1. Hon. Alfredo S.

Lim, In His Capacity as Mayor of Manila, AUTHOR:

and The City of Manila vs Hon. Felipe G. Pacquing, As Judge,
Branch 40, Regional Trial Court of Manila and Associated
Corporation
[G.R. No. 115044; January 27, 1995]
Teofisto Guingona, Jr. and Dominador R. Cepeda vs
Hon. Vetino Reyes and Associated Development Corporation
[G.R. No. 117263; January 27, 1995]
NOTES: Ang panget ng pagkakasulat ng case hassle.
ADC – Associated Development Corporation
GAB – Games and Amusements Board
Going about things. Police Power ata talaga main point ng case
(which is discussed in the latter part of the Ratio in Issue #2).
Daming laws involved. Main Issue revolves around PD 771.

TOPIC: Session 2 - General

PONENTE: Padilla, J.
CASE LAW/ DOCTRINE:
 The police power has been described as the least limitable of the inherent powers of the State. It is based on the ancient
doctrine — salus populi est suprema lex  (the welfare of the people is the supreme law.) In the early case of Rubi vs Provincial
Board of Mindoro, this Court through Mr. Justice George A. Malcolm stated thus:
“The police power of the State . . . is a power co-extensive with self-protection, and is not inaptly termed the "law of
overruling necessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit all
things hurtful to the comfort, safety and welfare of society. Carried onward by the current of legislation, the judiciary
rarely attempts to dam the onrushing power of legislative discretion, provided the purposes of the law do not go beyond
the great principles that mean security for the public welfare or do not arbitrarily interfere with the right of the
individual.”
 On the alleged violation of the non-impairment and equal protection clauses of the Constitution, it should be remembered
that a franchise is not in the strict sense a simple contract but rather it is more importantly, a mere privilege specially in
matters which are within the government's power to regulate and even prohibit through the exercise of the police power.
Thus, a gambling franchise is always subject to the exercise of police power for the public welfare.
Emergency Recit: In a civil case, the RTC of Manila ordered Mayor Lim to issue a permit to ADC to operate a jai-alai. Exec. Sec.
Guingona issued a directive to then Chairman of the GAB Francisco R. Sumulong, Jr. to hold in abeyance the grant of authority, or
if any had been issued, to withdraw such grant of authority, to ADC to operate the jai-alai in the City of Manila. ADC filed a
petition for prohibition, mandamus, injunction and damages with prayer for TRO and/or writ of preliminary injunction in the RTC
of Manila against Guingona and Sumulong, seeking to prevent GAB from withdrawing the provisional authority that had earlier
been granted to ADC. On the same day, the RTC of Manila, through presiding Judge Vetino Reyes, issued a TRO enjoining the
GAB from withdrawing ADC's provisional authority. This TRO was converted into a writ of preliminary injunction. Subsequently,
the Republic of the Philippines, through the GAB, filed a Motion for Intervention and invoked PD 771 which expressly revoked all
existing franchises and permits to operate all forms of gambling facilities (including Jai-Alai) by local governments. ADC assailed
the constitutionality of PD 771. The SC ruled against ADC (refer above).
FACTS:

Lim vs Pacquing [G.R. No. 115044]:

 The petition in G.R. No. 115044 was dismissed by the First Division of this Court on based on a finding that there was "no
abuse of discretion, much less lack of or excess of jurisdiction, on the part of Judge Pacquing in issuing the questioned orders.
Judge Pacquing had earlier issued in Civil Case No. 88-45660, RTC of Manila the following orders which were assailed by
Mayor Lim:
o order dated [28 Mar 1994] directing Mayor Lim to issue the permit/license to operate the jai-alai in favor of ADC.
o order dated [11 Apr 1994] directing Mayor Lim to explain why he should not be cited for contempt for non-
compliance with the order dated [28 March 1994].
o order dated [20 Apr 1994] reiterating the previous order directing Mayor Lim to immediately issue the
permit/license to ADC.
 An order dated [28 Mar 1994] was in turn issued upon motion by ADC for execution of the final judgment which ordered
Mayor Lim to immediately issue to ADC the permit/license to operate the jai-alai in Manila, under Manila Ordinance No.
7065.
 Exec. Sec. Guingona issued a directive to then Chairman of the GAB Francisco R. Sumulong, Jr. to hold in abeyance the grant
of authority, or if any had been issued, to withdraw such grant of authority, to ADC to operate the jai-alai in the City of
Manila, until the following legal questions are properly resolved:
o Whether PD 771 which revoked all existing Jai-Alai franchisers issued by local governments as of [20 Aug 1975] is
unconstitutional.
o Assuming that the City of Manila had the power on [7 Sept 1971] to issue a Jai-Alai franchise to ADC, whether the
franchise granted is valid considering that the franchise has no duration, and appears to be granted in perpetuity.
1
 o Whether the City of Manila had the power to issue a Jai-Alai franchise to ADC on [7 Sept 1971] in view of executive
Order No. 392 dated [1 Jan 1951] which transferred from local governments to the GAC the power to regulate Jai-
Alai.
 ADC filed a petition for prohibition, mandamus, injunction and damages with prayer for TRO and/or writ of preliminary
injunction in the RTC of Manila against Guingona and Sumulong, docketed as Civil Case No. 94-71656, seeking to prevent
GAB from withdrawing the provisional authority that had earlier been granted to ADC. On the same day, the RTC of Manila,
through presiding Judge Vetino Reyes, issued a TRO enjoining the GAB from withdrawing ADC's provisional authority. This
TRO was converted into a writ of preliminary injunction upon ADC's posting of a bond in the amount of Php 2M.
 Subsequently, also in G.R. No. 115044, the Republic of the Philippines, through the GAB, filed a "Motion for Intervention; for
Leave to File a Motion for reconsideration in Intervention; and to Refer the case to the Court En Banc" and later a "Motion for
Leave to File Supplemental Motion for Reconsideration-in-Intervention and to Admit Attached Supplemental Motion for
Reconsideration-in-Intervention".
 In an En Banc Resolution, this Court referred G.R. No. 115044 to the Court En Banc and required the respondents therein to
comment on the aforementioned motions.
 Meanwhile, Judge Reyes issued another order, this time, granting ADC a writ of preliminary mandatory injunction against
Guingona and the GAB to compel them to issue in favor of ADC the authority to operate jai-alai.
 Guingona and Dominador Cepeda, Jr. as the new GAB chairman, then filed the petition in G.R. No. 117263 assailing the
abovementioned orders of Judge Vetino Reyes.

Guingona vs Reyes [G.R. No. 117263]:

 On [25 Oct 1994], in G.R. No. 117263, this Court granted petitioner's motion for leave to file supplemental petition and to
admit attached supplemental petition with urgent prayer for restraining order. The Court further required respondents to file
their comment on the petition and supplemental petition with urgent prayer for restraining order. The Court likewise set the
case and all incidents thereof for hearing on [10 Nov 1994].
ISSUE(S):
 WON intervention by the Republic of the Philippines at this stage of the proceedings is proper;
 Assuming such intervention is proper, WON ADC has a valid and subsisting franchise to maintain and operate the jai-alai
[MAIN ISSUE];
 WON there was grave abuse of discretion committed by Judge Reyes in issuing the aforementioned TRO (later writ of
preliminary injunction); and
 WON there was grave abuse of discretion committed by Judge Reyes in issuing the aforementioned writ of
preliminary mandatory injunction.

HELD:
1. Yuh.
2. Nuh.
3. Yuhuh.
4. Yuhuhuh.
RATIO:

First Issue - WON intervention by the Republic of the Philippines at this stage of the proceedings is proper:
 On the issue of the propriety of the intervention by the Republic, a question was raised during the hearing on [10 Nov 1994]
as to whether intervention in G.R. No. 115044 was the proper remedy for the national government to take in questioning the
existence of a valid ADC franchise to operate the jai-alai or whether a separate action for quo warranto under Sec. 2, Rule 66
of the ROC was the proper remedy.
 We need not belabor this issue since counsel for ADC agreed to the suggestion that this Court once and for all settle all
substantive issues raised by the parties in these cases. Moreover, this Court can consider the petition filed in G.R. No. 117263
as one for quo warranto which is within the original jurisdiction of the Court under Sec. 5(1), Art. VIII of the Constitution. 
 On the propriety of intervention by the Republic, however, it will be recalled that this Court in Director of Lands vs CA
allowed intervention even beyond the period prescribed in Sec. 2 Rule 12 of the ROC. The Court ruled in said case that a
denial of the motions for intervention would "lead the Court to commit an act of injustice to the movants, to their successor-
in-interest and to all purchasers for value and in good faith and thereby open the door to fraud, falsehood and
misrepresentation, should intervenors' claim be proven to be true."
 In the present case, the resulting injustice and injury, should the national government's allegations be proven correct, are
manifest, since the latter has squarely questioned the very existence of a valid franchise to maintain and operate the jai-alai
(which is a gambling operation) in favor of ADC. As will be more extensively discussed later, the national government
contends that Manila Ordinance No. 7065 which purported to grant to ADC a franchise to conduct jai-alai operations is void
and ultra vires since RA 954, approved very much earlier than said Ordinance No. 7065, in Sec. 4 thereof, requires
2
 a legislative franchise, not a municipal franchise, for the operation of jai-alai. Additionally, the national government argues
that even assuming, arguendo, that the abovementioned ordinance is valid, ADC's franchise was nonetheless effectively
revoked by PD 771, Sec. 3 of which expressly revoked all existing franchises and permits to operate all forms of gambling
facilities (including the jai-alai) issued by local governments.
 On the other hand, ADC's position is that Ordinance No. 7065 was validly enacted by the City of Manila pursuant to its
delegated powers under it charter, RA 409. ADC also squarely assails the constitutionality of PD 771 as violative of the equal
protection and non-impairment clauses of the Constitution. In this connection, counsel for ADC contends that this Court
should really rule on the validity of PD 771 to be able to determine whether ADC continues to possess a valid franchise.
 It will undoubtedly be a grave injustice to both parties in this case if this Court were to shirk from ruling on the issue of
constitutionality of PD 771. Such issue has, in our view, become the very lis mota  in resolving the present controversy, in view
of ADC's insistence that it was granted a valid and legal franchise by Ordinance No. 7065 to operate the jai-alai.
 The time-honored doctrine is that all laws (PD 771 included) are presumed valid and constitutional until or unless otherwise
ruled by this Court. Not only this; Art. XVIII Sec. 3 of the Constitution states:
“Sec. 3. All existing laws, decrees, executive orders, proclamations, letters of instructions and other executive issuances
not inconsistent with this Constitution shall remain operative until amended, repealed or revoked.”
 There is nothing on record to show or even suggest that PD 771 has been repealed, altered or amended by any subsequent
law or presidential issuance (when the executive still exercised legislative powers).
 Neither can it be tenably stated that the issue of the continued existence of ADC's franchise by reason of the
unconstitutionality of PD 771 was settled in G.R. No. 115044, for the decision of the Court's First Division in said case, aside
from not being final, cannot have the effect of nullifying PD 771 as unconstitutional, since only the Court En Banc has that
power under Art. VIII, Sec. 4(2) of the Constitution.
 And on the question of WON the government is estopped from contesting ADC's possession of a valid franchise, the well-
settled rule is that the State cannot be put in estoppel by the mistakes or errors, if any, of its officials or agents.
 Consequently, in the light of the foregoing expostulation, we conclude that the Republic (in contra distinction to the City of
Manila) may be allowed to intervene in G.R. No. 115044. The Republic is intervening in G.R. No. 115044 in the exercise, not
of its business or proprietary functions, but in the exercise of its governmental functions to protect public morals and
promote the general welfare.

Second Issue - WON ADC has a valid and subsisting franchise to maintain and operate the jai-alai [Main Issue]:
 Anent the question of whether ADC has a valid franchise to operate the Jai-Alai de Manila, a statement of the pertinent laws
is in order:

1. The Charter of the City of Manila was enacted by Congress on 18 June 1949. Sec. 18 thereof provides:
“Sec. 18. Legislative Powers. — The Municipal Board shall have the following legislative powers:
(jj) To tax, license, permit and regulate wagers or betting by the public on boxing, sipa, bowling,
billiards, pools, horse and dog races, cockpits, jai-alai, roller or ice-skating on any sporting or athletic
contests, as well as grant exclusive rights to establishments for this purpose, notwithstanding any
existing law to the contrary.”

2. On 1 Jan 1951, EO 392 was issued transferring the authority to regulate jai-alais from local government to the GAB.

3. On 20 June 1953, Congress enacted RA 954, titled "An Act to Prohibit With Horse Races and Basque Pelota Games (Jai-
Alai), And To Prescribe Penalties For Its Violation". The provisions of RA 954 relating to jai-alai are as follows:

Sec. 4. No person, or group of persons other than the operator or maintainer of a fronton with legislative

franchise to conduct basque pelota games (Jai-alai), shall offer, to take or arrange bets on any basque pelota
game or event, or maintain or use a totalizator or other device, method or system to bet or gamble on any
basque pelota game or event.

Sec. 5. No person, operator or maintainer of a fronton with legislative franchise to conduct basque pelota
games shall offer, take, or arrange bets on any basque pelota game or event, or maintain or use a totalizator or
other device, method or system to bet or gamble on any basque pelota game or event outside the
place, enclosure, or fronton where the basque pelota game is held.

4. On 07 Sept 1971, however, the Municipal Board of Manila nonetheless passed Ordinance No. 7065 titled "An
Ordinance Authorizing the Mayor To Allow And Permit The Associated Development Corporation To Establish, Maintain
And Operate A Jai-Alai In The City Of Manila, Under Certain Terms And Conditions And For Other Purposes."

3
 5. On 20 Aug 1975, PD 771 was issued by then President Marcos. The decree, titled "Revoking All Powers and Authority
of Local Government(s) To Grant Franchise, License or Permit And Regulate Wagers Or Betting By The Public On Horse
And Dog Races, Jai-Alai Or Basque Pelota, And Other Forms Of Gambling", in Sec. 3 thereof, expressly revoked all existing
franchises and permits issued by local governments.

6. On 16 Oct 1975, PD 810, entitled "An Act granting The Philippine Jai-Alai And Amusement Corporation A Franchise To
Operate, Construct And Maintain A Fronton For Basque Pelota And Similar Games of Skill In THE Greater Manila Area,"
was promulgated.

7 On 08 May 1987, then President Aquino, by virtue of Art. XVIII, Sec. 6, of the Constitution, which allowed the
incumbent legislative powers until the first Congress was convened, issued EO 169 expressly repealing PD 810 and
revoking and cancelling the franchise granted to the Philippine Jai-Alai and Amusement Corporation.

 Petitioners in G.R. No. 117263 argue that RA 954 effectively removed the power of the Municipal Board of Manila to grant
franchises for gambling operations. It is argued that the term "legislative franchise" in RA 954 is used to refer to franchises
issued by Congress.
 On the other hand, ADC contends that RA 409 (Manila Chapter) gives legislative powers to the Municipal Board to grant
franchises, and since RA 954 does not specifically qualify the word "legislative" as referring exclusively to Congress, then RA
954 did not remove the power of the Municipal Board under Sec. 18(jj) of RA 409 and consequently it was within the power
of the City of Manila to allow ADC to operate the jai-alai in the City of Manila.
 On this point, the government counter-argues that the term "legislative powers" is used in RA 409 merely to distinguish the
powers under Sec. 18 of the law from the other powers of the Municipal Board, but that the term "legislative franchise" in RA
954 refers to a franchise granted solely by Congress.
 Further, the government argues that EO 392 transferred even the power to regulate Jai-Alai from the local governments to
the GAB, a national government agency.
 It is worthy of note that neither of the authorities relied upon by ADC to support its alleged possession of a valid franchise,
namely the Charter of the City of Manila (RA 409) and Manila Ordinance No. 7065 uses the word "franchise". RA 409
empowers the Municipal Board of Manila to "tax, license, permit and regulate wagers or betting" and to "grant
exclusive rights to establishments", while Ordinance No. 7065 authorized the Manila City Mayor to "allow and permit" ADC
to operate jai-alai facilities in the City of Manila.
 It is clear from the foregoing that Congress did not delegate to the City of Manila the power "to franchise" wagers or betting,
including the jai-alai, but retained for itself such power "to franchise". What Congress delegated to the City of Manila in RA
409, with respect to wagers or betting, was the power to "license, permit, or regulate" which therefore means that a license
or permit issued by the City of Manila to operate a wager or betting activity, such as the jai-alai where bets are accepted,
would not amount to something meaningful UNLESS the holder of the permit or license was also FRANCHISED by the national
government to so operate. Moreover, even this power to license, permit, or regulate wagers or betting on jai-alai was
removed from local governments, including the City of Manila, and transferred to the GAB on 1 Jan 1951 by EO 392. The net
result is that the authority to grant franchises for the operation of jai-alai frontons is in Congress, while the regulatory
function is vested in the GAB.
 In relation, therefore, to the facts of this case, since ADC has no franchise from Congress to operate the jai-alai, it may not so
operate even if it has a license or permit from the City Mayor to operate the jai-alai in the City of Manila.
 It cannot be overlooked, in this connection, that the RPC punishes gambling and betting under Arts. 195 to 199 thereof.
Gambling is thus generally prohibited by law, unless another law is enacted by Congress expressly exempting or excluding
certain forms of gambling from the reach of criminal law. Among these form the reach of criminal law. Among these forms of
gambling allowed by special law are the horse races authorized by RAs 309 and 983 and gambling casinos authorized under
PD 1869.
 While jai-alai as a sport is not illegal per se, the accepting of bets or wagers on the results of jai-alai games is undoubtedly
gambling and, therefore, a criminal offense punishable under Arts. 195-199 of the RPC, unless it is shown that a later or
special law had been passed allowing it. ADC has not shown any such special law.
 RA 409 (the Revised Charter of the City of Manila) gave the Municipal Board certain delegated legislative powers under Sec.
18. A perusal of the powers enumerated under Sec. 18 shows that these powers are basically regulatory in nature.  The
regulatory nature of these powers finds support not only in the plain words of the enumerations under Sec. 28 but also in this
Court's ruling in People vs Vera.
 In Vera, this Court declared that a law which gives the Provincial Board the discretion to determine whether or not a law of
general application (such as, the Probation law-Act No. 4221) would or would not be operative within the province, is
unconstitutional for being an undue delegation of legislative power.
 From the ruling in Vera, it would be logical to conclude that, if ADC's arguments were to prevail, this Court would likewise
declare Sec. 18(jj) of RA 409 unconstitutional for the power it would delegate to the Municipal Board of Manila would give
4
 the latter the absolute and unlimited discretion to render the penal code provisions on gambling inapplicable or inoperative
to persons or entities issued permits to operate gambling establishments in the City of Manila.
 We need not go to this extent, however, since the rule is that laws must be presumed valid, constitutional and in harmony
with other laws. Thus, the relevant provisions of RAs 409 and 954 and Ordinance No. 7065 should be taken together and it
should then be clear that the legislative powers of the Municipal Board should be understood to be regulatory in nature and
that RA 954 should be understood to refer to congressional franchises, as a necessity for the operation of jai-alai.
 We need not, however, again belabor this issue further since the task at hand which will ultimately, and with finality, decide
the issues in this case is to determine whether PD 771 validly revoked ADC's franchise to operate the jai-alai, assuming
(without conceding) that it indeed possessed such franchise under Ordinance No. 7065.
 ADC argues that PD 771 is unconstitutional for being violative of the equal protection and non-impairment provisions of the
Constitution. On the other hand, the government contends that PD 771 is a valid exercise of the inherent police power of the
State.
 The police power has been described as the least limitable of the inherent powers of the State. It is based on the ancient
doctrine — salus populi est suprema lex  (the welfare of the people is the supreme law.) In the early case of Rubi vs Provincial
Board of Mindoro, this Court through Mr. Justice George A. Malcolm stated thus:
“The police power of the State . . . is a power co-extensive with self-protection , and is not inaptly termed the "law of
overruling necessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit all
things hurtful to the comfort, safety and welfare of society. Carried onward by the current of legislation, the judiciary
rarely attempts to dam the onrushing power of legislative discretion, provided the purposes of the law do not go beyond
the great principles that mean security for the public welfare or do not arbitrarily interfere with the right of the
individual.”

