1. G.R. No.

92389 September 11, 1991

HON. JEJOMAR C. BINAY and the MUNICIPALITY OF MAKATI, petitioners,
vs.
HON. EUFEMIO DOMINGO and the COMMISSION ON AUDIT, respondents.
Jejomar C. Binay for himself and for his co-petitioner.
Manuel D. Tamase and Rafael C. Marquez for respondents.

PARAS, J.:
The only pivotal issue before Us is whether or not Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of Makati is a valid
exercise of police power under the general welfare clause.
The pertinent facts are:
On September 27, 1988, petitioner Municipality, through its Council, approved Resolution No. 60 which reads:
A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL ASSISTANCE PROGRAM INITIATED BY THE OFFICE OF THE
MAYOR, OF EXTENDING FINANCIAL ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO A BEREAVED FAMILY, FUNDS TO BE TAKEN
OUT OF UNAPPROPRIATED AVAILABLE FUNDS EXISTING IN THE MUNICIPAL TREASURY. (Rollo, Annnex "A" p. 39)
Qualified beneficiaries, under the Burial Assistance Program, are bereaved families of Makati whose gross family income does not exceed two
thousand pesos (P2,000.00) a month. The beneficiaries, upon fulfillment of other requirements, would receive the amount of five hundred pesos
(P500.00) cash relief from the Municipality of Makati. (Reno, Annex "13", p. 41)
Metro Manila Commission approved Resolution No. 60. Thereafter, the municipal secretary certified a disbursement fired of four hundred thousand
pesos (P400,000.00) for the implementation of the Burial Assistance Program. (Rollo, Annex "C", p. 43).
Resolution No. 60 was referred to respondent Commission on Audit (COA) for its expected allowance in audit. Based on its preliminary findings,
respondent COA disapproved Resolution No. 60 and disallowed in audit the disbursement of finds for the implementation thereof. (Rollo, Annex "D",
P. 44)
Two letters for reconsideration (Annexes "E" and "F", Rollo, pp. 45 and 48, respectively) filed by petitioners Mayor Jejomar Binay, were denied by
respondent in its Decision No. 1159, in the following manner:
Your request for reconsideration is predicated on the following grounds, to wit:
1. Subject Resolution No. 60, s. 1988, of the Municipal Council of Makati and the intended disbursements fall within the twin principles of 'police
power and parens patriae and
2. The Metropolitan Manila Commission (MMC), under a Certification, dated June 5, 1989, has already appropriated the amount of P400,000.00 to
implement the Id resolution, and the only function of COA on the matter is to allow the financial assistance in question.
The first contention is believed untenable. Suffice it to state that:
a statute or ordinance must have a real substantial, or rational relation to the public safety, health, morals, or general welfare to be sustained as a
legitimate exercise of the police power. The mere assertion by the legislature that a statute relates to the public health, safety, or welfare does not in
itself bring the statute within the police power of a state for there must always be an obvious and real connection between the actual provisions of a
police regulations and its avowed purpose, and the regulation adopted must be reasonably adapted to accomplish the end sought to be attained . 16
Am. Jur 2d, pp. 542-543; emphasis supplied).
Here, we see no perceptible connection or relation between the objective sought to be attained under Resolution No. 60, s. 1988, supra, and the
alleged public safety, general welfare, etc. of the inhabitants of Makati.
Anent the second contention, let it be stressed that Resolution No. 60 is still subject to the limitation that the expenditure covered thereby should be
for a public purpose, i.e., that the disbursement of the amount of P500.00 as burial assistance to a bereaved family of the Municipality of Makati, or a
total of P400,000.00 appropriated under the Resolution, should be for the benefit of the whole, if not the majority, of the inhabitants of the
Municipality and not for the benefit of only a few individuals as in the present case. On this point government funds or property shall be spent or used
solely for public purposes. (Cf. Section 4[2], P.D. 1445). (pp. 50-51, Rollo)
Bent on pursuing the Burial Assistance Program the Municipality of Makati, through its Council, passed Resolution No. 243, re-affirming Resolution
No. 60 (Rollo, Annex "H", p. 52).
However, the Burial Assistance Program has been stayed by COA Decision No. 1159. Petitioner, through its Mayor, was constrained to file this
special civil action of certiorari praying that COA Decision No. 1159 be set aside as null and void.
The police power is a governmental function, an inherent attribute of sovereignty, which was born with civilized government. It is founded largely on
the maxims, "Sic utere tuo et ahenum non laedas and "Salus populi est suprema lex Its fundamental purpose is securing the general welfare,
comfort and convenience of the people.
Police power is inherent in the state but not in municipal corporations (Balacuit v. CFI of Agusan del Norte, 163 SCRA 182). Before a municipal
corporation may exercise such power, there must be a valid delegation of such power by the legislature which is the repository of the inherent
powers of the State. A valid delegation of police power may arise from express delegation, or be inferred from the mere fact of the creation of the
municipal corporation; and as a general rule, municipal corporations may exercise police powers within the fair intent and purpose of their creation
which are reasonably proper to give effect to the powers expressly granted, and statutes conferring powers on public corporations have been
construed as empowering them to do the things essential to the enjoyment of life and desirable for the safety of the people. (62 C.J.S., p. 277). The
so-called inferred police powers of such corporations are as much delegated powers as are those conferred in express terms, the inference of their
delegation growing out of the fact of the creation of the municipal corporation and the additional fact that the corporation can only fully accomplish
the objects of its creation by exercising such powers. (Crawfordsville vs. Braden, 28 N.E. 849). Furthermore, municipal corporations, as
governmental agencies, must have such measures of the power as are necessary to enable them to perform their governmental functions. The
power is a continuing one, founded on public necessity. (62 C.J.S. p. 273) Thus, not only does the State effectuate its purposes through the exercise
of the police power but the municipality does also. (U.S. v. Salaveria, 39 Phil. 102).
Municipal governments exercise this power under the general welfare clause: pursuant thereto they are clothed with authority to "enact such
ordinances and issue such regulations as may be necessary to carry out and discharge the responsibilities conferred upon it by law, and such as
shall be necessary and proper to provide for the health, safety, comfort and convenience, maintain peace and order, improve public morals, promote
the prosperity and general welfare of the municipality and the inhabitants thereof, and insure the protection of property therein." (Sections 91, 149,
177 and 208, BP 337). And under Section 7 of BP 337, "every local government unit shall exercise the powers expressly granted, those necessarily
implied therefrom, as well as powers necessary and proper for governance such as to promote health and safety, enhance prosperity, improve
morals, and maintain peace and order in the local government unit, and preserve the comfort and convenience of the inhabitants therein."
Police power is the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the
people. It is the most essential, insistent, and illimitable of powers. In a sense it is the greatest and most powerful attribute of the government. It is
elastic and must be responsive to various social conditions. (Sangalang, et al. vs. IAC, 176 SCRA 719). On it depends the security of social order,

1
the life and health of the citizen, the comfort of an existence in a thickly populated community, the enjoyment of private and social life, and the
beneficial use of property, and it has been said to be the very foundation on which our social system rests. (16 C.J.S., P. 896) However, it is not
confined within narrow circumstances of precedents resting on past conditions; it must follow the legal progress of a democratic way of life.
(Sangalang, et al. vs. IAC, supra).
In the case at bar, COA is of the position that there is "no perceptible connection or relation between the objective sought to be attained under
Resolution No. 60, s. 1988, supra, and the alleged public safety, general welfare. etc. of the inhabitants of Makati." (Rollo, Annex "G", p. 51).
Apparently, COA tries to re-define the scope of police power by circumscribing its exercise to "public safety, general welfare, etc. of the inhabitants of
Makati."
In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of an exact definition but has been, purposely, veiled in general
terms to underscore its all comprehensiveness. Its scope, over-expanding to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest benefits.
The police power of a municipal corporation is broad, and has been said to be commensurate with, but not to exceed, the duty to provide for the real
needs of the people in their health, safety, comfort, and convenience as consistently as may be with private rights. It extends to all the great public
needs, and, in a broad sense includes all legislation and almost every function of the municipal government. It covers a wide scope of subjects, and,
while it is especially occupied with whatever affects the peace, security, health, morals, and general welfare of the community, it is not limited thereto,
but is broadened to deal with conditions which exists so as to bring out of them the greatest welfare of the people by promoting public convenience
or general prosperity, and to everything worthwhile for the preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec. 128). Thus, it
is deemed inadvisable to attempt to frame any definition which shall absolutely indicate the limits of police power.
COA's additional objection is based on its contention that "Resolution No. 60 is still subject to the limitation that the expenditure covered thereby
should be for a public purpose, ... should be for the benefit of the whole, if not the majority, of the inhabitants of the Municipality and not for the
benefit of only a few individuals as in the present case." (Rollo, Annex "G", p. 51).
COA is not attuned to the changing of the times. Public purpose is not unconstitutional merely because it incidentally benefits a limited number of
persons. As correctly pointed out by the Office of the Solicitor General, "the drift is towards social welfare legislation geared towards state policies to
provide adequate social services (Section 9, Art. II, Constitution), the promotion of the general welfare (Section 5, Ibid) social justice (Section 10,
Ibid) as well as human dignity and respect for human rights. (Section 11, Ibid." (Comment, p. 12)
The care for the poor is generally recognized as a public duty. The support for the poor has long been an accepted exercise of police power in the
promotion of the common good.
There is no violation of the equal protection clause in classifying paupers as subject of legislation. Paupers may be reasonably classified. Different
groups may receive varying treatment. Precious to the hearts of our legislators, down to our local councilors, is the welfare of the paupers. Thus,
statutes have been passed giving rights and benefits to the disabled, emancipating the tenant-farmer from the bondage of the soil, housing the urban
poor, etc.
Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of Makati is a paragon of the continuing program of our government
towards social justice. The Burial Assistance Program is a relief of pauperism, though not complete. The loss of a member of a family is a painful
experience, and it is more painful for the poor to be financially burdened by such death. Resolution No. 60 vivifies the very words of the late
President Ramon Magsaysay 'those who have less in life, should have more in law." This decision, however must not be taken as a precedent, or as
an official go-signal for municipal governments to embark on a philanthropic orgy of inordinate dole-outs for motives political or otherwise.
PREMISES CONSIDERED, and with the afore-mentioned caveat, this petition is hereby GRANTED and the Commission on Audit's Decision No.
1159 is hereby SET ASIDE.
SO ORDERED.

2
 2. G.R. No. 166494 June 29, 2007
CARLOS SUPERDRUG CORP., doing business under the name and style "Carlos Superdrug," ELSIE M. CANO, doing business under
the name and style "Advance Drug," Dr. SIMPLICIO L. YAP, JR., doing business under the name and style "City Pharmacy," MELVIN
S. DELA SERNA, doing business under the name and style "Botica dela Serna," and LEYTE SERV-WELL CORP., doing business
under the name and style "Leyte Serv-Well Drugstore," petitioners,
vs.
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD), DEPARTMENT OF HEALTH (DOH), DEPARTMENT OF
FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ), and DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT
(DILG), respondents.
DECISION
AZCUNA, J.:
This is a petition1 for Prohibition with Prayer for Preliminary Injunction assailing the constitutionality of Section 4(a) of Republic Act (R.A.) No.
9257,2 otherwise known as the "Expanded Senior Citizens Act of 2003."
Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.
Public respondents, on the other hand, include the Department of Social Welfare and Development (DSWD), the Department of Health (DOH), the
Department of Finance (DOF), the Department of Justice (DOJ), and the Department of Interior and Local Government (DILG) which have been
specifically tasked to monitor the drugstores’ compliance with the law; promulgate the implementing rules and regulations for the effective
implementation of the law; and prosecute and revoke the licenses of erring drugstore establishments.
The antecedents are as follows:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432, 3 was signed into law by President Gloria Macapagal-Arroyo and it became effective
on March 21, 2004. Section 4(a) of the Act states:
SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of services in hotels and similar lodging
establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior
citizens, including funeral and burial services for the death of senior citizens;
...
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services
rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is
granted. Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in their gross
sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as
amended.4
On May 28, 2004, the DSWD approved and adopted the Implementing Rules and Regulations of R.A. No. 9257, Rule VI, Article 8 of which states:
Article 8. Tax Deduction of Establishments. – The establishment may claim the discounts granted under Rule V, Section 4 – Discounts for
Establishments;5 Section 9, Medical and Dental Services in Private Facilities[,] 6 and Sections 107 and 118 – Air, Sea and Land Transportation as tax
deduction based on the net cost of the goods sold or services rendered. Provided, That the cost of the discount shall be allowed as deduction from
gross income for the same taxable year that the discount is granted; Provided, further, That the total amount of the claimed tax deduction net of
value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the
provisions of the National Internal Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be subject to the
Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department of Finance (DOF). 9
On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP) concerning the meaning of a tax
deduction under the Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B. Recente, clarified as follows:
1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction (under the Expanded Senior Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent (20%) discount from all establishments relative to
the utilization of transportation services, hotels and similar lodging establishment, restaurants and recreation centers and purchase of medicines
anywhere in the country, the costs of which may be claimed by the private establishments concerned as tax credit .
Effectively, a tax credit is a peso-for-peso deduction from a taxpayer’s tax liability due to the government of the amount of discounts such
establishment has granted to a senior citizen. The establishment recovers the full amount of discount given to a senior citizen and hence, the
government shoulders 100% of the discounts granted.
It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system, necessitates that prior payments of taxes have
been made and the taxpayer is attempting to recover this tax payment from his/her income tax due. The tax credit scheme under R.A. No. 7432 is,
therefore, inapplicable since no tax payments have previously occurred.
1.2. The provision under R.A. No. 9257, on the other hand, provides that the establishment concerned may claim the discounts under Section 4(a),
(f), (g) and (h) as tax deduction from gross income, based on the net cost of goods sold or services rendered.
Under this scheme, the establishment concerned is allowed to deduct from gross income, in computing for its tax liability, the amount of discounts
granted to senior citizens. Effectively, the government loses in terms of foregone revenues an amount equivalent to the marginal tax rate the said
establishment is liable to pay the government. This will be an amount equivalent to 32% of the twenty percent (20%) discounts so granted. The
establishment shoulders the remaining portion of the granted discounts.
It may be necessary to note that while the burden on [the] government is slightly diminished in terms of its percentage share on the discounts
granted to senior citizens, the number of potential establishments that may claim tax deductions, have however, been broadened. Aside from the
establishments that may claim tax credits under the old law, more establishments were added under the new law such as: establishments providing
medical and dental services, diagnostic and laboratory services, including professional fees of attending doctors in all private hospitals and medical
facilities, operators of domestic air and sea transport services, public railways and skyways and bus transport services.
A simple illustration might help amplify the points discussed above, as follows:
Tax Deduction Tax Credit
Gross Sales x x x x x x x x x x x x
Less : Cost of goods sold x x x x x x x x x x
Net Sales x x x x x x x x x x x x
Less: Operating Expenses:
Tax Deduction on Discounts x x x x --
Other deductions: x x x x x x x x
Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit -- ______x x

3
Net Tax Due -- x x
As shown above, under a tax deduction scheme, the tax deduction on discounts was subtracted from Net Sales together with other deductions
which are considered as operating expenses before the Tax Due was computed based on the Net Taxable Income. On the other hand, under a tax
credit scheme, the amount of discounts which is the tax credit item, was deducted directly from the tax due amount. 10
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and Guidelines to Implement the Relevant Provisions of
Republic Act 9257, otherwise known as the "Expanded Senior Citizens Act of 2003" 11 was issued by the DOH, providing the grant of twenty percent
(20%) discount in the purchase of unbranded generic medicines from all establishments dispensing medicines for the exclusive use of the senior
citizens.
On November 12, 2004, the DOH issued Administrative Order No 17712 amending A.O. No. 171. Under A.O. No. 177, the twenty percent discount
shall not be limited to the purchase of unbranded generic medicines only, but shall extend to both prescription and non-prescription medicines
whether branded or generic. Thus, it stated that "[t]he grant of twenty percent (20%) discount shall be provided in the purchase of medicines from all
establishments dispensing medicines for the exclusive use of the senior citizens."
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior Citizens Act based on the following grounds: 13
1) The law is confiscatory because it infringes Art. III, Sec. 9 of the Constitution which provides that private property shall not be taken for public use
without just compensation;
2) It violates the equal protection clause (Art. III, Sec. 1) enshrined in our Constitution which states that "no person shall be deprived of life, liberty or
property without due process of law, nor shall any person be denied of the equal protection of the laws;" and
3) The 20% discount on medicines violates the constitutional guarantee in Article XIII, Section 11 that makes "essential goods, health and other
social services available to all people at affordable cost."14
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of private property. Compelling drugstore owners
and establishments to grant the discount will result in a loss of profit
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby
drugstores will be justly compensated for the discount.
Examining petitioners’ arguments, it is apparent that what petitioners are ultimately questioning is the validity of the tax deduction scheme as a
reimbursement mechanism for the twenty percent (20%) discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is subtracted from the gross income and results in a
lower taxable income. Stated otherwise, it is an amount that is allowed by law 15 to reduce the income prior to the application of the tax rate to
compute the amount of tax which is due.16 Being a tax deduction, the discount does not reduce taxes owed on a peso for peso basis but merely
offers a fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private establishments concerned. The discounts given
would have entered the coffers and formed part of the gross sales of the private establishments, were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit. 17 This
constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s
gain but the owner’s loss. The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full and ample. 18
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation. 19
Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon
private establishments the burden of partly subsidizing a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant benefits and privileges
to them for their improvement and well-being as the State considers them an integral part of our society. 20
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself. Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. – Pursuant to Article XV, Section 4 of the Constitution, it is the duty of the family to take care of
its elderly members while the State may design programs of social security for them. In addition to this, Section 10 in the Declaration of Principles
and State Policies provides: "The State shall provide social justice in all phases of national development." Further, Article XIII, Section 11, provides:
"The State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and
other social services available to all the people at affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled,
women and children." Consonant with these constitutional principles the following are the declared policies of this Act:
...
(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to actively seek their
partnership.21
To implement the above policy, the law grants a twenty percent discount to senior citizens for medical and dental services, and diagnostic and
laboratory fees; admission fees charged by theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement;
fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments, restaurants and recreation centers; and
purchases of medicines for the exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that business
establishments extending the twenty percent discount to senior citizens may claim the discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its object. Police power is not
capable of an exact definition, but has been purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus assuring the greatest benefits. 22 Accordingly, it has
been described as "the most essential, insistent and the least limitable of powers, extending as it does to all the great public needs." 23 It is "[t]he
power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same."24
For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the primacy of police power because
property rights, though sheltered by due process, must yield to general welfare. 25
Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of petitioners that they will suffer loss of
earnings and capital, the questioned provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity which every law has in its favor. 26

4
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is unduly oppressive to their business, because
petitioners have not taken time to calculate correctly and come up with a financial report, so that they have not been able to show properly whether
or not the tax deduction scheme really works greatly to their disadvantage. 27
In treating the discount as a tax deduction, petitioners insist that they will incur losses because, referring to the DOF Opinion, for every ₱1.00 senior
citizen discount that petitioners would give, ₱0.68 will be shouldered by them as only ₱0.32 will be refunded by the government by way of a tax
deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug Norvasc as an example. According to the latter, it
acquires Norvasc from the distributors at ₱37.57 per tablet, and retails it at ₱39.60 (or at a margin of 5%). If it grants a 20% discount to senior
citizens or an amount equivalent to ₱7.92, then it would have to sell Norvasc at ₱31.68 which translates to a loss from capital of ₱5.89 per tablet.
Even if the government will allow a tax deduction, only ₱2.53 per tablet will be refunded and not the full amount of the discount which is ₱7.92. In
short, only 32% of the 20% discount will be reimbursed to the drugstores. 28
Petitioners’ computation is flawed. For purposes of reimbursement, the law states that the cost of the discount shall be deducted from gross
income,29 the amount of income derived from all sources before deducting allowable expenses, which will result in net income. Here, petitioners tried
to show a loss on a per transaction basis, which should not be the case. An income statement, showing an accounting of petitioners’ sales,
expenses, and net profit (or loss) for a given period could have accurately reflected the effect of the discount on their income. Absent any financial
statement, petitioners cannot substantiate their claim that they will be operating at a loss should they give the discount. In addition, the computation
was erroneously based on the assumption that their customers consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on
income, not on the amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of their medicines given the cutthroat nature of the
players in the industry. It is a business decision on the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as
alleged by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right, petitioners cannot reproach the law for being
oppressive, simply because they cannot afford to raise their prices for fear of losing their customers to competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing component of the business. While the
Constitution protects property rights, petitioners must accept the realities of business and the State, in the exercise of police power, can intervene in
the operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept for the protection of property,
various laws and jurisprudence, particularly on agrarian reform and the regulation of contracts and public utilities, continuously serve as a reminder
that the right to property can be relinquished upon the command of the State for the promotion of public good. 30
Undeniably, the success of the senior citizens program rests largely on the support imparted by petitioners and the other private establishments
concerned. This being the case, the means employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is arbitrary, and that the continued
implementation of the same would be unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act. 31
WHEREFORE, the petition is DISMISSED for lack of merit.
No costs.
SO ORDERED.

5
 3. G.R. No. 126102 December 4, 2000
ORTIGAS & CO. LTD., petitioner,
vs.
THE COURT OF APPEALS and ISMAEL G. MATHAY III, respondents.
DECISION
QUISUMBING, J.:
This petition seeks to reverse the decision of the Court of Appeals, dated March 25, 1996, in CA-G.R. SP No. 39193, which nullified the writ of
preliminary injunction issued by the Regional Trial Court of Pasig City, Branch 261, in Civil Case No. 64931. It also assails the resolution of the
appellate court, dated August 13, 1996, denying petitioner’s motion for reconsideration.
The facts of this case, as culled from the records, are as follows:
On August 25, 1976, petitioner Ortigas & Company sold to Emilia Hermoso, a parcel of land known as Lot 1, Block 21, Psd-66759, with an area of
1,508 square meters, located in Greenhills Subdivision IV, San Juan, Metro Manila, and covered by Transfer Certificate of Title No. 0737. The
contract of sale provided that the lot:
1. …(1) be used exclusively…for residential purposes only, and not more than one single-family residential building will be constructed thereon,…
xxx
6. The BUYER shall not erect…any sign or billboard on the roof…for advertising purposes…
xxx
11. No single-family residential building shall be erected…until the building plans, specification…have been approved by the SELLER…
xxx
14....restrictions shall run with the land and shall be construed as real covenants until December 31, 2025 when they shall cease and terminate… 1
These and the other conditions were duly annotated on the certificate of title issued to Emilia.
In 1981, the Metropolitan Manila Commission (now Metropolitan Manila Development Authority) enacted MMC Ordinance No. 81-01, also known as
the Comprehensive Zoning Area for the National Capital Region. The ordinance reclassified as a commercial area a portion of Ortigas Avenue from
Madison to Roosevelt Streets of Greenhills Subdivision where the lot is located.
On June 8, 1984, private respondent Ismael Mathay III leased the lot from Emilia Hermoso and J.P. Hermoso Realty Corp.. The lease contract did
not specify the purposes of the lease. Thereupon, private respondent constructed a single story commercial building for Greenhills Autohaus, Inc., a
car sales company.
On January 18, 1995, petitioner filed a complaint against Emilia Hermoso with the Regional Trial Court of Pasig, Branch 261. Docketed as Civil Case
No. 64931, the complaint sought the demolition of the said commercial structure for having violated the terms and conditions of the Deed of Sale.
Complainant prayed for the issuance of a temporary restraining order and a writ of preliminary injunction to prohibit petitioner from constructing the
commercial building and/or engaging in commercial activity on the lot. The complaint was later amended to implead Ismael G. Mathay III and J.P.
Hermoso Realty Corp., which has a ten percent (10%) interest in the lot.
In his answer, Mathay III denied any knowledge of the restrictions on the use of the lot and filed a cross-claim against the Hermosos.
On June 16, 1995, the trial court issued the writ of preliminary injunction. On June 29, 1995, Mathay III moved to set aside the injunctive order, but
the trial court denied the motion.
Mathay III then filed with the Court of Appeals a special civil action for certiorari, docketed as CA-G.R. SP No. 39193, ascribing to the trial court
grave abuse of discretion in issuing the writ of preliminary injunction. He claimed that MMC Ordinance No. 81-01 classified the area where the lot
was located as commercial area and said ordinance must be read into the August 25, 1976 Deed of Sale as a concrete exercise of police power.
Ortigas and Company averred that inasmuch as the restrictions on the use of the lot were duly annotated on the title it issued to Emilia Hermoso,
said restrictions must prevail over the ordinance, specially since these restrictions were agreed upon before the passage of MMC Ordinance No. 81-
01.
On March 25, 1996, the appellate court disposed of the case as follows:
WHEREFORE, in light of the foregoing, the petition is hereby GRANTED. The assailed orders are hereby nullified and set aside.
SO ORDERED.2
In finding for Mathay III, the Court of Appeals held that the MMC Ordinance No. 81-01 effectively nullified the restrictions allowing only residential use
of the property in question.
Ortigas seasonably moved for reconsideration, but the appellate court denied it on August 13, 1996.
Hence, the instant petition.
In its Memorandum, petitioner now submits that the "principal issue in this case is whether respondent Court of Appeals correctly set aside the Order
dated June 16, 1995 of the trial court which issued the writ of preliminary injunction on the sole ground that MMC Ordinance No. 81-01 nullified the
building restriction imposing exclusive residential use on the property in question." 3 It also asserts that "Mathay III lacks legal capacity to question the
validity of conditions of the deed of sale; and he is barred by estoppel or waiver to raise the same question like his principals, the owners." 4 Lastly, it
avers that the appellate court "unaccountably failed to address" several questions of fact.
Principally, we must resolve the issue of whether the Court of Appeals erred in holding that the trial court committed grave abuse of discretion when it
refused to apply MMC Ordinance No.81-01 to Civil Case No. 64931.
But first, we must address petitioner’s allegation that the Court of Appeals "unaccountably failed to address" questions of fact. For basic is the rule
that factual issues may not be raised before this Court in a petition for review and this Court is not duty-bound to consider said questions. 5 CA-G.R.
SP No. 39193 was a special civil action for certiorari, and the appellate court only had to determine if the trial court committed grave abuse of
discretion amounting to want or excess of jurisdiction in issuing the writ of preliminary injunction. Thus, unless vital to our determination of the issue
at hand, we shall refrain from further consideration of factual questions.
Petitioner contends that the appellate court erred in limiting its decision to the cited zoning ordinance. It avers that a contractual right is not
automatically discarded once a claim is made that it conflicts with police power. Petitioner submits that the restrictive clauses in the questioned
contract is not in conflict with the zoning ordinance. For one, according to petitioner, the MMC Ordinance No. 81-01 did not prohibit the construction
of residential buildings. Petitioner argues that even with the zoning ordinance, the seller and buyer of the re-classified lot can voluntarily agree to an
exclusive residential use thereof. Hence, petitioner concludes that the Court of Appeals erred in holding that the condition imposing exclusive
residential use was effectively nullified by the zoning ordinance.
In its turn, private respondent argues that the appellate court correctly ruled that the trial court had acted with grave abuse of discretion in refusing to
subject the contract to the MMC Ordinance No. 81-01. He avers that the appellate court properly held the police power superior to the non-
impairment of contract clause in the Constitution. He concludes that the appellate court did not err in dissolving the writ of preliminary injunction
issued by the trial court in excess of its jurisdiction.
We note that in issuing the disputed writ of preliminary injunction, the trial court observed that the contract of sale was entered into in August 1976,
while the zoning ordinance was enacted only in March 1981. The trial court reasoned that since private respondent had failed to show that MMC

6
Ordinance No. 81-01 had retroactive effect, said ordinance should be given prospective application only,6 citing Co vs. Intermediate Appellate
Court, 162 SCRA 390 (1988).
In general, we agree that laws are to be construed as having only prospective operation. Lex prospicit, non respicit. Equally settled, only laws
existing at the time of the execution of a contract are applicable thereto and not later statutes, unless the latter are specifically intended to have
retroactive effect.7 A later law which enlarges, abridges, or in any manner changes the intent of the parties to the contract necessarily impairs the
contract itself8 and cannot be given retroactive effect without violating the constitutional prohibition against impairment of contracts. 9
But, the foregoing principles do admit of certain exceptions. One involves police power. A law enacted in the exercise of police power to regulate or
govern certain activities or transactions could be given retroactive effect and may reasonably impair vested rights or contracts. Police power
legislation is applicable not only to future contracts, but equally to those already in existence. 10 Nonimpairment of contracts or vested rights clauses
will have to yield to the superior and legitimate exercise by the State of police power to promote the health, morals, peace, education, good order,
safety, and general welfare of the people.11 Moreover, statutes in exercise of valid police power must be read into every contract. 12 Noteworthy,
in Sangalang vs. Intermediate Appellate Court,13 we already upheld MMC Ordinance No. 81-01 as a legitimate police power measure.
The trial court’s reliance on the Co vs. IAC,14 is misplaced. In Co, the disputed area was agricultural and Ordinance No. 81-01 did not specifically
provide that "it shall have retroactive effect so as to discontinue all rights previously acquired over lands located within the zone which are neither
residential nor light industrial in nature,"15 and stated with respect to agricultural areas covered that "the zoning ordinance should be given
prospective operation only."16 The area in this case involves not agricultural but urban residential land. Ordinance No. 81-01 retroactively affected the
operation of the zoning ordinance in Greenhills by reclassifying certain locations therein as commercial.
Following our ruling in Ortigas & Co., Ltd. vs. Feati Bank & Trust Co., 94 SCRA 533 (1979), the contractual stipulations annotated on the Torrens
Title, on which Ortigas relies, must yield to the ordinance. When that stretch of Ortigas Avenue from Roosevelt Street to Madison Street was
reclassified as a commercial zone by the Metropolitan Manila Commission in March 1981, the restrictions in the contract of sale between Ortigas and
Hermoso, limiting all construction on the disputed lot to single-family residential buildings, were deemed extinguished by the retroactive operation of
the zoning ordinance and could no longer be enforced. While our legal system upholds the sanctity of contract so that a contract is deemed law
between the contracting parties,17 nonetheless, stipulations in a contract cannot contravene "law, morals, good customs, public order, or public
policy."18 Otherwise such stipulations would be deemed null and void. Respondent court correctly found that the trial court committed in this case a
grave abuse of discretion amounting to want of or excess of jurisdiction in refusing to treat Ordinance No. 81-01 as applicable to Civil Case No.
64931. In resolving matters in litigation, judges are not only duty-bound to ascertain the facts and the applicable laws, 19 they are also bound by their
oath of office to apply the applicable law.20
As a secondary issue, petitioner contends that respondent Mathay III, as a mere lessee of the lot in question, is a total stranger to the deed of sale
and is thus barred from questioning the conditions of said deed. Petitioner points out that the owners of the lot voluntarily agreed to the restrictions
on the use of the lot and do not question the validity of these restrictions. Petitioner argues that Mathay III as a lessee is merely an agent of the
owners, and could not override and rise above the status of his principals. Petitioner submits that he could not have a higher interest than those of
the owners, the Hermosos, and thus had no locus standi to file CA-G.R. SP No. 39193 to dissolve the injunctive writ issued by the RTC of Pasig City.
For his part, private respondent argues that as the lessee who built the commercial structure, it is he and he alone who stands to be either benefited
or injured by the results of the judgment in Civil Case No. 64931. He avers he is the party with real interest in the subject matter of the action, as it
would be his business, not the Hermosos’, which would suffer had not the respondent court dissolved the writ of preliminary injunction.
A real party in interest is defined as "the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit."
"Interest" within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental interest. 21 By real interest is meant a present substantial interest, as distinguished from a mere
expectancy or a future, contingent, subordinate, or consequential interest. 22
Tested by the foregoing definition, private respondent in this case is clearly a real party in interest. 1âwphi1 It is not disputed that he is in possession
of the lot pursuant to a valid lease. He is a possessor in the concept of a "holder of the thing" under Article 525 of the Civil Code. 23 He was impleaded
as a defendant in the amended complaint in Civil Case No. 64931. Further, what petitioner seeks to enjoin is the building by respondent of a
commercial structure on the lot. Clearly, it is private respondent’s acts which are in issue, and his interest in said issue cannot be a mere incidental
interest. In its amended complaint, petitioner prayed for, among others, judgment "ordering the demolition of all improvements illegally built on the lot
in question."24 These show that it is petitioner Mathay III, doing business as "Greenhills Autohaus, Inc.," and not only the Hermosos, who will be
adversely affected by the court’s decree.
Petitioner also cites the rule that a stranger to a contract has no rights or obligations under it, 25 and thus has no standing to challenge its validity.26 But
in seeking to enforce the stipulations in the deed of sale, petitioner impleaded private respondent as a defendant. Thus petitioner must recognize that
where a plaintiff has impleaded a party as a defendant, he cannot subsequently question the latter’s standing in court. 27
WHEREFORE, the instant petition is DENIED. The challenged decision of the Court of Appeals dated March 25, 1996, as well as the assailed
resolution of August 13, 1996, in CA-G.R. SP No. 39193 is AFFIRMED. Costs against petitioner.
SO ORDERED.

7
 4. G.R. No. 135962 March 27, 2000
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner,
vs.
BEL-AIR VILLAGE ASSOCIATION, INC., respondent.
PUNO, J.:
Not infrequently, the government is tempted to take legal shortcuts solve urgent problems of the people. But even when government is armed with
the best of intention, we cannot allow it to run roughshod over the rule of law. Again, we let the hammer fall and fall hard on the illegal attempt of the
MMDA to open for public use a private road in a private subdivision. While we hold that the general welfare should be promoted, we stress that it
should not be achieved at the expense of the rule of law.
Petitioner MMDA is a government agency tasked with the delivery of basic services in Metro Manila. Respondent Bel-Air Village Association, Inc.
(BAVA) is a non-stock, non-profit corporation whose members are homeowners in Bel-Air Village, a private subdivision in Makati City. Respondent
BAVA is the registered owner of Neptune Street, a road inside Bel-Air Village.
On December 30, 1995, respondent received from petitioner, through its Chairman, a notice dated December 22, 1995 requesting respondent to
open Neptune Street to public vehicular traffic starting January 2, 1996. The notice reads:
SUBJECT: NOTICE of the Opening of Neptune Street to Traffic.
Dear President Lindo,
Please be informed that pursuant to the mandate of the MMDA law or Republic Act No. 7924 which requires the Authority to rationalize the use of
roads and/or thoroughfares for the safe and convenient movement of persons, Neptune Street shall be opened to vehicular traffic effective January
2, 1996.
In view whereof, the undersigned requests you to voluntarily open the points of entry and exit on said street.
Thank you for your cooperation and whatever assistance that may be extended by your association to the MMDA personnel who will be directing
traffic in the area.
Finally, we are furnishing you with a copy of the handwritten instruction of the President on the matter.
Very truly yours,
PROSPERO I. ORETA
Chairman 1
On the same day, respondent was apprised that the perimeter wall separating the subdivision from the adjacent Kalayaan Avenue would be
demolished.
On January 2, 1996, respondent instituted against petitioner before the Regional Trial Court, Branch 136, Makati City, Civil Case No. 96-001 for
injunction. Respondent prayed for the issuance of a temporary restraining order and preliminary injunction enjoining the opening of Neptune Street
and prohibiting the demolition of the perimeter wall. The trial court issued a temporary restraining order the following day.
On January 23, 1996, after due hearing, the trial court denied issuance of a preliminary injunction. 2 Respondent questioned the denial before the
Court of Appeals in CA-G.R. SP No. 39549. The appellate court conducted an ocular inspection of Neptune Street 3 and on February 13, 1996, it
issued a writ of preliminary injunction enjoining the implementation of the MMDA's proposed action. 4
On January 28, 1997, the appellate court rendered a Decision on the merits of the case finding that the MMDA has no authority to order the opening
of Neptune Street, a private subdivision road and cause the demolition of its perimeter walls. It held that the authority is lodged in the City Council of
Makati by ordinance. The decision disposed of as follows:
WHEREFORE, the Petition is GRANTED; the challenged Order dated January 23, 1995, in Civil Case No. 96-001, is SET ASIDE and the Writ of
Preliminary Injunction issued on February 13, 1996 is hereby made permanent.
For want of sustainable substantiation, the Motion to Cite Roberto L. del Rosario in contempt is denied. 5
No pronouncement as to costs.
SO ORDERED. 6
The Motion for Reconsideration of the decision was denied on September 28, 1998. Hence, this recourse.
Petitioner MMDA raises the following questions:
I
HAS THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY (MMDA) THE MANDATE TO OPEN NEPTUNE STREET TO PUBLIC TRAFFIC
PURSUANT TO ITS REGULATORY AND POLICE POWERS?
II
IS THE PASSAGE OF AN ORDINANCE A CONDITION PRECEDENT BEFORE THE MMDA MAY ORDER THE OPENING OF SUBDIVISION
ROADS TO PUBLIC TRAFFIC?
III
IS RESPONDENT BEL-AIR VILLAGE ASSOCIATION, INC. ESTOPPED FROM DENYING OR ASSAILING THE AUTHORITY OF THE MMDA TO
OPEN THE SUBJECT STREET?
IV
WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL MEETINGS HELD BETWEEN MMDA AND THE AFFECTED EEL-
AIR RESIDENTS AND BAVA OFFICERS?
V
HAS RESPONDENT COME TO COURT WITH UNCLEAN HANDS?7
Neptune Street is owned by respondent BAVA. It is a private road inside Bel-Air Village, a private residential subdivision in the heart of the financial
and commercial district of Makati City. It runs parallel to Kalayaan Avenue, a national road open to the general public. Dividing the two (2) streets is a
concrete perimeter wall approximately fifteen (15) feet high. The western end of Neptune Street intersects Nicanor Garcia, formerly Reposo Street, a
subdivision road open to public vehicular traffic, while its eastern end intersects Makati Avenue, a national road. Both ends of Neptune Street are
guarded by iron gates.
Petitioner MMDA claims that it has the authority to open Neptune Street to public traffic because it is an agent of the state endowed with police
power in the delivery of basic services in Metro Manila. One of these basic services is traffic management which involves the regulation of the use of
thoroughfares to insure the safety, convenience and welfare of the general public. It is alleged that the police power of MMDA was affirmed by this
Court in the consolidated cases of Sangalang v. Intermediate Appellate Court. 8 From the premise that it has police power, it is now urged that there
is no need for the City of Makati to enact an ordinance opening Neptune street to the public. 9
Police power is an inherent attribute of sovereignty. It has been defined as the power vested by the Constitution in the legislature to make, ordain,
and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the
Constitution, as they shall judge to be for the good and welfare of the commonwealth, and for the subjects of the same. 10 The power is plenary and
its scope is vast and pervasive, reaching and justifying measures for public health, public safety, public morals, and the general welfare. 11

8
It bears stressing that police power is lodged primarily in the National Legislature. 12 It cannot be exercised by any group or body of individuals not
possessing legislative power. 13 The National Legislature, however, may delegate this power to the President and administrative boards as well as
the lawmaking bodies of municipal corporations or local government units. 14 Once delegated, the agents can exercise only such legislative powers
as are conferred on them by the national lawmaking body. 15
A local government is a "political subdivision of a nation or state which is constituted by law and has substantial control of local affairs." 16 The Local
Government Code of 1991 defines a local government unit as a "body politic and corporate." 17 — one endowed with powers as a political subdivision
of the National Government and as a corporate entity representing the inhabitants of its territory. 18 Local government units are the provinces, cities,
municipalities and barangays. 19 They are also the territorial and political subdivisions of the state. 20
Our Congress delegated police power to the local government units in the Local Government Code of 1991 . This delegation is found in Section 16 of
the same Code, known as the general welfare clause, viz:
Sec. 16. General Welfare. — Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well
as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the
general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation
and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the
development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. 21
Local government units exercise police power through their respective legislative bodies . The legislative body of the provincial government is
the sangguniang panlalawigan, that of the city government is the sangguniang panlungsod, that of the municipal government is the sangguniang
bayan, and that of the barangay is the sangguniang barangay. The Local Government Code of 1991 empowers the sangguniang
panlalawigan, sangguniang panlungsod and sangguniang bayan to "enact ordinances, approve resolutions and appropriate funds for the general
welfare of the [province, city or municipality, as the case may be], and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of
the corporate powers of the [province, city municipality] provided under the Code . . . " 22 The same Code gives the sangguniang barangay the power
to "enact ordinances as may be necessary to discharge the responsibilities conferred upon it by law or ordinance and to promote the general welfare
of the inhabitants thereon." 23
Metropolitan or Metro Manila is a body composed of several local government units — i.e., twelve (12) cities and five (5) municipalities, namely, the
cities of Caloocan, Manila, Mandaluyong, Makati, Pasay, Pasig, Quezon, Muntinlupa, Las Pinas, Marikina, Paranaque and Valenzuela, and the
municipalities of Malabon, Navotas, Pateros, San Juan and Taguig. With the passage of Republic Act (R. A.) No. 7924 24 in 1995, Metropolitan
Manila was declared as a "special development and administrative region" and the Administration of "metro-wide" basic services affecting the region
placed under "a development authority" referred to as the MMDA. 25
"Metro-wide services" are those "services which have metro-wide impact and transcend local political boundaries or entail huge expenditures such
that it would not be viable for said services to be provided by the individual local government units comprising Metro Manila." 26 There are seven (7)
basic metro-wide services and the scope of these services cover the following: (1) development planning; (2) transport and traffic management; (3)
solid waste disposal and management; (4) flood control and sewerage management; (5) urban renewal, zoning and land use planning, and shelter
services; (6) health and sanitation, urban protection and pollution control; and (7) public safety. The basic service of transport and traffic
management includes the following:
(b) Transport and traffic management which include the formulation , coordination, and monitoring of policies, standards, programs and projects to
rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares, and promotion of safe and convenient movement
of persons and goods; provision for the mass transport system and the institution of a system to regulate road users ; administration and
implementation of all traffic enforcement operations, traffic engineering services and traffic education programs , including the institution of a single
ticketing system in Metropolitan Manila;" 27
In the delivery of the seven (7) basic services , the MMDA has the following powers and functions:
Sec. 5. Functions and powers of the Metro Manila Development Authority . — The MMDA shall:
(a) Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for the delivery of metro-wide services,
land use and physical development within Metropolitan Manila, consistent with national development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-wide services which shall indicate sources
and uses of funds for priority programs and projects, and which shall include the packaging of projects and presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services under its jurisdiction, subject to the
approval of the Council. For this purpose, MMDA can create appropriate project management offices;
(d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify bottlenecks and adopt solutions to
problems of implementation;
(e) The MMDA shall set the policies concerning traffic in Metro Manila , and shall coordinate and regulate the implementation of all programs and
projects concerning traffic management, specifically pertaining to enforcement, engineering and education. Upon request, it shall be extended
assistance and cooperation, including but not limited to, assignment of personnel, by all other government agencies and offices concerned ;
(f) Install and administer a single ticketing system , fix, impose and collect fines and penalties for all kinds of violations of traffic rules and
regulations, whether moving or non-moving in nature, and confiscate and suspend or revoke drivers' licenses in the enforcement of such traffic laws
and regulations, the provisions of RA 4136 and PD 1605 to the contrary notwithstanding . For this purpose, the Authority shall impose all traffic laws
and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local government
units, duly licensed security guards, or members of non-governmental organizations to whom may be delegated certain authority , subject to such
conditions and requirements as the Authority may impose; and
(g) Perform other related functions required to achieve the objectives of the MMDA, including the undertaking of delivery of basic services to the local
government units, when deemed necessary subject to prior coordination with and consent of the local government unit concerned.
The implementation of the MMDA's plans, programs and projects is undertaken by the local government units, national government agencies,
accredited people's organizations, non-governmental organizations, and the private sector as well as by the MMDA itself. For this purpose, the
MMDA has the power to enter into contracts, memoranda of agreement and other arrangements with these bodies for the delivery of the required
services Metro Manila. 28
The governing board of the MMDA is the Metro Manila Council. The Council is composed of the mayors of the component 12 cities and 5
municipalities, the president of the Metro Manila Vice-Mayors' League and the president of the Metro Manila Councilors' League. 29 The Council is
headed by Chairman who is appointed by the President and vested with the rank of cabinet member. As the policy-making body of the MMDA, the
Metro Manila Council approves metro-wide plans, programs and projects, and issues the necessary rules and regulations for the implementation of
said plans; it approves the annual budget of the MMDA and promulgate the rules and regulations for the delivery of basic services, collection of
service and regulatory fees, fines and penalties. These functions are particularly enumerated as follows:
Sec. 6. Functions of the Metro Manila Council. —
(a) The Council shall be the policy-making body of the MMDA;

9
(b) It shall approve metro-wide plans, programs and projects and issue rules and regulations deemed necessary by the MMDA to carry out the
purposes of this Act;
(c) It may increase the rate of allowances and per diems of the members of the Council to be effective during the term of the succeeding Council. It
shall fix the compensation of the officers and personnel of the MMDA, and approve the annual budget thereof for submission to the Department of
Budget and Management (DBM);
(d) It shall promulgate rules and regulations and set policies and standards for metro-wide application governing the delivery of basic services,
prescribe and collect service and regulatory fees, and impose and collect fines and penalties.
Clearly, the scope of the MMDA's function is limited to the delivery of the seven (7) basic services. One of these is transport and traffic management
which includes the formulation and monitoring of policies, standards and projects to rationalize the existing transport operations, infrastructure
requirements, the use of thoroughfares and promotion of the safe movement of persons and goods. It also covers the mass transport system and the
institution of a system of road regulation, the administration of all traffic enforcement operations, traffic engineering services and traffic education
programs, including the institution of a single ticketing system in Metro Manila for traffic violations. Under the service, the MMDA is expressly
authorized "to set the policies concerning traffic" and "coordinate and regulate the implementation of all traffic management programs." In addition,
the MMDA may "install and administer a single ticketing system," fix, impose and collect fines and penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts: formulation, coordination, regulation, implementation, preparation,
management, monitoring, setting of policies, installation of a system and administration. There is no syllable in R.A. No. 7924 that grants the MMDA
police power, let alone legislative power. Even the Metro Manila Council has not been delegated any legislative power . Unlike the legislative bodies
of the local government units, there is no provision in R.A. No. 7924 that empowers the MMDA or its Council to "enact ordinances, approve
resolutions appropriate funds for the general welfare" of the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, "development
authority." 30 It is an agency created for the purpose of laying down policies and coordinating with the various national government agencies, people's
organizations, non-governmental organizations and the private sector for the efficient and expeditious delivery of basic services in the vast
metropolitan area. All its functions are administrative in nature and these are actually summed up in the charter itself, viz:
Sec. 2. Creation of the Metropolitan Manila Development Authority . — . . . .
The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise regulatory and supervisory authority over the
delivery of metro-wide services within Metro Manila, without diminution of the autonomy of the local government units concerning purely local
matters. 31
Petitioner cannot seek refuge in the cases of Sangalang v. Intermediate Appellate Court 32 where we upheld a zoning ordinance issued by the Metro
Manila Commission (MMC), the predecessor of the MMDA, as an exercise of police power. The first Sangalang decision was on the merits of the
petition, 33 while the second decision denied reconsideration of the first case and in addition discussed the case of Yabut v. Court of Appeals. 34
Sangalang v. IAC involved five (5) consolidated petitions filed by respondent BAVA and three residents of Bel-Air Village against other residents of
the Village and the Ayala Corporation, formerly the Makati Development Corporation, as the developer of the subdivision. The petitioners sought to
enforce certain restrictive easements in the deeds of sale over their respective lots in the subdivision. These were the prohibition on the setting up of
commercial and advertising signs on the lots, and the condition that the lots be used only for residential purposes. Petitioners alleged that
respondents, who were residents along Jupiter Street of the subdivision, converted their residences into commercial establishments in violation of
the "deed restrictions," and that respondent Ayala Corporation ushered in the full commercialization" of Jupiter Street by tearing down the perimeter
wall that separated the commercial from the residential section of the village. 35
The petitions were dismissed based on Ordinance No. 81 of the Municipal Council of Makati and Ordinance No. 81-01 of the Metro Manila
Commission (MMC). Municipal Ordinance No. 81 classified Bel-Air Village as a Class A Residential Zone, with its boundary in the south extending to
the center line of Jupiter Street. The Municipal Ordinance was adopted by the MMC under the Comprehensive Zoning Ordinance for the National
Capital Region and promulgated as MMC Ordinance No. 81-01. Bel-Air Village was indicated therein as bounded by Jupiter Street and the block
adjacent thereto was classified as a High Intensity Commercial Zone. 36
We ruled that since both Ordinances recognized Jupiter Street as the boundary between Bel-Air Village and the commercial district, Jupiter Street
was not for the exclusive benefit of Bel-Air residents. We also held that the perimeter wall on said street was constructed not to separate the
residential from the commercial blocks but simply for security reasons, hence, in tearing down said wall, Ayala Corporation did not violate the "deed
restrictions" in the deeds of sale.
We upheld the ordinances, specifically MMC Ordinance No. 81-01, as a legitimate exercise of police power. 37 The power of the MMC and the Makati
Municipal Council to enact zoning ordinances for the general welfare prevailed over the "deed restrictions".
In the second Sangalang/Yabut decision, we held that the opening of Jupiter Street was warranted by the demands of the common good in terms of
"traffic decongestion and public convenience." Jupiter was opened by the Municipal Mayor to alleviate traffic congestion along the public streets
adjacent to the Village. 38 The same reason was given for the opening to public vehicular traffic of Orbit Street, a road inside the same village. The
destruction of the gate in Orbit Street was also made under the police power of the municipal government. The gate, like the perimeter wall along
Jupiter, was a public nuisance because it hindered and impaired the use of property, hence, its summary abatement by the mayor was proper and
legal. 39
Contrary to petitioner's claim, the two Sangalang cases do not apply to the case at bar . Firstly, both involved zoning ordinances passed by the
municipal council of Makati and the MMC. In the instant case, the basis for the proposed opening of Neptune Street is contained in the notice of
December 22, 1995 sent by petitioner to respondent BAVA, through its president. The notice does not cite any ordinance or law, either by the
Sangguniang Panlungsod of Makati City or by the MMDA, as the legal basis for the proposed opening of Neptune Street. Petitioner MMDA simply
relied on its authority under its charter "to rationalize the use of roads and/or thoroughfares for the safe and convenient movement of persons."
Rationalizing the use of roads and thoroughfares is one of the acts that fall within the scope of transport and traffic management. By no stretch of the
imagination, however, can this be interpreted as an express or implied grant of ordinance-making power, much less police power.
Secondly, the MMDA is not the same entity as the MMC in Sangalang. Although the MMC is the forerunner of the present MMDA, an examination of
Presidential Decree (P. D.) No. 824, the charter of the MMC, shows that the latter possessed greater powers which were not bestowed on the
present MMDA.
Metropolitan Manila was first created in 1975 by Presidential Decree (P.D.) No. 824. It comprised the Greater Manila Area composed of the
contiguous four (4) cities of Manila, Quezon, Pasay and Caloocan, and the thirteen (13) municipalities of Makati, Mandaluyong, San Juan, Las Pinas,
Malabon, Navotas, Pasig, Pateros, Paranaque, Marikina, Muntinlupa and Taguig in the province of Rizal, and Valenzuela in the province of
Bulacan. 40 Metropolitan Manila was created as a response to the finding that the rapid growth of population and the increase of social and economic
requirements in these areas demand a call for simultaneous and unified development; that the public services rendered by the respective local
governments could be administered more efficiently and economically if integrated under a system of central planning; and this coordination,
"especially in the maintenance of peace and order and the eradication of social and economic ills that fanned the flames of rebellion and discontent
[were] part of reform measures under Martial Law essential to the safety and security of the State." 41
Metropolitan Manila was established as a "public corporation" with the following powers:
Sec. 1. Creation of the Metropolitan Manila. — There is hereby created a public corporation, to be known as the Metropolitan Manila, vested with
powers and attributes of a corporation including the power to make contracts , sue and be sued, acquire, purchase, expropriate, hold, transfer and

