DELA CRUZ VS PARAS
the Court of First Instance of Bulacan. 5 The grounds alleged follow: "1. Ordinance No. 84 is
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withdrawn without judicial hearing.
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
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 tourist-oriented 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: "1. 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. llcd
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 lifted, 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. In another leading case, United
States v. Salaveria, 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 powers and 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. 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." 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: . . . Then on May 21, 1954,
the first section was amended to include not merely "the power to regulate, but likewise
"prohibit . . ." 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." 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," in the language of the Administrative Code, such competence extending to all "the
great public needs," 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.
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; . . . ." 2 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; . . . ." It is clear that municipal corporations cannot prohibit the operation of
might 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.
BINAY VS DOMINGO
The only pivotal issue before Us is whether or not Resolution No. 60, re-enacted under
Resolution No. 243, of the Municipality of Makati is a valid exercise of police power under the
general welfare clause.
The pertinent facts are:
On September 27, 1988, petitioner Municipality, through its Council, approved Resolution No.
60 which reads:
"A RESOLUTION TO CONFIRM AND/OR RATIFY THE
ONGOING BURIAL ASSISTANCE PROGRAM INITIATED BY
THE OFFICE OF THE MAYOR, OF EXTENDING FINANCIAL
ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO A
BEREAVED FAMILY, FUNDS TO BE TAKEN OUT OF
UNAPPROPRIATED AVAILABLE FUNDS EXISTING IN THE
MUNICIPAL TREASURY." (Rollo, Annex "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. (Rollo, Annex "B", p. 41).
Metro Manila Commission approved Resolution No. 60. Thereafter, the municipal secretary
certified a disbursement fund of four hundred thousand pesos (P400,000.10) 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 funds 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 said 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 on
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, reaffirming 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 alienum
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." prLL
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 redefine 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. cdrep
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
Petitioners caption their petition as one for "Certiorari,Injunction With Preliminary and
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 the 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. On December 15, 1992, the Sangguniang Panlungsod ng Puerto Princesa City
enacted Ordinance No. 15-92 which took effect on January 1, 1993 entitled "AN
ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER
OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1,
1998 AND PROVIDING EXEMPTIONS; PENALTIES AND FOR OTHER PURPOSES
THEREOF",the full text of which reads as follows:
Section 1. Title of the Ordinance.— This Ordinance is entitled: AN
ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH
AND LOBSTER OUTSIDE PUERTO PRINCESA CITY FROM
JANUARY 1, 1993 TO JANUARY 1, 1998 AND PROVIDING
EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES
THEREOF
issued Office Order No. 23, Series of 1993 dated January 22, 1993 which reads as follows:
Section 2. Purpose, Scope and Coverage.— To effectively free our
City Sea Waters from Cyanide and other Obnoxious substance[s],and
shall cover all persons and/or entities operating within and outside the
City of Puerto Princesa who is are (sic) directly or indirectly in the
business or shipment of live fish and lobster outside the City.
Section 3. Definition of terms.— For purpose of this Ordinance the
following are hereby defined:
A. SEA BASS — A kind of fish under the family of
Centropomidae, better known as APAHAP;
B. CATFISH — A kind of fish under the family of
Plotosidae, better known as HITO-HITO;
C. MUDFISH — A kind of fish under the family of
Orphicaphalisae better known as DALAG;
D. ALL LIVE FISH — All alive, breathing not necessarily
moving of all specie[s] use[d] for food and for aquarium
purposes.
E. LIVE LOBSTER — Several relatively, large marine
crusteceans [sic] of the genus Homarus that are alive and
breathing not necessarily moving.
Section 4. It shall unlawful [for] any person or any business enterprise
or company to ship out from Puerto Princesa City to any point of
destination either via aircraft or seacraft of any live fish and lobster
except SEA BASS, CATFISH, MUDFISH, AND MILKFISH FRIES.
Section 5. Penalty Clause.— Any person/s and or business entity
violating this Ordinance shall be penalized with a fine of not more than
P5,000.00 or imprisonment of not more than twelve (12) months,
cancellation of their permit to do business in the City of Puerto Princesa
or all of the herein stated penalties, upon the discretion of the court.
Section 6. If the owner and/or operator of the establishment found
violating the provisions of this ordinance is a corporation or a
partnership, the penalty prescribed in Section 5 hereof shall be imposed
upon its president and/or General Manager or Managing Partner and/or
Manager, as the case maybe [sic].
Section 7. Any existing ordinance or any provision of any ordinance
inconsistent to [sic] this ordinance is deemed repealed.
Section 8. This Ordinance shall take effect on January 1, 1993.
SO ORDAINED."
xxx xxx xxx
2. To implement said city ordinance, then Acting City Mayor Amado L. Lucero
"In the interest of public service and for purposes of City Ordinance
No. PD426-14-74, otherwise known as 'AN ORDINANCE
REQUIRING ANY PERSON ENGAGED OR INTENDING TO
ENGAGE IN ANY BUSINESS, TRADE, OCCUPATION, CALLING
OR PROFESSION OR HAVING IN HIS POSSESSION ANY OF
THE ARTICLES FOR WHICH A PERMIT IS REQUIRED TO BE
HAD, TO OBTAIN FIRST A MAYOR'S PERMIT' and City
Ordinance No. 15-92, AN ORDINANCE BANNING THE
SHIPMENT OF ALL LIVE FISH AND LOBSTER OUTSIDE
PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO
 JANUARY 1, 1998, you are hereby authorized and directed to check
or conduct necessary inspections on cargoes containing live fish and
lobster being shipped out from the Puerto Princesa Airport, Puerto
Princesa Wharf or at any port within the jurisdiction of the City to any
point of destinations [sic] either via aircraft or seacraft.
The purpose of the inspection is to ascertain whether the shipper
possessed the required Mayor's Permit issued by this Office and the
shipment is covered by invoice or clearance issued by the local office
of the Bureau of Fisheries and Aquatic Resources and as to compliance
with all other existing rules and regulations on the matter.
Any cargo containing live fish and lobster without the required
documents as stated herein must be held for proper disposition.
In the pursuit of this Order, you are hereby authorized to coordinate
with the PAL Manager, the PPA Manager, the local PNP Station and
other offices concerned for the needed support and cooperation.
Further, that the usual courtesy and diplomacy must be observed at all
times in the conduct of the inspection.
Please be guided accordingly."
xxx xxx xxx
3. On February 19, 1993, the Sangguniang Panlalawigan, Provincial
Government of Palawan enacted Resolution No. 33 entitled: "A RESOLUTION
PROHIBITING THE CATCHING, GATHERING, POSSESSING, BUYING, SELLING
AND SHIPMENT OF LIVE MARINE CORAL DWELLING AQUATIC ORGANISMS,
TO WIT: FAMILY: SCARIDAE (MAMENG),EPINE PHELUS
FASCIATUS(SUNO),CROMILEPTES ALTIVELIS (PANTHER OR
SEÑORITA),LOBSTER BELOW 200 GRAMS AND SPAWNING, TRIDACNA
GIGAS (TAKLOBO),PINCTADA MARGARITEFERA (MOTHER PEARL, OYSTERS,
GIANT CLAMS AND OTHER SPECIES),PENAEUS MONODON (TIGER PRAWN-
BREEDER SIZE OR MOTHER),EPINEPHELUS SUILLUS (LOBA OR GREEN
GROUPER) AND FAMILY:BALISTIDAE (TROPICAL AQUARIUM FISHES) FOR A
PERIOD FIVE (5) YEARS IN AND COMING FROM PALAWAN WATERS",the full
text of which reads as follows:
"WHEREAS, scientific and factual researches [sic],and studies
disclose that only five (5) percent of the corals of our province remain
to be in excellent condition as [a] habitat of marine coral dwelling
aquatic organisms;
WHEREAS, it cannot be gainsaid that the destruction and devastation
of the corals of our province were principally due to illegal fishing
activities like dynamite fishing, sodium cyanide fishing, use of other
obnoxious substances and other related activities;
WHEREAS, there is an imperative and urgent need to protect and
preserve the existence of the remaining excellent corals and allow the
devastated ones to reinvigorate and regenerate themselves into vitality
within the span of five (5) years; cdpr
WHEREAS, Sec. 468, Par. 1, Sub-Par. VI of the [sic] R.A.
7160 otherwise known as the Local Government Code of
1991 empowers the Sangguniang Panlalawigan to protect the
environment and impose appropriate penalties [upon] acts which
endanger the environment such as dynamite fishing and other forms of
destructive fishing, among others.
NOW, THEREFORE, on motion by Kagawad Nelson P. Peneyra and
upon unanimous decision of all the members present;
Be it resolved as it is hereby resolved, to approve Resolution No. 33,
Series of 1993 of the Sangguniang Panlalawigan and to enact
Ordinance No. 2 for the purpose, to wit:
ORDINANCE NO. 2
Series of 1993
BE IT ORDAINED BY THE SANGGUNIANG PANLALAWIGAN
IN SESSION ASSEMBLED:
Section I. TITLE.— This Ordinance shall be known as an "Ordinance
Prohibiting the catching, gathering, possessing, buying, selling and
shipment of live marine coral dwelling, aquatic organisms, to wit: 1.
Family: Scaridae (Mameng),2. Ephinephelus Fasciatus (Suno),3.
Cromileptes altivelis (Panther or Señorita),lobster below 200 grams
and spawning),4. Tridacna Gigas (Taklobo),5. Pinctada Margaretefera
(Mother Pearl, Oysters, Giant Clams and other species),6. Penaeus
Monodon (Tiger Prawn-breeder size or mother),7. Epinephelus Suillus
(Loba or Green Grouper) and 8. Family: Balistidae (T[r]opical
Aquarium Fishes) for a period of five (5) years in and coming from
Palawan Waters.
Section II. PRELIMINARY CONSIDERATIONS .—
1. Sec. 2-A (Rep. Act 7160). It is hereby declared, the policy of the
state that the territorial and political subdivisions of the State shall
enjoy genuine and meaningful local autonomy to enable them to attain
their fullest development as self-reliant communities and make them
more effective partners in the attainment of national goals. Toward this
end, the State shall provide for [a] more responsive and accountable
local government structure instituted through a system of
decentralization whereby local government units shall be given more
powers, authority, responsibilities and resources.
2. Sec. 5-A (R.A. 7160). 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 government units. "Any fair and reasonable
 doubts as to the existence of the power shall be interpreted in favor of
all the Local Government Unit concerned."
3. Sec. 5-C (R.A. 7160). The general welfare provisions in this Code
shall be liberally interpreted to give more powers to local government
units in accelerating economic development and upgrading the quality
of life for the people in the community.
4. Sec. 16 (R.A. 7160). General Welfare.— Every local government
unit shall exercise the powers expressly granted, those necessarily
implied therefrom, as well as powers necessary, appropriate, or
incidental for its efficient and effective governance; and those which
are essential to the promotion of the general welfare.
Section III. DECLARATION OF POLICY .— It is hereby declared to
be the policy of the Province of Palawan to protect and conserve the
marine resources of Palawan not only for the greatest good of the
majority of the present generation but with [the] proper perspective and
consideration of [sic] their prosperity, and to attain this end, the
Sangguniang Panlalawigan henceforth declares that is (sic) shall be
unlawful for any person or any business entity to engage in catching,
gathering, possessing, buying, selling and shipment of live marine coral
dwelling aquatic organisms as enumerated in Section 1 hereof in and
coming out of Palawan Waters for a period of five (5) years;
Section IV. PENALTY CLAUSE.— Any person and/or business entity
violating this Ordinance shall be penalized with a fine of not more than
Five Thousand Pesos (P5,000.00),Philippine Currency, and/or
imprisonment of six (6) months to twelve (12) months and confiscation
and forfeiture of paraphernalias [sic] and equipment in favor of the
government at the discretion of the Court;
Section V. SEPARABILITY CLAUSE.— If for any reason, a Section or
provision of this Ordinance shall be held as unconditional [sic] or
invalid, it shall not affect the other provisions hereof.