 In the matter of PD. 771, the purpose of the law is clearly stated in the "whereas clause" as follows:

“WHEREAS, it has been reported that in spite of the current drive of our law enforcement agencies against vices and
illegal gambling, these social ills are still prevalent in many areas of the country;

WHEREAS, there is need to consolidate all the efforts of the government to eradicate and minimize vices and other forms
of social ills in pursuance of the social and economic development program under the new society;

WHEREAS, in order to effectively control and regulate wagers or betting by the public on horse and dog races, jai-alai and
other forms of gambling there is a necessity to transfer the issuance of permit and/or franchise from local government to
the National Government.”

 It cannot be argued that the control and regulation of gambling do not promote public morals and welfare. Gambling is
essentially antagonistic and self-reliance. It breeds indolence and erodes the value of good, honest and hard work. It is, as
very aptly stated by PD 771, a vice and a social ill which government must minimize (if not eradicate) in pursuit of social and
economic development.
 In Magtajas vs Pryce Properties Corporation, this Court stated thru Mr. Justice Isagani A. Cruz:
“In the exercise of its own discretion, the legislative power may prohibit gambling altogether or allow it without limitation
or it may prohibit some forms of gambling and allow others for whatever reasons it may consider sufficient. Thus, it has
prohibited jueteng  and  monte but permits lotteries, cockfighting and horse-racing. In making such choices, Congress has
consulted its own wisdom, which this Court has no authority to review, much less reverse. Well has it been said that
courts do not sit to resolve the merits of conflicting theories. That is the prerogative of the political departments. It is
settled that questions regarding wisdom, morality and practicability of statutes are not addressed to the judiciary but
may be resolved only by the executive and legislative departments, to which the function belongs in our scheme of
government.”

 Talks regarding the supposed vanishing line between right and privilege in American constitutional law has no relevance in
the context of these cases since the reference there is to economic regulations. On the other hand , jai-alai is not a mere
economic activity which the law seeks to regulate. It is essentially gambling and whether it should be permitted and, if so,
under what conditions are questions primarily for the lawmaking authority to determine, talking into account national and
local interests. Here, it is the police power of the State that is paramount.
 ADC questions the motive for the issuance of PD 771. Clearly, however, this Court cannot look into allegations that PD 771
was enacted to benefit a select group which was later given authority to operate the jai-alai under PD 810. The examination
of legislative motivation is generally prohibited. There is, the first place, absolute lack of evidence to support ADC's allegation
of improper motivation in the issuance of PD 771. In the second place, as already averred, this Court cannot go behind the
expressed and proclaimed purposes of PD 771, which are reasonable and even laudable.
5
 It should also be remembered that PD 771 provides that the national government can subsequently grant franchises "upon
proper application and verification of the qualifications of the applicant." ADC has not alleged that it filed an application for a
franchise with the national government subsequent to the enactment of PD 771; thus, the allegations abovementioned (of
preference to a select group) are based on conjectures, speculations and imagined biases which do not warrant the
consideration of this Court.
 On the other hand, it is noteworthy that while then President Aquino issued EO 169 revoking PD 810 (which granted a
franchise to a Marcos-crony to operate the jai-alai), she did not scrap or repeal PD 771 which had revoked all franchises to
operate jai-alais issued by local governments, thereby re-affirming the government policy that franchises to operate jai-alais
are for the national government (not local governments) to consider and approve.
 On the alleged violation of the non-impairment and equal protection clauses of the Constitution, it should be remembered
that a franchise is not in the strict sense a simple contract but rather it is more importantly, a mere privilege specially in
matters which are within the government's power to regulate and even prohibit through the exercise of the police power.
Thus, a gambling franchise is always subject to the exercise of police power for the public welfare.
 In RCPI vs  NTC, we held that:
“A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands of a subject ."
This definition was given by Finch, adopted by Blackstone, and accepted by every authority since . . . Today, a franchise
being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to
regulation by the state itself by virtue of its police power through its administrative agencies.”

 There is a stronger reason for holding ADC's permit to be a mere privilege because jai-alai, when played for bets, is pure and
simple gambling. To analogize a gambling franchise for the operation of a public utility, such as public transportation
company, is to trivialize the great historic origin of this branch of royal privilege.
 As earlier noted, ADC has not alleged ever applying for a franchise under the provisions of PD 771. and yet, the purpose of PD
771 is quite clear from its provisions, i.e., to give to the national government the exclusive power to grant gambling
franchises. Thus, all franchises then existing were revoked but were made subject to reissuance by the national government
upon compliance by the applicant with government-set qualifications and requirements.
 There was no violation by PD 771 of the equal protection clause since the decree revoked  all franchises issued by local
governments without qualification or exception. ADC cannot allege violation of the equal protection clause simply because it
was the only one affected by the decree, for as correctly pointed out by the government, ADC was not singled out when all
jai-alai franchises were revoked. Besides, it is too late in the day for ADC to seek redress for alleged violation of its
constitutional rights for it could have raised these issues as early as 1975, almost twenty 20 years ago.
 Finally, we do not agree that Sec. 3 of PD 771 and the requirement of a legislative franchise in RA 954 are "riders" to the two
laws and are violative of the rule that laws should embrace one subject which shall be expressed in the title, as argued by
ADC. In Cordero vs Cabatuando, this Court ruled that the requirement under the constitution that all laws should embrace
only one subject which shall be expressed in the title is sufficiently met if the title is comprehensive enough reasonably to
include the general object which the statute seeks to effect, without expressing each and every end and means necessary or
convenient for the accomplishing of the objective

Third Issue – Grave Abuse of Discretion:

 On the issue of WON there was grave abuse of discretion committed by Judge Reyes in issuing the TRO (later converted to a
writ of preliminary injunction) and the writ of preliminary mandatory injunction, we hold and rule there was.
 Sec. 3, Rule 58 of the ROC provides for the grounds for the issuance of a preliminary injunction. While ADC could allege these
grounds, Judge Reyes should have taken judicial notice of RAs 954 and PD 771, under Sec. 1 Rule 129 of the ROC. These laws
negate the existence of any legal right on the part of ADC to the reliefs it sought so as to justify the issuance of a writ of
preliminary injunction. Since PD 771 and RA 954 are presumed valid and constitutional until ruled otherwise by the SC after
due hearing, ADC was not entitled to the writs issued and consequently there was grave abuse of discretion in issuing them.

02 SURNECO v. ERC AUTHOR: TANDUAY LOVER

G.R. No. 183626. October 4, 2010. Notes:
TOPIC: SESSION 2
PONENTE: NACHURA, J.
CASE LAW/ DOCTRINE: The State, in the exercise of police power, can regulate the rates imposed by a public utility.
FACTS:
 The Association of Mindanao Rural Electric Cooperatives, as representative of SURNECO and of the other 33 rural electric
cooperatives in Mindanao, filed a petition before the then Energy Regulatory Board (ERB) for the approval of the formula for
automatic cost adjustment and adoption of the National Power Corporation (NPC) restructured rate adjustment to comply
with Republic Act (R.A.) No. 7832.
6
 ERB granted SURNECO and other rural electric cooperatives provisional authority to use and implement the Purchased Power
Adjustment (PPA) formula.
 In the meantime, the passage of R.A. No. 9136 led to the creation of the Energy Regulatory Commission (ERC), replacing and
succeeding the ERB. All pending cases before the ERB were transferred to the ERC.
 ERC issued its assailed Order, mandating SURNECO:
o to deduct from the power cost or refund to its consumers the discounts extended to it by its power supplier—NPC,
and
o to refund its over-recovery of over P18M to consumers.
 CA affirmed ERC Order.
ISSUE: WoN the CA erred in affirming the ERC Decision. –NO.
RATIO:
 The ERC was merely implementing the system loss caps in R.A. No. 7832 when it reviewed and confirmed SURNECOS PPA
charges, and ordered the refund of the amount collected in excess of the allowable system loss caps through its continued
use of the multiplier scheme. The Commission deemed it appropriate to clarify its PPA confirmation process particularly on
the treatment of the Prompt Payment Discount (PPD) granted to distribution utilities (DUs) by their power suppliers. The
foregoing clarification was intended to ensure that only the actual costs of purchased power are recovered by the DUs.
 In directing SURNECO to refund its over-recoveries based on PPA policies, which only ensured that the PPA mechanism
remains a purely cost-recovery mechanism and not a revenue-generating scheme for the electric cooperatives, the ERC
merely exercised its authority to regulate and approve the rates imposed by the electric cooperatives on their consumers.
The ERC simply performed its mandate to protect the public interest imbued in those rates.
 As held in the case of Republic v. Manila Electric Company, the regulation of rates to be charged by public utilities is founded
upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are a
valid exercise thereof. When private property is used for a public purpose and is affected with public interest, it ceases to be
juris privati only and becomes subject to regulation. The regulation is to promote the common good. Submission to regulation
may be withdrawn by the owner by discontinuing use; but as long as use of the property is continued, the same is subject to
public regulation.
 [In case itanong] Likewise, SURNECO cannot validly assert that the caps set by R.A. No. 7832 are arbitrary, or that they violate
the non-impairment clause of the Constitution for allegedly traversing the loan agreement between NEA and ADB. Striking
down a legislative enactment, or any of its provisions, can be done only by way of a direct action, not through a collateral
attack, and more so, not for the first time on appeal in order to avoid compliance. The challenge to the laws’ constitutionality
should also be raised at the earliest opportunity.
 Even assuming, merely for arguments sake, that the ERC issuances violated the NEA and ADB covenant, the contract had to
yield to the greater authority of the States exercise of police power. It has long been settled that police power legislation,
adopted by the State to promote the health, morals, peace, education, good order, safety, and general welfare of the people
prevail not only over future contracts but even over those already in existence, for all private contracts must yield to the
superior and legitimate measures taken by the State to promote public welfare.

3. CREBA vs. Secretary of Agrarian Reform AUTHOR: Valera

G.R. No. 183409 Notes: Got help from an online digest. (Nahirapan ako
TOPIC: ? intindihin yung case. ☹ Medjo LTD siya. ☹
PONENTE: Perez
CASE LAW/ DOCTRINE: See bold in Ratio
Emergency Recit: The Secretary of Agrarian Reform issued administrative orders and a memorandum regarding the procedures
governing land conversion from agricultural to non-agricultural. Petitioner assailed its constitutionality, stating that the Secretary
committed grave abuse of discretion in including lands already reclassified by LGUs and the President under the coverage of the
said orders whereby such lands must now undergo the conversion process over which the DAR has jurisdiction . According to
petitioner, this violates the autonomy granted to the LGUs. The SC did not agree with petitioner as the power of LGUs to reclassify
lands is not absolute and that the LGC recognized this by providing that the rules on reclassification will not modify RA 6657
(CARP). Moreover, since the Secretary has been vested with the power to implement the CARP, he has the power to promulgate
rules pursuant thereto, such as in the case at bar
FACTS:
 CREBA (Chamber of Real Estate and Builders Associations) seeks to nullify and prohibit the enforcement of Department of
Agrarian Reform(DAR) AO No. 01-2, as amended by DAR AO No. 05-07 and DAR Memorandum No 88 for having been issued
by the Secretary of Agrarian Reform with grave abuse of discretion amounting to lack or excess of jurisdiction as some of the
provisions of the administrative issuance are illegal and unconstitutional
 The Secretary of Agrarian Reform issued the ff.

7
  DAR AO No. 07-97 (Oct 29, 1997) entitled Omnibus Rules and Procedures Governing Conversion of Agricultural Lands
to Non-Agricultural Uses consolidated all existing implementing guidelines related to land use conversion.
- Embraced all private agricultural lands regardless of tenurial arrangement and commodity produced, and all untitled
agricultural lands and agricultural lands reclassified by Local Government Units (LGUs) into non-agricultural uses
after 15 June 1988.
 DAR AO No. 01-99 (March 30, 1999) entitled Revised Rules and Regulations on the Conversion of Agricultural Lands
to Non-agricultural Uses amended the previous rules on land use conversion. Its coverage includes the following
agricultural lands, to wit:
1.) Those to be converted to residential, commercial, industrial, institutional and other non-agricultural purposes
2.) Those to be devoted to another type of agricultural activity such as livestock, poultry, and fishpond ─ the effect of
which is to exempt the land from the Comprehensive Agrarian Reform Program (CARP) coverage
3.) Those to be converted to non-agricultural use other than that previously authorized.
4.) Those reclassified to residential, commercial, industrial, or other non-agricultural uses on or after the effectivity of
RA No. 66575 on 15 June 1988 pursuant to Section 206 of RA No. 7160 and other pertinent laws and regulations, and
are to be converted to such uses
 DAR AO No. 01-02 (Feb 28, 2002) entitled 2002 Comprehensive Rules on Land Use Conversion which further
amended DAR AO No. 07-97 and DAR AO No. 01-99, and repealed all issuances inconsistent therewith.
- Covered all applications for conversion from agricultural to non-agricultural uses or to another agricultural use
 DAR AO No. 05-07 (Aug 2, 2007) amended certain provisions of DAR AO No. 01 particularly addressing land
conversion in time of exigencies and calamities
 Memorandum No. 88 (April 15, 2008) addressed the unabated conversion of prime agricultural lands for real estate
development.
- Suspended the processing and approval of all land use conversion applications
 By reason thereof, petitioner claims that there is an actual slow-down of housing projects, which, in turn, aggravated the
housing shortage, unemployment and illegal squatting problems to the substantial prejudice not only of the petitioner and its
members but more so of the whole nation
ISSUE(S): W/N the Secretary of Agrarian Reform exceeded his authority in issuing the said orders and memorandum