10
dispose of property and such other powers as are necessary to carry out its purposes . The Corporation shall be administered by a Commission
created under this Decree. 42
The administration of Metropolitan Manila was placed under the Metro Manila Commission (MMC) vested with the following powers:
Sec. 4. Powers and Functions of the Commission. — The Commission shall have the following powers and functions:
1. To act as a central government to establish and administer programs and provide services common to the area;
2. To levy and collect taxes and special assessments, borrow and expend money and issue bonds, revenue certificates, and other obligations of
indebtedness. Existing tax measures should, however, continue to be operative until otherwise modified or repealed by the Commission;
3. To charge and collect fees for the use of public service facilities;
4. To appropriate money for the operation of the metropolitan government and review appropriations for the city and municipal units within its
jurisdiction with authority to disapprove the same if found to be not in accordance with the established policies of the Commission, without prejudice
to any contractual obligation of the local government units involved existing at the time of approval of this Decree;
5. To review, amend, revise or repeal all ordinances, resolutions and acts of cities and municipalities within Metropolitan Manila;
6. To enact or approve ordinances, resolutions and to fix penalties for any violation thereof which shall not exceed a fine of P10,000.00 or
imprisonment of six years or both such fine and imprisonment for a single offense;
7. To perform general administrative, executive and policy-making functions;
8. To establish a fire control operation center, which shall direct the fire services of the city and municipal governments in the metropolitan area;
9. To establish a garbage disposal operation center, which shall direct garbage collection and disposal in the metropolitan area;
10. To establish and operate a transport and traffic center, which shall direct traffic activities;
11. To coordinate and monitor governmental and private activities pertaining to essential services such as transportation, flood control and drainage,
water supply and sewerage, social, health and environmental services, housing, park development, and others;
12. To insure and monitor the undertaking of a comprehensive social, economic and physical planning and development of the area;
13. To study the feasibility of increasing barangay participation in the affairs of their respective local governments and to propose to the President of
the Philippines definite programs and policies for implementation;
14. To submit within thirty (30) days after the close of each fiscal year an annual report to the President of the Philippines and to submit a periodic
report whenever deemed necessary; and
15. To perform such other tasks as may be assigned or directed by the President of the Philippines.
The MMC was the "central government" of Metro Manila for the purpose of establishing and administering programs providing services common to
the area. As a "central government" it had the power to levy and collect taxes and special assessments, the power to charge and collect fees; the
power to appropriate money for its operation, and at the same time, review appropriations for the city and municipal units within its jurisdiction. It was
bestowed the power to enact or approve ordinances, resolutions and fix penalties for violation of such ordinances and resolutions. It also had the
power to review, amend, revise or repeal all ordinances, resolutions and acts of any of the four (4) cities and thirteen (13) municipalities comprising
Metro Manila.
P.D. No. 824 further provided:
Sec. 9. Until otherwise provided, the governments of the four cities and thirteen municipalities in the Metropolitan Manila shall continue to exist in
their present form except as may be inconsistent with this Decree. The members of the existing city and municipal councils in Metropolitan Manila
shall, upon promulgation of this Decree, and until December 31, 1975, become members of the Sangguniang Bayan which is hereby created for
every city and municipality of Metropolitan Manila.
In addition, the Sangguniang Bayan shall be composed of as many barangay captains as may be determined and chosen by the Commission, and
such number of representatives from other sectors of the society as may be appointed by the President upon recommendation of the Commission.
xxx xxx xxx
The Sangguniang Bayan may recommend to the Commission ordinances, resolutions or such measures as it may adopt; Provided, that no such
ordinance, resolution or measure shall become effective, until after its approval by the Commission; and Provided further, that the power to impose
taxes and other levies, the power to appropriate money and the power to pass ordinances or resolutions with penal sanctions shall be vested
exclusively in the Commission.
The creation of the MMC also carried with it the creation of the Sangguniang Bayan . This was composed of the members of the component city and
municipal councils, barangay captains chosen by the MMC and sectoral representatives appointed by the President. The Sangguniang Bayan had
the power to recommend to the MMC the adoption of ordinances, resolutions or measures. It was the MMC itself, however, that possessed
legislative powers. All ordinances, resolutions and measures recommended by the Sangguniang Bayan were subject to the MMC's approval.
Moreover, the power to impose taxes and other levies, the power to appropriate money, and the power to pass ordinances or resolutions with penal
sanctions were vested exclusively in the MMC.
Thus, Metropolitan Manila had a "central government," i.e., the MMC which fully possessed legislative police powers. Whatever legislative powers
the component cities and municipalities had were all subject to review and approval by the MMC.
After President Corazon Aquino assumed power, there was a clamor to restore the autonomy of the local government units in Metro Manila. Hence,
Sections 1 and 2 of Article X of the 1987 Constitution provided:
Sec. 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities and barangays. There shall
be autonomous regions in Muslim Mindanao and the Cordilleras as herein provided.
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
The Constitution, however, recognized the necessity of creating metropolitan regions not only in the existing National Capital Region but also in
potential equivalents in the Visayas and Mindanao. 43 Section 11 of the same Article X thus provided:
Sec. 11. The Congress may, by law, create special metropolitan political subdivisions, subject to a plebiscite as set forth in Section 10 hereof. The
component cities and municipalities shall retain their basic autonomy and shall be entitled to their own local executives and legislative assemblies.
The jurisdiction of the metropolitan authority that will thereby be created shall be limited to basic services requiring coordination.
Constitution itself expressly provides that Congress may, by law, create "special metropolitan political subdivisions" which shall be subject to
approval by a majority of the votes cast in a plebiscite in the political units directly affected; the jurisdiction of this subdivision shall be limited to basic
services requiring coordination; and the cities and municipalities comprising this subdivision shall retain their basic services requiring coordination;
and the cities and municipalities comprising this subdivision shall retain their basic autonomy and their own local executive and legislative
assemblies. 44 Pending enactment of this law, the Transitory Provisions of the Constitution gave the President of the Philippines the power to
constitute the Metropolitan Authority, viz:
Sec. 8. Until otherwise provided by Congress, the President may constitute the Metropolitan Authority to be composed of the heads of all local
government units comprising the Metropolitan Manila area. 45
In 1990, President Aquino issued Executive Order (E. O.) No. 392 and constituted the Metropolitan Manila Authority (MMA). The powers and
functions of the MMC were devolved to the MMA. 46 It ought to be stressed, however, that not all powers and functions of the MMC were passed to
the MMA. The MMA's power was limited to the "delivery of basic urban services requiring coordination in Metropolitan Manila." 47 The MMA's

11
governing body, the Metropolitan Manila Council, although composed of the mayors of the component cities and municipalities, was merely given
power of: (1) formulation of policies on the delivery of basic services requiring coordination and consolidation; and (2) promulgation resolutions and
other issuances, approval of a code of basic services and the exercise of its rule-making power. 48
Under the 1987 Constitution, the local government units became primarily responsible for the governance of their respective political subdivisions.
The MMA's jurisdiction was limited to addressing common problems involving basic services that transcended local boundaries. It did not have
legislative power. Its power was merely to provide the local government units technical assistance in the preparation of local development plans. Any
semblance of legislative power it had was confined to a "review [of] legislation proposed by the local legislative assemblies to ensure consistency
among local governments and with the comprehensive development plan of Metro Manila," and to "advise the local governments accordingly." 49
When R.A. No. 7924 took effect, Metropolitan Manila became a "special development and administrative region" and the MMDA a "special
development authority" whose functions were "without prejudice to the autonomy of the affected local government units." The character of the MMDA
was clearly defined in the legislative debates enacting its charter.
R.A. No. 7924 originated as House Bill No. 14170/11116 and was introduced by several legislators led by Dante Tinga, Roilo Golez and Feliciano
Belmonte. It was presented to the House of Representatives by the Committee on Local Governments chaired by Congressman Ciriaco R. Alfelor.
The bill was a product of Committee consultations with the local government units in the National Capital Region (NCR), with former Chairmen of the
MMC and MMA, 50 and career officials of said agencies. When the bill was first taken up by the Committee on Local Governments, the following
debate took place:
THE CHAIRMAN [Hon. Ciriaco Alfelor]: Okay, Let me explain. This has been debated a long time ago, you know. It's a special . . . we can create a
special metropolitan political subdivision.
Actually, there are only six (6) political subdivisions provided for in the Constitution: barangay, municipality, city, province, and we have the
Autonomous Region of Mindanao and we have the Cordillera. So we have 6. Now. . . . .
HON. [Elias] LOPEZ: May I interrupt, Mr. Chairman. In the case of the Autonomous Region, that is also specifically mandated by the Constitution.
THE CHAIRMAN: That's correct. But it is considered to be a political subdivision. What is the meaning of a political subdivision? Meaning to say, that
it has its own government, it has its own political personality, it has the power to tax, and all governmental powers: police power and everything. All
right. Authority is different; because it does not have its own government. It is only a council, it is an organization of political subdivision, powers, "no,
which is not imbued with any political power.
If you go over Section 6, where the powers and functions of the Metro Manila Development Authority, it is purely coordinative. And it provides here
that the council is policy-making. All right.
Under the Constitution is a Metropolitan Authority with coordinative power. Meaning to say, it coordinates all of the different basic services which
have to be delivered to the constituency. All right.
There is now a problem. Each local government unit is given its respective . . . as a political subdivision. Kalookan has its powers, as provided for
and protected and guaranteed by the Constitution. All right, the exercise. However, in the exercise of that power, it might be deleterious and
disadvantageous to other local government units. So, we are forming an authority where all of these will be members and then set up a policy in
order that the basic services can be effectively coordinated. All right.
Of course, we cannot deny that the MMDA has to survive. We have to provide some funds, resources. But it does not possess any political power.
We do not elect the Governor. We do not have the power to tax. As a matter of fact, I was trying to intimate to the author that it must have the power
to sue and be sued because it coordinates. All right. It coordinates practically all these basic services so that the flow and the distribution of the basic
services will be continuous. Like traffic, we cannot deny that. It's before our eyes. Sewerage, flood control, water system, peace and order, we
cannot deny these. It's right on our face. We have to look for a solution. What would be the right solution? All right, we envision that there should be a
coordinating agency and it is called an authority. All right, if you do not want to call it an authority, it's alright. We may call it a council or maybe a
management agency.
xxx xxx x x x 51
Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is that given to the Metro Manila Council to promulgate
administrative rules and regulations in the implementation of the MMDA's functions. There is no grant of authority to enact ordinances and
regulations for the general welfare of the inhabitants of the metropolis. This was explicitly stated in the last Committee deliberations prior to the bill's
presentation to Congress. Thus:
THE CHAIRMAN: Yeah, but we have to go over the suggested revision. I think this was already approved before, but it was reconsidered in view of
the proposals, set-up, to make the MMDA stronger. Okay, so if there is no objection to paragraph "f". . . And then next is paragraph "b," under Section
6. "It shall approve metro-wide plans, programs and projects and issue ordinances or resolutions deemed necessary by the MMDA to carry out the
purposes of this Act." Do you have the powers? Does the MMDA... because that takes the form of a local government unit, a political subdivision .
HON. [Feliciano] BELMONTE: Yes, I believe so, your Honor. When we say that it has the policies, it's very clear that those policies must be followed.
Otherwise, what's the use of empowering it to come out with policies. Now, the policies may be in the form of a resolution or it may be in the form of
a ordinance. The term "ordinance" in this case really gives it more teeth, your honor. Otherwise, we are going to see a situation where you have the
power to adopt the policy but you cannot really make it stick as in the case now, and I think here is Chairman Bunye. I think he will agree that that is
the case now. You've got the power to set a policy, the body wants to follow your policy, then we say let's call it an ordinance and see if they will not
follow it.
THE CHAIRMAN: That's very nice. I like that. However, there is a constitutional impediment. 1âwphi1 You are making this MMDA a political
subdivision. The creation of the MMDA would be subject to a plebiscite. That is what I'm trying to avoid. I've been trying to avoid this kind of
predicament. Under the Constitution it states: if it is a political subdivision, once it is created it has to be subject to a plebiscite. I'm trying to make this
as administrative. That's why we place the Chairman as a cabinet rank.
HON. BELMONTE: All right, Mr. Chairman, okay, what you are saying there is . . . . .
THE CHAIRMAN: In setting up ordinances, it is a political exercise, Believe me.
HON. [Elias] LOPEZ: Mr. Chairman, it can be changed into issuances of rules and regulations. That would be . . . it shall also be enforced.
HON. BELMONTE: Okay, I will . . . .
HON. LOPEZ: And you can also say that violation of such rule, you impose a sanction. But you know, ordinance has a different legal connotation.
HON. BELMONTE: All right, I defer to that opinion, your Honor.
THE CHAIRMAN: So instead of ordinances, say rules and regulations.
HON. BELMONTE: Or resolutions. Actually, they are actually considering resolutions now.
THE CHAIRMAN: Rules and resolutions.
HON. BELMONTE: Rules, regulations and resolutions. 52
The draft of H. B. No. 14170/11116 was presented by the Committee to the House of Representatives. The explanatory note to the bill stated that the
proposed MMDA is a "development authority" which is a "national agency, not a political government unit." 53 The explanatory note was adopted as
the sponsorship speech of the Committee on Local Governments. No interpellations or debates were made on the floor and no amendments
introduced. The bill was approved on second reading on the same day it was presented. 54

12
When the bill was forwarded to the Senate, several amendments were made. 1âwphi1 These amendments, however, did not affect the nature of the
MMDA as originally conceived in the House of Representatives. 55
It is thus beyond doubt that the MMDA is not a local government unit or a public corporation endowed with legislative power. It is not even a "special
metropolitan political subdivision" as contemplated in Section 11, Article X of the Constitution. The creation of a "special metropolitan political
subdivision" requires the approval by a majority of the votes cast in a plebiscite in the political units directly affected." 56 R. A. No. 7924 was not
submitted to the inhabitants of Metro Manila in a plebiscite. The Chairman of the MMDA is not an official elected by the people, but appointed by the
President with the rank and privileges of a cabinet member. In fact, part of his function is to perform such other duties as may be assigned to him by
the President, 57 whereas in local government units, the President merely exercises supervisory authority. This emphasizes the administrative
character of the MMDA.
Clearly then, the MMC under P.D. No. 824 is not the same entity as the MMDA under R.A. No. 7924. Unlike the MMC, the MMDA has no power to
enact ordinances for the welfare of the community. It is the local government units, acting through their respective legislative councils, that possess
legislative power and police power. In the case at bar, the Sangguniang Panlungsod of Makati City did not pass any ordinance or resolution ordering
the opening of Neptune Street, hence, its proposed opening by petitioner MMDA is illegal and the respondent Court of Appeals did not err in so
ruling. We desist from ruling on the other issues as they are unnecessary.
We stress that this decision does not make light of the MMDA's noble efforts to solve the chaotic traffic condition in Metro Manila. Everyday, traffic
jams and traffic bottlenecks plague the metropolis. Even our once sprawling boulevards and avenues are now crammed with cars while city streets
are clogged with motorists and pedestrians. Traffic has become a social malaise affecting our people's productivity and the efficient delivery of goods
and services in the country. The MMDA was created to put some order in the metropolitan transportation system but unfortunately the powers
granted by its charter are limited. Its good intentions cannot justify the opening for public use of a private street in a private subdivision without any
legal warrant. The promotion of the general welfare is not antithetical to the preservation of the rule of law. 1âwphi1.nêt
IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 39549 are affirmed.
SO ORDERED.

13
 5. G.R. No. 118127 April 12, 2005
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila, HON. JOSELITO L. ATIENZA, in his capacity as Vice-
Mayor of the City of Manila and Presiding Officer of the City Council of Manila, HON. ERNESTO A. NIEVA, HON. GONZALO P.
GONZALES, HON. AVELINO S. CAILIAN, HON. ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO, HON. HONORIO U. LOPEZ,
HON. FRANCISCO G. VARONA, JR., HON. ROMUALDO S. MARANAN, HON. NESTOR C. PONCE, JR., HON. HUMBERTO B.
BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON. ROMEO G. RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE
JESUS, HON. BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON. VICTORIANO
A. MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P. NIETO, HON. DANILO V. ROLEDA, HON. GERINO A.
TOLENTINO, JR., HON. MA. PAZ E. HERRERA, HON. JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q.
BUTIONG, HON. ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON. MA. CORAZON R. CABALLES, HON. CASIMIRO C.
SISON, HON. BIENVINIDO M. ABANTE, JR., HON. MA. LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F.
RIVERA, HON. LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their capacity as councilors of the City of Manila, Petitioner,
vs.
HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE TOURIST DEVELOPMENT
CORPORATION, Respondents.
DECISION
TINGA, J .:
I know only that what is moral is what you feel good after and what is immoral is what you feel bad after.
Ernest Hermingway
Death in the Afternoon, Ch. 1
It is a moral and political axiom that any dishonorable act, if performed by oneself, is less immoral than if performed by someone else, who would be
well-intentioned in his dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch. I
The Court's commitment to the protection of morals is secondary to its fealty to the fundamental law of the land. It is foremost a guardian of the
Constitution but not the conscience of individuals. And if it need be, the Court will not hesitate to "make the hammer fall, and heavily" in the words of
Justice Laurel, and uphold the constitutional guarantees when faced with laws that, though not lacking in zeal to promote morality, nevertheless fail
to pass the test of constitutionality.
The pivotal issue in this Petition1 under Rule 45 (then Rule 42) of the Revised Rules on Civil Procedure seeking the reversal of the Decision2 in Civil
Case No. 93-66511 of the Regional Trial Court (RTC) of Manila, Branch 18 (lower court), 3 is the validity of Ordinance No. 7783 (the Ordinance) of the
City of Manila.4
The antecedents are as follows:
Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the business of operating hotels, motels, hostels
and lodging houses.5 It built and opened Victoria Court in Malate which was licensed as a motel although duly accredited with the Department of
Tourism as a hotel.6 On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of Preliminary Injunction and/or Temporary
Restraining Order7 (RTC Petition) with the lower court impleading as defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon.
Joselito L. Atienza, and the members of the City Council of Manila (City Council). MTDC prayed that the Ordinance, insofar as it includes motels and
inns as among its prohibited establishments, be declared invalid and unconstitutional. 8
Enacted by the City Council9 on 9 March 1993 and approved by petitioner City Mayor on 30 March 1993, the said Ordinance is entitled–
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT,
ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND
FOR OTHER PURPOSES.10
The Ordinance is reproduced in full, hereunder:
SECTION 1. Any provision of existing laws and ordinances to the contrary notwithstanding, no person, partnership, corporation or entity shall,
in the Ermita-Malate area bounded by Teodoro M. Kalaw Sr. Street in the North, Taft Avenue in the East, Vito Cruz Street in the South and Roxas
Boulevard in the West, pursuant to P.D. 499 be allowed or authorized to contract and engage in, any business providing certain forms of
amusement, entertainment, services and facilities where women are used as tools in entertainment and which tend to disturb the
community, annoy the inhabitants, and adversely affect the social and moral welfare of the community, such as but not limited to:
1. Sauna Parlors
2. Massage Parlors
3. Karaoke Bars
4. Beerhouses
5. Night Clubs
6. Day Clubs
7. Super Clubs
8. Discotheques
9. Cabarets
10. Dance Halls
11. Motels
12. Inns
SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of the said officials are prohibited from issuing permits, temporary
or otherwise, or from granting licenses and accepting payments for the operation of business enumerated in the preceding section.
SEC. 3. Owners and/or operator of establishments engaged in, or devoted to, the businesses enumerated in Section 1 hereof are hereby given
three (3) months from the date of approval of this ordinance within which to wind up business operations or to transfer to any place
outside of the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area, such as but not
limited to:
1. Curio or antique shop
2. Souvenir Shops
3. Handicrafts display centers
4. Art galleries
5. Records and music shops
6. Restaurants
7. Coffee shops

14
8. Flower shops
9. Music lounge and sing-along restaurants, with well-defined activities for wholesome family entertainment that cater to both local and foreign
clientele.
10. Theaters engaged in the exhibition, not only of motion pictures but also of cultural shows, stage and theatrical plays, art exhibitions, concerts and
the like.
11. Businesses allowable within the law and medium intensity districts as provided for in the zoning ordinances for Metropolitan Manila, except new
warehouse or open-storage depot, dock or yard, motor repair shop, gasoline service station, light industry with any machinery, or funeral
establishments.
SEC. 4. Any person violating any provisions of this ordinance, shall upon conviction, be punished by imprisonment of one (1) year or
fine of FIVE THOUSAND (P5,000.00) PESOS, or both, at the discretion of the Court, PROVIDED, that in case of juridical person, the
President, the General Manager, or person-in-charge of operation shall be liable thereof; PROVIDED FURTHER, that in case of subsequent
violation and conviction, the premises of the erring establishment shall be closed and padlocked permanently.
SEC. 5. This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session today, March 9, 1993.
Approved by His Honor, the Mayor on March 30, 1993. (Emphasis supplied)
In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its enumeration of prohibited establishments, motels
and inns such as MTDC's Victoria Court considering that these were not establishments for "amusement" or "entertainment" and they were not
"services or facilities for entertainment," nor did they use women as "tools for entertainment," and neither did they "disturb the community," "annoy
the inhabitants" or "adversely affect the social and moral welfare of the community." 11
MTDC further advanced that the Ordinance was invalid and unconstitutional for the following reasons: (1) The City Council has no power to prohibit
the operation of motels as Section 458 (a) 4 (iv)12 of the Local Government Code of 1991 (the Code) grants to the City Council only the power to
regulate the establishment, operation and maintenance of hotels, motels, inns, pension houses, lodging houses and other similar establishments; (2)
The Ordinance is void as it is violative of Presidential Decree (P.D.) No. 499 13 which specifically declared portions of the Ermita-Malate area as a
commercial zone with certain restrictions; (3) The Ordinance does not constitute a proper exercise of police power as the compulsory closure of the
motel business has no reasonable relation to the legitimate municipal interests sought to be protected; (4) The Ordinance constitutes an ex post
facto law by punishing the operation of Victoria Court which was a legitimate business prior to its enactment; (5) The Ordinance violates MTDC's
constitutional rights in that: (a) it is confiscatory and constitutes an invasion of plaintiff's property rights; (b) the City Council has no power to find as a
fact that a particular thing is a nuisance per se nor does it have the power to extrajudicially destroy it; and (6) The Ordinance constitutes a denial of
equal protection under the law as no reasonable basis exists for prohibiting the operation of motels and inns, but not pension houses, hotels, lodging
houses or other similar establishments, and for prohibiting said business in the Ermita-Malate area but not outside of this area. 14
In their Answer15 dated 23 July 1993, petitioners City of Manila and Lim maintained that the City Council had the power to "prohibit certain forms of
entertainment in order to protect the social and moral welfare of the community" as provided for in Section 458 (a) 4 (vii) of the Local Government
Code,16 which reads, thus:
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and
in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
....
(4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose
shall:
....
(vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement facilities, including theatrical performances,
circuses, billiard pools, public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement;
regulate such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the
inhabitants, or require the suspension or suppression of the same; or, prohibit certain forms of amusement or entertainment in order to protect the
social and moral welfare of the community.
Citing Kwong Sing v. City of Manila,17 petitioners insisted that the power of regulation spoken of in the above-quoted provision included the power to
control, to govern and to restrain places of exhibition and amusement. 18
Petitioners likewise asserted that the Ordinance was enacted by the City Council of Manila to protect the social and moral welfare of the community
in conjunction with its police power as found in Article III, Section 18(kk) of Republic Act No. 409, 19 otherwise known as the Revised Charter of the
City of Manila (Revised Charter of Manila)20 which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
. . .
Section 18. Legislative powers. – The Municipal Board shall have the following legislative powers:
. . .
(kk) To enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of the prosperity, and the promotion of
the morality, peace, good order, comfort, convenience, and general welfare of the city and its inhabitants, and such others as may be necessary to
carry into effect and discharge the powers and duties conferred by this chapter; and to fix penalties for the violation of ordinances which shall not
exceed two hundred pesos fine or six months' imprisonment, or both such fine and imprisonment, for a single offense.
Further, the petitioners noted, the Ordinance had the presumption of validity; hence, private respondent had the burden to prove its illegality or
unconstitutionality.21
Petitioners also maintained that there was no inconsistency between P.D. 499 and the Ordinance as the latter simply disauthorized certain forms of
businesses and allowed the Ermita-Malate area to remain a commercial zone. 22 The Ordinance, the petitioners likewise claimed, cannot be assailed
as ex post facto as it was prospective in operation.23 The Ordinance also did not infringe the equal protection clause and cannot be denounced as
class legislation as there existed substantial and real differences between the Ermita-Malate area and other places in the City of Manila. 24
On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio) issued an ex-parte temporary restraining order against the
enforcement of the Ordinance.25 And on 16 July 1993, again in an intrepid gesture, he granted the writ of preliminary injunction prayed for by
MTDC.26
After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision, enjoining the petitioners from implementing the Ordinance. The
dispositive portion of said Decision reads:27
WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3], Series of 1993, of the City of Manila null and void, and making
permanent the writ of preliminary injunction that had been issued by this Court against the defendant. No costs.
SO ORDERED.28

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Petitioners filed with the lower court a Notice of Appeal29 on 12 December 1994, manifesting that they are elevating the case to this Court under then
Rule 42 on pure questions of law.30
On 11 January 1995, petitioners filed the present Petition, alleging that the following errors were committed by the lower court in its ruling: (1) It erred
in concluding that the subject ordinance is ultra vires, or otherwise, unfair, unreasonable and oppressive exercise of police power; (2) It erred in
holding that the questioned Ordinance contravenes P.D. 49931 which allows operators of all kinds of commercial establishments, except those
specified therein; and (3) It erred in declaring the Ordinance void and unconstitutional.32
In the Petition and in its Memorandum,33 petitioners in essence repeat the assertions they made before the lower court. They contend that the
assailed Ordinance was enacted in the exercise of the inherent and plenary power of the State and the general welfare clause exercised by local
government units provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and conjunctively, Section 458 (a) 4 (vii) of the Code. 34 They
allege that the Ordinance is a valid exercise of police power; it does not contravene P.D. 499; and that it enjoys the presumption of validity. 35
In its Memorandum36 dated 27 May 1996, private respondent maintains that the Ordinance is ultra vires and that it is void for being repugnant to the
general law. It reiterates that the questioned Ordinance is not a valid exercise of police power; that it is violative of due process, confiscatory and
amounts to an arbitrary interference with its lawful business; that it is violative of the equal protection clause; and that it confers on petitioner City
Mayor or any officer unregulated discretion in the execution of the Ordinance absent rules to guide and control his actions.
This is an opportune time to express the Court's deep sentiment and tenderness for the Ermita-Malate area being its home for several decades. A
long-time resident, the Court witnessed the area's many turn of events. It relished its glory days and endured its days of infamy. Much as the Court
harks back to the resplendent era of the Old Manila and yearns to restore its lost grandeur, it believes that the Ordinance is not the fitting means to
that end. The Court is of the opinion, and so holds, that the lower court did not err in declaring the Ordinance, as it did, ultra vires and therefore null
and void.
The Ordinance is so replete with constitutional infirmities that almost every sentence thereof violates a constitutional provision. The prohibitions and
sanctions therein transgress the cardinal rights of persons enshrined by the Constitution. The Court is called upon to shelter these rights from
attempts at rendering them worthless.
The tests of a valid ordinance are well established. A long line of decisions has held that for an ordinance to be valid, it must not only be within the
corporate powers of the local government unit to enact and must be passed according to the procedure prescribed by law, it must also conform to
the following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be
partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must not be
unreasonable.37
Anent the first criterion, ordinances shall only be valid when they are not contrary to the Constitution and to the laws. 38 The Ordinance must satisfy
two requirements: it must pass muster under the test of constitutionality and the test of consistency with the prevailing laws. That ordinances should
be constitutional uphold the principle of the supremacy of the Constitution. The requirement that the enactment must not violate existing law gives
stress to the precept that local government units are able to legislate only by virtue of their derivative legislative power, a delegation of legislative
power from the national legislature. The delegate cannot be superior to the principal or exercise powers higher than those of the latter. 39
This relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution
strengthening the policy of local autonomy. The national legislature is still the principal of the local government units, which cannot defy its will or
modify or violate it.40
The Ordinance was passed by the City Council in the exercise of its police power, an enactment of the City Council acting as agent of Congress.
Local government units, as agencies of the State, are endowed with police power in order to effectively accomplish and carry out the declared
objects of their creation.41 This delegated police power is found in Section 16 of the Code, known as the general welfare clause, viz:
SECTION 16. General Welfare.Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as
well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the
general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation
and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the
development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.
Local government units exercise police power through their respective legislative bodies; in this case, the sangguniang panlungsod or the city
council. The Code empowers the legislative bodies to "enact ordinances, approve resolutions and appropriate funds for the general welfare of the
province/city/municipality and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of the corporate powers of the
province/city/ municipality provided under the Code.42 The inquiry in this Petition is concerned with the validity of the exercise of such delegated
power.
The Ordinance contravenes
the Constitution
The police power of the City Council, however broad and far-reaching, is subordinate to the constitutional limitations thereon; and is subject to the
limitation that its exercise must be reasonable and for the public good. 43 In the case at bar, the enactment of the Ordinance was an invalid exercise of
delegated power as it is unconstitutional and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the general welfare are essential for
the enjoyment by all the people of the blessings of democracy.44
SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the fundamental equality before the law of women and men. 45
SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of
laws.46
Sec. 9. Private property shall not be taken for public use without just compensation. 47
A. The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is embodied in the fiat "(N)o person shall be deprived of life, liberty or property without due process of
law. . . ."48
There is no controlling and precise definition of due process. It furnishes though a standard to which governmental action should conform in order
that deprivation of life, liberty or property, in each appropriate case, be valid. This standard is aptly described as a responsiveness to the supremacy
of reason, obedience to the dictates of justice, 49 and as such it is a limitation upon the exercise of the police power.50
The purpose of the guaranty is to prevent governmental encroachment against the life, liberty and property of individuals; to secure the individual
from the arbitrary exercise of the powers of the government, unrestrained by the established principles of private rights and distributive justice; to
protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction without a trial and conviction by the ordinary
mode of judicial procedure; and to secure to all persons equal and impartial justice and the benefit of the general law. 51
The guaranty serves as a protection against arbitrary regulation, and private corporations and partnerships are "persons" within the scope of the
guaranty insofar as their property is concerned.52

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This clause has been interpreted as imposing two separate limits on government, usually called "procedural due process" and "substantive due
process."
Procedural due process, as the phrase implies, refers to the procedures that the government must follow before it deprives a person of life, liberty, or
property. Classic procedural due process issues are concerned with what kind of notice and what form of hearing the government must provide when
it takes a particular action.53
Substantive due process, as that phrase connotes, asks whether the government has an adequate reason for taking away a person's life, liberty, or
property. In other words, substantive due process looks to whether there is a sufficient justification for the government's action. 54 Case law in the
United States (U.S.) tells us that whether there is such a justification depends very much on the level of scrutiny used. 55 For example, if a law is in an
area where only rational basis review is applied, substantive due process is met so long as the law is rationally related to a legitimate government
purpose. But if it is an area where strict scrutiny is used, such as for protecting fundamental rights, then the government will meet substantive due
process only if it can prove that the law is necessary to achieve a compelling government purpose. 56
The police power granted to local government units must always be exercised with utmost observance of the rights of the people to due process and
equal protection of the law. Such power cannot be exercised whimsically, arbitrarily or despotically 57 as its exercise is subject to a qualification,
limitation or restriction demanded by the respect and regard due to the prescription of the fundamental law, particularly those forming part of the Bill
of Rights. Individual rights, it bears emphasis, may be adversely affected only to the extent that may fairly be required by the legitimate demands of
public interest or public welfare.58 Due process requires the intrinsic validity of the law in interfering with the rights of the person to his life, liberty and
property.59
Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance, and to free it from the imputation of
constitutional infirmity, not only must it appear that the interests of the public generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals.60 It must be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can
work. A reasonable relation must exist between the purposes of the police measure and the means employed for its accomplishment, for even under
the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded. 61
Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary intrusion into private rights 62 a violation of
the due process clause.
The Ordinance was enacted to address and arrest the social ills purportedly spawned by the establishments in the Ermita-Malate area which are
allegedly operated under the deceptive veneer of legitimate, licensed and tax-paying nightclubs, bars, karaoke bars, girlie houses, cocktail lounges,
hotels and motels. Petitioners insist that even the Court in the case of Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of
Manila63 had already taken judicial notice of the "alarming increase in the rate of prostitution, adultery and fornication in Manila traceable in great part
to existence of motels, which provide a necessary atmosphere for clandestine entry, presence and exit and thus become the ideal haven for
prostitutes and thrill-seekers."64
The object of the Ordinance was, accordingly, the promotion and protection of the social and moral values of the community. Granting for the sake of
argument that the objectives of the Ordinance are within the scope of the City Council's police powers, the means employed for the accomplishment
thereof were unreasonable and unduly oppressive.
It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable regulations looking to the promotion of the moral and
social values of the community. However, the worthy aim of fostering public morals and the eradication of the community's social ills can be achieved
through means less restrictive of private rights; it can be attained by reasonable restrictions rather than by an absolute prohibition. The closing down
and transfer of businesses or their conversion into businesses "allowed" under the Ordinance have no reasonable relation to the accomplishment of
its purposes. Otherwise stated, the prohibition of the enumerated establishments will not per se protect and promote the social and moral welfare of
the community; it will not in itself eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the spread of sexual disease in
Manila.
Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and establishments of the like which the City Council may
lawfully prohibit,65 it is baseless and insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars, night clubs, day
clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is not warranted under the accepted definitions of these terms. The
enumerated establishments are lawful pursuits which are not per se offensive to the moral welfare of the community.
That these are used as arenas to consummate illicit sexual affairs and as venues to further the illegal prostitution is of no moment. We lay stress on
the acrid truth that sexual immorality, being a human frailty, may take place in the most innocent of places that it may even take place in the
substitute establishments enumerated under Section 3 of the Ordinance. If the flawed logic of the Ordinance were to be followed, in the remote
instance that an immoral sexual act transpires in a church cloister or a court chamber, we would behold the spectacle of the City of Manila ordering
the closure of the church or court concerned. Every house, building, park, curb, street or even vehicles for that matter will not be exempt from the
prohibition. Simply because there are no "pure" places where there are impure men. Indeed, even the Scripture and the Tradition of Christians
churches continually recall the presence and universality of sin in man's history.66
The problem, it needs to be pointed out, is not the establishment, which by its nature cannot be said to be injurious to the health or comfort of the
community and which in itself is amoral, but the deplorable human activity that may occur within its premises. While a motel may be used as a venue
for immoral sexual activity, it cannot for that reason alone be punished. It cannot be classified as a house of ill-repute or as a nuisance per se on a
mere likelihood or a naked assumption. If that were so and if that were allowed, then the Ermita-Malate area would not only be purged of its
supposed social ills, it would be extinguished of its soul as well as every human activity, reprehensible or not, in its every nook and cranny would be
laid bare to the estimation of the authorities.
The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as the Ordinance may to shape morality, it should not
foster the illusion that it can make a moral man out of it because immorality is not a thing, a building or establishment; it is in the hearts of men. The
City Council instead should regulate human conduct that occurs inside the establishments, but not to the detriment of liberty and privacy which are
covenants, premiums and blessings of democracy.
While petitioners' earnestness at curbing clearly objectionable social ills is commendable, they unwittingly punish even the proprietors and operators
of "wholesome," "innocent" establishments. In the instant case, there is a clear invasion of personal or property rights, personal in the case of those
individuals desirous of owning, operating and patronizing those motels and property in terms of the investments made and the salaries to be paid to
those therein employed. If the City of Manila so desires to put an end to prostitution, fornication and other social ills, it can instead impose
reasonable regulations such as daily inspections of the establishments for any violation of the conditions of their licenses or permits; it may exercise
its authority to suspend or revoke their licenses for these violations; 67 and it may even impose increased license fees. In other words, there are other
means to reasonably accomplish the desired end.
Means employed are
constitutionally infirm

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The Ordinance disallows the operation of sauna parlors, massage parlors, karaoke bars, beerhouses, night clubs, day clubs, super clubs,
discotheques, cabarets, dance halls, motels and inns in the Ermita-Malate area. In Section 3 thereof, owners and/or operators of the enumerated
establishments are given three (3) months from the date of approval of the Ordinance within which "to wind up business operations or to transfer to
any place outside the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area." Further, it states in
Section 4 that in cases of subsequent violations of the provisions of the Ordinance, the "premises of the erring establishment shall be closed and
padlocked permanently."
It is readily apparent that the means employed by the Ordinance for the achievement of its purposes, the governmental interference itself, infringes
on the constitutional guarantees of a person's fundamental right to liberty and property.
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to exist and the right to be free from arbitrary restraint
or servitude. The term cannot be dwarfed into mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right
of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such restraint as are necessary for the common
welfare."68 In accordance with this case, the rights of the citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn
his livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the concept of liberty. 69
The U.S. Supreme Court in the case of Roth v. Board of Regents,70 sought to clarify the meaning of "liberty." It said:
While the Court has not attempted to define with exactness the liberty. . . guaranteed [by the Fifth and Fourteenth Amendments], the term denotes
not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire
useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to
enjoy those privileges long recognized…as essential to the orderly pursuit of happiness by free men. In a Constitution for a free people, there can be
no doubt that the meaning of "liberty" must be broad indeed.
In another case, it also confirmed that liberty protected by the due process clause includes personal decisions relating to marriage, procreation,
contraception, family relationships, child rearing, and education. In explaining the respect the Constitution demands for the autonomy of the person
in making these choices, the U.S. Supreme Court explained:
These matters, involving the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy,
are central to the liberty protected by the Fourteenth Amendment. At the heart of liberty is the right to define one's own concept of existence, of
meaning, of universe, and of the mystery of human life. Beliefs about these matters could not define the attributes of personhood where they formed
under compulsion of the State.71
Persons desirous to own, operate and patronize the enumerated establishments under Section 1 of the Ordinance may seek autonomy for these
purposes.
Motel patrons who are single and unmarried may invoke this right to autonomy to consummate their bonds in intimate sexual conduct within the
motel's premisesbe it stressed that their consensual sexual behavior does not contravene any fundamental state policy as contained in the
Constitution.72 Adults have a right to choose to forge such relationships with others in the confines of their own private lives and still retain their
dignity as free persons. The liberty protected by the Constitution allows persons the right to make this choice. 73 Their right to liberty under the due
process clause gives them the full right to engage in their conduct without intervention of the government, as long as they do not run afoul of the law.
Liberty should be the rule and restraint the exception.
Liberty in the constitutional sense not only means freedom from unlawful government restraint; it must include privacy as well, if it is to be a
repository of freedom. The right to be let alone is the beginning of all freedomit is the most comprehensive of rights and the right most valued by
civilized men.74
The concept of liberty compels respect for the individual whose claim to privacy and interference demands respect. As the case of Morfe v.
Mutuc,75 borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are indefeasible; indeed, they are so fundamental
that they are the basis on which his civic obligations are built. He cannot abandon the consequences of his isolation, which are, broadly speaking,
that his experience is private, and the will built out of that experience personal to himself. If he surrenders his will to others, he surrenders himself. If
his will is set by the will of others, he ceases to be a master of himself. I cannot believe that a man no longer a master of himself is in any real sense
free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which should be justified by a compelling state
interest. Morfe accorded recognition to the right to privacy independently of its identification with liberty; in itself it is fully deserving of constitutional
protection. Governmental powers should stop short of certain intrusions into the personal life of the citizen. 76
There is a great temptation to have an extended discussion on these civil liberties but the Court chooses to exercise restraint and restrict itself to the
issues presented when it should. The previous pronouncements of the Court are not to be interpreted as a license for adults to engage in criminal
conduct. The reprehensibility of such conduct is not diminished. The Court only reaffirms and guarantees their right to make this choice. Should they
be prosecuted for their illegal conduct, they should suffer the consequences of the choice they have made. That, ultimately, is their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and oppressive as it substantially divests the respondent of the beneficial use of its
property.77 The Ordinance in Section 1 thereof forbids the running of the enumerated businesses in the Ermita-Malate area and in Section 3 instructs
its owners/operators to wind up business operations or to transfer outside the area or convert said businesses into allowed businesses. An ordinance
which permanently restricts the use of property that it can not be used for any reasonable purpose goes beyond regulation and must be recognized
as a taking of the property without just compensation. 78 It is intrusive and violative of the private property rights of individuals.
The Constitution expressly provides in Article III, Section 9, that "private property shall not be taken for public use without just compensation." The
provision is the most important protection of property rights in the Constitution. This is a restriction on the general power of the government to take
property. The constitutional provision is about ensuring that the government does not confiscate the property of some to give it to others. In part too,
it is about loss spreading. If the government takes away a person's property to benefit society, then society should pay. The principal purpose of the
guarantee is "to bar the Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the
public as a whole.79
There are two different types of taking that can be identified. A "possessory" taking occurs when the government confiscates or physically occupies
property. A "regulatory" taking occurs when the government's regulation leaves no reasonable economically viable use of the property. 80
In the landmark case of Pennsylvania Coal v. Mahon,81 it was held that a taking also could be found if government regulation of the use of property
went "too far." When regulation reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and
compensation to support the act. While property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. 82
No formula or rule can be devised to answer the questions of what is too far and when regulation becomes a taking. In Mahon, Justice Holmes
recognized that it was "a question of degree and therefore cannot be disposed of by general propositions." On many other occasions as well, the
U.S. Supreme Court has said that the issue of when regulation constitutes a taking is a matter of considering the facts in each case. The Court asks
whether justice and fairness require that the economic loss caused by public action must be compensated by the government and thus borne by the
public as a whole, or whether the loss should remain concentrated on those few persons subject to the public action. 83

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What is crucial in judicial consideration of regulatory takings is that government regulation is a taking if it leaves no reasonable economically viable
use of property in a manner that interferes with reasonable expectations for use. 84 A regulation that permanently denies all economically beneficial or
productive use of land is, from the owner's point of view, equivalent to a "taking" unless principles of nuisance or property law that existed when the
owner acquired the land make the use prohibitable. 85 When the owner of real property has been called upon to sacrifice all economically beneficial
uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking. 86
A regulation which denies all economically beneficial or productive use of land will require compensation under the takings clause. Where a
regulation places limitations on land that fall short of eliminating all economically beneficial use, a taking nonetheless may have occurred, depending
on a complex of factors including the regulation's economic effect on the landowner, the extent to which the regulation interferes with reasonable
investment-backed expectations and the character of government action. These inquiries are informed by the purpose of the takings clause which is
to prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as
a whole.87
A restriction on use of property may also constitute a "taking" if not reasonably necessary to the effectuation of a substantial public purpose or if it
has an unduly harsh impact on the distinct investment-backed expectations of the owner.88
The Ordinance gives the owners and operators of the "prohibited" establishments three (3) months from its approval within which to "wind up
business operations or to transfer to any place outside of the Ermita-Malate area or convert said businesses to other kinds of business allowable
within the area." The directive to "wind up business operations" amounts to a closure of the establishment, a permanent deprivation of property, and
is practically confiscatory. Unless the owner converts his establishment to accommodate an "allowed" business, the structure which housed the
previous business will be left empty and gathering dust. Suppose he transfers it to another area, he will likewise leave the entire establishment idle.
Consideration must be given to the substantial amount of money invested to build the edifices which the owner reasonably expects to be returned
within a period of time. It is apparent that the Ordinance leaves no reasonable economically viable use of property in a manner that interferes with
reasonable expectations for use.
The second and third options to transfer to any place outside of the Ermita-Malate area or to convert into allowed businessesare confiscatory
as well. The penalty of permanent closure in cases of subsequent violations found in Section 4 of the Ordinance is also equivalent to a "taking" of
private property.
The second option instructs the owners to abandon their property and build another one outside the Ermita-Malate area. In every sense, it qualifies
as a taking without just compensation with an additional burden imposed on the owner to build another establishment solely from his coffers. The
proffered solution does not put an end to the "problem," it merely relocates it. Not only is this impractical, it is unreasonable, onerous and oppressive.
The conversion into allowed enterprises is just as ridiculous. How may the respondent convert a motel into a restaurant or a coffee shop, art gallery
or music lounge without essentially destroying its property? This is a taking of private property without due process of law, nay, even without
compensation.
The penalty of closure likewise constitutes unlawful taking that should be compensated by the government. The burden on the owner to convert or
transfer his business, otherwise it will be closed permanently after a subsequent violation should be borne by the public as this end benefits them as
a whole.
Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A zoning ordinance, although a valid exercise of police power, which
limits a "wholesome" property to a use which can not reasonably be made of it constitutes the taking of such property without just compensation.
Private property which is not noxious nor intended for noxious purposes may not, by zoning, be destroyed without compensation. Such principle
finds no support in the principles of justice as we know them. The police powers of local government units which have always received broad and
liberal interpretation cannot be stretched to cover this particular taking.
Distinction should be made between destruction from necessity and eminent domain. It needs restating that the property taken in the exercise of
police power is destroyed because it is noxious or intended for a noxious purpose while the property taken under the power of eminent domain is
intended for a public use or purpose and is therefore "wholesome." 89 If it be of public benefit that a "wholesome" property remain unused or relegated
to a particular purpose, then certainly the public should bear the cost of reasonable compensation for the condemnation of private property for public
use.90
Further, the Ordinance fails to set up any standard to guide or limit the petitioners' actions. It in no way controls or guides the discretion vested in
them. It provides no definition of the establishments covered by it and it fails to set forth the conditions when the establishments come within its ambit
of prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted power to close down establishments. Ordinances such as this, which
make possible abuses in its execution, depending upon no conditions or qualifications whatsoever other than the unregulated arbitrary will of the city
authorities as the touchstone by which its validity is to be tested, are unreasonable and invalid. The Ordinance should have established a rule by
which its impartial enforcement could be secured.91
Ordinances placing restrictions upon the lawful use of property must, in order to be valid and constitutional, specify the rules and conditions to be
observed and conduct to avoid; and must not admit of the exercise, or of an opportunity for the exercise, of unbridled discretion by the law enforcers
in carrying out its provisions.92
Thus, in Coates v. City of Cincinnati,93 as cited in People v. Nazario,94 the U.S. Supreme Court struck down an ordinance that had made it illegal
for "three or more persons to assemble on any sidewalk and there conduct themselves in a manner annoying to persons passing by." The ordinance
was nullified as it imposed no standard at all "because one may never know in advance what 'annoys some people but does not annoy others.' "
Similarly, the Ordinance does not specify the standards to ascertain which establishments "tend to disturb the community," "annoy the inhabitants,"
and "adversely affect the social and moral welfare of the community." The cited case supports the nullification of the Ordinance for lack of
comprehensible standards to guide the law enforcers in carrying out its provisions.
Petitioners cannot therefore order the closure of the enumerated establishments without infringing the due process clause. These lawful
establishments may be regulated, but not prevented from carrying on their business. This is a sweeping exercise of police power that is a result of a
lack of imagination on the part of the City Council and which amounts to an interference into personal and private rights which the Court will not
countenance. In this regard, we take a resolute stand to uphold the constitutional guarantee of the right to liberty and property.
Worthy of note is an example derived from the U.S. of a reasonable regulation which is a far cry from the ill-considered Ordinance enacted by the
City Council.
In FW/PBS, INC. v. Dallas,95 the city of Dallas adopted a comprehensive ordinance regulating "sexually oriented businesses," which are defined to
include adult arcades, bookstores, video stores, cabarets, motels, and theaters as well as escort agencies, nude model studio and sexual encounter
centers. Among other things, the ordinance required that such businesses be licensed. A group of motel owners were among the three groups of
businesses that filed separate suits challenging the ordinance. The motel owners asserted that the city violated the due process clause by failing to
produce adequate support for its supposition that renting room for fewer than ten (10) hours resulted in increased crime and other secondary effects.
They likewise argued than the ten (10)-hour limitation on the rental of motel rooms placed an unconstitutional burden on the right to freedom of
association. Anent the first contention, the U.S. Supreme Court held that the reasonableness of the legislative judgment combined with a study which
the city considered, was adequate to support the city's determination that motels permitting room rentals for fewer than ten (10 ) hours should be
included within the licensing scheme. As regards the second point, the Court held that limiting motel room rentals to ten (10) hours will have no

19
discernible effect on personal bonds as those bonds that are formed from the use of a motel room for fewer than ten (10) hours are not those that
have played a critical role in the culture and traditions of the nation by cultivating and transmitting shared ideals and beliefs.
The ordinance challenged in the above-cited case merely regulated the targeted businesses. It imposed reasonable restrictions; hence, its validity
was upheld.
The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila ,96 it needs pointing out, is also different from this case
in that what was involved therein was a measure which regulated the mode in which motels may conduct business in order to put an end to practices
which could encourage vice and immorality. Necessarily, there was no valid objection on due process or equal protection grounds as the ordinance
did not prohibit motels. The Ordinance in this case however is not a regulatory measure but is an exercise of an assumed power to prohibit. 97
The foregoing premises show that the Ordinance is an unwarranted and unlawful curtailment of property and personal rights of citizens. For being
unreasonable and an undue restraint of trade, it cannot, even under the guise of exercising police power, be upheld as valid.
B. The Ordinance violates Equal
Protection Clause
Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed.
Similar subjects, in other words, should not be treated differently, so as to give undue favor to some and unjustly discriminate against others. 98 The
guarantee means that no person or class of persons shall be denied the same protection of laws which is enjoyed by other persons or other classes
in like circumstances.99 The "equal protection of the laws is a pledge of the protection of equal laws." 100 It limits governmental discrimination. The
equal protection clause extends to artificial persons but only insofar as their property is concerned. 101
The Court has explained the scope of the equal protection clause in this wise:
… What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure Administration: "The ideal situation is for the law's benefits to be available
to all, that none be placed outside the sphere of its coverage. Only thus could chance and favor be excluded and the affairs of men governed by that
serene and impartial uniformity, which is of the very essence of the idea of law." There is recognition, however, in the opinion that what in fact exists
"cannot approximate the ideal. Nor is the law susceptible to the reproach that it does not take into account the realities of the situation. The
constitutional guarantee then is not to be given a meaning that disregards what is, what does in fact exist. To assure that the general welfare be
promoted, which is the end of law, a regulatory measure may cut into the rights to liberty and property. Those adversely affected may under such
circumstances invoke the equal protection clause only if they can show that the governmental act assailed, far from being inspired by the attainment
of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason." Classification is thus
not ruled out, it being sufficient to quote from the Tuason decision anew "that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the
liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every
person under circumstances which, if not identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class
should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. 102
Legislative bodies are allowed to classify the subjects of legislation. If the classification is reasonable, the law may operate only on some and not all
of the people without violating the equal protection clause. 103 The classification must, as an indispensable requisite, not be arbitrary. To be valid, it
must conform to the following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class. 104
In the Court's view, there are no substantial distinctions between motels, inns, pension houses, hotels, lodging houses or other similar
establishments. By definition, all are commercial establishments providing lodging and usually meals and other services for the public. No reason
exists for prohibiting motels and inns but not pension houses, hotels, lodging houses or other similar establishments. The classification in the instant
case is invalid as similar subjects are not similarly treated, both as to rights conferred and obligations imposed. It is arbitrary as it does not rest on
substantial distinctions bearing a just and fair relation to the purpose of the Ordinance.
The Court likewise cannot see the logic for prohibiting the business and operation of motels in the Ermita-Malate area but not outside of this area. A
noxious establishment does not become any less noxious if located outside the area.
The standard "where women are used as tools for entertainment" is also discriminatory as prostitutionone of the hinted ills the Ordinance aims to
banishis not a profession exclusive to women. Both men and women have an equal propensity to engage in prostitution. It is not any less grave a
sin when men engage in it. And why would the assumption that there is an ongoing immoral activity apply only when women are employed and be
inapposite when men are in harness? This discrimination based on gender violates equal protection as it is not substantially related to important
government objectives.105 Thus, the discrimination is invalid.
Failing the test of constitutionality, the Ordinance likewise failed to pass the test of consistency with prevailing laws.
C. The Ordinance is repugnant
to general laws; it is ultra vires
The Ordinance is in contravention of the Code as the latter merely empowers local government units to regulate, and not prohibit, the establishments
enumerated in Section 1 thereof.
The power of the City Council to regulate by ordinances the establishment, operation, and maintenance of motels, hotels and other similar
establishments is found in Section 458 (a) 4 (iv), which provides that:
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and
in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
. . .
(4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose
shall:
. . .
(iv) Regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses,
and other similar establishments, including tourist guides and transports . . . .
While its power to regulate the establishment, operation and maintenance of any entertainment or amusement facilities, and to prohibit certain forms
of amusement or entertainment is provided under Section 458 (a) 4 (vii) of the Code, which reads as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and
in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
. . .