Section VI. REPEALING CLAUSE.— Any existing Ordinance or a
provision of any ordinance inconsistent herewith is deemed modified,
amended or repealed.
Section VII. EFFECTIVITY .— This Ordinance shall take effect ten
(10) days after its publication.
SO ORDAINED."
xxx xxx xxx
4. The respondents implemented the said ordinances, Annexes "A" and "C"
hereof thereby depriving all the fishermen of the whole province of Palawan and the City
of Puerto Princesa of their only means of livelihood and the petitioners Airline Shippers
Association of Palawan and other marine merchants from performing their lawful
occupation and trade;
5. Petitioners Alfredo Tano, Baldomero Tano, Teocenes Midello, Angel de
Mesa, Eulogio Tremocha, and Felipe Ongonion, Jr. were even charged criminally under
criminal case no. 93-05-C in the 1st Municipal Circuit Trial Court of Cuyo-Agutaya-
Magsaysay, an original carbon copy of the criminal complaint dated April 12, 1993 is
hereto attached as Annex "D";while xerox copies are attached as Annex "D" to the copies
of the petition;
6. Petitioners Robert Lim and Virginia Lim, on the other hand, were charged by
the respondent PNP with the respondent City Prosecutor of Puerto Princesa City, a xerox
copy of the complaint is hereto attached as Annex "E";
Without seeking redress from the concerned local government units,
prosecutor's 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 Mayor's permit could be granted or denied; in other words, the Mayor had the absolute
authority to determine whether or not to issue the 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 petitioners-fishermen 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 Government's
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 responsibility . . . 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
the 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 Linijan 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 latter's 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, and on 22 July 1997, assigned it to the ponente to write the
opinion of the Court.
I only questions of law are involved, it being settled that the Court merely exercises
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 1st Municipal Circuit Trial Court (MCTC) of Palawan; 3 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.4 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 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 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
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 prejudice to reiterating special defenses involved in said motion, and
if, after trial on the merits an adverse decision is rendered, to appeal therefrom in the
manner authorized by law. And, even where in an exceptional circumstance such denial
may be the subject of a special civil action forcertiorari, 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
appellate jurisdiction over such petitions.
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 and 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: 13
This concurrence of jurisdiction is not ...to be taken as according to
parties seeking any of the writs an absolute unrestrained freedom of
choice of the court to which application therefor will be directed. There
is after all hierarchy of courts. That hierarchy is determinative of the
venue of appeals, and should also serve as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming
regard for that judicial hierarchy most certainly indicates that petitions
for the issuance of extraordinary writs against first level ("inferior")
courts should be filed with the Regional Trial Court, and those against
the latter, with the Court of Appeals. A direct invocation of the
Supreme Court's original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor,
clearly and specifically set out in the petition. This is established
policy. It is a policy necessary to prevent inordinate demands upon the
Court's time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding
of the Court's docket. ...cdti
The Court feels the need to reaffirm that policy at this time, and to
enjoin strict adherence thereto in the light of what it perceives to be a
growing tendency on the part of litigants and lawyers to have their
applications for the so-called extraordinary writs, and sometimes even
their appeals, passed upon and adjudicated directly and immediately by
the highest tribunal of the land ....
In Santiago v. Vasquez, 14 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."
III
Notwithstanding the foregoing procedural obstacles against the first set of
petitioners, we opt to resolve this case on its merits considering that the life-time 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. 15 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 scrutiny 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. ...
The State shall protect the nation's marine wealth in its archipelagic
waters, territorial sea, and exclusive economic zone, and reserve its use
and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural
resources by Filipino citizens, as well as cooperative fish farming, with
priority to subsistence fishermen and fishworkers in rivers, lakes, bays,
and lagoons.
Sections 2 and 7 of Article XIII provide:
SEC. 2. The promotion of social justice shall include the commitment
to create economic opportunities based on freedom of initiative and
self-reliance.
xxx xxx xxx
SEC. 7. The State shall protect the rights of subsistence fishermen,
especially of local communities, to the preferential use of the
communal marine and fishing resources, both inland and offshore. It
shall provide support to such fishermen through appropriate technology
and research, adequate financial, production, and marketing assistance,
and other services. The State shall also protect, develop, and conserve
such resources. The protection shall extend to offshore fishing grounds
of subsistence fishermen against foreign intrusion. Fisherworkers shall
receive a just share from their labor in the utilization of marine and
fishing resources.
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 self-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, 18 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, 19 while a subsistence
fisherman is one whose catch yields but the irreducible minimum for his
livelihood. 20 Section 131(p) of the LGC (R.A. No. 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 nation's 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 a preferential right of marginal fishermen is Section 149 of
the LGC,which pertinently provides:
SEC. 149. Fishery Rentals, Fees and Charges.— ...
(b) The sangguniang bayan may:
(1) Grant fishery privileges to erect fish corrals, oyster,
mussels or other aquatic beds or bangus fry
areas, within a definite zone of the municipal
waters, as determined by
it:Provided, however,That duly registered
organizations and cooperatives of marginal
fishermen shall have the preferential right to
such fishery privileges ...
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 guidelines concerning 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 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 fishermen, the
following exchange between Commissioner Francisco Rodrigo and Commissioner Jose
F.S. Bengzon, Jr., took place as the plenary session of the Constitutional Commission: prll
MR. RODRIGO:
Let us discuss the implementation of this because I would
not raise the hopes of our people, and afterwards fail in the
implementation. How will this be implemented? Will there
be a licensing or giving of permits so that government
officials will know that one is really a marginal fisherman?
Or if policeman say that a person is not a marginal
fisherman, he can show his permit, to prove that indeed he
is one.
MR. BENGZON:
Certainly, there will be some mode of licensing insofar as
this is concerned and this particular question could be
tackled when we discuss the Article on Local Governments
— whether we will leave to the local governments or to
Congress on how these things will be implemented. But
certainly, I think our congressmen and our local officials
will not be bereft of ideas on how to implement this
mandate.
xxx xxx xxx
MR. RODRIGO:
So, once one is licensed as a marginal fisherman, he can
go anywhere in the Philippines and fish in any fishing
grounds.
MR. BENGZON:
Subject to whatever rules and regulations and local laws
that may be passed, may be existing or will be
passed. 21 (emphasis supplied)
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. 22 On this score, in Oposa v. Factoran, 23 this Court declared:
While the right to a balanced and healthful ecology is to be found under
the Declaration of Principles the State Policies and not under the Bill
of Rights, it does not follow that it is less important than any of the civil
and political rights enumerated in the latter. Such a right belongs to a
different category of rights altogether for it concerns nothing less than
self-preservation and self-perpetuation — aptly and fittingly stressed
by the petitioners — the advancement of which may even be said to
prodate all governments and constitutions. As a matter of fact, these
basic rights need not even be written in the Constitution for they
assumed to exist from the inception of humankind. If they are now
explicitly mentioned in the fundamental charter, it is because of the
 well-founded fear of its framers that unless the rights to a balanced and
healthful ecology and to health are mandated as state policies by
the Constitution itself, thereby highlighting their continuing
importance and imposing upon the state a solemn obligation to preserve
the first and protect and advance the second, the day would not be too
far when all else would be lost not only for the present generation, but
also for those to come — generations which stand to inherit nothing
but parched earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it a
correlative duty to refrain from impairing the environment ...
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:
SEC. 16. General Welfare.— Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental for
its efficient and effective governance, and those which are essential to
the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among
other things, the preservation and enrichment of culture, promote
health and safety, enhance the right of the people to a balanced
ecology,encourage and support the development of appropriate and
self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full
employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants. (emphasis
supplied).
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 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 any violation of the
provisions of applicable fishery laws. 24 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." 25
Finally, the centerpiece of LGC is the system of decentralization 26 as
expressly mandated by the Constitution. 27 Indispensable to decentralization
is devolution and the LGCexpressly 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." 28 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. 29
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. 30This necessarily includes the enactment of ordinances to
effectively carry out such fishery laws within the municipal waters.
The term "municipal waters," in turn, includes 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. 31 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 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 therein 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 June 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 coral in 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 clearly 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 coral reefs results in serious, if not irreparable, ecological imbalance,
for coral reefs are among nature's life-support systems. They collect, retain and recycle
nutrients for adjacent nearshore areas such as 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 species of tropical 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. They are then 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 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 Mayor's 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 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.
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. However, the requirement of approval by 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 45 45a insofar as they are inconsistent with the provisions of theLGC.
(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; the
penalize, by appropriate ordinances, the use of explosives, noxious or poisonous
substances, electricity, muro-ami,and other deleterious methods of fishing; and to
prosecute any violation of the provisions of applicable fishery 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 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."
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. c
WHEREFORE, the instant petition is DISMISSED for lack of merit and the temporary
restraining order issued on 11 November 1993 is LIFTED.
WHITE LIGHT CORP. VS CITY OF MANILA
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., 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 Petition under Rule 45 of the Revised Rules on Civil Procedure, which seeks the
reversal of the Decision 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. The Ordinance is reproduced in full, hereunder:
SEC. 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. aDECHI
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) 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-intervention on the ground that the Ordinance directly
affects their business interests as operators of drive-in hotels and motels in Manila. The three
companies are components of the Anito Group of Companies which owns and operates several
hotels and motels in Metro Manila.
On December 23, 1992, the RTC granted the motion to intervene. 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.
On December 28, 1992, the RTC granted MTDC's motion to withdraw. The RTC issued
a TRO on January 14, 1993, directing the City to cease and desist from enforcing the
Ordinance. The City filed an Answer dated January 22, 1993 alleging that the Ordinance is a
legitimate exercise of police power.
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to
desist from the enforcement of the Ordinance. 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.
The RTC noted that the ordinance "strikes at the personal liberty of the individual
guaranteed and jealously guarded by the Constitution." 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, 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. ITSCED
The City later filed a petition for review on certiorari with the Supreme Court. 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.
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.
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.
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. acIHDA
The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of
the Ordinance. 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 inErmita-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. 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. aTcSID
Standing or locus standi is the ability of a party to demonstrate to the court sufficient
connection to and harm from the law or action challenged to support that party's participation
in the case. More importantly, the doctrine of standing is built on the principle of separation
of powers, sparing as it does unnecessary interference or invalidation by the judicial branch
of the actions rendered by its co-equal branches of government.
The requirement of standing is a core component of the judicial system derived directly from
the Constitution. The constitutional component of standing doctrine incorporates concepts
which concededly are not susceptible of precise definition. In this jurisdiction, the extancy of
"a direct and personal interest" presents the most obvious cause, as well as the standard test
for a petitioner's standing. In a similar vein, the United States Supreme Court reviewed and
elaborated on the meaning of the three constitutional standing requirements of injury,
causation, and redressability in Allen v. Wright.
Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth
doctrine, taxpayer suits, third party standing and, especially in the Philippines, the doctrine of
transcendental importance.
For this particular set of facts, the concept of third party standing as an exception and the
overbreadth doctrine are appropriate. In Powers v. Ohio, 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-in-
fact', 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". 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.
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, 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."
An even more analogous example may be found in Craig v. Boren, 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".
