Republic of the Philippines G.R. No.

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

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

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

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

KAPISANAN NG MGA BRODKASTER NG PILIPINAS (KBP) and ABS-CBN The five (5) petitions before the Court put in issue the alleged unconstitutionality of
CORPORATION, Petitioners, Section 9 (a) of COMELEC Resolution No. 9615 (Resolution) limiting the broadcast
vs. and radio advertisements of candidates and political parties for national election
COMMISSION ON ELECTIONS, Respondent. positions to an aggregate total of one hundred twenty (120) minutes and one hundred
eighty (180) minutes, respectively. They contend that such restrictive regulation on
x-----------------------x allowable broadcast time violates freedom of the press, impairs the people's right to
suffrage as well as their right to information relative to the exercise of their right to
choose who to elect during the forth coming elections.
The heart of the controversy revolves upon the proper interpretation of the limitation
on the number of minutes that candidates may use for television and radio
advertisements, as provided in Section 6 of Republic Act No. 9006 (R.A. No. 9006),
otherwise known as the Fair Election Act. Pertinent portions of said provision state,
thus:
Sec. 6. Equal Access to Media Time and Space. - All registered parties and bona fide
candidates shall have equal access to media time and space. The following guidelines
may be amplified on by the COMELEC:
xxxx
6.2 (a) Each bona fide candidate or registered political party for a nationally elective
office shall be entitled to not more than one hundred twenty (120) minutes of
television advertisement and one hundred eighty (180) minutes of radio
advertisement whether by purchase or donation.
b. Each bona fide candidate or registered political party for a locally elective office
shall be entitled to not more than sixty ( 60) minutes of television advertisement and
ninety (90) minutes of radio advertisement whether by purchase or donation.
For this purpose, the COMELEC shall require any broadcast station or entity to
submit to the COMELEC a copy of its broadcast logs and certificates of performance
for the review and verification of the frequency, date, time and duration of
advertisements broadcast for any candidate or political party.
During the previous elections of May 14, 2007 and May 10, 2010, COMELEC
issued Resolutions implementing and interpreting Section 6 of R.A. No. 9006,
regarding airtime limitations, to mean that a candidate is entitled to the aforestated
number of minutes "per station."7 For the May 2013 elections, however, respondent
COMELEC promulgated Resolution No. 9615 dated January 15, 2013, changing the
interpretation of said candidates' and political parties' airtime limitation for political
campaigns or advertisements from a "per station" basis, to a "total aggregate" basis.
Petitioners ABS-CBN Corporation (ABS-CBN), ABC Development Corporation
(ABC), GMA Network, Incorporated ( GMA), Manila Broadcasting Company, Inc.
(MBC), Newsounds Broadcasting Network, Inc. (NBN), and Radio Mindanao
Network, Inc. (RMN) are owners/operators of radio and television networks in the
Philippines, while petitioner Kapisanan ng mga Brodkaster ng Pilipinas (KBP) is the
national organization of broadcasting companies in the Philippines representing
operators of radio and television stations and said stations themselves. They sent
their respective letters to the COMELEC questioning the provisions of the
aforementioned Resolution, thus, the COMELEC held public hearings. Thereafter,
on February 1, 2013, respondent issued Resolution No. 9631 amending provisions of
Resolution No. 9615. Nevertheless, petitioners still found the provisions
objectionable and oppressive, hence, the present petitions.
All of the petitioners assail the following provisions of the Resolution:
a) Section 7 (d),8 which provides for a penalty of suspension or revocation
of an offender's franchise or permit, imposes criminal liability against
broadcasting entities and their officers in the event they sell airtime in
excess of the size, duration, or frequency authorized in the new rules;
b) Section 9 (a),9 which provides for an "aggregate total" airtime instead of
the previous "per station" airtime for political campaigns or dvertisements,
and also required prior COMELEC approval for candidates' television and
radio guestings and appearances; and
c) Section 14,10 which provides for a candidate's "right to reply."
In addition, petitioner ABC also questions Section 1 (4) 11 thereof, which defines the
term "political advertisement" or "election propaganda," while petitioner GMA
further assails Section 35, 12 which states that any violation of said Rules shall
constitute an election offense.
On March 15, 2013, Senator Alan Peter S. Cayetano (Petitioner-Intervenor) filed a
Motion for Leave to Intervene and to File and Admit the Petition-in-Intervention,
which was granted by the Court per its Resolution dated March 19, 2013. Petitioner-
Intervenor also assails Section 9 (a) of the Resolution changing the interpretation of
candidates' and political parties' airtime limitation for political campaigns or
advertisements from a "per station" basis, to a "total aggregate" basis. Petitioners
allege that Resolutions No. 9615 and 9631, amending the earlier Resolution, are
unconstitutional and issued without jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction, for the reasons set forth hereunder.
Petitioners posit that Section 9 (a) of the assailed Resolution provides for a very
restrictive aggregate airtime limit and a vague meaning for a proper computation of
"aggregate total" airtime, and violates the equal protection guarantee, thereby
defeating the intent and purpose of R.A. No. 9006.
Petitioners contend that Section 9 (a), which imposes a notice requirement, is vague
and infringes on the constitutionally protected freedom of speech, of the press and of
expression, and on the right of people to be informed on matters of public concern
Also, Section 9 (a) is a cruel and oppressive regulation as it imposes an unreasonable
and almost impossible burden on broadcast mass media of monitoring a candidate's
or political party's aggregate airtime, otherwise, it may incur administrative and
criminal liability.
Further, petitioners claim that Section 7 (d) is null and void for unlawfully
criminalizing acts not prohibited and penalized as criminal offenses by R.A. No.
9006.
Section 14 of Resolution No. 9615, providing for a candidate's or political party's
"right to reply," is likewise assailed to be unconstitutional for being an improper
exercise of the COMELEC's regulatory powers; for constituting prior restraint and
infringing petitioners' freedom of expression, speech and the press; and for being
violative of the equal protection guarantee. In addition to the foregoing, petitioner
GMA further argues that the Resolution was promulgated without public
consultations, in violation of petitioners' right to due process. Petitioner ABC also
avers that the Resolution's definition of the terms "political advertisement" and
"election propaganda" suffers from overbreadth, thereby producing a "chilling
effect," constituting prior restraint.
On the other hand, respondent posits in its Comment and Opposition13 dated March
8, 2013, that the petition should be denied based on the following reasons:
Respondent contends that the remedies of certiorari and prohibition are not available
to petitioners, because the writ of certiorari is only available against the COMELEC's
adjudicatory or quasi-judicial powers, while the writ of prohibition only lies against
the exercise of judicial, quasijudicial or ministerial functions. Said writs do not lie
against the COMELEC's administrative or rule-making powers.
Respondent likewise alleges that petitioners do not have locus standi, as the
constitutional rights and freedoms they enumerate are not personal to them, rather,
they belong to candidates, political parties and the Filipino electorate in general, as
the limitations are imposed on candidates, not on media outlets. It argues that
petitioners' alleged risk of exposure to criminal liability is insufficient to give them
legal standing as said "fear of injury" is highly speculative and contingent on a future
act.
Respondent then parries petitioners' attack on the alleged infirmities of the
Resolution's provisions.
Respondent maintains that the per candidate rule or total aggregate airtime limit is in
accordance with R.A. No. 9006 as this would truly give life to the constitutional
objective to equalize access to media during elections. It sees this as a more effective
way of levelling the playing field between candidates/political parties with enormous
resources and those without much. Moreover, the COMELEC's issuance of the
assailed Resolution is pursuant to Section 4, Article IX (C) of the Constitution which
vests on the COMELEC the power to supervise and regulate, during election periods,
transportation and other public utilities, as well as mass media, to wit:
Sec. 4. The Commission may, during the election period, supervise or regulate the
enjoyment or utilization of all franchises or permits for the operation of
transportation and other public utilities, media of communication or information, all
grants, special privileges, or concessions granted by the Government or any
subdivision, agency, or instrumentality thereof, including any government-owned or
controlled corporation or its subsidiary. Such supervision or regulation shall aim to
ensure equal opportunity, and equal rates therefor, for public information campaigns
and forums among candidates in connection with the objective of holding free,
orderly, honest, peaceful, and credible elections.
This being the case, then the Resolutions cannot be said to have been issued with
grave abuse of discretion amounting to lack of jurisdiction.
Next, respondent claims that the provisions are not vague because the assailed
Resolutions have given clear and adequate mechanisms to protect broadcast stations
from potential liability arising from a candidate's or party's violation of airtime limits
by putting in the proviso that the station "may require buyer to warrant under oath
that such purchase [of airtime] is not in excess of size, duration or frequency
authorized by law or these rules." Furthermore, words should be understood in the
sense that they have in common usage, and should be given their ordinary meaning.
Thus, in the provision for the right to reply, "charges" against candidates or parties
must be understood in the ordinary sense, referring to accusations or criticisms.
Respondent also sees no prior restraint in the provisions requiring notice to the
COMELEC for appearances or guestings of candidates in bona fide news broadcasts.
It points out that the fact that notice may be given 24 hours after first broadcast only
proves that the mechanism is for monitoring purposes only, not for censorship.
Further, respondent argues, that for there to be prior restraint, official governmental
restrictions on the press or other forms of expression must be done in advance of
actual publication or dissemination. Moreover, petitioners are only required to
inform the COMELEC of candidates'/parties' guestings, but there is no regulation as
to the content of the news or the expressions in news interviews or news
documentaries. Respondent then emphasized that the Supreme Court has held that
freedom of speech and the press may be limited in light of the duty of the
COMELEC to ensure equal access to opportunities for public service.
With regard to the right to reply provision, respondent also does not consider it as
restrictive of the airing of bona fide news broadcasts. More importantly, it stressed,
the right to reply is enshrined in the Constitution, and the assailed Resolutions
provide that said right can only be had after going through administrative due
process. The provision was also merely lifted from Section 10 of R.A. No. 9006,
hence, petitioner ABC is actually attacking the constitutionality of R.A. No. 9006,
which cannot be done through a collateral attack.
Next, respondent counters that there is no merit to ABC's claim that the Resolutions'
definition of "political advertisement" or "election propaganda" suffers from
overbreadth, as the extent or scope of what falls under said terms is clearly stated in
Section 1 (4) of Resolution No. 9615.
It is also respondent's view that the nationwide aggregate total airtime does not
violate the equal protection clause, because it does not make any substantial
distinctions between national and regional and/or local broadcast stations, and even
without the aggregate total airtime rule, candidates and parties are likely to be more
inclined to advertise in national broadcast stations. Respondent likewise sees no
merit in petitioners' claim that the Resolutions amount to taking of private property
without just compensation. Respondent emphasizes that radio and television
broadcasting companies do not own the airwaves and frequencies through which
they transmit broadcast signals; they are merely given the temporary privilege to use
the same. Since they are merely enjoying a privilege, the same may be reasonably
burdened with some form of public service, in this case, to provide candidates with
the opportunity to reply to charges aired against them.
Lastly, respondent contends that the public consultation requirement does not apply
to constitutional commissions such as the COMELEC, pursuant to Section 1,
Chapter I, Book VII of the Administrative Code of 1987. Indeed, Section 9, Chapter
II, Book VII of said Code provides, thus:
Section 9. Public Participation. - (1) If not otherwise required by law, an
agency shall, as far as practicable, publish or circulate notices of proposed
rules and afford interested parties the opportunity to submit their views
prior to the adoption of any rule.
However, Section 1, Chapter 1, Book VII of said Code clearly provides:
Section 1. Scope. -This Book shall be applicable to all agencies as defined
in the next succeeding section, except the Congress, the Judiciary, the
Constitutional Commissions, military establishments in all matters relating
exclusively to Armed Forces personnel, the Board of Pardons and Parole,
and state universities and colleges.
Nevertheless, even if public participation is not required, respondent still conducted a
meeting with representatives of the KBP and various media outfits on December 26,
2012, almost a month before the issuance of Resolution No. 9615.
On April 2, 2013, petitioner GMA filed its Reply,14 where it advanced the following
counter-arguments:
According to GMA, a petition for certiorari is the proper remedy to question the
herein assailed Resolutions, which should be considered as a "decision, order or
ruling of the Commission" as mentioned in Section 1, Rule 37 of the COMELEC
Rules of Procedure which provides:
Section 1. Petition for Certiorari,· and Time to File. - Unless otherwise provided by
law, or by any specific provisions in these Rules, any decision, order or ruling of the
Commission may be brought to the Supreme Court on certiorari by the aggrieved
party within thirty (30) days from its promulgation.
GMA further stressed that this case involves national interest, and the urgency of the
matter justifies its resort to the remedy of a petition for certiorari.
Therefore, GMA disagrees with the COMELEC's position that the proper remedy is
a petition for declaratory relief because such action only asks the court to make a
proper interpretation of the rights of parties under a statute or regulation. Such a
petition does not nullify the assailed statute or regulation, or grant injunctive relief,
which petitioners are praying for in their petition. Thus, GMA maintains that a
petition for certiorari is the proper remedy.
GMA further denies that it is making a collateral attack on the Fair Election Act, as it
is not attacking said law. GMA points out that it has stated in its petition that the law
in fact allows the sale or donation of airtime for political advertisements and does not
impose criminal liability against radio and television stations. What it is assailing is
the COMELEC's erroneous interpretation of the law's provisions by declaring such
sale and/or donation of airtime unlawful, which is contrary to the purpose of the Fair
Election Act.
GMA then claims that it has legal standing to bring the present suit because:
x x x First, it has personally suffered a threatened injury in the form of risk of
criminal liability because of the alleged unconstitutional and unlawful conduct of
respondent COMELEC in expanding what was provided for in R.A. No. 9006.
Second, the injury is traceable to the challenged action of respondent COMELEC,
that is, the issuance of the assailed Resolutions. Third, the injury is likely to be
redressed by the remedy sought in petitioner GMA's Petition, among others, for the
Honorable Court to nullify the challenged pertinent provisions of the assailed
Resolutions.15
On substantive issues, GMA first argues that the questioned Resolutions are contrary
to the objective and purpose of the Fair Election Act. It points out that the Fair
Election Act even repealed the political ad ban found in the earlier law, R.A. No.
6646. The Fair Election Act also speaks of "equal opportunity" and "equal access,''
but said law never mentioned equalizing the economic station of the rich and the
poor, as a declared policy. Furthermore, in its opinion, the supposed correlation
between candidates' expenditures for TV ads and actually winning the elections, is a
mere illusion, as there are other various factors responsible for a candidate's winning
the election. GMA then cites portions of the deliberations of the Bicameral
Conference Committee on the bills that led to the enactment of the Fair Election Act,
and alleges that this shows the legislative intent that airtime allocation should be on a
"per station" basis. Thus, GMA claims it was arbitrary and a grave abuse of
discretion for the COMELEC to issue the present Resolutions imposing airtime
limitations on an "aggregate total" basis.
It is likewise insisted by GMA that the assailed Resolutions impose an
unconstitutional burden on them, because their failure to strictly monitor the duration
of total airtime that each candidate has purchased even from other stations would
expose their officials to criminal liability and risk losing the station's good reputation
and goodwill, as well as its franchise. It argues that the wordings of the Resolutions
belie the COMELEC's claim that petitioners would only incur liability if they
"knowingly" sell airtime beyond the limits imposed by the Resolutions, because the
element of knowledge is clearly absent from the provisions thereof. This makes the
provisions have the nature of malum prohibitum.
Next, GMA also says that the application of the aggregate airtime limit constitutes
prior restraint and is unconstitutional, opining that "[t]he reviewing power of
respondent COMELEC and its sole judgment of a news event as a political
advertisement are so pervasive under the assailed Resolutions, and provoke the
distastes or chilling effect of prior restraint"16 as even a legitimate exercise of a
constitutional right might expose it to legal sanction. Thus, the governmental interest
of leveling the playing field between rich and poor candidates cannot justify the
restriction on the freedoms of expression, speech and of the press.
On the issue of lack of prior public participation, GMA cites Section 82 of the
Omnibus Election Code, pertinent portions of which provide, thus:
Section 82. Lawful election propaganda. - Lawful election propaganda shall include:
xxxx
All other forms of election propaganda not prohibited by this Code as the
Commission may authorize after due notice to all interested parties and hearing
where all the interested parties were given an equal opportunity to be heard:
Provided, That the Commission's authorization shall be published in two newspapers
of general circulation throughout the nation for at least twice within one week after
the authorization has been granted.
There having been no prior public consultation held, GMA contends that the
COMELEC is guilty of depriving petitioners of its right to due process of law.
GMA then concludes that it is also entitled to a temporary restraining order, because
the implementation of the Resolutions in question will cause grave and irreparable
damage to it by disrupting and emasculating its mandate to provide television and
radio services to the public, and by exposing it to the risk of incurring criminal and
administrative liability by requiring it to perform the impossible task of surveillance
and monitoring, or the broadcasts of other radio and television stations.
Thereafter, on April 4, 2013, the COMELEC, through the Office of the Solicitor
General (OSG), filed a Supplemental Comment and Opposition17 where it further
expounded on the legislative intent behind the Fair Election Act, also quoting
portions of the deliberations of the Bicameral Conference Committee, allegedly
adopting the Senate Bill version setting the computation of airtime limits on a per
candidate, not per station, basis. Thus, as enacted into law, the wordings of Section 6
of the Fair Election Act shows that the airtime limit is imposed on a per candidate
basis, rather than on a per station basis. Furthermore, the COMELEC states that
petitioner intervenor Senator Cayetano is wrong in arguing that there should be
empirical data to support the need to change the computation of airtime limits from a
per station basis to a per candidate basis, because nothing in law obligates the
COMELEC to support its Resolutions with empirical data, as said airtime limit was a
policy decision dictated by the legislature itself, which had the necessary empirical
and other data upon which to base said policy decision.
The COMELEC then points out that Section 2 (7),18 Article IX (C) of the
Constitution empowers it to recommend to Congress effective measures to minimize
election spending and in furtherance of such constitutional power, the COMELEC
issued the questioned Resolutions, in faithful implementation of the legislative intent
and objectives of the Fair Election Act.
The COMELEC also dismisses Senator Cayetano's fears that unauthorized or
inadvertent inclusion of his name, initial, image, brand, logo, insignia and/or symbol
in tandem advertisements will be charged against his airtime limits by pointing out
that what will be counted against a candidate's airtime and expenditures are those
advertisements that have been paid for or donated to them to which the candidate has
given consent.
With regard to the attack that the total aggregate airtime limit constitutes prior
restraint or undue abridgement of the freedom of speech and expression, the
COMELEC counters that "the Resolutions enjoy constitutional and congressional
imprimatur. It is the Constitution itself that imposes the restriction on the freedoms
of speech and expression, during election period, to promote an important and
significant governmental interest, which is to equalize, as far as practicable, the
situation of rich and poor candidates by preventing the former from enjoying the
undue advantage offered by huge campaign 'war chests."'19
Lastly, the COMELEC also emphasizes that there is no impairment of the people's
right to information on matters of public concern, because in this case, the
COMELEC is not withholding access to any public record.
On April 16, 2013, this Court issued a Temporary Restraining Order20 (TRO) in view
of the urgency involved and to prevent irreparable injury that may be caused to the
petitioners if respondent COMELEC is not enjoined from implementing Resolution
No. 9615.
On April 19, 2013 respondent filed an Urgent Motion to Lift Temporary Restraining
Order and Motion for Early Resolution of the Consolidated Petitions.21
On May 8, 2013, petitioners ABS-CBN and the KBP filed its
Opposition/Comment22 to the said Motion. Not long after, ABC followed suit and
filed its own Opposition to the Motion23 filed by the respondent.
In the interim, respondent filed a Second Supplemental Comment and
Opposition24 dated April 8, 2013.
In the Second Supplemental Comment and Opposition, respondent delved on points
which were not previously discussed in its earlier Comment and Supplemental
Comment, particularly those raised in the petition filed by petitioner ABS-CBN and
KBP.
Respondent maintains that certiorari in not the proper remedy to question the
Constitutionality of the assailed Resolutions and that petitioners ABS-CBN and KBP
have no locus standi to file the present petition.
Respondent posits that contrary to the contention of petitioners, the legislative
history of R.A. No. 9006 conclusively shows that congress intended the airtime
limits to be computed on a "per candidate" and not on a "per station" basis. In
addition, the legal duty of monitoring lies with the COMELEC. Broadcast stations
are merely required to submit certain documents to aid the COMELEC in ensuring
that candidates are not sold airtime in excess of the allowed limits.
Also, as discussed in the earlier Comment, the prior notice requirement is a
mechanism designed to inform the COMELEC of the appearances or guesting of
candidates in bona fide news broadcasts. It is for monitoring purposes only, not
censorship. It does not control the subject matter of news broadcasts in anyway.
Neither does it prevent media outlets from covering candidates in news interviews,
news events, and news documentaries, nor prevent the candidates from appearing
thereon.
As for the right to reply, respondent insists that the right to reply provision cannot be
considered a prior restraint on the freedoms of expression, speech and the press, as it
does not in any way restrict the airing of bona fide new broadcasts. Media entities are
free to report any news event, even if it should turn out to be unfavourable to a
candidate or party. The assailed Resolutions merely give the candidate or party the
right to reply to such charges published or aired against them in news broadcasts.
Moreover, respondent contends that the imposition of the penalty of suspension and
revocation of franchise or permit for the sale or donation of airtime beyond the
allowable limits is sanctioned by the Omnibus Election Code.
Meanwhile, RMN filed its Petition on April 8, 2013. On June 4, 2013, the Court
issued a Resolution25 consolidating the case with the rest of the petitions and
requiring respondent to comment thereon.
On October 10, 2013, respondent filed its Third Supplemental Comment and
Opposition.26 Therein, respondent stated that the petition filed by RMN repeats the
issues that were raised in the previous petitions. Respondent, likewise, reiterated its
arguments that certiorari in not the proper remedy to question the assailed resolutions
and that RMN has no locus standi to file the present petition. Respondent maintains
that the arguments raised by RMN, like those raised by the other petitioners are
without merit and that RMN is not entitled to the injunctive relief sought.
The petition is partly meritorious.
At the outset, although the subject of the present petit10ns are Resolutions
promulgated by the COMELEC relative to the conduct of the 2013 national and local
elections, nevertheless the issues raised by the petitioners have not been rendered
moot and academic by the conclusion of the 2013 elections. Considering that the
matters elevated to the Court for resolution are susceptible to repetition in the
conduct of future electoral exercises, these issues will be resolved in the present
action.
PROCEDURAL ASPECTS
Matters of procedure and technicalities normally take a backseat when issues of
substantial and transcendental importance are presented before the Court. So the
Court does again in this particular case.
Proper Remedy
Respondent claims that certiorari and prohibition are not the proper remedies that
petitioners have taken to question the assailed Resolutions of the COMELEC.
Technically, respondent may have a point. However, considering the very important
and pivotal issues raised, and the limited time, such technicality should not deter the
Court from having to make the final and definitive pronouncement that everyone else
depends for enlightenment and guidance. "[T]his Court has in the past seen fit to step
in and resolve petitions despite their being the subject of an improper remedy, in
view of the public importance of the tile issues raised therein.27
It has been in the past, we do so again.
Locus Standi
Every time a constitutional issue is brought before the Court, the issue of locus standi
is raised to question the personality of the parties invoking the Court's jurisdiction.
The Court has routinely made reference to a liberalized stance when it comes to
petitions raising issues of transcendental importance to the country. Invariably, after
some discussions, the Court would eventually grant standing.28
In this particular case, respondent also questions the standing of the petitioners. We
rule for the petitioners. For petitioner-intervenor Senator Cayetano, he undoubtedly
has standing since he is a candidate whose ability to reach out to the electorate is
impacted by the assailed Resolutions.
For the broadcast companies, they similarly have the standing in view of the direct
injury they may suffer relative to their ability to carry out their tasks of disseminating
information because of the burdens imposed on them. Nevertheless, even in regard to
the broadcast companies invoking the injury that may be caused to their customers or
the public - those who buy advertisements and the people who rely on their
broadcasts - what the Court said in White Light Corporation v. City of Manila29 may
dispose of the question. In that case, there was an issue as to whether owners of
establishments offering "wash-up" rates may have the requisite standing on behalf of
their patrons' equal protection claims relative to an ordinance of the City of Manila
which prohibited "short-time" or "wash-up" accommodation in motels and similar
establishments. The Court essentially condensed the issue in this manner: "[T]he
crux of the matter is whether or not these establishments have the requisite standing
to plead for protection of their patrons' equal protection rights."30 The Court then
went on to hold:
Standing or locus standi is the ability of a party to demonstrate to the court sufficient
connection to and harm from the law or action challenged to support that party's
participation in the case. More importantly, the doctrine of standing is built on the
principle of separation of powers, sparing as it does unnecessary interference or
invalidation by the judicial branch of the actions rendered by its co-equal branches of
government.
The requirement of standing is a core component of the judicial system derived
directly from the Constitution. The constitutional component of standing doctrine
incorporates concepts which concededly are not susceptible of precise definition. In
this jurisdiction, the extancy of "a direct and personal interest" presents the most
obvious cause, as well as the standard test for a petitioner's standing. In a similar
vein, the United States Supreme Court reviewed and elaborated on the meaning of
the three constitutional standing requirements of injury, causation, and redressability
in Allen v. Wright.
Nonetheless, the general rules on standing admit of several exceptions such as the
overbreadth doctrine, taxpayer suits, third party standing and, especially in the
Philippines, the doctrine of transcendental importance.
For this particular set of facts, the concept of third party standing as an exception and
the overbreadth doctrine are appropriate. x x x
xxxx
American jurisprudence is replete with examples where parties-ininterest were
allowed standing to advocate or invoke the fundamental due process or equal
protection claims of other persons or classes of persons injured by state action. x x x
xxxx
Assuming arguendo that petitioners do not have a relationship with their patrons for
the former to assert the rights of the latter, the overbreadth doctrine comes into play.
In overbreadth analysis, challengers to government action are in effect permitted to
raise the rights of third parties. Generally applied to statutes infringing on the
freedom of speech, the overbreadth doctrine applies when a statute needlessly
restrains even constitutionally guaranteed rights. In this case, the petitioners claim
that the Ordinance makes a sweeping intrusion into the right to liberty of their
clients. We can see that based on the allegations in the petition, the Ordinance suffers
from overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights
of their clients to patronize their establishments for a "wash-rate" time frame.31
If in regard to commercial undertakings, the owners may have the right to assert a
constitutional right of their clients, with more reason should establishments which
publish and broadcast have the standing to assert the constitutional freedom of
speech of candidates and of the right to information of the public, not to speak of
their own freedom of the press. So, we uphold the standing of petitioners on that
basis.
SUBSTANTIVE ASPECTS
Aggregate Time Limits
COMELEC Resolution No. 9615 introduced a radical departure from the previous
COMELEC resolutions relative to the airtime limitations on political advertisements.
This essentially consists in computing the airtime on an aggregate basis involving all
the media of broadcast communications compared to the past where it was done on a
per station basis. Thus, it becomes immediately obvious that there was effected a
drastic reduction of the allowable minutes within which candidates and political considered as their expenditures, regardless of whoever paid for the advertisements
parties would be able to campaign through the air. The question is accordingly or to whom the said advertisements were donated.
whether this is within the power of the COMELEC to do or not. The Court holds that
it is not within the power of the COMELEC to do so. x x x x37

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

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

a. Broadcast Election Propaganda

xxxx

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

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

We are not questioning the authority of the Honorable Commission to regulate Your Chairman Brillantes
Honor, we are just raising our concern on the manner of regulation because as it is
right now, there is a changing mode or sentiments of the Commission and the public What do you think there was no abuse in 201 O?
has the right to know, was there rampant overspending on political ads in 2010, we
were not informed Your Honor. Was there abuse of the media in 2010, we were not Atty. Lucila
informed Your Honor. So we would like to know what is the basis of the sudden
change in this limitation, Your Honor .. And law must have a consistent
As far as the network is concern, there was none Your Honor.
interpretation that [is]our position, Your Honor.
Chairman Brillantes
Chairman Brillantes
There was none ..... .
But my initial interpretation, this is personal to this representation counsel, is that if
the Constitution allows us to regulate and then it gives us the prerogative to amplify
then the prerogative to amplify you should leave this to the discretion of the Atty. Lucila
Commission. Which means if previous Commissions felt that expanding it should be
part of our authority that was a valid exercise if we reduce it to what is provided for I'm sorry, Your Honor ...
by law which is 120-180 per medium, TV, radio, that is also within the law and that
is still within our prerogative as provided for by the Constitution. If you say we have Chairman Brillantes
to expose the candidates to the public then I think the reaction should come, the
negative reaction should come from the candidates not from the media, unless you Yes, there was no abuse, okay, but there was some advantage given to those who
have some interest to protect directly. Is there any interest on the part of the media to took ... who had the more moneyed candidates took advantage of it.
expand it?
Atty. Lucila
Atty. Lucila
But that is the fact in life, Your Honor there are poor candidates, there are rich
Well, our interest Your Honor is to participate in this election Your Honor and we candidates. No amount of law or regulation can even level the playing filed (sic) as
have been constantly (sic) as the resolution says and even in the part involved far as the economic station in life of the candidates are concern (sic) our Honor.38
because you will be getting some affirmative action time coming from the media
itself and Comelec time coming from the media itself. So we could like to be both
Given the foregoing observations about what happened during the hearing,
involved in the whole process of the exercise of the freedom of suffrage Your Honor.
Petitioner-Intervenor went on to allege that:
Chairman Brillantes
6.16. Without any empirical data upon which to base the regulatory measures in
Section 9 (a), respondent Comelec arbitrarily changed the rule from per station basis
Yes, but the very essence of the Constitutional provision as well as the provision of to aggregate airtime basis. Indeed, no credence should be given to the cliched
9006 is actually to level the playing field. That should be the paramount explanation of respondent Comelec (i.e. leveling the playing field) in its published
consideration. If we allow everybody to make use of all their time and all radio time statements which in itself is a mere reiteration of the rationale for the enactment of
and TV time then there will be practically unlimited use of the mass media .... the political ad ban of Republic Act No. 6646, and which has likewise been foisted
when said political ad ban was lifted by R.A. 9006.39
Atty. Lucila
From the foregoing, it does appear that the COMELEC did not have any other basis
for coming up with a new manner of determining allowable time limits except its
own idea as to what should be the maximum number of minutes based on its exercise
of discretion as to how to level the playing field. The same could be encapsulized in
the remark of the COMELEC Chairman that "if the Constitution allows us to
regulate and then it gives us the prerogative to amplify then the prerogative to
amplify you should leave this to the discretion of the Commission."40
The Court could not agree with what appears as a nonchalant exercise of discretion,
as expounded anon.
b. COMELEC is duty bound to come up with reasonable basis for changing the
interpretation and implementation of the airtime limits
There is no question that the COMELEC is the office constitutionally and statutorily
authorized to enforce election laws but it cannot exercise its powers without
limitations - or reasonable basis. It could not simply adopt measures or regulations
just because it feels that it is the right thing to do, in so far as it might be concerned.
It does have discretion, but such discretion is something that must be exercised
within the bounds and intent of the law. The COMELEC is not free to simply change
the rules especially if it has consistently interpreted a legal provision in a particular
manner in the past. If ever it has to change the rules, the same must be properly
explained with sufficient basis.
Based on the transcripts of the hearing conducted by the COMELEC after it had
already promulgated the Resolution, the respondent did not fully explain or justify
the change in computing the airtime allowed candidates and political parties, except
to make reference to the need to "level the playing field." If the "per station" basis
was deemed enough to comply with that objective in the past, why should it now be
suddenly inadequate? And, the short answer to that from the respondent, in a manner
which smacks of overbearing exercise of discretion, is that it is within the discretion
of the COMELEC. As quoted in the transcript, "the right to amplify is with the
COMELEC. Nobody can encroach in our right to amplify. Now, if in 2010 the
Commission felt that per station or per network is the rule then that is the prerogative
of the Commission then they could amplify it to expand it. If the current Commission
feels that 120 is enough for the particular medium like TV and 180 for radio, that is
our prerogative. How can you encroach and what is unconstitutional about it?"41
There is something basically wrong with that manner of explaining changes in
administrative rules. For one, it does not really provide a good basis for change. For
another, those affected by such rules must be given a better explanation why the
previous rules are no longer good enough. As the Court has said in one case:
While stability in the law, particularly in the business field, is desirable, there is no
demand that the NTC slavishly follow precedent. However, we think it essential, for
the sake of clarity and intellectual honesty, that if an administrative agency decides
inconsistently with previous action, that it explain thoroughly why a different result
is warranted, or ?f need be, why the previous standards should no longer apply or
should be overturned. Such explanation is warranted in order to sufficiently establish
a decision as having rational basis. Any inconsistent decision lacking thorough,
ratiocination in support may be struck down as being arbitrary. And any decision
with absolutely nothing to support it is a nullity.42
What the COMELEC came up with does not measure up to that level of requirement
and accountability which elevates administrative rules to the level of respectability
and acceptability. Those governed by administrative regulations are entitled to a
reasonable and rational basis for any changes in those rules by which they are
supposed to live by, especially if there is a radical departure from the previous ones.
c. The COMELEC went beyond the authority granted it by the law in adopting
"aggregate" basis in the determination of allowable airtime
The law, which is the basis of the regulation subject of these petitions, pertinently
provides:
6.2. (a) Each bona fide candidate or registered political party for a nationally elective
office shall be entitled to not more than one hundred twenty (120) minutes of
television advertisement and one hundred eighty (180) minutes of radio
advertisement whether by purchase or donation.
(b) Each bona fide candidate or registered political party for a locally elective office
shall be entitled to not more than sixty (60) minutes of television advertisement and
ninety (90) minutes of radio advertisement whether by purchase or donation; x x x
The law, on its face, does not justify a conclusion that the maximum allowable
airtime should be based on the totality of possible broadcast in all television or radio
stations. Senator Cayetano has called our attention to the legislative intent relative to
the airtime allowed - that it should be on a "per station" basis.43
This is further buttressed by the fact that the Fair Election Act (R.A. No. 9006)
actually repealed the previous provision, Section ll(b) of Republic Act No.
6646,44 which prohibited direct political advertisements -the so-called "political ad
ban." If under the previous law, no candidate was allowed to directly buy or procure
on his own his broadcast or print campaign advertisements, and that he must get it
through the COMELEC Time or COMELEC Space, R.A. No. 9006 relieved him or
her from that restriction and allowed him or her to broadcast time or print space
subject to the limitations set out in the law. Congress, in enacting R.A. No. 9006, felt
that the previous law was not an effective and efficient way of giving voice to the
people. Noting the debilitating effects of the previous law on the right of suffrage
and Philippine democracy, Congress decided to repeal such rule by enacting the Fair
Election Act.
In regard to the enactment of the new law, taken in the context of the restrictive
nature of the previous law, the sponsorship speech of Senator Raul Roco is
enlightening:
The bill seeks to repeal Section 85 of the Omnibus Election Code and Sections 10
and 11 of RA 6646. In view of the importance of their appeal in connection with the
thrusts of the bill, I hereby quote these sections in full:
"SEC. 85. Prohibited forms of election propaganda. - It shall be unlawful:
"(a) To print, publish, post or distribute any poster, pamphlet,
circular, handbill, or printed matter urging voters to vote for or
against any candidate unless they hear the names and addresses of
the printed and payor as required in Section 84 hereof;
"(b) To erect, put up, make use of, attach, float or display any
billboard, tinplate-poster, balloons and the like, of whatever size,
shape, form or kind, advertising for or against any candidate or
political party;
"(c) To purchase, manufacture, request, distribute or accept
electoral propaganda gadgets, such as pens, lighters, fans of
whatever nature, flashlights, athletic goods or materials, wallets,
shirts, hats, bandannas, matches, cigarettes and the like, except that
campaign supporters accompanying a candidate shall be allowed to
wear hats and/or shirts or T-shirts advertising a candidate;
"(d) To show or display publicly any advertisement or propaganda
for or against any candidate by means of cinematography, audio-
visual units or other screen projections except telecasts which may
be allowed as hereinafter provided; and
"(e) For any radio broadcasting or television station to sell or give
free of charge airtime for campaign and other political purposes
except as authorized in this Code under the rules and regulations
promulgated by the Commission pursuant thereto;
"Any prohibited election propaganda gadget or advertisement shall be stopped,
confiscated or tom down by the representative of the Commission upon specific
authority of the Commission." "SEC. 10. Common Poster Areas. - The Commission
shall designate common poster areas in strategic public places such as markets,
barangay centers and the like wherein candidates can post, display or exhibit election
propaganda to announce or further their candidacy.
"Whenever feasible, common billboards may be installed by the Commission and/or
non-partisan private or civic organizations which the Commission may authorize
whenever available, after due notice and hearing, in strategic areas where it may
readily be seen or read, with the heaviest pedestrian and/or vehicular traffic in the
city or municipality.
The space in such common poster areas or billboards shall be allocated free of
charge, if feasible, equitably and impartially among the candidates in the province,
city or municipality. "SEC. 11. Prohibite,d Forms of Election Propaganda. - In
addition to the forms of election propaganda prohibited under Section 85 of Batas
Pambansa Blg. 881, it shall be unlawful: (a) to draw, paint, inscribe, write, post,
display or puolicly exhibit any election propaganda in any place, whether private or
public, except in common poster areas and/or billboards provided in the immediately
preceding section, at the candidate's own residence, or at the campaign headquarters
of the candidate or political party: Provided, That such posters or election
propaganda shall in no case exceed two (2) feet by three (3) feet in area; Provided,
further, That at the site of and on the occasion of a public meeting or rally, streamers,
not more than two (2) feet and not exceeding three (3) feet by eight (8) each may be
displayed five (5) days before the date of the meeting or rally, and shall be removed
within twenty-four (24) hours after said meeting or rally; and
"(b) For any newspapers, radio broadcasting or television station, or other mass
media, or any person making use of the mass media to sell or give for free of charge
print space or air time for campaign or other political purposes except to the
Commission as provided under Section 90 and 92 of Batas Pambansa Big. 881. Any
mass media columnist, commentator, announcer or personality who is a candidate for
any elective public office shall take a leave of absence from his work as such during
the campaign."
The repeal of the provision on the Common Poster Area implements the strong
recommendations of the Commission on Elections during the hearings. It also seeks
to apply the doctrine enunciated by the Supreme Court in the case of Blo Umpar
Adiong vs. Commission on Elections, 207 SCRA 712, 31 March 1992. Here a
unanimous Supreme Court ruled: The COMELEC's prohibition on the posting of
decals and stickers on "mobile" places whether public or private except [in]
designated areas provided for by the COMELEC itself is null and void on
constitutional grounds.
For the foregoing reasons, we commend to our colleagues the early passage of
Senate Bill No. 1742. In so doing, we move one step towards further ensuring "free,
orderly, honest, peaceful and credible elections" as mandated by the Constitution.45
Given the foregoing background, it is therefore ineluctable to conclude that Congress
intended to provide a more expansive and liberal means by which the candidates,
political parties, citizens and other stake holders in the periodic electoral exercise
may be given a chance to fully explain and expound on their candidacies and
platforms of governance, and for the electorate to be given a chance to know better
the personalities behind the candidates. In this regard, the media is also given a very
important part in that undertaking of providing the means by which the political
exercise becomes an interactive process. All of these would be undermined and
frustrated with the kind of regulation that the respondent came up with.
The respondent gave its own understanding of the import of the legislative
deliberations on the adoption of R.A. No. 9006 as follows:
The legislative history of R.A. 9006 clearly shows that Congress intended to impose
the per candidate or political party aggregate total airtime limits on political
advertisements and election propaganda. This is evidenced by the dropping of the
"per day per station" language embodied in both versions of the House of
Representatives and Senate bills in favour of the "each candidate" and "not more
than" limitations now found in Section 6 of R.A. 9006.
The pertinent portions of House Bill No. 9000 and Senate Bill No. 1742 read as
follows:
House Bill No. 9000:
SEC. 4. Section 86 of the same Batas is hereby amended to read as follows:
Sec. 86. Regulation of Election Propaganda Through Mass Media.
xxx xxx xxx
A) The total airtime available to the candidate and political party, whether by
purchase or by donation, shall be limited to five (5) minutes per day in each
television, cable television and radio stations during the applicable campaign period.
Senate Bill No. 1742:
SEC. 5. Equal Access to Media Space and Time. -All registered parties and bona fide
candidates shall have equal access to media space and time. The following guidelines
may be amplified by the COMELEC.
xxx xxx xxx
2. The total airtime available for each registered party and bona fide candidate
whether by purchase or donation shall not exceed a total of one (1) minute per day
per television or radio station. (Emphasis supplied.)
As Section 6 of R.A. 9006 is presently worded, it can be clearly seen that the
legislature intended the aggregate airtime limits to be computed on per candidate or
party basis. Otherwise, if the legislature intended the computation to be on per
station basis, it could have left the original "per day per station" formulation.46
The Court does not agree. It cannot bring itself to read the changes in the bill as
disclosing an intent that the COMELEC wants this Court to put on the final language
of the law. If anything, the change in language meant that the computation must not
be based on a "per day" basis for each television or radio station. The same could not
therefore lend itself to an understanding that the total allowable time is to be done on
an aggregate basis for all television or radio stations. Clearly, the respondent in this
instance went beyond its legal mandate when it provided for rules beyond what was
contemplated by the law it is supposed to implement. As we held in Lakin, Jr. v.
Commission on Elections:47
The COMELEC, despite its role as the implementing arm of the Government in the
enforcement and administration of all laws and regulations relative to the conduct of
an election, has neither the authority nor the license to expand, extend, or add
anything to the law it seeks to implement thereby. The IRRs the COMELEC issued
for that purpose should always be in accord with the law to be implemented, and
should not override, supplant, or modify the law. It is basic that the IRRs should
remain consistent with the law they intend to carry out.
Indeed, administrative IRRs adopted by a particular department of the Government
under legislative authority must be in harmony with the provisions of the law, and
should be for the sole purpose of carrying the law's general provisions into effect.
The law itself cannot be expanded by such IRRs, because an administrative agency
cannot amend an act of Congress.48
In the case of Lakin, Jr., the COMELEC's explanation that the Resolution then in
question did not add anything but merely reworded and rephrased the statutory
provision did not persuade the Court. With more reason here since the COMELEC
not only reworded or rephrased the statutory provision - it practically replaced it with
its own idea of what the law should be, a matter that certainly is not within its
authority. As the Court said in Villegas v. Subido:49
One last word. Nothing is better settled in the law than that a public official exercises
power, not rights. The government itself is merely an agency through which the will
of the state is expressed and enforced. Its officers therefore are likewise agents
entrusted with the responsibility of discharging its functions. As such there is no
presumption that they are empowered to act. There must be a delegation of such
authority, either express or implied. In the absence of a valid grant, they are devoid
of power. What they do suffers from a fatal infirmity. That principle cannot be
sufficiently stressed. In the appropriate language of Chief Justice Hughes: "It must be
conceded that departmental zeal may not be permitted to outrun the authority
conferred by statute." Neither the high dignity of the office nor the righteousness of
the motive then is an acceptable substitute. Otherwise the rule of law becomes a
myth. Such an eventuality, we must take all pains to avoid.50
So it was then. So does the rule still remains the same.
d. Section 9 (a) of COMELEC Resolution No. 9615 on airtime limits also goes
against the constitutional guaranty of freedom of expression, of speech and of the
press
The guaranty of freedom to speak is useless without the ability to communicate and
disseminate what is said. And where there is a need to reach a large audience, the
need to access the means and media for such dissemination becomes critical. This is
where the press and broadcast media come along. At the same time, the right to
speak and to reach out would not be meaningful if it is just a token ability to be heard
by a few. It must be coupled with substantially reasonable means by which the
communicator and the audience could effectively interact. Section 9 (a) of
COMELEC Resolution No. 9615, with its adoption of the "aggregate-based" airtime
limits unreasonably restricts the guaranteed freedom of speech and of the press.
Political speech is one of the most important expressions protected by the
Fundamental Law. "[F]reedom of speech, of expression, and of the press are at the
core of civil liberties and have to be protected at all costs for the sake of
democracy."51 Accordingly, the same must remain unfettered unless otherwise
justified by a compelling state interest.
In regard to limitations on political speech relative to other state interests, an
American case observed:
A restriction on the amount of money a person or group can spend on political
communication during a campaign necessarily reduces the quantity of expression by
restricting the number of issues discussed, the depth of their exploration, and the size
of the audience reached. This is because virtually every means of communicating
ideas in today's mass society requires the expenditure of money. The distribution of
the humblest handbill or leaflet entails printing, paper, and circulation costs.
Speeches and rallies generally necessitate hiring a hall and publicizing the event. The
electorate's increasing dependence on television, radio, and other mass media for
news and information has made these expensive modes of communication
indispensable instruments of effective political speech.
The expenditure limitations contained in the Act represent substantial, rather than
merely theoretical restraints on the quantity and diversity of political speech. The
$1,000 ceiling on spending "relative to a clearly identified candidate," 18 U.S.C. §
608(e)(l) (1970 ed., Supp. IV), would appear to exclude all citizens and groups
except candidates, political parties, and the institutional press from any significant
use of the most effective modes of communication. Although the Act's limitations on
expenditures by campaign organizations and political parties provide substantially
greater room for discussion and debate, they would have required restrictions in the
scope of a number of past congressional and Presidential campaigns and would
operate to constrain campaigning by candidates who raise sums in excess of the
spending ceiling.52
Section 9 (a) ofCOMELEC Resolution No. 9615 comes up with what is challenged
as being an unreasonable basis for determining the allowable air time that candidates
and political parties may avail of. Petitioner GMA came up with its analysis of the
practical effects of such a regulation:
5.8. Given the reduction of a candidate's airtime minutes in the New Rules,
petitioner GMA estimates that a national candidate will only have 120
minutes to utilize for his political advertisements in television during the
whole campaign period of 88 days, or will only have 81.81 seconds per day
TV exposure allotment. If he chooses to place his political advertisements in
the 3 major TV networks in equal allocation, he will only have 27.27
seconds of airtime per network per day. This barely translates to 1
advertisement spot on a 30-second spot basis in television.
5.9. With a 20-hour programming per day and considering the limits of a
station's coverage, it will be difficult for 1 advertising spot to make a
sensible and feasible communication to the public, or in political
propaganda, to "make known [a candidate's] qualifications and stand on
public issues".
5.10 If a candidate loads all of his 81.81 seconds per day in one network,
this will translate to barely three 30-second advertising spots in television
on a daily basis using the same assumptions above.
5.11 Based on the data from the 2012 Nielsen TV audience measurement in
Mega Manila, the commercial advertisements in television are viewed by
only 39.2% of the average total day household audience if such
advertisements are placed with petitioner GMA, the leading television
network nationwide and in Mega Manila. In effect, under the restrictive
aggregate airtime limits in the New Rules, the three 30-second political
advertisements of a candidate in petitioner GMA will only be
communicated to barely 40% of the viewing audience, not even the voting
population, but only in Mega Manila, which is defined by AGB Nielsen
 Philippines to cover Metro Manila and certain urban areas in the provinces
of Bulacan, Cavite, Laguna, Rizal, Batangas and Pampanga. Consequently,
given the voting population distribution and the drastically reduced supply
of airtime as a result of the New Rules' aggregate airtime limits, a national
candidate will be forced to use all of his airtime for political advertisements
in television only in urban areas such as Mega Manila as a political
campaign tool to achieve maximum exposure.
5.12 To be sure, the people outside of Mega Manila or other urban areas
deserve to be informed of the candidates in the national elections, and the
said candidates also enjoy the right to be voted upon by these informed
populace.53
The Court agrees. The assailed rule on "aggregate-based" airtime limits is
unreasonable and arbitrary as it unduly restricts and constrains the ability of
candidates and political parties to reach out and communicate with the people. Here,
the adverted reason for imposing the "aggregate-based" airtime limits - leveling the
playing field - does not constitute a compelling state interest which would justify
such a substantial restriction on the freedom of candidates and political parties to
communicate their ideas, philosophies, platforms and programs of government. And,
this is specially so in the absence of a clear-cut basis for the imposition of such a
prohibitive measure. In this particular instance, what the COMELEC has done is
analogous to letting a bird fly after one has clipped its wings.
It is also particularly unreasonable and whimsical to adopt the aggregate-based time
limits on broadcast time when we consider that the Philippines is not only composed
of so many islands. There are also a lot of languages and dialects spoken among the
citizens across the country. Accordingly, for a national candidate to really reach out
to as many of the electorates as possible, then it might also be necessary that he
conveys his message through his advertisements in languages and dialects that the
people may more readily understand and relate to. To add all of these airtimes in
different dialects would greatly hamper the ability of such candidate to express
himself - a form of suppression of his political speech.
Respondent itself states that "[t]elevision is arguably the most costeffective medium
of dissemination. Even a slight increase in television exposure can significantly boost
a candidate's popularity, name recall and electability."54 If that be so, then drastically
curtailing the ability of a candidate to effectively reach out to the electorate would
unjustifiably curtail his freedom to speak as a means of connecting with the people.
Finally on this matter, it is pertinent to quote what Justice Black wrote in his
concurring opinion in the landmark Pentagon Papers case: "In the First Amendment,
the Founding Fathers gave the free press the protection it must have to fulfill its
essential role in our democracy. The press was to serve the governed, not the
governors. The Government's power to censor the press was abolished so that the
press would remain forever free to censure the Government. The press was protected
so that it could bare the secrets of government and inform the people. Only a free and
unrestrained press can effectively expose deception in government."55
In the ultimate analysis, when the press is silenced, or otherwise muffled in its
undertaking of acting as a sounding board, the people ultimately would be the
victims.
e. Section 9 (a) of Resolution 9615 is violative of the people's right to suffrage
Fundamental to the idea of a democratic and republican state is the right of the
people to determine their own destiny through the choice of leaders they may have in
government. Thus, the primordial importance of suffrage and the concomitant right
of the people to be adequately informed for the intelligent exercise of such birthright.
It was said that:
x x x As long as popular government is an end to be achieved and safeguarded,
suffrage, whatever may be the modality and form devised, must continue to be the
means by which the great reservoir of power must be emptied into the receptacular
agencies wrought by the people through their Constitution in the interest of good
government and the common weal. Republicanism, in so far as it implies the
adoption of a representative type of government, necessarily points to the
enfranchised citizen as a particle of popular sovereignty and as the ultimate source of
the established authority. He has a voice in his Government and whenever possible it
is the solemn duty of the judiciary, when called upon to act in justifiable cases, to
give it efficacy and not to stifle or frustrate it. This, fundamentally, is the reason for
the rule that ballots should be read and appreciated, if not with utmost, with
reasonable, liberality. x x x56 It has also been said that "[ c ]ompetition in ideas and
governmental policies is at the core of our electoral process and of the First
Amendment freedoms."57 Candidates and political parties need adequate breathing
space - including the means to disseminate their ideas. This could not be reasonably
addressed by the very restrictive manner by which the respondent implemented the
time limits in regard to political advertisements in the broadcast media.
f. Resolution No. 9615 needs prior hearing before adoption
The COMELEC promulgated Resolution No. 9615 on January 15, 2013 then came
up with a public hearing on January 31, 2013 to explain what it had done,
particularly on the aggregate-based air time limits. This circumstance also renders
the new regulation, particularly on the adoption of the aggregate-based airtime limit,
questionable. It must not be overlooked that the new Resolution introduced a radical
change in the manner in which the rules on airtime for political advertisements are to
be reckoned. As such there is a need for adequate and effective means by which they
may be adopted, disseminated and implemented. In this regard, it is not enough that
they be published - or explained - after they have been adopted.
While it is true that the COMELEC is an independent office and not a mere
administrative agency under the Executive Department, rules which apply to the
latter must also be deemed to similarly apply to the former, not as a matter of
administrative convenience but as a dictate of due process. And this assumes greater
significance considering the important and pivotal role that the COMELEC plays in
the life of the nation. Thus, whatever might have been said in Commissioner of
Internal Revenue v. Court of Appeals,58 should also apply mutatis mutandis to the
COMELEC when it comes to promulgating rules and regulations which adversely
affect, or impose a heavy and substantial burden on, the citizenry in a matter that
implicates the very nature of government we have adopted:
It should be understandable that when an administrative rule is merely interpretative
in nature, its applicability needs nothing further than its bare issuance for it gives no
real consequence more than what the law itself has already prescribed. When, upon
the other hand, the administrative rule goes beyond merely providing for the means
that can facilitate or render least cumbersome the implementation of the law but
substantially adds to or increases the burden of those governed, it behooves the
agency to accord at least to those directly affected a chance to be heard, and
thereafter to be duly informed, before that new issuance is given the force and effect
of law.
A reading of RMC 37-93, particularly considering the circumstances under which it
has been issued, convinces us that the circular cannot be viewed simply as a
corrective measure (revoking in the process the previous holdings of past
Commissioners) or merely as construing Section 142(c)(l) of the NIRC, as amended,
but has, in fact and most importantly, been made in order to place "Hope Luxury,"
"Premium More" and "Champion" within the classification of locally manufactured
cigarettes bearing foreign brands and to thereby have them covered by RA 7654.
Specifically, the new law would have its amendatory provisions applied to locally
manufactured cigarettes which at the time of its effectivity were not so classified as
bearing foreign brands. x x x In so doing, the BIR not simply interpreted the law;
verily, it legislated under its quasi-legislative authority. The due observance of the
requirements of notice, of hearing, and of publication should not have been then
ignored.59
For failing to conduct prior hearing before coming up with Resolution No. 9615, said
Resolution, specifically in regard to the new rule on aggregate airtime is declared
defective and ineffectual.
g. Resolution No. 9615 does not impose an unreasonable burden on the broadcast
industry
It is a basic postulate of due process, specifically in relation to its substantive
component, that any governmental rule or regulation must be reasonable in its
operations and its impositions. Any restrictions, as well as sanctions, must be
reasonably related to the purpose or objective of the government in a manner that
would not work unnecessary and unjustifiable burdens on the citizenry. Petitioner
GMA assails certain requirements imposed on broadcast stations as unreasonable. It
explained:
5.40 Petitioner GMA currently operates and monitors 21 FM and AM radio
stations nationwide and 8 originating television stations (including its main
transmitter in Quezon City) which are authorized to dechain national
programs for airing and insertion of local content and advertisements.
5.41 In light of the New Rules wherein a candidate's airtime minutes are
applied on an aggregate basis and considering that said Rules declare it
unlawful in Section 7( d) thereof for a radio, television station or other mass
media to sell or give for free airtime to a candidate in excess of that allowed
by law or by said New Rules:
"Section 7. Prohibited Forms of Election Propaganda -During the campaign
period, it is unlawful: x x x x x x x x x
(d) for any newspaper or publication, radio, television or cable television
station, or other mass media, or any person making use of the mass media to
sell or to give free of charge print space or air time for campaign or election
propaganda purposes to any candidate or party in excess of the size,
duration or frequency authorized by law or these rules;
xxx xxx xxx
(Emphasis supplied)
petitioner GMA submits that compliance with the New Rules in order to
avoid administrative or criminal liability would be unfair, cruel and
oppressive.
x x x x.
5.43 In the present situation wherein airtime minutes shall be shared by all
television and radio stations, broadcast mass media organizations would
surely encounter insurmountable difficulties in monitoring the airtime
minutes spent by the numerous candidates for various elective positions, in
real time.
5.44 An inquiry with the National Telecommunications Commission (NTC)
bears out that there are 372 television stations and 398 AM and 800 FM
radio stations nationwide as of June 2012. In addition, there are 1, 113 cable
 TV providers authorized by the NTC to operate within the country as of the
said date.
5.45 Given such numbers of broadcast entities and the necessity to monitor
political advertisements pursuant to the New Rules, petitioner OMA
estimates that monitoring television broadcasts of all authorized television
station would involve 7,440 manhours per day. To aggravate matters, since
a candidate may also spend his/her broadcasting minutes on cable TV,
additional 281,040 manhours per day would have to be spent in monitoring
the various channels carried by cable TV throughout the Philippines. As far
as radio broadcasts (both AM and FM stations) are concerned, around
23,960 manhours per day would have to be devoted by petitioner OMA to
obtain an accurate and timely determination of a political candidate's
remaining airtime minutes. During the campaign period, petitioner OMA
would have to spend an estimated 27,494,720 manhours in monitoring the
election campaign commercials of the different candidates in the
country.1âwphi1
5.46 In order to carry-out the obligations imposed by the New Rules,
petitioner OMA further estimates that it would need to engage and train
39,055 additional persons on an eight-hour shift, and assign them all over
the country to perform the required monitoring of radio, television and cable
TV broadcasts. In addition, it would likewise need to allot radio, television,
recording equipment and computers, as well as telecommunications
equipment, for this surveillance and monitoring exercise, thus imputing
additional costs to the company. Attached herewith are the computations
explaining how the afore-said figures were derived and the conservative
assumptions made by petitioner OMA in reaching said figures, as Annex
"H".
5.47 Needless to say, such time, manpower requirements, expense and
effort would have to be replicated by each and every radio station to ensure
that they have properly monitored around 33 national and more than 40,000
local candidates' airtime minutes and thus, prevent any risk of
administrative and criminal liability.60
The Court cannot agree with the contentions of GMA. The apprehensions of the
petitioner appear more to be the result of a misappreciation of the real import of the
regulation rather than a real and present threat to its broadcast activities. The Court is
more in agreement with the respondent when it explained that:
The legal duty of monitoring lies with the Comelec. Broadcast stations are merely
required to submit certain documents to aid the Comelec in ensuring that candidates
are not sold airtime in excess of the allowed limits. These documents include: (1)
certified true copies of broadcast logs, certificates of performance, and certificates of
acceptance, or other analogous record on specified dates (Section 9[d][3], Resolution
No. 9615, in relation to Section 6.2, R.A. 9006; and (2) copies of all contract for
advertising, promoting or opposing any political party or the candidacy of any person
for public office within five (5) days after its signing (Section 6.3, R.A. 9006).
*****
[T]here is absolutely no duty on the broadcast stations to do monitoring, much less
monitoring in real time. GMA grossly exaggerates when it claims that the non-
existent duty would require them to hire and train an astounding additional 39,055
personnel working on eight-hour shifts all over the country.61
The Court holds, accordingly, that, contrary to petitioners' contention, the Reporting
Requirement for the COMELEC's monitoring is reasonable.
Further, it is apropos to note that, pursuant to Resolution No. 9631,62 the respondent
revised the third paragraph of Section 9 (a). As revised, the provision now reads:
Appearance or guesting by a candidate on any bona fide newscast, bona fide news
interview, bona fide news documentary, if the appearance of the candidate is
incidental to the presentation of the subject or subjects covered by the news
documentary, or on-the-spot coverage of bona fide news events, including but not
limited to events sanctioned by the Commission on Elections, political conventions,
and similar activities, shall not be deemed to be broadcast election propaganda
within the meaning of this provision. For purposes of monitoring by the COMELEC
and ensuring that parties and candidates were afforded equal opportunities to
promote their candidacy, the media entity shall give prior notice to the COMELEC,
through the appropriate Regional Election Director (RED), or in the case of the
National Capital Region (NCR), the Education and Information Department (EID). If
such prior notice is not feasible or practicable, the notice shall be sent within twenty-
four (24) hours from the first broadcast or publication.1awp++i1 Nothing in the
foregoing sentence shall be construed as relieving broadcasters, in connection with
the presentation of newscasts, news interviews, news documentaries, and on-the-spot
coverage of news events, from the obligation imposed upon them under Sections 10
and 14 of these Rules."63
Further, the petitioner in G.R. No. 205374 assails the constitutionality of such
monitoring requirement, contending, among others, that it constitutes prior restraint.
The Court finds otherwise. Such a requirement is a reasonable means adopted by the
COMELEC to ensure that parties and candidates are afforded equal opportunities to
promote their respective candidacies. Unlike the restrictive aggregate-based airtime
limits, the directive to give prior notice is not unduly burdensome and unreasonable,
much less could it be characterized as prior restraint since there is no restriction on
dissemination of information before broadcast. Additionally, it is relevant to point
out that in the original Resolution No. 9615, the paragraph in issue was worded in
this wise:
Appearance or guesting by a candidate on any bona fide newscast, bona fide news
interview, bona fide news documentary, if the appearance of the candidate is
incidental to the presentation of the subject or subjects covered by the news
documentary, or on-the-spot coverage of bona fide news events, including but not
limited to events sanctioned by the Commission on Elections, political conventions,
and similar activities, shall not be deemed to be broadcast election propaganda
within the meaning of this provision. To determine whether the appearance or
guesting in a program is bona fide, the broadcast stations or entities must show that
(1) prior approval of the Commission was secured; and (2) candidates and parties
were afforded equal opportunities to promote their candidacy. Nothing in the
foregoing sentence shall be construed as relieving broadcasters, in connection with
the presentation of newscasts, news interviews, news documentaries, and on-the-spot
coverage of news events, from the obligation imposed upon them under Sections 10
and 14 of these Rules.64
Comparing the original with the revised paragraph, one could readily appreciate what
the COMELEC had done - to modify the requirement from "prior approval" to "prior
notice." While the former may be suggestive of a censorial tone, thus inviting a
charge of prior restraint, the latter is more in the nature of a content-neutral
regulation designed to assist the poll body to undertake its job of ensuring fair
elections without having to undertake any chore of approving or disapproving certain
expressions.
Also, the right to reply provision is reasonable
In the same way that the Court finds the "prior notice" requirement as not
constitutionally infirm, it similarly concludes that the "right to reply" provision is
reasonable and consistent with the constitutional mandate.
Section 14 of Resolution No. 9615, as revised by Resolution No. 9631, provides:
SECTION 14. Right to Reply. - All registered political parties, party-list groups or
coalitions and bona fide candidates shall have the right to reply to charges published
or aired against them. The reply shall be given publicity by the newspaper,
television, and/or radio station which first printed or aired the charges with the same
prominence or in the same page or section or in the same time slot as the first
statement.
Registered political parties, party-list groups or coalitions and bona fide candidates
may invoke the right to reply by submitting within a nonextendible period of forty-
eight hours from first broadcast or publication, a formal verified claim against the
media outlet to the COMELEC, through the appropriate RED. The claim shall
include a detailed enumeration of the circumstances and occurrences which warrant
the invocation of the right to reply and must be accompanied by supporting evidence,
such a copy of the publication or recording of the television or radio broadcast, as the
case may be. If the supporting evidence is not yet available due to circumstances
beyond the power of the claimant, the latter shall supplement his claim as soon as the
supporting evidence becomes available, without delay on the part of the claimant.
The claimant must likewise furnish a copy of the verified claim and its attachments
to the media outlet concerned prior to the filing of the claim with the COMELEC.
The COMELEC, through the RED, shall view the verified claim within forty-eight (
48) hours from receipt thereof, including supporting evidence, and if circumstances
warrant, give notice to the media outlet involved for appropriate action, which shall,
within forty-eight ( 48) hours, submit its comment, answer or response to the RED,
explaining the action it has taken to address the claim. The media outlet must
likewise furnish a copy of the said comment, answer or response to the claimant
invoking the right to reply.
Should the claimant insist that his/her right to reply was not addressed, he/she may
file the appropriate petition and/or complaint before the Commission on Elections or
its field offices, which shall be endorsed to the Clerk of Court.
The attack on the validity of the "right to reply" provision is primarily anchored on
the alleged ground of prior restraint, specifically in so far as such a requirement may
have a chilling effect on speech or of the freedom of the press.
Petitioner ABC states, inter alia:
5 .14 5. A "conscious and detailed consideration" of the interplay of the
relevant interests - the constitutional mandate granting candidates the right
to reply and the inviolability of the constitutional freedom of expression,
speech, and the press - will show that the Right to Reply, as provided for in
the Assailed Resolution, is an impermissible restraint on these fundamental
freedoms.
5.146. An evaluation of the factors set forth in Soriano (for the balancing of
interests test) with respect to the present controversy will show that the
Constitution does not tilt the balance in favor of the Right to Reply
provision in the Assailed Resolution and the supposed governmental
interest it attempts to further.65
The Constitution itself provides as part of the means to ensure free, orderly, honest,
fair and credible elections, a task addressed to the COMELEC to provide for a right
to reply.66 Given that express constitutional mandate, it could be seen that the
Fundamental Law itself has weighed in on the balance to be struck between the
freedom of the press and the right to reply. Accordingly, one is not merely to see the
equation as purely between the press and the right to reply. Instead, the
constitutionallymandated desiderata of free, orderly, honest, peaceful, and credible
elections would necessarily have to be factored in trying to see where the balance lies
between press and the demands of a right-to-reply.
Moreover, as already discussed by the Court in Telecommunications and Broadcast
Attorneys of the Philippines, Inc. v. Commission on Elections.67
In truth, radio and television broadcasting companies, which are given franchises, do
not own the airwaves and frequencies through which they transmit broadcast signals
and images. They are merely given the temporary privilege of using them. Since a
franchise is a mere privilege, the exercise of the privilege may reasonably be
burdened with the performance by the grantee of some form of public service. x x x68
Relevant to this aspect are these passages from an American Supreme Court decision
with regard to broadcasting, right to reply requirements, and the limitations on
speech:
We have long recognized that each medium of expression presents special First
Amendment problems. Joseph Burstyn, Inc. v. Wilson, 343 US 495, 502-503, 96 L
Ed 1098, 72 S Ct 777. And of all forms of communication, it is broadcasting that has
received the most limited First Amendment protection. Thus, although other speakers
cannot be licensed except under laws that carefully define and narrow official
discretion, a broadcaster may be deprived of his license and his forum if the
Commission decides that such an action would serve "the public interest,
convenience, and necessity." Similarly, although the First Amendment protects
newspaper publishers from being required to print the replies of those whom they
criticize, Miami Herald Publishing Co. v. Tornillo, 418 US 241, 41 L Ed 2d 730, 94
S Ct 2831, it affords no such protection to broadcasters; on the contrary, they must
give free time to the victims of their criticism. Red Lion Broadcasting Co. v. FCC,
395 US. 367, 23 L Ed 2d 371, 89 S Ct 1794.
Second, broadcasting is uniquely accessible to children, even those too young to
read. Although Cohen's written message might have been incomprehensible to a first
grader, Pacifica's broadcast could have enlarged a child's vocabulary in an instant.
Other forms of offensive expression may be withheld from the young without
restricting the expression at its source. Bookstores and motion picture theaters, for
example, may be prohibited from making indecent material available to children. We
held in Ginsberg v. New York, 390 US 629, that the government's interest in the
"well-being of its youth" and in supporting "parents' claim to authority in their own
household" justified the regulation of otherwise protected expression. The ease with
which children may obtain access to broadcast material, coupled with the concerns
recognized in Ginsberg, amply justify special treatment of indecent broadcasting.69
Given the foregoing considerations, the traditional notions of preferring speech and
the press over so many other values of society do not readily lend itself to this
particular matter. Instead, additional weight should be accorded on the constitutional
directive to afford a right to reply. If there was no such mandate, then the
submissions of petitioners may more easily commend themselves for this Court's
acceptance. But as noted above, this is not the case. Their arguments simplistically
provide minimal importance to that constitutional command to the point of
marginalizing its importance in the equation.
In fine, when it comes to election and the exercise of freedom of speech, of
expression and of the press, the latter must be properly viewed in context as being
necessarily made to accommodate the imperatives of fairness by giving teeth and
substance to the right to reply requirement.
WHEREFORE, premises considered, the petitions are PARTIALLY GRANTED,
Section 9 (a) of Resolution No. 9615, as amended by Resolution No. 9631, is
declared UNCONSTITUTIONAL and, therefore, NULL and VOID. The
constitutionality of the remaining provisions of Resolution No. 9615, as amended by
Resolution No. 9631, is upheld and remain in full force and effect.