20
(4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose
shall:
. . .
(vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement facilities, including theatrical performances,
circuses, billiard pools, public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement;
regulate such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the
inhabitants, or require the suspension or suppression of the same; or, prohibit certain forms of amusement or entertainment in order to protect the
social and moral welfare of the community.
Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments, the
only power of the City Council to legislate relative thereto is to regulate them to promote the general welfare. The Code still withholds from cities the
power to suppress and prohibit altogether the establishment, operation and maintenance of such establishments. It is well to recall the rulings of the
Court in Kwong Sing v. City of Manila106 that:
The word "regulate," as used in subsection (l), section 2444 of the Administrative Code, means and includes the power to control, to govern, and to
restrain; but "regulate" should not be construed as synonymous with "suppress" or "prohibit." Consequently, under the power to regulate laundries,
the municipal authorities could make proper police regulations as to the mode in which the employment or business shall be exercised. 107
And in People v. Esguerra,108 wherein the Court nullified an ordinance of the Municipality of Tacloban which prohibited the selling, giving and
dispensing of liquor ratiocinating that the municipality is empowered only to regulate the same and not prohibit. The Court therein declared that:
(A)s a general rule when a municipal corporation is specifically given authority or power to regulate or to license and regulate the liquor traffic, power
to prohibit is impliedly withheld.109
These doctrines still hold contrary to petitioners' assertion 110 that they were modified by the Code vesting upon City Councils prohibitory powers.
Similarly, the City Council exercises regulatory powers over public dancing schools, public dance halls, sauna baths, massage parlors, and other
places for entertainment or amusement as found in the first clause of Section 458 (a) 4 (vii). Its powers to regulate, suppress and suspend "such
other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants" and to
"prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community" are stated in the second
and third clauses, respectively of the same Section. The several powers of the City Council as provided in Section 458 (a) 4 (vii) of the Code, it is
pertinent to emphasize, are separated by semi-colons (;), the use of which indicates that the clauses in which these powers are set forth are
independent of each other albeit closely related to justify being put together in a single enumeration or paragraph. 111 These powers, therefore, should
not be confused, commingled or consolidated as to create a conglomerated and unified power of regulation, suppression and prohibition. 112
The Congress unequivocably specified the establishments and forms of amusement or entertainment subject to regulation among which are
beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments (Section 458 (a) 4 (iv)), public dancing schools,
public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement (Section 458 (a) 4 (vii)). This enumeration
therefore cannot be included as among "other events or activities for amusement or entertainment, particularly those which tend to disturb the
community or annoy the inhabitants" or "certain forms of amusement or entertainment" which the City Council may suspend, suppress or prohibit.
The rule is that the City Council has only such powers as are expressly granted to it and those which are necessarily implied or incidental to the
exercise thereof. By reason of its limited powers and the nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity
arising out of the terms used in granting said powers must be construed against the City Council. 113 Moreover, it is a general rule in statutory
construction that the express mention of one person, thing, or consequence is tantamount to an express exclusion of all others. Expressio unius est
exclusio alterium. This maxim is based upon the rules of logic and the natural workings of human mind. It is particularly applicable in the construction
of such statutes as create new rights or remedies, impose penalties or punishments, or otherwise come under the rule of strict construction. 114
The argument that the City Council is empowered to enact the Ordinance by virtue of the general welfare clause of the Code and of Art. 3, Sec. 18
(kk) of the Revised Charter of Manila is likewise without merit. On the first point, the ruling of the Court in People v. Esguerra,115 is instructive. It held
that:
The powers conferred upon a municipal council in the general welfare clause, or section 2238 of the Revised Administrative Code, refers to matters
not covered by the other provisions of the same Code, and therefore it can not be applied to intoxicating liquors, for the power to regulate the selling,
giving away and dispensing thereof is granted specifically by section 2242 (g) to municipal councils. To hold that, under the general power granted by
section 2238, a municipal council may enact the ordinance in question, notwithstanding the provision of section 2242 (g), would be to make the
latter superfluous and nugatory, because the power to prohibit, includes the power to regulate, the selling, giving away and dispensing of intoxicating
liquors.
On the second point, it suffices to say that the Code being a later expression of the legislative will must necessarily prevail and override the earlier
law, the Revised Charter of Manila. Legis posteriores priores contrarias abrogant, or later statute repeals prior ones which are repugnant thereto. As
between two laws on the same subject matter, which are irreconcilably inconsistent, that which is passed later prevails, since it is the latest
expression of legislative will.116 If there is an inconsistency or repugnance between two statutes, both relating to the same subject matter, which
cannot be removed by any fair and reasonable method of interpretation, it is the latest expression of the legislative will which must prevail and
override the earlier.117
Implied repeals are those which take place when a subsequently enacted law contains provisions contrary to those of an existing law but no
provisions expressly repealing them. Such repeals have been divided into two general classes: those which occur where an act is so inconsistent or
irreconcilable with an existing prior act that only one of the two can remain in force and those which occur when an act covers the whole subject of
an earlier act and is intended to be a substitute therefor. The validity of such a repeal is sustained on the ground that the latest expression of the
legislative will should prevail.118
In addition, Section 534(f) of the Code states that "All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly." Thus, submitting to petitioners' interpretation that the Revised Charter of Manila empowers the City Council to prohibit motels, that
portion of the Charter stating such must be considered repealed by the Code as it is at variance with the latter's provisions granting the City Council
mere regulatory powers.
It is well to point out that petitioners also cannot seek cover under the general welfare clause authorizing the abatement of nuisances without judicial
proceedings. That tenet applies to a nuisance per se, or one which affects the immediate safety of persons and property and may be summarily
abated under the undefined law of necessity. It can not be said that motels are injurious to the rights of property, health or comfort of the community.
It is a legitimate business. If it be a nuisance per accidens it may be so proven in a hearing conducted for that purpose. A motel is not per se a
nuisance warranting its summary abatement without judicial intervention. 119
Notably, the City Council was conferred powers to prevent and prohibit certain activities and establishments in another section of the Code which is
reproduced as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and
in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:

21
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this connection, shall:
. . .
(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual drunkenness in public places, vagrancy,
mendicancy, prostitution, establishment and maintenance of houses of ill repute, gambling and other prohibited games of chance, fraudulent
devices and ways to obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing,
distribution or exhibition of obscene or pornographic materials or publications, and such other activities inimical to the welfare and morals of the
inhabitants of the city;
. . .
If it were the intention of Congress to confer upon the City Council the power to prohibit the establishments enumerated in Section 1 of
the Ordinance, it would have so declared in uncertain terms by adding them to the list of the matters it may prohibit under the above-quoted Section.
The Ordinance now vainly attempts to lump these establishments with houses of ill-repute and expand the City Council's powers in the second and
third clauses of Section 458 (a) 4 (vii) of the Code in an effort to overreach its prohibitory powers. It is evident that these establishments may only be
regulated in their establishment, operation and maintenance.
It is important to distinguish the punishable activities from the establishments themselves. That these establishments are recognized legitimate
enterprises can be gleaned from another Section of the Code. Section 131 under the Title on Local Government Taxation expressly mentioned
proprietors or operators of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging houses as among the "contractors"
defined in paragraph (h) thereof. The same Section also defined "amusement" as a "pleasurable diversion and entertainment," "synonymous to
relaxation, avocation, pastime or fun;" and "amusement places" to include "theaters, cinemas, concert halls, circuses and other places of amusement
where one seeks admission to entertain oneself by seeing or viewing the show or performances." Thus, it can be inferred that the Code considers
these establishments as legitimate enterprises and activities. It is well to recall the maxim r eddendo singula singulis which means that words in
different parts of a statute must be referred to their appropriate connection, giving to each in its place, its proper force and effect, and, if possible,
rendering none of them useless or superfluous, even if strict grammatical construction demands otherwise. Likewise, where words under
consideration appear in different sections or are widely dispersed throughout an act the same principle applies. 120
Not only does the Ordinance contravene the Code, it likewise runs counter to the provisions of P.D. 499. As correctly argued by MTDC, the statute
had already converted the residential Ermita-Malate area into a commercial area. The decree allowed the establishment and operation of all kinds of
commercial establishments except warehouse or open storage depot, dump or yard, motor repair shop, gasoline service station, light industry with
any machinery or funeral establishment. The rule is that for an ordinance to be valid and to have force and effect, it must not only be within the
powers of the council to enact but the same must not be in conflict with or repugnant to the general law. 121 As succinctly illustrated in Solicitor
General v. Metropolitan Manila Authority:122
The requirement that the enactment must not violate existing law explains itself. Local political subdivisions are able to legislate only by virtue of a
valid delegation of legislative power from the national legislature (except only that the power to create their own sources of revenue and to levy taxes
is conferred by the Constitution itself). They are mere agents vested with what is called the power of subordinate legislation. As delegates of the
Congress, the local government units cannot contravene but must obey at all times the will of their principal. In the case before us, the enactment in
question, which are merely local in origin cannot prevail against the decree, which has the force and effect of a statute. 123
Petitioners contend that the Ordinance enjoys the presumption of validity. While this may be the rule, it has already been held that although the
presumption is always in favor of the validity or reasonableness of the ordinance, such presumption must nevertheless be set aside when the
invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper evidence. The exercise of police power by the
local government is valid unless it contravenes the fundamental law of the land, or an act of the legislature, or unless it is against public policy or is
unreasonable, oppressive, partial, discriminating or in derogation of a common right. 124
Conclusion
All considered, the Ordinance invades fundamental personal and property rights and impairs personal privileges. It is constitutionally infirm.
The Ordinance contravenes statutes; it is discriminatory and unreasonable in its operation; it is not sufficiently detailed and explicit that abuses may
attend the enforcement of its sanctions. And not to be forgotten, the City Council under the Code had no power to enact the Ordinance and is
therefore ultra vires, null and void.
Concededly, the challenged Ordinance was enacted with the best of motives and shares the concern of the public for the cleansing of the Ermita-
Malate area of its social sins. Police power legislation of such character deserves the full endorsement of the judiciary we reiterate our support for
it. But inspite of its virtuous aims, the enactment of the Ordinance has no statutory or constitutional authority to stand on. Local legislative bodies, in
this case, the City Council, cannot prohibit the operation of the enumerated establishments under Section 1 thereof or order their transfer or
conversion without infringing the constitutional guarantees of due process and equal protection of laws not even under the guise of police power.
WHEREFORE, the Petition is hereby DENIED and the decision of the Regional Trial Court declaring the Ordinance void is AFFIRMED. Costs
against petitioners.
SO ORDERED.

22
 6. G.R. No. 100152 March 31, 2000
ACEBEDO OPTICAL COMPANY, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, Hon. MAMINDIARA MANGOTARA, in his capacity as Presiding Judge of the RTC, 12th
Judicial Region, Br. 1, Iligan City; SAMAHANG OPTOMETRIST Sa PILIPINAS — Iligan City Chapter, LEO T. CAHANAP, City Legal
Officer, and Hon. CAMILO P. CABILI, City Mayor of Iligan, respondents.
PURISIMA, J.:
At bar is a petition for review under Rule 45 of the Rules of Court seeking to nullify the dismissal by the Court of Appeals of the original petition
for certiorari, prohibition and mandamus filed by the herein petitioner against the City Mayor and City Legal Officer of Iligan and the Samahang
Optometrist sa Pilipinas — Iligan Chapter (SOPI, for brevity).
The antecedent facts leading to the filing of the instant petition are as follows:
Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After consideration of petitioner's application and the opposition
interposed thereto by local optometrists, respondent City Mayor issued Business Permit No. 5342 subject to the following conditions:
1. Since it is a corporation, Acebedo cannot put up an optical clinic but only a commercial store;
2. Acebedo cannot examine and/or prescribe reading and similar optical glasses for patients, because these are functions of optical clinics;
3. Acebedo cannot sell reading and similar eyeglasses without a prescription having first been made by an independent optometrist (not its
employee) or independent optical clinic. Acebedo can only sell directly to the public, without need of a prescription, Ray-Ban and similar eyeglasses;
4. Acebedo cannot advertise optical lenses and eyeglasses, but can advertise Ray-Ban and similar glasses and frames;
5. Acebedo is allowed to grind lenses but only upon the prescription of an independent optometrist. 1
On December 5, 1988, private respondent Samahan ng Optometrist Sa Pilipinas (SOPI), Iligan Chapter, through its Acting President, Dr. Frances B.
Apostol, lodged a complaint against the petitioner before the Office of the City Mayor, alleging that Acebedo had violated the conditions set forth in its
business permit and requesting the cancellation and/or revocation of such permit.
Acting on such complaint, then City Mayor Camilo P. Cabili designated City Legal Officer Leo T. Cahanap to conduct an investigation on the matter.
On July 12, 1989, respondent City Legal Officer submitted a report to the City Mayor finding the herein petitioner guilty of violating all the conditions
of its business permit and recommending the disqualification of petitioner from operating its business in Iligan City. The report further advised that no
new permit shall be granted to petitioner for the year 1989 and should only be given time to wind up its affairs.
On July 19, 1989, the City Mayor sent petitioner a Notice of Resolution and Cancellation of Business Permit effective as of said date and giving
petitioner three (3) months to wind up its affairs.
On October 17, 1989, petitioner brought a petition for certiorari, prohibition and mandamus with prayer for restraining order/preliminary injunction
against the respondents, City Mayor, City Legal Officer and Samahan ng Optometrists sa Pilipinas-Iligan City Chapter (SOPI), docketed as Civil
Case No. 1497 before the Regional Trial Court of Iligan City, Branch I. Petitioner alleged that (1) it was denied due process because it was not given
an opportunity to present its evidence during the investigation conducted by the City Legal Officer; (2) it was denied equal protection of the laws as
the limitations imposed on its business permit were not imposed on similar businesses in Iligan City; (3) the City Mayor had no authority to impose
the special conditions on its business permit; and (4) the City Legal Officer had no authority to conduct the investigation as the matter falls within the
exclusive jurisdiction of the Professional Regulation Commission and the Board of Optometry.
Respondent SOPI interposed a Motion to Dismiss the Petition on the ground of non-exhaustion of administrative remedies but on November 24,
1989, Presiding Judge Mamindiara P. Mangotara deferred resolution of such Motion to Dismiss until after trial of the case on the merits. However, the
prayer for a writ of preliminary injunction was granted. Thereafter, respondent SOPI filed its answer. 1âwphi1.nêt
On May 30, 1990, the trial court dismissed the petition for failure to exhaust administrative remedies, and dissolved the writ of preliminary injunction it
earlier issued. Petitioner's motion for reconsideration met the same fate. It was denied by an Order dated June 28, 1990.
On October 3, 1990, instead of taking an appeal, petitioner filed a petition for certiorari, prohibition and mandamus with the Court of Appeals seeking
to set aside the questioned Order of Dismissal, branding the same as tainted with grave abuse of discretion on the part of the trial court.
On January 24, 1991, the Ninth Division 2 of the Court of Appeals dismissed the petition for lack of merit. Petitioner's motion reconsideration was also
denied in the Resolution dated May 15, 1991.
Undaunted, petitioner has come before this court via the present petition, theorizing that:
A.
THE RESPONDENT COURT, WHILE CORRECTLY HOLDING THAT THE RESPONDENT CITY MAYOR ACTED BEYOND HIS AUTHORITY IN
IMPOSING THE SPECIAL CONDITIONS IN THE PERMIT AS THEY HAD NO BASIS IN ANY LAW OR ORDINANCE, ERRED IN HOLDING THAT
THE SAID SPECIAL CONDITIONS NEVERTHELESS BECAME BINDING ON PETITIONER UPON ITS ACCEPTANCE THEREOF AS A PRIVATE
AGREEMENT OR CONTRACT.
B.
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT BETWEEN PETITIONER AND THE CITY OF ILIGAN
WAS ENTERED INTO BY THE LATTER IN THE PERFORMANCE OF ITS PROPRIETARY FUNCTIONS.
The petition is impressed with merit.
Although petitioner agrees with the finding of the Court of Appeals that respondent City Mayor acted beyond the scope of his authority in imposing
the assailed conditions in subject business permit, it has excepted to the ruling of the Court of Appeals that the said conditions nonetheless became
binding on petitioner, once accepted, as a private agreement or contract. Petitioner maintains that the said special conditions are null and void for
being ultra vires and cannot be given effect; and therefore, the principle of estoppel cannot apply against it.
On the other hand, the public respondents, City Mayor and City Legal Officer, private respondent SOPI and the Office of the Solicitor General
contend that as a valid exercise of police power, respondent City Mayor has the authority to impose, as he did, special conditions in the grant of
business permits.
Police power as an inherent attribute of sovereignty is the power to prescribe regulations to promote the health, morals, peace, education, good
order or safety and general welfare of the people. 9 The State, through the legislature, has delegated the exercise of police power to local
government units, as agencies of the State, in order to effectively accomplish and carry out the declared objects of their creation. 4 This delegation of
police power is embodied in the general welfare clause of the Local Government Code which provides:
Sec. 6. General Welfare. — Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote
full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.

23
The scope of police power has been held to be so comprehensive as to encompass almost all matters affecting the health, safety, peace, order,
morals, comfort and convenience of the community. Police power is essentially regulatory in nature and the power to issue licenses or grant
business permits, if exercised for a regulatory and not revenue-raising purpose, is within the ambit of this power. 5
The authority of city mayors to issue or grant licenses and business permits is beyond cavil. It is provided for by law. Section 171, paragraph 2 (n) of
Batas Pambansa Bilang 337 otherwise known as the Local Government Code of 1983, reads:
Sec. 171. The City Mayor shall:
xxx xxx xxx
n) Grant or refuse to grant, pursuant to law, city licenses or permits, and revoke the same for violation of law or ordinance or the conditions upon
which they are granted.
However, the power to grant or issue licenses or business permits must always be exercised in accordance with law, with utmost observance of the
rights of all concerned to due process and equal protection of the law.
Succinct and in point is the ruling of this Court, that:
. . . While a business may be regulated, such regulation must, however, be within the bounds of reason, i.e., the regulatory ordinance must be
reasonable, and its provision cannot be oppressive amounting to an arbitrary interference with the business or calling subject of regulation. A lawful
business or calling may not, under the guise of regulation, be unreasonably interfered with even by the exercise of police power. . . .
xxx xxx xxx
. . . The exercise of police power by the local government is valid unless it contravenes the fundamental law of the land or an act of the legislature, or
unless it is against public policy or is unreasonable, oppressive, partial, discriminating or in derogation of a common right. 6
In the case under consideration, the business permit granted by respondent City Mayor to petitioner was burdened with several conditions. Petitioner
agrees with the holding by the Court of Appeals that respondent City Mayor acted beyond his authority in imposing such special conditions in its
permit as the same have no basis in the law or ordinance. Public respondents and private respondent SOPI, on the other hand, are one in saying
that the imposition of said special conditions on petitioner's business permit is well within the authority of the City Mayor as a valid exercise of police
power.
As aptly discussed by the Solicitor General in his Comment, the power to issue licenses and permits necessarily includes the corollary power to
revoke, withdraw or cancel the same. And the power to revoke or cancel, likewise includes the power to restrict through the imposition of certain
conditions. In the case of Austin-Hardware, Inc. vs. Court of Appeals, 7 it was held that the power to license carries with it the authority to provide
reasonable terms and conditions under which the licensed business shall be conducted. As the Solicitor General puts it:
If the City Mayor is empowered to grant or refuse to grant a license, which is a broader power, it stands to reason that he can also exercise a lesser
power that is reasonably incidental to his express power, i.e. to restrict a license through the imposition of certain conditions, especially so that there
is no positive prohibition to the exercise of such prerogative by the City Mayor, nor is there any particular official or body vested with such authority. 8
However, the present inquiry does not stop there, as the Solicitor General believes. The power or authority of the City Mayor to impose conditions or
restrictions in the business permit is indisputable. What petitioner assails are the conditions imposed in its particular case which, it complains,
amount to a confiscation of the business in which petitioner is engaged.
Distinction must be made between the grant of a license or permit to do business and the issuance of a license to engage in the practice of a
particular profession. The first is usually granted by the local authorities and the second is issued by the Board or Commission tasked to regulate the
particular profession. A business permit authorizes the person, natural or otherwise, to engage in business or some form of commercial activity. A
professional license, on the other hand, is the grant of authority to a natural person to engage in the practice or exercise of his or her profession.
In the case at bar, what is sought by petitioner from respondent City Mayor is a permit to engage in the business of running an optical shop. It does
not purport to seek a license to engage in the practice of optometry as a corporate body or entity, although it does have in its employ, persons who
are duly licensed to practice optometry by the Board of Examiners in Optometry.
The case of Samahan ng Optometrists sa Pilipinas vs. Acebedo International Corporation, G.R. No. 117097, 9 promulgated by this Court on March
21, 1997, is in point. The factual antecedents of that case are similar to those of the case under consideration and the issue ultimately resolved
therein is exactly the same issue posed for resolution by this Court en banc.
In the said case, the Acebedo International Corporation filed with the Office of the Municipal Mayor an application for a business permit for the
operation of a branch of Acebedo Optical in Candon, Ilocos Sur. The application was opposed by the Samahan ng Optometrists sa Pilipinas-Ilocos
Sur Chapter, theorizing that Acebedo is a juridical entity not qualified to practice optometry. A committee was created by the Office of the Mayor to
study private respondent's application. Upon recommendation of the said committee, Acebedo's application for a business permit was denied.
Acebedo filed a petition with the Regional Trial Court but the same was dismissed. On appeal, however, the Court of Appeals reversed the trial
court's disposition, prompting the Samahan ng Optometrists to elevate the matter to this Court.
The First Division of this Court, then composed of Honorable Justice Teodoro Padilla, Josue Bellosillo, Jose Vitug and Santiago Kapunan, with
Honorable Justice Regino Hermosisima, Jr. as ponente, denied the petition and ruled in favor of respondent Acebedo International Corporation,
holding that "the fact that private respondent hires optometrists who practice their profession in the course of their employment in private
respondent's optical shops, does not translate into a practice of optometry by private respondent itself," 10 The Court further elucidated that in both
the old and new Optometry Law, R.A. No. 1998, superseded by R.A. No. 8050, it is significant to note that there is no prohibition against the hiring by
corporations of optometrists. The Court concluded thus:
All told, there is no law that prohibits the hiring by corporations of optometrists or considers the hiring by corporations of optometrists as a practice by
the corporation itself of the profession of optometry.
In the present case, the objective of the imposition of subject conditions on petitioner's business permit could be attained by requiring the
optometrists in petitioner's employ to produce a valid certificate of registration as optometrist, from the Board of Examiners in Optometry. A business
permit is issued primarily to regulate the conduct of business and the City Mayor cannot, through the issuance of such permit, regulate the practice
of a profession, like that of optometry. Such a function is within the exclusive domain of the administrative agency specifically empowered by law to
supervise the profession, in this case the Professional Regulations Commission and the Board of Examiners in Optometry.
It is significant to note that during the deliberations of the bicameral conference committee of the Senate and the House of Representatives on R.A.
8050 (Senate Bill No. 1998 and House Bill No. 14100), the committee failed to reach a consensus as to the prohibition on indirect practice of
optometry by corporations. The proponent of the bill, former Senator Freddie Webb, admitted thus:
Senator Webb: xxx xxx xxx
The focus of contention remains to be the proposal of prohibiting the indirect practice of optometry by corporations. 1âwphi1 We took a second look
and even a third look at the issue in the bicameral conference, but a compromise remained elusive. 11
Former Senator Leticia Ramos-Shahani likewise voted her reservation in casting her vote:
Senator Shahani: Mr. President.
The optometry bills have evoked controversial views from the members of the panel. While we realize the need to uplift the standards of optometry
as a profession, the consesnsus of both Houses was to avoid touching sensitive issues which properly belong to judicial determination. Thus, the
bicameral conference committee decided to leave the issue of indirect practice of optometry and the use of trade names open to the wisdom of the
Courts which are vested with the prerogative of interpreting the laws. 12

24
From the foregoing, it is thus evident that Congress has not adopted a unanimous position on the matter of prohibition of indirect practice of
optometry by corporations, specifically on the hiring and employment of licensed optometrists by optical corporations. It is clear that Congress left the
resolution of such issue for judicial determination, and it is therefore proper for this Court to resolve the issue.
Even in the United States, jurisprudence varies and there is a conflict of opinions among the federal courts as to the right of a corporation or
individual not himself licensed, to hire and employ licensed optometrists. 13
Courts have distinguished between optometry as a learned profession in the category of law and medicine, and optometry as a mechanical art. And,
insofar as the courts regard optometry as merely a mechanical art, they have tended to find nothing objectionable in the making and selling of
eyeglasses, spectacles and lenses by corporations so long as the patient is actually examined and prescribed for by a qualified practitioner. 14
The primary purpose of the statute regulating the practice of optometry is to insure that optometrical services are to be rendered by competent and
licensed persons in order to protect the health and physical welfare of the people from the dangers engendered by unlicensed practice. Such
purpose may be fully accomplished although the person rendering the service is employed by a corporation. 15
Furthermore, it was ruled that the employment of a qualified optometrist by a corporation is not against public policy. 16 Unless prohibited by statutes,
a corporation has all the contractual rights that an individual has 17 and it does not become the practice of medicine or optometry because of the
presence of a physician or optometrist. 18 The manufacturing, selling, trading and bartering of eyeglasses and spectacles as articles of merchandise
do not constitute the practice of optometry. 19
In the case of Dvorine vs. Castelberg Jewelry Corporation, 20 defendant corporation conducted as part of its business, a department for the sale of
eyeglasses and the furnishing of optometrical services to its clients. It employed a registered optometrist who was compensated at a regular salary
and commission and who was furnished instruments and appliances needed for the work, as well as an office. In holding that corporation was not
engaged in the practice of optometry, the court ruled that there is no public policy forbidding the commercialization of optometry, as in law and
medicine, and recognized the general practice of making it a commercial business by advertising and selling eyeglasses.
To accomplish the objective of the regulation, a state may provide by statute that corporations cannot sell eyeglasses, spectacles, and lenses unless
a duly licensed physician or a duly qualified optometrist is in charge of, and in personal attendance at the place where such articles are sold. 21 In
such a case, the patient's primary and essential safeguard lies in the optometrist's control of the "treatment" by means of prescription and preliminary
and final examination. 22
In analogy, it is noteworthy that private hospitals are maintained by corporations incorporated for the purpose of furnishing medical and surgical
treatment. In the course of providing such treatments, these corporations employ physicians, surgeons and medical practitioners, in the same way
that in the course of manufacturing and selling eyeglasses, eye frames and optical lenses, optical shops hire licensed optometrists to examine,
prescribe and dispense ophthalmic lenses. No one has ever charged that these corporations are engaged in the practice of medicine. There is
indeed no valid basis for treating corporations engaged in the business of running optical shops differently.
It also bears stressing, as petitioner has pointed out, that the public and private respondents did not appeal from the ruling of the Court of Appeals.
Consequently, the holding by the Court of Appeals that the act of respondent City Mayor in imposing the questioned special conditions on petitioner's
business permit is ultra vires cannot be put into issue here by the respondents. It is well-settled that:
A party who has not appealed from the decision may not obtain any affirmative relief from the appellate court other than what he had obtain from the
lower court, if any, whose decision is brought up on appeal. 23
. . . an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot
seek modification or reversal of the judgment or affirmative relief unless he has also appealed. 24
Thus, respondents' submission that the imposition of subject special conditions on petitioner's business permit is not ultra vires cannot prevail over
the finding and ruling by the Court of Appeals from which they (respondents) did not appeal.
Anent the second assigned error, petitioner maintains that its business permit issued by the City Mayor is not a contract entered into by Iligan City in
the exercise of its proprietary functions, such that although petitioner agreed to such conditions, it cannot be held in estoppel since ultra vires acts
cannot be given effect.
Respondents, on the other hand, agree with the ruling of the Court of Appeals that the business permit in question is in the nature of a contract
between Iligan City and the herein petitioner, the terms and conditions of which are binding upon agreement, and that petitioner is estopped from
questioning the same. Moreover, in the Resolution denying petitioner's motion for reconsideration, the Court of Appeals held that the contract
between the petitioner and the City of Iligan was entered into by the latter in the performance of its proprietary functions.
This Court holds otherwise. It had occasion to rule that a license or permit is not in the nature of a contract but a special privilege.
. . . a license or a permit is not a contract between the sovereignty and the licensee or permitee, and is not a property in the constitutional sense, as
to which the constitutional proscription against impairment of the obligation of contracts may extend. A license is rather in the nature of a special
privilege, of a permission or authority to do what is within its terms. It is not in any way vested, permanent or absolute. 25
It is therefore decisively clear that estoppel cannot apply in this case. The fact that petitioner acquiesced in the special conditions imposed by the
City Mayor in subject business permit does not preclude it from challenging the said imposition, which is ultra vires or beyond the ambit of authority
of respondent City Mayor. Ultra vires acts or acts which are clearly beyond the scope of one's authority are null and void and cannot be given any
effect. The doctrine of estoppel cannot operate to give effect to an act which is otherwise null and void or ultra vires.
The Court of Appeals erred in adjudging subject business permit as having been issued by responded City Mayor in the performance of proprietary
functions of Iligan City. As hereinabove elaborated upon, the issuance of business licenses and permits by a municipality or city is essentially
regulatory in nature. The authority, which devolved upon local government units to issue or grant such licenses or permits, is essentially in the
exercise of the police power of the State within the contemplation of the general welfare clause of the Local Government Code.
WHEREFORE, the petition is GRANTED; the Decision of the Court of Appeals in CA-GR SP No. 22995 REVERSED: and the respondent City Mayor
is hereby ordered to reissue petitioner's business permit in accordance with law and with this disposition. No pronouncement as to costs.
SO ORDERED.

25
 7. G.R. No. L-59234 September 30, 1982
TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO CABIGAO and ACE TRANSPORTATION CORPORATION, petitioners,
vs.
THE BOARD OF TRANSPORTATION and THE DIRECTOR OF THE BUREAU OF LAND TRANSPORTATION, respondents.
MELENCIO-HERRERA, J.:
This Petition for "Certiorari, Prohibition and mandamus with Preliminary Injunction and Temporary Restraining Order" filed by the Taxicab Operators
of Metro Manila, Inc., Felicisimo Cabigao and Ace Transportation, seeks to declare the nullity of Memorandum Circular No. 77-42, dated October 10,
1977, of the Board of Transportation, and Memorandum Circular No. 52, dated August 15, 1980, of the Bureau of Land Transportation.
Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation composed of taxicab operators, who are grantees of
Certificates of Public Convenience to operate taxicabs within the City of Manila and to any other place in Luzon accessible to vehicular traffic.
Petitioners Ace Transportation Corporation and Felicisimo Cabigao are two of the members of TOMMI, each being an operator and grantee of such
certificate of public convenience.
On October 10, 1977, respondent Board of Transportation (BOT) issued Memorandum Circular No. 77-42 which reads:
SUBJECT: Phasing out and Replacement of
Old and Dilapidated Taxis
WHEREAS, it is the policy of the government to insure that only safe and comfortable units are used as public conveyances;
WHEREAS, the riding public, particularly in Metro-Manila, has, time and again, complained against, and condemned, the continued operation of old
and dilapidated taxis;
WHEREAS, in order that the commuting public may be assured of comfort, convenience, and safety, a program of phasing out of old and dilapidated
taxis should be adopted;
WHEREAS, after studies and inquiries made by the Board of Transportation, the latter believes that in six years of operation, a taxi operator has not
only covered the cost of his taxis, but has made reasonable profit for his investments;
NOW, THEREFORE, pursuant to this policy, the Board hereby declares that no car beyond six years shall be operated as taxi, and in implementation
of the same hereby promulgates the following rules and regulations:
1. As of December 31, 1977, all taxis of Model 1971 and earlier are ordered withdrawn from public service and thereafter may no longer be
registered and operated as taxis. In the registration of cards for 1978, only taxis of Model 1972 and later shall be accepted for registration and
allowed for operation;
2. As of December 31, 1978, all taxis of Model 1972 are ordered withdrawn from public service and thereafter may no longer be registered and
operated as taxis. In the registration of cars for 1979, only taxis of Model 1973 and later shall be accepted for registration and allowed for operation;
and every year thereafter, there shall be a six-year lifetime of taxi, to wit:
1980 — Model 1974
1981 — Model 1975, etc.
All taxis of earlier models than those provided above are hereby ordered withdrawn from public service as of the last day of registration of each
particular year and their respective plates shall be surrendered directly to the Board of Transportation for subsequent turnover to the Land
Transportation Commission.
For an orderly implementation of this Memorandum Circular, the rules herein shall immediately be effective in Metro-Manila. Its implementation
outside Metro- Manila shall be carried out only after the project has been implemented in Metro-Manila and only after the date has been determined
by the Board. 1
Pursuant to the above BOT circular, respondent Director of the Bureau of Land Transportation (BLT) issued Implementing Circular No. 52, dated
August 15, 1980, instructing the Regional Director, the MV Registrars and other personnel of BLT, all within the National Capitol Region, to
implement said Circular, and formulating a schedule of phase-out of vehicles to be allowed and accepted for registration as public conveyances. To
quote said Circular:
Pursuant to BOT Memo-Circular No. 77-42, taxi units with year models over six (6) years old are now banned from operating as public utilities in
Metro Manila. As such the units involved should be considered as automatically dropped as public utilities and, therefore, do not require any further
dropping order from the BOT.
Henceforth, taxi units within the National Capitol Region having year models over 6 years old shall be refused registration. The following schedule of
phase-out is herewith prescribed for the guidance of all concerned:
Year Model Automatic Phase-Out Year

1980

1974 1981

1975 1982

1976 1983

1977

etc. etc.
2
Strict compliance here is desired.
In accordance therewith, cabs of model 1971 were phase-out in registration year 1978; those of model 1972, in 1979; those of model 1973, in 1980;
and those of model 1974, in 1981.
On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case No. 80-7553, seeking to nullify MC No. 77-42 or to stop its
implementation; to allow the registration and operation in 1981 and subsequent years of taxicabs of model 1974, as well as those of earlier models
which were phased-out, provided that, at the time of registration, they are roadworthy and fit for operation.
On February 16, 1981, petitioners filed before the BOT a "Manifestation and Urgent Motion", praying for an early hearing of their petition. The case
was heard on February 20, 1981. Petitioners presented testimonial and documentary evidence, offered the same, and manifested that they would
submit additional documentary proofs. Said proofs were submitted on March 27, 1981 attached to petitioners' pleading entitled, "Manifestation,
Presentation of Additional Evidence and Submission of the Case for Resolution." 3

26
On November 28, 1981, petitioners filed before the same Board a "Manifestation and Urgent Motion to Resolve or Decide Main Petition" praying that
the case be resolved or decided not later than December 10, 1981 to enable them, in case of denial, to avail of whatever remedy they may have
under the law for the protection of their interests before their 1975 model cabs are phased-out on January 1, 1982.
Petitioners, through its President, allegedly made personal follow-ups of the case, but was later informed that the records of the case could not be
located.
On December 29, 1981, the present Petition was instituted wherein the following queries were posed for consideration by this Court:
A. Did BOT and BLT promulgate the questioned memorandum circulars in accord with the manner required by Presidential Decree No. 101, thereby
safeguarding the petitioners' constitutional right to procedural due process?
B. Granting, arguendo, that respondents did comply with the procedural requirements imposed by Presidential Decree No. 101, would the
implementation and enforcement of the assailed memorandum circulars violate the petitioners' constitutional rights to.
(1) Equal protection of the law;
(2) Substantive due process; and
(3) Protection against arbitrary and unreasonable classification and standard?
On Procedural and Substantive Due Process:
Presidential Decree No. 101 grants to the Board of Transportation the power
4. To fix just and reasonable standards, classification, regulations, practices, measurements, or service to be furnished, imposed, observed, and
followed by operators of public utility motor vehicles.
Section 2 of said Decree provides procedural guidelines for said agency to follow in the exercise of its powers:
Sec. 2. Exercise of powers. — In the exercise of the powers granted in the preceding section, the Board shag proceed promptly along the method of
legislative inquiry.
Apart from its own investigation and studies, the Board, in its discretion, may require the cooperation and assistance of the Bureau of Transportation,
the Philippine Constabulary, particularly the Highway Patrol Group, the support agencies within the Department of Public Works, Transportation and
Communications, or any other government office or agency that may be able to furnish useful information or data in the formulation of the Board of
any policy, plan or program in the implementation of this Decree.
The Board may also can conferences, require the submission of position papers or other documents, information, or data by operators or other
persons that may be affected by the implementation of this Decree, or employ any other suitable means of inquiry.
In support of their submission that they were denied procedural due process, petitioners contend that they were not caged upon to submit their
position papers, nor were they ever summoned to attend any conference prior to the issuance of the questioned BOT Circular.
It is clear from the provision aforequoted, however, that the leeway accorded the Board gives it a wide range of choice in gathering necessary
information or data in the formulation of any policy, plan or program. It is not mandatory that it should first call a conference or require the submission
of position papers or other documents from operators or persons who may be affected, this being only one of the options open to the Board, which is
given wide discretionary authority. Petitioners cannot justifiably claim, therefore, that they were deprived of procedural due process. Neither can they
state with certainty that public respondents had not availed of other sources of inquiry prior to issuing the challenged Circulars. operators of public
conveyances are not the only primary sources of the data and information that may be desired by the BOT.
Dispensing with a public hearing prior to the issuance of the Circulars is neither violative of procedural due process. As held in Central Bank vs. Hon.
Cloribel and Banco Filipino, 44 SCRA 307 (1972):
Pevious notice and hearing as elements of due process, are constitutionally required for the protection of life or vested property rights, as well as of
liberty, when its limitation or loss takes place in consequence of a judicial or quasi-judicial proceeding, generally dependent upon a past act or event
which has to be established or ascertained. It is not essential to the validity of general rules or regulations promulgated to govern future conduct of a
class or persons or enterprises, unless the law provides otherwise. (Emphasis supplied)
Petitioners further take the position that fixing the ceiling at six (6) years is arbitrary and oppressive because the roadworthiness of taxicabs depends
upon their kind of maintenance and the use to which they are subjected, and, therefore, their actual physical condition should be taken into
consideration at the time of registration. As public contend, however, it is impractical to subject every taxicab to constant and recurring evaluation,
not to speak of the fact that it can open the door to the adoption of multiple standards, possible collusion, and even graft and corruption. A
reasonable standard must be adopted to apply to an vehicles affected uniformly, fairly, and justly. The span of six years supplies that reasonable
standard. The product of experience shows that by that time taxis have fully depreciated, their cost recovered, and a fair return on investment
obtained. They are also generally dilapidated and no longer fit for safe and comfortable service to the public specially considering that they are in
continuous operation practically 24 hours everyday in three shifts of eight hours per shift. With that standard of reasonableness and absence of
arbitrariness, the requirement of due process has been met.
On Equal Protection of the Law:
Petitioners alleged that the Circular in question violates their right to equal protection of the law because the same is being enforced in Metro Manila
only and is directed solely towards the taxi industry. At the outset it should be pointed out that implementation outside Metro Manila is also
envisioned in Memorandum Circular No. 77-42. To repeat the pertinent portion:
For an orderly implementation of this Memorandum Circular, the rules herein shall immediately be effective in Metro Manila. Its implementation
outside Metro Manila shall be carried out only after the project has been implemented in Metro Manila and only after the date has been determined
by the Board. 4
In fact, it is the understanding of the Court that implementation of the Circulars in Cebu City is already being effected, with the BOT in the process of
conducting studies regarding the operation of taxicabs in other cities.
The Board's reason for enforcing the Circular initially in Metro Manila is that taxicabs in this city, compared to those of other places, are subjected to
heavier traffic pressure and more constant use. This is of common knowledge. Considering that traffic conditions are not the same in every city, a
substantial distinction exists so that infringement of the equal protection clause can hardly be successfully claimed.
As enunciated in the preambular clauses of the challenged BOT Circular, the overriding consideration is the safety and comfort of the riding public
from the dangers posed by old and dilapidated taxis. The State, in the exercise, of its police power, can prescribe regulations to promote the health,
morals, peace, good order, safety and general welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of society. 5 It may
also regulate property rights. 6 In the language of Chief Justice Enrique M. Fernando "the necessities imposed by public welfare may justify the
exercise of governmental authority to regulate even if thereby certain groups may plausibly assert that their interests are disregarded". 7
In so far as the non-application of the assailed Circulars to other transportation services is concerned, it need only be recalled that the equal
protection clause does not imply that the same treatment be accorded all and sundry. It applies to things or persons Identically or similarly situated. It
permits of classification of the object or subject of the law provided classification is reasonable or based on substantial distinction, which make for
real differences, and that it must apply equally to each member of the class. 8 What is required under the equal protection clause is the uniform
operation by legal means so that all persons under Identical or similar circumstance would be accorded the same treatment both in privilege
conferred and the liabilities imposed. 9 The challenged Circulars satisfy the foregoing criteria.

27
Evident then is the conclusion that the questioned Circulars do not suffer from any constitutional infirmity. To declare a law unconstitutional, the
infringement of constitutional right must be clear, categorical and undeniable. 10
WHEREFORE, the Writs prayed for are denied and this Petition is hereby dismissed. No costs.
SO ORDERED.

8. G.R. No. L-24153 February 14, 1983

TOMAS VELASCO, LOURDES RAMIREZ, SY PIN, EDMUNDO UNSON, APOLONIA RAMIREZ and LOURDES LOMIBAO, as
component members of the STA. CRUZ BARBERSHOP ASSOCIATION, in their own behalf and in representation of the other owners
of barbershops in the City of Manila, petitioners-appellants,
vs.
HON. ANTONIO J. VILLEGAS, City Mayor of Manila, HON. HERMINIO A. ASTORGA, Vice-Mayor and Presiding Officer of the
Municipal Board in relation to Republic Act 4065, THE MUNICIPAL BOARD OF THE CITY OF MANILA and EDUARDO QUINTOS SR.,
Chief of Police of the City of Manila, respondents-appellees.
Leonardo L. Arguelles for respondent-appellant.

FERNANDO, C.J.:
This is an appeal from an order of the lower court dismissing a suit for declaratory relief challenging the constitutionality based on Ordinance No.
4964 of the City of Manila, the contention being that it amounts to a deprivation of property of petitioners-appellants of their means of livelihood
without due process of law. The assailed ordinance is worded thus: "It shall be prohibited for any operator of any barber shop to conduct the
business of massaging customers or other persons in any adjacent room or rooms of said barber shop, or in any room or rooms within the same
building where the barber shop is located as long as the operator of the barber shop and the room where massaging is conducted is the same
person." 1 As noted in the appealed order, petitioners-appellants admitted that criminal cases for the violation of this ordinance had been previously
filed and decided. The lower court, therefore, held that a petition for declaratory relief did not lie, its availability being dependent on there being as yet
no case involving such issue having been filed. 2
Even if such were not the case, the attack against the validity cannot succeed. As pointed out in the brief of respondents-appellees, it is a police
power measure. The objectives behind its enactment are: "(1) To be able to impose payment of the license fee for engaging in the business of
massage clinic under Ordinance No. 3659 as amended by Ordinance 4767, an entirely different measure than the ordinance regulating the business
of barbershops and, (2) in order to forestall possible immorality which might grow out of the construction of separate rooms for massage of
customers." 3 This Court has been most liberal in sustaining ordinances based on the general welfare clause. As far back as U.S. v. Salaveria, 4 a
1918 decision, this Court through Justice Malcolm made clear the significance and scope of such a clause, which "delegates in statutory form the
police power to a municipality. As above stated, this clause has been given wide application by municipal authorities and has in its relation to the
particular circumstances of the case been liberally construed by the courts. Such, it is well to really is the progressive view of Philippine
jurisprudence." 5 As it was then, so it has continued to be. 6 There is no showing, therefore, of the unconstitutionality of such ordinance.
WHEREFORE, the appealed order of the lower court is affirmed. No costs.

28
 9. G.R. No. L-24693 July 31, 1967
ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION, INC., HOTEL DEL MAR INC. and GO CHIU, petitioners-appellees,
vs.
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant.
VICTOR ALABANZA, intervenor-appellee.
Panganiban, Abad and Associates Law Office for respondent-appellant.
J. M. Aruego, Tenchavez and Associates for intervenor-appellee.
FERNANDO, J.:
The principal question in this appeal from a judgment of the lower court in an action for prohibition is whether Ordinance No. 4760 of the City of
Manila is violative of the due process clause. The lower court held that it is and adjudged it "unconstitutional, and, therefore, null and void." For
reasons to be more specifically set forth, such judgment must be reversed, there being a failure of the requisite showing to sustain an attack against
its validity.
The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by the petitioners, Ermita-Malate Hotel and Motel Operators
Association, one of its members, Hotel del Mar Inc., and a certain Go Chiu, who is "the president and general manager of the second petitioner"
against the respondent Mayor of the City of Manila who was sued in his capacity as such "charged with the general power and duty to enforce
ordinances of the City of Manila and to give the necessary orders for the faithful execution and enforcement of such ordinances." (par. 1). It was
alleged that the petitioner non-stock corporation is dedicated to the promotion and protection of the interest of its eighteen (18) members "operating
hotels and motels, characterized as legitimate businesses duly licensed by both national and city authorities, regularly paying taxes, employing and
giving livelihood to not less than 2,500 person and representing an investment of more than P3 million." 1 (par. 2). It was then alleged that on June 13,
1963, the Municipal Board of the City of Manila enacted Ordinance No. 4760, approved on June 14, 1963 by the then Vice-Mayor Herminio Astorga,
who was at the time acting as Mayor of the City of Manila. (par. 3).
After which the alleged grievances against the ordinance were set forth in detail. There was the assertion of its being beyond the powers of the
Municipal Board of the City of Manila to enact insofar as it would regulate motels, on the ground that in the revised charter of the City of Manila or in
any other law, no reference is made to motels; that Section 1 of the challenged ordinance is unconstitutional and void for being unreasonable and
violative of due process insofar as it would impose P6,000.00 fee per annum for first class motels and P4,500.00 for second class motels; that the
provision in the same section which would require the owner, manager, keeper or duly authorized representative of a hotel, motel, or lodging house
to refrain from entertaining or accepting any guest or customer or letting any room or other quarter to any person or persons without his filling up the
prescribed form in a lobby open to public view at all times and in his presence, wherein the surname, given name and middle name, the date of birth,
the address, the occupation, the sex, the nationality, the length of stay and the number of companions in the room, if any, with the name,
relationship, age and sex would be specified, with data furnished as to his residence certificate as well as his passport number, if any, coupled with a
certification that a person signing such form has personally filled it up and affixed his signature in the presence of such owner, manager, keeper or
duly authorized representative, with such registration forms and records kept and bound together, it also being provided that the premises and
facilities of such hotels, motels and lodging houses would be open for inspection either by the City Mayor, or the Chief of Police, or their duly
authorized representatives is unconstitutional and void again on due process grounds, not only for being arbitrary, unreasonable or oppressive but
also for being vague, indefinite and uncertain, and likewise for the alleged invasion of the right to privacy and the guaranty against self-incrimination;
that Section 2 of the challenged ordinance classifying motels into two classes and requiring the maintenance of certain minimum facilities in first
class motels such as a telephone in each room, a dining room or, restaurant and laundry similarly offends against the due process clause for being
arbitrary, unreasonable and oppressive, a conclusion which applies to the portion of the ordinance requiring second class motels to have a dining
room; that the provision of Section 2 of the challenged ordinance prohibiting a person less than 18 years old from being accepted in such hotels,
motels, lodging houses, tavern or common inn unless accompanied by parents or a lawful guardian and making it unlawful for the owner, manager,
keeper or duly authorized representative of such establishments to lease any room or portion thereof more than twice every 24 hours, runs counter
to the due process guaranty for lack of certainty and for its unreasonable, arbitrary and oppressive character; and that insofar as the penalty
provided for in Section 4 of the challenged ordinance for a subsequent conviction would, cause the automatic cancellation of the license of the
offended party, in effect causing the destruction of the business and loss of its investments, there is once again a transgression of the due process
clause.
There was a plea for the issuance of preliminary injunction and for a final judgment declaring the above ordinance null and void and unenforceable.
The lower court on July 6, 1963 issued a writ of preliminary injunction ordering respondent Mayor to refrain from enforcing said Ordinance No. 4760
from and after July 8, 1963.
In the a answer filed on August 3, 1963, there was an admission of the personal circumstances regarding the respondent Mayor and of the fact that
petitioners are licensed to engage in the hotel or motel business in the City of Manila, of the provisions of the cited Ordinance but a denial of its
alleged nullity, whether on statutory or constitutional grounds. After setting forth that the petition did fail to state a cause of action and that the
challenged ordinance bears a reasonable relation, to a proper purpose, which is to curb immorality, a valid and proper exercise of the police power
and that only the guests or customers not before the court could complain of the alleged invasion of the right to privacy and the guaranty against self
incrimination, with the assertion that the issuance of the preliminary injunction ex parte was contrary to law, respondent Mayor prayed for, its
dissolution and the dismissal of the petition.
Instead of evidence being offered by both parties, there was submitted a stipulation of facts dated September 28, 1964, which reads:
1. That the petitioners Ermita-Malate Hotel and Motel Operators Association, Inc. and Hotel del Mar Inc. are duly organized and existing under the
laws of the Philippines, both with offices in the City of Manila, while the petitioner Go Chin is the president and general manager of Hotel del Mar
Inc., and the intervenor Victor Alabanza is a resident of Baguio City, all having the capacity to sue and be sued;
2. That the respondent Mayor is the duly elected and incumbent City Mayor and chief executive of the City of Manila charged with the general power
and duty to enforce ordinances of the City of Manila and to give the necessary orders for the faithful execution and enforcement of such ordinances;
3. That the petitioners are duly licensed to engage in the business of operating hotels and motels in Malate and Ermita districts in Manila;
4. That on June 13, 1963, the Municipal Board of the City of Manila enacted Ordinance No. 4760, which was approved on June 14, 1963, by Vice-
Mayor Herminio Astorga, then the acting City Mayor of Manila, in the absence of the respondent regular City Mayor, amending sections 661, 662,
668-a, 668-b and 669 of the compilation of the ordinances of the City of Manila besides inserting therein three new sections. This ordinance is similar
to the one vetoed by the respondent Mayor (Annex A) for the reasons stated in its 4th Indorsement dated February 15, 1963 (Annex B);
5. That the explanatory note signed by then Councilor Herminio Astorga was submitted with the proposed ordinance (now Ordinance 4760) to the
Municipal Board, copy of which is attached hereto as Annex C;
6. That the City of Manila derived in 1963 an annual income of P101,904.05 from license fees paid by the 105 hotels and motels (including herein
petitioners) operating in the City of Manila.1äwphï1.ñët
Thereafter came a memorandum for respondent on January 22, 1965, wherein stress was laid on the presumption of the validity of the challenged
ordinance, the burden of showing its lack of conformity to the Constitution resting on the party who assails it, citing not only U.S. v. Salaveria, but
likewise applicable American authorities. Such a memorandum likewise refuted point by point the arguments advanced by petitioners against its
validity. Then barely two weeks later, on February 4, 1965, the memorandum for petitioners was filed reiterating in detail what was set forth in the

29
petition, with citations of what they considered to be applicable American authorities and praying for a judgment declaring the challenged ordinance
"null and void and unenforceable" and making permanent the writ of preliminary injunction issued.
After referring to the motels and hotels, which are members of the petitioners association, and referring to the alleged constitutional questions raised
by the party, the lower court observed: "The only remaining issue here being purely a question of law, the parties, with the nod of the Court, agreed
to file memoranda and thereafter, to submit the case for decision of the Court." It does appear obvious then that without any evidence submitted by
the parties, the decision passed upon the alleged infirmity on constitutional grounds of the challenged ordinance, dismissing as is undoubtedly right
and proper the untenable objection on the alleged lack of authority of the City of Manila to regulate motels, and came to the conclusion that "the
challenged Ordinance No. 4760 of the City of Manila, would be unconstitutional and, therefore, null and void." It made permanent the preliminary
injunction issued against respondent Mayor and his agents "to restrain him from enforcing the ordinance in question." Hence this appeal.
As noted at the outset, the judgment must be reversed. A decent regard for constitutional doctrines of a fundamental character ought to have
admonished the lower court against such a sweeping condemnation of the challenged ordinance. Its decision cannot be allowed to stand,
consistently with what has hitherto been the accepted standards of constitutional adjudication, in both procedural and substantive aspects.
Primarily what calls for a reversal of such a decision is the absence of any evidence to offset the presumption of validity that attaches to a challenged
statute or ordinance. As was expressed categorically by Justice Malcolm: "The presumption is all in favor of validity x x x . The action of the elected
representatives of the people cannot be lightly set aside. The councilors must, in the very nature of things, be familiar with the necessities of their
particular municipality and with all the facts and circumstances which surround the subject and necessitate action. The local legislative body, by
enacting the ordinance, has in effect given notice that the regulations are essential to the well being of the people x x x . The Judiciary should not
lightly set aside legislative action when there is not a clear invasion of personal or property rights under the guise of police regulation. 2
It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or
ordinance is void on its face which is not the case here. The principle has been nowhere better expressed than in the leading case of O'Gorman &
Young v. Hartford Fire Insurance Co.,3 where the American Supreme Court through Justice Brandeis tersely and succinctly summed up the matter
thus: The statute here questioned deals with a subject clearly within the scope of the police power. We are asked to declare it void on the ground that
the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact
may condition the constitutionality of legislation of this character, the resumption of constitutionality must prevail in the absence of some factual
foundation of record for overthrowing the statute." No such factual foundation being laid in the present case, the lower court deciding the matter on
the pleadings and the stipulation of facts, the presumption of validity must prevail and the judgment against the ordinance set aside.
Nor may petitioners assert with plausibility that on its face the ordinance is fatally defective as being repugnant to the due process clause of the
Constitution. The mantle of protection associated with the due process guaranty does not cover petitioners. This particular manifestation of a police
power measure being specifically aimed to safeguard public morals is immune from such imputation of nullity resting purely on conjecture and
unsupported by anything of substance. To hold otherwise would be to unduly restrict and narrow the scope of police power which has been properly
characterized as the most essential, insistent and the least limitable of powers, 4 extending as it does "to all the great public needs."5 It would be, to
paraphrase another leading decision, to destroy the very purpose of the state if it could be deprived or allowed itself to be deprived of its competence
to promote public health, public morals, public safety and the genera welfare. 6 Negatively put, police power is "that inherent and plenary power in the
State which enables it to prohibit all that is hurt full to the comfort, safety, and welfare of society. 7
There is no question but that the challenged ordinance was precisely enacted to minimize certain practices hurtful to public morals. The explanatory
note of the Councilor Herminio Astorga included as annex to the stipulation of facts, speaks of the alarming increase in the rate of prostitution,
adultery and fornication in Manila traceable in great part to the existence of motels, which "provide a necessary atmosphere for clandestine entry,
presence and exit" and thus become the "ideal haven for prostitutes and thrill-seekers." The challenged ordinance then proposes to check the
clandestine harboring of transients and guests of these establishments by requiring these transients and guests to fill up a registration form,
prepared for the purpose, in a lobby open to public view at all times, and by introducing several other amendatory provisions calculated to shatter the
privacy that characterizes the registration of transients and guests." Moreover, the increase in the licensed fees was intended to discourage
"establishments of the kind from operating for purpose other than legal" and at the same time, to increase "the income of the city government." It
would appear therefore that the stipulation of facts, far from sustaining any attack against the validity of the ordinance, argues eloquently for it.
It is a fact worth noting that this Court has invariably stamped with the seal of its approval, ordinances punishing vagrancy and classifying a pimp or
procurer as a vagrant;8 provide a license tax for and regulating the maintenance or operation of public dance halls; 9 prohibiting
gambling;10 prohibiting jueteng;11 and monte;12 prohibiting playing of panguingui on days other than Sundays or legal holidays; 13 prohibiting the
operation of pinball machines;14 and prohibiting any person from keeping, conducting or maintaining an opium joint or visiting a place where opium is
smoked or otherwise used,15 all of which are intended to protect public morals.
On the legislative organs of the government, whether national or local, primarily rest the exercise of the police power, which, it cannot be too often
emphasized, is the power to prescribe regulations to promote the health, morals, peace, good order, safety and general welfare of the people. In
view of the requirements of due process, equal protection and other applicable constitutional guaranties however, the exercise of such police power
insofar as it may affect the life, liberty or property of any person is subject to judicial inquiry. Where such exercise of police power may be considered
as either capricious, whimsical, unjust or unreasonable, a denial of due process or a violation of any other applicable constitutional guaranty may call
for correction by the courts.
We are thus led to considering the insistent, almost shrill tone, in which the objection is raised to the question of due process. 16 There is no
controlling and precise definition of due process. It furnishes though a standard to which the governmental action should conform in order that
deprivation of life, liberty or property, in each appropriate case, be valid. What then is the standard of due process which must exist both as a
procedural and a substantive requisite to free the challenged ordinance, or any governmental action for that matter, from the imputation of legal
infirmity sufficient to spell its doom? It is responsiveness to the supremacy of reason, obedience to the dictates of justice. Negatively put,
arbitrariness is ruled out and unfairness avoided. To satisfy the due process requirement, official action, to paraphrase Cardozo, must not outrun the
bounds of reason and result in sheer oppression. Due process is thus hostile to any official action marred by lack of reasonableness. Correctly it has
been identified as freedom from arbitrariness. It is the embodiment of the sporting idea of fair play. 17 It exacts fealty "to those strivings for justice" and
judges the act of officialdom of whatever branch "in the light of reason drawn from considerations of fairness that reflect [democratic] traditions of
legal and political thought."18 It is not a narrow or "technical conception with fixed content unrelated to time, place and circumstances," 19 decisions
based on such a clause requiring a "close and perceptive inquiry into fundamental principles of our society." 20 Questions of due process are not to be
treated narrowly or pedantically in slavery to form or phrases. 21
It would thus be an affront to reason to stigmatize an ordinance enacted precisely to meet what a municipal lawmaking body considers an evil of
rather serious proportion an arbitrary and capricious exercise of authority. It would seem that what should be deemed unreasonable and what would
amount to an abdication of the power to govern is inaction in the face of an admitted deterioration of the state of public morals. To be more specific,
the Municipal Board of the City of Manila felt the need for a remedial measure. It provided it with the enactment of the challenged ordinance. A strong
case must be found in the records, and, as has been set forth, none is even attempted here to attach to an ordinance of such character the taint of
nullity for an alleged failure to meet the due process requirement. Nor does it lend any semblance even of deceptive plausibility to petitioners'
indictment of Ordinance No. 4760 on due process grounds to single out such features as the increased fees for motels and hotels, the curtailment of
the area of freedom to contract, and, in certain particulars, its alleged vagueness.