Assuming arguendo that petitioners do not have a relationship with their patrons for the
former to assert the rights of the latter, the overbreadth doctrine comes into play. In
overbreadth analysis, challengers to government action are in effect permitted to raise the
rights of third parties. Generally applied to statutes infringing on the freedom of speech, the
overbreadth doctrine applies when a statute needlessly restrains even constitutionally
guaranteed rights. In this case, the petitioners claim that the Ordinance makes a sweeping
intrusion into the right to liberty of their clients. We can see that based on the allegations in
the petition, the Ordinance suffers from overbreadth.
1We 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. 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.
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. Police power is based upon
the concept of necessity of the State and its corresponding right to protect itself and its
people. Police power has been used as justification for numerous and varied actions by the
State. These range from the regulation of dance halls, movie theaters, gas stations and
cockpits. The awesome scope of police power is best demonstrated by the fact that in its
hundred or so years of presence in our nation's 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. 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. 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.
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. 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". 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 gender and
legitimacy. Immediate scrutiny was adopted by the U.S. Supreme Court in Craig, after the
Court declined to do so in Reed v. Reed. 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. Using the rational basis examination, laws or ordinances are upheld if they
rationally further a legitimate governmental interest. Under intermediate review,
governmental interest is extensively examined and the availability of less restrictive measures
is considered. Applying strict scrutiny, the focus is on the presence of compelling, rather than
substantial, governmental interest and on the absence of less restrictive means for achieving
that interest.
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. 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. The United States Supreme Court
has expanded the scope of strict scrutiny to protect fundamental rights such as
suffrage, judicial access and interstate travel.
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 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 faculties 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.
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'". Whether or not this depiction of a mise-en-scene of
vice is accurate, it cannot be denied that legitimate sexual behavior among consenting married
or consenting single adults which is constitutionally protected 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.
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 to 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. 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.
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. 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.
Similar to the Comelec resolution requiring newspapers to donate advertising space to
candidates, this Ordinance is a blunt and heavy instrument. 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
subjects them without exception to the unjustified prohibition.
The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its
longtime home, 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 Joaquin-dreams 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. The notion that the promotion of public morality is a function of the State
is as old as Aristotle. 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.
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. 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.
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.
SOCIAL JUSTICE SOCIETY VS ATIENZA
After we promulgated our decision in this case on March 7, 2007, Chevron Philippines, Inc.
(Chevron),Petron Corporation (Petron) and Pilipinas Shell Petroleum Corporation (Shell)
(collectively, the oil companies) and the Republic of the Philippines, represented by the
Department of Energy (DOE),filed their respective motions for leave to intervene and for
reconsideration of the decision.
Chevron is engaged in the business of importing, distributing and marketing of petroleum
products in the Philippines while Shell and Petron are engaged in the business of
manufacturing, refining and likewise importing, distributing and marketing of petroleum
products in the Philippines. The DOE is a governmental agency created under Republic Act
(RA) No. 7638 and tasked to prepare, integrate, coordinate, supervise and control all plans,
programs, projects and activities of the government relative to energy exploration,
development, utilization, distribution and conservation.
The facts are restated briefly as follows:
Petitioners Social Justice Society, Vladimir Alarique T. Cabigao and Bonifacio S.
Tumbokon, in an original petition for mandamus under Rule 65 of the Rules of Court,
sought to compel respondent Hon. Jose L. Atienza, Jr.,then mayor of the City of Manila, to
enforce Ordinance No. 8027. This ordinance was enacted by the Sangguniang
Panlungsod of Manila on November 20, 2001, approved by respondent Mayor on
November 28, 2001, and became effective on December 28, 2001 after
publication. Sections 1 and 3 thereof 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 Pandacan 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. ICcDaA
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 the reclassification 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.
On June 26, 2002, the City of Manila and the Department of Energy (DOE) entered into a
memorandum of understanding (MOU) with the oil companies. They agreed that "the
scaling down of the Pandacan Terminals [was] the most viable and practicable option."
The Sangguniang Panlungsod ratified the MOU in Resolution No. 97. In the same
resolution, theSanggunian declared that the MOU was effective only for a period of six
months starting July 25, 2002. Thereafter, on January 30, 2003, the Sanggunian adopted
Resolution No. 13 extending the validity of Resolution No. 97 to April 30, 2003 and
authorizing the mayor of Manila to issue special business permits to the oil companies.
This was the factual backdrop presented to the Court which became the basis of our March
7, 2007 decision. We ruled that respondent had the ministerial duty under the Local
Government Code (LGC) to "enforce all laws and ordinances relative to the governance of
the city", including Ordinance No. 8027. We also held that we need not resolve the issue of
whether the MOU entered into by respondent with the oil companies and the subsequent
resolutions passed by the Sanggunian could amend or repeal Ordinance No. 8027 since the
resolutions which ratified the MOU and made it binding on the City of Manila expressly
gave it full force and effect only until April 30, 2003. We concluded that there was nothing
that legally hindered respondent from enforcing Ordinance No. 8027.
After we rendered our decision on March 7, 2007, the oil companies and DOE sought to
intervene and filed motions for reconsideration in intervention on March 12, 2007 and
March 21, 2007 respectively. On April 11, 2007, we conducted the oral arguments in Baguio
City to hear petitioners, respondent and movants-intervenors oil companies and DOE.
The oil companies called our attention to the fact that on April 25, 2003, Chevron had filed a
complaint against respondent and the City of Manila in the Regional Trial Court (RTC) of
Manila, Branch 39, for the annulment of Ordinance No. 8027 with application for writs of
preliminary prohibitory injunction and preliminary mandatory injunction. The case was
docketed as civil case no. 03-106377. On the same day, Shell filed a petition for prohibition
and mandamus likewise assailing the validity of Ordinance No. 8027 and with application
for writs of preliminary prohibitory injunction and preliminary mandatory injunction. This
was docketed as civil case no. 03-106380. Later on, these two cases were consolidated and
the RTC of Manila, Branch 39 issued an order dated May 19, 2003 granting the applications
for writs of preliminary prohibitory injunction and preliminary mandatory injunction: T
WHEREFORE, upon the filing of a total bond of TWO MILLION
(Php2,000,000.00) PESOS, let a Writ of Preliminary Prohibitory
Injunction be issued ordering [respondent] and the City of Manila,
their officers, agents, representatives, successors, and any other
persons assisting or acting in their behalf, during the pendency of the
case, to REFRAIN from taking steps to enforce Ordinance No. 8027,
and let a Writ of Preliminary Mandatory Injunction be issued ordering
[respondent] to issue [Chevron and Shell] the necessary Business
Permits to operate at the Pandacan Terminal.
Petron likewise filed its own petition in the RTC of Manila, Branch 42, also attacking the
validity of Ordinance No. 8027 with prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order (TRO).This was docketed as civil case no. 03-
106379. In an order dated August 4, 2004, the RTC enjoined the parties to maintain
the status quo.
Thereafter, in 2006, the city council of Manila enacted Ordinance No. 8119, also known as
the Manila Comprehensive Land Use Plan and Zoning Ordinance of 2006. This was
approved by respondent on June 16, 2006.
Aggrieved anew, Chevron and Shell filed a complaint in the RTC of Manila, Branch 20,
asking for the nullification of Ordinance No. 8119. This was docketed as civil case no. 06-
115334. Petron filed its own complaint on the same causes of action in the RTC of Manila,
Branch 41. This was docketed as civil case no. 07-116700. The court issued a TRO in
favor of Petron, enjoining the City of Manila and respondent from enforcing Ordinance No.
8119.
Meanwhile, in civil case no. 03-106379, the parties filed a joint motion to withdraw
complaint and counterclaim on February 20, 2007. In an order dated April 23, 2007, the
joint motion was granted and all the claims and counterclaims of the parties were
withdrawn.
Given these additional pieces of information, the following were submitted as issues for our
resolution:
1. whether movants-intervenors should be allowed to intervene in this
case; 2. whether the following are impediments to the execution of our March 7,
2007 decision:
(a) Ordinance No. 8119, the enactment and existence of which were not previously
brought by the parties to the attention of the Court and
(b) writs of preliminary prohibitory injunction and preliminary mandatory
injunction and status quo order issued by the RTC of Manila, Branches 39 and 42
and
3. whether the implementation of Ordinance No. 8027 will unduly encroach upon
the DOE's powers and functions involving energy resources.
During the oral arguments, the parties submitted to this Court's power to rule on the
constitutionality and validity of Ordinance No. 8027 despite the pendency of consolidated
cases involving this issue in the RTC. 27 The importance of settling this controversy as fully
and as expeditiously as possible was emphasized, considering its impact on public interest.
Thus, we will also dispose of this issue here. The parties were after all given ample
opportunity to present and argue their respective positions. By so doing, we will do away
with the delays concomitant with litigation and completely adjudicate an issue which will
most likely reach us anyway as the final arbiter of all legal disputes.
Before we resolve these issues, a brief review of the history of the Pandacan Terminals is
called for to put our discussion in the proper context.
HISTORY OF THE PANDACAN OIL TERMINALS
Pandacan (one of the districts of the City of Manila) is situated along the banks of the Pasig
river. At the turn of the twentieth century, Pandacan was unofficially designated as the
industrial center of Manila. The area, then largely uninhabited, was ideal for various
emerging industries as the nearby river facilitated the transportation of goods and products.
In the 1920s, it was classified as an industrial zone. Among its early industrial settlers were
the oil companies. Shell established its installation there on January 30, 1914. Caltex (now
Chevron) followed suit in 1917 when the company began marketing its products in the
country. In 1922, it built a warehouse depot which was later converted into a key
distribution terminal. The corporate presence in the Philippines of Esso (Petron's
predecessor) became more keenly felt when it won a concession to build and operate a
refinery in Bataan in 1957. It then went on to operate a state-of-the-art lube oil blending
plant in the Pandacan Terminals where it manufactures lubes and greases.
On December 8, 1941, the Second World War reached the shores of the Philippine Islands.
Although Manila was declared an open city, the Americans had no interest in welcoming the
Japanese. In fact, in their zealous attempt to fend off the Japanese Imperial Army, the United
States Army took control of the Pandacan Terminals and hastily made plans to destroy the
storage facilities to deprive the advancing Japanese Army of a valuable logistics
weapon. The U.S. Army burned unused petroleum, causing a frightening conflagration.
Historian Nick Joaquin recounted the events as follows:
After the USAFFE evacuated the City late in December 1941, all
army fuel storage dumps were set on fire. The flames spread,
enveloping the City in smoke, setting even the rivers ablaze,
endangering bridges and all riverside buildings. ...For one week
longer, the "open city" blazed — a cloud of smoke by day, a pillar of
fire by night.
The fire consequently destroyed the Pandacan Terminals and rendered its network
of depots and service stations inoperative.
After the war, the oil depots were reconstructed. Pandacan changed as Manila rebuilt itself.
The three major oil companies resumed the operation of their depots. But the district was no
longer a sparsely populated industrial zone; it had evolved into a bustling, hodgepodge
community. Today, Pandacan has become a densely populated area inhabited by about
84,000 people, majority of whom are urban poor who call it home. Aside from numerous
industrial installations, there are also small businesses, churches, restaurants, schools,
daycare centers and residences situated there. Malacañang Palace, the official residence of
the President of the Philippines and the seat of governmental power, is just two kilometers
away. There is a private school near the Petron depot. Along the walls of the Shell facility
are shanties of informal settlers. More than 15,000 students are enrolled in elementary and
high schools situated near these facilities. A university with a student population of about
25,000 is located directly across the depot on the banks of the Pasig river.