HELD: No.
RATIO:
Procedural
 Although the SC, CA and RTC have concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court forum
 petitioner failed to specifically and sufficiently set forth special and important reasons to justify direct recourse to this
Court and why this Court should give due course to this petition
 The present petition should have been initially filed in the Court of Appeals in strict observance of the doctrine on the
hierarchy of courts. Failure to do so is sufficient cause for the dismissal of this petition
 although the instant petition is styled as a Petition for Certiorari, in essence, it seeks the declaration by this Court of the
unconstitutionality or illegality of the questioned DAR AO No. 01-02, as amended, and Memorandum No. 88. It, thus,
partakes of the nature of a Petition for Declaratory Relief over which this Court has only appellate, not original, jurisdiction
 this Petition must necessarily fail because this Court does not have original jurisdiction over a Petition for Declaratory
Relief even if only questions of law are involved.
 special civil action for certiorari is intended for the correction of errors of jurisdiction only or grave abuse of discretion
amounting to lack or excess of jurisdiction. Its principal office is only to keep the inferior court within the parameters of its
jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to lack or excess of jurisdiction
 A Petition for Certiorari is a special civil action that may be invoked only against a tribunal, board, or officer exercising
judicial function
 The Secretary of Agrarian Reform does not fall within the ambit of a tribunal, board, or officer exercising judicial or
quasi-judicial functions. The issuance and enforcement by the Secretary of Agrarian Reform of the questioned DAR
AO No. 01-02, as amended, and Memorandum No. 88 were done in the exercise of his quasi-legislative and
administrative functions and not of judicial or quasi-judicial functions.
 In issuing the aforesaid administrative issuances, the Secretary of Agrarian Reform never made any adjudication of
rights of the parties. As such, it can never be said that the Secretary of Agrarian Reform had acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing and enforcing DAR AO No. 01-02, as amended, and
Memorandum No. 88 for he never exercised any judicial or quasi-judicial functions but merely his quasi-legislative
and administrative functions.
Substantive (Will be discussed presenting arguments of petitioner first then the ruling of SC)
1.) Petitioner asserts that Lands reclassified from agricultural to residential, commercial, industrial, or other non-agricultural
8
 uses after 15 June 1988 are considered to be agricultural lands for purposes of conversion, redistribution, or otherwise.
Over which, he Secretary had no authority expand or enlarge the legal signification of the term agricultural lands (in RA
6657) through DAR AO No. 01-02.
2.) Petitioner states there is nothing in Section 65 of Republic Act No. 6657 or in any other provision of law that confers to
the DAR the jurisdiction or authority to require that non-awarded lands or reclassified lands be submitted to its
conversion authority.
 Executive Order No. 129-A37 vested upon the DAR the responsibility of implementing the CARP
 Under DAR AO No. 01-02, as amended, "lands not reclassified as residential, commercial, industrial or other non-
agricultural uses before 15 June 1988" have been included in the definition of agricultural lands. In so doing, the
Secretary of Agrarian Reform merely acted within the scope of his authority stated in the aforesaid sections of
Executive Order No. 129-A, which is to promulgate rules and regulations for agrarian reform implementation and that
includes the authority to define agricultural lands for purposes of land use conversion. Further, the definition of
agricultural lands under DAR AO No. 01-02, as amended, merely refers to the category of agricultural lands that may
be the subject for conversion to non-agricultural uses and is not in any way confined to agricultural lands in the
context of land redistribution as provided for under Republic Act No. 6657.
 More so, Department of Justice Opinion No. 44, Series of 1990 clarified that after the effectivity of Republic Act No.
6657 on 15 June 1988 the DAR has been given the authority to approve land conversion . Concomitant to such
authority, therefore, is the authority to include in the definition of agricultural lands "lands not reclassified as
residential, commercial, industrial or other non-agricultural uses before 15 June 1988" for purposes of land use
conversion.
 After the passage of Republic Act No. 6657, agricultural lands, though reclassified, have to go through the process
of conversion, jurisdiction over which is vested in the DAR. However, agricultural lands, which are already
reclassified before the effectivity of Republic Act No. 6657 which is 15 June 1988, are exempted from conversion.
3.) Petitioner asserts that DAR AO No. 01-02 (making reclassification of agricultural lands subject to the requirements and
procedure for land use conversion), violates Section 20 of Republic Act No. 7160, because it was not provided therein
that reclassification by LGUs shall be subject to conversion procedures or requirements, or that the DAR’s approval or
clearance must be secured to effect reclassification. It also contravenes the constitutional mandate on local autonomy
under the 1987 Philippine Constitution
 It is true that the DAR’s express power over land use conversion provided for under Section 65 of Republic Act No.
6657 is limited to cases in which agricultural lands already awarded have, after five years, ceased to be economically
feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes. To suggest, however, that these are the only
instances that the DAR can require conversion clearances would open a loophole in Republic Act No. 6657 which
every landowner may use to evade compliance with the agrarian reform program
 It should logically follow, therefore, from the said department’s express duty and function to execute and enforce
the said statute that any reclassification of a private land as a residential, commercial or industrial property, on or
after the effectivity of Republic Act No. 6657 on 15 June 1988 should first be cleared by the DAR.
 Reclassification of lands does not suffice. Conversion and reclassification differ from each other. Conversion is the act
of changing the current use of a piece of agricultural land into some other use as approved by the DAR while
reclassification is the act of specifying how agricultural lands shall be utilized for non-agricultural uses such as
residential, industrial, and commercial, as embodied in the land use plan, subject to the requirements and
procedures for land use conversion. In view thereof, a mere reclassification of an agricultural land does not
automatically allow a landowner to change its use. He has to undergo the process of conversion before he is
permitted to use the agricultural land for other purposes.
 It is of no moment whether the reclassification of agricultural lands to residential, commercial, industrial or other
non-agricultural uses was done by the LGUs or by way of Presidential Proclamations because either way they must
still undergo conversion process
 The power of the LGUs to reclassify agricultural lands is not absolute. The authority of the DAR to approve
conversion of agricultural lands covered by Republic Act No. 6657 to non-agricultural uses has been validly
recognized by said Section 20 of Republic Act No. 7160 by explicitly providing therein that, "nothing in this section
shall be construed as repealing or modifying in any manner the provisions of Republic Act No. 6657
4.) Petitioner asserts that the promulgation and enforcement of DAR AO No. 01-02, as amended, constitute deprivation of
liberty and property without due process of law. Lands that are not within DAR’s jurisdiction are unjustly, arbitrarily and
oppressively prohibited or restricted from legitimate use on pain of administrative and criminal penalties. More so, there
is discrimination and violation of the equal protection clause of the Constitution because the aforesaid administrative
order is patently biased in favor of the peasantry at the expense of all other sectors of society
 In providing administrative and criminal penalties in the said administrative order, the Secretary of Agrarian Reform
simply implements the provisions of Sections 73 and 74 of Republic Act No. 6657 (CARP).
9
 5.) DAR Memorandum No. 88 is not a valid exercise of police power for it is the prerogative of the legislature and that it is
unconstitutional because it suspended the land use conversion without any basis.
 Memorandum No. 88 was issued upon the instruction of the President in order to address the unabated conversion
of prime agricultural lands for real estate development because of the worsening rice shortage in the country at that
time. Such measure was made in order to ensure that there are enough agricultural lands in which rice cultivation and
production may be carried into. The issuance of said Memorandum No. 88 was made pursuant to the general welfare
of the public, thus, it cannot be argued that it was made without any basis.

04 METROPOLITAN MANILA DEVELOPMENT AUTHORITY v. AUTHOR: ACIDO

BEL-AIR VILLAGE ASSOCIATION, INC. NOTES: Straightforward discussion. Included the Sangalang
[G.R. No. 135962, March 27, 2000] comparison just in case.
TOPIC: General
PONENTE: Puno, J.
CASE LAW/ DOCTRINE: 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.
Emergency Recit: MMDA wanted to open a Bel-Air street to the village to improve traffic, as well as demolish a perimeter wall.
The village association applied for TRO and PI. MMDA invoked police power. SC held [SEE DOCTRINE].
FACTS:
 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. On the same day,
respondent was apprised that the perimeter wall separating the subdivision from the adjacent Kalayaan Avenue would be
demolished.
“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.”
 On January 2, 1996, respondent instituted against petitioner before the RTC Makati Branch 136 a civil case 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.
 RTC: Denied the issuance of a preliminary injunction
 CA: Issued PI; eventually 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.
ISSUE: Whether the MMDA has the mandate to open Neptune Street to public traffic pursuant to its regulatory and police
powers.

HELD: No. Petition denied.

RATIO:
 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. 
 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.  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.
 It bears stressing that police power is lodged primarily in the National Legislature. It cannot be exercised by any group or
body of individuals not possessing legislative power. 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.  
Once delegated, the agents can exercise only  such legislative powers as are conferred on them by the national lawmaking

10
 body. Our Congress delegated police power to the local government units in the Local Government Code of 1991. Local
government units exercise police power through their respective legislative bodies.
 With the passage of R.A. No. 7924 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.
 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.
 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." 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.

[OPTIONAL]
 Petitioner cannot seek refuge in the cases of Sangalang v. Intermediate Appellate Court 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, while the second decision denied reconsideration of the first case and in
addition discussed the case of Yabut v. Court of Appeals.
 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. 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.
 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.

05 Moday v. Court of Appeals AUTHOR: Castro

[G.R. No. 107916. February 20, 1997] NOTES:
TOPIC: General
PONENTE: Romero, J.
CASE LAW/ DOCTRINE: Eminent domain is the government’s right to appropriate, in the nature of a compulsory sale to the State,
private property for public use or purpose. Inherently possessed by the national legislature, the power of eminent domain may be
validly delegated to local governments, other public entities and public utilities. For the taking of private property by the
government to be valid, the taking must be for public use and there must be just compensation.
EMERGENCY RECIT: The Sangguniang Bayan of the Municipality of Bunawan in Agusan del Sur passed a Resolution authorizing the
Municipal Mayor to Initiate a Petition for Expropriation. It was approved by the Mayor and transmitted to the Sangguniang
Panlalawigan for approval. However, the Sangguniang Panlalawigan disapproved the Resolution. Despite the disapproval, the
Municipality went ahead with the expropriation. The issue is whether the municipality may expropriate despite the Sangguniang

11
Panlalawigan’s disapproval of the resolution. The SC ruled that the Sangguniang Panlalawigan’s power to declare a municipal
resolution invalid is on the sole ground that it is beyond the power of the Sangguniang Bayan or the Mayor to issue such
resolution. The exercise of eminent domain is within the authority of the municipality.
FACTS:
 In 1989, Sangguniang Bayan of the Municipality of Bunawan in Agusan del Sur passed Resolution No. 43-89, “Authorizing the
Municipal Mayor to Initiate the Petition for Expropriation of a One (1) Hectare Portion of Lot No. 6138-Pls-4 Along the
National Highway Owned by Percival Moday for the Site of Bunawan Farmers Center and Other Government Sports
Facilities”, which was approved by the Mayor.
 The Sangguniang Panlalawigan (SP) disapproved the Resolution saying that such is unnecessary since there are other
available lots.
 Municipality of Bunawan (MB) subsequently filed a petition for Eminent Domain against Percival Moday.
 RTC granted MB’s Motion to Take or Enter Upon the Possession of Subject Matter of This Case stating that it had already
deposited with the municipal treasurer the necessary amount in accordance with Section 2, Rule 67 of the ROC.
 The lower court held that the Sangguniang Panlalawigan’s failure to declare the resolution invalid leaves it effective. It added
that the duty of the Sangguniang Panlalawigan is merely to review the ordinances and resolutions passed by the
Sangguniang Bayan under Section 208(l) of B.P. Blg. 337, old Local Government Code and that the exercise of eminent
domain is not one of the two acts enumerated in Section 19 thereof requiring the approval of the Sangguniang Panlalawigan.
CA affirmed the RTC decision.
 Meanwhile, MB had erected three buildings on the subject property: Association of Barangay Councils (ABC) Hall, the
Municipal Motorpool, both wooden structures, and the Bunawan Municipal Gymnasium, which is made of concrete.
 The Court issued a TRO in Moday’s favor. The Mayor was cited in contempt for building blocktiendas in violation of the TRO.
 CA ruled that SP’s reason for disapproving the resolution could be baseless because it failed to cite which lots are available
and that since SP did not declare the municipal board’s resolution as invalid, expropriation of the property could proceed.
ISSUE: Whether a municipality may expropriate private property by virtue of a municipal resolution which was disapproved by the
Sangguniang Panlalawigan

HELD: Yes
RATIO:
 Eminent domain, the power which the Municipality of Bunawan exercised in the instant case, is a fundamental State power
that is inseparable from sovereignty. It is government’s right to appropriate, in the nature of a compulsory sale to the State,
private property for public use or purpose. Inherently possessed by the national legislature, the power of eminent domain
may be validly delegated to local governments, other public entities and public utilities. For the taking of private property by
the government to be valid, the taking must be for public use and there must be just compensation.
 The Municipality of Bunawan’s power to exercise the right of eminent domain is not disputed as it is expressly provided for in
Batas Pambansa Blg. 337, the Local Government Code in force at the time expropriation proceedings were initiated. Section 9
of said law states:“Section 9. Eminent Domain.—A local government unit may, through its head and acting pursuant to a
resolution of its sanggunian, exercise the right of eminent domain and institute condemnation proceedings for public use or
purpose.”
 What petitioners question is the lack of authority of the municipality to exercise this right since the Sangguniang Panlalawigan
disapproved Resolution No. 43-89. Section 153 of B.P. Blg. 337 provides: “Sec. 153. Sangguniang Panlalawigan Review.—(1)
Within thirty days after receiving copies of approved ordinances, resolutions and executive orders promulgated by the
municipal mayor, the sangguniang panlalawigan shall examine the documents or transmit them to the provincial attorney, or
if there be done, to the provincial fiscal, who shall examine them promptly and inform the sangguniang panlalawigan in
writing of any defect or impropriety which he may discover therein and make such comments or recommendations as shall
appear to him proper. (2) If the sangguniang panlalawigan shall find that any municipal ordinance, resolution or executive
order is beyond the power conferred upon the sangguniang bayan or the mayor, it shall declare such ordinance, resolution or
executive order invalid in whole or in part, entering its actions upon the minutes and advising the proper municipal
authorities thereof. The effect of such an action shall be to annul the ordinance, resolution or executive order in question in
whole or in part. The action of the sangguniang panlalawigan shall be final.
 The Sangguniang Panlalawigan’s disapproval of Municipal Resolution No. 43-89 is an infirm action which does not render said
resolution null and void. The law, as expressed in Section 153 of B.P. Blg. 337, grants the Sangguniang Panlalawigan the
power to declare a municipal resolution invalid on the sole ground that it is beyond the power of the Sangguniang Bayan or
the Mayor to issue.
 Velazco v. Blas is applicable, in which the Court stated: “The only ground upon which a provincial board may declare any
municipal resolution, ordinance, or order invalid is when such resolution, ordinance, or order is ‘beyond the powers
conferred upon the council or president making the same.’ Absolutely no other ground is recognized by the law. A strictly
legal question is before the provincial board in its consideration of a municipal resolution, ordinance, or order. The provincial

12
 (board’s) disapproval of any resolution, ordinance, or order must be premised specifically upon the fact that such resolution,
ordinance, or order is outside the scope of the legal powers conferred by law. If a provincial board passes these limits, it
usurps the legislative functions of the municipal council or president. Such has been the consistent course of executive
authority.”
 Thus, the Sangguniang Panlalawigan was without the authority to disapprove Municipal Resolution No. 43-89 for the
Municipality of Bunawan clearly has the power to exercise the right of eminent domain and its Sangguniang Bayan the
capacity to promulgate said resolution, pursuant to the earlier-quoted Section 9 of B.P. Blg. 337 . Perforce, it follows that
Resolution No. 43-89 is valid and binding and could be used as lawful authority to petition for the condemnation of
petitioners’ property.
 As regards the accusation of political oppression, it is alleged that Percival Moday incurred the ire of then Mayor Anuncio C.
Bustillo when he refused to support the latter’s candidacy for mayor in previous elections. Petitioners claim that then
incumbent Mayor C. Bustillo used the expropriation to retaliate by expropriating their land even if there were other
properties belonging to the municipality and available for the purpose. Specifically, they allege that the municipality owns a
vacant seven-hectare property adjacent to petitioners’ land, evidenced by a sketch plan.
 The limitations on the power of eminent domain are that the use must be public, compensation must be made and due
process of law must be observed. The Supreme Court, taking cognizance of such issues as the adequacy of compensation,
necessity of the taking and the public use character or the purpose of the taking, has ruled that the necessity of exercising
eminent domain must be genuine and of a public character. Government may not capriciously choose what private property
should be taken.
 After a careful study of the records of the case, however, we find no evidentiary support for petitioners’ allegations. The
uncertified photocopy of the sketch plan does not conclusively prove that the municipality does own vacant land adjacent to
petitioners’ property suited to the purpose of the expropriation. In the questioned decision, respondent appellate court
similarly held that the pleadings and documents on record have not pointed out any of respondent municipality’s “other
available properties available for the same purpose.”

6. Land Bank vs. Yatco COQUIA

G.R. NO. 172551 : JANUARY 15, 2014 NOTES: Agra case. The land was placed under CARP (Sorry medj
BRION, J. magulo)
CASE LAW/ DOCTRINE: Determination of just compensation is fundamentally a judicial function.
FACTS:
 Rule 45
 The agricultural land, located in Barangay Mabato, Laguna, contested in this case is owned by Respondent Yatco Agricultural
Enterprises. The government placed the property under the coverage of its Comprehensive Agrarian Reform Program (CARP).
 Petitioner Bank and Yatco had a disagreement regarding the valuation of the property. According to Petitioner, the valuation
of P1,126,132.89.8 for the 27.5730 hectare land was made pursuant to EO NO. 405. Respondent Yatco elevated the matter to
the Department of Agrarian Reform (DAR) Provincial Agrarian Reform Adjudicator (PARAD) of San Pablo City.
 The PARAD computed the value of the property at P16,543,800.00;10 using the property’s current market value and the
formula MV x 2. It was alleged that the petitioner bank did not present any authentic or verified document to back up its
computation.
 Without reconsidering the PARAD’s decision, Petitioner bank filed with the RTC-SAC a petition for the judicial determination
of just compensation.
 RTC-SAC fixed the just compensation for the property at P200.00 per square meter, arriving at this valuation by adopting the
valuation set by the RTC of Calamba City, Branch 35 ( in an Order dated August 29, 2001, penned by Judge Romeo C. de
Leon), which in turn adopted the valuation the RTC of Calamba City, Branch 36 ( in a Judgment dated July 23, 1997, penned
by Judge Norberto Y. Geraldez).
 RTC-SAC pointing out that the LBP failed to prove that it complied with the prescribed procedure and likewise failed to
consider the valuation factors provided in Section 17 of the Comprehensive Agrarian Reform Law of 1988 (CARL).
 The CA dismissed Petitioner Bank’s appeal stating that Branch 36’s valuation was based on the report of the duly appointed
commissioners and was arrived at after proper land inspection.
 Petitioner’s contention:
1) property in the present case was expropriated pursuant to its agrarian reform program; in contrast, the land subject
of the civil cases (from Brach 35 and 36) was expropriated by the National Power Corporation (NAPOCOR) for
industrial purposes.
2) RTC-SAC completely disregarded the factors enumerated in Section 17 of R.A. No. 6657 and the guidelines and
procedure laid out in DAR AO 5-98.
3) Petitioner only followed Section 17 of R.A. No. 6657 and DAR AO 5-98 and merely discharged its mandate under EO

13
 No. 405
 Respondent’s contention:
1) RTC-SAC’s valuation was not only based on the valuation fixed by Branch 36 (as adopted by Branch 35); it was also
based on the property’s market value as stated in the current tax declaration
2) RTC-SAC considered the evidence of both parties; unfortunately for the LBP, the RTCSAC found its evidence wanting
and in total disregard of the factors enumerated in Section 17 of R.A. No. 6657
3) RTC-SAC considered all of the factors enumerated in Section 17
4) claims that the present petition’s issues and arguments are purely factual and they are not allowed in a petition for
review on certiorari and the LBP did not point to any specific error
ISSUE(S): WON RTC-SAC’s determination of just compensation for the property was proper?