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

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

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

- versus THE SECRETARY OF HEALTH,

Respondent.

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

Respondent.

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

AZCUNA, J.:
DOCTORS BLOOD CENTER, G.R. No. 133661
Petitioner,
Before this Court are petitions assailing primarily the constitutionality of Section 7 of
- versus Republic Act No. 7719, otherwise known as the National Blood Services Act of
1994, and the validity of Administrative Order (A.O.) No. 9, series of 1995 or the
Rules and Regulations Implementing Republic Act No. 7719.
G.R. No. 133640,[1] entitled Rodolfo S. Beltran, doing business under the name and
style, Our Lady of Fatima Blood Bank, et al., vs. The Secretary of Health and G.R.
No. 133661,[2] entitled Doctors Blood Bank Center vs. Department of Health are
petitions for certiorari and mandamus, respectively, seeking the annulment of the
following: (1) Section 7 of Republic Act No. 7719; and, (2) Administrative Order
(A.O.) No. 9, series of 1995. Both petitions likewise pray for the issuance of a writ of
prohibitory injunction enjoining the Secretary of Health from implementing and
enforcing the aforementioned law and its Implementing Rules and Regulations; and,
for a mandatory injunction ordering and commanding the Secretary of Health to
grant, issue or renew petitioners license to operate free standing blood banks (FSBB).
The above cases were consolidated in a resolution of the Court En Banc dated June
2, 1998.[3]
G.R. No. 139147,[4] entitled Rodolfo S. Beltran, doing business under the name and
style, Our Lady of Fatima Blood Bank, et al., vs. The Secretary of Health, on the
other hand, is a petition to show cause why respondent Secretary of Health should
not be held in contempt of court.
This case was originally assigned to the Third Division of this Court and
later consolidated with G.R. Nos. 133640 and 133661 in a resolution dated August 4,
1999.[5]
Petitioners comprise the majority of the Board of Directors of the Philippine
Association of Blood Banks, a duly registered non-stock and non-profit association
composed of free standing blood banks.
Public respondent Secretary of Health is being sued in his capacity as the public
official directly involved and charged with the enforcement and implementation of
the law in question.
The facts of the case are as follows:
Republic Act No. 7719 or the National Blood Services Act of 1994 was enacted into
law on April 2, 1994. The Act seeks to provide
an adequate supply of safe blood by promoting voluntary blood donation and by
regulating blood banks in the country. It was approved by then President Fidel V.
Ramos on May 15, 1994 and was subsequently published in the Official Gazette
on August 18, 1994. The law took effect on August 23, 1994.
On April 28, 1995, Administrative Order No. 9, Series of 1995, constituting
the Implementing Rules and Regulations of said law was promulgated by respondent
Secretary of the Department of Health (DOH).[6]
Section 7 of R.A. 7719 [7] provides:
Section 7. Phase-out of Commercial Blood Banks - All
commercial blood banks shall be phased-out over a period of two
(2) years after the effectivity of this Act, extendable to a maximum
period of two (2) years by the Secretary.
Section 23 of Administrative Order No. 9 provides:
Section 23. Process of Phasing Out. -- The Department shall
effect the phasing-out of all commercial blood banks over a period
of two (2) years, extendible for a maximum period of two (2) years
after the effectivity of R.A. 7719. The decision to extend shall be
based on the result of a careful study and review of the blood
supply and demand and public safety.[8]
Blood banking and blood transfusion services in the country have been arranged in
four (4) categories: blood centers run by the Philippine National Red Cross (PNRC),
government-run blood services, private hospital blood banks, and commercial blood
services.
Years prior to the passage of the National Blood Services Act of 1994,
petitioners have already been operating commercial blood banks under Republic Act
No. 1517, entitled An Act Regulating the Collection, Processing and Sale of Human
Blood, and the Establishment and Operation of Blood Banks and Blood Processing
Laboratories. The law, which was enacted on June 16, 1956, allowed the
establishment and operation by licensed physicians of blood banks and blood
processing laboratories. The Bureau of Research and Laboratories (BRL) was
created in 1958 and was given the power to regulate clinical laboratories in 1966
under Republic Act No. 4688. In 1971, the Licensure Section was created within the
BRL. It was given the duty to enforce the licensure requirements for blood banks as
well as clinical laboratories. Due to this development, Administrative Order No. 156,
Series of 1971, was issued. The new rules and regulations triggered a stricter
enforcement of the Blood Banking Law, which was characterized by frequent spot
checks, immediate suspension and communication of such suspensions to hospitals, a
more systematic record-keeping and frequent communication with blood banks
through monthly information bulletins. Unfortunately, by the 1980s, financial
difficulties constrained the BRL to reduce the frequency of its supervisory visits to
the blood banks.[9]
Meanwhile, in the international scene, concern for the safety of blood and blood
products intensified when the dreaded disease Acute Immune Deficiency Syndrome
(AIDS) was first described in 1979. In 1980, the International Society of Blood
Transfusion (ISBT) formulated the Code of Ethics for Blood Donation and
Transfusion. In 1982, the first case of transfusion-associated AIDS was described in
an infant. Hence, the ISBT drafted in 1984, a model for a national blood policy
outlining certain principles that should be taken into consideration. By 1985, the
ISBT had disseminated guidelines requiring AIDS testing of blood and blood
products for transfusion.[10]
In 1989, another revision of the Blood Banking Guidelines was made. The DOH
issued Administrative Order No. 57, Series of 1989, which classified banks into
primary, secondary and tertiary depending on the services they provided. The
standards were adjusted according to this classification. For instance, floor area
requirements varied according to classification level. The new guidelines likewise
required Hepatitis B and HIV testing, and that the blood bank be headed by a
pathologist or a hematologist.[11]
In 1992, the DOH issued Administrative Order No. 118-A institutionalizing the
National Blood Services Program (NBSP). The BRL was designated as the central
office primarily responsible for the NBSP. The program paved the way for the
creation of a committee that will implement the policies of the program and the
formation of the Regional Blood Councils.
In August 1992, Senate Bill No. 1011, entitled An Act Promoting Voluntary Blood
Donation, Providing for an Adequate Supply of Safe Blood, Regulating Blood Banks
and Providing Penalties for Violations Thereof, and for other Purposes was
introduced in the Senate.[12]
Meanwhile, in the House of Representatives, House Bills No. 384, 546, 780
and 1978 were being deliberated to address the issue of safety of the Philippine blood
bank system. Subsequently, the Senate and House Bills were referred to the
appropriate committees and subsequently consolidated.[13]
In January of 1994, the New Tropical Medicine Foundation, with the
assistance of the U.S. Agency for International Development (USAID) released its
final report of a study on the Philippine blood banking system entitled Project to
Evaluate the Safety of the Philippine Blood Banking System. It was revealed that of
the blood units collected in 1992, 64.4 % were supplied by commercial blood banks,
14.5% by the PNRC, 13.7% by government hospital-based blood banks, and 7.4% by
private hospital-based blood banks. During the time the study was made, there were
only twenty-four (24) registered or licensed free-standing or commercial blood banks
in the country. Hence, with these numbers in mind, the study deduced that each
commercial blood bank produces five times more blood than the Red Cross and
fifteen times more than the government-run blood banks. The study, therefore,
showed that the Philippines heavily relied on commercial sources of blood. The
study likewise revealed that 99.6% of the donors of commercial blood banks and
77.0% of the donors of private-hospital based blood banks are paid donors. Paid
donors are those who receive remuneration for donating their blood. Blood donors of
the PNRC and government-run hospitals, on the other hand, are mostly voluntary.[14]
It was further found, among other things, that blood sold by persons to blood
commercial banks are three times more likely to have any of the four (4) tested
infections or blood transfusion transmissible diseases, namely, malaria, syphilis,
Hepatitis B and Acquired Immune Deficiency Syndrome (AIDS) than those donated
to PNRC.[15]
Commercial blood banks give paid donors varying rates around P50
to P150, and because of this arrangement, many of these donors are poor, and often
they are students, who need cash immediately. Since they need the money, these
donors are not usually honest about their medical or social history. Thus, blood from
healthy, voluntary donors who give their true medical and social history are about
three times much safer than blood from paid donors.[16]
What the study also found alarming is that many Filipino doctors are not yet fully
trained on the specific indications for blood component transfusion. They are not
aware of the lack of blood supply and do not feel the need to adjust their practices
and use of blood and blood products. It also does not matter to them where the blood
comes from.[17]
On August 23, 1994, the National Blood Services Act providing for the phase out of
commercial blood banks took effect. On April 28, 1995, Administrative Order No. 9,
Series of 1995, constituting the Implementing Rules and Regulations of said law was
promulgated by DOH.
The phase-out period was extended for two years by the DOH pursuant to Section 7
of Republic Act No. 7719 and Section 23 of its Implementing Rules and Regulations.
Pursuant to said Act, all commercial blood banks should have been phased out
by May 28, 1998. Hence, petitioners were granted by the Secretary of Health their
licenses to open and operate a blood bank only until May 27, 1998.
On May 20, 1998, prior to the expiration of the licenses granted to
petitioners, they filed a petition for certiorari with application for the issuance of a
writ of preliminary injunction or temporary restraining order under Rule 65 of the
Rules of Court assailing the constitutionality and validity of the aforementioned Act
and its Implementing Rules and Regulations. The case was entitled Rodolfo S.
Beltran, doing business under the name and style, Our Lady of Fatima Blood Bank,
docketed as G.R. No. 133640.
On June 1, 1998, petitioners filed an Amended Petition for Certiorari with
Prayer for Issuance of a Temporary Restraining Order, writ of preliminary
mandatory injunction and/or status quo ante order.[18]
In the aforementioned petition, petitioners assail the constitutionality of the
questioned legal provisions, namely, Section 7 of Republic Act No. 7719 and Section
23 of Administrative Order No. 9, Series of 1995, on the following grounds: [19]
1. The questioned legal provisions of the National Blood
Services Act and its Implementing Rules violate the equal
protection clause for irrationally discriminating against
 free standing blood banks in a manner which is not
germane to the purpose of the law;
2. The questioned provisions of the National Blood
Services Act and its Implementing Rules represent undue
delegation if not outright abdication of the police power
of the state; and,
3. The questioned provisions of the National Blood
Services Act and its Implementing Rules are unwarranted
deprivation of personal liberty.
On May 22, 1998, the Doctors Blood Center filed a similar petition for
mandamus with a prayer for the issuance of a temporary restraining order,
preliminary prohibitory and mandatory injunction before this Court
entitled Doctors Blood Center vs. Department of Health, docketed as G.R. No.
133661. [20] This was consolidated with G.R. No. 133640.[21]
Similarly, the petition attacked the constitutionality of Republic Act No.
7719 and its implementing rules and regulations, thus, praying for the issuance of a
license to operate commercial blood banks beyond May 27, 1998. Specifically, with
regard to Republic Act No. 7719, the petition submitted the following
questions[22] for resolution:
1. Was it passed in the exercise of police
power, and was it a valid exercise of such power?
2. Does it not amount to deprivation of
property without due process?
3. Does it not unlawfully impair the
obligation of contracts?
4. With the commercial blood banks being abolished and with no
ready machinery to deliver the same supply and services,
does R.A. 7719 truly serve the public welfare?
On June 2, 1998, this Court issued a Resolution directing respondent DOH to file a
consolidated comment. In the same Resolution, the Court issued a temporary
restraining order (TRO) for respondent to cease and desist from implementing and
enforcing Section 7 of Republic Act No. 7719 and its implementing rules and
regulations until further orders from the Court.[23]
On August 26, 1998, respondent Secretary of Health filed a Consolidated Comment
on the petitions for certiorari and mandamus in G.R. Nos. 133640 and 133661, with
opposition to the issuance of a temporary restraining order.[24]
In the Consolidated Comment, respondent Secretary of Health submitted that blood
from commercial blood banks is unsafe and therefore the State, in the exercise of its
police power, can close down commercial blood banks to protect the public. He cited
the record of deliberations on Senate Bill No. 1101 which later became Republic Act
No. 7719, and the sponsorship speech of Senator Orlando Mercado.
The rationale for the closure of these commercial blood banks can be found in the
deliberations of Senate Bill No. 1011, excerpts of which are quoted below:
Senator Mercado: I am providing over a period of two years to
phase out all commercial blood banks. So that in the end, the new
section would have a provision that states:
ALL COMMERCIAL BLOOD BANKS SHALL BE
PHASED OUT OVER A PERIOD OF TWO YEARS AFTER
THE EFFECTIVITY OF THIS ACT. BLOOD SHALL BE
COLLECTED FROM VOLUNTARY DONORS ONLY AND
THE SERVICE FEE TO BE CHARGED FOR EVERY BLOOD
PRODUCT ISSUED SHALL BE LIMITED TO THE
NECESSARY EXPENSES ENTAILED IN COLLECTING AND
PROCESSING OF BLOOD. THE SERVICE FEE SHALL BE
MADE UNIFORM THROUGH GUIDELINES TO BE SET BY
THE DEPARTMENTOF HEALTH.
I am supporting Mr. President, the finding of a study
called Project to Evaluate the Safety of the Philippine Blood
Banking System. This has been taken note of. This is a study done
with the assistance of the USAID by doctors under the New
Tropical Medicine Foundation in Alabang.
Part of the long-term measures proposed by this particular
study is to improve laws, outlaw buying and selling of blood and
legally define good manufacturing processes for blood. This goes
to the very heart of my amendment which seeks to put into law the
principle that blood should not be subject of commerce of man.
The Presiding Officer [Senator Aquino]: What does the
sponsor say?
Senator Webb: Mr. President, just for clarity, I would
like to find out how the Gentleman defines a commercial blood
bank. I am at a loss at times what a commercial blood bank really
is.
Senator Mercado: We have a definition, I believe, in the
measure, Mr. President.
 The Presiding Officer [Senator Aquino]: It is a business
where profit is considered.
Senator Mercado: If the Chairman of the Committee would
accept it, we can put a provision on Section 3, a definition of a
commercial blood bank, which, as defined in this law, exists for
profit and engages in the buying and selling of blood or its
components.
Senator Webb: That is a good description, Mr. President.
Senator Mercado: I refer, Mr. President, to a letter
written by Dr. Jaime Galvez-Tan, the Chief of Staff,
Undersecretary of Health, to the good Chairperson of the
Committee on Health.
In recommendation No. 4, he says:
The need to phase out all commercial blood banks within
a two-year period will give the Department of Health enough time
to build up governments capability to provide an adequate supply
of blood for the needs of the nation...the use of blood for
transfusion is a medical service and not a sale of commodity.
Taking into consideration the experience of the National
Kidney Institute, which has succeeded in making the hospital 100
percent dependent on voluntary blood donation, here is a success
story of a hospital that does not buy blood. All those who are
operated on and need blood have to convince their relatives or have
to get volunteers who would donate blood
If we give the responsibility of the testing of blood to
those commercial blood banks, they will cut corners because it will
protect their profit.
In the first place, the people who sell their blood are the
people who are normally in the high-risk category. So we should
stop the system of selling and buying blood so that we can go into
a national voluntary blood program.
It has been said here in this report, and I quote:
Why is buying and selling of blood not safe? This is not
safe because a donor who expects payment for his blood will not
tell the truth about his illnesses and will deny any risky social
behavior such as sexual promiscuity which increases the risk of
having syphilis or AIDS or abuse of intravenous addictive drugs.
Laboratory tests are of limited value and will not detect early
infections. Laboratory tests are required only for four diseases in
the Philippines. There are other blood transmissible diseases we do
not yet screen for and there could be others where there are no tests
available yet.
A blood bank owner expecting to gain profit from selling
blood will also try his best to limit his expenses. Usually he tries to
increase his profit by buying cheaper reagents or test kits, hiring
cheaper manpower or skipping some tests altogether. He may also
try to sell blood even though these have infections in them.
Because there is no existing system of counterchecking these, the
blood bank owner can usually get away with many unethical
practices.
The experience of Germany, Mr. President is illustrative
of this issue. The reason why contaminated blood was sold was
that there were corners cut by commercial blood banks in the
testing process. They were protecting their profits.[25]
The sponsorship speech of Senator Mercado further elucidated his stand on the issue:
Senator Mercado: Today, across the country, hundreds of
poverty-stricken, sickly and weak Filipinos, who, unemployed,
without hope and without money to buy the next meal, will walk
into a commercial blood bank, extend their arms and plead that
their blood be bought. They will lie about their age, their medical
history. They will lie about when they last sold their blood. For
doing this, they will receive close to a hundred pesos. This may
tide them over for the next few days. Of course, until the next
bloodletting.
This same blood will travel to the posh city hospitals and urbane
medical centers. This same blood will now be bought by the rich at
a price over 500% of the value for which it was sold. Between this
buying and selling, obviously, someone has made a very fast buck.
Every doctor has handled at least one transfusion-related disease in
an otherwise normal patient. Patients come in for minor surgery of
the hand or whatever and they leave with hepatitis B. A patient
comes in for an appendectomy and he leaves with malaria. The
worst nightmare: A patient comes in for a Caesarian section and
leaves with AIDS.
We do not expect good blood from donors who sell their blood
because of poverty. The humane dimension of blood transfusion is
not in the act of receiving blood, but in the act of giving it
For years, our people have been at the mercy of commercial blood
banks that lobby their interests among medical technologists,
hospital administrators and sometimes even physicians so that a
 proactive system for collection of blood from healthy donors
becomes difficult, tedious and unrewarding.
The Department of Health has never institutionalized a
comprehensive national program for safe blood and for voluntary
blood donation even if this is a serious public health concern and
has fallen for the linen of commercial blood bankers, hook, line
and sinker because it is more convenient to tell the patient to buy
blood.
Commercial blood banks hold us hostage to their threat that if we
are to close them down, there will be no blood supply. This is true
if the Government does not step in to ensure that safe supply of
blood. We cannot allow commercial interest groups to dictate
policy on what is and what should be a humanitarian effort. This
cannot and will never work because their interest in blood donation
is merely monetary. We cannot expect commercial blood banks to
take the lead in voluntary blood donation. Only the Government
can do it, and the Government must do it.[26]
On May 5, 1999, petitioners filed a Motion for Issuance of Expanded Temporary
Restraining Order for the Court to order respondent Secretary of Health to cease and
desist from announcing the closure of commercial blood banks, compelling the
public to source the needed blood from voluntary donors only, and committing
similar acts that will ultimately cause the shutdown of petitioners blood banks.[27]
On July 8, 1999, respondent Secretary filed his Comment and/or Opposition
to the above motion stating that he has not ordered the closure of commercial blood
banks on account of the Temporary Restraining Order (TRO) issued on June 2, 1998
by the Court. In compliance with the TRO, DOH had likewise ceased to distribute
the health advisory leaflets, posters and flyers to the public which state that blood
banks are closed or will be closed. According to respondent Secretary, the same were
printed and circulated in anticipation of the closure of the commercial blood banks in
accordance with R.A. No. 7719, and were printed and circulated prior to the issuance
of the TRO.[28]
On July 15, 1999, petitioners in G.R. No. 133640 filed a Petition to Show
Cause Why Public Respondent Should Not be Held in Contempt of Court, docketed
as G.R. No. 139147, citing public respondents willful disobedience of or resistance
to the restraining order issued by the Court in the said case. Petitioners alleged that
respondents act constitutes circumvention of the temporary restraining order and a
mockery of the authority of the Court and the orderly administration of
justice.[29] Petitioners added that despite the issuance of the temporary restraining
order in G.R. No. 133640, respondent, in his effort to strike down the existence of
commercial blood banks, disseminated misleading information under the guise of
health advisories, press releases, leaflets, brochures and flyers stating, among others,
that this year [1998] all commercial blood banks will be closed by 27 May. Those
who need blood will have to rely on government blood banks.[30]Petitioners further
claimed that respondent Secretary of Health announced in a press conference during
the Blood Donors Week that commercial blood banks are illegal and dangerous and
that they are at the moment protected by a restraining order on the basis that their
commercial interest is more important than the lives of the people. These were all
posted in bulletin boards and other conspicuous places in all government hospitals as
well as other medical and health centers.[31]
In respondent Secretarys Comment to the Petition to Show Cause Why Public
Respondent Should Not Be Held in Contempt of Court, dated January 3, 2000, it was
explained that nothing was issued by the department ordering the closure of
commercial blood banks. The subject health advisory leaflets pertaining to said
closure pursuant to Republic Act No. 7719 were printed and circulated prior to the
Courts issuance of a temporary restraining order on June 21, 1998.[32]
Public respondent further claimed that the primary purpose of the
information campaign was to promote the importance and safety of voluntary blood
donation and to educate the public about the hazards of patronizing blood supplies
from commercial blood banks.[33] In doing so, he was merely performing his regular
functions and duties as the Secretary of Health to protect the health and welfare of
the public. Moreover, the DOH is the main proponent of the voluntary blood
donation program espoused by Republic Act No. 7719, particularly Section 4 thereof
which provides that, in order to ensure the adequate supply of human blood,
voluntary blood donation shall be promoted through public education, promotion in
schools, professional education, establishment of blood services network,
and walking blood donors.
Hence, by authority of the law, respondent Secretary contends that he has
the duty to promote the program of voluntary blood donation. Certainly, his act of
encouraging the public to donate blood voluntarily and educating the people on the
risks associated with blood coming from a paid donor promotes general health and
welfare and which should be given more importance than the commercial businesses
of petitioners.[34]
On July 29, 1999, interposing personal and substantial interest in the case as
taxpayers and citizens, a Petition-in-Intervention was filed interjecting the same
arguments and issues as laid down by petitioners in G.R. No. 133640 and 133661,
namely, the unconstitutionality of the Acts, and, the issuance of a writ of prohibitory
injunction. The intervenors are the immediate relatives of individuals who had died
allegedly because of shortage of blood supply at a critical time.[35]
The intervenors contended that Republic Act No. 7719 constitutes undue
delegation of legislative powers and unwarranted deprivation of personal liberty.[36]
In a resolution, dated September 7, 1999, and without giving due course to
the aforementioned petition, the Court granted the Motion for Intervention that was
filed by the above intervenors on August 9, 1999.
In his Comment to the petition-in-intervention, respondent Secretary of
Health stated that the sale of blood is contrary to the spirit and letter of the Act that
blood donation is a humanitarian act and blood transfusion is a professional medical
service and not a sale of commodity (Section 2[a] and [b] of Republic Act No. 7719).
The act of selling blood or charging fees other than those allowed by law is even
penalized under Section 12.[37]
Thus, in view of these, the Court is now tasked to pass upon the constitutionality of
Section 7 of Republic Act No. 7719 or the National Blood Services Act of 1994 and
its Implementing Rules and Regulations.
In resolving the controversy, this Court deems it necessary to address the
issues and/or questions raised by petitioners concerning the constitutionality of the
aforesaid Act in G.R. No. 133640 and 133661 as summarized hereunder:
I Legislature.[38] Except as to matters of detail that may be left to be filled in by rules
WHETHER OR NOT SECTION 7 OF R.A. 7719
CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE
POWER;
II
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND
ITS IMPLEMENTING RULES AND REGULATIONS VIOLATE
THE EQUAL PROTECTION CLAUSE;
III
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND
ITS IMPLEMENTING RULES AND REGULATIONS VIOLATE
THE NON-IMPAIRMENT CLAUSE;
IV
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND
ITS IMPLEMENTING RULES AND REGULATIONS
CONSTITUTE DEPRIVATION OF PERSONAL LIBERTY AND
PROPERTY;
V regulations to be promulgated by the Secretary, within sixty (60)
WHETHER OR NOT R.A. 7719 IS A VALID
EXERCISE OF POLICE POWER; and,
VI
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND
ITS IMPLEMENTING RULES AND REGULATIONS TRULY
SERVE PUBLIC WELFARE.
As to the first ground upon which the constitutionality of the Act is being challenged,
it is the contention of petitioners that the phase out of commercial or free standing
blood banks is unconstitutional because it is an improper and unwarranted delegation
of legislative power. According to petitioners, the Act was incomplete when it was
passed by the Legislature, and the latter failed to fix a standard to which the
Secretary of Health must conform in the performance of his functions. Petitioners
also contend that the two-year extension period that may be granted by the Secretary
of Health for the phasing out of commercial blood banks pursuant to Section 7 of the
Act constrained the Secretary to legislate, thus constituting undue delegation of
legislative power.
In testing whether a statute constitutes an undue delegation of legislative
power or not, it is usual to inquire whether the statute was complete in all its terms
and provisions when it left the hands of the Legislature so that nothing was left to the
judgment of the administrative body or any other appointee or delegate of the
and regulations to be adopted or promulgated by executive officers and
administrative boards, an act of the Legislature, as a general rule, is incomplete and
hence invalid if it does not lay down any rule or definite standard by which the
administrative board may be guided in the exercise of the discretionary powers
delegated to it.[39]
Republic Act No. 7719 or the National Blood Services Act of 1994 is
complete in itself. It is clear from the provisions of the Act that the Legislature
intended primarily to safeguard the health of the people and has mandated several
measures to attain this objective. One of these is the phase out of commercial blood
banks in the country. The law has sufficiently provided a definite standard for the
guidance of the Secretary of Health in carrying out its provisions, that is, the
promotion of public health by providing a safe and adequate supply of blood through
voluntary blood donation. By its provisions, it has conferred the power and authority
to the Secretary of Health as to its execution, to be exercised under and in pursuance
of the law.
Congress may validly delegate to administrative agencies the authority to
promulgate rules and regulations to implement a given legislation and effectuate its
policies.[40] The Secretary of Health has been given, under Republic Act No. 7719,
broad powers to execute the provisions of said Act. Section 11 of the Act states:
SEC. 11. Rules and Regulations. The implementation of the
provisions of the Act shall be in accordance with the rules and
days from the approval hereof
This is what respondent Secretary exactly did when DOH, by virtue of the
administrative bodys authority and expertise in the matter, came out with
Administrative Order No.9, series of 1995 or the Rules and Regulations
Implementing Republic Act No. 7719. Administrative Order. No. 9 effectively filled
in the details of the law for its proper implementation.
Specifically, Section 23 of Administrative Order No. 9 provides that the
phase-out period for commercial blood banks shall be extended for another two years
until May 28, 1998 based on the result of a careful study and review of the blood
supply and demand and public safety. This power to ascertain the existence of facts
and conditions upon which the Secretary may effect a period of extension for said
phase-out can be delegated by Congress. The true distinction between the power to
make laws and discretion as to its execution is illustrated by the fact that the
delegation of power to make the law, which necessarily involves a discretion as to
what it shall be, and conferring an authority or discretion as to its execution, to be
exercised under and in pursuance of the law. The first cannot be done; to the latter no
valid objection can be made.[41]
In this regard, the Secretary did not go beyond the powers granted to him by
the Act when said phase-out period was extended in accordance with the Act as laid
out in Section 2 thereof:
SECTION 2. Declaration of Policy In order to promote
public health, it is hereby declared the policy of the state:
a) to promote and encourage voluntary blood
donation by the citizenry and to instill public
consciousness of the principle that blood donation is
a humanitarian act;
b) to lay down the legal principle that the provision
of blood for transfusion is a medical service and not a
sale of commodity;
c) to provide for adequate, safe, affordable and
equitable distribution of blood supply and blood
products;
d) to inform the public of the need for voluntary
blood donation to curb the hazards caused by the
commercial sale of blood;
e) to teach the benefits and rationale of voluntary
blood donation in the existing health subjects of the
formal education system in all public and private
schools as well as the non-formal system;
f) to mobilize all sectors of the community to
participate in mechanisms for voluntary and non-
profit collection of blood;
g) to mandate the Department of Health to establish
and organize a National Blood Transfusion Service
Network in order to rationalize and improve the
provision of adequate and safe supply of blood;
h) to provide for adequate assistance to institutions
promoting voluntary blood donation and providing
non-profit blood services, either through a system of
reimbursement for costs from patients who can afford
to pay, or donations from governmental and non-
governmental entities;
i) to require all blood collection units and blood
banks/centers to operate on a non-profit basis;
j) to establish scientific and professional standards
for the operation of blood collection units and blood
banks/centers in the Philippines;
k) to regulate and ensure the safety of all activities
related to the collection, storage and banking of
blood; and,
l) to require upgrading of blood banks/centers to
include preventive services and education to control
spread of blood transfusion transmissible diseases.
Petitioners also assert that the law and its implementing rules and
regulations violate the equal protection clause enshrined in the Constitution because
it unduly discriminates against commercial or free standing blood banks in a manner
that is not germane to the purpose of the law.[42]
What may be regarded as a denial of the equal protection of the laws is a question
not always easily determined. No rule that will cover every case can be formulated.
Class legislation, discriminating against some and favoring others is prohibited but
classification on a reasonable basis and not made arbitrarily or capriciously is
permitted. The classification, however, to be reasonable: (a) must be based on
substantial distinctions which make real differences; (b) must be germane to the
purpose of the law; (c) must not be limited to existing conditions only; and, (d) must
apply equally to each member of the class.[43]
Republic Act No. 7719 or The National Blood Services Act of 1994, was
enacted for the promotion of public health and welfare. In the aforementioned study
conducted by the New Tropical Medicine Foundation, it was revealed that the
Philippine blood banking system is disturbingly primitive and unsafe, and with its
current condition, the spread of infectious diseases such as malaria, AIDS, Hepatitis
B and syphilis chiefly from blood transfusion is unavoidable. The situation becomes
more distressing as the study showed that almost 70% of the blood supply in the
country is sourced from paid blood donors who are three times riskier than voluntary
blood donors because they are unlikely to disclose their medical or social history
during the blood screening.[44]
 The above study led to the passage of Republic Act No. 7719, to instill
public consciousness of the importance and benefits of voluntary blood donation,
safe blood supply and proper blood collection from healthy donors. To do this, the
Legislature decided to order the phase out of commercial blood banks to improve the
Philippine blood banking system, to regulate the supply and proper collection of safe
blood, and so as not to derail the implementation of the voluntary blood donation
program of the government. In lieu of commercial blood banks, non-profit blood
banks or blood centers, in strict adherence to professional and scientific standards to
be established by the DOH, shall be set in place.[45]
Based on the foregoing, the Legislature never intended for the law to create
a situation in which unjustifiable discrimination and inequality shall be allowed. To
effectuate its policy, a classification was made between nonprofit blood
banks/centers and commercial blood banks.
We deem the classification to be valid and reasonable for the following
reasons:
One, it was based on substantial distinctions. The former operates for purely
humanitarian reasons and as a medical service while the latter is motivated by profit.
Also, while the former wholly encourages voluntary blood donation, the latter treats
blood as a sale of commodity.
Two, the classification, and the consequent phase out of commercial blood
banks is germane to the purpose of the law, that is, to provide the nation with an
adequate supply of safe blood by promoting voluntary blood donation and treating
blood transfusion as a humanitarian or medical service rather than a commodity. This
necessarily involves the phase out of commercial blood banks based on the fact that
they operate as a business enterprise, and they source their blood supply from paid
blood donors who are considered unsafe compared to voluntary blood donors as
shown by the USAID-sponsored study on the Philippine blood banking system.
Three, the Legislature intended for the general application of the law. Its
enactment was not solely to address the peculiar circumstances of the situation nor
was it intended to apply only to the existing conditions.
Lastly, the law applies equally to all commercial blood banks without
exception.
Having said that, this Court comes to the inquiry as to whether or not
Republic Act No. 7719 constitutes a valid exercise of police power.
The promotion of public health is a fundamental obligation of the State. The health
of the people is a primordial governmental concern. Basically, the National Blood
Services Act was enacted in the exercise of the States police power in order to
promote and preserve public health and safety.
Police power of the state is validly exercised if (a) the interest of the public
generally, as distinguished from those of a particular class, requires the interference
of the State; and, (b) the means employed are reasonably necessary to the attainment
of the objective sought to be accomplished and not unduly oppressive upon
individuals.[46]
In the earlier discussion, the Court has mentioned of the avowed policy of
the law for the protection of public health by ensuring an adequate supply of safe
blood in the country through voluntary blood donation. Attaining this objective
requires the interference of the State given the disturbing condition of the Philippine
blood banking system.
In serving the interest of the public, and to give meaning to the purpose of
the law, the Legislature deemed it necessary to phase out commercial blood banks.
This action may seriously affect the owners and operators, as well as the employees,
of commercial blood banks but their interests must give way to serve a higher end for
the interest of the public.
The Court finds that the National Blood Services Act is a valid exercise of
the States police power. Therefore, the Legislature, under the circumstances, adopted
a course of action that is both necessary and reasonable for the common good. Police
power is the State authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare.[47]
It is in this regard that the Court finds the related grounds and/or issues raised by
petitioners, namely, deprivation of personal liberty and property, and violation of the
non-impairment clause, to be unmeritorious.
Petitioners are of the opinion that the Act is unconstitutional and void
because it infringes on the freedom of choice of an individual in connection to what
he wants to do with his blood which should be outside the domain of State
intervention. Additionally, and in relation to the issue of classification, petitioners
asseverate that, indeed, under the Civil Code, the human body and its organs like the
heart, the kidney and the liver are outside the commerce of man but this cannot be
made to apply to human blood because the latter can be replenished by the body. To
treat human blood equally as the human organs would constitute invalid
classification.[48]
Petitioners likewise claim that the phase out of the commercial blood banks
will be disadvantageous to them as it will affect their businesses and existing
contracts with hospitals and other health institutions, hence Section 7 of the Act
should be struck down because it violates the non-impairment clause provided by the
Constitution.
As stated above, the State, in order to promote the general welfare, may
interfere with personal liberty, with property, and with business and occupations.
Thus, persons may be subjected to certain kinds of restraints and burdens in order to
secure the general welfare of the State and to this fundamental aim of government,
the rights of the individual may be subordinated.[49]
Moreover, in the case of Philippine Association of Service Exporters, Inc. v.
Drilon,[50] settled is the rule that the non-impairment clause of the Constitution must
yield to the loftier purposes targeted by the government. The right granted by this
provision must submit to the demands and necessities of the States power of
regulation. While the Court understands the grave implications of Section 7 of the
law in question, the concern of the Government in this case, however, is not
necessarily to maintain profits of business firms. In the ordinary sequence of events,
it is profits that suffer as a result of government regulation.
 Furthermore, the freedom to contract is not absolute; all contracts and all
rights are subject to the police power of the State and not only may regulations which
affect them be established by the State, but all such regulations must be subject to
change from time to time, as the general well-being of the community may require,
or as the circumstances may change, or as experience may demonstrate the
necessity.[51] This doctrine was reiterated in the case of Vda. de Genuino v. Court of
Agrarian Relations[52] where the Court held that individual rights to contract and to
property have to give way to police power exercised for public welfare.
As for determining whether or not the shutdown of commercial blood banks will
truly serve the general public considering the shortage of blood supply in the country
as proffered by petitioners, we maintain that the wisdom of the Legislature in the
lawful exercise of its power to enact laws cannot be inquired into by the Court.
Doing so would be in derogation of the principle of separation of powers.[53]
That, under the circumstances, proper regulation of all blood banks without
distinction in order to achieve the objective of the law as contended by petitioners is,
of course, possible; but, this would be arguing on what the law may be or should
be and not what the law is. Between is and ought there is a far cry. The wisdom and
propriety of legislation is not for this Court to pass upon.[54]
Finally, with regard to the petition for contempt in G.R. No. 139147, on the other
hand, the Court finds respondent Secretary of Healths explanation satisfactory. The
statements in the flyers and posters were not aimed at influencing or threatening the
Court in deciding in favor of the constitutionality of the law.
of constitutionality of the law. As to whether the Act constitutes a wise legislation,
considering the issues being raised by petitioners, is for Congress to determine.[57]
WHEREFORE, premises considered, the Court renders judgment as follows:
1. In G.R. Nos. 133640 and 133661, the
Court UPHOLDS THE VALIDITY of Section 7 of Republic Act
No. 7719, otherwise known as the National Blood Services Act of
1994, and Administrative Order No. 9, Series of 1995 or the Rules
and Regulations Implementing Republic Act No. 7719. The
petitions are DISMISSED. Consequently, the Temporary
Restraining Order issued by this Court on June 2, 1998,
is LIFTED.
2. In G.R. No. 139147, the petition seeking to cite
the Secretary of Health in contempt of court is DENIED for lack
of merit.
No costs.
SO ORDERED.

Contempt of court presupposes a contumacious attitude, a flouting or

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

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

Based on the grounds raised by petitioners to challenge the constitutionality

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

AZCUNA, J.:
This is a petition[1] for Prohibition with Prayer for Preliminary Injunction
assailing the constitutionality of Section 4(a) of Republic Act (R.A.) No.
9257,[2]otherwise known as the Expanded Senior Citizens Act of 2003.
Petitioners are domestic corporations and proprietors operating drugstores
in the Philippines.
Public respondents, on the other hand, include the Department of Social Welfare and
Development (DSWD), the Department of Health (DOH), the Department of Finance
(DOF), the Department of Justice (DOJ), and the Department of Interior and Local
Government (DILG) which have been specifically tasked to monitor the
drugstores compliance with the law; promulgate the implementing rules and
On May 28, 2004, the DSWD approved and adopted the Implementing
Rules and Regulations of R.A. No. 9257, Rule VI, Article 8 of which states:
Article 8. Tax Deduction of Establishments. The
establishment may claim the discounts granted under Rule V,
Section 4 Discounts for Establishments;[5] Section 9, Medical and
Dental Services in Private Facilities[,][6] and Sections 10[7] and
11[8] Air, Sea and Land Transportation as tax deduction based
on the net cost of the goods sold or services rendered. Provided,
That the cost of the discount shall be allowed as deduction from
gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax
deduction net of value added tax if applicable, shall be included in
 their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal
Revenue Code, as amended; Provided, finally, that the
implementation of the tax deduction shall be subject to the
Revenue Regulations to be issued by the Bureau of Internal
Revenue (BIR) and approved by the Department of Finance
(DOF).[9]
On July 10, 2004, in reference to the query of the Drug Stores Association
of the Philippines (DSAP) concerning the meaning of a tax deduction under the
Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B.
Recente, clarified as follows:
1) The difference between the Tax Credit (under the Old
Senior Citizens Act) and Tax Deduction (under the Expanded
Senior Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432
(the old Senior Citizens Act) grants twenty percent (20%)
discount from all establishments relative to the utilization
of transportation services, hotels and similar lodging
establishment, restaurants and recreation centers and
purchase of medicines anywhere in the country, the costs
of which may be claimed by the private establishments
concerned as tax credit.
Effectively, a tax credit is a peso-for-peso
deduction from a taxpayers tax liability due to the
government of the amount of discounts such
establishment has granted to a senior citizen. The
establishment recovers the full amount of discount given
to a senior citizen and hence, the government shoulders
100% of the discounts granted.
It must be noted, however, that conceptually,
a tax credit scheme under the Philippine tax system,
necessitates that prior payments of taxes have been made
and the taxpayer is attempting to recover this tax payment
from his/her income tax due. The tax credit scheme under
R.A. No. 7432 is, therefore, inapplicable since no tax
payments have previously occurred.
1.2. The provision under R.A. No. 9257,
on the other hand, provides that the establishment
concerned may claim the discounts under Section 4(a),
(f), (g) and (h) as tax deduction from gross income,
based on the net cost of goods sold or services rendered.
Under this scheme, the establishment concerned
is allowed to deduct from gross income, in computing for
its tax liability, the amount of discounts granted to senior
citizens. Effectively, the government loses in terms of
foregone revenues an amount equivalent to the marginal
tax rate the said establishment is liable to pay the
government. This will be an amount equivalent to 32% of
the twenty percent (20%) discounts so granted. The
establishment shoulders the remaining portion of the
granted discounts.
It may be necessary to note that while the burden
on [the] government is slightly diminished in terms of its
percentage share on the discounts granted to senior
citizens, the number of potential establishments that may
claim tax deductions, have however, been broadened.
Aside from the establishments that may claim tax
creditsunder the old law, more establishments were added
under the new law such as: establishments providing
medical and dental services, diagnostic and laboratory
services, including professional fees of attending doctors
in all private hospitals and medical facilities, operators of
domestic air and sea transport services, public railways
and skyways and bus transport services.
A simple illustration might help amplify the
points discussed above, as follows:
Tax Deduction Tax
Credit
Gross Sales x x x x x x x x x x x x
Less : Cost of goods sold x x x x x x x x x x
Net Sales x x x x x x x x x x x x
Less: Operating Expenses:
Tax Deduction on Discounts x x x x --
Other deductions: x x x x x x x x
Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit -- ______x x
Net Tax Due -- x x
As shown above, under a tax deduction scheme, the tax
deduction on discounts was subtracted from Net Sales together
with other deductions which are considered as operating expenses
before the Tax Due was computed based on the Net Taxable
 Income. On the other hand, under a tax credit scheme, the amount
of discounts which is the tax credit item, was deducted directly
from the tax due amount.[10]
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or
the Policies and Guidelines to Implement the Relevant Provisions of Republic Act
9257, otherwise known as the Expanded Senior Citizens Act of 2003[11] was issued by
the DOH, providing the grant of twenty percent (20%) discount in the purchase of
unbranded generic medicines from all establishments dispensing medicines for the
exclusive use of the senior citizens.
On November 12, 2004, the DOH issued Administrative Order No 177[12] amending
A.O. No. 171. Under A.O. No. 177, the twenty percent discount shall not be limited
to the purchase of unbranded generic medicines only, but shall extend to both
prescription and non-prescription medicines whether branded or generic. Thus, it
stated that [t]he grant of twenty percent (20%) discount shall be provided in the
purchase of medicines from all establishments dispensing medicines for the
exclusive use of the senior citizens.
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior
Citizens Act based on the following grounds:[13]
1) The law is confiscatory because it infringes Art. III,
Sec. 9 of the Constitution which provides that private
property shall not be taken for public use without just
compensation;
2) It violates the equal protection clause (Art. III, Sec. 1)
enshrined in our Constitution which states that no person
shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied of the
equal protection of the laws; and
3) The 20% discount on medicines violates the
constitutional guarantee in Article XIII, Section 11 that
makes essential goods, health and other social services
available to all people at affordable cost.[14]
Petitioners assert that Section 4(a) of the law is unconstitutional because it
constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be
justly compensated for the discount.
Examining petitioners arguments, it is apparent that what petitioners are
ultimately questioning is the validity of the tax deduction scheme as a reimbursement
mechanism for the twenty percent (20%) discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens. This
is because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated
otherwise, it is an amount that is allowed by law[15] to reduce the income prior to the
application of the tax rate to compute the amount of tax which is due.[16]Being a tax
deduction, the discount does not reduce taxes owed on a peso for peso basis but
merely offers a fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net
income of the private establishments concerned. The discounts given would have
entered the coffers and formed part of the gross sales of the private establishments,
were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy
corresponding to the taking of private property for public use or benefit.[17] This
constitutes compensable taking for which petitioners would ordinarily become
entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. The measure is not the takers gain but the
owners loss. The word just is used to intensify the meaning of the
word compensation, and to convey the idea that the equivalent to be rendered for the
property to be taken shall be real, substantial, full and ample.[18]
A tax deduction does not offer full reimbursement of the senior citizen
discount. As such, it would not meet the definition of just compensation.[19]
Having said that, this raises the question of whether the State, in promoting
the health and welfare of a special group of citizens, can impose upon private
establishments the burden of partly subsidizing a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution
of senior citizens to nation-building, and to grant benefits and privileges to them for
their improvement and well-being as the State considers them an integral part of our
society.[20]
The priority given to senior citizens finds its basis in the Constitution as set
forth in the law itself. Thus, the Act provides:
 SEC. 2. Republic Act No. 7432 is hereby amended to read
as follows:
SECTION 1. Declaration of Policies and
Objectives. Pursuant to Article XV, Section 4 of the Constitution, it
is the duty of the family to take care of its elderly members while
the State may design programs of social security for them. In
addition to this, Section 10 in the Declaration of Principles and
State Policies provides: The State shall provide social justice in all
phases of national development. Further, Article XIII, Section 11,
provides: The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make
essential goods, health and other social services available to all the
people at affordable cost. There shall be priority for the needs of
the underprivileged sick, elderly, disabled, women and children.
Consonant with these constitutional principles the following are
the declared policies of this Act:
...
(f) To recognize the important role of the private
sector in the improvement of the welfare of senior citizens and
to actively seek their partnership.[21]
To implement the above policy, the law grants a twenty percent discount to senior
citizens for medical and dental services, and diagnostic and laboratory fees;
admission fees charged by theaters, concert halls, circuses, carnivals, and other
similar places of culture, leisure and amusement; fares for domestic land, air and sea
travel; utilization of services in hotels and similar lodging establishments, restaurants
and recreation centers; and purchases of medicines for the exclusive use or
enjoyment of senior citizens. As a form of reimbursement, the law provides that
business establishments extending the twenty percent discount to senior citizens may
claim the discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of
eminent domain, has general welfare for its object. Police power is not capable of an
exact definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient
and flexible response to conditions and circumstances, thus assuring the greatest
benefits. [22] Accordingly, it has been described as the most essential, insistent and the
least limitable of powers, extending as it does to all the great public needs.[23] It is
[t]he power vested in the legislature by the constitution to make, ordain, and
establish all manner of wholesome and reasonable laws, statutes, and ordinances,
either with penalties or without, not repugnant to the constitution, as they shall judge
to be for the good and welfare of the commonwealth, and of the subjects of the
same.[24]
For this reason, when the conditions so demand as determined by the
legislature, property rights must bow to the primacy of police power because
property rights, though sheltered by due process, must yield to general welfare.[25]
Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of earnings
and capital, the questioned provision is invalidated. Moreover, in the absence of
evidence demonstrating the alleged confiscatory effect of the provision in question,
there is no basis for its nullification in view of the presumption of validity which
every law has in its favor.[26]
Given these, it is incorrect for petitioners to insist that the grant of the senior
citizen discount is unduly oppressive to their business, because petitioners have not
taken time to calculate correctly and come up with a financial report, so that they
have not been able to show properly whether or not the tax deduction scheme really
works greatly to their disadvantage.[27]
In treating the discount as a tax deduction, petitioners insist that they will
incur losses because, referring to the DOF Opinion, for every P1.00 senior citizen
discount that petitioners would give, P0.68 will be shouldered by them as only P0.32
will be refunded by the government by way of a tax deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-
hypertensive maintenance drug Norvasc as an example. According to the latter, it
acquires Norvasc from the distributors at P37.57 per tablet, and retails it at P39.60
(or at a margin of 5%). If it grants a 20% discount to senior citizens or an amount
equivalent to P7.92, then it would have to sell Norvasc at P31.68 which translates to
a loss from capital of P5.89 per tablet. Even if the government will allow a tax
deduction, only P2.53 per tablet will be refunded and not the full amount of the
discount which is P7.92. In short, only 32% of the 20% discount will be reimbursed
to the drugstores.[28]
Petitioners computation is flawed. For purposes of reimbursement, the law
states that the cost of the discount shall be deducted from gross income,[29] the
amount of income derived from all sources before deducting allowable expenses,
which will result in net income. Here, petitioners tried to show a loss on a per
transaction basis, which should not be the case. An income statement, showing an
accounting of petitioners sales, expenses, and net profit (or loss) for a given period
could have accurately reflected the effect of the discount on their income. Absent any
financial statement, petitioners cannot substantiate their claim that they will be
operating at a loss should they give the discount. In addition, the computation was
erroneously based on the assumption that their customers consisted wholly of senior
citizens. Lastly, the 32% tax rate is to be imposed on income, not on the amount of
the discount.

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

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

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

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

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

No costs.

