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G.R. No.

L-42571-72 July 25, 1983


VICENTE DE LA CRUZ, RENATO ALIPIO, JOSE TORRES III, LEONCIO CORPUZ,
TERESITA CALOT, ROSALIA FERNANDEZ, ELIZABETH VELASCO, NANETTE
VILLANUEVA, HONORATO BUENAVENTURA, RUBEN DE CASTRO, VICENTE
ROXAS, RICARDO DAMIAN, DOMDINO ROMDINA, ANGELINA OBLIGACION,
CONRADO GREGORIO, TEODORO REYES, LYDIA ATRACTIVO, NAPOLEON
MENDOZA, PERFECTO GUMATAY, ANDRES SABANGAN, ROSITA DURAN,
SOCORRO BERNARDEZ, and PEDRO GABRIEL, petitioners,
vs.
THE HONORABLE EDGARDO L. PARAS, MATIAS RAMIREZ as the Municipal
Mayor, MARIO MENDOZA as the Municipal Vice-Mayor, and THE MUNICIPAL
COUNCIL OF BOCAUE, BULACAN, respondents.
Federico N. Alday for petitioners.
Dakila F. Castro for respondents.
FERNANDO, C.J.:
The crucial question posed by this certiorari proceeding is whether or not a municipal
corporation, Bocaue, Bulacan, represented by respondents, 1 can, prohibit the exercise
of a lawful trade, the operation of night clubs, and the pursuit of a lawful occupation,
such clubs employing hostesses. It is contended that the ordinance assailed as invalid
is tainted with nullity, the municipality being devoid of power to prohibit a lawful
business, occupation or calling, petitioners at the same time alleging that their rights to
due process and equal protection of the laws were violated as the licenses previously
given to them was in effect withdrawn without judicial hearing. 2
The assailed ordinance 3 is worded as follows: "Section 1. Title of Ordinance. This
Ordinance shall be known and may be cited as the [Prohibition and Closure Ordinance]
of Bocaue, Bulacan. Section 2. Definitions of Terms (a) 'Night Club' shall include
any place or establishment selling to the public food or drinks where customers are
allowed to dance. (b) 'Cabaret' or 'Dance Hall' shall include any place or establishment
where dancing is permitted to the public and where professional hostesses or hospitality
girls and professional dancers are employed. (c) 'Professional hostesses' or 'hospitality
girls' shall include any woman employed by any of the establishments herein defined to
entertain guests and customers at their table or to dance with them. (d) 'Professional
dancer' shall include any woman who dances at any of the establishments herein
defined for a fee or remuneration paid directly or indirectly by the operator or by the
persons she dances with. (e) 'Operator' shall include the owner, manager, administrator
or any person who operates and is responsible for the operation of any night club,
cabaret or dance hall. Section 3. Prohibition in the Issuance and Renewal of
Licenses, Permits. Being the principal cause in the decadence of morality and
because of their other adverse effects on this community as explained above, no
operator of night clubs, cabarets or dance halls shall henceforth be issued
permits/licenses to operate within the jurisdiction of the municipality and no
license/permit shall be issued to any professional hostess, hospitality girls and
professional dancer for employment in any of the aforementioned establishments. The
prohibition in the issuance of licenses/permits to said persons and operators of said
establishments shall include prohibition in the renewal thereof. Section 4. Revocation

of Permits and Licenses. The licenses and permits issued to operators of night clubs,
cabarets or dance halls which are now in operation including permits issued to
professional hostesses, hospitality girls and professional dancers are hereby revoked
upon the expiration of the thirty-day period given them as provided in Section 8 hereof
and thenceforth, the operation of these establishments within the jurisdiction of the
municipality shall be illegal. Section 5. Penalty in case of violation. Violation of any
of the provisions of this Ordinance shall be punishable by imprisonment not exceeding
three (3) months or a fine not exceeding P200.00 or both at the discretion of the Court.
If the offense is committed by a juridical entity, the person charged with the
management and/or operation thereof shall be liable for the penalty provided herein.
Section 6. Separability Clause. If, for any reason, any section or provision of this
Ordinance is held unconstitutional or invalid, no other section or provision hereof shall
be affected thereby. Section 7. Repealing Clause. All ordinance, resolutions,
circulars, memoranda or parts thereof that are inconsistent with the provisions of this
Ordinance are hereby repealed. Section 8. Effectivity. This Ordinance shall take
effect immediately upon its approval; provided, however, that operators of night clubs,
cabarets and dance halls now in operation including professional hostesses, hospitality
girls and professional dancers are given a period of thirty days from the approval hereof
within which to wind up their businesses and comply with the provisions of this
Ordinance." 4
On November 5, 1975, two cases for prohibition with preliminary injunction were filed
with the Court of First Instance of Bulacan. 5 The grounds alleged follow:
1. Ordinance No. 84 is null and void as a municipality has no authority to prohibit a
lawful business, occupation or calling.
2. Ordinance No. 84 is violative of the petitioners' right to due process and the equal
protection of the law, as the license previously given to petitioners was in effect
withdrawn without judicial hearing. 3. That under Presidential Decree No. 189, as
amended, by Presidential Decree No. 259, the power to license and regulate touristoriented businesses including night clubs, has been transferred to the Department of
Tourism." 6 The cases were assigned to respondent Judge, now Associate Justice Paras
of the Intermediate Appellate Court, who issued a restraining order on November 7,
1975. The answers were thereafter filed. It was therein alleged: " 1. That the Municipal
Council is authorized by law not only to regulate but to prohibit the establishment,
maintenance and operation of night clubs invoking Section 2243 of the RAC, CA 601,
Republic Acts Nos. 938, 978 and 1224. 2. The Ordinance No. 84 is not violative of
petitioners' right to due process and the equal protection of the law, since property rights
are subordinate to public interests. 3. That Presidential Decree No. 189, as amended,
did not deprive Municipal Councils of their jurisdiction to regulate or prohibit night clubs."
7
There was the admission of the following facts as having been established: "l. That
petitioners Vicente de la Cruz, et al. in Civil Case No. 4755-M had been previously
issued licenses by the Municipal Mayor of Bocaue-petitioner Jose Torres III, since 1958;
petitioner Vicente de la Cruz, since 1960; petitioner Renato Alipio, since 1961 and
petitioner Leoncio Corpuz, since 1972; 2. That petitioners had invested large sums of
money in their businesses; 3. That the night clubs are well-lighted and have no
partitions, the tables being near each other; 4. That the petitioners owners/operators of
these clubs do not allow the hospitality girls therein to engage in immoral acts and to go

out with customers; 5. That these hospitality girls are made to go through periodic
medical check-ups and not one of them is suffering from any venereal disease and that
those who fail to submit to a medical check-up or those who are found to be infected
with venereal disease are not allowed to work; 6. That the crime rate there is better than
in other parts of Bocaue or in other towns of Bulacan." 8 Then came on January 15,
1976 the decision upholding the constitutionality and validity of Ordinance No. 84 and
dismissing the cases. Hence this petition for certiorari by way of appeal.
In an exhaustive as well as scholarly opinion, the lower court dismissed the petitions. Its
rationale is set forth in the opening paragraph thus: "Those who lust cannot last. This in
essence is why the Municipality of Bocaue, Province of Bulacan, stigmatized as it has
been by innuendos of sexual titillation and fearful of what the awesome future holds for
it, had no alternative except to order thru its legislative machinery, and even at the risk
of partial economic dislocation, the closure of its night clubs and/or cabarets. This in
essence is also why this Court, obedient to the mandates of good government, and
cognizant of the categorical imperatives of the current legal and social revolution,
hereby [upholds] in the name of police power the validity and constitutionality of
Ordinance No. 84, Series of 1975, of the Municipal Council of Bocaue, Bulacan. The
restraining orders heretofore issued in these two cases are therefore hereby rifted,
effective the first day of February, 1976, the purpose of the grace period being to enable
the petitioners herein to apply to the proper appellate tribunals for any contemplated
redress." 9 This Court is, however, unable to agree with such a conclusion and for
reasons herein set forth, holds that reliance on the police power is insufficient to justify
the enactment of the assailed ordinance. It must be declared null and void.
1. Police power is granted to municipal corporations in general terms as follows:
"General power of council to enact ordinances and make regulations. - The municipal
council shall enact such ordinances and make such regulations, not repugnant to law,
as may be necessary to carry into effect and discharge the powers and duties conferred
upon it by law and such as shall seem necessary and proper to provide for the health
and safety, promote the prosperity, improve the morals, peace, good order, comfort, and
convenience of the municipality and the inhabitants thereof, and for the protection of
property therein." 10 It is practically a reproduction of the former Section 39 of Municipal
Code. 11 An ordinance enacted by virtue thereof, according to Justice Moreland,
speaking for the Court in the leading case of United States v. Abendan 12 "is valid,
unless it contravenes the fundamental law of the Philippine Islands, or an Act of the
Philippine Legislature, or unless it is against public policy, or is unreasonable,
oppressive, partial, discriminating, or in derogation of common right. Where the power
to legislate upon a given subject, and the mode of its exercise and the details of such
legislation are not prescribed, the ordinance passed pursuant thereto must be a
reasonable exercise of the power, or it will be pronounced invalid." 13 In another leading
case, United States v. Salaveria, 14 the ponente this time being Justice Malcolm, where
the present Administrative Code provision was applied, it was stated by this Court: "The
general welfare clause has two branches: One branch attaches itself to the main trunk
of municipal authority, and relates to such ordinances and regulations as may be
necessary to carry into effect and discharge the powers and duties conferred upon the
municipal council by law. With this class we are not here directly concerned. The
second branch of the clause is much more independent of the specific functions of the

council which are enumerated by law. It authorizes such ordinances as shall seem
necessary and proper to provide for the health and safety, promote the prosperity,
improve the morals, peace, good order, comfort, and convenience of the municipality
and the inhabitants thereof, and for the protection of property therein.' It is a general rule
that ordinances passed by virtue of the implied power found in the general welfare
clause must be reasonable, consonant with the general powersand purposes of the
corporation, and not inconsistent with the laws or policy of the State." 15 If night clubs
were merely then regulated and not prohibited, certainly the assailed ordinance would
pass the test of validity. In the two leading cases above set forth, this Court 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 overbreadth. The purpose
sought to be achieved could have been attained by reasonable restrictions rather than
by an absolute prohibition. The admonition in Salaveria should be heeded: "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." 16 It is clear that in
the guise of a police regulation, there was in this instance a clear invasion of personal or
property rights, personal in the case of those individuals desirous of patronizing those
night clubs and property in terms of the investments made and salaries to be earned by
those therein employed.
2. The decision now under review refers to Republic Act No. 938 as amended. 17 It was
originally enacted on June 20, 1953. It is entitled: "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.' 18 Its
first section insofar as pertinent reads: "The municipal or city board or council of each
chartered city shall have the power to regulate by ordinance the establishment,
maintenance and operation of night clubs, cabarets, dancing schools, pavilions,
cockpits, bars, saloons, bowling alleys, billiard pools, and other similar places of
amusement within its territorial jurisdiction: ... " 19 Then on May 21, 1954, the first
section was amended to include not merely "the power to regulate, but likewise "Prohibit
... " 20 The title, however, remained the same. It is worded exactly as Republic Act No.
938. It is to be admitted that as thus amended, if only the above portion of the Act were
considered, a municipal council may go as far as to prohibit the operation of night clubs.
If that were all, then the appealed decision is not devoid of support in law. That is not all,
however. The title was not in any way altered. It was not changed one whit. The exact
wording was followed. The power granted remains that of regulation, not prohibition.
There is thus support for the view advanced by petitioners that to construe Republic Act
No. 938 as allowing the prohibition of the operation of night clubs would give rise to a
constitutional question. The Constitution mandates: "Every bill shall embrace only one
subject which shall be expressed in the title thereof. " 21 Since there is no dispute as the
title limits the power to regulating, not prohibiting, it would result in the statute being
invalid if, as was done by the Municipality of Bocaue, the operation of a night club was

prohibited. There is a wide gap between the exercise of a regulatory power "to provide
for the health and safety, promote the prosperity, improve the morals, 22 in the language
of the Administrative Code, such competence extending to all "the great public needs, 23
to quote from Holmes, and to interdict any calling, occupation, or enterprise. In
accordance with the well-settled principle of constitutional construction that between two
possible interpretations by one of which it will be free from constitutional infirmity and by
the other tainted by such grave defect, the former is to be preferred. A construction that
would save rather than one that would affix the seal of doom certainly commends itself.
We have done so before We do so again. 24
3. There is reinforcement to the conclusion reached by virtue of a specific provision of
the recently-enacted Local Government Code. 25 The general welfare clause, a
reiteration of the Administrative Code provision, is set forth in the first paragraph of
Section 149 defining the powers and duties of the sangguniang bayan. It read as
follows: "(a) Enact such ordinances and issue such regulations as may be necessary to
carry out and discharge the responsibilities conferred upon it by law, and such as shall
be necessary and proper to provide for the health, safety, comfort and convenience,
maintain peace and order, improve public morals, promote the prosperity and general
welfare of the municipality and the inhabitants thereof, and insure the protection of
property therein; ..." 26 There are in addition provisions that may have a bearing on the
question now before this Court. Thus the sangguniang bayan shall "(rr) Regulate cafes,
restaurants, beer-houses, hotels, motels, inns, pension houses and lodging houses,
except travel agencies, tourist guides, tourist transports, hotels, resorts, de luxe
restaurants, and tourist inns of international standards which shall remain under the
licensing and regulatory power of the Ministry of Tourism which shall exercise such
authority without infringing on the taxing or regulatory powers of the municipality; (ss)
Regulate public dancing schools, public dance halls, and sauna baths or massage
parlors; (tt) Regulate the establishment and operation of billiard pools, theatrical
performances, circuses and other forms of entertainment; ..." 27 It is clear that municipal
corporations cannot prohibit the operation of night clubs. They may be regulated, but
not prevented from carrying on their business. It would be, therefore, an exercise in
futility if the decision under review were sustained. All that petitioners would have to do
is to apply once more for licenses to operate night clubs. A refusal to grant licenses,
because no such businesses could legally open, would be subject to judicial correction.
That is to comply with the legislative will to allow the operation and continued existence
of night clubs subject to appropriate regulations. In the meanwhile, to compel petitioners
to close their establishments, the necessary result of an affirmance, would amount to no
more than a temporary termination of their business. During such time, their employees
would undergo a period of deprivation. Certainly, if such an undesirable outcome can be
avoided, it should be. The law should not be susceptible to the reproach that it displays
less than sympathetic concern for the plight of those who, under a mistaken
appreciation of a municipal power, were thus left without employment. Such a
deplorable consequence is to be avoided. If it were not thus, then the element of
arbitrariness enters the picture. That is to pay less, very much less, than full deference
to the due process clause with its mandate of fairness and reasonableness.
4. The conclusion reached by this Court is not to be interpreted as a retreat from its
resolute stand sustaining police power legislation to promote public morals. The

commitment to such an Ideal forbids such a backward step. Legislation of that character
is deserving of the fullest sympathy from the judiciary. Accordingly, the judiciary has not
been hesitant to lend the weight of its support to measures that can be characterized as
falling within that aspect of the police power. Reference is made by respondents to
Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila. 28
There is a misapprehension as to what was decided by this Court. That was a
regulatory measure. Necessarily, there was no valid objection on due process or equal
protection grounds. It did not prohibit motels. It merely regulated the mode in which it
may conduct business in order precisely to put an end to practices which could
encourage vice and immorality. This is an entirely different case. What was involved is a
measure not embraced within the regulatory power but an exercise of an assumed
power to prohibit. Moreover, while it was pointed out in the aforesaid Ermita-Malate
Hotel and Motel Operators Association, Inc. decision that there must be a factual
foundation of invalidity, it was likewise made clear that there is no need to satisfy such a
requirement if a statute were void on its face. That it certainly is if the power to enact
such ordinance is at the most dubious and under the present Local Government Code
non-existent.
WHEREFORE, the writ of certiorari is granted and the decision of the lower court dated
January 15, 1976 reversed, set aside, and nullied. Ordinance No. 84, Series of 1975 of
the Municipality of Bocaue is declared void and unconstitutional. The temporary
restraining order issued by this Court is hereby made permanent. No costs.

G.R. No. 92389 September 11, 1991


HON. JEJOMAR C. BINAY and the MUNICIPALITY OF MAKATI,
petitioners,
vs.
HON. EUFEMIO DOMINGO and the COMMISSION ON AUDIT,
respondents.
Jejomar C. Binay for himself and for his co-petitioner.
Manuel D. Tamase and Rafael C. Marquez for respondents.
PARAS, J.:p
The only pivotal issue before Us is whether or not Resolution No. 60, reenacted under Resolution No. 243, of the Municipality of Makati is a valid
exercise of police power under the general welfare clause.
The pertinent facts are:
On September 27, 1988, petitioner Municipality, through its Council,
approved Resolution No. 60 which reads:
A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL
ASSISTANCE PROGRAM INITIATED BY THE OFFICE OF THE MAYOR,
OF EXTENDING FINANCIAL ASSISTANCE OF FIVE HUNDRED PESOS
(P500.00) TO A BEREAVED FAMILY, FUNDS TO BE TAKEN OUT OF
UNAPPROPRIATED AVAILABLE FUNDS EXISTING IN THE MUNICIPAL
TREASURY. (Rollo, Annnex "A" p. 39)
Qualified beneficiaries, under the Burial Assistance Program, are bereaved
families of Makati whose gross family income does not exceed two
thousand pesos (P2,000.00) a month. The beneficiaries, upon fulfillment of
other requirements, would receive the amount of five hundred pesos
(P500.00) cash relief from the Municipality of Makati. (Reno, Annex "13", p.
41)
Metro Manila Commission approved Resolution No. 60. Thereafter, the
municipal secretary certified a disbursement fired of four hundred thousand
pesos (P400,000.00) for the implementation of the Burial Assistance
Program. (Rollo, Annex "C", p. 43).
Resolution No. 60 was referred to respondent Commission on Audit (COA)
for its expected allowance in audit. Based on its preliminary findings,
respondent COA disapproved Resolution No. 60 and disallowed in audit the

disbursement of finds for the implementation thereof. (Rollo, Annex "D", P.


44)
Two letters for reconsideration (Annexes "E" and "F", Rollo, pp. 45 and 48,
respectively) filed by petitioners Mayor Jejomar Binay, were denied by
respondent in its Decision No. 1159, in the following manner:
Your request for reconsideration is predicated on the following grounds, to
wit:
1. Subject Resolution No. 60, s. 1988, of the Municipal Council of Makati
and the intended disbursements fall within the twin principles of 'police
power and parens patriae and
2. The Metropolitan Manila Commission (MMC), under a Certification,
dated June 5, 1989, has already appropriated the amount of P400,000.00
to implement the Id resolution, and the only function of COA on the matter
is to allow the financial assistance in question.
The first contention is believed untenable. Suffice it to state that:
a statute or ordinance must have a real substantial, or rational relation to
the public safety, health, morals, or general welfare to be sustained as a
legitimate exercise of the police power. The mere assertion by the
legislature that a statute relates to the public health, safety, or welfare does
not in itself bring the statute within the police power of a state for there
must always be an obvious and real connection between the actual
provisions of a police regulations and its avowed purpose, and the
regulation adopted must be reasonably adapted to accomplish the end
sought to be attained. 16 Am. Jur 2d, pp. 542-543; emphasis supplied).
Here, we see no perceptible connection or relation between the objective
sought to be attained under Resolution No. 60, s. 1988, supra, and the
alleged public safety, general welfare, etc. of the inhabitants of Makati.
Anent the second contention, let it be stressed that Resolution No. 60 is still
subject to the limitation that the expenditure covered thereby should be for
a public purpose, i.e., that the disbursement of the amount of P500.00 as
burial assistance to a bereaved family of the Municipality of Makati, or a
total of P400,000.00 appropriated under the Resolution, should be for the
benefit of the whole, if not the majority, of the inhabitants of the Municipality
and not for the benefit of only a few individuals as in the present case. On
this point government funds or property shall be spent or used solely for
public purposes. (Cf. Section 4[2], P.D. 1445). (pp. 50-51, Rollo)
Bent on pursuing the Burial Assistance Program the Municipality of Makati,
through its Council, passed Resolution No. 243, re-affirming Resolution No.
60 (Rollo, Annex "H", p. 52).
However, the Burial Assistance Program has been stayed by COA Decision

No. 1159. Petitioner, through its Mayor, was constrained to file this special
civil action of certiorari praying that COA Decision No. 1159 be set aside as
null and void.
The police power is a governmental function, an inherent attribute of
sovereignty, which was born with civilized government. It is founded largely
on the maxims, "Sic utere tuo et ahenum non laedas and "Salus populi est
suprema lex Its fundamental purpose is securing the general welfare,
comfort and convenience of the people.
Police power is inherent in the state but not in municipal corporations
(Balacuit v. CFI of Agusan del Norte, 163 SCRA 182). Before a municipal
corporation may exercise such power, there must be a valid delegation of
such power by the legislature which is the repository of the inherent powers
of the State. A valid delegation of police power may arise from express
delegation, or be inferred from the mere fact of the creation of the municipal
corporation; and as a general rule, municipal corporations may exercise
police powers within the fair intent and purpose of their creation which are
reasonably proper to give effect to the powers expressly granted, and
statutes conferring powers on public corporations have been construed as
empowering them to do the things essential to the enjoyment of life and
desirable for the safety of the people. (62 C.J.S., p. 277). The so-called
inferred police powers of such corporations are as much delegated powers
as are those conferred in express terms, the inference of their delegation
growing out of the fact of the creation of the municipal corporation and the
additional fact that the corporation can only fully accomplish the objects of
its creation by exercising such powers. (Crawfordsville vs. Braden, 28 N.E.
849). Furthermore, municipal corporations, as governmental agencies,
must have such measures of the power as are necessary to enable them to
perform their governmental functions. The power is a continuing one,
founded on public necessity. (62 C.J.S. p. 273) Thus, not only does the
State effectuate its purposes through the exercise of the police power but
the municipality does also. (U.S. v. Salaveria, 39 Phil. 102).
Municipal governments exercise this power under the general welfare
clause: pursuant thereto they are clothed with authority to "enact such
ordinances and issue such regulations as may be necessary to carry out
and discharge the responsibilities conferred upon it by law, and such as
shall be necessary and proper to provide for the health, safety, comfort and
convenience, maintain peace and order, improve public morals, promote
the prosperity and general welfare of the municipality and the inhabitants
thereof, and insure the protection of property therein." (Sections 91, 149,
177 and 208, BP 337). And under Section 7 of BP 337, "every local

government unit shall exercise the powers expressly granted, those


necessarily implied therefrom, as well as powers necessary and proper for
governance such as to promote health and safety, enhance prosperity,
improve morals, and maintain peace and order in the local government
unit, and preserve the comfort and convenience of the inhabitants therein."
Police power is the power to prescribe regulations to promote the health,
morals, peace, education, good order or safety and general welfare of the
people. It is the most essential, insistent, and illimitable of powers. In a
sense it is the greatest and most powerful attribute of the government. It is
elastic and must be responsive to various social conditions. (Sangalang, et
al. vs. IAC, 176 SCRA 719). On it depends the security of social order, the
life and health of the citizen, the comfort of an existence in a thickly
populated community, the enjoyment of private and social life, and the
beneficial use of property, and it has been said to be the very foundation on
which our social system rests. (16 C.J.S., P. 896) However, it is not
confined within narrow circumstances of precedents resting on past
conditions; it must follow the legal progress of a democratic way of life.
(Sangalang, et al. vs. IAC, supra).
In the case at bar, COA is of the position that there is "no perceptible
connection or relation between the objective sought to be attained under
Resolution No. 60, s. 1988, supra, and the alleged public safety, general
welfare. etc. of the inhabitants of Makati." (Rollo, Annex "G", p. 51).
Apparently, COA tries to re-define the scope of police power by
circumscribing its exercise to "public safety, general welfare, etc. of the
inhabitants of Makati."
In the case of Sangalang vs. IAC, supra, We ruled that police power is not
capable of an exact definition but has been, purposely, veiled in general
terms to underscore its all comprehensiveness. Its scope, over-expanding
to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response
to conditions and circumstances thus assuring the greatest benefits.
The police power of a municipal corporation is broad, and has been said to
be commensurate with, but not to exceed, the duty to provide for the real
needs of the people in their health, safety, comfort, and convenience as
consistently as may be with private rights. It extends to all the great public
needs, and, in a broad sense includes all legislation and almost every
function of the municipal government. It covers a wide scope of subjects,
and, while it is especially occupied with whatever affects the peace,
security, health, morals, and general welfare of the community, it is not
limited thereto, but is broadened to deal with conditions which exists so as

to bring out of them the greatest welfare of the people by promoting public
convenience or general prosperity, and to everything worthwhile for the
preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec.
128). Thus, it is deemed inadvisable to attempt to frame any definition
which shall absolutely indicate the limits of police power.
COA's additional objection is based on its contention that "Resolution No.
60 is still subject to the limitation that the expenditure covered thereby
should be for a public purpose, ... should be for the benefit of the whole, if
not the majority, of the inhabitants of the Municipality and not for the benefit
of only a few individuals as in the present case." (Rollo, Annex "G", p. 51).
COA is not attuned to the changing of the times. Public purpose is not
unconstitutional merely because it incidentally benefits a limited number of
persons. As correctly pointed out by the Office of the Solicitor General, "the
drift is towards social welfare legislation geared towards state policies to
provide adequate social services (Section 9, Art. II, Constitution), the
promotion of the general welfare (Section 5, Ibid) social justice (Section 10,
Ibid) as well as human dignity and respect for human rights. (Section 11,
Ibid." (Comment, p. 12)
The care for the poor is generally recognized as a public duty. The support
for the poor has long been an accepted exercise of police power in the
promotion of the common good.
There is no violation of the equal protection clause in classifying paupers
as subject of legislation. Paupers may be reasonably classified. Different
groups may receive varying treatment. Precious to the hearts of our
legislators, down to our local councilors, is the welfare of the paupers.
Thus, statutes have been passed giving rights and benefits to the disabled,
emancipating the tenant-farmer from the bondage of the soil, housing the
urban poor, etc.
Resolution No. 60, re-enacted under Resolution No. 243, of the
Municipality of Makati is a paragon of the continuing program of our
government towards social justice. The Burial Assistance Program is a
relief of pauperism, though not complete. The loss of a member of a family
is a painful experience, and it is more painful for the poor to be financially
burdened by such death. Resolution No. 60 vivifies the very words of the
late President Ramon Magsaysay 'those who have less in life, should have
more in law." This decision, however must not be taken as a precedent, or
as an official go-signal for municipal governments to embark on a
philanthropic orgy of inordinate dole-outs for motives political or otherwise.

PREMISES CONSIDERED, and with the afore-mentioned caveat, this


petition is hereby GRANTED and the Commission on Audit's Decision No.
1159 is hereby SET ASIDE.

