is subject to taxation.[41] The words dominant use or principal use cannot be substituted
for the words used exclusively without doing violence to the Constitutions and the law.[42] Solely is
synonymous with exclusively.[43]
What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct
and immediate and actual application of the property itself to the purposes for which the charitable
institution is organized. It is not the use of the income from the real property that is determinative of
whether the property is used for tax-exempt purposes.[44]
The petitioner failed to discharge its burden to prove that the entirety of its real property is actually,
directly and exclusively used for charitable purposes. While portions of the hospital are used for the
treatment of patients and the dispensation of medical services to them, whether paying or non-paying,
other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a
portion of the land is being leased to a private individual for her business enterprise under the business
name Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows that it collected
P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees.
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt from such taxes.[45] On the other hand, the
portions of the land occupied by the hospital and portions of the hospital used for its patients, whether
paying or non-paying, are exempt from real property taxes.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City
Assessor is hereby DIRECTED to determine, after due hearing, the precise portions of the land and the
area thereof which are leased to private persons, and to compute the real property taxes due thereon
as provided for by law. SO ORDERED.
11
 12
G.R. No. 109289 October 3, 1994
Article III, Section 1 — No person shall be deprived of . . . property without due process of law, nor shall
RUFINO R. TAN, petitioner, any person be denied the equal protection of the laws.
vs.
RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as COMMISSIONER OF INTERNAL In G.R. No. 109446, petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that public
REVENUE, respondents. respondents have exceeded their rule-making authority in applying SNIT to general professional
partnerships.
G.R. No. 109446 October 3, 1994
The Solicitor General espouses the position taken by public respondents.
CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A. CARAG, MANUELITO O. CABALLES,
ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA, JR., petitioners, The Court has given due course to both petitions. The parties, in compliance with the Court's directive,
vs. have filed their respective memoranda.
RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE and JOSE U. ONG, in his capacity as
COMMISSIONER OF INTERNAL REVENUE, respondents. G.R. No. 109289

Rufino R. Tan for and in his own behalf. Petitioner contends that the title of House Bill No. 34314, progenitor of Republic Act No. 7496, is a
misnomer or, at least, deficient for being merely entitled, "Simplified Net Income Taxation Scheme for
Carag, Caballes, Jamora & Zomera Law Offices for petitioners in G.R. 109446. the Self-Employed
and Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289).

VITUG, J.: The full text of the title actually reads:

These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the
constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation
Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code and, in
G.R. No. 109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated by public
respondents pursuant to said law.
Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory
legislation.
An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals
Engaged In The Practice of Their Profession, Amending Sections 21 and 29 of the National Internal
Revenue Code, as Amended.
The pertinent provisions of Sections 21 and 29, so referred to, of the National Internal Revenue Code, as
now amended, provide:
Sec. 21. Tax on citizens or residents. —

In G.R. No. 109289, it is asserted that the enactment of Republic Act
No. 7496 violates the following provisions of the Constitution:
Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one subject which shall
be expressed in the title thereof.
Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The Congress shall evolve
a progressive system of taxation.
(f) Simplified Net Income Tax for the Self-Employed and/or Professionals Engaged in the Practice
of Profession. — A tax is hereby imposed upon the taxable net income as determined in Section 27
received during each taxable year from all sources, other than income covered by paragraphs (b), (c), (d)
and (e) of this section by every individual whether
a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his
profession herein, determined in accordance with the following schedule:
Not over P10,000 3%
12
 13
Over P10,000 P300 + 9% Article VI, Section 26(1), of the Constitution has been envisioned so as (a) to prevent log-rolling legislation
but not over P30,000 of excess over P10,000 intended to unite the members of the legislature who favor any one of unrelated subjects in support of
Over P30,000 P2,100 + 15% the whole act, (b) to avoid surprises or even fraud upon the legislature, and (c) to fairly apprise the
but not over P120,00 of excess over P30,000 people, through such publications of its proceedings as are usually made, of the subjects of legislation.1
Over P120,000 P15,600 + 20% The above objectives of the fundamental law appear to us to have been sufficiently met. Anything else
but not over P350,000 of excess over P120,000 would be to require a virtual compendium of the law which could not have been the intendment of the
Over P350,000 P61,600 + 30% constitutional mandate.
of excess over P350,000
Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation
Sec. 29. Deductions from gross income. — In computing taxable income subject to tax under Sections "shall be uniform and equitable" in that the law would now attempt to tax single proprietorships and
21(a), 24(a), (b) and (c); and 25 (a)(1), there shall be allowed as deductions the items specified in professionals differently from the manner it imposes the tax on corporations and partnerships. The
paragraphs (a) to (i) of this section: Provided, however, That in computing taxable income subject to tax contention clearly forgets, however, that such a system of income taxation has long been the prevailing
under Section 21 (f) in the case of individuals engaged in business or practice of profession, only the rule even prior to Republic Act No. 7496.
following direct costs shall be allowed as deductions:
Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or
(a) Raw materials, supplies and direct labor; objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan Luna
(b) Salaries of employees directly engaged in activities in the course of or pursuant to the business Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as: (1) the
or practice of their profession; standards that are used therefor are substantial and not arbitrary, (2) the categorization is germane to
(c) Telecommunications, electricity, fuel, light and water; achieve the legislative purpose, (3) the law applies, all things being equal, to both present and future
(d) Business rentals; conditions, and (4) the classification applies equally well to all those belonging to the same class (Pepsi
(e) Depreciation; Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52).
(f) Contributions made to the Government and accredited relief organizations for the
rehabilitation of calamity stricken areas declared by the President; and What may instead be perceived to be apparent from the amendatory law is the legislative intent to
(g) Interest paid or accrued within a taxable year on loans contracted from accredited financial increasingly shift the income tax system towards the schedular approach2 in the income taxation of
institutions which must be proven to have been incurred in connection with the conduct of a taxpayer's individual taxpayers and to maintain, by and large, the present global treatment3 on taxable
profession, trade or business. corporations. We certainly do not view this classification to be arbitrary and inappropriate.