30
Admittedly there was a decided increase of the annual license fees provided for by the challenged ordinance for hotels and motels, 150% for the
former and over 200% for the latter, first-class motels being required to pay a P6,000 annual fee and second-class motels, P4,500 yearly. It has been
the settled law however, as far back as 1922 that municipal license fees could be classified into those imposed for regulating occupations or regular
enterprises, for the regulation or restriction of non-useful occupations or enterprises and for revenue purposes only. 22 As was explained more in detail
in the above Cu Unjieng case: (2) Licenses for non-useful occupations are also incidental to the police power and the right to exact a fee may be
implied from the power to license and regulate, but in fixing amount of the license fees the municipal corporations are allowed a much wider
discretion in this class of cases than in the former, and aside from applying the well-known legal principle that municipal ordinances must not be
unreasonable, oppressive, or tyrannical, courts have, as a general rule, declined to interfere with such discretion. The desirability of imposing
restraint upon the number of persons who might otherwise engage in non-useful enterprises is, of course, generally an important factor in the
determination of the amount of this kind of license fee. Hence license fees clearly in the nature of privilege taxes for revenue have frequently been
upheld, especially in of licenses for the sale of liquors. In fact, in the latter cases the fees have rarely been declared unreasonable. 23
Moreover in the equally leading case of Lutz v. Araneta24 this Court affirmed the doctrine earlier announced by the American Supreme Court that
taxation may be made to implement the state's police power. Only the other day, this Court had occasion to affirm that the broad taxing authority
conferred by the Local Autonomy Act of 1959 to cities and municipalities is sufficiently plenary to cover a wide range of subjects with the only
limitation that the tax so levied is for public purposes, just and uniform. 25
As a matter of fact, even without reference to the wide latitude enjoyed by the City of Manila in imposing licenses for revenue, it has been explicitly
held in one case that "much discretion is given to municipal corporations in determining the amount," here the license fee of the operator of a
massage clinic, even if it were viewed purely as a police power measure. 26 The discussion of this particular matter may fitly close with this pertinent
citation from another decision of significance: "It is urged on behalf of the plaintiffs-appellees that the enforcement of the ordinance could deprive
them of their lawful occupation and means of livelihood because they can not rent stalls in the public markets. But it appears that plaintiffs are also
dealers in refrigerated or cold storage meat, the sale of which outside the city markets under certain conditions is permitted x x x . And surely, the
mere fact, that some individuals in the community may be deprived of their present business or a particular mode of earning a living cannot prevent
the exercise of the police power. As was said in a case, persons licensed to pursue occupations which may in the public need and interest be
affected by the exercise of the police power embark in these occupations subject to the disadvantages which may result from the legal exercise of
that power."27
Nor does the restriction on the freedom to contract, insofar as the challenged ordinance makes it unlawful for the owner, manager, keeper or duly
authorized representative of any hotel, motel, lodging house, tavern, common inn or the like, to lease or rent room or portion thereof more than twice
every 24 hours, with a proviso that in all cases full payment shall be charged, call for a different conclusion. Again, such a limitation cannot be viewed
as a transgression against the command of due process. It is neither unreasonable nor arbitrary. Precisely it was intended to curb the opportunity for
the immoral or illegitimate use to which such premises could be, and, according to the explanatory note, are being devoted. How could it then be
arbitrary or oppressive when there appears a correspondence between the undeniable existence of an undesirable situation and the legislative
attempt at correction. Moreover, petitioners cannot be unaware that every regulation of conduct amounts to curtailment of liberty which as pointed
out by Justice Malcolm cannot be absolute. Thus: "One thought which runs through all these different conceptions of liberty is plainly apparent. It is
this: 'Liberty' as understood in democracies, is not license; it is 'liberty regulated by law.' Implied in the term is restraint by law for the good of the
individual and for the greater good of the peace and order of society and the general well-being. No man can do exactly as he pleases. Every man
must renounce unbridled license. The right of the individual is necessarily subject to reasonable restraint by general law for the common good x x x
The liberty of the citizen may be restrained in the interest of the public health, or of the public order and safety, or otherwise within the proper scope
of the police power."28
A similar observation was made by Justice Laurel: "Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to
promote the general welfare may interfere with personal liberty, with property, and with business and occupations. Persons and property may be
subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state x x x To this fundamental
aim of our Government the rights of the individual are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made
to prevail over authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty because then the
individual will fall into slavery. The citizen should achieve the required balance of liberty and authority in his mind through education and personal
discipline, so that there may be established the resultant equilibrium, which means peace and order and happiness for all. 29
It is noteworthy that the only decision of this Court nullifying legislation because of undue deprivation of freedom to contract, People v. Pomar,30 no
longer "retains its virtuality as a living principle. The policy of laissez faire has to some extent given way to the assumption by the government of the
right of intervention even in contractual relations affected with public interest. 31 What may be stressed sufficiently is that if the liberty involved were
freedom of the mind or the person, the standard for the validity of governmental acts is much more rigorous and exacting, but where the liberty
curtailed affects at the most rights of property, the permissible scope of regulatory measure is wider. 32 How justify then the allegation of a denial of
due process?
Lastly, there is the attempt to impugn the ordinance on another due process ground by invoking the principles of vagueness or uncertainty. It would
appear from a recital in the petition itself that what seems to be the gravamen of the alleged grievance is that the provisions are too detailed and
specific rather than vague or uncertain. Petitioners, however, point to the requirement that a guest should give the name, relationship, age and sex of
the companion or companions as indefinite and uncertain in view of the necessity for determining whether the companion or companions referred to
are those arriving with the customer or guest at the time of the registry or entering the room With him at about the same time or coming at any
indefinite time later to join him; a proviso in one of its sections which cast doubt as to whether the maintenance of a restaurant in a motel is
dependent upon the discretion of its owners or operators; another proviso which from their standpoint would require a guess as to whether the "full
rate of payment" to be charged for every such lease thereof means a full day's or merely a half-day's rate. It may be asked, do these allegations
suffice to render the ordinance void on its face for alleged vagueness or uncertainty? To ask the question is to answer it. From Connally v. General
Construction Co.33 to Adderley v. Florida,34 the principle has been consistently upheld that what makes a statute susceptible to such a charge is an
enactment either forbidding or requiring the doing of an act that men of common intelligence must necessarily guess at its meaning and differ as to
its application. Is this the situation before us? A citation from Justice Holmes would prove illuminating: "We agree to all the generalities about not
supplying criminal laws with what they omit but there is no canon against using common sense in construing laws as saying what they obviously
mean."35
That is all then that this case presents. As it stands, with all due allowance for the arguments pressed with such vigor and determination, the attack
against the validity of the challenged ordinance cannot be considered a success. Far from it. Respect for constitutional law principles so uniformly
held and so uninterruptedly adhered to by this Court compels a reversal of the appealed decision.
Wherefore, the judgment of the lower court is reversed and the injunction issued lifted forthwith. With costs.

31
 10. G.R. No. L-18841 January 27, 1969
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-appellant.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and Solicitor Camilo D. Quiason for plaintiff-appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant-appellant.
REYES, J.B.L., J.:
Direct appeals, upon a joint record on appeal, by both the plaintiff and the defendant from the dismissal, after hearing, by the Court of First Instance
of Manila, in its Civil Case No. 35805, of their respective complaint and counterclaims, but making permanent a preliminary mandatory injunction
theretofore issued against the defendant on the interconnection of telephone facilities owned and operated by said parties.
The plaintiff, Republic of the Philippines, is a political entity exercising governmental powers through its branches and instrumentalities, one of
which is the Bureau of Telecommunications. That office was created on 1 July 1947, under Executive Order No. 94, with the following powers and
duties, in addition to certain powers and duties formerly vested in the Director of Posts: 1awphil.ñêt
SEC. 79. The Bureau of Telecommunications shall exercise the following powers and duties:
(a) To operate and maintain existing wire-telegraph and radio-telegraph offices, stations, and facilities, and those to be established to restore the pre-
war telecommunication service under the Bureau of Posts, as well as such additional offices or stations as may hereafter be established to provide
telecommunication service in places requiring such service;
(b) To investigate, consolidate, negotiate for, operate and maintain wire-telephone or radio telephone communication service throughout the
Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or
arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned;
(c) To prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for time calls
and other services that may be rendered by said system;
(d) To establish and maintain coastal stations to serve ships at sea or aircrafts and, when public interest so requires, to engage in the international
telecommunication service in agreement with other countries desiring to establish such service with the Republic of the Philippines; and
(e) To abide by all existing rules and regulations prescribed by the International Telecommunication Convention relative to the accounting, disposition
and exchange of messages handled in the international service, and those that may hereafter be promulgated by said convention and adhered to by
the Government of the Republic of the Philippines. 1
The defendant, Philippine Long Distance Telephone Company (PLDT for short), is a public service corporation holding a legislative franchise, Act
3426, as amended by Commonwealth Act 407, to install, operate and maintain a telephone system throughout the Philippines and to carry on the
business of electrical transmission of messages within the Philippines and between the Philippines and the telephone systems of other
countries. 2 The RCA Communications, Inc., (which is not a party to the present case but has contractual relations with the parties) is an American
corporation authorized to transact business in the Philippines and is the grantee, by assignment, of a legislative franchise to operate a domestic
station for the reception and transmission of long distance wireless messages (Act 2178) and to operate broadcasting and radio-telephone and
radio-telegraphic communications services (Act 3180). 3
Sometime in 1933, the defendant, PLDT, and the RCA Communications, Inc., entered into an agreement whereby telephone messages, coming
from the United States and received by RCA's domestic station, could automatically be transferred to the lines of PLDT; and vice-versa, for calls
collected by the PLDT for transmission from the Philippines to the United States. The contracting parties agreed to divide the tolls, as follows: 25% to
PLDT and 75% to RCA. The sharing was amended in 1941 to 30% for PLDT and 70% for RCA, and again amended in 1947 to a 50-50 basis. The
arrangement was later extended to radio-telephone messages to and from European and Asiatic countries. Their contract contained a stipulation that
either party could terminate it on a 24-month notice to the other. 4 On 2 February 1956, PLDT gave notice to RCA to terminate their contract on 2
February 1958. 5
Soon after its creation in 1947, the Bureau of Telecommunications set up its own Government Telephone System by utilizing its own appropriation
and equipment and by renting trunk lines of the PLDT to enable government offices to call private parties. 6 Its application for the use of these trunk
lines was in the usual form of applications for telephone service, containing a statement, above the signature of the applicant, that the latter will abide
by the rules and regulations of the PLDT which are on file with the Public Service Commission. 7 One of the many rules prohibits the public use of the
service furnished the telephone subscriber for his private use. 8 The Bureau has extended its services to the general public since 1948, 9 using the
same trunk lines owned by, and rented from, the PLDT, and prescribing its (the Bureau's) own schedule of rates. 10 Through these trunk lines, a
Government Telephone System (GTS) subscriber could make a call to a PLDT subscriber in the same way that the latter could make a call to the
former.
On 5 March 1958, the plaintiff, through the Director of Telecommunications, entered into an agreement with RCA Communications, Inc., for a joint
overseas telephone service whereby the Bureau would convey radio-telephone overseas calls received by RCA's station to and from local
residents. 11 Actually, they inaugurated this joint operation on 2 February 1958, under a "provisional" agreement. 12
On 7 April 1958, the defendant Philippine Long Distance Telephone Company, complained to the Bureau of Telecommunications that said bureau
was violating the conditions under which their Private Branch Exchange (PBX) is inter-connected with the PLDT's facilities, referring to the rented
trunk lines, for the Bureau had used the trunk lines not only for the use of government offices but even to serve private persons or the general public,
in competition with the business of the PLDT; and gave notice that if said violations were not stopped by midnight of 12 April 1958, the PLDT would
sever the telephone connections. 13 When the PLDT received no reply, it disconnected the trunk lines being rented by the Bureau at midnight on 12
April 1958. 14 The result was the isolation of the Philippines, on telephone services, from the rest of the world, except the United States. 15
At that time, the Bureau was maintaining 5,000 telephones and had 5,000 pending applications for telephone connection. 16 The PLDT was also
maintaining 60,000 telephones and had also 20,000 pending applications. 17 Through the years, neither of them has been able to fill up the demand
for telephone service.
The Bureau of Telecommunications had proposed to the PLDT on 8 January 1958 that both enter into an interconnecting agreement, with the
government paying (on a call basis) for all calls passing through the interconnecting facilities from the Government Telephone System to the
PLDT. 18 The PLDT replied that it was willing to enter into an agreement on overseas telephone service to Europe and Asian countries provided that
the Bureau would submit to the jurisdiction and regulations of the Public Service Commission and in consideration of 37 1/2% of the gross
revenues. 19 In its memorandum in lieu of oral argument in this Court dated 9 February 1964, on page 8, the defendant reduced its offer to 33 1/3 %
(1/3) as its share in the overseas telephone service. The proposals were not accepted by either party.
On 12 April 1958, plaintiff Republic commenced suit against the defendant, Philippine Long Distance Telephone Company, in the Court of First
Instance of Manila (Civil Case No. 35805), praying in its complaint for judgment commanding the PLDT to execute a contract with plaintiff, through
the Bureau, for the use of the facilities of defendant's telephone system throughout the Philippines under such terms and conditions as the court
might consider reasonable, and for a writ of preliminary injunction against the defendant company to restrain the severance of the existing telephone
connections and/or restore those severed.
Acting on the application of the plaintiff, and on the ground that the severance of telephone connections by the defendant company would isolate
the Philippines from other countries, the court a quo, on 14 April 1958, issued an order for the defendant:

32
(1) to forthwith reconnect and restore the seventy-eight (78) trunk lines that it has disconnected between the facilities of the Government Telephone
System, including its overseas telephone services, and the facilities of defendant; (2) to refrain from carrying into effect its threat to sever the existing
telephone communication between the Bureau of Telecommunications and defendant, and not to make connection over its telephone system of
telephone calls coming to the Philippines from foreign countries through the said Bureau's telephone facilities and the radio facilities of RCA
Communications, Inc.; and (3) to accept and connect through its telephone system all such telephone calls coming to the Philippines from foreign
countries — until further order of this Court.
On 28 April 1958, the defendant company filed its answer, with counterclaims.
It denied any obligation on its part to execute a contrary of services with the Bureau of Telecommunications; contested the jurisdiction of the Court
of First Instance to compel it to enter into interconnecting agreements, and averred that it was justified to disconnect the trunk lines heretofore leased
to the Bureau of Telecommunications under the existing agreement because its facilities were being used in fraud of its rights. PLDT further claimed
that the Bureau was engaging in commercial telephone operations in excess of authority, in competition with, and to the prejudice of, the PLDT, using
defendants own telephone poles, without proper accounting of revenues.
After trial, the lower court rendered judgment that it could not compel the PLDT to enter into an agreement with the Bureau because the parties
were not in agreement; that under Executive Order 94, establishing the Bureau of Telecommunications, said Bureau was not limited to servicing
government offices alone, nor was there any in the contract of lease of the trunk lines, since the PLDT knew, or ought to have known, at the time that
their use by the Bureau was to be public throughout the Islands, hence the Bureau was neither guilty of fraud, abuse, or misuse of the poles of the
PLDT; and, in view of serious public prejudice that would result from the disconnection of the trunk lines, declared the preliminary injunction
permanent, although it dismissed both the complaint and the counterclaims.
Both parties appealed.
Taking up first the appeal of the Republic, the latter complains of the action of the trial court in dismissing the part of its complaint seeking to compel
the defendant to enter into an interconnecting contract with it, because the parties could not agree on the terms and conditions of the
interconnection, and of its refusal to fix the terms and conditions therefor.
We agree with the court below that parties can not be coerced to enter into a contract where no agreement is had between them as to the principal
terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express
provision of the statute, a contract may be annulled if tainted by violence, intimidation, or undue influence (Articles 1306, 1336, 1337, Civil Code of
the Philippines). But the court a quo has apparently overlooked that while the Republic may not compel the PLDT to celebrate a contract with it, the
Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government
telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be
determined by the court. Nominally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the
expropriated property; but no cogent reason appears why the said power may not be availed of to impose only a burden upon the owner of
condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an
easement of right of way. The use of the PLDT's lines and services to allow inter-service connection between both telephone systems is not much
different. In either case private property is subjected to a burden for public use and benefit. If, under section 6, Article XIII, of the Constitution, the
State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the
State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. Ultimately, the beneficiary
of the interconnecting service would be the users of both telephone systems, so that the condemnation would be for public use.
The Bureau of Telecommunications, under section 78 (b) of Executive Order No. 94, may operate and maintain wire telephone or radio telephone
communications throughout the Philippines by utilizing existing facilities in cities, towns, and provinces under such terms and conditions or
arrangement with present owners or operators as may be agreed upon to the satisfaction of all concerned; but there is nothing in this section that
would exclude resort to condemnation proceedings where unreasonable or unjust terms and conditions are exacted, to the extent of crippling or
seriously hampering the operations of said Bureau.
A perusal of the complaint shows that the Republic's cause of action is predicated upon the radio telephonic isolation of the Bureau's facilities from
the outside world if the severance of interconnection were to be carried out by the PLDT, thereby preventing the Bureau of Telecommunications from
properly discharging its functions, to the prejudice of the general public. Save for the prayer to compel the PLDT to enter into a contract (and the
prayer is no essential part of the pleading), the averments make out a case for compulsory rendering of inter-connecting services by the telephone
company upon such terms and conditions as the court may determine to be just. And since the lower court found that both parties "are practically at
one that defendant (PLDT) is entitled to reasonable compensation from plaintiff for the reasonable use of the former's telephone facilities" (Decision,
Record on Appeal, page 224), the lower court should have proceeded to treat the case as one of condemnation of such services independently of
contract and proceeded to determine the just and reasonable compensation for the same, instead of dismissing the petition.
This view we have taken of the true nature of the Republic's petition necessarily results in overruling the plea of defendant-appellant PLDT that the
court of first instance had no jurisdiction to entertain the petition and that the proper forum for the action was the Public Service Commission. That
body, under the law, has no authority to pass upon actions for the taking of private property under the sovereign right of eminent domain.
Furthermore, while the defendant telephone company is a public utility corporation whose franchise, equipment and other properties are under the
jurisdiction, supervision and control of the Public Service Commission (Sec. 13, Public Service Act), yet the plaintiff's telecommunications network is
a public service owned by the Republic and operated by an instrumentality of the National Government, hence exempt, under Section 14 of the
Public Service Act, from such jurisdiction, supervision and control. The Bureau of Telecommunications was created in pursuance of a state policy
reorganizing the government offices —
to meet the exigencies attendant upon the establishment of the free and independent Government of the Republic of the Philippines, and for the
purpose of promoting simplicity, economy and efficiency in its operation (Section 1, Republic Act No. 51) —
and the determination of state policy is not vested in the Commission (Utilities Com. vs. Bartonville Bus Line, 290 Ill. 574; 124 N.E. 373).
Defendant PLDT, as appellant, contends that the court below was in error in not holding that the Bureau of Telecommunications was not
empowered to engage in commercial telephone business, and in ruling that said defendant was not justified in disconnecting the telephone trunk
lines it had previously leased to the Bureau. We find that the court a quo ruled correctly in rejecting both assertions.
Executive Order No. 94, Series of 1947, reorganizing the Bureau of Telecommunications, expressly empowered the latter in its Section 79,
subsection (b), to "negotiate for, operate and maintain wire telephone or radio telephone communication service throughout the Philippines", and, in
subsection (c), "to prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for
time calls and other services that may be rendered by the system". Nothing in these provisions limits the Bureau to non-commercial activities or
prevents it from serving the general public. It may be that in its original prospectuses the Bureau officials had stated that the service would be limited
to government offices: but such limitations could not block future expansion of the system, as authorized by the terms of the Executive Order, nor
could the officials of the Bureau bind the Government not to engage in services that are authorized by law. It is a well-known rule that erroneous
application and enforcement of the law by public officers do not block subsequent correct application of the statute (PLDT vs. Collector of Internal
Revenue, 90 Phil. 676), and that the Government is never estopped by mistake or error on the part of its agents (Pineda vs. Court of First Instance of
Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. vs. Pineda, 98 Phil. 711, 724).

33
 The theses that the Bureau's commercial services constituted unfair competition, and that the Bureau was guilty of fraud and abuse under its
contract, are, likewise, untenable.
First, the competition is merely hypothetical, the demand for telephone service being very much more than the supposed competitors can supply.
As previously noted, the PLDT had 20,000 pending applications at the time, and the Bureau had another 5,000. The telephone company's inability to
meet the demands for service are notorious even now. Second, the charter of the defendant expressly provides:
SEC. 14. The rights herein granted shall not be exclusive, and the rights and power to grant to any corporation, association or person other than the
grantee franchise for the telephone or electrical transmission of message or signals shall not be impaired or affected by the granting of this franchise:
— (Act 3436)
And third, as the trial court correctly stated, "when the Bureau of Telecommunications subscribed to the trunk lines, defendant knew or should have
known that their use by the subscriber was more or less public and all embracing in nature, that is, throughout the Philippines, if not abroad"
(Decision, Record on Appeal, page 216).
The acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had extended the use of the trunk lines to
commercial purposes, continuously since 1948, implies assent by the defendant to such extended use. Since this relationship has been maintained
for a long time and the public has patronized both telephone systems, and their interconnection is to the public convenience, it is too late for the
defendant to claim misuse of its facilities, and it is not now at liberty to unilaterally sever the physical connection of the trunk lines.
..., but there is high authority for the position that, when such physical connection has been voluntarily made, under a fair and workable
arrangement and guaranteed by contract and the continuous line has come to be patronized and established as a great public convenience, such
connection shall not in breach of the agreement be severed by one of the parties. In that case, the public is held to have such an interest in the
arrangement that its rights must receive due consideration. This position finds approval in State ex rel. vs. Cadwaller, 172 Ind. 619, 636, 87 N.E. 650,
and is stated in the elaborate and learned opinion of Chief Justice Myers as follows: "Such physical connection cannot be required as of right, but if
such connection is voluntarily made by contract, as is here alleged to be the case, so that the public acquires an interest in its continuance, the act of
the parties in making such connection is equivalent to a declaration of a purpose to waive the primary right of independence, and it imposes upon the
property such a public status that it may not be disregarded" — citing Mahan v. Mich. Tel. Co., 132 Mich. 242, 93 N.W. 629, and the reasons upon
which it is in part made to rest are referred to in the same opinion, as follows: "Where private property is by the consent of the owner invested with a
public interest or privilege for the benefit of the public, the owner can no longer deal with it as private property only, but must hold it subject to the
right of the public in the exercise of that public interest or privilege conferred for their benefit." Allnut v. Inglis (1810) 12 East, 527. The doctrine of this
early case is the acknowledged law. (Clinton-Dunn Tel. Co. v. Carolina Tel. & Tel. Co., 74 S.E. 636, 638).
It is clear that the main reason for the objection of the PLDT lies in the fact that said appellant did not expect that the Bureau's telephone system
would expand with such rapidity as it has done; but this expansion is no ground for the discontinuance of the service agreed upon.
The last issue urged by the PLDT as appellant is its right to compensation for the use of its poles for bearing telephone wires of the Bureau of
Telecommunications. Admitting that section 19 of the PLDT charter reserves to the Government —
the privilege without compensation of using the poles of the grantee to attach one ten-pin cross-arm, and to install, maintain and operate wires of its
telegraph system thereon; Provided, however, That the Bureau of Posts shall have the right to place additional cross-arms and wires on the poles of
the grantee by paying a compensation, the rate of which is to be agreed upon by the Director of Posts and the grantee; —
the defendant counterclaimed for P8,772.00 for the use of its poles by the plaintiff, contending that what was allowed free use, under the
aforequoted provision, was one ten-pin cross-arm attachment and only for plaintiff's telegraph system, not for its telephone system; that said section
could not refer to the plaintiff's telephone system, because it did not have such telephone system when defendant acquired its franchise. The
implication of the argument is that plaintiff has to pay for the use of defendant's poles if such use is for plaintiff's telephone system and has to pay
also if it attaches more than one (1) ten-pin cross-arm for telegraphic purposes.
As there is no proof that the telephone wires strain the poles of the PLDT more than the telegraph wires, nor that they cause more damage than the
wires of the telegraph system, or that the Government has attached to the poles more than one ten-pin cross-arm as permitted by the PLDT charter,
we see no point in this assignment of error. So long as the burden to be borne by the PLDT poles is not increased, we see no reason why the
reservation in favor of the telegraph wires of the government should not be extended to its telephone lines, any time that the government decided to
engage also in this kind of communication.
In the ultimate analysis, the true objection of the PLDT to continue the link between its network and that of the Government is that the latter
competes "parasitically" (sic) with its own telephone services. Considering, however, that the PLDT franchise is non-exclusive; that it is well-known
that defendant PLDT is unable to adequately cope with the current demands for telephone service, as shown by the number of pending applications
therefor; and that the PLDT's right to just compensation for the services rendered to the Government telephone system and its users is herein
recognized and preserved, the objections of defendant-appellant are without merit. To uphold the PLDT's contention is to subordinate the needs of
the general public to the right of the PLDT to derive profit from the future expansion of its services under its non-exclusive franchise.
WHEREFORE, the decision of the Court of First Instance, now under appeal, is affirmed, except in so far as it dismisses the petition of the Republic
of the Philippines to compel the Philippine Long Distance Telephone Company to continue servicing the Government telephone system upon such
terms, and for a compensation, that the trial court may determine to be just, including the period elapsed from the filing of the original complaint or
petition. And for this purpose, the records are ordered returned to the court of origin for further hearings and other proceedings not inconsistent with
this opinion. No costs.

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 11. G.R. No. L-12792 February 28, 1961
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
LA ORDEN DE PP. BENEDICTINOS DE FILIPINAS, defendant-appellee.
Office of the Solicitor General for plaintiff-appellant.
Ledesma, Puno, Guytingco, Antonio and Associates for defendant-appellee.
DIZON, J .:
To ease and solve the daily traffic congestion on Legarda Street, the Government drew plans to extend Azcarraga street from its junction with
Mendiola street, up to the Sta. Mesa Rotonda, Sampaloc, Manila. To carry out this plan it offered to buy a portion of approximately 6,000 square
meters of a bigger parcel belonging to La Orden de PP. Benedictinos de Filipinas, a domestic religious corporation that owns the San Beda College,
a private educational institution situated on Mendiola street. Not having been able to reach an agreement on the matter with the owner, the
Government instituted the present expropriation proceedings.
On May 27, 1957 the trial court, upon application of the Government — hereinafter referred to as appellant — issued an order fixing the provisional
value of the property in question at P270,000.00 and authorizing appellant to take immediate possession thereof upon depositing said amount. The
deposit having been made with the City Treasurer of Manila, the trial court issued the corresponding order directing the Sheriff of Manila to place
appellant in possession of the property aforesaid.
On June 8, 1957, as directed by the Rules of Court, the herein appellee, in lieu of an answer, filed a motion to dismiss the complaint based on the
following grounds:
I. That the property sought to be expropriated is already dedicated to public use and therefore is not subject to expropriation.
II. That there is no necessity for the proposed expropriation.
III. That the proposed Azcarraga Extension could pass through a different site which would entail less expense to the Government and which would
not necessitate the expropriation of a property dedicated to education.
IV. That the present action filed by the plaintiff against the defendant is discriminatory.
V. That the herein plaintiff does not count with sufficient funds to push through its project of constructing the proposed Azcarraga Extension and to
allow the plaintiff to expropriate defendant's property at this time would be only to needlessly deprive the latter of the use of its property.".
The government filed a written opposition to the motion to dismiss (Record on Appeal, pp. 30-37) while appellee filed a reply thereto (Id., pp. 38-48).
On July 29, 1957, without receiving evidence upon the questions of fact arising from the complaint, the motion to dismiss and the opposition thereto
filed, the trial court issued the appealed order dismissing the case.
The appealed order shows that the trial court limited itself to deciding the point of whether or not the expropriation of the property in question is
necessary (Rec. on Ap., p. 50) and, having arrived at the conclusion that such expropriation was not of extreme necessity, dismissed the
proceedings.
It is to be observed that paragraph IV of the complaint expressly alleges that appellant needs, among other properties, the portion of appellee's
property in question for the purpose of constructing the Azcarraga street extension, and that paragraph VII of the same complaint expressly alleges
that, in accordance with Section 64(b) of the Revised Administrative Code, the President of the Philippines had authorized the acquisition, thru
condemnation proceedings, of the aforesaid parcel of land belonging to appellee, as evidenced by the third indorsement dated May 15, 1957 of the
Executive Secretary, Office of the President of the Philippines, a copy of which was attached to the complaint as Annex "C" and made an integral
part thereof. In denial of these allegations appellee's motion to dismiss alleged that "there is no necessity for the proposed expropriation". Thus, the
question of fact decisive of the whole case arose.
It is the rule in this jurisdiction that private property may be expropriated for public use and upon payment of just compensation; that condemnation of
private property is justified only if it is for the public good and there is a genuine necessity therefor of a public character. Consequently, the courts
have the power to inquire into the legality of the exercise of the right of eminent domain and to determine whether or not there is a genuine necessity
therefor (City of Manila vs. Chinese Community, 40 Phil. 349; Manila Railroad Company vs. Hacienda Benito, Inc., 37 O.G. 1957).
Upon the other hand, it does not need extended argument to show that whether or not the proposed opening of the Azcarraga extension is a
necessity in order to relieve the daily congestion of traffic on Legarda St., is a question of fact dependent not only upon the facts of which the trial
court very liberally took judicial notice but also up on other factors that do not appear of record and must, therefore, be established by means of
evidence. We are, therefore, of the opinion that the parties should have been given an opportunity to present their respective evidence upon these
factors and others that might be of direct or indirect help in determining the vital question of fact involved, namely, the need to open the extension of
Azcarraga street to ease and solve the traffic congestion on Legarda street.
WHEREFORE, the appealed order of dismissal is set aside and the present case is remanded to the trial court for further proceedings in accordance
with this decision. Without costs.

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 12. G.R. No. L-14355 October 31, 1919
THE CITY OF MANILA, plaintiff-appellant, vs.
CHINESE COMMUNITY OF MANILA, ET AL., defendants-appellees. City Fiscal Diaz for appellant.
Crossfield and O'Brien, Williams, Ferrier and Sycip, Delgado and Delgado, Filemon Sotto, and Ramon Salinas for appellees.
JOHNSON, J.:
The important question presented by this appeal is: In expropriation proceedings by the city of Manila, may the courts inquire into, and hear proof
upon, the necessity of the expropriation?
That question arose in the following manner:
On the 11th day of December, 1916, the city of Manila presented a petition in the Court of First Instance of said city, praying that certain lands,
therein particularly described, be expropriated for the purpose of constructing a public improvement. The petitioner, in the second paragraph of the
petition, alleged:
That for the purpose of constructing a public improvement, namely, the extension of Rizal Avenue, Manila, it is necessary for the plaintiff to acquire
ownership in fee simple of certain parcels of land situated in the district of Binondo of said city within Block 83 of said district, and within the
jurisdiction of this court.
The defendant, the Comunidad de Chinos de Manila [Chinese Community of Manila], answering the petition of the plaintiff, alleged that it was a
corporation organized and existing under and by virtue of the laws of the Philippine Islands, having for its purpose the benefit and general welfare of
the Chinese Community of the City of Manila; that it was the owner of parcels one and two of the land described in paragraph 2 of the complaint; that
it denied that it was either necessary or expedient that the said parcels be expropriated for street purposes; that existing street and roads furnished
ample means of communication for the public in the district covered by such proposed expropriation; that if the construction of the street or road
should be considered a public necessity, other routes were available, which would fully satisfy the plaintiff's purposes, at much less expense and
without disturbing the resting places of the dead; that it had a Torrens title for the lands in question; that the lands in question had been used by the
defendant for cemetery purposes; that a great number of Chinese were buried in said cemetery; that if said expropriation be carried into effect, it
would disturb the resting places of the dead, would require the expenditure of a large sum of money in the transfer or removal of the bodies to some
other place or site and in the purchase of such new sites, would involve the destruction of existing monuments and the erection of new monuments
in their stead, and would create irreparable loss and injury to the defendant and to all those persons owning and interested in the graves and
monuments which would have to be destroyed; that the plaintiff was without right or authority to expropriate said cemetery or any part or portion
thereof for street purposes; and that the expropriation, in fact, was not necessary as a public improvement.
The defendant Ildefonso Tambunting, answering the petition, denied each and every allegation of the complaint, and alleged that said expropriation
was not a public improvement; that it was not necessary for the plaintiff to acquire the parcels of land in question; that a portion of the lands in
question was used as a cemetery in which were the graves of his ancestors; that monuments and tombstones of great value were found thereon;
that the land had become quasi-public property of a benevolent association, dedicated and used for the burial of the dead and that many dead were
buried there; that if the plaintiff deemed it necessary to extend Rizal Avenue, he had offered and still offers to grant a right of way for the said
extension over other land, without cost to the plaintiff, in order that the sepulchers, chapels and graves of his ancestors may not be disturbed; that
the land so offered, free of charge, would answer every public necessity on the part of the plaintiff.
The defendant Feliza Concepcion de Delgado, with her husband, Jose Maria Delgado, and each of the other defendants, answering separately,
presented substantially the same defense as that presented by the Comunidad de Chinos de Manila and Ildefonso Tambunting above referred to.
The foregoing parts of the defense presented by the defendants have been inserted in order to show the general character of the defenses
presented by each of the defendants. The plaintiff alleged that the expropriation was necessary. The defendants each alleged ( a) that no necessity
existed for said expropriation and (b) that the land in question was a cemetery, which had been used as such for many years, and was covered with
sepulchres and monuments, and that the same should not be converted into a street for public purposes.
Upon the issue thus presented by the petition and the various answers, the Honorable Simplicio del Rosario, judge, in a very elucidated opinion, with
very clear and explicit reasons, supported by ambulance of authorities, decided that there was no necessity for the expropriation of the particular
strip of land in question, and absolved each and all of the defendants from all liability under the complaint, without any finding as to costs.
From that judgment the plaintiff appealed and presented the above question as its principal ground of appeal.
The theory of the plaintiff is, that once it has established the fact, under the law, that it has authority to expropriate land, it may expropriate any land it
may desire; that the only function of the court in such proceedings is to ascertain the value of the land in question; that neither the court nor the
owners of the land can inquire into the advisible purpose of purpose of the expropriation or ask any questions concerning the necessities therefor;
that the courts are mere appraisers of the land involved in expropriation proceedings, and, when the value of the land is fixed by the method adopted
by the law, to render a judgment in favor of the defendant for its value.
That the city of Manila has authority to expropriate private lands for public purposes, is not denied. Section 2429 of Act No. 2711 (Charter of the city
of Manila) provides that "the city (Manila) . . . may condemn private property for public use."
The Charter of the city of Manila contains no procedure by which the said authority may be carried into effect. We are driven, therefore, to the
procedure marked out by Act No. 190 to ascertain how the said authority may be exercised. From an examination of Act No. 190, in its section 241,
we find how the right of eminent domain may be exercised. Said section 241 provides that, "The Government of the Philippine Islands, or of any
province or department thereof, or of any municipality, and any person, or public or private corporation having, by law, the right to condemn private
property for public use, shall exercise that right in the manner hereinafter prescribed ."
Section 242 provides that a complaint in expropriation proceeding shall be presented; that the complaint shall state with certainty the right of
condemnation, with a description of the property sought to be condemned together with the interest of each defendant separately.
Section 243 provides that if the court shall find upon trial that the right to expropriate the land in question exists, it shall then appoint commissioners.
Sections 244, 245 and 246 provide the method of procedure and duty of the commissioners. Section 248 provides for an appeal from the judgment
of the Court of First Instance to the Supreme Court. Said section 248 gives the Supreme Court authority to inquire into the right of expropriation on
the part of the plaintiff. If the Supreme Court on appeal shall determine that no right of expropriation existed, it shall remand the cause to the Court of
First Instance with a mandate that the defendant be replaced in the possession of the property and that he recover whatever damages he may have
sustained by reason of the possession of the plaintiff.
It is contended on the part of the plaintiff that the phrase in said section, "and if the court shall find the right to expropriate exists," means simply that,
if the court finds that there is some law authorizing the plaintiff to expropriate, then the courts have no other function than to authorize the
expropriation and to proceed to ascertain the value of the land involved; that the necessity for the expropriation is a legislative and not a judicial
question.
Upon the question whether expropriation is a legislative function exclusively, and that the courts cannot intervene except for the purpose of
determining the value of the land in question, there is much legal legislature. Much has been written upon both sides of that question. A careful
examination of the discussions pro and con will disclose the fact that the decisions depend largely upon particular constitutional or statutory
provisions. It cannot be denied, if the legislature under proper authority should grant the expropriation of a certain or particular parcel of land for
some specified public purpose, that the courts would be without jurisdiction to inquire into the purpose of that legislation.

36
If, upon the other hand, however, the Legislature should grant general authority to a municipal corporation to expropriate private
land for public purposes, we think the courts have ample authority in this jurisdiction, under the provisions above quoted, to make inquiry and to hear
proof, upon an issue properly presented, concerning whether or not the lands were private and whether the purpose was, in fact, public. In other
words, have no the courts in this jurisdiction the right, inasmuch as the questions relating to expropriation must be referred to them (sec. 241, Act No.
190) for final decision, to ask whether or not the law has been complied with? Suppose in a particular case, it should be denied that the property is
not private property but public, may not the courts hear proof upon that question? Or, suppose the defense is, that the purpose of the expropriation is
not public but private, or that there exists no public purpose at all, may not the courts make inquiry and hear proof upon that question?
The city of Manila is given authority to expropriate private lands for public purposes. Can it be possible that said authority confers the right to
determine for itself that the land is private and that the purpose is public, and that the people of the city of Manila who pay the taxes for its support,
especially those who are directly affected, may not question one or the other, or both, of these questions? Can it be successfully contended that the
phrase used in Act No. 190, "and if the court upon trial shall find that such right exists," means simply that the court shall examine the statutes
simply for the purpose of ascertaining whether a law exists authorizing the petitioner to exercise the right of eminent domain? Or, when the case
arrives in the Supreme Court, can it be possible that the phrase, "if the Supreme Court shall determine that no right of expropriation exists," that that
simply means that the Supreme Court shall also examine the enactments of the legislature for the purpose of determining whether or not a law exists
permitting the plaintiff to expropriate?
We are of the opinion that the power of the court is not limited to that question. The right of expropriation is not an inherent power in a municipal
corporation, and before it can exercise the right some law must exist conferring the power upon it. When the courts come to determine the question,
they must only find (a) that a law or authority exists for the exercise of the right of eminent domain, but ( b) also that the right or authority is being
exercised in accordance with the law. In the present case there are two conditions imposed upon the authority conceded to the City of Manila: First,
the land must be private; and, second, the purpose must be public. If the court, upon trial, finds that neither of these conditions exists or that either
one of them fails, certainly it cannot be contended that the right is being exercised in accordance with law.
Whether the purpose for the exercise of the right of eminent domain is public, is a question of fact. Whether the land is public, is a question of fact;
and, in our opinion, when the legislature conferred upon the courts of the Philippine Islands the right to ascertain upon trial whether the right exists
for the exercise of eminent domain, it intended that the courts should inquire into, and hear proof upon, those questions. Is it possible that the owner
of valuable land in this jurisdiction is compelled to stand mute while his land is being expropriated for a use not public, with the right simply to beg the
city of Manila to pay him the value of his land? Does the law in this jurisdiction permit municipalities to expropriate lands, without question, simply for
the purpose of satisfying the aesthetic sense of those who happen for the time being to be in authority? Expropriation of lands usually calls for public
expense. The taxpayers are called upon to pay the costs. Cannot the owners of land question the public use or the public necessity?
As was said above, there is a wide divergence of opinion upon the authority of the court to question the necessity or advisability of the exercise of
the right of eminent domain. The divergence is usually found to depend upon particular statutory or constitutional provisions.
It has been contended — and many cases are cited in support of that contention, and section 158 of volume 10 of Ruling Case Law is cited as
conclusive — that the necessity for taking property under the right of eminent domain is not a judicial question. But those who cited said section
evidently overlooked the section immediately following (sec. 159), which adds: "But it is obvious that if the property is taken in the ostensible behalf
of a public improvement which it can never by any possibility serve, it is being taken for a use not public, and the owner's constitutional rights call for
protection by the courts. While many courts have used sweeping expression in the decisions in which they have disclaimed the power of supervising
the power of supervising the selection of the sites of public improvements, it may be safely said that the courts of the various states would feel bound
to interfere to prevent an abuse of the discretion delegated by the legislature , by an attempted appropriation of land in utter disregard of the possible
necessity of its use, or when the alleged purpose was a cloak to some sinister scheme." (Norwich City vs. Johnson, 86 Conn., 151; Bell vs. Mattoon
Waterworks, etc. Co., 245 Ill., 544; Wheeling, etc. R. R. Co. vs. Toledo Ry. etc. Co., 72 Ohio St., 368; State vs. Stewart, 74 Wis., 620.)
Said section 158 (10 R. C. L., 183) which is cited as conclusive authority in support of the contention of the appellant, says:
The legislature, in providing for the exercise of the power of eminent domain, may directly determine the necessity for appropriating private property
for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well settled that the utility of
the proposed improvement, the extent of the public necessity for its construction, the expediency of constructing it, the suitableness of the location
selected and the consequent necessity of taking the land selected for its site, are all questions exclusively for the legislature to determine, and the
courts have no power to interfere, or to substitute their own views for those of the representatives of the people.
Practically every case cited in support of the above doctrine has been examined, and we are justified in making the statement that in each case the
legislature directly determined the necessity for the exercise of the right of eminent domain in the particular case. It is not denied that if the necessity
for the exercise of the right of eminent domain is presented to the legislative department of the government and that department decides that there
exists a necessity for the exercise of the right in a particular case, that then and in that case, the courts will not go behind the action of the legislature
and make inquiry concerning the necessity. But, in the case of Wheeling, etc. R. R. Co. vs. Toledo, Ry, etc., Co. (72 Ohio St., 368 [106 Am. St. rep.,
622, 628]), which was cited in support of the doctrine laid down in section 158 above quoted, the court said:
But when the statute does not designate the property to be taken nor how may be taken, then the necessity of taking particular property is a question
for the courts. Where the application to condemn or appropriate is made directly to the court, the question (of necessity) should be raised and
decided in limene.
The legislative department of the government was rarely undertakes to designate the precise property which should be taken for public use. It has
generally, like in the present case, merely conferred general authority to take land for public use when a necessity exists therefor. We believe that it
can be confidently asserted that, under such statute, the allegation of the necessity for the appropriation is an issuable allegation which it is
competent for the courts to decide. (Lynch vs. Forbes, 161 Mass., 302 [42 Am. St. Rep., 402, 407].)
There is a wide distinction between a legislative declaration that a municipality is given authority to exercise the right of eminent domain, and a
decision by the municipality that there exist a necessity for the exercise of that right in a particular case. The first is a declaration simply that there
exist reasons why the right should be conferred upon municipal corporation, while the second is the application of the right to a particular case.
Certainly, the legislative declaration relating to the advisability of granting the power cannot be converted into a declaration that a necessity exists for
its exercise in a particular case, and especially so when, perhaps, the land in question was not within the territorial authority was granted.
Whether it was wise, advisable, or necessary to confer upon a municipality the power to exercise the right of eminent domain, is a question with
which the courts are not concerned. But when that right or authority is exercised for the purpose of depriving citizens of their property, the courts are
authorized, in this jurisdiction, to make inquiry and to hear proof upon the necessity in the particular case, and not the general authority.
Volume 15 of the Cyclopedia of Law and Procedure (Cyc.), page 629, is cited as a further conclusive authority upon the question that the necessity
for the exercise of the right of eminent domain is a legislative and not a judicial question. Cyclopedia, at the page stated, says:
In the absence of some constitutional or statutory provision to the contrary, the necessity and expediency of exercising the right of eminent domain
are questions essentially political and not judicial in their character. The determination of those questions (the necessity and the expediency) belongs
to the sovereign power; the legislative department is final and conclusive, and the courts have no power to review it (the necessity and the
expediency) . . . . It (the legislature) may designate the particular property to be condemned, and its determination in this respect cannot be reviewed
by the courts.