The 36-hectare Pandacan Terminals house the oil companies' distribution terminals and
depot facilities. The refineries of Chevron and Shell in Tabangao and Bauan, both in
Batangas, respectively, are connected to the Pandacan Terminals through a 114-
kilometer underground pipeline system. Petron's refinery in Limay, Bataan, on the other
hand, also services the depot. The terminals store fuel and other petroleum products and
supply 95% of the fuel requirements of Metro Manila, 50% of Luzon's consumption and
35% nationwide. Fuel can also be transported through barges along the Pasig river or tank
trucks via the South Luzon Expressway.
We now discuss the first issue: whether movants-intervenors should be allowed to intervene
in this case.
INTERVENTION OF THE OIL COMPANIES AND THE DOE SHOULD BE
ALLOWED IN THE INTEREST OF JUSTICE
Intervention is a remedy by which a third party, not originally impleaded in the proceedings,
becomes a litigant therein to enable him, her or it to protect or preserve a right or interest
which may be affected by such proceedings. The pertinent rules are Sections 1 and 2, Rule
19 of the Rules of Court:
SEC. 1. Who may intervene. — A person who has a legal interest in
the matter in litigation, or in the success of either of the parties, or an
interest against both, or is so situated as to be adversely affected by a
distribution or other disposition of property in the custody of the court
or of an officer thereof may, with leave of court, be allowed to
intervene in the action. The court shall consider whether or not the
intervention will unduly delay or prejudice the adjudication of the
rights of the original parties, and whether or not the intervenor's rights
may be fully protected in a separate proceeding.
SEC. 2. Time to intervene. — The motion to intervene may be filed at
any time before rendition of judgment by the trial court. A copy of the
pleading-in-intervention shall be attached to the motion and served on
the original parties.
Thus, the following are the requisites for intervention of a non-party:
(1) Legal interest
(a) in the matter in controversy; or
(b) in the success of either of the parties; or
(c) against both parties; or
(d) person is so situated as to be adversely affected by a
distribution or other disposition of property in
the custody of the court or of an officer thereof;
(2) Intervention will not unduly delay or prejudice the adjudication of
rights of original parties;
(3) Intervenor's rights may not be fully protected in a separate
proceeding 51 and
 (4) The motion to intervene may be filed at any time before rendition
of judgment by the trial court.
For both the oil companies and DOE, the last requirement is definitely absent. As a rule,
intervention is allowed "before rendition of judgment" as Section 2, Rule 19 expressly
provides. Both filed their separate motions after our decision was promulgated. In Republic
of the Philippines v. Gingoyon, a recently decided case which was also an original action
filed in this Court, we declared that the appropriate time to file the motions-in-intervention
was before and not after resolution of the case.
The Court, however, has recognized exceptions to Section 2, Rule 19 in the interest of
substantial justice:
The rule on intervention, like all other rules of procedure, is intended
to make the powers of the Court fully and completely available for
justice. It is aimed to facilitate a comprehensive adjudication of rival
claims overriding technicalities on the timeliness of the filing thereof.
The oil companies assert that they have a legal interest in this case because the
implementation of Ordinance No. 8027 will directly affect their business and property
rights.
[T]he interest which entitles a person to intervene in a suit between
other parties must be in the matter in litigation and of such direct and
immediate character that the intervenor will either gain or lose by
direct legal operation and effect of the judgment. Otherwise, if
persons not parties to the action were allowed to intervene,
proceedings would become unnecessarily complicated, expensive and
interminable. And this would be against the policy of the law. The
words "an interest in the subject" means a direct interest in the cause
of action as pleaded, one that would put the intervenor in a legal
position to litigate a fact alleged in the complaint without the
establishment of which plaintiff could not recover.
We agree that the oil companies have a direct and immediate interest in the implementation
of Ordinance No. 8027. Their claim is that they will need to spend billions of pesos if they
are compelled to relocate their oil depots out of Manila. Considering that they admitted
knowing about this case from the time of its filing on December 4, 2002, they should have
intervened long before our March 7, 2007 decision to protect their interests. But they did
not. Neither did they offer any worthy explanation to justify their late intervention.
Be that as it may, although their motion for intervention was not filed on time, we will allow
it because they raised and presented novel issues and arguments that were not considered by
the Court in its March 7, 2007 decision. After all, the allowance or disallowance of a motion
to intervene is addressed to the sound discretion of the court before which the case is
pending. Considering the compelling reasons favoring intervention, we do not think that
this will unduly delay or prejudice the adjudication of rights of the original parties. In fact, it
will be expedited since their intervention will enable us to rule on the constitutionality of
Ordinance No. 8027 instead of waiting for the RTC's decision.
The DOE, on the other hand, alleges that its interest in this case is also direct and immediate
as Ordinance No. 8027 encroaches upon its exclusive and national authority over matters
affecting the oil industry. It seeks to intervene in order to represent the interests of the
members of the public who stand to suffer if the Pandacan Terminals' operations are
discontinued. We will tackle the issue of the alleged encroachment into DOE's domain later
on. Suffice it to say at this point that, for the purpose of hearing all sides and considering the
transcendental importance of this case, we will also allow DOE's intervention.
THE INJUNCTIVE WRITS ARE NOT IMPEDIMENTS TO THE
ENFORCEMENT OF ORDINANCE NO. 8027
Under Rule 65, Section 3 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.
According to the oil companies, respondent did not unlawfully fail or neglect to enforce
Ordinance No. 8027 because he was lawfully prevented from doing so by virtue of the
injunctive writs and status quo order issued by the RTC of Manila, Branches 39 and 42.
First, we note that while Chevron and Shell still have in their favor the writs of preliminary
injunction and preliminary mandatory injunction, the status quo order in favor of Petron is
no longer in effect since the court granted the joint motion of the parties to withdraw the
complaint and counterclaim.
Second, the original parties failed to inform the Court about these injunctive writs.
Respondent (who was also impleaded as a party in the RTC cases) defends himself by
saying that he informed the court of the pendency of the civil cases and that a TRO was
issued by the RTC in the consolidated cases filed by Chevron and Shell. It is true that had
the oil companies only intervened much earlier, the Court would not have been left in the
dark about these facts. Nevertheless, respondent should have updated the Court, by way of
manifestation, on such a relevant matter.
In his memorandum, respondent mentioned the issuance of a TRO. Under Section 5 of Rule
58 of the Rules of Court, a TRO issued by the RTC is effective only for a period of 20 days.
This is why, in our March 7, 2007 decision, we presumed with certainty that this had already
lapsed. Respondent also mentioned the grant of injunctive writs in his rejoinder which the
Court, however, expunged for being a prohibited pleading. The parties and their counsels
were clearly remiss in their duties to this Court.
In resolving controversies, courts can only consider facts and issues pleaded by the
parties. Courts, as well as magistrates presiding over them are not omniscient. They can
only act on the facts and issues presented before them in appropriate pleadings. They may
not even substitute their own personal knowledge for evidence. Nor may they take notice of
matters except those expressly provided as subjects of mandatory judicial notice.
We now proceed to the issue of whether the injunctive writs are legal impediments to the
enforcement of Ordinance No. 8027.
Section 3, Rule 58 of the Rules of Court enumerates the grounds for the issuance of a writ
of preliminary injunction:
SEC. 3. Grounds for issuance of preliminary injunction. — A preliminary
injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;
 (b) That the commission, continuance or nonperformance of the act or
acts complained of during the litigation would probably
work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is
attempting to do, or is procuring or suffering to be done,
some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or
proceeding, and tending to render the judgment
ineffectual.
There are two requisites for the issuance of a preliminary injunction: (1) the right to be
protected exists prima facie and (2) the acts sought to be enjoined are violative of that right.
It must be proven that the violation sought to be prevented will cause an irreparable
injustice.
The act sought to be restrained here was the enforcement of Ordinance No. 8027. It is a
settled rule that an ordinance enjoys the presumption of validity and, as such, cannot be
restrained by injunction. Nevertheless, when the validity of the ordinance is assailed, the
courts are not precluded from issuing an injunctive writ against its enforcement. However,
we have declared that the issuance of said writ is proper only when:
...the petitioner assailing the ordinance has made out a case of
unconstitutionality strong enough to overcome, in the mind of the
judge, the presumption of validity,in addition to a showing of a
clear legal right to the remedy sought. ...
Judge Reynaldo G. Ros, in his order dated May 19, 2003, stated his basis for issuing the
injunctive writs:
The Court, in resolving whether or not a Writ of Preliminary
Injunction or Preliminary Mandatory Injunction should be issued, is
guided by the following requirements: (1) a clear legal right of the
complainant; (2) a violation of that right; and (3) a permanent and
urgent necessity for the Writ to prevent serious damage. The Court
believes that these requisites are present in these cases.
There is no doubt that the plaintiff/petitioners have been legitimately
operating their business in the Pandacan Terminal for many years and
they have made substantial capital investment therein. Every year
they were issued Business Permits by the City of Manila. Its
operations have not been declared illegal or contrary to law or morals.
In fact, because of its vital importance to the national economy, it was
included in the Investment Priorities Plan as mandated under the
"Downstream Oil Industry Deregulation Act of 1988 (R.A. 8479). As
a lawful business, the plaintiff/petitioners have a right, therefore, to
continue their operation in the Pandacan Terminal and the right to
protect their investments. This is a clear and unmistakable right of the
plaintiff/petitioners.
The enactment, therefore, of City Ordinance No. 8027 passed by the
City Council of Manila reclassifying the area where the Pandacan
Terminal is located from Industrial II to Commercial I and requiring
the plaintiff/petitioners to cease and desist from the operation of their
business has certainly violated the rights of the plaintiff/petitioners to
continue their legitimate business in the Pandacan Terminal and
deprived them of their huge investments they put up therein. Thus,
before the Court, therefore, determines whether the Ordinance in
question is valid or not, a Writ of Preliminary Injunction and a Writ of
Mandatory Injunction be issued to prevent serious and irreparable
damage to plaintiff/petitioners.
Nowhere in the judge's discussion can we see that, in addition to a showing of a clear
legal right of Chevron and Shell to the remedy sought, he was convinced that they had
made out a case of unconstitutionality or invalidity strong enough to overcome the
presumption of validity of the ordinance. Statutes and ordinances are presumed valid
unless and until the courts declare the contrary in clear and unequivocal terms. The mere
fact that the ordinance is alleged to be unconstitutional or invalid will not entitle a party to
have its enforcement enjoined. The presumption is all in favor of validity. The reason for
this is obvious:
The action of the elected representatives of the people cannot be
lightly set aside. The councilors must, in the very nature of things, be
familiar with the necessities of their particular municipality and with
all the facts and circumstances which surround the subject and
necessitate action. The local legislative body, by enacting the
ordinance, has in effect given notice that the regulations are essential
to the well being of the people ...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.
xxx xxx xxx
. . . [Courts] accord the presumption of constitutionality to legislative
enactments, not only because the legislature is presumed to abide by
the Constitution but also because the judiciary[,] in the determination
of actual cases and controversies[,] must reflect the wisdom and
justice of the people as expressed through their representatives in the
executive and legislative departments of the government.