For individuals whose cost of goods sold and direct costs are difficult to determine, a maximum of forty
per cent (40%) of their gross receipts shall be allowed as deductions to answer for business or
professional expenses as the case may be.
On the basis of the above language of the law, it would be difficult to accept petitioner's view that the
amendatory law should be considered as having now adopted a gross income, instead of as having still
retained the net income, taxation scheme. The allowance for deductible items, it is true, may have
significantly been reduced by the questioned law in comparison with that which has prevailed prior to
the amendment; limiting, however, allowable deductions from gross income is neither discordant with,
nor opposed to, the net income tax concept. The fact of the matter is still that various deductions, which
are by no means inconsequential, continue to be well provided under the new law.
Petitioner gives a fairly extensive discussion on the merits of the law, illustrating, in the process, what he
believes to be an imbalance between the tax liabilities of those covered by the amendatory law and those
who are not. With the legislature primarily lies the discretion to determine the nature (kind), object
(purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This court cannot freely delve
into those matters which, by constitutional fiat, rightly rest on legislative judgment. Of course, where a
tax measure becomes so unconscionable and unjust as to amount to confiscation of property, courts will
not hesitate to strike it down, for, despite all its plenitude, the power to tax cannot override
constitutional proscriptions. This stage, however, has not been demonstrated to have been reached
within any appreciable distance in this controversy before us.
Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for
being violative of due process must perforce fail. The due process clause may correctly be invoked only
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when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax
power. No such transgression is so evident to us.
G.R. No. 109446
The several propositions advanced by petitioners revolve around the question of whether or not public
respondents have exceeded their authority in promulgating Section 6, Revenue Regulations No. 2-93, to
carry out Republic Act No. 7496.
The questioned regulation reads:
Sec. 6. General Professional Partnership — The general professional partnership (GPP) and the
partners comprising the GPP are covered by R. A. No. 7496. Thus, in determining the net profit of the
partnership, only the direct costs mentioned in said law are to be deducted from partnership income.
Also, the expenses paid or incurred by partners in their individual capacities in the practice of their
profession which are not reimbursed or paid by the partnership but are not considered as direct cost,
are not deductible from his gross income.
The real objection of petitioners is focused on the administrative interpretation of public respondents
that would apply SNIT to partners in general professional partnerships. Petitioners cite the pertinent
deliberations in Congress during its enactment of Republic Act No. 7496, also quoted by the Honorable
Hernando B. Perez, minority floor leader of the House of Representatives, in the latter's privilege speech
by way of commenting on the questioned implementing regulation of public respondents following the
effectivity of the law, thusly:
In fact, in the sponsorship speech of Senator Mamintal Tamano on the Senate version of the SNITS, it is
categorically stated, thus:
This bill, Mr. President, is not applicable to business corporations or to partnerships; it is only with respect
to individuals and professionals. (Emphasis ours)
The Court, first of all, should like to correct the apparent misconception that general professional
partnerships are subject to the payment of income tax or that there is a difference in the tax treatment
between individuals engaged in business or in the practice of their respective professions and partners
in general professional partnerships. The fact of the matter is that a general professional partnership,
unlike an ordinary business partnership (which is treated as a corporation for income tax purposes and
so subject to the corporate income tax), is not itself an income taxpayer. The income tax is imposed not
on the professional partnership, which is tax exempt, but on the partners themselves in their individual
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capacity computed on their distributive shares of partnership profits. Section 23 of the Tax Code, which
has not been amended at all by Republic Act 7496, is explicit:
Sec. 23. Tax liability of members of general professional partnerships. — (a) Persons exercising a
common profession in general partnership shall be liable for income tax only in their individual capacity,