SO ORDERED.
G.R. No. 158793 June 8, 2006
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON
MOTORCYCLISTS FEDERATION, INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL
REGULATORY BOARD, Respondents.
DECISION
CARPIO, J.:
This petition for review on certiorari1 seeks to reverse the Decision dated 10 March
2003 of the Regional Trial Court, Branch 147, Makati City (RTC) in Civil Case No.
01-034, as well as the RTC’s Order dated 16 June 2003 which denied petitioners’
Motion for Reconsideration. Petitioners assert that Department of Public Works and
Highways’ (DPWH) Department Order No. 74 (DO 74), Department Order No. 215
(DO 215), and the Revised Rules and Regulations on Limited Access Facilities of the
Toll Regulatory Board (TRB) violate Republic Act No. 2000 (RA 2000) or the
Limited Access Highway Act. Petitioners also seek to declare Department Order No.
123 (DO 123) and Administrative Order No. 1 (AO 1)2 unconstitutional.
Antecedent Facts
The facts are not in dispute. As summarized by the Solicitor General, the facts are as
follows:
1. On January 10, 2001, petitioners filed before the trial court a Petition for
Declaratory Judgment with Application for Temporary Restraining Order
and Injunction docketed as Civil Case No. 01-034. The petition sought the
declaration of nullity of the following administrative issuances for being
inconsistent with the provisions of Republic Act 2000, entitled "Limited
Access Highway Act" enacted in 1957:
a. DPWH Administrative Order No. 1, Series of 1968;
b. DPWH Department Order No. 74, Series of 1993;
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access
Facilities promulgated in 199[8] by the DPWH thru the Toll
Regulatory Board (TRB).
2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on
June 25, 1998 Department Order (DO) No. 215 declaring the Manila-Cavite
(Coastal Road) Toll Expressway as limited access facilities.
3. Accordingly, petitioners filed an Amended Petition on February 8, 2001
wherein petitioners sought the declaration of nullity of the aforesaid
administrative issuances. Moreover, petitioners prayed for the issuance of a
temporary restraining order and/or preliminary injunction to prevent the
enforcement of the total ban on motorcycles along the entire breadth of
North and South Luzon Expressways and the Manila-Cavite (Coastal Road)
Toll Expressway under DO 215.
4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo
Guadiz, after due hearing, issued an order granting petitioners’ application
for preliminary injunction. On July 16, 2001, a writ of preliminary
injunction was issued by the trial court, conditioned upon petitioners’ filing
of cash bond in the amount of P100,000.00, which petitioners subsequently
complied with.
5. On July 18, 2001, the DPWH acting thru the TRB, issued Department
Order No. 123 allowing motorcycles with engine displacement of 400 cubic
centimeters inside limited access facilities (toll ways).
6. Upon the assumption of Honorable Presiding Judge Ma. Cristina
Cornejo, both the petitioners and respondents were required to file their
respective Memoranda. Petitioners likewise filed [their] Supplemental
Memorandum. Thereafter, the case was deemed submitted for decision.
7. Consequently, on March 10, 2003, the trial court issued the assailed
decision dismissing the petition but declaring invalid DO 123. Petitioners
moved for a reconsideration of the dismissal of their petition; but it was
denied by the trial court in its Order dated June 16, 2003.3
Hence, this petition.
The RTC’s Ruling
The dispositive portion of the RTC’s Decision dated 10 March 2003 reads:
WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to
declare null and void ab initio DPWH Department Order No. 74, Series of 1993,
Administrative Order No. 1, and Art. II, Sec. 3(a) of the Revised Rules on Limited
Access Facilities promulgated by the DPWH thru the TRB, the presumed validity
thereof not having been overcome; but the petition is granted insofar as DPWH
Department Order No. 123 is concerned, declaring the same to be invalid for being
violative of the equal protection clause of the Constitution.
SO ORDERED.4
The Issues
Petitioners seek a reversal and raise the following issues for resolution:
1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BY RES
JUDICATA;
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS
CONTRAVENE RA 2000; AND
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5
The Ruling of the Court
The petition is partly meritorious.
Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res Judicata
Petitioners rely on the RTC’s Order dated 28 June 2001, which granted their prayer
for a writ of preliminary injunction. Since respondents did not appeal from that
Order, petitioners argue that the Order became "a final judgment" on the issues.
Petitioners conclude that the RTC erred when it subsequently dismissed their petition
in its Decision dated 10 March 2003.
Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June 2001
was not an adjudication on the merits of the case that would trigger res judicata. A
preliminary injunction does not serve as a final determination of the issues. It is a
provisional remedy, which merely serves to preserve the status quo until the court
could hear the merits of the case.6 Thus, Section 9 of Rule 58 of the 1997 Rules of
Civil Procedure requires the issuance of a final injunction to confirm the preliminary
injunction should the court during trial determine that the acts complained of deserve
to be permanently enjoined. A preliminary injunction is a mere adjunct, an ancillary
remedy which exists only as an incident of the main proceeding.7
Validity of DO 74, DO 215 and the TRB Regulations
Petitioners claim that DO 74,8 DO 215,9 and the TRB’s Rules and Regulations issued
under them violate the provisions of RA 2000. They contend that the two issuances
unduly expanded the power of the DPWH in Section 4 of RA 2000 to regulate toll
ways. Petitioners assert that the DPWH’s regulatory authority is limited to acts like
redesigning curbings or central dividing sections. They claim that the DPWH is only
allowed to re-design the physical structure of toll ways, and not to determine "who or
what can be qualified as toll way users."10
Section 4 of RA 200011 reads:
SEC. 4. Design of limited access facility. — The Department of Public Works and
Communications is authorized to so design any limited access facility and to so
regulate, restrict, or prohibit access as to best serve the traffic for which such
facility is intended; and its determination of such design shall be final. In this
connection, it is authorized to divide and separate any limited access facility into
separate roadways by the construction of raised curbings, central dividing sections,
or other physical separations, or by designating such separate roadways by signs,
markers, stripes, and the proper lane for such traffic by appropriate signs, markers,
stripes and other devices. No person, shall have any right of ingress or egress to,
from or across limited access facilities to or from abutting lands, except at such
designated points at which access may be permitted, upon such terms and conditions
as may be specified from time to time. (Emphasis supplied)
On 19 February 1968, Secretary Antonio V. Raquiza of the Department of Public
Works and Communicationsissued AO 1, which, among others, prohibited
motorcycles on limited access highways. The pertinent provisions of AO 1 read:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary [of] Public Works and
Communications under Section 3 of R.A. 2000, otherwise known as the Limited
Access Highway Act, the following rules and regulations governing limited access
highways are hereby promulgated for the guidance of all concerned:
xxxx
Section 3 – On limited access highways, it is unlawful for any person or group of
persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
x x x x12 (Emphasis supplied)
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public
Works and Highways issued DO 74:
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Tabang
and the South Luzon Expressway from Nichols to Alabang as Limited Access
Facilities
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined
as "a highway or street especially designed for through traffic, and over, from, or to
which owners or occupants of abutting land or other persons have no right or
easement or only a limited right or easement of access, light, air or view by reason of
the fact that their proper[t]y abuts upon such limited access facility or for any other
reason. Such highways or streets may be parkways, from which trucks, buses, and
other commerical [sic] vehicles shall be excluded; or they may be free ways open to
use by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and
Communications (now Department of Public Works and Highways) "to plan,
designate, establish, regulate, vacate, alter, improve, maintain, and provide limited
access facilities for public use wherever it is of the opinion that traffic conditions,
present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works
and Highways hereby designates and declares the Balintawak to Tabang Sections of
the North Luzon Expressway, and the Nichols to Alabang Sections of the South
Luzon Expressways, to be LIMITED ACCESS HIGHWAYS/FACILITIES subject
to such rules and regulations that may be imposed by the DPWH thru the Toll
Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby
ordered, after consultation with the TRB and in coordination with the Philippine
National Police (PNP), to close all illegal openings along the said Limited Access
Highways/Facilities. In this connection, the NCR is instructed to organize its own
enforcement and security group for the purpose of assuring the continued closure of
the right-of-way fences and the implementation of the rules and regulations that may
be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.13
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-5
Link Expressway, from Zapote to Noveleta, of the Manila Cavite Toll Expressway as
Limited Access Facility.
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined
as "a highway or street especially designed for through traffic, and over, from, or to
which owners or occupants of abutting land or other persons have no right or
easement or only a limited right or easement of access, light, air or view by reason of
the fact that their property abuts upon such limited access facility or for any other
reason. Such highways or streets may be parkways, from which trucks, buses, and
other commercial vehicles shall be excluded; or they may be free ways open to use
by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and
Communications (now Department of Public Works and Highways) "to plan,
designate, establish, regulate, vacate, alter, improve, maintain, and provide limited
access facilities for public use wherever it is of the opinion that traffic conditions,
present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works
and Highways hereby designates and declares the R-1 Expressway, C-5 Link
Expressway and the R-1 Extension Expressway Sections of the Manila Cavite Toll
Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES subject to such
rules and regulations that may be imposed by the DPWH thru the Toll Regulatory
Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby
ordered, after consultation with the TRB and in coordination with the Philippine
National Police (PNP), to close all illegal openings along the said Limited Access
Highways/Facilities. In this connection, the NCR is instructed to organize its own
enforcement and security group for the purpose of assuring the continued closure of
the right-of-way fences and the implementation of the rules and regulations that may
be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.14
The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to design
limited access facilities and to regulate, restrict, or prohibit access as to serve the
traffic for which such facilities are intended. According to the RTC, such authority to
regulate, restrict, or prohibit logically includes the determination of who and what
can and cannot be permitted entry or access into the limited access facilities. Thus,
the RTC concluded that AO 1, DO 74, and the Revised Rules and Regulations on
Limited Access Facilities, which ban motorcycles’ entry or access to the limited
access facilities, are not inconsistent with RA 2000.
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22
June 1957. Section 4 of RA 2000 provides that "[t]he Department of Public Works
and Communications is authorized to so design any limited access facility and to so
regulate, restrict, or prohibit access as to best serve the traffic for which such facility
is intended." The RTC construed this authorization to regulate, restrict, or prohibit
access to limited access facilities to apply to the Department of Public Works and
Highways (DPWH).
The RTC’s ruling is based on a wrong premise. The RTC assumed that the DPWH
derived its authority from its predecessor, the Department of Public Works and
Communications, which is expressly authorized to regulate, restrict, or prohibit
access to limited access facilities under Section 4 of RA 2000. However, such
assumption fails to consider the evolution of the Department of Public Works and
Communications.
Under Act No. 2711, otherwise known as the Revised Administrative Code,
approved on 10 March 1917, there were only seven executive departments, namely:
the Department of the Interior, the Department of Finance, the Department of Justice,
the Department of Agriculture and Commerce, the Department of Public Works
and Communications, the Department of Public Instruction, and the Department of
Labor.15 On 20 June 1964, Republic Act No. 413616 created the Land Transportation
Commission under the Department of Public Works and Communications. Later, the
Department of Public Works and Communications was restructured into
the Department of Public Works, Transportation and Communications.
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau of
Public Highways from the Department of Public Works, Transportation and
Communications and created it as a department to be known as Department of Public
Highways. Under Section 3 of PD 458, the Department of Public Highways is
"responsible for developing and implementing programs on the construction and
maintenance of roads, bridges and airport runways."
With the amendment of the 1973 Philippine Constitution in 1976, resulting in the
shift in the form of government, national agencies were renamed from Departments
to Ministries. Thus, the Department of Public Works, Transportation and
Communications became the Ministry of Public Works, Transportation and
Communications.
On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order No.
546 (EO 546), creating a Ministry of Public Works and a Ministry of
Transportation and Communications.17 Under Section 1 of EO 546, the Ministry
of Public Works assumed the public works functions of the Ministry of Public
Works, Transportation and Communications. The functions of the Ministry of
Public Works were the "construction, maintenance and repair of port works, harbor
facilities, lighthouses, navigational aids, shore protection works, airport buildings
and associated facilities, public buildings and school buildings, monuments and other
related structures, as well as undertaking harbor and river dredging works,
reclamation of foreshore and swampland areas, water supply, and flood control and
drainage works."18
On the other hand, the Ministry of Transportation and Communications became
the "primary policy, planning, programming, coordinating, implementing, regulating
and administrative entity of the executive branch of the government in the
promotion, development, and regulation of a dependable and coordinated network of
transportation and communication systems."19 The functions of the Ministry of
Transportation and Communications were:
a. Coordinate and supervise all activities of the Ministry relative to
transportation and communications;
b. Formulate and recommend national policies and guidelines for the
preparation and implementation of an integrated and comprehensive
transportation and communications system at the national, regional
and local levels;
c. Establish and administer comprehensive and integrated programs for
transportation and communication, and for this purpose, may call on any
agency, corporation, or organization, whether government or private, whose
development programs include transportation and communications as an
integral part to participate and assist in the preparation and implementation
of such programs;
d. Regulate, whenever necessary, activities relative to transportation
and communications and prescribe and collect fees in the exercise of
such power;
e. Assess, review and provide direction to transportation and
communications research and development programs of the government in
coordination with other institutions concerned; and
f. Perform such other functions as may be necessary to carry into effect the
provisions of this Executive Order.20 (Emphasis supplied)
On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO 710),
which merged the Ministry of Public Works and the Ministry of Public Highways for
"greater simplicity and economy in operations."21 The restructured agency became
known as the Ministry of Public Works and Highways. Under Section 1 of EO 710
the functions of the Ministry of Public Works and the Ministry of Public
Highways22 were transferred to the Ministry of Public Works and Highways.
Upon the ratification of the 1987 Constitution in February 1987, the former Ministry
of Public Works and Highways became the Department of Public Works and
Highways (DPWH) and the former Ministry of Transportation and Communications
became the Department of Transportation and Communications (DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited access
facilities on 5 April 1993 and 25 June 1998, respectively. Later, the TRB, under the
DPWH, issued the Revised Rules and Regulations on Limited Access Facilities.
However, on 23 July 1979, long before these department orders and regulations were
issued, the Ministry of Public Works, Transportation and Communications was
divided into two agencies – the Ministry of Public Works and the Ministry of
Transportation and Communications – by virtue of EO 546. The question
is, which of these two agencies is now authorized to regulate, restrict, or prohibit
access to limited access facilities?23
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed
the public works functions of the Ministry of Public Works, Transportation and
Communications. On the other hand, among the functions of the Ministry of
Transportation and Communications (now Department of Transportation and
Communications [DOTC]) were to (1) formulate and recommend national policies
and guidelines for the preparation and implementation of an integrated and
comprehensive transportation and communications systems at the national, regional,
and local levels; and (2) regulate, whenever necessary, activities relative to
transportation and communications and prescribe and collect fees in the exercise of
such power. Clearly, under EO 546, it is the DOTC, not the DPWH, which has
authority to regulate, restrict, or prohibit access to limited access facilities.
Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-A
(EO 125-A),25 which further reorganized the DOTC, the authority to administer and
enforce all laws, rules and regulations relative to transportation is clearly with the
DOTC.26
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare
certain expressways as limited access facilities. Under the law, it is the DOTC which
is authorized to administer and enforce all laws, rules and regulations in the field of
transportation and to regulate related activities.
Since the DPWH has no authority to regulate activities relative to transportation, the
TRB27 cannot derive its power from the DPWH to issue regulations governing
limited access facilities. The DPWH cannot delegate a power or function which it
does not possess in the first place. Since DO 74 and DO 215 are void, it follows that
the rules implementing them are likewise void.
Whether AO 1 and DO 123 are Unconstitutional
DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO 123
reads in part:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary of Public Works and Highways
under Section 3 of R.A. 2000, otherwise known as the Limited Access Highway
Act, the following revised rules and regulations governing limited access highways
are hereby promulgated for the guidance of all concerned:
1. Administrative Order No. 1 dated February 19, 1968, issued by the Secretary of
the then Department of Public Works and Communications, is hereby amended by
deleting the word "motorcycles" mentioned in Section 3(h) thereof.
Therefore, motorcycles are hereby allowed to operate inside the toll roads and
limited access highways, subject to the following:
a. Motorcycles shall have an engine displacement of at least 400 cubic
centimeters (cc) provided that:
x x x x28 (Emphasis supplied)
The RTC’s Decision dated 10 March 2003 declared DO 123 unconstitutional on the
ground that it violates the equal protection clause by allowing only motorcycles with
at least 400 cubic centimeters engine displacement to use the toll ways. The RTC
reasoned that the creation of a distinction within the class of motorcycles was not
based on real differences.
We need not pass upon the constitutionality of the classification of motorcycles
under DO 123. As previously discussed, the DPWH has no authority to regulate
limited access highways since EO 546 has devolved this function to the DOTC.
Thus, DO 123 is void for want of authority of the DPWH to promulgate it.
On the other hand, the assailed portion of AO 1 states:
Section 3. On limited access highways, it is unlawful for any person or group of
persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
xxxx
Petitioners assail the DPWH’s failure to provide "scientific" and "objective" data on
the danger of having motorcycles plying our highways. They attack this exercise of
police power as baseless and unwarranted. Petitioners belabor the fact that there are
studies that provide proof that motorcycles are safe modes of transport. They also
claim that AO 1 introduces an unreasonable classification by singling-out
motorcycles from other motorized modes of transport. Finally, petitioners argue that
AO 1 violates their right to travel.
Petitioners’ arguments do not convince us.
We emphasize that the Secretary of the Department of Public Works and
Communications issued AO 1 on 19 February 1968.
Section 3 of RA 200029 authorized the issuance of the guidelines. In
contrast, DPWH issued DO 74, DO 215 and DO 123 after EO 546 devolved to
the DOTC the authority to regulate limited access highways.
We now discuss the constitutionality of AO 1. Administrative issuances have the
force and effect of law.30 They benefit from the same presumption of validity and
constitutionality enjoyed by statutes.31 These two precepts place a heavy burden
upon any party assailing governmental regulations. The burden of proving
unconstitutionality rests on such party.32 The burden becomes heavier when the
police power is at issue.
The use of public highways by motor vehicles is subject to regulation as an exercise
of the police power of the state.33 The police power is far-reaching in scope and is the
"most essential, insistent and illimitable" of all government powers.34 The tendency
is to extend rather than to restrict the use of police power. The sole standard in
measuring its exercise is reasonableness.35 What is "reasonable" is not subject to
exact definition or scientific formulation. No all-embracing test of reasonableness
exists,36 for its determination rests upon human judgment applied to the facts and
circumstances of each particular case.37
We find that AO 1 does not impose unreasonable restrictions. It merely outlines
several precautionary measures, to which toll way users must adhere. These rules
were designed to ensure public safety and the uninhibited flow of traffic within
limited access facilities. They cover several subjects, from what lanes should be used
by a certain vehicle, to maximum vehicle height. The prohibition of certain types of
vehicles is but one of these. None of these rules violates reason. The purpose of these
rules and the logic behind them are quite evident. A toll way is not an ordinary road.
The special purpose for which a toll way is constructed necessitates the imposition of
guidelines in the manner of its use and operation. Inevitably, such rules will restrict
certain rights. But the mere fact that certain rights are restricted does not invalidate
the rules.
Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll
ways.38 The regulation affects the right to peaceably assemble. The exercise of police
power involves restriction, restriction being implicit in the power itself. Thus, the test
of constitutionality of a police power measure is limited to an inquiry on whether the
restriction imposed on constitutional rights is reasonable, and not whether it imposes
a restriction on those rights.
None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The
DPWH, through the Solicitor General, maintains that the toll ways were not designed
to accommodate motorcycles and that their presence in the toll ways will
compromise safety and traffic considerations. The DPWH points out that the same
study the petitioners rely on cites that the inability of other drivers to detect
motorcycles is the predominant cause of accidents.39 Arguably, prohibiting the use of
motorcycles in toll ways may not be the "best" measure to ensure the safety and
comfort of those who ply the toll ways.
However, the means by which the government chooses to act is not judged in terms
of what is "best," rather, on simply whether the act is reasonable. The validity of a
police power measure does not depend upon the absolute assurance that the purpose
desired can in fact be probably fully accomplished, or upon the certainty that it will
best serve the purpose intended.40 Reason, not scientific exactitude, is the measure of
the validity of the governmental regulation. Arguments based on what is "best" are
arguments reserved for the Legislature’s discussion. Judicial intervention in such
matters will only be warranted if the assailed regulation is patently whimsical. We do
not find the situation in this case to be so.
Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right
to use the limited access facility. They are merely being required, just like the rest of
the public, to adhere to the rules on how to use the facility. AO 1 does not infringe
upon petitioners’ right to travel but merely bars motorcycles, bicycles, tricycles,
pedicabs, and any non-
motorized vehicles as the mode of traveling along limited access highways.41 Several
cheap, accessible and practical alternative modes of transport are open to petitioners.
There is nothing oppressive in being required to take a bus or drive a car instead of
one’s scooter, bicycle, calesa, or motorcycle upon using a toll way.
Petitioners’ reliance on the studies they gathered is misplaced. Police power does not
rely upon the existence of definitive studies to support its use. Indeed, no
requirement exists that the exercise of police power must first be conclusively
justified by research. The yardstick has always been simply whether the
government’s act is reasonable and not oppressive.42 The use of "reason" in this
sense is simply meant to guard against arbitrary and capricious government action.
Scientific certainty and conclusiveness, though desirable, may not be demanded in
every situation. Otherwise, no government will be able to act in situations demanding
the exercise of its residual powers because it will be tied up conducting studies.
A police power measure may be assailed upon proof that it unduly violates
constitutional limitations like due process and equal protection of the
law.43 Petitioners’ attempt to seek redress from the motorcycle ban under the aegis of
equal protection must fail. Petitioners’ contention that AO 1 unreasonably singles out
motorcycles is specious. To begin with, classification by itself is not prohibited.44
A classification can only be assailed if it is deemed invidious, that is, it is not based
on real or substantial differences. As explained by Chief Justice Fernando in Bautista
v. Juinio:45
x x x To assure that the general welfare be promoted, which is the end of law, a
regulatory measure may cut into the rights to liberty and property. Those adversely
affected may under such circumstances invoked the equal protection clause only if
they can show that the governmental act assailed, far from being inspired by the
attainment of the common weal was prompted by the spirit of hostility, or at the very
least, discrimination that finds no support in reason. It suffices then that the laws
operate equally and uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not being different, both
in the privileges conferred and the liabilities imposed. Favoritism and undue
preference cannot be allowed. For the principle is that equal protection and security
shall be given to every person under circumstances, which if not identical is
analogous. If law be looked upon in terms of burden or charges, those that fall within
a class should be treated in the same fashion, whatever restrictions cast on some in
the group equally binding the rest.
We find that it is neither warranted nor reasonable for petitioners to say that the only
justifiable classification among modes of transport is the motorized against the non-
motorized. Not all motorized vehicles are created equal. A 16-wheeler truck is
substantially different from other light vehicles. The first may be denied access to
some roads where the latter are free to drive. Old vehicles may be reasonably
differentiated from newer models.46 We find that real and substantial differences
exist between a motorcycle and other forms of transport sufficient to justify its
classification among those prohibited from plying the toll ways. Amongst all types of
motorized transport, it is obvious, even to a child, that a motorcycle is quite different
from a car, a bus or a truck. The most obvious and troubling difference would be that
a two-wheeled vehicle is less stable and more easily overturned than a four-wheeled
vehicle.
A classification based on practical convenience and common knowledge is not
unconstitutional simply because it may lack purely theoretical or scientific
uniformity. Moreover, we take note that the Philippines is home to a host of unique
motorized modes of transport ranging from modified hand-carts (kuliglig) to bicycle
"sidecars" outfitted with a motor. To follow petitioners’ argument to its logical
conclusion would open up toll ways to all these contraptions. Both safety and traffic
considerations militate against any ruling that would bring about such a nightmare.
Petitioners complain that the prohibition on the use of motorcycles in toll ways
unduly deprive them of their right to travel.
We are not persuaded.
A toll way is not an ordinary road. As a facility designed to promote the fastest
access to certain destinations, its use, operation, and maintenance require close
regulation. Public interest and safety require the imposition of certain restrictions on
toll ways that do not apply to ordinary roads. As a special kind of road, it is but
reasonable that not all forms of transport could use it.
The right to travel does not mean the right to choose any vehicle in traversing a toll
way. The right to travel refers to the right to move from one place to another.
Petitioners can traverse the toll way any time they choose using private or public
four-wheeled vehicles. Petitioners are not denied the right to move from Point A to
Point B along the toll way. Petitioners are free to access the toll way, much as the
rest of the public can. The mode by which petitioners wish to travel pertains to the
manner of using the toll way, a subject that can be validly limited by regulation.
Petitioners themselves admit that alternative routes are available to them. Their
complaint is that these routes are not the safest and most convenient. Even if their
claim is true, it hardly qualifies as an undue curtailment of their freedom of
movement and travel. The right to travel does not entitle a person to the best form of
transport or to the most convenient route to his destination. The obstructions found in
normal streets, which petitioners complain of (i.e., potholes, manholes, construction
barriers, etc.), are not suffered by them alone.
Finally, petitioners assert that their possession of a driver’s license from the Land
Transportation Office (LTO) and the fact that their vehicles are registered with that
office entitle them to use all kinds of roads in the country. Again, petitioners are
mistaken. There exists no absolute right to drive. On the contrary, this privilege, is
heavily regulated. Only a qualified group is allowed to drive motor vehicles: those
who pass the tests administered by the LTO. A driver’s license issued by the LTO
merely allows one to drive a particular mode of transport. It is not a license to drive
or operate any form of transportation on any type of road. Vehicle registration in the
LTO on the other hand merely signifies the roadworthiness of a vehicle. This does
not preclude the government from prescribing which roads are accessible to certain
vehicles.
WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision
dated 10 March 2003 of the Regional Trial Court, Branch 147, Makati City and its
Order dated 16 June 2003 in Civil Case No. 01-034. We declare VOID Department
Order Nos. 74, 215, and 123 of the Department of Public Works and Highways, and
the Revised Rules and Regulations on Limited Access Facilities of the Toll
Regulatory Board. We declare VALID Administrative Order No. 1 of the
Department of Public Works and Communications.
SO ORDERED.
G.R. No. 187836
SOCIAL JUSTICE SOCIETY (SJS) OFFICERS, namely, SAMSON S.
ALCANTARA, and VLADIMIR ALARIQUE T. CABIGAO, Petitioners,
vs.
ALFREDO S. LIM, in his capacity as mayor of the City of Manila, Respondent.
x-----------------------x
G.R. No. 187916
JOSE L. ATIENZA, JR., BIENVINIDO M. ABANTE, MA. LOURDES M.
ISIP-GARCIA, RAFAEL P. BORROMEO, JOCELYN DAWIS-ASUNCION,
minors MARIAN REGINA B. TARAN, MACAILA RICCI B. TARAN,
RICHARD KENNETH B. TARAN, represented and joined by their parents
RICHARD and MARITES TARAN, minors CZARINA ALYSANDRA C.
RAMOS, CEZARAH ADRIANNA C. RAMOS, and CRISTEN AIDAN C.
RAMOS represented and joined by their mother DONNA C. RAMOS, minors
JAZMIN SYLLITA T. VILA and ANTONIO T. CRUZ IV, represented and
joined by their mother MAUREEN C. TOLENTINO, Petitioners,
vs.
MAYOR ALFREDO S. LIM, VICE MAYOR FRANCISCO DOMAGOSO,
COUNCILORS ARLENE W. KOA, MOISES T. LIM, JESUS FAJARDO
LOUISITO N. CHUA, VICTORIANO A. MELENDEZ, JOHN MARVIN C.
NIETO, ROLANDO M. VALERIANO, RAYMUNDO R. YUPANGCO,
EDWARD VP MACEDA, RODERICK D. V ALBUENA, JOSEFINA M.
SISCAR, SALVADOR PHILLIP .H. LACUNA, LUCIANO M. VELOSO,
CARLO V. LOPEZ, ERNESTO F. RIVERA, DANILO VICTOR H. LACUNA,
JR., ERNESTO G. ISIP, HONEY H. LACUNA-PANGAN, ERNESTO M.
DIONISO, JR. and ERICK IAN 0. NIEVA, Respondents,
CHEVRON PHILIPPINES INC., PETRON CORPORATION AND
PILIPINAS SHELL PETROLEUM CORPORATION, Intervenors.
RESOLUTION
PEREZ, J.:
In the Decision2 promulgated on 25 November 2014, this Court declared Ordinance
No. 8187 UNCONSTITUTIONAL and INVALID with respect to the continued stay
of the Pandacan Oil Terminals. The following timelines were set for the relocation
and transfer of the terminals:
[T]he intervenors Chevron Philippines, Inc., Pilipinas Shell Petroleum Corporation,
and Petron Corporation shall, within a non- extendible period of forty-five (45) days,
submit to the Regional Trial Court, Branch 39, Manila an updated comprehensive
plan and relocation schedule, which relocation shall be completed not later than six
(6) months from the date the required documents are submitted. The presiding judge
of Branch 39 shall monitor the strict enforcement of this Decision.3
Now before us are the following submissions of the intervenor oil companies, to wit:
(1) Motion for Reconsideration4of the Decision dated 25 November 2014 filed by
intervenor Pilipinas Shell Petroleum Corporation (Shell); (2) Motion for
Clarification5 filed by intervenor Chevron Philippines, Inc. (Chevron); and (3)
Manifestation of Understanding of the Dispositive Portion of the Decision of 15
December 20146 (the correct date of promulgation is 25 November 2014) filed by
intervenor Petron Corporation (Petron).
I
Shell seeks reconsideration of the Decision based on the following grounds:
1.Erroneous reliance on the factual pronouncements in G.R. No. 156052 entitled
"Social Justice Society v. Atienza," which, it argues, were completely unsupported
by competent evidence;
2.Adoption of "imagined fears, causes, surmises and conjectures interposed by the
petitioners," which it also raises as totally unsupported by evidence because the
petitions, which involve factual issues, were wrongfully filed with this Court;
3.Conclusion that there is no substantial difference between the conditions in 2001
and the present setup with respect to the oil depots operations; and
4.Failure to dismiss the petitions despite the enactment of Ordinance No. 8187,
which, it maintains, has rendered the cases moot and academic.7
The Motion for Reconsideration must be denied.
It bears stressing that these cases were called in session several times to give the
members of the Court time to study and present their respective positions. Before the
Decision was finally promulgated, the Court had thoroughly deliberated on the
arguments of the parties, including the basic issues herein raised - the rationale for
upholding the position of the Court in G.R. No. 156052, on one hand, and the safety
measures adopted by the intervenors, including the alleged "imagined fears, causes,
surmises and conjectures interposed by the petitioners," on the other; the argument of
whether or not the petition should have been filed with the trial court or at least
referred to the Court of Appeals to receive evidence; and the issue on whether or not
the enactment of Ordinance No. 8283 has rendered the instant petitions moot and
academic. And for failure to reconcile diverse views on several issues, a Concurring
and Dissenting Opinion was written.
The grounds relied on being mere reiterations of the issues already passed upon by
the Court, there is no need to "cut and paste" pertinent portions of the Decision or re-
write the ponencia in accordance with the outline of the instant motion.
As succinctly put by then Chief Justice Andres R. Narvasa in Ortigas and Co. Ltd.
Partnership v. Judge Velasco8 on the effect and disposition of a motion for
reconsideration:
The filing of a motion for reconsideration, authorized by Rule 52 of the Rules of
Court, does not impose on the Court the obligation to deal individually and
specifically with the grounds relied upon therefor, in much the same way that the
Court does in its judgment or final order as regards the issues raised and submitted
for decision. This would be a useless formality or ritual invariably involving merely
a reiteration of the reasons already set forth in the judgment or final order for
rejecting the arguments advanced by the movant; and it would be a needless act, too,
with respect to issues raised for the first time, these being, as above stated, deemed
waived because not asserted at the first opportunity. It suffices for the Court to deal
generally and summarily with the motion for reconsideration, and merely state a
legal ground for its denial (Sec. 14, Art. VIII, Constitution); i.e., the motion contains
merely a reiteration or rehash of arguments already submitted to and pronounced
without merit by the Court in its judgment, or the basic issues have already been
passed upon, or the motion discloses no substantial argument or cogent reason to
warrant reconsideration or modification of the judgment or final order; or the
arguments in the motion are too unsubstantial to require consideration, etc.9
II
Chevron, in its Motion for Clarification,10 manifests that it has already ceased using
the Pandacan terminals since June 2014. However, the Pandacan Depot Services,
Inc. (PDSI), an incorporated joint venture of Chevron, Petron and Shell, and of
which Chevron continues to be a shareholder, still maintains the operations through
Petron and Shell. Thus:
2.At the outset, CHEVRON respectfully manifests that it has already completed the
relocation of its depot and terminal operations from the Pandacan area, as it ceased
using the Pandacan terminals for its fuel and lubricants operations last June 2014.
CHEVRON currently has zero volume of lubricants and fuel products for
commercial use stored at the Pandacan terminals and the supply requirements of its
customers are being withdrawn from the other supply facilities available to
CHEVRON.
3.While CHEVRON has ceased using the Pandacan terminals, it continues to be a
shareholder as well as hold a governance role in Pandacan Depot Services Inc.
("PDSI"), the operator of the Pandacan terminals for fuels products operations. PDSI
is an incorporated joint venture established pursuant to the joint venture agreements
between CHEVRON, Petron and PSPC. Notwithstanding CHEVRON's ceasing to
use the facility, Petron and PSPC continue to use the Pandacan terminals for their
own commercial fuel and lubricant operation. This joint venture continues to exist
until terminated and dissolved by the mutual agreement of CHEVRON, Petron, and
PSP or as provided for in the agreements of the parties.11
With the withdrawal of its products from the Pandacan terminals yet with the
continued operation of the PDSI, Chevron now pleads that this Court review and
clarify a portion of the Decision concerning what it understands as an unqualified
statement that "all oil depots, in general, even those outside of Pandacan, have no
place in any densely populated area."12 The exact wordings in the Decision sought to
be clarified read:
Even assuming that the respondents and intervenors were correct, the very nature of
the depots where millions of liters of highly flammable and highly volatile products
[are stored], regardless of whether or not the composition may cause explosions, has
no place in a densely populated area. Surely, any untoward incident in the oil depots,
be it related to terrorism of whatever origin or otherwise, would definitely cause not
only destruction to properties within and among the neighboring communities but
certainly mass deaths and injuries.13
Stressing that a judgment should be confined to the lis mota of the case, Chevron
posits that the paragraph sought to be clarified was a sweeping and categorical
pronouncement sans factual basis or evidence against all oil depots inasmuch as the
prevailing circumstances, types of products stored or the safety measures in place
vary from one depot to another. If such is left as is, it claims that it would be
tantamount to interference with the policy making of the political departments of the
government.
We differ.
There are overwhelming reasons stated in the Decision to support the Court's
pronouncement that the very nature of depots has no place in a densely populated
area, among others, the very history of the Pandacan terminals where flames spread
over the entire City of Manila when fuel storage dumps were set on fire in December
194114and the other incident of explosion,15 which were both considered in G.R. No.
156052.
Indeed, the bases of the assailed paragraph were confined to the lis mota of these
cases, and no other depots were considered. But would the situation be different if,
given the same composition of flammable and volatile products, the depots are
placed in another densely populated area?
The answer was well explained in the Decision. Thus:
For, given that the threat sought to be prevented may strike at one point or another,
no matter how remote it is as perceived by one or some, we cannot allow the right to
life to be dependent on the unlikelihood of an event. Statistics and theories of
probability have no place in situations where the very life of not just an individual
but of residents of big neighborhoods is at stake.16
Moreover, the Decision should be taken as a whole and considered in its entirety.
The Decision is clear - it is the City's Ordinance No. 8187 that has been declared
unconstitutional and invalid insofar as the continued stay of the Pandacan Oil
Terminals is concerned.
For the same reasons, the allegation of encroachment on the policy making power of
the political departments of the government is bereft of merit.
The prayer that the submission of an updated comprehensive plan and relocation
schedule, including the period for relocation, be deferred until after the Motion is
resolved with finality is denied. The compliance period prescribed in the Decision
shall remain.
III
In its Manifestation of Understanding of the Dispositive Portion of the Decision of
15 December 2014,17 (the correct date of promulgation is 25 November 2014) Petron
seeks to clarify whether the dispositive portion thereof on the submission of "updated
comprehensive plan and relocation schedule" within forty-five (45) days is limited to
the operation itself and does not include the removal of the facilities. It ratiocinates
that it is the operation, and not the presence of the facilities, that runs contrary to
Ordinance No. 8119 (Manila Comprehensive Land Use Plan and Zoning Ordinance
of 2006).18
Petron should have cited Ordinance No. 8027, the ordinance ordered to be enforced
in G.R. No. 156052, instead of Ordinance No. 8119.
To recall, the Court, in G.R. No. 156052, ruled that Ordinance No. 8027 was not
impliedly repealed by Ordinance No. 8119. It explained:
x x x The repealing clause of Ordinance No. 8119 cannot be taken to indicate the
legislative intent to repeal all prior inconsistent laws on the subject matter, including
Ordinance No. 8027, a special enactment, since the aforequoted minutes (an official
record of the discussions in the Sanggunian) actually indicated the clear intent to
preserve the provisions of Ordinance No. 8027.
To summarize, the conflict between the two ordinances is more apparent than real.
The two ordinances can be reconciled. Ordinance No. 8027 is applicable to the area
particularly described therein whereas Ordinance No. 8119 is applicable to the entire
City of Manila.19
At first blush, the clause "cease and desist" appears to specifically refer only to the
operations, considering that Sec. 3 of Ordinance No. 8027 provides for a period of
six (6) months from the date of its effectivity "within which to cease and desist from
the operations of businesses."20
However, in the Decision dated 7 March 2007 in G.R. No. 156052, the Court granted
the petition21 which sought the enforcement of Ordinance No. 8027 and the
immediate removal of the terminals of the oil companies. By so granting the petition,
it necessarily follows that the relocation and transfer it ordered contemplates the
complete removal of the facilities.
These cases being a mere sequel to the earlier petition, we so hold that the relocation
and transfer contemplated therein include the removal of the facilities, especially so
when the city plans on building commercial establishments to replace the Pandacan
terminals and provide a source of employment for displaced employees.
Accordingly, the comprehensive plan to be submitted within forty-five (45) days
from receipt of the Decision shall also include the removal of the facilities.
On the matter of the enforcement of the assailed Decision in these cases, Petron
further posits that its first theory, that is, that the removal of the facilities is excluded
from the comprehensive plan to be submitted to the Regional Trial Court, would be
in accord with its "Manifestation" dated 30 November 2010, which it emphasized,
the Court noted in the Decision and quoted as follows:
2. Without prejudice to its position in the instant case as elucidated in its
Memorandum, Petron files this Manifestation to inform this Honorable Court that in
accordance with its agreement with and to honor its commitment to the City of
Manila, Petron has decided to cease operation of its petroleum product storage
facilities in Pandacan, Manila within five (5) years or not later than January 2016 for
the following reasons, x x x.22 (Emphasis in the Manifestation of Understanding x x
x)
Let Petron be reminded that the Court did not, by noting its "Manifestation" dated 30
November 2010, consent to consider January 2016 as a separate deadline for
compliance with our Decision, which, to repeat, includes the removal of facilities
after cessation of operations. The timelines prescribed in the assailed Decision shall
be observed to the letter.1âwphi1
WHEREFORE, the Court hereby resolves to:
1.DENY Shell's Motion for Reconsideration of the Decision dated 25 November
2014;
2.DENY the prayers in the Motion for Clarification of Chevron that:

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

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

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

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

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

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

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

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

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

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

SO ORDERED.
G.R. No. 194561, September 14, 2016
DRUGSTORES ASSOCIATION OF THE PHILIPPINES, INC. AND
NORTHERN LUZON DRUG CORPORATION, Petitioners, v. NATIONAL
COUNCIL ON DISABILITY AFFAIRS; DEPARTMENT OF HEALTH;
DEPARTMENT OF FINANCE; BUREAU OF INTERNAL REVENUE;
DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT; AND
DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT, Respondent.
DECISION
PERALTA, J.:
Before us is a Petition for Review on Certiorari1 with a Prayer for a Temporary
Restraining Order and/or Writ of Preliminary Injunction which seeks to annul and set
aside the Decision2 dated July 26, 2010, and the Resolution3 dated November 19,
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 109903. The CA dismissed
petitioners' Petition for Prohibition4 and upheld the constitutionality of the mandatory
twenty percent (20%) discount on the purchase of medicine by persons with
disability (PWD).
The antecedents are as follows:
chanRoblesvirtualLawlibraryOn March 24, 1992, Republic Act (R.A.) No. 7277,
entitled "An Act Providing for the Rehabilitation, Self-Development and Self-
Reliance of Disabled Persons and their Integration into the Mainstream of Society
and for Other Purposes," otherwise known as the "Magna Carta for Disabled
Persons," was passed into law.5 The law defines "disabled persons", "impairment"
and "disability" as follows:ChanRoblesVirtualawlibrary
SECTION 4. Definition of Terms. - For purposes of this Act, these terms are defined
as follows:
chanRoblesvirtualLawlibrary(a) Disabled Persons are those suffering from
restriction of different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in the manner or within the range considered
normal for a human being;
(b) Impairment is any loss, diminution or aberration of psychological, physiological,
or anatomical structure of function;
(c) Disability shall mean (1) a physical or mental impairment that substantially limits
one or more psychological, physiological or anatomical function of an individual or
activities of such individual; (2) a record of such an impairment; or (3) being
regarded as having such an impairment.6chanroblesvirtuallawlibrary
On April 30, 2007, Republic Act No. 94427 was enacted amending R.A. No. 7277.
The Title of R.A. No. 7277 was amended to read as "Magna Carta for Persons with
Disability" and all references on the law to "disabled persons" were amended to read
as "persons with disability" (PWD).8 Specifically, R.A. No. 9442 granted the PWDs
a twenty (20) percent discount on the purchase of medicine, and a tax deduction
scheme was adopted wherein covered establishments may deduct the discount
granted from gross income based on the net cost of goods sold or services
rendered:ChanRoblesVirtualawlibrary
CHAPTER 8. Other Privileges and Incentives. SEC. 32. Persons with disability shall
be entitled to the following:
chanRoblesvirtualLawlibraryx x x x
(d) At least twenty percent (20%) discount for the purchase of medicines in
all drugstores for the exclusive use or enjoyment of persons with
disability;
xxxx
The abovementioned privileges are available only to persons with disability who are
Filipino citizens upon submission of any of the following as proof of his/her
entitlement thereto:
chanRoblesvirtualLawlibrary
(i) An identification card issued by the city or municipal mayor or the
barangay captain of the place where the person with disability resides;
(ii) The passport of the person with disability concerned; or
(ii) Transportation discount fare Identification Card (ID) issued by the
National Council for the Welfare of Disabled Persons (NCWDP).
xxxx
The establishments may claim the discounts granted in subsections (a), (b), (c), (f)
and (g) as tax deductions based on the net cost of the goods sold or services
rendered: Provided, however, That the cost of the discount shall be allowed as
deduction from gross income for the same taxable year that the discount is
granted: Provided, further, That the total amount of the claimed tax deduction net of
value-added tax if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code (NIRC), as amended.9chanroblesvirtuallawlibrary
The Implementing Rules and Regulations (IRR) of R.A. No. 944210 was jointly
promulgated by the Department of Social Welfare and Development (DSWD),
Department of Education, Department of Finance (DOF), Department of Tourism,
Department of Transportation and Communication, Department of the Interior and
Local Government (DILG) and Department of Agriculture. Insofar as pertinent to
this petition, the salient portions of the IRR are hereunder quoted:11
RULE III. DEFINITION OF TERMS
Section 5. Definition of Terms. For purposes of these Rules and Regulations, these
terms are defined as follows:
chanRoblesvirtualLawlibrary5.1. Persons with Disability - are those individuals
defined under Section 4 of RA 7277 "An Act Providing for the Rehabilitation, Self-
Development and Self-Reliance of Persons with Disability as amended and their
integration into the Mainstream of Society and for Other Purposes". This is defined
as a person suffering from restriction or different abilities, as a result of a mental,
physical or sensory impairment, to perform an activity in a manner or within the
range considered normal for human being. Disability shall mean (1) a physical or
mental impairment that substantially limits one or more psychological, physiological
or anatomical function of an individual or activities of such individual; (2) a record
of such an impairment; or (3) being regarded as having such an impairment.
xxxx
RULE IV. PRIVILEGES AND INCENTIVES FOR THE PERSONS WITH
DISABILITY
Section 6. Other Privileges and Incentives. Persons with disability shall be entitled to
the following:
chanRoblesvirtualLawlibraryx x x x
6.1.d. Purchase of Medicine - at least twenty percent (20%) discount on the purchase
of medicine for the exclusive use and enjoyment of persons with disability. All
drugstores, hospital, pharmacies, clinics and other similar establishments selling
medicines are required to provide at least twenty percent (20%) discount subject to
the guidelines issued by DOH and PHILHEALTH.12chanrobleslaw
xxxx
6.11 The abovementioned privileges are available only to persons with disability
who are Filipino citizens upon submission of any of the following as proof of his/her
entitlement thereto subject to the guidelines issued by the NCWDP in coordination
with DSWD, DOH and DILG.
6.11.1 An identification card issued by the city or municipal mayor or the barangay
captain of the place where the person with disability resides;
6.11.2 The passport of the persons with disability concerned; or
6.11.3 Transportation discount fare Identification Card (ID) issued by the National
Council for the Welfare of Disabled Persons (NCWDP). However, upon effectivity
of this Implementing Rules and Regulations, NCWDP will already adopt the
Identification Card issued by the Local Government Unit for purposes of uniformity
in the implementation. NCWDP will provide the design and specification of the
identification card that will be issued by the Local Government
Units.13chanroblesvirtuallawlibrary
6.14. Availmenl of Tax Deductions by Establishment Granting Twenty Percent. 20%
Discount - The establishments may claim the discounts granted in sub-sections (6.1),
(6.2), (6.4), (6.5) and (6.6) as tax deductions based on the net cost of the goods sold
or services rendered: Provided, however, that the cost of the discount shall be
allowed as deduction from gross income for the same taxable year that the discount
is granted: Provided, further, That the total amount of the claimed tax deduction net
of value-added tax if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code, as amended.
On April 23, 2008, the National Council on Disability Affairs (NCDA)14 issued
Administrative Order (A.O.) No. 1, Series of 2008,15 prescribing guidelines which
should serve as a mechanism for the issuance of a PWD Identification Card (IDC)
which shall be the basis for providing privileges and discounts to bona fidePWDs in
accordance with R.A. 9442:ChanRoblesVirtualawlibrary
IV. INSTITUTIONAL ARRANGEMENTS
A. The Local Government Unit of the City or Municipal Office shall
implement these guidelines in the issuance of the PWD-IDC
xxxx
D. Issuance of the appropriate document to confirm the medical condition of the
applicant is as follows:ChanRoblesVirtualawlibrary
Disability Document Issuing Entity
Apparent Medical Licensed Private or Government
Disability Certificate Physician
School Licensed Teacher duly signed by the
Assessment School Principal
 1) Section 32 of R.A. No. 7277 as amended by R.A. No. 9442;
Certificate of Head of the Business Establishment or
Disability Head of Non-Government Organization 2) Section 6, Rule IV of the Implementing Rules and Regulations of R.A. No. 9442;

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

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

On July 28, 2009, petitioners filed a Petition for Prohibition with application for a II. THE CA SERIOUSLY ERRED WHEN IT RULED THAT SECTION 32 OF RA
Temporary Restraining Order and/or a Writ of Preliminary Injunction21 before the 7277 AS AMENDED BY RA 9442, NCDA AO 1 AND THE OTHER
Court of Appeals to annul and enjoin the implementation of the following IMPLEMENTING REGULATIONS DID NOT VIOLATE THE DUE PROCESS
laws:ChanRoblesVirtualawlibrary CLAUSE;
III. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE DEFINITIONS
OF DISABILITIES UNDER SECTION 4(A), SECTION 4(B) AND SECTION 4(C)
OF RA 7277 AS AMENDED BY RA 9442, RULE 1 OF THE IMPLEMENTING
RULES AND REGULATIONS23 OF RA 7277, SECTION 5.1 OF THE
IMPLEMENTING RULES AND REGULATIONS OF RA 9442, NCDA AO 1
AND DOH AO 2009-11 ARE NOT VAGUE, AMBIGUOUS AND
UNCONSTITUTIONAL;
IV. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE MANDATED
PWD DISCOUNT DOES NOT VIOLATE THE EQUAL PROTECTION CLAUSE.
We deny the petition.
The CA is correct when it applied by analogy the case of Carlos Superdrug
Corporation et al. v. DSWD, et al.24 wherein We pronouced that Section 4 of R.A.
No. 9257 which grants 20% discount on the purchase of medicine of senior citizens
is a legitimate exercise of police power:ChanRoblesVirtualawlibrary
The law is a legitimate exercise of police power which, similar to the power of
eminent domain, has general welfare for its object. Police power is not capable of an
exact definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient
and flexible response to conditions and circumstances, thus assuring the greatest
benefits.25cralawredAccordingly, it has been described as the most essential, insistent
and the least limitable of powers, extending as it does to all the great public
needs.26 It is [t]he power vested in the legislature by the constitution to make, ordain,
and establish all manner of wholesome and reasonable laws, statutes, and ordinances,
either with penalties or without, not repugnant to the constitution, as they shall judge
to be for the good and welfare of the commonwealth, and of the subjects of the
same.27chanrobleslaw
For this reason, when the conditions so demand as determined by the legislature,
property rights must bow to the primacy of police power because property rights,
though sheltered by due process, must yield to general welfare.28chanrobleslaw
Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of earnings
and capital, the questioned provision is invalidated. Moreover, in the absence of
evidence demonstrating the alleged confiscatory effect of the provision in question,
there is no basis for its nullification in view of the presumption of validity which
every law has in its favor.29chanroblesvirtuallawlibrary
Police power is the power of the state to promote public welfare by restraining and
regulating the use of liberty and property. On the other hand, the power of eminent
domain is the inherent right of the state (and of those entities to which the power has
been lawfully delegated) to condemn private property to public use upon payment of
just compensation. In the exercise of police power, property rights of private
individuals are subjected to restraints and burdens in order to secure the general
comfort, health, and prosperity of the state.30 A legislative act based on the police
power requires the concurrence of a lawful subject and a lawful method. In more
familiar words, (a) the interests of the public generally, as distinguished from those
of a particular class, should justify the interference of the state; and (b) the means
employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals.31chanrobleslaw
R.A. No. 7277 was enacted primarily to provide full support to the improvement of
the total well-being of PWDs and their integration into the mainstream of society.
The priority given to PWDs finds its basis in the
Constitution:ChanRoblesVirtualawlibrary
ARTICLE XII
NATIONAL ECONOMY AND PATRIMONY
xxxx
Section 6. The use of property bears a social function, and all economic agents shall
contribute to the common good. Individuals and private groups, including
corporations, cooperatives, and similar collective organizations, shall have the right
to own, establish, and operate economic enterprises, subject to the duty of the State
to promote distributive justice and to intervene when the common good so
demands.32chanrobleslaw
ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS
xxxx
Section 11. The State shall adopt an integrated and comprehensive approach
to health development which shall endeavor to make essential goods, health and
other social services available to all the people at affordable cost. There shall
be priority for the needsof the underprivileged, sick, elderly, disabled, women, and
children. The State shall endeavor to provide free medical care to
paupers.33chanroblesvirtuallawlibrary
Thus, R.A. No. 7277 provides:ChanRoblesVirtualawlibrary
SECTION 2. Declaration of Policy. The grant of the rights and privileges for
disabled persons shall be guided by the following principles:
chanRoblesvirtualLawlibrary(a). Disabled persons are part of the Philippine society,
thus the Senate shall give full support to the improvement of the total well-being of
disabled persons and their integration into the mainstream of society.
Toward this end, the State shall adopt policies ensuring the rehabilitation, self-
development and self-reliance of disabled persons.
It shall develop their skills and potentials to enable them to compete favorably for
available opportunities.
(b). Disabled persons have the same rights as other people to take their proper place
in society. They should be able to live freely and as independently as possible. This
must be the concern of everyone - the family, community and all government and
non-government organizations.
Disabled person's rights must never be perceived as welfare services by the
Government.
xxxx
(d). The State also recognizes the role of the private sector in promoting the welfare
of disabled persons and shall encourage partnership in programs that address their
needs and concerns.34chanroblesvirtuallawlibrary
To implement the above policies, R.A. No. 9442 which amended R.A. No. 7277
grants incentives and benefits including a twenty percent (20%) discount to PWDs in
the purchase of medicines; fares for domestic air, sea and land travels including
public railways and skyways; recreation and amusement centers including theaters,
food chains and restaurants.35 This is specifically stated in Section 4 of the IRR of
R.A. No. 9442:ChanRoblesVirtualawlibrary
Section 4. Policies and Objectives - It is the objective of Republic Act No. 9442 to
provide persons with disability, the opportunity to participate fully into the
mainstream of society by granting them at least twenty percent (20%) discount
in all basic services. It is a declared policy of RA 7277 that persons with disability
are part of Philippine society, and thus the State shall give full support to the
improvement of their total wellbeing and their integration into the mainstream
of society. They have the same rights as other people to take their proper place in
society. They should be able to live freely and as independently as possible. This
must be the concern of everyone the family, community and all government and non-
government organizations. Rights of persons with disability must never be perceived
as welfare services. Prohibitions on verbal, non-verbal ridicule and vilification
against persons with disability shall always be observed at all
times.36chanroblesvirtuallawlibrary
Hence, the PWD mandatory discount on the purchase of medicine is supported by a
valid objective or purpose as aforementioned. It has a valid subject considering that
the concept of public use is no longer confined to the traditional notion of use by the
public, but held synonymous with public interest, public benefit, public welfare,
and public convenience. As in the case of senior citizens,37 the discount privilege to
which the PWDs are entitled is actually a benefit enjoyed by the general public to
which these citizens belong. The means employed in invoking the active
participation of the private sector, in order to achieve the purpose or objective of the
law, is reasonably and directly related.38 Also, the means employed to provide a fair,
just and quality health care to PWDs are reasonably related to its accomplishment,
and are not oppressive, considering that as a form of reimbursement, the discount
extended to PWDs in the purchase of medicine can be claimed by the establishments
as allowable tax deductions pursuant to Section 32 of R.A. No. 9442 as implemented
in Section 4 of DOF Revenue Regulations No. 1-2009. Otherwise stated, the
discount reduces taxable income upon which the tax liability of the establishments is
computed.
Further, petitioners aver that Section 32 of R.A. No. 7277 as amended by R.A. No.
9442 is unconstitutional and void for violating the due process clause of the
Constitution since entitlement to the 20% discount is allegedly merely based on any
of the three documents mentioned in the provision, namely: (i) an identification card
issued by the city or municipal mayor or the barangay captain of the place where the
PWD resides; (ii) the passport of the PWD; or (iii) transportation discount fare
identification card issued by NCDA. Petitioners, thus, maintain that none of the said
documents has any relation to a medical finding of disability, and the grant of the
discount is allegedly without any process for the determination of a PWD in
accordance with law.
Section 32 of R.A. No. 7277, as amended by R.A. No. 9442, must be read with its
IRR which stated that upon its effectivity, NCWDP (which is the government agency
tasked to ensure the implementation of RA 7277), would adopt the IDC issued by the
local government units for purposes of uniformity in the implementation.39 Thus,
NCDA A.O. No. 1 provides the reasonable guidelines in the issuance of IDCs to
PWDs as proof of their entitlement to the privileges and incentives under the
law40 and fills the details in the implementation of the law.
As stated in NCDA A.O. No. 1, before an IDC is issued by the city or municipal
mayor or the barangay captain,41 or the Chairman of the NCDA,42 the applicant must
first secure a medical certificate issued by a licensed private or government physician
that will confirm his medical or disability condition. If an applicant is an employee
with apparent disability, a "certificate of disability" issued by the head of the
business establishment or the head of the non-governmental organization is needed
for him to be issued a PWD-IDC. For a student with apparent disability, the "school
assessment" issued by the teacher and signed by the school principal should be
presented to avail of a PWD-ID.
Petitioners' insistence that Part IV (D) of NCDA Administrative Order No. 1 is void
because it allows allegedly non-competent persons like teachers, head of
establishments and heads of Non-Governmental Organizations (NGOs) to confirm
the medical condition of the applicant is misplaced. It must be stressed that only for
apparent disabilities can the teacher or head of a business establishment validly issue
the mentioned required document because, obviously, the disability is easily seen or
clearly visible. It is, therefore, not an unqualified grant of authority for the said non-
medical persons as it is simply limited to apparent disabilities. For a non-apparent
disability or a disability condition that is not easily seen or clearly visible, the
disability can only be validated by a licensed private or government physician, and a
medical certificate has to be presented in the procurement of an IDC. Relative to this
issue, the CA validly ruled, thus:ChanRoblesVirtualawlibrary
We agree with the Office of the Solicitor General's (OSG) ratiocination that teachers,
heads of business establishments and heads of NGOs can validly confirm the medical
condition of their students/employees with apparent disability for obvious reasons as
compared to non-apparent disability which can only be determined by licensed
physicians. Under the Labor Code, disabled persons are eligible as apprentices or
learners provided that their handicap are not as much as to effectively impede the
performance of their job. We find that heads of business establishments can validly
issue certificates of disability of their employees because aside from the fact that
they can obviously validate the disability, they also have medical records of the
employees as a pre-requisite in the hiring of employees. Hence, Part IV (D) of
NCDA AO No. 1 is logical and valid.43chanroblesvirtuallawlibrary
Furthermore, DOH A.O. No. 2009-11 prescribes additional guidelines for the 20%
discount in the purchase of all medicines for the exclusive use of PWD.44 To avail of
the discount, the PWD must not only present his I.D. but also the doctor's
prescription stating, among others, the generic name of the medicine, the physician's
address, contact number and professional license number, professional tax receipt
number and narcotic license number, if applicable. A purchase booklet issued by the
local social/health office is also required in the purchase of over-the-counter
medicines. Likewise, any single dispensing of medicine must be in accordance with
the prescription issued by the physician and should not exceed a one (1) month
supply. Therefore, as correctly argued by the respondents, Section 32 of R.A. No.
7277 as amended by R.A. No. 9442 complies with the standards of substantive due
process.
We are likewise not persuaded by the argument of petitioners that the definition of
"disabilities" under the subject laws is vague and ambiguous because it is allegedly
so general and broad that the person tasked with implementing the law will
undoubtedly arrive at different interpretations and applications of the law. Aside
from the definitions of a "person with disability" or "disabled persons" under Section
4 of R.A. No. 7277 as amended by R.A. No. 9442 and in the IRR of RA 9442,
NCDA A.O. No. 1 also provides:ChanRoblesVirtualawlibrary
4. Identification Cards shall be issued to any bonafide PWD with
permanent disabilities due to any one or more of the following
conditions: psychosocial, chronic illness, learning, mental, visual,
orthopedic, speech and hearing conditions. This includes persons
suffering from disabling diseases resulting to the person's
limitations to do day to day activities as normally as possible such
as but not limited to those undergoing dialysis, heart disorders,
severe cancer cases and such other similar cases resulting to
temporary or permanent disability.45
Similarly, DOH A.O. No. 2009-0011 defines the different categories of disability as
follows:ChanRoblesVirtualawlibrary
Rule IV, Section 4, Paragraph B of the Implementing Rules and Regulations (IRR)
of this Act required the Department of Health to address the health concerns of seven
(7) different categories of disability, which include the following: (1) Psychological
and behavioral disabilities (2) Chronic illness with disabilities (3)Learning(cognitive
or intellectual) disabilities (4) Mental disabilities (5) Visual/seeing disabilities (6)
Orthopedic/moving, and (7) communication deficits.46chanroblesvirtuallawlibrary
Elementary is the rule that when laws or rules are clear, when the law is
unambiguous and unequivocal, application not interpretation thereof is imperative.
However, where the language of a statute is vague and ambiguous, an interpretation
thereof is resorted to. A law is deemed ambiguous when it is capable of being
understood by reasonably well-informed persons in either of two or more senses. The
fact that a law admits of different interpretations is the best evidence that it is vague
and ambiguous.47chanrobleslaw
In the instant case, We do not find the aforestated definition of terms as vague and
ambiguous. Settled is the rule that courts will not interfere in matters which are
addressed to the sound discretion of the government agency entrusted with the
regulation of activities coming under the special and technical training and
knowledge of such agency.48 As a matter of policy, We accord great respect to the
decisions and/or actions of administrative authorities not only because of the doctrine
of separation of powers but also for their presumed knowledge, ability, and expertise
in the enforcement of laws and regulations entrusted to their jurisdiction. The
rationale for this rule relates not only to the emergence of the multifarious needs of a
modern or modernizing society and the establishment of diverse administrative
agencies for addressing and satisfying those needs; it also relates to the accumulation
of experience and growth of specialized capabilities by the administrative agency
charged with implementing a particular statute.49chanrobleslaw
Lastly, petitioners contend that R.A. No. 7227, as amended by R.A. No. 9442,
violates the equal protection clause of the Constitution because it fairly singles out
drugstores to bear the burden of the discount, and that it can hardly be said to
"rationally" meet a legitimate government objective which is the purpose of the law.
The law allegedly targets only retailers such as petitioners, and that the other
enterprises in the drug industry are not imposed with similar burden. This same
argument had been raised in the case of Carlos Superdrug Corp., et al. v. DSWD, et
al.,50 and We reaffirm and apply the ruling therein in the case at
bar:ChanRoblesVirtualawlibrary
The Court is not oblivious of the retail side of the pharmaceutical industry and the
competitive pricing component of the business. While the Constitution protects
property rights, petitioners must accept the realities of business and the State, in the
exercise of police power, can intervene in the operations of a business which may
result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the
Constitution provides the precept for the protection of property, various laws and
jurisprudence, particularly on agrarian reform and the regulation of contracts and
public utilities, continuously serve as a reminder that the right to property can be
relinquished upon the command of the State for the promotion of public
good.51chanroblesvirtuallawlibrary
Under the equal protection clause, all persons or things similarly situated must be
treated alike, both in the privileges conferred and the obligations imposed.
Conversely, all persons or things differently situated should be treated
differently.52 In the case of ABAKADA Guro Party List, et al. v. Hon. Purisima, et
al.,53 We held:ChanRoblesVirtualawlibrary
Equality guaranteed under the equal protection clause is equality under the same
conditions and among persons similarly situated; it is equality among equals, not
similarity of treatment of persons who are classified based on substantial differences
in relation to the object to be accomplished. When things or persons are different in
fact or circumstance, they may be treated in law differently. In Victoriano v. Elizalde
Rope Workers' Union, this Court declared:ChanRoblesVirtualawlibrary
The guaranty of equal protection of the laws is not a guaranty of equality in the
application of the laws upon all citizens of the State. It is not, therefore, a
requirement, in order to avoid the constitutional prohibition against inequality, that
every man, woman and child should be affected alike by a statute. Equality of
operation of statutes does not mean indiscriminate operation on persons merely as
such, but on persons according to the circumstances surrounding them. It guarantees
equality, not identity of rights. The Constitution does not require that things
which are different in fact be treated in law as though they were the same. The
equal protection clause does not forbid discrimination as to things that are
different. It does not prohibit legislation which is limited either in the object to
which it is directed or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows classification.
Classification in law, as in the other departments of knowledge or practice, is the
grouping of things in speculation or practice because they agree with one another in
certain particulars. A law is not invalid because of simple inequality. The very idea
of classification is that of inequality, so that it goes without saying that the mere fact
of inequality in no manner determines the matter of constitutionality. All that is
required of a valid classification is that it be reasonable, which means that the
classification should be based on substantial distinctions which make for real
differences, that it must be germane to the purpose of the law; that it must not
be limited to existing conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable foundation or rational basis
and is not palpably arbitrary.
guaranty does not preclude the legislature from recognizing degrees of evil or harm,
and legislation is addressed to evils as they may appear.
The equal protection clause recognizes a valid classification, that is, a classification
that has a reasonable foundation or rational basis and not arbitrary.54 With respect to
R.A. No. 9442, its expressed public policy is the rehabilitation, self-development and
self-reliance of PWDs. Persons with disability form a class separate and distinct from
the other citizens of the country. Indubitably, such substantial distinction is germane
and intimately related to the purpose of the law. Hence, the classification and
treatment accorded to the PWDs fully satisfy the demands of equal protection. Thus,
Congress may pass a law providing for a different treatment to persons with
disability apart from the other citizens of the country.
Subject to the determination of the courts as to what is a proper exercise of police
power using the due process clause and the equal protection clause as yardsticks, the
State may interfere wherever the public interests demand it, and in this particular, a
large discretion is necessarily vested in the legislature to determine, not only what
interests of the public require, but what measures are necessary for the protection of
such interests.55 Thus, We are mindful of the fundamental criteria in cases of this
nature that all reasonable doubts should be resolved in favor of the constitutionality
of a statute.56 The burden of proof is on him who claims that a statute is
unconstitutional. Petitioners failed to discharge such burden of proof.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals
dated July 26, 2010, and the Resolution dated November 19, 2010, in CA-G.R. SP
No. 109903 are AFFIRMED.
SO ORDERED.chanRoblesvirtualLawlibrary

In the exercise of its power to make classifications for the purpose of enacting laws
over matters within its jurisdiction, the state is recognized as enjoying a wide range
of discretion. It is not necessary that the classification be based on scientific or
marked differences of things or in their relation. Neither is it necessary that the
classification be made with mathematical nicety. Hence, legislative classification
may in many cases properly rest on narrow distinctions, for the equal protection
G.R. No. 207132, December 06, 2016
ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS,
INC., (AMCOW), REPRESENTED HEREIN BY ITS PRESIDENT, DR.
ROLANDO VILLOTE, Petitioner, v. GCC APPROVED MEDICAL CENTERS
ASSOCIATION, INC. AND CHRISTIAN CANGCO, Respondents.
G.R. No. 207205
HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE
DEPARTMENT OF HEALTH, Petitioner, v. GCC APPROVED MEDICAL
CENTERS ASSOCIATION, INC. AND CHRISTIAN E.
CANGCO, Respondents.
DECISION
BRION, J.:
In these consolidated petitions for review on certiorari1 filed under Rule 45 of the
Rules of Court, by the Association of Medical Clinics for Overseas Workers, Inc.
(AMCOW) in GR No. 207132, and by Secretary Enrique T. Ona (Secretary Ona) of
the Department of Health (DOH) in GR No. 207205, we resolve the challenge to
the August 10, 2012 decision2 and the April 12, 2013 order3 of the Regional Trial
Court (RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-
CV.4
The August 10, 2012 decision and April 12, 2013 order declared null and void ab
initio the August 23, 2010 and November 2, 2010 orders issued by the DOH
directing respondent GCC Approved Medical Centers Association, Inc. (GAMCA) to
cease and desist from implementing the referral decking system (these orders shall be
alternately referred to as DOH CDO letters).
I. The Antecedents
On March 8, 2001, the DOH issued Administrative Order No. 5, Series of
20015(AO 5-01) which directed the decking or equal distribution of migrant
workers among the several clinics who are members of GAMCA.
AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States'
requirement that only GCC-accredited medical clinics/hospitals' examination results
will be honored by the GCC States' respective embassies. It required an OFW
applicant to first go to a GAMCA Center which, in turn, will refer the applicant to a
GAMCA clinic or hospital.
Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance the
implementation of the referral decking system. The DOH reiterated its directive
suspending the referral decking system in AO No. 159, Series of 2004.7
In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning
that the referral decking system did not guarantee the migrant workers' right to safe
and quality health service. AO 167-04 pertinently reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation
about the GAMCA referral decking system, the DOH believes that its mandate is to
protect and promote the health of the Filipino people by ensuring the rights to safe
and quality health service and reliable medical examination results through the
stricter regulation of medical clinics and other health facilities, which the referral
decking system neither assures nor guarantees.
NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby
withdraws, repeals and/or revokes Administrative Order No. 5, series of 2001,
concerning the referral decking system. Hence, all other administrative issuances,
bureau circulars and memoranda related to A.O. No. 5, series of 2001, are hereby
withdrawn, repealed and/revoked accordingly.
In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then
DOH Secretary Francisco T. Duque III expressed his concern about the continued
implementation of the referral decking system despite the DOH's prior suspension
directives. The DOH directed the "OFW clinics, duly accredited/licensed by the
DOH and/or by the Philippine Health Insurance Corporation (PHILHEALTH)
belonging to and identified with GAMCA x x x to forthwith stop, terminate,
withdraw or otherwise end the x x x 'referral decking system.'"10
GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of
the President (OP). In a decision11 dated January 14, 2010, the OP nullified
Memorandum No. 2008-0210.
On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the
President's signature. Section 16 of RA No. 10022 amended Section 23 of RA No.
8042, adding two new paragraphs - paragraphs (c) and (d). The pertinent portions of
the amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new
paragraphs (c) and (d) with their corresponding subparagraphs to read as follows:
(c) Department of Health. - The Department of Health (DOH) shall regulate the
activities and operations of all clinics which conduct medical, physical, optical,
dental, psychological and other similar examinations, hereinafter referred to as
health examinations, on Filipino migrant workers as requirement for their
overseas employment. Pursuant to this, the DOH shall ensure that:
(c.1) The fees for the health examinations are regulated, regularly monitored and
duly published to ensure that the said fees are reasonable and not exorbitant;
(c.2) The Filipino migrant worker shall only be required to undergo health
examinations when there is reasonable certainty that he or she will be hired and
deployed to the jobsite and only those health examinations which are absolutely
necessary for the type of job applied for or those specifically required by the foreign
employer shall be conducted;
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively
conducting health examinations on migrant workers for certain receiving
countries;
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the
DOH-accredited or DOH-operated clinics that will conduct his/her health
examinations and that his or her rights as a patient are respected. The decking
practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall not
be allowed;
(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH
regional and/or provincial hospitals shall establish and operate clinics that can serve
the health examination requirements of Filipino migrant workers to provide them
easy access to such clinics all over the country and lessen their transportation and
lodging expenses; and
(c.6) All DOH-accredited medical clinics, including the DOH operated clinics,
conducting health examinations for Filipino migrant workers shall observe the same
standard operating procedures and shall comply with internationally accepted
standards in their operations to conform with the requirements of receiving countries
or of foreign employers/principals.
Any Foreign employer who does not honor the results of valid health examinations
conducted by a DOH-accredited or DOH-operated clinic shall be temporarily
disqualified from participating in the overseas employment program, pursuant to
POEA rules and regulations.
In case an overseas Filipino worker is found to be not medically fit upon his/her
immediate arrival in the country of destination, the medical clinic that conducted the
health examinations of such overseas Filipino worker shall pay for his or her
repatriation back to the Philippines and the cost of deployment of such worker.
Any government official or employee who violates any provision of this subsection
shall be removed or dismissed from service with disqualification to hold any
appointive public office for five (5) years. Such penalty is without prejudice to any
other liability which he or she may have incurred under existing laws, rules or
regulations. [emphases and underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No.
8042, as amended by RA No. 10022, took effect.
Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010
letter-order,14directed GAMCA to cease and desist from implementing the referral
decking system and to wrap up their operations within three (3) days from receipt
thereof. GAMCA received its copy of the August 23, 2010 letter-order on August 25,
2010.
On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition
for certiorari and prohibition with prayer for a writ of preliminary injunction and/or
temporary restraining order (GAMCA's petition).15 It assailed: (1) the DOH's August
23, 2010 letter-order on the ground of grave abuse of discretion; and (2) paragraphs
c.3 and c.4, Section 16 of RA No. 10022, as well as Section 1 (c) and (d), Rule XI of
the IRR, as unconstitutional.
Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive
that GAMCA cease and desist from implementing the referral decking system.16
On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and
to file an opposition-in-intervention, attaching its opposition-in-intervention to its
motion.17 In the hearing conducted the following day, November 24, 2010, the RTC
granted AMCOW's intervention; DOH and GAMCA did not oppose AMCOW's
motion.18 AMCOW subsequently paid the docket fees and submitted its
memorandum.19
In an order20 dated August 1, 2011, the RTC issued a writ of preliminary
injunction21 directing the DOH to cease and desist from implementing its August 23,
2010 and November 2, 2010 orders. The RTC likewise issued an order denying the
motion for inhibition/disqualification filed by AMCOW.
On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011
order.
The assailed RTC rulings
In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and
declared null and void ab initio the DOH CDO letters. It also issued a writ of
prohibition directing "the DOH Secretary and all persons acting on his behalf to
cease and desist from implementing the assailed Orders against the [GAMCA]."
The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending
Section 23 of RA No. 8042, but ruled that Section 16 of RA No. 10022 does not
apply to GAMCA.
The RTC reasoned out that the prohibition against the referral decking system under
Section 16 of RA No. 10022 must be interpreted as applying only to clinics that
conduct health examination on migrant workers bound for countries that do not
require the referral decking system for the issuance of visas to job applicants.