37
The volume of Cyclopedia, above referred to, cites many cases in support of the doctrine quoted. While time has not permitted an examination of all
of said citations, many of them have been examined, and it can be confidently asserted that said cases which are cited in support of the assertion
that, "the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial," show clearly and
invariably that in each case the legislature itself usually, by a special law, designated the particular case in which the right of eminent domain might
be exercised by the particular municipal corporation or entity within the state. (Eastern R. Co. vs. Boston, etc., R. Co., 11 Mass., 125 [15 Am. Rep.,
13]; Brooklyn Park Com'rs vs. Armstrong, 45 N.Y., 234 [6 Am. Rep., 70]; Hairston vs. Danville, etc. Ry. Co., 208 U. S. 598; Cincinnati vs. Louisville,
etc. Ry. Co., 223 U. S., 390; U.S. vs. Chandler-Dunbar Water Power Co., 229 U. S., 53; U.S. vs. Gettysburg, etc. Co., 160 U. S., 668; Traction
Co. vs. Mining Co., 196 U.S., 239; Sears vs. City of Akron, 246 U.S., 351 [erroneously cited as 242 U.S.].)
In the case of Traction Co. vs. Mining Co. (196 U.S., 239), the Supreme Court of the United States said: "It is erroneous to suppose that the
legislature is beyond the control of the courts in exercising the power of eminent domain, either as to the nature of the use or the necessity to the
use of any particular property. For if the use be not public or no necessity for the taking exists, the legislature cannot authorize the taking of private
property against the will of the owner, notwithstanding compensation may be required."
In the case of School Board of Carolina vs. Saldaña (14 Porto Rico, 339, 356), we find the Supreme Court of Porto Rico, speaking through Justice
MacLeary, quoting approvingly the following, upon the question which we are discussing: "It is well settled that although the legislature must
necessarily determine in the first instance whether the use for which they (municipalities, etc.) attempt to exercise the power is a public one or not,
their (municipalities, etc.) determination is not final, but is subject to correction by the courts, who may undoubtedly declare the statute
unconstitutional, if it shall clearly appear that the use for which it is proposed to authorize the taking of private property is in reality not public but
private." Many cases are cited in support of that doctrine.
Later, in the same decision, we find the Supreme Court of Porto Rico says: "At any rate, the rule is quite well settled that in the cases under
consideration the determination of the necessity of taking a particular piece or a certain amount of land rests ultimately with the courts." (Spring
Valley etc. Co. vs. San Mateo, etc. Co., 64 Cal., 123.) .
In the case of Board of Water Com'rs., etc. vs. Johnson (86 Conn., 571 [41 L. R. A., N. S., 1024]), the Supreme Court of Connecticut approvingly
quoted the following doctrine from Lewis on Eminent Domain (3d ed.), section 599: "In all such cases the necessity of public utility of the proposed
work or improvement is a judicial question. In all such cases, where the authority is to take property necessary for the purpose, the necessity of
taking particular property for a particular purpose is a judicial one, upon which the owner is entitled to be heard." (Riley vs. Charleston, etc. Co., 71
S. C., 457, 489 [110 Am. St. Rep., 579]; Henderson vs. Lexington 132 Ky., 390, 403.)
The taking of private property for any use which is not required by the necessities or convenience of the inhabitants of the state, is an unreasonable
exercise of the right of eminent domain, and beyond the power of the legislature to delegate. (Bennett vs. Marion, 106 Iowa, 628, 633;
Wilson vs. Pittsburg, etc. Co., 222 Pa. St., 541, 545; Greasy, etc. Co. vs. Ely, etc. Co., 132 Ky., 692, 697.)
In the case of New Central Coal Co. vs. George's etc. Co. (37 Md., 537, 564), the Supreme Court of the State of Maryland, discussing the question
before us, said: "To justify the exercise of this extreme power (eminent domain) where the legislature has left it to depend upon the necessity that
may be found to exist, in order to accomplish the purpose of the incorporation, as in this case, the party claiming the right to the exercise of the
power should be required to show at least a reasonable degree of necessity for its exercise. Any rule less strict than this, with the large and almost
indiscriminate delegation of the right to corporations, would likely lead to oppression and the sacrifice of private right to corporate power."
In the case of Dewey vs. Chicago, etc. Co. (184 Ill., 426, 433), the court said: "Its right to condemn property is not a general power of condemnation,
but is limited to cases where a necessity for resort to private property is shown to exist. Such necessity must appear upon the face of the petition to
condemn. If the necessary is denied the burden is upon the company (municipality) to establish it." (Highland, etc. Co. vs. Strickley, 116 Fed., 852,
856; Kiney vs. Citizens' Water & Light Co., 173 Ind., 252, 257 ; Bell vs. Mattoon Waterworks, etc. Co., 245 Ill., 544 [137 Am. St. Rep. 338].)
It is true that naby decisions may be found asserting that what is a public use is a legislative question, and many other decisions declaring with equal
emphasis that it is a judicial question. But, as long as there is a constitutional or statutory provision denying the right to take land for any use other
than a public use, it occurs to us that the question whether any particular use is a public one or not is ultimately, at least, a judicial question. The
legislative may, it is true, in effect declare certain uses to be public, and, under the operation of the well-known rule that a statute will not be declared
to be unconstitutional except in a case free, or comparatively free, from doubt, the courts will certainly sustain the action of the legislature unless it
appears that the particular use is clearly not of a public nature. The decisions must be understood with this limitation; for, certainly, no court of last
resort will be willing to declare that any and every purpose which the legislative might happen to designate as a public use shall be conclusively held
to be so, irrespective of the purpose in question and of its manifestly private character Blackstone in his Commentaries on the English Law remarks
that, so great is the regard of the law for private property that it will not authorize the least violation of it, even for the public good, unless there exists
a very great necessity therefor.
In the case of Wilkinson vs. Leland (2 Pet. [U.S.], 657), the Supreme Court of the United States said: "That government can scarcely be deemed free
where the rights of property are left solely defendant on the legislative body, without restraint. The fundamental maxims of free government seem to
require that the rights of personal liberty and private property should be held sacred. At least no court of justice in this country would be warranted in
assuming that the power to violate and disregard them — a power so repugnant to the common principles of justice and civil liberty — lurked in any
general grant of legislature authority, or ought to be implied from any general expression of the people. The people ought no to be presumed to part
with rights so vital to their security and well-being without very strong and direct expression of such intention." (Lewis on Eminent Domain, sec. 603;
Lecoul vs. Police Jury 20 La. Ann., 308; Jefferson vs. Jazem, 7 La. Ann., 182.)
Blackstone, in his Commentaries on the English Law said that the right to own and possess land — a place to live separate and apart from others —
to retain it as a home for the family in a way not to be molested by others — is one of the most sacred rights that men are heirs to. That right has
been written into the organic law of every civilized nation. The Acts of Congress of July 1, 1902, and of August 29, 1916, which provide that "no law
shall be enacted in the Philippine Islands which shall deprive any person of his property without due process of law," are but a restatement of the
time-honored protection of the absolute right of the individual to his property. Neither did said Acts of Congress add anything to the law already
existing in the Philippine Islands. The Spaniard fully recognized the principle and adequately protected the inhabitants of the Philippine Islands
against the encroachment upon the private property of the individual. Article 349 of the Civil Code provides that: "No one may be deprived of his
property unless it be by competent authority, for some purpose of proven public utility, and after payment of the proper compensation Unless this
requisite (proven public utility and payment) has been complied with, it shall be the duty of the courts to protect the owner of such property in its
possession or to restore its possession to him , as the case may be."
The exercise of the right of eminent domain, whether directly by the State, or by its authorized agents, is necessarily in derogation of private rights,
and the rule in that case is that the authority must be strictly construed. No species of property is held by individuals with greater tenacity, and none
is guarded by the constitution and laws more sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right,
and, for greater public purposes, appropriates the land of an individual without his consent, the plain meaning of the law should not be enlarged by
doubtly interpretation. (Bensely vs. Mountainlake Water Co., 13 Cal., 306 and cases cited [73 Am. Dec., 576].)
The statutory power of taking property from the owner without his consent is one of the most delicate exercise of government authority. It is to be
watched with jealous scrutiny. Important as the power may be to the government, the inviolable sanctity which all free constitutions attach to the right
of property of the citizens, constrains the strict observance of the substantial provisions of the law which are prescribed as modes of the exercise of
the power, and to protect it from abuse. Not only must the authority of municipal corporations to take property be expressly conferred and the use for

38
which it is taken specified, but the power, with all constitutional limitation and directions for its exercise, must be strictly pursued. (Dillon on Municipal
Corporations [5th Ed.], sec. 1040, and cases cited; Tenorio vs. Manila Railroad Co., 22 Phil., 411.)
It can scarcely be contended that a municipality would be permitted to take property for some public use unless some public necessity existed
therefor. The right to take private property for public use originates in the necessity, and the taking must be limited by such necessity. The appellant
contends that inasmuch as the legislature has given it general authority to take private property for public use, that the legislature has, therefore,
settled the question of the necessity in every case and that the courts are closed to the owners of the property upon that question. Can it be
imagined, when the legislature adopted section 2429 of Act No. 2711, that it thereby declared that it was necessary to appropriate the property of
Juan de la Cruz, whose property, perhaps, was not within the city limits at the time the law was adopted? The legislature, then, not having declared
the necessity, can it be contemplated that it intended that a municipality should be the sole judge of the necessity in every case, and that the courts,
in the face of the provision that "if upon trial they shall find that a right exists," cannot in that trial inquire into and hear proof upon the necessity for
the appropriation in a particular case?
The Charter of the city of Manila authorizes the taking of private property for public use. Suppose the owner of the property denies and successfully
proves that the taking of his property serves no public use: Would the courts not be justified in inquiring into that question and in finally denying the
petition if no public purpose was proved? Can it be denied that the courts have a right to inquire into that question? If the courts can ask questions
and decide, upon an issue properly presented, whether the use is public or not, is not that tantamount to permitting the courts to inquire into the
necessity of the appropriation? If there is no public use, then there is no necessity, and if there is no necessity, it is difficult to understand how a
public use can necessarily exist. If the courts can inquire into the question whether a public use exists or not, then it seems that it must follow that
they can examine into the question of the necessity.
The very foundation of the right to exercise eminent domain is a genuine necessity, and that necessity must be of a public character. The
ascertainment of the necessity must precede or accompany, and not follow, the taking of the land. (Morrison vs. Indianapolis, etc. Ry. Co., 166 Ind.,
511; Stearns vs. Barre, 73 Vt., 281; Wheeling, etc. R. R. Co. vs. Toledo, Ry. etc. Co., 72 Ohio St., 368.)
The general power to exercise the right of eminent domain must not be confused with the right to exercise it in a particular case. The power of the
legislature to confer, upon municipal corporations and other entities within the State, general authority to exercise the right of eminent domain cannot
be questioned by the courts, but that general authority of municipalities or entities must not be confused with the right to exercise it in particular
instances. The moment the municipal corporation or entity attempts to exercise the authority conferred, it must comply with the conditions
accompanying the authority. The necessity for conferring the authority upon a municipal corporation to exercise the right of eminent domain is
admittedly within the power of the legislature. But whether or not the municipal corporation or entity is exercising the right in a particular case under
the conditions imposed by the general authority, is a question which the courts have the right to inquire into.
The conflict in the authorities upon the question whether the necessity for the exercise of the right of eminent domain is purely legislative and not
judicial, arises generally in the wisdom and propriety of the legislature in authorizing the exercise of the right of eminent domain instead of in the
question of the right to exercise it in a particular case. (Creston Waterworks Co. vs. McGrath, 89 Iowa, 502.)
By the weight of authorities, the courts have the power of restricting the exercise of eminent domain to the actual reasonable necessities of the case
and for the purposes designated by the law. (Fairchild vs. City of St. Paul. 48 Minn., 540.)
And, moreover, the record does not show conclusively that the plaintiff has definitely decided that their exists a necessity for the appropriation of the
particular land described in the complaint. Exhibits 4, 5, 7, and E clearly indicate that the municipal board believed at one time that other land might
be used for the proposed improvement, thereby avoiding the necessity of distributing the quiet resting place of the dead.
Aside from insisting that there exists no necessity for the alleged improvements, the defendants further contend that the street in question should not
be opened through the cemetery. One of the defendants alleges that said cemetery is public property. If that allegations is true, then, of course, the
city of Manila cannot appropriate it for public use. The city of Manila can only expropriate private property.
It is a well known fact that cemeteries may be public or private. The former is a cemetery used by the general community, or neighborhood, or
church, while the latter is used only by a family, or a small portion of the community or neighborhood. (11 C. J., 50.)
Where a cemetery is open to public, it is a public use and no part of the ground can be taken for other public uses under a general authority. And this
immunity extends to the unimproved and unoccupied parts which are held in good faith for future use. (Lewis on Eminent Domain, sec. 434, and
cases cited.)
The cemetery in question seems to have been established under governmental authority. The Spanish Governor-General, in an order creating the
same, used the following language:
The cemetery and general hospital for indigent Chinese having been founded and maintained by the spontaneous and fraternal contribution of their
protector, merchants and industrials, benefactors of mankind, in consideration of their services to the Government of the Islands its internal
administration, government and regime must necessarily be adjusted to the taste and traditional practices of those born and educated in China in
order that the sentiments which animated the founders may be perpetually effectuated.
It is alleged, and not denied, that the cemetery in question may be used by the general community of Chinese, which fact, in the general acceptation
of the definition of a public cemetery, would make the cemetery in question public property. If that is true, then, of course, the petition of the plaintiff
must be denied, for the reason that the city of Manila has no authority or right under the law to expropriate public property.
But, whether or not the cemetery is public or private property, its appropriation for the uses of a public street, especially during the lifetime of those
specially interested in its maintenance as a cemetery, should be a question of great concern, and its appropriation should not be made for such
purposes until it is fully established that the greatest necessity exists therefor.
While we do not contend that the dead must not give place to the living, and while it is a matter of public knowledge that in the process of time
sepulchres may become the seat of cities and cemeteries traversed by streets and daily trod by the feet of millions of men, yet, nevertheless such
sacrifices and such uses of the places of the dead should not be made unless and until it is fully established that there exists an eminent necessity
therefor. While cemeteries and sepulchres and the places of the burial of the dead are still within
the memory and command of the active care of the living; while they are still devoted to pious uses and sacred regard, it is difficult to believe that
even the legislature would adopt a law expressly providing that such places, under such circumstances, should be violated.
In such an appropriation, what, we may ask, would be the measure of damages at law, for the wounded sensibilities of the living, in having the
graves of kindred and loved ones blotted out and desecrated by a common highway or street for public travel? The impossibility of measuring the
damage and inadequacy of a remedy at law is too apparent to admit of argument. To disturb the mortal remains of those endeared to us in life
sometimes becomes the sad duty of the living; but, except in cases of necessity, or for laudable purposes, the sanctity of the grave, the last resting
place of our friends, should be maintained, and the preventative aid of the courts should be invoked for that object. (Railroad Company vs. Cemetery
Co., 116 Tenn., 400; Evergreen Cemetery Association vs. The City of New Haven, 43 Conn., 234; Anderson vs. Acheson, 132 Iowa, 744;
Beatty vs. Kurtz, 2 Peters, 566.)
In the present case, even granting that a necessity exists for the opening of the street in question, the record contains no proof of the necessity of
opening the same through the cemetery. The record shows that adjoining and adjacent lands have been offered to the city free of charge, which will
answer every purpose of the plaintiff.
For all of the foregoing, we are fully persuaded that the judgment of the lower court should be and is hereby affirmed, with costs against the
appellant. So ordered.

39
 13. G.R. No. L-20620 August 15, 1974
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
CARMEN M. VDA. DE CASTELLVI, ET AL., defendants-appellees.
Office of the Solicitor General for plaintiff-appellant.
C.A. Mendoza & A. V. Raquiza and Alberto Cacnio & Associates for defendant-appellees.

ZALDIVAR, J.:p
Appeal from the decision of the Court of First Instance of Pampanga in its Civil Case No. 1623, an expropriation proceeding.
Plaintiff-appellant, the Republic of the Philippines, (hereinafter referred to as the Republic) filed, on June 26, 1959, a complaint for eminent domain
against defendant-appellee, Carmen M. Vda. de Castellvi, judicial administratrix of the estate of the late Alfonso de Castellvi (hereinafter referred to
as Castellvi), over a parcel of land situated in the barrio of San Jose, Floridablanca, Pampanga, described as follows:
A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo 23666. Bounded on the NE by Maria Nieves Toledo-Gozun; on the SE by national road;
on the SW by AFP reservation, and on the NW by AFP reservation. Containing an area of 759,299 square meters, more or less, and registered in the
name of Alfonso Castellvi under TCT No. 13631 of the Register of Pampanga ...;
and against defendant-appellee Maria Nieves Toledo Gozun (hereinafter referred to as Toledo-Gozun over two parcels of land described as follows:
A parcel of land (Portion Lot Blk-1, Bureau of Lands Plan Psd, 26254. Bounded on the NE by Lot 3, on the SE by Lot 3; on the SW by Lot 1-B, Blk. 2
(equivalent to Lot 199-B Swo 23666; on the NW by AFP military reservation. Containing an area of 450,273 square meters, more or less and
registered in the name of Maria Nieves Toledo-Gozun under TCT No. 8708 of the Register of Deeds of Pampanga. ..., and
A parcel of land (Portion of lot 3, Blk-1, Bureau of Lands Plan Psd 26254. Bounded on the NE by Lot No. 3, on the SE by school lot and national
road, on the SW by Lot 1-B Blk 2 (equivalent to Lot 199-B Swo 23666), on the NW by Lot 1-B, Blk-1. Containing an area of 88,772 square meters,
more or less, and registered in the name of Maria Nieves Toledo Gozun under TCT No. 8708 of the Register of Deeds of Pampanga, ....
In its complaint, the Republic alleged, among other things, that the fair market value of the above-mentioned lands, according to the Committee on
Appraisal for the Province of Pampanga, was not more than P2,000 per hectare, or a total market value of P259,669.10; and prayed, that the
provisional value of the lands be fixed at P259.669.10, that the court authorizes plaintiff to take immediate possession of the lands upon deposit of
that amount with the Provincial Treasurer of Pampanga; that the court appoints three commissioners to ascertain and report to the court the just
compensation for the property sought to be expropriated, and that the court issues thereafter a final order of condemnation.
On June 29, 1959 the trial court issued an order fixing the provisional value of the lands at P259,669.10.
In her "motion to dismiss" filed on July 14, 1959, Castellvi alleged, among other things, that the land under her administration, being a residential
land, had a fair market value of P15.00 per square meter, so it had a total market value of P11,389,485.00; that the Republic, through the Armed
Forces of the Philippines, particularly the Philippine Air Force, had been, despite repeated demands, illegally occupying her property since July 1,
1956, thereby preventing her from using and disposing of it, thus causing her damages by way of unrealized profits. This defendant prayed that the
complaint be dismissed, or that the Republic be ordered to pay her P15.00 per square meter, or a total of P11,389,485.00, plus interest thereon at
6% per annum from July 1, 1956; that the Republic be ordered to pay her P5,000,000.00 as unrealized profits, and the costs of the suit.
By order of the trial court, dated August, 1959, Amparo C. Diaz, Dolores G. viuda de Gil, Paloma Castellvi, Carmen Castellvi, Rafael Castellvi, Luis
Castellvi, Natividad Castellvi de Raquiza, Jose Castellvi and Consuelo Castellvi were allowed to intervene as parties defendants. Subsequently,
Joaquin V. Gozun, Jr., husband of defendant Nieves Toledo Gozun, was also allowed by the court to intervene as a party defendant.
After the Republic had deposited with the Provincial Treasurer of Pampanga the amount of P259,669.10, the trial court ordered that the Republic be
placed in possession of the lands. The Republic was actually placed in possession of the lands on August 10,
1959.1
In her "motion to dismiss", dated October 22, 1959, Toledo-Gozun alleged, among other things, that her two parcels of land were residential lands, in
fact a portion with an area of 343,303 square meters had already been subdivided into different lots for sale to the general public, and the remaining
portion had already been set aside for expansion sites of the already completed subdivisions; that the fair market value of said lands was P15.00 per
square meter, so they had a total market value of P8,085,675.00; and she prayed that the complaint be dismissed, or that she be paid the amount of
P8,085,675.00, plus interest thereon at the rate of 6% per annum from October 13, 1959, and attorney's fees in the amount of P50,000.00.
Intervenors Jose Castellvi and Consuelo Castellvi in their answer, filed on February 11, 1960, and also intervenor Joaquin Gozun, Jr., husband of
defendant Maria Nieves Toledo-Gozun, in his motion to dismiss, dated May 27, 1960, all alleged that the value of the lands sought to be expropriated
was at the rate of P15.00 per square meter.
On November 4, 1959, the trial court authorized the Provincial Treasurer of Pampanga to pay defendant Toledo-Gozun the sum of P107,609.00 as
provisional value of her lands.2 On May 16, 1960 the trial Court authorized the Provincial Treasurer of Pampanga to pay defendant Castellvi the
amount of P151,859.80 as provisional value of the land under her administration, and ordered said defendant to deposit the amount with the
Philippine National Bank under the supervision of the Deputy Clerk of Court. In another order of May 16, 1960 the trial Court entered an order of
condemnation.3
The trial Court appointed three commissioners: Atty. Amadeo Yuzon, Clerk of Court, as commissioner for the court; Atty. Felicisimo G. Pamandanan,
counsel of the Philippine National Bank Branch at Floridablanca, for the plaintiff; and Atty. Leonardo F. Lansangan, Filipino legal counsel at Clark Air
Base, for the defendants. The Commissioners, after having qualified themselves, proceeded to the performance of their duties.
On March 15,1961 the Commissioners submitted their report and recommendation, wherein, after having determined that the lands sought to be
expropriated were residential lands, they recommended unanimously that the lowest price that should be paid was P10.00 per square meter, for both
the lands of Castellvi and Toledo-Gozun; that an additional P5,000.00 be paid to Toledo-Gozun for improvements found on her land; that legal
interest on the compensation, computed from August 10, 1959, be paid after deducting the amounts already paid to the owners, and that no
consequential damages be awarded.4 The Commissioners' report was objected to by all the parties in the case — by defendants Castellvi and
Toledo-Gozun, who insisted that the fair market value of their lands should be fixed at P15.00 per square meter; and by the Republic, which insisted
that the price to be paid for the lands should be fixed at P0.20 per square meter. 5
After the parties-defendants and intervenors had filed their respective memoranda, and the Republic, after several extensions of time, had adopted
as its memorandum its objections to the report of the Commissioners, the trial court, on May 26, 1961, rendered its decision 6 the dispositive portion
of which reads as follows:
WHEREFORE, taking into account all the foregoing circumstances, and that the lands are titled, ... the rising trend of land values ..., and the lowered
purchasing power of the Philippine peso, the court finds that the unanimous recommendation of the commissioners of ten (P10.00) pesos per square
meter for the three lots of the defendants subject of this action is fair and just.
xxx xxx xxx
The plaintiff will pay 6% interest per annum on the total value of the lands of defendant Toledo-Gozun since (sic) the amount deposited as provisional
value from August 10, 1959 until full payment is made to said defendant or deposit therefor is made in court.
In respect to the defendant Castellvi, interest at 6% per annum will also be paid by the plaintiff to defendant Castellvi from July 1, 1956 when plaintiff
commenced its illegal possession of the Castellvi land when the instant action had not yet been commenced to July 10, 1959 when the provisional

40
value thereof was actually deposited in court, on the total value of the said (Castellvi) land as herein adjudged. The same rate of interest shall be
paid from July 11, 1959 on the total value of the land herein adjudged minus the amount deposited as provisional value, or P151,859.80, such
interest to run until full payment is made to said defendant or deposit therefor is made in court. All the intervenors having failed to produce evidence
in support of their respective interventions, said interventions are ordered dismissed.
The costs shall be charged to the plaintiff.
On June 21, 1961 the Republic filed a motion for a new trial and/or reconsideration, upon the grounds of newly-discovered evidence, that the
decision was not supported by the evidence, and that the decision was against the law, against which motion defendants Castellvi and Toledo-Gozun
filed their respective oppositions. On July 8, 1961 when the motion of the Republic for new trial and/or reconsideration was called for hearing, the
Republic filed a supplemental motion for new trial upon the ground of additional newly-discovered evidence. This motion for new trial and/or
reconsideration was denied by the court on July 12, 1961.
On July 17, 1961 the Republic gave notice of its intention to appeal from the decision of May 26, 1961 and the order of July 12, 1961. Defendant
Castellvi also filed, on July 17, 1961, her notice of appeal from the decision of the trial court.
The Republic filed various ex-parte motions for extension of time within which to file its record on appeal. The Republic's record on appeal was finally
submitted on December 6, 1961.
Defendants Castellvi and Toledo-Gozun filed not only a joint opposition to the approval of the Republic's record on appeal, but also a joint
memorandum in support of their opposition. The Republic also filed a memorandum in support of its prayer for the approval of its record on appeal.
On December 27, 1961 the trial court issued an order declaring both the record on appeal filed by the Republic, and the record on appeal filed by
defendant Castellvi as having been filed out of time, thereby dismissing both appeals.
On January 11, 1962 the Republic filed a "motion to strike out the order of December 27, 1961 and for reconsideration", and subsequently an
amended record on appeal, against which motion the defendants Castellvi and Toledo-Gozun filed their opposition. On July 26, 1962 the trial court
issued an order, stating that "in the interest of expediency, the questions raised may be properly and finally determined by the Supreme Court," and
at the same time it ordered the Solicitor General to submit a record on appeal containing copies of orders and pleadings specified therein. In an
order dated November 19, 1962, the trial court approved the Republic's record on appeal as amended.
Defendant Castellvi did not insist on her appeal. Defendant Toledo-Gozun did not appeal.
The motion to dismiss the Republic's appeal was reiterated by appellees Castellvi and Toledo-Gozun before this Court, but this Court denied the
motion.
In her motion of August 11, 1964, appellee Castellvi sought to increase the provisional value of her land. The Republic, in its comment on Castellvi's
motion, opposed the same. This Court denied Castellvi's motion in a resolution dated October 2,1964.
The motion of appellees, Castellvi and Toledo-Gozun, dated October 6, 1969, praying that they be authorized to mortgage the lands subject of
expropriation, was denied by this Court or October 14, 1969.
On February 14, 1972, Attys. Alberto Cacnio, and Associates, counsel for the estate of the late Don Alfonso de Castellvi in the expropriation
proceedings, filed a notice of attorney's lien, stating that as per agreement with the administrator of the estate of Don Alfonso de Castellvi they shall
receive by way of attorney's fees, "the sum equivalent to ten per centum of whatever the court may finally decide as the expropriated price of the
property subject matter of the case."
---------
Before this Court, the Republic contends that the lower court erred:
1. In finding the price of P10 per square meter of the lands subject of the instant proceedings as just compensation;
2. In holding that the "taking" of the properties under expropriation commenced with the filing of this action;
3. In ordering plaintiff-appellant to pay 6% interest on the adjudged value of the Castellvi property to start from July of 1956;
4. In denying plaintiff-appellant's motion for new trial based on newly discovered evidence.
In its brief, the Republic discusses the second error assigned as the first issue to be considered. We shall follow the sequence of the Republic's
discussion.
1. In support of the assigned error that the lower court erred in holding that the "taking" of the properties under expropriation commenced with the
filing of the complaint in this case, the Republic argues that the "taking" should be reckoned from the year 1947 when by virtue of a special lease
agreement between the Republic and appellee Castellvi, the former was granted the "right and privilege" to buy the property should the lessor wish
to terminate the lease, and that in the event of such sale, it was stipulated that the fair market value should be as of the time of occupancy; and that
the permanent improvements amounting to more that half a million pesos constructed during a period of twelve years on the land, subject of
expropriation, were indicative of an agreed pattern of permanency and stability of occupancy by the Philippine Air Force in the interest of national
Security.7
Appellee Castellvi, on the other hand, maintains that the "taking" of property under the power of eminent domain requires two essential elements, to
wit: (1) entrance and occupation by condemn or upon the private property for more than a momentary or limited period, and (2) devoting it to a public
use in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property. This appellee argues that in the instant case the
first element is wanting, for the contract of lease relied upon provides for a lease from year to year; that the second element is also wanting, because
the Republic was paying the lessor Castellvi a monthly rental of P445.58; and that the contract of lease does not grant the Republic the "right and
privilege" to buy the premises "at the value at the time of occupancy." 8
Appellee Toledo-Gozun did not comment on the Republic's argument in support of the second error assigned, because as far as she was concerned
the Republic had not taken possession of her lands prior to August 10, 1959. 9
In order to better comprehend the issues raised in the appeal, in so far as the Castellvi property is concerned, it should be noted that the Castellvi
property had been occupied by the Philippine Air Force since 1947 under a contract of lease, typified by the contract marked Exh. 4-Castellvi, the
pertinent portions of which read:
CONTRACT OF LEASE
This AGREEMENT OF LEASE MADE AND ENTERED into by and between INTESTATE ESTATE OF ALFONSO DE CASTELLVI, represented by
CARMEN M. DE CASTELLVI, Judicial Administratrix ... hereinafter called the LESSOR and THE REPUBLIC OF THE PHILIPPINES represented by
MAJ. GEN. CALIXTO DUQUE, Chief of Staff of the ARMED FORCES OF THE PHILIPPINES, hereinafter called the LESSEE,
WITNESSETH:
1. For and in consideration of the rentals hereinafter reserved and the mutual terms, covenants and conditions of the parties, the LESSOR has, and
by these presents does, lease and let unto the LESSEE the following described land together with the improvements thereon and appurtenances
thereof, viz:
Un Terreno, Lote No. 27 del Plano de subdivision Psu 34752, parte de la hacienda de Campauit, situado en el Barrio de San Jose, Municipio de
Floridablanca Pampanga. ... midiendo una extension superficial de cuatro milliones once mil cuatro cientos trienta y cinco (4,001,435) [sic] metros
cuadrados, mas o menos.
Out of the above described property, 75.93 hectares thereof are actually occupied and covered by this contract. .

41
Above lot is more particularly described in TCT No. 1016, province of
Pampanga ...
of which premises, the LESSOR warrants that he/she/they/is/are the registered owner(s) and with full authority to execute a contract of this nature.
2. The term of this lease shall be for the period beginning July 1, 1952 the date the premises were occupied by the PHILIPPINE AIR FORCE, AFP
until June 30, 1953, subject to renewal for another year at the option of the LESSEE or unless sooner terminated by the LESSEE as hereinafter
provided.
3. The LESSOR hereby warrants that the LESSEE shall have quiet, peaceful and undisturbed possession of the demised premises throughout the
full term or period of this lease and the LESSOR undertakes without cost to the LESSEE to eject all trespassers, but should the LESSOR fail to do
so, the LESSEE at its option may proceed to do so at the expense of the LESSOR. The LESSOR further agrees that should he/she/they sell or
encumber all or any part of the herein described premises during the period of this lease, any conveyance will be conditioned on the right of the
LESSEE hereunder.
4. The LESSEE shall pay to the LESSOR as monthly rentals under this lease the sum of FOUR HUNDRED FIFTY-FIVE PESOS & 58/100 (P455.58)
...
5. The LESSEE may, at any time prior to the termination of this lease, use the property for any purpose or purposes and, at its own costs and
expense make alteration, install facilities and fixtures and errect additions ... which facilities or fixtures ... so placed in, upon or attached to the said
premises shall be and remain property of the LESSEE and may be removed therefrom by the LESSEE prior to the termination of this lease. The
LESSEE shall surrender possession of the premises upon the expiration or termination of this lease and if so required by the LESSOR, shall return
the premises in substantially the same condition as that existing at the time same were first occupied by the AFP, reasonable and ordinary wear and
tear and damages by the elements or by circumstances over which the LESSEE has no control excepted: PROVIDED, that if the LESSOR so
requires the return of the premises in such condition, the LESSOR shall give written notice thereof to the LESSEE at least twenty (20) days before
the termination of the lease and provided, further, that should the LESSOR give notice within the time specified above, the LESSEE shall have the
right and privilege to compensate the LESSOR at the fair value or the equivalent, in lieu of performance of its obligation, if any, to restore the
premises. Fair value is to be determined as the value at the time of occupancy less fair wear and tear and depreciation during the period of this
lease.
6. The LESSEE may terminate this lease at any time during the term hereof by giving written notice to the LESSOR at least thirty (30) days in
advance ...
7. The LESSEE should not be responsible, except under special legislation for any damages to the premises by reason of combat operations, acts of
GOD, the elements or other acts and deeds not due to the negligence on the part of the LESSEE.
8. This LEASE AGREEMENT supersedes and voids any and all agreements and undertakings, oral or written, previously entered into between the
parties covering the property herein leased, the same having been merged herein. This AGREEMENT may not be modified or altered except by
instrument in writing only duly signed by the parties. 10
It was stipulated by the parties, that "the foregoing contract of lease (Exh. 4, Castellvi) is 'similar in terms and conditions, including the date', with the
annual contracts entered into from year to year between defendant Castellvi and the Republic of the Philippines (p. 17, t.s.n., Vol. III)". 11 It is
undisputed, therefore, that the Republic occupied Castellvi's land from July 1, 1947, by virtue of the above-mentioned contract, on a year to year
basis (from July 1 of each year to June 30 of the succeeding year) under the terms and conditions therein stated.
Before the expiration of the contract of lease on June 30, 1956 the Republic sought to renew the same but Castellvi refused. When the AFP refused
to vacate the leased premises after the termination of the contract, on July 11, 1956, Castellvi wrote to the Chief of Staff, AFP, informing the latter
that the heirs of the property had decided not to continue leasing the property in question because they had decided to subdivide the land for sale to
the general public, demanding that the property be vacated within 30 days from receipt of the letter, and that the premises be returned in
substantially the same condition as before occupancy (Exh. 5 — Castellvi). A follow-up letter was sent on January 12, 1957, demanding the delivery
and return of the property within one month from said date (Exh. 6 Castellvi). On January 30, 1957, Lieutenant General Alfonso Arellano, Chief of
Staff, answered the letter of Castellvi, saying that it was difficult for the army to vacate the premises in view of the permanent installations and other
facilities worth almost P500,000.00 that were erected and already established on the property, and that, there being no other recourse, the
acquisition of the property by means of expropriation proceedings would be recommended to the President (Exhibit "7" — Castellvi).
Defendant Castellvi then brought suit in the Court of First Instance of Pampanga, in Civil Case No. 1458, to eject the Philippine Air Force from the
land. While this ejectment case was pending, the Republic instituted these expropriation proceedings, and, as stated earlier in this opinion, the
Republic was placed in possession of the lands on August 10, 1959, On November 21, 1959, the Court of First Instance of Pampanga, dismissed
Civil Case No. 1458, upon petition of the parties, in an order which, in part, reads as follows:
1. Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby she has agreed to receive the rent of the
lands, subject matter of the instant case from June 30, 1966 up to 1959 when the Philippine Air Force was placed in possession by virtue of an order
of the Court upon depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial Treasurer of Pampanga;
2. That because of the above-cited agreement wherein the administratrix decided to get the rent corresponding to the rent from 1956 up to 1959 and
considering that this action is one of illegal detainer and/or to recover the possession of said land by virtue of non-payment of rents, the instant case
now has become moot and academic and/or by virtue of the agreement signed by plaintiff, she has waived her cause of action in the above-entitled
case. 12
The Republic urges that the "taking " of Castellvi's property should be deemed as of the year 1947 by virtue of afore-quoted lease agreement. In
American Jurisprudence, Vol. 26, 2nd edition, Section 157, on the subject of "Eminent Domain, we read the definition of "taking" (in eminent domain)
as follows:
Taking' under the power of eminent domain may be defined generally as entering upon private property for more than a momentary period, and,
under the warrant or color of legal authority, devoting it to a public use, or otherwise informally appropriating or injuriously affecting it in such a way
as substantially to oust the owner and deprive him of all beneficial enjoyment thereof. 13
Pursuant to the aforecited authority, a number of circumstances must be present in the "taking" of property for purposes of eminent domain.
First, the expropriator must enter a private property. This circumstance is present in the instant case, when by virtue of the lease agreement the
Republic, through the AFP, took possession of the property of Castellvi.
Second, the entrance into private property must be for more than a momentary period. "Momentary" means, "lasting but a moment; of but a
moment's duration" (The Oxford English Dictionary, Volume VI, page 596); "lasting a very short time; transitory; having a very brief life; operative or
recurring at every moment" (Webster's Third International Dictionary, 1963 edition.) The word "momentary" when applied to possession or occupancy
of (real) property should be construed to mean "a limited period" — not indefinite or permanent. The aforecited lease contract was for a period of one
year, renewable from year to year. The entry on the property, under the lease, is temporary, and considered transitory. The fact that the Republic,
through the AFP, constructed some installations of a permanent nature does not alter the fact that the entry into the land was transitory, or intended
to last a year, although renewable from year to year by consent of 'The owner of the land. By express provision of the lease agreement the Republic,
as lessee, undertook to return the premises in substantially the same condition as at the time the property was first occupied by the AFP. It is claimed
that the intention of the lessee was to occupy the land permanently, as may be inferred from the construction of permanent improvements. But this
"intention" cannot prevail over the clear and express terms of the lease contract. Intent is to be deduced from the language employed by the parties,

42
and the terms 'of the contract, when unambiguous, as in the instant case, are conclusive in the absence of averment and proof of mistake or fraud —
the question being not what the intention was, but what is expressed in the language used. (City of Manila v. Rizal Park Co., Inc., 53 Phil. 515, 525);
Magdalena Estate, Inc. v. Myrick, 71 Phil. 344, 348). Moreover, in order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered (Art. 1371, Civil Code). If the intention of the lessee (Republic) in 1947 was really to occupy
permanently Castellvi's property, why was the contract of lease entered into on year to year basis? Why was the lease agreement renewed from year
to year? Why did not the Republic expropriate this land of Castellvi in 1949 when, according to the Republic itself, it expropriated the other parcels of
land that it occupied at the same time as the Castellvi land, for the purpose of converting them into a jet air base? 14 It might really have been the
intention of the Republic to expropriate the lands in question at some future time, but certainly mere notice - much less an implied notice — of such
intention on the part of the Republic to expropriate the lands in the future did not, and could not, bind the landowner, nor bind the land itself. The
expropriation must be actually commenced in court (Republic vs. Baylosis, et al., 96 Phil. 461, 484).
Third, the entry into the property should be under warrant or color of legal authority. This circumstance in the "taking" may be considered as present
in the instant case, because the Republic entered the Castellvi property as lessee.
Fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously affected. It may be conceded that the
circumstance of the property being devoted to public use is present because the property was used by the air force of the AFP.
Fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the
property. In the instant case, the entry of the Republic into the property and its utilization of the same for public use did not oust Castellvi and deprive
her of all beneficial enjoyment of the property. Castellvi remained as owner, and was continuously recognized as owner by the Republic, as shown
by the renewal of the lease contract from year to year, and by the provision in the lease contract whereby the Republic undertook to return the
property to Castellvi when the lease was terminated. Neither was Castellvi deprived of all the beneficial enjoyment of the property, because the
Republic was bound to pay, and had been paying, Castellvi the agreed monthly rentals until the time when it filed the complaint for eminent domain
on June 26, 1959.
It is clear, therefore, that the "taking" of Catellvi's property for purposes of eminent domain cannot be considered to have taken place in 1947 when
the Republic commenced to occupy the property as lessee thereof. We find merit in the contention of Castellvi that two essential elements in the
"taking" of property under the power of eminent domain, namely: (1) that the entrance and occupation by the condemnor must be for a permanent, or
indefinite period, and (2) that in devoting the property to public use the owner was ousted from the property and deprived of its beneficial use, were
not present when the Republic entered and occupied the Castellvi property in 1947.
Untenable also is the Republic's contention that although the contract between the parties was one of lease on a year to year basis, it was "in reality
a more or less permanent right to occupy the premises under the guise of lease with the 'right and privilege' to buy the property should the lessor
wish to terminate the lease," and "the right to buy the property is merged as an integral part of the lease relationship ... so much so that the fair
market value has been agreed upon, not, as of the time of purchase, but as of the time of occupancy" 15 We cannot accept the Republic's contention
that a lease on a year to year basis can give rise to a permanent right to occupy, since by express legal provision a lease made for a determinate
time, as was the lease of Castellvi's land in the instant case, ceases upon the day fixed, without need of a demand (Article 1669, Civil Code). Neither
can it be said that the right of eminent domain may be exercised by simply leasing the premises to be expropriated (Rule 67, Section 1, Rules of
Court). Nor can it be accepted that the Republic would enter into a contract of lease where its real intention was to buy, or why the Republic should
enter into a simulated contract of lease ("under the guise of lease", as expressed by counsel for the Republic) when all the time the Republic had the
right of eminent domain, and could expropriate Castellvi's land if it wanted to without resorting to any guise whatsoever. Neither can we see how a
right to buy could be merged in a contract of lease in the absence of any agreement between the parties to that effect. To sustain the contention of
the Republic is to sanction a practice whereby in order to secure a low price for a land which the government intends to expropriate (or would
eventually expropriate) it would first negotiate with the owner of the land to lease the land (for say ten or twenty years) then expropriate the same
when the lease is about to terminate, then claim that the "taking" of the property for the purposes of the expropriation be reckoned as of the date
when the Government started to occupy the property under the lease, and then assert that the value of the property being expropriated be reckoned
as of the start of the lease, in spite of the fact that the value of the property, for many good reasons, had in the meantime increased during the period
of the lease. This would be sanctioning what obviously is a deceptive scheme, which would have the effect of depriving the owner of the property of
its true and fair market value at the time when the expropriation proceedings were actually instituted in court. The Republic's claim that it had the
"right and privilege" to buy the property at the value that it had at the time when it first occupied the property as lessee nowhere appears in the lease
contract. What was agreed expressly in paragraph No. 5 of the lease agreement was that, should the lessor require the lessee to return the premises
in the same condition as at the time the same was first occupied by the AFP, the lessee would have the "right and privilege" (or option) of paying the
lessor what it would fairly cost to put the premises in the same condition as it was at the commencement of the lease, in lieu of the lessee's
performance of the undertaking to put the land in said condition. The "fair value" at the time of occupancy, mentioned in the lease agreement, does
not refer to the value of the property if bought by the lessee, but refers to the cost of restoring the property in the same condition as of the time when
the lessee took possession of the property. Such fair value cannot refer to the purchase price, for purchase was never intended by the parties to the
lease contract. It is a rule in the interpretation of contracts that "However general the terms of a contract may be, they shall not be understood to
comprehend things that are distinct and cases that are different from those upon which the parties intended to agree" (Art. 1372, Civil Code).
We hold, therefore, that the "taking" of the Castellvi property should not be reckoned as of the year 1947 when the Republic first occupied the same
pursuant to the contract of lease, and that the just compensation to be paid for the Castellvi property should not be determined on the basis of the
value of the property as of that year. The lower court did not commit an error when it held that the "taking" of the property under expropriation
commenced with the filing of the complaint in this case.
Under Section 4 of Rule 67 of the Rules of Court, 16 the "just compensation" is to be determined as of the date of the filing of the complaint. This
Court has ruled that when the taking of the property sought to be expropriated coincides with the commencement of the expropriation proceedings,
or takes place subsequent to the filing of the complaint for eminent domain, the just compensation should be determined as of the date of the filing of
the complaint. (Republic vs. Philippine National Bank, L-14158, April 12, 1961, 1 SCRA 957, 961-962). In the instant case, it is undisputed that the
Republic was placed in possession of the Castellvi property, by authority of the court, on August 10, 1959. The "taking" of the Castellvi property for
the purposes of determining the just compensation to be paid must, therefore, be reckoned as of June 26, 1959 when the complaint for eminent
domain was filed.
Regarding the two parcels of land of Toledo-Gozun, also sought to be expropriated, which had never been under lease to the Republic, the Republic
was placed in possession of said lands, also by authority of the court, on August 10, 1959, The taking of those lands, therefore, must also be
reckoned as of June 26, 1959, the date of the filing of the complaint for eminent domain.
2. Regarding the first assigned error — discussed as the second issue — the Republic maintains that, even assuming that the value of the
expropriated lands is to be determined as of June 26, 1959, the price of P10.00 per square meter fixed by the lower court "is not only exhorbitant but
also unconscionable, and almost fantastic". On the other hand, both Castellvi and Toledo-Gozun maintain that their lands are residential lands with a
fair market value of not less than P15.00 per square meter.
The lower court found, and declared, that the lands of Castellvi and Toledo-Gozun are residential lands. The finding of the lower court is in
consonance with the unanimous opinion of the three commissioners who, in their report to the court, declared that the lands are residential lands.

43
The Republic assails the finding that the lands are residential, contending that the plans of the appellees to convert the lands into subdivision for
residential purposes were only on paper, there being no overt acts on the part of the appellees which indicated that the subdivision project had been
commenced, so that any compensation to be awarded on the basis of the plans would be speculative. The Republic's contention is not well taken.
We find evidence showing that the lands in question had ceased to be devoted to the production of agricultural crops, that they had become
adaptable for residential purposes, and that the appellees had actually taken steps to convert their lands into residential subdivisions even before the
Republic filed the complaint for eminent domain. In the case of City of Manila vs. Corrales (32 Phil. 82, 98) this Court laid down basic guidelines in
determining the value of the property expropriated for public purposes. This Court said:
In determining the value of land appropriated for public purposes, the same consideration are to be regarded as in a sale of property between private
parties. The inquiry, in such cases, must be what is the property worth in the market, viewed not merely with reference to the uses to which it is at the
time applied, but with reference to the uses to which it is plainly adapted, that is to say, What is it worth from its availability for valuable uses?
So many and varied are the circumstances to be taken into account in determining the value of property condemned for public purposes, that it is
practically impossible to formulate a rule to govern its appraisement in all cases. Exceptional circumstances will modify the most carefully guarded
rule, but, as a general thing, we should say that the compensation of the owner is to be estimated by reference to the use for which the property is
suitable, having regard to the existing business or wants of the community, or such as may be reasonably expected in the immediate future. (Miss.
and Rum River Boom Co. vs. Patterson, 98 U.S., 403).
In expropriation proceedings, therefore, the owner of the land has the right to its value for the use for which it would bring the most in the
market. 17 The owner may thus show every advantage that his property possesses, present and prospective, in order that the price it could be sold
for in the market may be satisfactorily determined. 18 The owner may also show that the property is suitable for division into village or town lots. 19
The trial court, therefore, correctly considered, among other circumstances, the proposed subdivision plans of the lands sought to be expropriated in
finding that those lands are residential lots. This finding of the lower court is supported not only by the unanimous opinion of the commissioners, as
embodied in their report, but also by the Provincial Appraisal Committee of the province of Pampanga composed of the Provincial Treasurer, the
Provincial Auditor and the District Engineer. In the minutes of the meeting of the Provincial Appraisal Committee, held on May 14, 1959 (Exh. 13-
Castellvi) We read in its Resolution No. 10 the following:
3. Since 1957 the land has been classified as residential in view of its proximity to the air base and due to the fact that it was not being devoted to
agriculture. In fact, there is a plan to convert it into a subdivision for residential purposes. The taxes due on the property have been paid based on its
classification as residential land;
The evidence shows that Castellvi broached the idea of subdividing her land into residential lots as early as July 11, 1956 in her letter to the Chief of
Staff of the Armed Forces of the Philippines. (Exh. 5-Castellvi) As a matter of fact, the layout of the subdivision plan was tentatively approved by the
National Planning Commission on September 7, 1956. (Exh. 8-Castellvi). The land of Castellvi had not been devoted to agriculture since 1947 when
it was leased to the Philippine Army. In 1957 said land was classified as residential, and taxes based on its classification as residential had been paid
since then (Exh. 13-Castellvi). The location of the Castellvi land justifies its suitability for a residential subdivision. As found by the trial court, "It is at
the left side of the entrance of the Basa Air Base and bounded on two sides by roads (Exh. 13-Castellvi), paragraphs 1 and 2, Exh. 12-Castellvi), the
poblacion, (of Floridablanca) the municipal building, and the Pampanga Sugar Mills are closed by. The barrio schoolhouse and chapel are also near
(T.S.N. November 23,1960, p. 68)." 20
The lands of Toledo-Gozun (Lot 1-B and Lot 3) are practically of the same condition as the land of Castellvi. The lands of Toledo-Gozun adjoin the
land of Castellvi. They are also contiguous to the Basa Air Base, and are along the road. These lands are near the barrio schoolhouse, the barrio
chapel, the Pampanga Sugar Mills, and the poblacion of Floridablanca (Exhs. 1, 3 and 4-Toledo-Gozun). As a matter of fact, regarding lot 1-B it had
already been surveyed and subdivided, and its conversion into a residential subdivision was tentatively approved by the National Planning
Commission on July 8, 1959 (Exhs. 5 and 6 Toledo-Gozun). As early as June, 1958, no less than 32 man connected with the Philippine Air Force
among them commissioned officers, non-commission officers, and enlisted men had requested Mr. and Mrs. Joaquin D. Gozun to open a subdivision
on their lands in question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21
We agree with the findings, and the conclusions, of the lower court that the lands that are the subject of expropriation in the present case, as of
August 10, 1959 when the same were taken possession of by the Republic, were residential lands and were adaptable for use as residential
subdivisions. Indeed, the owners of these lands have the right to their value for the use for which they would bring the most in the market at the time
the same were taken from them. The most important issue to be resolved in the present case relates to the question of what is the just compensation
that should be paid to the appellees.
The Republic asserts that the fair market value of the lands of the appellees is P.20 per square meter. The Republic cites the case of Republic vs.
Narciso, et al., L-6594, which this Court decided on May 18, 1956. The Narciso case involved lands that belonged to Castellvi and Toledo-Gozun,
and to one Donata Montemayor, which were expropriated by the Republic in 1949 and which are now the site of the Basa Air Base. In the Narciso
case this Court fixed the fair market value at P.20 per square meter. The lands that are sought to be expropriated in the present case being
contiguous to the lands involved in the Narciso case, it is the stand of the Republic that the price that should be fixed for the lands now in question
should also be at P.20 per square meter.
We can not sustain the stand of the Republic. We find that the price of P.20 per square meter, as fixed by this Court in the Narciso case, was based
on the allegation of the defendants (owners) in their answer to the complaint for eminent domain in that case that the price of their lands was
P2,000.00 per hectare and that was the price that they asked the court to pay them. This Court said, then, that the owners of the land could not be
given more than what they had asked, notwithstanding the recommendation of the majority of the Commission on Appraisal — which was adopted by
the trial court — that the fair market value of the lands was P3,000.00 per hectare. We also find that the price of P.20 per square meter in the Narciso
case was considered the fair market value of the lands as of the year 1949 when the expropriation proceedings were instituted, and at that time the
lands were classified as sugar lands, and assessed for taxation purposes at around P400.00 per hectare, or P.04 per square meter. 22 While the
lands involved in the present case, like the lands involved in the Narciso case, might have a fair market value of P.20 per square meter in 1949, it
can not be denied that ten years later, in 1959, when the present proceedings were instituted, the value of those lands had increased considerably.
The evidence shows that since 1949 those lands were no longer cultivated as sugar lands, and in 1959 those lands were already classified, and
assessed for taxation purposes, as residential lands. In 1959 the land of Castellvi was assessed at P1.00 per square meter. 23
The Republic also points out that the Provincial Appraisal Committee of Pampanga, in its resolution No. 5 of February 15, 1957 (Exhibit D),
recommended the sum of P.20 per square meter as the fair valuation of the Castellvi property. We find that this resolution was made by the Republic
the basis in asking the court to fix the provisional value of the lands sought to be expropriated at P259,669.10, which was approved by the court. 24 It
must be considered, however, that the amount fixed as the provisional value of the lands that are being expropriated does not necessarily represent
the true and correct value of the land. The value is only "provisional" or "tentative", to serve as the basis for the immediate occupancy of the property
being expropriated by the condemnor. The records show that this resolution No. 5 was repealed by the same Provincial Committee on Appraisal in
its resolution No. 10 of May 14, 1959 (Exhibit 13-Castellvi). In that resolution No. 10, the appraisal committee stated that "The Committee has
observed that the value of the land in this locality has increased since 1957 ...", and recommended the price of P1.50 per square meter. It follows,
therefore, that, contrary to the stand of the Republic, that resolution No. 5 of the Provincial Appraisal Committee can not be made the basis for fixing
the fair market value of the lands of Castellvi and Toledo-Gozun.

