Investors The providers of risk capital and their advisers are concerned with the risk inherent in,

and return provided by, their investments. They need information to help in information which enables them to assess the ability of the enterprise to pay dividends Employees Employees and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of the enterprise to provide remuneration, retirement benefits and employment opportunities. Lenders Lenders are interested in information that enables them to determine whether their loans, and the interest attaching to them, will be paid when due. Suppliers and other trade creditors Suppliers and other creditors Are interested in information that enables them to determine whether amounts owing to them will be paid when due. Trade creditors are likely to be interested in an enterprise over a shorter period than lenders unless they are dependent upon the continuation of the enterprise as a major customer. Customers Have an interest in information about the continuance of an enterprise, especially when they have a long-term involvement with, or are dependent on, the enterprise Governments and their agencies Are interested in the allocation of resources and, therefore, the activities of enterprises. They also require information in order to regulate the activities of enterprises, determine taxation policies and as the basis for national income and similar statistics. Public Enterprises affect members of the public in a variety of ways. For example, enterprises may make a substantial contribution to the local economy in many ways including the number of people they employ and their patronage of local suppliers. Financial statements may assist the public by providing information about the trends and recent developments in the prosperity of the enterprise and the range of its activities. Qualitative characteristics of Financial Statements Qualitative Characteristics are the attributes that make the information provided in financial statements useful to users. The four principal qualitative characteristics are: UNDERSTANDABILITY An essential quality of the information provided in financial statements is that it is readily understandable by users. For this purpose, users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence. RELEVANCE To be useful, information must be relevant to the decision-making needs of users. Information has the quality of relevance when it influences the economic decisions of users by helping them evaluate past, present or future events or confirming, or correcting, their past evaluation. Materiality Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size of the item or error

judged in the particular circumstances of its omission or misstatement. Thus , materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful. RELIABILITY To be useful, information must be reliable. Information has the quality of reliability when it is free from material error and bias and can be depended upon by users to represent faithfully that which it either purports to represent or could reasonably be expected to represent. Faithful representation Information must represent faithfully the transactions and other events it either purports to represent or could reasonably be expected to represent. Some risk of being less than a faithful representation of that which it purports to portray is not due to bias, but rather to inherent difficulties either in identifying the transactions and other events to be measured. Substance over Form If information is to represent faithfully the transactions and other events that it purports to represent, it is necessary that they are accounted for and presented in accordance with their substance and economic reality and not merely their legal form. Neutrality The information contained in financial statements must be neutral, that is, free from bias. Financial statements are not neutral if, by the selection or presentation of information, they influence the making of a decision or judgment in order to achieve a predetermined result or outcome. Prudence (Conservation) Is the inclusion of a degree of caution in the exercise of the judgments needed in making the estimates required under conditions of uncertainty., such that assets or income are not overstated and liabilities or expenses are not understated. Completeness The information in financial statements must be complete within the bounds of materiality and cost. An omission can cause information to be false or misleading and thus unreliable and deficient in terms of its relevance. COMPARABILITY Users must be able to compare the financial statements of an entity through time in order to identify trends in its financial position and performance and for the purpose of identifying the similarities and differences.

Constitutional Law 2

Assignment for November 22nd, 2012

1. Continue discussion on the inherent powers of the State. 2. Concentrate on Police Power. 3. Note: Submit case digests only if assigned per group. If a case is assigned for all students, do not submit a case digest. 4. Ermita Malate Hotel and Motel Operators Association, Inc. vs. City Mayor of Manila, 20 SCRA 849 [No. L-24693] (July 31, 1967) ALL STUDENTS What is police power? Who exercises police power? What is the presumption that the law accords to the validity of a law or ordinance? What action is instituted if an ordinance is attacked or impugned as invalid? Who can impugn the validity of constitutionality of an ordinance or a law? 5. City of Manila vs. Judge Laguio, 455 SCRA 308 [G.R. No. 118127] (2005) ALL STUDENTS When is a police power measure invalid? 6. MMDA vs. Bel-Air Village Association, Inc. 328 SCRA 836 [G.R. No. 135962] (March 27, 2000) Group 1 Does MMDA possess police power? 7. Ichong vs. Hernandez, and Sarmiento, 101 Phil. 1155 [L-50908] (Jan.11, 1984) ALL GROUPS. Case digest to be submitted Can police power be bargained or negotiated by treaty or contract? 8. Churchill and Tait vs. Rafferty, 32 Phil. 580, [No. 10572] (Dec. 21, 11915) Group 2 What is the scope of police power? Examples of police power 9. JMM Promotions and Management Inc. vs. Court of Appeals, 260 SCRA 319 [G.R. No. 1200095] (August 5, 19960 Group 1 10. Department of Education, Culture and Sports vs. San Diego, 180 SCRA 533 [G.R. No. 89572] (December 21, 1989) Group 2