HELD: NO
RATIO:
 RTC-SACs are not granted unlimited discretion and must consider and apply the R.A. No. 6657-enumerated factors and the
DAR formula that reflect these factors. These factors and formula provide the uniform framework or structure for the
computation of the just compensation for a property subject to agrarian reform.
 When acting within the parameters set by the law itself, the RTCSACs, however, are not strictly bound to apply the DAR
formula to its minute detail, particularly when faced with situations that do not warrant the formula’s strict application; they
may, in the exercise of their discretion, relax the formula’s application to fit38 the factual situations before them. They must,
however, clearly explain the reason for any deviation from the factors and formula that the law and the rules have provided.
 RTC-SAC did not point to any specific evidence or cite the values and amounts it used in arriving at the P200.00 per square
meter valuation. It did not even consider the property’s market value based on the current tax declaration that Yatco insists
the RTC-SAC considered in addition to Branch 36’s valuation. It did not indicate the formula that it used in arriving at its
valuation or which led it to believe that Branch 36’s valuation was applicable to this case. Lastly, the RTC-SAC did not conduct
an independent assessment and computation using the considerations required by the law and the rules.
 The civil cases were not made under the provisions of the CARL nor for agrarian reform purposes , as enunciated under R.A.
No. 6657.57 In exercising the power vested in it by the provisions of C.A. No. 120 (as amended), the NAPOCOR did not seek to
acquire and distribute lands to farmers and regular farmworkers; the NAPOCOR sought easement of right of way to transmit
electric power as it was tasked to.
 RTC-SAC adopted Branch 36’s valuation without any qualification or condition. Yet, in disposing of the present case, the just
compensation that it fixed for the property largely differed from the former. Note that Branch 36 fixed a valuation of P20.00
per square meter; while the RTC-SAC, in the present case, valued the property at P200.00 per square meter. Strangely, the
RTC-SAC did not offer any explanation nor point to any evidence, fact or particular that justified the obvious discrepancy
between these amounts.
 The fair market value of the expropriated property is determined as of the time of taking. The “time of taking” refers to that
time when the State deprived the landowner of the use and benefit of his property, as when the State acquires title to the
property or as of the filing of the complaint, per Section 4, Rule 67 of the Rules of Court.
 The determination of the value in the Civil Case of Branch 36 used in this case was still back in 1997. Whilst, the taking of the
property in this case was in 2002. With a difference of 5 years, a significant gap in the matter of valuation since the lands
involved are not in the hinterlands, but in the rapidly industrializing Calamba, Laguna.
 WHEREFORE, in view of these considerations, we hereby GRANT the petition. Accordingly, we REVERSE and SET ASIDE the
decision and Remand the case.

JUST IN CASE HE ASKS THE LAWS AND THE COMPUTATION:

Section 17. Determination of Just Compensation. – In determining just compensation, the cost of acquisition of the land, the
current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the
assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and
the farmworkers and by the Government to the property as well as the non-payment of taxes or loans secured from any
government financing institution on the said land shall be considered as additional factors to determine its valuation.

DAR AO 5-98: Land Value = (Capitalized Net Income x 0.6) + (Comparable Sales x 0.3) + (Market Value x 0.1)

PROCEDURAL MATTERS, just in case:

 A question of law arises when the doubt or difference exists as to what the law is on a certain state of facts. Negatively put,
Rule 45 does not allow the review of questions of fact. A question of fact exists when the doubt or difference arises as to the
truth or falsity of the alleged facts. The test in determining whether a question is one of law or of fact is “whether the
appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of

14
 law".
 Petitioner’s question is one of law when it asked whether or not the just compensation fixed by the RTC-SAC for the property,
which was based solely on Branch 36’s valuation, determined in accordance with law. Resolution of this question can be
made by mere inquiry into the law and jurisprudence on the matter, and does not require a review of the parties’ evidence.
 Generally, courts are not authorized to “take judicial notice of the contents of the records of other cases even when said
cases have been tried or are pending in the same court or before the same judge.” They may, however, take judicial notice of
a decision or the facts prevailing in another case sitting in the same court if: ( 1) the parties present them in evidence, absent
any opposition from the other party; or (2) the court, in its discretion, resolves to do so. In either case, the courts must
observe the clear boundary provided by Section 3, Rule 129 of the Rules of Court.
 Even assuming, however, that the April 21, 2004 order of the RTC-SAC (that noted Yatco’s offer in evidence and the LBP’s
opposition to it) constitutes sufficient compliance with the requirement of Section 3, Rule 129 of the Rules of Court, still we
find the RTC-SAC’s valuation – based on Branch 36’s previous ruling – to be legally erroneous due to the disregard of
pertinent laws.

07 Manila Memorial Park v. Secretary of DSWD: AUTHOR: Mendoza

[G.R. No.17536; December 3 , 2013] NOTES:
TOPIC: Police Power
PONENTE: Del Castillo
CASE LAW/ DOCTRINE:
 Police power is the inherent power of the State to regulate or to restrain the use of liberty and property for public welfare.
The only limitation is that the restriction imposed should be reasonable, not oppressive. In other words, to be a valid exercise
of police power, it must have a lawful subject or objective and a lawful method of accomplishing the goal.
 In the exercise of police power, a property right is impaired by regulation, or the use of property is merely prohibited,
regulated or restricted to promote public welfare. In such cases, there is no compensable taking, hence, payment of just
compensation is not required.
Emergency Recit: Petitioners filed a petition for prohibition assailing the constitutionality of RA 9257, that grants 20% discount to
senior citizens from all establishments. According to them, it violates Articles 3, 13, and 15 of the Constitution, thus, an invalid
exercise of police power. On the other hand, respondents contend that there is no justiciable controversy and that petitioners
filed to overturn the presumption of constitutionality. SC held that there is an actual justiciable controversy but RA 9257 is still
constitutional because validity of the 20% senior citizen discount and tax deduction scheme under RA 9257 , as an exercise of
police power of the State, has already been settled, not been shown to be unreasonable and oppressive.
FACTS:
 This is a Petition for Prohibition filed by petitioners Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic
corporations engaged in the business of providing funeral and burial services, against public respondents Secretaries of the
DSWD and the DOF.
 Petitioners assail the constitutionality of Section 4 of R.A. No. 7432, as amended by RA 9257, and the IRRs issued by the
DSWD and DOF insofar as these allow business establishments to claim the 20% discount given to senior citizens as a tax
deduction.
 On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following privileges:
“SECTION 4. Privileges for the Senior Citizens.·The senior citizens shall be entitled to the following:
the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation
services, hotels and similar lodging establishment[s], restaurants and recreation centers and purchase of
medicine anywhere in the country: Provided, That private establishments may claim the cost as tax credit;”
 On February 26, 2004, RA 9257 amended certain provisions of RA 7432.
 To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006. The DSWD likewise issued its own
IRR Implementing RA 9257.
 Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying that Section 4 of RA 7432, as
amended by RA 9257, and the implementing rules and regulations issued by the DSWD and the DOF be declared
unconstitutional insofar as these allow business establishments to claim the 20% discount given to senior citizens as a tax
deduction; that the DSWD and the DOF be prohibited from enforcing the same; and that the tax credit treatment of the 20%
discount under the former Section 4 (a) of RA 7432 be reinstated.
 Petitioners: the tax deduction scheme contravenes Article III, Section 9 of the Constitution, which provides that: “private
property shall not be taken for public use without just compensation.” Moreover, the tax deduction scheme violates Article
XV, Section 4 and Article XIII, Section 11 of the Constitution because it shifts the State’s constitutional mandate or duty of
improving the welfare of the elderly to the private sector.
 Respondents: There is no justiciable controversy as petitioners failed to prove that the tax deduction treatment is not a “fair

15
 and full equivalent of the loss sustained” by them. As to the constitutionality of RA 9257 and its IRR, respondents contend
that petitioners failed to overturn its presumption of constitutionality. More important, respondents maintain that the tax
deduction scheme is a legitimate exercise of the State’s police power.
ISSUE(S): Whether Section 4 of RA 9257 and its IRR, insofar as they provide that the 20% discount to senior citizens may be
claimed as a tax deduction by the private establishments, are invalid and unconstitutional.

HELD: No. It is valid and constitutional. Petition denied. The 20% discount and tax deduction scheme is a valid exercise of the
police power of the State.
RATIO:
There is an actual case or controversy
 An actual case or controversy exists when there is “a conflict of legal rights” or “an assertion of opposite legal claims
susceptible of judicial resolution.” The Petition must therefore show that “the governmental act being challenged has a
direct adverse effect on the individual challenging it.”
 In this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on them. Thus, it cannot be
denied that there exists an actual case or controversy.
 The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257 , as an exercise of police
power of the State, has already been settled
 In Carlos Superdrug Corporation v. DSWD, the Court held that it 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.
 There is a whole class of police power measures which justify the destruction of private property in order to preserve public
health, morals, safety or welfare. Prior to the sale of goods or services, a business establishment may be subject to State
regulations, such as the 20% senior citizen discount, which may impact the level or amount of profits or income/gross sales
that can be generated by such establishment.
 For this reason, the validity of the discount is to be determined based on its overall effects on the operations of the business
establishment.

The 20% senior citizen discount is an exercise of police power.

 The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less likely to be gainfully
employed, more prone to illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic commodities.
This distinct cultural Filipino practice of honoring the elderly is an integral part of this law.
 The subject regulation affects the pricing, and, hence, the profitability of a private establishment.
 However, it does not purport to appropriate or burden specific properties, used in the operation or conduct of the business
of private establishments, for the use or benefit of the public, or senior citizens for that matter, but merely regulates the
pricing of goods and services relative to, and the amount of profits or income/gross sales that such private establishments
may derive from, senior citizens.
 The subject regulation differs therefrom in that (1) the discount does not prevent the establishments from adjusting the level
of prices of their goods and services, and (2) the discount does not apply to all customers of a given establishment but only to
the class of senior citizens. Nonetheless, to the degree material to the resolution of this case, the 20% discount may be
properly viewed as belonging to the category of price regulatory measures which affect the profitability of establishments
subjected thereto.
 The State has, in the past, regulated prices and profits of business establishments. In other words, this type of regulatory
measures is traditionally recognized as police power measures so that the senior citizen discount may be considered as a
police power measure as well.
 On its face, therefore, the subject regulation is a police power measure.

The 20% senior citizen discount has not been shown to be unreasonable , oppressive or confiscatory.
 No evidence, such as a financial report, to establish the impact of the 20% discount on the overall profitability of petitioners
was presented in order to show that they would be operating at a loss due to the subject regulation or that the continued
implementation of the law would be unconscionably detrimental to the business operations of petitioners. In the case at bar,
petitioners proceeded with a hypothetical computation of the alleged loss that they will suffer similar to what the petitioners
in Carlos Superdrug Corporation did. Petitioners went directly to this Court without first establishing the factual bases of their
claims. Hence, the present recourse must, likewise, fail.
DISSENTING OPINION: J. Carpio
1) the discussion on eminent domain in Central Luzon Drug Corporation is not obiter dicta; (2) allowable taking, in police power, is
limited to property that is destroyed or placed outside the commerce of man for public welfare; (3) the amount of mandatory

16
discount is private property within the ambit of Article III, Section 9 of the Constitution; and (4) the permanent reduction in a
private establishment’s total revenue, arising from the mandatory discount, is a taking of private property for public use or
benefit, hence, an exercise of the power of eminent domain requiring the payment of just compensation.

8. Smart Communications vs. Municipality of Malvar, AUTHOR: Ocampo, Miguel Angelo C.

Batangas NOTES:
[G.R. No. 204429; Feb. 18, 2014]
TOPIC: General
PONENTE: Carpio, J.
CASE LAW/ DOCTRINE: In bold letters sa Ratio. Madami pwedeng doctrine e. But I think the main doctrine is in Bullet #1.
Emergency Recit: Smart put up a telecom tower in Malvar, Batangas. Municipality of Malvar assessed Smart “fees” in accordance
with the newly passed Ordinance No. 18. Smart contends that such a fee is in a nature of a tax, it is excessive, another body
(which is the NTC) is the one who has the power to impose such a fee, therefore it will not pay it. RTC and CTA ruled against Smart
because CTA has no jurisdiction. SC affirms, CTA has no jurisdiction. It’s not a tax because it is fee as exercised in accordance with
police power of the Municipality of Malvar. This is based on the LGC. Moreover, the Ordinance is constitutional and valid because
Smart failed to present evidence that it is unconstitutional and void. Smart only alleged it.
FACTS:
 Petitioner Smart Communications, Inc. (Smart) is a domestic corporation engaged in the business of providing
telecommunications services to the general public while respondent Municipality of Malvar, Batangas (Malvar) is a LGU
created by law.
 In the course of its business, Smart constructed a telecommunications tower within Malvar’s territorial jurisdiction. The
construction of the tower was receiving and transmitting cellular communications within the covered area.
 On July 30 2003, Malvar passed Ordinance No. 18, series of 2003, entitled "An Ordinance Regulating the Establishment of
Special Projects."
 On Aug. 24, 2004, Smart received from the Permit and Licensing Division of the Office of the Mayor of Malvar an assessment
letter with a schedule of payment of ₱389,950k for Smart’s telecommunications tower. Due to the alleged arrears in the
payment of the assessment, Malvar also caused the posting of a closure notice on the telecommunications tower.
 On Sept. 9, 2004, Smart filed a protest, claiming lack of due process in the issuance of the assessment and closure notice, and
also challenged the validity of Ordinance No. 18 on which the assessment was based. But Malvar denied the protest, hence,
Smart was constrained to file with the RTC a case assailing the validity of the Ordinance.
 On Dec. 2, 2008, RTC partly granted Smart’s Appeal/Petition as the ruling was only confined to the validity of the assessment,
but did not rule on the legality of Ordinance No. 18. The RTC held that the assessment covering the period from 2001-July
2003 was void since Ordinance No. 18 was approved only on July 30, 2003. However, the RTC declared valid the assessment
starting Oct. 1, 2003, citing NCC4 in relation to the provisions of Ordinance No. 18 and Sec. 166 of the LGC.
 Smart filed a PetRev with the CTA First Division but the latter denied. CTA En Banc affirmed because of lack of jurisdiction. The
CTA En Banc declared that it is a court of special jurisdiction and as such, it can take cognizance only of such matters as are
clearly within its jurisdiction. Citing Sec.7(a), par. 3, of R.A. No. 9282, the CTA En Banc held that the CTA has exclusive
appellate jurisdiction to review on appeal, decisions, orders or resolutions of RTCs in local tax cases originally resolved by
them in the exercise of their original or appellate jurisdiction. However, the same provision does not confer on the CTA
jurisdiction to resolve cases where the constitutionality of a law or rule is challenged.
ISSUE(S):
1. WON the CTA En Banc’s decision should be reversed and set aside for being contrary to law and jurisprudence considering
that the CTA En Banc should have exercised its jurisdiction and declared the Ordinance as illegal;
2. WON the CTA En Banc’s decision should be reversed and set aside for being contrary to law and jurisprudence considering
that the doctrine of exhaustion of administrative remedies does not apply in this case;
3. WON the CTA En Banc’s decision should be reversed and set aside for being contrary to law and jurisprudence considering
that the respondent has no authority to impose the so-called "fees" on the basis of the void ordinance.