TANO VS SOCRATES
G.R. NO. 110249, SEPTEMBER 11, 1997

Petitioners caption their petition as one for Certiorari, Injunction


With Preliminary Mandatory Injunction,with Prayer for Temporary
Restraining Order and pray that this Court: (1) declare as
unconstitutional: (a) Ordinance No. 15-92, dated 15 December
1992, of the Sangguniang Panlungsod of Puerto Princesa; (b)
Office Order No. 23, Series of 1993, dated 22 January 1993,
issued by Acting City Mayor Amado L. Lucero of Puerto Princesa
City; and (c) Resolution No. 33, Ordinance No. 2, Series of 1993,
dated 19 February 1993, of the Sangguniang Panlalawigan of
Palawan; (2) enjoin the enforcement thereof; and (3) restrain
respondents Provincial and City Prosecutors of Palawan and
Puerto Princesa City and Judges of Regional Trial Courts,
Metropolitan Trial Courts
and Municipal Circuit Trial
Courts in Palawan from assuming jurisdiction over and hearing
cases concerning the violation of the Ordinances and of the Office
Order.
More appropriately, the petition is, and shall be treated as, a
special civil action for certiorari and prohibition.
The following is petitioners summary of the factual antecedents
giving rise to the petition:
1.OnDecember15,1992,theSangguniangPanlungsodngPuerto
PrincesaCityenactedOrdinanceNo.1592whichtookeffectonJanuary
1,1993entitled:ANORDINANCEBANNINGTHESHIPMENTOF
ALLLIVEFISHANDLOBSTEROUTSIDEPUERTOPRINCESA
CITYFROMJANUARY1,1993TOJANUARY1,1998AND
[if !supportFootnotes][1][endif]

PROVIDINGEXEMPTIONS,PENALTIESANDFOROTHER
PURPOSESTHEREOF,thefulltextofwhichreadsasfollows:
Section1.TitleoftheOrdinance.ThisOrdinanceisentitled:AN
ORDINANCEBANNINGTHESHIPMENTOFALLLIVEFISH
ANDLOBSTEROUTSIDEPUERTOPRINCESACITYFROM
JANUARY1,1993TOJANUARY1,1998ANDPROVIDING
EXEMPTIONS,PENALTIESANDFOROTHERPURPOSES
THEREOF.
Section2.Purpose,ScopeandCoverage.ToeffectivelyfreeourCity
SeaWatersfromCyanideandotherObnoxioussubstance,andshall
coverallpersonsand/orentitiesoperatingwithinandoutsidetheCityof
PuertoPrincesawhoisare[sic]directlyorindirectlyinthebusinessor
shipmentoflivefishandlobsteroutsidetheCity.
Section3.Definitionofterms.ForpurposeofthisOrdinancethe
followingareherebydefined:
A.SEABASSAkindoffishunderthefamilyofCentropomidae,
betterknownasAPAHAP;
B.CATFISHAkindoffishunderthefamilyofPlotosidae,better
knownasHITOHITO;
C.MUDFISHAkindoffishunderthefamilyofOrphicaphalisae
betterknownasDALAG
D.ALLLIVEFISHAllalive,breathingnotnecessarilymovingofall
specie[s]useforfoodandforaquariumpurposes.
E.LIVELOBSTERSeveralrelatively,largemarinecrustaceansofthe
genusHomarusthatarealiveandbreathingnotnecessarilymoving.
Section4.Itshallbeunlawful[for]anypersonoranybusiness
enterpriseorcompanytoshipoutfromPuertoPrincesaCitytoanypoint
ofdestinationeitherviaaircraftorseacraftofanylivefishandlobster
exceptSEABASS,CATFISH,MUDFISH,ANDMILKFISHFRIES.
Section5.PenaltyClause.Anyperson/sandorbusinessentity
violatingthisOrdinanceshallbepenalizedwithafineofnotmorethan
P5,000.00orimprisonmentofnotmorethantwelve(12)months,
cancellationoftheirpermittodobusinessintheCityofPuertoPrincesa

orallofthehereinstatedpenalties,uponthediscretionofthecourt.
Section6.Iftheownerand/oroperatoroftheestablishmentfound
vilatingtheprovisionsofthisordinanceisacorporationorapartnership,
thepenaltyprescribedinSection5hereofshallbeimposeduponits
presidentand/orGeneralManagerorManagingPartnerand/orManager,
asthecasemaybe[sic].
Section7.Anyexistingordinanceoranyprovisionofanyordinance
inconsistentto[sic]thisordinanceisdeemedrepealed.
Section8.ThisOrdinanceshalltakeeffectonJanuary1,1993.
SOORDAINED.
xxx
2.Toimplementsaidcityordinance,thenActingCityMayorAmadoL.
LuceroissuedOfficeOrderNo.23,Seriesof1993datedJanuary22,
1993whichreadsasfollows:
IntheinterestofpublicserviceandforpurposesofCityOrdinanceNo.
PD4261474,otherwiseknownasANORDINANCEREQUIRING
ANYPERSONENGAGEDORINTENDINGTOENGAGEINANY
BUSINESS,TRADE,OCCUPATION,CALLINGORPROFESSION
ORHAVINGINHISPOSSESSIONANYOFTHEARTICLESFOR
WHICHAPERMITISREQUIREDTOBEHAD,TOOBTAINFIRST
AMAYORSPERMITandCityOrdinanceNo.1592,AN
ORDINANCEBANNINGTHESHIPMENTOFALLLIVEFISH
ANDLOBSTEROUTSIDEPUERTOPRINCESACITYFROM
JANUARY1,1993TOJANUARY1,1998,youareherebyauthorized
anddirectedtocheckorconductnecessaryinspectionsoncargoes
containinglivefishandlobsterbeingshippedoutfromthePuerto
PrincesaAirport,PuertoPrincesaWharforatanyportwithinthe
jurisdictionoftheCitytoanypointofdestinations[sic]eithervia
aircraftorseacraft.
Thepurposeoftheinspectionistoascertainwhethertheshipper
possessedtherequiredMayorsPermitissuedbythisOfficeandthe
shipmentiscoveredbyinvoiceorclearanceissuedbythelocalofficeof
theBureauofFisheriesandAquaticResourcesandastocompliance

withallotherexistingrulesandregulationsonthematter.
Anycargocontaininglivefishandlobsterwithouttherequired
documentsasstatedhereinmustbeheldforproperdisposition.
InthepursuitofthisOrder,youareherebyauthorizedtocoordinatewith
thePALManager,thePPAManager,thelocalPNPStationandother
officesconcernedfortheneededsupportandcooperation.Further,that
theusualcourtesyanddiplomacymustbeobservedatalltimesinthe
conductoftheinspection.
Pleasebeguidedaccordingly.
xxx
3.OnFebruary19,1993,theSangguniangPanlalawigan,Provincial
GovernmentofPalawanenactedResolutionNo.33entitled:A
RESOLUTIONPROHIBITINGTHECATCHING,GATHERING,
POSSESSING,BUYING,SELLINGANDSHIPMENTOFLIVE
MARINECORALDWELLINGAQUATICORGANISMS,TOWIT:
FAMILY:SCARIDAE(MAMENG),EPINEPHELUSFASCIATUS
(SUNO).CROMILEPTESALTIVELIS(PANTHERORSENORITA),
LOBSTERBELOW200GRAMSANDSPAWNING,TRADACNA
GIGAS(TAKLOBO),PINCTADAMARGARITEFERA(MOTHER
PEARL,OYSTERS,GIANTCLAMSANDOTHERSPECIES),
PENAEUSMONODON(TIGERPRAWNBREEDERSIZEOR
MOTHER),EPINEPHELUSSUILLUS(LOBAORGREEN
GROUPER)ANDFAMILY:BALISTIDAE(TROPICALAQUARIUM
FISHES)FORAPERIODFIVE(5)YEARSINANDCOMINGFROM
PALAWANWATERS,thefulltextofwhichreadsasfollows:
WHEREAS,scientificandfactualresearches[sic]andstudiesdisclose
thatonlyfive(5)percentofthecoralsofourprovinceremaintobein
excellentconditionas[a]habitatofmarinecoraldwellingaquatic
organisms;
WHEREAS,itcannotbegainsaidthatthedestructionanddevastationof
thecoralsofourprovincewereprincipallyduetoillegalfishing
activitieslikedynamitefishing,sodiumcyanidefishing,useofother
obnoxioussubstancesandotherrelatedactivities;

WHEREAS,thereisanimperativeandurgentneedtoprotectand
preservetheexistenceoftheremainingexcellentcoralsandallowthe
devastatedonestoreinvigorateandregeneratethemselvesintovitality
withinthespanoffive(5)years;
WHEREAS,Sec.468,Par.1,SubPar.VIofthe[sic]R.A.7160
otherwiseknownastheLocalGovernmentCodeof1991empowersthe
SangguniangPanlalawigantoprotecttheenvironmentandimpose
appropriatepenalties[upon]actswhichendangertheenvironmentsuch
asdynamitefishingandotherformsofdestructivefishing,among
others.
NOW,THEREFORE,onmotionbyKagawadNelsonP.Peneyraand
uponunanimousdecisionofallthememberspresent;
Beitresolvedasitisherebyresolved,toapproveResolutionNo.33,
Seriesof1993oftheSangguniangPanlalawiganandtoenactOrdinance
No.2forthepurpose,towit:
ORDINANCENO.2
Seriesof1993
BEITORDAINEDBYTHESANGGUNIANGPANLALAWIGANIN
SESSIONASSEMBLED:
Section1.TITLEThisOrdinanceshallbeknownasanOrdinance
Prohibitingthecatching,gathering,possessing,buying,sellingand
shipmentoflivemarinecoraldwellingaquaticorganisms,towit:1.
Family:Scaridae(Mameng),2.EpinephelusFasciatus(Suno),3.
Cromileptesaltivelis(PantherorSenorita),lobsterbelow200gramsand
spawning),4.TridacnaGigas(Taklobo),5.PinctadaMargaretefera
(MotherPearl,Oysters,GiantClamsandotherspecies),6.Penaeus
Monodon(TigerPrawnbreedersizeormother),7.EpinephelusSuillus
(LobaorGreenGrouper)and8.Family:Balistidae(TopicalAquarium
Fishes)foraperiodoffive(5)yearsinandcomingfromPalawan
Waters.
SectionII.PRELIMINARYCONSIDERATIONS
1.Sec.2A(Rep.Act7160).Itisherebydeclared,thepolicyofthestate
thattheterritorialandpoliticalsubdivisionsoftheStateshallenjoy

genuineandmeaningfullocalautonomytoenablethemtoattaintheir
fullestdevelopmentasselfreliantcommunitiesandmakethemmore
effectivepartnersintheattainmentofnationalgoals.Towardthisend,
theStateshallprovidefor[a]moreresponsiveandaccountablelocal
governmentstructureinstitutedthroughasystemofdecentralization
wherebylocalgovernmentunitsshallbegivenmorepowers,authority,
responsibilitiesandresources.
2.Sec.5A(R.A.7160).Anyprovisiononapowerof[a]local
GovernmentUnitshallbeliberalyinterpretedinitsfavor,andincaseof
doubt,anyquestionthereonshallberesolvedinfavorofdevolutionof
powersandofthelowergovernmentunits.Anyfairandreasonable
doubtsastotheexistenceofthepowershallbeinterpretedinfavorof
theLocalGovernmentUnitconcerned.
3.Sec.5C(R.A.7160).ThegeneralwelfareprovisionsinthisCode
shallbeliberallyinterpretedtogivemorepowerstolocalgovernment
unitsinacceleratingeconomicdevelopmentandupgradingthequalityof
lifeforthepeopleinthecommunity.
4.Sec.16(R.A.7160).GeneralWelfare.Everylocalgovernmentunit
shallexercisethepowersexpresslygranted,thosenecessarilyimplied
therefrom,aswellaspowersnecessary,appropriate,orincidentalforits
efficientandeffectivegovernance;andthosewhichareessentialtothe
promotionofthegeneralwelfare.
SectionIII.DECLARATIONOFPOLICY.Itisherebydeclaredtobe
thepolicyoftheProvinceofPalawantoprotectandconservethemarine
resourcesofPalawannotonlyforthegreatestgoodofthemajorityof
thepresentgenerationbutwith[the]properperspectiveand
considerationof[sic]theirprosperity,andtoattainthisend,the
SangguniangPanlalawiganhenceforthdeclaresthatis[sic]shallbe
unlawfulforanypersonoranybusinessentitytoengageincatching,
gathering,possessing,buying,sellingandshipmentoflivemarinecoral
dwellingaquaticorganismsasenumeratedinSection1hereofinand
comingoutofPalawanWatersforaperiodoffive(5)years;
SectionIV.PENALTYCLAUSE.Anypersonand/orbusinessentity

violatingthisOrdinanceshallbepenalizedwithafineofnotmorethan
FiveThousandPesos(P5,000.00),PhilippineCurrency,and/or
imprisonmentofsix(6)monthstotwelve(12)monthsandconfiscation
andforfeitureofparaphernalias[sic]andequipmentinfavorofthe
governmentatthediscretionoftheCourt;
SectionV.SEPARABILITYCLAUSE.Ifforanyreason,aSectionor
provisionofthisOrdinanceshallbeheldasunconditional[sic]or
invalid,itshallnotaffecttheotherprovisionshereof.
SectionVI.REPEALINGCLAUSE.AnyexistingOrdinanceora
provisionofanyordinanceinconsistentherewithisdeemedmodified,
amendedorrepealed.
SectionVII.EFFECTIVITY.ThisOrdinanceshalltakeeffectten(10)
daysafteritspublication.
SOORDAINED.
xxx
4.Therespondentsimplementedthesaidordinances,AnnexesAandC
hereoftherebydeprivingallthefishermenofthewholeprovinceof
PalawanandtheCityofPuertoPrincesaoftheironlymeansof
livelihoodandthepetitionersAirlineShippersAssociationofPalawan
andothermarinemerchantsfromperformingtheirlawfuloccupation
andtrade;
5.PetitionersAlfredoTano,BaldomeroTano,TeocenesMidello,Angel
deMesa,EulogioTremocha,andFelipeOngonion,Jr.wereeven
chargedcriminallyundercriminalcaseno.9305Cinthe1stMunicipal
CircuitTrialCourtofCuyoAgutayaMagsaysay,anoriginalcarbon
copyofthecriminalcomplaintdatedApril12,1993isheretoattachedas
AnnexD;whilexeroxcopiesareattachedasAnnexDtothecopiesof
thepetition;
6.PetitionersRobertLimandVirginiaLim,ontheotherhand,were
chargedbytherespondentPNPwiththerespondentCityProsecutorof
PuertoPrincesaCity,axeroxcopyofthecomplaintisheretoattachedas
AnnexE;
Without seeking redress from the concerned local government

units, prosecutors office and courts, petitioners directly invoked


our original jurisdiction by filing this petition on 4 June 1993. In
sum, petitioners contend that:
First, the Ordinances deprived them of due process of law, their
livelihood, and unduly restricted them from the practice of their
trade, in violation of Section 2, Article XII and Sections 2 and 7 of
Article XIII of the 1987 Constitution.
Second, Office Order No. 23 contained no regulation nor
condition under which the Mayors permit could be granted or
denied; in other words, the Mayor had the absolute authority to
determine whether or not to issue permit.
Third, as Ordinance No. 2 of the Province of Palawan altogether
prohibited the catching, gathering, possession, buying, selling and
shipping of live marine coral dwelling organisms, without any
distinction whether it was caught or gathered through lawful
fishing method, the Ordinance took away the right of petitionersfishermen to earn their livelihood in lawful ways; and insofar as
petitioners-members of Airline Shippers Association are
concerned, they were unduly prevented from pursuing their
vocation and entering into contracts which are proper, necessary,
and essential to carry out their business endeavors to a
successful conclusion.
Finally, as Ordinance No. 2 of the Sangguniang Panlalawigan is
null and void, the criminal cases based thereon against petitioners
Tano and the others have to be dismissed.
In the Resolution of 15 June 1993 we required respondents to
comment on the petition, and furnished the Office of the Solicitor
General with a copy thereof.
In their comment filed on 13 August 1993, public respondents
Governor Socrates and Members of the Sangguniang
Panlalawigan of Palawan defended the validity of Ordinance
No.2, Series of 1993, as a valid exercise of the Provincial
Governments power under the general welfare clause (Section 16
of the Local Government Code of 1991 [hereafter, LGC]), and its
specific power to protect the environment and impose appropriate

penalties for acts which endanger the environment, such as


dynamite fishing and other forms of destructive fishing under
Section 447 (a) (1) (vi), Section 458 (a) (1) (vi), and Section 468
(a) (1) (vi), of the LGC. They claimed that in the exercise of such
powers, the Province of Palawan had the right and responsibilty
to insure that the remaining coral reefs, where fish dwells [sic],
within its territory remain healthy for the future generation. The
Ordinance, they further asserted, covered only live marine coral
dwelling aquatic organisms which were enumerated in the
ordinance and excluded other kinds of live marine aquatic
organisms not dwelling in coral reefs; besides the prohibition was
for only five (5) years to protect and preserve the pristine coral
and allow those damaged to regenerate.
Aforementioned respondents likewise maintained that there was
no violation of due process and equal protection clauses of the
Constitution. As to the former, public hearings were conducted
before the enactment of the Ordinance which, undoubtedly, had a
lawful purpose and employed reasonable means; while as to the
latter, a substantial distinction existed between a fisherman who
catches live fish with the intention of selling it live, and a
fisherman who catches live fish with no intention at all of selling it
live, i.e., the former uses sodium cyanide while the latter does not.
Further, the Ordinance applied equally to all those belonging to
one class.
On 25 October 1993 petitioners filed an Urgent Plea for the
Immediate Issuance of a Temporary Restraining Order claiming
that despite the pendency of this case, Branch 50 of the Regional
Trial Court of Palawan was bent on proceeding with Criminal
Case No. 11223 against petitioners Danilo Tano, Alfredo Tano,
Eulogio Tremocha, Romualdo Tano, Baldomero Tano, Andres
Lemihan and Angel de Mesa for violation of Ordinance No. 2 of
the Sangguniang Panlalawigan of Palawan. Acting on said plea,
we issued on 11 November 1993 a temporary restraining order
directing Judge Angel Miclat of said court to cease and desist
from proceeding with the arraignment and pre-trial of Criminal

Case No. 11223.


On 12 July 1994, we excused the Office of the Solicitor General
from filing a comment, considering that as claimed by said office
in its Manifestation of 28 June 1994, respondents were already
represented by counsel.
The rest of the respondents did not file any comment on the
petition.
In the resolution of 15 September 1994, we resolved to consider
the comment on the petition as the Answer, gave due course to
the petition and required the parties to submit their respective
memoranda.
On 22 April 1997 we ordered impleaded as party respondents the
Department of Agriculture and the Bureau of Fisheries and
Aquatic Resources and required the Office of the Solicitor
General to comment on their behalf. But in light of the latters
motion of 9 July 1997 for an extension of time to file the comment
which would only result in further delay, we dispensed with said
comment.
After due deliberation on the pleadings filed, we resolved to
dismiss this petition for want of merit, on 22 July 1997, and
assigned it to the ponente for the writing of the opinion of the
Court.
[if !supportFootnotes][2][endif]

There are actually two sets of petitioners in this case. The first is
composed of Alfredo Tano, Baldomero Tano, Danilo Tano,
Romualdo Tano, Teocenes Midello, Angel de Mesa, Eulogio
Tremocha, Felipe Ongonion, Jr., Andres Linijan, and Felimon de
Mesa, who were criminally charged with violating Sangguniang
Panlalawigan Resolution No. 33 and Ordinance No. 2, Series of
1993, of the Province of Palawan, in Criminal Case No. 93-05-C
of the 1 Municipal Circuit Trial Court (MCTC) of Palawan;
and Robert Lim and Virginia Lim who were charged with
violating City Ordinance No. 15-92 of Puerto Princesa City and
Ordinance No. 2, Series of 1993, of the Province of Palawan
before the Office of the City Prosecutor of Puerto Princesa.
st

[if !supportFootnotes]

[3][endif]

[if !

All of them, with the exception of Teocenes Midello,


Felipe Ongonion, Jr., Felimon de Mesa, Robert Lim and Virginia
Lim, are likewise the accused in Criminal Case No. 11223 for the
violation of Ordinance No. 2 of the Sangguniang Panlalawigan of
Palawan, pending before Branch 50 of the Regional Trial Court of
Palawan.
The second set of petitioners is composed of the rest of the
petitioners numbering seventy-seven (77), all of whom, except the
Airline Shippers Association of Palawan -- an alleged private
association of several marine merchants -- are natural persons
who claim to be fishermen.
The primary interest of the first set of petitioners is, of course, to
prevent the prosecution, trial and determination of the criminal
cases until the constitutionality or legality of the Ordinances they
allegedly violated shall have been resolved. The second set of
petitioners merely claim that they being fishermen or marine
merchants, they would be adversely affected by the ordinances.
As to the first set of petitioners, this special civil for certiorari must
fail on the ground of prematurity amounting to a lack of cause of
action. There is no showing that the said petitioners, as the
accused in the criminal cases, have filed motions to quash the
informations therein and that the same were denied. The ground
available for such motions is that the facts charged therein do not
constitute an offense because the ordinances in question are
unconstitutional.
It cannot then be said that the lower
courts acted without or in excess of jurisdiction or with grave
abuse of discretion to justify recourse to the extraordinary remedy
of certiorari or prohibition. It must further be stressed that even if
the petitioners did file motions to quash, the denial thereof would
not forthwith give rise to a cause of action under Rule 65 of the
Rules of Court. The general rule is that where a motion to quash
is denied, the remedy therefrom is not certiorari, but for the party
aggrieved thereby to go to trial without prejudice to reiterating
special defenses involved in said motion, and if, after trial on the
merits of adverse decision is rendered, to appeal therefrom in the
supportFootnotes][4][endif]

[if !supportFootnotes][5][endif]

[if !supportFootnotes][6][endif]

manner authorized by law.


And , even where in an
exceptional circumstance such denial may be the subject of a
special civil action for certiorari, a motion for reconsideration must
have to be filed to allow the court concerned an opportunity to
correct its errors, unless such motion may be dispensed with
because of existing exceptional circumstances.
Finally, even if a motion for reconsideration has been filed and
denied, the remedy under Rule 65 is still unavailable absent any
showing of the grounds provided for in Section 1 thereof.
For obvious reasons, the petition at bar does not, and could
not have , alleged any of such grounds.
As to the second set of petitioners, the instant petition is obviously
one for DECLARATORY RELIEF, i.e., for a declaration that the
Ordinances in question are a nullity ... for being unconstitutional.
As such, their petition must likewise fail, as this Court
is not possessed of original jurisdiction over petitions for
declaratory relief even if only questions of law are involved,
it being settled that the Court merely exercises
appellate jurisdiction over such petitions.
[if !supportFootnotes][7][endif]

[if !supportFootnotes][8][endif]

[if !supportFootnotes][9]

[endif]

[if !

supportFootnotes][10][endif]

[if !

supportFootnotes][11][endif]

[if !supportFootnotes][12][endif]

II

Even granting arguendo that the first set of petitioners have a


cause of action ripe for the extraordinary writ of certiorari, there is
here a clear disregard of the hierarchy of courts, and no special
and important reason or exceptional or compelling circumstance
has been adduced why direct recourse to us should be allowed.
While we have concurrent jurisdiction with Regional Trial courts
and with the Court of Appeals to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence gives petitioners no unrestricted
freedom of choice of court forum, so we held in People v.
Cuaresma:
Thisconcurrenceofjurisdictionisnottobetakenasaccordingtoparties
seekinganyofthewritsanabsoluteunrestrainedfreedomofchoiceof
thecourttowhichapplicationthereforwillbedirected.Thereisafterall
hierarchyofcourts.Thathierarchyisdeterminativeofthevenueof
[if !supportFootnotes][13][endif]

appeals,andshouldalsoserveasageneraldeterminantofthe
appropriateforumforpetitionsfortheextraordinarywrits.Abecoming
regardforthatjudicialhierarchymostcertainlyindicatesthatpetitions
fortheissuanceofextraordinarywritsagainstfirstlevel(inferior)courts
shouldbefiledwiththeRegionalTrialCourt,andthoseagainstthe
latter,withtheCourtofAppeals.AdirectinvocationoftheSupreme
Courtsoriginaljurisdictiontoissuethesewritsshouldbeallowedonly
whentherearespecialandimportantreasonstherefor,clearlyand
specificallysetoutinthepetition.Thisisestablishedpolicy.Itisa
policynecessarytopreventinordinatedemandsupontheCourtstime
andattentionwhicharebetterdevotedtothosematterswithinits
exclusivejurisdiction,andtopreventfurtherovercrowdingofthe
Courtsdocket.
TheCourtfeelstheneedtoreaffirmthatpolicyatthistime,andto
enjoinstrictadherencetheretointhelightofwhatitperceivestobea
growingtendencyonthepartoflitigantsandlawyerstohavetheir
applicationsforthesocalledextraordinarywrits,andsometimeseven
theirappeals,passeduponandadjudicateddirectlyandimmediatelyby
thehighesttribunaloftheland.
In Santiago v. Vasquez,
this Court forcefully
expressed that the propensity of litigants and lawyers to disregard
the hierarchy of courts must be put to a halt, not only because of
the imposition upon the precious time of this Court, but also
because of the inevitable and resultant delay, intended or
otherwise, in the adjudication of the case which often has to be
remanded or referred to the lower court, the proper forum under
the rules of procedure, or as better equipped to resolve the issues
since this Court is not a trier of facts. We reiterated the judicial
policy that this Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify availment
of a remedy within and calling for the exercise of [its] primary
jurisdiction.
[if !supportFootnotes][14][endif]

III

Notwithstanding the foregoing procedural obstacles against the


first set of petitioners, we opt to resolve this case on its merits
considering that the lifetime of the challenged Ordinances is about
to end. Ordinance No. 15-92 of the City of Puerto Princesa is
effective only up to 1 January 1998, while Ordinance No. 2 of the
Province of Palawan, enacted on 19 February 1993, is effective
for only five (5) years. Besides, these Ordinances were
undoubtedly enacted in the exercise of powers under the new
LGC relative to the protection and preservation of the
environment and are thus novel and of paramount importance. No
further delay then may be allowed in the resolution of the issues
raised.
It is of course settled that laws (including ordinances enacted by
local government units) enjoy the presumption of constitutionality.
To overthrow this presumption, there must be a clear
and unequivocal breach of the Constitution, not merely a doubtful
or argumentative contradiction. In short, the conflict with the
Constitution must be shown beyond reasonable doubt.
Where doubt exists, even if well founded, there can be no
finding of unconstitutionality. To doubt is to sustain.
After a scrunity of the challenged Ordinances and the provisions
of the Constitution petitioners claim to have been violated, we find
petitioners contentions baseless and so hold that the former do
not suffer from any infirmity, both under the Constitution and
applicable laws.
Petitioners specifically point to Section 2, Article XII and Sections
2 and 7, Article XIII of the Constitution as having been
transgressed by the Ordinances.
The pertinent portion of Section 2 of Article XII reads:
SEC.2.xxx
TheStateshallprotectthenation'smarinewealthinitsarchipelagic
waters,territorialsea,andexclusiveeconomiczone,andreserveitsuse
andenjoymentexclusivelytoFilipinocitizens.
TheCongressmay,bylaw,allowsmallscaleutilizationofnatural
[if

!supportFootnotes][15][endif]

[if !supportFootnotes][16]

[endif]

[if !supportFootnotes][17][endif]

resourcesbyFilipinocitizens,aswellascooperativefishfarming,with
prioritytosubsistencefishermenandfishworkersinrivers,lakes,bays,
andlagoons.
Sections 2 and 7 of Article XIII provide:
Sec.2.Thepromotionofsocialjusticeshallincludethecommitmentto
createeconomicopportunitiesbasedonfreedomofinitiativeandself
reliance.
xxx
SEC.7.TheStateshallprotecttherightsofsubsistencefishermen,
especiallyoflocalcommunities,tothepreferentialuseofthecommunal
marineandfishingresources,bothinlandandoffshore.Itshallprovide
supporttosuchfishermenthroughappropriatetechnologyandresearch,
adequatefinancial,production,andmarketingassistance,andother
services.TheStateshallalsoprotect,develop,andconservesuch
resources.Theprotectionshallextendtooffshorefishinggroundsof
subsistencefishermenagainstforeignintrusion.Fishworkersshall
receiveajustsharefromtheirlaborintheutilizationofmarineand
fishingresources.
There is absolutely no showing that any of the petitioners qualifies
as a subsistence or marginal fisherman. In their petition, petitioner
Airline Shippers Association of Palawan is described as a private
association composed of Marine Merchants; petitioners Robert
Lim and Virginia Lim, as merchants; while the rest of the
petitioners claim to be fishermen, without any qualification,
however, as to their status.
Since the Constitution does not specifically provide a definition of
the terms subsistence or marginal fishermen,
they
should be construed in their general and ordinary sense. A
marginal fisherman is an individual engaged in fishing whose
margin of return or reward in his harvest of fish as measured by
existing price levels is barely sufficient to yield a profit or cover the
cost of gathering the fish,
while a subsistence
fisherman is one whose catch yields but the irreducible minimum
for his livelihood.
Section 131(p) of the LGC (R.A. No.
[if !supportFootnotes][18][endif]

[if !supportFootnotes][19][endif]

[if !supportFootnotes][20][endif]

7160) defines a marginal farmer or fisherman as an individual


engaged in subsistence farming or fishing which shall be limited
to the sale, barter or exchange of agricultural or marine products
produced by himself and his immediate family. It bears repeating
that nothing in the record supports a finding that any petitioner
falls within these definitions.
Besides, Section 2 of Article XII aims primarily not to bestow any
right to subsistence fishermen, but to lay stress on the duty of the
State to protect the nations marine wealth. What the provision
merely recognizes is that the State may allow, by law, cooperative
fish farming, with priority to subsistence fishermen and
fishworkers in rivers, lakes, bays, and lagoons. Our survey of the
statute books reveals that the only provision of law which speaks
of the preferential right of marginal fishermen is Section 149 of the
LGC of 1991 which pertinently provides:
SEC.149.FisheryRentals,FeesandCharges.xxx
(b)Thesangguniangbayanmay:
(1)Grantfisheryprivilegestoerectfishcorrals,oyster,musselsorother
aquaticbedsorbangusfryareas,withinadefinitezoneofthemunicipal
waters,asdeterminedbyit:Provided,however,Thatdulyregistered
organizationsandcooperativesofmarginalfishermenshallhave
preferentialrighttosuchfisheryprivileges....
In a Joint Administrative Order No. 3, dated 25 April 1996, the
Secretary of the Department of Agriculture and the Secretary of
the Department of Interior and Local Government prescribed the
guidelines on the preferential treatment of small fisherfolk relative
to the fishery right mentioned in Section 149. This case, however,
does not involve such fishery right.
Anent Section 7 of Article XIII, it speaks not only of the use of
communal marine and fishing resources, but of their protection,
development, and conservation. As hereafter shown, the
ordinances in question are meant precisely to protect and
conserve our marine resources to the end that their enjoyment by
the people may be guaranteed not only for the present

generation, but also for the generations to come.


The so-called preferential right of subsistence or marginal
fishermen to the use of marine resources is not at all absolute. In
accordance with the Regalian Doctrine, marine resources belong
to the State, and, pursuant to the first paragraph of Section 2,
Article XII of the Constitution, their exploration, development and
utilization ... shall be under the full control and supervision of the
State. Moreover, their mandated protection, development, and
conservation as necessarily recognized by the framers of the
Constitution, imply certain restrictions on whatever right of
enjoyment there may be in favor of anyone. Thus, as to the
curtailment of the preferential treatment of marginal fisherman,
the following exchange between Commissioner Francisco
Rodrigo and Commissioner Jose F.S. Bengzon, Jr., took place at
the plenary session of the Constitutional Commission:
MR.RODRIGO:
LetusdiscusstheimplementationofthisbecauseIwouldnotraisethe
hopesofourpeople,andafterwardsfailintheimplementation.Howwill
thisbeimplemented?Willtherebealicensingorgivingofpermitsso
thatgovernmentofficialswillknowthatoneisreallyamarginal
fisherman?Orifpolicemansaythatapersonisnotamarginal
fisherman,hecanshowhispermit,toprovethatindeedheisone.
MR.BENGZON:
Certainly,therewillbesomemodeoflicensinginsofarasthisis
concernedandthisparticularquestioncouldbetackledwhenwediscuss
theArticleonLocalGovernmentswhetherwewillleavetothelocal
governmentsortoCongressonhowthesethingswillbeimplemented.
Butcertainly,IthinkourCongressmenandourlocalofficialswillnotbe
bereftofideasonhowtoimplementthismandate.
xxx
MR.RODRIGO:
So,onceoneislicensedasamarginalfisherman,hecangoanywherein
thePhilippinesandfishinanyfishinggrounds.
MR.BENGZON:

Subjecttowhateverrulesandregulationsandlocallawsthatmaybe
passed,maybeexistingorwillbepassed.