The oil companies argue that this presumption must be set aside when the invalidity or
unreasonableness appears on the face of the ordinance itself. We see no reason to set aside
the presumption. The ordinance, on its face, does not at all appear to be unconstitutional. It
reclassified the subject area from industrial to commercial. Prima facie,this power is within
the power of municipal corporations:
The power of municipal corporations to divide their territory into
industrial, commercial and residential zones is recognized in almost
all jurisdictions inasmuch as it is derived from the police power itself
and is exercised for the protection and benefit of their inhabitants.
xxx xxx xxx
There can be no doubt that the City of Manila has the power to divide
its territory into residential and industrial zones, and to prescribe that
 offensive and unwholesome trades and occupations are to be
established exclusively in the latter zone.
xxx xxx xxx
Likewise, it cannot be denied that the City of Manila has the
authority, derived from the police power, of forbidding the appellant
to continue the manufacture of toyo in the zone where it is now
situated, which has been declared residential. ...
Courts will not invalidate an ordinance unless it clearly appears that it is unconstitutional.
There is no such showing here. Therefore, the injunctive writs issued in the Manila RTC's
May 19, 2003 order had no leg to stand on.
We are aware that the issuance of these injunctive writs is not being assailed as tainted with
grave abuse of discretion. However, we are confronted with the question of whether these
writs issued by a lower court are impediments to the enforcement of Ordinance No. 8027
(which is the subject of the mandamus petition).As already discussed, we rule in the
negative.
ORDINANCE NO. 8027 WAS NOT SUPERSEDED BY ORDINANCE NO. 8119
The March 7, 2007 decision did not take into consideration the passage of Ordinance No.
8119 entitled "An Ordinance Adopting the Manila Comprehensive Land Use Plan and
Zoning Regulations of 2006 and Providing for the Administration, Enforcement and
Amendment thereto" which was approved by respondent on June 16, 2006. The simple
reason was that the Court was never informed about this ordinance.
While courts are required to take judicial notice of the laws enacted by Congress, the rule
with respect to local ordinances is different. Ordinances are not included in the enumeration
of matters covered by mandatory judicial notice under Section 1, Rule 129 of the Rules of
Court.
Although, Section 50 of RA 409 74 provides that:
SEC. 50. Judicial notice of ordinances. — All courts sitting in the city
shall take judicial notice of the ordinances passed by
the [Sangguniang Panglungsod].
this cannot be taken to mean that this Court, since it has its seat in the City of Manila, should
have taken steps to procure a copy of the ordinance on its own, relieving the party of any
duty to inform the Court about it.
Even where there is a statute that requires a court to take judicial notice of municipal
ordinances, a court is not required to take judicial notice of ordinances that are not before it
and to which it does not have access. The party asking the court to take judicial notice is
obligated to supply the court with the full text of the rules the party desires it to have notice
of. Counsel should take the initiative in requesting that a trial court take judicial notice of an
ordinance even where a statute requires courts to take judicial notice of local ordinances.
The intent of a statute requiring a court to take judicial notice of a local ordinance is to
remove any discretion a court might have in determining whether or not to take notice of an
ordinance. Such a statute does not direct the court to act on its own in obtaining evidence for
the record and a party must make the ordinance available to the court for it to take notice.
In its defense, respondent claimed that he did not inform the Court about the enactment of
Ordinance No. 8119 because he believed that it was different from Ordinance No. 8027 and
that the two were not inconsistent with each other.
In the same way that we deem the intervenors' late intervention in this case unjustified, we
find the failure of respondent, who was an original party here, inexcusable.
THE RULE ON JUDICIAL ADMISSIONS IS NOT APPLICABLE
AGAINST RESPONDENT
The oil companies assert that respondent judicially admitted that Ordinance No. 8027 was
repealed by Ordinance No. 8119 in civil case no. 03-106379 (where Petron assailed the
constitutionality of Ordinance No. 8027) when the parties in their joint motion to withdraw
complaint and counterclaim stated that "the issue . . . has been rendered moot and academic
by virtue of the passage of [Ordinance No. 8119]." They contend that such admission
worked as an estoppel against the respondent.
Respondent countered that this stipulation simply meant that Petron was recognizing the
validity and legality of Ordinance No. 8027 and that it had conceded the issue of said
ordinance's constitutionality, opting instead to question the validity of Ordinance No.
8119. The oil companies deny this and further argue that respondent, in his answer in civil
case no. 06-115334 (where Chevron and Shell are asking for the nullification of Ordinance
No. 8119), expressly stated that Ordinance No. 8119 replaced Ordinance No. 8027:
...Under Ordinance No. 8027, businesses whose uses are not in accord
with the reclassification were given six months to cease [their]
operation. Ordinance No. 8119, which in effect, replaced
Ordinance [No.] 8027,merely took note of the time frame provided
for in Ordinance No. 8119. ...Ordinance No. 8119 thus provided for
an even longer term, that is[,] seven years; (Emphasis supplied)
Rule 129, Section 4 of the Rules of Court provides:
Section 4.Judicial admissions. — An admission, verbal or written,
made by a party in the course of the proceedings in the same
case,does not require proof. The admission may be contradicted only
by showing that it was made through palpable mistake or that no such
admission was made. (Emphasis supplied)
While it is true that a party making a judicial admission cannot subsequently take a position
contrary to or inconsistent with what was pleaded, the aforestated rule is not applicable
here. Respondent made the statements regarding the ordinances in civil case nos. 03-106379
and 06-115334 which are not "the same" as this case before us. 84 To constitute a judicial
admission, the admission must be made in the same case in which it is offered.
Hence, respondent is not estopped from claiming that Ordinance No. 8119 did
not supersede Ordinance No. 8027. On the contrary, it is the oil companies which should
be considered estopped. They rely on the argument that Ordinance No. 8119 superseded
Ordinance No. 8027 but, at the same time, also impugn its (8119's) validity. We frown on
the adoption of inconsistent positions and distrust any attempt at clever positioning under
one or the other on the basis of what appears advantageous at the moment. Parties cannot
take vacillating or contrary positions regarding the validity of a statute 85 or ordinance.
Nonetheless, we will look into the merits of the argument of implied repeal.
ORDINANCE NO. 8119 DID NOT IMPLIEDLY REPEAL ORDINANCE
NO. 8027
Both the oil companies and DOE argue that Ordinance No. 8119 repealed Ordinance No.
8027. They assert that although there was no express repeal of Ordinance No. 8027,
Ordinance No. 8119 impliedly repealed it.
According to the oil companies, Ordinance No. 8119 reclassified the area covering the
Pandacan Terminals to "High Density Residential/Mixed Use Zone (R-3/MXD)" whereas
Ordinance No. 8027 reclassified the same area from Industrial II to Commercial I:
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 Pandacan 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.(Emphasis supplied)
Moreover, Ordinance No. 8119 provides for a phase-out of seven years:
SEC. 72. Existing Non-Conforming Uses and Buildings. — The
lawful use of any building, structure or land at the time of the
adoption of this Ordinance may be continued, although such use does
not conform with the provision of the Ordinance, provided:
xxx xxx xxx
(2) In case the non-conforming use is an industrial use:
xxx xxx xxx
d. The land use classified as non-conforming shall program the
phase-out and relocation of the non-conforming use within seven (7) years
from the date of effectivity of this Ordinance. (Emphasis supplied)
This is opposed to Ordinance No. 8027 which compels affected entities to vacate the area
within six months from the effectivity of the ordinance:
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. 8119 also designated the Pandacan oil depot area as a "Planned Unit
Development/Overlay Zone (O-PUD)":
SEC. 23. Use Regulations in Planned Unit Development/Overlay
Zone (O-PUD).— O-PUD Zones are identified specific sites in the
City of Manila wherein the project site is comprehensively planned as
an entity via unitary site plan which permits flexibility in
planning/design, building siting, complementarity of building types
and land uses, usable open spaces and the preservation of significant
natural land features, pursuant to regulations specified for each
particular PUD. Enumerated below are identified PUD:
xxx xxx xxx
6. Pandacan Oil Depot Area
xxx xxx xxx
Enumerated below are the allowable uses:
1. all uses allowed in all zones where it is located
2. the [Land Use Intensity Control (LUIC)] under which zones are
located shall, in all instances be complied with
3. the validity of the prescribed LUIC shall only be [superseded] by
the development controls and regulations specified for
each PUD as provided for each PUD as provided for by
the masterplan of respective PUDs.
Respondent claims that in passing Ordinance No. 8119, the Sanggunian did not intend to
repeal Ordinance No. 8027 but meant instead to carry over 8027's provisions to 8119 for the
purpose of making Ordinance No. 8027 applicable to the oil companies even after the
passage of Ordinance No. 8119. He quotes an excerpt from the minutes of the July 27, 2004
session of the Sanggunian during the first reading of Ordinance No. 8119:
Member GARCIA: Your Honor, iyong patungkol po roon sa oil depot
doon sa amin sa Sixth District sa Pandacan, wala pong nakalagay dito
sa ordinansa rito na taliwas o kakaiba roon sa ordinansang ipinasa
noong nakaraang Konseho, iyong Ordinance No. 8027. So kung ano
po ang nandirito sa ordinansa na ipinasa ninyo last time, iyon lang po
ang ni-lift namin at inilagay dito. At dito po sa ordinansang ...iyong
naipasa ng huling Konseho, niri-classify [ninyo] from Industrial II to
Commercial C-1 ang area ng Pandacan kung nasaan ang oil depot. So
ini-lift lang po [namin] iyong definition, density, at saka po yon pong
...ng ...noong ordinansa ninyo na siya na po naming inilagay dito,
iniba lang po naming iyong title. So wala po kaming binago na
taliwas o nailagay na taliwas doon sa ordinansang ipinasa ninyo,
ni-lift lang po [namin] from Ordinance No. 8027."
We agree with respondent.
Repeal by implication proceeds on the premise that where a statute of later date clearly
reveals the intention of the legislature to abrogate a prior act on the subject, that intention
must be given effect.
There are two kinds of implied repeal. The first is: where the provisions in the two acts on
the same subject matter are irreconcilably contradictory, the latter act, to the extent of the
conflict, constitutes an implied repeal of the earlier one. The second is: if the later act
covers the whole subject of the earlier one and is clearly intended as a substitute, it will
operate to repeal the earlier law. The oil companies argue that the situation here falls under
the first category.
Implied repeals are not favored and will not be so declared unless the intent of the legislators
is manifest. As statutes and ordinances are presumed to be passed only after careful
deliberation and with knowledge of all existing ones on the subject, it follows that, in
passing a law, the legislature did not intend to interfere with or abrogate a former law
relating to the same subject matter. If the intent to repeal is not clear, the later act should be
construed as a continuation of, and not a substitute for, the earlier act.
These standards are deeply enshrined in our jurisprudence. We disagree that, in enacting
Ordinance No. 8119, there was any indication of the legislative purpose to repeal Ordinance
No. 8027. 97 The excerpt quoted above is proof that there was never such an intent. While it
is true that both ordinances relate to the same subject matter, i.e., classification of the land
use of the area where Pandacan oil depot is located, if there is no intent to repeal the earlier
enactment, every effort at reasonable construction must be made to reconcile the ordinances
so that both can be given effect:
The fact that a later enactment may relate to the same subject matter
as that of an earlier statute is not of itself sufficient to cause an
implied repeal of the prior act, since the new statute may merely be
cumulative or a continuation of the old one. What is necessary is a
manifest indication of legislative purpose to repeal.