HELD: NO NO NO!
RATIO:
1. On WON the CTA has jurisdiction:
a. Smart contends that the CTA erred in dismissing the case for lack of jurisdiction because the CTA has jurisdiction over the
present case considering the "unique" factual circumstances involved;
b. Smart also argues that the "fees" in Ordinance No. 18 are actually taxes since they are not regulatory, but revenue-
raising. They use, as basis, the case of Philippine Airlines, Inc. v. Edu wherein Smart contends that the designation of
"fees" in Ordinance No. 18 is not controlling;

17
 c. But the Supreme Court ruled that the fees imposed under such Ordinance No. 18 are not taxes. Article 10, Sec. 5 of the
Constitution provides that "each LGU shall have the power to create its own sources of revenues and to levy taxes, fees,
and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges shall accrue exclusively to the LGUs.";
d. Thus, the LGC grants the taxing powers to each LGU. Sec. 142 of the LGC grants municipalities the power to levy taxes,
fees, and charges not otherwise levied by provinces. Sec. 143 of the LGC provides for the scale of taxes on business that
may be imposed by municipalities while Sec. 147of the same law provides for the fees and charges that may be imposed
by municipalities on business and occupation. The LGC defines the term "charges" as referring to pecuniary liability, as
rents or fees against persons or property, while the term "fee" means "a charge fixed by law or ordinance for the
regulation or inspection of a business or activity.";
e. In this case, Malvar issued Ordinance No. 18 to regulate the "placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and telephone wires, conduits, meters and other apparatus, and provide
for the correction, condemnation or removal of the same when found to be dangerous, defective or otherwise hazardous
to the welfare of the inhabitants.";
f. It was also envisioned to address the foreseen "environmental depredation" to be brought about by these "special
projects" to the Municipality of Mavar. Pursuant to these objectives, Malvar imposed fees on various structures, which
included telecommunications towers;
g. As clearly stated in its whereas clauses of the Ordinance, the primary purpose is to regulate the "placing, stringing,
attaching, installing, repair and construction of all gas mains, electric, telegraph and telephone wires, conduits, meters
and other apparatus" listed therein, which included Smart’s telecommunications tower. In essence, the purpose of the
Ordinance is to regulate the enumerated activities particularly related to the construction and maintenance of various
structures. The fees are not impositions on the building or structure itself; rather, they are impositions on the activity
subject of government regulation, such as the installation and construction of the structures;
h. The Court ruled that since the main purpose of Ordinance is to regulate certain construction activities of the identified
special projects, which included "cell sites" or telecommunications towers, the fees imposed are primarily regulatory in
nature, and not primarily revenue-raising. While the fees may contribute to the revenues of Malvar, this is merely
incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes;
i. Court cites Progressive Development Corporation v. Quezon City and Victorias Milling Co., Inc. v. Municipality of Victorias
– If the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a
tax;
j. The Court also mention other determining factors to ascertain the purpose and effect of the imposition, which in this
case, may be apparent from the provisions of the ordinance. Thus, "when no police inspection, supervision, or
regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but
any and all persons engaged in the business designated, without qualification or hindrance, may come, and a license
on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no
guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is
strong that the power of taxation, and not the police power, is being exercised”;
k. In this case, contrary to Smart’s contention, Ordinance No. 18 expressly provides for the standards which Smart must
satisfy prior to the issuance of the specified permits, clearly indicating that the fees are regulatory in nature. They’re
stated in Sec. 5 and 6 of the Ordinance (Submission of documents with regard to zoning clearance, conversion order from
DAR of the lot, Brgy. Reso. endorsing the project, etc.). Since they are not taxes, CTA correctly dismissed the case.

2. On WON the Doctrine of Administrative Remedies applies – Sec. 187 of the LGC, which outlines the procedure for questioning
the constitutionality of a tax ordinance, is inapplicable, rendering unnecessary the resolution of the issue on non-exhaustion
of administrative remedies;

3. On WON Malvar has no authority to impose such a fee:

a. Smart argues that Malvar exceeded its power to impose taxes and fees as provided in Book 2, Title 1, Chapter 2,
Article 2 of the LGC. The mayor’s permit fees in Ordinance No. 18 (equivalent to 1% of the project cost) are not
among those expressly enumerated in the LGC;
b. But the Supreme Court ruled that the imposition are not taxes as it doesn’t appear in Sec. 143 of the LGC. Moreover,
even if the fees do not appear in Sec. 143 or any other provision in the LGC, Malvar is empowered to impose taxes,
fees and charges, not specifically enumerated in the LGC, Tax Code or other applicable law. Sec. 186 of the LGC
grants LGUs wide latitude in imposing fees;
c. Smart further argues that Malvar is encroaching on the regulatory powers of the National Telecommunications
Commission (NTC) citing Sec. 5(g) of R.A. No. 7925 which provides that the NTC, in the exercise of its regulatory
powers, shall impose such fees and charges as may be necessary to cover reasonable costs and expenses for the
18
 regulation and supervision of the operations of telecommunications entities. Thus, Smart alleges that the NTC has
the power to regulate of telecommunications entities and all aspects of its operations, not Malvar;
d. But the Court said that the ordinance aims to regulate the "placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and telephone wires, conduits, meters and other apparatus" within
the Municipality. The fees are not imposed to regulate the administrative, technical, financial, or marketing
operations of telecommunications entities, such as Smart’s; rather, they are to regulate the installation and
maintenance of physical structures – Smart’s cell sites or telecommunications tower. The regulation of the
installation and maintenance of such physical structures is an exercise of the police power of Malvar. Clearly, Malvar
does not encroach on NTC’s regulatory powers;
e. The Court also rejects Smart’s contention that the power to fix the fees for the issuance of development permits and
locational clearances is exercised by the Housing and Land Use Regulatory Board (HLURB). Suffice it to state that the
HLURB itself recognizes the LGUs’ power to collect fees related to land use and development. Significantly, the
HLURB issued locational guidelines governing telecommunications infrastructure

4. WON Ordinance No. 18 is valid:

a. Smart contends that Ordinance No. 18 violates Sections 130(b)(3) and 186 of the LGC since the fees are unjust,
excessive, oppressive and confiscatory.
b. But the Court said that Smart did not present any evidence substantiating its claims. It cited Victorias Milling Co., Inc.
v. Municipality of Victorias where it was held by the Court that an ordinance carries with it the presumption of
validity. The question of reasonableness is open to judicial inquiry. Much should be left to the discretion of
municipal authorities. Courts will go slow in writing off an ordinance as unreasonable unless the amount is so
excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or confiscatory. The rule is that factors
relevant to such an inquiry are the municipal conditions as a whole and the nature of the business made subject
to imposition;
c. On the constitutionality issue, Smart merely pleaded for the declaration of unconstitutionality of Ordinance No. 18 in
its prayer, without any argument or evidence to support its plea. Nowhere in the petition was this issue specifically
raised and discussed. Smart failed to cite any constitutional provision allegedly violated by respondent when it
issued Ordinance No. 18.
a. Settled is the rule that every law, in this case an ordinance, is presumed valid. To strike down a law as
unconstitutional, Smart has the burden to prove a clear and unequivocal breach of the Constitution, which Smart
miserably failed to do;
b. Court cites Lawyers Against Monopoly and Poverty (LAMP) v. Secretary of Budget and Management where it was
held that to justify the nullification of the law or its implementation, there must be a clear and unequivocal, not a
doubtful, breach of the Constitution. In case of doubt in the sufficiency of proof establishing unconstitutionality,
the Court must sustain legislation because "to invalidate a law founded on baseless supposition is an affront to
the wisdom not only of the legislature that passed it but also of the executive which approved it. This
presumption of constitutionality can be overcome only by the clearest showing that there was indeed an
infraction of the Constitution, and only when such a conclusion is reached by the required majority may the Court
pronounce, in the discharge of the duty it cannot escape, that the challenged act must be struck down.

09 CIR V JOHNSON AND JOHNSON, INC. AUTHOR: PAGCALIWAGAN

G.R. No. 127105 June 25, 1999 Notes:
TOPIC:
PONENTE: Gonzaga-Reyes, J.
CASE LAW/ DOCTRINE:
 The purpose of a most favored nation clause is to grant to the contracting party treatment not less favorable than that which
has been or may be granted to the most favored among other countries. The most favored nation clause is intended to
establish the principle of equality of international treatment by providing that the citizens or subjects of the contracting
nations may enjoy the privileges accorded by either party to those of the most favored nation. The essence of the principle is
to allow the taxpayer in one state to avail of more liberal provisions granted in another tax treaty to which the country of
residence of such taxpayer is also a party provided that the subject matter of taxation, in this case royalty income, is the same
as that in the tax treaty under which the taxpayer is liable. 
 The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting. Article 24 of the RP-
Germany Tax Treaty, supra, expressly allows crediting against German income and corporation tax of 20% of the gross
amount of royalties paid under the law of the Philippines. On the other hand, Article 23 of the RP-US Tax Treaty, which is the
counterpart provision with respect to relief for double taxation, does not provide for similar crediting of 20% of the gross
amount of royalties paid. 
19
Emergency Recit: J&J filed a claim for refund of overpaid withholding tax on royalties arguing that the royalties paid by J&J to J&J
US is subject to 10% withholding tax pursuant to the most-favored nation clause of the RP-US Treaty in relation to the RP-West
Germany Tax Treaty. Issue is WON J&J is entitled to the most favored nation tax rate of 10% on royalties. Court ruled in the
negative (see doctrine)
FACTS:
 Respondent Johnson and Johnson (J&J), a domestic corporation organized and operating under PH laws, entered into a
license agreement with SC Johnson and Son, USA (J&J US), a non-resident foreign corporation based in USA.
 Pursuant to license agreement J&J was granted the right to use the trademark, patents and technology owned by J&J US
including the right to manufacture, package and distribute the products covered by the Agreement and secure assistance
in management, marketing and production J&J US
 For the use of trademark or technology, J&J was obliged to pay J&J US royalties based on percentage of net sales and
subjected the same to 25% withholding tax on royalty payments which J&J paid for the period July 1993-May 1993 in
the amount of P1.6M
 J&J filed with International Tax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties
arguing that the antecedent facts fall squarely within the same circumstances under which MacGeorge and Gillete rulings
were issued.
 Argued that since the agreement was approved by the Technology Transfer Board, the preferential rate of 10% should
apply to J&J.
 Thus, the royalties paid by the J&J to J&J US is subject to 10% withholding tax pursuant to the most-favored nation
clause of the RP-US Treaty in relation to the RP-West Germany Tax Treaty.
 Claim for refund is in the amount of P963K
ISSUE(S): WON J&J US is entitled to the most favored nation tax rate of 10% on royalties as provided in the RP-US tax treaty in
relation to the RP-West Germany tax treaty.

HELD: NO.
RATIO:
 We are unable to sustain the position of the CTA, which was upheld by the CA, that the phrase paid under similar
circumstances in Article 13 (2) (b), (iii) of the RP-US Tax Treaty should be interpreted to refer to payment of royalty, and
not to the payment of the tax, for the reason that the phrase paid under similar circumstances is followed by the phrase to a
resident of a third state. The respondent court held that Words are to be understood in the context in which they are used,
and since what is paid to a resident of a third state is not a tax but a royalty. Logic instructs that the treaty provision in
question should refer to royalties of the same kind paid under similar circumstances.
 The RP-US Tax Treaty is just one of a number of bilateral treaties which the Philippines has entered into for the avoidance of
double taxation. The purpose of these international agreements is to reconcile the national fiscal legislations of the
contracting parties in order to help the taxpayer avoid simultaneous taxation in two different jurisdictions. More precisely,
the tax conventions are drafted with a view towards the elimination of international juridical double taxation, which is
defined as the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject
matter and for identical periods., citing the Committee on Fiscal Affairs of the Organization for Economic Co-operation and
Development (OECD). The apparent rationale for doing away with double taxation is to encourage the free flow of goods
and services and the movement of capital, technology and persons between countries, conditions deemed vital in creating
robust and dynamic economies. Foreign investments will only thrive in a fairly predictable and reasonable international
investment climate and the protection against double taxation is crucial in creating such a climate.
 In negotiating tax treaties, the underlying rationale for reducing the tax rate is that the Philippines will give up a part of the
tax in the expectation that the tax given up for this particular investment is not taxed by the other country . Thus, the
petitioner correctly opined that the phrase royalties paid under similar circumstances in the most favored nation clause of the
US-RP Tax Treaty necessarily contemplated circumstances that are tax-related.
 In the case at bar, the state of source is the Philippines because the royalties are paid for the right to use property or rights,
i.e. trademarks, patents and technology, located within the Philippines. The United States is the state of residence since the
taxpayer, S. C. Johnson and Son, U. S. A., is based there. Under the RP-US Tax Treaty, the state of residence and the state of
source are both permitted to tax the royalties, with a restraint on the tax that may be collected by the state of
source. Furthermore, the method employed to give relief from double taxation is the allowance of a tax credit to citizens or
residents of the United States (in an appropriate amount based upon the taxes paid or accrued to the Philippines) against
the United States tax, but such amount shall not exceed the limitations provided by United States law for the taxable year .
Under Article 13 thereof, the Philippines may impose one of three rates- 25% of the gross amount of the royalties; 15% when
the royalties are paid by a corporation registered with the Philippine Board of Investments and engaged in preferred areas of
activities; or the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar
circumstances to a resident of a third state.
 Given the purpose underlying tax treaties and the rationale for the most favored nation clause, the concessional tax rate of
20
 10% provided for in the RP-Germany Tax Treaty should apply only if the taxes imposed upon royalties in the RP-US Tax
Treaty and in the RP-Germany Tax Treaty are paid under similar circumstances. This would mean that private respondent
must prove that the RP-US Tax Treaty grants similar tax reliefs to residents of the United States in respect of the taxes
imposable upon royalties earned from sources within the Philippines as those allowed to their German counterparts under
the RP-Germany Tax Treaty.
 The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting. Article 24 of the RP-
Germany Tax Treaty, supra, expressly allows crediting against German income and corporation tax of 20% of the gross
amount of royalties paid under the law of the Philippines. On the other hand, Article 23 of the RP-US Tax Treaty, which is
the counterpart provision with respect to relief for double taxation, does not provide for similar crediting of 20% of the
gross amount of royalties paid. 
 The Vienna Convention on the Law of Treaties states that a treaty shall be interpreted in good faith in accordance with the
ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
 As stated earlier, the ultimate reason for avoiding double taxation is to encourage foreign investors to invest in the
Philippines - a crucial economic goal for developing countries. The goal of double taxation conventions would be thwarted if
such treaties did not provide for effective measures to minimize, if not completely eliminate, the tax burden laid upon the
income or capital of the investor.
 At the same time, the intention behind the adoption of the provision on relief from double taxation in the two tax treaties in
question should be considered in light of the purpose behind the most favored nation clause.
 The purpose of a most favored nation clause is to grant to the contracting party treatment not less favorable than that
which has been or may be granted to the most favored among other countries.  The most favored nation clause is intended
to establish the principle of equality of international treatment by providing that the citizens or subjects of the contracting
nations may enjoy the privileges accorded by either party to those of the most favored nation.  The essence of the principle
is to allow the taxpayer in one state to avail of more liberal provisions granted in another tax treaty to which the country
of residence of such taxpayer is also a party provided that the subject matter of taxation, in this case royalty income, is the
same as that in the tax treaty under which the taxpayer is liable. Both Article 13 of the RP-US Tax Treaty and Article 12 (2)
(b) of the RP-West Germany Tax Treaty, above-quoted, speaks of tax on royalties for the use of trademark, patent, and
technology. The entitlement of the 10% rate by U.S. firms despite the absence of a matching credit (20% for royalties) would
derogate from the design behind the most favored nation clause to grant equality of international treatment since the tax
burden laid upon the income of the investor is not the same in the two countries.  The similarity in the circumstances of
payment of taxes is a condition for the enjoyment of most favored nation treatment precisely to underscore the need for
equality of treatment.
 We accordingly agree with petitioner that since the RP-US Tax Treaty does not give a matching tax credit of 20% for the
taxes paid to the Philippines on royalties as allowed under the RP-West Germany Tax Treaty, private respondent cannot be
deemed entitled to the 10% rate granted under the latter treaty for the reason that there is no payment of taxes on
royalties under similar circumstances.
 It bears stress that tax refunds are in the nature of tax exemptions. As such they are regarded as in derogation of sovereign
authority and to be construed strictissimi juris against the person or entity claiming the exemption. The burden of proof is
upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or
statute law. Private respondent is claiming for a refund of the alleged overpayment of tax on royalties; however, there is
nothing on record to support a claim that the tax on royalties under the RP-US Tax Treaty is paid under similar
circumstances as the tax on royalties under the RP-West Germany Tax Treaty.

10. Department of Agriculture V NLRC AUTHOR: Reyes

TOPIC: Non-suability of the State NOTES:
PONENTE: J. Vitug
CASE LAW/ DOCTRINE: The rule is not really absolute for it does not say that the State may not be sued under any circumstances.
The State may at times be sued. The State’s consent may be given expressly or impliedly. Express consent may be made through a
general law or a special law. Implied consent, on the other hand, is conceded when the State itself commences litigation, thus
opening itself to a counterclaim, or when it enters into a contract. In this situation, the government is deemed to have descended
to the level of the other contracting party and to have divested itself of its sovereign immunity.
Emergency Recit: Petitioner Department of Agriculture (DA) and Sultan Security Agency entered into a contract for security
services to be provided by the latter to the said governmental entity. Pursuant to their arrangements, guards were deployed by
Sultan Security Agency in the various premises of the DA. Thereafter, several guards filed a complaint for underpayment of wages,
nonpayment of 13th month pay, uniform allowances, night shift differential pay, holiday pay, and overtime pay, as well as for
damages against the DA and the security agency. The Labor Arbiter rendered a decision finding the DA jointly and severally liable
with the security agency for the payment of money claims of the complainant security guards. Hence the controversy.