It noted that the referral decking system is part of the application procedure in
obtaining visas to enter the GCC States, a procedure made in the exercise of the
sovereign power of the GCC States to protect their nationals from health hazards,
and of their diplomatic power to regulate and screen entrants to their territories.
Under the principle of sovereign equality and independence of States, the Philippines
cannot interfere with this system and, in fact, must respect the visa-granting
procedures of foreign states in the same way that they respect our immigration
procedures.
Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC
States, is to restrain the GCC States themselves. To the RTC, the Congress was
aware of this limitation, pursuant to the generally accepted principles of international
law under Article II, Section 2 of the 1987 Constitution, when it enacted Section 16
of RA No. 10022.
The DOH and AMCOW separately sought reconsideration of the RTC's August 10,
2012 decision, which motions the RTC denied.23 The DOH and AMCOW separately
filed the present Rule 45 petitions.
On August 24, 2013, AMCOW filed a motion for consolidation24 of the two
petitions; the Court granted this motion and ordered the consolidation of the two
petitions in a resolution dated September 17, 2013.25cralawred
In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent
motion for issuance of temporary restraining order/writ of preliminary
injunction/status quo ante order (with request for immediate inclusion in the
Honorable Court's agenda of March 3, 2015, its motion dated March 2, 2015);27 and
(2) the most urgent reiterating motion for issuance of temporary restraining
order/writ of preliminary injunction/status quo ante order dated March 11, 2015.28
The Court also suspended the implementation of the permanent injunction issued by
the RTC of Pasay City, Branch 108 in its August 10, 2012 decision.
II. The Issues
The consolidated cases before us present the following issues:
First, whether the Regional Trial Court legally erred in giving due course to the
petition for certiorari and prohibition against the DOH CDO letters;
Second, whether the DOH CDO letters prohibiting GAMCA from implementing the
referral decking system embodied under Section 16 of Republic Act No. 10022
violates Section 3, Article II of the 1987 Constitution for being an undue taking of
property;
Third, whether the application of Section 16 of Republic Act No.10022 to the
GAMCA violates the international customary principles of sovereign independence
and equality.
III. Our Ruling
A. The RTC legally erred when it gave due course to GAMCA's petition
for certiorari and prohibition.
The present case reached us through an appeal by certiorari (pursuant to Rule 45) of
an RTC ruling, assailing the decision based solely on questions of law. The RTC
decision, on the other hand, involves the grant of the petitions for certiorari and
prohibition (pursuant to Rule 65) assailing the DOH CDO letters for grave abuse of
discretion.
The question before us asks whether the RTC made a reversible error of law
when it issued writs of certiorari and prohibition against the DOH CDO letters.
AMCOW questions the means by which GAMCA raised the issue of the legality of
RA No. 10022 before the RTC. AMCOW posits that GAMCA availed of an
improper remedy, as certiorari and prohibition lie only against quasi-judicial acts,
and quasi-judicial and ministerial acts, respectively. Since the disputed cease and
desist order is neither, the RTC should have dismissed the petition outright for being
an improper remedy.
We agree with the petitioners' assertion that the RTC erred when it gave due course
to GAMCA's petition for certiorari and prohibition, but we do so for different
reasons.
1. Certiorari under Rules of Court and under the courts' expanded jurisdiction
under Art VIII, Section 1 of the Constitution, as recognized by jurisprudence.
A.1.a. The Current Certiorari Situation
The use of petitions for certiorari and prohibition under Rule 65 is a remedy that
judiciaries have used long before our Rules of Court existed.29 As footnoted below,
these writs - now recognized and regulated as remedies under Rule 65 of our Rules
of Court - have been characterized a "supervisory writs" used by superior courts to
keep lower courts within the confines of their granted jurisdictions, thereby ensuring
orderliness in lower courts' rulings.
We confirmed this characterization in Madrigal Transport v. Lapanday Holdings
Corporation,30 when we held that a writ is founded on the supervisory jurisdiction of
appellate courts over inferior courts, and is issued to keep the latter within the
bounds of their jurisdiction. Thus, the writ corrects only errors of jurisdiction of
judicial and quasi-judicial bodies, and cannot be used to correct errors of law or fact.
For these mistakes of judgment, the appropriate remedy is an appeal.31
This situation changed after 1987 when the new Constitution "expanded" the scope
of judicial power by providing that -
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. (italics supplied)32
In Francisco v. The House of Representatives,33 we recognized that this expanded
jurisdiction was meant "to ensure the potency of the power of judicial review to curb
grave abuse of discretion by 'any branch or instrumentalities of government.'" Thus,
the second paragraph of Article VIII, Section 1 engraves, for the first time in its
history, into black letter law the "expanded certiorari jurisdiction" of this Court,
whose nature and purpose had been provided in the sponsorship speech of its
proponent, former Chief Justice Constitutional Commissioner Roberto Concepcion:
xxxx
The first section starts with a sentence copied from former
Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it first and explain.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the government.
Fellow Members of this Commission, this is actually a product of our experience
during martial law. As a matter of fact, it has some antecedents in the past, but the
role of the judiciary during the deposed regime was marred considerably by the
circumstance that in a number of cases against the government, which then had no
legal defense at all, the solicitor general set up the defense of political question and
got away with it. As a consequence, certain principles concerning particularly the
writ of habeas corpus, that is, the authority of courts to order the release of political
detainees, and other matters related to the operation and effect of martial law failed
because the government set up the defense of political question. And the Supreme
Court said: "Well, since it is political, we have no authority to pass upon it." The
Committee on the Judiciary feels that this was not a proper solution of the questions
involved. It did not merely request an encroachment upon the rights of the people,
but it, in effect, encouraged further violations thereof during the martial law regime.
xxx
xxxx
Briefly stated, courts of justice determine the limits of power of the agencies and
offices of the government as well as those of its officers. In other words, the
judiciary is the final arbiter on the question whether or not a branch of government or
any of its officials has acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to excess of
jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass
judgment on matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts
cannot hereafter evade the duty to settle matters of this nature, by claiming that such
matters constitute a political question.34 (italics in the original; emphasis and
underscoring supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this
"expanded" constitutional definition of judicial power and because of the
commonality of "grave abuse of discretion" as a ground for review under Rule 65
and the courts expanded jurisdiction, the Supreme Court based on its power to relax
its rules35 allowed Rule 65 to be used as the medium for petitions invoking the
courts' expanded jurisdiction based on its power to relax its Rules.36 This is however
an ad hoc approach that does not fully consider the accompanying implications,
among them, that Rule 65 is an essentially distinct remedy that cannot simply be
bodily lifted for application under the judicial power's expanded mode. The terms of
Rule 65, too, are not fully aligned with what the Court's expanded jurisdiction
signifies and requires.37
On the basis of almost thirty years' experience with the courts' expanded jurisdiction,
the Court should now fully recognize the attendant distinctions and should be aware
that the continued use of Rule 65 on an ad hoc basis as the operational remedy in
implementing its expanded jurisdiction may, in the longer term, result in problems of
uneven, misguided, or even incorrect application of the courts' expanded mandate.
The present case is a prime example of the misguided reading that may take place in
constitutional litigation: the procedural issues raised apparently spring from the lack
of proper understanding of what a petition for certiorari assails under the traditional
and expanded modes, and the impact of these distinctions in complying with the
procedural requirements for a valid petition.
2. The Basic Distinctions
A.2.a. Actual Case or Controversy
Basic in the exercise of judicial power whether under the traditional or in the
expanded setting - is the presence of an actual case or controversy. For a dispute to
be justiciable, a legally demandable and enforceable right must exist as basis, and
must be shown to have been violated.38
Whether a case actually exists depends on the pleaded allegations, as affected by the
elements of standing (translated in civil actions as the status of being a "real-
party-in-interest," in criminal actions as "offended party" and in special
proceedings as "interested party"),39ripeness,40prematurity, and the moot and
academic principle that likewise interact with one another. These elements and their
interactions are discussed m greater detail below.
The Court's expanded jurisdiction - itself an exercise of judicial power - does not do
away with the actual case or controversy requirement in presenting a constitutional
issue, but effectively simplifies this requirement by merely requiring a prima
facie showing of grave abuse of discretion in the assailed governmental act.
A.2.b. Actions Correctable by Certiorari
A basic feature of the expanded jurisdiction under the constitutional definition of
judicial power, is the authority and command for the courts to act on petitions
involving the commission by any branch or instrumentality of government of grave
abuse of discretion amounting to lack or excess of jurisdiction.
This command distinctly contrasts with the terms of Rule 65 which confines
court certiorari action solely to the review of judicial and quasi-judicial acts.41 These
differing features create very basic distinctions that must necessarily result in
differences in the application of remedies.
While actions by lower courts do not pose a significant problem because they are
necessarily acting judicially when they adjudicate, a critical question comes up for
the court acting on certiorari petitions when governmental agencies are involved
- under what capacity does the agency act?
This is a critical question as the circumstances of the present case show. When the
government entity acts quasi-judicially, the petition for certiorari challenging the
action falls under Rule 65; in other instances, the petition must be filed based on the
courts' expanded jurisdiction.
A.2.c. Grave Abuse of Discretion
Another distinction, a seeming one as explained below, relates to the cited ground of
a certiorari petition under Rule 65 which speaks of lack or excess of jurisdiction or
grave abuse of discretion amounting to lack or excess of jurisdiction, as against the
remedy under the courts' expanded jurisdiction which expressly only mentions grave
abuse of discretion amounting to lack or excess of jurisdiction.
This distinction is apparently not legally significant when it is considered that action
outside of or in excess of the granted authority necessarily involves action with grave
abuse of discretion: no discretion is allowed in areas outside of an agency's granted
authority so that any such action would be a gravely abusive exercise of power. The
constitutional grant of power, too, pointedly addresses grave abuse of
discretion when it amounts to lack or excess of jurisdiction,42 thus establishing that
the presence of jurisdiction is the critical element; failure to comply with this
requirement necessarily leads to the certiorari petition's immediate dismissal.43
As an added observation on a point that our jurisprudence has not fully explored, the
result of the action by a governmental entity (e.g., a law or an executive order) can
be distinguished from the perspective of its legality as tested against the terms of the
Constitution or of another law (where subordinate action like an executive order is
involved), vis-a-vis the legality of the resulting action where grave abuse of
discretion attended the governmental action or the exercise of the governmental
function.
In the former, the conclusion may be plain illegality or legal error that characterized
the law or exec order (as tested, for example, under the established rules of
interpretation); no consideration is made of how the governmental entity exercised
its function. In the latter case, on the other hand, it is the governmental entity's
exercise of its function that is examined and adjudged independently of the result,
with impact on the legality of the result of the gravely abusive action.
Where the dispute in a case relates to plain legal error, ordinary court action and
traditional mode are called for and this must be filed in the lower courts based on
rules of jurisdiction while observing the hierarchy of courts.
Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction
is brought into play based on the express wording of the Constitution and
constitutional implications may be involved (such as grave abuse of discretion
because of plain oppression or discrimination), but this must likewise be filed with
the lowest court of concurrent jurisdiction, unless the court highest in the hierarchy
grants exemption. Note that in the absence of express rules, it is only the highest
court, the Supreme Court, that can only grant exemptions.
From these perspectives, the use of grave abuse of discretion can spell the difference
in deciding whether a case filed directly with the Supreme Court has been properly
filed.
A.2.d. Exhaustion of Available Remedies
A basic requirement under Rule 65 is that there be "no other plain, speedy and
adequate remedy found in law,"44 which requirement the expanded jurisdiction
provision does not expressly carry. Nevertheless, this requirement is not a significant
distinction in using the remedy of certiorari under the traditional and the expanded
modes. The doctrine of exhaustion of administrative remedies applies to a petition
for certiorari, regardless of the act of the administrative agency concerned, i.e.,
whether the act concerns a quasi-judicial, or quasi-legislative function, or is purely
regulatory.45
Consider in this regard that once an administrative agency has been empowered by
Congress to undertake a sovereign function, the agency should be allowed to perform
its function to the full extent that the law grants. This full extent covers the authority
of superior officers in the administrative agencies to correct the actions of
subordinates, or for collegial bodies to reconsider their own decisions on a motion
for reconsideration. Premature judicial intervention would interfere with this
administrative mandate, leaving administrative action incomplete; if allowed, such
premature judicial action through a writ of certiorari, would be a usurpation that
violates the separation of powers principle that underlies our Constitution.46
In every case, remedies within the agency's administrative process must be exhausted
before external remedies can be applied. Thus, even if a governmental entity may
have committed a grave abuse of discretion, litigants should, as a rule, first ask
reconsideration from the body itself, or a review thereof before the agency
concerned. This step ensures that by the time the grave abuse of discretion issue
reaches the court, the administrative agency concerned would have fully exercised its
jurisdiction and the court can focus its attention on the questions of law presented
before it.
Additionally, the failure to exhaust administrative remedies affects the ripeness to
adjudicate the constitutionality of a governmental act, which in turn affects the
existence of the need for an actual case or controversy for the courts to exercise
their power of judicial review.47 The need for ripeness - an aspect of the timing of a
case or controversy does not change regardless of whether the issue of
constitutionality reaches the Court through the traditional means, or through the
Court's expanded jurisdiction. In fact, separately from ripeness, one other concept
pertaining to judicial review is intrinsically connected to it; the concept of a case
being moot and academic.48
Both these concepts relate to the timing of the presentation of a controversy before
the Court ripeness relates to its prematurity, while mootness relates to a belated or
unnecessary judgment on the issues. The Court cannot preempt the actions of the
parties, and neither should it (as a rule) render judgment after the issue has already
been resolved by or through external developments.
The importance of timing in the exercise of judicial review highlights and reinforces
the need for an actual case or controversy an act that may violate a party's right.
Without any completed action or a concrete threat of injury to the petitioning party,
the act is not yet ripe for adjudication. It is merely a hypothetical problem. The
challenged act must have been accomplished or performed by either branch or
instrumentality of government before a court may come into the picture, and the
petitioner must allege the existence of an immediate or threatened injury to itself as a
result of the challenged action.
In these lights, a constitutional challenge, whether presented through the traditional
route or through the Court's expanded jurisdiction, requires compliance with the
ripeness requirement. In the case of administrative acts, ripeness manifests itself
through compliance with the doctrine of exhaustion of administrative remedies.
In like manner, an issue that was once ripe for resolution but whose resolution, since
then, has been rendered unnecessary, needs no resolution from the Court, as it
presents no actual case or controversy and likewise merely presents a hypothetical
problem. In simpler terms, a case is moot and academic when an event supervenes to
render a judgment over the issues unnecessary and superfluous.
Without the element of ripeness or a showing that the presented issue is moot and
academic, petitions challenging the constitutionality of a law or governmental act are
vulnerable to dismissal.
Not to be forgotten is that jurisprudence also prohibits litigants from immediately
seeking judicial relief without first exhausting the available administrative remedies
for practical reasons.49
From the perspective of practicality, immediate resort to the courts on issues that are
within the competence of administrative agencies to resolve, would unnecessarily
clog the courts' dockets. These issues, too, usually involve technical considerations
that are within the agency's specific competence and which, for the courts, would
require additional time and resources to study and consider.50 Of course, the Supreme
Court cannot really avoid the issues that a petition for certiorari, filed with the lower
courts may present; the case may be bound ultimately to reach the Court, albeit as an
appeal from the rulings of the lower courts.
3. Situations Where a Petition for Certiorari May Be Used
There are two distinct situations where a writ of certiorari or prohibition may be
sought. Each situation carries requirements, peculiar to the nature of each situation,
that lead to distinctions that should be recognized in the use of certiorari under Rule
65 and under the courts' expanded jurisdiction.
The two situations differ in the type of questions raised. The first is
the constitutional situation where the constitutionality of acts are questioned. The
second is the non-constitutional situation where acts amounting to grave abuse of
discretion are challenged without raising constitutional questions or violations.
The process of questioning the constitutionality of a governmental action provides a
notable area of comparison between the use of certiorari in the traditional and the
expanded modes.
Under the traditional mode, plaintiffs question the constitutionality of a
governmental action through the cases they file before the lower courts; the
defendants may likewise do so when they interpose the defense of unconstitutionality
of the law under which they are being sued. A petition for declaratory relief may also
be used to question the constitutionality or application of a legislative (or quasi-
legislative) act before the court.51
For quasi-judicial actions, on the other hand, certiorari is an available remedy, as
acts or exercise of functions that violate the Constitution are necessarily committed
with grave abuse of discretion for being acts undertaken outside the contemplation of
the Constitution. Under both remedies, the petitioners should comply with the
traditional requirements of judicial review, discussed below.52 In both cases, the
decisions of these courts reach the Court through an appeal by certiorari under Rule
45.
In contrast, existing Court rulings in the exercise of its expanded jurisdiction have
allowed the direct filing of petitions for certiorari and prohibition with the Court to
question, for grave abuse of discretion, actions or the exercise of a function that
violate the Constitution.53 The governmental action may be questioned regardless of
whether it is quasi-judicial, quasi-legislative, or administrative in nature. The Court's
expanded jurisdiction does not do away with the actual case or controversy
requirement for presenting a constitutional issue, but effectively simplifies this
requirement by merely requiring a prima facie showing of grave abuse of discretion
in the exercise of the governmental act.54
To return to judicial review heretofore mentioned, in constitutional cases where the
question of constitutionality of a governmental action is raised, the judicial power the
courts exercise is likewise identified as the power of judicial review - the power to
review the constitutionality of the actions of other branches of government.55 As a
rule, as required by the hierarchy of courts principle, these cases are filed with the
lowest court with jurisdiction over the matter. The judicial review that the courts
undertake requires:
1) there be an actual case or controversy calling for the exercise of judicial
power;
(2) the person challenging the act must have "Standing" to challenge; he
must have a personal and substantial interest in the case such that he has
sustained, or will sustain, direct injury as a result of its enforcement;
(3) the question of constitutionality must be raised at the earliest possible
opportunity; and
(4) the issue of constitutionality must be the very lis mota of the case.56
The lower court's decision under the constitutional situation reaches the Supreme
Court through the appeal process, interestingly, through a petition for review
on certiorari under Rule 45 of the Rules of Court.
In the non-constitutional situation, the same requirements essentially apply, less the
requirements specific to the constitutional issues. In particular, there must be an
actual case or controversy and the compliance with requirements of standing, as
affected by the hierarchy of courts, exhaustion of remedies, ripeness, prematurity,
and the moot and academic principles.
A.3.a. The "Standing" Requirement
Under both situations, the party bringing suit must have the necessary "standing."
This means that this party has, in its favor, the demandable and enforceable right or
interest giving rise to a justiciable controversy after the right is violated by the
offending party.
The necessity of a person's standing to sue derives from the very definition of
judicial power. Judicial power includes the duty of the courts to settle actual
controversies involving rights which are legally demandable and
enforceable. Necessarily, the person availing of a judicial remedy must show that he
possesses a legal interest or right to it, otherwise, the issue presented would be
purely hypothetical and academic. This concept has been translated into the
requirement to have "standing" in judicial review,57or to be considered as a "real-
party-in-interest" in civil actions,58 as the "offended party" in criminal actions59 and
the "interested party" in special proceedings.60
While the Court follows these terms closely in both non-constitutional cases and
constitutional cases under the traditional mode, it has relaxed the rule in
constitutional cases harrdled under the expanded jurisdiction mode. in the latter case,
a prima facie showing that the questioned governmental act violated the
Constitution, effectively disputably shows an injury to the sovereign Filipino nation
who approved the Constitution and endowed it with authority, such that the
challenged act may be questioned by any Philippine citizen before the Supreme
Court.61 In this manner, the "standing" requirement is relaxed compared with the
standard of personal stake or injury that the traditional petition requires.
The relaxation of the standing requirement has likewise been achieved through the
application of the "transcendental importance doctrine" under the traditional mode
for constitutional cases.62 (Under the traditional mode, "transcendental importance"
not only relaxes the standing requirement, but also allows immediate access to this
Court, thus exempting the petitioner from complying with the hierarchy of courts
requirement.)63
More importantly perhaps, the prima facie showing of grave abuse of discretion in
constitutional cases also implies that the injury alleged is actual or imminent, and not
merely hypothetical.
Through this approach, the Court's attention is directed towards the existence of an
actual case or controversy - that is, whether the government indeed violated the
Constitution to the detriment of the Filipino people without the distractions of
determining the existence of transcendental importance indicators unrelated to the
dispute and which do not at all determine whether the Court properly exercises its
power of judicial review.
Parenthetically, in the traditional mode, the determination of the transcendental
importance of the issue presented,64 aside from simply relaxing the standing
requirement, may result in the dilution of the actual case or controversy element
because of the inextricable link between standing and the existence of an actual case
or controversy.
Consider, in this regard, that an actual case or controversy that calls for the exercise
of judicial power necessarily requires that the party presenting it possesses the
standing to mount a challenge to a governmental act. A case or controversy exists
when there is an actual dispute between parties over their legal rights, which remains
in conflict at the time the dispute is presented before the court.65Standing, on the
other hand, involves a personal and substantial interest in the case because the
petitioner has sustained, or will sustain, direct injury as a result of the violation of its
right.66
With the element of "standing" (or the petitioner's personal or substantial stake or
interest in the case) relaxed, the practical effect is to dilute the need to show that an
immediate actual dispute over legal rights did indeed take place and is now the
subject of the action before the court.67
In both the traditional and the expanded modes, this relaxation carries a ripple effect
under established jurisprudential rulings,68 affecting not only the actual case or
controversy requirement, but compliance with the doctrine of hierarchy of courts,
discussed in greater detail below.
A.3.b. The Hierarchy of Courts Principle
Another requirement that a certiorari petition carries, springs from the principle of
"hierarchy of courts" which recognizes the various levels of courts in the country as
they are established under the Constitution and by law, their ranking and effect of
their rulings in relation with one another, and how these different levels of court
interact with one another.69 Since courts are established and given their defined
jurisdictions by law, the hierarchy of the different levels of courts should leave very
little opening for flexibility (and potential legal questions), but for the fact that the
law creates courts at different and defined levels but with concurrent jurisdictions.
The Constitution itself has partially determined the judicial hierarchy in the
Philippine legal system by designating the Supreme Court as the highest court with
irreducible powers; its rulings serve as precedents that other courts must
follow70 because they form part of the law of the land.71 As a rule, the Supreme
Court is not a trial court and rules only on questions of law, in contrast with the
Court of Appeals and other intermediate courts72 which rule on both questions of law
and of fact. At the lowest level of courts are the municipal and the regional trial
courts which handle questions of fact and law at the first instance according to the
jurisdiction granted to them by law.
Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the
regional trial courts and the higher courts, all the way up to the Supreme Court. As a
general rule, under the hierarchy of courts principle, the petition must be brought to
the lowest court with jurisdiction;73 the petition brought to the higher courts may be
dismissed based on the hierarchy principle. Cases, of course, may ultimately reach
the Supreme Court through the medium of an appeal.
The recognition of exceptions to the general rule is provided by the Supreme Court
through jurisprudence, i.e., through the cases that recognized the propriety of filing
cases directly with the Supreme Court. This is possible as the Supreme Court has the
authority to relax the application of its own rules.74
As observed above, this relaxation waters down other principles affecting the remedy
of certiorari. While the relaxation may result in greater and closer supervision by the
Court over the lower courts and quasi-judicial bodies under Rule 65, the effect may
not always be salutary in the long term when it is considered that this may affect the
constitutional standards for the exercise of judicial power, particularly the existence
of an actual case or controversy.
The "transcendental importance" standard, in particular, is vague, open-ended and
value-laden, and should be limited in its use to exemptions from the application of
the hierarchy of courts principle. It should not carry any ripple effect on the
constitutional requirement for the presence of an actual case or controversy.
4. The petition for certiorari and prohibition against the DOH Letter was filed
before the wrong court.
In the present case, the act alleged to be unconstitutional refers to the cease and
desist order that the DOH issued against GAMCA's referral decking system. Its
constitutionality was questioned through a petition for certiorari and prohibition
before the RTC. The case reached this Court through a Rule 45 appeal
by certiorari under the traditional route.
In using a petition for certiorari and prohibition to assail the DOHCDO letters,
GAMCA committed several procedural lapses that rendered its petition readily
dismissible by the RTC. Not only did the petitioner present a premature
challenge against an administrative act; it also committed the grave jurisdictional
error of filing the petition before the wrong court.
A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-
judicial functions, and could be assailed through Rule 65 on certiorari and
prohibition.
A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to
an individual or group within the coverage of the law containing the policy.
The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of
Batangas,75 recognized the difficulty of d fining the precise demarcation line
between what are judicial and what are administrative or ministerial functions, as the
exercise of judicial functions may involve the performance of legislative or
administrative duties, and the performance of administrative or ministerial duties
may, to some extent, involve the exercise of functions judicial in character. Thus, the
Court held that the nature of the act to be performed, rather than of the office,
board, or body which performs it, should determine whether or not an action is in
the discharge of a judicial or a quasi-judicial function.76
Generally, the exercise of judicial functions involves the determination of what the
law is, and what the legal rights of parties are under this law with respect to a matter
in controversy. Whenever an officer is clothed with this authority and undertakes to
determine those questions, he acts judicially.77
In the administrative realm, a government officer or body exercises a quasi-judicial
function when it hears and determines questions of fact to which the legislative
policy is to apply, and decide, based on the law's standards, matters relating to the
enforcement and administration of the law.78
The DOH CDO letter directed GAMCA to cease and desist from engaging in the
referral decking system practice within three days from receipt of the letter. By
issuing this CDO letter implementing Section 16 of RA No. 10022, the DOH (1)
made the finding of fact that GAMCA implements the referral decking system, and
(2) applied Section 16 of RA No. 10022, to conclude that GAMCA's practice is
prohibited by law and should be stopped.
From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter
determined a question of fact, and applied the legislative policy prohibiting the
referral decking system practice.
Notably, cease and desist orders have been described and treated as quasi-judicial
acts in past cases, and had even been described as similar to the remedy of injunction
granted by the courts.79
A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters
fall within the jurisdiction of the Court of Appeals.
Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA
assailed it before the courts of law had been erroneous; the RTC should not have
entertained GAMCA's petition.
First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy
involves a Rule 43 appeal or a Rule 65 petition for certiorari, is cognizable by the
Court of Appeals. In particular, Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than
sixty (60) days from notice of the judgment, order or resolution. In case a motion for
reconsideration or new trial is timely filed, whether such motion is required or not,
the sixty (60) day period shall be counted from notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or
omissions of a lower court or of a corporation, board, officer or person, in the
Regional Trial Court exercising jurisdiction over the territorial area as defined by the
Supreme Court. It may also be filed in the Court of Appeals whether or not the same
is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its
appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these Rules, the petition shall be filed in and
cognizable only by the Court of Appeals. (emphasis, italics, and underscoring
supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial
capacity, the petition challenging its CDO letter should have been filed before the
Court of Appeals. The RTC thus did not have jurisdiction over the subject matter of
the petitions and erred in giving due course to the petition for certiorari and
prohibition against the DOH CDO letters. In procedural terms, petitions
for certiorari and prohibition against a government agency are remedies avaiJable to
assail its quasi-judicial acts, and should thus have been filed before the CA.
The provision in Section 4, Rule 65 requiring that certiorari petitions challenging
quasi-judicial acts to be filed with the CA is in full accord with Section 9 of Batas
Pambansa Blg. 12980 on the same point. Section 9 provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:
1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas
corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;
xxxx
3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities,
boards or commission, including the Securities and Exchange Commission, the
Social Security Commission, the Employees Compensation Commission and the
Civil Service Commission, except those falling within the appellate jurisdiction of
the Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this
Act, and of subparagraph (1) of the third paragraph and subparagraph 4 of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
xxxx
(emphases, italics, and underscoring supplied)
Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive
original jurisdiction to entertain petitions for certiorari and prohibition against quasi-
judicial agencies. In short, GAMCA filed its remedy with the wrong court.
A.4.c The petitions for certiorari and prohibition against the DOH CDO letters
were premature challenges - they failed to comply with the requirement that there
be "no other plain, speedy and adequate remedy" and with the doctrine of
exhaustion of administrative remedies.
Second, the Regional Trial Court of Pasay City unduly disregarded the requirements
that there be "no other plain, speedy and adequate remedy at law" and the doctrine
of exhaustion of administrative remedies, when it gave due course to
the certiorari and prohibition petition against the DOH's CDO.
Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the
DOH Secretary "shall have supervision and control over the bureaus, offices, and
agencies under him"82 and "shall have authority over and responsibility for x x x
operation" of the Department.
Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII,
Sections 1 and 17 of the Constitution,83 on the other hand, provides that the
"President shall have control of all the executive departments, bureaus, and offices."
These provisions both signify that remedies internal to the Executive Branch exist
before resorting to judicial remedies: GAMCA could ask the DOH Secretary to
reconsider or clarify its letter-order, after which it could appeal, should the ruling be
unfavorable, to the Office of the President.
Significantly, this was what GAMCA did in the past when the DOH issued
Memorandum Order No. 2008-0210 that prohibited the referral decking system.
GAMCA then asked for the DOH Secretary's reconsideration, and subsequently
appealed the DOH's unfavorable decision with the Office of the President. The OP
then reversed Memorandum Order No. 2008-0210 and allowed the referral decking
system to continue.
That GAMCA had earlier taken this course indicates that it was not unaware of the
administrative remedies available to it; it simply opted to disregard the doctrine of
exhaustion of administrative remedies and the requirement that there be no other
plain, speedy, and adequate remedy in law when it immediately filed its petition
for certiorari with the RTC.
This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition
outside the exceptions that we recognized in the past in relaxing strict compliance
with the exhaustion of administrative remedies requirement.
Jurisprudence84 shows that this Court never hesitated in the past in relaxing the
application of the rules of procedure to accommodate exceptional circumstances
when their strict application would result in injustice. These instances, founded as
they are on equitable considerations, do not include the undue disreiard of
administrative remedies, particularly when they are readily available.85
A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters
should have been dismissed outright, as Rule 65 Petitions for Certiorari and
Prohibition are extraordinary remedies given due course only upon compliance
with the formal and substantive requirements.
Note, at this point, that Rule 65 petitions for certiorari and prohibition are
discretionary writs, and that the handling court possesses the authority to dismiss
them outright for failure to comply with the form and substance requirements.
Section 6, Rule 65 of the Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance to
justify suclr process, the court shall issue an order requiring the respondent or
respondents to comment on the petition within ten (10) days from receipt of a copy
thereof. Such order shall be served on the respondents in such manner as the court
may direct together with a copy of the petition and any annexes thereto. (emphasis,
italics, and underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the
petition for certiorariand prohibition for its compliance with the Rule 65
requirements. At that point, the petition for certiorariand prohibition should have
been dismissed outright, for failing to comply with Section 1 and Section 4 of Rule
65. When the court instead took cognizance of the petition, it acted on a matter
outside its jurisdiction.
Consequently, the RTC's resulting judgment is void and carries no legal effect. The
decision exempting GAMCA from the application of the referral decking system
should equally have no legal effect.
Noncompliance with the Section 1, Rule 65 requirement that there be no other plain,
speedy, and adequate remedy in law, on the other hand, is more than just a pro-forma
requirement in the present case. Since the petitions for certiorari and prohibition
challenge a governmental act - i.e. action under the DOH CDO letters, as well as the
validity of the instruments under which these letters were issued - compliance with
Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that
judicial review requires is also mandatory. To recall a previous discussion, the
exhaustion of administrative remedies is also an aspect of ripeness in deciding a
constitutional issue.
Thus, GAMCA's disregard of the Rules of Court not only renders the petition
dismissible for failure to first exhaust administrative remedies; the constitutional
issues GAMCA posed before the RTC were not also ripe for adjudication.
5. The Regional Trial Court erred in finding grave abuse of discretion on the part
of the DOH's issuance of the DOH CDO letters.
On the merits, we find that the RTC of Pasay reversibly erred in law when it held
that the DOH acted with grave abuse of discretion m prohibiting GAMCA from
implementing the referral decking system.
In exempting GAMCA from the referral decking system that RA No. 10022
prohibits, the RTC of Pasay City noted that the regulation per se was not
unconstitutional, but its application to GAMCA would violate the principle of
sovereign equality and independence.
While we agree with the RTC's ultimate conclusion upholding the constitutionality
of the prohibition against the referral decking system under RA No. 10022, our
agreement proceeds from another reason; we disagree that the prohibition does not
apply to GAMCA and with the consequent ruling nullifying the DOH's CDO Letter.
A.5.a. The prohibition against the referral decking system under Section 16, RA
No. 10022, is a valid exercise of police power.
In its comment, GAMCA asserts that implementing the prohibition against the
referral decking system would amount to an undue taking of property that violates
Article II, Section 2 of the 1987 Constitution.
It submits that the Securities and Exchange Commission had in fact approved its
Articles of Incorporation and Bylaws that embody the referral decking system; thus,
the DOH cannot validly prohibit the implementation of this system.
GAMCA further claims that its members made substantial investments to upgrade
their facilities and equipment. From this perspective, the August 23, 2010 order
constitutes taking of property without due process of law as its implementation
would deprive GAMCA members of their property.
AMCOW responded to these claims with the argument that the DOH CDO letters
implementing RA No. 10022 are consistent with the State's exercise of the police
power to prescribe regulations to promote the health, safety, and general welfare of
the people. Public interest justifies the State's interference in health matters, since the
welfare of migrant workers is a legitimate public concern. The DOH thus merely
performed its duty of upholding the migrant workers' freedom to consult their chosen
clinics for the conduct of health examinations.
We agree with AMCOW.
The State's police power86 is vast and plenary87 and the operation of a
business,88 especially one that is imbued with public interest (such as healthcare
services),89 falls within the scope of governmental exercise of police power through
regulation.
As defined, police power includes (1) the imposition of restraint on liberty or
property, (2) in order to foster the common good.90 The exercise of police power
involves the "state authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare."91
By its very nature, the exercise of the State's police power limits individual rights
and liberties, and subjects them to the "far more overriding demands and
requirements of the greater number."92 Though vast and plenary, this State power
also carries limitations, specifically, it may not be exercised arbitrarily or
unreasonably. Otherwise, it defeats the purpose for which it is exercised, that is, the
advancement of the public good.93
To be considered reasonable, the government's exercise of police power must satisfy
the "valid object and valid means" method of analysis: first, the interest of the public
generally, as distinguished from those of a particular class, requires interference;
and second, the means employed are reasonably necessary to attain the objective
sought and not unduly oppressive upon individuals.94
These two elements of reasonableness are undeniably present in Section 16 of RA
No. 10022. The prohibition against the referral decking system is consistent with the
State's exercise of the police power to prescribe regulations to promote the health,
safety, and general welfare of the people. Public interest demands State interference
on health matters, since the welfare of migrant workers is a legitimate public
concern.
We note that RA No. 10022 expressly reflects the declared State policies to "uphold
the dignity of its citizens whether in the country or overseas, in general, and Filipino
migrant workers," and to "afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all. Towards this end, the State shall provide adequate
and timely social, economic and legal services to Filipino migrant workers." The
prohibition against the referral decking system in Section 16 of RA No. 10022 is an
expression and implementation of these state policies.
The guarantee under Section 16 for OFWs to be given the option to choose a quality
healthcare service provider as expressed in Section 16 (c)95 of RA No. 10022 is
guaranteed by the prohibition against the decking practice and against monopoly
practices in OFW health examinations.96
Section 16 likewise requires employers to accept health examinations from any
DOH-accredited health facility; a refusal could lead to their temporary
disqualification under pertinent rules to be formulated by the Philippine Overseas
Employment Authority (POEA).97
These rules are part of the larger legal framework to ensure the Overseas Filipino
Workers' (OFW) access to quality healthcare services, and to curb existing practices
that limit their choices to specific clinics and facilities.
Separately from the Section 16 prohibition against the referral decking system, RA
No. 10022 also prohibits and penalizes the imposition of a compulsory exclusive
arrangement requiring OFWs to undergo health examinations only from specifically
designated medical clinics, institutions, entities or persons. Section 5, in relation to
Section 6 of RA No. 10022, penalizes compulsory, exclusive arrangements98 by
imprisonment and fine and by the automatic revocation of the participating medical
clinic's license.
The DOH's role under this framework is to regulate the activities and operations of
all clinics conducting health examinations on Filipino migrant workers as a
requirement for their overseas employment. The DOH is tasked to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively
conducting health examinations on migrant workers for certain receiving countries;
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the
DOH-accredited or DOH-operated clinics that will conduct his/her health
examinations and that his or her rights as a patient are respected. The decking
practice, which requires an overseas Filipino worker to go first to an office for
registration and then farmed out to a medical clinic located elsewhere, shall not be
allowed;99
While Section 16 of RA No. 10022 does not specifically define the consequences of
violating the prohibition against the referral decking system, Republic Act No. 4226
(Hospital Licensure Act), which governs the licensure and regulation of hospitals and
health facilities, authorizes the DOH to suspend, revoke, or refuse to renew the
license of hospitals and clinics violating the law.100
These consequences cannot but apply to the violation of the prohibition against the
referral decking system under RA No. 10022. If, under the law, the DOH can
suspend, revoke, or refuse to renew the license of these hospitals upon the finding
that they violated any provision of law (whether those found in RA No. 4226 or in
RA No. 10022), it follows- as a necessarily included lesser power - that the DOH can
likewise order these clinics and their association to cease and desist from practices
that the law deems to be undesirable.
A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH
CDO letters.
As discussed above, the letter-order implementing the prohibition against the referral
decking system is quasi-judicial in nature. This characteristic requires that procedural
due process be observed - that is, that the clinics concerned be given the opportunity
to be heard before the standard found in the law can be applied to them.
Thus, prior to the issuance of the disputed CDO letter, the DOH should have given
GAMCA the opportunity to be heard on whether the prohibition applies to it. Lest
this opportunity to be heard be misunderstood, this DOH obligation raises an issue
different from the question of whether Congress can, under the exercise of police
power, prohibit the referral decking system; this latter issue lies outside the scope of
the DOH to pass upon. The required hearing before the DOH relates solely to
whether it properly implemented, based on the given standards under the law, the
prohibition that Congress decreed under RA No. 10022.
Under normal circumstances, the issuance of a CDO without a prior hearing would
violate GAMCA's procedural due process rights, and would amount to more than a
legal error, i.e., an error equivalent to action without jurisdiction. Rendering a
decision quasi-judicial in nature without providing the opportunity to be heard
amounts to a grave abuse of discretion that divests a quasi-judicial agency of its
jurisdiction.
Factual circumstances unique to the present case, however, lead us to conclude that
while it was an error of law for the DOH to issue a CDO without complying with the
requirements of procedural due process, its action did not amount to a grave abuse of
discretion.
Grave abuse of discretion amounts to more than an error of law; it refers to an act
that is so capricious, arbitrary, and whimsical that it amounts to a clear evasion of a
positive duty or a virtual refusal to perform a duty enjoined by law, as where the
power is exercised in an arbitrary and despotic manner because of passion or
hostility.101
Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to
determine that GAMCA practices the prohibited referral decking system under RA
No. 10022. Notably, the DOH had earlier allowed and recognized the referral
decking system that GAMCA practiced through AO 5-01. This recognition was
made with GAMCA's practice in mind. The subsequent administrative orders and
department memorandum suspending and terminating the referral decking system,
respectively, all pertain to the practice that the DOH had authorized under AO 5-01.
Even the subject matter of these issuances do not just pertain to any other referral
decking system, but to the "GAMCA referral decking system."
GAMCA likewise had more than several opportunities to contest the suspension and
eventual revocation of the referral decking system initially pe1mitted under AO 5-01.
Its appeal even reached the Office of the President, which overturned the DOH
Memorandum Order terminating the referral decking system.
That the referral decking system had been subsequently prohibited by law shows the
intent of Congress to prevent and prohibit the practice that GAMCA initiated and
which the President had allowed. The President's duty under our political system is to
implement the law; hence, when Congress subsequently prohibited the practice that
GAMCA initiated, the Executive - including the President -has no choice but to
implement it.
Based on these circumstances, while the DOH erred when it issued its CDO letters
without first giving GAMCA the opportunity to prove whether the practice
conducted by GAMCA is the same practice prohibited under RA No. 10022, the
DOH conclusion to so act, in our view, did not constitute grave abuse of discretion
that would have divested it of jurisdiction.
We note that the DOH had sufficient basis when it determined that the referral
decking system prohibited under RA No. 10022 was the same decking system
practiced by GAMCA. To reiterate, the referral decking system was not something
new; it was an old system that GAMCA practiced and was known to all in its scope
and operating details. That GAMCA had previously questioned the DOH prohibition
and had been given ample opportunity to be heard when it filed an appeal before the
OP, negate the conclusion that GAMCA had been aggrieved by precipitate and
unfair DOH action.
To be sure, these factual circumstances do not make the CDO letter compliant with
procedural due process. They mitigate, however, the error committed and render it
less than the capricious, arbitrary, and patent refusal to comply with a positive legal
duty that characterizes an act committed with grave abuse of discretion.
The Court furthermore, in several instances,102 has recognized that an administrative
agency may issue an ex parte cease and desist order, where vital public interests
outweigh the need for procedural due process." In these instances, the Court noted
that the affected establishment may contest the ex parteorder, upon which the
administrative agency concerned must conduct a hearing and allow the establishment
to be heard. While jurisprudence has so far used the "vital public interests" standard
to pollution cases, it had not been a grave abuse of discretion on the part of the DOH
to consider that GAMCA's referral decking practice falls within this category. The
DOH has long made the factual finding that the referral decking system hinders our
Filipino seafarers' access to quality and affordable healthcare in its A.O. No. 106,
series of 2002.
These circumstances further mitigate whatever legal error the DOH has committed
and render the conclusion that grave abuse of discretion had taken place misplaced.
Since the writs of certiorari and prohibition do not issue against legal errors, but to
acts of grave abuse of discretion, the RTC erred in issuing these writs against the
DOH CDO letters.
6. The prohibition against the referral decking system against GAMCA does not
violate the principle of sovereign equality and independence.
The RTC based its decision to grant the writs of certiorari and prohibition against
the DOH letter-order on the principle of sovereign equality and independence;
applying the referral decking system prohibition against GAMCA violates this
principle.
The RTC reasoned out that the prohibition against the referral decking system under
Section 16 of RA No. 10022 must be interpreted to apply only to clinics conducting
health examinations on migrant workers bound for countries that do not require the
referral decking system for the issuance of visas to job applicants.
The RTC observed, too, that the refer al decking system is part of the application
procedure in obtaining visas to enter the GCC States, a procedure made in the
exercise of the sovereign power of the GCC States to protect their nationals from
health hazards, and of their diplomatic power to regulate and screen entrants to their
territories.
It also reasoned out that under the principle of sovereign equality and independence
of States, the Philippines cannot interfere with this system and in fact must respect
the visa-granting procedures of foreign states in the same way that they respect our
immigration procedures. Moreover, to restrain GAMCA which is a mere adjunct of
HMC (an agent of GCC States) is to restrain the GCC States themselves.
AMCOW contests the RTC's conclusion, arguing that the principles of sovereign
equality and independence of States do not apply to the present case. According to
AMCOW, the subject matter of this case pertains to a domestic concern as the law
and the regulations that GAMCA assails relate to the operation of medical clinics in
the Philippines.
It points out that the Philippines gave GAMCA and its members the privilege of
conducting their businesses domestically; hence, their operations are governed by
Philippine laws, specifically by RA No. 10022 which serves as one of the limitations
on the privilege granted to them. GAMCA's right to engage in business should yield
to the State's exercise of police power. In legal contemplation, therefore, the DOH
CDO letters did not prejudice GAMCA's right to engage in business; nor did they
hamper the GAMCA members' business operations.
AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are
consistent with the State's exercise of the police power to prescribe regulations to
promote the health, safety, and general welfare of the people. Public interest
demands State interference on health matters, since the welfare of migrant workers is
a legitimate public concern. The DOH thus merely performed its duty of upholding
the migrant workers' freedom to choose any of its accredited or operated clinics that
will conduct health examinations.
The DOH, for its part, adds that the implementation of RA No. 10022 cannot be
defeated by agreements entered into by GAMCA with the GCC States. The GCC
States, the DOH points out, are not empowered to determine the Philippines' courses
of action with respect to the operation, within Philippine territory, of medical clinics;
the conduct of health examinations; and the freedom of choice of Filipino migrant
workers.
GAMCA responds to these arguments by asserting that the referral decking system is
a part of the application procedure for obtaining visas to enter the GCC States.
Hence, it is an exercise of the sovereign power of the GCC States to protect their
nationals from health hazards, and their diplomatic power to regulate and screen
entrants to their territories. To restrain an agent of the GCC States under the control
and acting in accordance with the direction of these GCC States, restrains the GCC
States.
GAMCA also points out that the OFWs would suffer grave and irreparable damage
and injury if the DOH CDO letters would be implemented as the GCC States would
not issue working visas without the GAMCA seal attesting that the OFWs had been
medically examined by GAMCA member clinics.
After considering all these arguments, we find that the RTC's decision misapplied the
principle of sovereign independence and equality to the present case. While the
principles of sovereign independence and equality have been recognized in
Philippine jurisprudence, our recogmtmn of this principle does not extend to the
exemption of States and their affiliates from compliance with Philippine regulatory
laws.
A.6. The principle of sovereign equality and independence of states does not
exempt GAMCAfrom the referral decking system prohibition under RA No. 10022.
In Republic of Indonesia v. Vinzon,103 we recognized the principle of sovereign
independence and equality as part of the law of the land. We used this principle to
justify the recognition of the principle of sovereign immunity which exempts the
State - both our Government and foreign governments - from suit. We held:
International law is founded largely upon the principles of reciprocity, comity,
independence, and equality of States which were adopted as part of the law of our
land under Article II, Section 2 of the 1987 Constitution. The rule that a State may
not be sued without its consent is a necessary consequence of the principles of
independence and equality of States. As enunciated in Sanders v. Veridiano II, the
practical justification for the doctrine of sovereign immunity is that there can be no
legal right against the authority that makes the law on which the right depends. In the
case of foreign States, the rule is derived from the principle of the sovereign equality
of States, as expressed in the maxim par in parem non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary attitude
would "unduly vex the peace of nations."
Our recognition of sovereign immunity, however, has never been unqualified. While
we recognized the principles of independence and equality of States to justify a
State's sovereign immunity from suit, we also restricted state immunity to acts jus
imperii, or public acts. We said that once a State enters into commercial transactions
(jus gestionis), then it descends to the level of a private individual, and is thus not
immune from the resulting liability and consequences of its actions.104
By this recognition, we acknowledge that a foreign government acting in its jus
imperii function cannot be held liable in a Philippine court. Philippine courts, as part
of the Philippine government, cannot and should not take jurisdiction over cases
involving the public acts of a foreign government. Taking jurisdiction would amount
to authority over a foreign government, and would thus violate the principle of
sovereign independence and equality.105
This recognition is altogether different from exempting governments whose agents
are in the Philippines from complying with our domestic laws.106 We have yet to
declare in a case that the principle of sovereign independence and equality exempts
agents of foreign governments from compliance with the application of Philippine
domestic law.
In the present case, GAMCA has not adduced any evidence in the court below, nor
has it presented any argument before us showing that the principle of sovereign
equality and independence has developed into an international custom shielding state
agents from compliance with another state's domestic laws. Under this situation, the
Court is in no position to determine whether the practice that GAMCA alleges has
indeed crystallized into an international custom.
GAMCA has never proven in this case, too, that the GCC has extended its sovereign
immunity to GAMCA. Sovereign immunity belongs to the State, and it must first be
extended to its agents before the latter may be considered to possess sovereign
immunity.
Significantly, the Court has even adopted a restrictive approach in recognizing state
immunity, by distinguishing between a State's jus imperii and jus gestionis. It is only
when a State acts in its jus imperii function that we recognize state immunity.107
We point out furthermore that the prohibition against the referral decking system
applies to hospitals and clinics, as well as to OFW employers, and does not seek to
interfere with the GCC's visa requirement processes. RA 10022 prohibits hospitals
and clinics in the Philippines from practicing the referral decking system, and
employers from requiring OFWs to procure their medical examinations from
hospitals and clinics practicing the referral decking system.

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

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

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

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

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

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

Costs against respondent GAMCA.

SO ORDERED. cralawlawlibrary
G.R. No. 161107 March 12, 2013
HON. MA. LOURDES C. FERNANDO, in her capacity as City Mayor of
Marikina City, JOSEPHINE C. EVANGELIST A, in her capacity as Chief,
Permit Division, Office of the City Engineer, and ALFONSO ESPIRITU, in his
capacity as City Engineer of Marikina City, Petitioners,
vs.
ST. SCHOLASTICA'S COLLEGE and ST. SCHOLASTICA'S ACADEMY-
MARIKINA, INC., Respondents.
DECISION
MENDOZA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court, which seeks to set aside the December 1, 2003 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 75691.
The Facts
Respondents St. Scholastica’s College (SSC) and St. Scholastica’s Academy-
Marikina, Inc. (SSA-Marikina) are educational institutions organized under the laws
of the Republic of the Philippines, with principal offices and business addresses at
Leon Guinto Street, Malate, Manila, and at West Drive, Marikina Heights, Marikina
City, respectively.2
Respondent SSC is the owner of four (4) parcels of land measuring a total of
56,306.80 square meters, located in Marikina Heights and covered by Transfer
Certificate Title (TCT) No. 91537. Located within the property are SSA-Marikina,
the residence of the sisters of the Benedictine Order, the formation house of the
novices, and the retirement house for the elderly sisters. The property is enclosed by
a tall concrete perimeter fence built some thirty (30) years ago. Abutting the fence
along the West Drive are buildings, facilities, and other improvements.3
The petitioners are the officials of the City Government of Marikina. On September
30, 1994, the Sangguniang Panlungsod of Marikina City enacted Ordinance No.
192,4 entitled "Regulating the Construction of Fences and Walls in the Municipality
of Marikina." In 1995 and 1998, Ordinance Nos. 2175 and 2006 were enacted to
amend Sections 7 and 5, respectively. Ordinance No. 192, as amended, is reproduced
hereunder, as follows:
ORDINANCE No. 192
Series of 1994
ORDINANCE REGULATING THE CONSTRUCTION OF FENCES AND
WALLS IN THE MUNICIPALITY OF MARIKINA
WHEREAS, under Section 447.2 of Republic Act No. 7160 otherwise known as the
Local Government Code of 1991 empowers the Sangguniang Bayan as the local
legislative body of the municipality to "x x x Prescribe reasonable limits and
restraints on the use of property within the jurisdiction of the municipality, x x x";
WHEREAS the effort of the municipality to accelerate its economic and physical
development, coupled with urbanization and modernization, makes imperative the
adoption of an ordinance which shall embody up-to-date and modern technical
design in the construction of fences of residential, commercial and industrial
buildings;
WHEREAS, Presidential Decree No. 1096, otherwise known as the National
Building Code of the Philippines, does not adequately provide technical guidelines
for the construction of fences, in terms of design, construction, and criteria;
WHEREAS, the adoption of such technical standards shall provide more efficient
and effective enforcement of laws on public safety and security;
WHEREAS, it has occurred in not just a few occasions that high fences or walls did
not actually discourage but, in fact, even protected burglars, robbers, and other
lawless elements from the view of outsiders once they have gained ingress into these
walls, hence, fences not necessarily providing security, but becomes itself a "security
problem";
WHEREAS, to discourage, suppress or prevent the concealment of prohibited or
unlawful acts earlier enumerated, and as guardian of the people of Marikina, the
municipal government seeks to enact and implement rules and ordinances to protect
and promote the health, safety and morals of its constituents;
WHEREAS, consistent too, with the "Clean and Green Program" of the government,
lowering of fences and walls shall encourage people to plant more trees and
ornamental plants in their yards, and when visible, such trees and ornamental plants
are expected to create an aura of a clean, green and beautiful environment for
Marikeños;
WHEREAS, high fences are unsightly that, in the past, people planted on sidewalks
to "beautify" the façade of their residences but, however, become hazards and
obstructions to pedestrians;
WHEREAS, high and solid walls as fences are considered "un-neighborly"
preventing community members to easily communicate and socialize and deemed to
create "boxed-in" mentality among the populace;
WHEREAS, to gather as wide-range of opinions and comments on this proposal, and
as a requirement of the Local Government Code of 1991 (R.A. 7160), the
Sangguniang Bayan of Marikina invited presidents or officers of homeowners
associations, and commercial and industrial establishments in Marikina to two public
hearings held on July 28, 1994 and August 25, 1994;
WHEREAS, the rationale and mechanics of the proposed ordinance were fully
presented to the attendees and no vehement objection was presented to the municipal
government;
NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUINANG BAYAN OF
MARIKINA IN SESSION DULY ASSEMBLED:
Section 1. Coverage: This Ordinance regulates the construction of all fences, walls
and gates on lots classified or used for residential, commercial, industrial, or special
purposes.
Section 2. Definition of Terms:
a. Front Yard – refers to the area of the lot fronting a street, alley or
public thoroughfare.
b. Back Yard – the part of the lot at the rear of the structure
constructed therein.
c. Open fence – type of fence which allows a view of "thru-see" of
the inner yard and the improvements therein. (Examples: wrought
iron, wooden lattice, cyclone wire)
d. Front gate – refers to the gate which serves as a passage of
persons or vehicles fronting a street, alley, or public thoroughfare.
Section 3. The standard height of fences or walls allowed under this ordinance are as
follows:
(1) Fences on the front yard – shall be no more than one (1) meter
in height. Fences in excess of one (1) meter shall be of an open
fence type, at least eighty percent (80%) see-thru; and
(2) Fences on the side and back yard – shall be in accordance with
the provisions of P.D. 1096 otherwise known as the National
Building Code.
Section 4. No fence of any kind shall be allowed in areas specifically reserved or
classified as parks.
Section 5. In no case shall walls and fences be built within the five (5) meter parking
area allowance located between the front monument line and the building line of
commercial and industrial establishments and educational and religious institutions.7
Section 6. Exemption.
(1) The Ordinance does not cover perimeter walls of residential
subdivisions.
(2) When public safety or public welfare requires, the Sangguniang
Bayan may allow the construction and/or maintenance of walls
higher than as prescribed herein and shall issue a special permit or
exemption.
Section 7. Transitory Provision. Real property owners whose existing fences and
walls do not conform to the specifications herein are allowed adequate period of time
from the passage of this Ordinance within which to conform, as follows:
(1) Residential houses – eight (8) years
(2) Commercial establishments – five (5) years
(3) Industrial establishments – three (3) years
(4) Educational institutions – five (5) years8 (public and privately
owned)
Section 8. Penalty. Walls found not conforming to the provisions of this Ordinance
shall be demolished by the municipal government at the expense of the owner of the
lot or structure.
Section 9. The Municipal Engineering Office is tasked to strictly implement this
ordinance, including the issuance of the necessary implementing guidelines, issuance
of building and fencing permits, and demolition of non-conforming walls at the lapse
of the grace period herein provided.
Section 10. Repealing Clause. All existing Ordinances and Resolutions, Rules and
Regulations inconsistent with the foregoing provisions are hereby repealed, amended
or modified.
Section 11. Separability Clause. If for any reason or reasons, local executive orders,
rules and regulations or parts thereof in conflict with this Ordinance are hereby
repealed and/or modified accordingly.
Section 12. Effectivity. This ordinance takes effect after publication.
APPROVED: September 30, 1994
(Emphases supplied)
On April 2, 2000, the City Government of Marikina sent a letter to the respondents
ordering them to demolish and replace the fence of their Marikina property to make
it 80% see-thru, and, at the same time, to move it back about six (6) meters to
provide parking space for vehicles to park.9 On April 26, 2000, the respondents
requested for an extension of time to comply with the directive.10 In response, the
petitioners, through then City Mayor Bayani F. Fernando, insisted on the
enforcement of the subject ordinance.
Not in conformity, the respondents filed a petition for prohibition with an application
for a writ of preliminary injunction and temporary restraining order before the
Regional Trial Court, Marikina, Branch 273 (RTC), docketed as SCA Case No.
2000-381-MK.11
The respondents argued that the petitioners were acting in excess of jurisdiction in
enforcing Ordinance No. 192, asserting that such contravenes Section 1, Article III
of the 1987 Constitution. That demolishing their fence and constructing it six (6)
meters back would result in the loss of at least 1,808.34 square meters, worth about
₱9,041,700.00, along West Drive, and at least 1,954.02 square meters, worth roughly
₱9,770,100.00, along East Drive. It would also result in the destruction of the
garbage house, covered walk, electric house, storage house, comfort rooms, guards’
room, guards’ post, waiting area for visitors, waiting area for students, Blessed
Virgin Shrine, P.E. area, and the multi-purpose hall, resulting in the permanent loss
of their beneficial use. The respondents, thus, asserted that the implementation of the
ordinance on their property would be tantamount to an appropriation of property
without due process of law; and that the petitioners could only appropriate a portion
of their property through eminent domain. They also pointed out that the goal of the
provisions to deter lawless elements and criminality did not exist as the solid
concrete walls of the school had served as sufficient protection for many years.12
The petitioners, on the other hand, countered that the ordinance was a valid exercise
of police power, by virtue of which, they could restrain property rights for the
protection of public safety, health, morals, or the promotion of public convenience
and general prosperity.13
On June 30, 2000, the RTC issued a writ of preliminary injunction, enjoining the
petitioners from implementing the demolition of the fence at SSC’s Marikina
property.14
Ruling of the RTC
On the merits, the RTC rendered a Decision,15 dated October 2, 2002, granting the
petition and ordering the issuance of a writ of prohibition commanding the
petitioners to permanently desist from enforcing or implementing Ordinance No. 192
on the respondents’ property.
The RTC agreed with the respondents that the order of the petitioners to demolish the
fence at the SSC property in Marikina and to move it back six (6) meters would
amount to an appropriation of property which could only be done through the
exercise of eminent domain. It held that the petitioners could not take the
respondents’ property under the guise of police power to evade the payment of just
compensation.
It did not give weight to the petitioners’ contention that the parking space was for the
benefit of the students and patrons of SSA-Marikina, considering that the
respondents were already providing for sufficient parking in compliance with the
standards under Rule XIX of the National Building Code.
It further found that the 80% see-thru fence requirement could run counter to the
respondents’ right to privacy, considering that the property also served as a residence
of the Benedictine sisters, who were entitled to some sense of privacy in their affairs.
It also found that the respondents were able to prove that the danger to security had
no basis in their case. Moreover, it held that the purpose of beautification could not
be used to justify the exercise of police power.
It also observed that Section 7 of Ordinance No. 192, as amended, provided for
retroactive application. It held, however, that such retroactive effect should not
impair the respondents’ vested substantive rights over the perimeter walls, the six-
meter strips of land along the walls, and the building, structures, facilities, and
improvements, which would be destroyed by the demolition of the walls and the
seizure of the strips of land.
The RTC also found untenable the petitioners’ argument that Ordinance No. 192 was
a remedial or curative statute intended to correct the defects of buildings and
structures, which were brought about by the absence or insufficiency of laws. It ruled
that the assailed ordinance was neither remedial nor curative in nature, considering
that at the time the respondents’ perimeter wall was built, the same was valid and
legal, and the ordinance did not refer to any previous legislation that it sought to
correct.
The RTC noted that the petitioners could still take action to expropriate the subject
property through eminent domain.
The RTC, thus, disposed:
WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued
commanding the respondents to permanently desist from enforcing or implementing
Ordinance No. 192, Series of 1994, as amended, on petitioners’ property in question
located at Marikina Heights, Marikina, Metro Manila.
No pronouncement as to costs.
SO ORDERED.16
Ruling of the CA
In its December 1, 2003 Decision, the CA dismissed the petitioners’ appeal and
affirmed the RTC decision.
The CA reasoned out that the objectives stated in Ordinance No. 192 did not justify
the exercise of police power, as it did not only seek to regulate, but also involved the
taking of the respondents’ property without due process of law. The respondents
were bound to lose an unquantifiable sense of security, the beneficial use of their
structures, and a total of 3,762.36 square meters of property. It, thus, ruled that the
assailed ordinance could not be upheld as valid as it clearly invaded the personal and
property rights of the respondents and "[f]or being unreasonable, and undue restraint
of trade."17
It noted that although the petitioners complied with procedural due process in
enacting Ordinance No. 192, they failed to comply with substantive due process.
Hence, the failure of the respondents to attend the public hearings in order to raise
objections did not amount to a waiver of their right to question the validity of the
ordinance.
The CA also shot down the argument that the five-meter setback provision for
parking was a legal easement, the use and ownership of which would remain with,
and inure to, the benefit of the respondents for whom the easement was primarily
intended. It found that the real intent of the setback provision was to make the
parking space free for use by the public, considering that such would cease to be for
the exclusive use of the school and its students as it would be situated outside school
premises and beyond the school administration’s control.
In affirming the RTC ruling that the ordinance was not a curative statute, the CA
found that the petitioner failed to point out any irregularity or invalidity in the
provisions of the National Building Code that required correction or cure. It noted
that any correction in the Code should be properly undertaken by the Congress and
not by the City Council of Marikina through an ordinance.
The CA, thus, disposed:
WHEREFORE, all foregoing premises considered, the instant appeal is
DENIED.1âwphi1 The October 2, 2002 Decision and the January 13, 2003 Order of
the Regional Trial Court (RTC) of Marikina City, Branch 273, granting petitioners-
appellees’ petition for Prohibition in SCA Case No. 2000-381-MK are hereby
AFFIRMED.
SO ORDERED.18
Aggrieved by the decision of the CA, the petitioners are now before this Court
presenting the following
ASSIGNMENT OF ERRORS
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN DECLARING THAT CITY ORDINANCE NO. 192, SERIES
OF 1994 IS NOT A VALID EXERCISE OF POLICE POWER;
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN RULING THAT THE AFOREMENTIONED ORDINANCE IS
AN EXERCISE OF THE CITY OF THE POWER OF EMINENT
DOMAIN;
3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN DECLARING THAT THE CITY VIOLATED THE DUE
PROCESS CLAUSE IN IMPLEMENTING ORDINANCE NO. 192,
SERIES OF 1994; AND
4. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN RULING THAT THE ABOVE-MENTIONED ORDINANCE
CANNOT BE GIVEN RETROACTIVE APPLICATION.19
In this case, the petitioners admit that Section 5 of the assailed ordinance, pertaining
to the five-meter setback requirement is, as held by the lower courts,
invalid.20 Nonetheless, the petitioners argue that such invalidity was subsequently
cured by Zoning Ordinance No. 303, series of 2000. They also contend that Section
3, relating to the 80% see-thru fence requirement, must be complied with, as it
remains to be valid.
Ruling of the Court
The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance
No. 192 are valid exercises of police power by the City Government of Marikina.
"Police power is the plenary power vested in the legislature to make statutes and
ordinances to promote the health, morals, peace, education, good order or safety and
general welfare of the people."21 The State, through the legislature, has delegated the
exercise of police power to local government units, as agencies of the State. This
delegation of police power is embodied in Section 1622 of the Local Government
Code of 1991 (R.A. No. 7160), known as the General Welfare Clause,23 which has
two branches. "The first, known as the general legislative power, authorizes the
municipal council to enact ordinances and make regulations not repugnant to law, as
may be necessary to carry into effect and discharge the powers and duties conferred
upon the municipal council by law. The second, known as the police power proper,
authorizes the municipality to enact ordinances as may be necessary and proper for
the health and safety, prosperity, morals, peace, good order, comfort, and
convenience of the municipality and its inhabitants, and for the protection of their
property."24
White Light Corporation v. City of Manila,25 discusses the test of a valid ordinance:
The test of a valid ordinance is well established. A long line of decisions including
City of Manila has held that for an ordinance to be valid, it must not only be within
the corporate powers of the local government unit to enact and pass according to the
procedure prescribed by law, it must also conform to the following substantive
requirements: (1) must not contravene the
Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be
partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be
general and consistent with public policy; and (6) must not be unreasonable.26
Ordinance No. 192 was passed by the City Council of Marikina in the apparent
exercise of its police power. To successfully invoke the exercise of police power as
the rationale for the enactment of an ordinance and to free it from the imputation of
constitutional infirmity, two tests have been used by the Court – the rational
relationship test and the strict scrutiny test:
We ourselves have often applied the rational basis test mainly in analysis of equal
protection challenges. Using the rational basis examination, laws or ordinances are
upheld if they rationally further a legitimate governmental interest. Under
intermediate review, governmental interest is extensively examined and the
availability of less restrictive measures is considered. Applying strict scrutiny, the
focus is on the presence of compelling, rather than substantial, governmental interest
and on the absence of less restrictive means for achieving that interest.27
Even without going to a discussion of the strict scrutiny test, Ordinance No. 192,
series of 1994 must be struck down for not being reasonably necessary to accomplish
the City’s purpose. More importantly, it is oppressive of private rights.
Under the rational relationship test, an ordinance must pass the following requisites
as discussed in Social Justice Society (SJS) v. Atienza, Jr.:28
As with the State, local governments may be considered as having properly exercised
their police power only if the following requisites are met: (1) the interests of the
public generally, as distinguished from those of a particular class, require its exercise
and (2) the means employed are reasonably necessary for the accomplishment of the
purpose and not unduly oppressive upon individuals. In short, there must be a
concurrence of a lawful subject and lawful method.29
Lacking a concurrence of these two requisites, the police power measure shall be
struck down as an arbitrary intrusion into private rights and a violation of the due
process clause.30
Section 3.1 and 5 of the assailed ordinance are pertinent to the issue at hand, to wit:
Section 3. The standard height of fences of walls allowed under this ordinance are as
follows:
(1) Fences on the front yard – shall be no more than one (1) meter in height. Fences
in excess of one (1) meter shall be an open fence type, at least eighty percent (80%)
see-thru;
xxx xxx xxx
Section 5. In no case shall walls and fences be built within the five (5) meter parking
area allowance located between the front monument line and the building line of
commercial and industrial establishments and educational and religious institutions.
The respondents, thus, sought to prohibit the petitioners from requiring them to (1)
demolish their existing concrete wall, (2) build a fence (in excess of one meter)
which must be 80% see-thru, and (3) build the said fence six meters back in order to
provide a parking area.
Setback Requirement
The Court first turns its attention to Section 5 which requires the five-meter setback
of the fence to provide for a parking area. The petitioners initially argued that the
ownership of the parking area to be created would remain with the respondents as it
would primarily be for the use of its students and faculty, and that its use by the
public on non-school days would only be incidental. In their Reply, however, the
petitioners admitted that Section 5 was, in fact, invalid for being repugnant to the
Constitution.31
The Court agrees with the latter position.
The Court joins the CA in finding that the real intent of the setback requirement was
to make the parking space free for use by the public, considering that it would no
longer be for the exclusive use of the respondents as it would also be available for
use by the general public. Section 9 of Article III of the 1987 Constitution, a
provision on eminent domain, provides that private property shall not be taken for
public use without just compensation.
The petitioners cannot justify the setback by arguing that the ownership of the
property will continue to remain with the respondents. It is a settled rule that neither
the acquisition of title nor the total destruction of value is essential to taking. In fact,
it is usually in cases where the title remains with the private owner that inquiry
should be made to determine whether the impairment of a property is merely
regulated or amounts to a compensable taking.32 The Court is of the view that the
implementation of the setback requirement would be tantamount to a taking of a total
of 3,762.36 square meters of the respondents’ private property for public use without
just compensation, in contravention to the Constitution.
Anent the objectives of prevention of concealment of unlawful acts and "un-
neighborliness," it is obvious that providing for a parking area has no logical
connection to, and is not reasonably necessary for, the accomplishment of these
goals.
Regarding the beautification purpose of the setback requirement, it has long been
settled that the State may not, under the guise of police power, permanently divest
owners of the beneficial use of their property solely to preserve or enhance the
aesthetic appearance of the community.33 The Court, thus, finds Section 5 to be
unreasonable and oppressive as it will substantially divest the respondents of the
beneficial use of their property solely for aesthetic purposes. Accordingly, Section 5
of Ordinance No. 192 is invalid.
The petitioners, however, argue that the invalidity of Section 5 was properly cured
by Zoning Ordinance No. 303,34Series of 2000, which classified the respondents’
property to be within an institutional zone, under which a five-meter setback has
been required.
The petitioners are mistaken. Ordinance No. 303, Series of 2000, has no bearing to
the case at hand.
The Court notes with displeasure that this argument was only raised for the first time
on appeal in this Court in the petitioners’ Reply. Considering that Ordinance No. 303
was enacted on December 20, 2000, the petitioners could very well have raised it in
their defense before the RTC in 2002. The settled rule in this jurisdiction is that a
party cannot change the legal theory of this case under which the controversy was
heard and decided in the trial court. It should be the same theory under which the
review on appeal is conducted. Points of law, theories, issues, and arguments not
adequately brought to the attention of the lower court will not be ordinarily
considered by a reviewing court, inasmuch as they cannot be raised for the first time
on appeal. This will be offensive to the basic rules of fair play, justice, and due
process.35
Furthermore, the two ordinances have completely different purposes and subjects.
Ordinance No. 192 aims to regulate the construction of fences, while Ordinance No.
303 is a zoning ordinance which classifies the city into specific land uses. In fact, the
five-meter setback required by Ordinance No. 303 does not even appear to be for the
purpose of providing a parking area.
By no stretch of the imagination, therefore, can Ordinance No. 303, "cure" Section 5
of Ordinance No. 192.
In any case, the clear subject of the petition for prohibition filed by the respondents is
Ordinance No. 192 and, as such, the precise issue to be determined is whether the
petitioners can be prohibited from enforcing the said ordinance, and no other, against
the respondents.
80% See-Thru Fence Requirement
The petitioners argue that while Section 5 of Ordinance No. 192 may be invalid,
Section 3.1 limiting the height of fences to one meter and requiring fences in excess
of one meter to be at least 80% see-thru, should remain valid and enforceable against
the respondents.
The Court cannot accommodate the petitioner.
For Section 3.1 to pass the rational relationship test, the petitioners must show the
reasonable relation between the purpose of the police power measure and the means
employed for its accomplishment, for even under the guise of protecting the public
interest, personal rights and those pertaining to private property will not be permitted
to be arbitrarily invaded.36
The principal purpose of Section 3.1 is "to discourage, suppress or prevent the
concealment of prohibited or unlawful acts." The ultimate goal of this objective is
clearly the prevention of crime to ensure public safety and security. The means
employed by the petitioners, however, is not reasonably necessary for the
accomplishment of this purpose and is unduly oppressive to private rights. The
petitioners have not adequately shown, and it does not appear obvious to this Court,
that an 80% see-thru fence would provide better protection and a higher level of
security, or serve as a more satisfactory criminal deterrent, than a tall solid concrete
wall. It may even be argued that such exposed premises could entice and tempt
would-be criminals to the property, and that a see-thru fence would be easier to
bypass and breach. It also appears that the respondents’ concrete wall has served as
more than sufficient protection over the last 40 years. `
As to the beautification purpose of the assailed ordinance, as previously discussed,
the State may not, under the guise of police power, infringe on private rights solely
for the sake of the aesthetic appearance of the community. Similarly, the Court
cannot perceive how a see-thru fence will foster "neighborliness" between members
of a community.
Compelling the respondents to construct their fence in accordance with the assailed
ordinance is, thus, a clear encroachment on their right to property, which necessarily
includes their right to decide how best to protect their property.
It also appears that requiring the exposure of their property via a see-thru fence is
violative of their right to privacy, considering that the residence of the Benedictine
nuns is also located within the property. The right to privacy has long been
considered a fundamental right guaranteed by the Constitution that must be protected
from intrusion or constraint. The right to privacy is essentially the right to be let
alone,37 as governmental powers should stop short of certain intrusions into the
personal life of its citizens.38 It is inherent in the concept of liberty, enshrined in the
Bill of Rights (Article III) in Sections 1, 2, 3(1), 6, 8, and 17, Article III of the 1987
Constitution.39
The enforcement of Section 3.1 would, therefore, result in an undue interference with
the respondents’ rights to property and privacy. Section 3.1 of Ordinance No. 192 is,
thus, also invalid and cannot be enforced against the respondents.
No Retroactivity
Ordinance No. 217 amended Section 7 of Ordinance No. 192 by including the
regulation of educational institutions which was unintentionally omitted, and giving
said educational institutions five (5) years from the passage of Ordinance No. 192
(and not Ordinance No. 217) to conform to its provisions.40 The petitioners argued
that the amendment could be retroactively applied because the assailed ordinance is a
curative statute which is retroactive in nature.
Considering that Sections 3.1 and 5 of Ordinance No. 192 cannot be enforced against
the respondents, it is no longer necessary to rule on the issue of retroactivity. The
Court shall, nevertheless, pass upon the issue for the sake of clarity.
"Curative statutes are enacted to cure defects in a prior law or to validate legal
proceedings which would otherwise be void for want of conformity with certain legal
requirements. They are intended to supply defects, abridge superfluities and curb
certain evils. They are intended to enable persons to carry into effect that which they
have designed or intended, but has failed of expected legal consequence by reason of
some statutory disability or irregularity in their own action. They make valid that
which, before the enactment of the statute was invalid. Their purpose is to give
validity to acts done that would have been invalid under existing laws, as if existing
laws have been complied with. Curative statutes, therefore, by their very essence, are
retroactive."41
The petitioners argue that Ordinance No. 192 is a curative statute as it aims to correct
or cure a defect in the National Building Code, namely, its failure to provide for
adequate guidelines for the construction of fences. They ultimately seek to remedy
an insufficiency in the law. In aiming to cure this insufficiency, the petitioners
attempt to add lacking provisions to the National Building Code. This is not what is
contemplated by curative statutes, which intend to correct irregularities or invalidity
in the law. The petitioners fail to point out any irregular or invalid provision. As
such, the assailed ordinance cannot qualify as curative and retroactive in nature.
At any rate, there appears to be no insufficiency in the National Building Code with
respect to parking provisions in relation to the issue of the respondents. Paragraph
1.16.1, Rule XIX of the Rules and Regulations of the said code requires an
educational institution to provide one parking slot for every ten classrooms. As found
by the lower courts, the respondents provide a total of 76 parking slots for their 80
classrooms and, thus, had more than sufficiently complied with the law.
Ordinance No. 192, as amended, is, therefore, not a curative statute which may be
applied retroactively.
Separability
Sections 3.1 and 5 of Ordinance No. 192, as amended, are, thus, invalid and cannot
be enforced against the respondents. Nonetheless, "the general rule is that where part
of a statute is void as repugnant to the Constitution, while another part is valid, the
valid portion, if susceptible to being separated from the invalid, may stand and be
enforced."42 Thus, the other sections of the assailed ordinance remain valid and
enforceable.
Conclusion
Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were
acting in excess of their jurisdiction in enforcing Ordinance No. 192 against the
respondents. The CA was correct in affirming the decision of the RTC in issuing the
writ of prohibition. The petitioners must permanently desist from enforcing Sections
3.1 and 5 of the assailed ordinance on the respondents' property in Marikina City.

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

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

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

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

No pronouncement as to costs.