For the first kind of implied repeal, there must be an irreconcilable conflict between the two
ordinances. There is no conflict between the two ordinances. Ordinance No. 8027
reclassified the Pandacan area from Industrial II to Commercial I. Ordinance No. 8119, in
Section 23, designated it as a "Planned Unit Development/Overlay Zone (O-PUD)." In its
Annex C which defined the zone boundaries, the Pandacan area was shown to be within the
"High Density Residential/Mixed Use Zone (R-3/MXD)." These zone classifications in
Ordinance No. 8119 are not inconsistent with the reclassification of the Pandacan area from
Industrial to Commercial in Ordinance No. 8027. The "O-PUD" classification merely made
Pandacan a "project site . . . comprehensively planned as an entity via unitary site plan
which permits flexibility in planning/design, building siting, complementarity of building
types and land uses, usable open spaces and the preservation of significant natural land
features. . . ." Its classification as "R-3/MXD" means that it should "be used primarily for
high-rise housing/dwelling purposes and limited complementary/supplementary trade,
services and business activities." There is no conflict since both ordinances actually have a
common objective, i.e.,to shift the zoning classification from industrial to commercial
(Ordinance No. 8027) or mixed residential/commercial (Ordinance No. 8119).
Moreover, it is a well-settled rule in statutory construction that a subsequent general law
does not repeal a prior special law on the same subject unless it clearly appears that the
legislature has intended by the latter general act to modify or repeal the earlier special
law. Generalia specialibus non derogant (a general law does not nullify a specific or special
law). This is so even if the provisions of the general law are sufficiently comprehensive to
include what was set forth in the special act. The special act and the general law must stand
together, one as the law of the particular subject and the other as the law of general
application. The special law must be taken as intended to constitute an exception to, or a
qualification of, the general act or provision.
The reason for this is that the legislature, in passing a law of special
character, considers and makes special provisions for the particular
circumstances dealt with by the special law. This being so, the
legislature, by adopting a general law containing provisions repugnant
to those of the special law and without making any mention of its
intention to amend or modify such special law, cannot be deemed to
have intended an amendment, repeal or modification of the latter.
Ordinance No. 8027 is a special law since it deals specifically with a certain area described
therein (the Pandacan oil depot area) whereas Ordinance No. 8119 can be considered a
general law as it covers the entire city of Manila. ECISAD
The oil companies assert that even if Ordinance No. 8027 is a special law, the existence of
an all-encompassing repealing clause in Ordinance No. 8119 evinces an intent on the part of
the Sanggunian to repeal the earlier ordinance:
Sec. 84. Repealing Clause. — All ordinances, rules, regulations in
conflict with the provisions of this Ordinance are hereby
repealed; PROVIDED,That the rights that are vested upon the
effectivity of this Ordinance shall not be impaired.
They cited Hospicio de San Jose de Barili, Cebu City v. Department of Agrarian Reform:
The presence of such general repealing clause in a later statute clearly
indicates the legislative intent to repeal all prior inconsistent laws on
the subject matter, whether the prior law is a general law or a special
law. ..Without such a clause, a later general law will ordinarily not
repeal a prior special law on the same subject. But with such clause
contained in the subsequent general law, the prior special law will be
deemed repealed, as the clause is a clear legislative intent to bring
about that result.
This ruling in not applicable here. The repealing clause of Ordinance No. 8119 cannot be
taken to indicate the legislative intent to repeal all prior inconsistent laws on the subject
matter, including Ordinance No. 8027, a special enactment, since the aforequoted minutes
(an official record of the discussions in the Sanggunian) actually indicated the clear intent to
preserve the provisions of Ordinance No. 8027.
To summarize, the conflict between the two ordinances is more apparent than real. The two
ordinances can be reconciled. Ordinance No. 8027 is applicable to the area particularly
described therein whereas Ordinance No. 8119 is applicable to the entire City of Manila.
MANDAMUS LIES TO COMPEL RESPONDENT MAYOR TO ENFORCE
ORDINANCE NO. 8027
The oil companies insist that mandamus does not lie against respondent in consideration of
the separation of powers of the executive and judiciary. This argument is misplaced.
Indeed,
[the] Courts will not interfere by mandamus proceedings with the
legislative [or executive departments] of the government in the
 legitimate exercise of its powers, except to enforce mere ministerial
acts required by law to be performed by some officer thereof.
since this is the function of a writ of mandamus, which is the power to compel "the
performance of an act which the law specifically enjoins as a duty resulting from office,
trust or station."
They also argue that petitioners had a plain, speedy and adequate remedy to compel
respondent to enforce Ordinance No. 8027 which was to seek relief from the President of the
Philippines through the Secretary of the Department of Interior and Local Government
(DILG) by virtue of the President's power of supervision over local government units.
Again, we disagree. A party need not go first to the DILG in order to compel the
enforcement of an ordinance. This suggested process would be unreasonably long, tedious
and consequently injurious to the interests of the local government unit (LGU) and its
constituents whose welfare is sought to be protected. Besides, petitioners' resort to an
original action for mandamusbefore this Court is undeniably allowed by the Constitution.
ORDINANCE NO. 8027 IS CONSTITUTIONAL AND VALID
Having ruled that there is no impediment to the enforcement of Ordinance No. 8027, we
now proceed to make a definitive ruling on its constitutionality and validity.
The tests of a valid ordinance are well established. For an ordinance to be valid, it must not
only be within the corporate powers of the LGU to enact and be passed according to the
procedure prescribed by law, it must also conform to the following substantive
requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair
or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may
regulate trade; (5) must be general and consistent with public policy and (6) must not be
unreasonable.
THE CITY OF MANILA HAS THE POWER TO ENACT ORDINANCE
NO. 8027
Ordinance No. 8027 was passed by the Sangguniang Panlungsod of Manila in the exercise
of its police power. Police power is the plenary power vested in the legislature to make
statutes and ordinances to promote the health, morals, peace, education, good order or safety
and general welfare of the people. This power flows from the recognition that salus populi
est suprema lex (the welfare of the people is the supreme law). While police power rests
primarily with the national legislature, such power may be delegated. Section 16 of the
LGC, known as the general welfare clause, encapsulates the delegated police power to local
governments:
Section 16.General Welfare. — Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental for
its efficient and effective governance, and those which are essential to
the promotion of the general welfare. Within their respective
territorial jurisdictions, local government units shall ensure and
support, among other things, the preservation and enrichment of
culture, promote health and safety, enhance the right of the people to
a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities,
improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their
inhabitants.
LGUs like the City of Manila exercise police power through their respective legislative
bodies, in this case, the Sangguniang Panlungsod or the city council. Specifically,
the Sanggunian can enact ordinances for the general welfare of the city:
Section 458. Powers, Duties, Functions and Compensation.— (a)
The sangguniang panglungsod, as the legislative branch of the city,
shall enact ordinances, approve resolutions and appropriate funds for
the general welfare of the city and its inhabitants pursuant to Section
16 of this Code .... TICaEc
This police power was also provided for in RA 409 or the Revised Charter of the City of
Manila:
Section 18. Legislative powers. — The [City Council] shall have the
following legislative powers:
xxx xxx xxx
(kk) To enact all ordinances it may deem necessary and proper for the
sanitation and safety, the furtherance of the prosperity, and the
promotion of the morality, peace, good order, comfort, convenience,
and general welfare of the city and its inhabitants, and such others as
may be necessary to carry into effect and discharge the powers and
duties conferred by this chapter..
Specifically, the Sanggunian has the power to "reclassify land within the jurisdiction of the
city."
THE ENACTMENT OF ORDINANCE NO. 8027 IS A LEGITIMATE
EXERCISE OF POLICE POWER
As with the State, local governments may be considered as having properly exercised their
police power only if the following requisites are met: (1) the interests of the public
generally, as distinguished from those of a particular class, require its exercise and (2) the
means employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals. In short, there must be a concurrence of a lawful
subject and a lawful method.
Ordinance No. 8027 was enacted "for the purpose of promoting sound urban planning,
ensuring health, public safety and general welfare" of the residents of Manila.
TheSanggunian was impelled to take measures to protect the residents of Manila from
catastrophic devastation in case of a terrorist attack on the Pandacan Terminals. Towards
this objective, the Sanggunian reclassified the area defined in the ordinance from industrial
to commercial.
The following facts were found by the Committee on Housing, Resettlement and Urban
Development of the City of Manila which recommended the approval of the ordinance:
(1) the depot facilities contained 313.5 million liters of highly
flammable and highly volatile products which include
 petroleum gas, liquefied petroleum gas, aviation fuel,
diesel, gasoline, kerosene and fuel oil among others;
(2) the depot is open to attack through land, water or air;
(3) it is situated in a densely populated place and near Malacañang
Palace and
(4) in case of an explosion or conflagration in the depot, the fire could
spread to the neighboring communities.
The ordinance was intended to safeguard the rights to life, security and safety of all the
inhabitants of Manila and not just of a particular class. The depot is perceived, rightly or
wrongly, as a representation of western interests which means that it is a terrorist target. As
long as it there is such a target in their midst, the residents of Manila are not safe. It
therefore became necessary to remove these terminals to dissipate the threat. According to
respondent:
Such a public need became apparent after the 9/11 incident which
showed that what was perceived to be impossible to happen, to the
most powerful country in the world at that, is actually possible. The
destruction of property and the loss of thousands of lives on that
fateful day became the impetus for a public need. In the aftermath of
the 9/11 tragedy, the threats of terrorism continued [such] that it
became imperative for governments to take measures to combat their
effects.
Wide discretion is vested on the legislative authority to determine not only what the
interests of the public require but also what measures are necessary for the
protection of such interests. Clearly, the Sanggunian was in the best position to
determine the needs of its constituents.
In the exercise of police power, property rights of individuals may be subjected to restraints
and burdens in order to fulfill the objectives of the government. Otherwise stated, the
government may enact legislation that may interfere with personal liberty, property, lawful
businesses and occupations to promote the general welfare. However, the interference must
be reasonable and not arbitrary. And to forestall arbitrariness, the methods or means used to
protect public health, morals, safety or welfare must have a reasonable relation to the end in
view.
The means adopted by the Sanggunian was the enactment of a zoning ordinance which
reclassified the area where the depot is situated from industrial to commercial. A zoning
ordinance is defined as a local city or municipal legislation which logically arranges,
prescribes, defines and apportions a given political subdivision into specific land uses as
present and future projection of needs. As a result of the zoning, the continued operation of
the businesses of the oil companies in their present location will no longer be permitted. The
power to establish zones for industrial, commercial and residential uses is derived from the
police power itself and is exercised for the protection and benefit of the residents of a
locality. Consequently, the enactment of Ordinance No. 8027 is within the power of
the Sangguniang Panlungsod of the City of Manila and any resulting burden on those
affected cannot be said to be unjust:
There can be no doubt that the City of Manila has the power to divide
its territory into residential and industrial zones, and to prescribe that
offensive and unwholesome trades and occupations are to be
established exclusively in the latter zone.
"The benefits to be derived by cities adopting such regulations
(zoning) may be summarized as follows: They attract a desirable and
assure a permanent citizenship; they foster pride in and attachment to
the city; they promote happiness and contentment; they stabilize the
use and value of property and promote the peace, [tranquility],and
good order of the city. We do not hesitate to say that the attainment of
these objects affords a legitimate field for the exercise of the police
power. He who owns property in such a district is not deprived of its
use by such regulations. He may use it for the purposes to which the
section in which it is located is dedicated. That he shall not be
permitted to use it to the desecration of the community constitutes no
unreasonable or permanent hardship and results in no unjust
burden." ACTaDH
xxx xxx xxx
"The 14th Amendment protects the citizen in his right to engage in
any lawful business, but it does not prevent legislation intended to
regulate useful occupations which, because of their nature or location,
may prove injurious or offensive to the public."
We entertain no doubt that Ordinance No. 8027 is a valid police power measure because
there is a concurrence of lawful subject and lawful method.