(underscoringsuppliedforemphasis).
What must likewise be borne in mind is the state policy enshrined
in the Constitution regarding the duty of the State to protect and
advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature.
On this score, in Oposa v. Factoran,
this Court
declared:
Whiletherighttobalancedandhealthfulecologyistobefoundunder
theDeclarationofPrinciplestheStatePoliciesandnotundertheBillof
Rights,itdoesnotfollowthatitislessimportantthananyofthecivil
andpoliticalrightsenumeratedinthelatter.Sucharightbelongstoa
differentcategoryofrightsaltogetherforitconcernsnothinglessthan
selfpreservationandselfperpetuationaptlyandfittinglystressedby
thepetitionerstheadvancementofwhichmayevenbesaidtopredate
allgovernmentsandconstitutions.Asamatteroffact,thesebasicrights
neednotevenbewrittenintheConstitutionfortheyareassumedtoexist
fromtheinceptionofhumankind.Iftheyarenowexplicitlymentioned
inthefundamentalcharter,itisbecauseofthewellfoundedfearofits
framersthatunlesstherightstoabalancedandhealthfulecologyandto
healtharemandatedasstatepoliciesbytheConstitutionitself,thereby
highlightingtheircontinuingimportanceandimposinguponthestatea
solemnobligationtopreservethefirstandprotectandadvancethe
second,thedaywouldnotbetoofarwhenallelsewouldbelostnot
onlyforthepresentgeneration,butalsoforthosetocomegenerations
whichstandtoinheritnothingbutparchedearthincapableofsustaining
life.
Therighttoabalancedandhealthfulecologycarrieswithitacorrelative
dutytorefrainfromimpairingtheenvironment...
The LGC provisions invoked by private respondents merely seek
to give flesh and blood to the right of the people to a balanced
and healthful ecology. In fact, the General Welfare Clause,
expressly mentions this right:
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[if !supportFootnotes]

[22][endif]

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SEC.16.GeneralWelfare.Everylocalgovernmentunitshallexercise
thepowersexpresslygranted,thosenecessarilyimpliedtherefrom,as
wellaspowersnecessary,appropriate,orincidentalforitsefficientand
effectivegovernance,andthosewhichareessentialtothepromotionof
thegeneralwelfare.Withintheirrespectiveterritorialjurisdictions,local
governmentunitsshallensureandsupport,amongotherthings,the
preservationandenrichmentofculture,promotehealthandsafety,
enhancetherightofthepeopletoabalancedecology,encourageand
supportthedevelopmentofappropriateandselfreliantscientificand
technologicalcapabilities,improvepublicmorals,enhanceeconomic
prosperityandsocialjustice,promotefullemploymentamongtheir
residents,maintainpeaceandorder,andpreservethecomfortand
convenienceoftheirinhabitants.(underscoringsupplied).
Moreover, Section 5(c) of the LGC explicitly mandates that the
general welfare provisions of the LGC shall be liberally interpreted
to give more powers to the local government units in accelerating
economic development and upgrading the quality of life for the
people of the community.
The LGC vests municipalities with the power to grant fishery
privileges in municipal waters and to impose rentals, fees or
charges therefor; to penalize, by appropriate ordinances, the use
of explosives, noxious or poisonous substances, electricity, muroami, and other deleterious methods of fishing; and to prosecute
any violation of the provisions of applicable fishery laws.
Further, the sangguniang bayan, the sangguniang panlungsod
and the sangguniang panlalawigan are directed to enact
ordinances for the general welfare of the municipality and its
inhabitants, which shall include, inter alia, ordinances that
[p]rotect the environment and impose appropriate penalties for
acts which endanger the environment such as dynamite fishing
and other forms of destructive fishing ... and such other activities
which result in pollution, acceleration of eutrophication of rivers
and lakes or of ecological imbalance.
Finally, the centerpiece of LGC is the system of decentralization
[if !supportFootnotes][24]

[endif]

[if !supportFootnotes][25][endif]

[if !

as expressly mandated by the Constitution.


Indispensable thereto is devolution and the LGC expressly
provides that [a]ny provision on a power of a local government
unit shall be liberally interpreted in its favor, and in case of doubt,
any question thereon shall be resolved in favor of devolution of
powers and of the lower local government unit. Any fair and
reasonable doubt as to the existence of the power shall be
interpreted in favor of the local government unit concerned,
Devolution refers to the act by which the National
Government confers power and authority upon the various local
government units to perform specific functions and
responsibilities.
One of the devolved powers enumerated in the section of the
LGC on devolution is the enforcement of fishery laws in municipal
waters including the conservation of mangroves.
This
necessarily includes enactment of ordinances to effectively carry
out such fishery laws within the municipal waters.
The term municipal waters, in turn, include not only streams,
lakes, and tidal waters within the municipality, not being the
subject of private ownership and not comprised within the national
parks, public forest, timber lands, forest reserves, or fishery
reserves, but also marine waters included between two lines
drawn perpendicularly to the general coastline from points where
the boundary lines of the municipality or city touch the sea at low
tide and a third line parallel with the general coastline and fifteen
kilometers from it.
Under P.D. No. 704, the marine
waters included in municipal waters is limited to three nautical
miles from the general coastline using the above perpendicular
lines and a third parallel line.
These fishery laws which local government units may enforce
under Section 17(b), (2), (i) in municipal waters include: (1) P.D.
No. 704; (2) P.D. No. 1015 which, inter alia, authorizes the
establishment of a closed season in any Philippine water if
necessary for conservation or ecological purposes; (3) P.D. No.
1219 which provides for the exploration, exploitation, utilization,
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[endif]

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and conservation of coral resources; (4) R.A. No. 5474, as


amended by B.P. Blg. 58, which makes it unlawful for any person,
association, or corporation to catch or cause to be caught, sell,
offer to sell, purchase, or have in possession any of the fish
specie called gobiidae or ipon during closed season; and (5) R.A.
No. 6451 which prohibits and punishes electrofishing, as well as
various issuances of the BFAR.
To those specifically devolved insofar as the control and
regulation of fishing in municipal waters and the protection of its
marine environment are concerned, must be added the following:
1. Issuance of permits to construct fish cages within municipal waters;
2. Issuance of permits to gather aquarium fishes within municipal
waters;
3. Issuance of permits to gather kapis shells within municipal waters;
4. Issuance of permits to gather/culture shelled mollusks within
municipal waters;
5. Issuance of licenses to establish seaweed farms within municipal
waters;
6. Issuance of licenses to establish culture pearls within municipal
waters;
7. Issuance of auxiliary invoice to transport fish and fishery products;
and
8. Establishment of closed season in municipal waters.

These functions are covered in the Memorandum of Agreement of


5 April 1994 between the Department of Agriculture and the
Department of Interior and Local Government.
In light then of the principles of decentralization and devolution
enshrined in the LGC and the powers granted to local government
units under Section 16 (the General Welfare Clause), and under
Sections 149, 447 (a) (1) (vi), 458 (a) (1) (vi) and 468 (a) (1) (vi),
which unquestionably involve the exercise of police power, the
validity of the questioned Ordinances cannot be doubted.
Parenthetically, we wish to add that these Ordinances find full
support under R.A. No. 7611, otherwise known as the Strategic
Environmental Plan (SEP) for Palawan Act, approved on 19 July
1992. This statute adopts a comprehensive framework for the

sustainable development of Palawan compatible with protecting


and enhancing the natural resources and endangered
environment of the province, which shall serve to guide the local
government of Palawan and the government agencies concerned
in the formulation and implementation of plans, programs and
projects affecting said province.
At this time then, it would be appropriate to determine the relation
between the assailed Ordinances and the aforesaid powers of the
Sangguniang Panlungsod of the City of Puerto Princesa and the
Sangguniang Panlalawigan of the Province of Palawan to protect
the environment. To begin, we ascertain the purpose of the
Ordinances as set forth in the statement of purposes or
declaration of policies quoted earlier.
It is clear to the Court that both Ordinances have two principal
objectives or purposes: (1) to establish a closed season for the
species of fish or aquatic animals covered therein for a period of
five years, and (2) to protect the corals of the marine waters of the
City of Puerto Princesa and the Province of Palawan from further
destruction due to illegal fishing activities.
The accomplishment of the first objective is well within the
devolved power to enforce fishery laws in municipal waters, such
as P.D. No. 1015, which allows the establishment of closed
seasons. The devolution of such power has been expressly
confirmed in the Memorandum of Agreement of 5 April 1994
between the Department of Agriculture and the Department of
Interior and Local Government.
The realization of the second objective falls within both the
general welfare clause of the LGC and the express mandate
thereunder to cities and provinces to protect the environment and
impose appropriate penalties for acts which endanger the
environment.
The destruction of the coral reefs results in serious, if not
irreparable, ecological imbalance, for coral reefs are among the
natures life-support systems.
They collect, retain, and
recycle nutrients for adjacent nearshore areas such as
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[if !supportFootnotes][33][endif]

[if !supportFootnotes][34][endif]

mangroves, seagrass beds, and reef flats; provide food for marine
plants and animals; and serve as a protective shelter for aquatic
organisms.
It is said that [e]cologically, the reefs are
to the oceans what forests are to continents: they are shelter and
breeding grounds for fish and plant species that will disappear
without them.
The prohibition against catching live fish stems, in part, from the
modern phenomenon of live-fish trade which entails the catching
of so-called exotic tropical species of fish not only for aquarium
use in the West, but also for the market for live banquet fish
[which] is virtually insatiable in ever more affluent Asia.
These exotic species are coral-dwellers, and fishermen catch
them by diving in shallow water with corraline habitats and
squirting sodium cyanide poison at passing fish directly or onto
coral crevices; once affected the fish are immobilized [merely
stunned] and then scooped by hand.
The diver then
surfaces and dumps his catch into a submerged net attached to
the skiff . Twenty minutes later, the fish can swim normally. Back
on shore, they are placed in holding pens, and within a few
weeks, they expel the cyanide from their system and are ready to
be hauled. Then they are placed in saltwater tanks or packaged in
plastic bags filled with seawater for shipment by air freight to
major markets for live food fish.
While the fish are
meant to survive, the opposite holds true for their former home as
[a]fter the fisherman squirts the cyanide, the first thing to perish is
the reef algae, on which fish feed. Days later, the living coral
starts to expire. Soon the reef loses its function as habitat for the
fish, which eat both the algae and invertebrates that cling to the
coral. The reef becomes an underwater graveyard, its skeletal
remains brittle, bleached of all color and vulnerable to erosion
from the pounding of the waves.
It has been found
that cyanide fishing kills most hard and soft corals within three
months of repeated application.
The nexus then between the activities barred by Ordinance No.
15-92 of the City of Puerto Princesa and the prohibited acts
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[if !supportFootnotes][37]

[endif]

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provided in Ordinance No. 2, Series of 1993 of the Province of


Palawan, on one hand, and the use of sodium cyanide, on the
other, is painfully obvious. In sum, the public purpose and
reasonableness of the Ordinances may not then be controverted.
As to Office Order No. 23, Series of 1993, issued by Acting City
Mayor Amado L. Lucero of the City of Puerto Princesa, we find
nothing therein violative of any constitutional or statutory
provision. The Order refers to the implementation of the
challenged ordinance and is not the Mayors Permit.
The dissenting opinion of Mr. Justice Josue N. Bellosillo relies
upon the lack of authority on the part of the Sangguniang
Panlungsod of Puerto Princesa to enact Ordinance No. 15, Series
of 1992, on the theory that the subject thereof is within the
jurisdiction and responsibility of the Bureau of Fisheries and
Aquatic Resources (BFAR) under P.D. No. 704, otherwise known
as the Fisheries Decree of 1975; and that, in any event, the
Ordinance is unenforceable for lack of approval by the Secretary
of the Department of Natural Resources (DNR), likewise in
accordance with P.D. No. 704.
The majority is unable to accommodate this view. The jurisdiction
and responsibility of the BFAR under P. D. no. 704, over the
management, conservation, development, protection, utilization
and disposition of all fishery and aquatic resources of the country
is not all-encompassing. First, Section 4 thereof excludes from
such jurisdiction and responsibility municipal waters, which shall
be under the municipal or city government concerned, except
insofar as fishpens and seaweed culture in municipal in municipal
centers are concerned. This section provides, however, that all
municipal or city ordinances and resolutions affecting fishing and
fisheries and any disposition thereunder shall be submitted to the
Secretary of the Department of Natural Resources for appropriate
action and shall have full force and effect only upon his approval.

[if !

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Second, it must at once be pointed out that the BFAR is no longer


under the Department of Natural Resources (now Department of

Environment and Natural Resources). Executive Order No. 967 of


30 June 1984 transferred the BFAR from the control and
supervision of the Minister (formerly Secretary) of Natural
Resources to the Ministry of Agriculture and Food (MAF) and
converted it into a mere staff agency thereof, integrating its
functions with the regional offices of the MAF.
In Executive Order No. 116 of 30 January 1987, which
reorganized the MAF, the BFAR was retained as an attached
agency of the MAF. And under the Administrative Code of 1987,
the BFAR is placed under the Title concerning the
Department of Agriculture.
Therefore, it is incorrect to say that the challenged Ordinance of
the City of Puerto Princesa is invalid or unenforceable because it
was not approved by the Secretary of the DENR. If at all, the
approval that should be sought would be that of the Secretary of
the Department of Agriculture (not DENR) of municipal ordinances
affecting fishing and fisheries in municipal waters has been
dispensed with in view of the following reasons:
(1) Section 534 (Repealing Clause) of the LGC expressly repeals
or amends Section 16 and 29 of P.D. No. 704
insofar
that they are inconsistent with the provisions of the LGC.
(2) As discussed earlier, under the general welfare clause of the
LGC, local government units have the power, inter alia, to enact
ordinances to enhance the right of the people to a balanced
ecology. It likewise specifically vests municipalities with the power
to grant fishery privileges in municipal waters, and impose rentals,
fees or charges therefor; to penalize, by appropriate ordinances,
the use of explosives, noxious or poisonous substances,
electricity, muro-ami, and other deleterious methods of fishing;
and to prosecute other methods of fishing; and to prosecute any
violation of the provisions of applicable fishing laws.
Finally, it imposes upon the sangguniang bayan, the sangguniang
panlungsod, and the sangguniang panlalawigan the duty to enact
ordinances to [p]rotect the environment and impose appropriate
penalties for acts which endanger the environment such as
[if !

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[if !supportFootnotes][44][endif]

[if !supportFootnotes][45][endif]

[if !supportFootnotes][46][endif]

dynamite fishing and other forms of destructive fishing and such


other activities which result in pollution, acceleration of
eutrophication of rivers and lakes or of ecological imbalance.
[if !

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In closing, we commend the Sangguniang Panlungsod of the City


of Puerto Princesa and Sangguniang Panlalawigan of the
Province of Palawan for exercising the requisite political will to
enact urgently needed legislation to protect and enhance the
marine environment, thereby sharing in the herculean task of
arresting the tide of ecological destruction. We hope that other
local government units shall now be roused from their lethargy
and adopt a more vigilant stand in the battle against the
decimation of our legacy to future generations. At this time, the
repercussions of any further delay in their response may prove
disastrous, if not, irreversible.
WHEREFORE, the instant petition is DISMISSED for lack of
merit and the temporary restraining order issued on 11 November
1993 is LIFTED.
No pronouncement as to costs.

G.R. No. 122846


January 20, 2009
WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA.
MESA TOURIST & DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S.
LIM, Respondent.
DECISION
Tinga, J.:
With another city ordinance of Manila also principally involving the tourist
district as subject, the Court is confronted anew with the incessant clash
between government power and individual liberty in tandem with the
archetypal tension between law and morality.
In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city
ordinance barring the operation of motels and inns, among other

establishments, within the Ermita-Malate area. The petition at bar assails a


similarly-motivated city ordinance that prohibits those same establishments
from offering short-time admission, as well as pro-rated or "wash up" rates
for such abbreviated stays. Our earlier decision tested the city ordinance
against our sacred constitutional rights to liberty, due process and equal
protection of law. The same parameters apply to the present petition.
This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which
seeks the reversal of the Decision3 in C.A.-G.R. S.P. No. 33316 of the Court
of Appeals, challenges the validity of Manila City Ordinance No. 7774
entitled, "An Ordinance Prohibiting Short-Time Admission, Short-Time
Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns,
Lodging Houses, Pension Houses, and Similar Establishments in the City
of Manila" (the Ordinance).
I.
The facts are as follows:
On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into
law the Ordinance.4 The Ordinance is reproduced in full, hereunder:
SECTION 1. Declaration of Policy. It is hereby the declared policy of the
City Government to protect the best interest, health and welfare, and the
morality of its constituents in general and the youth in particular.
SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting
short time admission in hotels, motels, lodging houses, pension houses
and similar establishments in the City of Manila.
SEC. 3. Pursuant to the above policy, short-time admission and rate [sic],
wash-up rate or other similarly concocted terms, are hereby prohibited in
hotels, motels, inns, lodging houses, pension houses and similar
establishments in the City of Manila.
SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance
and charging of room rate for less than twelve (12) hours at any given time
or the renting out of rooms more than twice a day or any other term that
may be concocted by owners or managers of said establishments but
would mean the same or would bear the same meaning.
SEC. 5. Penalty Clause. Any person or corporation who shall violate any
provision of this ordinance shall upon conviction thereof be punished by a
fine of Five Thousand (P5,000.00) Pesos or imprisonment for a period of
not exceeding one (1) year or both such fine and imprisonment at the
discretion of the court; Provided, That in case of [a] juridical person, the
president, the manager, or the persons in charge of the operation thereof
shall be liable: Provided, further, That in case of subsequent conviction for
the same offense, the business license of the guilty party shall

automatically be cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not
consistent with or contrary to this measure or any portion hereof are hereby
deemed repealed.
SEC. 7. Effectivity. This ordinance shall take effect immediately upon
approval.
Enacted by the city Council of Manila at its regular session today,
November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.
On December 15, 1992, the Malate Tourist and Development Corporation
(MTDC) filed a complaint for declaratory relief with prayer for a writ of
preliminary injunction and/or temporary restraining order ( TRO) 5 with the
Regional Trial Court (RTC) of Manila, Branch 9 impleading as defendant,
herein respondent City of Manila (the City) represented by Mayor Lim. 6
MTDC prayed that the Ordinance, insofar as it includes motels and inns as
among its prohibited establishments, be declared invalid and
unconstitutional. MTDC claimed that as owner and operator of the Victoria
Court in Malate, Manila it was authorized by Presidential Decree (P.D.) No.
259 to admit customers on a short time basis as well as to charge
customers wash up rates for stays of only three hours.
On December 21, 1992, petitioners White Light Corporation (WLC),
Titanium Corporation (TC) and Sta. Mesa Tourist and Development
Corporation (STDC) filed a motion to intervene and to admit attached
complaint-in-intervention7 on the ground that the Ordinance directly affects
their business interests as operators of drive-in-hotels and motels in
Manila.8 The three companies are components of the Anito Group of
Companies which owns and operates several hotels and motels in Metro
Manila.9
On December 23, 1992, the RTC granted the motion to intervene. 10 The
RTC also notified the Solicitor General of the proceedings pursuant to then
Rule 64, Section 4 of the Rules of Court. On the same date, MTDC moved
to withdraw as plaintiff.11
On December 28, 1992, the RTC granted MTDC's motion to withdraw.12
The RTC issued a TRO on January 14, 1993, directing the City to cease
and desist from enforcing the Ordinance.13 The City filed an Answer dated
January 22, 1993 alleging that the Ordinance is a legitimate exercise of
police power.14
On February 8, 1993, the RTC issued a writ of preliminary injunction
ordering the city to desist from the enforcement of the Ordinance. 15 A month
later, on March 8, 1993, the Solicitor General filed his Comment arguing

that the Ordinance is constitutional.


During the pre-trial conference, the WLC, TC and STDC agreed to submit
the case for decision without trial as the case involved a purely legal
question.16 On October 20, 1993, the RTC rendered a decision declaring
the Ordinance null and void. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the
City of Manila is hereby declared null and void.
Accordingly, the preliminary injunction heretofor issued is hereby made
permanent.
SO ORDERED.17
The RTC noted that the ordinance "strikes at the personal liberty of the
individual guaranteed and jealously guarded by the Constitution." 18
Reference was made to the provisions of the Constitution encouraging
private enterprises and the incentive to needed investment, as well as the
right to operate economic enterprises. Finally, from the observation that the
illicit relationships the Ordinance sought to dissuade could nonetheless be
consummated by simply paying for a 12-hour stay, the RTC likened the law
to the ordinance annulled in Ynot v. Intermediate Appellate Court,19 where
the legitimate purpose of preventing indiscriminate slaughter of carabaos
was sought to be effected through an inter-province ban on the transport of
carabaos and carabeef.
The City later filed a petition for review on certiorari with the Supreme
Court.20 The petition was docketed as G.R. No. 112471. However in a
resolution dated January 26, 1994, the Court treated the petition as a
petition for certiorari and referred the petition to the Court of Appeals. 21
Before the Court of Appeals, the City asserted that the Ordinance is a valid
exercise of police power pursuant to Section 458 (4)(iv) of the Local
Government Code which confers on cities, among other local government
units, the power:
[To] regulate the establishment, operation and maintenance of cafes,
restaurants, beerhouses, hotels, motels, inns, pension houses, lodging
houses and other similar establishments, including tourist guides and
transports.22
The Ordinance, it is argued, is also a valid exercise of the power of the City
under Article III, Section 18(kk) of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the
sanitation and safety, the furtherance of the prosperity and the promotion of
the morality, peace, good order, comfort, convenience and general welfare
of the city and its inhabitants, and such others as be necessary to carry into
effect and discharge the powers and duties conferred by this Chapter; and

to fix penalties for the violation of ordinances which shall not exceed two
hundred pesos fine or six months imprisonment, or both such fine and
imprisonment for a single offense.23
Petitioners argued that the Ordinance is unconstitutional and void since it
violates the right to privacy and the freedom of movement; it is an invalid
exercise of police power; and it is an unreasonable and oppressive
interference in their business.
The Court of Appeals reversed the decision of the RTC and affirmed the
constitutionality of the Ordinance.24 First, it held that the Ordinance did not
violate the right to privacy or the freedom of movement, as it only penalizes
the owners or operators of establishments that admit individuals for short
time stays. Second, the virtually limitless reach of police power is only
constrained by having a lawful object obtained through a lawful method.
The lawful objective of the Ordinance is satisfied since it aims to curb
immoral activities. There is a lawful method since the establishments are
still allowed to operate. Third, the adverse effect on the establishments is
justified by the well-being of its constituents in general. Finally, as held in
Ermita-Malate Motel Operators Association v. City Mayor of Manila, liberty
is regulated by law.
TC, WLC and STDC come to this Court via petition for review on
certiorari.25 In their petition and Memorandum, petitioners in essence repeat
the assertions they made before the Court of Appeals. They contend that
the assailed Ordinance is an invalid exercise of police power.
II.
We must address the threshold issue of petitioners standing. Petitioners
allege that as owners of establishments offering "wash-up" rates, their
business is being unlawfully interfered with by the Ordinance. However,
petitioners also allege that the equal protection rights of their clients are
also being interfered with. Thus, the crux of the matter is whether or not
these establishments have the requisite standing to plead for protection of
their patrons' equal protection rights.
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, 26 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.27 The constitutional component of
standing doctrine incorporates concepts which concededly are not

susceptible of precise definition.28 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.29 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.30
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. 31
For this particular set of facts, the concept of third party standing as an
exception and the overbreadth doctrine are appropriate. In Powers v.
Ohio,32 the United States Supreme Court wrote that: "We have recognized
the right of litigants to bring actions on behalf of third parties, provided three
important criteria are satisfied: the litigant must have suffered an injury-infact, thus giving him or her a "sufficiently concrete interest" in the outcome
of the issue in dispute; the litigant must have a close relation to the third
party; and there must exist some hindrance to the third party's ability to
protect his or her own interests."33 Herein, it is clear that the business
interests of the petitioners are likewise injured by the Ordinance. They rely
on the patronage of their customers for their continued viability which
appears to be threatened by the enforcement of the Ordinance. The
relative silence in constitutional litigation of such special interest groups in
our nation such as the American Civil Liberties Union in the United States
may also be construed as a hindrance for customers to bring suit. 34
American jurisprudence is replete with examples where parties-in-interest
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. In Griswold v. Connecticut,35 the United States Supreme Court
held that physicians had standing to challenge a reproductive health statute
that would penalize them as accessories as well as to plead the
constitutional protections available to their patients. The Court held that:
"The rights of husband and wife, pressed here, are likely to be diluted or
adversely affected unless those rights are considered in a suit involving
those who have this kind of confidential relation to them." 36
An even more analogous example may be found in Craig v. Boren,37
wherein the United States Supreme Court held that a licensed beverage
vendor has standing to raise the equal protection claim of a male customer
challenging a statutory scheme prohibiting the sale of beer to males under
the age of 21 and to females under the age of 18. The United States High
Court explained that the vendors had standing "by acting as advocates of

the rights of third parties who seek access to their market or function." 38
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.39 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.
III.
To students of jurisprudence, the facts of this case will recall to mind not
only the recent City of Manila ruling, but our 1967 decision in Ermita-Malate
Hotel and Motel Operations Association, Inc., v. Hon. City Mayor of
Manila.40 Ermita-Malate concerned the City ordinance requiring patrons to
fill up a prescribed form stating personal information such as name, gender,
nationality, age, address and occupation before they could be admitted to a
motel, hotel or lodging house. This earlier ordinance was precisely enacted
to minimize certain practices deemed harmful to public morals. A purpose
similar to the annulled ordinance in City of Manila which sought a blanket
ban on motels, inns and similar establishments in the Ermita-Malate area.
However, the constitutionality of the ordinance in Ermita-Malate was
sustained by the Court.
The common thread that runs through those decisions and the case at bar
goes beyond the singularity of the localities covered under the respective
ordinances. All three ordinances were enacted with a view of regulating
public morals including particular illicit activity in transient lodging
establishments. This could be described as the middle case, wherein there
is no wholesale ban on motels and hotels but the services offered by these
establishments have been severely restricted. At its core, this is another
case about the extent to which the State can intrude into and regulate the
lives of its citizens.
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.41
The Ordinance prohibits two specific and distinct business practices,
namely wash rate admissions and renting out a room more than twice a
day. The ban is evidently sought to be rooted in the police power as
conferred on local government units by the Local Government Code
through such implements as the general welfare clause.
A.
Police power, while incapable of an exact definition, 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
as the conditions warrant.42 Police power is based upon the concept of
necessity of the State and its corresponding right to protect itself and its
people.43 Police power has been used as justification for numerous and
varied actions by the State. These range from the regulation of dance
halls,44 movie theaters,45 gas stations46 and cockpits.47 The awesome scope
of police power is best demonstrated by the fact that in its hundred or so
years of presence in our nations legal system, its use has rarely been
denied.
The apparent goal of the Ordinance is to minimize if not eliminate the use
of the covered establishments for illicit sex, prostitution, drug use and alike.
These goals, by themselves, are unimpeachable and certainly fall within
the ambit of the police power of the State. Yet the desirability of these ends
do not sanctify any and all means for their achievement. Those means
must align with the Constitution, and our emerging sophisticated analysis of
its guarantees to the people. The Bill of Rights stands as a rebuke to the
seductive theory of Macchiavelli, and, sometimes even, the political
majorities animated by his cynicism.
Even as we design the precedents that establish the framework for analysis
of due process or equal protection questions, the courts are naturally
inhibited by a due deference to the co-equal branches of government as
they exercise their political functions. But when we are compelled to nullify
executive or legislative actions, yet another form of caution emerges. If the
Court were animated by the same passing fancies or turbulent emotions
that motivate many political decisions, judicial integrity is compromised by
any perception that the judiciary is merely the third political branch of
government. We derive our respect and good standing in the annals of

history by acting as judicious and neutral arbiters of the rule of law, and
there is no surer way to that end than through the development of rigorous
and sophisticated legal standards through which the courts analyze the
most fundamental and far-reaching constitutional questions of the day.
B.
The primary constitutional question that confronts us is one of due process,
as guaranteed under Section 1, Article III of the Constitution. Due process
evades a precise definition.48 The purpose of the guaranty is to prevent
arbitrary governmental encroachment against the life, liberty and property
of individuals. The due process guaranty serves as a protection against
arbitrary regulation or seizure. Even corporations and partnerships are
protected by the guaranty insofar as their property is concerned.
The due process guaranty has traditionally been interpreted as imposing
two related but distinct restrictions on government, "procedural due
process" and "substantive due process." Procedural due process refers to
the procedures that the government must follow before it deprives a person
of life, liberty, or property.49 Procedural due process concerns itself with
government action adhering to the established process when it makes an
intrusion into the private sphere. Examples range from the form of notice
given to the level of formality of a hearing.
If due process were confined solely to its procedural aspects, there would
arise absurd situation of arbitrary government action, provided the proper
formalities are followed. Substantive due process completes the protection
envisioned by the due process clause. It inquires whether the government
has sufficient justification for depriving a person of life, liberty, or property.50
The question of substantive due process, moreso than most other fields of
law, has reflected dynamism in progressive legal thought tied with the
expanded acceptance of fundamental freedoms. Police power, traditionally
awesome as it may be, is now confronted with a more rigorous level of
analysis before it can be upheld. The vitality though of constitutional due
process has not been predicated on the frequency with which it has been
utilized to achieve a liberal result for, after all, the libertarian ends should
sometimes yield to the prerogatives of the State. Instead, the due process
clause has acquired potency because of the sophisticated methodology
that has emerged to determine the proper metes and bounds for its
application.
C.
The general test of the validity of an ordinance on substantive due process
grounds is best tested when assessed with the evolved footnote 4 test laid
down by the U.S. Supreme Court in U.S. v. Carolene Products. 51 Footnote 4

of the Carolene Products case acknowledged that the judiciary would defer
to the legislature unless there is a discrimination against a "discrete and
insular" minority or infringement of a "fundamental right." 52 Consequently,
two standards of judicial review were established: strict scrutiny for laws
dealing with freedom of the mind or restricting the political process, and the
rational basis standard of review for economic legislation.
A third standard, denominated as heightened or immediate scrutiny, was
later adopted by the U.S. Supreme Court for evaluating classifications
based on gender53 and legitimacy.54 Immediate scrutiny was adopted by the
U.S. Supreme Court in Craig,55 after the Court declined to do so in Reed v.
Reed.56 While the test may have first been articulated in equal protection
analysis, it has in the United States since been applied in all substantive
due process cases as well.
We ourselves have often applied the rational basis test mainly in analysis
of equal protection challenges.57 Using the rational basis examination, laws
or ordinances are upheld if they rationally further a legitimate governmental
interest.58 Under intermediate review, governmental interest is extensively
examined and the availability of less restrictive measures is considered. 59
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.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to
the standard for determining the quality and the amount of governmental
interest brought to justify the regulation of fundamental freedoms. 60 Strict
scrutiny is used today to test the validity of laws dealing with the regulation
of speech, gender, or race as well as other fundamental rights as
expansion from its earlier applications to equal protection. 61 The United
States Supreme Court has expanded the scope of strict scrutiny to protect
fundamental rights such as suffrage,62 judicial access63 and interstate
travel.64
If we were to take the myopic view that an Ordinance should be analyzed
strictly as to its effect only on the petitioners at bar, then it would seem that
the only restraint imposed by the law which we are capacitated to act upon
is the injury to property sustained by the petitioners, an injury that would
warrant the application of the most deferential standard the rational basis
test. Yet as earlier stated, we recognize the capacity of the petitioners to
invoke as well the constitutional rights of their patrons those persons who
would be deprived of availing short time access or wash-up rates to the
lodging establishments in question.
Viewed cynically, one might say that the infringed rights of these customers

were are trivial since they seem shorn of political consequence.