11. Taxicab Operators vs. Board of Transportation, 117 SCRA 597 [L-59234] Group 3 12. United States vs. Toribio, 15 Phil 85 Group 3

13. Bautista vs. Junio, 127 SCRA 329 [L-50908] (Jan. 11, 1984) Group 1 14. Anglo-Fil Trading Corp. vs. Lazaro, 124 SCRA 494, [L-54958] (Sept. 2, 1983) Group 2 15. Binay vs. Domingo, 201 SCRA 508 [G.R. No. 92389] (Sept. 11, 1991) Group 3 16. Acebedo Optical Co. vs. Court of Appeals, 32 SCRA 314 [G.R. No. 100152] (March 31, 2000) Group 1 17. De La Cruz vs. Paras, 123 SCRA 569, [No. 42571] (July 25, 1983) Group 2 18. Velasco vs. Villegas, 120 SCRA 568 [No. L-24153] (Feb. 14, 1983) Group 3

to successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear that the interests of the public generally, as distinguished from those of a particular class, require an interference with private rights, but the means adopted must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. It must be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can work. A reasonable relation must exist between the purposes of the police measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded

Police Power JMM Promotion and Management vs Court of Appeals

FACTS Due to the death of one Maricris Sioson in 1991, Cory banned the deployment of performing artists to Japan and other destinations. This was relaxed however with the introduction of the Entertainment Industry Advisory Council which later proposed a plan to POEA to screen and train performing artists seeking to go abroad. In pursuant to the proposal POEA and the secretary of DOLE sought a 4 step plan to realize the plan which included an Artists Record Book which a performing artist must acquire prior to being deployed abroad. The Federation of Talent Managers of the Philippines assailed the validity of the said regulation as it violated the right to travel, abridge existing contracts and rights and deprives artists of their individual rights. JMM intervened to bolster the cause of FETMOP. The lower court ruled in favor of EIAC. ISSUE: WON the regulation by EIAC is valid exercise of police power. HELD: The SC ruled in favor of the lower court. The regulation is a valid exercise of police power. Police power concerns government enactments which precisely interfere with personal liberty or property in order to promote the general welfare or the common good. As the assailed Department Order enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that the said order, particularly, its ARB requirement, does not enhance the public welfare or was exercised arbitrarily or unreasonably. The welfare of Filipino performing artists, particularly the women was paramount in the issuance of Department Order No. 3. Short of a total and absolute ban against the deployment of performing artists to high risk destinations, a measure which would only drive recruitment further underground, the new scheme at the very least rationalizes the method of screening performing artists by requiring reasonable educational and artistic skills from them and limits deployment to only those individuals adequately prepared for the unpredictable demands of employment as artists abroad. It cannot be gainsaid that this scheme at least lessens the room for exploitation by unscrupulous individuals and agencies.

Labels: police power

Ermita-Malate Hotel/Motel vs. City of Manila

Facts: The principal question in this appeal from a judgment of the lower court in an action for prohibition is whether Ordinance No. Of the City of Manila is violating of due process clause 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 filling up the prescribed form in a lobby open to public view at all times and in his presence, that Sec. 2, prohibiting a person less than 18 years 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 due process guaranty for lack of certainty and for its unreasonable, arbitrary and oppressive character. Issue: Whether or not the ordinance is a valid exercise of police power? Held: A Manila ordinance regulating the operation of hotels, motels and lodging houses is a police measure specifically aimed to safeguards public morals. As such it is immune from any 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 less limitable of powers extending as it does to all great public needs. 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 general welfare. 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.