ORDINANCE NO. 8027 IS NOT UNFAIR, OPPRESSIVE OR CONFISCATORY
WHICH AMOUNTS TO TAKING WITHOUT COMPENSATION
According to the oil companies, Ordinance No. 8027 is unfair and oppressive as it does not
only regulate but also absolutely prohibits them from conducting operations in the City of
Manila. Respondent counters that this is not accurate since the ordinance merely prohibits
the oil companies from operating their businesses in the Pandacan area.
Indeed, the ordinance expressly delineated in its title and in Section 1 what it pertained to.
Therefore, the oil companies' contention is not supported by the text of the ordinance.
Respondent succinctly stated that:
The oil companies are not forbidden to do business in the City of
Manila. They may still very well do so, except that their oil storage
facilities are no longer allowed in the Pandacan area. Certainly, there
are other places in the City of Manila where they can conduct this
specific kind of business. Ordinance No. 8027 did not render the oil
companies illegal. The assailed ordinance affects the oil companies
business only in so far as the Pandacan area is concerned.
The oil companies are not prohibited from doing business in other appropriate zones
in Manila. The City of Manila merely exercised its power to regulate the businesses
and industries in the zones it established:
 As to the contention that the power to regulate does not include the
power to prohibit, it will be seen that the ordinance copied above does
not prohibit the installation of motor engines within the municipality
of Cabanatuan but only within the zone therein fixed. If the municipal
council of Cabanatuan is authorized to establish said zone, it is also
authorized to provide what kind of engines may be installed therein.
In banning the installation in said zone of all engines not excepted in
the ordinance, the municipal council of Cabanatuan did no more than
regulate their installation by means of zonification.
The oil companies aver that the ordinance is unfair and oppressive because they have
invested billions of pesos in the depot. Its forced closure will result in huge losses in income
and tremendous costs in constructing new facilities.
Their contention has no merit. In the exercise of police power, there is a limitation on or
restriction of property interests to promote public welfare which involves no compensable
taking. Compensation is necessary only when the state's power of eminent domain is
exercised. In eminent domain, property is appropriated and applied to some public purpose.
Property condemned under the exercise of police power, on the other hand, is noxious or
intended for a noxious or forbidden purpose and, consequently, is not compensable. The
restriction imposed to protect lives, public health and safety from danger is not a taking. It is
merely the prohibition or abatement of a noxious use which interferes with paramount rights
of the public.
Property has not only an individual function, insofar as it has to provide for the needs of the
owner, but also a social function insofar as it has to provide for the needs of the other
members of society. The principle is this:
Police power proceeds from the principle that every holder of
property, however absolute and unqualified may be his title, holds it
under the implied liability that his use of it shall not be injurious to
the equal enjoyment of others having an equal right to the enjoyment
of their property, nor injurious to the right of the community. Rights
of property, like all other social and conventional rights, are subject to
reasonable limitations in their enjoyment as shall prevent them from
being injurious, and to such reasonable restraints and regulations
established by law as the legislature, under the governing and
controlling power vested in them by the constitution, may think
necessary and expedient.
In the regulation of the use of the property, nobody else acquires the use or interest therein,
hence there is no compensable taking. In this case, the properties of the oil companies and
other businesses situated in the affected area remain theirs. Only their use is restricted
although they can be applied to other profitable uses permitted in the commercial zone.
ORDINANCE NO. 8027 IS NOT PARTIAL AND DISCRIMINATORY
The oil companies take the position that the ordinance has discriminated against and singled
out the Pandacan Terminals despite the fact that the Pandacan area is congested with
buildings and residences that do not comply with the National Building Code, Fire Code and
Health and Sanitation Code.
This issue should not detain us for long. An ordinance based on reasonable classification
does not violate the constitutional guaranty of the equal protection of the law. The
requirements for a valid and reasonable classification are: (1) it must rest on substantial
distinctions; (2) it must be germane to the purpose of the law; (3) it must not be limited to
existing conditions only and (4) it must apply equally to all members of the same class.
The law may treat and regulate one class differently from another class provided there are
real and substantial differences to distinguish one class from another. Here, there is a
reasonable classification. We reiterate that what the ordinance seeks to prevent is a
catastrophic devastation that will result from a terrorist attack. Unlike the depot, the
surrounding community is not a high-value terrorist target. Any damage caused by fire or
explosion occurring in those areas would be nothing compared to the damage caused by a
fire or explosion in the depot itself. Accordingly, there is a substantial distinction. The
enactment of the ordinance which provides for the cessation of the operations of these
terminals removes the threat they pose. Therefore it is germane to the purpose of the
ordinance. The classification is not limited to the conditions existing when the ordinance
was enacted but to future conditions as well. Finally, the ordinance is applicable to all
businesses and industries in the area it delineated.
ORDINANCE NO. 8027 IS NOT INCONSISTENT WITH RA 7638
AND RA 8479
The oil companies and the DOE assert that Ordinance No. 8027 is unconstitutional because
it contravenes RA 7638 (DOE Act of 1992) and RA 8479 (Downstream Oil Industry
Deregulation Law of 1998). They argue that through RA 7638, the national legislature
declared it a policy of the state "to ensure a continuous, adequate, and economic supply of
energy" and created the DOE to implement this policy. Thus, under Section 5 (c), DOE is
empowered to "establish and administer programs for the exploration, transportation,
marketing, distribution, utilization, conservation, stockpiling, and storage of energy
resources". Considering that the petroleum products contained in the Pandacan Terminals
are major and critical energy resources, they conclude that their administration, storage,
distribution and transport are of national interest and fall under DOE's primary and exclusive
jurisdiction.
They further assert that the terminals are necessary for the delivery of immediate and
adequate supply of oil to its recipients in the most economical way. Local legislation such
as Ordinance No. 8027 (which effectively calls for the removal of these terminals) allegedly
frustrates the state policy of ensuring a continuous, adequate, and economic supply of
energy expressed in RA 7638, a national law. Likewise, the ordinance thwarts the
determination of the DOE that the terminals' operations should be merely scaled down and
not discontinued. They insist that this should not be allowed considering that it has a
nationwide economic impact and affects public interest transcending the territorial
jurisdiction of the City of Manila.
According to them, the DOE's supervision over the oil industry under RA 7638 was
subsequently underscored by RA 8479, particularly in Section 7 thereof:
SECTION 7. Promotion of Fair Trade Practices. — The Department
of Trade and Industry (DTI) and DOE shall take all measures to
promote fair trade and prevent cartelization, monopolies,
combinations in restraint of trade, and any unfair competition in the
Industry as defined in Article 186 of the Revised Penal Code, and
Articles 168 and 169 of Republic Act No. 8293, otherwise known as
 the "Intellectual Property Rights Law". The DOE shall continue
to encourage certain practices in the Industry which serve the
public interest and are intended to achieve efficiency and cost
reduction, ensure continuous supply of petroleum products,and
enhance environmental protection. These practices may include
borrow-and-loan agreements, rationalized depot and manufacturing
operations, hospitality agreements, joint tanker and pipeline
utilization, and joint actions on oil spill control and fire prevention.
Respondent counters that DOE's regulatory power does not preclude LGUs from exercising
their police power.
Indeed, ordinances should not contravene existing statutes enacted by Congress. The
rationale for this was clearly explained in Magtajas vs. Pryce Properties Corp., Inc.:
The rationale of the requirement that the ordinances should not
contravene a statute is obvious. Municipal governments are only
agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the
national lawmaking body. The delegate cannot be superior to the
principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of
Congress, from which they have derived their power in the first place,
and negate by mere ordinance the mandate of the statute.
"Municipal corporations owe their origin to, and derive their powers
and rights wholly from the legislature. It breathes into them the breath
of life, without which they cannot exist. As it creates, so it may
destroy. As it may destroy, it may abridge and control. Unless there is
some constitutional limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so great a folly and so
great a wrong, sweep from existence all of the municipal corporations
in the State, and the corporation could not prevent it. We know of no
limitation on the right so far as to the corporation themselves are
concerned. They are, so to phrase it, the mere tenants at will of the
legislature."
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in
the Constitution strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The
power to create still includes the power to destroy. The power to grant
still includes the power to withhold or recall. True, there are certain
notable innovations in the Constitution, like the direct conferment on
the local government units of the power to tax, which cannot now be
withdrawn by mere statute. By and large, however, the national
legislature is still the principal of the local government units, which
cannot defy its will or modify or violate it. 155
The question now is whether Ordinance No. 8027 contravenes RA 7638 and RA 8479. It
does not.
Under Section 5 (c) of RA 7638, DOE was given the power to "establish and administer
programs for the exploration, transportation, marketing, distribution, utilization,
conservation, stockpiling, and storage of energy resources". On the other hand, under
Section 7 of RA 8749, the DOE "shall continue to encourage certain practices in the
Industry which serve the public interest and are intended to achieve efficiency and cost
reduction, ensure continuous supply of petroleum products." Nothing in these statutes
prohibits the City of Manila from enacting ordinances in the exercise of its police
power. IDESTH
The principle of local autonomy is enshrined in and zealously protected under
the Constitution. In Article II, Section 25 thereof, the people expressly adopted the
following policy:
Section 25. The State shall ensure the autonomy of local
governments.
An entire article (Article X) of the Constitution has been devoted to guaranteeing and
promoting the autonomy of LGUs. The LGC was specially promulgated by Congress to
ensure the autonomy of local governments as mandated by the Constitution:
Sec. 2. Declaration of Policy. — (a) It is hereby declared the policy
of the State that the territorial and political subdivisions of the
State shall enjoy genuine and meaningful local autonomy to
enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the
attainment of national goals.Toward this end, the State shall provide
for a more responsive and accountable local government structure
instituted through a system of decentralization whereby local
government units shall be given more powers, authority,
responsibilities, and resources. The process of decentralization shall
proceed from the National Government to the local government
units.
We do not see how the laws relied upon by the oil companies and DOE stripped the City of
Manila of its power to enact ordinances in the exercise of its police power and to reclassify
the land uses within its jurisdiction. To guide us, we shall make a brief survey of our
decisions where the police power measure of the LGU clashed with national laws.
In Tan v. Pereña, the Court ruled that Ordinance No. 7 enacted by the municipality of
Daanbantayan, Cebu allowing the operation of three cockpits was invalid for violating PD
449 (or the Cockfighting Law of 1974) which permitted only one cockpit per municipality.
In Batangas CATV, Inc. v. Court of Appeals, the Sangguniang Panlungsod of Batangas City
enacted Resolution No. 210 granting Batangas CATV, Inc. a permit to operate a cable
television (CATV) system in Batangas City. The Court held that the LGU did not have the
authority to grant franchises to operate a CATV system because it was the National
Telecommunications Commission (NTC) that had the power under EO Nos. 205 and 436 to
regulate CATV operations. EO 205 mandated the NTC to grant certificates of authority to
CATV operators while EO 436 vested on the NTC the power to regulate and supervise the
CATV industry. aEHADT
In Lina, Jr. v. Paño, we held that Kapasiyahan Bilang 508, Taon 1995 of the Sangguniang
Panlalawigan of Laguna could not be used as justification to prohibit lotto in the
municipality of San Pedro, Laguna because lotto was duly authorized by RA 1169, as
amended by BP 42. This law granted a franchise to the Philippine Charity Sweepstakes
Office and allowed it to operate lotteries.
In Magtajas v. Pryce Properties Corp., Inc., the Sangguniang Panlungsod of Cagayan de
Oro City passed Ordinance Nos. 3353 and 3375-93 prohibiting the operation of casinos in
the city. We ruled that these ordinances were void for contravening PD 1869 or the charter
of the Philippine Amusements and Gaming Corporation which had the power to operate
casinos.