21
FACTS:
 Petitioner Department of Agriculture and Sultan Security Agency entered into a contract for security services to be provided
by the latter to the said governmental entity. Pursuant to their arrangements, guards were deployed by Sultan Security
Agency in the various premises of the DA.
 Thereafter, several guards filed a complaint for underpayment of wages, non-payment of 13th month pay, uniform
allowances, night shift differential pay, holiday pay, and overtime pay, as well as for damages against the DA and the security
agency.
 The Labor Arbiter rendered a decision finding the DA jointly and severally liable with the security agency for the payment of
money claims of the complainant security guards.
 The DA and the security agency did not appeal the decision. Thus, the decision became final and executory. The Labor Arbiter
issued a writ of execution to enforce and execute the judgment against the property of the DA and the security agency.
Thereafter, the City Sheriff levied on execution the motor vehicles of the DA.
 The petitioner charges the NLRC with grave abuse of discretion for refusing to quash the writ of execution.
 The petitioner faults the NLRC for assuming jurisdiction over a money claim against the Department, which, it claims, falls
under the exclusive jurisdiction of the Commission on Audit. More importantly, the petitioner asserts, the NLRC has
disregarded the cardinal rule on the non-suability of the State.
 The private respondents, on the other hand, argue that the petitioner has impliedly waived its immunity from suit by
concluding a service contract with Sultan Security Agency
ISSUE(S): WON Whether or not the doctrine of non-suability of the State applies in the case

HELD: No
RATIO:
 The basic postulate enshrined in the constitution that "(t)he State may not be sued without its consent," reflects nothing less
than a recognition of the sovereign character of the State and an express affirmation of the unwritten rule effectively
insulating it from the jurisdiction of courts. It is based on the very essence of sovereignty.
 The rule is not really absolute for it does not say that the State may not be sued under any circumstances. The State may at
times be sued. The State’s consent may be given expressly or impliedly. Express consent may be made through a general
law or a special law. Implied consent, on the other hand, is conceded when the State itself commences litigation, thus
opening itself to a counterclaim, or when it enters into a contract. In this situation, the government is deemed to have
descended to the level of the other contracting party and to have divested itself of its sovereign immunity.
 As has been aptly observed, by Justice Holmes, “a sovereign is exempt from suit, not because of any formal conception or
obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes
the law on which the right depends. True, the doctrine, not too infrequently, is derisively called "the royal prerogative of
dishonesty" because it grants the state the prerogative to defeat any legitimate claim against it by simply invoking its non-
suability. We have had occasion, to explain in its defense, however, that a continued adherence to the doctrine of non-
suability cannot be deplored, for the loss of governmental efficiency and the obstacle to the performance of its multifarious
functions would be far greater in severity than the inconvenience that may be caused private parties, if such fundamental
principle is to be abandoned and the availability of judicial remedy is not to be accordingly restricted”.
 The rule does not say that the State may not be sued under any circumstances.
 The State may at times be sued. The general law waiving the immunity of the state from suit is found in Act No. 3083, where
the Philippine government “consents and submits to be sued upon any money claims involving liability arising from contract,
express or implied, which could serve as a basis of civil action between private parties.”
 Unites States of America vs. Ruiz, where the questioned transaction dealt with improvements on the wharves in the naval
installation at Subic Bay, SC held: “The traditional rule of immunity exempts a State from being sued in the courts of another
State without its consent or waiver. This rule is a necessary consequence of the principles of independence and equality of
States. However, the rules of International Law are not petrified; they are constantly developing and evolving. And because
the activities of states have multiplied, it has been necessary to distinguish them — between sovereign and governmental
acts (jure imperii) and private, commercial and proprietary act ( jure gestionis). The result is that State immunity now
extends only to acts jure imperii. The restrictive application of State immunity is now the rule in the United States, the
United Kingdom and other states in Western Europe. The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a state may be said to have descended to the level of an individual and can this be deemed to have actually
given its consent to be sued only when it enters into business contracts. It does not apply where the contracts relate to the
exercise of its sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the
defense of both the United States and the Philippines, indisputably a function of the government of the highest order; they
are not utilized for not dedicated to commercial or business purposes.”
 In this case, the DA has not pretended to have assumed a capacity apart from its being a governmental entity when it entered

22
 into the questioned contract; nor that it could have, in fact, performed any act proprietary in character. But the claims of the
complainant security guards clearly constitute money claims.

11. Department of Health et al. v.Phil. Pharmawealth, Inc. AUTHOR: S A Y O

G.R. No. 182358 Notes: Long case
February 20, 2013
TOPIC:
PONENTE:
CASE LAW/ DOCTRINE:
 GR: a state may not be sued.
 XPN: If it consents, either expressly or impliedly, then it may be the subject of a suit.
 There is express consent when a law, either special or general, so provides. On the other hand, there is implied consent when
the state "enters into a contract or it itself commences litigation." However, it must be clarified that when a state enters into
a contract, it does not automatically mean that it has waived its non-suability. The State "will be deemed to have impliedly
waived its non-suability [only] if it has entered into a contract in its proprietary or private capacity. [However,] when the
contract involves its sovereign or governmental capacity[,] x x x no such waiver may be implied.” "Statutory provisions
waiving [s]tate immunity are construed in strictissimi juris. For, waiver of immunity is in derogation of sovereignty.

EMERGENCY RECIT: There were several orders issued by the DOH. Essentially, the order set guidelines in the accreditation of
suppliers of pharmaceutical products and the validity of their accreditation. Respondent PPI was one of the suppliers called by the
DOH as they violated the guidelines set by the department. PPI challenged the validity of the orders on the ground that they
encroached the powers of the BFAD to regulate the suppliers of pharmaceutical products. The petition was partially granted thus
the appeal of petitioners invoking the non-suability of the state.
FACTS:
 Administrative Order (AO) No. 27 series of 1998: Issued by DOH Sec. Romualdez which set the guidelines and procedure for
accreditation of government suppliers of pharmaceutical products for sale or distribution to the public, such accreditation to
be valid for three years but subject to annual review.
 AO 10 series of 2000: amended AO 27. Accreditation for suppliers was reduced to two years. Moreover, such accreditation
may be recalled, suspended or revoked after due deliberation and proper notice by the DOH Accreditation Committee.
 AO 66 series of 2000: amended Section VII of AO 10 which states that the two-year accreditation period may be recalled,
suspended or revoked only after due deliberation, hearing  and notice by the DOH Accreditation Committee, through its
Chairman.
 Memorandum No. 171-C was issued: provided for a list and category of sanctions to be imposed on accredited government
suppliers of pharmaceutical products in case of adverse findings regarding their products ( e.g.  substandard, fake, or
misbranded) or violations committed by them during their accreditation.
 In line with Memorandum No. 171-C, Usec. Galon issued Memorandum No. 209 series of 2000: inviting representatives of 24
accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a meeting. During the meeting,
Undersecretary Galon handed them copies of a document entitled "Report on Violative Products” issued by the BFAD, which
detailed violations or adverse findings relative to these accredited drug companies’ products.
 Specifically, the BFAD found that PPIs products which were being sold to the public were unfit for human consumption.
 During the meeting, the 24 drug companies were directed to submit within 10 days their respective explanations on the
adverse findings covering their respective products contained in the Report on Violative Products.
 Instead of submitting its written explanation within the 10-day period as required, PPI belatedly sent a letter merely
informing her that PPI has referred the Report on Violative Products to its lawyers with instructions to prepare the
corresponding reply.
 However, PPI did not indicate when its reply would be submitted; nor did it seek an extension of the 10-day period, which
had previously expired on November 6, 2000, much less offer any explanation for its failure to timely submit its reply.
 Usec. Galon found "untenable" PPIs November 13, 2000 letter and therein informed PPI that, effective immediately, its
accreditation has been suspended for two years pursuant to AO 10 and Memorandum No. 171-C.
 PPI questioned the suspension of its accreditation, saying that the same was made pursuant to Section VII of AO 10 which it
claimed was patently illegal and null and void because it arrogated unto the DOH Accreditation Committee powers and
functions which were granted to the BFAD under Republic Act (RA) No. 3720 and Executive Order (EO) No. 175.
 PPI added that its accreditation was suspended without the benefit of notice and hearing, in violation of its right to

23
 substantive and administrative due process.
 On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a Complaint seeking to declare null and void
certain DOH administrative issuances, with prayer for damages and injunction against the DOH, former Secretary Romualdez
and DOH Undersecretary Galon.
 PPI: claimed that AO 10, Memorandum No. 171-C, Undersecretary Galons suspension order contained in her November 23,
2000 letter, and AO 14 series of 2001 are null and void for being in contravention of Section 26(d) of RA 3720 as amended by
EO 17. (BFAD Law)
 Usec Galon: sought the dismissal of the Complaint, stressing that PPIs accreditation was suspended because most of the
drugs it was importing and distributing/selling to the public were found by the BFAD to be substandard for human
consumption.
 They added that the DOH is primarily responsible for the formulation, planning, implementation, and coordination of policies
and programs in the field of health; it is vested with the comprehensive power to make essential health services and goods
available to the people, including accreditation of drug suppliers and regulation of importation and distribution of basic
medicines for the public.
 Petitioners added that, contrary to PPIs claim, it was given the opportunity to present its side within the 10-day period or
until November 6, 2000, but it failed to submit the required comment/reply.
 RTC: court partially granted PPIs prayer for a temporary restraining order, but only covering PPIs products which were not
included in the list of violative products or drugs as found by the BFAD.
 Petitioners moved for the dismissal of Civil Case No. 68200:
 claiming that the case was one against the State
 Complaint was improperly verified;
 lack of authority of the corporate officer to commence the suit, as the requisite resolution of PPIs board of directors
granting to the commencing officer PPIs Vice President for Legal and Administrative Affairs, Alan Alambra, the authority
to file Civil Case No. 68200 was lacking.

RTC: dismissed Civil Case No. 68200, declaring the case to be one instituted against the State, in which case the principle of state
immunity from suit is applicable.

CA: Reversed the trial court ruling and ordered the remand of the case for the conduct of further proceedings. The CA concluded
that it was premature for the trial court to have dismissed the Complaint. It added that it was apparent from the Complaint that
petitioners were being sued in their private and personal capacities for acts done beyond the scope of their official functions.
ISSUE(S): WON Petitioner is correct on the position that it cannot be sued (YES)
RATIO:
The DOH can validly invoke state immunity.

a) DOH is an unincorporated agency which performs sovereign or governmental functions.

In this case, the DOH, being an "unincorporated agency of the government" can validly invoke the defense of immunity from suit
because it has not consented, either expressly or impliedly, to be sued. Significantly, the DOH is an unincorporated agency which
performs functions of governmental character.

The ruling in Air Transportation Office v. Ramos is relevant, 

An unincorporated government agency without any separate juridical personality of its own enjoys immunity from suit because it
is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the agency cannot prosper;
otherwise, the doctrine of sovereign immunity is violated. However, the need to distinguish between an unincorporated
government agency performing governmental function and one performing proprietary functions has arisen . The immunity has
been upheld in favor of the former because its function is governmental or incidental to such function; it has not been upheld in
favor of the latter whose function was not in pursuit of a necessary function of government but was essentially a business.

b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other defendants for damages which constitutes a
charge or financial liability against the state.

Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against the state," the defense of non-
suability may be properly invoked. In this case, PPI specifically prayed, in its Complaint and Amended and Supplemental
Complaint, for the DOH, together with Secretaries Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and
severally liable for moral damages, exemplary damages, attorneys fees and costs of suit. Undoubtedly, in the event that PPI
succeeds in its suit, the government or the state through the DOH would become vulnerable to an imposition or financial charge
24
in the form of damages. This would require an appropriation from the national treasury which is precisely the situation which the
doctrine of state immunity aims to protect the state from.

The mantle of non-suability extends to complaints filed against public officials for acts done in the performance of their official
functions.
As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary Galon, it must be stressed that the
doctrine of state immunity extends its protective mantle also to complaints filed against state officials for acts done in the
discharge and performance of their duties." The suability of a government official depends on whether the official concerned was
acting within his official or jurisdictional capacity, and whether the acts done in the performance of official functions will result in
a charge or financial liability against the government." Otherwise stated, "public officials can be held personally accountable for
acts claimed to have been performed in connection with official duties where they have acted ultra vires  or where there is
showing of bad faith." Moreover, "[t]he rule is that if the judgment against such officials will require the state itself to perform an
affirmative act to satisfy the same, such as the appropriation of the amount needed to pay the damages awarded against them,
the suit must be regarded as against the state x x x. In such a situation, the state may move to dismiss the [C]omplaint on the
ground that it has been filed without its consent." 

It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as Undersecretary Galon, were done
while in the performance and discharge of their official functions or in their official capacities, and not in their personal or
individual capacities. Secretaries Romualdez and Dayrit were being charged with the issuance of the assailed orders. On the other
hand, Undersecretary Galon was being charged with implementing the assailed issuances. By no stretch of imagination could the
same be categorized as ultra vires simply because the said acts are well within the scope of their authority. Section 4 of RA 3720
specifically provides that the BFAD is an office under the Office of the Health Secretary. Also, the Health Secretary is authorized to
issue rules and regulations as may be necessary to effectively enforce the provisions of RA 3720.
As regards Undersecretary Galon, she is authorized by law to supervise the offices under the DOHs authority,  such as the BFAD.
Moreover, there was also no showing of bad faith on their part. The assailed issuances were not directed only against PPI. The
suspension of PPIs accreditation only came about after it failed to submit its comment as directed by Undersecretary Galon. It is
also beyond dispute that if found wanting, a financial charge will be imposed upon them which will require an appropriation from
the state of the needed amount. Thus, based on the foregoing considerations, the Complaint against them should likewise be
dismissed for being a suit against the state which absolutely did not give its consent to be sued. Based on the foregoing
considerations, and regardless of the merits of PPIs case, this case deserves a dismissal. Evidently, the very foundation of Civil
Case No. 68200 has crumbled at this initial juncture.

12. Air Transportation Office vs Spouses David and Elisea AUTHOR:

Ramos NOTES: Short Facts  Yey.
[G.R. No. 159402; February 23, 2011] ATO – Air Transportation Office
TOPIC: Session 2 - General
PONENTE: Bersamin, J.
CASE LAW/ DOCTRINE:
 The State’s immunity from suit does not extend to the petitioner because it is an agency of the State engaged in an
enterprise that is far from being the State’s exclusive prerogative.
 The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the State, is
expressly provided in Art. XVI of the 1987 Constitution, viz:
“Section 3. The State may not be sued without its consent.”
 The immunity from suit is based on the political truism that the State, as a sovereign, can do no wrong. Moreover, as the
eminent Justice Holmes said in Kawananakoa v. Polyblank:
“A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and
practical ground that there can be no legal right as against the authority that makes the law on which the right depends.”
 The CA thereby correctly appreciated the juridical character of the ATO as an agency of the Government not performing a
purely governmental or sovereign function, but was instead involved in the management and maintenance of the Loakan
Airport, an activity that was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO had no claim
to the State’s immunity from suit.
Emergency Recit: No Need. Short Facts. :p
FACTS:
 Respondents discovered that a portion of their land registered under TCT No. T-58894 of the Baguio City land records with an
area of 985 sqm, more or less, was being used as part of the runway and running shoulder of the Loakan Airport being
operated by ATO.
 The respondents agreed after negotiations to convey the affected portion by deed of sale to the ATO in consideration of the
25
 amount of Php 778,150.00. However, the ATO failed to pay despite repeated verbal and written demands.
 The respondents filed an action for collection against the ATO and some of its officials in the RTC titled “Spouses David and
Elisea Ramos vs Air Transportation Office, Capt. Panfilo Villaruel, Gen. Carlos Tanega, and Mr. Cesar de Jesus.”
 In their answer, the ATO and its co-defendants invoked as an affirmative defense the issuance of Proclamation No. 1358,
whereby President Marcos had reserved certain parcels of land that included the respondents’ affected portion for use of
the Loakan Airport. They asserted that the RTC had no jurisdiction to entertain the action without the State’s consent
considering that the deed of sale had been entered into in the performance of governmental functions.
 RTC: Denied the ATO’s motion for a preliminary hearing of the affirmative defense, as well as the MR later filed.
 The ATO commenced a special civil action for certiorari in the CA to assail the RTC’s orders.
 CA: Dismissed the petition for certiorari, however, upon its finding that the assailed orders were not tainted with grave abuse
of discretion.
 RTC: Subsequently, rendered its decision on the merits, ordering ATO to pay the respondents the following:
o The amount of Php 778,150 being the value of the parcel of land appropriated by the ATO as embodied in the Deed
of Sale, plus an annual interest of 12% from Aug. 11, 1995, the date of the Deed of Sale until fully paid;
o The amount of Php 150k by way of moral damages and Php 150k as exemplary damages;
o the amount of Php 50k by way of attorney’s fees plus Php 15k representing the 10, more or less, court appearances
of respondents’ counsel;
o The costs of this suit.
 CA: On appeal, it affirmed the RTC’s decision with modification that the awarded cost therein is deleted, while that of moral
and exemplary damages is reduced to Php 30k each, and attorney’s fees is lowered to Php 10k.
 Hence, this appeal by petition for review on certiorari.
ISSUE(S): WON the ATO could be sued without the consent of the State.

HELD: Yarp.
RATIO:
 The State’s immunity from suit does not extend to the petitioner because it is an agency of the State engaged in an
enterprise that is far from being the State’s exclusive prerogative.
 The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the State, is
expressly provided in Art. XVI of the 1987 Constitution, viz:
“Section 3. The State may not be sued without its consent.”

 The immunity from suit is based on the political truism that the State, as a sovereign, can do no wrong . Moreover, as the
eminent Justice Holmes said in Kawananakoa v. Polyblank:
“A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and
practical ground that there can be no legal right as against the authority that makes the law on which the right depends.”

 Practical considerations dictate the establishment of an immunity from suit in favor of the State. Otherwise, and the State is
suable at the instance of every other individual, government service may be severely obstructed and public safety
endangered because of the number of suits that the State has to defend against. Several justifications have been offered to
support the adoption of the doctrine in the Philippines, but that offered in Providence Washington Insurance Co. vs Republic
of the Philippines is "the most acceptable explanation," according to Father Bernas, a recognized commentator on
Constitutional Law, to wit:
“A continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that may
be caused private parties, the loss of governmental efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were abandoned and the availability of judicial remedy were not
thus restricted. With the well-known propensity on the part of our people to go to court, at the least provocation, the loss
of time and energy required to defend against law suits, in the absence of such a basic principle that constitutes such an
effective obstacle, could very well be imagined.”

 An unincorporated government agency without any separate juridical personality of its own enjoys immunity from suit
because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the agency cannot
prosper; otherwise, the doctrine of sovereign immunity is violated. However, the need to distinguish between an
unincorporated government agency performing governmental function and one performing proprietary functions has arisen.
The immunity has been upheld in favor of the former because its function is governmental or incidental to such function; it
has not been upheld in favor of the latter whose function was not in pursuit of a necessary function of government but was
essentially a business.
 Should the doctrine of sovereignty immunity or non-suability of the State be extended to the ATO? In its challenged
decision, the CA answered in the negative, holding:
26
 “On the first assignment of error, appellants seek to impress upon Us that the subject contract of sale partook of a
governmental character. Apropos, the lower court erred in applying the High Court’s ruling in National Airports
Corporation vs Teodoro, arguing that in Teodoro, the matter involved the collection of landing and parking fees which is a
proprietary function, while the case at bar involves the maintenance and operation of aircraft and air navigational
facilities and services which are governmental functions.”