and the share in the net profits of the general professional partnership to which any taxable partner
would be entitled whether distributed or otherwise, shall be returned for taxation and the tax paid in
accordance with the provisions of this Title.
(b) In determining his distributive share in the net income of the partnership, each partner —
(1) Shall take into account separately his distributive share of the partnership's income, gain, loss,
deduction, or credit to the extent provided by the pertinent provisions of this Code, and
(2) Shall be deemed to have elected the itemized deductions, unless he declares his distributive
share of the gross income undiminished by his share of the deductions.
There is, then and now, no distinction in income tax liability between a person who practices his
profession alone or individually and one who does it through partnership (whether registered or not)
with others in the exercise of a common profession. Indeed, outside of the gross compensation income
tax and the final tax on passive investment income, under the present income tax system all individuals
deriving income from any source whatsoever are treated in almost invariably the same manner and
under a common set of rules.
We can well appreciate the concern taken by petitioners if perhaps we were to consider Republic Act
No. 7496 as an entirely independent, not merely as an amendatory, piece of legislation. The view can
easily become myopic, however, when the law is understood, as it should be, as only forming part of,
and subject to, the whole income tax concept and precepts long obtaining under the National Internal
Revenue Code. To elaborate a little, the phrase "income taxpayers" is an all embracing term used in the
Tax Code, and it practically covers all persons who derive taxable income. The law, in levying the tax,
adopts the most comprehensive tax situs of nationality and residence of the taxpayer (that renders
citizens, regardless of residence, and resident aliens subject to income tax liability on their income from
all sources) and of the generally accepted and internationally recognized income taxable base (that can
subject non-resident aliens and foreign corporations to income tax on their income from Philippine
sources). In the process, the Code classifies taxpayers into four main groups, namely: (1) Individuals, (2)
Corporations, (3) Estates under Judicial Settlement and (4) Irrevocable Trusts (irrevocable both as to
corpus and as to income).
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Partnerships are, under the Code, either "taxable partnerships" or "exempt partnerships." Ordinarily,
partnerships, no matter how created or organized, are subject to income tax (and thus alluded to as
"taxable partnerships") which, for purposes of the above categorization, are by law assimilated to be
within the context of, and so legally contemplated as, corporations. Except for few variances, such as in
the application of the "constructive receipt rule" in the derivation of income, the income tax approach is
alike to both juridical persons. Obviously, SNIT is not intended or envisioned, as so correctly pointed out
in the discussions in Congress during its deliberations on Republic Act 7496, aforequoted, to cover
corporations and partnerships which are independently subject to the payment of income tax.

"Exempt partnerships," upon the other hand, are not similarly identified as corporations nor even
considered as independent taxable entities for income tax purposes. A general professional partnership
is such an example.4 Here, the partners themselves, not the partnership (although it is still obligated to
file an income tax return [mainly for administration and data]), are liable for the payment of income tax
in their individual capacity computed on their respective and distributive shares of profits. In the
determination of the tax liability, a partner does so as an individual, and there is no choice on the matter.
In fine, under the Tax Code on income taxation, the general professional partnership is deemed to be no
more than a mere mechanism or a flow-through entity in the generation of income by, and the ultimate
distribution of such income to, respectively, each of the individual partners.

Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing rule
as now so modified by Republic Act
No. 7496 on basically the extent of allowable deductions applicable to all individual income taxpayers on
their non-compensation income. There is no evident intention of the law, either before or after the
amendatory legislation, to place in an unequal footing or in significant variance the income tax treatment
of professionals who practice their respective professions individually and of those who do it through a
general professional partnership.

WHEREFORE, the petitions are DISMISSED. No special pronouncement on costs.

SO ORDERED.

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