Concededly, these are not the sort of cherished rights that, when
proscribed, would impel the people to tear up their cedulas. Still, the Bill of
Rights does not shelter gravitas alone. Indeed, it is those "trivial" yet
fundamental freedoms which the people reflexively exercise any day
without the impairing awareness of their constitutional consequence that
accurately reflect the degree of liberty enjoyed by the people. Liberty, as
integrally incorporated as a fundamental right in the Constitution, is not a
Ten Commandments-style enumeration of what may or what may not be
done; but rather an atmosphere of freedom where the people do not feel
labored under a Big Brother presence as they interact with each other, their
society and nature, in a manner innately understood by them as inherent,
without doing harm or injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty
which we upheld in City of Manila v. Hon. Laguio, Jr. We expounded on that
most primordial of rights, thus:
Liberty as guaranteed by the Constitution was defined by Justice Malcolm
to include "the right to exist and the right to be free from arbitrary restraint
or servitude. The term cannot be dwarfed into mere freedom from physical
restraint of the person of the citizen, but is deemed to embrace the right of
man to enjoy the facilities with which he has been endowed by his Creator,
subject only to such restraint as are necessary for the common welfare."[ 65]
In accordance with this case, the rights of the citizen to be free to use his
faculties in all lawful ways; to live and work where he will; to earn his
livelihood by any lawful calling; and to pursue any avocation are all deemed
embraced in the concept of liberty.[ 66]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to
clarify the meaning of "liberty." It said:
While the Court has not attempted to define with exactness the liberty . . .
guaranteed [by the Fifth and Fourteenth Amendments], the term denotes
not merely freedom from bodily restraint but also the right of the individual
to contract, to engage in any of the common occupations of life, to acquire
useful knowledge, to marry, establish a home and bring up children, to
worship God according to the dictates of his own conscience, and generally
to enjoy those privileges long recognized . . . as essential to the orderly
pursuit of happiness by free men. In a Constitution for a free people, there
can be no doubt that the meaning of "liberty" must be broad indeed. 67
[Citations omitted]
It cannot be denied that the primary animus behind the ordinance is the

curtailment of sexual behavior. The City asserts before this Court that the
subject establishments "have gained notoriety as venue of prostitution,
adultery and fornications in Manila since they provide the necessary
atmosphere for clandestine entry, presence and exit and thus became the
ideal haven for prostitutes and thrill-seekers." 68 Whether or not this
depiction of a mise-en-scene of vice is accurate, it cannot be denied that
legitimate sexual behavior among willing married or consenting single
adults which is constitutionally protected69 will be curtailed as well, as it was
in the City of Manila case. Our holding therein retains significance for our
purposes:
The concept of liberty compels respect for the individual whose claim to
privacy and interference demands respect. As the case of Morfe v. Mutuc,
borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His
separateness, his isolation, are indefeasible; indeed, they are so
fundamental that they are the basis on which his civic obligations are built.
He cannot abandon the consequences of his isolation, which are, broadly
speaking, that his experience is private, and the will built out of that
experience personal to himself. If he surrenders his will to others, he
surrenders himself. If his will is set by the will of others, he ceases to be a
master of himself. I cannot believe that a man no longer a master of himself
is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in
Morfe, the invasion of which should be justified by a compelling state
interest. Morfe accorded recognition to the right to privacy independently of
its identification with liberty; in itself it is fully deserving of constitutional
protection. Governmental powers should stop short of certain intrusions
into the personal life of the citizen.70
We cannot discount other legitimate activities which the Ordinance would
proscribe or impair. There are very legitimate uses for a wash rate or
renting the room out for more than twice a day. Entire families are known to
choose pass the time in a motel or hotel whilst the power is momentarily
out in their homes. In transit passengers who wish to wash up and rest
between trips have a legitimate purpose for abbreviated stays in motels or
hotels. Indeed any person or groups of persons in need of comfortable
private spaces for a span of a few hours with purposes other than having
sex or using illegal drugs can legitimately look to staying in a motel or hotel
as a convenient alternative.
E.
That the Ordinance prevents the lawful uses of a wash rate depriving

patrons of a product and the petitioners of lucrative business ties in with


another constitutional requisite for the legitimacy of the Ordinance as a
police power measure. It must appear that the interests of the public
generally, as distinguished from those of a particular class, require an
interference with private rights and the means must be reasonably
necessary for the accomplishment of the purpose and not unduly
oppressive of private rights.71 It must also be evident that no other
alternative for the accomplishment of the purpose less intrusive of private
rights can work. More importantly, a reasonable relation must exist between
the purposes of the 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.72
Lacking a concurrence of these requisites, the police measure shall be
struck down as an arbitrary intrusion into private rights. As held in Morfe v.
Mutuc, the exercise of police power is subject to judicial review when life,
liberty or property is affected.73 However, this is not in any way meant to
take it away from the vastness of State police power whose exercise enjoys
the presumption of validity.74
Similar to the Comelec resolution requiring newspapers to donate
advertising space to candidates, this Ordinance is a blunt and heavy
instrument.75 The Ordinance makes no distinction between places
frequented by patrons engaged in illicit activities and patrons engaged in
legitimate actions. Thus it prevents legitimate use of places where illicit
activities are rare or even unheard of. A plain reading of section 3 of the
Ordinance shows it makes no classification of places of lodging, thus
deems them all susceptible to illicit patronage and subject them without
exception to the unjustified prohibition.
The Court has professed its deep sentiment and tenderness of the ErmitaMalate area, its longtime home,76 and it is skeptical of those who wish to
depict our capital city the Pearl of the Orient as a modern-day Sodom
or Gomorrah for the Third World set. Those still steeped in Nick Joaquindreams of the grandeur of Old Manila will have to accept that Manila like all
evolving big cities, will have its problems. Urban decay is a fact of mega
cities such as Manila, and vice is a common problem confronted by the
modern metropolis wherever in the world. The solution to such perceived
decay is not to prevent legitimate businesses from offering a legitimate
product. Rather, cities revive themselves by offering incentives for new
businesses to sprout up thus attracting the dynamism of individuals that
would bring a new grandeur to Manila.

The behavior which the Ordinance seeks to curtail is in fact already


prohibited and could in fact be diminished simply by applying existing laws.
Less intrusive measures such as curbing the proliferation of prostitutes and
drug dealers through active police work would be more effective in easing
the situation. So would the strict enforcement of existing laws and
regulations penalizing prostitution and drug use. These measures would
have minimal intrusion on the businesses of the petitioners and other
legitimate merchants. Further, it is apparent that the Ordinance can easily
be circumvented by merely paying the whole day rate without any
hindrance to those engaged in illicit activities. Moreover, drug dealers and
prostitutes can in fact collect "wash rates" from their clientele by charging
their customers a portion of the rent for motel rooms and even apartments.
IV.
We reiterate that individual rights may be adversely affected only to the
extent that may fairly be required by the legitimate demands of public
interest or public welfare. The State is a leviathan that must be restrained
from needlessly intruding into the lives of its citizens. However wellintentioned the Ordinance may be, it is in effect an arbitrary and whimsical
intrusion into the rights of the establishments as well as their patrons. The
Ordinance needlessly restrains the operation of the businesses of the
petitioners as well as restricting the rights of their patrons without sufficient
justification. The Ordinance rashly equates wash rates and renting out a
room more than twice a day with immorality without accommodating
innocuous intentions.
The promotion of public welfare and a sense of morality among citizens
deserves the full endorsement of the judiciary provided that such measures
do not trample rights this Court is sworn to protect. 77 The notion that the
promotion of public morality is a function of the State is as old as Aristotle. 78
The advancement of moral relativism as a school of philosophy does not
de-legitimize the role of morality in law, even if it may foster wider debate
on which particular behavior to penalize. It is conceivable that a society
with relatively little shared morality among its citizens could be functional so
long as the pursuit of sharply variant moral perspectives yields an adequate
accommodation of different interests.79
To be candid about it, the oft-quoted American maxim that "you cannot
legislate morality" is ultimately illegitimate as a matter of law, since as
explained by Calabresi, that phrase is more accurately interpreted as
meaning that efforts to legislate morality will fail if they are widely at
variance with public attitudes about right and wrong. 80 Our penal laws, for
one, are founded on age-old moral traditions, and as long as there are

widely accepted distinctions between right and wrong, they will remain so
oriented.
Yet the continuing progression of the human story has seen not only the
acceptance of the right-wrong distinction, but also the advent of
fundamental liberties as the key to the enjoyment of life to the fullest. Our
democracy is distinguished from non-free societies not with any more
extensive elaboration on our part of what is moral and immoral, but from
our recognition that the individual liberty to make the choices in our lives is
innate, and protected by the State. Independent and fair-minded judges
themselves are under a moral duty to uphold the Constitution as the
embodiment of the rule of law, by reason of their expression of consent to
do so when they take the oath of office, and because they are entrusted by
the people to uphold the law.81
Even as the implementation of moral norms remains an indispensable
complement to governance, that prerogative is hardly absolute, especially
in the face of the norms of due process of liberty. And while the tension
may often be left to the courts to relieve, it is possible for the government to
avoid the constitutional conflict by employing more judicious, less drastic
means to promote morality.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of
Appeals is REVERSED, and the Decision of the Regional Trial Court of
Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is hereby declared
UNCONSTITUTIONAL. No pronouncement as to costs.
SO ORDERED.
G.R. No. 156052
March 7, 2007
SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR ALARIQUE T. CABIGAO,
and BONIFACIO S. TUMBOKON, Petitioners,
vs.
HON. JOSE L. ATIENZA, JR., in his capacity as Mayor of the City of
Manila, Respondent.
DECISION
CORONA, J.:
In this original petition for mandamus,1 petitioners Social Justice Society
(SJS), Vladimir Alarique T. Cabigao and Bonifacio S. Tumbokon seek to
compel respondent Hon. Jose L. Atienza, Jr., mayor of the City of Manila, to
enforce Ordinance No. 8027.
The antecedents are as follows.
On November 20, 2001, the Sangguniang Panlungsod of Manila enacted

Ordinance No. 8027.2 Respondent mayor approved the ordinance on


November 28, 2001.3 It became effective on December 28, 2001, after its
publication.4
Ordinance No. 8027 was enacted pursuant to the police power delegated
to local government units, a principle described as the power inherent in a
government to enact laws, within constitutional limits, to promote the order,
safety, health, morals and general welfare of the society.5 This is evident
from Sections 1 and 3 thereof which state:
SECTION 1. For the purpose of promoting sound urban planning and
ensuring health, public safety, and general welfare of the residents of
Pandacan and Sta. Ana as well as its adjoining areas, the land use of
[those] portions of land bounded by the Pasig River in the north, PNR
Railroad Track in the east, Beata St. in the south, Palumpong St. in the
southwest, and Estero de Pancacan in the west[,] PNR Railroad in the
northwest area, Estero de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest. The area of Punta, Sta.
Ana bounded by the Pasig River, Marcelino Obrero St., Mayo 28 St., and F.
Manalo Street, are hereby reclassified from Industrial II to Commercial I.
xxx xxx xxx
SEC. 3. Owners or operators of industries and other businesses, the
operation of which are no longer permitted under Section 1 hereof, are
hereby given a period of six (6) months from the date of effectivity of this
Ordinance within which to cease and desist from the operation of
businesses which are hereby in consequence, disallowed.
Ordinance No. 8027 reclassified the area described therein from industrial
to commercial and directed the owners and operators of businesses
disallowed under Section 1 to cease and desist from operating their
businesses within six months from the date of effectivity of the ordinance.
Among the businesses situated in the area are the so-called "Pandacan
Terminals" of the oil companies Caltex (Philippines), Inc., Petron
Corporation and Pilipinas Shell Petroleum Corporation.
However, on June 26, 2002, the City of Manila and the Department of
Energy (DOE) entered into a memorandum of understanding (MOU) 6 with
the oil companies in which they agreed that "the scaling down of the
Pandacan Terminals [was] the most viable and practicable option." Under
the MOU, the oil companies agreed to perform the following:
Section 1. - Consistent with the objectives stated above, the OIL
COMPANIES shall, upon signing of this MOU, undertake a program to
scale down the Pandacan Terminals which shall include, among others, the
immediate removal/decommissioning process of TWENTY EIGHT (28)

tanks starting with the LPG spheres and the commencing of works for the
creation of safety buffer and green zones surrounding the Pandacan
Terminals. xxx
Section 2. Consistent with the scale-down program mentioned above,
the OIL COMPANIES shall establish joint operations and management,
including the operation of common, integrated and/or shared facilities,
consistent with international and domestic technical, safety, environmental
and economic considerations and standards. Consequently, the joint
operations of the OIL COMPANIES in the Pandacan Terminals shall be
limited to the common and integrated areas/facilities. A separate agreement
covering the commercial and operational terms and conditions of the joint
operations, shall be entered into by the OIL COMPANIES.
Section 3. - The development and maintenance of the safety and green
buffer zones mentioned therein, which shall be taken from the properties of
the OIL COMPANIES and not from the surrounding communities, shall be
the sole responsibility of the OIL COMPANIES.
The City of Manila and the DOE, on the other hand, committed to do the
following:
Section 1. - The City Mayor shall endorse to the City Council this MOU for
its appropriate action with the view of implementing the spirit and intent
thereof.
Section 2. - The City Mayor and the DOE shall, consistent with the spirit
and intent of this MOU, enable the OIL COMPANIES to continuously
operate in compliance with legal requirements, within the limited area
resulting from the joint operations and the scale down program.
Section 3. - The DOE and the City Mayor shall monitor the OIL
COMPANIES compliance with the provisions of this MOU.
Section 4. - The CITY OF MANILA and the national government shall
protect the safety buffer and green zones and shall exert all efforts at
preventing future occupation or encroachment into these areas by illegal
settlers and other unauthorized parties.
The Sangguniang Panlungsod ratified the MOU in Resolution No. 97. 7 In
the same resolution, the Sanggunian declared that the MOU was effective
only for a period of six months starting July 25, 2002. 8 Thereafter, on
January 30, 2003, the Sanggunian adopted Resolution No. 139 extending
the validity of Resolution No. 97 to April 30, 2003 and authorizing Mayor
Atienza to issue special business permits to the oil companies. Resolution
No. 13, s. 2003 also called for a reassessment of the ordinance. 10
Meanwhile, petitioners filed this original action for mandamus on December
4, 2002 praying that Mayor Atienza be compelled to enforce Ordinance No.

8027 and order the immediate removal of the terminals of the oil
companies.11
The issues raised by petitioners are as follows:
1. whether respondent has the mandatory legal duty to enforce Ordinance
No. 8027 and order the removal of the Pandacan Terminals, and
2. whether the June 26, 2002 MOU and the resolutions ratifying it can
amend or repeal Ordinance No. 8027.12
Petitioners contend that respondent has the mandatory legal duty, under
Section 455 (b) (2) of the Local Government Code (RA 7160), 13 to enforce
Ordinance No. 8027 and order the removal of the Pandacan Terminals of
the oil companies. Instead, he has allowed them to stay.
Respondents defense is that Ordinance No. 8027 has been superseded by
the MOU and the resolutions.14 However, he also confusingly argues that
the ordinance and MOU are not inconsistent with each other and that the
latter has not amended the former. He insists that the ordinance remains
valid and in full force and effect and that the MOU did not in any way
prevent him from enforcing and implementing it. He maintains that the
MOU should be considered as a mere guideline for its full implementation. 15
Under Rule 65, Section 3 16 of the Rules of Court, a petition for mandamus
may be filed when any tribunal, corporation, board, officer or person
unlawfully neglects the performance of an act which the law specifically
enjoins as a duty resulting from an office, trust or station. Mandamus is an
extraordinary writ that is employed to compel the performance, when
refused, of a ministerial duty that is already imposed on the respondent and
there is no other plain, speedy and adequate remedy in the ordinary course
of law. The petitioner should have a well-defined, clear and certain legal
right to the performance of the act and it must be the clear and imperative
duty of respondent to do the act required to be done. 17
Mandamus will not issue to enforce a right, or to compel compliance with a
duty, which is questionable or over which a substantial doubt exists. The
principal function of the writ of mandamus is to command and to expedite,
not to inquire and to adjudicate; thus, it is neither the office nor the aim of
the writ to secure a legal right but to implement that which is already
established. Unless the right to the relief sought is unclouded, mandamus
will not issue.18
To support the assertion that petitioners have a clear legal right to the
enforcement of the ordinance, petitioner SJS states that it is a political party
registered with the Commission on Elections and has its offices in Manila. It
claims to have many members who are residents of Manila. The other
petitioners, Cabigao and Tumbokon, are allegedly residents of Manila.

We need not belabor this point. We have ruled in previous cases that when
a mandamus proceeding concerns a public right and its object is to compel
a public duty, the people who are interested in the execution of the laws are
regarded as the real parties in interest and they need not show any specific
interest.19 Besides, as residents of Manila, petitioners have a direct interest
in the enforcement of the citys ordinances. Respondent never questioned
the right of petitioners to institute this proceeding.
On the other hand, the Local Government Code imposes upon respondent
the duty, as city mayor, to "enforce all laws and ordinances relative to the
governance of the city.">20 One of these is Ordinance No. 8027. As the
chief executive of the city, he has the duty to enforce Ordinance No. 8027
as long as it has not been repealed by the Sanggunian or annulled by the
courts.21 He has no other choice. It is his ministerial duty to do so. In
Dimaporo v. Mitra, Jr.,22 we stated the reason for this:
These officers cannot refuse to perform their duty on the ground of an
alleged invalidity of the statute imposing the duty. The reason for this is
obvious. It might seriously hinder the transaction of public business if these
officers were to be permitted in all cases to question the constitutionality of
statutes and ordinances imposing duties upon them and which have not
judicially been declared unconstitutional. Officers of the government from
the highest to the lowest are creatures of the law and are bound to obey it. 23
The question now is whether the MOU entered into by respondent with the
oil companies and the subsequent resolutions passed by the Sanggunian
have made the respondents duty to enforce Ordinance No. 8027 doubtful,
unclear or uncertain. This is also connected to the second issue raised by
petitioners, that is, whether the MOU and Resolution Nos. 97, s. 2002 and
13, s. 2003 of the Sanggunian can amend or repeal Ordinance No. 8027.
We need not resolve this issue. Assuming that the terms of the MOU were
inconsistent with Ordinance No. 8027, the resolutions which ratified it and
made it binding on the City of Manila expressly gave it full force and effect
only until April 30, 2003. Thus, at present, there is nothing that legally
hinders respondent from enforcing Ordinance No. 8027. 24
Ordinance No. 8027 was enacted right after the Philippines, along with the
rest of the world, witnessed the horror of the September 11, 2001 attack on
the Twin Towers of the World Trade Center in New York City. The objective
of the ordinance is to protect the residents of Manila from the catastrophic
devastation that will surely occur in case of a terrorist attack 25 on the
Pandacan Terminals. No reason exists why such a protective measure
should be delayed.

WHEREFORE, the petition is hereby GRANTED. Respondent Hon. Jose L.


Atienza, Jr., as mayor of the City of Manila, is directed to immediately
enforce Ordinance No. 8027.

G.R. No. 155650


July 20, 2006
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF
PARAAQUE, SANGGUNIANG PANGLUNGSOD NG PARAAQUE,
CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF
PARAAQUE, respondents.
DECISION
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) Complex in Paraaque City under
Executive Order No. 903, otherwise known as the Revised Charter of the
Manila International Airport Authority ("MIAA Charter"). Executive Order No.
903 was issued on 21 July 1983 by then President Ferdinand E. Marcos.
Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA
Charter.
As operator of the international airport, MIAA administers the land,
improvements and equipment within the NAIA Complex. The MIAA Charter
transferred to MIAA approximately 600 hectares of land, 3 including the
runways and buildings ("Airport Lands and Buildings") then under the
Bureau of Air Transportation.4 The MIAA Charter further provides that no
portion of the land transferred to MIAA shall be disposed of through sale or
any other mode unless specifically approved by the President of the
Philippines.5
On 21 March 1997, the Office of the Government Corporate Counsel
(OGCC) issued Opinion No. 061. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax
granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Paraaque to pay the real estate tax
imposed by the City. MIAA then paid some of the real estate tax already
due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax
Delinquency from the City of Paraaque for the taxable years 1992 to

2001. MIAA's real estate tax delinquency is broken down as follows:


TAX
DECLARATION

TAXABLE YEAR TAX DUE

PENALTY

TOTAL

E-016-01370

1992-2001

19,558,160.00

11,201,083.20

30,789,243.20

E-016-01374

1992-2001

111,689,424.90

68,149,479.59

179,838,904.49

E-016-01375

1992-2001

20,276,058.00

12,371,832.00

32,647,890.00

E-016-01376

1992-2001

58,144,028.00

35,477,712.00

93,621,740.00

E-016-01377

1992-2001

18,134,614.65

11,065,188.59

29,199,803.24

E-016-01378

1992-2001

111,107,950.40

67,794,681.59

178,902,631.99

E-016-01379

1992-2001

4,322,340.00

2,637,360.00

6,959,700.00

E-016-01380

1992-2001

7,776,436.00

4,744,944.00

12,521,380.00

*E-016-013-85

1998-2001

6,444,810.00

2,900,164.50

9,344,974.50

*E-016-01387

1998-2001

34,876,800.00

5,694,560.00

50,571,360.00

*E-016-01396

1998-2001

75,240.00

33,858.00

109,098.00

GRAND TOTAL
P392,435,861.95 P232,070,863.47 P 624,506,725
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for
P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.006
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued
notices of levy and warrants of levy on the Airport Lands and Buildings. The
Mayor of the City of Paraaque threatened to sell at public auction the
Airport Lands and Buildings should MIAA fail to pay the real estate tax
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC
Opinion No. 061. The OGCC pointed out that Section 206 of the Local
Government Code requires persons exempt from real estate tax to show
proof of exemption. The OGCC opined that Section 21 of the MIAA Charter
is the proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition
for prohibition and injunction, with prayer for preliminary injunction or
temporary restraining order. The petition sought to restrain the City of
Paraaque from imposing real estate tax on, levying against, and
auctioning for public sale the Airport Lands and Buildings. The petition was
docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because

MIAA filed it beyond the 60-day reglementary period. The Court of Appeals
also denied on 27 September 2002 MIAA's motion for reconsideration and
supplemental motion for reconsideration. Hence, MIAA filed on 5 December
2002 the present petition for review.7
Meanwhile, in January 2003, the City of Paraaque posted notices of
auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and
Tambo, Paraaque City; in the public market of Barangay La Huerta; and in
the main lobby of the Paraaque City Hall. The City of Paraaque
published the notices in the 3 and 10 January 2003 issues of the Philippine
Daily Inquirer, a newspaper of general circulation in the Philippines. The
notices announced the public auction sale of the Airport Lands and
Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the
Legislative Session Hall Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA
filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the
Issuance of a Temporary Restraining Order. The motion sought to restrain
respondents the City of Paraaque, City Mayor of Paraaque,
Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque,
and the City Assessor of Paraaque ("respondents") from auctioning the
Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO)
effective immediately. The Court ordered respondents to cease and desist
from selling at public auction the Airport Lands and Buildings. Respondents
received the TRO on the same day that the Court issued it. However,
respondents received the TRO only at 1:25 p.m. or three hours after the
conclusion of the public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro
tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In
compliance with the directive issued during the hearing, MIAA, respondent
City of Paraaque, and the Solicitor General subsequently submitted their
respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands
and Buildings in the name of MIAA. However, MIAA points out that it cannot
claim ownership over these properties since the real owner of the Airport
Lands and Buildings is the Republic of the Philippines. The MIAA Charter
mandates MIAA to devote the Airport Lands and Buildings for the benefit of
the general public. Since the Airport Lands and Buildings are devoted to
public use and public service, the ownership of these properties remains
with the State. The Airport Lands and Buildings are thus inalienable and are

not subject to real estate tax by local governments.