44
The Republic further relied on the certification of the Acting Assistant Provincial Assessor of Pampanga, dated February 8, 1961 (Exhibit K), to the
effect that in 1950 the lands of Toledo-Gozun were classified partly as sugar land and partly as urban land, and that the sugar land was assessed at
P.40 per square meter, while part of the urban land was assessed at P.40 per square meter and part at P.20 per square meter; and that in 1956 the
Castellvi land was classified as sugar land and was assessed at P450.00 per hectare, or P.045 per square meter. We can not also consider this
certification of the Acting Assistant Provincial Assessor as a basis for fixing the fair market value of the lands of Castellvi and Toledo-Gozun because,
as the evidence shows, the lands in question, in 1957, were already classified and assessed for taxation purposes as residential lands. The
certification of the assessor refers to the year 1950 as far as the lands of Toledo-Gozun are concerned, and to the year 1956 as far as the land of
Castellvi is concerned. Moreover, this Court has held that the valuation fixed for the purposes of the assessment of the land for taxation purposes
can not bind the landowner where the latter did not intervene in fixing it. 25
On the other hand, the Commissioners, appointed by the court to appraise the lands that were being expropriated, recommended to the court that
the price of P10.00 per square meter would be the fair market value of the lands. The commissioners made their recommendation on the basis of
their observation after several ocular inspections of the lands, of their own personal knowledge of land values in the province of Pampanga, of the
testimonies of the owners of the land, and other witnesses, and of documentary evidence presented by the appellees. Both Castellvi and Toledo-
Gozun testified that the fair market value of their respective land was at P15.00 per square meter. The documentary evidence considered by the
commissioners consisted of deeds of sale of residential lands in the town of San Fernando and in Angeles City, in the province of Pampanga, which
were sold at prices ranging from P8.00 to P20.00 per square meter (Exhibits 15, 16, 17, 18, 19, 20, 21, 22, 23-Castellvi). The commissioners also
considered the decision in Civil Case No. 1531 of the Court of First Instance of Pampanga, entitled Republic vs. Sabina Tablante, which was
expropriation case filed on January 13, 1959, involving a parcel of land adjacent to the Clark Air Base in Angeles City, where the court fixed the price
at P18.00 per square meter (Exhibit 14-Castellvi). In their report, the commissioners, among other things, said:
... This expropriation case is specially pointed out, because the circumstances and factors involved therein are similar in many respects to the
defendants' lands in this case. The land in Civil Case No. 1531 of this Court and the lands in the present case (Civil Case No. 1623) are both near
the air bases, the Clark Air Base and the Basa Air Base respectively. There is a national road fronting them and are situated in a first-class
municipality. As added advantage it may be said that the Basa Air Base land is very near the sugar mill at Del Carmen, Floridablanca, Pampanga,
owned by the Pampanga Sugar Mills. Also just stone's throw away from the same lands is a beautiful vacation spot at Palacol, a sitio of the town of
Floridablanca, which counts with a natural swimming pool for vacationists on weekends. These advantages are not found in the case of the Clark Air
Base. The defendants' lands are nearer to the poblacion of Floridablanca then Clark Air Base is nearer (sic) to the poblacion of Angeles, Pampanga.
The deeds of absolute sale, according to the undersigned commissioners, as well as the land in Civil Case No. 1531 are competent evidence,
because they were executed during the year 1959 and before August 10 of the same year. More specifically so the land at Clark Air Base which
coincidentally is the subject matter in the complaint in said Civil Case No. 1531, it having been filed on January 13, 1959 and the taking of the land
involved therein was ordered by the Court of First Instance of Pampanga on January 15, 1959, several months before the lands in this case were
taken by the plaintiffs ....
From the above and considering further that the lowest as well as the highest price per square meter obtainable in the market of Pampanga relative
to subdivision lots within its jurisdiction in the year 1959 is very well known by the Commissioners, the Commission finds that the lowest price that
can be awarded to the lands in question is P10.00 per square meter. 26
The lower court did not altogether accept the findings of the Commissioners based on the documentary evidence, but it considered the documentary
evidence as basis for comparison in determining land values. The lower court arrived at the conclusion that "the unanimous recommendation of the
commissioners of ten (P10.00) pesos per square meter for the three lots of the defendants subject of this action is fair and just". 27 In arriving at its
conclusion, the lower court took into consideration, among other circumstances, that the lands are titled, that there is a rising trend of land values,
and the lowered purchasing power of the Philippine peso.
In the case of Manila Railroad Co. vs. Caligsihan, 40 Phil. 326, 328, this Court said:
A court of first instance or, on appeal, the Supreme Court, may change or modify the report of the commissioners by increasing or reducing the
amount of the award if the facts of the case so justify. While great weight is attached to the report of the commissioners, yet a court may substitute
therefor its estimate of the value of the property as gathered from the record in certain cases, as, where the commissioners have applied illegal
principles to the evidence submitted to them, or where they have disregarded a clear preponderance of evidence, or where the amount allowed is
either palpably inadequate or excessive. 28
The report of the commissioners of appraisal in condemnation proceedings are not binding, but merely advisory in character, as far as the court is
concerned. 29 In our analysis of the report of the commissioners, We find points that merit serious consideration in the determination of the just
compensation that should be paid to Castellvi and Toledo-Gozun for their lands. It should be noted that the commissioners had made ocular
inspections of the lands and had considered the nature and similarities of said lands in relation to the lands in other places in the province of
Pampanga, like San Fernando and Angeles City. We cannot disregard the observations of the commissioners regarding the circumstances that make
the lands in question suited for residential purposes — their location near the Basa Air Base, just like the lands in Angeles City that are near the
Clark Air Base, and the facilities that obtain because of their nearness to the big sugar central of the Pampanga Sugar mills, and to the flourishing
first class town of Floridablanca. It is true that the lands in question are not in the territory of San Fernando and Angeles City, but, considering the
facilities of modern communications, the town of Floridablanca may be considered practically adjacent to San Fernando and Angeles City. It is not
out of place, therefore, to compare the land values in Floridablanca to the land values in San Fernando and Angeles City, and form an idea of the
value of the lands in Floridablanca with reference to the land values in those two other communities.
The important factor in expropriation proceeding is that the owner is awarded the just compensation for his property. We have carefully studied the
record, and the evidence, in this case, and after considering the circumstances attending the lands in question We have arrived at the conclusion
that the price of P10.00 per square meter, as recommended by the commissioners and adopted by the lower court, is quite high. It is Our considered
view that the price of P5.00 per square meter would be a fair valuation of the lands in question and would constitute a just compensation to the
owners thereof. In arriving at this conclusion We have particularly taken into consideration the resolution of the Provincial Committee on Appraisal of
the province of Pampanga informing, among others, that in the year 1959 the land of Castellvi could be sold for from P3.00 to P4.00 per square
meter, while the land of Toledo-Gozun could be sold for from P2.50 to P3.00 per square meter. The Court has weighed all the circumstances relating
to this expropriations proceedings, and in fixing the price of the lands that are being expropriated the Court arrived at a happy medium between the
price as recommended by the commissioners and approved by the court, and the price advocated by the Republic. This Court has also taken judicial
notice of the fact that the value of the Philippine peso has considerably gone down since the year 1959. 30 Considering that the lands of Castellvi and
Toledo-Gozun are adjoining each other, and are of the same nature, the Court has deemed it proper to fix the same price for all these lands.
3. The third issue raised by the Republic relates to the payment of interest. The Republic maintains that the lower court erred when it ordered the
Republic to pay Castellvi interest at the rate of 6% per annum on the total amount adjudged as the value of the land of Castellvi, from July 1, 1956 to
July 10, 1959. We find merit in this assignment of error.
In ordering the Republic to pay 6% interest on the total value of the land of Castellvi from July 1, 1956 to July 10, 1959, the lower court held that the
Republic had illegally possessed the land of Castellvi from July 1, 1956, after its lease of the land had expired on June 30, 1956, until August 10,
1959 when the Republic was placed in possession of the land pursuant to the writ of possession issued by the court. What really happened was that
the Republic continued to occupy the land of Castellvi after the expiration of its lease on June 30, 1956, so much so that Castellvi filed an ejectment

45
case against the Republic in the Court of First Instance of Pampanga. 31 However, while that ejectment case was pending, the Republic filed the
complaint for eminent domain in the present case and was placed in possession of the land on August 10, 1959, and because of the institution of the
expropriation proceedings the ejectment case was later dismissed. In the order dismissing the ejectment case, the Court of First Instance of
Pampanga said:
Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby she had agreed to receive the rent of the lands,
subject matter of the instant case from June 30, 1956 up to 1959 when the Philippine Air Force was placed in possession by virtue of an order of the
Court upon depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial Treasurer of
Pampanga; ...
If Castellvi had agreed to receive the rentals from June 30, 1956 to August 10, 1959, she should be considered as having allowed her land to be
leased to the Republic until August 10, 1959, and she could not at the same time be entitled to the payment of interest during the same period on the
amount awarded her as the just compensation of her land. The Republic, therefore, should pay Castellvi interest at the rate of 6% per annum on the
value of her land, minus the provisional value that was deposited, only from July 10, 1959 when it deposited in court the provisional value of the land.
4. The fourth error assigned by the Republic relates to the denial by the lower court of its motion for a new trial based on nearly discovered evidence.
We do not find merit in this assignment of error.
After the lower court had decided this case on May 26, 1961, the Republic filed a motion for a new trial, supplemented by another motion, both
based upon the ground of newly discovered evidence. The alleged newly discovered evidence in the motion filed on June 21, 1961 was a deed of
absolute sale-executed on January 25, 1961, showing that a certain Serafin Francisco had sold to Pablo L. Narciso a parcel of sugar land having an
area of 100,000 square meters with a sugar quota of 100 piculs, covered by P.A. No. 1701, situated in Barrio Fortuna, Floridablanca, for P14,000, or
P.14 per square meter.
In the supplemental motion, the alleged newly discovered evidence were: (1) a deed of sale of some 35,000 square meters of land situated at
Floridablanca for P7,500.00 (or about P.21 per square meter) executed in July, 1959, by the spouses Evelyn D. Laird and Cornelio G. Laird in favor
of spouses Bienvenido S. Aguas and Josefina Q. Aguas; and (2) a deed of absolute sale of a parcel of land having an area of 4,120,101 square
meters, including the sugar quota covered by Plantation Audit No. 161 1345, situated at Floridablanca, Pampanga, for P860.00 per hectare (a little
less than P.09 per square meter) executed on October 22, 1957 by Jesus Toledo y Mendoza in favor of the Land Tenure Administration.
We find that the lower court acted correctly when it denied the motions for a new trial.
To warrant the granting of a new trial based on the ground of newly discovered evidence, it must appear that the evidence was discovered after the
trial; that even with the exercise of due diligence, the evidence could not have been discovered and produced at the trial; and that the evidence is of
such a nature as to alter the result of the case if admitted. 32 The lower court correctly ruled that these requisites were not complied with.
The lower court, in a well-reasoned order, found that the sales made by Serafin Francisco to Pablo Narciso and that made by Jesus Toledo to the
Land Tenure Administration were immaterial and irrelevant, because those sales covered sugarlands with sugar quotas, while the lands sought to be
expropriated in the instant case are residential lands. The lower court also concluded that the land sold by the spouses Laird to the spouses Aguas
was a sugar land.
We agree with the trial court. In eminent domain proceedings, in order that evidence as to the sale price of other lands may be admitted in evidence
to prove the fair market value of the land sought to be expropriated, the lands must, among other things, be shown to be similar.
But even assuming, gratia argumenti, that the lands mentioned in those deeds of sale were residential, the evidence would still not warrant the grant
of a new trial, for said evidence could have been discovered and produced at the trial, and they cannot be considered newly discovered evidence as
contemplated in Section 1(b) of Rule 37 of the Rules of Court. Regarding this point, the trial court said:
The Court will now show that there was no reasonable diligence employed.
The land described in the deed of sale executed by Serafin Francisco, copy of which is attached to the original motion, is covered by a Certificate of
Title issued by the Office of the Register of Deeds of Pampanga. There is no question in the mind of the court but this document passed through the
Office of the Register of Deeds for the purpose of transferring the title or annotating the sale on the certificate of title. It is true that Fiscal Lagman
went to the Office of the Register of Deeds to check conveyances which may be presented in the evidence in this case as it is now sought to be
done by virtue of the motions at bar, Fiscal Lagman, one of the lawyers of the plaintiff, did not exercise reasonable diligence as required by the rules.
The assertion that he only went to the office of the Register of Deeds 'now and then' to check the records in that office only shows the half-hazard
[sic] manner by which the plaintiff looked for evidence to be presented during the hearing before the Commissioners, if it is at all true that Fiscal
Lagman did what he is supposed to have done according to Solicitor Padua. It would have been the easiest matter for plaintiff to move for the
issuance of a subpoena duces tecum directing the Register of Deeds of Pampanga to come to testify and to bring with him all documents found in
his office pertaining to sales of land in Floridablanca adjacent to or near the lands in question executed or recorded from 1958 to the present. Even
this elementary precaution was not done by plaintiff's numerous attorneys.
The same can be said of the deeds of sale attached to the supplementary motion. They refer to lands covered by certificate of title issued by the
Register of Deeds of Pampanga. For the same reason they could have been easily discovered if reasonable diligence has been exerted by the
numerous lawyers of the plaintiff in this case. It is noteworthy that all these deeds of sale could be found in several government offices, namely, in
the Office of the Register of Deeds of Pampanga, the Office of the Provincial Assessor of Pampanga, the Office of the Clerk of Court as a part of
notarial reports of notaries public that acknowledged these documents, or in the archives of the National Library. In respect to Annex 'B' of the
supplementary motion copy of the document could also be found in the Office of the Land Tenure Administration, another government entity. Any
lawyer with a modicum of ability handling this expropriation case would have right away though [sic] of digging up documents diligently showing
conveyances of lands near or around the parcels of land sought to be expropriated in this case in the offices that would have naturally come to his
mind such as the offices mentioned above, and had counsel for the movant really exercised the reasonable diligence required by the Rule'
undoubtedly they would have been able to find these documents and/or caused the issuance of subpoena duces tecum. ...
It is also recalled that during the hearing before the Court of the Report and Recommendation of the Commissioners and objection thereto, Solicitor
Padua made the observation:
I understand, Your Honor, that there was a sale that took place in this place of land recently where the land was sold for P0.20 which is contiguous to
this land.
The Court gave him permission to submit said document subject to the approval of the Court. ... This was before the decision was rendered, and
later promulgated on May 26, 1961 or more than one month after Solicitor Padua made the above observation. He could have, therefore, checked up
the alleged sale and moved for a reopening to adduce further evidence. He did not do so. He forgot to present the evidence at a more propitious
time. Now, he seeks to introduce said evidence under the guise of newly-discovered evidence. Unfortunately the Court cannot classify it as newly-
discovered evidence, because tinder the circumstances, the correct qualification that can be given is 'forgotten evidence'. Forgotten however, is not
newly-discovered
evidence. 33
The granting or denial of a motion for new trial is, as a general rule, discretionary with the trial court, whose judgment should not be disturbed unless
there is a clear showing of abuse of discretion. 34 We do not see any abuse of discretion on the part of the lower court when it denied the motions for
a new trial.
WHEREFORE, the decision appealed from is modified, as follows:

46
(a) the lands of appellees Carmen Vda. de Castellvi and Maria Nieves Toledo-Gozun, as described in the complaint, are declared expropriated for
public use;
(b) the fair market value of the lands of the appellees is fixed at P5.00 per square meter;
(c) the Republic must pay appellee Castellvi the sum of P3,796,495.00 as just compensation for her one parcel of land that has an area of 759,299
square meters, minus the sum of P151,859.80 that she withdrew out of the amount that was deposited in court as the provisional value of the land,
with interest at the rate of 6% per annum from July 10, 1959 until the day full payment is made or deposited in court;
(d) the Republic must pay appellee Toledo-Gozun the sum of P2,695,225.00 as the just compensation for her two parcels of land that have a total
area of 539,045 square meters, minus the sum of P107,809.00 that she withdrew out of the amount that was deposited in court as the provisional
value of her lands, with interest at the rate of 6%, per annum from July 10, 1959 until the day full payment is made or deposited in court; (e) the
attorney's lien of Atty. Alberto Cacnio is enforced; and
(f) the costs should be paid by appellant Republic of the Philippines, as provided in Section 12, Rule 67, and in Section 13, Rule 141, of the Rules of
Court.
IT IS SO ORDERED.

47
 14. G.R. No. L-12172 August 29, 1958
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
JUAN F. FAJARDO, ET AL., defendants-appellants.
Assistant Solicitor General Esmeraldo Umali and Higinio V. Catalan for appellee.
Prila, Pardalis and Pejo for appellants.
REYES, J. B. L., J. :
Appeal from the decision of the Court of First Instance of Camarines Sur convicting defendants-appellants Juan F. Fajardo and Pedro Babilonia of a
violation of Ordinance No. 7, Series of 1950, of the Municipality of Baao, Camarines Sur, for having constructed without a permit from the municipal
mayor a building that destroys the view of the public plaza.
It appears that on August 15, 1950, during the incumbency of defendant-appellant Juan F. Fajardo as mayor of the municipality of Baao, Camarines
Sur, the municipal council passed the ordinance in question providing as follows:
SECTION 1. Any person or persons who will construct or repair a building should, before constructing or repairing, obtain a written permit from the
Municipal Mayor.
SEC. 2. A fee of not less than P2.00 should be charged for each building permit and P1.00 for each repair permit issued.
SEC. 3. PENALTY — Any violation of the provisions of the above, this ordinance, shall make the violation liable to pay a fine of not less than P25 nor
more than P50 or imprisonment of not less than 12 days nor more than 24 days or both, at the discretion of the court. If said building destroys the
view of the Public Plaza or occupies any public property, it shall be removed at the expense of the owner of the building or house.
SEC. 4. EFFECTIVITY — This ordinance shall take effect on its approval. (Orig. Recs., P. 3)
Four years later, after the term of appellant Fajardo as mayor had expired, he and his son in-law, appellant Babilonia, filed a written request with the
incumbent municipal mayor for a permit to construct a building adjacent to their gasoline station on a parcel of land registered in Fajardo's name,
located along the national highway and separated from the public plaza by a creek (Exh. D). On January 16, 1954, the request was denied, for the
reason among others that the proposed building would destroy the view or beauty of the public plaza (Exh. E). On January 18, 1954, defendants
reiterated their request for a building permit (Exh. 3), but again the request was turned down by the mayor. Whereupon, appellants proceeded with
the construction of the building without a permit, because they needed a place of residence very badly, their former house having been destroyed by
a typhoon and hitherto they had been living on leased property.
On February 26, 1954, appellants were charged before and convicted by the justice of the peace court of Baao, Camarines Sur, for violation of the
ordinance in question. Defendants appealed to the Court of First Instance, which affirmed the conviction, and sentenced appellants to pay a fine of
P35 each and the costs, as well as to demolish the building in question because it destroys the view of the public plaza of Baao, in that "it hinders
the view of travelers from the National Highway to the said public plaza." From this decision, the accused appealed to the Court of Appeals, but the
latter forwarded the records to us because the appeal attacks the constitutionality of the ordinance in question.
We find that the appealed conviction can not stand.
A first objection to the validity of the ordinance in question is that under it the mayor has absolute discretion to issue or deny a permit. The ordinance
fails to state any policy, or to set up any standard to guide or limit the mayor's action. No purpose to be attained by requiring the permit is expressed;
no conditions for its grant or refusal are enumerated. It is not merely a case of deficient standards; standards are entirely lacking. The ordinance thus
confers upon the mayor arbitrary and unrestricted power to grant or deny the issuance of building permits, and it is a settled rule that such an
undefined and unlimited delegation of power to allow or prevent an activity, per se lawful, is invalid (People vs. Vera, 65 Phil., 56; Primicias vs.
Fugoso, 80 Phil., 71; Schloss Poster Adv. Co. vs. Rock Hill, 2 SE (2d) 392)
The ordinance in question in no way controls or guides the discretion vested thereby in the respondents. It prescribes no uniform rule upon which the
special permission of the city is to be granted. Thus the city is clothed with the uncontrolled power to capriciously grant the privilege to some and
deny it others; to refuse the application of one landowner or lessee and to grant that of another, when for all material purposes, the two applying for
precisely the same privileges under the same circumstances. The danger of such an ordinance is that it makes possible arbitrary discriminations and
abuses in its execution, depending upon no conditions or qualifications whatever, other than the unregulated arbitrary will of the city authorities as
the touchstone by which its validity is to be tested. Fundamental rights under our government do not depend for their existence upon such a slender
and uncertain thread. Ordinances which thus invest a city council with a discretion which is purely arbitrary, and which may be exercised in the
interest of a favored few, are unreasonable and invalid. The ordinance should have established a rule by which its impartial enforcement could be
secured. All of the authorities cited above sustain this conclusion.
As was said in City of Richmond vs. Dudley, 129 Ind. 112,28 N. E. 312, 314 13 L. R. A. 587, 28 Am. St. Rep. 180: "It seems from the foregoing
authorities to be well established that municipal ordinances placing restrictions upon lawful conduct or the lawful use of property must, in order to be
valid, specify the rules and conditions to be observed in such conduct or business; and must admit of the exercise of the privilege of all citizens alike
who will comply with such rules and conditions; and must not admit of the exercise, or of an opportunity for the exercise, of any arbitrary
discrimination by the municipal authorities between citizens who will so comply. (Schloss Poster Adv. Co., Inc. vs. City of Rock Hill, et al., 2 SE (2d),
pp. 394-395).
It is contended, on the other hand, that the mayor can refuse a permit solely in case that the proposed building "destroys the view of the public plaza
or occupies any public property" (as stated in its section 3); and in fact, the refusal of the Mayor of Baao to issue a building permit to the appellant
was predicated on the ground that the proposed building would "destroy the view of the public plaza" by preventing its being seen from the public
highway. Even thus interpreted, the ordinance is unreasonable and oppressive, in that it operates to permanently deprive appellants of the right to
use their own property; hence, it oversteps the bounds of police power, and amounts to a taking of appellants property without just compensation.
We do not overlook that the modern tendency is to regard the beautification of neighborhoods as conducive to the comfort and happiness of
residents. But while property may be regulated in the interest of the general welfare, and in its pursuit, the State may prohibit structures offensive to
the sight (Churchill and Tait vs. Rafferty, 32 Phil. 580), the State may not, under the guise of police power, permanently divest owners of the
beneficial use of their property and practically confiscate them solely to preserve or assure the aesthetic appearance of the community. As the case
now stands, every structure that may be erected on appellants' land, regardless of its own beauty, stands condemned under the ordinance in
question, because it would interfere with the view of the public plaza from the highway. The appellants would, in effect, be constrained to let their
land remain idle and unused for the obvious purpose for which it is best suited, being urban in character. To legally achieve that result, the
municipality must give appellants just compensation and an opportunity to be heard.
An ordinance which permanently so restricts the use of property that it can not be used for any reasonable purpose goes, it is plain, beyond
regulation and must be recognized as a taking of the property. The only substantial difference, in such case, between restriction and actual taking, is
that the restriction leaves the owner subject to the burden of payment of taxation, while outright confiscation would relieve him of that burden.
(Arverne Bay Constr. Co. vs. Thatcher (N.Y.) 117 ALR. 1110, 1116).
A regulation which substantially deprives an owner of all beneficial use of his property is confiscation and is a deprivation within the meaning of the
14th Amendment. (Sundlum vs. Zoning Bd., 145 Atl. 451; also Eaton vs. Sweeny, 177 NE 412; Taylor vs. Jacksonville, 133 So. 114).
Zoning which admittedly limits property to a use which can not reasonably be made of it cannot be said to set aside such property to a use but
constitutes the taking of such property without just compensation. Use of property is an element of ownership therein. Regardless of the opinion of

48
zealots that property may properly, by zoning, be utterly destroyed without compensation, such principle finds no support in the genius of our
government nor in the principles of justice as we known them. Such a doctrine shocks the sense of justice. If it be of public benefit that property
remain open and unused, then certainly the public, and not the private individuals, should bear the cost of reasonable compensation for such
property under the rules of law governing the condemnation of private property for public use . (Tews vs. Woolhiser (1933) 352 I11. 212, 185 N.E.
827) (Emphasis supplied.)
The validity of the ordinance in question was justified by the court below under section 2243, par. (c), of the Revised Administrative Code, as
amended. This section provides:
SEC. 2243. Certain legislative powers of discretionary character. — The municipal council shall have authority to exercise the following discretionary
powers:
xxx xxx xxx
(c) To establish fire limits in populous centers, prescribe the kinds of buildings that may be constructed or repaired within them, and issue permits for
the creation or repair thereof, charging a fee which shall be determined by the municipal council and which shall not be less than two pesos for each
building permit and one peso for each repair permit issued. The fees collected under the provisions of this subsection shall accrue to the municipal
school fund.
Under the provisions of the section above quoted, however, the power of the municipal council to require the issuance of building permits rests upon
its first establishing fire limits in populous parts of the town and prescribing the kinds of buildings that may be constructed or repaired within them. As
there is absolutely no showing in this case that the municipal council had either established fire limits within the municipality or set standards for the
kind or kinds of buildings to be constructed or repaired within them before it passed the ordinance in question, it is clear that said ordinance was not
conceived and promulgated under the express authority of sec. 2243 (c) aforequoted.
We rule that the regulation in question, Municipal Ordinance No. 7, Series of 1950, of the Municipality of Baao, Camarines Sur, was beyond the
authority of said municipality to enact, and is therefore null and void. Hence, the conviction of herein appellants is reversed, and said accused are
acquitted, with costs de oficio. So ordered.

49
 15. G.R. No. L-59603 April 29, 1987
EXPORT PROCESSING ZONE AUTHORITY, petitioner,
vs.
HON. CEFERINO E. DULAY, in his capacity as the Presiding Judge, Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, and
SAN ANTONIO DEVELOPMENT CORPORATION, respondents.
Elena M. Cuevas for respondents.
GUTIERREZ, JR., J.:
The question raised in this petition is whether or not Presidential Decrees Numbered 76, 464, 794 and 1533 have repealed and superseded Sections
5 to 8 of Rule 67 of the Revised Rules of Court, such that in determining the just compensation of property in an expropriation case, the only basis
should be its market value as declared by the owner or as determined by the assessor, whichever is lower.
On January 15, 1979, the President of the Philippines, issued Proclamation No. 1811, reserving a certain parcel of land of the public domain situated
in the City of Lapu-Lapu, Island of Mactan, Cebu and covering a total area of 1,193,669 square meters, more or less, for the establishment of an
export processing zone by petitioner Export Processing Zone Authority (EPZA).
Not all the reserved area, however, was public land. The proclamation included, among others, four (4) parcels of land with an aggregate area of
22,328 square meters owned and registered in the name of the private respondent. The petitioner, therefore, offered to purchase the parcels of land
from the respondent in acccordance with the valuation set forth in Section 92, Presidential Decree (P.D.) No. 464, as amended. The parties failed to
reach an agreement regarding the sale of the property.
The petitioner filed with the then Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, a complaint for expropriation with a prayer for the
issuance of a writ of possession against the private respondent, to expropriate the aforesaid parcels of land pursuant to P.D. No. 66, as amended,
which empowers the petitioner to acquire by condemnation proceedings any property for the establishment of export processing zones, in relation to
Proclamation No. 1811, for the purpose of establishing the Mactan Export Processing Zone.
On October 21, 1980, the respondent judge issued a writ of possession authorizing the petitioner to take immediate possession of the premises. On
December 23, 1980, the private respondent flied its answer.
At the pre-trial conference on February 13, 1981, the respondent judge issued an order stating that the parties have agreed that the only issue to be
resolved is the just compensation for the properties and that the pre-trial is thereby terminated and the hearing on the merits is set on April 2, 1981.
On February 17, 1981, the respondent judge issued the order of condemnation declaring the petitioner as having the lawful right to take the
properties sought to be condemned, upon the payment of just compensation to be determined as of the filing of the complaint. The respondent judge
also issued a second order, subject of this petition, appointing certain persons as commissioners to ascertain and report to the court the just
compensation for the properties sought to be expropriated.
On June 19, 1981, the three commissioners submitted their consolidated report recommending the amount of P15.00 per square meter as the fair
and reasonable value of just compensation for the properties.
On July 29, 1981, the petitioner Med a Motion for Reconsideration of the order of February 19, 1981 and Objection to Commissioner's Report on the
grounds that P.D. No. 1533 has superseded Sections 5 to 8 of Rule 67 of the Rules of Court on the ascertainment of just compensation through
commissioners; and that the compensation must not exceed the maximum amount set by P.D. No. 1533.
On November 14, 1981, the trial court denied the petitioner's motion for reconsideration and gave the latter ten (10) days within which to file its
objection to the Commissioner's Report.
On February 9, 1982, the petitioner flied this present petition for certiorari and mandamus with preliminary restraining order, enjoining the trial court
from enforcing the order dated February 17, 1981 and from further proceeding with the hearing of the expropriation case.
The only issue raised in this petition is whether or not Sections 5 to 8, Rule 67 of the Revised Rules of Court had been repealed or deemed
amended by P.D. No. 1533 insofar as the appointment of commissioners to determine the just compensation is concerned. Stated in another way, is
the exclusive and mandatory mode of determining just compensation in P.D. No. 1533 valid and constitutional?
The petitioner maintains that the respondent judge acted in excess of his jurisdiction and with grave abuse of discretion in denying the petitioner's
motion for reconsideration and in setting the commissioner's report for hearing because under P.D. No. 1533, which is the applicable law herein, the
basis of just compensation shall be the fair and current market value declared by the owner of the property sought to be expropriated or such market
value as determined by the assessor, whichever is lower. Therefore, there is no more need to appoint commissioners as prescribed by Rule 67 of the
Revised Rules of Court and for said commissioners to consider other highly variable factors in order to determine just compensation. The petitioner
further maintains that P.D. No. 1533 has vested on the assessors and the property owners themselves the power or duty to fix the market value of
the properties and that said property owners are given the full opportunity to be heard before the Local Board of Assessment Appeals and the
Central Board of Assessment Appeals. Thus, the vesting on the assessor or the property owner of the right to determine the just compensation in
expropriation proceedings, with appropriate procedure for appeal to higher administrative boards, is valid and constitutional.
Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533, this Court has interpreted the eminent domain provisions of the Constitution and
established the meaning, under the fundametal law, of just compensation and who has the power to determine it. Thus, in the following cases,
wherein the filing of the expropriation proceedings were all commenced prior to the promulgation of the aforementioned decrees, we laid down the
doctrine onjust compensation:
Municipality of Daet v. Court of Appeals (93 SCRA 503, 516),
xxx xxx xxx
"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, the Court, speaking thru now Chief Justice Fernando,
reiterated the 'well-settled (rule) that just compensation means the equivalent for the value of the property at the time of its taking. Anything beyond
that is more and anything short of that is less, than just compensation. It means a fair and full equivalent for the loss sustained, which is the measure
of the indemnity, not whatever gain would accrue to the expropriating entity."
Garcia v. Court ofappeals (102 SCRA 597, 608),
xxx xxx xxx
"Hence, in estimating the market value, all the capabilities of the property and all the uses to which it may be applied or for which it is adapted are to
be considered and not merely the condition it is in the time and the use to which it is then applied by the owner. All the facts as to the condition of the
property and its surroundings, its improvements and capabilities may be shown and considered in estimating its value."
Republic v. Santos (141 SCRA 30, 35-36),
"According to section 8 of Rule 67, the court is not bound by the commissioners' report. It may make such order or render such judgment as shall
secure to the plaintiff the property essential to the exercise of his right of condemnation, and to the defendant just compensation for the property
expropriated. This Court may substitute its own estimate of the value as gathered from the record (Manila Railroad Company v. Velasquez, 32 Phil.
286)."
However, the promulgation of the aforementioned decrees practically set aside the above and many other precedents hammered out in the course of
evidence-laden, well argued, fully heard, studiously deliberated, and judiciously considered court proceedings. The decrees categorically and
peremptorily limited the definition of just compensation thus:

50
P.D. No. 76:
xxx xxx xxx
"For purposes of just compensation in cases of private property acquired by the government for public use, the basis shall be the current and fair
market value declared by the owner or administrator, or such market value as determined by the Assessor, whichever is lower."
P.D. No. 464:
"Section 92. Basis for payment of just compensation in expropriation proceedings. — In determining just compensation which private property is
acquired by the government for public use, the basis shall be the market value declared by the owner or administrator or anyone having legal interest
in the property, or such market value as determined by the assessor, whichever is lower."
P.D. No. 794:
"Section 92. Basis for payment of just compensation in expropriation proceedings. — In determining just compensation when private property is
acquired by the government for public use, the same shall not exceed the market value declared by the owner or administrator or anyone having
legal interest in the property, or such market value as determined by the assessor, whichever is lower."
P.D. No. 1533:
"Section 1. In determining just compensation for private property acquired through eminent domain proceedings, the compensation to be paid shall
not exceed the value declared by the owner or administrator or anyone having legal interest in the property or determined by the assessor, pursuant
to the Real Property Tax Code, whichever value is lower, prior to the recommendation or decision of the appropriate Government office to acquire the
property."
We are constrained to declare the provisions of the Decrees on just compensation unconstitutional and void and accordingly dismiss the instant
petition for lack of merit.
The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial prerogatives. It
tends to render this Court inutile in a matter which under the Constitution is reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically would still have the power to determine the just compensation for the property,
following the applicable decrees, its task would be relegated to simply stating the lower value of the property as declared either by the owner or the
assessor. As a necessary consequence, it would be useless for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover,
the need to satisfy the due process clause in the taking of private property is seemingly fulfilled since it cannot be said that a judicial proceeding was
not had before the actual taking. However, the strict application of the decrees during the proceedings would be nothing short of a mere formality or
charade as the court has only to choose between the valuation of the owner and that of the assessor, and its choice is always limited to the lower of
the two. The court cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil could substitute for the
judge insofar as the determination of constitutional just compensation is concerned.
In the case of National Housing Authority v. Reyes (123 SCRA 245), this Court upheld P.D. No. 464, as further amended by P.D. Nos. 794, 1224 and
1259. In this case, the petitioner National Housing Authority contended that the owner's declaration at P1,400.00 which happened to be lower than
the assessor's assessment, is the just compensation for the respondent's property under section 92 of P.D. No. 464. On the other hand, the private
respondent stressed that while there may be basis for the allegation that the respondent judge did not follow the decree, the matter is still subject to
his final disposition, he having been vested with the original and competent authority to exercise his judicial discretion in the light of the constitutional
clauses on due process and equal protection.
To these opposing arguments, this Court ruled ihat under the conceded facts, there should be a recognition that the law as it stands must be applied;
that the decree having spoken so clearly and unequivocably calls for obedience; and that on a matter where the applicable law speaks in no
uncertain language, the Court has no choice except to yield to its command. We further stated that "the courts should recognize that the rule
introduced by P.D. No. 76 and reiterated in subsequent decrees does not upset the established concepts of justice or the constitutional provision on
just compensation for, precisely, the owner is allowed to make his own valuation of his property."
While the Court yielded to executive prerogative exercised in the form of absolute law-making power, its members, nonetheless, remained
uncomfortable with the implications of the decision and the abuse and unfairness which might follow in its wake. For one thing, the President himself
did not seem assured or confident with his own enactment. It was not enough to lay down the law on determination of just compensation in P.D. 76. It
had to be repeated and reiterated in P.D. 464, P.D. 794, and P.D. 1533. The provision is also found in P.D. 1224, P.D. 1259 and P.D. 1313. Inspite of
its effectivity as general law and the wide publicity given to it, the questioned provision or an even stricter version had to be embodied in cases of
specific expropriations by decree as in P.D. 1669 expropriating the Tambunting Estate and P.D. 1670 expropriating the Sunog Apog area in Tondo,
Manila.
In the present petition, we are once again confronted with the same question of whether the courts under P.D. 1533, which contains the same
provision on just compensation as its predecessor decrees, still have the power and authority to determine just compensation, independent of what
is stated by the decree and to this effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
In overruling the petitioner's motion for reconsideration and objection to the commissioner's report, the trial court said:
"Another consideration why the Court is empowered to appoint commissioners to assess the just compensation of these properties under eminent
domain proceedings, is the well-entrenched ruling that 'the owner of property expropriated is entitled to recover from expropriating authority the fair
and full value of the lot, as of the time when possession thereof was actually taken by the province, plus consequential damages — including
attorney's fees — from which the consequential benefits, if any should be deducted, with interest at the legal rate, on the aggregate sum due to the
owner from and after the date of actual taking.' (Capitol Subdivision, Inc. v. Province of Negros Occidental, 7 SCRA 60). In fine, the decree only
establishes a uniform basis for determining just compensation which the Court may consider as one of the factors in arriving at 'just compensation,'
as envisage in the Constitution. In the words of Justice Barredo, "Respondent court's invocation of General Order No. 3 of September 21, 1972 is
nothing short of an unwarranted abdication of judicial authority, which no judge duly imbued with the implications of the paramount principle of
independence of the judiciary should ever think of doing." (Lina v. Purisima, 82 SCRA 344, 351; Cf. Prov. of Pangasinan v. CFI Judge of Pangasinan,
Br. VIII, 80 SCRA 117) Indeed, where this Court simply follows PD 1533, thereby limiting the determination of just compensation on the value
declared by the owner or administrator or as determined by the Assessor, whichever is lower, it may result in the deprivation of the landowner's right
of due process to enable it to prove its claim to just compensation, as mandated by the Constitution. (Uy v. Genato, 57 SCRA 123). The tax
declaration under the Real Property Tax Code is, undoubtedly, for purposes of taxation."
We are convinced and so rule that the trial court correctly stated that the valuation in the decree may only serve as a guiding principle or one of the
factors in determining just compensation but it may not substitute the court's own judgment as to what amount should be awarded and how to arrive
at such amount. A return to the earlier well-established doctrine, to our mind, is more in keeping with the principle that the judiciary should live up to
its mission "by vitalizing and not denigrating constitutional rights." (See Salonga v. Cruz Paño, 134 SCRA 438, 462; citing Mercado v. Court of First
Instance of Rizal, 116 SCRA 93.) The doctrine we enunciated in National Housing Authority v. Reyes, supra, therefore, must necessarily be
abandoned if we are to uphold this Court's role as the guardian of the fundamental rights guaranteed by the due process and equal protection
clauses and as the final arbiter over transgressions committed against constitutional rights.
The basic unfairness of the decrees is readily apparent.

51
Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for the loss sustained. All the facts as
to the condition of the property and its surroundings, its improvements and capabilities, should be considered.
In this particular case, the tax declarations presented by the petitioner as basis for just compensation were made by the Lapu-Lapu municipal, later
city assessor long before martial law, when land was not only much cheaper but when assessed values of properties were stated in figures
constituting only a fraction of their true market value. The private respondent was not even the owner of the properties at the time. It purchased the
lots for development purposes. To peg the value of the lots on the basis of documents which are out of date and at prices below the acquisition cost
of present owners would be arbitrary and confiscatory.
Various factors can come into play in the valuation of specific properties singled out for expropriation. The values given by provincial assessors are
usually uniform for very wide areas covering several barrios or even an entire town with the exception of the poblacion. Individual differences are
never taken into account. The value of land is based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often
land described as "cogonal" has been cultivated for generations. Buildings are described in terms of only two or three classes of building materials
and estimates of areas are more often inaccurate than correct. Tax values can serve as guides but cannot be absolute substitutes for just
compensation.
To say that the owners are estopped to question the valuations made by assessors since they had the opportunity to protest is illusory. The
overwhelming mass of land owners accept unquestioningly what is found in the tax declarations prepared by local assessors or municipal clerks for
them. They do not even look at, much less analyze, the statements. The Idea of expropriation simply never occurs until a demand is made or a case
filed by an agency authorized to do so.
It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is
repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment
of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been
presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated.
As was held in the case of Gideon v. Wainwright (93 ALR 2d,733,742):
"In the light of these and many other prior decisions of this Court, it is not surprising that the Betts Court, when faced with the contention that 'one
charged with crime, who is unable to obtain counsel must be furnished counsel by the State,' conceded that '[E]xpressions in the opinions of this
court lend color to the argument. . .' 316 U.S., at 462, 463, 86 L ed. 1602, 62 S Ct. 1252. The fact is that in deciding as it did-that "appointment of
counsel is not a fundamental right, essential to a fair trial" — the Court in Betts v. Brady made an ubrupt brake with its own well-considered
precedents. In returning to these old precedents, sounder we believe than the new, we but restore constitutional principles established to achieve a
fair system of justice. . ."
We return to older and more sound precedents. This Court has the duty to formulate guiding and controlling constitutional principles, precepts,
doctrines, or rules. (See Salonga v. Cruz Pano, supra).
The determination of "just compensation" in eminent domain cases is a judicial function. The executive department or the legislature may make the
initial determinations but when a party claims a violation of the guarantee in the Bill of Rights that private property may not be taken for public use
without just compensation, no statute, decree, or executive order can mandate that its own determination shall prevail over the court's findings. Much
less can the courts be precluded from looking into the "just-ness" of the decreed compensation.
We, therefore, hold that P.D. No. 1533, which eliminates the court's discretion to appoint commissioners pursuant to Rule 67 of the Rules of Court, is
unconstitutional and void. To hold otherwise would be to undermine the very purpose why this Court exists in the first place.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The temporary restraining order issued on February 16, 1982 is
LIFTED and SET ASIDE.
SO ORDERED.

52
 16. G.R. No. L-48685 September 30, 1987
LORENZO SUMULONG and EMILIA VIDANES-BALAOING, petitioners,
vs.
HON. BUENAVENTURA GUERRERO and NATIONAL HOUSING AUTHORITY, respondents.

CORTES, J.:
On December 5, 1977 the National Housing Authority (NIIA) filed a complaint for expropriation of parcels of land covering approximately twenty five
(25) hectares, (in Antipolo, Rizal) including the lots of petitioners Lorenzo Sumulong and Emilia Vidanes-Balaoing with an area of 6,667 square
meters and 3,333 square meters respectively. The land sought to be expropriated were valued by the NHA at one peso (P1.00) per square meter
adopting the market value fixed by the provincial assessor in accordance with presidential decrees prescribing the valuation of property in
expropriation proceedings.
Together with the complaint was a motion for immediate possession of the properties. The NHA deposited the amount of P158,980.00 with the
Philippine National Bank, representing the "total market value" of the subject twenty five hectares of land, pursuant to Presidential Decree No. 1224
which defines "the policy on the expropriation of private property for socialized housing upon payment of just compensation."
On January 17, 1978, respondent Judge issued the following Order:
Plaintiff having deposited with the Philippine National Bank, Heart Center Extension Office, Diliman, Quezon City, Metro Manila, the amount of
P158,980.00 representing the total market value of the subject parcels of land, let a writ of possession be issued.
SO ORDERED.
Pasig, Metro Manila, January 17, 1978.
(SGD) BUENAVENTURA S. GUERRERO
Judge
Petitioners filed a motion for reconsideration on the ground that they had been deprived of the possession of their property without due process of
law. This was however, denied.
Hence, this petition challenging the orders of respondent Judge and assailing the constitutionality of Pres. Decree No. 1224, as amended. Petitioners
argue that:
1) Respondent Judge acted without or in excess of his jurisdiction or with grave abuse of discretion by issuing the Order of January 17, 1978 without
notice and without hearing and in issuing the Order dated June 28, 1978 denying the motion for reconsideration.
2) Pres. Decree l224, as amended, is unconstitutional for being violative of the due process clause, specifically:
a) The Decree would allow the taking of property regardless of size and no matter how small the area to be expropriated;
b) "Socialized housing" for the purpose of condemnation proceeding, as defined in said Decree, is not really for a public purpose;
c) The Decree violates procedural due process as it allows immediate taking of possession, control and disposition of property without giving the
owner his day in court;
d) The Decree would allow the taking of private property upon payment of unjust and unfair valuations arbitrarily fixed by government assessors;
e) The Decree would deprive the courts of their judicial discretion to determine what would be the "just compensation" in each and every raise of
expropriation.
Indeed, the exercise of the power of eminent domain is subject to certain limitations imposed by the constitution, to wit:
Private property shall not be taken for public use without just compensation (Art. IV, Sec. 9);
No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws
(Art. IV, sec. 1).
Nevertheless, a clear case of constitutional infirmity has to be established for this Court to nullify legislative or executive measures adopted to
implement specific constitutional provisions aimed at promoting the general welfare.
Petitioners' objections to the taking of their property subsumed under the headings of public use, just compensation, and due process have to be
balanced against competing interests of the public recognized and sought to be served under declared policies of the constitution as implemented by
legislation.
1. Public use
a) Socialized Housing
Petitioners contend that "socialized housing" as defined in Pres. Decree No. 1224, as amended, for the purpose of condemnation proceedings is not
"public use" since it will benefit only "a handful of people, bereft of public character."
"Socialized housing" is defined as, "the construction of dwelling units for the middle and lower class members of our society, including the
construction of the supporting infrastructure and other facilities" (Pres. Decree No. 1224, par. 1). This definition was later expanded to include among
others:
a) The construction and/or improvement of dwelling units for the middle and lower income groups of the society, including the construction of the
supporting infrastructure and other facilities;
b) Slum clearance, relocation and resettlement of squatters and slum dwellers as well as the provision of related facilities and services;
c) Slum improvement which consists basically of allocating homelots to the dwellers in the area or property involved, rearrangemeant and re-
alignment of existing houses and other dwelling structures and the construction and provision of basic community facilities and services, where there
are none, such as roads, footpaths, drainage, sewerage, water and power system schools, barangay centers, community centers, clinics, open
spaces, parks, playgrounds and other recreational facilities;
d) The provision of economic opportunities, including the development of commercial and industrial estates and such other facilities to enhance the
total community growth; and
e) Such other activities undertaken in pursuance of the objective to provide and maintain housing for the greatest number of people under
Presidential Decree No, 757, (Pres. Decree No. 1259, sec. 1)
The "public use" requirement for a and exercise of the power of eminent domain is a flexible and evolving concept influenced by changing conditions.
In this jurisdiction, the statutory and judicial trend has been summarized as follows:
The taking to be valid must be for public use. There was a time when it was felt that a literal meaning should be attached to such a requirement.
Whatever project is undertaken must be for the public to enjoy, as in the case of streets or parks. Otherwise, expropriation is not allowable. It is not
anymore. As long as the purpose of the taking is public, then the power of eminent domain comes into play. As just noted, the constitution in at least
two cases, to remove any doubt, determines what is public use. One is the expropriation of lands to be subdivided into small lots for resale at cost to
individuals. The other is in the transfer, through the exercise of this power, of utilities and other private enterprise to the government. It is accurate to
state then that at present whatever may be beneficially employed for the general welfare satisfies the requirement of public use [Heirs of Juancho
Ardona v. Reyes, G.R. Nos. 60549, 60553-60555 October 26, 1983, 125 SCRA 220 (1983) at 234-5 quoting E. FERNANDO, THE CONSTITUTION
OF THE PHILIPPINES 523-4, (2nd ed., 1977) Emphasis supplied].

53
The term "public use" has acquired a more comprehensive coverage. To the literal import of the term signifying strict use or employment by the
public has been added the broader notion of indirect public benefit or advantage. As discussed in the above cited case of Heirs of Juancho Ardona:
The restrictive view of public use may be appropriate for a nation which circumscribes the scope of government activities and public concerns and
which possesses big and correctly located public lands that obviate the need to take private property for public purposes. Neither circumstance
applies to the Philippines. We have never been a laissez faire State. And the necessities which impel the exertion of sovereign power are all too
often found in areas of scarce public land or limited government resources. (p. 231)
Specifically, urban renewal or redevelopment and the construction of low-cost housing is recognized as a public purpose, not only because of the
expanded concept of public use but also because of specific provisions in the Constitution. The 1973 Constitution made it incumbent upon the State
to establish, maintain and ensure adequate social services including housing [Art. 11, sec. 7]. The 1987 Constitution goes even further by providing
that:
The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for
all. [Art. II, sec. 9]
The state shall by law, and for the common good, undertake, in cooperation with the private sector, a continuing program of urban land reform and
housing which will make available at affordable cost decent housing and basic services to underprivileged and homeless citizens in urban centers
and resettlement areas. It shall also promote adequate employment opportunities to such citizens. In the implementation of such program the State
shall respect the rights of small property owners. (Art. XIII, sec. 9, Emphaisis supplied)
Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and significantly affects public health, safety, the
environment and in sum, the general welfare. The public character of housing measures does not change because units in housing projects cannot
be occupied by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not possible to provide housing for are
who need it, all at once.
Population growth, the migration to urban areas and the mushrooming of crowded makeshift dwellings is a worldwide development particularly in
developing countries. So basic and urgent are housing problems that the United Nations General Assembly proclaimed 1987 as the "International
Year of Shelter for the Homeless" "to focus the attention of the international community on those problems". The General Assembly is Seriously
concerned that, despite the efforts of Governments at the national and local levels and of international organizations, the driving conditions of the
majority of the people in slums and squatter areas and rural settlements, especially in developing countries, continue to deteriorate in both relative
and absolute terms." [G.A. Res. 37/221, Yearbook of the United Nations 1982, Vol. 36, p. 1043-4]
In the light of the foregoing, this Court is satisfied that "socialized housing" fans within the confines of "public use". It is, particularly important to draw
attention to paragraph (d) of Pres. Dec. No. 1224 which opportunities inextricably linked with low-cost housing, or slum clearance, relocation and
resettlement, or slum improvement emphasize the public purpose of the project.
In the case at bar, the use to which it is proposed to put the subject parcels of land meets the requisites of "public use". The lands in question are
being expropriated by the NHA for the expansion of Bagong Nayon Housing Project to provide housing facilities to low-salaried government
employees. Quoting respondents:
1. The Bagong Nayong Project is a housing and community development undertaking of the National Housing Authority. Phase I covers about 60
hectares of GSIS property in Antipolo, Rizal; Phase II includes about 30 hectares for industrial development and the rest are for residential housing
development.
It is intended for low-salaried government employees and aims to provide housing and community services for about 2,000 families in Phase I and
about 4,000 families in Phase II.
It is situated on rugged terrain 7.5 kms. from Marikina Town proper; 22 Kms. east of Manila; and is within the Lungs Silangan Townsite Reservation
(created by Presidential Proclamation No. 1637 on April 18, 1977).
The lands involved in the present petitions are parts of the expanded/additional areas for the Bagong Nayon Project totalling 25.9725 hectares. They
likewise include raw, rolling hills. (Rollo, pp. 266-7)
The acute shortage of housing units in the country is of public knowledge. Official data indicate that more than one third of the households
nationwide do not own their dwelling places. A significant number live in dwellings of unacceptable standards, such as shanties, natural shelters, and
structures intended for commercial, industrial, or agricultural purposes. Of these unacceptable dwelling units, more than one third is located within
the National Capital Region (NCR) alone which lies proximate to and is expected to be the most benefited by the housing project involved in the case
at bar [See, National Census and Statistics Office, 1980 Census of Population and Housing].
According to the National Economic and Development Authority at the time of the expropriation in question, about "50 per cent of urban families,
cannot afford adequate shelter even at reduced rates and will need government support to provide them with social housing, subsidized either
partially or totally" [NEDA, FOUR YEAR DEVELOPMENT PLAN For 1974-1977, p. 357]. Up to the present, housing some remains to be out of the
reach of a sizable proportion of the population" [NEDA, MEDIUM-TERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, p. 240].
The mushrooming of squatter colonies in the Metropolitan Manila area as well as in other cities and centers of population throughout the country,
and, the efforts of the government to initiate housing and other projects are matters of public knowledge [See NEDA, FOUR YEAR DEVELOPMENT
PLAN For 1974-1977, pp. 357-361; NEDA, FIVE-YEAR PHILIPPINE DEVELOPMENT PLAN 1978-1982, pp. 215-228 NEDA, FIVE YEAR
PHILIPPINE DEVELOPMENT PLAN 1983-1987, pp. 109-117; NEDA, MEDIUM TERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, pp. 240-
254].
b) Size of Property
Petitioners further contend that Pres. Decree 1224, as amended, would allow the taking of "any private land" regardless of the size and no matter
how small the area of the land to be expropriated. Petitioners claim that "there are vast areas of lands in Mayamot, Cupang, and San Isidro, Antipolo,
Rizal hundred of hectares of which are owned by a few landowners only. It is surprising [therefore] why respondent National Housing Authority
[would] include [their] two man lots ..."
In J.M. Tuason Co., Inc. vs. Land Tenure Administration [G. R. No. L-21064, February 18, 1970, 31 SCRA 413 (1970) at 428] this Court earlier ruled
that expropriation is not confined to landed estates. This Court, quoting the dissenting opinion of Justice J.B.L. Reyes in Republic vs. Baylosis, [96
Phil. 461 (1955)], held that:
The propriety of exercising the power of eminent domain under Article XIII, section 4 of our Constitution cannot be determined on a purely
quantitative or area basis. Not only does the constitutional provision speak of lands instead of landed estates, but I see no cogent reason why the
government, in its quest for social justice and peace, should exclusively devote attention to conflicts of large proportions, involving a considerable
number of individuals, and eschew small controversies and wait until they grow into a major problem before taking remedial action.
The said case of J.M. Tuason Co., Inc. departed from the ruling in Guido vs. Rural Progress Administration [84 Phil. 847 (1949)] which held that the
test to be applied for a valid expropriation of private lands was the area of the land and not the number of people who stood to be benefited. Since
then "there has evolved a clear pattern of adherence to the "number of people to be benefited test" " [Mataas na Lupa Tenants Association, Inc. v.
Dimayuga, G.R. No. 32049, June 25,1984, 130 SCRA 30 (1984) at 39]. Thus, in Pulido vs. Court of Appeals [G.R. No. 57625, May 3, 1983, 122
SCRA 63 (1983) at 73], this Court stated that, "[i]t is unfortunate that the petitioner would be deprived of his landholdings, but his interest and that of
his family should not stand in the way of progress and the benefit of the greater may only of the inhabitants of the country."