SO ORDERED.
G.R. No. 91649 May 14, 1991
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES
MARANAN AND LORENZO SANCHEZ,petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION
(PAGCOR), respondent.
H.B. Basco & Associates for petitioners.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.
PARAS, J.:
A TV ad proudly announces:
"The new PAGCOR — responding through responsible gaming."
But the petitioners think otherwise, that is why, they filed the instant petition seeking
to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter —
PD 1869, because it is allegedly contrary to morals, public policy and order, and
because —
A. It constitutes a waiver of a right prejudicial to a third person with a right
recognized by law. It waived the Manila City government's right to impose
taxes and license fees, which is recognized by law;
B. For the same reason stated in the immediately preceding paragraph, the
law has intruded into the local government's right to impose local taxes and
license fees. This, in contravention of the constitutionally enshrined
principle of local autonomy;
C. It violates the equal protection clause of the constitution in that it
legalizes PAGCOR — conducted gambling, while most other forms of
gambling are outlawed, together with prostitution, drug trafficking and
other vices;
D. It violates the avowed trend of the Cory government away from
monopolistic and crony economy, and toward free enterprise and
privatization. (p. 2, Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to
the declared national policy of the "new restored democracy" and the people's will as
expressed in the 1987 Constitution. The decree is said to have a "gambling objective"
and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII
and Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second Amended
Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing lawyers
(petitioner Basco being also the Chairman of the Committee on Laws of the City
Council of Manila), can question and seek the annulment of PD 1869 on the alleged
grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by
virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D.
1067-B also dated January 1, 1977 "to establish, operate and maintain gambling
casinos on land or water within the territorial jurisdiction of the Philippines." Its
operation was originally conducted in the well known floating casino "Philippine
Tourist." The operation was considered a success for it proved to be a potential
source of revenue to fund infrastructure and socio-economic projects, thus, P.D.
1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the
Government to regulate and centralize all games of chance authorized by existing
franchise or permitted by law, under the following declared policy —
Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of the
State to centralize and integrate all games of chance not heretofore
authorized by existing franchises or permitted by law in order to attain the
following objectives:
(a) To centralize and integrate the right and authority to operate and conduct
games of chance into one corporate entity to be controlled, administered and
supervised by the Government.
(b) To establish and operate clubs and casinos, for amusement and
recreation, including sports gaming pools, (basketball, football, lotteries,
etc.) and such other forms of amusement and recreation including games of
chance, which may be allowed by law within the territorial jurisdiction of
the Philippines and which will: (1) generate sources of additional revenue to
fund infrastructure and socio-civic projects, such as flood control programs,
beautification, sewerage and sewage projects, Tulungan ng Bayan Centers,
Nutritional Programs, Population Control and such other essential public
services; (2) create recreation and integrated facilities which will expand
and improve the country's existing tourist attractions; and (3) minimize, if
not totally eradicate, all the evils, malpractices and corruptions that are
normally prevalent on the conduct and operation of gambling clubs and
casinos without direct government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders,
rules and regulations, inconsistent therewith, are accordingly repealed, amended or
modified.
It is reported that PAGCOR is the third largest source of government revenue, next
to the Bureau of Internal Revenue and the Bureau of Customs. In 1989 alone,
PAGCOR earned P3.43 Billion, and directly remitted to the National Government a
total of P2.5 Billion in form of franchise tax, government's income share, the
President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored
other socio-cultural and charitable projects on its own or in cooperation with various
governmental agencies, and other private associations and organizations. In its 3 1/2
years of operation under the present administration, PAGCOR remitted to the
government a total of P6.2 Billion. As of December 31, 1989, PAGCOR was
employing 4,494 employees in its nine (9) casinos nationwide, directly supporting
the livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that
the same is "null and void" for being "contrary to morals, public policy and public
order," monopolistic and tends toward "crony economy", and is violative of the equal
protection clause and local autonomy as well as for running counter to the state
policies enunciated in Sections 11 (Personal Dignity and Human Rights), 12
(Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article
XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the
most deliberate consideration by the Court, involving as it does the exercise of what
has been described as "the highest and most delicate function which belongs to the
judicial department of the government." (State v. Manuel, 20 N.C. 144; Lozano v.
Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and
coordinate branch of the government We need not be reminded of the time-honored
principle, deeply ingrained in our jurisprudence, that a statute is presumed to be
valid. Every presumption must be indulged in favor of its constitutionality. This is
not to say that We approach Our task with diffidence or timidity. Where it is clear
that the legislature or the executive for that matter, has over-stepped the limits of its
authority under the constitution, We should not hesitate to wield the axe and let it fall
heavily, as fall it must, on the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru
Mr. Justice Zaldivar underscored the —
. . . thoroughly established principle which must be followed in all cases
where questions of constitutionality as obtain in the instant cases are
involved. All presumptions are indulged in favor of constitutionality; one
who attacks a statute alleging unconstitutionality must prove its invalidity
beyond a reasonable doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate all
possible basis; that the courts are not concerned with the wisdom, justice,
policy or expediency of a statute and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be
adopted. (Danner v. Hass, 194 N.W. 2nd534, 539; Spurbeck v. Statton, 106
N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA
734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55
[1978]; and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983]
cited in Citizens Alliance for Consumer Protection v. Energy Regulatory
Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning the
legal personality of petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping
with the Court's duty, under the 1987 Constitution, to determine whether or not the
other branches of government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion given to them,
the Court has brushed aside technicalities of procedure and has taken cognizance of
this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v.
Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as applied in the
cases before us, We hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of sustaining
an immediate injury as a result of the acts or measures complained of. And
even if, strictly speaking they are not covered by the definition, it is still
within the wide discretion of the Court to waive the requirement and so
remove the impediment to its addressing and resolving the serious
constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued
by President Quirino although they were involving only an indirect and
general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the transcendental
importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must technicalities of
procedure." We have since then applied the exception in many other cases.
(Association of Small Landowners in the Philippines, Inc. v. Sec. of
Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues
raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the
prohibition of gambling does not mean that the Government cannot regulate it in the
exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been
defined as the "state authority to enact legislation that may interfere with personal
liberty or property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA
481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or
property, (2) in order to foster the common good. It is not capable of an exact
definition but has been, purposely, veiled in general terms to underscore its all-
comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon,
163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the
future where it could be done, provides enough room for an efficient and flexible
response to conditions and circumstances thus assuming the greatest benefits. (Edu v.
Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe its
origin to the charter. Along with the taxing power and eminent domain, it is inborn in
the very fact of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital functions of governance.
Marshall, to whom the expression has been credited, refers to it succinctly as the
plenary power of the state "to govern its citizens". (Tribe, American Constitutional
Law, 323, 1978). The police power of the State is a power co-extensive with self-
protection and is most aptly termed the "law of overwhelming necessity." (Rubi v.
Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most essential, insistent,
and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a
dynamic force that enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and
centralize thru an appropriate institution all games of chance authorized by existing
franchise or permitted by law" (1st whereas clause, PD 1869). As was subsequently
proved, regulating and centralizing gambling operations in one corporate entity —
the PAGCOR, was beneficial not just to the Government but to society in general. It
is a reliable source of much needed revenue for the cash strapped Government. It
provided funds for social impact projects and subjected gambling to "close scrutiny,
regulation, supervision and control of the Government" (4th Whereas Clause, PD
1869). With the creation of PAGCOR and the direct intervention of the Government,
the evil practices and corruptions that go with gambling will be minimized if not
totally eradicated. Public welfare, then, lies at the bottom of the enactment of PD
1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of
Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is
violative of the principle of local autonomy. They must be referring to Section 13
par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying
any "tax of any kind or form, income or otherwise, as well as fees, charges or levies
of whatever nature, whether National or Local."
(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or
form, income or otherwise as well as fees, charges or levies of whatever
nature, whether National or Local, shall be assessed and collected under this
franchise from the Corporation; nor shall any form or tax or charge attach in
any way to the earnings of the Corporation, except a franchise tax of five
(5%) percent of the gross revenues or earnings derived by the Corporation
from its operations under this franchise. Such tax shall be due and payable
quarterly to the National Government and shall be in lieu of all kinds of
taxes, levies, fees or assessments of any kind, nature or description, levied,
established or collected by any municipal, provincial or national
government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to
impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105
Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or
statute must plainly show an intent to confer that power or the municipality cannot
assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore
must always yield to a legislative act which is superior having been passed upon by
the state itself which has the "inherent power to tax" (Bernas, the Revised [1973]
Philippine Constitution, Vol. 1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be
stressed that "municipal corporations are mere creatures of Congress" (Unson v.
Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and
abolish municipal corporations" due to its "general legislative powers" (Asuncion v.
Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has
the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July
2, 1950). And if Congress can grant the City of Manila the power to tax certain
matters, it can also provide for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been
revoked. As early as 1975, the power of local governments to regulate gambling thru
the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was
vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority
of chartered cities and other local governments to issue license, permit or
other form of franchise to operate, maintain and establish horse and dog
race tracks, jai-alai and other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and
establish, horse and dog race tracks, jai-alai and other forms of gambling
shall be issued by the national government upon proper application and
verification of the qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or
permits" for the operation of gambling. Necessarily, the power to demand or collect
license fees which is a consequence of the issuance of "licenses or permits" is no
longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National
Government. PAGCOR is a government owned or controlled corporation with an
original charter, PD 1869. All of its shares of stocks are owned by the National
Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also
exercises regulatory powers thus:
Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of
the affiliated entities, and shall exercise all the powers, authority and the
responsibilities vested in the Securities and Exchange Commission over
such affiliating entities mentioned under the preceding section, including,
but not limited to amendments of Articles of Incorporation and By-Laws,
changes in corporate term, structure, capitalization and other matters
concerning the operation of the affiliated entities, the provisions of the
Corporation Code of the Philippines to the contrary notwithstanding, except
only with respect to original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role
is governmental, which places it in the category of an agency or instrumentality of
the Government. Being an instrumentality of the Government, PAGCOR should be
and actually is exempt from local taxes. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws enacted
by Congress to carry into execution the powers vested in the federal
government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local
governments.
Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them. (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable activities or
enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US
42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc
Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or
creation of the very entity which has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be
violated by P.D. 1869. This is a pointless argument. Article X of the 1987
Constitution (on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its own
source of revenue and to levy taxes, fees, and other charges subject to such
guidelines and limitation as the congress may provide, consistent with the
basic policy on local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an
"operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception to the exercise of the
power of local governments to impose taxes and fees. It cannot therefore be violative
but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means
"decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436,
as cited in Bernas, The Constitution of the Republic of the Philippines, Vol. II, First
Ed., 1988, p. 374). It does not make local governments sovereign within the state or
an "imperium in imperio."
 Local Government has been described as a political subdivision of a nation
or state which is constituted by law and has substantial control of local
affairs. In a unitary system of government, such as the government under
the Philippine Constitution, local governments can only be an intra
sovereign subdivision of one sovereign nation, it cannot be
an imperium in imperio. Local government in such a system can only mean
a measure of decentralization of the function of government. (emphasis
supplied)
As to what state powers should be "decentralized" and what may be delegated to
local government units remains a matter of policy, which concerns wisdom. It is
therefore a political question. (Citizens Alliance for Consumer Protection v. Energy
Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing with
gambling is a State concern and hence, it is the sole prerogative of the State to retain
it or delegate it to local governments.
As gambling is usually an offense against the State, legislative grant or
express charter power is generally necessary to empower the local
corporation to deal with the subject. . . . In the absence of express grant of
power to enact, ordinance provisions on this subject which are inconsistent
with the state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-
Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal.
99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan
Vol. 3 Ibid, p. 548, emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the
Constitution, because "it legalized PAGCOR — conducted gambling, while most
gambling are outlawed together with prostitution, drug trafficking and other vices"
(p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture
ignores the well-accepted meaning of the clause "equal protection of the laws." The
clause does not preclude classification of individuals who may be accorded different
treatment under the law as long as the classification is not unreasonable or arbitrary
(Itchong v. Hernandez, 101 Phil. 1155). A law does not have to operate in equal
force on all persons or things to be conformable to Article III, Section 1 of the
Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing
classes of individuals or objects upon which different rules shall operate (Laurel v.
Misa, 43 O.G. 2847). The Constitution does not require situations which are different
in fact or opinion to be treated in law as though they were the same (Gomez v.
Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the
equal protection is not clearly explained in the petition. The mere fact that some
gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as amended
by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are
legalized under certain conditions, while others are prohibited, does not render the
applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been
applied. (Gomez v. Palomar, 25 SCRA 827)
The equal protection clause of the 14th Amendment does not mean that all
occupations called by the same name must be treated the same way; the
state may do what it can to prevent which is deemed as evil and stop short
of those cases in which harm to the few concerned is not less than the harm
to the public that would insure if the rule laid down were made
mathematically exact. (Dominican Hotel v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory
Government away from monopolies and crony economy and toward free enterprise
and privatization" suffice it to state that this is not a ground for this Court to nullify
P.D. 1869. If, indeed, PD 1869 runs counter to the government's policies then it is for
the Executive Department to recommend to Congress its repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare what
the law is and not what the law should be.1âwphi1 Under our system of
government, policy issues are within the domain of the political branches of
government and of the people themselves as the repository of all state
power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public
interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed. (Art. XII, National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily
prohibited by the Constitution. The state must still decide whether public interest
demands that monopolies be regulated or prohibited. Again, this is a matter of policy
for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity)
12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of
Article XIII and Section 2 (Educational Values) of Article XIV of the 1987
Constitution, suffice it to state also that these are merely statements of principles and,
policies. As such, they are basically not self-executing, meaning a law should be
passed by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-
executing principles ready for enforcement through the courts. They were
rather directives addressed to the executive and the legislature. If the
executive and the legislature failed to heed the directives of the articles the
available remedy was not judicial or political. The electorate could express
their displeasure with the failure of the executive and the legislature through
the language of the ballot. (Bernas, Vol. II, p. 2)
but also on his mental, social, and spiritual outlook on life. However, the mere fact
that some persons may have lost their material fortunes, mental control, physical
health, or even their lives does not necessarily mean that the same are directly
attributable to gambling. Gambling may have been the antecedent, but certainly not
necessarily the cause. For the same consequences could have been preceded by an
overdose of food, drink, exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.

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

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

Regulatory Board, 162 SCRA 521 —

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

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

precisely so when the gambling resorted to is excessive. This excessiveness
necessarily depends not only on the financial resources of the gambler and his family
G.R. No. L-34915 June 24, 1983
CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF
QUEZON CITY, petitioners,
vs.
HON. JUDGE VICENTE G. ERICTA as Judge of the Court of First Instance of
Rizal, Quezon City, Branch XVIII; HIMLAYANG PILIPINO,
INC., respondents.
City Fiscal for petitioners.
Manuel Villaruel, Jr. and Feliciano Tumale for respondents.
GUTIERREZ, JR., J.:
This is a petition for review which seeks the reversal of the decision of the Court of
First Instance of Rizal, Branch XVIII declaring Section 9 of Ordinance No. 6118, S-
64, of the Quezon City Council null and void.
Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE REGULATING
THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE
MEMORIAL TYPE CEMETERY OR BURIAL GROUND WITHIN THE
JURISDICTION OF QUEZON CITY AND PROVIDING PENALTIES FOR THE
VIOLATION THEREOF" provides:
Sec. 9. At least six (6) percent of the total area of the memorial
park cemetery shall be set aside for charity burial of deceased
persons who are paupers and have been residents of Quezon City
for at least 5 years prior to their death, to be determined by
competent City Authorities. The area so designated shall
immediately be developed and should be open for operation not
later than six months from the date of approval of the application.
For several years, the aforequoted section of the Ordinance was not enforced by city
authorities but seven years after the enactment of the ordinance, the Quezon City
Council passed the following resolution:
RESOLVED by the council of Quezon assembled, to request, as it
does hereby request the City Engineer, Quezon City, to stop any
further selling and/or transaction of memorial park lots in Quezon
City where the owners thereof have failed to donate the required
6% space intended for paupers burial.
Pursuant to this petition, the Quezon City Engineer notified respondent Himlayang
Pilipino, Inc. in writing that Section 9 of Ordinance No. 6118, S-64 would be
enforced
Respondent Himlayang Pilipino reacted by filing with the Court of First Instance of
Rizal Branch XVIII at Quezon City, a petition for declaratory relief, prohibition and
mandamus with preliminary injunction (Sp. Proc. No. Q-16002) seeking to annul
Section 9 of the Ordinance in question The respondent alleged that the same is
contrary to the Constitution, the Quezon City Charter, the Local Autonomy Act, and
the Revised Administrative Code.
There being no issue of fact and the questions raised being purely legal both
petitioners and respondent agreed to the rendition of a judgment on the pleadings.
The respondent court, therefore, rendered the decision declaring Section 9 of
Ordinance No. 6118, S-64 null and void.
A motion for reconsideration having been denied, the City Government and City
Council filed the instant petition.
Petitioners argue that the taking of the respondent's property is a valid and reasonable
exercise of police power and that the land is taken for a public use as it is intended
for the burial ground of paupers. They further argue that the Quezon City Council is
authorized under its charter, in the exercise of local police power, " to make such
further ordinances and resolutions not repugnant to law as may be necessary to carry
into effect and discharge the powers and duties conferred by this Act and such as it
shall deem necessary and proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order, comfort and convenience of the
city and the inhabitants thereof, and for the protection of property therein."
On the other hand, respondent Himlayang Pilipino, Inc. contends that the taking or
confiscation of property is obvious because the questioned ordinance permanently
restricts the use of the property such that it cannot be used for any reasonable
purpose and deprives the owner of all beneficial use of his property.
The respondent also stresses that the general welfare clause is not available as a
source of power for the taking of the property in this case because it refers to "the
power of promoting the public welfare by restraining and regulating the use of
liberty and property." The respondent points out that if an owner is deprived of his
property outright under the State's police power, the property is generally not taken
for public use but is urgently and summarily destroyed in order to promote the
general welfare. The respondent cites the case of a nuisance per se or the destruction
of a house to prevent the spread of a conflagration.
We find the stand of the private respondent as well as the decision of the respondent
Judge to be well-founded. We quote with approval the lower court's ruling which
declared null and void Section 9 of the questioned city ordinance:
The issue is: Is Section 9 of the ordinance in question a valid
exercise of the police power?
An examination of the Charter of Quezon City (Rep. Act No. 537),
does not reveal any provision that would justify the ordinance in
question except the provision granting police power to the City.
Section 9 cannot be justified under the power granted to Quezon
City to tax, fix the license fee, and regulate such other business,
trades, and occupation as may be established or practised in the
City.' (Subsections 'C', Sec. 12, R.A. 537).
The power to regulate does not include the power to prohibit
(People vs. Esguerra, 81 PhiL 33, Vega vs. Municipal Board of
Iloilo, L-6765, May 12, 1954; 39 N.J. Law, 70, Mich. 396). A
fortiori, the power to regulate does not include the power to
confiscate. The ordinance in question not only confiscates but also
prohibits the operation of a memorial park cemetery, because
under Section 13 of said ordinance, 'Violation of the provision
thereof is punishable with a fine and/or imprisonment and that
upon conviction thereof the permit to operate and maintain a
private cemetery shall be revoked or cancelled.' The confiscatory
clause and the penal provision in effect deter one from operating a
memorial park cemetery. Neither can the ordinance in question be
justified under sub- section "t", Section 12 of Republic Act 537
which authorizes the City Council to-
'prohibit the burial of the dead within the center
of population of the city and provide for their
burial in such proper place and in such manner as
the council may determine, subject to the
provisions of the general law regulating burial
grounds and cemeteries and governing funerals
and disposal of the dead.' (Sub-sec. (t), Sec. 12,
Rep. Act No. 537).
There is nothing in the above provision which authorizes
confiscation or as euphemistically termed by the respondents,
'donation'
We now come to the question whether or not Section 9 of the
ordinance in question is a valid exercise of police power. The
police power of Quezon City is defined in sub-section 00, Sec. 12,
Rep. Act 537 which reads as follows:
(00) To make such further ordinance and
regulations not repugnant to law as may be
necessary to carry into effect and discharge the
powers and duties conferred by this act and such
as it shall deem necessary and proper to provide
for the health and safety, promote, the prosperity,
improve the morals, peace, good order, comfort
and convenience of the city and the inhabitants
thereof, and for the protection of property
therein; and enforce obedience thereto with such
lawful fines or penalties as the City Council may
prescribe under the provisions of subsection (jj)
of this section.
We start the discussion with a restatement of certain basic
principles. Occupying the forefront in the bill of rights is the
provision which states that 'no person shall be deprived of life,
liberty or property without due process of law' (Art. Ill, Section 1
subparagraph 1, Constitution).
On the other hand, there are three inherent powers of government
by which the state interferes with the property rights, namely-. (1)
police power, (2) eminent domain, (3) taxation. These are said to
exist independently of the Constitution as necessary attributes of
sovereignty.
Police power is defined by Freund as 'the power of promoting the
public welfare by restraining and regulating the use of liberty and
property' (Quoted in Political Law by Tanada and Carreon, V-11,
p. 50). It is usually exerted in order to merely regulate the use and
enjoyment of property of the owner. If he is deprived of his
property outright, it is not taken for public use but rather to destroy
in order to promote the general welfare. In police power, the owner
does not recover from the government for injury sustained in
consequence thereof (12 C.J. 623). It has been said that police
power is the most essential of government powers, at times the
most insistent, and always one of the least limitable of the powers
of government (Ruby vs. Provincial Board, 39 PhiL 660; Ichong
vs. Hernandez, 1,7995, May 31, 1957). This power embraces the
whole system of public regulation (U.S. vs. Linsuya Fan, 10 PhiL
104). The Supreme Court has said that police power is so far-
reaching in scope that it has almost become impossible to limit its
sweep. As it derives its existence from the very existence of the
 state itself, it does not need to be expressed or defined in its scope.
Being coextensive with self-preservation and survival itself, it is
the most positive and active of all governmental processes, the
most essential insistent and illimitable Especially it is so under the
modern democratic framework where the demands of society and
nations have multiplied to almost unimaginable proportions. The
field and scope of police power have become almost boundless,
just as the fields of public interest and public welfare have become
almost all embracing and have transcended human foresight. Since
the Courts cannot foresee the needs and demands of public interest
and welfare, they cannot delimit beforehand the extent or scope of
the police power by which and through which the state seeks to
attain or achieve public interest and welfare. (Ichong vs.
Hernandez, L-7995, May 31, 1957).
The police power being the most active power of the government
and the due process clause being the broadest station on
governmental power, the conflict between this power of
government and the due process clause of the Constitution is
oftentimes inevitable.
It will be seen from the foregoing authorities that police power is
usually exercised in the form of mere regulation or restriction in
the use of liberty or property for the promotion of the general
welfare. It does not involve the taking or confiscation of property
with the exception of a few cases where there is a necessity to
confiscate private property in order to destroy it for the purpose of
protecting the peace and order and of promoting the general
welfare as for instance, the confiscation of an illegally possessed
article, such as opium and firearms.
It seems to the court that Section 9 of Ordinance No. 6118, Series
of 1964 of Quezon City is not a mere police regulation but an
outright confiscation. It deprives a person of his private property
without due process of law, nay, even without compensation.
In sustaining the decision of the respondent court, we are not unmindful of the heavy
burden shouldered by whoever challenges the validity of duly enacted legislation
whether national or local As early as 1913, this Court ruled in Case v. Board of
Health (24 PhiL 250) that the courts resolve every presumption in favor of validity
and, more so, where the ma corporation asserts that the ordinance was enacted to
promote the common good and general welfare.
In the leading case of Ermita-Malate Hotel and Motel Operators Association Inc. v.
City Mayor of Manila (20 SCRA 849) the Court speaking through the then Associate
Justice and now Chief Justice Enrique M. Fernando stated
Primarily what calls for a reversal of such a decision is the a of any
evidence to offset the presumption of validity that attaches to a
statute or ordinance. As was expressed categorically by Justice
Malcolm 'The presumption is all in favor of validity. ... The action
of the elected representatives of the people cannot be lightly set
aside. The councilors must, in the very nature of things, be familiar
with the necessities of their particular ... municipality and with all
the facts and lances which surround the subject and necessitate
action. The local legislative body, by enacting the ordinance, has in
effect given notice that the regulations are essential to the well-
being of the people. ... The Judiciary should not lightly set aside
legislative action when there is not a clear invasion of personal or
property rights under the guise of police regulation. (U.S. v.
Salaveria (1918], 39 Phil. 102, at p. 111. There was an affirmation
of the presumption of validity of municipal ordinance as
announced in the leading Salaveria decision in Ebona v. Daet,
[1950]85 Phil. 369.)
We have likewise considered the principles earlier stated in Case v.
Board of Health supra :
... Under the provisions of municipal charters which are known as
the general welfare clauses, a city, by virtue of its police power,
may adopt ordinances to the peace, safety, health, morals and the
best and highest interests of the municipality. It is a well-settled
principle, growing out of the nature of well-ordered and society,
that every holder of property, however absolute and may be his
title, holds it under the implied liability that his use of it shall not
be injurious to the equal enjoyment of others having an equal right
to the enjoyment of their property, nor injurious to the rights of the
community. An property in the state is held subject to its general
regulations, which are necessary to the common good and general
welfare. Rights of property, like all other social and conventional
rights, are subject to such reasonable limitations in their enjoyment
as shall prevent them from being injurious, and to such reasonable
restraints and regulations, established by law, as the legislature,
under the governing and controlling power vested in them by the
constitution, may think necessary and expedient. The state, under
the police power, is possessed with plenary power to deal with all
matters relating to the general health, morals, and safety of the
people, so long as it does not contravene any positive inhibition of
the organic law and providing that such power is not exercised in
 such a manner as to justify the interference of the courts to prevent SO ORDERED.
positive wrong and oppression.

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

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

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

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

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

WHEREFORE, the petition for review is hereby DISMISSED. The decision of the
respondent court is affirmed.
G.R. No. 206484, June 29, 2016
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
(DOTC), Petitioner, v. SPOUSES VICENTE ABECINA AND MARIA CLEOFE
ABECINA, Respondents.
DECISION
BRION, J.:
This petition for review on certiorari seeks to reverse and set aside the March 20,
2013 decision of the Court of Appeals (CA) in CA-G.R. CV No. 937951 affirming
the decision of the Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39,
in Civil Case No. 7355.2 The RTC ordered the Department of Transportation and
Communications (DOTC) to vacate the respondents' properties and to pay them
actual and moral damages.
ANTECEDENTS
Respondent spouses Vicente and Maria Cleofe Abecina (respondents/spouses
Abecina) are the registered owners of five parcels of land in Sitio Paltik, Barrio Sta.
Rosa, Jose Panganiban, Camarines Norte. The properties are covered by Transfer
Certificates of Title (TCT) Nos. T-25094, T-25095, T-25096, T-25097, and T-
25098.3chanrobleslaw
In February 1993, the DOTC awarded Digitel Telecommunications Philippines, Inc.
(Digitel) a contract for the management, operation, maintenance, and development of
a Regional Telecommunications Development Project (RTDP) under the National
Telephone Program, Phase I, Tranche 1 (NTPI-1)4chanrobleslaw
The DOTC and Digitel subsequently entered into several Facilities Management
Agreements (FMA) for Digitel to manage, operate, maintain, and develop the RTDP
and NTPI-1 facilities comprising local telephone exchange lines in various
municipalities in Luzon. The FMAs were later converted into Financial Lease
Agreements (FLA) in 1995.
Later on, the municipality of Jose Panganiban, Camarines Norte, donated a one
thousand two hundred (1,200) square-meter parcel of land to the DOTC for the
implementation of the RDTP in the municipality. However, the municipality
erroneously included portions of the respondents' property in the donation. Pursuant
to the FLAs, Digitel constructed a telephone exchange on the property which
encroached on the properties of the respondent spouses.5chanrobleslaw
Sometime in the mid-1990s, the spouses Abecina discovered Digitel's occupation
over portions of their properties. They required Digitel to vacate their properties and
pay damages, but the latter refused, insisting that it was occupying the property of
the DOTC pursuant to their FLA.
On April 29, 2003, the respondent spouses sent a final demand letter to both the
DOTC and Digitel to vacate the premises and to pay unpaid rent/damages in the
amount of one million two hundred thousand pesos (P1,200,000.00). Neither the
DOTC nor Digitel complied with the demand.
On September 3, 2003, the respondent spouses filed an accion
publiciana complaint6 against the DOTC and Digitel for recovery of possession and
damages. The complaint was docketed as Civil Case No. 7355.
In its answer, the DOTC claimed immunity from suit and ownership over the subject
properties.7Nevertheless, during the pre-trial conference, the DOTC admitted that the
Abecinas were the rightful owners of the properties and opted to rely instead on state
immunity from suit.8chanrobleslaw
On March 12, 2007, the respondent spouses and Digitel executed a Compromise
Agreement and entered into a Contract of Lease. The RTC rendered a partial
decision and approved the Compromise Agreement on March 22,
2007.9chanrobleslaw
On May 20, 2009, the RTC rendered its decision against the DOTC.10 It brushed
aside the defense of state immunity. Citing Ministerio v. Court of First
Instance11 and Amigable v. Cuenca,12 it held that government immunity from suit
could not be used as an instrument to perpetuate an injustice on a
citizen.13chanrobleslaw
The RTC held that as the lawful owners of the properties, the respondent spouses
enjoyed the right to use and to possess them - rights that were violated by the
DOTC's unauthorized entry, construction, and refusal to vacate. The RTC (1) ordered
the Department - as a builder in bad faith -to forfeit the improvements and vacate the
properties; and (2) awarded the spouses with P1,200,000.00 as actual damages,
P200,000.00 as moral damages, and P200,000.00 as exemplary damages plus
attorney's fees and costs of suit.
The DOTC elevated the case to the CA arguing: (1) that the RTC never acquired
jurisdiction over it due to state immunity from suit; (2) that the suit against it should
have been dismissed after the spouses Abecina and Digitel executed a compromise
agreement; and (3) that the RTC erred in awarding actual, moral, and exemplary
damages against it.14 The appeal was docketed as CA-G.R. CV No. 93795.
On March 20, 2013, the CA affirmed the RTC's decision but deleted the award of
exemplary damages. The CA upheld the RTC's jurisdiction over cases for accion
publiciana where the assessed value exceeds P20,000.00.15 It likewise denied the
DOTC's claim of state immunity from suit, reasoning that the DOTC removed its
cloak of immunity after entering into a proprietary contract - the Financial Lease
Agreement with Digitel.16 It also adopted the RTC's position that state immunity
cannot be used to defeat a valid claim for compensation arising from an unlawful
taking without the proper expropriation proceedings.17The CA affirmed the award of
actual and moral damages due to the DOTC's neglect to verify the perimeter of the
telephone exchange construction but found no valid justification for the award of
exemplary damages.18chanrobleslaw
On April 16, 2013, the DOTC filed the present petition for review on certiorari.
THE PARTIES' ARGUMENTS
The DOTC asserts that its Financial Lease Agreement with Digitel was entered into
in pursuit of its governmental functions to promote and develop networks of
communication systems.19 Therefore, it cannot be interpreted as a waiver of state
immunity.
The DOTC also maintains that while it was regrettable that the construction of the
telephone exchange erroneously encroached on portions of the respondent's
properties, the RTC erred in ordering the return of the property.20 It argues that while
the DOTC, in good faith and in the performance of its mandate, took private property
without formal expropriation proceedings, the taking was nevertheless an exercise of
eminent domain.21chanrobleslaw
Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office
(ATO),22 the Department prays that instead of allowing recovery of the property, the
case should be remanded to the RTC for determination of just compensation.
On the other hand, the respondents counter that the state immunity cannot be invoked
to perpetrate an injustice against its citizens.23 They also maintain that because the
subject properties are titled, the DOTC is a builder in bad faith who is deemed to
have lost the improvements it introduced.24 Finally, they differentiate their case
from Heirs of Mateo Pidacan v. ATO because Pidacan originated from a complaint
for payment of the value of the property and rentals while their case originated from
a complaint for recovery of possession and damages.25cralawredchanrobleslaw
OUR RULING
We find no merit in the petition.
26
The State may not be sued without its consent. This fundamental doctrine stems
from the principle that there can be no legal right against the authority which makes
the law on which the right depends.27This generally accepted principle of law has
been explicitly expressed in both the 197328 and the present Constitutions.
But as the principle itself implies, the doctrine of state immunity is not absolute. The
State may waive its cloak of immunity and the waiver may be made expressly or by
implication.
Over the years, the State's participation in economic and commercial activities
gradually expanded beyond its sovereign function as regulator and governor. The
evolution of the State's activities and degree of participation in commerce demanded
a parallel evolution in the traditional rule of state immunity. Thus, it became
necessary to distinguish between the State's sovereign and governmental acts (jure
imperii) and its private, commercial, and proprietary acts (jure gestionis). Presently,
state immunity restrictively extends only to acts jure imperii while acts jure
gestionis are considered as a waiver of immunity.29chanrobleslaw
The Philippines recognizes the vital role of information and communication in nation
building.30 As a consequence, we have adopted a policy environment that aspires for
the full development of communications infrastructure to facilitate the flow of
information into, out of, and across the country.31To this end, the DOTC has been
mandated with the promotion, development, and regulation of dependable and
coordinated networks of communication.32chanrobleslaw
The DOTC encroached on the respondents' properties when it constructed the local
telephone exchange in Daet, Camarines Norte. The exchange was part of the RTDP
pursuant to the National Telephone Program. We have no doubt that when the DOTC
constructed the encroaching structures and subsequently entered into the FLA with
Digitel for their maintenance, it was carrying out a sovereign function. Therefore, we
agree with the DOTC's contention that these are acts jure imperii that fall within the
cloak of state immunity.
However, as the respondents repeatedly pointed out, this Court has long established
in Ministerio v CFI,33Amigable v. Cuenca,34 the 2010 case Heirs of Pidacan v.
ATO,35 and more recently in Vigilar v. Aquino36 that the doctrine of state immunity
cannot serve as an instrument for perpetrating an injustice to a citizen.
The Constitution identifies the limitations to the awesome and near-limitless powers
of the State. Chief among these limitations are the principles that no person shall be
deprived of life, liberty, or property without due process of law and that private
property shall not be taken for public use without just compensation.37 These
limitations are enshrined in no less than the Bill of Rights that guarantees the citizen
protection from abuse by the State.
Consequently, our laws38 require that the State's power of eminent domain shall be
exercised through expropriation proceedings in court. Whenever private property is
taken for public use, it becomes the ministerial duty of the concerned office or
agency to initiate expropriation proceedings. By necessary implication, the filing of a
complaint for expropriation is a waiver of State immunity.
If the DOTC had correctly followed the regular procedure upon discovering that it
had encroached on the respondents' property, it would have initiated expropriation
proceedings instead of insisting on its immunity from suit. The petitioners would not
have had to resort to filing its complaint for reconveyance. As this Court said
in Ministerio:ChanRoblesVirtualawlibrary
It is unthinkable then that precisely because there was a failure to abide by what the
law requires, the government would stand to benefit. It is just as important, if not
more so, that there be fidelity to legal norms on the part of officialdom if the rule of
law were to be maintained. It is not too much to say that when the government
takes any property for public use, which is conditioned upon the payment of
just compensation, to be judicially ascertained, it makes manifest that it submits
to the jurisdiction of a court. There is no thought then that the doctrine of immunity
from suit could still be appropriately invoked.39 [Emphasis supplied]
We hold, therefore, that the Department's entry into and taking of possession of the
respondents' property amounted to an implied waiver of its governmental immunity
from suit.
Article 52743 of the Civil Code presumes good faith. Without proof that the
Department's mistake was made in bad faith, its construction is presumed to have
been made in good faith. Therefore, the forfeiture of the improvements in favor of
the respondent spouses is unwarranted.
WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009
decision of the Regional Trial Court in Civil Case No. 7355, as modified by the
March 20, 2013 decision of the Court of Appeals in CA-G.R. CV No. 93795,
is AFFIRMED with further MODIFICATION that the forfeiture of the
improvements made by the DOTC in favor of the respondents is DELETED. No
costs.
SO ORDERED.chanRoblesvirtualLawlibrary

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

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

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

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

Good faith consists in the belief of the builder that the land he is building on is his
and [of] his ignorance of any defect or flaw in his title.42 While the DOTC later
realized its error and admitted its encroachment over the respondents' property, there
is no evidence that it acted maliciously or in bad faith when the construction was
done.
G.R. No. 175356 December 3, 2013
MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT,
INC., Petitioners,
vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT and THE SECRETARY OF THE DEPARTMENT OF
FINANCE, Respondents.
DECISION
DEL CASTILLO, J.:
When a party challeges the constitutionality of a law, the burden of proof rests upon
him.
Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court 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 Department of Social Welfare and
Development (DSWD) and the Department of Finance (DOF).
Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No.
7432,3 as amended by RA 9257,4 and the implementing rules and regulations 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.
Factual Antecedents
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:
a) 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;
b) a minimum of twenty percent (20%) discount on admission fees charged
by theaters, cinema houses and concert halls, circuses, carnivals and other
similar places of culture, leisure, and amusement;
c) exemption from the payment of individual income taxes: Provided, That
their annual taxable income does not exceed the property level as
determined by the National Economic and Development Authority (NEDA)
for that year;
d) exemption from training fees for socioeconomic programs undertaken by
the OSCA as part of its work;
e) free medical and dental services in government establishment[s]
anywhere in the country, subject to guidelines to be issued by the
Department of Health, the Government Service Insurance System and the
Social Security System;
f) to the extent practicable and feasible, the continuance of the same benefits
and privileges given by the Government Service Insurance System (GSIS),
Social Security System (SSS) and PAG-IBIG, as the case may be, as are
enjoyed by those in actual service.
On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement
RA 7432. Sections 2(i) and 4 of RR No. 02-94 provide:
Sec. 2. DEFINITIONS. – For purposes of these regulations: i. Tax Credit – refers to
the amount representing the 20% discount granted to a qualified senior citizen by all
establishments relative to their utilization of transportation services, hotels and
similar lodging establishments, restaurants, drugstores, recreation centers, theaters,
cinema houses, concert halls, circuses, carnivals and other similar places of culture,
leisure and amusement, which discount shall be deducted by the said establishments
from their gross income for income tax purposes and from their gross sales for value-
added tax or other percentage tax purposes. x x x x Sec. 4.
RECORDING/BOOKKEEPING REQUIREMENTS FOR PRIVATE
ESTABLISHMENTS. – Private establishments, i.e., transport services, hotels and
similar lodging establishments, restaurants, recreation centers, drugstores, theaters,
cinema houses, concert halls, circuses, carnivals and other similar places of culture[,]
leisure and amusement, giving 20% discounts to qualified senior citizens are required
to keep separate and accurate record[s] of sales made to senior citizens, which shall
include the name, identification number, gross sales/receipts, discounts, dates of
transactions and invoice number for every transaction. The amount of 20% discount
shall be deducted from the gross income for income tax purposes and from gross
sales of the business enterprise concerned for purposes of the VAT and other
percentage taxes.
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court
declared Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene
RA 7432,6 thus:
RA 7432 specifically allows private establishments to claim as tax credit the amount
of discounts they grant. In turn, the Implementing Rules and Regulations, issued
pursuant thereto, provide the procedures for its availment. To deny such credit,
despite the plain mandate of the law and the regulations carrying out that mandate, is
indefensible. First, the definition given by petitioner is erroneous. It refers to tax
credit as the amount representing the 20 percent discount that "shall be deducted by
the said establishments from their gross income for income tax purposes and from
their gross sales for value-added tax or other percentage tax purposes." In ordinary
business language, the tax credit represents the amount of such discount. However,
the manner by which the discount shall be credited against taxes has not been
clarified by the revenue regulations. By ordinary acceptation, a discount is an
"abatement or reduction made from the gross amount or value of anything." To be
more precise, it is in business parlance "a deduction or lowering of an amount of
money;" or "a reduction from the full amount or value of something, especially a
price." In business there are many kinds of discount, the most common of which is
that affecting the income statement or financial report upon which the income tax is
based.
xxxx
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20
percent discount deductible from gross income for income tax purposes, or from
gross sales for VAT or other percentage tax purposes. In effect, the tax credit benefit
under RA 7432 is related to a sales discount. This contrived definition is improper,
considering that the latter has to be deducted from gross sales in order to compute the
gross income in the income statement and cannot be deducted again, even for
purposes of computing the income tax. When the law says that the cost of the
discount may be claimed as a tax credit, it means that the amount — when claimed
— shall be treated as a reduction from any tax liability, plain and simple. The option
to avail of the tax credit benefit depends upon the existence of a tax liability, but to
limit the benefit to a sales discount — which is not even identical to the discount
privilege that is granted by law — does not define it at all and serves no useful
purpose. The definition must, therefore, be stricken down.
Laws Not Amended by Regulations
Second, the law cannot be amended by a mere regulation. In fact, a regulation that
"operates to create a rule out of harmony with the statute is a mere nullity;" it cannot
prevail. It is a cardinal rule that courts "will and should respect the contemporaneous
construction placed upon a statute by the executive officers whose duty it is to
enforce it x x x." In the scheme of judicial tax administration, the need for certainty
and predictability in the implementation of tax laws is crucial. Our tax authorities fill
in the details that "Congress may not have the opportunity or competence to
provide." The regulations these authorities issue are relied upon by taxpayers, who
are certain that these will be followed by the courts. Courts, however, will not uphold
these authorities’ interpretations when clearly absurd, erroneous or improper. In the
present case, the tax authorities have given the term tax credit in Sections 2.i and 4 of
RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation
has muddled x x x the intent of Congress in granting a mere discount privilege, not a
sales discount. The administrative agency issuing these regulations may not enlarge,
alter or restrict the provisions of the law it administers; it cannot engraft additional
requirements not contemplated by the legislature.
In case of conflict, the law must prevail. A "regulation adopted pursuant to law is
law." Conversely, a regulation or any portion thereof not adopted pursuant to law is
no law and has neither the force nor the effect of law.7
On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled
to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the
utilization of services in hotels and similar lodging establishments, restaurants and
recreation centers, and purchase of medicines in all establishments for the exclusive
use or enjoyment of senior citizens, including funeral and burial services for the
death of senior citizens;
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax
deduction based on the net cost of the goods sold or services rendered: Provided,
That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted. Provided, further, That the total
amount of the claimed tax deduction net of value added tax if applicable, shall be
included in their gross sales receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal Revenue Code, as
amended.
To implement the tax provisions of RA 9257, the Secretary of Finance issued RR
No. 4-2006, the pertinent provision of which provides:
SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS
DEDUCTION FROM GROSS INCOME. – Establishments enumerated in
subparagraph (6) hereunder granting sales discounts to senior citizens on the sale of
goods and/or services specified thereunder are entitled to deduct the said discount
from gross income subject to the following conditions:
(1) Only that portion of the gross sales EXCLUSIVELY USED,
CONSUMED OR ENJOYED BY THE SENIOR CITIZEN shall be eligible
for the deductible sales discount.
 (2) The gross selling price and the sales discount MUST BE
SEPARATELY INDICATED IN THE OFFICIAL RECEIPT OR SALES
INVOICE issued by the establishment for the sale of goods or services to
the senior citizen.
(3) Only the actual amount of the discount granted or a sales discount not
exceeding 20% of the gross selling price can be deducted from the gross
income, net of value added tax, if applicable, for income tax purposes, and
from gross sales or gross receipts of the business enterprise concerned, for
VAT or other percentage tax purposes.
(4) The discount can only be allowed as deduction from gross income for
the same taxable year that the discount is granted.
(5) The business establishment giving sales discounts to qualified senior
citizens is required to keep separate and accurate record[s] of sales, which
shall include the name of the senior citizen, TIN, OSCA ID, gross
sales/receipts, sales discount granted, [date] of [transaction] and invoice
number for every sale transaction to senior citizen.
(6) Only the following business establishments which granted sales discount
to senior citizens on their sale of goods and/or services may claim the said
discount granted as deduction from gross income, namely:
xxxx
(i) Funeral parlors and similar establishments – The beneficiary or any person who
shall shoulder the funeral and burial expenses of the deceased senior citizen shall
claim the discount, such as casket, embalmment, cremation cost and other related
services for the senior citizen upon payment and presentation of [his] death
certificate.
The DSWD likewise issued its own Rules and Regulations Implementing RA 9257,
to wit:
RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS
Article 8. Tax Deduction of Establishments. – The establishment may claim the
discounts granted under Rule V, Section 4 – Discounts for Establishments, Section 9,
Medical and Dental Services in Private Facilities and Sections 10 and 11 – Air, Sea
and Land Transportation as tax deduction based on the net cost of the goods sold or
services rendered.
Provided, That the cost of the discount shall be allowed as deduction from gross
income for the same taxable year that the discount is granted; Provided, further, That
the total amount of the claimed tax deduction net of value added tax if applicable,
shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code,
as amended; Provided, finally, that the implementation of the tax deduction shall be
subject to the Revenue Regulations to be issued by the Bureau of Internal Revenue
(BIR) and approved by the Department of Finance (DOF).
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.
Issues
Petitioners raise the following issues:
A.
WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR
CONTROVERSY.
B.
WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS
IMPLEMENTING RULES AND REGULATIONS, INSOFAR AS THEY
PROVIDE THAT THE TWENTY PERCENT (20%) DISCOUNT TO SENIOR
CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE PRIVATE
ESTABLISHMENTS, ARE INVALID AND UNCONSTITUTIONAL.9
Petitioners’ Arguments
Petitioners emphasize that they are not questioning the 20% discount granted to
senior citizens but are only assailing the constitutionality of the tax deduction scheme
prescribed under RA 9257 and the implementing rules and regulations issued by the
DSWD and the DOF.10
Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of
the Constitution, which provides that: "[p]rivate property shall not be taken for
public use without just compensation."11
In support of their position, petitioners cite Central Luzon Drug Corporation,12 where
it was ruled that the 20% discount privilege constitutes taking of private property for
public use which requires the payment of just compensation,13 and Carlos Superdrug
Corporation v. Department of Social Welfare and Development,14 where it was
acknowledged that the tax deduction scheme does not meet the definition of just
compensation.15
Petitioners likewise seek a reversal of the ruling in Carlos Superdrug
Corporation16 that the tax deduction scheme adopted by the government is justified
by police power.17
They assert that "[a]lthough both police power and the power of eminent domain
have the general welfare for their object, there are still traditional distinctions
between the two"18 and that "eminent domain cannot be made less supreme than
police power."19
Petitioners further claim that the legislature, in amending RA 7432, relied on an
erroneous contemporaneous construction that prior payment of taxes is required for
tax credit.20
Petitioners also contend that the tax deduction scheme violates Article XV, Section
421 and Article XIII, Section 1122of the Constitution because it shifts the State’s
constitutional mandate or duty of improving the welfare of the elderly to the private
sector.23
Under the tax deduction scheme, the private sector shoulders 65% of the discount
because only 35%24 of it is actually returned by the government.25
Consequently, the implementation of the tax deduction scheme prescribed under
Section 4 of RA 9257 affects the businesses of petitioners.26
Thus, there exists an actual case or controversy of transcendental importance which
deserves judicious disposition on the merits by the highest court of the land.27
Respondents’ Arguments
Respondents, on the other hand, question the filing of the instant Petition directly
with the Supreme Court as this disregards the hierarchy of courts.28
They likewise assert that there is no justiciable controversy as petitioners failed to
prove that the tax deduction treatment is not a "fair and full equivalent of the loss
sustained" by them.29
As to the constitutionality of RA 9257 and its implementing rules and regulations,
respondents contend that petitioners failed to overturn its presumption of
constitutionality.30
More important, respondents maintain that the tax deduction scheme is a legitimate
exercise of the State’s police power.31
Our Ruling
The Petition lacks merit.
There exists an actual case or controversy.
We shall first resolve the procedural issue. When the constitutionality of a law is put
in issue, judicial review may be availed of only if the following requisites concur:
"(1) the existence of an actual and appropriate case; (2) the existence of personal and
substantial interest on the part of the party raising the [question of constitutionality];
(3) recourse to judicial review is made at the earliest opportunity; and (4) the
[question of constitutionality] is the lis mota of the case."32
In this case, petitioners are challenging the constitutionality of the tax deduction
scheme provided in RA 9257 and the implementing rules and regulations issued by
the DSWD and the DOF. Respondents, however, oppose the Petition on the ground
that there is no actual case or controversy. We do not agree with respondents. An
actual case or controversy exists when there is "a conflict of legal rights" or "an
assertion of opposite legal claims susceptible of judicial resolution."33
The Petition must therefore show that "the governmental act being challenged has a
direct adverse effect on the individual challenging it."34
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.
Petitioners posit that the resolution of this case lies in the determination of whether
the legally mandated 20% senior citizen discount is an exercise of police power or
eminent domain. If it is police power, no just compensation is warranted. But if it is
eminent domain, the tax deduction scheme is unconstitutional because it is not a peso
for peso reimbursement of the 20% discount given to senior citizens. Thus, it
constitutes taking of private property without payment of just compensation. At the
outset, we note that this question has been settled in Carlos Superdrug Corporation.35
In that case, we ruled:
Petitioners assert that Section 4(a) of the law is unconstitutional because it
constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit and capital because
1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the
law failed to provide a scheme whereby drugstores will be justly compensated for the
discount. Examining petitioners’ arguments, it is apparent that what petitioners are
ultimately questioning is the validity of the tax deduction scheme as a reimbursement
mechanism for the twenty percent (20%) discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully
reimburse petitioners for the discount privilege accorded to senior citizens. This is
because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated
otherwise, it is an amount that is allowed by law to reduce the income prior to the
application of the tax rate to compute the amount of tax which is due. Being a tax
deduction, the discount does not reduce taxes owed on a peso for peso basis but
merely offers a fractional reduction in taxes owed. Theoretically, the treatment of the
discount as a deduction reduces the net income of the private establishments
concerned. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments, were it not for R.A. No. 9257. The
permanent reduction in their total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit. This constitutes compensable
taking for which petitioners would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator. The measure is not the taker’s gain but the
owner’s loss. The word just is used to intensify the meaning of the word
compensation, and to convey the idea that the equivalent to be rendered for the
property to be taken shall be real, substantial, full and ample. A tax deduction does
not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation. Having said that, this raises the question of
whether the State, in promoting the health and welfare of a special group of citizens,
can impose upon private establishments the burden of partly subsidizing a
government program. The Court believes so. The Senior Citizens Act was enacted
primarily to maximize the contribution of senior citizens to nation-building, and to
grant benefits and privileges to them for their improvement and well-being as the
State considers them an integral part of our society. The priority given to senior
citizens finds its basis in the Constitution as set forth in the law itself.1âwphi1 Thus,
the Act provides: SEC. 2. Republic Act No. 7432 is hereby amended to read as
follows:
SECTION 1. Declaration of Policies and Objectives. — Pursuant to Article XV,
Section 4 of the Constitution, it is the duty of the family to take care of its elderly
members while the State may design programs of social security for them. In
addition to this, Section 10 in the Declaration of Principles and State Policies
provides: "The State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "The State shall adopt an
integrated and comprehensive approach to health development which shall endeavor
to make essential goods, health and other social services available to all the people at
affordable cost. There shall be priority for the needs of the underprivileged sick,
elderly, disabled, women and children." Consonant with these constitutional
principles the following are the declared policies of this Act:
xxx xxx xxx
(f) To recognize the important role of the private sector in the improvement of the
welfare of senior citizens and to actively seek their partnership.
To implement the above policy, the law grants a twenty percent discount to senior
citizens for medical and dental services, and diagnostic and laboratory fees;
admission fees charged by theaters, concert halls, circuses, carnivals, and other
similar places of culture, leisure and amusement; fares for domestic land, air and sea
travel; utilization of services in hotels and similar lodging establishments, restaurants
and recreation centers; and purchases of medicines for the exclusive use or
enjoyment of senior citizens. As a form of reimbursement, the law provides that
business establishments extending the twenty percent discount to senior citizens may
claim the discount as a tax deduction. The law is a legitimate exercise of police
power which, similar to the power of eminent domain, has general welfare for its
object. Police power is not capable of an exact definition, but has been purposely
veiled in general terms to underscore its comprehensiveness to meet all exigencies
and provide enough room for an efficient and flexible response to conditions and
circumstances, thus assuring the greatest benefits. Accordingly, it has been described
as "the most essential, insistent and the least limitable of powers, extending as it does
to all the great public needs." It is "[t]he power vested in the legislature by the
constitution to make, ordain, and establish all manner of wholesome and reasonable
laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth,
and of the subjects of the same." For this reason, when the conditions so demand as
determined by the legislature, property rights must bow to the primacy of police
power because property rights, though sheltered by due process, must yield to
general welfare. Police power as an attribute to promote the common good would be
diluted considerably if on the mere plea of petitioners that they will suffer loss of
earnings and capital, the questioned provision is invalidated. Moreover, in the
absence of evidence demonstrating the alleged confiscatory effect of the provision in
question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor. Given these, it is incorrect for petitioners to insist
that the grant of the senior citizen discount is unduly oppressive to their business,
because petitioners have not taken time to calculate correctly and come up with a
financial report, so that they have not been able to show properly whether or not the
tax deduction scheme really works greatly to their disadvantage. In treating the
discount as a tax deduction, petitioners insist that they will incur losses because,
referring to the DOF Opinion, for every ₱1.00 senior citizen discount that petitioners
would give, P0.68 will be shouldered by them as only P0.32 will be refunded by the
government by way of a tax deduction. To illustrate this point, petitioner Carlos
Super Drug cited the anti-hypertensive maintenance drug Norvasc as an example.
According to the latter, it acquires Norvasc from the distributors at ₱37.57 per tablet,
and retails it at ₱39.60 (or at a margin of 5%). If it grants a 20% discount to senior
citizens or an amount equivalent to ₱7.92, then it would have to sell Norvasc at
₱31.68 which translates to a loss from capital of ₱5.89 per tablet. Even if the
government will allow a tax deduction, only ₱2.53 per tablet will be refunded and
not the full amount of the discount which is ₱7.92. In short, only 32% of the 20%
discount will be reimbursed to the drugstores. Petitioners’ computation is flawed. For
purposes of reimbursement, the law states that the cost of the discount shall be
deducted from gross income, the amount of income derived from all sources before
deducting allowable expenses, which will result in net income. Here, petitioners tried
to show a loss on a per transaction basis, which should not be the case. An income
statement, showing an accounting of petitioners' sales, expenses, and net profit (or
loss) for a given period could have accurately reflected the effect of the discount on
their income. Absent any financial statement, petitioners cannot substantiate their
claim that they will be operating at a loss should they give the discount. In addition,
the computation was erroneously based on the assumption that their customers
consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on
income, not on the amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise
the prices of their medicines given the cutthroat nature of the players in the industry.
It is a business decision on the part of petitioners to peg the mark-up at 5%. Selling
the medicines below acquisition cost, as alleged by petitioners, is merely a result of
this decision. Inasmuch as pricing is a property right, petitioners cannot reproach the
law for being oppressive, simply because they cannot afford to raise their prices for
fear of losing their customers to competition. The Court is not oblivious of the retail
side of the pharmaceutical industry and the competitive pricing component of the
business. While the Constitution protects property rights, petitioners must accept the
realities of business and the State, in the exercise of police power, can intervene in
the operations of a business which may result in an impairment of property rights in
the process.
Moreover, the right to property has a social dimension. While Article XIII of the
Constitution provides the precept for the protection of property, various laws and
jurisprudence, particularly on agrarian reform and the regulation of contracts and
public utilities, continuously serve as x x x reminder[s] that the right to property can
be relinquished upon the command of the State for the promotion of public good.
Undeniably, the success of the senior citizens program rests largely on the support
imparted by petitioners and the other private establishments concerned. This being
the case, the means employed in invoking the active participation of the private
sector, in order to achieve the purpose or objective of the law, is reasonably and
directly related. Without sufficient proof that Section 4 (a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a
legislative act.36 (Bold in the original; underline supplied)
We, thus, found that the 20% discount as well as the tax deduction scheme is a valid
exercise of the police power of the State.
No compelling reason has been proffered to overturn, modify or abandon the
ruling in Carlos Superdrug Corporation.
Petitioners argue that we have previously ruled in Central Luzon Drug
Corporation37 that the 20% discount is an exercise of the power of eminent domain,
thus, requiring the payment of just compensation. They urge us to re-examine our
ruling in Carlos Superdrug Corporation38 which allegedly reversed the ruling in
Central Luzon Drug Corporation.39
They also point out that Carlos Superdrug Corporation40 recognized that the tax
deduction scheme under the assailed law does not provide for sufficient just
compensation. We agree with petitioners’ observation that there are statements in
Central Luzon Drug Corporation41 describing the 20% discount as an exercise of the
power of eminent domain, viz.:
[T]he privilege enjoyed by senior citizens does not come directly from the State, but
rather from the private establishments concerned. Accordingly, the tax credit benefit
granted to these establishments can be deemed as their just compensation for private
property taken by the State for public use. The concept of public use is no longer
confined to the traditional notion of use by the public, but held synonymous with
public interest, public benefit, public welfare, and public convenience. The discount
privilege to which our senior citizens are entitled is actually a benefit enjoyed by the
general public to which these citizens belong. The discounts given would have
entered the coffers and formed part of the gross sales of the private establishments
concerned, were it not for RA 7432. The permanent reduction in their total revenues
is a forced subsidy corresponding to the taking of private property for public use or
benefit. As a result of the 20 percent discount imposed by RA 7432, respondent
becomes entitled to a just compensation. This term refers not only to the issuance of
a tax credit certificate indicating the correct amount of the discounts given, but also
to the promptness in its release. Equivalent to the payment of property taken by the
State, such issuance — when not done within a reasonable time from the grant of the
discounts — cannot be considered as just compensation. In effect, respondent is
made to suffer the consequences of being immediately deprived of its revenues while
awaiting actual receipt, through the certificate, of the equivalent amount it needs to
cope with the reduction in its revenues. Besides, the taxation power can also be used
as an implement for the exercise of the power of eminent domain. Tax measures are
but "enforced contributions exacted on pain of penal sanctions" and "clearly imposed
for a public purpose." In recent years, the power to tax has indeed become a most
effective tool to realize social justice, public welfare, and the equitable distribution of
wealth. While it is a declared commitment under Section 1 of RA 7432, social justice
"cannot be invoked to trample on the rights of property owners who under our
Constitution and laws are also entitled to protection. The social justice consecrated in
our [C]onstitution [is] not intended to take away rights from a person and give them
to another who is not entitled thereto." For this reason, a just compensation for
income that is taken away from respondent becomes necessary. It is in the tax credit
that our legislators find support to realize social justice, and no administrative body
can alter that fact. To put it differently, a private establishment that merely breaks
even — without the discounts yet — will surely start to incur losses because of such
discounts. The same effect is expected if its mark-up is less than 20 percent, and if all
its sales come from retail purchases by senior citizens. Aside from the observation
we have already raised earlier, it will also be grossly unfair to an establishment if the
discounts will be treated merely as deductions from either its gross income or its
gross sales.1âwphi1 Operating at a loss through no fault of its own, it will realize that
the tax credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-
generating businesses will be put in a better position if they avail themselves of tax
credits denied those that are losing, because no taxes are due from the latter.42 (Italics
in the original; emphasis supplied)
The above was partly incorporated in our ruling in Carlos Superdrug
Corporation43 when we stated preliminarily that—
Petitioners assert that Section 4(a) of the law is unconstitutional because it
constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit and capital because
1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the
law failed to provide a scheme whereby drugstores will be justly compensated for the
discount. Examining petitioners’ arguments, it is apparent that what petitioners are
ultimately questioning is the validity of the tax deduction scheme as a reimbursement
mechanism for the twenty percent (20%) discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully
reimburse petitioners for the discount privilege accorded to senior citizens. This is
because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated
otherwise, it is an amount that is allowed by law to reduce the income prior to the
application of the tax rate to compute the amount of tax which is due. Being a tax
deduction, the discount does not reduce taxes owed on a peso for peso basis but
merely offers a fractional reduction in taxes owed. Theoretically, the treatment of the
discount as a deduction reduces the net income of the private establishments
concerned. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments, were it not for R.A. No. 9257. The
permanent reduction in their total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit. This constitutes compensable
taking for which petitioners would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator. The measure is not the taker’s gain but the
owner’s loss. The word just is used to intensify the meaning of the word
compensation, and to convey the idea that the equivalent to be rendered for the
property to be taken shall be real, substantial, full and ample. A tax deduction does
not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation. Having said that, this raises the question of
whether the State, in promoting the health and welfare of a special group of citizens,
can impose upon private establishments the burden of partly subsidizing a
government program. The Court believes so.44
This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the
20% discount and tax deduction scheme is a valid exercise of the police power of the
State. The present case, thus, affords an opportunity for us to clarify the above-
quoted statements in Central Luzon Drug Corporation46 and Carlos Superdrug
Corporation.47
First, we note that the above-quoted disquisition on eminent domain in Central
Luzon Drug Corporation48 is obiter dicta and, thus, not binding precedent. As stated
earlier, in Central Luzon Drug Corporation,49 we ruled that the BIR acted ultra
vires when it effectively treated the 20% discount as a tax deduction, under Sections
2.i and 4 of RR No. 2-94, despite the clear wording of the previous law that the same
should be treated as a tax credit. We were, therefore, not confronted in that case with
the issue as to whether the 20% discount is an exercise of police power or eminent
domain. Second, although we adverted to Central Luzon Drug Corporation50 in our
ruling in Carlos Superdrug Corporation,51 this referred only to preliminary matters. A
fair reading of Carlos Superdrug Corporation52would show that we categorically
ruled therein that the 20% discount is a valid exercise of police power. Thus, even if
the current law, through its tax deduction scheme (which abandoned the tax credit
scheme under the previous law), does not provide for a peso for peso reimbursement
of the 20% discount given by private establishments, no constitutional infirmity
obtains because, being a valid exercise of police power, payment of just
compensation is not warranted. We have carefully reviewed the basis of our ruling in
Carlos Superdrug Corporation53 and we find no cogent reason to overturn, modify or
abandon it. We also note that petitioners’ arguments are a mere reiteration of those
raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos
Superdrug Corporation.55
Nonetheless, we deem it proper, in what follows, to amplify our explanation in
Carlos Superdrug Corporation56 as to why the 20% discount is a valid exercise of
police power and why it may not, under the specific circumstances of this case, be
considered as an exercise of the power of eminent domain contrary to the obiter in
Central Luzon Drug Corporation.57
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain the use of
liberty and property for public welfare.58
The only limitation is that the restriction imposed should be reasonable, not
oppressive.59
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.60
Under the police power of the State, "property rights of individuals may be subjected
to restraints and burdens in order to fulfill the objectives of the government."61
The State "may interfere with personal liberty, property, lawful businesses and
occupations to promote the general welfare [as long as] the interference [is]
reasonable and not arbitrary."62
Eminent domain, on the other hand, is the inherent power of the State to take or
appropriate private property for public use.63
The Constitution, however, requires that private property shall not be taken without
due process of law and the payment of just compensation.64
Traditional distinctions exist between police power and eminent domain. In the
exercise of police power, a property right is impaired by regulation,65 or the use of
property is merely prohibited, regulated or restricted66 to promote public welfare. In
such cases, there is no compensable taking, hence, payment of just compensation is
not required. Examples of these regulations are property condemned for being
noxious or intended for noxious purposes (e.g., a building on the verge of collapse to
be demolished for public safety, or obscene materials to be destroyed in the interest
of public morals)67 as well as zoning ordinances prohibiting the use of property for
purposes injurious to the health, morals or safety of the community (e.g., dividing a
city’s territory into residential and industrial areas).68
It has, thus, been observed that, in the exercise of police power (as distinguished
from eminent domain), although the regulation affects the right of ownership, none
of the bundle of rights which constitute ownership is appropriated for use by or for
the benefit of the public.69
On the other hand, in the exercise of the power of eminent domain, property interests
are appropriated and applied to some public purpose which necessitates the payment
of just compensation therefor. Normally, the title to and possession of the property
are transferred to the expropriating authority. Examples include the acquisition of
lands for the construction of public highways as well as agricultural lands acquired
by the government under the agrarian reform law for redistribution to qualified
farmer beneficiaries. However, it is a settled rule that the acquisition of title or total
destruction of the property is not essential for "taking" under the power of eminent
domain to be present.70
Examples of these include establishment of easements such as where the land owner
is perpetually deprived of his proprietary rights because of the hazards posed by
electric transmission lines constructed above his property71 or the compelled
interconnection of the telephone system between the government and a private
company.72
In these cases, although the private property owner is not divested of ownership or
possession, payment of just compensation is warranted because of the burden placed
on the property for the use or benefit of the public.
The 20% senior citizen discount is an exercise of police power.
It may not always be easy to determine whether a challenged governmental act is an
exercise of police power or eminent domain. The very nature of police power as
elastic and responsive to various social conditions73 as well as the evolving meaning
and scope of public use74 and just compensation75 in eminent domain evinces that
these are not static concepts. Because of the exigencies of rapidly changing times,
Congress may be compelled to adopt or experiment with different measures to
promote the general welfare which may not fall squarely within the traditionally
recognized categories of police power and eminent domain. The judicious approach,
therefore, is to look at the nature and effects of the challenged governmental act and
decide, on the basis thereof, whether the act is the exercise of police power or
eminent domain. Thus, we now look at the nature and effects of the 20% discount to
determine if it constitutes an exercise of police power or eminent domain. 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. It may not be amiss to
mention also that the discount serves to honor senior citizens who presumably spent
the productive years of their lives on contributing to the development and progress of
the nation. This distinct cultural Filipino practice of honoring the elderly is an
integral part of this law. As to its nature and effects, the 20% discount is a regulation
affecting the ability of private establishments to price their products and services
relative to a special class of individuals, senior citizens, for which the Constitution
affords preferential concern.76
In turn, this affects the amount of profits or income/gross sales that a private
establishment can derive from senior citizens. In other words, 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 may
be said to be similar to, but with substantial distinctions from, price control or rate of
return on investment control laws which are traditionally regarded as police power
measures.77
These laws generally regulate public utilities or industries/enterprises imbued with
public interest in order to protect consumers from exorbitant or unreasonable pricing
as well as temper corporate greed by controlling the rate of return on investment of
these corporations considering that they have a monopoly over the goods or services
that they provide to the general public. 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. On its face,
therefore, the subject regulation is a police power measure. The obiter in Central
Luzon Drug Corporation,78 however, describes the 20% discount as an exercise of
the power of eminent domain and the tax credit, under the previous law, equivalent
to the amount of discount given as the just compensation therefor. The reason is that
(1) the discount would have formed part of the gross sales of the establishment were
it not for the law prescribing the 20% discount, and (2) the permanent reduction in
total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. The flaw in this reasoning is in its premise. It presupposes that
the subject regulation, which impacts the pricing and, hence, the profitability of a
private establishment, automatically amounts to a deprivation of property without
due process of law. If this were so, then all price and rate of return on investment
control laws would have to be invalidated because they impact, at some level, the
regulated establishment’s profits or income/gross sales, yet there is no provision for
payment of just compensation. It would also mean that overnment cannot set price or
rate of return on investment limits, which reduce the profits or income/gross sales of
private establishments, if no just compensation is paid even if the measure is not
confiscatory. The obiter is, thus, at odds with the settled octrine that the State can
employ police power measures to regulate the pricing of goods and services, and,
hence, the profitability of business establishments in order to pursue legitimate State
objectives for the common good, provided that the regulation does not go too far as
to amount to "taking."79
In City of Manila v. Laguio, Jr.,80 we recognized that— x x x a taking also could be
found if government regulation of the use of property went "too far." When
regulation reaches a certain magnitude, in most if not in all cases there must be an
exercise of eminent domain and compensation to support the act. While property
may be regulated to a certain extent, if regulation goes too far it will be recognized as
a taking. No formula or rule can be devised to answer the questions of what is too far
and when regulation becomes a taking. In Mahon, Justice Holmes recognized that it
was "a question of degree and therefore cannot be disposed of by general
propositions." On many other occasions as well, the U.S. Supreme Court has said
that the issue of when regulation constitutes a taking is a matter of considering the
facts in each case. The Court asks whether justice and fairness require that the
economic loss caused by public action must be compensated by the government and
thus borne by the public as a whole, or whether the loss should remain concentrated
on those few persons subject to the public action.81
The impact or effect of a regulation, such as the one under consideration, must, thus,
be determined on a case-to-case basis. Whether that line between permissible
regulation under police power and "taking" under eminent domain has been crossed
must, under the specific circumstances of this case, be subject to proof and the one
assailing the constitutionality of the regulation carries the heavy burden of proving
that the measure is unreasonable, oppressive or confiscatory. The time-honored rule
is that the burden of proving the unconstitutionality of a law rests upon the one
assailing it and "the burden becomes heavier when police power is at issue."82
The 20% senior citizen discount has not been shown to be unreasonable, oppressive
or confiscatory.
In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders
of electric plants, challenged the validity of a law limiting their allowable net profits
to no more than 12% per annum of their investments plus two-month operating
expenses. In rejecting their plea, we ruled that, in an earlier case, it was found that
12% is a reasonable rate of return and that petitioners failed to prove that the
aforesaid rate is confiscatory in view of the presumption of constitutionality.84
We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we
ruled that petitioners therein failed to prove that the 20% discount is arbitrary,
oppressive or confiscatory. We noted that 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 Corporation86 did.
Petitioners went directly to this Court without first establishing the factual bases of
their claims. Hence, the present recourse must, likewise, fail. Because all laws enjoy
the presumption of constitutionality, courts will uphold a law’s validity if any set of
facts may be conceived to sustain it.87
On its face, we find that there are at least two conceivable bases to sustain the subject
regulation’s validity absent clear and convincing proof that it is unreasonable,
oppressive or confiscatory. Congress may have legitimately concluded that business
establishments have the capacity to absorb a decrease in profits or income/gross sales
due to the 20% discount without substantially affecting the reasonable rate of return
on their investments considering (1) not all customers of a business establishment are
senior citizens and (2) the level of its profit margins on goods and services offered to
the general public. Concurrently, Congress may have, likewise, legitimately
concluded that the establishments, which will be required to extend the 20%
discount, have the capacity to revise their pricing strategy so that whatever reduction
in profits or income/gross sales that they may sustain because of sales to senior
citizens, can be recouped through higher mark-ups or from other products not subject
of discounts. As a result, the discounts resulting from sales to senior citizens will not
be confiscatory or unduly oppressive. In sum, we sustain our ruling in Carlos
Superdrug Corporation88 that the 20% senior citizen discount and tax deduction
scheme are valid exercises of police power of the State absent a clear showing that it
is arbitrary, oppressive or confiscatory.
Conclusion
In closing, we note that petitioners hypothesize, consistent with our previous
ratiocinations, that the discount will force establishments to raise their prices in order
to compensate for its impact on overall profits or income/gross sales. The general
public, or those not belonging to the senior citizen class, are, thus, made to
effectively shoulder the subsidy for senior citizens. This, in petitioners’ view, is
unfair.
As already mentioned, Congress may be reasonably assumed to have foreseen this
eventuality. But, more importantly, this goes into the wisdom, efficacy and
expediency of the subject law which is not proper for judicial review. In a way, this
law pursues its social equity objective in a non-traditional manner unlike past and
existing direct subsidy programs of the government for the poor and marginalized
sectors of our society. Verily, Congress must be given sufficient leeway in
formulating welfare legislations given the enormous challenges that the government
faces relative to, among others, resource adequacy and administrative capability in
implementing social reform measures which aim to protect and uphold the interests
of those most vulnerable in our society. In the process, the individual, who enjoys the
rights, benefits and privileges of living in a democratic polity, must bear his share in
supporting measures intended for the common good. This is only fair. In fine,
without the requisite showing of a clear and unequivocal breach of the Constitution,
the validity of the assailed law must be sustained.
Refutation of the Dissent
The main points of Justice Carpio’s Dissent may be summarized as follows: (1) the
discussion on eminent domain in Central Luzon Drug Corporation89 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 discount is private property within the ambit of Article III, Section 990 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. I We maintain that the discussion on eminent
domain in Central Luzon Drug Corporation91 is obiter dicta. As previously discussed,
in Central Luzon Drug Corporation,92 the BIR, pursuant to Sections 2.i and 4 of RR
No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax
deduction instead of a tax credit despite the clear provision in that law which stated –
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled
to the following:
a) The grant of twenty percent (20%) discount from all establishments
relative to utilization of transportation services, hotels and similar lodging
establishment, restaurants and recreation centers and purchase of medicines
anywhere in the country: Provided, That private establishments may claim
the cost as tax credit; (Emphasis supplied)
Thus, the Court ruled that the subject revenue regulation violated the law, viz:
The 20 percent discount required by the law to be given to senior citizens is a tax
credit, not merely a tax deduction from the gross income or gross sale of the
establishment concerned. A tax credit is used by a private establishment only after
the tax has been computed; a tax deduction, before the tax is computed. RA 7432
unconditionally grants a tax credit to all covered entities. Thus, the provisions of the
revenue regulation that withdraw or modify such grant are void. Basic is the rule that
administrative regulations cannot amend or revoke the law.93
As can be readily seen, the discussion on eminent domain was not necessary in order
to arrive at this conclusion. All that was needed was to point out that the revenue
regulation contravened the law which it sought to implement. And, precisely, this
was done in Central Luzon Drug Corporation94 by comparing the wording of the
previous law vis-à-vis the revenue regulation; employing the rules of statutory
construction; and applying the settled principle that a regulation cannot amend the
law it seeks to implement. A close reading of Central Luzon Drug
Corporation95 would show that the Court went on to state that the tax credit "can be
deemed" as just compensation only to explain why the previous law provides for a
tax credit instead of a tax deduction. The Court surmised that the tax credit was a
form of just compensation given to the establishments covered by the 20% discount.
However, the reason why the previous law provided for a tax credit and not a tax
deduction was not necessary to resolve the issue as to whether the revenue regulation
contravenes the law. Hence, the discussion on eminent domain is obiter dicta.
A court, in resolving cases before it, may look into the possible purposes or reasons
that impelled the enactment of a particular statute or legal provision. However,
statements made relative thereto are not always necessary in resolving the actual
controversies presented before it. This was the case in Central Luzon Drug
Corporation96resulting in that unfortunate statement that the tax credit "can be
deemed" as just compensation. This, in turn, led to the erroneous conclusion, by
deductive reasoning, that the 20% discount is an exercise of the power of eminent
domain. The Dissent essentially adopts this theory and reasoning which, as will be
shown below, is contrary to settled principles in police power and eminent domain
analysis. II The Dissent discusses at length the doctrine on "taking" in police power
which occurs when private property is destroyed or placed outside the commerce of
man. Indeed, 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. As earlier mentioned, these would include a building on the verge of
collapse or confiscated obscene materials as well as those mentioned by the Dissent
with regard to property used in violating a criminal statute or one which constitutes a
nuisance. In such cases, no compensation is required. However, it is equally true that
there is another class of police power measures which do not involve the destruction
of private property but merely regulate its use. The minimum wage law, zoning
ordinances, price control laws, laws regulating the operation of motels and hotels,
laws limiting the working hours to eight, and the like would fall under this category.
The examples cited by the Dissent, likewise, fall under this category: Article 157 of
the Labor Code, Sections 19 and 18 of the Social Security Law, and Section 7 of the
Pag-IBIG Fund Law. These laws merely regulate or, to use the term of the Dissent,
burden the conduct of the affairs of business establishments. In such cases, payment
of just compensation is not required because they fall within the sphere of
permissible police power measures. The senior citizen discount law falls under this
latter category. III The Dissent proceeds from the theory that the permanent
reduction of profits or income/gross sales, due to the 20% discount, is a "taking" of
private property for public purpose without payment of just compensation. At the
outset, it must be emphasized that petitioners never presented any evidence to
establish that they were forced to suffer enormous losses or operate at a loss due to
the effects of the assailed law. They came directly to this Court and provided a
hypothetical computation of the loss they would allegedly suffer due to the operation
of the assailed law. The central premise of the Dissent’s argument that the 20%
discount results in a permanent reduction in profits or income/gross sales, or forces a
business establishment to operate at a loss is, thus, wholly unsupported by competent
evidence. To be sure, the Court can invalidate a law which, on its face, is arbitrary,
oppressive or confiscatory.97
But this is not the case here.
In the case at bar, evidence is indispensable before a determination of a constitutional
violation can be made because of the following reasons. First, the assailed law, by
imposing the senior citizen discount, does not take any of the properties used by a
business establishment like, say, the land on which a manufacturing plant is
constructed or the equipment being used to produce goods or services. Second, rather
than taking specific properties of a business establishment, the senior citizen discount
law merely regulates the prices of the goods or services being sold to senior citizens
by mandating a 20% discount. Thus, if a product is sold at ₱10.00 to the general
public, then it shall be sold at ₱8.00 ( i.e., ₱10.00 less 20%) to senior citizens. Note
that the law does not impose at what specific price the product shall be sold, only
that a 20% discount shall be given to senior citizens based on the price set by the
business establishment. A business establishment is, thus, free to adjust the prices of
the goods or services it provides to the general public. Accordingly, it can increase
the price of the above product to ₱20.00 but is required to sell it at ₱16.00 (i.e. ,
₱20.00 less 20%) to senior citizens. Third, because the law impacts the prices of the
goods or services of a particular establishment relative to its sales to senior citizens,
its profits or income/gross sales are affected. The extent of the impact would,
however, depend on the profit margin of the business establishment on a particular
good or service. If a product costs ₱5.00 to produce and is sold at ₱10.00, then the
profit98 is ₱5.0099 or a profit margin100 of 50%.101
Under the assailed law, the aforesaid product would have to be sold at ₱8.00 to
senior citizens yet the business would still earn ₱3.00102 or a 30%103 profit margin.
On the other hand, if the product costs ₱9.00 to produce and is required to be sold at
₱8.00 to senior citizens, then the business would experience a loss of ₱1.00.104
But note that since not all customers of a business establishment are senior citizens,
the business establishment may continue to earn ₱1.00 from non-senior citizens
which, in turn, can offset any loss arising from sales to senior citizens.
Fourth, when the law imposes the 20% discount in favor of senior citizens, it does
not prevent the business establishment from revising its pricing strategy.
By revising its pricing strategy, a business establishment can recoup any reduction of
profits or income/gross sales which would otherwise arise from the giving of the
20% discount. To illustrate, suppose A has two customers: X, a senior citizen, and Y,
a non-senior citizen. Prior to the law, A sells his products at ₱10.00 a piece to X and
Y resulting in income/gross sales of ₱20.00 (₱10.00 + ₱10.00). With the passage of
the law, A must now sell his product to X at ₱8.00 (i.e., ₱10.00 less 20%) so that his
income/gross sales would be ₱18.00 (₱8.00 + ₱10.00) or lower by ₱2.00. To prevent
this from happening, A decides to increase the price of his products to ₱11.11 per
piece. Thus, he sells his product to X at ₱8.89 (i.e. , ₱11.11 less 20%) and to Y at
₱11.11. As a result, his income/gross sales would still be ₱20.00105 (₱8.89 + ₱11.11).
The capacity, then, of business establishments to revise their pricing strategy makes
it possible for them not to suffer any reduction in profits or income/gross sales, or, in
the alternative, mitigate the reduction of their profits or income/gross sales even after
the passage of the law. In other words, business establishments have the capacity to
adjust their prices so that they may remain profitable even under the operation of the
assailed law.
The Dissent, however, states that – The explanation by the majority that private
establishments can always increase their prices to recover the mandatory discount
will only encourage private establishments to adjust their prices upwards to the
prejudice of customers who do not enjoy the 20% discount. It was likewise suggested
that if a company increases its prices, despite the application of the 20% discount, the
establishment becomes more profitable than it was before the implementation of
R.A. 7432. Such an economic justification is self-defeating, for more consumers will
suffer from the price increase than will benefit from the 20% discount. Even then,
such ability to increase prices cannot legally validate a violation of the eminent
domain clause.106
But, if it is possible that the business establishment, by adjusting its prices, will
suffer no reduction in its profits or income/gross sales (or suffer some reduction but
continue to operate profitably) despite giving the discount, what would be the basis
to strike down the law? If it is possible that the business establishment, by adjusting
its prices, will not be unduly burdened, how can there be a finding that the assailed
law is an unconstitutional exercise of police power or eminent domain? That there
may be a burden placed on business establishments or the consuming public as a
result of the operation of the assailed law is not, by itself, a ground to declare it
unconstitutional for this goes into the wisdom and expediency of the law.
The cost of most, if not all, regulatory measures of the government on business
establishments is ultimately passed on to the consumers but that, by itself, does not
justify the wholesale nullification of these measures. It is a basic postulate of our
democratic system of government that the Constitution is a social contract whereby
the people have surrendered their sovereign powers to the State for the common
good.107
All persons may be burdened by regulatory measures intended for the common good
or to serve some important governmental interest, such as protecting or improving
the welfare of a special class of people for which the Constitution affords preferential
concern. Indubitably, the one assailing the law has the heavy burden of proving that
the regulation is unreasonable, oppressive or confiscatory, or has gone "too far" as to
amount to a "taking." Yet, here, the Dissent would have this Court nullify the law
without any proof of such nature.
Further, this Court is not the proper forum to debate the economic theories or
realities that impelled Congress to shift from the tax credit to the tax deduction
scheme. It is not within our power or competence to judge which scheme is more or
less burdensome to business establishments or the consuming public and, thereafter,
to choose which scheme the State should use or pursue. The shift from the tax credit
to tax deduction scheme is a policy determination by Congress and the Court will
respect it for as long as there is no showing, as here, that the subject regulation has
transgressed constitutional limitations. Unavoidably, the lack of evidence constrains
the Dissent to rely on speculative and hypothetical argumentation when it states that
the 20% discount is a significant amount and not a minimal loss (which erroneously
assumes that the discount automatically results in a loss when it is possible that the
profit margin is greater than 20% and/or the pricing strategy can be revised to
prevent or mitigate any reduction in profits or income/gross sales as illustrated
above),108 and not all private establishments make a 20% profit margin (which
conversely implies that there are those who make more and, thus, would not be
greatly affected by this regulation).109
In fine, because of the possible scenarios discussed above, we cannot assume that the
20% discount results in a permanent reduction in profits or income/gross sales, much
less that business establishments are forced to operate at a loss under the assailed
law. And, even if we gratuitously assume that the 20% discount results in some
degree of reduction in profits or income/gross sales, we cannot assume that such
reduction is arbitrary, oppressive or confiscatory. To repeat, there is no actual proof
to back up this claim, and it could be that the loss suffered by a business
establishment was occasioned through its fault or negligence in not adapting to the
effects of the assailed law. The law uniformly applies to all business establishments
covered thereunder. There is, therefore, no unjust discrimination as the aforesaid
business establishments are faced with the same constraints. The necessity of proof is
all the more pertinent in this case because, as similarly observed by Justice Velasco
in his Concurring Opinion, the law has been in operation for over nine years now.
However, the grim picture painted by petitioners on the unconscionable losses to be
indiscriminately suffered by business establishments, which should have led to the
closure of numerous business establishments, has not come to pass. Verily, we
cannot invalidate the assailed law based on assumptions and conjectures. Without
adequate proof, the presumption of constitutionality must prevail. IV At this
juncture, we note that the Dissent modified its original arguments by including a new
paragraph, to wit:
Section 9, Article III of the 1987 Constitution speaks of private property without any
distinction. It does not state that there should be profit before the taking of property
is subject to just compensation. The private property referred to for purposes of
taking could be inherited, donated, purchased, mortgaged, or as in this case, part of
the gross sales of private establishments. They are all private property and any taking
should be attended by corresponding payment of just compensation. The 20%
discount granted to senior citizens belong to private establishments, whether these
establishments make a profit or suffer a loss. In fact, the 20% discount applies to
non-profit establishments like country, social, or golf clubs which are open to the
public and not only for exclusive membership. The issue of profit or loss to the
establishments is immaterial.110
Two things may be said of this argument. First, it contradicts the rest of the
arguments of the Dissent. After it states that the issue of profit or loss is immaterial,
the Dissent proceeds to argue that the 20% discount is not a minimal loss111 and that
the 20% discount forces business establishments to operate at a loss.112
Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially
adopts and relies on, is premised on the permanent reduction of total revenues and
the loss that business establishments will be forced to suffer in arguing that the 20%
discount constitutes a "taking" under the power of eminent domain. Thus, when the
Dissent now argues that the issue of profit or loss is immaterial, it contradicts itself
because it later argues, in order to justify that there is a "taking" under the power of
eminent domain in this case, that the 20% discount forces business establishments to
suffer a significant loss or to operate at a loss. Second, this argument suffers from the
same flaw as the Dissent's original arguments. It is an erroneous characterization of
the 20% discount. According to the Dissent, the 20% discount is part of the gross
sales and, hence, private property belonging to business establishments. However, as
previously discussed, the 20% discount is not private property actually owned and/or
used by the business establishment. It should be distinguished from properties like
lands or buildings actually used in the operation of a business establishment which, if
appropriated for public use, would amount to a "taking" under the power of eminent
domain. Instead, the 20% discount is a regulatory measure which impacts the pricing
and, hence, the profitability of business establishments. At the time the discount is
imposed, no particular property of the business establishment can be said to be
"taken." That is, the State does not acquire or take anything from the business
establishment in the way that it takes a piece of private land to build a public road.
While the 20% discount may form part of the potential profits or income/gross
sales114 of the business establishment, as similarly characterized by Justice Bersamin
in his Concurring Opinion, potential profits or income/gross sales are not private
property, specifically cash or money, already belonging to the business
establishment. They are a mere expectancy because they are potential fruits of the
successful conduct of the business. Prior to the sale of goods or services, a business
establishment may be subject to State regulations, such as the 20% senior citizen
discount, which may impact the level or amount of profits or income/gross sales that
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.
Again, as previously discussed, the 20% discount does not automatically result in a
20% reduction in profits, or, to align it with the term used by the Dissent, the 20%
discount does not mean that a 20% reduction in gross sales necessarily results.
Because (1) the profit margin of a product is not necessarily less than 20%, (2) not
all customers of a business establishment are senior citizens, and (3) the
establishment may revise its pricing strategy, such reduction in profits or
income/gross sales may be prevented or, in the alternative, mitigated so that the
business establishment continues to operate profitably. Thus, even if we gratuitously
assume that some degree of reduction in profits or income/gross sales occurs because
of the 20% discount, it does not follow that the regulation is unreasonable,
oppressive or confiscatory because the business establishment may make the
necessary adjustments to continue to operate profitably. No evidence was presented
by petitioners to show otherwise. In fact, no evidence was presented by petitioners at
all. Justice Leonen, in his Concurring and Dissenting Opinion, characterizes "profits"
(or income/gross sales) as an inchoate right. Another way to view it, as stated by
Justice Velasco in his Concurring Opinion, is that the business establishment merely
has a right to profits. The Constitution adverts to it as the right of an enterprise to a
reasonable return on investment.115
Undeniably, this right, like any other right, may be regulated under the police power
of the State to achieve important governmental objectives like protecting the interests
and improving the welfare of senior citizens. It should be noted though that potential
profits or income/gross sales are relevant in police power and eminent domain
analyses because they may, in appropriate cases, serve as an indicia when a
regulation has gone "too far" as to amount to a "taking" under the power of eminent
domain. When the deprivation or reduction of profits or income/gross sales is shown
to be unreasonable, oppressive or confiscatory, then the challenged governmental
regulation may be nullified for being a "taking" under the power of eminent domain.
In such a case, it is not profits or income/gross sales which are actually taken and
appropriated for public use. Rather, when the regulation causes an establishment to
incur losses in an unreasonable, oppressive or confiscatory manner, what is actually
taken is capital and the right of the business establishment to a reasonable return on
investment. If the business losses are not halted because of the continued operation
of the regulation, this eventually leads to the destruction of the business and the total
loss of the capital invested therein. But, again, petitioners in this case failed to prove
that the subject regulation is unreasonable, oppressive or confiscatory.
V.
The Dissent further argues that we erroneously used price and rate of return on
investment control laws to justify the senior citizen discount law. According to the
Dissent, only profits from industries imbued with public interest may be regulated
because this is a condition of their franchises. Profits of establishments without
franchises cannot be regulated permanently because there is no law regulating their
profits. The Dissent concludes that the permanent reduction of total revenues or
gross sales of business establishments without franchises is a taking of private
property under the power of eminent domain. In making this argument, it is
unfortunate that the Dissent quotes only a portion of the ponencia – The subject
regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded
as police power measures. These laws generally regulate public utilities or
industries/enterprises imbued with public interest in order to protect consumers from
exorbitant or unreasonable pricing as well as temper corporate greed by controlling
the rate of return on investment of these corporations considering that they have a
monopoly over the goods or services that they provide to the general public. 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. x x x116
The above paragraph, in full, states –
The subject regulation may be said to be similar to, but with substantial distinctions
from, price control or rate of return on investment control laws which are
traditionally regarded as police power measures. These laws generally regulate
public utilities or industries/enterprises imbued with public interest in order to
protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations
considering that they have a monopoly over the goods or services that they provide
to the general public. 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 affects the profitability of establishments subjected thereto. (Emphasis
supplied)
The point of this paragraph is to simply show that 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. What is more,
the substantial distinctions between price and rate of return on investment control
laws vis-à-vis the senior citizen discount law provide greater reason to uphold the
validity of the senior citizen discount law. As previously discussed, the ability to
adjust prices allows the establishment subject to the senior citizen discount to prevent
or mitigate any reduction of profits or income/gross sales arising from the giving of
the discount. In contrast, establishments subject to price and rate of return on
investment control laws cannot adjust prices accordingly. Certainly, there is no
intention to say that price and rate of return on investment control laws are the
justification for the senior citizen discount law. Not at all. The justification for the
senior citizen discount law is the plenary powers of Congress. The legislative power
to regulate business establishments is broad and covers a wide array of areas and
subjects. It is well within Congress’ legislative powers to regulate the profits or
income/gross sales of industries and enterprises, even those without franchises. For
what are franchises but mere legislative enactments? There is nothing in the
Constitution that prohibits Congress from regulating the profits or income/gross sales
of industries and enterprises without franchises. On the contrary, the social justice
provisions of the Constitution enjoin the State to regulate the "acquisition,
ownership, use, and disposition" of property and its increments.117
This may cover the regulation of profits or income/gross sales of all businesses,
without qualification, to attain the objective of diffusing wealth in order to protect
and enhance the right of all the people to human dignity.118
Thus, under the social justice policy of the Constitution, business establishments may
be compelled to contribute to uplifting the plight of vulnerable or marginalized
groups in our society provided that the regulation is not arbitrary, oppressive or
confiscatory, or is not in breach of some specific constitutional limitation. When the
Dissent, therefore, states that the "profits of private establishments which are non-
franchisees cannot be regulated permanently, and there is no such law regulating
their profits permanently,"119 it is assuming what it ought to prove. First, there are
laws which, in effect, permanently regulate profits or income/gross sales of
establishments without franchises, and RA 9257 is one such law. And, second,
Congress can regulate such profits or income/gross sales because, as previously
noted, there is nothing in the Constitution to prevent it from doing so. Here, again, it
must be emphasized that petitioners failed to present any proof to show that the
effects of the assailed law on their operations has been unreasonable, oppressive or
confiscatory. The permanent regulation of profits or income/gross sales of business
establishments, even those without franchises, is not as uncommon as the Dissent
depicts it to be. For instance, the minimum wage law allows the State to set the
minimum wage of employees in a given region or geographical area. Because of the
added labor costs arising from the minimum wage, a permanent reduction of profits
or income/gross sales would result, assuming that the employer does not increase the
prices of his goods or services. To illustrate, suppose it costs a company ₱5.00 to
produce a product and it sells the same at ₱10.00 with a 50% profit margin. Later,
the State increases the minimum wage. As a result, the company incurs greater labor
costs so that it now costs ₱7.00 to produce the same product. The profit per product
of the company would be reduced to ₱3.00 with a profit margin of 30%. The net
effect would be the same as in the earlier example of granting a 20% senior citizen
discount. As can be seen, the minimum wage law could, likewise, lead to a
permanent reduction of profits. Does this mean that the minimum wage law should,
likewise, be declared unconstitutional on the mere plea that it results in a permanent
reduction of profits? Taking it a step further, suppose the company decides to
increase the price of its product in order to offset the effects of the increase in labor
cost; does this mean that the minimum wage law, following the reasoning of the
Dissent, is unconstitutional because the consuming public is effectively made to
subsidize the wage of a group of laborers, i.e., minimum wage earners? The same
reasoning can be adopted relative to the examples cited by the Dissent which,
according to it, are valid police power regulations. Article 157 of the Labor Code,
Sections 19 and 18 of the Social Security Law, and Section 7 of the Pag-IBIG Fund
Law would effectively increase the labor cost of a business
establishment.1âwphi1 This would, in turn, be integrated as part of the cost of its
goods or services. Again, if the establishment does not increase its prices, the net
effect would be a permanent reduction in its profits or income/gross sales. Following
the reasoning of the Dissent that "any form of permanent taking of private property
(including profits or income/gross sales)120 is an exercise of eminent domain that
requires the State to pay just compensation,"121 then these statutory provisions
would, likewise, have to be declared unconstitutional. It does not matter that these
benefits are deemed part of the employees’ legislated wages because the net effect is
the same, that is, it leads to higher labor costs and a permanent reduction in the
profits or income/gross sales of the business establishments.122
The point then is this – most, if not all, regulatory measures imposed by the State on or confiscatory. Under the specific circumstances of this case, such determination
business establishments impact, at some level, the latter’s prices and/or profits or can only be made upon the presentation of competent proof which petitioners failed
income/gross sales.123 to do. A law, which has been in operation for many years and promotes the welfare
of a group accorded special concern by the Constitution, cannot and should not be
If the Court were to sustain the Dissent’s theory, then a wholesale nullification of summarily invalidated on a mere allegation that it reduces the profits or income/gross
such measures would inevitably result. The police power of the State and the social sales of business establishments.
justice provisions of the Constitution would, thus, be rendered nugatory. There is
nothing sacrosanct about profits or income/gross sales. This, we made clear in Carlos WHEREFORE, the Petition is hereby DISMISSED for lack of merit.
Superdrug Corporation:124
SO ORDERED.
Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of earnings
and capital, the questioned provision is invalidated. Moreover, in the absence of
evidence demonstrating the alleged confiscatory effect of the provision in question,
there is no basis for its nullification in view of the presumption of validity which
every law has in its favor.