Requisites for the valid exercise of Police Power are not met CITY OF MANILA VS. LAGUIO, JR.,
FACTS: The private respondent, Malate Tourist Development Corporation (MTDC) is a corporation engaged in the business of operating hotels, motels, hostels, and lodging houses. It built and opened Victoria Court in Malate which was licensed as a motel although duly accredited with the Department of Tourism as a hotel. March 30, 1993 - City Mayor Alfredo S. Lim approved an ordinance enacted which prohibited certain forms of amusement, entertainment, services and facilities where women are used as tools in entertainment and which tend to disturb the community, annoy the inhabitants, and adversely affect the social and moral welfare of the community. The Ordinance also provided that in case of violation and conviction, the premises of the erring establishment shall be closed and padlocked permanently. June 28, 1993 - MTDC filed a Petition with the lower court, praying that the Ordinance, insofar as it included motels and inns as among its prohibited establishments, be declared invalid and unconstitutional for several reasons but mainly because it is not a valid exercise of police power and it constitutes a denial of equal protection under the law. Judge Laguio ruled for the petitioners. The case was elevated to the Supreme Court. ISSUE: When is a police power measure invalid HELD: When the requisites for a valid exercise of police power are not met. The prohibition of the enumerated establishments will not per se protect and promote the social and moral welfare of the community; it will not in itself eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the spread of sexual diseases in Manila. It is baseless and insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. These are lawful pursuits which are not per se offensive to the moral welfare of the community. Sexual immorality, being a human frailty, may take place in the most innocent places.... Every house, building, park, curb, street, or even vehicles for that matter will not be exempt from the prohibition. Simply because there are no "pure" places where there are impure men. The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as the Ordinance may to shape morality, it should not foster the illusion that it can make a moral man out of it because immorality is not a thing, a building or establishment; it is in the hearts of men. All considered, the Ordinance invades fundamental personal and property rights and impairs personal privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is discriminatory and unreasonable in its operation; it is not sufficiently detailed and explicit that abuses may attend the enforcement of its sanctions. And not to be forgotten, the City Council under the Code had no power to enact the Ordinance and is therefore ultra vires null and void.

The Act was passed in the valid exercise of the police power of the State, which exercise is authorized in the Constitution in the interest of national economic survival

ICHONG VS. HERNANDEZ [101 PHIL 1155; L-7995; 31 MAY 1957]

Facts:
Republic Act 1180 or commonly known as An Act to Regulate the Retail Business was passed. The said law provides for a prohibition against foreigners as well as corporations owned by foreigners from engaging from retail trade in our country. This was protested by the petitioner in this case. According to him, the said law violates the international and treaty of the Philippines therefore it is unconstitutional. Specifically, the Treaty of Amity between the Philippines and China was violated according to him.

Issue:

Can

police

power

be

bargained

or

negotiated

by

treaty

or

contract

Held: According to the Court, RA 1180 is a valid exercise of police power. It was also then provided that police power cannot be bargained away through the medium of a treaty or a contract. The Court also provided that RA 1180 was enacted to remedy a real and actual danger to national economy posed by alien dominance and control. If ever the law infringes upon the said treaty, the latter is always subject to qualification or amendment by a subsequent law and the same may never curtain or restrict the scope of the police power of the state.

The three-flunk rule is intended to insulate the medical schools and ultimately the medical profession from the intrusion of those not qualified to be doctors. DECS vs San Diego
FACTS: Respondent claims that he took the NMAT three times and flunked it as many times. When he applied to take it again, the petitioner rejected his application on the basis that A student shall be allowed only three (3) chances to take the NMAT. After three (3) successive failures, a student shall not be allowed to take the NMAT for the fourth time He then went to the Regional Trial Court of Valenzuela, Metro Manila, to compel his admission to the test. After hearing, the respondent judge rendered a decision declaring the challenged order invalid and granting the petition. Judge Teresita Dizon-Capulong held that the petitioner had been deprived of his right to pursue a medical education through an arbitrary exercise of the police power We cannot sustain the respondent judge. Her decision must be reversed.

ISSUE: Whether or not there is a valid exercise of the police power HELD: Yes. Decision REVERSED. The court cited that the power is validly exercised if (a) the interests of the public generally, as distinguished from those of a particular class, require the interference of the State, and (b) the means employed are reasonably necessary to the attainment of the object sought to be accomplished and not unduly oppressive upon individuals. In other words, the proper exercise of the police power requires the concurrence of a lawful subject and a lawful method. The subject of the challenged regulation is certainly within the ambit of the police power. It is the right and indeed the responsibility of the State to insure that the medical profession is not infiltrated by incompetents to whom patients may unwarily entrust their lives and health. The method employed by the challenged regulation is not irrelevant to the purpose of the law nor is it arbitrary or oppressive. The three-flunk rule is intended to insulate the medical schools and ultimately the medical profession from the intrusion of those not qualified to be doctors. The State has the responsibility to harness its human resources and to see to it that they are not dissipated or, no less worse, not used at all. These resources must be applied in a manner that will best promote the common good while also giving the individual a sense of satisfaction.