MIAA also points out that Section 21 of the MIAA Charter specifically
exempts MIAA from the payment of real estate tax. MIAA insists that it is
also exempt from real estate tax under Section 234 of the Local
Government Code because the Airport Lands and Buildings are owned by
the Republic. To justify the exemption, MIAA invokes the principle that the
government cannot tax itself. MIAA points out that the reason for tax
exemption of public property is that its taxation would not inure to any
public advantage, since in such a case the tax debtor is also the tax
creditor.
Respondents invoke Section 193 of the Local Government Code, which
expressly withdrew the tax exemption privileges of "government-owned
and-controlled corporations" upon the effectivity of the Local
Government Code. Respondents also argue that a basic rule of statutory
construction is that the express mention of one person, thing, or act
excludes all others. An international airport is not among the exceptions
mentioned in Section 193 of the Local Government Code. Thus,
respondents assert that MIAA cannot claim that the Airport Lands and
Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International
Airport v. Marcos8 where we held that the Local Government Code has
withdrawn the exemption from real estate tax granted to international
airports. Respondents further argue that since MIAA has already paid some
of the real estate tax assessments, it is now estopped from claiming that
the Airport Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and
Buildings of MIAA are exempt from real estate tax under existing laws. If so
exempt, then the real estate tax assessments issued by the City of
Paraaque, and all proceedings taken pursuant to such assessments, are
void. In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real
estate tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but an
instrumentality of the National Government and thus exempt from local
taxation. Second, the real properties of MIAA are owned by the Republic
of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled

corporation, is not exempt from real estate tax. Respondents claim that the
deletion of the phrase "any government-owned or controlled so exempt by
its charter" in Section 234(e) of the Local Government Code withdrew the
real estate tax exemption of government-owned or controlled corporations.
The deleted phrase appeared in Section 40(a) of the 1974 Real Property
Tax Code enumerating the entities exempt from real estate tax.
There is no dispute that a government-owned or controlled corporation is
not exempt from real estate tax. However, MIAA is not a governmentowned or controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-owned
or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature, and
owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the
extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis
supplied)
A government-owned or controlled corporation must be "organized as a
stock or non-stock corporation." MIAA is not organized as a stock or
non-stock corporation. MIAA is not a stock corporation because it has no
capital stock divided into shares. MIAA has no stockholders or voting
shares. Section 10 of the MIAA Charter9 provides:
SECTION 10. Capital. The capital of the Authority to be contributed by
the National Government shall be increased from Two and One-half Billion
(P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to
consist of:
(a) The value of fixed assets including airport facilities, runways and
equipment and such other properties, movable and immovable[,] which
may be contributed by the National Government or transferred by it from
any of its agencies, the valuation of which shall be determined jointly with
the Department of Budget and Management and the Commission on Audit
on the date of such contribution or transfer after making due allowances for
depreciation and other deductions taking into account the loans and other
liabilities of the Authority at the time of the takeover of the assets and other
properties;
(b) That the amount of P605 million as of December 31, 1986 representing
about seventy percentum (70%) of the unremitted share of the National
Government from 1983 to 1986 to be remitted to the National Treasury as

provided for in Section 11 of E. O. No. 903 as amended, shall be converted


into the equity of the National Government in the Authority. Thereafter, the
Government contribution to the capital of the Authority shall be provided in
the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided
into shares.
Section 3 of the Corporation Code10 defines a stock corporation as one
whose "capital stock is divided into shares and x x x authorized to
distribute to the holders of such shares dividends x x x." MIAA has
capital but it is not divided into shares of stock. MIAA has no stockholders
or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members.
Section 87 of the Corporation Code defines a non-stock corporation as
"one where no part of its income is distributable as dividends to its
members, trustees or officers." A non-stock corporation must have
members. Even if we assume that the Government is considered as the
sole member of MIAA, this will not make MIAA a non-stock corporation.
Non-stock corporations cannot distribute any part of their income to their
members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of
its annual gross operating income to the National Treasury.11 This prevents
MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations
are "organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers." MIAA is not
organized for any of these purposes. MIAA, a public utility, is organized to
operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not
qualify as a government-owned or controlled corporation. What then is the
legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with
corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions
or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually

through a charter. x x x (Emphasis supplied)


When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains
a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain,12 police authority13 and the levying of fees and charges.14
At the same time, MIAA exercises "all the powers of a corporation under
the Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order."15
Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government
machinery although not integrated with the department framework. The
MIAA Charter expressly states that transforming MIAA into a "separate and
autonomous body"16 will make its operation more "financially viable." 17
Many government instrumentalities are vested with corporate powers but
they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a governmentowned or controlled corporation. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the
Philippines and Bangko Sentral ng Pilipinas. All these government
instrumentalities exercise corporate powers but they are not organized as
stock or non-stock corporations as required by Section 2(13) of the
Introductory Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate
entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative
Code, which is the governing law defining the legal relationship and status
of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the
Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units.(Emphasis
and underscoring supplied)
Section 133(o) recognizes the basic principle that local governments

cannot tax the national government, which historically merely delegated to


local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines
and limitations as the Congress may provide."18
When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local
governments. The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies
with greater force when local governments seek to tax national government
instrumentalities.
Another rule is that a tax exemption is strictly construed against the
taxpayer claiming the exemption. However, when Congress grants an
exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to
the benefit of the government itself or its agencies. In such case the
practical effect of an exemption is merely to reduce the amount of money
that has to be handled by government in the course of its operations. For
these reasons, provisions granting exemptions to government agencies
may be construed liberally, in favor of non tax-liability of such agencies. 19
There is, moreover, no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of public
funds from one government pocket to another.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of
local governments. The only exception is when the legislature clearly
intended to tax government instrumentalities for the delivery of
essential public services for sound and compelling policy
considerations. There must be express language in the law empowering
local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax national
government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:
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. Maryland, 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. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of the Philippines.
The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character
stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial property of
the State.
No one can dispute that properties of public dominion mentioned in Article
420 of the Civil Code, like "roads, canals, rivers, torrents, ports and

bridges constructed by the State," are owned by the State. The term
"ports" includes seaports and airports. The MIAA Airport Lands and
Buildings constitute a "port" constructed by the State. Under Article 420 of
the Civil Code, the MIAA Airport Lands and Buildings are properties of
public dominion and thus owned by the State or the Republic of the
Philippines.
The Airport Lands and Buildings are devoted to public use because they
are used by the public for international and domestic travel and
transportation. The fact that the MIAA collects terminal fees and other
charges from the public does not remove the character of the Airport Lands
and Buildings as properties for public use. The operation by the
government of a tollway does not change the character of the road as one
for public use. Someone must pay for the maintenance of the road, either
the public indirectly through the taxes they pay the government, or only
those among the public who actually use the road through the toll fees they
pay upon using the road. The tollway system is even a more efficient and
equitable manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the character of the
property whether it is of public dominion or not. Article 420 of the Civil Code
defines property of public dominion as one "intended for public use." Even
if the government collects toll fees, the road is still "intended for public use"
if anyone can use the road under the same terms and conditions as the
rest of the public. The charging of fees, the limitation on the kind of vehicles
that can use the road, the speed restrictions and other conditions for the
use of the road do not affect the public character of the road.
The terminal fees MIAA charges to passengers, as well as the landing fees
MIAA charges to airlines, constitute the bulk of the income that maintains
the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed
user's tax. This means taxing those among the public who actually use a
public facility instead of taxing all the public including those who never use
the particular public facility. A user's tax is more equitable a principle of
taxation mandated in the 1987 Constitution. 21
The Airport Lands and Buildings of MIAA, which its Charter calls the
"principal airport of the Philippines for both international and domestic air
traffic,"22 are properties of public dominion because they are intended for
public use. As properties of public dominion, they indisputably belong
to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and

thus are properties of public dominion. As properties of public dominion,


the Airport Lands and Buildings are outside the commerce of man.
The Court has ruled repeatedly that properties of public dominion are
outside the commerce of man. As early as 1915, this Court already ruled in
Municipality of Cavite v. Rojas that properties devoted to public use are
outside the commerce of man, thus:
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public
works of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal
council of Cavite could not in 1907 withdraw or exclude from public use a
portion thereof in order to lease it for the sole benefit of the defendant
Hilaria Rojas. In leasing a portion of said plaza or public place to the
defendant for private use the plaintiff municipality exceeded its authority in
the exercise of its powers by executing a contract over a thing of which it
could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside
the commerce of man may be the object of a contract, and plazas and
streets are outside of this commerce, as was decided by the supreme
court of Spain in its decision of February 12, 1895, which says:
"Communal things that cannot be sold because they are by their very
nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc." (Emphasis
supplied) 23
Again in Espiritu v. Municipal Council, the Court declared that properties
of public dominion are outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to
public use and to be made available to the public in general. They are
outside the commerce of man and cannot be disposed of or even leased
by the municipality to private parties. While in case of war or during an
emergency, town plazas may be occupied temporarily by private
individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary occupation
or use must also cease, and the town officials should see to it that the town
plazas should ever be kept open to the public and free from encumbrances
or illegal private constructions.24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the
commerce of man, cannot be the subject of an auction sale. 25
Properties of public dominion, being for public use, are not subject to levy,

encumbrance or disposition through public or private sale. Any


encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale. This will happen if the City of
Paraaque can foreclose and compel the auction sale of the 600-hectare
runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the President
must first withdraw from public use the Airport Lands and Buildings.
Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141,
which "remains to this day the existing general law governing the
classification and disposition of lands of the public domain other than
timber and mineral lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture
and Natural Resources, the President may designate by proclamation any
tract or tracts of land of the public domain as reservations for the use of the
Republic of the Philippines or of any of its branches, or of the inhabitants
thereof, in accordance with regulations prescribed for this purposes, or for
quasi-public uses or purposes when the public interest requires it, including
reservations for highways, rights of way for railroads, hydraulic power sites,
irrigation systems, communal pastures or lequas communales, public
parks, public quarries, public fishponds, working men's village and other
improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions
of Section eighty-three shall be non-alienable and shall not be subject
to occupation, entry, sale, lease, or other disposition until again
declared alienable under the provisions of this Act or by proclamation
of the President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport
Lands and Buildings from public use, these properties remain properties of
public dominion and are inalienable. Since the Airport Lands and Buildings
are inalienable in their present status as properties of public dominion, they
are not subject to levy on execution or foreclosure sale. As long as the
Airport Lands and Buildings are reserved for public use, their ownership
remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for
public use, and to withdraw such public use, is reiterated in Section 14,
Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the
Government. (1) The President shall have the power to reserve for

settlement or public use, and for specific public purposes, any of the
lands of the public domain, the use of which is not otherwise directed
by law. The reserved land shall thereafter remain subject to the
specific public purpose indicated until otherwise provided by law or
proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings
are withdrawn by law or presidential proclamation from public use, they are
properties of public dominion, owned by the Republic and outside the
commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for
the Republic. Section 48, Chapter 12, Book I of the Administrative Code
allows instrumentalities like MIAA to hold title to real properties
owned by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly
vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled
in the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and
Buildings is clearer because even its executive head cannot sign the deed
of conveyance on behalf of the Republic. Only the President of the
Republic can sign such deed of conveyance.28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport
Lands and Buildings from the Bureau of Air Transportation of the
Department of Transportation and Communications. The MIAA Charter
provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x
x
The land where the Airport is presently located as well as the
surrounding land area of approximately six hundred hectares, are
hereby transferred, conveyed and assigned to the ownership and

administration of the Authority, subject to existing rights, if any. The


Bureau of Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within one year from the
promulgation of this Executive Order and the corresponding title to be
issued in the name of the Authority. Any portion thereof shall not be
disposed through sale or through any other mode unless specifically
approved by the President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. All
existing public airport facilities, runways, lands, buildings and other
property, movable or immovable, belonging to the Airport, and all assets,
powers, rights, interests and privileges belonging to the Bureau of Air
Transportation relating to airport works or air operations, including all
equipment which are necessary for the operation of crash fire and rescue
facilities, are hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in
the Bureau of Air Transportation and Transitory Provisions. The Manila
International Airport including the Manila Domestic Airport as a division
under the Bureau of Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA
without the Republic receiving cash, promissory notes or even stock since
MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the
transfer of the Airport Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the
Philippines for both international and domestic air traffic, is required to
provide standards of airport accommodation and service comparable with
the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other
facilities, have to be upgraded to meet the current and future air traffic and
other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the
objectives of providing high standards of accommodation and service
within the context of a financially viable operation, will best be
achieved by a separate and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by
Presidential Decree No. 1772, the President of the Philippines is given
continuing authority to reorganize the National Government, which
authority includes the creation of new entities, agencies and
instrumentalities of the Government[.] (Emphasis supplied)

The transfer of the Airport Lands and Buildings from the Bureau of Air
Transportation to MIAA was not meant to transfer beneficial ownership of
these assets from the Republic to MIAA. The purpose was merely to
reorganize a division in the Bureau of Air Transportation into a
separate and autonomous body. The Republic remains the beneficial
owner of the Airport Lands and Buildings. MIAA itself is owned solely by the
Republic. No party claims any ownership rights over MIAA's assets adverse
to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings
"shall not be disposed through sale or through any other mode unless
specifically approved by the President of the Philippines." This only
means that the Republic retained the beneficial ownership of the Airport
Lands and Buildings because under Article 428 of the Civil Code, only the
"owner has the right to x x x dispose of a thing." Since MIAA cannot
dispose of the Airport Lands and Buildings, MIAA does not own the Airport
Lands and Buildings.
At any time, the President can transfer back to the Republic title to the
Airport Lands and Buildings without the Republic paying MIAA any
consideration. Under Section 3 of the MIAA Charter, the President is the
only one who can authorize the sale or disposition of the Airport Lands and
Buildings. This only confirms that the Airport Lands and Buildings belong to
the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate tax
any "[r]eal property owned by the Republic of the Philippines." Section
234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of
its political subdivisions except when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same
Code, which prohibits local governments from imposing "[t]axes, fees or
charges of any kind on the National Government, its agencies and
instrumentalities x x x." The real properties owned by the Republic are
titled either in the name of the Republic itself or in the name of agencies or
instrumentalities of the National Government. The Administrative Code
allows real property owned by the Republic to be titled in the name of
agencies or instrumentalities of the national government. Such real

properties remain owned by the Republic and continue to be exempt from


real estate tax.
The Republic may grant the beneficial use of its real property to an agency
or instrumentality of the national government. This happens when title of
the real property is transferred to an agency or instrumentality even as the
Republic remains the owner of the real property. Such arrangement does
not result in the loss of the tax exemption. Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its
tax exemption only if the "beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person." MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the Local
Government Code. Thus, even if we assume that the Republic has granted
to MIAA the beneficial use of the Airport Lands and Buildings, such fact
does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax. For example, the land
area occupied by hangars that MIAA leases to private corporations is
subject to real estate tax. In such a case, MIAA has granted the beneficial
use of such land area for a consideration to a taxable person and
therefore such land area is subject to real estate tax. In Lung Center of
the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities
as well as those parts of the hospital leased to private individuals are not
exempt from such taxes. On the other hand, the portions of the land
occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes. 29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax
because Section 193 of the Local Government Code of 1991 withdrew the
tax exemption of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions are hereby withdrawn upon effectivity
of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The
minority argues that since the Local Government Code withdrew the tax

exemption of all juridical persons, then MIAA is not exempt from real
estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government
Code that the withdrawn exemptions from realty tax cover not just
GOCCs, but all persons. To repeat, the provisions lay down the explicit
proposition that the withdrawal of realty tax exemption applies to all
persons. The reference to or the inclusion of GOCCs is only clarificatory or
illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons
recognized under our laws, natural and juridical persons. Obviously,
MIAA is not a natural person. Thus, the determinative test is not just
whether MIAA is a GOCC, but whether MIAA is a juridical person at all.
(Emphasis and underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt
from local taxation is its status whether MIAA is a juridical person or not.
The minority also insists that "Sections 193 and 234 may be examined in
isolation from Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local
Government Code expressly withdrew the tax exemption of all juridical
persons "[u]nless otherwise provided in this Code." Now, Section 133(o)
of the Local Government Code expressly provides otherwise, specifically
prohibiting local governments from imposing any kind of tax on national
government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its
agencies and instrumentalities, and local government units. (Emphasis and
underscoring supplied)
By express mandate of the Local Government Code, local governments
cannot impose any kind of tax on national government instrumentalities like
the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its agencies and
instrumentalities, "[u]nless otherwise provided in this Code" as stated in the
saving clause of Section 133. The saving clause refers to Section 234(a)
on the exception to the exemption from real estate tax of real property
owned by the Republic.

The minority, however, theorizes that unless exempted in Section 193 itself,
all juridical persons are subject to tax by local governments. The minority
insists that the juridical persons exempt from local taxation are limited to
the three classes of entities specifically enumerated as exempt in Section
193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts;
(b) cooperatives duly registered under Republic Act No. 6938; and (c) nonstock and non-profit hospitals and educational institutions. It would be
belaboring the obvious why the MIAA does not fall within any of the exempt
entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section
133(o) of the Local Government Code. This theory will result in gross
absurdities. It will make the national government, which itself is a juridical
person, subject to tax by local governments since the national government
is not included in the enumeration of exempt entities in Section 193. Under
this theory, local governments can impose any kind of local tax, and not
only real estate tax, on the national government.
Under the minority's theory, many national government instrumentalities
with juridical personalities will also be subject to any kind of local tax, and
not only real estate tax. Some of the national government instrumentalities
vested by law with juridical personalities are: Bangko Sentral ng Pilipinas, 30
Philippine Rice Research Institute,31 Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases
Conversion Development Authority,34 Philippine Ports Authority,35 Cagayan
de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port
Authority,38 and Philippine National Railways.39
The minority's theory violates Section 133(o) of the Local Government
Code which expressly prohibits local governments from imposing any kind
of tax on national government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities with or without
juridical personalities. Where the law does not distinguish, courts should
not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative
test whether MIAA is exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government instrumentality
under Section 133(o) of the Local Government Code. Section 133(o) is the
specific provision of law prohibiting local governments from imposing any
kind of tax on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause
"[u]nless otherwise provided in this Code." This means that unless the

Local Government Code grants an express authorization, local


governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no power
to tax the national government, its agencies and instrumentalities. As an
exception to this rule, local governments may tax the national government,
its agencies and instrumentalities only if the Local Government Code
expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption
in Section 234(a) of the Code, which makes the national government
subject to real estate tax when it gives the beneficial use of its real
properties to a taxable entity. Section 234(a) of the Local Government
Code provides:
SEC. 234. Exemptions from Real Property Tax The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from
real estate tax. The exception to this exemption is when the government
gives the beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when
the national government, its agencies and instrumentalities are subject to
any kind of tax by local governments. The exception to the exemption
applies only to real estate tax and not to any other tax. The justification for
the exception to the exemption is that the real property, although owned by
the Republic, is not devoted to public use or public service but devoted to
the private gain of a taxable person.
The minority also argues that since Section 133 precedes Section 193 and
234 of the Local Government Code, the later provisions prevail over
Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234.
Following an accepted rule of construction, in case of conflict the
subsequent provisions should prevail. Therefore, MIAA, as a juridical
person, is subject to real property taxes, the general exemptions attaching
to instrumentalities under Section 133(o) of the Local Government Code
being qualified by Sections 193 and 234 of the same law. (Emphasis
supplied)
The minority assumes that there is an irreconcilable conflict between
Section 133 on one hand, and Sections 193 and 234 on the other. No one

has urged that there is such a conflict, much less has any one presenteda
persuasive argument that there is such a conflict. The minority's
assumption of an irreconcilable conflict in the statutory provisions is an
egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193
because Section 193 expressly admits its subordination to other provisions
of the Code when Section 193 states "[u]nless otherwise provided in this
Code." By its own words, Section 193 admits the superiority of other
provisions of the Local Government Code that limit the exercise of the
taxing power in Section 193. When a provision of law grants a power but
withholds such power on certain matters, there is no conflict between the
grant of power and the withholding of power. The grantee of the power
simply cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers
of Local Government Units." Section 133 limits the grant to local
governments of the power to tax, and not merely the exercise of a
delegated power to tax. Section 133 states that the taxing powers of local
governments "shall not extend to the levy" of any kind of tax on the national
government, its agencies and instrumentalities. There is no clearer
limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing
powers of local governments, Section 133 logically prevails over Section
193 which grants local governments such taxing powers. By their very
meaning and purpose, the "common limitations" on the taxing power prevail
over the grant or exercise of the taxing power. If the taxing power of local
governments in Section 193 prevails over the limitations on such taxing
power in Section 133, then local governments can impose any kind of tax
on the national government, its agencies and instrumentalities a gross
absurdity.
Local governments have no power to tax the national government, its
agencies and instrumentalities, except as otherwise provided in the Local
Government Code pursuant to the saving clause in Section 133 stating
"[u]nless otherwise provided in this Code." This exception which is an
exception to the exemption of the Republic from real estate tax imposed by
local governments refers to Section 234(a) of the Code. The exception
to the exemption in Section 234(a) subjects real property owned by the
Republic, whether titled in the name of the national government, its
agencies or instrumentalities, to real estate tax if the beneficial use of such
property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the

phrase "government-owned or controlled corporation" is not controlling. The


minority points out that Section 2 of the Introductory Provisions of the
Administrative Code admits that its definitions are not controlling when it
provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or
the context as a whole, or a particular statute, shall require a different
meaning:
xxxx
The minority then concludes that reliance on the Administrative Code
definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the
Administrative Code recognizes that a statute may require a different
meaning than that defined in the Administrative Code. However, this does
not automatically mean that the definition in the Administrative Code does
not apply to the Local Government Code. Section 2 of the Administrative
Code clearly states that "unless the specific words x x x of a particular
statute shall require a different meaning," the definition in Section 2 of the
Administrative Code shall apply. Thus, unless there is specific language in
the Local Government Code defining the phrase "government-owned or
controlled corporation" differently from the definition in the Administrative
Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code
defining the phrase "government-owned or controlled corporation"
differently from the definition in the Administrative Code. Indeed, there is
none. The Local Government Code is silent on the definition of the phrase
"government-owned or controlled corporation." The Administrative Code,
however, expressly defines the phrase "government-owned or controlled
corporation." The inescapable conclusion is that the Administrative Code
definition of the phrase "government-owned or controlled corporation"
applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code
"incorporates in a unified document the major structural, functional and
procedural principles and rules of governance." Thus, the Administrative
Code is the governing law defining the status and relationship of
government departments, bureaus, offices, agencies and instrumentalities.
Unless a statute expressly provides for a different status and relationship
for a specific government unit or entity, the provisions of the Administrative
Code prevail.
The minority also contends that the phrase "government-owned or
controlled corporation" should apply only to corporations organized under

the Corporation Code, the general incorporation law, and not to


corporations created by special charters. The minority sees no reason why
government corporations with special charters should have a capital stock.
Thus, the minority declares:
I submit that the definition of "government-owned or controlled
corporations" under the Administrative Code refer to those corporations
owned by the government or its instrumentalities which are created not by
legislative enactment, but formed and organized under the Corporation
Code through registration with the Securities and Exchange Commission.
In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a
capital structure for GOCCs whose full ownership is limited by its charter to
the State or Republic. Such GOCCs are not empowered to declare
dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the
Constitution and existing legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned
or controlled corporation" does not distinguish between one incorporated
under the Corporation Code or under a special charter. Where the law does
not distinguish, courts should not distinguish.
Second, Congress has created through special charters several
government-owned corporations organized as stock corporations. Prime
examples are the Land Bank of the Philippines and the Development Bank
of the Philippines. The special charter 40 of the Land Bank of the Philippines
provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be
nine billion pesos, divided into seven hundred and eighty million common
shares with a par value of ten pesos each, which shall be fully subscribed
by the Government, and one hundred and twenty million preferred shares
with a par value of ten pesos each, which shall be issued in accordance
with the provisions of Sections seventy-seven and eighty-three of this
Code. (Emphasis supplied)
Likewise, the special charter 41 of the Development Bank of the Philippines
provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of
the Bank shall be Five Billion Pesos to be divided into Fifty Million common
shares with par value of P100 per share. These shares are available for
subscription by the National Government. Upon the effectivity of this
Charter, the National Government shall subscribe to Twenty-Five Million

common shares of stock worth Two Billion Five Hundred Million which shall
be deemed paid for by the Government with the net asset values of the
Bank remaining after the transfer of assets and liabilities as provided in
Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations
under their special charters are the Philippine Crop Insurance
Corporation,42 Philippine International Trading Corporation, 43 and the
Philippine National Bank44 before it was reorganized as a stock corporation
under the Corporation Code. All these government-owned corporations
organized under special charters as stock corporations are subject to real
estate tax on real properties owned by them. To rule that they are not
government-owned or controlled corporations because they are not
registered with the Securities and Exchange Commission would remove
them from the reach of Section 234 of the Local Government Code, thus
exempting them from real estate tax.
Third, the government-owned or controlled corporations created through
special charters are those that meet the two conditions prescribed in
Section 16, Article XII of the Constitution. The first condition is that the
government-owned or controlled corporation must be established for the
common good. The second condition is that the government-owned or
controlled corporation must meet the test of economic viability. Section 16,
Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Governmentowned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of
economic viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create
"government-owned or controlled corporations" through special charters
only if these entities are required to meet the twin conditions of common
good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters
unless they are made to comply with the two conditions of common good
and economic viability. The test of economic viability applies only to
government-owned or controlled corporations that perform economic or
commercial activities and need to compete in the market place. Being
essentially economic vehicles of the State for the common good
meaning for economic development purposes these government-owned
or controlled corporations with special charters are usually organized as
stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and


performing governmental or public functions need not meet the test of
economic viability. These instrumentalities perform essential public services
for the common good, services that every modern State must provide its
citizens. These instrumentalities need not be economically viable since the
government may even subsidize their entire operations. These
instrumentalities are not the "government-owned or controlled corporations"
referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but performing
essential governmental or public functions. Congress has plenary authority
to create government instrumentalities vested with corporate powers
provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special
charters corporations that perform economic or commercial activities, such
entities known as "government-owned or controlled corporations"
must meet the test of economic viability because they compete in the
market place.
This is the situation of the Land Bank of the Philippines and the
Development Bank of the Philippines and similar government-owned or
controlled corporations, which derive their income to meet operating
expenses solely from commercial transactions in competition with the
private sector. The intent of the Constitution is to prevent the creation of
government-owned or controlled corporations that cannot survive on their
own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:
MR. OPLE: Madam President, the reason for this concern is really that
when the government creates a corporation, there is a sense in which this
corporation becomes exempt from the test of economic performance. We
know what happened in the past. If a government corporation loses, then it
makes its claim upon the taxpayers' money through new equity infusions
from the government and what is always invoked is the common good.
That is the reason why this year, out of a budget of P115 billion for the
entire government, about P28 billion of this will go into equity infusions to
support a few government financial institutions. And this is all taxpayers'
money which could have been relocated to agrarian reform, to social
services like health and education, to augment the salaries of grossly
underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together


with the "common good," this becomes a restraint on future enthusiasts for
state capitalism to excuse themselves from the responsibility of meeting the
market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in
this proposal by Commissioner Foz, the insertion of the standard of
"ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the
common good.45
Father Joaquin G. Bernas, a leading member of the Constitutional
Commission, explains in his textbook The 1987 Constitution of the Republic
of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission.
The significant addition, however, is the phrase "in the interest of the
common good and subject to the test of economic viability." The addition
includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private sector
can do better. Moreover, economic viability is more than financial viability
but also includes capability to make profit and generate benefits not
quantifiable in financial terms.46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities
vested with corporate powers and performing essential public services. The
State is obligated to render essential public services regardless of the
economic viability of providing such service. The non-economic viability of
rendering such essential public service does not excuse the State from
withholding such essential services from the public.
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives,
must meet the test of economic viability. These are the government-owned
or controlled corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of the Philippines and
the Development Bank of the Philippines. These are the governmentowned or controlled corporations, along with government-owned or
controlled corporations organized under the Corporation Code, that fall
under the definition of "government-owned or controlled corporations" in
Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the
legislature did not create MIAA to compete in the market place. MIAA does
not compete in the market place because there is no competing
international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international airport of

the Philippines. The operation of an international airport requires the


presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and
departure of passengers, screening out those without visas or travel
documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on
prohibited importations;
3. The quarantine office of the Department of Health, to enforce health
measures against the spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread
of plant and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to
prevent the entry of terrorists and the escape of criminals, as well as to
secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and
Communications, to authorize aircraft to enter or leave Philippine airspace,
as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and
buildings for the government personnel, passengers, and airlines, and to
manage the airport operations.
All these agencies of government perform government functions essential
to the operation of an international airport.
MIAA performs an essential public service that every modern State must
provide its citizens. MIAA derives its revenues principally from the
mandatory fees and charges MIAA imposes on passengers and airlines.
The terminal fees that MIAA charges every passenger are regulatory or
administrative fees47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under
Section 2(10) of the Introductory Provisions of the Administrative Code,
which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions
or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make
MIAA a government-owned or controlled corporation. Without a change in
its capital structure, MIAA remains a government instrumentality under
Section 2(10) of the Introductory Provisions of the Administrative Code.

More importantly, as long as MIAA renders essential public services, it


need not comply with the test of economic viability. Thus, MIAA is outside
the scope of the phrase "government-owned or controlled corporations"
under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase
"government-owned or controlled corporation" as merely "clarificatory or
illustrative." This is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or controlled
corporations." The Administrative Code defines what constitutes a
"government-owned or controlled corporation." To belittle this phrase as
"clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation
under Section 2(13) of the Introductory Provisions of the Administrative
Code because it is not organized as a stock or non-stock corporation.
Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential
public services pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. As a government instrumentality, MIAA is not
subject to any kind of tax by local governments under Section 133(o) of the
Local Government Code. The exception to the exemption in Section 234(a)
does not apply to MIAA because MIAA is not a taxable entity under the
Local Government Code. Such exception applies only if the beneficial use
of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to
public use and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and
seaports. The Airport Lands and Buildings of MIAA are intended for public
use, and at the very least intended for public service. Whether intended for
public use or public service, the Airport Lands and Buildings are properties

of public dominion. As properties of public dominion, the Airport Lands and


Buildings are owned by the Republic and thus exempt from real estate tax
under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the
Administrative Code, which governs the legal relation and status of
government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a governmentowned or controlled corporation. Under Section 133(o) of the Local
Government Code, MIAA as a government instrumentality is not a taxable
person because it is not subject to "[t]axes, fees or charges of any kind" by
local governments. The only exception is when MIAA leases its real
property to a "taxable person" as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased
becomes subject to real estate tax. Thus, only portions of the Airport Lands
and Buildings leased to taxable persons like private parties are subject to
real estate tax by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of
MIAA, being devoted to public use, are properties of public dominion and
thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions "ports x x x constructed by the State," which includes
public airports and seaports, as properties of public dominion and owned
by the Republic. As properties of public dominion owned by the Republic,
there is no doubt whatsoever that the Airport Lands and Buildings are
expressly exempt from real estate tax under Section 234(a) of the Local
Government Code. This Court has also repeatedly ruled that properties of
public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed
Resolutions of the Court of Appeals of 5 October 2001 and 27 September
2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and
Buildings of the Manila International Airport Authority EXEMPT from the
real estate tax imposed by the City of Paraaque. We declare VOID all the
real estate tax assessments, including the final notices of real estate tax
delinquencies, issued by the City of Paraaque on the Airport Lands and
Buildings of the Manila International Airport Authority, except for the
portions that the Manila International Airport Authority has leased to private
parties. We also declare VOID the assailed auction sale, and all its effects,
of the Airport Lands and Buildings of the Manila International Airport
Authority.
No costs.