xxxx

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

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

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

In conclusion, we maintain that the correct rule in determining whether the subject
regulatory measure has amounted to a "taking" under the power of eminent domain is
the one laid down in Alalayan v. National Power Corporation126 and followed
in Carlos Superdurg Corporation127 consistent with long standing principles in
police power and eminent domain analysis. Thus, the deprivation or reduction of
profits or income. Gross sales must be clearly shown to be unreasonable, oppressive
G.R. Nos. L-49839-46 April 26, 1991
JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,
vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their
capacities as appointed and Acting Members of the CENTRAL BOARD OF
ASSESSMENT APPEALS; TERESITA H. NOBLEJAS, ROMULO M. DEL
ROSARIO, RAUL C. FLORES, in their capacities as appointed and Acting
Members of the BOARD OF ASSESSMENT APPEALS of Manila; and
NICOLAS CATIIL in his capacity as City Assessor of Manila,respondents.
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.
PARAS, J.:
This is a petition for review on certiorari to reverse the June 10, 1977 decision of the
Central Board of Assessment Appeals1 in CBAA Cases Nos. 72-79 entitled "J.B.L.
Reyes, Edmundo Reyes, et al. v. Board of Assessment Appeals of Manila and City
Assessor of Manila" which affirmed the March 29, 1976 decision of the Board of
Tax Assessment Appeals2 in BTAA Cases Nos. 614, 614-A-J, 615, 615-A, B, E,
"Jose Reyes, et al. v. City Assessor of Manila" and "Edmundo Reyes and Milagros
Reyes v. City Assessor of Manila" upholding the classification and assessments
made by the City Assessor of Manila.
The facts of the case are as follows:
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land
situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and
entirely occupied as dwelling sites by tenants. Said tenants were paying monthly
rentals not exceeding three hundred pesos (P300.00) in July, 1971. On July 14, 1971,
the National Legislature enacted Republic Act No. 6359 prohibiting for one year
from its effectivity, an increase in monthly rentals of dwelling units or of lands on
which another's dwelling is located, where such rentals do not exceed three hundred
pesos (P300.00) a month but allowing an increase in rent by not more than 10%
thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil
Code for two years from its effectivity thereby disallowing the ejectment of lessees
upon the expiration of the usual legal period of lease. On October 12, 1972,
Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the
prohibition to increase monthly rentals below P300.00 and by indefinitely
suspending the aforementioned provision of the Civil Code, excepting leases with a
definite period. Consequently, the Reyeses, petitioners herein, were precluded from
raising the rentals and from ejecting the tenants. In 1973, respondent City Assessor
of Manila re-classified and reassessed the value of the subject properties based on the
schedule of market values duly reviewed by the Secretary of Finance. The revision,
as expected, entailed an increase in the corresponding tax rates prompting petitioners
to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals.
They averred that the reassessments made were "excessive, unwarranted, inequitable,
confiscatory and unconstitutional" considering that the taxes imposed upon them
greatly exceeded the annual income derived from their properties. They argued that
the income approach should have been used in determining the land values instead of
the comparable sales approach which the City Assessor adopted (Rollo, pp. 9-10-A).
The Board of Tax Assessment Appeals, however, considered the assessments valid,
holding thus:
WHEREFORE, and considering that the appellants have failed to submit
concrete evidence which could overcome the presumptive regularity of the
classification and assessments appear to be in accordance with the base
schedule of market values and of the base schedule of building unit values,
as approved by the Secretary of Finance, the cases should be, as they are
hereby, upheld.
SO ORDERED. (Decision of the Board of Tax Assessment Appeals, Rollo,
p. 22).
The Reyeses appealed to the Central Board of Assessment Appeals.1âwphi1 They
submitted, among others, the summary of the yearly rentals to show the income
derived from the properties. Respondent City Assessor, on the other hand, submitted
three (3) deeds of sale showing the different market values of the real property
situated in the same vicinity where the subject properties of petitioners are located.
To better appreciate the locational and physical features of the land, the Board of
Hearing Commissioners conducted an ocular inspection with the presence of two
representatives of the City Assessor prior to the healing of the case. Neither the
owners nor their authorized representatives were present during the said ocular
inspection despite proper notices served them. It was found that certain parcels of
land were below street level and were affected by the tides (Rollo, pp. 24-25).
On June 10, 1977, the Central Board of Assessment Appeals rendered its decision,
the dispositive portion of which reads:
WHEREFORE, the appealed decision insofar as the valuation and
assessment of the lots covered by Tax Declaration Nos. (5835) PD-5847,
(5839), (5831) PD-5844 and PD-3824 is affirmed.
For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509,
146 and (1) PD-266, the appealed Decision is modified by allowing a 20%
reduction in their respective market values and applying therein the
assessment level of 30% to arrive at the corresponding assessed value.
 SO ORDERED. (Decision of the Central Board of Assessment
Appeals, Rollo, p. 27)
Petitioner's subsequent motion for reconsideration was denied, hence, this petition.
The Reyeses assigned the following error:
THE HONORABLE BOARD ERRED IN ADOPTING THE
"COMPARABLE SALES APPROACH" METHOD IN FIXING THE
ASSESSED VALUE OF APPELLANTS' PROPERTIES.
The petition is impressed with merit.
The crux of the controversy is in the method used in tax assessment of the properties
in question. Petitioners maintain that the "Income Approach" method would have
been more realistic for in disregarding the effect of the restrictions imposed by P.D.
20 on the market value of the properties affected, respondent Assessor of the City of
Manila unlawfully and unjustifiably set increased new assessed values at levels so
high and successive that the resulting annual real estate taxes would admittedly
exceed the sum total of the yearly rentals paid or payable by the dweller tenants
under P.D. 20. Hence, petitioners protested against the levels of the values assigned
to their properties as revised and increased on the ground that they were arbitrarily
excessive, unwarranted, inequitable, confiscatory and unconstitutional (Rollo, p. 10-
A).
On the other hand, while respondent Board of Tax Assessment Appeals admits in its
decision that the income approach is used in determining land values in some
vicinities, it maintains that when income is affected by some sort of price control, the
same is rejected in the consideration and study of land values as in the case of
properties affected by the Rent Control Law for they do not project the true market
value in the open market (Rollo, p. 21). Thus, respondents opted instead for the
"Comparable Sales Approach" on the ground that the value estimate of the properties
predicated upon prices paid in actual, market transactions would be a uniform and a
more credible standards to use especially in case of mass appraisal of properties
(Ibid.). Otherwise stated, public respondents would have this Court completely
ignore the effects of the restrictions of P.D. No. 20 on the market value of properties
within its coverage. In any event, it is unquestionable that both the "Comparable
Sales Approach" and the "Income Approach" are generally acceptable methods of
appraisal for taxation purposes (The Law on Transfer and Business Taxation by
Hector S. De Leon, 1988 Edition). However, it is conceded that the propriety of one
as against the other would of course depend on several factors. Hence, as early as
1923 in the case of Army & Navy Club, Manila v. Wenceslao Trinidad, G.R. No.
19297 (44 Phil. 383), it has been stressed that the assessors, in finding the value of
the property, have to consider all the circumstances and elements of value and must
exercise a prudent discretion in reaching conclusions.
Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of
taxation must not only be uniform, but must also be equitable and progressive.
Uniformity has been defined as that principle by which all taxable articles or kinds of
property of the same class shall be taxed at the same rate (Churchill v. Concepcion,
34 Phil. 969 [1916]).
Notably in the 1935 Constitution, there was no mention of the equitable or
progressive aspects of taxation required in the 1973 Charter (Fernando "The
Constitution of the Philippines", p. 221, Second Edition). Thus, the need to examine
closely and determine the specific mandate of the Constitution.
Taxation is said to be equitable when its burden falls on those better able to pay.
Taxation is progressive when its rate goes up depending on the resources of the
person affected (Ibid.).
The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the
powers of government. But for all its plenitude the power to tax is not unconfined as
there are restrictions. Adversely effecting as it does property rights, both the due
process and equal protection clauses of the Constitution may properly be invoked to
invalidate in appropriate cases a revenue measure. If it were otherwise, there would
be truth to the 1903 dictum of Chief Justice Marshall that "the power to tax involves
the power to destroy." The web or unreality spun from Marshall's famous dictum was
brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is
not the power to destroy while this Court sits. So it is in the Philippines " (Sison, Jr.
v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v. Commissioner of Internal
Revenue, 139 SCRA 439 [1985]).
In the same vein, the due process clause may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution. An obvious example is where it
can be shown to amount to confiscation of property. That would be a clear abuse of
power (Sison v. Ancheta, supra).
The taxing power has the authority to make a reasonable and natural classification
for purposes of taxation but the government's act must not be prompted by a spirit of
hostility, or at the very least discrimination that finds no support in reason. It suffices
then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions
not being different both in the privileges conferred and the liabilities imposed (Ibid.,
p. 662).
Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that
the first Fundamental Principle to guide the appraisal and assessment of real property
for taxation purposes is that the property must be "appraised at its current and fair
market value."
By no strength of the imagination can the market value of properties covered by P.D.
No. 20 be equated with the market value of properties not so covered. The former
has naturally a much lesser market value in view of the rental restrictions.

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

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

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

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

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

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

SO ORDERED.
G.R. No. 167330 September 18, 2009
PHILIPPINE HEALTH CARE PROVIDERS, INC., Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
RESOLUTION
CORONA, J.:
ARTICLE II
Declaration of Principles and State Policies
Section 15. The State shall protect and promote the right to health of the people and
instill health consciousness among them.
ARTICLE XIII
Social Justice and Human Rights
Section 11. The State shall adopt an integrated and comprehensive approach to
health development which shall endeavor to make essential goods, health and other
social services available to all the people at affordable cost. There shall be priority
for the needs of the underprivileged sick, elderly, disabled, women, and children.
The State shall endeavor to provide free medical care to paupers.1
For resolution are a motion for reconsideration and supplemental motion for
reconsideration dated July 10, 2008 and July 14, 2008, respectively, filed by
petitioner Philippine Health Care Providers, Inc.2
We recall the facts of this case, as follows:
Petitioner is a domestic corporation whose primary purpose is "[t]o establish,
maintain, conduct and operate a prepaid group practice health care delivery system
or a health maintenance organization to take care of the sick and disabled persons
enrolled in the health care plan and to provide for the administrative, legal, and
financial responsibilities of the organization." Individuals enrolled in its health care
programs pay an annual membership fee and are entitled to various preventive,
diagnostic and curative medical services provided by its duly licensed physicians,
specialists and other professional technical staff participating in the group practice
health delivery system at a hospital or clinic owned, operated or accredited by it.
xxx xxx xxx
On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent
petitioner a formal demand letter and the corresponding assessment notices
demanding the payment of deficiency taxes, including surcharges and interest, for
the taxable years 1996 and 1997 in the total amount of ₱224,702,641.18. xxxx
The deficiency [documentary stamp tax (DST)] assessment was imposed on
petitioner’s health care agreement with the members of its health care program
pursuant to Section 185 of the 1997 Tax Code xxxx
xxx xxx xxx
Petitioner protested the assessment in a letter dated February 23, 2000. As
respondent did not act on the protest, petitioner filed a petition for review in the
Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and
DST assessments.
On April 5, 2002, the CTA rendered a decision, the dispositive portion of which
read:
WHEREFORE, in view of the foregoing, the instant Petition for Review is
PARTIALLY GRANTED. Petitioner is hereby ORDERED to PAY the deficiency
VAT amounting to ₱22,054,831.75 inclusive of 25% surcharge plus 20% interest
from January 20, 1997 until fully paid for the 1996 VAT deficiency and
₱31,094,163.87 inclusive of 25% surcharge plus 20% interest from January 20, 1998
until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No. [231]-
88 is declared void and without force and effect. The 1996 and 1997 deficiency DST
assessment against petitioner is hereby CANCELLED AND SET ASIDE.
Respondent is ORDERED to DESIST from collecting the said DST deficiency tax.
SO ORDERED.
Respondent appealed the CTA decision to the [Court of Appeals (CA)] insofar as it
cancelled the DST assessment. He claimed that petitioner’s health care agreement
was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision. It held that petitioner’s health
care agreement was in the nature of a non-life insurance contract subject to DST.
WHEREFORE, the petition for review is GRANTED. The Decision of the Court of
Tax Appeals, insofar as it cancelled and set aside the 1996 and 1997 deficiency
documentary stamp tax assessment and ordered petitioner to desist from collecting
the same is REVERSED and SET ASIDE.
Respondent is ordered to pay the amounts of ₱55,746,352.19 and ₱68,450,258.73 as
deficiency Documentary Stamp Tax for 1996 and 1997, respectively, plus 25%
surcharge for late payment and 20% interest per annum from January 27, 2000,
pursuant to Sections 248 and 249 of the Tax Code, until the same shall have been
fully paid.
SO ORDERED.
Petitioner moved for reconsideration but the CA denied it. Hence, petitioner filed this
case.
xxx xxx xxx
In a decision dated June 12, 2008, the Court denied the petition and affirmed the
CA’s decision. We held that petitioner’s health care agreement during the pertinent
period was in the nature of non-life insurance which is a contract of indemnity,
citing Blue Cross Healthcare, Inc. v. Olivares3 and Philamcare Health Systems, Inc.
v. CA.4We also ruled that petitioner’s contention that it is a health maintenance
organization (HMO) and not an insurance company is irrelevant because contracts
between companies like petitioner and the beneficiaries under their plans are treated
as insurance contracts. Moreover, DST is not a tax on the business transacted but an
excise on the privilege, opportunity or facility offered at exchanges for the
transaction of the business.
Unable to accept our verdict, petitioner filed the present motion for reconsideration
and supplemental motion for reconsideration, asserting the following arguments:
(a) The DST under Section 185 of the National Internal Revenue of 1997 is
imposed only on a company engaged in the business of fidelity bonds and
other insurance policies. Petitioner, as an HMO, is a service provider, not an
insurance company.
(b) The Court, in dismissing the appeal in CIR v. Philippine National Bank,
affirmed in effect the CA’s disposition that health care services are not in
the nature of an insurance business.
(c) Section 185 should be strictly construed.
(d) Legislative intent to exclude health care agreements from items subject
to DST is clear, especially in the light of the amendments made in the DST
law in 2002.
(e) Assuming arguendo that petitioner’s agreements are contracts of
indemnity, they are not those contemplated under Section 185.
(f) Assuming arguendo that petitioner’s agreements are akin to health
insurance, health insurance is not covered by Section 185.
(g) The agreements do not fall under the phrase "other branch of insurance"
mentioned in Section 185.
(h) The June 12, 2008 decision should only apply prospectively.
(i) Petitioner availed of the tax amnesty benefits under RA5 9480 for the
taxable year 2005 and all prior years. Therefore, the questioned assessments
on the DST are now rendered moot and academic.6
Oral arguments were held in Baguio City on April 22, 2009. The parties submitted
their memoranda on June 8, 2009.
In its motion for reconsideration, petitioner reveals for the first time that it availed of
a tax amnesty under RA 94807(also known as the "Tax Amnesty Act of 2007") by
fully paying the amount of ₱5,127,149.08 representing 5% of its net worth as of the
year ending December 31, 2005.8
We find merit in petitioner’s motion for reconsideration.
Petitioner was formally registered and incorporated with the Securities and Exchange
Commission on June 30, 1987.9 It is engaged in the dispensation of the following
medical services to individuals who enter into health care agreements with it:
Preventive medical services such as periodic monitoring of health problems, family
planning counseling, consultation and advices on diet, exercise and other healthy
habits, and immunization;
Diagnostic medical services such as routine physical examinations, x-rays,
urinalysis, fecalysis, complete blood count, and the like and
Curative medical services which pertain to the performing of other remedial and
therapeutic processes in the event of an injury or sickness on the part of the enrolled
member.10
Individuals enrolled in its health care program pay an annual membership fee.
Membership is on a year-to-year basis. The medical services are dispensed to
enrolled members in a hospital or clinic owned, operated or accredited by petitioner,
through physicians, medical and dental practitioners under contract with it. It
negotiates with such health care practitioners regarding payment schemes, financing
and other procedures for the delivery of health services. Except in cases of
emergency, the professional services are to be provided only by petitioner's
physicians, i.e. those directly employed by it11 or whose services are contracted by
it.12 Petitioner also provides hospital services such as room and board
accommodation, laboratory services, operating rooms, x-ray facilities and general
nursing care.13 If and when a member avails of the benefits under the agreement,
petitioner pays the participating physicians and other health care providers for the
services rendered, at pre-agreed rates.14
To avail of petitioner’s health care programs, the individual members are required to
sign and execute a standard health care agreement embodying the terms and
conditions for the provision of the health care services. The same agreement contains
the various health care services that can be engaged by the enrolled member, i.e.,
preventive, diagnostic and curative medical services. Except for the curative aspect
of the medical service offered, the enrolled member may actually make use of the
health care services being offered by petitioner at any time.
Health Maintenance Organizations Are Not Engaged In The Insurance Business
We said in our June 12, 2008 decision that it is irrelevant that petitioner is an HMO
and not an insurer because its agreements are treated as insurance contracts and the
DST is not a tax on the business but an excise on the privilege, opportunity or facility
used in the transaction of the business.15
Petitioner, however, submits that it is of critical importance to characterize the
business it is engaged in, that is, to determine whether it is an HMO or an insurance
company, as this distinction is indispensable in turn to the issue of whether or not it
is liable for DST on its health care agreements.16
A second hard look at the relevant law and jurisprudence convinces the Court that
the arguments of petitioner are meritorious.
Section 185 of the National Internal Revenue Code of 1997 (NIRC of 1997)
provides:
Section 185. Stamp tax on fidelity bonds and other insurance policies. – On all
policies of insurance or bonds or obligations of the nature of indemnity for loss,
damage, or liability made or renewed by any person, association or company or
corporation transacting the business of accident, fidelity, employer’s liability,
plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of
insurance (except life, marine, inland, and fire insurance), and all bonds,
undertakings, or recognizances, conditioned for the performance of the duties of any
office or position, for the doing or not doing of anything therein specified, and on all
obligations guaranteeing the validity or legality of any bond or other obligations
issued by any province, city, municipality, or other public body or organization, and
on all obligations guaranteeing the title to any real estate, or guaranteeing any
mercantile credits, which may be made or renewed by any such person, company or
corporation, there shall be collected a documentary stamp tax of fifty centavos
(₱0.50) on each four pesos (₱4.00), or fractional part thereof, of the premium
charged. (Emphasis supplied)
It is a cardinal rule in statutory construction that no word, clause, sentence, provision
or part of a statute shall be considered surplusage or superfluous, meaningless, void
and insignificant. To this end, a construction which renders every word operative is
preferred over that which makes some words idle and nugatory.17 This principle is
expressed in the maxim Ut magis valeat quam pereat, that is, we choose the
interpretation which gives effect to the whole of the statute – its every word.18
From the language of Section 185, it is evident that two requisites must concur
before the DST can apply, namely: (1) the document must be a policy of insurance
or an obligation in the nature of indemnity and (2) the maker should be
transacting the business of accident, fidelity, employer’s liability, plate, glass,
steam boiler, burglar, elevator, automatic sprinkler, or other branch
of insurance (except life, marine, inland, and fire insurance).
Petitioner is admittedly an HMO. Under RA 7875 (or "The National Health
Insurance Act of 1995"), an HMO is "an entity that provides, offers or arranges for
coverage of designated health services needed by plan members for a fixed prepaid
premium."19 The payments do not vary with the extent, frequency or type of services
provided.
The question is: was petitioner, as an HMO, engaged in the business of insurance
during the pertinent taxable years? We rule that it was not.
Section 2 (2) of PD20 1460 (otherwise known as the Insurance Code) enumerates
what constitutes "doing an insurance business" or "transacting an insurance
business:"
a) making or proposing to make, as insurer, any insurance contract;
b) making or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or
activity of the surety;
c) doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the
meaning of this Code;
d) doing or proposing to do any business in substance equivalent to any of
the foregoing in a manner designed to evade the provisions of this Code.
In the application of the provisions of this Code, the fact that no profit is derived
from the making of insurance contracts, agreements or transactions or that no
separate or direct consideration is received therefore, shall not be deemed conclusive
to show that the making thereof does not constitute the doing or transacting of an
insurance business.
Various courts in the United States, whose jurisprudence has a persuasive effect on
our decisions,21 have determined that HMOs are not in the insurance business. One
test that they have applied is whether the assumption of risk and indemnification of
loss (which are elements of an insurance business) are the principal object and
purpose of the organization or whether they are merely incidental to its business. If
these are the principal objectives, the business is that of insurance. But if they are
merely incidental and service is the principal purpose, then the business is not
insurance.
Applying the "principal object and purpose test,"22 there is significant American case
law supporting the argument that a corporation (such as an HMO, whether or not
organized for profit), whose main object is to provide the members of a group with
health services, is not engaged in the insurance business.
The rule was enunciated in Jordan v. Group Health Association23 wherein the Court
of Appeals of the District of Columbia Circuit held that Group Health Association
should not be considered as engaged in insurance activities since it was created
primarily for the distribution of health care services rather than the assumption of
insurance risk.
xxx Although Group Health’s activities may be considered in one aspect as creating
security against loss from illness or accident more truly they constitute the quantity
purchase of well-rounded, continuous medical service by its members. xxx The
functions of such an organization are not identical with those of insurance or
indemnity companies. The latter are concerned primarily, if not exclusively, with
risk and the consequences of its descent, not with service, or its extension in kind,
quantity or distribution; with the unusual occurrence, not the daily routine of living.
Hazard is predominant. On the other hand, the cooperative is concerned
principally with getting service rendered to its members and doing so at lower
prices made possible by quantity purchasing and economies in operation. Its
primary purpose is to reduce the cost rather than the risk of medical care; to
broaden the service to the individual in kind and quantity; to enlarge the
number receiving it; to regularize it as an everyday incident of living, like
purchasing food and clothing or oil and gas, rather than merely protecting
against the financial loss caused by extraordinary and unusual occurrences,
such as death, disaster at sea, fire and tornado. It is, in this instance, to take care
of colds, ordinary aches and pains, minor ills and all the temporary bodily
discomforts as well as the more serious and unusual illness. To summarize, the
distinctive features of the cooperative are the rendering of service, its extension,
the bringing of physician and patient together, the preventive features, the
regularization of service as well as payment, the substantial reduction in cost by
quantity purchasing in short, getting the medical job done and paid for; not,
except incidentally to these features, the indemnification for cost after the
services is rendered. Except the last, these are not distinctive or generally
characteristic of the insurance arrangement. There is, therefore, a substantial
difference between contracting in this way for the rendering of service, even on the
contingency that it be needed, and contracting merely to stand its cost when or after
it is rendered.
That an incidental element of risk distribution or assumption may be present should
not outweigh all other factors. If attention is focused only on that feature, the line
between insurance or indemnity and other types of legal arrangement and economic
function becomes faint, if not extinct. This is especially true when the contract is for
the sale of goods or services on contingency. But obviously it was not the purpose of
the insurance statutes to regulate all arrangements for assumption or distribution of
risk. That view would cause them to engulf practically all contracts, particularly
conditional sales and contingent service agreements. The fallacy is in looking only
at the risk element, to the exclusion of all others present or their subordination
to it. The question turns, not on whether risk is involved or assumed, but on
whether that or something else to which it is related in the particular plan is its
principal object purpose.24 (Emphasis supplied)
In California Physicians’ Service v. Garrison,25 the California court felt that, after
scrutinizing the plan of operation as a whole of the corporation, it was service rather
than indemnity which stood as its principal purpose.
There is another and more compelling reason for holding that the service is not
engaged in the insurance business. Absence or presence of assumption of risk or
peril is not the sole test to be applied in determining its status. The question,
more broadly, is whether, looking at the plan of operation as a whole, ‘service’
rather than ‘indemnity’ is its principal object and purpose. Certainly the objects
and purposes of the corporation organized and maintained by the California
physicians have a wide scope in the field of social service. Probably there is no
more impelling need than that of adequate medical care on a voluntary, low-
cost basis for persons of small income. The medical profession unitedly is
endeavoring to meet that need. Unquestionably this is ‘service’ of a high order
and not ‘indemnity.’26 (Emphasis supplied)
American courts have pointed out that the main difference between an HMO and an
insurance company is that HMOs undertake to provide or arrange for the provision
of medical services through participating physicians while insurance companies
simply undertake to indemnify the insured for medical expenses incurred up to a pre-
agreed limit. Somerset Orthopedic Associates, P.A. v. Horizon Blue Cross and Blue
Shield of New Jersey27 is clear on this point:
The basic distinction between medical service corporations and ordinary health and
accident insurers is that the former undertake to provide prepaid medical
services through participating physicians, thus relieving subscribers of any further
financial burden, while the latter only undertake to indemnify an insured for medical
expenses up to, but not beyond, the schedule of rates contained in the policy.
xxx xxx xxx
The primary purpose of a medical service corporation, however, is an undertaking to
provide physicians who will render services to subscribers on a prepaid basis. Hence,
if there are no physicians participating in the medical service corporation’s
plan, not only will the subscribers be deprived of the protection which they
might reasonably have expected would be provided, but the corporation will, in
effect, be doing business solely as a health and accident indemnity
insurer without having qualified as such and rendering itself subject to the more
stringent financial requirements of the General Insurance Laws….
A participating provider of health care services is one who agrees in writing to render
health care services to or for persons covered by a contract issued by health service
corporation in return for which the health service corporation agrees to make
payment directly to the participating provider.28 (Emphasis supplied)
Consequently, the mere presence of risk would be insufficient to override the
primary purpose of the business to provide medical services as needed, with payment
made directly to the provider of these services.29 In short, even if petitioner assumes
the risk of paying the cost of these services even if significantly more than what the
member has prepaid, it nevertheless cannot be considered as being engaged in the
insurance business.
By the same token, any indemnification resulting from the payment for services
rendered in case of emergency by non-participating health providers would still be
incidental to petitioner’s purpose of providing and arranging for health care services
and does not transform it into an insurer. To fulfill its obligations to its members
under the agreements, petitioner is required to set up a system and the facilities for
the delivery of such medical services. This indubitably shows that indemnification is
not its sole object.
In fact, a substantial portion of petitioner’s services covers preventive and diagnostic
medical services intended to keep members from developing medical conditions or
diseases.30 As an HMO, it is its obligation to maintain the good health of its
members. Accordingly, its health care programs are designed to prevent or to
minimize thepossibility of any assumption of risk on its part. Thus, its
undertaking under its agreements is not to indemnify its members against any loss or
damage arising from a medical condition but, on the contrary, to provide the health
and medical services needed to prevent such loss or damage.31
Overall, petitioner appears to provide insurance-type benefits to its members (with
respect to its curative medical services), but these are incidental to the principal
activity of providing them medical care. The "insurance-like" aspect of petitioner’s
business is miniscule compared to its noninsurance activities. Therefore, since it
substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.
It is important to emphasize that, in adopting the "principal purpose test" used in the
above-quoted U.S. cases, we are not saying that petitioner’s operations are identical
in every respect to those of the HMOs or health providers which were parties to
those cases. What we are stating is that, for the purpose of determining what "doing
an insurance business" means, we have to scrutinize the operations of the business as
a whole and not its mere components. This is of course only prudent and appropriate,
taking into account the burdensome and strict laws, rules and regulations applicable
to insurers and other entities engaged in the insurance business. Moreover, we are
also not unmindful that there are other American authorities who have found
particular HMOs to be actually engaged in insurance activities.32
Lastly, it is significant that petitioner, as an HMO, is not part of the insurance
industry. This is evident from the fact that it is not supervised by the Insurance
Commission but by the Department of Health.33 In fact, in a letter dated September 3,
2000, the Insurance Commissioner confirmed that petitioner is not engaged in the
insurance business. This determination of the commissioner must be accorded great
weight. It is well-settled that the interpretation of an administrative agency which is
tasked to implement a statute is accorded great respect and ordinarily controls the
interpretation of laws by the courts. The reason behind this rule was explained
in Nestle Philippines, Inc. v. Court of Appeals:34
The rationale for this rule relates not only to the emergence of the multifarious needs
of a modern or modernizing society and the establishment of diverse administrative
agencies for addressing and satisfying those needs; it also relates to the accumulation
of experience and growth of specialized capabilities by the administrative agency
charged with implementing a particular statute. In Asturias Sugar Central, Inc. vs.
Commissioner of Customs,35 the Court stressed that executive officials are presumed
to have familiarized themselves with all the considerations pertinent to the meaning
and purpose of the law, and to have formed an independent, conscientious and
competent expert opinion thereon. The courts give much weight to the government
agency officials charged with the implementation of the law, their competence,
expertness, experience and informed judgment, and the fact that they frequently are
the drafters of the law they interpret.36
A Health Care Agreement Is Not An Insurance Contract Contemplated Under
Section 185 Of The NIRC of 1997
Section 185 states that DST is imposed on "all policies of insurance… or obligations
of the nature of indemnity for loss, damage, or liability…." In our decision dated
June 12, 2008, we ruled that petitioner’s health care agreements are contracts of
indemnity and are therefore insurance contracts:
It is … incorrect to say that the health care agreement is not based on loss or damage
because, under the said agreement, petitioner assumes the liability and indemnifies
its member for hospital, medical and related expenses (such as professional fees of
physicians). The term "loss or damage" is broad enough to cover the monetary
expense or liability a member will incur in case of illness or injury.
Under the health care agreement, the rendition of hospital, medical and professional
services to the member in case of sickness, injury or emergency or his availment of
so-called "out-patient services" (including physical examination, x-ray and
laboratory tests, medical consultations, vaccine administration and family planning
counseling) is the contingent event which gives rise to liability on the part of the
member. In case of exposure of the member to liability, he would be entitled to
indemnification by petitioner.
Furthermore, the fact that petitioner must relieve its member from liability by paying
for expenses arising from the stipulated contingencies belies its claim that its services
are prepaid. The expenses to be incurred by each member cannot be predicted
beforehand, if they can be predicted at all. Petitioner assumes the risk of paying for
the costs of the services even if they are significantly and substantially more than
what the member has "prepaid." Petitioner does not bear the costs alone but
distributes or spreads them out among a large group of persons bearing a similar risk,
that is, among all the other members of the health care program. This is insurance.37
We reconsider. We shall quote once again the pertinent portion of Section 185:
Section 185. Stamp tax on fidelity bonds and other insurance policies. – On all
policies of insurance or bonds or obligations of the nature of indemnity for loss,
damage, or liability made or renewed by any person, association or company or
corporation transacting the business of accident, fidelity, employer’s liability, plate,
glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of
insurance (except life, marine, inland, and fire insurance), xxxx (Emphasis supplied)
In construing this provision, we should be guided by the principle that tax statutes
are strictly construed against the taxing authority.38 This is because taxation is a
destructive power which interferes with the personal and property rights of the
people and takes from them a portion of their property for the support of the
government.39 Hence, tax laws may not be extended by implication beyond the clear
import of their language, nor their operation enlarged so as to embrace matters not
specifically provided.40
We are aware that, in Blue Cross and Philamcare, the Court pronounced that a health
care agreement is in the nature of non-life insurance, which is primarily a contract of
indemnity. However, those cases did not involve the interpretation of a tax provision.
Instead, they dealt with the liability of a health service provider to a member under
the terms of their health care agreement. Such contracts, as contracts of adhesion, are
liberally interpreted in favor of the member and strictly against the HMO. For this
reason, we reconsider our ruling that Blue Cross and Philamcare are applicable here.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement
whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event. An insurance
contract exists where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designed
peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual
losses among a large group of persons bearing a similar risk and
5. In consideration of the insurer’s promise, the insured pays a premium.41
Do the agreements between petitioner and its members possess all these elements?
They do not.
First. In our jurisdiction, a commentator of our insurance laws has pointed out that,
even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance:
It does not necessarily follow however, that a contract containing all the four
elements mentioned above would be an insurance contract. The primary purpose of
the parties in making the contract may negate the existence of an insurance
contract. For example, a law firm which enters into contracts with clients whereby
in consideration of periodical payments, it promises to represent such clients in all
suits for or against them, is not engaged in the insurance business. Its contracts are
simply for the purpose of rendering personal services. On the other hand, a contract
by which a corporation, in consideration of a stipulated amount, agrees at its own
expense to defend a physician against all suits for damages for malpractice is one of
insurance, and the corporation will be deemed as engaged in the business of
insurance. Unlike the lawyer’s retainer contract, the essential purpose of such a
contract is not to render personal services, but to indemnify against loss and damage
resulting from the defense of actions for malpractice.42 (Emphasis supplied)
Second. Not all the necessary elements of a contract of insurance are present in
petitioner’s agreements. To begin with, there is no loss, damage or liability on the
part of the member that should be indemnified by petitioner as an HMO. Under the
agreement, the member pays petitioner a predetermined consideration in exchange
for the hospital, medical and professional services rendered by the petitioner’s
physician or affiliated physician to him. In case of availment by a member of the
benefits under the agreement, petitioner does not reimburse or indemnify the member
as the latter does not pay any third party. Instead, it is the petitioner who pays the
participating physicians and other health care providers for the services rendered at
pre-agreed rates. The member does not make any such payment.
In other words, there is nothing in petitioner's agreements that gives rise to a
monetary liability on the part of the member to any third party-provider of medical
services which might in turn necessitate indemnification from petitioner. The terms
"indemnify" or "indemnity" presuppose that a liability or claim has already been
incurred. There is no indemnity precisely because the member merely avails of
medical services to be paid or already paid in advance at a pre-agreed price under the
agreements.
Third. According to the agreement, a member can take advantage of the bulk of the
benefits anytime, e.g. laboratory services, x-ray, routine annual physical examination
and consultations, vaccine administration as well as family planning counseling,
even in the absence of any peril, loss or damage on his or her part.
Fourth. In case of emergency, petitioner is obliged to reimburse the member who
receives care from a non-participating physician or hospital. However, this is only a
very minor part of the list of services available. The assumption of the expense by
petitioner is not confined to the happening of a contingency but includes incidents
even in the absence of illness or injury.
In Michigan Podiatric Medical Association v. National Foot Care Program,
Inc.,43 although the health care contracts called for the defendant to partially
reimburse a subscriber for treatment received from a non-designated doctor, this did
not make defendant an insurer. Citing Jordan, the Court determined that "the
primary activity of the defendant (was) the provision of podiatric services to
subscribers in consideration of prepayment for such services."44 Since indemnity of
the insured was not the focal point of the agreement but the extension of medical
services to the member at an affordable cost, it did not partake of the nature of a
contract of insurance.
Fifth. Although risk is a primary element of an insurance contract, it is not
necessarily true that risk alone is sufficient to establish it. Almost anyone who
undertakes a contractual obligation always bears a certain degree of financial risk.
Consequently, there is a need to distinguish prepaid service contracts (like those of
petitioner) from the usual insurance contracts.
Indeed, petitioner, as an HMO, undertakes a business risk when it offers to provide
health services: the risk that it might fail to earn a reasonable return on its
investment. But it is not the risk of the type peculiar only to insurance companies.
Insurance risk, also known as actuarial risk, is the risk that the cost of insurance
claims might be higher than the premiums paid. The amount of premium is
calculated on the basis of assumptions made relative to the insured.45
However, assuming that petitioner’s commitment to provide medical services to its
members can be construed as an acceptance of the risk that it will shell out more than
the prepaid fees, it still will not qualify as an insurance contract because petitioner’s
objective is to provide medical services at reduced cost, not to distribute risk like an
insurer.
In sum, an examination of petitioner’s agreements with its members leads us to
conclude that it is not an insurance contract within the context of our Insurance
Code.
There Was No Legislative Intent To Impose DST On Health Care Agreements
Of HMOs
Furthermore, militating in convincing fashion against the imposition of DST on
petitioner’s health care agreements under Section 185 of the NIRC of 1997 is the
provision’s legislative history. The text of Section 185 came into U.S. law as early as
1904 when HMOs and health care agreements were not even in existence in this
jurisdiction. It was imposed under Section 116, Article XI of Act No. 1189
(otherwise known as the "Internal Revenue Law of 1904")46enacted on July 2, 1904
and became effective on August 1, 1904. Except for the rate of tax, Section 185 of
the NIRC of 1997 is a verbatim reproduction of the pertinent portion of Section 116,
to wit:
ARTICLE XI
Stamp Taxes on Specified Objects
Section 116. There shall be levied, collected, and paid for and in respect to the
several bonds, debentures, or certificates of stock and indebtedness, and other
documents, instruments, matters, and things mentioned and described in this section,
or for or in respect to the vellum, parchment, or paper upon which such instrument,
matters, or things or any of them shall be written or printed by any person or persons
who shall make, sign, or issue the same, on and after January first, nineteen hundred
and five, the several taxes following:
xxx xxx xxx
Third xxx (c) on all policies of insurance or bond or obligation of the nature of
indemnity for loss, damage, or liability made or renewed by any person,
association, company, or corporation transacting the business of accident,
fidelity, employer’s liability, plate glass, steam boiler, burglar, elevator,
automatic sprinkle, or other branch of insurance (except life, marine, inland,
and fire insurance) xxxx (Emphasis supplied)
On February 27, 1914, Act No. 2339 (the Internal Revenue Law of 1914) was
enacted revising and consolidating the laws relating to internal revenue. The
aforecited pertinent portion of Section 116, Article XI of Act No. 1189 was
completely reproduced as Section 30 (l), Article III of Act No. 2339. The very
detailed and exclusive enumeration of items subject to DST was thus retained.
On December 31, 1916, Section 30 (l), Article III of Act No. 2339 was again
reproduced as Section 1604 (l), Article IV of Act No. 2657 (Administrative Code).
Upon its amendment on March 10, 1917, the pertinent DST provision became
Section 1449 (l) of Act No. 2711, otherwise known as the Administrative Code of
1917.
Section 1449 (1) eventually became Sec. 222 of Commonwealth Act No. 466 (the
NIRC of 1939), which codified all the internal revenue laws of the Philippines. In an
amendment introduced by RA 40 on October 1, 1946, the DST rate was increased
but the provision remained substantially the same.
Thereafter, on June 3, 1977, the same provision with the same DST rate was
reproduced in PD 1158 (NIRC of 1977) as Section 234. Under PDs 1457 and 1959,
enacted on June 11, 1978 and October 10, 1984 respectively, the DST rate was again
increased.1avvphi1
Effective January 1, 1986, pursuant to Section 45 of PD 1994, Section 234 of the
NIRC of 1977 was renumbered as Section 198. And under Section 23 of EO47 273
dated July 25, 1987, it was again renumbered and became Section 185.
On December 23, 1993, under RA 7660, Section 185 was amended but, again, only
with respect to the rate of tax.
Notwithstanding the comprehensive amendment of the NIRC of 1977 by RA 8424
(or the NIRC of 1997), the subject legal provision was retained as the present Section
185. In 2004, amendments to the DST provisions were introduced by RA 924348 but
Section 185 was untouched.
On the other hand, the concept of an HMO was introduced in the Philippines with the
formation of Bancom Health Care Corporation in 1974. The same pioneer HMO was
later reorganized and renamed Integrated Health Care Services, Inc. (or Intercare).
However, there are those who claim that Health Maintenance, Inc. is the HMO
industry pioneer, having set foot in the Philippines as early as 1965 and having been
formally incorporated in 1991. Afterwards, HMOs proliferated quickly and currently,
there are 36 registered HMOs with a total enrollment of more than 2 million.49
We can clearly see from these two histories (of the DST on the one hand and HMOs
on the other) that when the law imposing the DST was first passed, HMOs were yet
unknown in the Philippines. However, when the various amendments to the DST law
were enacted, they were already in existence in the Philippines and the term had in
fact already been defined by RA 7875. If it had been the intent of the legislature to
impose DST on health care agreements, it could have done so in clear and
categorical terms. It had many opportunities to do so. But it did not. The fact that the
NIRC contained no specific provision on the DST liability of health care agreements
of HMOs at a time they were already known as such, belies any legislative intent to
impose it on them. As a matter of fact, petitioner was assessed its DST liability
only on January 27, 2000, after more than a decade in the business as an
HMO.50
Considering that Section 185 did not change since 1904 (except for the rate of tax), it
would be safe to say that health care agreements were never, at any time, recognized
as insurance contracts or deemed engaged in the business of insurance within the
context of the provision.
The Power To Tax Is Not The Power To Destroy
As a general rule, the power to tax is an incident of sovereignty and is unlimited in
its range, acknowledging in its very nature no limits, so that security against its abuse
is to be found only in the responsibility of the legislature which imposes the tax on
the constituency who is to pay it.51 So potent indeed is the power that it was once
opined that "the power to tax involves the power to destroy."52
Petitioner claims that the assessed DST to date which amounts to ₱376 million53 is
way beyond its net worth of ₱259 million.54 Respondent never disputed these
assertions. Given the realities on the ground, imposing the DST on petitioner would
be highly oppressive. It is not the purpose of the government to throttle private
business. On the contrary, the government ought to encourage private
enterprise.55 Petitioner, just like any concern organized for a lawful economic
activity, has a right to maintain a legitimate business.56 As aptly held in Roxas, et al.
v. CTA, et al.:57
The power of taxation is sometimes called also the power to destroy. Therefore it
should be exercised with caution to minimize injury to the proprietary rights of a
taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the "hen that lays the golden egg."58
Legitimate enterprises enjoy the constitutional protection not to be taxed out of
existence. Incurring losses because of a tax imposition may be an acceptable
consequence but killing the business of an entity is another matter and should not be
allowed. It is counter-productive and ultimately subversive of the nation’s thrust
towards a better economy which will ultimately benefit the majority of our people.59
Petitioner’s Tax Liability Was Extinguished Under The Provisions Of RA 9840
Petitioner asserts that, regardless of the arguments, the DST assessment for taxable
years 1996 and 1997 became moot and academic60 when it availed of the tax
amnesty under RA 9480 on December 10, 2007. It paid ₱5,127,149.08 representing
5% of its net worth as of the year ended December 31, 2005 and complied with all
requirements of the tax amnesty. Under Section 6(a) of RA 9480, it is entitled to
immunity from payment of taxes as well as additions thereto, and the appurtenant
civil, criminal or administrative penalties under the 1997 NIRC, as amended, arising
from the failure to pay any and all internal revenue taxes for taxable year 2005 and
prior years.61
Far from disagreeing with petitioner, respondent manifested in its memorandum:
Section 6 of [RA 9840] provides that availment of tax amnesty entitles a taxpayer to
immunity from payment of the tax involved, including the civil, criminal, or
administrative penalties provided under the 1997 [NIRC], for tax liabilities arising in
2005 and the preceding years.
In view of petitioner’s availment of the benefits of [RA 9840], and without
conceding the merits of this case as discussed above, respondent concedes that
such tax amnesty extinguishes the tax liabilities of petitioner. This admission,
however, is not meant to preclude a revocation of the amnesty granted in case it is
found to have been granted under circumstances amounting to tax fraud under
Section 10 of said amnesty law.62 (Emphasis supplied)
Furthermore, we held in a recent case that DST is one of the taxes covered by the tax
amnesty program under RA 9480.63 There is no other conclusion to draw than that
petitioner’s liability for DST for the taxable years 1996 and 1997 was totally
extinguished by its availment of the tax amnesty under RA 9480.
Is The Court Bound By A Minute Resolution In Another Case?
Petitioner raises another interesting issue in its motion for reconsideration: whether
this Court is bound by the ruling of the CA64 in CIR v. Philippine National
Bank65 that a health care agreement of Philamcare Health Systems is not an insurance
contract for purposes of the DST.
In support of its argument, petitioner cites the August 29, 2001 minute resolution of
this Court dismissing the appeal in Philippine National Bank (G.R. No.
148680).66 Petitioner argues that the dismissal of G.R. No. 148680 by minute
resolution was a judgment on the merits; hence, the Court should apply the CA
ruling there that a health care agreement is not an insurance contract.
It is true that, although contained in a minute resolution, our dismissal of the petition
was a disposition of the merits of the case. When we dismissed the petition, we
effectively affirmed the CA ruling being questioned. As a result, our ruling in that
case has already become final.67 When a minute resolution denies or dismisses a
petition for failure to comply with formal and substantive requirements, the
challenged decision, together with its findings of fact and legal conclusions, are
deemed sustained.68 But what is its effect on other cases?
With respect to the same subject matter and the same issues concerning the same
parties, it constitutes res judicata.69 However, if other parties or another subject
matter (even with the same parties and issues) is involved, the minute resolution is
not binding precedent. Thus, in CIR v. Baier-Nickel,70 the Court noted that a previous
case, CIR v. Baier-Nickel71 involving the same parties and the same issues, was
previously disposed of by the Court thru a minute resolution dated February 17, 2003
sustaining the ruling of the CA. Nonetheless, the Court ruled that the previous case
"ha(d) no bearing" on the latter case because the two cases involved different
subject matters as they were concerned with the taxable income of different taxable
years.72
Besides, there are substantial, not simply formal, distinctions between a minute
resolution and a decision. The constitutional requirement under the first paragraph of
Section 14, Article VIII of the Constitution that the facts and the law on which the
judgment is based must be expressed clearly and distinctly applies only to decisions,
not to minute resolutions. A minute resolution is signed only by the clerk of court by
authority of the justices, unlike a decision. It does not require the certification of the
Chief Justice. Moreover, unlike decisions, minute resolutions are not published in the
Philippine Reports. Finally, the proviso of Section 4(3) of Article VIII speaks of a
decision.73Indeed, as a rule, this Court lays down doctrines or principles of law
which constitute binding precedent in a decision duly signed by the members of the
Court and certified by the Chief Justice.
Accordingly, since petitioner was not a party in G.R. No. 148680 and since
petitioner’s liability for DST on its health care agreement was not the subject matter
of G.R. No. 148680, petitioner cannot successfully invoke the minute resolution in
that case (which is not even binding precedent) in its favor. Nonetheless, in view of
the reasons already discussed, this does not detract in any way from the fact that
petitioner’s health care agreements are not subject to DST.
A Final Note
Taking into account that health care agreements are clearly not within the ambit of
Section 185 of the NIRC and there was never any legislative intent to impose the
same on HMOs like petitioner, the same should not be arbitrarily and unjustly
included in its coverage.