54
The State acting through the NHA is vested with broad discretion to designate the particular property/properties to be taken for socialized housing
purposes and how much thereof may be expropriated. Absent a clear showing of fraud, bad faith, or gross abuse of discretion, which petitioners
herein failed to demonstrate, the Court will give due weight to and leave undisturbed the NHA's choice and the size of the site for the project. The
property owner may not interpose objections merely because in their judgment some other property would have been more suitable, or just as
suitable, for the purpose. The right to the use, enjoyment and disposal of private property is tempered by and has to yield to the demands of the
common good. The Constitutional provisions on the subject are clear:
The State shall promote social justice in all phases of national development. (Art. II, sec. 10)
The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce
social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. To
this end, the State shall regulate the acquisition, ownership, use and disposition of property and its increments. (Art, XIII, sec. 1)
Indeed, the foregoing provisions, which are restatements of the provisions in the 1935 and 1973 Constitutions, emphasize:
...the stewardship concept, under which private property is supposed to be held by the individual only as a trustee for the people in general, who are
its real owners. As a mere steward, the individual must exercise his rights to the property not for his own exclusive and selfish benefit but for the
good of the entire community or nation [Mataas na Lupa Tenants Association, Inc. supra at 42-3 citing I. CRUZ, PHILIPPINE POLITICAL LAW, 70
(1983 ed.)].
2. Just Compensation
Petitioners maintain that Pres. Decree No. 1224, as amended, would allow the taking of private property upon payment of unjust and unfair
valuations arbitrarily fixed by government assessors. In addition, they assert that the Decree would deprive the courts of their judicial discretion to
determine what would be "just compensation".
The foregoing contentions have already been ruled upon by this Court in the case of Ignacio vs. Guerrero (G.R. No. L-49088, May 29, 1987) which,
incidentally, arose from the same expropriation complaint that led to this instant petition. The provisions on just compensation found in Presidential
Decree Nos. 1224, 1259 and 1313 are the same provisions found in Presidential Decree Nos. 76, 464, 794 and 1533 which were declared
unconstitutional in Export Processing Zone All thirty vs. Dulay (G.R. No. 5960 April 29, 1987) for being encroachments on prerogatives.
This Court abandoned the ruling in National Housing Authority vs. Reyes [G.R. No. 49439, June 29,1983, 123 SCRA 245 (1983)] which upheld Pres.
Decree No. 464, as amended by - Presidential Decree Nos. 794, 1224 and 1259.
In said case of Export Processing Zone Authority, this Court pointed out that:
The basic unfairness of the decrees is readily apparent.
Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for the loss sustained. ALL the facts
as to the condition of the property and its surroundings, its improvements and capabilities, should be considered.
xxx xxx xxx
Various factors can come into play in the valuation of specific properties singled out for expropriation. The values given by provincial assessors are
usually uniform for very wide areas covering several barrios or even an entire total with the exception of the poblacion. Individual differences are
never taken into account. The value of land is based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often
land described as directional has been cultivated for generations. Buildings are described in terms of only two or three classes of building materials
and estimates of areas are more often inaccurate than correct. Tax values can serve as guides but cannot be absolute substitutes for just
compensation.
To say that the owners are estopped to question the valuations made by assessors since they had the opportunity to protest is illusory. The
overwhelming mass of landowners accept unquestioningly what is found in the tax declarations prepared by local assessors or municipal clerks for
them. They do not even look at, much less analyze, the statements. The Idea of expropriation simply never occurs until a demand is made or a case
filed by an agency authorized to do so. (pp. 12-3)
3. Due Process
Petitioners assert that Pres. Decree 1224, as amended, violates procedural due process as it allows immediate taking of possession, control and
disposition of property without giving the owner his day in court. Respondent Judge ordered the issuance of a writ of possession without notice and
without hearing.
The constitutionality of this procedure has also been ruled upon in the Export Processing Zone Authority case, viz:
It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is
repulsive to basic concepts of justice and fairness to allow the haphazard work of minor bureaucrat or clerk to absolutely prevail over the judgment of
a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been
presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated. (p. 13)
On the matter of the issuance of a writ of possession, the ruling in the Ignacio case is reiterated, thus:
[I]t is imperative that before a writ of possession is issued by the Court in expropriation proceedings, the following requisites must be met: (1) There
must be a Complaint for expropriation sufficient in form and in substance; (2) A provisional determination of just compensation for the properties
sought to be expropriated must be made by the trial court on the basis of judicial (not legislative or executive) discretion; and (3) The deposit
requirement under Section 2, Rule 67 must be complied with. (p. 14)
This Court holds that "socialized housing" defined in Pres. Decree No. 1224, as amended by Pres. Decree Nos. 1259 and 1313, constitutes "public
use" for purposes of expropriation. However, as previously held by this Court, the provisions of such decrees on just compensation are
unconstitutional; and in the instant case the Court finds that the Orders issued pursuant to the corollary provisions of those decrees authorizing
immediate taking without notice and hearing are violative of due process.
WHEREFORE, the Orders of the lower court dated January 17, 1978 and June 28, 1978 issuing the writ of possession on the basis of the market
value appearing therein are annulled for having been issued in excess of jurisdiction. Let this case be remanded to the court of origin for further
proceedings to determine the compensation the petitioners are entitled to be paid. No costs.
SO ORDERED.

55
 17. G.R. No. 132922 April 21, 1998
TELECOMMUNICATIONS AND BROADCAST ATTORNEYS OF THE PHILIPPINES, INC. and GMA NETWORK, INC., petitioners,
vs.
THE COMMISSION ON ELECTIONS, respondent.

MENDOZA, J.:
In Osmeña v. COMELEC, G.R. No. 132231, decided March 31, 1998,1 we upheld the validity of § 11(b) of R.A. No. 6646 which prohibits the sale or
donation of print space or air time for political ads, except to the Commission on Elections under §90, of B.P. No. 881, the Omnibus Election Code,
with respect to print media, and §92, with respect to broadcast media. In the present case, we consider the validity of §92 of B.P. Blg. No. 881
against claims that the requirement that radio and television time be given free takes property without due process of law; that it violates the eminent
domain clause of the Constitution which provides for the payment of just compensation; that it denies broadcast media the equal protection of the
laws; and that, in any event, it violates the terms of the franchise of petitioner GMA Network, Inc.
Petitioner Telecommunications and Broadcast Attorneys of the Philippines, Inc. is an organization of lawyers of radio and television broadcasting
companies. They are suing as citizens, taxpayers, and registered voters. The other petitioner, GMA Network, Inc., operates radio and television
broadcasting stations throughout the Philippines under a franchise granted by Congress.
Petitioners challenge the validity of §92 on the ground (1) that it takes property without due process of law and without just compensation; (2) that it
denies radio and television broadcast companies the equal protection of the laws; and (3) that it is in excess of the power given to the COMELEC to
supervise or regulate the operation of media of communication or information during the period of election.
The Question of Standing
At the threshold of this suit is the question of standing of petitioner Telecommunications and Broadcast Attorneys of the Philippines, Inc. (TELEBAP).
As already noted, its members assert an interest as lawyers of radio and television broadcasting companies and as citizens, taxpayers, and
registered voters.
In those cases2 in which citizens were authorized to sue, this Court upheld their standing in view of the "transcendental importance" of the
constitutional question raised which justified the granting of relief. In contrast, in the case at bar, as will presently be shown, petitioner's substantive
claim is without merit. To the extent, therefore, that a party's standing is determined by the substantive merit of his case or preliminary estimate
thereof, petitioner TELEBAP must be held to be without standing. Indeed, a citizen will be allowed to raise a constitutional question only when he can
show that he has personally suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury fairly is
fairly traceable to the challenged action; and the injury is likely to be redressed by a favorable action. 3 Members of petitioner have not shown that
they have suffered harm as a result of the operation of §92 of B.P. Blg. 881.
Nor do members of petitioner TELEBAP have an interest as registered voters since this case does not concern their right of suffrage. Their interest in
§92 of B.P. Blg. 881 should be precisely in upholding its validity.
Much less do they have an interest as taxpayers since this case does not involve the exercise by Congress of its taxing or spending power. 4 A party
suing as a taxpayer must specifically show that he has a sufficient interest in preventing the illegal expenditure of money raised by taxation and that
he will sustain a direct injury as a result of the enforcement of the questioned statute.
Nor indeed as a corporate entity does TELEBAP have standing to assert the rights of radio and television broadcasting companies. Standing jus
tertii will be recognized only if it can be shown that the party suing has some substantial relation to the third party, or that the third party cannot assert
his constitutional right, or that the eight of the third party will be diluted unless the party in court is allowed to espouse the third party's constitutional
claim. None of these circumstances is here present. The mere fact that TELEBAP is composed of lawyers in the broadcast industry does not entitle
them to bring this suit in their name as representatives of the affected companies.
Nevertheless, we have decided to take this case since the other petitioner, GMA Network, Inc., appears to have the requisite standing to bring this
constitutional challenge. Petitioner operates radio and television broadcast stations in the Philippines affected by the enforcement of §92 of B.P. Blg.
881 requiring radio and television broadcast companies to provide free air time to the COMELEC for the use of candidates for campaign and other
political purposes.
Petitioner claims that it suffered losses running to several million pesos in providing COMELEC Time in connection with the 1992 presidential
election and the 1995 senatorial election and that it stands to suffer even more should it be required to do so again this year. Petitioner's allegation
that it will suffer losses again because it is required to provide free air time is sufficient to give it standing to question the validity of §92. 5
Airing of COMELEC Time, a
Reasonable Condition for
Grant of Petitioner's
Franchise
As pointed out in our decision in Osmeña v. COMELEC, §11(b) of R.A. No. 6646 and §90 and §92 of the B.P. Blg. 881 are part and parcel of a
regulatory scheme designed to equalize the opportunity of candidates in an election in regard to the use of mass media for political campaigns.
These statutory provisions state in relevant parts:
R.A. No. 6646
Sec. 11. Prohibited Forms of Election Propaganda. — In addition to the forms of election propaganda prohibited under Section 85 of Batas
Pambansa Blg. 881, it shall be unlawful:
xxx xxx xxx
(b) for any newspapers, radio broadcasting or television station, or other mass media, or any person making use of the mass media to sell or to give
free of charge print space or air time for campaign or other political purposes except to the Commission as provided under Section 90 and 92 of
Batas Pambansa Blg. 881. Any mass media columnist, commentator, announcer or personality who is a candidate for any elective public office shall
take a leave of absence from his work as such during the campaign period.
B.P. Blg. 881, (Omnibus Election Code)
Sec. 90. Comelec space. — The Commission shall procure space in at least one newspaper of general circulation in every province or
city; Provided, however, That in the absence of said newspaper, publication shall be done in any other magazine or periodical in said province or city,
which shall be known as "Comelec Space" wherein candidates can announce their candidacy. Said space shall be allocated, free of charge, equally
and impartially by the Commission among all candidates within the area in which the newspaper is circulated. (Sec. 45, 1978 EC).
Sec. 92. Comelec time. — The commission shall procure radio and television time to be known as "Comelec Time" which shall be allocated equally
and impartially among the candidates within the area of coverage of all radio and television stations. For this purpose, the franchise of all radio
broadcasting and television stations are hereby amended so as to provide radio or television time, free of charge, during the period of the campaign.
(Sec. 46, 1978 EC)

56
Thus, the law prohibits mass media from selling or donating print space and air time to the candidates and requires the COMELEC instead to
procure print space and air time for allocation to the candidates. It will be noted that while §90 of B.P. Blg. 881 requires the COMELEC to procure
print space which, as we have held, should be paid for, §92 states that air time shall be procured by the COMELEC free of charge.
Petitioners contend that §92 of BP Blg. 881 violates the due process clause 6 and the eminent domain provision7 of the Constitution by taking air time
from radio and television broadcasting stations without payment of just compensation. Petitioners claim that the primary source of revenue of the
radio and television stations is the sale of air time to advertisers and that to require these stations to provide free air time is to authorize a taking
which is not "a de minimis temporary limitation or restraint upon the use of private property." According to petitioners, in 1992, the GMA Network, Inc.
lost P22,498,560.00 in providing free air time of one (1) hour every morning from Mondays to Fridays and one (1) hour on Tuesdays and Thursday
from 7:00 to 8:00 p.m. (prime time) and, in this year's elections, it stands to lose P58,980,850.00 in view of COMELEC'S requirement that radio and
television stations provide at least 30 minutes of prime time daily for the COMELEC Time. 8
Petitioners' argument is without merit, All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave
frequencies have to be allocated as there are more individuals who want to broadcast than there are frequencies to assign. 9 A franchise is thus a
privilege subject, among other things, to amended by Congress in accordance with the constitutional provision that "any such franchise or right
granted . . . shall be subject to amendment, alteration or repeal by the Congress when the common good so requires." 10
The idea that broadcast stations may be required to provide COMELEC Time free of charge is not new. It goes back to the Election Code of 1971
(R.A. No. 6388), which provided:
Sec. 49. Regulation of election propaganda through mass media . — (a) The franchise of all radio broadcasting and television stations are hereby
amended so as to require each such station to furnish free of charge, upon request of the Commission [on Elections], during the period of sixty days
before the election not more than fifteen minutes of prime time once a week which shall be known as "Comelec Time" and which shall be used
exclusively by the Commission to disseminate vital election information. Said "Comelec Time" shall be considered as part of the public service time
said stations are required to furnish the Government for the dissemination of public information and education under their respective franchises or
permits.
The provision was carried over with slight modification by the 1978 Election Code (P.D. No. 1296), which provided:
Sec. 46. COMELEC Time. — The Commission [on Elections] shall procure radio and television time to be known as "COMELEC Time" which shall
be allocated equally and impartially among the candidates within the area of coverage of said radio and television stations. For this purpose, the
franchises of all radio broadcasting and television stations are hereby amended so as to require such stations to furnish the Commission radio or
television time, free of charge, during the period of the campaign, at least once but not oftener than every other day.
Substantially the same provision is now embodied in §92 of B.P. Blg. 881.
Indeed, provisions for COMELEC Tima have been made by amendment of the franchises of radio and television broadcast stations and, until the
present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, §11 of the Constitution
authorizes the amendment of franchises for "the common good." What better measure can be conceived for the common good than one for free air
time for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed of the issues in an
election? "[I]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount." 11
Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United States, there are
responsible scholars who believe that government controls on broadcast media can constitutionally be instituted to ensure diversity of views and
attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give free air time to
candidates in an election. 12 Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the
broadcast industry, writes:
Elections. We could do a lot to improve coverage of electoral campaigns. Most important, government should ensure free media time for candidates.
Almost all European nations make such provisions; the United States does not. Perhaps government should pay for such time on its own. Perhaps
broadcasters should have to offer it as a condition for receiving a license . Perhaps a commitment to provide free time would count in favor of the
grant of a license in the first instance. Steps of this sort would simultaneously promote attention to public affairs and greater diversity of view. They
would also help overcome the distorting effects of "soundbites" and the corrosive financial pressures faced by candidates in seeking time on the
media. 13
In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they
transmit broadcast signals and images. They are merely given the temporary privilege of using them. Since a franchise is a mere privilege, the
exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service. Thus, in De Villata
v. Stanley,14 a regulation requiring interisland vessels licensed to engage in the interisland trade to carry mail and, for this purpose, to give advance
notice to postal authorities of date and hour of sailings of vessels and of changes of sailing hours to enable them to tender mail for transportation at
the last practicable hour prior to the vessel's departure, was held to be a reasonable condition for the state grant of license. Although the question of
compensation for the carriage of mail was not in issue, the Court strongly implied that such service could be without compensation, as in fact under
Spanish sovereignty the mail was carried free.15
In Philippine Long Distance Telephone Company v. NTC,16 the Court ordered the PLDT to allow the interconnection of its domestic telephone system
with the international gateway facility of Eastern Telecom. The Court cited (1) the provisions of the legislative franchise allowing such interconnection;
(2) the absence of any physical, technical, or economic basis for restricting the linking up of two separate telephone systems; and (3) the possibility
of increase in the volume of international traffic and more efficient service, at more moderate cost, as a result of interconnection.
Similarly, in the earlier case of PLDT v. NTC,17 it was held:
Such regulation of the use and ownership of telecommunications systems is in the exercise of the plenary police power of the State for the promotion
of the general welfare. The 1987 Constitution recognizes the existence of that power when it provides:
Sec. 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups,
including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises,
subject to the duty of the State to promote distributive justice and to intervene when the common good so demands (Article XII).
The interconnection which has been required of PLDT is a form of "intervention" with property rights dictated by "the objective of government to
promote the rapid expansion of telecommunications services in all areas of the Philippines, . . . to maximize the use of telecommunications facilities
available, . . . in recognition of the vital role of communications in nation building . . . and to ensure that all users of the public telecommunications
service have access to all other users of the service wherever they may be within the Philippines at an acceptable standard of service and at
reasonable cost" (DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the common good. The NTC, as the regulatory agency of
the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it decreed interconnection.
In the granting of the privilege to operate broadcast stations and thereafter supervising radio and television stations, the state spends considerable
public funds in licensing and supervising such stations. 18 It would be strange if it cannot even require the licensees to render public service by giving
free air time.
Considerable effort is made in the dissent of Mr. Justice Panganiban to show that the production of television programs involves large expenditure
and requires the use of equipment for which huge investments have to be made. The dissent cites the claim of GMA Network that the grant of free
air time to the COMELEC for the duration of the 1998 campaign period would cost the company P52,380,000, representing revenue it would

57
otherwise earn if the air time were sold to advertisers, and the amount of P6,600,850, representing the cost of producing a program for the
COMELEC Time, or the total amount of P58,980,850.
The claim that petitioner would be losing P52,380,000 in unrealized revenue from advertising is based on the assumption that air time is "finished
product" which, it is said, become the property of the company, like oil produced from refining or similar natural resources after undergoing a process
for their production. But air time is not owned by broadcast companies. As held in Red Lion Broadcasting Co. v. F.C.C.,19 which upheld the right of a
party personally attacked to reply, "licenses to broadcast do not confer ownership of designated frequencies, but only the temporary privilege of
using them." Consequently, "a license permits broadcasting, but the license has no constitutional right to be the one who holds the license or to
monopolize a radio frequency to the exclusion of his fellow citizens. There is nothing in the First Amendment which prevents the Government from
requiring a licensee to share his frequency with others and to conduct himself as a proxy or fiduciary with obligations to present those views and
voices which are representative of his community and which would otherwise, by necessity, be barred from the airwaves." 20 As radio and television
broadcast stations do not own the airwaves, no private property is taken by the requirement that they provide air time to the COMELEC.
Justice Panganiban's dissent quotes from Tolentino on the Civil Code which says that "the air lanes themselves 'are not property because they
cannot be appropriated for the benefit of any individual.'" (p. 5) That means neither the State nor the stations own the air lanes. Yet the dissent also
says that "The franchise holders can recover their huge investments only by selling air time to advertisers." (p. 13) If air lanes cannot be
appropriated, how can they be used to produce air time which the franchise holders can sell to recover their investment? There is a contradiction
here.
As to the additional amount of P6,600,850, it is claimed that this is the cost of producing a program and it is for such items as "sets and props,"
"video tapes," "miscellaneous (other rental, supplies, transportation, etc.)," and "technical facilities (technical crew such as director and cameraman
as well as 'on air plugs')." There is no basis for this claim. Expenses for these items will be for the account of the candidates. COMELEC Resolution
No. 2983, §6(d) specifically provides in this connection:
(d) Additional services such as tape-recording or video-taping of programs, the preparation of visual aids, terms and condition thereof, and
consideration to be paid therefor may be arranged by the candidates with the radio/television station concerned . However, no radio/television station
shall make any discrimination among candidates relative to charges, terms, practices or facilities for in connection with the services rendered.
It is unfortunate that in the effort to show that there is taking of private property worth millions of pesos, the unsubstantiated charge is made that by
its decision the Court permits the "grand larceny of precious time," and allows itself to become "the people's unwitting oppressor." The charge is
really unfortunate. In Jackson v. Rosenbaun,21 Justice Holmes was so incensed by the resistance of property owners to the erection of party walls
that he was led to say in his original draft, "a statute, which embodies the community's understanding of the reciprocal rights and duties of
neighboring landowners, does not need to invoke the penalty larceny of the police power in its justification." Holmes's brethren corrected his taste,
and Holmes had to amend the passage so that in the end it spoke only of invoking "the police power." 22 Justice Holmes spoke of the "petty larceny"
of the police power. Now we are being told of the "grand larceny [by means of the police power] of precious air time."
Giving Free Air Time a Duty
Assumed by Petitioner
Petitioners claim that §92 is an invalid amendment of R.A. No. 7252 which granted GMA Network, Inc. a franchise for the operation of radio and
television broadcasting stations. They argue that although §5 of R.A. No. 7252 gives the government the power to temporarily use and operate the
stations of petitioner GMA Network or to authorize such use and operation, the exercise of this right must be compensated.
The cited provision of. R.A. No. 7252 states:
Sec. 5. Right of Government. — A special right is hereby reserved to the President of the Philippines, in times of rebellion, public peril, calamity,
emergency, disaster or disturbance of peace and order, to temporarily take over and operate the stations of the grantee, to temporarily suspend the
operation of any station in the interest of public safety, security and public welfare, or to authorize the temporary use and operation thereof by any
agency of the Government, upon due compensation to the grantee, for the use of said stations during the period when they shall be so operated.
The basic flaw in petitioner's argument is that it assumes that the provision for COMELEC Time constitutes the use and operation of the stations of
the GMA Network, Inc., This is not so. Under §92 of B.P. Blg. 881, the COMELEC does not take over the operation of radio and television stations
but only the allocation of air time to the candidates for the purpose of ensuring, among other things, equal opportunity, time, and the right to reply as
mandated by the Constitution.23
Indeed, it is wrong to claim an amendment of petitioner's franchise for the reason that B.P. Blg. 881, which is said to have amended R.A. No. 7252,
actually antedated it.24 The provision of §92 of B.P. Blg. 881 must be deemed instead to be incorporated in R.A. No. 7252. And, indeed, §4 of the
latter statute does.
For the fact is that the duty imposed on the GMA Network, Inc. by its franchise to render "adequate public service time" implements §92 of B.P. Blg.
881. Undoubtedly, its purpose is to enable the government to communicate with the people on matters of public interest. Thus, R.A. No. 7252
provides:
Sec. 4. Responsibility to the Public. — The grantee shall provide adequate public service time to enable the Government, through the said
broadcasting stations, to reach the population on important public issues ; provide at all times sound and balanced programming; promote public
participation such as in community programming; assist in the functions of public information and education ; conform to the ethics of honest
enterprise; and not use its station for the broadcasting of obscene and indecent language, speech, act or scene, or for the dissemination of
deliberately false information or willful misrepresentation, or to the detriment of the public interest, or to incite, encourage, or assist in subversive or
treasonable acts. (Emphasis added).
It is noteworthy that §40 of R.A. No. 6388, from which §92 of B.P. Blg. 881 was taken, expressly provided that the COMELEC Time should "be
considered as part of the public service time said stations are required to furnish the Government for the dissemination of public information and
education under their respective franchises or permits." There is no reason to suppose that §92 of B.P. Blg. 881 considers the COMELEC Time
therein provided to be otherwise than as a public service which petitioner is required to render under §4 of its charter (R.A. No. 7252). In sum, B.P.
Blg. 881, §92 is not an invalid amendment of petitioner's franchise but the enforcement of a duty voluntarily assumed by petitioner in accepting a
public grant of privilege.
Thus far, we have confined the discussion to the provision of §92 of B.P. Blg. 881 for free air time without taking into account COMELEC Resolution
No. 2983-A, §2 of which states:
Sec. 2. Grant of "Comelec Time." — Every radio broadcasting and television station operating under franchise shall grant the Commission, upon
payment of just compensation, at least thirty (30) minutes of prime time daily, to be known as "Comelec Time", effective February 10, 1998 for
candidates for President, Vice-President and Senators, and effective March 27, 1998, for candidates for local elective offices, until May 9, 1998.
(Emphasis added).
This is because the amendment providing for the payment of "just compensation" is invalid, being in contravention of §92 of B.P. Blg. 881 that radio
and television time given during the period of the campaign shall be "free of charge." Indeed, Resolution No. 2983 originally provided that the time
allocated shall be "free of charge," just as §92 requires such time to be given "free of charge." The amendment appears to be a reaction to
petitioner's claim in this case that the original provision was unconstitutional because it allegedly authorized the taking of property without just
compensation.

58
The Solicitor General, relying on the amendment, claims that there should be no more dispute because the payment of compensation is now
provided for. It is basic, however, that an administrative agency cannot, in the exercise of lawmaking, amend a statute of Congress. Since §2 of
Resolution No. 2983-A is invalid, it cannot be invoked by the parties.
Law Allows Flextime for Programming
by Stations, Not Confiscation of
Air Time by COMELEC
It is claimed that there is no standard in the law to guide the COMELEC in procuring free air time and that "theoretically the COMELEC can demand
all of the air time of such stations."25 Petitioners do not claim that COMELEC Resolution No. 2983-A arbitrarily sequesters radio and television time.
What they claim is that because of the breadth of the statutory language, the provision in question is susceptible of "unbridled, arbitrary and
oppressive exercise."26
The contention has no basis. For one, the COMELEC is required to procure free air time for candidates "within the area of coverage" of a particular
radio or television broadcaster so that it cannot, for example, procure such time for candidates outside that area. At what time of the day and how
much time the COMELEC may procure will have to be determined by it in relation to the overall objective of informing the public about the
candidates, their qualifications and their programs of government. As stated in Osmeña v. COMELEC, the COMELEC Time provided for in §92, as
well as the COMELEC Space provided for in §90, is in lieu of paid ads which candidates are prohibited to have under §11(b) of R.A. No. 6646.
Accordingly, this objective must be kept in mind in determining the details of the COMELEC Time as well as those of the COMELEC Space.
There would indeed be objection to the grant of power to the COMELEC if §92 were so detailed as to leave no room for accommodation of the
demands of radio and television programming. For were that the case, there could be an intrusion into the editorial prerogatives of radio and
television stations.
Differential Treatment of
Broadcast Media Justified
Petitioners complain that B.P. Blg. 881, §92 singles out radio and television stations to provide free air time. They contend that newspapers and
magazines are not similarly required as, in fact, in Philippine Press Institute v. COMELEC,27 we upheld their right to the payment of just
compensation for the print space they may provide under §90.
The argument will not bear analysis. It rests on the fallacy that broadcast media are entitled to the same treatment under the free speech guarantee
of the Constitution as the print media. There are important differences in the characteristics of the two media, however, which justify their differential
treatment for free speech purposes. Because of the physical limitations of the broadcast spectrum, the government must, of necessity, allocate
broadcast frequencies to those wishing to use them. There is no similar justification for government allocation and regulation of the print media. 28
In the allocation of limited resources, relevant conditions may validly be imposed on the grantees or licensees. The reason for this is that, as already
noted, the government spends public funds for the allocation and regulation of the broadcast industry, which it does not do in the case of the print
media. To require the radio and television broadcast industry to provide free air time for the COMELEC Time is a fair exchange for what the industry
gets.
From another point of view, this Court has also held that because of the unique and pervasive influence of the broadcast media, "[n]ecessarily . . .
the freedom of television and radio broadcasting is somewhat lesser in scope than the freedom accorded to newspaper and print media." 29
The broadcast media have also established a uniquely pervasive presence in the lives of all Filipinos. Newspapers and current books are found only
in metropolitan areas and in the poblaciones of municipalities accessible to fast and regular transportation. Even here, there are low income masses
who find the cost of books, newspapers, and magazines beyond their humble means. Basic needs like food and shelter perforce enjoy high priorities.
On the other hand, the transistor radio is found everywhere. The television set is also becoming universal. Their message may be simultaneously
received by a national or regional audience of listeners including the indifferent or unwilling who happen to be within reach of a blaring radio or
television set. The materials broadcast over the airwaves reach every person of every age, persons of varying susceptibilities to persuasion, persons
of different I.Q.s and mental capabilities, persons whose reactions to inflammatory or offensive speech would he difficult to monitor or predict. The
impact of the vibrant speech is forceful and immediate. Unlike readers of the printed work, the radio audience has lesser opportunity to cogitate,
analyze, and reject the utterance. 30
Petitioners' assertion therefore that §92 of B.P. Blg. 881 denies them the equal protection of the law has no basis. In addition, their plea that §92 (free
air time) and §11(b) of R.A. No. 6646 (ban on paid political ads) should be invalidated would pave the way for a return to the old regime where
moneyed candidates could monopolize media advertising to the disadvantage of candidates with less resources. That is what Congress tried to
reform in 1987 with the enactment of R.A. No. 6646. We are not free to set aside the judgment of Congress, especially in light of the recent failure of
interested parties to have the law repealed or at least modified.
Requirement of COMELEC Time, a
Reasonable Exercise of the
State's Power to Regulate
Use of Franchises
Finally, it is argued that the power to supervise or regulate given to the COMELEC under Art. IX-C, §4 of the Constitution does not include the power
to prohibit. In the first place, what the COMELEC is authorized to supervise or regulate by Art. IX-C, §4 of the Constitution, 31 among other things, is
the use by media of information of their franchises or permits, while what Congress (not the COMELEC) prohibits is the sale or donation of print
space or air time for political ads. In other words, the object of supervision or regulation is different from the object of the prohibition. It is another
fallacy for petitioners to contend that the power to regulate does not include the power to prohibit. This may have force if the object of the power were
the same.
In the second place, the prohibition in §11(b) of R.A. No. 6646 is only half of the regulatory provision in the statute. The other half is the mandate to
the COMELEC to procure print space and air time for allocation to candidates. As we said in Osmeña v. COMELEC:
The term political "ad ban" when used to describe §11(b) of R.A. No. 6646, is misleading, for even as §11(b) prohibits the sale or donation of print
space and air time to political candidates, it mandates the COMELEC to procure and itself allocate to the candidates space and time in the media.
There is no suppression of political ads but only a regulation of the time and manner of advertising.
xxx xxx xxx
. . . What is involved here is simply regulation of this nature. Instead of leaving candidates to advertise freely in the mass media, the law provides for
allocation, by the COMELEC of print space and air time to give all candidates equal time and space for the purpose of ensuring "free, orderly,
honest, peaceful, and credible elections."
With the prohibition on media advertising by candidates themselves, the COMELEC Time and COMELEC Space are about the only means through
which candidates can advertise their qualifications and programs of government. More than merely depriving their qualifications and programs of
government. More than merely depriving candidates of time for their ads, the failure of broadcast stations to provide air time unless paid by the
government would clearly deprive the people of their right to know. Art III, §7 of the Constitution provides that "the right of the people to information
on matters of public concern shall be recognized," while Art. XII, §6 states that "the use of property bears a social function [and] the right to own,
establish, and operate economic enterprises [is] subject to the duty of the State to promote distributive justice and to intervene when the common
good so demands."

59
To affirm the validity of §92 of B.P. Blg. 881 is to hold public broadcasters to their obligation to see to it that the variety and vigor of public debate on
issues in an election is maintained. For while broadcast media are not mere common carriers but entities with free speech rights, they are also public
trustees charged with the duty of ensuring that the people have access to the diversity of views on political issues. This right of the people is
paramount to the autonomy of broadcast media. To affirm the validity of §92, therefore, is likewise to uphold the people's right to information on
matters of public concern. The use of property bears a social function and is subject to the state's duty to intervene for the common good. Broadcast
media can find their just and highest reward in the fact that whatever altruistic service they may render in connection with the holding of elections is
for that common good.
For the foregoing reasons, the petition is dismissed.
SO ORDERED.

60
 18. G.R. No. L-60077 January 18, 1991
NATIONAL POWER CORPORATION, petitioner,
vs.
SPS. MISERICORDIA GUTIERREZ and RICARDO MALIT and THE HONORABLE COURT OF APPEALS, respondents.
Pedro S. Dabu for private respondents.

BIDIN, J.:
This is a petition for review on certiorari filed by the National Power Corporation (NPC) seeking the reversal or modification of the March 9, 1986
Decision of the Court of Appeals in CA G.R. No. 54291-R entitled "National Power Corporation v. Sps. Misericordia Gutierrez and Ricardo Malit",
affirming the December 4, 1972 Decision of the then Court of First Instance of Pampanga, Fifth Judicial District, Branch II, in Civil Case No. 2709,
entitled National Power Corporation v. Matias Cruz, et al.
The undisputed facts of the case, as found by the Court of Appeals, are as follows:
Plaintiff National Power Corporation, a government owned and controlled entity, in accordance with Commonwealth Act No. 120, is invested with the
power of eminent domain for the purpose of pursuing its objectives, which among others is the construction, operation, and maintenance of electric
transmission lines for distribution throughout the Philippines. For the construction of its 230 KV Mexico-Limay transmission lines, plaintiff's lines have
to pass the lands belonging to defendants Matias Cruz, Heirs of Natalia Paule and spouses Misericordia Gutierrez and Ricardo Malit covered by tax
declarations Nos. 907, 4281 and 7582, respectively.
Plaintiff initiated negotiations for the acquisition of right of way easements over the aforementioned lots for the construction of its transmission lines
but unsuccessful in this regard, said corporation was constrained to file eminent domain proceedings against the herein defendants on January 20,
1965.
Upon filing of the corresponding complaint, plaintiff corporation deposited the amount of P973.00 with the Provincial Treasurer of Pampanga,
tendered to cover the provisional value of the land of the defendant spouses Ricardo Malit and Misericordia Gutierrez. And by virtue of which, the
plaintiff corporation was placed in possession of the property of the defendant spouses so it could immediately proceed with the construction of its
Mexico-Limay 230 KV transmission line. In this connection, by the trial court's order of September 30, 1965, the defendant spouses were authorized
to withdraw the fixed provisional value of their land in the sum of P973.00.
The only controversy existing between the parties litigants is the reasonableness and adequacy of the disturbance or compensation fee of the
expropriated properties.
Meanwhile, for the purpose of determining the fair and just compensation due the defendants, the court appointed three commissioners, comprised
of one representative of the plaintiff, one for the defendants and the other from the court, who then were empowered to receive evidence, conduct
ocular inspection of the premises, and thereafter, prepare their appraisals as to the fair and just compensation to be paid to the owners of the lots.
Hearings were consequently held before said commissioners and during their hearings, the case of defendant Heirs of Natalia Paule was amicably
settled by virtue of a Right of Way Grant (Exh. C) executed by Guadalupe Sangalang for herself and in behalf of her co-heirs in favor of the plaintiff
corporation. The case against Matias Cruz was earlier decided by the court, thereby leaving only the case against the defendant spouses Ricardo
Malit and Misericordia Gutierrez still to be resolved. Accordingly, the commissioners submitted their individual reports. The commissioner for the
plaintiff corporation recommended the following:
. . . that plaintiff be granted right of way easement over the 760 square meters of the defendants Malit and Gutierrez land for plaintiff transmission
line upon payment of an easement fee of P1.00 therefor. . . . (Annex M)
The commissioner for the defendant spouses recommended the following:
. . . that Mr. and Mrs. Ricardo Malit be paid as disturbance compensation the amount of P10.00 sq. meter or the total amount of P7,600.00' (Annex
K)
The Court's commissioner recommended the following:
. . . the payment of Five (P 5.OO) Pesos per square meter of the area covered by the Right-of-way to be granted, . . .(Annex L)
The plaintiff corporation urged the Court that the assessment as recommended by their commissioner be the one adopted. Defendant spouses,
however, dissented and objected to the price recommended by both the representative of the court and of the plaintiff corporation.
With these reports submitted by the three commissioners and on the evidence adduced by the defendants as well as the plaintiff for the purpose of
proving the fair market value of the property sought to be expropriated, the lower court rendered a decision the dispositive portion of which reads as
follows:
WHEREFORE, responsive to the foregoing considerations, judgment is hereby rendered ordering plaintiff National Power Corporation to pay
defendant spouses Ricardo Malit and Misericordia Gutierrez the sum of P10.00 per square meter as the fair and reasonable compensation for the
right-of-way easement of the affected area, which is 760 squares, or a total sum of P7,600.00 and P800.00 as attorney's fees' (Record on Appeal, p.
83)
Dissatisfied with the decision, the plaintiff corporation filed a motion for reconsideration which was favorably acted upon by the lower court, and in an
order dated June 10, 1973, it amended its previous decision in the following tenor:
On the basis of an ocular inspection made personally by the undersigned, this court finally classified the land of the spouses Ricardo Malit and
Misericordia to be partly commercial and partly agricultural, for which reason the amount of P10.00 per sq. meter awarded in the decision of
December 4,1972 is hereby reduced to P5.00 per square meter as the fair and reasonable market value of the 760 square meters belonging to the
said spouses.
There being no claim and evidence for attorney's fees, the amount of P800.00 awarded as attorney's fees, in the decision of December 4, 1972 is
hereby reconsidered and set aside. (Annex S)
Still not satisfied, an appeal was filed by petitioner (NPC) with the Court of Appeals but respondent Court of Appeals in its March 9, 1982, sustained
the trial court, as follows:
WHEREFORE, finding no reversible error committed by the court a quo, the appealed judgment is hereby affirmed with costs against the plaintiff-
appellant.
Hence, the instant petition.
The First Division of this Court gave due course to the petition and required both parties to submit their respective memoranda (Resolution of
January 12, 1983). It also noted in an internal resolution of August 17, 1983 that petitioner flied its memorandum while the respondents failed to file
their memorandum within the period which expired on February 24,1983; hence, the case was considered submitted for decision.
The sole issue raised by petitioner is —
WHETHER PETITIONER SHOULD BE MADE TO PAY SIMPLE EASEMENT FEE OR FULL COMPENSATION FOR THE LAND TRAVERSED BY
ITS TRANSMISSION LINES.
It is the contention of petitioner that the Court of Appeals committed gross error by adjudging the petitioner liable for the payment of the full market
value of the land traversed by its transmission lines, and that it overlooks the undeniable fact that a simple right-of-way easement (for the passage of

61
transmission lines) transmits no rights, except that of the easement. Full ownership is retained by the private respondents and they are not totally
deprived of the use of the land. They can continue planting the same agricultural crops, except those that would result in contact with the wires. On
this premise, petitioner submits that if full market value is required, then full transfer of ownership is only the logical equivalent.
The petition is devoid of merit. The resolution of this case hinges on the determination of whether the acquisition of a mere right-of-way is an
exercise of the power of eminent domain contemplated by law.1âwphi1
The trial court's observation shared by the appellate court show that ". . . While it is true that plaintiff are ( sic) only after a right-of-way easement, it
nevertheless perpetually deprives defendants of their proprietary rights as manifested by the imposition by the plaintiff upon defendants that below
said transmission lines no plant higher than three (3) meters is allowed. Furthermore, because of the high-tension current conveyed through said
transmission lines, danger to life and limbs that may be caused beneath said wires cannot altogether be discounted, and to cap it all plaintiff only
pays the fee to defendants once, while the latter shall continually pay the taxes due on said affected portion of their property."
The foregoing facts considered, the acquisition of the right-of-way easement falls within the purview of the power of eminent domain. Such
conclusion finds support in similar cases of easement of right-of-way where the Supreme Court sustained the award of just compensation for private
property condemned for public use (See National Power Corporation vs. Court of Appeals, 129 SCRA 665, 1984; Garcia vs. Court of Appeals, 102
SCRA 597,1981). The Supreme Court, in Republic of the Philippines vs. PLDT, * thus held that:
Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but
no cogent reason appears why said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of
title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right-of-way.
In the case at bar, the easement of right-of-way is definitely a taking under the power of eminent domain. Considering the nature and effect of the
installation of the 230 KV Mexico-Limay transmission lines, the limitation imposed by NPC against the use of the land for an indefinite period
deprives private respondents of its ordinary use.
For these reasons, the owner of the property expropriated is entitled to a just compensation, which should be neither more nor less, whenever it is
possible to make the assessment, than the money equivalent of said property. Just compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing expropriated has to suffer by reason of the expropriation (Province of Tayabas vs.
Perez, 66 Phil. 467 [1938]; Assoc. of Small Land Owners of the Phils., Inc. vs. Secretary of Agrarian Reform, G.R. No. 78742; Acuna vs. Arroyo , G.R.
No. 79310; Pabrico vs. Juico, G.R. No. 79744; Manaay v. Juico, G.R. No. 79777,14 July 1989, 175 SCRA 343 [1989]). The price or value of the land
and its character at the time it was taken by the Government are the criteria for determining just compensation (National Power Corp. v. Court of
Appeals, 129 SCRA 665, [1984]). The above price refers to the market value of the land which may be the full market value thereof. According to
private respondents, the market value of their lot is P50.00 per square meter because the said lot is adjacent to the National and super highways of
Gapan, Nueva Ecija and Olongapo City.
Private respondents recognize the inherent power of eminent domain being exercised by NPC when it finally consented to the expropriation of the
said portion of their land, subject however to payment of just compensation. No matter how laudable NPC's purpose is, for which expropriation was
sought, it is just and equitable that they be compensated the fair and full equivalent for the loss sustained, which is the measure of the indemnity, not
whatever gain would accrue to the expropriating entity (EPZA v. Dulay, 149 SCRA 305 [1987]; Mun. of Daet v. Court of Appeals, 93 SCRA 503
(1979]).
It appearing that the trial court did not act capriciously and arbitrarily in setting the price of P5.00 per square meter of the affected property, the said
award is proper and not unreasonable.
On the issue of ownership being claimed by petitioner in the event that the price of P5.00 per square meter be sustained, it is well settled that an
issue which has not been raised in the Court a quo cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play,
justice and due process . . . (Filipino Merchants v. Court of Appeals, G.R. No. 85141, November 8, 1989, 179 SCRA 638; Commissioner of Internal
Revenue v. Procter and Gamble Philippines Manufacturing Corporation, 160 SCRA 560 [1988]; Commissioner of Internal Revenue v. Wander
Philippines, Inc., 160 SCRA 573 1988]). Petitioner only sought an easement of right-of-way, and as earlier discussed, the power of eminent domain
may be exercised although title was not transferred to the expropriator.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

62
 19. G.R. No. L- 41383 August 15, 1988
PHILIPPINE AIRLINES, INC., plaintiff-appellant,
vs.
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National
Treasurer, defendants-appellants.
Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

GUTIERREZ, JR., J.:

What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
This question has been brought before this Court in the past. The parties are, in effect, asking for a re-examination of the latest decision on this
issue.
This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where the then Court of First Instance of
Rizal dismissed the portion-about complaint for refund of registration fees paid under protest.
The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant to Section 8, Republic Act No. 4136,
otherwise known as the Land Transportation and Traffic Code.
The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business
under a legislative franchise, Act No. 42739, as amended by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the payment
of taxes. The pertinent provision of the franchise provides as follows:
Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the National Government during the life of this
franchise a tax of two per cent of the gross revenue or gross earning derived by the grantee from its operations under this franchise. Such tax shall
be due and payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied, established or collected by any municipal,
provincial or national automobiles, Provided, that if, after the audit of the accounts of the grantee by the Commissioner of Internal Revenue, a
deficiency tax is shown to be due, the deficiency tax shall be payable within the ten days from the receipt of the assessment. The grantee shall pay
the tax on its real property in conformity with existing law.
On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not been paying motor vehicle
registration fees.
Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay
motor vehicle registration fees.
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136
were paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees of its motor vehicles.
After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner Edu demanding a refund of the amounts paid,
invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the
payment of which PAL is exempt by virtue of its legislative franchise.
Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March
30, 1970) to the effect that motor vehicle registration fees are regulatory exceptional. and not revenue measures and, therefore, do not come within
the exemption granted to PAL? under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and
National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862.
Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity as National Treasurer, filed a motion to dismiss
alleging that the complaint states no cause of action. In support of the motion to dismiss, defendants repatriation the ruling in Republic v. Philippine
Rabbit Bus Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the
police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or
earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The resolution of the motion to dismiss
was deferred by the Court until after trial on the merits.
On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by the later ruling laid down by the Supreme Court
in the case or Republic v. Philippine Rabbit Bus Lines, Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the
case to us.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and Commissioner Romeo F. Edu respectively,
discuss the main points of contention in the case at bar.
Resolving the issue in the Philippine Rabbit case, this Court held:
"The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law (Republic Act No. 587
[1950]). Its heading speaks of "registration fees." The term is repeated four times in the body thereof. Equally so, mention is made of the "fee for
registration." (Ibid., Subsection G) A subsection starts with a categorical statement "No fees shall be charged." ( lbid., Subsection H) The conclusion
is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power. Hence the
incipient, of the section relied upon by defendant-appellee under the Back Pay Law, It is not held liable for a tax but for a registration fee. It therefore
cannot make use of a backpay certificate to meet such an obligation.
Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act No. 5448. ([1968]. Section 3 thereof as
to the imposition of additional tax on privately-owned passenger automobiles, motorcycles and scooters was amended by Republic Act No. 5470
which is (sic) approved on May 30, 1969.) A special science fund was thereby created and its title expressly sets forth that a tax on privately-owned
passenger automobiles, motorcycles and scooters was imposed. The rates thereof were provided for in its Section 3 which clearly specifies the"
Philippine tax."(Cooley to be paid as distinguished from the registration fee under the Motor Vehicle Act. There cannot be any clearer expression
therefore of the legislative will, even on the assumption that the earlier legislation could by subdivision the point be susceptible of the interpretation
that a tax rather than a fee was levied. What is thus most apparent is that where the legislative body relies on its authority to tax it expressly so
states, and where it is enacting a regulatory measure, it is equally exploded (at p. 22,1969
In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand, held:
The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in section 8 of that law called "fees". But the
appellation is no impediment to their being considered taxes if taxes they really are. For not the name but the object of the charge determines
whether it is a tax or a fee. Geveia speaking, taxes are for revenue, whereas fees are exceptional. for purposes of regulation and inspection and are
for that reason limited in amount to what is necessary to cover the cost of the services rendered in that connection. Hence, a charge fixed by statute
for the service to be person,-When by an officer, where the charge has no relation to the value of the services performed and where the amount
collected eventually finds its way into the treasury of the branch of the government whose officer or officers collected the chauffeur, is not a fee but a
tax."(Cooley on Taxation, Vol. 1, 4th ed., p. 110.)
From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle Office are but a small portion—about 5 per centum
—of the total collections from motor vehicle registration fees. And as proof that the money collected is not intended for the expenditures of that office,
the law itself provides that all such money shall accrue to the funds for the construction and maintenance of public roads, streets and bridges. It is

63
thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the
operation of motor vehicles on public highways, for their express object is to provide revenue with which the Government is to discharge one of its
principal functions—the construction and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.
As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides that "no other taxes or fees than those
prescribed in this Act shall be imposed," thus implying that the charges therein imposed—though called fees—are of the category of taxes. The
provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of Republic Act 587, which reads:
Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or operation or on the ownership of any motor
vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the provisions of any city charter to the contrary
notwithstanding: Provided, however, That any provincial board, city or municipal council or board, or other competent authority may exact and collect
such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and
approved by the Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the President
of the Philippines upon the recommendation of the Secretary of Public Works and Communications, but in none of these cases, shall any toll fee." be
charged or collected until and unless the approved schedule of tolls shall have been posted levied, in a conspicuous place at such toll station. (at pp.
213-214)
Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992 [19511) as amended by
Commonwealth Act 123 and Republic Acts Nos. 587 and 1621.
Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation Code, (as amended by Rep. Acts Nos. 5715
and 64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg. 43, 74 and 398).
Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unsegregated, by Rep. Act Nos. 587 and 1603) states:
Section 73. Disposal of moneys collected.—Twenty per centum of the money collected under the provisions of this Act shall accrue to the road and
bridge funds of the different provinces and chartered cities in proportion to the centum shall during the next previous year and the remaining eighty
per centum shall be deposited in the Philippine Treasury to create a special fund for the construction and maintenance of national and provincial
roads and bridges. as well as the streets and bridges in the chartered cities to be alloted by the Secretary of Public Works and Communications for
projects recommended by the Director of Public Works in the different provinces and chartered cities. ....
Presently, Sec. 61 of the Land Transportation and Traffic Code provides:
Sec. 61. Disposal of Mortgage. Collected—Monies collected under the provisions of this Act shall be deposited in a special trust account in the
National Treasury to constitute the Highway Special Fund, which shall be apportioned and expended in accordance with the provisions of the"
Philippine Highway Act of 1935. "Provided, however, That the amount necessary to maintain and equip the Land Transportation Commission but not
to exceed twenty per cent of the total collection during one year, shall be set aside for the purpose. (As amended by RA 64-67, approved August 6,
1971).
It appears clear from the above provisions 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. On the other hand, the Philippine Rabbit case mentions a presumption arising from the use of the term "fees," which
appears to have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 which
reads:
Sec. 13. Payment of taxes upon registration.—No original registration of motor vehicles subject to payment of taxes, customs s duties or other
charges shall be accepted unless proof of payment of the taxes due thereon has been presented to the Commission.
referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle (Sec. 59, b, Rep. Act 4136, as amended).
Fees may be properly regarded as taxes even though they also serve as an instrument of regulation, As stated by a former presiding judge of the
Court of Tax Appeals and writer on various aspects of taxpayers
It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as a source of revenue as well as a means of
regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. Isabela such case, the fees may properly be
regarded as taxes even though they also serve as an instrument of regulation. 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. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.)
592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs.
4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory
taxes.) (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).
Indeed, 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
(Umali, Id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted
in the Calalang case. The same provision appears as Section 591-593). 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."
Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 591-593). speaks of "taxes." or fees ... for the
registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a
tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional" tax," where the law could have referred to an
original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 41383.
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. 591-593). of the Code as taxes like the motor vehicle registration fee and chauffers' license fee. Such fees are to go into the
expenditures of the Land Transportation Commission as provided for in the last proviso of see. 61, aforequoted.
It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for rigidly purposes in the exercise of the State's
police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which
modem life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues.
Without changing the earlier deputy. of registration payments as "fees," their nature has become that of "taxes."
In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are
actually taxes intended for additional revenues. of government even if one fifth or less of the amount collected is set aside for the operating expenses
of the agency administering the program.
May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?
The answer is NO.
The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We
have ruled that Section 24 of Rep. Act No. 5448 dated June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in legislative
franchises similar to that invoked by PAL in this case.
In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals , et al. (G.R. No. 615)." July 11, 1985), this Court ruled:

64
Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio Communications of the Philippines, Inc., was subject to both the
franchise tax and income tax. In 1964, however, petitioner's franchise was amended by Republic Act No. 41-42). to the effect that its franchise tax of
one and one-half percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all taxes of any kind, nature, or description levied,
established, or collected by any authority whatsoever, municipal, provincial, or national from which taxes the grantee is hereby expressly exempted."
The issue raised to this Court now is the validity of the respondent court's decision which ruled that the exemption under Republic Act No. 41-42).
was repealed by Section 24 of Republic Act No. 5448 dated June 27, 1968 which reads:
"(d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Sections
24 (c) (1) of this Code shall pay the rates provided in this section. All corporations, agencies, or instrumentalities owned or controlled by the
government, including the Government Service Insurance System and the Social Security System but excluding educational institutions, shall pay
such rate of tax upon their taxable net income as are imposed by this section upon associations or corporations engaged in a similar business or
industry. "
An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate taxpayers to pay income tax as provided
by the statute. There can be no doubt as to the power of Congress to repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935
Constitution and Article XIV, Section 5 of the Constitution as amended in 1973 expressly provide that no franchise shall be granted to any individual,
firm, or corporation except under the condition that it shall be subject to amendment, alteration, or repeal by the legislature when the public interest
so requires. There is no question as to the public interest involved. The country needs increased revenues. The repealing clause is clear and
unambiguous. There is a listing of entities entitled to tax exemption. The petitioner is not covered by the provision. Considering the foregoing, the
Court Resolved to DENY the petition for lack of merit. The decision of the respondent court is affirmed.
Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the tax exemption in the franchise of PAL
was repealed during the period. However, an amended franchise was given to PAL in 1979. Section 13 of Presidential Decree No. 1590, now
provides:
In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the lifetime of this franchise
whichever of subsections (a) and (b) hereunder will result in a lower taxes.)
(a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the Internal
Revenue Code; or
(b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees from all specific. without distinction as to transport or
nontransport corporations; provided that with respect to international airtransport service, only the gross passengers, mail, and freight revenues. from
its outgoing flights shall be subject to this law.
The tax paid by the grantee under either of the above alternatives shall be 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, including but not limited to the following:
xxx xxx xxx
(5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of airtransport equipment, motor vehicles, and all other
personal or real property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979).
PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now exempt from the payment of any tax,
fee, or other charge on the registration and licensing of motor vehicles. Such payments are already included in the basic tax or franchise tax
provided in Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be exacted.
WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees paid in 1971 is DENIED. The Land
Transportation Franchising and Regulatory Board (LTFRB) is enjoined functions-the collecting any tax, fee, or other charge on the registration and
licensing of the petitioner's motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.
SO ORDERED.