SO ORDERED.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, SandovalGutierrez, Austria-Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna,
Tinga, Chico-Nazario, Garcia, Velasco, Jr., J.J., concur.
x-------------------------------------------------------------------------------x
DISSENTING OPINION
TINGA, J. :
The legally correct resolution of this petition would have had the added
benefit of an utterly fair and equitable result a recognition of the
constitutional and statutory power of the City of Paraaque to impose real
property taxes on the Manila International Airport Authority (MIAA), but at
the same time, upholding a statutory limitation that prevents the City of
Paraaque from seizing and conducting an execution sale over the real
properties of MIAA. In the end, all that the City of Paraaque would hold
over the MIAA is a limited lien, unenforceable as it is through the sale or
disposition of MIAA properties. Not only is this the legal effect of all the
relevant constitutional and statutory provisions applied to this case, it also
leaves the room for negotiation for a mutually acceptable resolution
between the City of Paraaque and MIAA.
Instead, with blind but measured rage, the majority today veers wildly offcourse, shattering statutes and judicial precedents left and right in order to
protect the precious Ming vase that is the Manila International Airport
Authority (MIAA). While the MIAA is left unscathed, it is surrounded by the
wreckage that once was the constitutional policy, duly enacted into law, that
was local autonomy. Make no mistake, the majority has virtually declared
war on the seventy nine (79) provinces, one hundred seventeen (117)
cities, and one thousand five hundred (1,500) municipalities of the
Philippines.1
The icing on this inedible cake is the strained and purposely vague
rationale used to justify the majority opinion. Decisions of the Supreme
Court are expected to provide clarity to the parties and to students of
jurisprudence, as to what the law of the case is, especially when the
doctrines of long standing are modified or clarified. With all due respect, the
decision in this case is plainly so, so wrong on many levels. More
egregious, in the majority's resolve to spare the Manila International Airport
Authority (MIAA) from liability for real estate taxes, no clear-cut rule
emerges on the important question of the power of local government units
(LGUs) to tax government corporations, instrumentalities or agencies.

The majority would overturn sub silencio, among others, at least one dozen
precedents enumerated below:
1) Mactan-Cebu International Airport Authority v. Hon. Marcos, 2 the leading
case penned in 1997 by recently retired Chief Justice Davide, which held
that the express withdrawal by the Local Government Code of previously
granted exemptions from realty taxes applied to instrumentalities and
government-owned or controlled corporations (GOCCs) such as the
Mactan-Cebu International Airport Authority (MCIAA). The majority invokes
the ruling in Basco v. Pagcor,3 a precedent discredited in Mactan, and a
vanguard of a doctrine so noxious to the concept of local government rule
that the Local Government Code was drafted precisely to counter such
philosophy. The efficacy of several rulings that expressly rely on Mactan,
such as PHILRECA v. DILG Secretary,4 City Government of San Pablo v.
Hon. Reyes5 is now put in question.
2) The rulings in National Power Corporation v. City of Cabanatuan, 6
wherein the Court, through Justice Puno, declared that the National Power
Corporation, a GOCC, is liable for franchise taxes under the Local
Government Code, and succeeding cases that have relied on it such as
Batangas Power Corp. v. Batangas City7 The majority now states that
deems instrumentalities as defined under the Administrative Code of 1987
as purportedly beyond the reach of any form of taxation by LGUs, stating
"[l]ocal governments are devoid of power to tax the national government, its
agencies and instrumentalities."8 Unfortunately, using the definition
employed by the majority, as provided by Section 2(d) of the Administrative
Code, GOCCs are also considered as instrumentalities, thus leading to the
astounding conclusion that GOCCs may not be taxed by LGUs under the
Local Government Code.
3) Lung Center of the Philippines v. Quezon City,9 wherein a unanimous en
banc Court held that the Lung Center of the Philippines may be liable for
real property taxes. Using the majority's reasoning, the Lung Center would
be properly classified as an instrumentality which the majority now holds as
exempt from all forms of local taxation.10
4) City of Davao v. RTC,11 where the Court held that the Government
Service Insurance System (GSIS) was liable for real property taxes for the
years 1992 to 1994, its previous exemption having been withdrawn by the
enactment of the Local Government Code.12 This decision, which expressly
relied on Mactan, would be directly though silently overruled by the
majority.
5) The common essence of the Court's rulings in the two Philippine Ports
Authority v. City of Iloilo,13 cases penned by Justices Callejo and Azcuna

respectively, which relied in part on Mactan in holding the Philippine Ports


Authority (PPA) liable for realty taxes, notwithstanding the fact that it is a
GOCC. Based on the reasoning of the majority, the PPA cannot be
considered a GOCC. The reliance of these cases on Mactan, and its
rationale for holding governmental entities like the PPA liable for local
government taxation is mooted by the majority.
6) The 1963 precedent of Social Security System Employees Association v.
Soriano,14 which declared the Social Security Commission (SSC) as a
GOCC performing proprietary functions. Based on the rationale employed
by the majority, the Social Security System is not a GOCC. Or perhaps
more accurately, "no longer" a GOCC.
7) The decision penned by Justice (now Chief Justice) Panganiban, Light
Rail Transit Authority v. Central Board of Assessment. 15 The
characterization therein of the Light Rail Transit Authority (LRTA) as a
"service-oriented commercial endeavor" whose patrimonial property is
subject to local taxation is now rendered inconsequential, owing to the
majority's thinking that an entity such as the LRTA is itself exempt from
local government taxation16, irrespective of the functions it performs.
Moreover, based on the majority's criteria, LRTA is not a GOCC.
8) The cases of Teodoro v. National Airports Corporation 17 and Civil
Aeronautics Administration v. Court of Appeals.18 wherein the Court held
that the predecessor agency of the MIAA, which was similarly engaged in
the operation, administration and management of the Manila International
Agency, was engaged in the exercise of proprietary, as opposed to
sovereign functions. The majority would hold otherwise that the property
maintained by MIAA is actually patrimonial, thus implying that MIAA is
actually engaged in sovereign functions.
9) My own majority in Phividec Industrial Authority v. Capitol Steel, 19
wherein the Court held that the Phividec Industrial Authority, a GOCC, was
required to secure the services of the Office of the Government Corporate
Counsel for legal representation.20 Based on the reasoning of the majority,
Phividec would not be a GOCC, and the mandate of the Office of the
Government Corporate Counsel extends only to GOCCs.
10) Two decisions promulgated by the Court just last month (June 2006),
National Power Corporation v. Province of Isabela 21 and GSIS v. City
Assessor of Iloilo City.22 In the former, the Court pronounced that "[a]lthough
as a general rule, LGUs cannot impose taxes, fees, or charges of any kind
on the National Government, its agencies and instrumentalities, this rule
admits of an exception, i.e., when specific provisions of the LGC authorize
the LGUs to impose taxes, fees or charges on the aforementioned entities."

Yet the majority now rules that the exceptions in the LGC no longer hold,
since "local governments are devoid of power to tax the national
government, its agencies and instrumentalities." 23 The ruling in the latter
case, which held the GSIS as liable for real property taxes, is now put in
jeopardy by the majority's ruling.
There are certainly many other precedents affected, perhaps all previous
jurisprudence regarding local government taxation vis-a-vis government
entities, as well as any previous definitions of GOCCs, and previous
distinctions between the exercise of governmental and proprietary functions
(a distinction laid down by this Court as far back as 1916 24). What is the
reason offered by the majority for overturning or modifying all these
precedents and doctrines? None is given, for the majority takes comfort
instead in the pretense that these precedents never existed. Only children
should be permitted to subscribe to the theory that something bad will go
away if you pretend hard enough that it does not exist.
I.
Case Should Have Been Decided
Following Mactan Precedent
The core issue in this case, whether the MIAA is liable to the City of
Paraaque for real property taxes under the Local Government Code, has
already been decided by this Court in the Mactan case, and should have
been resolved by simply applying precedent.
Mactan Explained
A brief recall of the Mactan case is in order. The Mactan-Cebu International
Airport Authority (MCIAA) claimed that it was exempt from payment of real
property taxes to the City of Cebu, invoking the specific exemption granted
in Section 14 of its charter, Republic Act No. 6958, and its status as an
instrumentality of the government performing governmental functions. 25
Particularly, MCIAA invoked Section 133 of the Local Government Code,
precisely the same provision utilized by the majority as the basis for MIAA's
exemption. Section 133 reads:
Sec. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend
to the levy of the following:
xxx
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units. (emphasis and
underscoring supplied).
However, the Court in Mactan noted that Section 133 qualified the

exemption of the National Government, its agencies and instrumentalities


from local taxation with the phrase "unless otherwise provided herein." It
then considered the other relevant provisions of the Local Government
Code, particularly the following:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise
provided in this Code, tax exemption or incentives granted to, or enjoyed by
all persons, whether natural or juridical, including government-owned and
controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.26
SECTION 232. Power to Levy Real Property Tax. A province or city or a
municipality within the Metropolitan Manila area may levy an annual ad
valorem tax on real property such as land, building, machinery, and other
improvements not hereafter specifically exempted.27
SECTION 234. Exemptions from Real Property Tax. -- The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person:
(b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, non-profit or religious cemeteries and all lands,
buildings, and improvements actually, directly, and exclusively used for
religious charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively
used by local water districts and government-owned and controlled
corporations engaged in the distribution of water and/or generation and
transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental
protection.
Except as provided herein, any exemption from payment of real property
tax previously granted to, or presently enjoyed by, all persons, whether
natural or juridical, including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity of this Code. 28
Clearly, Section 133 was not intended to be so absolute a prohibition on the
power of LGUs to tax the National Government, its agencies and
instrumentalities, as evidenced by these cited provisions which "otherwise
provided." But what was the extent of the limitation under Section 133?

This is how the Court, correctly to my mind, defined the parameters in


Mactan:
The foregoing sections of the LGC speak of: (a) the limitations on the
taxing powers of local government units and the exceptions to such
limitations; and (b) the rule on tax exemptions and the exceptions thereto.
The use of exceptions or provisos in these sections, as shown by the
following clauses:
(1) "unless otherwise provided herein" in the opening paragraph of Section
133;
(2) "Unless otherwise provided in this Code" in Section 193;
(3) "not hereafter specifically exempted" in Section 232; and
(4) "Except as provided herein" in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that the
aforementioned clause in Section 133 seems to be inaccurately worded.
Instead of the clause "unless otherwise provided herein," with the "herein"
to mean, of course, the section, it should have used the clause "unless
otherwise provided in this Code." The former results in absurdity since the
section itself enumerates what are beyond the taxing powers of local
government units and, where exceptions were intended, the exceptions are
explicitly indicated in the next. For instance, in item (a) which excepts
income taxes "when levied on banks and other financial institutions"; item
(d) which excepts "wharfage on wharves constructed and maintained by
the local government unit concerned"; and item (1) which excepts taxes,
fees and charges for the registration and issuance of licenses or permits for
the driving of "tricycles." It may also be observed that within the body itself
of the section, there are exceptions which can be found only in other parts
of the LGC, but the section interchangeably uses therein the clause,
"except as otherwise provided herein" as in items (c) and (i), or the clause
"except as provided in this Code" in item (j). These clauses would be
obviously unnecessary or mere surplusages if the opening clause of the
section were "Unless otherwise provided in this Code" instead of "Unless
otherwise provided herein." In any event, even if the latter is used, since
under Section 232 local government units have the power to levy real
property tax, except those exempted therefrom under Section 234, then
Section 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the LGC, we
conclude that as a general rule, as laid down in Section 133, the taxing
powers of local government units cannot extend to the levy of, inter alia,
"taxes, fees and charges of any kind on the National Government, its
agencies and instrumentalities, and local government units"; however,

pursuant to Section 232, provinces, cities, and municipalities in the


Metropolitan Manila Area may impose the real property tax except on, inter
alia, "real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person," as provided in
item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by
natural or judicial persons, including government-owned and controlled
corporations, Section 193 of the LGC prescribes the general rule, viz., they
are withdrawn upon the effectivity of the LGC, except those granted to local
water districts, cooperatives duly registered under R.A. No. 6938, nonstock and non-profit hospitals and educational institutions, and unless
otherwise provided in the LGC. The latter proviso could refer to Section 234
which enumerates the properties exempt from real property tax. But the last
paragraph of Section 234 further qualifies the retention of the exemption
insofar as real property taxes are concerned by limiting the retention only to
those enumerated therein; all others not included in the enumeration lost
the privilege upon the effectivity of the LGC. Moreover, even as to real
property owned by the Republic of the Philippines or any of its political
subdivisions covered by item (a) of the first paragraph of Section 234, the
exemption is withdrawn if the beneficial use of such property has been
granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the
effectivity of the LGC, exemptions from payment of real property taxes
granted to natural or juridical persons, including government-owned or
controlled corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it necessarily
follows that its exemption from such tax granted it in Section 14 of its
Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can
only be justified if the petitioner can seek refuge under any of the
exceptions provided in Section 234, but not under Section 133, as it now
asserts, since, as shown above, the said section is qualified by Sections
232 and 234.29
The Court in Mactan acknowledged that under Section 133,
instrumentalities were generally exempt from all forms of local government
taxation, unless otherwise provided in the Code. On the other hand,
Section 232 "otherwise provided" insofar as it allowed LGUs to levy an ad
valorem real property tax, irrespective of who owned the property. At the
same time, the imposition of real property taxes under Section 232 is in
turn qualified by the phrase "not hereinafter specifically exempted." The

exemptions from real property taxes are enumerated in Section 234, which
specifically states that only real properties owned "by the Republic of the
Philippines or any of its political subdivisions" are exempted from the
payment of the tax. Clearly, instrumentalities or GOCCs do not fall within
the exceptions under Section 234.30
Mactan Overturned the
Precedents Now Relied
Upon by the Majority
But the petitioners in Mactan also raised the Court's ruling in Basco v.
PAGCOR,31 decided before the enactment of the Local Government Code.
The Court in Basco declared the PAGCOR as exempt from local taxes,
justifying the exemption in this wise:
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 xxx
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." (McCulloch 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
activates 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" (McCulloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power
to wield it.32
Basco is as strident a reiteration of the old guard view that frowned on the
principle of local autonomy, especially as it interfered with the prerogatives
and privileges of the national government. Also consider the following
citation from Maceda v. Macaraig,33 decided the same year as Basco.
Discussing the rule of construction of tax exemptions on government
instrumentalities, the sentiments are of a similar vein.
Moreover, it is a recognized principle that the rule on strict interpretation
does not apply in the case of exemptions in favor of a government political
subdivision or instrumentality.
The basis for applying the rule of strict construction to statutory provisions
granting tax exemptions or deductions, even more obvious than with
reference to the affirmative or levying provisions of tax statutes, is to
minimize differential treatment and foster impartiality, fairness, and equality
of treatment among tax payers.
The reason for the rule does not apply in the case of exemptions running to
the benefit of the government itself or its agencies. In such case the
practical effect of an exemption is merely to reduce the amount of money
that has to be handled by government in the course of its operations. For
these reasons, provisions granting exemptions to government agencies
may be construed liberally, in favor of non tax-liability of such agencies.
In the case of property owned by the state or a city or other public
corporations, the express exemption should not be construed with the
same degree of strictness that applies to exemptions contrary to the policy
of the state, since as to such property "exemption is the rule and taxation
the exception."34
Strikingly, the majority cites these two very cases and the stodgy rationale
provided therein. This evinces the perspective from which the majority is
coming from. It is admittedly a viewpoint once shared by this Court, and en
vogue prior to the enactment of the Local Government Code of 1991.
However, the Local Government Code of 1991 ushered in a new ethos on
how the art of governance should be practiced in the Philippines,
conceding greater powers once held in the private reserve of the national
government to LGUs. The majority might have private qualms about the
wisdom of the policy of local autonomy, but the members of the Court are
not expected to substitute their personal biases for the legislative will,

especially when the 1987 Constitution itself promotes the principle of local
autonomy.
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units.
xxx
Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local governments.
xxx
The Court in Mactan recognized that a new day had dawned with the
enactment of the 1987 Constitution and the Local Government Code of
1991. Thus, it expressly rejected the contention of the MCIAA that Basco
was applicable to them. In doing so, the language of the Court was
dramatic, if only to emphasize how monumental the shift in philosophy was
with the enactment of the Local Government Code:
Accordingly, the position taken by the [MCIAA] is untenable. Reliance on
Basco v. Philippine Amusement and Gaming Corporation is unavailing
since it was decided before the effectivity of the [Local Government Code].
Besides, nothing can prevent Congress from decreeing that even
instrumentalities or agencies of the Government performing governmental
functions may be subject to tax. Where it is done precisely to fulfill a
constitutional mandate and national policy, no one can doubt its wisdom. 35
(emphasis supplied)
The Court Has Repeatedly
Reaffirmed Mactan Over the
Precedents Now Relied Upon

By the Majority
Since then and until today, the Court has been emphatic in declaring the
Basco doctrine as dead. The notion that instrumentalities may be subjected
to local taxation by LGUs was again affirmed in National Power Corporation
v. City of Cabanatuan,36 which was penned by Justice Puno. NPC or
Napocor, invoking its continued exemption from payment of franchise taxes
to the City of Cabanatuan, alleged that it was an instrumentality of the
National Government which could not be taxed by a city government. To
that end, Basco was cited by NPC. The Court had this to say about Basco.
xxx[T]he doctrine in Basco vs. Philippine Amusement and Gaming
Corporation relied upon by the petitioner to support its claim no longer
applies. To emphasize, the Basco case was decided prior to the effectivity
of the LGC, when no law empowering the local government units to tax
instrumentalities of the National Government was in effect. However, as
this Court ruled in the case of Mactan Cebu International Airport Authority
(MCIAA) vs. Marcos, nothing prevents Congress from decreeing that even
instrumentalities or agencies of the government performing governmental
functions may be subject to tax. In enacting the LGC, Congress exercised
its prerogative to tax instrumentalities and agencies of government as it
sees fit. Thus, after reviewing the specific provisions of the LGC, this Court
held that MCIAA, although an instrumentality of the national government,
was subject to real property tax.37
In the 2003 case of Philippine Ports Authority v. City of Iloilo, 38 the Court, in
the able ponencia of Justice Azcuna, affirmed the levy of realty taxes on the
PPA. Although the taxes were assessed under the old Real Property Tax
Code and not the Local Government Code, the Court again cited Mactan to
refute PPA's invocation of Basco as the basis of its exemption.
[Basco] did not absolutely prohibit local governments from taxing
government instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is always
subject to "limitations" which Congress may provide by law. Since P.D.
1869 remains an "operative" law until "amended, repealed or revoked". . .
its "exemption clause" remains an exemption to the exercise of the power
of local governments to impose taxes and fees.
Furthermore, in the more recent case of Mactan Cebu International Airport
Authority v. Marcos, where the Basco case was similarly invoked for tax
exemption, we stated: "[N]othing can prevent Congress from decreeing that
even instrumentalities or agencies of the Government performing
governmental functions may be subject to tax. Where it is done precisely to
fulfill a constitutional mandate and national policy, no one can doubt its

wisdom." The fact that tax exemptions of government-owned or controlled


corporations have been expressly withdrawn by the present Local
Government Code clearly attests against petitioner's claim of absolute
exemption of government instrumentalities from local taxation. 39
Just last month, the Court in National Power Corporation v. Province of
Isabela40 again rejected Basco in emphatic terms. Held the Court, through
Justice Callejo, Sr.:
Thus, the doctrine laid down in the Basco case is no longer true. In the
Cabanatuan case, the Court noted primarily that the Basco case was
decided prior to the effectivity of the LGC, when no law empowering the
local government units to tax instrumentalities of the National Government
was in effect. It further explained that in enacting the LGC, Congress
empowered the LGUs to impose certain taxes even on instrumentalities of
the National Government.41
The taxability of the PPA recently came to fore in Philippine Ports Authority
v. City of Iloilo42 case, a decision also penned by Justice Callejo, Sr.,
wherein the Court affirmed the sale of PPA's properties at public auction for
failure to pay realty taxes. The Court again reiterated that "it was the
intention of Congress to withdraw the tax exemptions granted to or
presently enjoyed by all persons, including government-owned or controlled
corporations, upon the effectivity" of the Code. 43 The Court in the second
Public Ports Authority case likewise cited Mactan as providing the "raison
d'etre for the withdrawal of the exemption," namely, "the State policy to
ensure autonomy to local governments and the objective of the [Local
Government Code] that they enjoy genuine and meaningful local autonomy
to enable them to attain their fullest development as self-reliant
communities. . . . "44
Last year, the Court, in City of Davao v. RTC,45 affirmed that the legislated
exemption from real property taxes of the Government Service Insurance
System (GSIS) was removed under the Local Government Code. Again,
Mactan was relied upon as the governing precedent. The removal of the
tax exemption stood even though the then GSIS law46 prohibited the
removal of GSIS' tax exemptions unless the exemption was specifically
repealed, "and a provision is enacted to substitute the declared policy of
exemption from any and all taxes as an essential factor for the solvency of
the fund."47 The Court, citing established doctrines in statutory construction
and Duarte v. Dade48 ruled that such proscription on future legislation was
itself prohibited, as "the legislature cannot bind a future legislature to a
particular mode of repeal."49
And most recently, just less than one month ago, the Court, through Justice

Corona in Government Service Insurance System v. City Assessor of Iloilo 50


again affirmed that the Local Government Code removed the previous
exemption from real property taxes of the GSIS. Again Mactan was cited as
having "expressly withdrawn the [tax] exemption of the [GOCC]. 51
Clearly then, Mactan is not a stray or unique precedent, but the basis of a
jurisprudential rule employed by the Court since its adoption, the doctrine
therein consistent with the Local Government Code. Corollarily, Basco, the
polar opposite of Mactan has been emphatically rejected and declared
inconsistent with the Local Government Code.
II.
Majority, in Effectively Overturning Mactan,
Refuses to Say Why Mactan Is Wrong
The majority cites Basco in support. It does not cite Mactan, other than an
incidental reference that it is relied upon by the respondents. 52 However, the
ineluctable conclusion is that the majority rejects the rationale and ruling in
Mactan. The majority provides for a wildly different interpretation of Section
133, 193 and 234 of the Local Government Code than that employed by
the Court in Mactan. Moreover, the parties in Mactan and in this case are
similarly situated, as can be obviously deducted from the fact that both
petitioners are airport authorities operating under similarly worded charters.
And the fact that the majority cites doctrines contrapuntal to the Local
Government Code as in Basco and Maceda evinces an intent to go against
the Court's jurisprudential trend adopting the philosophy of expanded local
government rule under the Local Government Code.
Before I dwell upon the numerous flaws of the majority, a brief comment is
necessitated on the majority's studied murkiness vis--vis the Mactan
precedent. The majority is obviously inconsistent with Mactan and there is
no way these two rulings can stand together. Following basic principles in
statutory construction, Mactan will be deemed as giving way to this new
ruling.
However, the majority does not bother to explain why Mactan is wrong. The
interpretation in Mactan of the relevant provisions of the Local Government
Code is elegant and rational, yet the majority refuses to explain why this
reasoning of the Court in Mactan is erroneous. In fact, the majority does not
even engage Mactan in any meaningful way. If the majority believes that
Mactan may still stand despite this ruling, it remains silent as to the viable
distinctions between these two cases.
The majority's silence on Mactan is baffling, considering how different this
new ruling is with the ostensible precedent. Perhaps the majority does not
simply know how to dispense with the ruling in Mactan. If Mactan truly

deserves to be discarded as precedent, it deserves a more honorable end


than death by amnesia or ignonominous disregard. The majority could have
devoted its discussion in explaining why it thinks Mactan is wrong, instead
of pretending that Mactan never existed at all. Such an approach might not
have won the votes of the minority, but at least it would provide some
degree of intellectual clarity for the parties, LGUs and the national
government, students of jurisprudence and practitioners. A more
meaningful debate on the matter would have been possible, enriching the
study of law and the intellectual dynamic of this Court.
There is no way the majority can be justified unless Mactan is overturned.
The MCIAA and the MIAA are similarly situated. They are both, as will be
demonstrated, GOCCs, commonly engaged in the business of operating an
airport. They are the owners of airport properties they respectively maintain
and hold title over these properties in their name. 53 These entities are both
owned by the State, and denied by their respective charters the absolute
right to dispose of their properties without prior approval elsewhere. 54 Both
of them are
not empowered to obtain loans or encumber their properties without prior
approval the prior approval of the President. 55
III.
Instrumentalities, Agencies
And GOCCs Generally
Liable for Real Property Tax
I shall now proceed to demonstrate the errors in reasoning of the majority.
A bulwark of my position lies with Mactan, which will further demonstrate
why the majority has found it inconvenient to even grapple with the
precedent that is Mactan in the first place.
Mactan held that the prohibition on taxing the national government, its
agencies and instrumentalities under Section 133 is qualified by Section
232 and Section 234, and accordingly, the only relevant exemption now
applicable to these bodies is as provided under Section 234(o), or on "real
property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person."
It should be noted that the express withdrawal of previously granted
exemptions by the Local Government Code do not even make any
distinction as to whether the exempt person is a governmental entity or not.
As Sections 193 and 234 both state, the withdrawal applies to "all persons,
including [GOCCs]", thus encompassing the two classes of persons
recognized under our laws, natural persons56 and juridical persons.57

The fact that the Local Government Code mandates the withdrawal of
previously granted exemptions evinces certain key points. If an entity was
previously granted an express exemption from real property taxes in the
first place, the obvious conclusion would be that such entity would
ordinarily be liable for such taxes without the exemption. If such entities
were already deemed exempt due to some overarching principle of law,
then it would be a redundancy or surplusage to grant an exemption to an
already exempt entity. This fact militates against the claim that MIAA is
preternaturally exempt from realty taxes, since it required the enactment of
an express exemption from such taxes in its charter.
Amazingly, the majority all but ignores the disquisition in Mactan and
asserts that government instrumentalities are not taxable persons unless
they lease their properties to a taxable person. The general rule laid down
in Section 232 is given short shrift. In arriving at this conclusion, several
leaps in reasoning are committed.
Majority's Flawed Definition
of GOCCs.
The majority takes pains to assert that the MIAA is not a GOCC, but rather
an instrumentality. However, and quite grievously, the supposed foundation
of this assertion is an adulteration.
The majority gives the impression that a government instrumentality is a
distinct concept from a government corporation.58 Most tellingly, the majority
selectively cites a portion of Section 2(10) of the Administrative Code of
1987, as follows:
Instrumentality refers to any agency of the National Government not
integrated within the department framework, vested with special functions
or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. xxx59 (emphasis omitted)
However, Section 2(10) of the Administrative Code, when read in full,
makes an important clarification which the majority does not show. The
portions omitted by the majority are highlighted below:
(10)Instrumentality refers to any agency of the National Government not
integrated within the department framework, vested with special functions
or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered
institutions and governmentowned or controlled corporations. 60
Since Section 2(10) makes reference to "agency of the National
Government," Section 2(4) is also worth citing in full:

(4) Agency of the Government refers to any of the various units of the
Government, including a department, bureau, office, instrumentality, or
government-owned or controlled corporation, or a local government or a
distinct unit therein. (emphasis supplied)61
Clearly then, based on the Administrative Code, a GOCC may be an
instrumentality or an agency of the National Government. Thus, there
actually is no point in the majority's assertion that MIAA is not a GOCC,
since based on the majority's premise of Section 133 as the key provision,
the material question is whether MIAA is either an instrumentality, an
agency, or the National Government itself. The very provisions of the
Administrative Code provide that a GOCC can be either an instrumentality
or an agency, so why even bother to extensively discuss whether or not
MIAA is a GOCC?
Indeed as far back as the 1927 case of Government of the Philippine
Islands v. Springer,62 the Supreme Court already noted that a corporation of
which the government is the majority stockholder "remains an agency or
instrumentality of government."63
Ordinarily, the inconsequential verbiage stewing in judicial opinions deserve
little rebuttal. However, the entire discussion of the majority on the definition
of a GOCC, obiter as it may ultimately be, deserves emphatic refutation.
The views of the majority on this matter are very dangerous, and would
lead to absurdities, perhaps unforeseen by the majority. For in fact, the
majority effectively declassifies many entities created and recognized as
GOCCs and would give primacy to the Administrative Code of 1987 rather
than their respective charters as to the definition of these entities.
Majority Ignores the Power
Of Congress to Legislate and
Define Chartered Corporations
First, the majority declares that, citing Section 2(13) of the Administrative
Code, a GOCC must be "organized as a stock or non-stock corporation,"
as defined under the Corporation Code. To insist on this as an absolute rule
fails on bare theory. Congress has the undeniable power to create a
corporation by legislative charter, and has been doing so throughout
legislative history. There is no constitutional prohibition on Congress as to
what structure these chartered corporations should take on. Clearly,
Congress has the prerogative to create a corporation in whatever form it
chooses, and it is not bound by any traditional format. Even if there is a
definition of what a corporation is under the Corporation Code or the
Administrative Code, these laws are by no means sacrosanct. It should be
remembered that these two statutes fall within the same level of hierarchy

as a congressional charter, since they all are legislative enactments.