The subservience of the contract clause to the police power enacting public regulations intended for the general welfare of the community is even more clear-cut. ANGLO-FIL TRADING CORPORATION VS. LAZARO

FACTS: Respondent Philippine Ports Authority (PPA) implemented a policy of integrating contractors engaged in stevedoring services and has only one stevedoring contractor to engage in cargo-handling services in Manila South Harbor to insure efficiency and economy in cargo-handling operation and provide better service to port users and to amply protect the interest of labor and the government as well. The evaluation of performance of existing contractors made by a special committee created by PPA resulted to an award in favor of Ocean Terminal Services, Inc. (OTSI). Petitioners with hold-over permits, contends that the award is invalid because contracts entered into with local and foreign clients or customers would be impaired. ISSUE: Whether or not PPA have the power and authority to award an exclusive stevedoring contract in favor of respondent OTSI under the police power HELD: Yes. Manila South Harbor is a public property owned by the State, wherein operations of the port including stevedoring services are subject to regulation and control for the public good and interest of the general welfare. In addition, the contract clause cannot override the police power enacting public regulations intended for the general welfare. Petition Denied.

Police Power Not Validly Exercise- The power granted remains that of regulation, not prohibition

Vicente De La Cruz vs Edgardo Paras

FACTS: De La Cruz et al were club & cabaret operators. They assail the constitutionality of Ord. No. 84, Ser. of 1975 or the Prohibition and Closure Ordinance of Bocaue, Bulacan. De la Cruz averred that the said Ordinance violates their right to engage in a lawful business for the said ordinance would close out their business. That the hospitality girls they employed are healthy and are not allowed going out with customers. Judge Paras however lifted the TRO he earlier issued against Ord. 84 after due hearing declaring that Ord 84. is constitutional for it is pursuant to RA 938 which reads AN ACT GRANTING MUNICIPAL OR CITY BOARDS AND COUNCILS THE POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF CERTAIN PLACES OF AMUSEMENT WITHIN THEIR RESPECTIVE TERRITORIAL JURISDICTIONS. Paras ruled that the prohibition is a valid exercise of police power to promote general welfare ISSUE: WON the prohibition is a valid exercise of police power HELD: The SC ruled against Paras. If night clubs were merely then regulated and not prohibited, certainly the assailed ordinance would pass the test of validity. SC had stressed reasonableness, consonant with the general powers and purposes of municipal corporations, as well as consistency with the laws or policy of the State. It cannot be said that such a sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized by over breadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute prohibition. Pursuant to the title of the Ordinance, Bocaue should and can only regulate not prohibit the business of cabarets.

Scope of Police Power Churchill and Tait v. Rafferty FACTS: Plaintiffs put up a billboard on private land in Rizal Province "quite a distance from the road and strongly built". Some residents (German and British Consuls) find it offensive. Act # 2339 allows the defendant, the Collector of Internal Revenue, to collect taxes from such property and to remove it when it is offensive to sight .Court of first Instance prohibited the defendant to collector remove the billboard

ISSUE: Whether or not the enactment was a legitimate exercise of the police power of the Government HELD: YES. Police power is reasonable insofar as it properly considers public health, safety, comfort, etc. If nothing can justify a statute, it's void. State may interfere in public interest but not final. Court is final. Police power has been expanding. The basic idea of civil polity in US is gov't should interfere with individual effort only to the extent necessary to preserve a healthy social and economic condition of society. State interferes with private property through, taxation, eminent domain and police power. Only under the last are the benefits derived from the maintenance of a healthy economic standard of society and aka damnum absque injuria. Once police power was reserved for common nuisances. Now industry is organized along lines which make it possible for large combinations of capital to profit at the expense of socio-economic progress of the nation by controlling prices and dictating to industrial workers wages and conditions of labor. It has increased the toll on life and affects public health, safety and morals, also general social and economic life of the nation, as such state must necessarily regulate industries. Various industries have regulated and even offensive noises and smells coming from those industries. Those noises and smells though ostensibly regulated for health reason are actually regulated for more aesthetic reasons. What is more aesthetic than sight which the ad industry is wooing us with. Ads cover landscapes etc. The success of billboards lie not upon the use of private property but on channels of travel used by the general public. Billboard that cannot be seen by people are useless. Billboards are legitimate; they are not garbage but can be offensive in certain circumstances. Other courts in US hold the view that police power cannot interfere with private property rights for purely aesthetic purposes. Unsightly advertisements which are offensive to the sight are not dissociated from the general welfare of the public, therefore can be regulated by police power, and act is constitutional