65
 20. G.R. No. L-75697
VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR and CITY
TREASURER OF MANILA, respondents.
Nelson Y. Ng for petitioner.
The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other videogram operators adversely
affected. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad
powers to regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5,
1985 and took effect on April 10, 1986, fifteen (15) days after completion of its publication in the Official Gazette.
On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the National Internal
Revenue Code providing, inter alia:
SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax
of five pesos; Provided, That locally manufactured or imported blank video tapes shall be subject to sales tax.
On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of the
Philippines, and Philippine Motion Pictures Producers Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court
to intervene in the case, over petitioner's opposition, upon the allegations that intervention was necessary for the complete protection of their rights
and that their "survival and very existence is threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to file
their Comment in Intervention.
The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others, videotapes, discs, cassettes or any technical
improvement or variation thereof, have greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp decline in theatrical
attendance by at least forty percent (40%) and a tremendous drop in the collection of sales, contractor's specific, amusement and other taxes,
thereby resulting in substantial losses estimated at P450 Million annually in government revenues;
2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and
such earnings have not been subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram establishments have also affected the viability of the movie industry, particularly the more than
1,200 movie houses and theaters throughout the country, and occasioned industry-wide displacement and unemployment due to the shutdown of
numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to create an environment conducive to growth and
development of all business industries, including the movie industry which has an accumulated investment of about P3 Billion;
5. WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie industry
upon which more than 75,000 families and 500,000 workers depend for their livelihood, but also provide an additional source of revenue for the
Government, and at the same time rationalize the heretofore uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and
spiritual well-being of the youth, and impairs the mandate of the Constitution for the State to support the rearing of the youth for civic efficiency and
the development of moral character and promote their physical, intellectual, and social well-being;
7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant malpractices which have flaunted our
censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people and betraying the national economic recovery
program, bold emergency measures must be adopted with dispatch; ... (Numbering of paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:
1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to
the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution;
3. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a nuisance, which it is not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" 1 is sufficiently
complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related, and are
germane to the subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject and title. 2 An act
having a single general subject, indicated in the title, may contain any number of provisions, no matter how diverse they may be, so long as they are
not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means
of carrying out the general object." 3 The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly construed as
to cripple or impede the power of legislation. 4 It should be given practical rather than technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without merit. That section reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision of law to the contrary, the province shall collect a tax
of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a
reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and
the other fifty percent (50%) shall acrrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be
shared equally by the City/Municipality and the Metropolitan Manila Commission.
xxx xxx xxx
The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which
is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor
foreign to that general subject and title. As a tool for regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout the
DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore

66
uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles explain the motives of the lawmaker in
presenting the measure. The title of the DECREE, which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the
purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or that the
latter be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in restraint of trade. However, it is
beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is
subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts
upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10
The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram
establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of an additional source of
revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the 30% amusement
tax imposed or borne by the movie industry which the theater-owners pay to the government, but which is passed on to the entire cost of the
admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of
the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over
another. 11
It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result
from a singling out of one particular class for taxation or exemption infringe no constitutional limitation". 12 Taxation has been made the implement of
the state's police power.13
At bottom, the rate of tax is a matter better addressed to the taxing legislature.
3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former President under Amendment No. 6
of the 1973 Constitution providing that "whenever in the judgment of the President ... , there exists a grave emergency or a threat or imminence
thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any
reason that in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees, orders, or letters of
instructions, which shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that
grave emergencies corroding the moral values of the people and betraying the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President, considering that the issue of the validity of the
exercise of legislative power under the said Amendment still pends resolution in several other cases, we reserve resolution of the question raised at
the proper time.
4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. The grant in Section 11 of the DECREE
of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government and deputize, for a fixed and limited period,
the heads or personnel of such agencies and units to perform enforcement functions for the Board" is not a delegation of the power to legislate but
merely a conferment of authority or discretion as to its execution, enforcement, and implementation. "The true distinction is between the delegation
of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution to be
exercised under and in pursuance of the law. The first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language
of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized agencies concerned being
"subject to the direction and control of the BOARD." That the grant of such authority might be the source of graft and corruption would not stigmatize
the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will not be without adequate remedy in law.
5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one which "alters the legal rules of
evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense." It is
petitioner's position that Section 15 of the DECREE in providing that:
All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the effectivity of this Decree within which to
register with and secure a permit from the BOARD to engage in the videogram business and to register with the BOARD all their inventories of
videograms, including videotapes, discs, cassettes or other technical improvements or variations thereof, before they could be sold, leased, or
otherwise disposed of. Thereafter any videogram found in the possession of any person engaged in the videogram business without the required
proof of registration by the BOARD, shall be prima facie evidence of violation of the Decree, whether the possession of such videogram be for
private showing and/or public exhibition.
raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of any videogram cannot be presented
and thus partakes of the nature of an ex post facto law.
The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15
... it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be
overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome
such presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL
LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been proved that they shall be prima facie evidence of the
existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate
facts presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the
two in common experience". 16
Applied to the challenged provision, there is no question that there is a rational connection between the fact proved, which is non-registration, and
the ultimate fact presumed which is violation of the DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches
only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in character.
6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. Being
a relatively new industry, the need for its regulation was apparent. While the underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy; the
erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video tapes containing pornographic
films and films with brutally violent sequences; and losses in government revenues due to the drop in theatrical attendance, not to mention the fact
that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to
engage in business. 17
The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video industry. On the contrary, video establishments
are seen to have proliferated in many places notwithstanding the 30% tax imposed.

67
In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of the DECREE. These considerations, however, are
primarily and exclusively a matter of legislative concern.
Only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to
be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to
such a sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the
judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be courts of justice, to which
rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity
of the challenged provision likewise insofar as there may be objections, even if valid and cogent on its wisdom cannot be sustained. 18
In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute. We find no clear violation of the Constitution
which would justify us in pronouncing Presidential Decree No. 1987 as unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
SO ORDERED.

68
 21. G.R. No. L-20462 June 30, 1965
CALTEX (PHILIPPINES), INC., petitioner-appellant,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent-appellee.
Ross, Selph and Carrascoso for petitioner-appellant.
Office of the Solicitor General for respondent-appellee.
REYES, J.B.L. J.:
Appeal from a resolution of the Court of Tax Appeals in its CTA Case No. 966, dismissing, without prejudice, the petition for review of herein
petitioner-appellant, Caltex (Philippines) Inc., seeking a refund of P6,110.00 (later reduced to P5,781.68 as per amended petition for review dated
June 11, 1962) representing its payments of special import tax imposed on its importations from abroad of various items of machinery, equipment,
accessories and spare parts, of which it claims to be exempt, pursuant to Section 6 of Republic Act No. 1394.
On 9 November 1960, Caltex (Philippines) Inc., filed in the Tax Court its petition for review against respondent Commissioner of Internal Revenue in
the Court of Appeals, alleging, inter alia, that it is a domestic corporation and holder of a petroleum refining concession under Republic Act No. 387;
that it is engaged in a productive enterprise in which it has employed substantial amounts of capital and labor in connection with the refining, storage,
handling and distribution of petroleum products; that on several occasions in 1958 and 1959 it imported from abroad various items of machinery,
equipment, accessories, and spare parts for use of its depots or installations and in the gasoline service stations; that the Collector of Customs of
Manila levied and collected in the aforesaid importations the special import tax imposed by Republic Act No. 1394, and included said tax in landed
costs of the imported merchandise for the purpose of computing the compensating tax due thereon under Section 190 of the National Internal
Revenue Code and for which it (petitioner) paid the corresponding special import tax and compensating tax so computed and imposed; that the
aforesaid importations were not subject to special import tax because Section 6 of Republic Act No. 1394 exempts from said tax "machinery,
equipment, accessories and spare parts for the use of industries; that the inclusion and imposition of said special import tax in the landed costs of
the imported merchandise for purposes of computing the compensating tax due thereon was erroneous, and, as a consequence thereof, it
(petitioner) overpaid compensating taxes in the total sum of P5,781.68; that it (petitioner) filed claims for refund with respondent Commissioner of
Internal Revenue on the said overpaid compensating taxes, and until the petition was filed respondent has failed to refund said amount, nor has he
denied its claims for refund; and that because the two-year prescriptive period for recovery of internal revenue taxes illegally or erroneously collected
as provided in Section 306 of the National Internal Revenue Code will soon expire, it was constrained to file the instant petition while awaiting
respondent's decision in its claim for refund to protect its interests. Petitioner prays that respondent Commissioner of Internal Revenue be ordered to
refund the total sum of P5,781.68 paid by it as excess compensating taxes.
Although on 27 December 1960 respondent Commissioner of Internal Revenue answered the petition for review substantially denying the material
allegations thereof, the facts alleged by petitioner are uncontroverted. At the hearing, petitioner submitted evidence that it filed protests with the
Collector of Customs of Manila against the imposition of the tax in question over its importations, that the earliest liquidation of its several
importations was made on 13 November 1958; and that, on 28 April 1960 and 4 November 1960, respectively, it filed claims for refund of the
disputed tax with respondent Commissioner of Internal Revenue. It was established, however, that when the petition for review was commenced in
the Tax Court on 9 November 1960, there had been no action yet by the Collector of Customs of Manila on the protests of petitioner Caltex, nor has
there been any decision on its claim for refund.
Respondent did not present any evidence. After the parties filed their respective memorandums, the case was submitted for decision.
As stated in the beginning of this opinion, the lower court dismissed the petition for review, without prejudice, reasoning out that:
Petitioner filed protests against the levy and collection by the Collector of Customs of Manila of the special import tax in question, but it does not
appear that the question has been finally resolved by the customs authorities.
The question in regard to the exemption of petitioner from or liability for the special import tax is a matter falling within the jurisdiction of the Bureau of
Customs and not of the Bureau of Internal Revenue. Until and after the question in regard to the special import tax is resolved, the legality or
correctness of the compensating tax collected on said merchandise cannot be determined. (Resolution, pages 85-86, CTA Record).
Petitioner filed a motion to reconsider said resolution, but the lower court denied it; hence, the present appeal.
It is first contended by petitioner that the special import tax imposed by Republic Act No. 1394 is an internal revenue tax, and, as such, a claim for
refund of taxes so erroneously or illegally levied and collected by the Collector of Customs pursuant to said law should be lodged with the
Commissioner of Internal Revenue and not with the Commissioner of Customs. Petitioner argues that the Customs head and his subordinates are
merely agents of the Revenue Commissioner in the collection of national internal revenue on imported articles (Section 6, National Internal Revenue
Code) ; and that per Customs regulations, "protest against the payment of internal revenue taxes on imported merchandise shall, if filed with the
Collector of Customs, be transmitted directly to the Collector of Internal Revenue for action in accordance with the provisions of the National Internal
Revenue Code" (Par. V, first sentence, Customs Administrative Order No. 226, dated December 3, 1957; 54 O.G. 301).
Petitioner's contention is not well-taken. In the guise of a demand for reimbursement of compensating taxes, petitioner's case is actually one for
exemption from the special import tax under Republic Act No. 1394.
Since Section 4 of Republic Act No. 1394 provides that:
The special import tax shall be paid by the importer to the Bureau of Customs in accordance with the regulations to be promulgated by the
Department of Finance and prior to the release of the imported goods, articles or products from customs custody.
and it being undisputed that the Special Import Tax Law (Republic Act No. 1394) is one of the laws administered by the Bureau of Customs, it is
evident that said law should be considered as customs law, to which the section of Customs Administrative Order No. 226 (invoked by Caltex) does
not apply, since the section, by its terms, refers only to internal revenue taxes.
Disposing of a practically identical issue raised in another case, this Court, speaking through Mr. Justice Labrador, held:
It is also contended that the Internal Revenue Law, especially the provisions thereof imposing the advance sales tax under Section 183 (b), does not
fall within the jurisdiction of the Bureau of Customs for the reason that when the Bureau of Customs collects the advance sales tax it does so as
deputies of the Collector of Internal Revenue. It is argued as a consequence therefrom that the undervaluation of the onions may not be considered
as a violation of the customs laws or the laws and regulations enforced by said bureau. There is no merit in this contention. The law considers as
customs law all laws and regulations subject to enforcement by the Bureau of Customs, thus:
"Customs Law" includes not only the provisions of the Customs Law and regulations pursuant thereto but all other laws and regulations which are
subject to enforcement by the Bureau of Customs or otherwise within its jurisdiction. (Section 1419, last paragraph, Revised Administrative Code;
now, Section 3514, 10th paragraph, Tariff and Customs Code. (Leuterio vs. Commissioner of Customs, G.R. No. L-9810, April 27, 1957; 53 O. G.
6520)
Having arrived at the foregoing conclusion, and since the Bureau of Customs has jurisdiction over the special import tax in question (See also
Section 602 (a) and (j) of the Tariff and Customs Code), it also follows, as a logical consequence thereof, that any issue involving liability for, or
exemption from, said tax as well as the procedure on protests and appeals should be governed by the pertinent provisions of the Tariff and Customs
Code (Republic Act No. 1937), more specifically Sections 2308 to 2313 thereof. In fact, these provisions had been implemented by Customs
Administrative Order No. 226, dated December 3, 1957 (published in 54 O.G. 300-302), in which the special import tax is enumerated as among
those to be governed by said customs order.

69
It is also undisputed that the Collector of Customs of Manila has not yet acted upon the protests of petitioner. Hence, there is no adverse ruling from
which an appeal may be taken to the Commissioner of Customs in accordance with Section 2313 of the Tariff and Customs Code. Likewise, there is
no decision or ruling of the Commissioner of Customs which may be appealed to the Court of Tax Appeals, pursuant to Section 7(2) of Republic Act
No. 1125 in relation to Section 2402 of Republic Act No. 1937, both of which read —
SEC. 7. Jurisdiction. — The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided —
xxx xxx xxx
(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charger; seizure, detention or
release of property affected; fines forfeitures or other penalties imposed in relation thereto; or other matters arising under the Customs Law or other
law or part of law administered by the Bureau of Customs; (Republic Act No. 1125)
SEC. 2402. Review by Court of Tax Appeals. — The party aggrieved by a ruling of the Commissioner on any matter brought before him upon protest
or by his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by laws and
regulations. (first paragraph, Republic Act No. 1937)
In the absence of any decision or ruling which may be the subject of an appeal or petition for review to the Court of Tax Appeals, said court has no
case to take cognizance of (See CNS Estate, Inc. vs. Commissioner of Customs, G.R. No. L-18773, January 31, 1964). So that the lower court
correctly dismissed the petition for review of petitioner for being premature or for not stating a cause of action.
WHEREFORE, the resolution appealed from should be, as it is hereby affirmed. Costs against petitioner-appellant Caltex (Philippines), Inc.

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 22. G.R. No. 76778 June 6, 1990
FRANCISCO I. CHAVEZ, petitioner,
vs.
JAIME B. ONGPIN, in his capacity as Minister of Finance and FIDELINA CRUZ, in her capacity as Acting Municipal Treasurer of the
Municipality of Las Piñas, respondents, REALTY OWNERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner-intervenor.
Brotherhood of Nationalistic, Involved and Free Attorneys to Combat Injustice and Oppression (Bonifacio) for petitioner.
Ambrosia Padilla, Mempin and Reyes Law Offices for movant Realty Owners Association.

MEDIALDEA, J. :
The petition seeks to declare unconstitutional Executive Order No. 73 dated November 25, 1986, which We quote in full, as follows (78 O.G. 5861):
EXECUTIVE ORDER No. 73
PROVIDING FOR THE COLLECTION OF REAL PROPERTY TAXES BASED ON THE 1984 REAL PROPERTY VALUES, AS PROVIDED FOR
UNDER SECTION 21 OF THE REAL PROPERTY TAX CODE, AS AMENDED
WHEREAS, the collection of real property taxes is still based on the 1978 revision of property values;
WHEREAS, the latest general revision of real property assessments completed in 1984 has rendered the 1978 revised values obsolete;
WHEREAS, the collection of real property taxes based on the 1984 real property values was deferred to take effect on January 1, 1988 instead of
January 1, 1985, thus depriving the local government units of an additional source of revenue;
WHEREAS, there is an urgent need for local governments to augment their financial resources to meet the rising cost of rendering effective services
to the people;
NOW, THEREFORE, I. CORAZON C. AQUINO, President of the Philippines, do hereby order:
SECTION 1. Real property values as of December 31, 1984 as determined by the local assessors during the latest general revision of assessments
shall take effect beginning January 1, 1987 for purposes of real property tax collection.
SEC. 2. The Minister of Finance shall promulgate the necessary rules and regulations to implement this Executive Order.
SEC. 3. Executive Order No. 1019, dated April 18, 1985, is hereby repealed.
SEC. 4. All laws, orders, issuances, and rules and regulations or parts thereof inconsistent with this Executive Order are hereby repealed or modified
accordingly.
SEC. 5. This Executive Order shall take effect immediately.
On March 31, 1987, Memorandum Order No. 77 was issued suspending the implementation of Executive Order No. 73 until June 30, 1987.
The petitioner, Francisco I. Chavez, 1 is a taxpayer and an owner of three parcels of land. He alleges the following: that Executive Order No. 73
accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating an excessive increase in real property
taxes by 100% to 400% on improvements, and up to 100% on land; that any increase in the value of real property brought about by the revision of
real property values and assessments would necessarily lead to a proportionate increase in real property taxes; that sheer oppression is the result of
increasing real property taxes at a period of time when harsh economic conditions prevail; and that the increase in the market values of real property
as reflected in the schedule of values was brought about only by inflation and economic recession.
The intervenor Realty Owners Association of the Philippines, Inc. (ROAP), which is the national association of owners-lessors, joins Chavez in his
petition to declare unconstitutional Executive Order No. 73, but additionally alleges the following: that Presidential Decree No. 464 is unconstitutional
insofar as it imposes an additional one percent (1%) tax on all property owners to raise funds for education, as real property tax is admittedly a local
tax for local governments; that the General Revision of Assessments does not meet the requirements of due process as regards publication, notice
of hearing, opportunity to be heard and insofar as it authorizes "replacement cost" of buildings (improvements) which is not provided in Presidential
Decree No. 464, but only in an administrative regulation of the Department of Finance; and that the Joint Local Assessment/Treasury Regulations
No. 2-86 2 is even more oppressive and unconstitutional as it imposes successive increase of 150% over the 1986 tax.
The Office of the Solicitor General argues against the petition.
The petition is not impressed with merit.
Petitioner Chavez and intervenor ROAP question the constitutionality of Executive Order No. 73 insofar as the revision of the assessments and the
effectivity thereof are concerned. It should be emphasized that Executive Order No. 73 merely directs, in Section 1 thereof, that:
SECTION 1. Real property values as of December 31, 1984 as determined by the local assessors during the latest general revision of assessments
shall take effect beginning January 1, 1987 for purposes of real property tax collection. (emphasis supplied)
The general revision of assessments completed in 1984 is based on Section 21 of Presidential Decree No. 464 which provides, as follows:
SEC. 21. General Revision of Assessments. — Beginning with the assessor shall make a calendar year 1978, the provincial or city general revision
of real property assessments in the province or city to take effect January 1, 1979, and once every five years thereafter: Provided; however, That if
property values in a province or city, or in any municipality, have greatly changed since the last general revision, the provincial or city assesor may,
with the approval of the Secretary of Finance or upon bis direction, undertake a general revision of assessments in the province or city, or in any
municipality before the fifth year from the effectivity of the last general revision.
Thus, We agree with the Office of the Solicitor General that the attack on Executive Order No. 73 has no legal basis as the general revision of
assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should
be challenged as constitutionally infirm. However, Chavez failed to raise any objection against said decree. It was ROAP which questioned the
constitutionality thereof. Furthermore, Presidential Decree No. 464 furnishes the procedure by which a tax assessment may be questioned:
SEC. 30. Local Board of Assessment Appeals. — Any owner who is not satisfied with the action of the provincial or city assessor in the assessment
of his property may, within sixty days from the date of receipt by him of the written notice of assessment as provided in this Code, appeal to the
Board of Assessment Appeals of the province or city, by filing with it a petition under oath using the form prescribed for the purpose, together with
copies of the tax declarations and such affidavit or documents submitted in support of the appeal.
xxx xxx xxx
SEC. 34. Action by the Local Board of assessment Appeals. — The Local Board of Assessment Appeals shall decide the appeal within one hundred
and twenty days from the date of receipt of such appeal. The decision rendered must be based on substantial evidence presented at the hearing or
at least contained in the record and disclosed to the parties or such relevant evidence as a reasonable mind might accept as adequate to support the
conclusion.
In the exercise of its appellate jurisdiction, the Board shall have the power to summon witnesses, administer oaths, conduct ocular inspection, take
depositions, and issue subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted solely for the purpose of
ascertaining the truth without-necessarily adhering to technical rules applicable in judicial proceedings.
The Secretary of the Board shall furnish the property owner and the Provincial or City Assessor with a copy each of the decision of the Board. In
case the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to notify the property owner of such fact using the
form prescribed for the purpose. The owner or administrator of the property or the assessor who is not satisfied with the decision of the Board of
Assessment Appeals, may, within thirty days after receipt of the decision of the local Board, appeal to the Central Board of Assessment Appeals by

71
filing his appeal under oath with the Secretary of the proper provincial or city Board of Assessment Appeals using the prescribed form stating therein
the grounds and the reasons for the appeal, and attaching thereto any evidence pertinent to the case. A copy of the appeal should be also furnished
the Central Board of Assessment Appeals, through its Chairman, by the appellant.
Within ten (10) days from receipt of the appeal, the Secretary of the Board of Assessment Appeals concerned shall forward the same and all papers
related thereto, to the Central Board of Assessment Appeals through the Chairman thereof.
xxx xxx xxx
SEC. 36. Scope of Powers and Functions. — The Central Board of Assessment Appeals shall have jurisdiction over appealed assessment cases
decided by the Local Board of Assessment Appeals. The said Board shall decide cases brought on appeal within twelve (12) months from the date of
receipt, which decision shall become final and executory after the lapse of fifteen (15) days from the date of receipt of a copy of the decision by the
appellant.
In the exercise of its appellate jurisdiction, the Central Board of Assessment Appeals, or upon express authority, the Hearing Commissioner, shall
have the power to summon witnesses, administer oaths, take depositions, and issue subpoenas and subpoenas duces tecum.
The Central Board of assessment Appeals shall adopt and promulgate rules of procedure relative to the conduct of its business.
Simply stated, within sixty days from the date of receipt of the, written notice of assessment, any owner who doubts the assessment of his property,
may appeal to the Local Board of Assessment Appeals. In case the, owner or administrator of the property or the assessor is not satisfied with the
decision of the Local Board of Assessment Appeals, he may, within thirty days from the receipt of the decision, appeal to the Central Board of
Assessment Appeals. The decision of the Central Board of Assessment Appeals shall become final and executory after the lapse of fifteen days from
the date of receipt of the decision.
Chavez argues further that the unreasonable increase in real property taxes brought about by Executive Order No. 73 amounts to a confiscation of
property repugnant to the constitutional guarantee of due process, invoking the cases of Ermita-Malate Hotel, et al. v. Mayor of Manila (G.R. No. L-
24693, July 31, 1967, 20 SCRA 849) and Sison v. Ancheta, et al. (G.R. No. 59431, July 25, 1984, 130 SCRA 654).
The reliance on these two cases is certainly misplaced because the due process requirement called for therein applies to the "power to tax."
Executive Order No. 73 does not impose new taxes nor increase taxes.
Indeed, the government recognized the financial burden to the taxpayers that will result from an increase in real property taxes. Hence, Executive
Order No. 1019 was issued on April 18, 1985, deferring the implementation of the increase in real property taxes resulting from the revised real
property assessments, from January 1, 1985 to January 1, 1988. Section 5 thereof is quoted herein as follows:
SEC. 5. The increase in real property taxes resulting from the revised real property assessments as provided for under Section 21 of Presidential
Decree No. 464, as amended by Presidential Decree No. 1621, shall be collected beginning January 1, 1988 instead of January 1, 1985 in order to
enable the Ministry of Finance and the Ministry of Local Government to establish the new systems of tax collection and assessment provided herein
and in order to alleviate the condition of the people, including real property owners, as a result of temporary economic difficulties. (emphasis
supplied)
The issuance of Executive Order No. 73 which changed the date of implementation of the increase in real property taxes from January 1, 1988 to
January 1, 1987 and therefore repealed Executive Order No. 1019, also finds ample justification in its "whereas' clauses, as follows:
WHEREAS, the collection of real property taxes based on the 1984 real property values was deferred to take effect on January 1, 1988 instead of
January 1, 1985, thus depriving the local government units of an additional source of revenue;
WHEREAS, there is an urgent need for local governments to augment their financial resources to meet the rising cost of rendering effective services
to the people; (emphasis supplied)
xxx xxx xxx
The other allegation of ROAP that Presidential Decree No. 464 is unconstitutional, is not proper to be resolved in the present petition. As stated at
the outset, the issue here is limited to the constitutionality of Executive Order No. 73. Intervention is not an independent proceeding, but an ancillary
and supplemental one which, in the nature of things, unless otherwise provided for by legislation (or Rules of Court), must be in subordination to the
main proceeding, and it may be laid down as a general rule that an intervention is limited to the field of litigation open to the original parties (59 Am.
Jur. 950. Garcia, etc., et al. v. David, et al., 67 Phil. 279).
We agree with the observation of the Office of the Solicitor General that without Executive Order No. 73, the basis for collection of real property taxes
win still be the 1978 revision of property values. Certainly, to continue collecting real property taxes based on valuations arrived at several years ago,
in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal
adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government
expenditures and their variations.
ACCORDINGLY, the petition and the petition-in-intervention are hereby DISMISSED.
SO ORDERED.

72
 23. G.R. No. L-25043 April 26, 1968
ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-guardians of JOSE
ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
Leido, Andrada, Perez and Associates for petitioners.
Office of the Solicitor General for respondents.
BENGZON, J.P., J.:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession the following properties:
(1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu, Batangas province;
(2) A residential house and lot located at Wright St., Malate, Manila; and
(3) Shares of stocks in different corporations.
To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called
Roxas y Compania.
AGRICULTURAL LANDS
At the conclusion of the Second World War, the tenants who have all been tilling the lands in Nasugbu for generations expressed their desire to
purchase from Roxas y Cia. the parcels which they actually occupied. For its part, the Government, in consonance with the constitutional mandate to
acquire big landed estates and apportion them among landless tenants-farmers, persuaded the Roxas brothers to part with their landholdings.
Conferences were held with the farmers in the early part of 1948 and finally the Roxas brothers agreed to sell 13,500 hectares to the Government for
distribution to actual occupants for a price of P2,079,048.47 plus P300,000.00 for survey and subdivision expenses.
It turned out however that the Government did not have funds to cover the purchase price, and so a special arrangement was made for the
Rehabilitation Finance Corporation to advance to Roxas y Cia. the amount of P1,500,000.00 as loan. Collateral for such loan were the lands
proposed to be sold to the farmers. Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment,
and contracted with the Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly amortizations paid by the farmers.
In 1953 and 1955 Roxas y Cia. derived from said installment payments a net gain of P42,480.83 and P29,500.71. Fifty percent of said net gain was
reported for income tax purposes as gain on the sale of capital asset held for more than one year pursuant to Section 34 of the Tax Code.
RESIDENTIAL HOUSE
During their bachelor days the Roxas brothers lived in the residential house at Wright St., Malate, Manila, which they inherited from their
grandparents. After Antonio and Eduardo got married, they resided somewhere else leaving only Jose in the old house. In fairness to his brothers,
Jose paid to Roxas y Cia. rentals for the house in the sum of P8,000.00 a year.
ASSESSMENTS
On June 17, 1958, the Commissioner of Internal Revenue demanded from Roxas y Cia the payment of real estate dealer's tax for 1952 in the
amount of P150.00 plus P10.00 compromise penalty for late payment, and P150.00 tax for dealers of securities for 1952 plus P10.00 compromise
penalty for late payment. The assessment for real estate dealer's tax was based on the fact that Roxas y Cia. received house rentals from Jose
Roxas in the amount of P8,000.00. Pursuant to Sec. 194 of the Tax Code, an owner of a real estate who derives a yearly rental income therefrom in
the amount of P3,000.00 or more is considered a real estate dealer and is liable to pay the corresponding fixed tax.
The Commissioner of Internal Revenue justified his demand for the fixed tax on dealers of securities against Roxas y Cia., on the fact that said
partnership made profits from the purchase and sale of securities.
In the same assessment, the Commissioner assessed deficiency income taxes against the Roxas Brothers for the years 1953 and 1955, as follows:
1953 1955
Antonio Roxas P7,010.00 P5,813.00
Eduardo Roxas 7,281.00 5,828.00
Jose Roxas 6,323.00 5,588.00
The deficiency income taxes resulted from the inclusion as income of Roxas y Cia. of the unreported 50% of the net profits for 1953 and 1955
derived from the sale of the Nasugbu farm lands to the tenants, and the disallowance of deductions from gross income of various business expenses
and contributions claimed by Roxas y Cia. and the Roxas brothers. For the reason that Roxas y Cia. subdivided its Nasugbu farm lands and sold
them to the farmers on installment, the Commissioner considered the partnership as engaged in the business of real estate, hence, 100% of the
profits derived therefrom was taxed.
The following deductions were disallowed:
ROXAS Y CIA.:
1953
Tickets for Banquet in honor of
P 40.00
S. Osmeña

Gifts of San Miguel beer 28.00

Contributions to —

Philippine Air Force Chapel 100.00

Manila Police Trust Fund 150.00

Philippines Herald's fund for Manila's neediest

families 100.00

1955
Contributions to Contribution to
Our Lady of Fatima Chapel, FEU 50.00

ANTONIO ROXAS:
1953

73
 Contributions to —

Pasay City Firemen Christmas Fund 25.00

Pasay City Police Dept. X'mas fund 50.00

1955
Contributions to —

Baguio City Police Christmas fund 25.00

Pasay City Firemen Christmas fund 25.00

Pasay City Police Christmas fund 50.00

EDUARDO ROXAS:
1953
Contributions to —

Hijas de Jesus' Retiro de Manresa 450.00

Philippines Herald's fund for Manila's neediest

families 100.00

1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00

JOSE ROXAS:
1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00
The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted an appeal in the Court of Tax Appeals on
January 9, 1961. The Tax Court heard the appeal and rendered judgment on July 31, 1965 sustaining the assessment except the demand for the
payment of the fixed tax on dealer of securities and the disallowance of the deductions for contributions to the Philippine Air Force Chapel and Hijas
de Jesus' Retiro de Manresa. The Tax Court's judgment reads:
WHEREFORE, the decision appealed from is hereby affirmed with respect to petitioners Antonio Roxas, Eduardo Roxas, and Jose Roxas who are
hereby ordered to pay the respondent Commissioner of Internal Revenue the amounts of P12,808.00, P12,887.00 and P11,857.00, respectively, as
deficiency income taxes for the years 1953 and 1955, plus 5% surcharge and 1% monthly interest as provided for in Sec. 51(a) of the Revenue
Code; and modified with respect to the partnership Roxas y Cia. in the sense that it should pay only P150.00, as real estate dealer's tax. With costs
against petitioners.
Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this Court. The Commissioner of Internal Revenue did not appeal.
The issues:
(1) Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable?
(2) Are the deductions for business expenses and contributions deductible?
(3) Is Roxas y Cia. liable for the payment of the fixed tax on real estate dealers?
The Commissioner of Internal Revenue contends that Roxas y Cia. could be considered a real estate dealer because it engaged in the business of
selling real estate. The business activity alluded to was the act of subdividing the Nasugbu farm lands and selling them to the farmers-occupants on
installment. To bolster his stand on the point, he cites one of the purposes of Roxas y Cia. as contained in its articles of partnership, quoted below:
4. (a) La explotacion de fincas urbanes pertenecientes a la misma o que pueden pertenecer a ella en el futuro, alquilandoles por los plazos y demas
condiciones, estime convenientes y vendiendo aquellas que a juicio de sus gerentes no deben conservarse;
The above-quoted purpose notwithstanding, the proposition of the Commissioner of Internal Revenue cannot be favorably accepted by Us in this
isolated transaction with its peculiar circumstances in spite of the fact that there were hundreds of vendees. Although they paid for their respective
holdings in installment for a period of ten years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the ten-year
amortization period.
It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for generations was not only in consonance
with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless. It was the bounden duty of
the Government to pay the agreed compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to subsequently subdivide them
among the farmers at very reasonable terms and prices. However, the Government could not comply with its duty for lack of funds. Obligingly, Roxas
y Cia. shouldered the Government's burden, went out of its way and sold lands directly to the farmers in the same way and under the same terms as
would have been the case had the Government done it itself. For this magnanimous act, the municipal council of Nasugbu passed a resolution
expressing the people's gratitude.
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg". And, in
order to maintain the general public's trust and confidence in the Government this power must be used justly and not treacherously. It does not
conform with Our sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later on to penalize
him for duly answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of the Tax Code the lands sold
to the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.
DISALLOWED DEDUCTIONS

74
Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given in honor of Sergio Osmena and P28.00 for San
Miguel beer given as gifts to various persons. The deduction were claimed as representation expenses. Representation expenses are deductible
from gross income as expenditures incurred in carrying on a trade or business under Section 30(a) of the Tax Code provided the taxpayer proves
that they are reasonable in amount, ordinary and necessary, and incurred in connection with his business. In the case at bar, the evidence does not
show such link between the expenses and the business of Roxas y Cia. The findings of the Court of Tax Appeals must therefore be sustained.
The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City Firemen, and Baguio City Police Christmas funds, Manila
Police Trust Fund, Philippines Herald's fund for Manila's neediest families and Our Lady of Fatima chapel at Far Eastern University.
The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and Baguio City Police are not deductible for the reason that
the Christmas funds were not spent for public purposes but as Christmas gifts to the families of the members of said entities. Under Section 39(h), a
contribution to a government entity is deductible when used exclusively for public purposes. For this reason, the disallowance must be sustained. On
the other hand, the contribution to the Manila Police trust fund is an allowable deduction for said trust fund belongs to the Manila Police, a
government entity, intended to be used exclusively for its public functions.
The contributions to the Philippines Herald's fund for Manila's neediest families were disallowed on the ground that the Philippines Herald is not a
corporation or an association contemplated in Section 30 (h) of the Tax Code. It should be noted however that the contributions were not made to the
Philippines Herald but to a group of civic spirited citizens organized by the Philippines Herald solely for charitable purposes. There is no question that
the members of this group of citizens do not receive profits, for all the funds they raised were for Manila's neediest families. Such a group of citizens
may be classified as an association organized exclusively for charitable purposes mentioned in Section 30(h) of the Tax Code.
Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of Fatima chapel at the Far Eastern University on the ground
that the said university gives dividends to its stockholders. Located within the premises of the university, the chapel in question has not been shown
to belong to the Catholic Church or any religious organization. On the other hand, the lower court found that it belongs to the Far Eastern University,
contributions to which are not deductible under Section 30(h) of the Tax Code for the reason that the net income of said university injures to the
benefit of its stockholders. The disallowance should be sustained.
Lastly, Roxas y Cia. questions the imposition of the real estate dealer's fixed tax upon it, because although it earned a rental income of P8,000.00
per annum in 1952, said rental income came from Jose Roxas, one of the partners. Section 194 of the Tax Code, in considering as real estate
dealers owners of real estate receiving rentals of at least P3,000.00 a year, does not provide any qualification as to the persons paying the rentals.
The law, which states: 1äwphï1.ñët
. . . "Real estate dealer" includes any person engaged in the business of buying, selling, exchanging, leasing or renting property on his own account
as principal and holding himself out as a full or part-time dealer in real estate or as an owner of rental property or properties rented or offered to rent
for an aggregate amount of three thousand pesos or more a year : . . . (Emphasis supplied) .
is too clear and explicit to admit construction. The findings of the Court of Tax Appeals or, this point is sustained. 1äwphï1.ñët
To Summarize, no deficiency income tax is due for 1953 from Antonio Roxas, Eduardo Roxas and Jose Roxas. For 1955 they are liable to pay
deficiency income tax in the sum of P109.00, P91.00 and P49.00, respectively, computed as follows: *
ANTONIO ROXAS
Net income per return P315,476.59

Add: 1/3 share, profits in Roxas y Cia. P 153,249.15

Less amount declared 146,135.46

Amount understated P 7,113.69

Contributions disallowed 115.00

P 7,228.69

Less 1/3 share of contributions amounting to

P21,126.06 disallowed from partnership but allowed to
partners 7,042.02 186.67

Net income per review P315,663.26

Less: Exemptions 4,200.00

Net taxable income P311,463.26

Tax due 154,169.00

Tax paid 154,060.00

Deficiency P 109.00
==========

EDUARDO ROXAS
Net income per return P 304,166.92

Add: 1/3 share, profits in Roxas y Cia P 153,249.15

Less profits declared 146,052.58

Amount understated

75
 P 7,196.57

Less 1/3 share in contributions amounting to

P21,126.06 disallowed from partnership but allowed to
partners 7,042.02 155.55

Net income per review P304,322.47

Less: Exemptions 4,800.00

Net taxable income P299,592.47

Tax Due P147,250.00

Tax paid 147,159.00

Deficiency P91.00
===========

JOSE ROXAS
Net income per return P222,681.76

Add: 1/3 share, profits in Roxas y Cia. P153,429.15

Less amount reported 146,135.46

Amount understated 7,113.69

Less 1/3 share of contributions disallowed from

partnership but allowed as deductions to partners 7,042.02 71.67

Net income per review P222,753.43

Less: Exemption 1,800.00

Net income subject to tax P220,953.43

Tax due P102,763.00

Tax paid 102,714.00

Deficiency P 49.00
===========
WHEREFORE, the decision appealed from is modified. Roxas y Cia. is hereby ordered to pay the sum of P150.00 as real estate dealer's fixed tax for
1952, and Antonio Roxas, Eduardo Roxas and Jose Roxas are ordered to pay the respective sums of P109.00, P91.00 and P49.00 as their
individual deficiency income tax all corresponding for the year 1955. No costs. So ordered.

76
 24. 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, 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

77
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."
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.
xxx xxx xxx
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.
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

78
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 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.

79
 25. G.R. No. 127410 January 20, 1999
CONRADO L. TIU, JUAN T. MONTELIBANO JR. and ISAGANI M. JUNGCO, petitioners,
vs.
COURT OF APPEALS, HON. TEOFISTO T. GUINGONA JR., BASES CONVERSION AND DEVELOPMENT AUTHORITY, SUBIC BAY
METROPOLITAN AUTHORITY, BUREAU OF INTERNAL REVENUE, CITY TREASURER OF OLONGAPO and MUNICIPAL
TREASURER OF SUBIC, ZAMBALES, respondents.

PANGANIBAN, J.:
The constituttional rights to equal protection of the law is not violated by an executive order, issued pursuant to law, granting tax and duty incentives
only to the bussiness and residents within the "secured area" of the Subic Special Econimic Zone and denying them to those who live within the
Zone but outside such "fenced-in" territory. The Constitution does not require absolute equality among residents. It is enough that all persons under
like circumstances or conditions are given the same privileges and required to follow the same obligations. In short, a classification based on valid
and reasonable standards does not violate the equal protection clause.
The Case
Before us is a petition for review under Rule 45 of the Rules of Court, seeking the reversal of the Court of Appeals' Decision 1 promulgated on August
29, 1996, and Resolution2 dated November 13, 1996, in CA-GR SP No. 37788. 3 The challenged Decision upheld the constitutionality and validity of
Executive Order No. 97-A (EO 97-A), according to which the grant and enjoyment of the tax and duty incentives authorized under Republic Act No.
7227 (RA 7227) were limited to the business enterprises and residents within the fenced-in area of the Subic Special Economic Zone (SSEZ).
The assailed Resolution denied the petitioners' motion for reconsideration.
On March 13, 1992, Congress, with the approval of the President, passed into law RA 7227 entitled "An Act Accelerating the Conversion of Military
Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor
and for Other Purposes." Section 12 thereof created the Subic Special Economic Zone and granted there to special privileges, as follows:
Sec. 12. Subic Special Economic Zone. — Subject to the concurrence by resolution of the sangguniang panlungsod of the City of Olongapo and
the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa, there is hereby created a Special Economic and Free-port Zone
consisting of the City of Olongapo and the Municipality of Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its
contiguous extensions as embraced, covered, and defined by the 1947 Military Bases Agreement between the Philippines and the United States of
America as amended, and within the territorial jurisdiction of the Municipalities of Morong and Hermosa, Province of Bataan, hereinafter referred to
as the Subic Special Economic Zone whose metes and bounds shall be delineated in a proclamation to be issued by the President of the Philippines.
Within thirty (30) days after the approval of this Act, each local government unit shall submit its resolution of concurrence to join the Subic Special
Economic Zone to the Office of the President. Thereafter, the President of the Philippines shall issue a proclamation defining the metes and bounds
of the zone as provided herein.
The abovementioned zone shall be subject to the following policies:
(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code,
the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate
employment opportunities in and around the zone and to attract and promote productive foreign investments;
(b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and
capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw
materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts
of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the
Philippines;
(c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed within the
Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the
Subic Special Economic Zone shall be remitted to the National Government, one percent (1%) each to the local government units affected by the
declaration of the zone in proportion to their population area, and other factors. In addition, there is hereby established a development fund of one
percent (1%) of the gross income earned by all businesses and enterprises within the Subic Special Economic Zone to be utilized for the
development of municipalities outside the City of Olongapo and the Municipality of Subic, and other municipalities contiguous to the base areas.
In case of conflict between national and local laws with respect to tax exemption privileges in the Subic Special Economic Zone, the same shall be
resolved in favor of the latter;
(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and future shall be allowed and maintained in
the Subic Special Economic Zone;
(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks and other financial institutions within the
Subic Special Economic Zone;
(f) Banking and finance shall be liberalized with the establishment of foreign currency depository units of local commercial banks and offshore
banking units of foreign banks with minimum Central Bank regulation;
(g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than two hundred fifty thousand dollars
($250,000), his/her spouse and dependent children under twenty-one (21) years of age, shall be granted permanent resident status within the Subic
Special Economic Zone. They shall have the freedom of ingress and egress to and from the Subic Special Economic Zone without any need of
special authorization form the Bureau of Immigration and Deportation. The Subic Bay Metropolitan Authority referred to in Section 13 of this Act may
also issue working visas renewable every two (2) years to foreign executives and other aliens possessing highly technical skills which no Filipino
within the Subic Special Economic Zone possesses, as certified by the Department of Labor and Employment. The names of aliens granted
permanent residence status and working visas by the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and
Deportation within thirty (30) days after issuance thereof;
(h) The defense of the zone and the security of its perimeters shall be the responsibility of the National Government in coordination with the Subic
Bay Metropolitan Authority. The Subic Bay Metropolitan Authority shall provide and establish its own security and fire-fighting forces; and
(i) Except as herein provided, the local government units comprising the Subic Special Economic Zone shall retain their basic autonomy and identity.
The cities shall be governed by their respective charters and the municipalities shall operate and function in accordance with Republic Act No. 7160,
otherwise known as the Local Government Code of 1991.
On June 10, 1993, then President Fidel V. Ramos issued Executive Order No. 97 (EO 97), clarifying the application of the tax and duty incentives
thus:
Sec. 1. On Import Taxes and Duties. — Tax and duty-free importations shall apply only to raw materials, capital goods and equipment brought in by
business enterprises into the SSEZ. Except for these items, importations of other goods into the SSEZ, whether by business enterprises or resident
individuals, are subject to taxes and duties under relevant Philippine laws.
The exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of the Philippine territory shall be subject to duties
and taxes under relevant Philippine laws.

80
Sec. 2. On All Other Taxes. — In lieu of all local and national taxes (except import taxes and duties), all business enterprises in the SSEZ shall be
required to pay the tax specified in Section 12(c) of R.A. No. 7227.
Nine days after, on June 19, 1993, the President issued Executive Order No. 97-A (EO 97-A), specifying the area within which the tax-and-duty-free
privilege was operative, viz.:
Sec. 1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the
SSEFPZ [Subic Special Economic and Free Port Zone]. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured
Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free. Consumption items, however, must be
consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to
non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.
On October 26, 1994, the petitioners challenged before this Court the constitutionality of EO 97-A for allegedly being violative of their right to equal
protection of the laws. In a Resolution dated June 27, 1995, this Court referred the matter to the Court of Appeals, pursuant to Revised
Administrative Circular No. 1-95.
Incidentally, on February 1, 1995, Proclamation No. 532 was issued by President Ramos. It delineated the exact metes and bounds of the Subic
Special Economic and Free Port Zone, pursuant to Section 12 of RA 7227.
Ruling of the Court of Appeals
Respondent Court held that "there is no substantial difference between the provisions of EO 97-A and Section 12 of RA 7227. In both, the 'Secured
Area' is precise and well-defined as '. . . the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and
defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended . . .'" The appellate court
concluded that such being the case, petitioners could not claim that EO 97-A is unconstitutional, while at the same time maintaining the validity of RA
7227.
The court a quo also explained that the intention of Congress was to confine the coverage of the SSEZ to the "secured area" and not to include the
"entire Olongapo City and other areas mentioned in Section 12 of the law." It relied on the following deliberarions in the Senate:
Senator Paterno. Thank you, Mr. President. My first question is the extent of the economic zone. Since this will be a free port, in effect, I believe that
it is important to delineate or make sure that the delineation will be quite precise[. M]y question is: Is it the intention that the entire of Olongapo City,
the Municipality of Subic and the Municipality of Dinalupihan will be covered by the special economic zone or only portions thereof?
Senator Shahani. Only portions, Mr. President. In other words, where the actual operations of the free port will take place.
Senator Paterno. I see. So, we should say, "COVERING THE DESIGNATED PORTIONS OR CERTAIN PORTIONS OF OLONGAPO CITY, SUBIC
AND DINALUPIHAN" to make it clear that it is not supposed to cover the entire area of all of these territories.
Senator Shahani. So, the Gentleman is proposing that the words "CERTAIN AREAS". . .
The President. The Chair would want to invite the attention of the Sponsor and Senator Paterno to letter "C," which says: "THE PRESIDENT OF THE
PHILIPPINES IS HEREBY AUTHORIZED TO PROCLAIM, DELINEATE AND SPECIFY THE METES AND BOUNDS OF OTHER SPECIAL
ECONOMIC ZONES WHICH MAY BE CREATED IN THE CLARK MILITARY RESERVATIONS AND ITS EXTENSIONS."
Probably, this provision can be expanded since, apparently, the intention is that what is referred to in Olongapo as Metro Olongapo is not by
itself ipso jure already a special economic zone.
Senator Paterno. That is correct.
The President. Someone, some authority must declare which portions of the same shall be the economic zone. Is it the intention of the author that it
is the President of the Philippines who will make such delineation?
Senator Shahani. Yes Mr. President.
The Court of Appeals further justified the limited application of the tax incentives as being within the prerogative of the legislature, pursuant to its
"avowed purpose [of serving] some public benefit or interest." It ruled that "EO 97-A merely implements the legislative purpose of [RA 7227]."
Disagreeing, petitioners now seek before us a review of the aforecited Court of Appeals Decision and Resolution.
The Issue
Petitioners submit the following issue for the resolution of the Court:
[W]hether or not Executive Order No. 97-A violates the equal protection clause of the Constitution. Specifically the issue is whether the provisions of
Executive Order No. 97-A confining the application of R.A. 7227 within the secured area and excluding the residents of the zone outside of the
secured area is discriminatory or not.4
The Court's Ruling
The petition 5 is bereft of merit.
Main Issue:
The Constitionality of EO 37-A
Citing Section 12 of RA 7227, petitioners contend that the SSEZ encompasses (1) the City of Olongapo, (2) the Municipality of Subic in Zambales,
and (3) the area formerly occupied by the Subic Naval Base. However, EO 97-A, according to them, narrowed down the area within which the
special privileges granted to the entire zone would apply to the present "fenced-in former Subic Naval Base" only. It has thereby excluded the
residents of the first two components of the zone from enjoying the benefits granted by the law. It has effectively discriminated against them without
reasonable or valid standards, in contravention of the equal protection guarantee.
On the other hand, the solicitor general defends, on behalf of respondents, the validity of EO 97-A, arguing that Section 12 of RA 7227 clearly vests
in the President the authority to delineate the metes and bounds of the SSEZ. He adds that the issuance fully complies with the requiretnents of a
valid classification.
We rule in favor of the constitutionality and validity of the assailed EO. Said Order is not violative of the equal protection clause; neither is it
discriminatory. Rather, than we find real and substantive distinctions between the circumstances obtain;ng inside and those outside the Subic Naval
Base, thereby justifying a valid and reasonable classification.
The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by
substantial distinctions that make real differences, one class may be treated and regulated differently from another. 6 The classification must also be
germane to the purpose of the law and must apply to all those belonging to the same class. Explaining the nature of the equal protection guarantee,
the Court in Ichong v. Hernandez 8 said:
The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of
inequality. It is not intended to prohibit legislation which is limited either [by] the object to which it is directed or by [the] territory within which it is to
operate. It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances
and conditions both as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to
those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable. grounds exist for making a distinction
between those who fall within such class and those who do not.
Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions
only, and (4) apply equally to all members of the same class. 9

81
We first determine the purpose of the law. From the very title itself, it is clear that RA 7227 aims primarily to accelerate the conversion of military
reservations into productive uses. Obviously, the "lands covered under the 1947 Military Bases Agreement" are its object. Thus, the law avows this
policy:
Sec. 2. Declaration of Policies. — It is hereby declared the policy of the Government to accelerate the sound and balanced conversion into
alternative productive uses of the Clark and Subic military reservations and their extensions (John Hay Station, Wallace Air Station, O'Donnell
Transmitter Station, San Miguel Naval Communications Station and Capas Relay Station), to raise funds by the sale of portions of Metro Manila
military camps, and to apply said funds as provided herein for the development and conversion to productive civilian use of the lands covered under
the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended.
To undertake the above objectives, the same law created the Bases Conversion and Development Authority, some of whose relevant defined
purposes are:
(b) To adopt, prepare and implement a comprehensive and detailed development plan embodying a list of projects including but not limited to those
provided in the Legislative-Executive Bases Council (LEBC) framework plan for the sound and balanced conversion of the Clark and Subic military
reservations and their extensions consistent with ecological and environmental standards, into other productive uses to promote the economic and
social development of Central Luzon in particular and the country in general;
(c). To encourage the active participation of the private sector in transforming the Clark and Subic military reservations and their extensions into other
productive uses;
Further, in creating the SSEZ, the law declared it a policy to develop the zone into a "self-sustaining, industrial, commercial, financial and investment
center."10
From the above provisions of the law, it can easily be deduced that the real concern of RA 7227 is to convert the lands formerly occupied by the US
military bases into economic or industrial areas. In furtherance of such objective, Congress deemed it necessary to extend economic incentives to
attract and encourage investors, both local and foreign. Among such enticements are: 11 (1) a separate customs territory within the zone, (2) tax-and-
duty-free importation's, (3) restructured income tax rates on business enterprises within the zone, (4) no foreign exchange control, (5) liberalized
regulations on banking and finance, and (6) the grant of resident status to certain investors and of working visas to certain foreign executives and
workers .
We believe it was reasonable for the President to have delimited the application of some incentives to the confines of the former Subic military base.
It is this specific area which the government intends to transform and develop from its status quo ante as an abandoned naval facility into a self-
sustaining industrial and commercial zone, particularly for big foreign and local investors to use as operational bases for their businesses and
industries. Why the seeming bias for the big investors? Undeniably, they are the ones who can pour huge investments to spur economic growth in
the country and to generate employment opportunities for the Filipinos, the ultimate goals of the government for such conversion. The classification
is, therefore, germane to the purposes of the law. And as the legal maxim goes, "The intent of a statute is the law." 12
Certainly, there are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called
"secured area" and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands
of new, jobs. On the other hand, definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local. Even
more important, at this time the business activities outside the "secured area" are not likely to have any impact in achieving the purpose of the law,
which is to turn the former military base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable basis to
extend to them the benefits and incentives accorded in RA 7227. Additionally, as the Court of Appeals pointed out, it will be easier to manage and
monitor the activities within the "secured area," which is already fenced off, to prevent "fraudulent importation of merchandise" or smuggling.
It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. 13 As long as there are actual and material
differences between territories, there is no violation of the constitutional clause. And of course, anyone, including the petitioners, possessing the
requisite investment capital can always avail of the same benefits by channeling his or her resources or business operations into the fenced-off free
port zone.
We believe that the classification set forth by the executive issuance does not apply merely to existing conditions. As laid down in RA 7227, the
objective is to establish a "self-sustaining, industrial, commercial, financial and investment center" in the area. There will, therefore, be a long-term
difference between such investment center and the areas outside it.
Lastly, the classification applies equally to all the resident individuals and businesses within the "secured area." The residents, being in like
circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. Instead, they are all similarly
treated, both in privileges granted and in obligations required.
All told, the Court holds that no undue favor or privilege was extended. The classification occasioned by EO 97-A was not unreasonable, capricious
or unfounded. To repeat, it was based, rather, on fair and substantive considerations that were germane to the legislative purpose.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision and Resolution are hereby AFFIRMED. Costs against
petitioners.1âwphi1.nêt
SO ORDERED.

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