Certainly, Congress can choose to disregard either the Corporation Code
or the Administrative Code in defining the corporate structure of a GOCC,
utilizing the same extent of legislative powers similarly vesting it the
putative ability to amend or abolish the Corporation Code or the
Administrative Code.
These principles are actually recognized by both the Administrative Code
and the Corporation Code. The definition of GOCCs, agencies and
instrumentalities under the Administrative Code are laid down in the section
entitled "General Terms Defined," which qualifies:
Sec. 2. General Terms Defined. Unless the specific words of the text, or
the context as a whole, or a particular statute, shall require a different
meaning: (emphasis supplied)
xxx
Similar in vein is Section 6 of the Corporation Code which provides:
SEC. 4. Corporations created by special laws or charters. Corporations
created by special laws or charters shall be governed primarily by the
provisions of the special law or charter creating them or applicable to them,
supplemented by the provisions of this Code, insofar as they are
applicable. (emphasis supplied)
Thus, the clear doctrine emerges the law that governs the definition of a
corporation or entity created by Congress is its legislative charter. If the
legislative enactment defines an entity as a corporation, then it is a
corporation, no matter if the Corporation Code or the Administrative Code
seemingly provides otherwise. In case of conflict between the legislative
charter of a government corporation, on one hand, and the Corporate Code
and the Administrative Code, on the other, the former always prevails.
Majority, in Ignoring the
Legislative Charters, Effectively
Classifies Duly Established GOCCs,
With Disastrous and Far Reaching
Legal Consequences
Second, the majority claims that MIAA does not qualify either as a stock or
non-stock corporation, as defined under the Corporation Code. It explains
that the MIAA is not a stock corporation because it does not have any
capital stock divided into shares. Neither can it be considered as a nonstock corporation because it has no members, and under Section 87, a
non-stock corporation is one where no part of its income is distributable as
dividends to its members, trustees or officers.
This formulation of course ignores Section 4 of the Corporation Code,

which again provides that corporations created by special laws or charters


shall be governed primarily by the provisions of the special law or charter,
and not the Corporation Code.
That the MIAA cannot be considered a stock corporation if only because it
does not have a stock structure is hardly a plausible proposition. Indeed,
there is no point in requiring a capital stock structure for GOCCs whose full
ownership is limited by its charter to the State or Republic. Such GOCCs
are not empowered to declare dividends or alienate their capital shares.
Admittedly, there are GOCCs established in such a manner, such as the
National Power Corporation (NPC), which is provided with authorized
capital stock wholly subscribed and paid for by the Government of the
Philippines, divided into shares but at the same time, is prohibited from
transferring, negotiating, pledging, mortgaging or otherwise giving these
shares as security for payment of any obligation. 64 However, based on the
Corporation Code definition relied upon by the majority, even the NPC
cannot be considered as a stock corporation. Under Section 3 of the
Corporation Code, stock corporations are defined as being "authorized to
distribute to the holders of its shares dividends or allotments of the surplus
profits on the basis of the shares held."65 On the other hand, Section 13 of
the NPC's charter states that "the Corporation shall be non-profit and shall
devote all its returns from its capital investment, as well as excess
revenues from its operation, for expansion."66 Can the holder of the shares
of NPC, the National Government, receive its surplus profits on the basis of
its shares held? It cannot, according to the NPC charter, and hence,
following Section 3 of the Corporation Code, the NPC is not a stock
corporation, if the majority is to be believed.
The majority likewise claims that corporations without members cannot be
deemed non-stock corporations. This would seemingly exclude entities
such as the NPC, which like MIAA, has no ostensible members. Moreover,
non-stock corporations cannot distribute any part of its income as dividends
to its members, trustees or officers. The majority faults MIAA for remitting
20% of its gross operating income to the national government. How about
the Philippine Health Insurance Corporation, created with the "status of a
tax-exempt government corporation attached to the Department of Health"
under Rep. Act No. 7875.67 It too cannot be considered as a stock
corporation because it has no capital stock structure. But using the criteria
of the majority, it is doubtful if it would pass muster as a non-stock
corporation, since the PHIC or Philhealth, as it is commonly known, is
expressly empowered "to collect, deposit, invest, administer and disburse"
the National Health Insurance Fund.68 Or how about the Social Security

System, which under its revised charter, Republic Act No. 8282, is
denominated as a "corporate body." 69 The SSS has no capital stock
structure, but has capital comprised of contributions by its members, which
are eventually remitted back to its members. Does this disqualify the SSS
from classification as a GOCC, notwithstanding this Court's previous
pronouncement in Social Security System Employees Association v.
Soriano?70
In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs,
whether stock or non-stock,71 declare and remit at least fifty percent (50%)
of their annual net earnings as cash, stock or property dividends to the
National Government.72 But according to the majority, non-stock
corporations are prohibited from declaring any part of its income as
dividends. But if Republic Act No. 7656 requires even non-stock
corporations to declare dividends from income, should it not follow that the
prohibition against declaration of dividends by non-stock corporations
under the Corporation Code does not apply to government-owned or
controlled corporations? For if not, and the majority's illogic is pursued,
Republic Act No. 7656, passed in 1993, would be fatally flawed, as it would
contravene the Administrative Code of 1987 and the Corporation Code.
In fact, the ruinous effects of the majority's hypothesis on the nature of
GOCCs can be illustrated by Republic Act No. 7656. Following the
majority's definition of a GOCC and in accordance with Republic Act No.
7656, here are but a few entities which are not obliged to remit fifty (50%)
of its annual net earnings to the National Government as they are excluded
from the scope of Republic Act No. 7656:
1) Philippine Ports Authority73 has no capital stock74, no members, and
obliged to apply the balance of its income or revenue at the end of each
year in a general reserve.75
2) Bases Conversion Development Authority76 - has no capital stock,77 no
members.
3) Philippine Economic Zone Authority78 - no capital stock,79 no members.
4) Light Rail Transit Authority80 - no capital stock,81 no members.
5) Bangko Sentral ng Pilipinas82 - no capital stock,83 no members, required
to remit fifty percent (50%) of its net profits to the National Treasury.84
6) National Power Corporation85 - has capital stock but is prohibited from
"distributing to the holders of its shares dividends or allotments of the
surplus profits on the basis of the shares held;" 86 no members.
7) Manila International Airport Authority no capital stock 87, no members88,
mandated to remit twenty percent (20%) of its annual gross operating
income to the National Treasury.89

Thus, for the majority, the MIAA, among many others, cannot be
considered as within the coverage of Republic Act No. 7656. Apparently,
President Fidel V. Ramos disagreed. How else then could Executive Order
No. 483, signed in 1998 by President Ramos, be explained? The issuance
provides:
WHEREAS, Section 1 of Republic Act No. 7656 provides that:
"Section 1. Declaration of Policy. - It is hereby declared the policy of the
State that in order for the National Government to realize additional
revenues, government-owned and/or controlled corporations, without
impairing their viability and the purposes for which they have been
established, shall share a substantial amount of their net earnings to the
National Government."
WHEREAS, to support the viability and mandate of government-owned
and/or controlled corporations [GOCCs], the liquidity, retained earnings
position and medium-term plans and programs of these GOCCs were
considered in the determination of the reasonable dividend rates of such
corporations on their 1997 net earnings.
WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance
recommended the adjustment on the percentage of annual net earnings
that shall be declared by the Manila International Airport Authority [MIAA]
and Phividec Industrial Authority [PIA] in the interest of national economy
and general welfare.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines, by
virtue of the powers vested in me by law, do hereby order:
SECTION 1. The percentage of net earnings to be declared and remitted
by the MIAA and PIA as dividends to the National Government as provided
for under Section 3 of Republic Act No. 7656 is adjusted from at least fifty
percent [50%] to the rates specified hereunder:
1. Manila International Airport Authority - 35% [cash]
2. Phividec Industrial Authority - 25% [cash]
SECTION 2. The adjusted dividend rates provided for under Section 1 are
only applicable on 1997 net earnings of the concerned government-owned
and/or controlled corporations.
Obviously, it was the opinion of President Ramos and the Secretary of
Finance that MIAA is a GOCC, for how else could it have come under the
coverage of Republic Act No. 7656, a law applicable only to GOCCs? But,
the majority apparently disagrees, and resultantly holds that MIAA is not
obliged to remit even the reduced rate of thirty five percent (35%) of its net
earnings to the national government, since it cannot be covered by
Republic Act No. 7656.

All this mischief because the majority would declare the Administrative
Code of 1987 and the Corporation Code as the sole sources of law defining
what a government corporation is. As I stated earlier, I find it illogical that
chartered corporations are compelled to comply with the templates of the
Corporation Code, especially when the Corporation Code itself states that
these corporations are to be governed by their own charters. This is
especially true considering that the very provision cited by the majority,
Section 87 of the Corporation Code, expressly says that the definition
provided therein is laid down "for the purposes of this [Corporation] Code."
Read in conjunction with Section 4 of the Corporation Code which
mandates that corporations created by charter be governed by the law
creating them, it is clear that contrary to the majority, MIAA is not
disqualified from classification as a non-stock corporation by reason of
Section 87, the provision not being applicable to corporations created by
special laws or charters. In fact, I see no real impediment why the MIAA
and similarly situated corporations such as the PHIC, the SSS, the
Philippine Deposit Insurance Commission, or maybe even the NPC could
at the very least, be deemed as no stock corporations (as differentiated
from non-stock corporations).
The point, stripped to bare simplicity, is that entity created by legislative
enactment is a corporation if the legislature says so. After all, it is the
legislature that dictates what a corporation is in the first place. This is better
illustrated by another set of entities created before martial law. These
include the Mindanao Development Authority,90 the Northern Samar
Development Authority,91 the Ilocos Sur Development Authority,92 the
Southeastern Samar Development Authority93 and the Mountain Province
Development Authority.94 An examination of the first section of the statutes
creating these entities reveal that they were established "to foster
accelerated and balanced growth" of their respective regions, and towards
such end, the charters commonly provide that "it is recognized that a
government corporation should be created for the purpose," and
accordingly, these charters "hereby created a body corporate." 95 However,
these corporations do not have capital stock nor members, and are obliged
to return the unexpended balances of their appropriations and earnings to a
revolving fund in the National Treasury. The majority effectively declassifies
these entities as GOCCs, never mind the fact that their very charters
declare them to be GOCCs.
I mention these entities not to bring an element of obscurantism into the
fray. I cite them as examples to emphasize my fundamental pointthat it is
the legislative charters of these entities, and not the Administrative Code,

which define the class of personality of these entities created by Congress.


To adopt the view of the majority would be, in effect, to sanction an implied
repeal of numerous congressional charters for the purpose of declassifying
GOCCs. Certainly, this could not have been the intent of the crafters of the
Administrative Code when they drafted the "Definition of Terms"
incorporated therein.
MIAA Is Without
Doubt, A GOCC
Following the charters of government corporations, there are two kinds of
GOCCs, namely: GOCCs which are stock corporations and GOCCs which
are no stock corporations (as distinguished from non-stock corporation).
Stock GOCCs are simply those which have capital stock while no stock
GOCCs are those which have no capital stock. Obviously these definitions
are different from the definitions of the terms in the Corporation Code.
Verily, GOCCs which are not incorporated with the Securities and
Exchange Commission are not governed by the Corporation Code but by
their respective charters.
For the MIAA's part, its charter is replete with provisions that indubitably
classify it as a GOCC. Observe the following provisions from MIAA's
charter:
SECTION 3. Creation of the Manila International Airport Authority.There
is hereby established a body corporate to be known as the Manila
International Airport Authority which shall be attached to the Ministry of
Transportation and Communications. The principal office of the Authority
shall be located at the New Manila International Airport. The Authority may
establish such offices, branches, agencies or subsidiaries as it may deem
proper and necessary; Provided, That any subsidiary that may be
organized shall have the prior approval of the President.
The land where the Airport is presently located as well as the surrounding
land area of approximately six hundred hectares, are hereby transferred,
conveyed and assigned to the ownership and administration of the
Authority, subject to existing rights, if any. The Bureau of Lands and other
appropriate government agencies shall undertake an actual survey of the
area transferred within one year from the promulgation of this Executive
Order and the corresponding title to be issued in the name of the Authority.
Any portion thereof shall not be disposed through sale or through any other
mode unless specifically approved by the President of the Philippines.
xxx
SECTION 5. Functions, Powers, and Duties. The Authority shall have
the following functions, powers and duties:

xxx
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same from time to
time;
(h) To execute or enter into contracts of any kind or nature;
(i) To acquire, purchase, own, administer, lease, mortgage, sell or
otherwise dispose of any land, building, airport facility, or property of
whatever kind and nature, whether movable or immovable, or any interest
therein;
(j) To exercise the power of eminent domain in the pursuit of its purposes
and objectives;
xxx
(o) To exercise all the powers of a corporation under the Corporation Law,
insofar as these powers are not inconsistent with the provisions of this
Executive Order.
xxx
SECTION 16. Borrowing Power. The Authority may, after consultation
with the Minister of Finance and with the approval of the President of the
Philippines, as recommended by the Minister of Transportation and
Communications, raise funds, either from local or international sources, by
way of loans, credits or securities, and other borrowing instruments, with
the power to create pledges, mortgages and other voluntary liens or
encumbrances on any of its assets or properties.
All loans contracted by the Authority under this Section, together with all
interests and other sums payable in respect thereof, shall constitute a
charge upon all the revenues and assets of the Authority and shall rank
equally with one another, but shall have priority over any other claim or
charge on the revenue and assets of the Authority: Provided, That this
provision shall not be construed as a prohibition or restriction on the power
of the Authority to create pledges, mortgages, and other voluntary liens or
encumbrances on any assets or property of the Authority.
Except as expressly authorized by the President of the Philippines the total
outstanding indebtedness of the Authority in the principal amount, in local
and foreign currency, shall not at any time exceed the net worth of the
Authority at any given time.
xxx
The President or his duly authorized representative after consultation with
the Minister of Finance may guarantee, in the name and on behalf of the

Republic of the Philippines, the payment of the loans or other indebtedness


of the Authority up to the amount herein authorized.
These cited provisions establish the fitness of MIAA to be the subject of
legal relations.96 MIAA under its charter may acquire and possess property,
incur obligations, and bring civil or criminal actions. It has the power to
contract in its own name, and to acquire title to real or personal property. It
likewise may exercise a panoply of corporate powers and possesses all the
trappings of corporate personality, such as a corporate name, a corporate
seal and by-laws. All these are contained in MIAA's charter which, as
conceded by the Corporation Code and even the Administrative Code, is
the primary law that governs the definition and organization of the MIAA.
In fact, MIAA itself believes that it is a GOCC represents itself as such. It
said so itself in the very first paragraph of the present petition before this
Court.97 So does, apparently, the Department of Budget and Management,
which classifies MIAA as a "government owned & controlled corporation"
on its internet website.98 There is also the matter of Executive Order No.
483, which evinces the belief of the then-president of the Philippines that
MIAA is a GOCC. And the Court before had similarly characterized MIAA as
a government-owned and controlled corporation in the earlier MIAA case,
Manila International Airport Authority v. Commission on Audit. 99
Why then the hesitance to declare MIAA a GOCC? As the majority
repeatedly asserts, it is because MIAA is actually an instrumentality. But the
very definition relied upon by the majority of an instrumentality under the
Administrative Code clearly states that a GOCC is likewise an
instrumentality or an agency. The question of whether MIAA is a GOCC
might not even be determinative of this Petition, but the effect of the
majority's disquisition on that matter may even be more destructive than the
ruling that MIAA is exempt from realty taxes. Is the majority ready to live up
to the momentous consequences of its flawed reasoning?
Novel Proviso in 1987 Constitution
Prescribing Standards in the
Creation of GOCCs Necessarily
Applies only to GOCCs Created
After 1987.
One last point on this matter on whether MIAA is a GOCC. The majority
triumphantly points to Section 16, Article XII of the 1987 Constitution, which
mandates that the creation of GOCCs through special charters be "in the
interest of the common good and subject to the test of economic viability."
For the majority, the test of economic viability does not apply to government
entities vested with corporate powers and performing essential public

services. But this test of "economic viability" is new to the constitutional


framework. No such test was imposed in previous Constitutions, including
the 1973 Constitution which was the fundamental law in force when the
MIAA was created. How then could the MIAA, or any GOCC created before
1987 be expected to meet this new precondition to the creation of a
GOCC? Does the dissent seriously suggest that GOCCs created before
1987 may be declassified on account of their failure to meet this "economic
viability test"?
Instrumentalities and Agencies
Also Generally Liable For
Real Property Taxes
Next, the majority, having bludgeoned its way into asserting that MIAA is
not a GOCC, then argues that MIAA is an instrumentality. It cites
incompletely, as earlier stated, the provision of Section 2(10) of the
Administrative Code. A more convincing view offered during deliberations,
but which was not adopted by the ponencia, argued that MIAA is not an
instrumentality but an agency, considering the fact that under the
Administrative Code, the MIAA is attached within the department
framework of the Department of Transportation and Communications. 100
Interestingly, Executive Order No. 341, enacted by President Arroyo in
2004, similarly calls MIAA an agency. Since instrumentalities are expressly
defined as "an agency not integrated within the department framework,"
that view concluded that MIAA cannot be deemed an instrumentality.
Still, that distinction is ultimately irrelevant. Of course, as stated earlier, the
Administrative Code considers GOCCs as agencies, 101 so the fact that
MIAA is an agency does not exclude it from classification as a GOCC. On
the other hand, the majority justifies MIAA's purported exemption on
Section 133 of the Local Government Code, which similarly situates
"agencies and instrumentalities" as generally exempt from the taxation
powers of LGUs. And on this point, the majority again evades Mactan and
somehow concludes that Section 133 is the general rule, notwithstanding
Sections 232 and 234(a) of the Local Government Code. And the majority's
ultimate conclusion? "By express mandate of the Local Government Code,
local governments cannot impose any kind of tax on national government
instrumentalities like the MIAA. Local governments are devoid of power to
tax the national government, its agencies and instrumentalities." 102
The Court's interpretation of the Local Government Code in Mactan renders
the law integrally harmonious and gives due accord to the respective
prerogatives of the national government and LGUs. Sections 133 and
234(a) ensure that the Republic of the Philippines or its political

subdivisions shall not be subjected to any form of local government


taxation, except realty taxes if the beneficial use of the property owned has
been granted for consideration to a taxable entity or person. On the other
hand, Section 133 likewise assures that government instrumentalities such
as GOCCs may not be arbitrarily taxed by LGUs, since they could be
subjected to local taxation if there is a specific proviso thereon in the Code.
One such proviso is Section 137, which as the Court found in National
Power Corporation,103 permits the imposition of a franchise tax on
businesses enjoying a franchise, even if it be a GOCC such as NPC. And,
as the Court acknowledged in Mactan, Section 232 provides another
exception on the taxability of instrumentalities.
The majority abjectly refuses to engage Section 232 of the Local
Government Code although it provides the indubitable general rule that
LGUs "may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvements not hereafter specifically
exempted." The specific exemptions are provided by Section 234. Section
232 comes sequentially after Section 133(o),104 and even if the sequencing
is irrelevant, Section 232 would fall under the qualifying phrase of Section
133, "Unless otherwise provided herein." It is sad, but not surprising that
the majority is not willing to consider or even discuss the general rule, but
only the exemptions under Section 133 and Section 234. After all, if the
majority is dead set in ruling for MIAA no matter what the law says, why
bother citing what the law does say.
Constitution, Laws and
Jurisprudence Have Long
Explained the Rationale
Behind the Local Taxation
Of GOCCs.
This blithe disregard of precedents, almost all of them unanimously
decided, is nowhere more evident than in the succeeding discussion of the
majority, which asserts that the power of local governments to tax national
government instrumentalities be construed strictly against local
governments. The Maceda case, decided before the Local Government
Code, is cited, as is Basco. This section of the majority employs deliberate
pretense that the Code never existed, or that the fundamentals of local
autonomy are of limited effect in our country. Why is it that the Local
Government Code is barely mentioned in this section of the majority?
Because Section 5 of the Code, purposely omitted by the majority provides
for a different rule of interpretation than that asserted:
Section 5. Rules of Interpretation. In the interpretation of the provisions of

this Code, the following rules shall apply:


(a) Any provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall be
resolved in favor of devolution of powers and of the lower local government
unit. Any fair and reasonable doubt as to the existence of the power shall
be interpreted in favor of the local government unit concerned;
(b) In case of doubt, any tax ordinance or revenue measure shall be
construed strictly against the local government unit enacting it, and liberally
in favor of the taxpayer. Any tax exemption, incentive or relief granted by
any local government unit pursuant to the provisions of this Code shall be
construed strictly against the person claiming it; xxx
Yet the majority insists that "there is no point in national and local
governments taxing each other, unless a sound and compelling policy
requires such transfer of public funds from one government pocket to
another."105 I wonder whether the Constitution satisfies the majority's desire
for "a sound and compelling policy." To repeat:
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
xxx
Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local governments.
Or how about the Local Government Code, presumably an expression of
sound and compelling policy considering that it was enacted by the
legislature, that veritable source of all statutes:
SEC. 129. Power to Create Sources of Revenue. - Each local government
unit shall exercise its power to create its own sources of revenue and to
levy taxes, fees, and charges subject to the provisions herein, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local government units.
Justice Puno, in National Power Corporation v. City of Cabanatuan, 106
provides a more "sound and compelling policy considerations" that would
warrant sustaining the taxability of government-owned entities by local

government units under the Local Government Code.


Doubtless, the power to tax is the most effective instrument to raise needed
revenues to finance and support myriad activities of the local government
units for the delivery of basic services essential to the promotion of the
general welfare and the enhancement of peace, progress, and prosperity of
the people. As this Court observed in the Mactan case, "the original
reasons for the withdrawal of tax exemption privileges granted to
government-owned or controlled corporations and all other units of
government were that such privilege resulted in serious tax base erosion
and distortions in the tax treatment of similarly situated enterprises." With
the added burden of devolution, it is even more imperative for government
entities to share in the requirements of development, fiscal or otherwise, by
paying taxes or other charges due from them. 107
I dare not improve on Justice Puno's exhaustive disquisition on the
statutory and jurisprudential shift brought about the acceptance of the
principles of local autonomy:
In recent years, the increasing social challenges of the times expanded the
scope of state activity, and taxation has become a tool to realize social
justice and the equitable distribution of wealth, economic progress and the
protection of local industries as well as public welfare and similar
objectives. Taxation assumes even greater significance with the ratification
of the 1987 Constitution. Thenceforth, the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given direct
authority to levy taxes, fees and other charges pursuant to Article X, section
5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create its
own sources of revenue, to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the Local Governments."
This paradigm shift results from the realization that genuine development
can be achieved only by strengthening local autonomy and promoting
decentralization of governance. For a long time, the country's highly
centralized government structure has bred a culture of dependence among
local government leaders upon the national leadership. It has also
"dampened the spirit of initiative, innovation and imaginative resilience in
matters of local development on the part of local government leaders." 35
The only way to shatter this culture of dependence is to give the LGUs a
wider role in the delivery of basic services, and confer them sufficient
powers to generate their own sources for the purpose. To achieve this goal,

section 3 of Article X of the 1987 Constitution mandates Congress to enact


a local government code that will, consistent with the basic policy of local
autonomy, set the guidelines and limitations to this grant of taxing powers,
viz:
"Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160, also known as
the Local Government Code of 1991 (LGC), various measures have been
enacted to promote local autonomy. These include the Barrio Charter of
1959, the Local Autonomy Act of 1959, the Decentralization Act of 1967
and the Local Government Code of 1983. Despite these initiatives,
however, the shackles of dependence on the national government
remained. Local government units were faced with the same problems that
hamper their capabilities to participate effectively in the national
development efforts, among which are: (a) inadequate tax base, (b) lack of
fiscal control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control over
personnel of national line agencies.
Considered as the most revolutionary piece of legislation on local
autonomy, the LGC effectively deals with the fiscal constraints faced by
LGUs. It widens the tax base of LGUs to include taxes which were
prohibited by previous laws such as the imposition of taxes on forest
products, forest concessionaires, mineral products, mining operations, and
the like. The LGC likewise provides enough flexibility to impose tax rates in
accordance with their needs and capabilities. It does not prescribe
graduated fixed rates but merely specifies the minimum and maximum tax
rates and leaves the determination of the actual rates to the respective
sanggunian.108
And the Court's ruling through Justice Azcuna in Philippine Ports Authority
v. City of Iloilo109, provides especially clear and emphatic rationale:
In closing, we reiterate that in taxing government-owned or controlled
corporations, the State ultimately suffers no loss. In National Power Corp. v.
Presiding Judge, RTC, Br. XXV, 38 we elucidated:

Actually, the State has no reason to decry the taxation of NPC's properties,
as and by way of real property taxes. Real property taxes, after all, form
part and parcel of the financing apparatus of the Government in
development and nation-building, particularly in the local government level.
xxxxxxxxx
To all intents and purposes, real property taxes are funds taken by the
State with one hand and given to the other. In no measure can the
government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the
withdrawal of tax exemption privileges granted to government-owned and
controlled corporations and all other units of government was that such
privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises, hence resulting in the need for
these entities to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due from them. 110
How does the majority counter these seemingly valid rationales which
establish the soundness of a policy consideration subjecting national
instrumentalities to local taxation? Again, by simply ignoring that these
doctrines exist. It is unfortunate if the majority deems these cases or the
principles of devolution and local autonomy as simply too inconvenient, and
relies instead on discredited precedents. Of course, if the majority faces the
issues squarely, and expressly discusses why Basco was right and Mactan
was wrong, then this entire endeavor of the Court would be more
intellectually satisfying. But, this is not a game the majority wants to play.
Mischaracterization of My
Views on the Tax Exemption
Enjoyed by the National Government
Instead, the majority engages in an extended attack pertaining to Section
193, mischaracterizing my views on that provision as if I had been
interpreting the provision as making "the national government, which itself
is a juridical person, subject to tax by local governments since the national
government is not included in the enumeration of exempt entities in Section
193."111
Nothing is farther from the truth. I have never advanced any theory of the
sort imputed in the majority. My main thesis on the matter merely echoes
the explicit provision of Section 193 that unless otherwise provided in the
Local Government Code (LGC) all tax exemptions enjoyed by all persons,
whether natural or juridical, including GOCCs, were withdrawn upon the
effectivity of the Code. Since the provision speaks of withdrawal of tax
exemptions of persons, it follows that the exemptions theretofore enjoyed

by MIAA which is definitely a person are deemed withdrawn upon the


advent of the Code.
On the other hand, the provision does not address the question of who are
beyond the reach of the taxing power of LGUs. In fine, the grant of tax
exemption or the withdrawal thereof assumes that the person or entity
involved is subject to tax. Thus, Section 193 does not apply to entities
which were never given any tax exemption. This would include the national
government and its political subdivisions which, as a general rule, are not
subjected to tax in the first place.112 Corollarily, the national government and
its political subdivisions do not need tax exemptions. And Section 193
which ordains the withdrawal of tax exemptions is obviously irrelevant to
them.
Section 193 is in point for the disposition of this case as it forecloses
dependence for the grant of tax exemption to MIAA on Section 21 of its
charter. Even the majority should concede that the charter section is now
ineffectual, as Section 193 withdraws the tax exemptions previously
enjoyed by all juridical persons.
With Section 193 mandating the withdrawal of tax exemptions granted to all
persons upon the effectivity of the LGC, for MIAA to continue enjoying
exemption from realty tax, it will have to rely on a basis other than Section
21 of its charter.
Lung Center of the Philippines v. Quezon City113 provides another illustrative
example of the jurisprudential havoc wrought about by the majority.
Pursuant to its charter, the Lung Center was organized as a trust
administered by an eponymous GOCC organized with the SEC. 114 There is
no doubt it is a GOCC, even by the majority's reckoning. Applying the
Administrative Code, it is also considered as an agency, the term
encompassing even GOCCs. Yet since the Administrative Code definition
of "instrumentalities" encompasses agencies, especially those not attached
to a line department such as the Lung Center, it also follows that the Lung
Center is an instrumentality, which for the majority is exempt from all local
government taxes, especially real estate taxes. Yet just in 2004, the Court
unanimously held that the Lung Center was not exempt from real property
taxes. Can the majority and Lung Center be reconciled? I do not see how,
and no attempt is made to demonstrate otherwise.
Another key point. The last paragraph of Section 234 specifically asserts
that any previous exemptions from realty taxes granted to or enjoyed by all
persons, including all GOCCs, are thereby withdrawn. The majority's
interpretation of Sections 133 and 234(a) however necessarily implies that
all instrumentalities, including GOCCs, can never be subjected to real

property taxation under the Code. If that is so, what then is the sense of the
last paragraph specifically withdrawing previous tax exemptions to all
persons, including GOCCs when juridical persons such as MIAA are
anyway, to his view, already exempt from such taxes under Section 133?
The majority's interpretation would effectively render the express and
emphatic withdrawal of previous exemptions to GOCCs inutile. Ut magis
valeat quam pereat. Hence, where a statute is susceptible of more than
one interpretation, the court should adopt such reasonable and beneficial
construction which will render the provision thereof operative and effective,
as well as harmonious with each other.115
But, the majority seems content rendering as absurd the Local Government
Code, since it does not have much use anyway for the Code's general
philosophy of fiscal autonomy, as evidently seen by the continued reliance
on Basco or Maceda. Local government rule has never been a grant of
emancipation from the national government. This is the favorite bugaboo of
the opponents of local autonomythe fallacy that autonomy equates to
independence.
Thus, the conclusion of the majority is that under Section 133(o), MIAA as a
government instrumentality is beyond the reach of local taxation because it
is not subject to taxes, fees or charges of any kind. Moreover, the taxation
of national instrumentalities and agencies by LGUs should be strictly
construed against the LGUs, citing Maceda and Basco. No mention is
made of the subsequent rejection of these cases in jurisprudence following
the Local Government Code, including Mactan. The majority is similarly
silent on the general rule under Section 232 on real property taxation or
Section 5 on the rules of construction of the Local Government Code.
V.
MIAA, and not the National Government
Is the Owner of the Subject Taxable Properties
Section 232 of the Local Government Code explicitly provides that there
are exceptions to the general rule on rule property taxation, as "hereafter
specifically exempted." Section 234, certainly "hereafter," provides
indubitable basis for exempting entities from real property taxation. It
provides the most viable legal support for any claim that an governmental
entity such as the MIAA is exempt from real property taxes. To repeat:
SECTION 234. Exemptions from Real Property Tax. -- The following are
exempted from payment of the real property tax:
xxx
(f) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been

granted, for consideration or otherwise, to a taxable person:


The majority asserts that the properties owned by MIAA are owned by the
Republic of the Philippines, thus placing them under the exemption under
Section 234. To arrive at this conclusion, the majority employs four main
arguments.
MIAA Property Is Patrimonial
And Not Part of Public Dominion
The majority claims that the Airport Lands and Buildings are property of
public dominion as defined by the Civil Code, and therefore owned by the
State or the Republic of the Philippines. But as pointed out by Justice
Azcuna in the first PPA case, if indeed a property is considered part of the
public dominion, such property is "owned by the general public and cannot
be declared to be owned by a public corporation, such as [the PPA]."
Relevant on this point are the following provisions of the MIAA charter:
Section 3. Creation of the Manila International Airport Authority. xxx
The land where the Airport is presently located as well as the surrounding
land area of approximately six hundred hectares, are hereby transferred,
conveyed and assigned to the ownership and administration of the
Authority, subject to existing rights, if any. xxx Any portion thereof shall not
be disposed through sale or through any other mode unless specifically
approved by the President of the Philippines.
Section 22. Transfer of Existing Facilities and Intangible Assets. All
existing public airport facilities, runways, lands, buildings and other
property, movable or immovable, belonging to the Airport, and all assets,
powers rights, interests and privileges belonging to the Bureau of Air
Transportation relating to airport works or air operations, including all
equipment which are necessary for the operation of crash fire and rescue
facilities, are hereby transferred to the Authority.
Clearly, it is the MIAA, and not either the State, the Republic of the
Philippines or the national government that asserts legal title over the
Airport Lands and Buildings. There was an express transfer of ownership
between the MIAA and the national government. If the distinction is to be
blurred, as the majority does, between the State/Republic/Government and
a body corporate such as the MIAA, then the MIAA charter showcases the
remarkable absurdity of an entity transferring property to itself.
Nothing in the Civil Code or the Constitution prohibits the State from
transferring ownership over property of public dominion to an entity that it
similarly owns. It is just like a family transferring ownership over the
properties its members own into a family corporation. The family exercises
effective control over the administration and disposition of these properties.