 Contrary to appellants’ conclusions, it was not merely the collection of landing and parking fees which was declared as
proprietary in nature by the High Court in Teodoro, but management and maintenance of airport operations as a whole, as
well. Thus, in the much later case of Civil Aeronautics Administration vs CA, the Supreme Court, reiterating the
pronouncements laid down in Teodoro, declared that the CAA (predecessor of ATO) is an agency not immune from suit, it
being engaged in functions pertaining to a private entity. It went on to explain in this wise:

“The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it
was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what
is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the
convenience of the travelling public. It is engaged in an enterprise which, far from being the exclusive prerogative of
state, may, more than the construction of public roads, be undertaken by private concerns.

True, the law prevailing in 1952 when the Teodoro  case was promulgated was EO 365 (Reorganizing the Civil Aeronautics
Administration and Abolishing the National Airports Corporation). RA 776 (Civil Aeronautics Act of the Philippines),
subsequently enacted on June 20, 1952, did not alter the character of the CAA’s objectives under EO 365. The pertinent
provisions cited in the Teodoro  case, particularly Secs. 3 and 4 of EO 365, which led the Court to consider the CAA in the
category of a private entity were retained substantially in RA 776, Sec. 32(24) and (25). Said Act provides:

Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and supervision of the
Department Head, the Administrator shall have among others, the following powers and duties:

(24) To administer, operate, manage, control, maintain and develop the Manila International Airport
and all government-owned aerodromes except those controlled or operated by the Armed Forces of
the Philippines including such powers and duties as: (a) to plan, design, construct, equip, expand,
improve, repair or alter aerodromes or such structures, improvement or air navigation facilities; (b) to
enter into, make and execute contracts of any kind with any person, firm, or public or private
corporation or entity;

(25) To determine, fix, impose, collect and receive landing fees, parking space fees, royalties on sales or
deliveries, direct or indirect, to any aircraft for its use of aviation gasoline, oil and lubricants, spare
parts, accessories and supplies, tools, other royalties, fees or rentals for the use of any of the property
under its management and control.

From the foregoing, it can be seen that the CAA is tasked with private or non-governmental functions which operate to
remove it from the purview of the rule on State immunity from suit. For the correct rule as set forth in the Teodoro case
states:

Not all government entities, whether corporate or non-corporate, are immune from suits. Immunity from suits
is determined by the character of the objects for which the entity was organized. The rule is thus stated in
Corpus Juris:

Suits against State agencies with relation to matters in which they have assumed to act in private or
non-governmental capacity, and various suits against certain corporations created by the state for
public purposes, but to engage in matters partaking more of the nature of ordinary business rather
than functions of a governmental or political character, are not regarded as suits against the state . The
latter is true, although the state may own stock or property of such a corporation for by engaging in
business operations through a corporation, the state divests itself so far of its sovereign character, and
by implication consents to suits against the corporation.

This doctrine has been reaffirmed in the recent case of Malong vs Philippine National Railways, where it was held that
the Philippine National Railways, although owned and operated by the government, was not immune from suit as it does
not exercise sovereign but purely proprietary and business functions. Accordingly, as the CAA was created to undertake
27
 the management of airport operations which primarily involve proprietary functions, it cannot avail of the immunity from
suit accorded to government agencies performing strictly governmental functions.”

 In our view, the CA thereby correctly appreciated the juridical character of the ATO as an agency of the Government not
performing a purely governmental or sovereign function, but was instead involved in the management and maintenance of
the Loakan Airport, an activity that was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO
had no claim to the State’s immunity from suit. We uphold the CA’s aforequoted holding.
 We further observe the doctrine of sovereign immunity cannot be successfully invoked to defeat a valid claim for
compensation arising from the taking without just compensation and without the proper expropriation proceedings being
first resorted to of the respondents’ property. Thus, in De los Santos vs IAC, the trial court’s dismissal based on the doctrine
of non-suability of the State of two cases (one of which was for damages) filed by owners of property where a road 9 meters
wide and 128.70 meters long occupying a total area of 1,165 square meters and an artificial creek 23.20 meters wide and
128.69 meters long occupying an area of 2,906 square meters had been constructed by the provincial engineer of Rizal and a
private contractor without the owners’ knowledge and consent was reversed and the cases remanded for trial on the merits.
The Supreme Court ruled that the doctrine of sovereign immunity was not an instrument for perpetrating any injustice on a
citizen. In exercising the right of eminent domain, the Court explained, the State exercised its jus imperii, as distinguished
from its proprietary rights, or jus gestionis; yet, even in that area, where private property had been taken in expropriation
without just compensation being paid, the defense of immunity from suit could not be set up by the State against an action
for payment by the owners.
 Lastly, the issue of whether or not the ATO could be sued without the State’s consent has been rendered moot by the
passage of RA 9497, otherwise known as the Civil Aviation Authority Act of 2008.
 R.A. No. 9497 abolished the ATO, to wit:
“Section 4. Creation of the Authority. – There is hereby created an independent regulatory body with quasi-judicial and
quasi-legislative powers and possessing corporate attributes to be known as the Civil Aviation Authority of the Philippines
(CAAP), herein after referred to as the "Authority" attached to the Department of Transportation and Communications
(DOTC) for the purpose of policy coordination. For this purpose, the existing Air transportation Office created under the
provisions of Republic Act No. 776, as amended is hereby abolished.

 Under its Transitory Provisions, RA 9497 established in place of the ATO the Civil Aviation Authority of the Philippines
(CAAP), which thereby assumed all of the ATO’s powers, duties and rights, assets, real and personal properties, funds, and
revenues, viz:
CHAPTER XII
TRANSITORTY PROVISIONS

Section 85. Abolition of the Air Transportation Office. – The Air Transportation Office (ATO) created under Republic Act
No. 776, a sectoral office of the Department of Transportation and Communications (DOTC), is hereby abolished.

All powers, duties and rights vested by law and exercised by the ATO is hereby transferred to the Authority.

All assets, real and personal properties, funds and revenues owned by or vested in the different offices of
the ATO are transferred to the Authority. All contracts, records and documents relating to the operations of the
abolished agency and its offices and branches are likewise transferred to the Authority. Any real property owned
by the national government or government-owned corporation or authority which is being used and utilized as
office or facility by the ATO shall be transferred and titled in favor of the Authority.

 Sec. 23 of RA 9497 enumerates the corporate powers vested in the CAAP, including the power to sue and be sued, to enter
into contracts of every class, kind and description, to construct, acquire, own, hold, operate, maintain, administer and lease
personal and real properties, and to settle, under such terms and conditions most advantageous to it, any claim by or against
it.
 With the CAAP having legally succeeded the ATO pursuant to RA 9497, the obligations that the ATO had incurred by virtue of
the deed of sale with the respondents might now be enforced against the CAAP.

13 YUJUICO v. ATIENZA, et. al. AUTHOR: TAN

G.R. No. 164282. October 12, 2005 Notes:
TOPIC: SESSION 2
PONENTE: TINGA, J.
CASE LAW/ DOCTRINE: The City of Manila cannot be excused from paying the property owner the balance of just compensation because it
28
was the city which initiated the expropriation proceedings. (From Atty. Loanzon’s reviewer)
FACTS:
 The City Council of Manila enacted an Ordinance authorizing the City Mayor to acquire by negotiation or expropriation certain parcels
of land for utilization as a site for the Francisco Benitez Elementary School. The property chosen is located along Solis St. near Juan Luna
St. in the Second District of Manila and contains an approximate area of 3,979.10 square meters. It is covered by Transfer Certificates of
Title Nos. 71541, 71548, 24423, 71544 and 71546, all in the name of Yujuico.
 The Ordinance provides that an amount not to exceed the fair market value of the land then prevailing in the area will be allocated out
of the Special Education Fund (SEF) of the City of Manila (City) to defray the cost of the property’s acquisition.
 Failing to acquire the land by negotiation, the City filed a case for eminent domain/expropriation against Yujuico as owner of the
property. RTC rendered a Decision in favor of the City. The judgment became final and executory, no appeal having been interposed by
either party.
 Yujuico filed a Motion for Execution of Judgment, which the trial court granted. Pursuant to a Writ of Execution, the branch sheriff
served a Notice of Garnishment on the funds of the City deposited with the Land Bank of the Philippines to satisfy the judgment
amount of P67,894,226.00, with interest at 6% per annum.
 Invoking jurisprudence holding that public funds cannot be made subject to garnishment, the City filed a motion to quash the Notice of
Garnishment, which was partially granted.
o The lower court recalled that during the hearing on the motion, the counsel for the City manifested that the amount of
P36,403,170.00 had been appropriated by the City School Board (CSB) under CSB Resolutions Nos. 613 and 623, of which
P31,039,881.00 was available for release. In line with the manifestation made by the counsel for the City, the trial court
ordered the release to petitioner of the amount of P31,039,881.00 deposited with the Land Bank, in partial payment of the
just compensation adjudged in favor of petitioner.
o However, with regard to the remainder, the trial court lifted the Notice of Garnishment and instead ordered the CSB to pass
the necessary resolution for the payments of the remaining balance due to Yujuico.
 Yujuico eventually filed before the RTC a petition for Mandamus against respondents (members of the CSB), to compel them to pass a
resolution appropriating the amount necessary to pay the balance of the just compensation awarded to petitioner in the expropriation
case.
 RTC granted Mandamus. The decision became final and executory.
 Respondents filed a petition for relief from judgment citing excusable negligence in failing to appeal. Petition granted. This prompted
Yujuico to elevate the case to the SC.
ISSUE(S): WoN respondents are justified in not paying the petitioner her just compensation. –NO.
RATIO:
 While this Court recognizes the power of LGU to expropriate private property for public use, it will not stand idly by while the
expropriating authority maneuvers to evade the payment of just compensation of property already in its possession.
 The notion of expropriation is hard enough to take for a private owner. He is compelled to give up his property for the common weal.
But to give it up and wait in vain for the just compensation decreed by the courts is too much to bear. In cases like these, courts will not
hesitate to step in to ensure that justice and fair play are served. As we have already ruled:
. . . This Court will not condone petitioner’s blatant refusal to settle its legal obligation arising from expropriation proceedings it
had in fact initiated. It cannot be over-emphasized that within the context of the State’s inherent power of eminent domain,. . .
(j)ust compensation means not only the correct determination of the amount to be paid to the owner of the land but also the
payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered
‘just’ for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to cope with his loss.

14. City of Manila vs. Alegar Corp, Terocel Corp and Filomena AUTHOR: Valera
vda. De Legarda Notes:
G.R. No. 187604
TOPIC: Expropriation?
PONENTE: Abad
CASE LAW/ DOCTRINE:
 An expropriation proceeding has 2 stages, 1st, the determination of the City’s authority to exercise the power of eminent
domain. 2nd, if there is such authority, the determination of just compensation
 the Court has held that when the property owner rejects the offer but hints for a better price, the government should
renegotiate by calling the property owner to a conference The government must exhaust all reasonable efforts to obtain by
agreement the land it desires. Its failure to comply will warrant the dismissal of the complaint. As provided by Art 35 of the
IRR of the LGC
 The Court cannot treat the requirements of Secs 9 and 10 lightly because jurisprudence provides that these requirements

29
 are strict limitations on the local governments exercise of the power of eminent domain.
 The only safeguards of property owners against the power of the state.
 The burden is on the local government to prove that it satisfied the requirements or that they do not apply in the
case
Emergency Recit: The City of Manila, tried to aquire the property of the respondents as authorized by Ordinance 8012. The city
initially offered 1.5k/sqm but the owners refused. The city then filed a case for expropriation. The City deposited 1.5m to be
issued a writ of possession. When the RTC ordered the case for pre-trial, the Parties agreed that they will just submit memoranda,
but Only the owners did. RTC then dismissed the petition on the grounds that it was in violation of Sec 9 and 10 of RA 7279 which
provides that the priority of lands to be expropriated dor socialized housing and the procedure when to file an expropriation case.
The CA, SC affirmed. ( See Ratio for in depth discussion)
FACTS:
 On Mar 1, 2001 the City council of Manila passed Ordinance 8012 that authorized the Mayor to acquire certain lots belonging
to the respondents, for the socialized housing project of the City.
 The City offered to buy the lots at 1.5k/sqm, but the owners rejected. On Dec 2, 2003, the City filed a complaint for
expropriation with the RTC.
 The City alleged in its complaint the ff:
 It wanted to acquire the lots for its land for the landless and on-site development programs involving the residents
occupying them
 That it offered to buy the lots at 1.5k/sqm which the owners rejected.
 That the total aggregate value of the lots was P809,280,00
 And that the City deposited 1.5million php with Land Bank to enable them to immediately occupy the same pending the
case.
 Respondents questioned the legitimacy of the City’s taking of their lots solely for the benefit of a few long-time occupants.
 They also pointed out that while they declined the initial offer, it did not foreclose the possibility of the sale for the right
price. And that the filing of the suit was premature because the City made no effort in good faith to negotiate.
 The RTC then issued a writ of possession in favor of the City. And upon the joint motion of the parties, the RTC released the
1.5m deposit to the respondents.
 The parties then agreed to forego with the pre-trial opting to simultaneously submit their memoranda on the issue of W/N
there is necessity for the expropriation
 The respondents submitted their memorandum but the City did not.
 The RTC dismissed the complaint on the ff grounds:
 Did not comply with Sec. 9 of RA 7279 which set the order of priority in the acquisition of properties for socialized
housing.
- Private properties rank last in such order for acquisition and the City failed to show that no other properties were
available for the project.
 Did not comply with Sec 10, which authorized expropriation only when resort to other modes (such as community
mortgage, land swapping, and negotiated purchase) had been exhausted.
- The court pointed out that the City failed to show that it exhausted all efforts to acquire the lots through a
negotiated sale as provided by the Local Government Code in Sec 35.
- Here, after the owners refused to sell the lots for P1.5k/sqm offer, the City did not exert any effort to renegotiate or
revise its offer.
 City submitted the issue of genuine necessity to acquire the properties for public purpose or benefit without presenting
evidence on the same.
 On appeal, the CA affirmed the RTC’s dismissal
 Mainly for the reason of the City’s failure to comply with Sections 9 and 10 of Ra 7279
 The CA rejected City’s claim that the RTC denied it its right to due process.
ISSUE(S):
1. ) W/N the CA erred in failing to rule that the RTC denied the City its right to due process when it dismissed the case without
hearing the Citys side;
2.) W/N the CA erred in affirming the RTCs ruling that the City failed to comply with the requirements of Sections 9 and 10 of R.A.
7279 in trying to acquire the subject lots by expropriation;
3.) Whether or not the CA erred in failing to set aside the RTCs ruling that the City failed to establish the existence of genuine
necessity in expropriating the subject lots for public use or purpose; and
4.) Whether or not the CA erred in failing to rule that the owners withdrawal of its P1.5 million deposit constituted implied
consent to the expropriation of their lots.

HELD:
1. No
30
 2. No.
3. No.
4. No.
RATIO: per issue
1.) The RTC did not deny the City its right to be heard when it dismissed the case.
 An expropriation proceeding has 2 stages, 1 st, the determination of the City’s authority to exercise the power of eminent
domain. 2nd, if there is such authority, the determination of just compensation.
 The City’s action was still in the 1 st stage when the RTC called the pre-trial conference to discuss on the City’s authority to
expropriate the lots for its intended purpose.
 As this happened, the parties opted to submit memoranda on the issue. There was nothing infirm with such agreement.
 Unfortunately, the agreement implied that the City was waiving its right to present evidence that it was acquiring the lots
for a proper public purpose. The City may have been confident that its allegations in the complaint can stand on its own,
ignoring the owners challenge.
 The City cannot claim that it had been denied the opportunity of a hearing, when the City moved for reconsideration of
the RTC’s order, but withdrawing it by filing a notice of appeal with the CA
2.) The CA correctly ruled that the City failed to show that it complied with the requirements of Sec 9 of RA 7279 which lays
down the order of priority in the acquisition of lands for socialized housing.

“Section 9. Priorities in the acquisition of Land.Lands for socialized housing shall be acquired in the following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies, including government-owned
or controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas for Priority Development, Zonal Improvement Program sites, and Slum Improvement
and Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS sites which have not yet been acquired; and
(f) Privately-owned lands

Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in
this section shall not apply. The local government units shall give budgetary priority to on-site development of government
lands.”

 The City argues that it did not have to observe such hierarchy since it found on-site development to be more practical
and advantageous to the beneficiaries who were the lot’s long time occupants. – However the City did not adduce
evidence that this was so.
 Besides, sec 10 of the RA prefers the acquisition of private property by negotiated sale. It provides that expropriation
only be resorted to when the other modes have been exhausted.
 the Court has held that when the property owner rejects the offer but hints for a better price, the government should
renegotiate by calling the property owner to a conference. The government must exhaust all reasonable efforts to
obtain by agreement the land it desires. Its failure to comply will warrant the dismissal of the complaint . As provided
by Art 35 of the IRR of the LGC
 In this case, the City of Manila initially offered 1.5k/sqm to the owners, but after the rejection, the City did not bother to
renegotiate its offer. The intent of the law is for the State to make a reasonable offer in good faith, and not merely a pro
forma offer to acquire the property
 The Court cannot treat the requirements of Secs 9 and 10 lightly because jurisprudence provides that these requirements
are strict limitations on the local governments exercise of the power of eminent domain.
- The only safeguards of property owners against the power of the state.
- The burden is on the local government to prove that it satisfied the requirements or that they do not apply in the
case.
3.) The City did allege in its complaint that it wanted to acquire the lots for its land for the landless program and that it was in
accord with Ordinance 8012.
 The Owners directly challenged the validity of the action alleging that the expropriation of their lots is not for public
purpose since it would only benefit a few.
 The answer tendered a factual issue which calls for evidence on the City’s part to prove its allegations, The City submitted
the issue for resolution without presenting evidence.
4.) The City insists that by the withdrawal of 1.5m deposit by the owners, it may be assumed that they have given their consent.
 But the advance deposit required under Section 19 of the Local Government Code constitutes an advance payment only
in the event the expropriation prospers
31
  Deposit has a dual purpose: as Prepayment if the expropriation succeeds or as indemnity for damages if its dismissed.
 The advance payment is a pre-req for the issuance of a writ of possession should not be confused with payment of just
compensation.
 The owners’ withdrawal of the deposit does not amount to a waiver of the defenses they raised against the
expropriation.
 The City is entitled to the return of the advance it made but considering the expenses the owners needed, in its defense,
an award of 50k as attorneys fees is in order, and that the owners must return the rest of the 1.5m they withdrew.