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

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

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

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

No costs.

SO ORDERED.
G.R. No. L-24693 July 31, 1967
ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION,
INC., HOTEL DEL MAR INC. and GO CHIU, petitioners-appellees,
vs.
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant.
VICTOR ALABANZA, intervenor-appellee.
Panganiban, Abad and Associates Law Office for respondent-appellant.
J. M. Aruego, Tenchavez and Associates for intervenor-appellee.
FERNANDO, J.:
The principal question in this appeal from a judgment of the lower court in an action
for prohibition is whether Ordinance No. 4760 of the City of Manila is violative of
the due process clause. The lower court held that it is and adjudged it
"unconstitutional, and, therefore, null and void." For reasons to be more specifically
set forth, such judgment must be reversed, there being a failure of the requisite
showing to sustain an attack against its validity.
The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by
the petitioners, Ermita-Malate Hotel and Motel Operators Association, one of its
members, Hotel del Mar Inc., and a certain Go Chiu, who is "the president and
general manager of the second petitioner" against the respondent Mayor of the City
of Manila who was sued in his capacity as such "charged with the general power and
duty to enforce ordinances of the City of Manila and to give the necessary orders for
the faithful execution and enforcement of such ordinances." (par. 1). It was alleged
that the petitioner non-stock corporation is dedicated to the promotion and protection
of the interest of its eighteen (18) members "operating hotels and motels,
characterized as legitimate businesses duly licensed by both national and city
authorities, regularly paying taxes, employing and giving livelihood to not less than
2,500 person and representing an investment of more than P3 million."1 (par. 2). It
was then alleged that on June 13, 1963, the Municipal Board of the City of Manila
enacted Ordinance No. 4760, approved on June 14, 1963 by the then Vice-Mayor
Herminio Astorga, who was at the time acting as Mayor of the City of Manila. (par.
3).
After which the alleged grievances against the ordinance were set forth in detail.
There was the assertion of its being beyond the powers of the Municipal Board of the
City of Manila to enact insofar as it would regulate motels, on the ground that in the
revised charter of the City of Manila or in any other law, no reference is made to
motels; that Section 1 of the challenged ordinance is unconstitutional and void for
being unreasonable and violative of due process insofar as it would impose
P6,000.00 fee per annum for first class motels and P4,500.00 for second class
motels; that the provision in the same section which would require the owner,
manager, keeper or duly authorized representative of a hotel, motel, or lodging house
to refrain from entertaining or accepting any guest or customer or letting any room or
other quarter to any person or persons without his filling up the prescribed form in a
lobby open to public view at all times and in his presence, wherein the surname,
given name and middle name, the date of birth, the address, the occupation, the sex,
the nationality, the length of stay and the number of companions in the room, if any,
with the name, relationship, age and sex would be specified, with data furnished as to
his residence certificate as well as his passport number, if any, coupled with a
certification that a person signing such form has personally filled it up and affixed
his signature in the presence of such owner, manager, keeper or duly authorized
representative, with such registration forms and records kept and bound together, it
also being provided that the premises and facilities of such hotels, motels and
lodging houses would be open for inspection either by the City Mayor, or the Chief
of Police, or their duly authorized representatives is unconstitutional and void again
on due process grounds, not only for being arbitrary, unreasonable or oppressive but
also for being vague, indefinite and uncertain, and likewise for the alleged invasion
of the right to privacy and the guaranty against self-incrimination; that Section 2 of
the challenged ordinance classifying motels into two classes and requiring the
maintenance of certain minimum facilities in first class motels such as a telephone in
each room, a dining room or, restaurant and laundry similarly offends against the due
process clause for being arbitrary, unreasonable and oppressive, a conclusion which
applies to the portion of the ordinance requiring second class motels to have a dining
room; that the provision of Section 2 of the challenged ordinance prohibiting a
person less than 18 years old from being accepted in such hotels, motels, lodging
houses, tavern or common inn unless accompanied by parents or a lawful guardian
and making it unlawful for the owner, manager, keeper or duly authorized
representative of such establishments to lease any room or portion thereof more than
twice every 24 hours, runs counter to the due process guaranty for lack of certainty
and for its unreasonable, arbitrary and oppressive character; and that insofar as the
penalty provided for in Section 4 of the challenged ordinance for a subsequent
conviction would, cause the automatic cancellation of the license of the offended
party, in effect causing the destruction of the business and loss of its investments,
there is once again a transgression of the due process clause.
There was a plea for the issuance of preliminary injunction and for a final judgment
declaring the above ordinance null and void and unenforceable. The lower court on
July 6, 1963 issued a writ of preliminary injunction ordering respondent Mayor to
refrain from enforcing said Ordinance No. 4760 from and after July 8, 1963.
In the a answer filed on August 3, 1963, there was an admission of the personal
circumstances regarding the respondent Mayor and of the fact that petitioners are
licensed to engage in the hotel or motel business in the City of Manila, of the
provisions of the cited Ordinance but a denial of its alleged nullity, whether on
statutory or constitutional grounds. After setting forth that the petition did fail to state
a cause of action and that the challenged ordinance bears a reasonable relation, to a
proper purpose, which is to curb immorality, a valid and proper exercise of the police
power and that only the guests or customers not before the court could complain of
the alleged invasion of the right to privacy and the guaranty against self
incrimination, with the assertion that the issuance of the preliminary injunction ex
parte was contrary to law, respondent Mayor prayed for, its dissolution and the
dismissal of the petition.
Instead of evidence being offered by both parties, there was submitted a stipulation
of facts dated September 28, 1964, which reads:
1. That the petitioners Ermita-Malate Hotel and Motel Operators
Association, Inc. and Hotel del Mar Inc. are duly organized and existing
under the laws of the Philippines, both with offices in the City of Manila,
while the petitioner Go Chin is the president and general manager of Hotel
del Mar Inc., and the intervenor Victor Alabanza is a resident of Baguio
City, all having the capacity to sue and be sued;
2. That the respondent Mayor is the duly elected and incumbent City Mayor
and chief executive of the City of Manila charged with the general power
and duty to enforce ordinances of the City of Manila and to give the
necessary orders for the faithful execution and enforcement of such
ordinances;
3. That the petitioners are duly licensed to engage in the business of
operating hotels and motels in Malate and Ermita districts in Manila;
4. That on June 13, 1963, the Municipal Board of the City of Manila
enacted Ordinance No. 4760, which was approved on June 14, 1963, by
Vice-Mayor Herminio Astorga, then the acting City Mayor of Manila, in the
absence of the respondent regular City Mayor, amending sections 661, 662,
668-a, 668-b and 669 of the compilation of the ordinances of the City of
Manila besides inserting therein three new sections. This ordinance is
similar to the one vetoed by the respondent Mayor (Annex A) for the
reasons stated in its 4th Indorsement dated February 15, 1963 (Annex B);
5. That the explanatory note signed by then Councilor Herminio Astorga
was submitted with the proposed ordinance (now Ordinance 4760) to the
Municipal Board, copy of which is attached hereto as Annex C;
6. That the City of Manila derived in 1963 an annual income of
P101,904.05 from license fees paid by the 105 hotels and motels (including
herein petitioners) operating in the City of Manila.1äwphï1.ñët
Thereafter came a memorandum for respondent on January 22, 1965, wherein stress
was laid on the presumption of the validity of the challenged ordinance, the burden
of showing its lack of conformity to the Constitution resting on the party who assails
it, citing not only U.S. v. Salaveria, but likewise applicable American authorities.
Such a memorandum likewise refuted point by point the arguments advanced by
petitioners against its validity. Then barely two weeks later, on February 4, 1965, the
memorandum for petitioners was filed reiterating in detail what was set forth in the
petition, with citations of what they considered to be applicable American authorities
and praying for a judgment declaring the challenged ordinance "null and void and
unenforceable" and making permanent the writ of preliminary injunction issued.
After referring to the motels and hotels, which are members of the petitioners
association, and referring to the alleged constitutional questions raised by the party,
the lower court observed: "The only remaining issue here being purely a question of
law, the parties, with the nod of the Court, agreed to file memoranda and thereafter,
to submit the case for decision of the Court." It does appear obvious then that
without any evidence submitted by the parties, the decision passed upon the alleged
infirmity on constitutional grounds of the challenged ordinance, dismissing as is
undoubtedly right and proper the untenable objection on the alleged lack of authority
of the City of Manila to regulate motels, and came to the conclusion that "the
challenged Ordinance No. 4760 of the City of Manila, would be unconstitutional
and, therefore, null and void." It made permanent the preliminary injunction issued
against respondent Mayor and his agents "to restrain him from enforcing the
ordinance in question." Hence this appeal.
As noted at the outset, the judgment must be reversed. A decent regard for
constitutional doctrines of a fundamental character ought to have admonished the
lower court against such a sweeping condemnation of the challenged ordinance. Its
decision cannot be allowed to stand, consistently with what has hitherto been the
accepted standards of constitutional adjudication, in both procedural and substantive
aspects.
Primarily what calls for a reversal of such a decision is the absence of any evidence
to offset the presumption of validity that attaches to a challenged statute or
ordinance. As was expressed categorically by Justice Malcolm: "The presumption is
all in favor of validity x x x . The action of the elected representatives of the people
cannot be lightly set aside. The councilors must, in the very nature of things, be
familiar with the necessities of their particular municipality and with all the facts and
circumstances which surround the subject and necessitate action. The local
legislative body, by enacting the ordinance, has in effect given notice that the
regulations are essential to the well being of the people x x x . The Judiciary should
not lightly set aside legislative action when there is not a clear invasion of personal
or property rights under the guise of police regulation.2
It admits of no doubt therefore that there being a presumption of validity, the
necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is
void on its face which is not the case here. The principle has been nowhere better
expressed than in the leading case of O'Gorman & Young v. Hartford Fire Insurance
Co.,3 where the American Supreme Court through Justice Brandeis tersely and
succinctly summed up the matter thus: The statute here questioned deals with a
subject clearly within the scope of the police power. We are asked to declare it void
on the ground that the specific method of regulation prescribed is unreasonable and
hence deprives the plaintiff of due process of law. As underlying questions of fact
may condition the constitutionality of legislation of this character, the resumption of
constitutionality must prevail in the absence of some factual foundation of record for
overthrowing the statute." No such factual foundation being laid in the present case,
the lower court deciding the matter on the pleadings and the stipulation of facts, the
presumption of validity must prevail and the judgment against the ordinance set
aside.
Nor may petitioners assert with plausibility that on its face the ordinance is fatally
defective as being repugnant to the due process clause of the Constitution. The
mantle of protection associated with the due process guaranty does not cover
petitioners. This particular manifestation of a police power measure being
specifically aimed to safeguard public morals is immune from such imputation of
nullity resting purely on conjecture and unsupported by anything of substance. To
hold otherwise would be to unduly restrict and narrow the scope of police power
which has been properly characterized as the most essential, insistent and the least
limitable of powers,4 extending as it does "to all the great public needs."5 It would
be, to paraphrase another leading decision, to destroy the very purpose of the state if
it could be deprived or allowed itself to be deprived of its competence to promote
public health, public morals, public safety and the genera welfare.6 Negatively put,
police power is "that inherent and plenary power in the State which enables it to
prohibit all that is hurt full to the comfort, safety, and welfare of society.7
There is no question but that the challenged ordinance was precisely enacted to
minimize certain practices hurtful to public morals. The explanatory note of the
Councilor Herminio Astorga included as annex to the stipulation of facts, speaks of
the alarming increase in the rate of prostitution, adultery and fornication in Manila
traceable in great part to the existence of motels, which "provide a necessary
atmosphere for clandestine entry, presence and exit" and thus become the "ideal
haven for prostitutes and thrill-seekers." The challenged ordinance then proposes to
check the clandestine harboring of transients and guests of these establishments by
requiring these transients and guests to fill up a registration form, prepared for the
purpose, in a lobby open to public view at all times, and by introducing several other
amendatory provisions calculated to shatter the privacy that characterizes the
registration of transients and guests." Moreover, the increase in the licensed fees was
intended to discourage "establishments of the kind from operating for purpose other
than legal" and at the same time, to increase "the income of the city government." It
would appear therefore that the stipulation of facts, far from sustaining any attack
against the validity of the ordinance, argues eloquently for it.
It is a fact worth noting that this Court has invariably stamped with the seal of its
approval, ordinances punishing vagrancy and classifying a pimp or procurer as a
vagrant;8 provide a license tax for and regulating the maintenance or operation of
public dance halls;9 prohibiting gambling;10 prohibiting jueteng;11 and
monte;12 prohibiting playing of panguingui on days other than Sundays or legal
holidays;13 prohibiting the operation of pinball machines;14 and prohibiting any
person from keeping, conducting or maintaining an opium joint or visiting a place
where opium is smoked or otherwise used,15 all of which are intended to protect
public morals.
On the legislative organs of the government, whether national or local, primarily rest
the exercise of the police power, which, it cannot be too often emphasized, is the
power to prescribe regulations to promote the health, morals, peace, good order,
safety and general welfare of the people. In view of the requirements of due process,
equal protection and other applicable constitutional guaranties however, the exercise
of such police power insofar as it may affect the life, liberty or property of any
person is subject to judicial inquiry. Where such exercise of police power may be
considered as either capricious, whimsical, unjust or unreasonable, a denial of due
process or a violation of any other applicable constitutional guaranty may call for
correction by the courts.
We are thus led to considering the insistent, almost shrill tone, in which the objection
is raised to the question of due process.16 There is no controlling and precise
definition of due process. It furnishes though a standard to which the governmental
action should conform in order that deprivation of life, liberty or property, in each
appropriate case, be valid. What then is the standard of due process which must exist
both as a procedural and a substantive requisite to free the challenged ordinance, or
any governmental action for that matter, from the imputation of legal infirmity
sufficient to spell its doom? It is responsiveness to the supremacy of reason,
obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and
unfairness avoided. To satisfy the due process requirement, official action, to
paraphrase Cardozo, must not outrun the bounds of reason and result in sheer
oppression. Due process is thus hostile to any official action marred by lack of
reasonableness. Correctly it has been identified as freedom from arbitrariness. It is
the embodiment of the sporting idea of fair play.17 It exacts fealty "to those strivings
for justice" and judges the act of officialdom of whatever branch "in the light of
reason drawn from considerations of fairness that reflect [democratic] traditions of
legal and political thought."18 It is not a narrow or "technical conception with fixed
content unrelated to time, place and circumstances,"19 decisions based on such a
clause requiring a "close and perceptive inquiry into fundamental principles of our
society."20 Questions of due process are not to be treated narrowly or pedantically in
slavery to form or phrases.21
It would thus be an affront to reason to stigmatize an ordinance enacted precisely to
meet what a municipal lawmaking body considers an evil of rather serious proportion
an arbitrary and capricious exercise of authority. It would seem that what should be
deemed unreasonable and what would amount to an abdication of the power to
govern is inaction in the face of an admitted deterioration of the state of public
morals. To be more specific, the Municipal Board of the City of Manila felt the need
for a remedial measure. It provided it with the enactment of the challenged
ordinance. A strong case must be found in the records, and, as has been set forth,
none is even attempted here to attach to an ordinance of such character the taint of
nullity for an alleged failure to meet the due process requirement. Nor does it lend
any semblance even of deceptive plausibility to petitioners' indictment of Ordinance
No. 4760 on due process grounds to single out such features as the increased fees for
motels and hotels, the curtailment of the area of freedom to contract, and, in certain
particulars, its alleged vagueness.
Admittedly there was a decided increase of the annual license fees provided for by
the challenged ordinance for hotels and motels, 150% for the former and over 200%
for the latter, first-class motels being required to pay a P6,000 annual fee and second-
class motels, P4,500 yearly. It has been the settled law however, as far back as 1922
that municipal license fees could be classified into those imposed for regulating
occupations or regular enterprises, for the regulation or restriction of non-useful
occupations or enterprises and for revenue purposes only.22 As was explained more
in detail in the above Cu Unjieng case: (2) Licenses for non-useful occupations are
also incidental to the police power and the right to exact a fee may be implied from
the power to license and regulate, but in fixing amount of the license fees the
municipal corporations are allowed a much wider discretion in this class of cases
than in the former, and aside from applying the well-known legal principle that
municipal ordinances must not be unreasonable, oppressive, or tyrannical, courts
have, as a general rule, declined to interfere with such discretion. The desirability of
imposing restraint upon the number of persons who might otherwise engage in non-
useful enterprises is, of course, generally an important factor in the determination of
the amount of this kind of license fee. Hence license fees clearly in the nature of
privilege taxes for revenue have frequently been upheld, especially in of licenses for
the sale of liquors. In fact, in the latter cases the fees have rarely been declared
unreasonable.23
Moreover in the equally leading case of Lutz v. Araneta24 this Court affirmed the
doctrine earlier announced by the American Supreme Court that taxation may be
made to implement the state's police power. Only the other day, this Court had
occasion to affirm that the broad taxing authority conferred by the Local Autonomy
Act of 1959 to cities and municipalities is sufficiently plenary to cover a wide range
of subjects with the only limitation that the tax so levied is for public purposes, just
and uniform.25
As a matter of fact, even without reference to the wide latitude enjoyed by the City
of Manila in imposing licenses for revenue, it has been explicitly held in one case
that "much discretion is given to municipal corporations in determining the amount,"
here the license fee of the operator of a massage clinic, even if it were viewed purely
as a police power measure.26 The discussion of this particular matter may fitly close
with this pertinent citation from another decision of significance: "It is urged on
behalf of the plaintiffs-appellees that the enforcement of the ordinance could deprive
them of their lawful occupation and means of livelihood because they can not rent
stalls in the public markets. But it appears that plaintiffs are also dealers in
refrigerated or cold storage meat, the sale of which outside the city markets under
certain conditions is permitted x x x . And surely, the mere fact, that some
individuals in the community may be deprived of their present business or a
particular mode of earning a living cannot prevent the exercise of the police power.
As was said in a case, persons licensed to pursue occupations which may in the
public need and interest be affected by the exercise of the police power embark in
these occupations subject to the disadvantages which may result from the legal
exercise of that power."27
Nor does the restriction on the freedom to contract, insofar as the challenged
ordinance makes it unlawful for the owner, manager, keeper or duly authorized
representative of any hotel, motel, lodging house, tavern, common inn or the like, to
lease or rent room or portion thereof more than twice every 24 hours, with a proviso
that in all cases full payment shall be charged, call for a different conclusion. Again,
such a limitation cannot be viewed as a transgression against the command of due
process. It is neither unreasonable nor arbitrary. Precisely it was intended to curb the
opportunity for the immoral or illegitimate use to which such premises could be, and,
according to the explanatory note, are being devoted. How could it then be arbitrary
or oppressive when there appears a correspondence between the undeniable existence
of an undesirable situation and the legislative attempt at correction. Moreover,
petitioners cannot be unaware that every regulation of conduct amounts to
curtailment of liberty which as pointed out by Justice Malcolm cannot be absolute.
Thus: "One thought which runs through all these different conceptions of liberty is
plainly apparent. It is this: 'Liberty' as understood in democracies, is not license; it is
'liberty regulated by law.' Implied in the term is restraint by law for the good of the
individual and for the greater good of the peace and order of society and the general
well-being. No man can do exactly as he pleases. Every man must renounce
unbridled license. The right of the individual is necessarily subject to reasonable
restraint by general law for the common good x x x The liberty of the citizen may be
restrained in the interest of the public health, or of the public order and safety, or
otherwise within the proper scope of the police power."28
A similar observation was made by Justice Laurel: "Public welfare, then, lies at the
bottom of the enactment of said law, and the state in order to promote the general
welfare may interfere with personal liberty, with property, and with business and
occupations. Persons and property may be subjected to all kinds of restraints and
burdens, in order to secure the general comfort, health, and prosperity of the state x x
x To this fundamental aim of our Government the rights of the individual are
subordinated. Liberty is a blessing without which life is a misery, but liberty should
not be made to prevail over authority because then society will fall into anarchy.
Neither should authority be made to prevail over liberty because then the individual
will fall into slavery. The citizen should achieve the required balance of liberty and
authority in his mind through education and personal discipline, so that there may be
established the resultant equilibrium, which means peace and order and happiness for
all.29
It is noteworthy that the only decision of this Court nullifying legislation because of
undue deprivation of freedom to contract, People v. Pomar,30 no longer "retains its
virtuality as a living principle. The policy of laissez faire has to some extent given
way to the assumption by the government of the right of intervention even in
contractual relations affected with public interest.31 What may be stressed
sufficiently is that if the liberty involved were freedom of the mind or the person, the
standard for the validity of governmental acts is much more rigorous and exacting,
but where the liberty curtailed affects at the most rights of property, the permissible
scope of regulatory measure is wider.32 How justify then the allegation of a denial of
due process?

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

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

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

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

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

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

Prescinding from the above, it could logically be

The Facts deduced that tax credit is premised on the
 existence of tax liability on the part of taxpayer.
In other words, if there is no tax liability, tax
credit is not available.
Respondent lodged a Motion for Reconsideration. The [CTA], in
its assailed resolution,[6] granted respondents motion for
reconsideration and ordered herein petitioner to issue a Tax Credit
Certificate in favor of respondent citing the decision of the then
Special Fourth Division of [the CA] in CA G.R. SP No. 60057
entitled Central [Luzon] Drug Corporation vs. Commissioner of
Internal Revenue promulgated on May 31, 2001, to wit:
However, Sec. 229 clearly does not apply in the
instant case because the tax sought to be
refunded or credited by petitioner was not
erroneously paid or illegally collected. We take
exception to the CTAs sweeping but unfounded
statement that both tax refund and tax credit are
modes of recovering taxes which are either
erroneously or illegally paid to the government.
Tax refunds or credits do not exclusively pertain
to illegally collected or erroneously paid taxes as
they may be other circumstances where a refund
is warranted. The tax refund provided under
Section 229 deals exclusively with illegally
collected or erroneously paid taxes but there are
other possible situations, such as the refund of
excess estimated corporate quarterly income tax
paid, or that of excess input tax paid by a VAT-
registered person, or that of excise tax paid on
goods locally produced or manufactured but
actually exported. The standards and mechanics
for the grant of a refund or credit under these
situations are different from that under Sec. 229.
Sec. 4[.a)] of R.A. 7432, is yet another instance
of a tax credit and it does not in any way refer to
illegally collected or erroneously paid taxes, x x
x.[7]
Ruling of the Court of Appeals
The CA affirmed in toto the Resolution of the Court of Tax Appeals (CTA) ordering
petitioner to issue a tax credit certificate in favor of respondent in the reduced
amount of P903,038.39. It reasoned that Republic Act No. (RA) 7432 required
neither a tax liability nor a payment of taxes by private establishments prior to the
availment of a tax credit. Moreover, such credit is not tantamount to an unintended
benefit from the law, but rather a just compensation for the taking of private property
for public use.
Hence this Petition.[8]
The Issues
Petitioner raises the following issues for our consideration:
Whether the Court of Appeals erred in holding that respondent
may claim the 20% sales discount as a tax credit instead of as a
deduction from gross income or gross sales.
Whether the Court of Appeals erred in holding that respondent is
entitled to a refund.[9]
These two issues may be summed up in only one: whether respondent, despite
incurring a net loss, may still claim the 20 percent sales discount as a tax credit.
The Courts Ruling
The Petition is not meritorious.
Sole Issue:
Claim of 20 Percent Sales Discount
as Tax Credit Despite Net Loss
Section 4a) of RA 7432[10] grants to senior citizens the privilege of obtaining a 20
percent discount on their purchase of medicine from any private establishment in the
country.[11] The latter may then claim the cost of the discount as a tax credit.[12] But
can such credit be claimed, even though an establishment operates at a loss?
We answer in the affirmative.
Tax Credit versus
Tax Deduction
Although the term is not specifically defined in our Tax Code,[13] tax credit generally
refers to an amount that is subtracted directly from ones total tax liability.[14] It is an
allowance against the tax itself[15] or a deduction from what is owed[16] by a taxpayer
to the government. Examples of tax credits are withheld taxes, payments of
estimated tax, and investment tax credits.[17]
Tax credit should be understood in relation to other tax concepts. One of these is tax
deduction -- defined as a subtraction from income for tax purposes,[18] or an amount
that is allowed by law to reduce income prior to [the] application of the tax rate to
compute the amount of tax which is due.[19] An example of a tax deduction is any of
the allowable deductions enumerated in Section 34[20] of the Tax Code.
A tax credit differs from a tax deduction. On the one hand, a tax credit reduces the
tax due, including -- whenever applicable -- the income taxthat is determined after
applying the corresponding tax rates to taxable income.[21] A tax deduction, on the
other, reduces the income that is subject to tax[22] in order to arrive at taxable
income.[23] To think of the former as the latter is to avoid, if not entirely confuse, the
issue. A tax credit is used only after the tax has been computed; a tax
deduction, before.
Tax Liability Required
for Tax Credit
Since a tax credit is used to reduce directly the tax that is due, there ought to be a tax
liability before the tax credit can be applied. Without that liability, any tax
credit application will be useless. There will be no reason for deducting the latter
when there is, to begin with, no existing obligation to the government. However, as
will be presented shortly, the existence of a tax credit or its grant by law is not the
same as the availment or use of such credit. While the grant is mandatory, the
availment or use is not.
If a net loss is reported by, and no other taxes are currently due from, a business
establishment, there will obviously be no tax liability against which any tax
credit can be applied.[24] For the establishment to choose the immediate availment of
a tax credit will be premature and impracticable. Nevertheless, the irrefutable fact
remains that, under RA 7432, Congress has granted without conditions a tax
credit benefit to all covered establishments.
Although this tax credit benefit is available, it need not be used by losing ventures,
since there is no tax liability that calls for its application. Neither can it be reduced to
nil by the quick yet callow stroke of an administrative pen, simply because no
reduction of taxes can instantly be effected. By its nature, the tax credit may still be
deducted from a future, not a present, tax liability, without which it does not have
any use. In the meantime, it need not move. But it breathes.
Prior Tax Payments Not
Required for Tax Credit
While a tax liability is essential to the availment or use of any tax credit, prior tax
payments are not. On the contrary, for the existence or grantsolely of such credit,
neither a tax liability nor a prior tax payment is needed. The Tax Code is in fact
replete with provisions granting or allowing tax credits, even though no taxes have
been previously paid.
For example, in computing the estate tax due, Section 86(E) allows a tax credit --
subject to certain limitations -- for estate taxes paid to a foreign country. Also found
in Section 101(C) is a similar provision for donors taxes -- again when paid to a
foreign country -- in computing for the donors tax due. The tax credits in both
instances allude to the prior payment of taxes, even if not made to our government.
Under Section 110, a VAT (Value-Added Tax)- registered person engaging in
transactions -- whether or not subject to the VAT -- is also allowed a tax credit that
includes a ratable portion of any input tax not directly attributable to either activity.
This input tax may either be the VAT on the purchase or importation of goods or
services that is merely due from -- not necessarily paid by -- such VAT-registered
person in the course of trade or business; or the transitional input tax determined in
accordance with Section 111(A). The latter type may in fact be an amount equivalent
to only eight percent of the value of a VAT-registered persons beginning inventory
of goods, materials and supplies, when such amount -- as computed -- is higher than
the actual VAT paid on the said items.[25] Clearly from this provision, the tax
credit refers to an input tax that is either due only or given a value by mere
comparison with the VAT actually paid -- then later prorated. No tax is actually paid
prior to the availment of such credit.
In Section 111(B), a one and a half percent input tax credit that is merely
presumptive is allowed. For the purchase of primary agricultural products used as
inputs -- either in the processing of sardines, mackerel and milk, or in the
manufacture of refined sugar and cooking oil -- and for the contract price of public
work contracts entered into with the government, again, no prior tax payments are
needed for the use of the tax credit.
More important, a VAT-registered person whose sales are zero-rated or effectively
zero-rated may, under Section 112(A), apply for the issuance of a tax
credit certificate for the amount of creditable input taxes merely due -- again not
necessarily paid to -- the government and attributable to such sales, to the extent that
the input taxes have not been applied against output taxes.[26] Where a taxpayer
is engaged in zero-rated or effectively zero-rated sales and also in taxable or exempt
sales, the amount of creditable input taxes due that are not directly and entirely
attributable to any one of these transactions shall be proportionately allocated on the
basis of the volume of sales. Indeed, in availing of such tax credit for VAT purposes,
this provision -- as well as the one earlier mentioned -- shows that the prior payment
of taxes is not a requisite.

It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration of
a tax credit allowed, even though no prior tax payments are not required.
Specifically, in this provision, the imposition of a final withholding tax rate on cash
and/or property dividends received by a nonresident foreign corporation from a
domestic corporation is subjected to the condition that a foreign tax credit will be
given by the domiciliary country in an amount equivalent to taxes that are merely
deemed paid.[27] Although true, this provision actually refers to the tax credit as
a condition only for the imposition of a lower tax rate, not as a deduction from the
corresponding tax liability. Besides, it is not our government but the domiciliary
country that credits against the income tax payable to the latter by the foreign
corporation, the tax to be foregone or spared.[28]
In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically allows
as credits, against the income tax imposable under Title II, the amount of income
taxes merely incurred -- not necessarily paid -- by a domestic corporation during a
taxable year in any foreign country. Moreover, Section 34(C)(5) provides that for
such taxes incurred but not paid, a tax credit may be allowed, subject to the condition
precedent that the taxpayer shall simply give a bond with sureties satisfactory to and
approved by petitioner, in such sum as may be required; and further conditioned
upon payment by the taxpayer of any tax found due, upon petitioners redetermination
of it.
In addition to the above-cited provisions in the Tax Code, there are also tax treaties
and special laws that grant or allow tax credits, even though no prior tax payments
have been made.
Under the treaties in which the tax credit method is used as a relief to avoid double
taxation, income that is taxed in the state of source is also taxable in the state of
residence, but the tax paid in the former is merely allowed as a credit against the tax
levied in the latter.[29] Apparently, payment is made to the state of source, not
the state of residence. No tax, therefore, has been previously paid to the latter.
Under special laws that particularly affect businesses, there can also be tax
credit incentives. To illustrate, the incentives provided for in Article 48 of
Presidential Decree No. (PD) 1789, as amended by Batas Pambansa Blg. (BP) 391,
include tax credits equivalent to either five percent of the net value earned, or five or
ten percent of the net local content of exports.[30] In order to avail of such credits
under the said law and still achieve its objectives, no prior tax payments are
necessary.
From all the foregoing instances, it is evident that prior tax payments are not
indispensable to the availment of a tax credit. Thus, the CA correctly held that the
availment under RA 7432 did not require prior tax payments by private
establishments concerned.[31] However, we do not agree with its finding[32] that the
carry-over of tax credits under the said special law to succeeding taxable periods,
and even their application against internal revenue taxes, did not necessitate the
existence of a tax liability.
The examples above show that a tax liability is certainly important in the availment
or use, not the existence or grant, of a tax credit. Regarding this matter, a private
establishment reporting a net loss in its financial statements is no different from
another that presents a net income. Both are entitled to the tax credit provided for
under RA 7432, since the law itself accords that unconditional benefit. However, for
the losing establishment to immediately apply such credit, where no tax is due, will
be an improvident usance.
Sections 2.i and 4 of Revenue
Regulations No. 2-94 Erroneous
RA 7432 specifically allows private establishments to claim as tax credit the amount
of discounts they grant.[33] In turn, the Implementing Rules and Regulations, issued
pursuant thereto, provide the procedures for its availment.[34] To deny such credit,
despite the plain mandate of the law and the regulations carrying out that mandate, is
indefensible.
First, the definition given by petitioner is erroneous. It refers to tax credit as the
amount representing the 20 percent discount that shall be deducted by the said
establishments from their gross income for income tax purposes and from their gross
sales for value-added tax or other percentage tax purposes.[35] In ordinary business
language, the tax credit represents the amount of such discount. However, the
manner by which the discount shall be credited against taxes has not been clarified
by the revenue regulations.
By ordinary acceptation, a discount is an abatement or reduction made from the gross
amount or value of anything.[36] To be more precise, it is in business parlance a
deduction or lowering of an amount of money;[37] or a reduction from the full amount
or value of something, especially a price.[38] In business there are many kinds of
discount, the most common of which is that affecting the income statement[39] or
financial report upon which the income tax is based.
Business Discounts
Deducted from Gross Sales
A cash discount, for example, is one granted by business establishments to credit
customers for their prompt payment.[40] It is a reduction in price offered to the
purchaser if payment is made within a shorter period of time than the maximum time
specified.[41] Also referred to as a sales discount on the part of the seller and
a purchase discount on the part of the buyer, it may be expressed in such
terms as 5/10, n/30.[42]
A quantity discount, however, is a reduction in price allowed for purchases made in
large quantities, justified by savings in packaging, shipping, and handling.[43] It is
also called a volume or bulk discount.[44]
A percentage reduction from the list price x x x allowed by manufacturers to
wholesalers and by wholesalers to retailers[45] is known as a trade discount. No entry
for it need be made in the manual or computerized books of accounts, since the
purchase or sale is already valued at the net price actually charged the buyer.[46] The
purpose for the discount is to encourage trading or increase sales, and the prices at
which the purchased goods may be resold are also suggested.[47] Even a chain
discount -- a series of discounts from one list price -- is recorded at net.[48]
Finally, akin to a trade discount is a functional discount. It is a suppliers price
discount given to a purchaser based on the [latters] role in the [formers] distribution
system.[49] This role usually involves warehousing or advertising.
Based on this discussion, we find that the nature of a sales discount is peculiar.
Applying generally accepted accounting principles (GAAP) in the country, this type
of discount is reflected in the income statement[50] as a line item deducted -- along
with returns, allowances, rebates and other similar expenses -- from gross sales to
arrive at net sales.[51] This type of presentation is resorted to, because the accounts
receivable and sales figures that arise from sales discounts, -- as well as
from quantity, volume or bulk discounts -- are recorded in the manual and
computerized books of accounts and reflected in the financial statements at the gross
amounts of the invoices.[52] This manner of recording credit sales -- known as
the gross method -- is most widely used, because it is simple, more convenient to
apply than the net method, and produces no material errors over time.[53]
However, under the net method used in recording trade, chain or functional
discounts, only the net amounts of the invoices -- after the discounts have been
deducted -- are recorded in the books of accounts[54] and reflected in the financial
statements. A separate line item cannot be shown,[55] because the transactions
themselves involving both accounts receivable and sales have already been entered
into, net of the said discounts.
The term sales discounts is not expressly defined in the Tax Code, but one provision
adverts to amounts whose sum -- along with sales returns, allowances and cost of
goods sold[56] -- is deducted from gross sales to come up with the gross
income, profit or margin[57] derived from business.[58] In another provision
therein, sales discounts that are granted and indicated in the invoices at the time of
sale -- and that do not depend upon the happening of any future event -- may be
excluded from the gross sales within the same quarter they were given.[59] While
determinative only of the VAT, the latter provision also appears as a suitable
reference point for income tax purposes already embraced in the former. After all,
these two provisions affirm that sales discounts are amounts that are always
deductible from gross sales.
Reason for the Senior Citizen Discount:
The Law, Not Prompt Payment
A distinguishing feature of the implementing rules of RA 7432 is the private
establishments outright deduction of the discount from the invoice price of the
medicine sold to the senior citizen.[60] It is, therefore, expected that for each retail
sale made under this law, the discount period lasts no more than a day, because such
discount is given -- and the net amount thereof collected -- immediately upon
perfection of the sale.[61]Although prompt payment is made for an arms-length
transaction by the senior citizen, the real and compelling reason for the private
establishment giving the discount is that the law itself makes it mandatory.
What RA 7432 grants the senior citizen is a mere discount privilege, not a sales
discount or any of the above discounts in particular. Prompt payment is not the
reason for (although a necessary consequence of) such grant. To be sure, the
privilege enjoyed by the senior citizen must be equivalent to the tax credit benefit
enjoyed by the private establishment granting the discount. Yet, under the revenue
regulations promulgated by our tax authorities, this benefit has been erroneously
likened and confined to a sales discount.
To a senior citizen, the monetary effect of the privilege may be the same as that
resulting from a sales discount. However, to a private establishment, the effect is
different from a simple reduction in price that results from such discount. In other
words, the tax credit benefit is not the same as a sales discount. To repeat from our
earlier discourse, this benefit cannot and should not be treated as a tax deduction.
To stress, the effect of a sales discount on the income statement and income tax
return of an establishment covered by RA 7432 is different from that resulting from
the availment or use of its tax credit benefit. While the former is a deduction before,
the latter is a deduction after, the income tax is computed. As mentioned earlier, a
discount is not necessarily a sales discount, and a tax credit for a simple discount
privilege should not be automatically treated like a sales discount. Ubi lex non
distinguit, nec nos distinguere debemus. Where the law does not distinguish, we
ought not to distinguish.
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20
percent discount deductible from gross income for income tax purposes, or
from gross sales for VAT or other percentage tax purposes. In effect, the tax
credit benefit under RA 7432 is related to a sales discount. This contrived definition
is improper, considering that the latter has to be deducted from gross sales in order to
compute the gross income in the income statement and cannot be deducted again,
even for purposes of computing the income tax.
When the law says that the cost of the discount may be claimed as a tax credit, it
means that the amount -- when claimed -- shall be treated as a reduction from any tax
liability, plain and simple. The option to avail of the tax credit benefit depends upon
the existence of a tax liability, but to limit the benefit to a sales discount -- which is
not even identical to the discount privilege that is granted by law -- does not define it
at all and serves no useful purpose. The definition must, therefore, be stricken down.
Laws Not Amended
by Regulations
Second, the law cannot be amended by a mere regulation. In fact, a regulation that
operates to create a rule out of harmony with
the statute is a mere nullity;[62] it cannot prevail.
It is a cardinal rule that courts will and should respect the contemporaneous
construction placed upon a statute by the executive officers whose duty it is to
enforce it x x x.[63] In the scheme of judicial tax administration, the need for certainty
and predictability in the implementation of tax laws is crucial.[64] Our tax authorities
fill in the details that Congress may not have the opportunity or competence to
provide.[65] The regulations these authorities issue are relied upon by taxpayers, who
are certain that these will be followed by the courts.[66] Courts, however, will not
uphold these authorities interpretations when clearly absurd, erroneous or improper.
In the present case, the tax authorities have given the term tax credit in Sections 2.i
and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their
interpretation has muddled up the intent of Congress in granting a mere discount
privilege, not a sales discount. The administrative agency issuing these regulations
may not enlarge, alter or restrict the provisions of the law it administers; it cannot
engraft additional requirements not contemplated by the legislature.[67]
In case of conflict, the law must prevail.[68] A regulation adopted pursuant to law is
law.[69] Conversely, a regulation or any portion thereof not adopted pursuant to law is
no law and has neither the force nor the effect of law.[70]
Availment of Tax
Credit Voluntary
Third, the word may in the text of the statute[71] implies that the
availability of the tax credit benefit is neither unrestricted nor mandatory.[72] There is
no absolute right conferred upon respondent, or any similar taxpayer, to avail itself
of the tax credit remedy whenever it chooses; neither does it impose a duty on the
part of the government to sit back and allow an important facet of tax collection to be
at the sole control and discretion of the taxpayer.[73] For the tax authorities to compel
respondent to deduct the 20 percent discount from either its gross income or its gross
sales[74] is, therefore, not only to make an imposition without basis in law, but also to
blatantly contravene the law itself.
What Section 4.a of RA 7432 means is that the tax credit benefit is merely
permissive, not imperative. Respondent is given two options -- either to claim or not
to claim the cost of the discounts as a tax credit. In fact, it may even ignore the credit
and simply consider the gesture as an act of beneficence, an expression of its social
conscience.
Granting that there is a tax liability and respondent claims such cost as a tax credit,
then the tax credit can easily be applied. If there is none, the credit cannot be used
and will just have to be carried over and revalidated[75] accordingly. If, however, the
business continues to operate at a loss and no other taxes are due, thus compelling it
to close shop, the credit can never be applied and will be lost altogether.
In other words, it is the existence or the lack of a tax liability that determines whether
the cost of the discounts can be used as a tax credit. RA 7432 does not give
respondent the unfettered right to avail itself of the credit whenever it pleases.
Neither does it allow our tax administrators to expand or contract the legislative
mandate. The plain meaning rule or verba legis in statutory construction is thus
applicable x x x. Where the words of a statute are clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted
interpretation.[76]
Tax Credit Benefit
Deemed Just Compensation
Fourth, Sections 2.i and 4 of RR 2-94 deny the exercise by the State of its power of
eminent domain. Be it stressed that the privilege enjoyed by senior citizens does not
come directly from the State, but rather from the private establishments concerned.
Accordingly, the tax credit benefit granted to these establishments can be deemed as
their just compensation for private property taken by the State for public use.[77]
The concept of public use is no longer confined to the traditional notion of use by the
public, but held synonymous with public interest, public benefit, public welfare,
and public convenience.[78] The discount privilege to which our senior citizens are
entitled is actually a benefit enjoyed by the general public to which these citizens
belong. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments concerned, were it not for RA 7432. The
permanent reduction in their total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit.
As a result of the 20 percent discount imposed by RA 7432, respondent becomes
entitled to a just compensation. This term refers not only to the issuance of a tax
credit certificate indicating the correct amount of the discounts given, but also to the
promptness in its release. Equivalent to the payment of property taken by the State,
such issuance -- when not done within a reasonable time from the grant of the 7432, disclose the true intent of our legislators to treat the sales discounts as a tax
discounts -- cannot be considered as just compensation. In effect, respondent is made credit, rather than as a deduction from gross income. We quote from those
to suffer the consequences of being immediately deprived of its revenues while deliberations as follows:
awaiting actual receipt, through the certificate, of the equivalent amount it needs to
cope with the reduction in its revenues.[79] "THE CHAIRMAN (Rep. Unico). By the way, before that ano,
about deductions from taxable income. I
Besides, the taxation power can also be used as an implement for the exercise of the think we incorporated there a provision
power of eminent domain.[80] Tax measures are but enforced contributions exacted na - on the responsibility of the private
on pain of penal sanctions[81] and clearly imposed for a public purpose.[82] In recent hospitals and drugstores, hindi ba?
years, the power to tax has indeed become a most effective tool to realize social
justice, public welfare, and the equitable distribution of wealth.[83] SEN. ANGARA. Oo.

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

Fifth, RA 7432 itself seeks to adopt measures whereby senior citizens are assisted by THE CHAIRMAN (Rep. Unico). Yung ang proposal ni Senator
the community as a whole and to establish a program beneficial to them.[86] These Shahani, e.
objectives are consonant with the constitutional policy of making health x x x
services available to all the people at affordable cost[87] and of giving priority for the SEN. ANGARA. In the case of private hospitals they got the grant
needs of the x x x elderly.[88] Sections 2.i and 4 of RR 2-94, however, contradict of 15% discount, provided that, the
these constitutional policies and statutory objectives. private hospitals can claim the expense
as a tax credit.
Furthermore, Congress has allowed all private establishments a simple tax credit, not
a deduction. In fact, no cash outlay is required from the government for REP. AQUINO. Yah could be allowed as deductions in the
the availment or use of such credit. The deliberations on February 5, 1992 of the perpetrations of (inaudible) income.
Bicameral Conference Committee Meeting on Social Justice, which finalized RA
 SEN. ANGARA. I-tax credit na lang natin para walang cash-out
ano?
REP. AQUINO. Oo, tax credit. Tama, Okay. Hospitals ba o lahat
ng establishments na covered.
THE CHAIRMAN. (Rep. Unico). Sa kuwan lang yon, as private
hospitals lang.
REP. AQUINO. Ano ba yung establishments na covered?
SEN. ANGARA. Restaurant lodging houses, recreation centers.
REP. AQUINO. All establishments covered siguro?
SEN. ANGARA. From all establishments. Alisin na natin 'Yung
kuwan kung ganon. Can we go back to
Section 4 ha?
REP. AQUINO. Oho.
SEN. ANGARA. Letter A. To capture that thought, we'll say the
grant of 20% discount from all
establishments et cetera, et cetera,
provided that said establishments -
provided that private establishments
may claim the cost as a tax credit.
Ganon ba 'yon?
REP. AQUINO. Yah.
SEN. ANGARA. Dahil kung government, they don't need to claim
it.
THE CHAIRMAN. (Rep. Unico). Tax credit.
SEN. ANGARA. As a tax credit [rather] than a kuwan -
deduction, Okay.
REP. AQUINO Okay.
SEN. ANGARA. Sige Okay. Di subject to style na lang sa Letter
A".[89]
Special Law
Over General Law
Sixth and last, RA 7432 is a special law that should prevail over the Tax Code -- a
general law. x x x [T]he rule is that on a specific matter the special law shall prevail
over the general law, which shall
be resorted to only to supply deficiencies in the former.[90] In addition, [w]here there
are two statutes, the earlier special and the later general -- the terms of the general
broad enough to include the matter provided for in the special -- the fact that one is
special and the other is general creates a presumption that the special is to be
considered as remaining an exception to the general,[91] one as a general law of the
land, the other as the law of a particular case.[92] It is a canon of statutory
construction that a later statute, general in its terms and not expressly repealing
a prior special statute, will ordinarily not affect the special provisions of such earlier
statute.[93]
RA 7432 is an earlier law not expressly repealed by, and therefore remains an
exception to, the Tax Code -- a later law. When the former states that a tax
credit may be claimed, then the requirement of prior tax payments under certain
provisions of the latter, as discussed above, cannot be made to apply. Neither can the
instances of or references to a tax deduction under the Tax Code[94] be made to
restrict RA 7432. No provision of any revenue regulation can supplant or modify the
acts of Congress.
WHEREFORE, the Petition is hereby DENIED. The assailed Decision and
Resolution of the Court of Appeals AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 81561 January 18, 1991
PEOPLE OF THE PHILIPPINES, plaintiff-appellee
vs.
ANDRE MARTI, accused-appellant.
The Solicitor General for plaintiff-appellee.
Reynaldo B. Tatoy and Abelardo E. Rogacion for accused-appellant.
BIDIN, J.:
This is an appeal from a decision * rendered by the Special Criminal Court of Manila
(Regional Trial Court, Branch XLIX) convicting accused-appellant of violation of
Section 21 (b), Article IV in relation to Section 4, Article 11 and Section 2 (e) (i),
Article 1 of Republic Act 6425, as amended, otherwise known as the Dangerous
Drugs Act.
The facts as summarized in the brief of the prosecution are as follows:
On August 14, 1987, between 10:00 and 11:00 a.m., the appellant and his
common-law wife, Shirley Reyes, went to the booth of the "Manila Packing
and Export Forwarders" in the Pistang Pilipino Complex, Ermita, Manila,
carrying with them four (4) gift wrapped packages. Anita Reyes (the
proprietress and no relation to Shirley Reyes) attended to them. The
appellant informed Anita Reyes that he was sending the packages to a friend
in Zurich, Switzerland. Appellant filled up the contract necessary for the
transaction, writing therein his name, passport number, the date of shipment
and the name and address of the consignee, namely, "WALTER FIERZ,
Mattacketr II, 8052 Zurich, Switzerland" (Decision, p. 6)
Anita Reyes then asked the appellant if she could examine and inspect the
packages. Appellant, however, refused, assuring her that the packages
simply contained books, cigars, and gloves and were gifts to his friend in
Zurich. In view of appellant's representation, Anita Reyes no longer insisted
on inspecting the packages. The four (4) packages were then placed inside a
brown corrugated box one by two feet in size (1' x 2'). Styro-foam was
placed at the bottom and on top of the packages before the box was sealed
with masking tape, thus making the box ready for shipment (Decision, p. 8).
Before delivery of appellant's box to the Bureau of Customs and/or Bureau
of Posts, Mr. Job Reyes (proprietor) and husband of Anita (Reyes),
following standard operating procedure, opened the boxes for final
inspection. When he opened appellant's box, a peculiar odor emitted
therefrom. His curiousity aroused, he squeezed one of the bundles allegedly
containing gloves and felt dried leaves inside. Opening one of the bundles,
he pulled out a cellophane wrapper protruding from the opening of one of
the gloves. He made an opening on one of the cellophane wrappers and
took several grams of the contents thereof (tsn, pp. 29-30, October 6, 1987;
Emphasis supplied).
Job Reyes forthwith prepared a letter reporting the shipment to the NBI and
requesting a laboratory examination of the samples he extracted from the
cellophane wrapper (tsn, pp. 5-6, October 6, 1987).
He brought the letter and a sample of appellant's shipment to the Narcotics
Section of the National Bureau of Investigation (NBI), at about 1:30 o'clock
in the afternoon of that date, i.e., August 14, 1987. He was interviewed by
the Chief of Narcotics Section. Job Reyes informed the NBI that the rest of
the shipment was still in his office. Therefore, Job Reyes and three (3) NBI
agents, and a photographer, went to the Reyes' office at Ermita, Manila (tsn,
p. 30, October 6, 1987).
Job Reyes brought out the box in which appellant's packages were placed
and, in the presence of the NBI agents, opened the top flaps, removed the
styro-foam and took out the cellophane wrappers from inside the
gloves. Dried marijuana leaves were found to have been contained inside
the cellophane wrappers (tsn, p. 38, October 6, 1987; Emphasis supplied).
The package which allegedly contained books was likewise opened by Job
Reyes. He discovered that the package contained bricks or cake-like dried
marijuana leaves. The package which allegedly contained tabacalera cigars
was also opened. It turned out that dried marijuana leaves were neatly
stocked underneath the cigars (tsn, p. 39, October 6, 1987).
The NBI agents made an inventory and took charge of the box and of the
contents thereof, after signing a "Receipt" acknowledging custody of the
said effects (tsn, pp. 2-3, October 7, 1987).
Thereupon, the NBI agents tried to locate appellant but to no avail. Appellant's stated
address in his passport being the Manila Central Post Office, the agents requested
assistance from the latter's Chief Security. On August 27, 1987, appellant, while
claiming his mail at the Central Post Office, was invited by the NBI to shed light on
the attempted shipment of the seized dried leaves. On the same day the Narcotics
Section of the NBI submitted the dried leaves to the Forensic Chemistry Section for
laboratory examination. It turned out that the dried leaves were marijuana flowering
tops as certified by the forensic chemist. (Appellee's Brief, pp. 9-11, Rollo, pp. 132-
134).
Thereafter, an Information was filed against appellant for violation of RA 6425,
otherwise known as the Dangerous Drugs Act.
After trial, the court a quo rendered the assailed decision.
In this appeal, accused/appellant assigns the following errors, to wit:
THE LOWER COURT ERRED IN ADMITTING IN EVIDENCE THE
ILLEGALLY SEARCHED AND SEIZED OBJECTS CONTAINED IN
THE FOUR PARCELS.
THE LOWER COURT ERRED IN CONVICTING APPELLANT
DESPITE THE UNDISPUTED FACT THAT HIS RIGHTS UNDER THE
CONSTITUTION WHILE UNDER CUSTODIAL PROCEEDINGS
WERE NOT OBSERVED.
THE LOWER COURT ERRED IN NOT GIVING CREDENCE TO THE
EXPLANATION OF THE APPELLANT ON HOW THE FOUR
PARCELS CAME INTO HIS POSSESSION (Appellant's Brief, p. 1; Rollo,
p. 55)
1. Appellant contends that the evidence subject of the imputed offense had been
obtained in violation of his constitutional rights against unreasonable search and
seizure and privacy of communication (Sec. 2 and 3, Art. III, Constitution) and
therefore argues that the same should be held inadmissible in evidence (Sec. 3 (2),
Art. III).
Sections 2 and 3, Article III of the Constitution provide:
Sec. 2. The right of the people to be secure in their persons, houses, papers
and effects against unreasonable searches and seizures of whatever nature
and for any purpose shall be inviolable, and no search warrant or warrant of
arrest shall issue except upon probable cause to be determined personally by
the judge after examination under oath or affirmation of the complainant
and the witnesses he may produce, and particularly describing the place to
be searched and the persons or things to be seized.
Sec. 3. (1) The privacy of communication and correspondence shall be
inviolable except upon lawful order of the court, or when public safety or
order requires otherwise as prescribed by law.
(2) Any evidence obtained in violation of this or the preceding section shall
be inadmissible for any purpose in any proceeding.
Our present constitutional provision on the guarantee against unreasonable search
and seizure had its origin in the 1935 Charter which, worded as follows:
The right of the people to be secure in their persons, houses, papers and
effects against unreasonable searches and seizures shall not be violated, and
no warrants shall issue but upon probable cause, to be determined by the
judge after examination under oath or affirmation of the complainant and
the witnesses he may produce, and particularly describing the place to be
searched, and the persons or things to be seized. (Sec. 1 [3], Article III)
was in turn derived almost verbatim from the Fourth Amendment ** to the United
States Constitution. As such, the Court may turn to the pronouncements of the
United States Federal Supreme Court and State Appellate Courts which are
considered doctrinal in this jurisdiction.
Thus, following the exclusionary rule laid down in Mapp v. Ohio by the US Federal
Supreme Court (367 US 643, 81 S.Ct. 1684, 6 L.Ed. 1081 [1961]), this Court,
in Stonehill v. Diokno (20 SCRA 383 [1967]), declared as inadmissible any evidence
obtained by virtue of a defective search and seizure warrant, abandoning in the
process the ruling earlier adopted in Moncado v. People's Court (80 Phil. 1 [1948])
wherein the admissibility of evidence was not affected by the illegality of its seizure.
The 1973 Charter (Sec. 4 [2], Art. IV) constitutionalized the Stonehill ruling and is
carried over up to the present with the advent of the 1987 Constitution.
In a number of cases, the Court strictly adhered to the exclusionary rule and has
struck down the admissibility of evidence obtained in violation of the constitutional
safeguard against unreasonable searches and seizures. (Bache & Co., (Phil.), Inc., v.
Ruiz, 37 SCRA 823 [1971]; Lim v. Ponce de Leon, 66 SCRA 299 [1975]; People v.
Burgos, 144 SCRA 1 [1986]; Roan v. Gonzales, 145 SCRA 687 [1987]; See
also Salazar v. Hon. Achacoso, et al., GR No. 81510, March 14, 1990).
It must be noted, however, that in all those cases adverted to, the evidence so
obtained were invariably procured by the State acting through the medium of its law
enforcers or other authorized government agencies.
On the other hand, the case at bar assumes a peculiar character since the evidence
sought to be excluded was primarily discovered and obtained by a private person,
acting in a private capacity and without the intervention and participation of State
authorities. Under the circumstances, can accused/appellant validly claim that his
constitutional right against unreasonable searches and seizure has been violated?
Stated otherwise, may an act of a private individual, allegedly in violation of
appellant's constitutional rights, be invoked against the State?
We hold in the negative. In the absence of governmental interference, the liberties
guaranteed by the Constitution cannot be invoked against the State.
As this Court held in Villanueva v. Querubin (48 SCRA 345 [1972]:
1. This constitutional right (against unreasonable search and seizure) refers
to the immunity of one's person, whether citizen or alien, from interference
by government, included in which is his residence, his papers, and other
possessions. . . .
. . . There the state, however powerful, does not as such have the access
except under the circumstances above noted, for in the traditional
formulation, his house, however humble, is his castle. Thus is outlawed any
unwarranted intrusion by government, which is called upon to refrain from
any invasion of his dwelling and to respect the privacies of his life. . . . (Cf.
Schermerber v. California, 384 US 757 [1966] and Boyd v. United States,
116 US 616 [1886]; Emphasis supplied).
In Burdeau v. McDowell (256 US 465 (1921), 41 S Ct. 547; 65 L.Ed. 1048), the
Court there in construing the right against unreasonable searches and seizures
declared that:
(t)he Fourth Amendment gives protection against unlawful searches and
seizures, and as shown in previous cases, its protection applies to
governmental action. Its origin and history clearly show that it was intended
as a restraint upon the activities of sovereign authority, and was not
intended to be a limitation upon other than governmental agencies; as
against such authority it was the purpose of the Fourth Amendment to
secure the citizen in the right of unmolested occupation of his dwelling and
the possession of his property, subject to the right of seizure by process duly
served.
The above ruling was reiterated in State v. Bryan (457 P.2d 661 [1968]) where a
parking attendant who searched the automobile to ascertain the owner thereof found
marijuana instead, without the knowledge and participation of police authorities, was
declared admissible in prosecution for illegal possession of narcotics.
And again in the 1969 case of Walker v. State (429 S.W.2d 121), it was held that the
search and seizure clauses are restraints upon the government and its agents, not
upon private individuals (citing People v. Potter, 240 Cal. App.2d 621, 49 Cap. Rptr,
892 (1966); State v. Brown, Mo., 391 S.W.2d 903 (1965); State v. Olsen, Or., 317
P.2d 938 (1957).
Likewise appropos is the case of Bernas v. US (373 F.2d 517 (1967). The Court there
said:
The search of which appellant complains, however, was made by a private
citizen — the owner of a motel in which appellant stayed overnight and in
which he left behind a travel case containing the evidence***complained of.
The search was made on the motel owner's own initiative. Because of it, he
became suspicious, called the local police, informed them of the bag's
contents, and made it available to the authorities.
The fourth amendment and the case law applying it do not require exclusion
of evidence obtained through a search by a private citizen. Rather, the
amendment only proscribes governmental action."
The contraband in the case at bar having come into possession of the Government
without the latter transgressing appellant's rights against unreasonable search and
seizure, the Court sees no cogent reason why the same should not be admitted
against him in the prosecution of the offense charged.
Appellant, however, would like this court to believe that NBI agents made an illegal
search and seizure of the evidence later on used in prosecuting the case which
resulted in his conviction.
The postulate advanced by accused/appellant needs to be clarified in two days. In
both instances, the argument stands to fall on its own weight, or the lack of it.
First, the factual considerations of the case at bar readily foreclose the proposition
that NBI agents conducted an illegal search and seizure of the prohibited
merchandise. Records of the case clearly indicate that it was Mr. Job Reyes, the
proprietor of the forwarding agency, who made search/inspection of the packages.
Said inspection was reasonable and a standard operating procedure on the part of Mr.
Reyes as a precautionary measure before delivery of packages to the Bureau of
Customs or the Bureau of Posts (TSN, October 6 & 7, 1987, pp. 15-18; pp. 7-8;
Original Records, pp. 119-122; 167-168).
It will be recalled that after Reyes opened the box containing the illicit cargo, he took
samples of the same to the NBI and later summoned the agents to his place of
business. Thereafter, he opened the parcel containing the rest of the shipment and
entrusted the care and custody thereof to the NBI agents. Clearly, the NBI agents
made no search and seizure, much less an illegal one, contrary to the postulate of
accused/appellant.
Second, the mere presence of the NBI agents did not convert the reasonable search
effected by Reyes into a warrantless search and seizure proscribed by the
Constitution. Merely to observe and look at that which is in plain sight is not a
search. Having observed that which is open, where no trespass has been committed
in aid thereof, is not search (Chadwick v. State, 429 SW2d 135). Where the
contraband articles are identified without a trespass on the part of the arresting
officer, there is not the search that is prohibited by the constitution (US v. Lee 274
US 559, 71 L.Ed. 1202 [1927]; Ker v. State of California 374 US 23, 10 L.Ed.2d.
726 [1963]; Moore v. State, 429 SW2d 122 [1968]).
In Gandy v. Watkins (237 F. Supp. 266 [1964]), it was likewise held that where the
property was taken into custody of the police at the specific request of the manager
and where the search was initially made by the owner there is no unreasonable search
and seizure within the constitutional meaning of the term.
That the Bill of Rights embodied in the Constitution is not meant to be invoked
against acts of private individuals finds support in the deliberations of the
Constitutional Commission. True, the liberties guaranteed by the fundamental law of
the land must always be subject to protection. But protection against whom?
Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the
query which he himself posed, as follows:
First, the general reflections. The protection of fundamental liberties in the
essence of constitutional democracy. Protection against whom? Protection
against the state. The Bill of Rights governs the relationship between the
individual and the state. Its concern is not the relation between individuals,
between a private individual and other individuals. What the Bill of Rights
does is to declare some forbidden zones in the private sphere inaccessible to
any power holder. (Sponsorship Speech of Commissioner Bernas , Record
of the Constitutional Commission, Vol. 1, p. 674; July 17, 1986; Emphasis
supplied)
The constitutional proscription against unlawful searches and seizures therefore
applies as a restraint directed only against the government and its agencies tasked
with the enforcement of the law. Thus, it could only be invoked against the State to
whom the restraint against arbitrary and unreasonable exercise of power is imposed.
If the search is made upon the request of law enforcers, a warrant must generally be
first secured if it is to pass the test of constitutionality. However, if the search is
made at the behest or initiative of the proprietor of a private establishment for its
own and private purposes, as in the case at bar, and without the intervention of police
authorities, the right against unreasonable search and seizure cannot be invoked for
only the act of private individual, not the law enforcers, is involved. In sum, the
protection against unreasonable searches and seizures cannot be extended to acts
committed by private individuals so as to bring it within the ambit of alleged
unlawful intrusion by the government.
Appellant argues, however, that since the provisions of the 1935 Constitution has
been modified by the present phraseology found in the 1987 Charter, expressly
declaring as inadmissible any evidence obtained in violation of the constitutional
prohibition against illegal search and seizure, it matters not whether the evidence was
procured by police authorities or private individuals (Appellant's Brief, p. 8, Rollo, p.
62).
The argument is untenable. For one thing, the constitution, in laying down the
principles of the government and fundamental liberties of the people, does not
govern relationships between individuals. Moreover, it must be emphasized that the
modifications introduced in the 1987 Constitution (re: Sec. 2, Art. III) relate to the
issuance of either a search warrant or warrant of arrest vis-a-vis the responsibility of
the judge in the issuance thereof (SeeSoliven v. Makasiar, 167 SCRA 393 [1988];
Circular No. 13 [October 1, 1985] and Circular No. 12 [June 30, 1987]. The
modifications introduced deviate in no manner as to whom the restriction or
inhibition against unreasonable search and seizure is directed against. The restraint
stayed with the State and did not shift to anyone else.
Corolarilly, alleged violations against unreasonable search and seizure may only be
invoked against the State by an individual unjustly traduced by the exercise of
sovereign authority. To agree with appellant that an act of a private individual in
violation of the Bill of Rights should also be construed as an act of the State would
result in serious legal complications and an absurd interpretation of the constitution.
Similarly, the admissibility of the evidence procured by an individual effected
through private seizure equally applies, in pari passu, to the alleged violation, non-
governmental as it is, of appellant's constitutional rights to privacy and
communication.
2. In his second assignment of error, appellant contends that the lower court erred in
convicting him despite the undisputed fact that his rights under the constitution while
under custodial investigation were not observed.
Again, the contention is without merit, We have carefully examined the records of
the case and found nothing to indicate, as an "undisputed fact", that appellant was not
informed of his constitutional rights or that he gave statements without the assistance
of counsel. The law enforcers testified that accused/appellant was informed of his
constitutional rights. It is presumed that they have regularly performed their duties
(See. 5(m), Rule 131) and their testimonies should be given full faith and credence,
there being no evidence to the contrary. What is clear from the records, on the other
hand, is that appellant refused to give any written statement while under
investigation as testified by Atty. Lastimoso of the NBI, Thus:
Fiscal Formoso:
You said that you investigated Mr. and Mrs. Job Reyes. What about the
accused here, did you investigate the accused together with the girl?
WITNESS:
 Yes, we have interviewed the accused together with the girl but the accused
availed of his constitutional right not to give any written statement, sir.
(TSN, October 8, 1987, p. 62; Original Records, p. 240)
The above testimony of the witness for the prosecution was not contradicted by the
defense on cross-examination. As borne out by the records, neither was there any
proof by the defense that appellant gave uncounselled confession while being
investigated. What is more, we have examined the assailed judgment of the trial court
and nowhere is there any reference made to the testimony of appellant while under
custodial investigation which was utilized in the finding of conviction. Appellant's
second assignment of error is therefore misplaced.
3. Coming now to appellant's third assignment of error, appellant would like us to
believe that he was not the owner of the packages which contained prohibited drugs
but rather a certain Michael, a German national, whom appellant met in a pub along
Ermita, Manila: that in the course of their 30-minute conversation, Michael requested
him to ship the packages and gave him P2,000.00 for the cost of the shipment since
the German national was about to leave the country the next day (October 15, 1987,
TSN, pp. 2-10).
Evidence to be believed, must not only proceed from the mouth of a credible witness,
but it must be credible in itself such as the common experience and observation of
mankind can approve as probable under the circumstances (People v. Alto, 26 SCRA
342 [1968], citing Daggers v. Van Dyke, 37 N.J. Eg. 130; see also People v. Sarda,
172 SCRA 651 [1989]; People v. Sunga, 123 SCRA 327 [1983]); Castañares v. CA,
92 SCRA 567 [1979]). As records further show, appellant did not even bother to ask
Michael's full name, his complete address or passport number. Furthermore, if
indeed, the German national was the owner of the merchandise, appellant should
have so indicated in the contract of shipment (Exh. "B", Original Records, p. 40). On
the contrary, appellant signed the contract as the owner and shipper thereof giving
more weight to the presumption that things which a person possesses, or exercises
acts of ownership over, are owned by him (Sec. 5 [j], Rule 131). At this point,
appellant is therefore estopped to claim otherwise.
Premises considered, we see no error committed by the trial court in rendering the
assailed judgment.
WHEREFORE, the judgment of conviction finding appellant guilty beyond
reasonable doubt of the crime charged is hereby AFFIRMED. No costs.

Rather than give the appearance of veracity, we find appellant's disclaimer as SO ORDERED.
incredulous, self-serving and contrary to human experience. It can easily be
fabricated. An acquaintance with a complete stranger struck in half an hour could not
have pushed a man to entrust the shipment of four (4) parcels and shell out P2,000.00
for the purpose and for appellant to readily accede to comply with the undertaking
without first ascertaining its contents. As stated by the trial court, "(a) person would
not simply entrust contraband and of considerable value at that as the marijuana
flowering tops, and the cash amount of P2,000.00 to a complete stranger like the
Accused. The Accused, on the other hand, would not simply accept such undertaking
to take custody of the packages and ship the same from a complete stranger on his
mere say-so" (Decision, p. 19, Rollo, p. 91). As to why he readily agreed to do the
errand, appellant failed to explain. Denials, if unsubstantiated by clear and
convincing evidence, are negative self-serving evidence which deserve no weight in
law and cannot be given greater evidentiary weight than the testimony of credible
witnesses who testify on affirmative matters (People v. Esquillo, 171 SCRA 571
[1989]; People vs. Sariol, 174 SCRA 237 [1989]).