Yet for several purposes under the law, such as taxation, it is the
corporation that is deemed to own those properties. A similar situation
obtains with MIAA, the State, and the Airport Lands and Buildings.
The second Public Ports Authority case, penned by Justice Callejo, likewise
lays down useful doctrines in this regard. The Court refuted the claim that
the properties of the PPA were owned by the Republic of the Philippines,
noting that PPA's charter expressly transferred ownership over these
properties to the PPA, a situation which similarly obtains with MIAA. The
Court even went as far as saying that the fact that the PPA "had not been
issued any torrens title over the port and port facilities and appurtenances
is of no legal consequence. A torrens title does not, by itself, vest
ownership; it is merely an evidence of title over properties. xxx It has never
been recognized as a mode of acquiring ownership over real properties." 116
The Court further added:
xxx The bare fact that the port and its facilities and appurtenances are
accessible to the general public does not exempt it from the payment of
real property taxes. It must be stressed that the said port facilities and
appurtenances are the petitioner's corporate patrimonial properties, not for
public use, and that the operation of the port and its facilities and the
administration of its buildings are in the nature of ordinary business. The
petitioner is clothed, under P.D. No. 857, with corporate status and
corporate powers in the furtherance of its proprietary interests xxx The
petitioner is even empowered to invest its funds in such government
securities approved by the Board of Directors, and derives its income from
rates, charges or fees for the use by vessels of the port premises,
appliances or equipment. xxx Clearly then, the petitioner is a profit-earning
corporation; hence, its patrimonial properties are subject to tax. 117
There is no doubt that the properties of the MIAA, as with the PPA, are in a
sense, for public use. A similar argument was propounded by the Light Rail
Transit Authority in Light Rail Transit Authority v. Central Board of
Assessment,118 which was cited in Philippine Ports Authority and deserves
renewed emphasis. The Light Rail Transit Authority (LRTA), a body
corporate, "provides valuable transportation facilities to the paying
public."119 It claimed that its carriage-ways and terminal stations are
immovably attached to government-owned national roads, and to impose
real property taxes thereupon would be to impose taxes on public roads.
This view did not persuade the Court, whose decision was penned by
Justice (now Chief Justice) Panganiban. It was noted:
Though the creation of the LRTA was impelled by public service to
provide mass transportation to alleviate the traffic and transportation

situation in Metro Manila its operation undeniably partakes of ordinary


business. Petitioner is clothed with corporate status and corporate powers
in the furtherance of its proprietary objectives. Indeed, it operates much like
any private corporation engaged in the mass transport industry. Given that
it is engaged in a service-oriented commercial endeavor, its carriageways
and terminal stations are patrimonial property subject to tax,
notwithstanding its claim of being a government-owned or controlled
corporation.
xxx
Petitioner argues that it merely operates and maintains the LRT system,
and that the actual users of the carriageways and terminal stations are the
commuting public. It adds that the public use character of the LRT is not
negated by the fact that revenue is obtained from the latter's operations.
We do not agree. Unlike public roads which are open for use by everyone,
the LRT is accessible only to those who pay the required fare. It is thus
apparent that petitioner does not exist solely for public service, and that the
LRT carriageways and terminal stations are not exclusively for public use.
Although petitioner is a public utility, it is nonetheless profit-earning. It
actually uses those carriageways and terminal stations in its public utility
business and earns money therefrom.120
xxx
Even granting that the national government indeed owns the carriageways
and terminal stations, the exemption would not apply because their
beneficial use has been granted to petitioner, a taxable entity.121
There is no substantial distinction between the properties held by the PPA,
the LRTA, and the MIAA. These three entities are in the business of
operating facilities that promote public transportation.
The majority further asserts that MIAA's properties, being part of the public
dominion, are outside the commerce of man. But if this is so, then why
does Section 3 of MIAA's charter authorize the President of the Philippines
to approve the sale of any of these properties? In fact, why does MIAA's
charter in the first place authorize the transfer of these airport properties,
assuming that indeed these are beyond the commerce of man?
No Trust Has Been Created
Over MIAA Properties For
The Benefit of the Republic
The majority posits that while MIAA might be holding title over the Airport
Lands and Buildings, it is holding it in trust for the Republic. A provision of
the Administrative Code is cited, but said provision does not expressly
provide that the property is held in trust. Trusts are either express or

implied, and only those situations enumerated under the Civil Code would
constitute an implied trust. MIAA does not fall within this enumeration, and
neither is there a provision in MIAA's charter expressly stating that these
properties are being held in trust. In fact, under its charter, MIAA is
obligated to retain up to eighty percent (80%) of its gross operating income,
not an inconsequential sum assuming that the beneficial owner of MIAA's
properties is actually the Republic, and not the MIAA.
Also, the claim that beneficial ownership over the MIAA remains with the
government and not MIAA is ultimately irrelevant. Section 234(a) of the
Local Government Code provides among those exempted from paying real
property taxes are "[r]eal property owned by the [Republic] except when
the beneficial use thereof has been granted, for consideration or otherwise,
to a taxable person." In the context of Section 234(a), the identity of the
beneficial owner over the properties is not determinative as to whether the
exemption avails. It is the identity of the beneficial user of the property
owned by the Republic or its political subdivisions that is crucial, for if said
beneficial user is a taxable person, then the exemption does not lie.
I fear the majority confuses the notion of what might be construed as
"beneficial ownership" of the Republic over the properties of MIAA as
nothing more than what arises as a consequence of the fact that the capital
of MIAA is contributed by the National Government. 122 If so, then there is no
difference between the State's ownership rights over MIAA properties than
those of a majority stockholder over the properties of a corporation. Even if
such shareholder effectively owns the corporation and controls the
disposition of its assets, the personality of the stockholder remains
separately distinct from that of the corporation. A brief recall of the
entrenched rule in corporate law is in order:
The first consequence of the doctrine of legal entity regarding the separate
identity of the corporation and its stockholders insofar as their obligations
and liabilities are concerned, is spelled out in this general rule deeply
entrenched in American jurisprudence:
Unless the liability is expressly imposed by constitutional or statutory
provisions, or by the charter, or by special agreement of the stockholders,
stockholders are not personally liable for debts of the corporation either at
law or equity. The reason is that the corporation is a legal entity or artificial
person, distinct from the members who compose it, in their individual
capacity; and when it contracts a debt, it is the debt of the legal entity or
artificial person the corporation and not the debt of the individual
members. (13A Fletcher Cyc. Corp. Sec. 6213)
The entirely separate identity of the rights and remedies of a corporation

itself and its individual stockholders have been given definite recognition for
a long time. Applying said principle, the Supreme Court declared that a
corporation may not be made to answer for acts or liabilities of its
stockholders or those of legal entities to which it may be connected, or vice
versa. (Palay Inc. v. Clave et. al. 124 SCRA 638) It was likewise declared in
a similar case that a bonafide corporation should alone be liable for
corporate acts duly authorized by its officers and directors. (Caram Jr. v.
Court of Appeals et.al. 151 SCRA, p. 372)123
It bears repeating that MIAA under its charter, is expressly conferred the
right to exercise all the powers of a corporation under the Corporation Law,
including the right to corporate succession, and the right to sue and be
sued in its corporate name.124 The national government made a particular
choice to divest ownership and operation of the Manila International Airport
and transfer the same to such an empowered entity due to perceived
advantages. Yet such transfer cannot be deemed consequence free merely
because it was the State which contributed the operating capital of this
body corporate.
The majority claims that the transfer the assets of MIAA was meant merely
to effect a reorganization. The imputed rationale for such transfer does not
serve to militate against the legal consequences of such assignment.
Certainly, if it was intended that the transfer should be free of consequence,
then why was it effected to a body corporate, with a distinct legal
personality from that of the State or Republic? The stated aims of the MIAA
could have very well been accomplished by creating an agency without
independent juridical personality.
VI.
MIAA Performs Proprietary Functions
Nonetheless, Section 234(f) exempts properties owned by the Republic of
the Philippines or its political subdivisions from realty taxation. The obvious
question is what comprises "the Republic of the Philippines." I think the key
to understanding the scope of "the Republic" is the phrase "political
subdivisions." Under the Constitution, political subdivisions are defined as
"the provinces, cities, municipalities and barangays." 125 In correlation, the
Administrative Code of 1987 defines "local government" as referring to "the
political subdivisions established by or in accordance with the Constitution."
Clearly then, these political subdivisions are engaged in the exercise of
sovereign functions and are accordingly exempt. The same could be said
generally of the national government, which would be similarly exempt.
After all, even with the principle of local autonomy, it is inherently noxious
and self-defeatist for local taxation to interfere with the sovereign exercise

of functions. However, the exercise of proprietary functions is a different


matter altogether.
Sovereign and Proprietary
Functions Distinguished
Sovereign or constituent functions are those which constitute the very
bonds of society and are compulsory in nature, while ministrant or
proprietary functions are those undertaken by way of advancing the general
interests of society and are merely optional.126 An exhaustive discussion on
the matter was provided by the Court in Bacani v. NACOCO: 127
xxx This institution, when referring to the national government, has
reference to what our Constitution has established composed of three great
departments, the legislative, executive, and the judicial, through which the
powers and functions of government are exercised. These functions are
twofold: constituent and ministrant. The former are those which constitute
the very bonds of society and are compulsory in nature; the latter are those
that are undertaken only by way of advancing the general interests of
society, and are merely optional. President Wilson enumerates the
constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons and
property from violence and robbery.
'(2) The fixing of the legal relations between man and wife and between
parents and children.
'(3) The regulation of the holding, transmission, and interchange of
property, and the determination of its liabilities for debt or for crime.
'(4) The determination of contract rights between individuals.
'(5) The definition and punishment of crime.
'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges, and relations of
citizens.
'(8) Dealings of the state with foreign powers: the preservation of the state
from external danger or encroachment and the advancement of its
international interests.'" (Malcolm, The Government of the Philippine
Islands, p. 19.)
The most important of the ministrant functions are: public works, public
education, public charity, health and safety regulations, and regulations of
trade and industry. The principles determining whether or not a government
shall exercise certain of these optional functions are: (1) that a government
should do for the public welfare those things which private capital would not
naturally undertake and (2) that a government should do these things which
by its very nature it is better equipped to administer for the public welfare

than is any private individual or group of individuals. (Malcolm, The


Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions
which our government is required to exercise to promote its objectives as
expressed in our Constitution and which are exercised by it as an attribute
of sovereignty, and those which it may exercise to promote merely the
welfare, progress and prosperity of the people. To this latter class belongs
the organization of those corporations owned or controlled by the
government to promote certain aspects of the economic life of our people
such as the National Coconut Corporation. These are what we call
government-owned or controlled corporations which may take on the form
of a private enterprise or one organized with powers and formal
characteristics of a private corporations under the Corporation Law.128
The Court in Bacani rejected the proposition that the National Coconut
Corporation exercised sovereign functions:
Does the fact that these corporations perform certain functions of
government make them a part of the Government of the Philippines?
The answer is simple: they do not acquire that status for the simple reason
that they do not come under the classification of municipal or public
corporation. Take for instance the National Coconut Corporation. While it
was organized with the purpose of "adjusting the coconut industry to a
position independent of trade preferences in the United States" and of
providing "Facilities for the better curing of copra products and the proper
utilization of coconut by-products," a function which our government has
chosen to exercise to promote the coconut industry, however, it was given
a corporate power separate and distinct from our government, for it was
made subject to the provisions of our Corporation Law in so far as its
corporate existence and the powers that it may exercise are concerned
(sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in
the same manner as any other private corporations, and in this sense it is
an entity different from our government. As this Court has aptly said, "The
mere fact that the Government happens to be a majority stockholder does
not make it a public corporation" (National Coal Co. vs. Collector of Internal
Revenue, 46 Phil., 586-587). "By becoming a stockholder in the National
Coal Company, the Government divested itself of its sovereign character so
far as respects the transactions of the corporation. . . . Unlike the
Government, the corporation may be sued without its consent, and is
subject to taxation. Yet the National Coal Company remains an agency or
instrumentality of government." (Government of the Philippine Islands vs.
Springer, 50 Phil., 288.)

The following restatement of the entrenched rule by former SEC


Chairperson Rosario Lopez bears noting:
The fact that government corporations are instrumentalities of the State
does not divest them with immunity from suit. (Malong v. PNR, 138 SCRA
p. 63) It is settled that when the government engages in a particular
business through the instrumentality of a corporation, it divests itself pro
hoc vice of its sovereign character so as to subject itself to the rules
governing private corporations, (PNB v. Pabolan 82 SCRA 595) and is to
be treated like any other corporation. (PNR v. Union de Maquinistas
Fogonero y Motormen, 84 SCRA 223)
In the same vein, when the government becomes a stockholder in a
corporation, it does not exercise sovereignty as such. It acts merely as a
corporator and exercises no other power in the management of the affairs
of the corporation than are expressly given by the incorporating act. Nor
does the fact that the government may own all or a majority of the capital
stock take from the corporation its character as such, or make the
government the real party in interest. (Amtorg Trading Corp. v. US 71 F2d
524, 528)129
MIAA Performs Proprietary
Functions No Matter How
Vital to the Public Interest
The simple truth is that, based on these accepted doctrinal tests, MIAA
performs proprietary functions. The operation of an airport facility by the
State may be imbued with public interest, but it is by no means
indispensable or obligatory on the national government. In fact, as
demonstrated in other countries, it makes a lot of economic sense to leave
the operation of airports to the private sector.
The majority tries to becloud this issue by pointing out that the MIAA does
not compete in the marketplace as there is no competing international
airport operated by the private sector; and that MIAA performs an essential
public service as the primary domestic and international airport of the
Philippines. This premise is false, for one. On a local scale, MIAA competes
with other international airports situated in the Philippines, such as Davao
International Airport and MCIAA. More pertinently, MIAA also competes
with other international airports in Asia, at least. International airlines take
into account the quality and conditions of various international airports in
determining the number of flights it would assign to a particular airport, or
even in choosing a hub through which destinations necessitating
connecting flights would pass through.
Even if it could be conceded that MIAA does not compete in the market

place, the example of the Philippine National Railways should be taken into
account. The PNR does not compete in the marketplace, and performs an
essential public service as the operator of the railway system in the
Philippines. Is the PNR engaged in sovereign functions? The Court, in
Malong v. Philippine National Railways, 130 held that it was not.131
Even more relevant to this particular case is Teodoro v. National Airports
Corporation,132 concerning the proper appreciation of the functions
performed by the Civil Aeronautics Administration (CAA), which had
succeeded the defunction National Airports Corporation. The CAA claimed
that as an unincorporated agency of the Republic of the Philippines, it was
incapable of suing and being sued. The Court noted:
Among the general powers of the Civil Aeronautics Administration are,
under Section 3, to execute contracts of any kind, to purchase property,
and to grant concession rights, and under Section 4, to charge landing
fees, royalties on sales to aircraft of aviation gasoline, accessories and
supplies, and rentals for the use of any property under its management.
These provisions confer upon the Civil Aeronautics Administration, in our
opinion, the power to sue and be sued. The power to sue and be sued is
implied from the power to transact private business. And if it has the power
to sue and be sued on its behalf, the Civil Aeronautics Administration with
greater reason should have the power to prosecute and defend suits for
and against the National Airports Corporation, having acquired all the
properties, funds and choses in action and assumed all the liabilities of the
latter. To deny the National Airports Corporation's creditors access to the
courts of justice against the Civil Aeronautics Administration is to say that
the government could impair the obligation of its corporations by the simple
expedient of converting them into unincorporated agencies. 133
xxx
Eventually, the charter of the CAA was revised, and it among its expanded
functions was "[t]o administer, operate, manage, control, maintain and
develop the Manila International Airport." 134 Notwithstanding this expansion,
in the 1988 case of CAA v. Court of Appeals135 the Court reaffirmed the
ruling that the CAA was engaged in "private or non-governmental
functions."136 Thus, the Court had already ruled that the predecessor
agency of MIAA, the CAA was engaged in private or non-governmental
functions. These are more precedents ignored by the majority. The
following observation from the Teodoro case very well applies to MIAA.
The Civil Aeronautics Administration comes under the category of a private
entity. Although not a body corporate it was created, like the National
Airports Corporation, not to maintain a necessary function of government,

but to run what is essentially a business, even if revenues be not its prime
objective but rather the promotion of travel and the convenience of the
traveling public. It is engaged in an enterprise which, far from being the
exclusive prerogative of state, may, more than the construction of public
roads, be undertaken by private concerns.137
If the determinative point in distinguishing between sovereign functions and
proprietary functions is the vitality of the public service being performed,
then it should be noted that there is no more important public service
performed than that engaged in by public utilities. But notably, the
Constitution itself authorizes private persons to exercise these functions as
it allows them to operate public utilities in this country138 If indeed such
functions are actually sovereign and belonging properly to the government,
shouldn't it follow that the exercise of these tasks remain within the
exclusive preserve of the State?
There really is no prohibition against the government taxing itself, 139 and
nothing obscene with allowing government entities exercising proprietary
functions to be taxed for the purpose of raising the coffers of LGUs. On the
other hand, it would be an even more noxious proposition that the
government or the instrumentalities that it owns are above the law and may
refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in
the exercise of proprietary, and not sovereign functions, cannot avoid the
adverse-effects of tax evasion simply on the claim that it is imbued with
some of the attributes of government.
VII.
MIAA Property Not Subject to
Execution Sale Without Consent
Of the President.
Despite the fact that the City of Paraaque ineluctably has the power to
impose real property taxes over the MIAA, there is an equally relevant
statutory limitation on this power that must be fully upheld. Section 3 of the
MIAA charter states that "[a]ny portion [of the [lands transferred, conveyed
and assigned to the ownership and administration of the MIAA] shall not be
disposed through sale or through any other mode unless specifically
approved by the President of the Philippines." 140
Nothing in the Local Government Code, even with its wide grant of powers
to LGUs, can be deemed as repealing this prohibition under Section 3,
even if it effectively forecloses one possible remedy of the LGU in the
collection of delinquent real property taxes. While the Local Government
Code withdrew all previous local tax exemptions of the MIAA and other
natural and juridical persons, it did not similarly withdraw any previously

enacted prohibitions on properties owned by GOCCs, agencies or


instrumentalities. Moreover, the resulting legal effect, subjecting on one
hand the MIAA to local taxes but on the other hand shielding its properties
from any form of sale or disposition, is not contradictory or paradoxical,
onerous as its effect may be on the LGU. It simply means that the LGU has
to find another way to collect the taxes due from MIAA, thus paving the way
for a mutually acceptable negotiated solution. 141
There are several other reasons this statutory limitation should be upheld
and applied to this case. It is at this juncture that the importance of the
Manila Airport to our national life and commerce may be accorded proper
consideration. The closure of the airport, even by reason of MIAA's legal
omission to pay its taxes, will have an injurious effect to our national
economy, which is ever reliant on air travel and traffic. The same effect
would obtain if ownership and administration of the airport were to be
transferred to an LGU or some other entity which were not specifically
chartered or tasked to perform such vital function. It is for this reason that
the MIAA charter specifically forbids the sale or disposition of MIAA
properties without the consent of the President. The prohibition prevents
the peremptory closure of the MIAA or the hampering of its operations on
account of the demands of its creditors. The airport is important enough to
be sheltered by legislation from ordinary legal processes.
Section 3 of the MIAA charter may also be appreciated as within the proper
exercise of executive control by the President over the MIAA, a GOCC
which despite its separate legal personality, is still subsumed within the
executive branch of government. The power of executive control by the
President should be upheld so long as such exercise does not contravene
the Constitution or the law, the President having the corollary duty to
faithfully execute the Constitution and the laws of the land. 142 In this case,
the exercise of executive control is precisely recognized and authorized by
the legislature, and it should be upheld even if it comes at the expense of
limiting the power of local government units to collect real property taxes.
Had this petition been denied instead with Mactan as basis, but with the
caveat that the MIAA properties could not be subject of execution sale
without the consent of the President, I suspect that the parties would feel
little distress. Through such action, both the Local Government Code and
the MIAA charter would have been upheld. The prerogatives of LGUs in
real property taxation, as guaranteed by the Local Government Code,
would have been preserved, yet the concerns about the ruinous effects of
having to close the Manila International Airport would have been averted.
The parties would then be compelled to try harder at working out a

compromise, a task, if I might add, they are all too willing to engage in. 143
Unfortunately, the majority will cause precisely the opposite result of
unremitting hostility, not only to the City of Paraaque, but to the thousands
of LGUs in the country.
VIII.
Summary of Points
My points may be summarized as follows:
1) Mactan and a long line of succeeding cases have already settled the rule
that under the Local Government Code, enacted pursuant to the
constitutional mandate of local autonomy, all natural and juridical persons,
even those GOCCs, instrumentalities and agencies, are no longer exempt
from local taxes even if previously granted an exemption. The only
exemptions from local taxes are those specifically provided under the Local
Government Code itself, or those enacted through subsequent legislation.
2) Under the Local Government Code, particularly Section 232,
instrumentalities, agencies and GOCCs are generally liable for real
property taxes. The only exemptions therefrom under the same Code are
provided in Section 234, which include real property owned by the Republic
of the Philippines or any of its political subdivisions.
3) The subject properties are owned by MIAA, a GOCC, holding title in its
own name. MIAA, a separate legal entity from the Republic of the
Philippines, is the legal owner of the properties, and is thus liable for real
property taxes, as it does not fall within the exemptions under Section 234
of the Local Government Code.
4) The MIAA charter expressly bars the sale or disposition of MIAA
properties. As a result, the City of Paraaque is prohibited from seizing or
selling these properties by public auction in order to satisfy MIAA's tax
liability. In the end, MIAA is encumbered only by a limited lien possessed by
the City of Paraaque.
On the other hand, the majority's flaws are summarized as follows:
1) The majority deliberately ignores all precedents which run counter to its
hypothesis, including Mactan. Instead, it relies and directly cites those
doctrines and precedents which were overturned by Mactan. By imposing a
different result than that warranted by the precedents without explaining
why Mactan or the other precedents are wrong, the majority attempts to
overturn all these ruling sub silencio and without legal justification, in a
manner that is not sanctioned by the practices and traditions of this Court.
2) The majority deliberately ignores the policy and philosophy of local fiscal
autonomy, as mandated by the Constitution, enacted under the Local
Government Code, and affirmed by precedents. Instead, the majority

asserts that there is no sound rationale for local governments to tax


national government instrumentalities, despite the blunt existence of such
rationales in the Constitution, the Local Government Code, and precedents.
3) The majority, in a needless effort to justify itself, adopts an extremely
strained exaltation of the Administrative Code above and beyond the
Corporation Code and the various legislative charters, in order to impose a
wholly absurd definition of GOCCs that effectively declassifies innumerable
existing GOCCs, to catastrophic legal consequences.
4) The majority asserts that by virtue of Section 133(o) of the Local
Government Code, all national government agencies and instrumentalities
are exempt from any form of local taxation, in contravention of several
precedents to the contrary and the proviso under Section 133, "unless
otherwise provided herein [the Local Government Code]."
5) The majority erroneously argues that MIAA holds its properties in trust
for the Republic of the Philippines, and that such properties are patrimonial
in character. No express or implied trust has been created to benefit the
national government. The legal distinction between sovereign and
proprietary functions, as affirmed by jurisprudence, likewise preclude the
classification of MIAA properties as patrimonial.
IX.
Epilogue
If my previous discussion still fails to convince on how wrong the majority
is, then the following points are well-worth considering. The majority cites
the Bangko Sentral ng Pilipinas (Bangko Sentral) as a government
instrumentality that exercises corporate powers but not organized as a
stock or non-stock corporation. Correspondingly for the majority, the
Bangko ng Sentral is exempt from all forms of local taxation by LGUs by
virtue of the Local Government Code.
Section 125 of Rep. Act No. 7653, The New Central Bank Act, states:
SECTION 125. Tax Exemptions. The Bangko Sentral shall be exempt for
a period of five (5) years from the approval of this Act from all national,
provincial, municipal and city taxes, fees, charges and assessments.
The New Central Bank Act was promulgated after the Local Government
Code if the BSP is already preternaturally exempt from local taxation owing
to its personality as an "government instrumentality," why then the need to
make a new grant of exemption, which if the majority is to be believed, is
actually a redundancy. But even more tellingly, does not this provision
evince a clear intent that after the lapse of five (5) years, that the Bangko
Sentral will be liable for provincial, municipal and city taxes? This is the
clear congressional intent, and it is Congress, not this Court which dictates

which entities are subject to taxation and which are exempt.


Perhaps this notion will offend the majority, because the Bangko Sentral is
not even a government owned corporation, but a government
instrumentality, or perhaps "loosely", a "government corporate entity." How
could such an entity like the Bangko Sentral , which is not even a
government owned corporation, be subjected to local taxation like any
mere mortal? But then, see Section 1 of the New Central Bank Act:
SECTION 1. Declaration of Policy. The State shall maintain a central
monetary authority that shall function and operate as an independent and
accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this
policy, and considering its unique functions and responsibilities, the central
monetary authority established under this Act, while being a governmentowned corporation, shall enjoy fiscal and administrative autonomy.
Apparently, the clear legislative intent was to create a government
corporation known as the Bangko Sentral ng Pilipinas. But this legislative
intent, the sort that is evident from the text of the provision and not the one
that needs to be unearthed from the bowels of the archival offices of the
House and the Senate, is for naught to the majority, as it contravenes the
Administrative Code of 1987, which after all, is "the governing law defining
the status and relationship of government agencies and instrumentalities"
and thus superior to the legislative charter in determining the personality of
a chartered entity. Its like saying that the architect who designed a school
building is better equipped to teach than the professor because at least the
architect is familiar with the geometry of the classroom.
Consider further the example of the Philippine Institute of Traditional and
Alternative Health Care (PITAHC), created by Republic Act No. 8243 in
1997. It has similar characteristics as MIAA in that it is established as a
body corporate,144 and empowered with the attributes of a corporation, 145
including the power to purchase or acquire real properties. 146 However the
PITAHC has no capital stock and no members, thus following the majority,
it is not a GOCC.
The state policy that guides PITAHC is the development of traditional and
alternative health care,147 and its objectives include the promotion and
advocacy of alternative, preventive and curative health care modalities that
have been proven safe, effective and cost effective. 148 "Alternative health
care modalities" include "other forms of non-allophatic, occasionally nonindigenous or imported healing methods" which include, among others
"reflexology, acupuncture, massage, acupressure" and chiropractics. 149
Given these premises, there is no impediment for the PITAHC to purchase

land and construct thereupon a massage parlor that would provide a


cheaper alternative to the opulent spas that have proliferated around the
metropolis. Such activity is in line with the purpose of the PITAHC and with
state policy. Is such massage parlor exempt from realty taxes? For the
majority, it is, for PITAHC is an instrumentality or agency exempt from local
government taxation, which does not fall under the exceptions under
Section 234 of the Local Government Code. Hence, this massage parlor
would not just be a shelter for frazzled nerves, but for taxes as well.
Ridiculous? One might say, certainly a decision of the Supreme Court
cannot be construed to promote an absurdity. But precisely the majority,
and the faulty reasoning it utilizes, opens itself up to all sorts of mischief,
and certainly, a tax-exempt massage parlor is one of the lesser evils that
could arise from the majority ruling. This is indeed a very strange and very
wrong decision.
I dissent.