15 ERDITO QUARTO v. THE HONORABLE OMBUDSMAN AUTHOR: ACIDO

SIMEON MARCELO, CHIEF SPECIAL PROSECUTOR DENNIS NOTES: good naaaayt
VILLA IGNACIO, LUISITO M. TABLAN, RAUL B. BORILLO, and
LUIS A. GAYYA
[G.R. No. 169042, October 5, 2011]
TOPIC: General
PONENTE: Brion, J.
CASE LAW/ DOCTRINE: The power to grant immunity from prosecution is essentially a legislative prerogative. While the
legislature is the source of the power to grant immunity, the authority to implement is lodged elsewhere. The authority to choose
the individual to whom immunity would be granted is a constituent part of the process and is essentially an executive function.
Emergency Recit: A DPWH internal audit of repairs/purchase of spare parts of service vehicles resulted to petitioner Quarto and
respondents Tablan, Borillo, and Gayya being charged before the Ombudsman with Plunder, Money Laundering, Malversation,
and violations of RA No. 3019 and the Administrative Code. Petitioner denied the allegations; respondents offered to testify. The
Ombudsman went ahead with filing Informations with the Sandiganbayan AND granted respondents’ request for immunity in
exchange for their testimonies. Petitioner questioned this grant by way of certiorari and mandamus. SC held there was no grave
abuse of discretion on the part of the Ombudsman; also see doctrine.
FACTS:
 [PURO ACRONYMS!] The petitioner is the Chief of the Central Equipment and Spare Parts Division (CESPD),  Bureau of
Equipment (BOE), Department of Public Works and Highways (DPWH), Port Area, Manila. As CESPD Chief, he is also the Head
of the Special Inspectorate Team (SIT) of the DPWH. The respondents Tablan, Borillo, and Gayya are members of the SIT.
 On January 9, 2002, DPWH Secretary Simeon Datumanong created a committee to investigate alleged anomalous
transactions involving the repairs and/or purchase of spare parts of DPWH service vehicles in 2001. On January 17, 2002, the
committee designated the DPWH Internal Audit Service (IAS) as its Technical Working Group to conduct the actual
investigation.
 The DPWH-IAS discovered that from March to December 2001, several emergency repairs and/or purchase of spare parts of
hundreds of DPWH service vehicles, which were approved and paid by the government, did not actually take place, resulting
in government losses of approximately ₱143 million for this ten-month period alone.
 Thus, Atty. Irene D. Ofilada of the DPWH-IAS filed before the Office of the Ombudsman a Complaint-Affidavit and a
Supplemental Complaint-Affidavit charging several high-ranking DPWH officials and employees – including the petitioner,
the respondents, and other private individuals who purportedly benefited from the anomalous transactions – with Plunder,
Money Laundering, Malversation, and violations of RA No. 3019 and the Administrative Code.
 The petitioner denied the allegations against him, claiming that he merely relied on his subordinates when he signed the job
orders and the inspection reports. In contrast, the respondents admitted the existence of irregularities in the repairs and/or
purchase of spare parts of DPWH service vehicles, and offered to testify and to provide evidence against the DPWH officials
and employees involved in the anomaly in exchange for their immunity from prosecution. 
 After conducting preliminary investigation, the Ombudsman filed with the Sandiganbayan several Informations charging a
number of DPWH officials and employees with plunder, estafa through falsification of official/commercial documents and
violation of Section 3(e), RA No. 3019. On the other hand, the Ombudsman granted the respondents’ request for immunity
in exchange for their testimonies and cooperation in the prosecution of the cases filed.
 The petitioner initially filed a certiorari petition with the Sandiganbayan, questioning the Ombudsman’s grant of immunity in
the respondents’ favor.
 SB: Dismissed the petition for lack of jurisdiction and advised the petitioner to instead question the Ombudsman’s actions
before the SC.
 Hence, this petition for certiorari and mandamus, seeking to nullify the immunity granted to the respondents, and to compel
the Ombudsman to include them as accused in the Informations for estafa through falsification of public documents and for
violation of Section 3(e), RA No. 3019.

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ISSUE: Whether mandamus will lie against the Ombudsman with regard to the power to (or not to) grant immunity from
prosecution to witnesses.

HELD: No. Petition dismissed.

RATIO:
 In the exercise of his investigatory and prosecutorial powers, the Ombudsman is generally no different from an ordinary
prosecutor in determining who must be charged. He also enjoys the same latitude of discretion in determining what
constitutes sufficient evidence to support a finding of probable cause (that must be established for the filing of an
information in court) and the degree of participation of those involved or the lack thereof. His findings and conclusions on
these matters are not ordinarily subject to review by the courts except when he gravely abuses his discretion, i.e., when his
action amounts to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or when he acts outside
the contemplation of law.
 In the present case, the Ombudsman granted the respondents immunity from prosecution pursuant to RA No. 6770 which
specifically empowers the Ombudsman to grant immunity "in any hearing, inquiry or proceeding being conducted by the
Ombudsman or under its authority, in the performance or in the furtherance of its constitutional functions and statutory
objectives."
 The power to grant immunity from prosecution is essentially a legislative prerogative. The exclusive power of Congress to
define crimes and their nature and to provide for their punishment concomitantly carries the power to immunize certain
persons from prosecution to facilitate the attainment of state interests, among them, the solution and prosecution of crimes
with high political, social and economic impact. In the exercise of this power, Congress possesses broad discretion and can lay
down the conditions and the extent of the immunity to be granted.
 While the legislature is the source of the power to grant immunity, the authority to implement is lodged elsewhere. The
authority to choose the individual to whom immunity would be granted is a constituent part of the process and is
essentially an executive function.
 The decision to grant immunity from prosecution forms a constituent part of the prosecution process. It is essentially a
tactical decision to forego prosecution of a person for government to achieve a higher objective. It is a deliberate
renunciation of the right of the State to prosecute all who appear to be guilty of having committed a crime.
 RA No. 6770 fully recognizes this prosecutory prerogative by empowering the Ombudsman to grant immunity, subject to
"such terms and conditions" as he may determine. The only textual limitation imposed by law on this authority is the need
to take "into account the pertinent provisions of the Rules of Court," – i.e., Section 17, Rule 119 of the Rules of Court.
 An immunity statute does not, and cannot, rule out a review by this Court of the Ombudsman’s exercise of discretion. Like all
other officials under our constitutional scheme of government, all their acts must adhere to the Constitution.
 The Court’s intervention through a Rule 65 only occurs when a clear and grave abuse of the exercise of discretion is shown.
Necessarily, this limitation similarly reflects on the petitioner who comes on the allegation of grave abuse of discretion; the
petitioner himself is bound to clearly and convincingly establish that the Ombudsman gravely abused his discretion in
granting immunity in order to fully establish his case.
 Why there is no grave abuse of discretion
o  Absolute necessity for testimony of the respondents – SATISFIED
o The respondents do not appear to be the "most guilty" – SATISFIED
o The respondents’ administrative liability has no bearing at all on the immunity granted to the respondents - The fact
that the respondents had previously been found administratively liable, based on the same set of facts, does not
necessarily make them the "most guilty." An administrative case is altogether different from a criminal case, such
that the disposition in the former does not necessarily result in the same disposition for the latter, although both
may arise from the same set of facts.
 The Constitution and RA No. 6770 have endowed the Office of the Ombudsman with a wide latitude of investigatory and
prosecutory powers, freed, to the extent possible within our governmental system and structure, from legislative, executive,
or judicial intervention, and insulated from outside pressure and improper influence. Consistent with this purpose and
subject to the command of paragraph 2, Section 1, Article VIII of the 1987 Constitution, the Court reiterates its policy of
non-interference with the Ombudsman’s exercise of his investigatory and prosecutory powers (among them, the power to
grant immunity to witnesses), and respects the initiative and independence inherent in the Ombudsman who, "beholden
to no one, acts as the champion of the people and the preserver of the integrity of the public service.
o Ocampo IV v. Ombudsman: The rule is based not only upon respect for the investigatory and prosecutory powers
granted by the Constitution to the Office of the Ombudsman but upon practicality as well. Otherwise, the functions
of the courts will be grievously hampered by innumerable petitions assailing the dismissal of investigatory
proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, in much the same
way that the courts would be extremely swamped if they could be compelled to review the exercise of discretion on
the part of the fiscals or prosecuting attorneys each time they decide to file an information in court or dismiss a

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 complaint by a private complainant.
 Following this policy, the Court deems it neither appropriate nor advisable to interfere with the Ombudsman’s grant of
immunity to the respondents, particularly in this case, where the petitioner has not clearly and convincingly shown the grave
abuse of discretion that would call for intervention.

16 Chavez v. Sandiganbayan and Enrile AUTHOR: Castro

[G.R. No. 91391. January 24, 1991] NOTES:
TOPIC: General
PONENTE: Gutierrez, Jr., J.
CASE LAW/ DOCTRINE: A public officer may not be held liable for the counterclaim by one of the accused when he performs his
duties in good faith (Loanzon notes)
EMERGENCY RECIT: In a Civil case filed against Enrile, he filed his answer with compulsory counterclaim impleading SolGen
Chavez. He imputes bad faith and malice on the part of Chavez for filing an allegedly baseless complaint. Chavez invokes immunity
from suit provided under Sec. 4 of Executive Order No. 1. The SC ruled that the issue is not the right of Enrile to file an action for
damages. He has the right. The issue is whether or not that action must be filed as a compulsory counterclaim in the case filed
against him. Here, the charges do not constitute a compulsory counterclaim. To vindicate his rights, Enrile has to file a separate
and distinct civil action for damages against the Solicitor General.
FACTS:
 In July 1987, the Presidential Commission on Good Government (PCGG), with the assistance of SolGen Francisco Chavez,
filed with the Sandiganbayan (SB) a Complaint against Eduardo Cojuangco, Jr, Juan Ponce Enrile, and others for
Reconveyance, Reversion and Accounting, and Restitution and Damages.
 After the denial of his MTD, Enrile filed his answer with compulsory counterclaim and cross-claim with damages.
 On Jun. 8, 1989, SB granted Enrile’s Manifestation and Motion with Leave of Court to implead as additional parties to his
counterclaim SolGen Chavez, Ex-PCGG Chairman Diaz, and former Commissioners Doromal, Rodrigo, Romero and Bautista.
[Note: At first, no leave of court was sought]
 On Nov. 2, 1989, SB issued a resolution denying the MRs filed by the impleaded officials and ruled that “considering these
motions as in the nature of motions to dismiss counterclaim/answers, resolution of these motions is held in abeyance
pending trial on the merits”.
 All the PCGG officials then filed their answer to the counterclaims invoking their immunity from suits as provided in Section 4
of Executive Order No. 1.
 Enrile: Alleges malice, bad faith, and grave abuse of power. Despite the fact the PGCC Chairman Jovito Salonga had already
cleared him and knowing the allegations to be false, SolGen Chavez still filed the complaint against him. [Excerpt from
Enrile’s answer: Salonga found and declared that ‘not one of the documents left by then President and Mrs. Ferdinand E.
Marcos including the 2,300-page evidence turned over to the PCGG by the US State Department implicates Enrile. Chavez
assisted or cooperated in, or induced or instigated, the filing of this harassment suit against Defendant]
 Chavez: No counterclaim can be filed against him in his capacity as Solicitor General since he is only acting as counsel for the
Republic. Since he is simply the lawyer in the case, exercising his duty under the law to assist the Government in the filing
and prosecution of all cases pursuant to Section 1, Executive Order No. 14, he cannot be sued in a counterclaim in the same
case.
ISSUE: Whether Sandiganbayan erred in impleading SolGen Chavez as party defendant in the counterclaim

HELD: Yes
RATIO:
 There is no general immunity arising solely from occupying a public office. The general rule is that public officials can be
held personally accountable for acts claimed to have been performed in connection with official duties where they have
acted ultra vires or where there is a showing of bad faith.
 We ruled in one case: “A number of cases decided by the Court where the municipal mayor alone was held liable for back
salaries of, or damages to dismissed municipal employees, to the exclusion of the municipality, are not applicable in this
instance. In Salcedo v. Court of for instance, the municipal mayor was held liable for the back salaries of the Chief of Police he
had dismissed, not only because the dismissal was arbitrary but also because the mayor refused to reinstate him in defiance
of an order of the Commissioner of Civil Service to reinstate. In Nemenzo v. Sabillano, the municipal mayor was held
personally liable for dismissing a police corporal who possessed the necessary civil service eligibility, the dismissal being done
without justifiable cause and without any administrative investigation.
 The petitioner’s argument that the immunity proviso under Section 4(a) of Executive Order No. 1 also extends to him is not
well-taken. A mere invocation of the immunity clause does not ipso facto result in the charges being automatically
dropped. In the case of Presidential Commission on Good Government v. Peña, then Chief Justice Claudio Teehankee, added a

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 clarification of the immunity accorded PCGG officials under Section 4(a) of Executive Order No. 1 as follows: “With respect to
the qualifications expressed by Mr. Justice Feliciano in his separate opinion, I just wish to point out two things: First, the main
opinion does not claim absolute immunity for the members of the Commission. The cited section of Executive Order No. 1
provides the Commission’s members immunity from suit thus: ‘No civil action shall lie against the Commission or any member
thereof for anything done or omitted in the discharge of the task contemplated by this order.’ No absolute immunity like that
sought by Mr. Marcos in his Constitution for himself and his subordinates is herein involved. It is understood that the
immunity granted the members of the Commission by virtue of the unimaginable magnitude of its task to recover the
plundered wealth and the State’s exercise of police power was immunity from liability for damages in the official discharge of
the task granted the members of the Commission much in the same manner that judges are immune from suit in the official
discharge of the functions of their office.x x x “
 Justice Florentino P. Feliciano stated in the same case: “It may be further submitted, with equal respect, that Section 4(a) of
Executive Order No. 1 was intended merely to restate the general principle of the law of public officers that the PCGG or any
member thereof may not be held civilly liable for acts done in the performance of official duty, provided that such member
had acted in good faith and within the scene of his lawful authority. It may also be assumed that the Sandiganbayan would
have jurisdiction to determine whether the PCGG or any particular official thereof may be held liable in damages to a private
person injured by acts of such manner. It would seem constitutionally offensive to suppose that a member or staff member of
the PCGG could not be required to testify before the Sandiganbayan or that such members were exempted from complying
with orders of this Court.” Immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a
privileged status not claimed by any other official of the Republic.
 Where the petitioner exceeds his authority as Solicitor General, acts in bad faith, or, as contended by the private
respondent, “maliciously conspires with the PCGG commissioners in persecuting respondent Enrile by filing against him an
evidently baseless suit in derogation of the latter’s constitutional rights and liberties”, there can be no question that a
complaint for damages may be filed against him. High position in government does not confer a license to persecute or
recklessly injure another. The actions governed by Articles 19, 20, 21, and 32 of the Civil Code on Human Relations may be
taken against public officers or private citizens alike. The issue is not the right of respondent Enrile to file an action for
damages. He has the right. The issue is whether or not that action must be filed as a compulsory counterclaim in the case
filed against him.
 Under the circumstances of this case, we rule that the charges pressed by respondent Enrile for damages under Article 32
of the Civil Code arising from the filing of an alleged harassment suit with malice and evident bad faith do not constitute a
compulsory counterclaim. To vindicate his rights, Senator Enrile has to file a separate and distinct civil action for damages
against the Solicitor General.
 In the case of Tiu Po v. Bautista, we ruled that damages claimed to have been suffered as a consequence of an action filed
against the petitioner must be pleaded in the same action as a compulsory counterclaim. We were referring, however, to a
case filed by the private respondent against the petitioners or parties in the litigation. In the present case, the counterclaim
was filed against the lawyer, not against the party plaintiff itself. To allow a counterclaim against a lawyer who files a
complaint for his clients, who is merely their representative in court and not a plaintiff or complainant in the case would lead
to mischievous consequences.
 A lawyer owes his client entire devotion to his genuine interest, warm zeal in the maintenance and defense of his rights and
the exertion of his utmost learning and ability.
 The problem is particularly perplexing for the Solicitor General. As counsel of the Republic, the Solicitor General has to appear
in controversial and politically charged cases. It is not unusual for high officials of the Government to unwittingly use
shortcuts in the zealous desire to expedite executive programs or reforms. The Solicitor General cannot look at these cases
with indifferent neutrality. His perception of national interest and obedience to instructions from above may compel him to
take a stance which to a respondent may appear too personal and biased. It is likewise unreasonable to require Government
Prosecutors to defend themselves against counterclaims in the very same cases they are prosecuting.
 As earlier stated, we do not suggest that a lawyer enjoys a special immunity from damage suits. However, when he acts in
the name of a client, he should not be sued on a counterclaim in the very same case he has filed only as counsel and not as
a party. Any claim for alleged damages or other causes of action should be filed in an entirely separate and distinct civil
action.

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