Appellant's bare denial is even made more suspect considering that, as per records of
the Interpol, he was previously convicted of possession of hashish by the Kleve
Court in the Federal Republic of Germany on January 1, 1982 and that the consignee
of the frustrated shipment, Walter Fierz, also a Swiss national, was likewise
convicted for drug abuse and is just about an hour's drive from appellant's residence
in Zurich, Switzerland (TSN, October 8, 1987, p. 66; Original Records, p. 244;
Decision, p. 21; Rollo, p. 93).
G.R. No. 187417, February 24, 2016
CHRISTINE JOY CAPIN-CADIZ, Petitioner, v. BRENT HOSPITAL AND
COLLEGES, INC., Respondent.
DECISION
REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court
assailing the Resolutions dated July 22, 20082 and February 24, 20093 of the Court of
Appeals (CA) in CA-G.R. SP No. 02373-MIN, which dismissed the petition filed by
petitioner Christine Joy Capin-Cadiz (Cadiz) on the following grounds: (1)
incomplete statement of material dates; (2) failure to attach registry receipts; and (3)
failure to indicate the place of issue of counsel's Professional Tax Receipt (PTR) and
Integrated Bar of the Philippines (IBP) official receipts.
Antecedent Facts
Cadiz was the Human Resource Officer of respondent Brent Hospital and Colleges,
Inc. (Brent) at the time of her indefinite suspension from employment in 2006. The
cause of suspension was Cadiz's Unprofessionalism and Unethical Behavior
Resulting to Unwed Pregnancy. It appears that Cadiz became pregnant out of
wedlock, and Brent imposed the suspension until such time that she marries her
boyfriend in accordance with law.
Cadiz then filed with the Labor Arbiter (LA) a complaint for Unfair Labor Practice,
Constructive Dismissal, Non-Payment of Wages and Damages with prayer for
Reinstatement.4
Ruling of the Labor Tribunals
In its Decision5 dated April 12, 2007, the LA found that Cadiz's indefinite suspension
amounted to a constructive dismissal; nevertheless, the LA ruled that Cadiz was not
illegally dismissed as there was just cause for her dismissal, that is, she engaged in
premarital sexual relations with her boyfriend resulting in a pregnancy out of
wedlock.6 The LA further stated that her "immoral conduct x x x [was] magnified as
serious misconduct not only by heir getting pregnant as a result thereof before and
without marriage, but more than that, also by the fact that Brent is an institution of
the Episcopal Church in the Philippines operating both a hospital and college where
[Cadiz] was employed."7 The LA also ruled that she was not entitled to reinstatement
"at least until she marries her boyfriend," to backwages and vacation/sick leave pay.
Brent, however, manifested that it was willing to pay her 1311 month pay. The
dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered, ordering [Brent] to pay [Cadiz] 13th
month pay in the sum of Seven Thousand Nine Hundred Seventy & 11/100 Pesos
(P7,970.11).
All other charges and claims are hereby dismissed for lack of merit.
SO ORDERED.8ChanRoblesVirtualawlibrary
Cadiz appealed to the National Labor Relations Commission (NLRC), which
affirmed the LA decision in its Resolution9 dated December 10, 2007. Her motion
for reconsideration having been denied by the NLRC in its Resolution10 dated
February 29, 2008, Cadiz elevated her case to the CA on petition for certiorariunder
Rule 65.
Ruling of the CA
The CA, however, dismissed her petition outright due to technical defects in the
petition: (1) incomplete statement of material dates; (2) failure to attach registry
receipts; and (3) failure to indicate the place of issue of counsel's PTR and IBP
official receipts.11 Cadiz sought reconsideration of the assailed CA Resolution dated
July 22, 2008 but it was denied in the assailed Resolution dated February 24,
2009.12The CA further ruled that "a perusal of the petition will reveal that public
respondent NLRC committed no grave abuse of discretion amounting to lack or
excess of jurisdiction x x x holding [Cadiz's] dismissal from employment valid."13
Hence, the present petition. Cadiz argues that -
I
THE HONORABLE [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT
HELD TFIAT [CADIZ'S] IMPREGNATION OUTSIDE OF WEDLOCK IS A
GROUND FOR THE TERMINATION OF [CADIZ'S] EMPLOYMENT14
II
THE [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
UPHELD THE DISMISSAL OF [CADIZ] ON THE GROUND THAT THE
INDEFINITE SUSPENSION WAS VALID AND REQUIRED [CADIZ] TO FIRST
ENTER INTO MARRIAGE BEFORE SHE CAN BE ADMITTED BACK TO HER
EMPLOYMENT15
III
RESPONDENT [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT
DENIED [CADIZ'S] CLAIM FOR BACKWAGES, ALLOWANCES, SICK
LEAVE PAY, MATERNITY PAY AND MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES16
IV
THE [CA] MISPLACED APPLICATION OF THE MATERIAL DATA RULE
RESULTING TO GRAVE ABUSE OF DISCRETION WHEN IT DISMISSED
THE APPEAL17
Cadiz contends, among others, that getting pregnant outside of wedlock is not
grossly immoral, especially when both partners do not have any legal impediment to
marry. Cadiz surmises that the reason for her suspension was not because of her
relationship with her then boyfriend but because of the resulting pregnancy. Cadiz
also lambasts Brent's condition for her reinstatement - that she gets married to her
boyfriend - saying that this violates the stipulation against marriage under Article
136 of the Labor Code. Finally, Cadiz contends that there was substantial compliance
with the rules of procedure, and the CA should not have dismissed the petition.18
Brent, meanwhile, adopts and reiterates its position before the LA and the NLRC that
Cadiz's arguments are irrational and out of context. Brent argues, among others, that
for Cadiz to limit acts of immorality only to extra-marital affairs is to "change the
norms, beliefs, teachings and practices of BRENT as a Church institution of the x x x
Episcopal Church in the Philippines."19
Ruling of the Court
Ordinarily, the Court will simply gloss over the arguments raised by Cadiz, given
that the main matter dealt with by the CA were the infirmities found in the petition
and which caused the dismissal of her case before it. In view, however, of the
significance of the issues involved in Cadiz's dismissal from employment, the Court
will resolve the petition including the substantial grounds raised herein.
The issue to be resolved is whether the CA committed a reversible error in ruling
that: (1) Cadiz's petition is dismissible on ground of technical deficiencies; and (2)
the NLRC did not commit grave abuse of discretion in upholding her dismissal from
employment.
Rules of procedure are mere
tools designed to facilitate the
attainment of justice
In dismissing outright Cadiz's petition, the CA found the following defects: (1)
incomplete statement of material dates; (2) failure to attach registry receipts; and (3)
failure to indicate the place of issue of counsel's PTR and IBP official receipts.
Rule 46, Section 3 of the Rules of Court states the contents of a petition filed with
the CA under Rule 65, viz, "the petition shall x x x indicate the material dates
showing when notice of the judgment or final order or resolution subject thereof was
received, when a motion for new trial or reconsideration, if any, was filed and when
notice of the denial thereof was received." The rationale for this is to enable the CA
to determine whether the petition was filed within the period fixed in the
rules.20 Cadiz's failure to state the date of receipt of the copy of the NLRC decision,
however, is not fatal to her case since the more important material date which must
be duly alleged in a petition is the date of receipt of the resolution of denial of the
motion for reconsideration,21 which she has duly complied with.22
The CA also dismissed the petition for failure to attach the registry receipt in the
affidavit of service.23Cadiz points out, on the other hand, that the registry receipt
number was indicated in the petition and this constitutes substantial compliance with
the requirement. What the rule requires, however, is that the registry receipt must be
appended to the paper being served.24 Clearly, mere indication of the registry receipt
numbers will not suffice. In fact, the absence of the registry receipts amounts to lack
of proof of service.25 Nevertheless, despite this defect, the Court finds that the ends
of substantial justice would be better served by relaxing the application of technical
rules of procedure.26 With regard to counsel's failure to indicate the place where the
IBP and PTR receipts were issued, there was substantial compliance with the
requirement since it was indicated in the verification and certification of non-forum
shopping, as correctly argued by Cadiz's lawyer.27cralawred
Time and again, the Court has emphasized that rules of procedure are designed to
secure substantial justice. These are mere tools to expedite the decision or resolution
of cases and if their strict and rigid application would frustrate rather than promote
substantial justice, then it must be avoided.28
Immorality as a just cause for
termination of employment
Both the LA and the NLRC upheld Cadiz's dismissal as. one attended with just
cause. The LA, while ruling that Cadiz's indefinite suspension was tantamount to a
constructive dismissal, nevertheless found that there was just cause for her dismissal.
According to the LA, "there was just cause therefor, consisting in her engaging in
premarital sexual relations with Carl Cadiz, allegedly her boyfriend, resulting in her
becoming pregnant out of wedlock."29 The LA deemed said act to be immoral, which
was punishable by dismissal under Brent's rules and which likewise constituted
serious misconduct under Article 282(a) of the Labor Code. The LA also opined that
since Cadiz was Brent's ITuman Resource Officer in charge of implementing its rules
against immoral conduct, she should have been the "epitome of proper
conduct."30 The LA ruled:
[Cadiz's] immoral conduct by having premarital sexual relations with her alleged boy
friend, a former Brent worker and her co-employee, is magnified as serious
misconduct not only by her getting pregnant as a result thereof before and without
marriage, but more than that, also by the fact that Brent is an institution of the
Episcopal Church in the Philippines xxx committed to "developing competent and
dedicated professionals xxx and in providing excellent medical and other health
services to the community for the Glory of God and Service to Humanity." x x x As
if these were not enough, [Cadiz] was Brent's Human Resource Officer charged with,
among others, implementing the rules of Brent against immoral conduct, including
premarital sexual relations, or fornication xxx. She should have been the epitome of
proper conduct, but miserably failed. She herself engaged in premarital sexual
relations, which surely scandalized the Brent community, x x x.31
The NLRC, for its part, sustained the LA's conclusion.
The Court, however, cannot subscribe to the labor tribunals' conclusions.
Admittedly, one of the grounds for disciplinary action under Brent's policies is
immorality, which is punishable by dismissal at first offense32 Brent's Policy Manual
provides:
CATEGORY IV
In accordance with Republic Act No. 1052,33 the following are just cause for
terminating an employment of an employee without a definite period:
xxxx
2. Serious misconduct or willful disobedience by the employee of the orders of his
employer or representative in connection with his work, such as, but not limited to
the following:
chanRoblesvirtualLawlibrary
xxxx
b. Commission of immoral conduct or indecency within the company premises, such
as an act of lasciviousness or any act which is sinful and vulgar in nature.
c. Immorality, concubinage, bigamy.34ChanRoblesVirtualawlibrary
Its Employee's Manual of Policies, meanwhile, enumerates "[a]cts of immorality
such as scandalous behaviour, acts of lasciviousness against any person (patient,
visitors, co-workers) within hospital premises"35 as a ground for discipline and
discharge. Brent also relied on Section 94 of the Manual of Regulations for Private
Schools (MRPS), which lists "disgraceful or immoral conduct" as a cause for
terminating employment.36
Thus, the question that must be resolved is whether Cadiz's premarital relations with
her boyfriend and the resulting pregnancy out of wedlock constitute immorality. To
resolve this, the Court makes reference to the recently promulgated case of Cheryll
Santos Lens v. St. Scholastica 's College Westgrove and/or Sr. Edna Quiambao,
OSB37
Leus involved the same personal circumstances as the case at bench, albeit the
employer was a Catholic and sectarian educational institution and the petitioner,
Cheryl 1 Santos Leus (Leus), worked as an assistant to the school's Director of the
Lay Apostolate and Community Outreach Directorate. Leus was dismissed from
employment by the school for having borne a child out of wedlock. The Court ruled
in Leus that the determination of whether a conduct is disgraceful or immoral
involves a two-step process: first, a consideration of the totality of the circumstances
surrounding the conduct; and second, an assessment of the said circumstances vis-a-
vis the prevailing norms of conduct, i.e., what the society generally considers moral
and respectable.
In this case, the surrounding facts leading to Cadiz's dismissal are straightforward -
she was employed as a human resources officer in an educational and medical
institution of the Episcopal Church of the Philippines; she and her boyfriend at that
time were both single; they engaged in premarital sexual relations, which resulted
into pregnancy. The labor tribunals characterized these as constituting disgraceful or
immoral conduct. They also sweepingly concluded that as Human Resource Officer,
Cadiz should have been the epitome of proper conduct and her indiscretion "surely
scandalized the Brent community."38
The foregoing circumstances, however, do not readily equate to disgraceful and
immoral conduct. Brent's Policy Manual and Employee's Manual of Policies do not
define what constitutes immorality; it simply stated immorality as a ground for
disciplinary action. Instead, Brent erroneously relied on the standard dictionary
definition of fornication as a form of illicit relation and proceeded to conclude that
Cadiz's acts fell under such classification, thus constituting immorality.39
Jurisprudence has already set the standard of morality with which an act should be
gauged - it is public and secular, not religious.40 Whether a conduct is considered
disgraceful or immoral should be made in accordance with the prevailing norms of
conduct, which, as stated in Leus, refer to those conducts which are proscribed
because they are detrimental to conditions upon which depend the existence and
progress of human society. The fact that a particular act does not conform to the
traditional moral views of a certain sectarian institution is not sufficient reason to
qualify such act as immoral unless it, likewise, does not conform to public and
secular standards. More importantly, there must be substantial evidence to establish
that premarital sexual relations and pregnancy out of wedlock is considered
disgraceful or immoral.41
The totality of the circumstances of this case does not justify the conclusion that
Cadiz committed acts of immorality. Similar to Leus, Cadiz and her boyfriend were
both single and had no legal impediment to marry at the time she committed the
alleged immoral conduct. In fact, they eventually married on April 15, 2008.42 Aside
from these, the labor tribunals' respective conclusion that Cadiz's "indiscretion"
"scandalized the Brent community" is speculative, at most, and there is no proof
adduced by Brent to support such sweeping conclusion. Even Brent admitted that it
came to know of Cadiz's "situation" only when her pregnancy became
manifest.43 Brent also conceded that "[a]t the time [Cadiz] and Carl R. Cadiz were
just carrying on their boyfriend-girlfriend relationship, there was no knowledge or
evidence by [Brent] that they were engaged also in premarital sex."44 This only goes
to show that Cadiz did not flaunt her premarital relations with her boyfriend and it
was not carried on under scandalous or disgraceful circumstances. As declared in
Leus, "there is no law which penalizes an unmarried mother by reason of her sexual
conduct or proscribes the consensual sexual activity between two unmarried persons;
that neither does such situation contravene[s] any fundamental state policy enshrined
in the Constitution."45 The fact that Brent is a sectarian institution does not
automatically subject Cadiz to its religious standard of morality absent an express
statement in its manual of personnel policy and regulations, prescribing such
religious standard as gauge as these regulations create the obligation on both the
employee and the employer to abide by the same.46
Brent, likewise, cannot resort to the MRPS because the Court already stressed in
Leus that "premarital sexual relations between two consenting adults who have no
impediment to marry each other, and, consequently, conceiving a child out of
wedlock, gauged from a purely public and secular view of morality, does not amount
to a disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS."47
Marriage as a condition for reinstatement
The doctrine of management prerogative gives an employer the right to "regulate,
according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, the time, place and manner of work,
work supervision, transfer of employees, lay-off of workers, and discipline,
dismissal, and recall of employees."48 In this case, Brent imposed on Cadiz the
condition that she subsequently contract marriage with her then boyfriend for her to
be reinstated. According to Brent, this is "in consonance with the policy against
encouraging illicit or common-law relations that would subvert the sacrament of
marriage."49
Statutory law is replete with legislation protecting labor and promoting equal
opportunity in employment. No less than the 1987 Constitution mandates that the
"State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment
opportunities for all."50 The Labor Code of the Philippines, meanwhile, provides:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require
as a condition of employment or continuation of employment that a woman
employee shall not get married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely
by reason of her marriage.
With particular regard to women, Republic Act No. 9710 or the Magna Carta of
Women51 protects women against discrimination in all matters relating to marriage
and family relations, including the right to choose freely a spouse and to enter into
marriage only with their free and full consent.52
Weighed against these safeguards, it becomes apparent that Brent's condition is
coercive, oppressive and discriminatory. There is no rhyme or reason for it. It forces
Cadiz to marry for economic reasons and deprives her of the freedom to choose her
status, which is a privilege that inheres in her as an intangible and inalienable
right.53 While a marriage or no-marriage qualification may be justified as a "bona
fide occupational qualification," Brent must prove two factors necessitating its
imposition, viz: (1) that the employment qualification is reasonably related to the
essential operation of the job involved; and (2) that there is a factual basis for
believing that all or substantially all persons meeting the qualification would be
unable to properly perform the duties of the job.54 Brent has not shown the presence
of neither of these factors. Perforce, the Court cannot uphold the validity of said
condition.
Given the foregoing, Cadiz, therefore, is entitled to reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation
was withheld up to the date of actual reinstatement. Where reinstatement is no longer
viable as an option, separation pay should be awarded as an alternative and as a form
of financial assistance.55 In the computation of separation pay, the Court stresses
that it should not go beyond the date an employee was deemed to have been
actually separated from employment, or beyond the date when reinstatement
was rendered impossible.56 In this case, the records do not show whether Cadiz
already severed her employment with Brent or whether she is gainfully employed
elsewhere; thus, the computation of separation pay shall be pegged based on the
findings that she was employed on August 16, 2002, on her own admission in her
complaint that she was dismissed on November 17, 2006, and that she was earning a
salary of P9,108.70 per month,57 which shall then be computed at a rate of one (1)
month salary for every year of service,58 as follows:
Monthly salary P9,108.70
multiplied by number of years x
in service (Aug 02 to Nov 06) 4
P36,434.80
The Court also finds that Cadiz is only entitled to limited backwages. Generally, the (1) One Hundred Nine Thousand Three Hundred Four Pesos and 40/100
computation of backwages is reckoned from the date of illegal dismissal until actual (P109,304.40) as backwages;
reinstatement.59 In case separation pay is ordered in lieu of reinstatement or
reinstatement is waived by the employee, backwages is computed from the time of (2) Thirty-Six Thousand Four Hundred Thirty-Four Pesos and 80/100 (P36,434.80)
dismissal until the finality of the decision ordering separation pay.60Jurisprudence as separation pay; and
further clarified that the period for computing the backwages during the period of
appeal should end on the date that a higher court reversed the labor arbitration ruling (3) Attorney's fees equivalent to ten percent (10%) of the total award.
of illegal dismissal.61 If applied in Cadiz's case, then the computation of backwages
should be from November 17, 2006, which was the time of her illegal dismissal, until The monetary awards granted shall earn legal interest at the rate of six percent
the date of promulgation of this decision. Nevertheless, the Court has also recognized (6%) per annum from the date of the finality of this Decision until fully paid.
that the constitutional policy of providing full protection to labor is not intended to
oppress or destroy management.62 The Court notes that at the time of Cadiz's SO ORDERED
indefinite suspension from employment, Leus was yet to be decided by the Court.
Moreover, Brent was acting in good faith and on its honest belief that Cadiz's
pregnancy out of wedlock constituted immorality. Thus, fairness and equity dictate
that the award of backwages shall only be equivalent to one (1) year or P109,304.40,
computed as follows:

Monthly salary P9,108.70

multiplied by one year x x

or 12 months 12

P109,304.40

Finally, with regard to Cadiz's prayer for moral and exemplary damages, the Court
finds the same without merit. A finding of illegal dismissal, by itself, does not
establish bad faith to entitle an employee to moral damages.63 Absent clear and
convincing evidence showing that Cadiz's dismissal from Brent's employ had been
carried out in an arbitrary, capricious and malicious manner, moral and exemplary
damages cannot be awarded. The Court nevertheless grants the award of attorney's
fees in the amount often percent (10%) of the total monetary award, Cadiz having
been forced to litigate in order to seek redress of her grievances.64

WHEREFORE, the petition is GRANTED. The Resolutions dated July 22, 2008
and February 24, 2009 of the Court of Appeals in CA-G.R. SP No. 02373-M1N
are REVERSED and SET ASIDE, and a NEW ONE ENTERED finding petitioner
Christine Joy Capin-Cadiz to have been dismissed without just cause.

Respondent Brent Hospital and Colleges, Inc. is hereby ORDERED TO

PAY petitioner Christine Joy Capin-Cadiz:
Republic of the Philippines, petitioner, vs. Sandiganbayan, Major General
Josephus Q. Ramas and Elizabeth Dimaano, respondents.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari seeking to set aside the
Resolutions of the Sandiganbayan (First Division)[1] dated 18 November 1991 and 25
March 1992 in Civil Case No. 0037. The first Resolution dismissed petitioners
Amended Complaint and ordered the return of the confiscated items to respondent
Elizabeth Dimaano, while the second Resolution denied petitioners Motion for
Reconsideration. Petitioner prays for the grant of the reliefs sought in its Amended
Complaint, or in the alternative, for the remand of this case to the Sandiganbayan
(First Division) for further proceedings allowing petitioner to complete the
presentation of its evidence.
Antecedent Facts
Immediately upon her assumption to office following the successful EDSA
Revolution, then President Corazon C. Aquino issued Executive Order No. 1 (EO
No. 1) creating the Presidential Commission on Good Government (PCGG). EO No.
1 primarily tasked the PCGG to recover all ill-gotten wealth of former President
Ferdinand E. Marcos, his immediate family, relatives, subordinates and close
associates. EO No. 1 vested the PCGG with the power (a) to conduct investigation as
may be necessary in order to accomplish and carry out the purposes of this order and
the power (h) to promulgate such rules and regulations as may be necessary to carry
out the purpose of this order. Accordingly, the PCGG, through its then Chairman
Jovito R. Salonga, created an AFP Anti-Graft Board (AFP Board) tasked to
investigate reports of unexplained wealth and corrupt practices by AFP personnel,
whether in the active service or retired.[2]
Based on its mandate, the AFP Board investigated various reports of alleged
unexplained wealth of respondent Major General Josephus Q. Ramas (Ramas). On
27 July 1987, the AFP Board issued a Resolution on its findings and
recommendation on the reported unexplained wealth of Ramas. The relevant part of
the Resolution reads:
III. FINDINGS and EVALUATION:
Evidence in the record showed that respondent is the owner of a house and lot
located at 15-Yakan St., La Vista, Quezon City. He is also the owner of a house and
lot located in Cebu City. The lot has an area of 3,327 square meters.
The value of the property located in Quezon City may be estimated modestly
at P700,000.00.
The equipment/items and communication facilities which were found in the premises
of Elizabeth Dimaano and were confiscated by elements of the PC Command of
Batangas were all covered by invoice receipt in the name of CAPT. EFREN
SALIDO, RSO Command Coy, MSC, PA. These items could not have been in the
possession of Elizabeth Dimaano if not given for her use by respondent
Commanding General of the Philippine Army.
Aside from the military equipment/items and communications equipment, the raiding
team was also able to confiscate money in the amount of P2,870,000.00 and $50,000
US Dollars in the house of Elizabeth Dimaano on 3 March 1986.
Affidavits of members of the Military Security Unit, Military Security Command,
Philippine Army, stationed at Camp Eldridge, Los Baos, Laguna, disclosed that
Elizabeth Dimaano is the mistress of respondent. That respondent usually goes and
stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga,
Itaas, Batangas City and when he arrives, Elizabeth Dimaano embraces and kisses
respondent. That on February 25, 1986, a person who rode in a car went to the
residence of Elizabeth Dimaano with four (4) attache cases filled with money and
owned by MGen Ramas.
Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible
means of income and is supported by respondent for she was formerly a mere
secretary.
Taking in toto the evidence, Elizabeth Dimaano could not have used the military
equipment/items seized in her house on March 3, 1986 without the consent of
respondent, he being the Commanding General of the Philippine Army. It is also
impossible for Elizabeth Dimaano to claim that she owns the P2,870,000.00 and
$50,000 US Dollars for she had no visible source of income.
This money was never declared in the Statement of Assets and Liabilities of
respondent. There was an intention to cover the existence of these money because
these are all ill-gotten and unexplained wealth. Were it not for the affidavits of the
members of the Military Security Unit assigned at Camp Eldridge, Los Baos,
Laguna, the existence and ownership of these money would have never been known.
The Statement of Assets and Liabilities of respondent were also submitted for
scrutiny and analysis by the Boards consultant. Although the amount
of P2,870,000.00 and $50,000 US Dollars were not included, still it was disclosed
that respondent has an unexplained wealth of P104,134. 60.
IV. CONCLUSION:
In view of the foregoing, the Board finds that a prima facie case exists against
respondent for ill-gotten and unexplained wealth in the amount of P2,974,134.00 and
$50,000 US Dollars.
V. RECOMMENDATION:
Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted
and tried for violation of RA 3019, as amended, otherwise known as Anti-Graft and
Corrupt Practices Act and RA 1379, as amended, otherwise known as The Act for
the Forfeiture of Unlawfully Acquired Property.[3]
Thus, on 1 August 1987, the PCGG filed a petition for forfeiture under
Republic Act No. 1379 (RA No. 1379) [4] against Ramas.
Before Ramas could answer the petition, then Solicitor General Francisco I.
Chavez filed an Amended Complaint naming the Republic of the Philippines
(petitioner), represented by the PCGG, as plaintiff and Ramas as defendant. The
Amended Complaint also impleaded Elizabeth Dimaano (Dimaano) as co-defendant.
The Amended Complaint alleged that Ramas was the Commanding General of
the Philippine Army until 1986. On the other hand, Dimaano was a confidential
agent of the Military Security Unit, Philippine Army, assigned as a clerk-typist at the
office of Ramas from 1 January 1978 to February 1979. The Amended Complaint
further alleged that Ramas acquired funds, assets and properties manifestly out of
proportion to his salary as an army officer and his other income from legitimately
acquired property by taking undue advantage of his public office and/or using his
power, authority and influence as such officer of the Armed Forces of the Philippines
and as a subordinate and close associate of the deposed President Ferdinand
Marcos.[5]
The Amended Complaint also alleged that the AFP Board, after a previous
inquiry, found reasonable ground to believe that respondents have violated RA No.
1379.[6] The Amended Complaint prayed for, among others, the forfeiture of
respondents properties, funds and equipment in favor of the State.
Ramas filed an Answer with Special and/or Affirmative Defenses and
Compulsory Counterclaim to the Amended Complaint. In his Answer, Ramas
contended that his property consisted only of a residential house at La Vista
Subdivision, Quezon City, valued at P700,000, which was not out of proportion to
his salary and other legitimate income. He denied ownership of any mansion in Cebu
City and the cash, communications equipment and other items confiscated from the
house of Dimaano.
Dimaano filed her own Answer to the Amended Complaint. Admitting her
employment as a clerk-typist in the office of Ramas from January-November 1978
only, Dimaano claimed ownership of the monies, communications equipment,
jewelry and land titles taken from her house by the Philippine Constabulary raiding
team.
After termination of the pre-trial,[7] the court set the case for trial on the merits
on 9-11 November 1988.
On 9 November 1988, petitioner asked for a deferment of the hearing due to its
lack of preparation for trial and the absence of witnesses and vital documents to
support its case. The court reset the hearing to 17 and 18 April 1989.
On 13 April 1989, petitioner filed a motion for leave to amend the complaint in
order to charge the delinquent properties with being subject to forfeiture as having
been unlawfully acquired by defendant Dimaano alone x x x.[8]
Nevertheless, in an order dated 17 April 1989, the Sandiganbayan proceeded
with petitioners presentation of evidence on the ground that the motion for leave to
amend complaint did not state when petitioner would file the amended
complaint. The Sandiganbayan further stated that the subject matter of the amended
complaint was on its face vague and not related to the existing complaint. The
Sandiganbayan also held that due to the time that the case had been pending in court,
petitioner should proceed to present its evidence.
After presenting only three witnesses, petitioner asked for a postponement of
the trial.
On 28 September 1989, during the continuation of the trial, petitioner
manifested its inability to proceed to trial because of the absence of other witnesses
or lack of further evidence to present. Instead, petitioner reiterated its motion to
amend the complaint to conform to the evidence already presented or to change the
averments to show that Dimaano alone unlawfully acquired the monies or properties
subject of the forfeiture.
The Sandiganbayan noted that petitioner had already delayed the case for over a
year mainly because of its many postponements. Moreover, petitioner would want
the case to revert to its preliminary stage when in fact the case had long been ready
for trial. The Sandiganbayan ordered petitioner to prepare for presentation of its
additional evidence, if any.
During the trial on 23 March 1990, petitioner again admitted its inability to
present further evidence. Giving petitioner one more chance to present further
evidence or to amend the complaint to conform to its evidence, the Sandiganbayan
reset the trial to 18 May 1990. The Sandiganbayan, however, hinted that the re-
setting was without prejudice to any action that private respondents might take under
the circumstances.
However, on 18 May 1990, petitioner again expressed its inability to proceed to
trial because it had no further evidence to present. Again, in the interest of justice,
the Sandiganbayan granted petitioner 60 days within which to file an appropriate (3.) The evidence adduced against Ramas does not constitute a prima facie case
pleading. The Sandiganbayan, however, warned petitioner that failure to act would against him.
constrain the court to take drastic action.
Private respondents then filed their motions to dismiss based on Republic v. (4.) There was an illegal search and seizure of the items confiscated.
Migrino.[9] The Court held in Migrino that the PCGG does not have jurisdiction to
investigate and prosecute military officers by reason of mere position held without a
showing that they are subordinates of former President Marcos. The Issues
On 18 November 1991, the Sandiganbayan rendered a resolution, the
dispositive portion of which states: Petitioner raises the following issues:

WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint, A. RESPONDENT COURT SERIOUSLY ERRED IN
without pronouncement as to costs. The counterclaims are likewise dismissed for CONCLUDING THAT PETITIONERS
lack of merit, but the confiscated sum of money, communications equipment, jewelry EVIDENCE CANNOT MAKE A CASE FOR
and land titles are ordered returned to Elizabeth Dimaano. FORFEITURE AND THAT THERE WAS NO
The records of this case are hereby remanded and referred to the Hon. Ombudsman, SHOWING OF CONSPIRACY, COLLUSION OR
who has primary jurisdiction over the forfeiture cases under R.A. No. 1379, for such RELATIONSHIP BY CONSANGUINITY OR
appropriate action as the evidence warrants. This case is also referred to the AFFINITY BY AND BETWEEN RESPONDENT
Commissioner of the Bureau of Internal Revenue for a determination of any tax RAMAS AND RESPONDENT DIMAANO
liability of respondent Elizabeth Dimaano in connection herewith. NOTWITHSTANDING THE FACT THAT SUCH
CONCLUSIONS WERE CLEARLY
UNFOUNDED AND PREMATURE, HAVING
SO ORDERED.
BEEN RENDERED PRIOR TO THE
COMPLETION OF THE PRESENTATION OF
On 4 December 1991, petitioner filed its Motion for Reconsideration. THE EVIDENCE OF THE PETITIONER.
In answer to the Motion for Reconsideration, private respondents filed a Joint B. RESPONDENT COURT SERIOUSLY ERRED IN
Comment/Opposition to which petitioner filed its Reply on 10 January 1992. HOLDING THAT THE ACTIONS TAKEN BY
On 25 March 1992, the Sandiganbayan rendered a Resolution denying the THE PETITIONER, INCLUDING THE FILING
Motion for Reconsideration. OF THE ORIGINAL COMPLAINT AND THE
AMENDED COMPLAINT, SHOULD BE
STRUCK OUT IN LINE WITH THE RULINGS OF
THE SUPREME COURT IN CRUZ, JR. v.
Ruling of the Sandiganbayan SANDIGANBAYAN, 194 SCRA 474 AND
REPUBLIC v. MIGRINO, 189 SCRA 289,
NOTWITHSTANDING THE FACT THAT:
The Sandiganbayan dismissed the Amended Complaint on the following
grounds:
1. The cases of Cruz, Jr. v. Sandiganbayan, supra, and
Republic v. Migrino, supra, are clearly not
(1.) The actions taken by the PCGG are not in accordance with the rulings of applicable to this case;
the Supreme Court in Cruz, Jr. v. Sandiganbayan[10] and Republic v.
Migrino[11] which involve the same issues.
2. Any procedural defect in the institution of the
complaint in Civil Case No. 0037 was cured
(2.) No previous inquiry similar to preliminary investigations in criminal cases and/or waived by respondents with the filing of
was conducted against Ramas and Dimaano. their respective answers with counterclaim; and
 3. The separate motions to dismiss were evidently
improper considering that they were filed after
commencement of the presentation of the
evidence of the petitioner and even before the
latter was allowed to formally offer its evidence
and rest its case;
C. RESPONDENT COURT SERIOUSLY ERRED IN
HOLDING THAT THE ARTICLES AND THINGS
SUCH AS SUMS OF MONEY,
COMMUNICATIONS EQUIPMENT, JEWELRY
AND LAND TITLES CONFISCATED FROM THE
HOUSE OF RESPONDENT DIMAANO WERE
ILLEGALLY SEIZED AND THEREFORE
EXCLUDED AS EVIDENCE.[12]
The Courts Ruling
First Issue: PCGGs Jurisdiction to Investigate Private Respondents
This case involves a revisiting of an old issue already decided by this Court
in Cruz, Jr. v. Sandiganbayan[13] and Republic v. Migrino.[14]
The primary issue for resolution is whether the PCGG has the jurisdiction to
investigate and cause the filing of a forfeiture petition against Ramas and Dimaano
for unexplained wealth under RA No. 1379.
We hold that PCGG has no such jurisdiction.
The PCGG created the AFP Board to investigate the unexplained wealth and
corrupt practices of AFP personnel, whether in the active service or retired.[15] The
PCGG tasked the AFP Board to make the necessary recommendations to appropriate
government agencies on the action to be taken based on its findings.[16] The PCGG
gave this task to the AFP Board pursuant to the PCGGs power under Section 3 of EO
No. 1 to conduct investigation as may be necessary in order to accomplish and to
carry out the purposes of this order. EO No. 1 gave the PCGG specific
responsibilities, to wit:
SEC. 2. The Commission shall be charged with the task of assisting the President in
regard to the following matters:
(a) The recovery of all ill-gotten wealth accumulated by former President
Ferdinand E. Marcos, his immediate family, relatives,
subordinates and close associates, whether located in the
Philippines or abroad, including the takeover and sequestration
of all business enterprises and entities owned or controlled by
them, during his administration, directly or through nominees,
by taking undue advantage of their public office and/ or using
their powers, authority, influence, connections or relationship.
(b) The investigation of such cases of graft and corruption as the
President may assign to the Commission from time to time.
x x x.
The PCGG, through the AFP Board, can only investigate the unexplained
wealth and corrupt practices of AFP personnel who fall under either of the two
categories mentioned in Section 2 of EO No. 1. These are: (1) AFP personnel who
have accumulated ill-gotten wealth during the administration of former President
Marcos by being the latters immediate family, relative, subordinate or close
associate, taking undue advantage of their public office or using their powers,
influence x x x;[17] or (2) AFP personnel involved in other cases of graft and
corruption provided the President assigns their cases to the PCGG.[18]
Petitioner, however, does not claim that the President assigned Ramas case to
the PCGG. Therefore, Ramas case should fall under the first category of AFP
personnel before the PCGG could exercise its jurisdiction over him. Petitioner argues
that Ramas was undoubtedly a subordinate of former President Marcos because of
his position as the Commanding General of the Philippine Army. Petitioner claims
that Ramas position enabled him to receive orders directly from his commander-in-
chief, undeniably making him a subordinate of former President Marcos.
We hold that Ramas was not a subordinate of former President Marcos in the
sense contemplated under EO No. 1 and its amendments.
Mere position held by a military officer does not automatically make him a
subordinate as this term is used in EO Nos. 1, 2, 14 and 14-A absent a showing that
he enjoyed close association with former President Marcos. Migrino discussed this
issue in this wise:
A close reading of EO No. 1 and related executive orders will readily show what is
contemplated within the term subordinate. The Whereas Clauses of EO No. 1 express
the urgent need to recover the ill-gotten wealth amassed by former President
Ferdinand E. Marcos, his immediate family, relatives, and close associates both here
and abroad.
EO No. 2 freezes all assets and properties in the Philippines in which former
President Marcos and/or his wife, Mrs. Imelda Marcos, their close relatives,
subordinates, business associates, dummies, agents, or nominees have any interest or
participation.
Applying the rule in statutory construction known as ejusdem generis that is-
[W]here general words follow an enumeration of persons or things by words of a
particular and specific meaning, such general words are not to be construed in their
widest extent, but are to be held as applying only to persons or things of the same
kind or class as those specifically mentioned [Smith, Bell & Co, Ltd. vs. Register of
Deeds of Davao, 96 Phil. 53, 58, citing Black on Interpretation of Laws, 2nd Ed.,
203].
[T]he term subordinate as used in EO Nos. 1 & 2 refers to one who enjoys a close
association with former President Marcos and/or his wife, similar to the immediate
family member, relative, and close associate in EO No. 1 and the close relative,
business associate, dummy, agent, or nominee in EO No. 2.
xxx
It does not suffice, as in this case, that the respondent is or was a government official
or employee during the administration of former President Marcos. There must be a
prima facie showing that the respondent unlawfully accumulated wealth by virtue
of his close association or relation with former Pres. Marcos and/or his wife.
(Emphasis supplied)
Ramas position alone as Commanding General of the Philippine Army with the
rank of Major General[19] does not suffice to make him a subordinate of former
President Marcos for purposes of EO No. 1 and its amendments. The PCGG has to
provide a prima facie showing that Ramas was a close associate of former President
Marcos, in the same manner that business associates, dummies, agents or nominees
of former President Marcos were close to him. Such close association is manifested
either by Ramas complicity with former President Marcos in the accumulation of ill-
gotten wealth by the deposed President or by former President Marcos acquiescence
in Ramas own accumulation of ill-gotten wealth if any.
This, the PCGG failed to do.
Petitioners attempt to differentiate the instant case from Migrino does not
convince us. Petitioner argues that unlike in Migrino, the AFP Board Resolution in
the instant case states that the AFP Board conducted the investigation pursuant to EO
Nos. 1, 2, 14 and 14-A in relation to RA No. 1379. Petitioner asserts that there is a
presumption that the PCGG was acting within its jurisdiction of investigating crony-
related cases of graft and corruption and that Ramas was truly a subordinate of the
former President.However, the same AFP Board Resolution belies this
contention. Although the Resolution begins with such statement, it ends with the
following recommendation:
V. RECOMMENDATION:
Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted
and tried for violation of RA 3019, as amended, otherwise known as Anti-Graft and
Corrupt Practices Act and RA 1379, as amended, otherwise known as The Act for
the Forfeiture of Unlawfully Acquired Property.[20]
Thus, although the PCGG sought to investigate and prosecute private respondents
under EO Nos. 1, 2, 14 and 14-A, the result yielded a finding of violation of
Republic Acts Nos. 3019 and 1379 without any relation to EO Nos. 1, 2, 14 and 14-
A. This absence of relation to EO No. 1 and its amendments proves fatal to
petitioners case. EO No. 1 created the PCGG for a specific and limited purpose, and
necessarily its powers must be construed to address such specific and limited
purpose.
Moreover, the resolution of the AFP Board and even the Amended Complaint
do not show that the properties Ramas allegedly owned were accumulated by him in
his capacity as a subordinate of his commander-in-chief. Petitioner merely
enumerated the properties Ramas allegedly owned and suggested that these
properties were disproportionate to his salary and other legitimate income without
showing that Ramas amassed them because of his close association with former
President Marcos.Petitioner, in fact, admits that the AFP Board resolution does not
contain a finding that Ramas accumulated his wealth because of his close association
with former President Marcos, thus:
10. While it is true that the resolution of the Anti-Graft Board of the New Armed
Forces of the Philippines did not categorically find a prima facie evidence
showing that respondent Ramas unlawfully accumulated wealth by virtue of his
close association or relation with former President Marcos and/or his wife, it is
submitted that such omission was not fatal. The resolution of the Anti-Graft Board
should be read in the context of the law creating the same and the objective of the
investigation which was, as stated in the above, pursuant to Republic Act Nos. 3019
and 1379 in relation to Executive Order Nos. 1, 2, 14 and 14-a;[21] (Emphasis
supplied)
Such omission is fatal. Petitioner forgets that it is precisely a prima
facie showing that the ill-gotten wealth was accumulated by a subordinate of former
President Marcos that vests jurisdiction on PCGG. EO No. 1[22] clearly premises the
creation of the PCGG on the urgent need to recover all ill-gotten wealth amassed by
former President Marcos, his immediate family, relatives, subordinates and close
associates. Therefore, to say that such omission was not fatal is clearly contrary to
the intent behind the creation of the PCGG.
In Cruz, Jr. v. Sandiganbayan,[23] the Court outlined the cases that fall under
the jurisdiction of the PCGG pursuant to EO Nos. 1, 2,[24] 14,[25] 14-A:[26]
A careful reading of Sections 2(a) and 3 of Executive Order No. 1 in relation with
Sections 1, 2 and 3 of Executive Order No. 14, shows what the authority of the
respondent PCGG to investigate and prosecute covers:
(a) the investigation and prosecution of the civil action for the recovery of
ill-gotten wealth under Republic Act No. 1379, accumulated by
former President Marcos, his immediate family, relatives,
subordinates and close associates, whether located in the
Philippines or abroad, including the take-over or sequestration of
all business enterprises and entities owned or controlled by them,
during his administration, directly or through his nominees, by
taking undue advantage of their public office and/or using
their powers, authority and influence, connections or
relationships; and
(b) the investigation and prosecution of such offenses committed in the
acquisition of said ill-gotten wealth as contemplated under Section
2(a) of Executive Order No. 1.
However, other violations of the Anti-Graft and Corrupt Practices Act not
otherwise falling under the foregoing categories, require a previous authority of
the President for the respondent PCGG to investigate and prosecute in
accordance with Section 2 (b) of Executive Order No. 1. Otherwise, jurisdiction
over such cases is vested in the Ombudsman and other duly authorized
investigating agencies such as the provincial and city prosecutors, their
assistants, the Chief State Prosecutor and his assistants and the state
prosecutors.(Emphasis supplied)
The proper government agencies, and not the PCGG, should investigate and
prosecute forfeiture petitions not falling under EO No. 1 and its amendments. The
preliminary investigation of unexplained wealth amassed on or before 25 February
1986 falls under the jurisdiction of the Ombudsman, while the authority to file the
corresponding forfeiture petition rests with the Solicitor General.[27] The
Ombudsman Act or Republic Act No. 6770 (RA No. 6770) vests in the Ombudsman
the power to conduct preliminary investigation and to file forfeiture proceedings
involving unexplained wealth amassed after 25 February 1986.[28]
After the pronouncements of the Court in Cruz, the PCGG still pursued this
case despite the absence of a prima facie finding that Ramas was a subordinate of
former President Marcos. The petition for forfeiture filed with the Sandiganbayan
should be dismissed for lack of authority by the PCGG to investigate respondents
since there is no prima facie showing that EO No. 1 and its amendments apply to
respondents. The AFP Board Resolution and even the Amended Complaint state that
there are violations of RA Nos. 3019 and 1379. Thus, the PCGG should have
recommended Ramas case to the Ombudsman who has jurisdiction to conduct the
preliminary investigation of ordinary unexplained wealth and graft cases. As stated
in Migrino:
[But] in view of the patent lack of authority of the PCGG to investigate and cause the
prosecution of private respondent for violation of Rep. Acts Nos. 3019 and 1379, the
PCGG must also be enjoined from proceeding with the case, without prejudice to any
action that may be taken by the proper prosecutory agency. The rule of law mandates
that an agency of government be allowed to exercise only the powers granted to it.
Petitioners argument that private respondents have waived any defect in the
filing of the forfeiture petition by submitting their respective Answers with
counterclaim deserves no merit as well.
Petitioner has no jurisdiction over private respondents. Thus, there is no
jurisdiction to waive in the first place. The PCGG cannot exercise investigative or
prosecutorial powers never granted to it. PCGGs powers are specific and
limited. Unless given additional assignment by the President, PCGGs sole task is
only to recover the ill-gotten wealth of the Marcoses, their relatives and
cronies.[29] Without these elements, the PCGG cannot claim jurisdiction over a case.
Private respondents questioned the authority and jurisdiction of the PCGG to
investigate and prosecute their cases by filing their Motion to Dismiss as soon as
they learned of the pronouncement of the Court in Migrino. This case was decided
on 30 August 1990, which explains why private respondents only filed their Motion
to Dismiss on 8 October 1990. Nevertheless, we have held that the parties may raise
lack of jurisdiction at any stage of the proceeding.[30] Thus, we hold that there was no
waiver of jurisdiction in this case. Jurisdiction is vested by law and not by the parties
to an action.[31]
Consequently, the petition should be dismissed for lack of jurisdiction by the
PCGG to conduct the preliminary investigation. The Ombudsman may still conduct
the proper preliminary investigation for violation of RA No. 1379, and if warranted,
the Solicitor General may file the forfeiture petition with the Sandiganbayan.[32] The
right of the State to forfeit unexplained wealth under RA No. 1379 is not subject to
prescription, laches or estoppel.[33]
Second Issue: Propriety of Dismissal of Case
Before Completion of Presentation of Evidence
Petitioner also contends that the Sandiganbayan erred in dismissing the case
before completion of the presentation of petitioners evidence.
We disagree.
Based on the findings of the Sandiganbayan and the records of this case, we
find that petitioner has only itself to blame for non-completion of the presentation of
its evidence. First, this case has been pending for four years before the
Sandiganbayan dismissed it. Petitioner filed its Amended Complaint on 11
August 1987, and only beganto present its evidence on 17 April 1989. Petitioner had
almost two years to prepare its evidence. However, despite this sufficient time,
petitioner still delayed the presentation of the rest of its evidence by filing numerous
motions for postponements and extensions. Even before the date set for the
presentation of its evidence, petitioner filed, on 13 April 1989, a Motion for Leave to
Amend the Complaint.[34] The motion sought to charge the delinquent properties
(which comprise most of petitioners evidence) with being subject to forfeiture as
having been unlawfully acquired by defendant Dimaano alone x x x.
The Sandiganbayan, however, refused to defer the presentation of petitioners
evidence since petitioner did not state when it would file the amended complaint. On
18 April 1989, the Sandiganbayan set the continuation of the presentation of
evidence on 28-29 September and 9-11 October 1989, giving petitioner ample time
to prepare its evidence. Still, on 28 September 1989, petitioner manifested its
inability to proceed with the presentation of its evidence. The Sandiganbayan issued
an Order expressing its view on the matter, to wit:
The Court has gone through extended inquiry and a narration of the above events
because this case has been ready for trial for over a year and much of the delay
hereon has been due to the inability of the government to produce on scheduled dates
for pre-trial and for trial documents and witnesses, allegedly upon the failure of the
military to supply them for the preparation of the presentation of evidence
thereon. Of equal interest is the fact that this Court has been held to task in public
about its alleged failure to move cases such as this one beyond the preliminary stage,
when, in view of the developments such as those of today, this Court is now faced
with a situation where a case already in progress will revert back to the preliminary
stage, despite a five-month pause where appropriate action could have been
undertaken by the plaintiff Republic.[35]
On 9 October 1989, the PCGG manifested in court that it was conducting a
preliminary investigation on the unexplained wealth of private respondents as
mandated by RA No. 1379.[36] The PCGG prayed for an additional four months to
conduct the preliminary investigation. The Sandiganbayan granted this request and
scheduled the presentation of evidence on 26-29 March 1990. However, on the
scheduled date, petitioner failed to inform the court of the result of the preliminary
investigation the PCGG supposedly conducted. Again, the Sandiganbayan gave
petitioner until 18 May 1990 to continue with the presentation of its evidence and to
inform the court of what lies ahead insofar as the status of the case is concerned x x
x.[37] Still on the date set, petitioner failed to present its evidence. Finally, on 11 July
1990, petitioner filed its Re-Amended Complaint.[38] The Sandiganbayan correctly
observed that a case already pending for years would revert to its preliminary stage if
the court were to accept the Re-Amended Complaint.
Based on these circumstances, obviously petitioner has only itself to blame for
failure to complete the presentation of its evidence. The Sandiganbayan gave
petitioner more than sufficient time to finish the presentation of its evidence. The
Sandiganbayan overlooked petitioners delays and yet petitioner ended the long-string
of delays with the filing of a Re-Amended Complaint, which would only prolong
even more the disposition of the case.
Moreover, the pronouncements of the Court in Migrino and Cruz prompted the
Sandiganbayan to dismiss the case since the PCGG has no jurisdiction to investigate
and prosecute the case against private respondents. This alone would have been
sufficient legal basis for the Sandiganbayan to dismiss the forfeiture case against
private respondents.
Thus, we hold that the Sandiganbayan did not err in dismissing the case before
completion of the presentation of petitioners evidence.
Third Issue: Legality of the Search and Seizure
Petitioner claims that the Sandiganbayan erred in declaring the properties
confiscated from Dimaanos house as illegally seized and therefore inadmissible in
evidence.This issue bears a significant effect on petitioners case since these
properties comprise most of petitioners evidence against private respondents.
Petitioner will not have much evidence to support its case against private respondents
if these properties are inadmissible in evidence.
On 3 March 1986, the Constabulary raiding team served at Dimaanos residence
a search warrant captioned Illegal Possession of Firearms and Ammunition. Dimaano
was not present during the raid but Dimaanos cousins witnessed the raid. The raiding
team seized the items detailed in the seizure receipt together with other
items not included in the search warrant. The raiding team seized these items: one
baby armalite rifle with two magazines; 40 rounds of 5.56 ammunition; one pistol,
caliber .45; communications equipment, cash consisting of P2,870,000 and
US$50,000, jewelry, and land titles.
Petitioner wants the Court to take judicial notice that the raiding team
conducted the search and seizure on March 3, 1986 or five days after the successful
EDSA revolution.[39] Petitioner argues that a revolutionary government was operative
at that time by virtue of Proclamation No. 1 announcing that President Aquino and
Vice President Laurel were taking power in the name and by the will of the Filipino
people.[40] Petitioner asserts that the revolutionary government effectively withheld
the operation of the 1973 Constitution which guaranteed private respondents
exclusionary right.
Moreover, petitioner argues that the exclusionary right arising from an illegal
search applies only beginning 2 February 1987, the date of ratification of the 1987
Constitution. Petitioner contends that all rights under the Bill of Rights had already
reverted to its embryonic stage at the time of the search. Therefore, the government
may confiscate the monies and items taken from Dimaano and use the same in
evidence against her since at the time of their seizure, private respondents did not
enjoy any constitutional right.
Petitioner is partly right in its arguments.
The EDSA Revolution took place on 23-25 February 1986. As succinctly stated
in President Aquinos Proclamation No. 3 dated 25 March 1986, the EDSA
Revolution was done in defiance of the provisions of the 1973 Constitution.[41] The
resulting government was indisputably a revolutionary government bound by no
constitution or legal limitations except treaty obligations that the revolutionary
government, as the de jure government in the Philippines, assumed under
international law.
The correct issues are: (1) whether the revolutionary government was bound by
the Bill of Rights of the 1973 Constitution during the interregnum, that is, after the
actual and effective take-over of power by the revolutionary government following
the cessation of resistance by loyalist forces up to 24 March 1986 (immediately
before the adoption of the Provisional Constitution); and (2) whether the protection
accorded to individuals under the International Covenant on Civil and Political
Rights (Covenant) and the Universal Declaration of Human Rights (Declaration)
remained in effect during the interregnum.
We hold that the Bill of Rights under the 1973 Constitution was not operative
during the interregnum. However, we rule that the protection accorded to individuals
under the Covenant and the Declaration remained in effect during the interregnum.
During the interregnum, the directives and orders of the revolutionary
government were the supreme law because no constitution limited the extent and
scope of such directives and orders. With the abrogation of the 1973 Constitution by
the successful revolution, there was no municipal law higher than the directives and
orders of the revolutionary government. Thus, during the interregnum, a person
could not invoke any exclusionary right under a Bill of Rights because there was
neither a constitution nor a Bill of Rights during the interregnum. As the Court
explained in Letter of Associate Justice Reynato S. Puno:[42]
A revolution has been defined as the complete overthrow of the established
government in any country or state by those who were previously subject to it or as a
sudden, radical and fundamental change in the government or political system,
usually effected with violence or at least some acts of violence. In Kelsen's book,
General Theory of Law and State, it is defined as that which occurs whenever the
legal order of a community is nullified and replaced by a new order . . . a way not
prescribed by the first order itself.
It was through the February 1986 revolution, a relatively peaceful one, and more
popularly known as the people power revolution that the Filipino people tore
themselves away from an existing regime. This revolution also saw the
unprecedented rise to power of the Aquino government.
From the natural law point of view, the right of revolution has been defined as an
inherent right of a people to cast out their rulers, change their policy or effect radical
reforms in their system of government or institutions by force or a general uprising
when the legal and constitutional methods of making such change have proved
inadequate or are so obstructed as to be unavailable. It has been said that the locus of
positive law-making power lies with the people of the state and from there is derived
the right of the people to abolish, to reform and to alter any existing form of
government without regard to the existing constitution.
xxx
It is widely known that Mrs. Aquinos rise to the presidency was not due to
constitutional processes; in fact, it was achieved in violation of the provisions of
the 1973 Constitution as a Batasang Pambansa resolution had earlier declared Mr.
Marcos as the winner in the 1986 presidential election. Thus it can be said that the
organization of Mrs. Aquinos Government which was met by little resistance and her
control of the state evidenced by the appointment of the Cabinet and other key
officers of the administration, the departure of the Marcos Cabinet officials, revamp
of the Judiciary and the Military signaled the point where the legal system then in
effect, had ceased to be obeyed by the Filipino. (Emphasis supplied)
To hold that the Bill of Rights under the 1973 Constitution remained operative
during the interregnum would render void all sequestration orders issued by the
Philippine Commission on Good Government (PCGG) before the adoption of the
Freedom Constitution. The sequestration orders, which direct the freezing and even
the take-over of private property by mere executive issuance without judicial action,
would violate the due process and search and seizure clauses of the Bill of Rights.
During the interregnum, the government in power was concededly a
revolutionary government bound by no constitution. No one could validly question
the sequestration orders as violative of the Bill of Rights because there was no Bill of
Rights during the interregnum. However, upon the adoption of the Freedom
Constitution, the sequestered companies assailed the sequestration orders as contrary
to the Bill of Rights of the Freedom Constitution.
In Bataan Shipyard & Engineering Co. Inc. vs. Presidential Commission on
Good Government,[43] petitioner Baseco, while conceding there was no Bill of Rights
during the interregnum, questioned the continued validity of the sequestration orders
upon adoption of the Freedom Constitution in view of the due process clause in its
Bill of Rights. The Court ruled that the Freedom Constitution, and later the 1987
Constitution, expressly recognized the validity of sequestration orders, thus:
If any doubt should still persist in the face of the foregoing considerations as to the
validity and propriety of sequestration, freeze and takeover orders, it should be
dispelled by the fact that these particular remedies and the authority of the PCGG to
issue them have received constitutional approbation and sanction. As already
mentioned, the Provisional or Freedom Constitution recognizes the power and duty
of the President to enact measures to achieve the mandate of the people to . . .
(r)ecover ill-gotten properties amassed by the leaders and supporters of the previous
regime and protect the interest of the people through orders of sequestration or
freezing of assets or accounts. And as also already adverted to, Section 26, Article
XVIII of the 1987 Constitution treats of, and ratifies the authority to issue
sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986.
The framers of both the Freedom Constitution and the 1987 Constitution were
fully aware that the sequestration orders would clash with the Bill of Rights. Thus,
the framers of both constitutions had to include specific language recognizing the
validity of the sequestration orders. The following discourse by Commissioner
Joaquin G. Bernas during the deliberations of the Constitutional Commission is
instructive:
FR. BERNAS: Madam President, there is something schizophrenic about the
arguments in defense of the present amendment.
For instance, I have carefully studied Minister Salongas lecture in the
Gregorio Araneta University Foundation, of which all of us have been
given a copy. On the one hand, he argues that everything the Commission
is doing is traditionally legal. This is repeated by Commissioner Romulo
also. Minister Salonga spends a major portion of his lecture developing
that argument. On the other hand, almost as an afterthought, he says that
in the end what matters are the results and not the legal niceties, thus
suggesting that the PCGG should be allowed to make some legal
shortcuts, another word for niceties or exceptions.
Now, if everything the PCGG is doing is legal, why is it asking the
CONCOM for special protection? The answer is clear. What they are
doing will not stand the test of ordinary due process, hence they are
asking for protection, for exceptions. Grandes malos, grandes remedios,
fine, as the saying stands, but let us not say grandes malos, grande y malos
remedios. That is not an allowable extrapolation. Hence, we should not
give the exceptions asked for, and let me elaborate and give three reasons:
First, the whole point of the February Revolution and of the work of the
CONCOM is to hasten constitutional normalization. Very much at the
heart of the constitutional normalization is the full effectivity of the Bill of
Rights. We cannot, in one breath, ask for constitutional normalization and
at the same time ask for a temporary halt to the full functioning of what is
at the heart of constitutionalism. That would be hypocritical; that would
be a repetition of Marcosian protestation of due process and rule of law.
The New Society word for that is backsliding. It is tragic when we begin
to backslide even before we get there.
Second, this is really a corollary of the first. Habits tend to become
ingrained. The committee report asks for extraordinary exceptions from
the Bill of Rights for six months after the convening of Congress, and
Congress may even extend this longer.
Good deeds repeated ripen into virtue; bad deeds repeated become vice.
What the committee report is asking for is that we should allow the new
government to acquire the vice of disregarding the Bill of Rights.
Vices, once they become ingrained, become difficult to shed. The
practitioners of the vice begin to think that they have a vested right to its
practice, and they will fight tooth and nail to keep the franchise. That
would be an unhealthy way of consolidating the gains of a democratic
revolution.
Third, the argument that what matters are the results and not the legal
niceties is an argument that is very disturbing. When it comes from a
staunch Christian like Commissioner Salonga, a Minister, and repeated
verbatim by another staunch Christian like Commissioner Tingson, it
becomes doubly disturbing and even discombobulating. The argument
makes the PCGG an auctioneer, placing the Bill of Rights on the auction
block. If the price is right, the search and seizure clause will be sold. Open
your Swiss bank account to us and we will award you the search and
seizure clause. You can keep it in your private safe.
Alternatively, the argument looks on the present government as hostage to
the hoarders of hidden wealth. The hoarders will release the hidden health
if the ransom price is paid and the ransom price is the Bill of Rights,
specifically the due process in the search and seizure clauses. So, there is
something positively revolving about either argument. The Bill of Rights
is not for sale to the highest bidder nor can it be used to ransom captive
dollars. This nation will survive and grow strong, only if it would become
convinced of the values enshrined in the Constitution of a price that is
beyond monetary estimation.
For these reasons, the honorable course for the Constitutional Commission
is to delete all of Section 8 of the committee report and allow the new
Constitution to take effect in full vigor. If Section 8 is deleted, the PCGG
has two options. First, it can pursue the Salonga and the Romulo argument
that what the PCGG has been doing has been completely within the pale
of the law. If sustained, the PCGG can go on and should be able to go on,
even without the support of Section 8. If not sustained, however, the
PCGG has only one honorable option, it must bow to the majesty of the
Bill of Rights.
The PCGG extrapolation of the law is defended by staunch Christians. Let
me conclude with what another Christian replied when asked to toy
around with the law. From his prison cell, Thomas More said, "I'll give
the devil benefit of law for my nations safety sake. I ask the Commission
to give the devil benefit of law for our nations sake. And we should delete
Section 8.
Thank you, Madam President. (Emphasis supplied)
Despite the impassioned plea by Commissioner Bernas against the amendment
excepting sequestration orders from the Bill of Rights, the Constitutional
Commission still adopted the amendment as Section 26,[44] Article XVIII of the 1987
Constitution. The framers of the Constitution were fully aware that absent Section
26, sequestration orders would not stand the test of due process under the Bill of
Rights.
Thus, to rule that the Bill of Rights of the 1973 Constitution remained in force
during the interregnum, absent a constitutional provision excepting sequestration
orders from such Bill of Rights, would clearly render all sequestration orders void
during the interregnum. Nevertheless, even during the interregnum the Filipino
people continued to enjoy, under the Covenant and the Declaration, almost the same
rights found in the Bill of Rights of the 1973 Constitution.
The revolutionary government, after installing itself as the de jure government,
assumed responsibility for the States good faith compliance with the Covenant to
which the Philippines is a signatory. Article 2(1) of the Covenant requires each
signatory State to respect and to ensure to all individuals within its territory and
subject to its jurisdiction the rights[45] recognized in the present Covenant. Under
Article 17(1) of the Covenant, the revolutionary government had the duty to insure
that [n]o one shall be subjected to arbitrary or unlawful interference with his privacy,
family, home or correspondence.
The Declaration, to which the Philippines is also a signatory, provides in its
Article 17(2) that [n]o one shall be arbitrarily deprived of his property. Although the
signatories to the Declaration did not intend it as a legally binding document, being
only a declaration, the Court has interpreted the Declaration as part of the generally
accepted principles of international law and binding on the State.[46] Thus, the
revolutionary government was also obligated under international law to observe the
rights[47] of individuals under the Declaration.
The revolutionary government did not repudiate the Covenant or the
Declaration during the interregnum. Whether the revolutionary government could
have repudiated all its obligations under the Covenant or the Declaration is another
matter and is not the issue here. Suffice it to say that the Court considers the
Declaration as part of customary international law, and that Filipinos as human
beings are proper subjects of the rules of international law laid down in the
Covenant. The fact is the revolutionary government did not repudiate the Covenant
or the Declaration in the same way it repudiated the 1973 Constitution. As the de
jure government, the revolutionary government could not escape responsibility for
the States good faith compliance with its treaty obligations under international law.
It was only upon the adoption of the Provisional Constitution on 25 March
1986 that the directives and orders of the revolutionary government became subject
to a higher municipal law that, if contravened, rendered such directives and orders
void. The Provisional Constitution adopted verbatim the Bill of Rights of the 1973
Constitution.[48] The Provisional Constitution served as a self-limitation by the
revolutionary government to avoid abuses of the absolute powers entrusted to it by
the people.
During the interregnum when no constitution or Bill of Rights existed,
directives and orders issued by government officers were valid so long as these
officers did not exceed the authority granted them by the revolutionary government.
The directives and orders should not have also violated the Covenant or the
Declaration. In this case, the revolutionary government presumptively sanctioned the
warrant since the revolutionary government did not repudiate it. The warrant, issued
by a judge upon proper application, specified the items to be searched and seized.
The warrant is thus valid with respect to the items specifically described in the
warrant.
However, the Constabulary raiding team seized items not included in the
warrant. As admitted by petitioners witnesses, the raiding team confiscated items not
included in the warrant, thus:
Direct Examination of Capt. Rodolfo Sebastian
AJ AMORES
Q. According to the search warrant, you are supposed to seize only
for weapons. What else, aside from the weapons, were seized
from the house of Miss Elizabeth Dimaano?
A. The communications equipment, money in Philippine currency
and US dollars, some jewelries, land titles, sir.
Q. Now, the search warrant speaks only of weapons to be seized
from the house of Elizabeth Dimaano. Do you know the
reason why your team also seized other properties not
mentioned in said search warrant?
A. During the conversation right after the conduct of said raid, I was
informed that the reason why they also brought the other
items not included in the search warrant was because the
money and other jewelries were contained in attach cases and
cartons with markings Sony Trinitron, and I think three (3)
vaults or steel safes. Believing that the attach cases and the
steel safes were containing firearms, they forced open these
containers only to find out that they contained money.
xxx
Q. You said you found money instead of weapons, do you know the
reason why your team seized this money instead of weapons?
A. I think the overall team leader and the other two officers assisting
him decided to bring along also the money because at that
time it was already dark and they felt most secured if they
will bring that because they might be suspected also of taking
money out of those items, your Honor.[49]
Cross-examination
Atty. Banaag
Q. Were you present when the search warrant in connection with
this case was applied before the Municipal Trial Court of
Batangas, Branch 1?
A. Yes, sir.
Q. And the search warrant applied for by you was for the search and
seizure of five (5) baby armalite rifles M-16 and five (5)
boxes of ammunition?
A. Yes, sir.
xxx
AJ AMORES
Q. Before you applied for a search warrant, did you conduct
surveillance in the house of Miss Elizabeth Dimaano?
A. The Intelligence Operatives conducted surveillance together with
the MSU elements, your Honor.
Q. And this party believed there were weapons deposited in
the house of Miss Elizabeth Dimaano?
A. Yes, your Honor.
Q. And they so swore before the Municipal Trial Judge?
A. Yes, your Honor.
Q. But they did not mention to you, the applicant for the
search warrant, any other properties or contraband which
could be found in the residence of Miss Elizabeth Dimaano?
A. They just gave us still unconfirmed report about some hidden
items, for instance, the communications equipment and
money. However, I did not include that in the application for
search warrant considering that we have not established
concrete evidence about that. So when
Q. So that when you applied for search warrant, you had reason to
believe that only weapons were in the house of Miss
Elizabeth Dimaano?
A. Yes, your Honor.[50]
xxx
Q. You stated that a .45 caliber pistol was seized along with one
armalite rifle M-16 and how many ammunition?
A. Forty, sir.
Q. And this became the subject of your complaint with the issuing
Court, with the fiscals office who charged Elizabeth Dimaano
for Illegal Possession of Firearms and Ammunition?
A. Yes, sir.
Q. Do you know what happened to that case?
A. I think it was dismissed, sir.
Q. In the fiscals office?
A. Yes, sir.
Q. Because the armalite rifle you seized, as well as the .45 caliber
pistol had a Memorandum Receipt in the name of Felino
Melegrito, is that not correct?
A. I think that was the reason, sir.
Q. There were other articles seized which were not included in
the search warrant, like for instance, jewelries. Why did you
seize the jewelries?
A. I think it was the decision of the overall team leader and his
assistant to bring along also the jewelries and other items,
sir. I do not really know where it was taken but they brought
along also these articles. I do not really know their reason for
bringing the same, but I just learned that these were taken
because they might get lost if they will just leave this behind.
xxx
Q. How about the money seized by your raiding team, they were not
also included in the search warrant?
A. Yes sir, but I believe they were also taken considering that the
money was discovered to be contained in attach cases. These
attach cases were suspected to be containing pistols or other
high powered firearms, but in the course of the search the
contents turned out to be money. So the team leader also
decided to take this considering that they believed that if they
will just leave the money behind, it might get lost also.
Q. That holds true also with respect to the other articles that were
seized by your raiding team, like Transfer Certificates of
Title of lands?
A. Yes, sir. I think they were contained in one of the vaults that
were opened.[51]
It is obvious from the testimony of Captain Sebastian that the warrant did not
include the monies, communications equipment, jewelry and land titles that the
raiding team confiscated. The search warrant did not particularly describe these items
and the raiding team confiscated them on its own authority. The raiding team had no
legal basis to seize these items without showing that these items could be the subject
of warrantless search and seizure.[52] Clearly, the raiding team exceeded its authority
when it seized these items.
The seizure of these items was therefore void, and unless these items are
contraband per se,[53] and they are not, they must be returned to the person from
whom the raiding seized them. However, we do not declare that such person is the
lawful owner of these items, merely that the search and seizure warrant could not be
used as basis to seize and withhold these items from the possessor. We thus hold that
these items should be returned immediately to Dimaano.
WHEREFORE, the petition for certiorari is DISMISSED. The questioned
Resolutions of the Sandiganbayan dated 18 November 1991 and 25 March 1992 in
Civil Case No. 0037, remanding the records of this case to the Ombudsman for such
appropriate action as the evidence may warrant, and referring this case to the
Commissioner of the Bureau of Internal Revenue for a determination of any tax
liability of respondent Elizabeth Dimaano, are AFFIRMED.
SO ORDERED.