The common dominator of all of these cases is that the national laws were clearly and
expressly in conflict with the ordinances/resolutions of the LGUs. The inconsistencies were
so patent that there was no room for doubt. This is not the case here.
The laws cited merely gave DOE general powers to "establish and administer programs for
the exploration, transportation, marketing, distribution, utilization, conservation, stockpiling,
and storage of energy resources" and "to encourage certain practices in the [oil] industry
which serve the public interest and are intended to achieve efficiency and cost reduction,
ensure continuous supply of petroleum products".These powers can be exercised without
emasculating the LGUs of the powers granted them. When these ambiguous powers are
pitted against the unequivocal power of the LGU to enact police power and zoning
ordinances for the general welfare of its constituents, it is not difficult to rule in favor of the
latter. Considering that the powers of the DOE regarding the Pandacan Terminals are not
categorical, the doubt must be resolved in favor of the City of Manila:
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;
xxx xxx xxx
(c) The general welfare provisions in this Code shall be
liberally interpreted to give more powers to local
government units in accelerating economic development
and upgrading the quality of life for the people in the
community ....
The least we can do to ensure genuine and meaningful local autonomy is not to force an
interpretation that negates powers explicitly granted to local governments. To rule against
the power of LGUs to reclassify areas within their jurisdiction will subvert the principle of
local autonomy guaranteed by the Constitution. As we have noted in earlier decisions, our
national officials should not only comply with the constitutional provisions on local
autonomy but should also appreciate the spirit and liberty upon which these provisions are
based.
THE DOE CANNOT EXERCISE THE POWER OF CONTROL OVER LGUs
Another reason that militates against the DOE's assertions is that Section 4 of
Article X of the Constitution confines the President's power over LGUs to one of general
supervision:
SECTION 4. The President of the Philippines shall exercise general
supervision over local governments. ....
Consequently, the Chief Executive or his or her alter egos, cannot exercise the power of
control over them. 162 Control and supervision are distinguished as follows:
[Supervision] means overseeing or the power or authority of an
officer to see that subordinate officers perform their duties. If the
latter fail or neglect to fulfill them, the former may take such action or
step as prescribed by law to make them perform their duties. Control,
on the other hand, means the power of an officer to alter or modify or
nullify or set aside what a subordinate officer ha[s] done in the
performance of his duties and to substitute the judgment of the former
for that of the latter. 163
Supervisory power, when contrasted with control, is the power of mere
oversight over an inferior body; it does not include any restraining authority over such
body. 164 It does not allow the supervisor to annul the acts of the subordinate. 165 Here,
what the DOE seeks to do is to set aside an ordinance enacted by local officials, a power
that not even its principal, the President, has. This is because:
Under our present system of government, executive power is vested
in the President. The members of the Cabinet and other executive
officials are merely alter egos. As such, they are subject to the power
of control of the President, at whose will and behest they can be
removed from office; or their actions and decisions changed,
suspended or reversed. In contrast, the heads of political subdivisions
are elected by the people. Their sovereign powers emanate from the
electorate, to whom they are directly accountable. By constitutional
fiat, they are subject to the President's supervision only, not control,
so long as their acts are exercised within the sphere of their legitimate
powers. By the same token, the President may not withhold or alter
any authority or power given them by the Constitution and the law.
Thus, the President and his or her alter egos, the department heads, cannot interfere with the
activities of local governments, so long as they act within the scope of their authority.
Accordingly, the DOE cannot substitute its own discretion for the discretion exercised by
the sanggunian of the City of Manila. In local affairs, the wisdom of local officials must
prevail as long as they are acting within the parameters of the Constitution and the law.
ORDINANCE NO. 8027 IS NOT INVALID FOR FAILURE TO COMPLY
WITH RA 7924 AND EO 72
The oil companies argue that zoning ordinances of LGUs are required to be submitted to the
Metropolitan Manila Development Authority (MMDA) for review and if found to be in
compliance with its metropolitan physical framework plan and regulations, it shall endorse
the same to the Housing and Land Use Regulatory Board (HLURB). Their basis is Section 3
(e) ofRA 7924:
SECTION 3. Scope of MMDA Services. — Metro-wide services
under the jurisdiction of the MMDA are those services which have
metro-wide impact and transcend local political boundaries or entail
huge expenditures such that it would not be viable for said services to
be provided by the individual [LGUs] comprising Metropolitan
Manila. These services shall include:
xxx xxx xxx
(e) Urban renewal, zoning, and land use planning,and shelter
services which include the formulation, adoption and implementation
of policies, standards, rules and regulations, programs and projects to
rationalize and optimize urban land use and provide direction to urban
growth and expansion, the rehabilitation and development of slum
and blighted areas, the development of shelter and housing facilities
and the provision of necessary social services thereof. (Emphasis
supplied)
Reference was also made to Section 15 of its implementing rules:
Section 15. Linkages with HUDCC, HLURB, NHA, LGUs and Other
National Government Agencies Concerned on Urban Renewal,
Zoning and Land Use Planning and Shelter Services. Within the
context of the National Housing and Urban Development Framework,
and pursuant to the national standards, guidelines and regulations
formulated by the Housing and Land Use Regulatory Board
[HLURB] on land use planning and zoning, the [MMDA] shall
prepare a metropolitan physical framework plan and regulations
which shall complement and translate the socio-economic
development plan for Metro Manila into physical or spatial terms, and
provide the basis for the preparation, review, integration and
implementation of local land use plans and zoning, ordinance of cities
and municipalities in the area.
Said framework plan and regulations shall contain, among others,
planning and zoning policies and procedures that shall be observed by
local government units in the preparation of their own plans and
ordinances pursuant to Section 447 and 458 of RA 7160, as well as
the identification of sites and projects that are considered to be of
national or metropolitan significance. aADSIc
Cities and municipalities shall prepare their respective land use
plans and zoning ordinances and submit the same for review and
integration by the [MMDA] and indorsement to HLURB in
accordance with Executive Order No. 72 and other pertinent
laws.
In the preparation of a Metropolitan Manila physical framework plan
and regulations, the [MMDA] shall coordinate with the Housing and
Urban Development Coordinating Council, HLURB, the National
Housing Authority, Intramuros Administration, and all other agencies
of the national government which are concerned with land use and
zoning, urban renewal and shelter services. (Emphasis supplied)
They also claim that EO 72 provides that zoning ordinances of cities and
municipalities of Metro Manila are subject to review by the HLURB to ensure
compliance with national standards and guidelines. They cite Section 1, paragraphs (c),
(e), (f) and (g):
SECTION 1. Plan formulation or updating. —
xxx xxx xxx
(c) Cities and municipalities of Metropolitan Manila shall continue to
formulate or update their respective comprehensive land use plans,
in accordance with the land use planning and zoning standards and
guidelines prescribed by the HLURB pursuant to EO 392, S. of 1990,
and other pertinent national policies.
xxx xxx xxx
(e) Pursuant to LOI 729, S. of 1978, EO 648, S. of 1981, and RA
7279, the comprehensive land use plans of provinces, highly
urbanized cities and independent component cities shall be reviewed
and ratified by the HLURB to ensure compliance with national
standards and guidelines.
(f) Pursuant to EO 392, S. of 1999, the comprehensive land use
plans of cities and municipalities of Metropolitan Manila shall be
reviewed by the HLURB to ensure compliance with national
standards and guidelines.
(g) Said review shall be completed within three (3) months upon
receipt thereof otherwise, the same shall be deemed consistent with
law, and, therefore, valid. (Emphasis supplied)
They argue that because Ordinance No. 8027 did not go through this review process, it is
invalid.
The argument is flawed.
RA 7942 does not give MMDA the authority to review land use plans and zoning
ordinances of cities and municipalities. This was only found in its implementing rules which
made a reference to EO 72. EO 72 expressly refers to comprehensive land use plans
(CLUPs) only. Ordinance No. 8027 is admittedly not a CLUP nor intended to be one.
Instead, it is a very specific ordinance which reclassified the land use of a defined area in
order to prevent the massive effects of a possible terrorist attack. It is Ordinance No. 8119
which was explicitly formulated as the "Manila [CLUP] and Zoning Ordinance of 2006."
CLUPs are the ordinances which should be submitted to the MMDA for integration in its
metropolitan physical framework plan and approved by the HLURB to ensure that they
conform with national guidelines and policies.
Moreover, even assuming that the MMDA review and HLURB ratification are necessary,
the oil companies did not present any evidence to show that these were not complied with.
In accordance with the presumption of validity in favor of an ordinance, its constitutionality
or legality should be upheld in the absence of proof showing that the procedure prescribed
by law was not observed. The burden of proof is on the oil companies which already had
notice that this Court was inclined to dispose of all the issues in this case. Yet aside from
their bare assertion, they did not present any certification from the MMDA or the HLURB
nor did they append these to their pleadings. Clearly, they failed to rebut the presumption of
validity of Ordinance No. 8027.
CONCLUSION
Essentially, the oil companies are fighting for their right to property. They allege that they
stand to lose billions of pesos if forced to relocate. However, based on the hierarchy of
constitutionally protected rights, the right to life enjoys precedence over the right to
property. The reason is obvious: life is irreplaceable, property is not. When the state or
LGU's exercise of police power clashes with a few individuals' right to property, the former
should prevail.
Both law and jurisprudence support the constitutionality and validity of Ordinance No.
8027. Without a doubt, there are no impediments to its enforcement and implementation.
Any delay is unfair to the inhabitants of the City of Manila and its leaders who have
categorically expressed their desire for the relocation of the terminals. Their power to chart
and control their own destiny and preserve their lives and safety should not be curtailed by
the intervenors' warnings of doomsday scenarios and threats of economic disorder if the
ordinance is enforced.
Secondary to the legal reasons supporting the immediate implementation of Ordinance No.
8027 are the policy considerations which drove Manila's government to come up with such a
measure:
...[The] oil companies still were not able to allay the apprehensions of
the city regarding the security threat in the area in general. No
specific action plan or security measures were presented that would
prevent a possible large-scale terrorist or malicious attack especially
an attack aimed at Malacañang. The measures that were installed
were more directed towards their internal security and did not include
the prevention of an external attack even on a bilateral level of
cooperation between these companies and the police and military.
xxx xxx xxx
It is not enough for the city government to be told by these oil
companies that they have the most sophisticated fire-fighting
equipments and have invested millions of pesos for these equipments.
The city government wants to be assured that its residents are safe at
any time from these installations, and in the three public hearings and
in their position papers, not one statement has been said that indeed
the absolute safety of the residents from the hazards posed by these
installations is assured. 173
We are also putting an end to the oil companies' determination to prolong their
stay in Pandacan despite the objections of Manila's residents. As early as October 2001,
the oil companies signed a MOA with the DOE obliging themselves to:
...undertake a comprehensive and comparative study ...[which] shall
include the preparation of a Master Plan, whose aim is to determine
the scope and timing of the feasible location of the Pandacan oil
terminals and all associated facilities and infrastructure including
government support essential for the relocation such as the necessary
transportation infrastructure, land and right of way acquisition,
resettlement of displaced residents and environmental and social
acceptability which shall be based on mutual benefit of the Parties
and the public.
Now that they are being compelled to discontinue their operations in the Pandacan
Terminals, they cannot feign unreadiness considering that they had years to prepare for this
eventuality.
Just the same, this Court is not about to provoke a crisis by ordering the immediate
relocation of the Pandacan Terminals out of its present site. The enforcement of a decision
of this Court, specially one with far-reaching consequences, should always be within the
bounds of reason, in accordance with a comprehensive and well-coordinated plan, and
within a time-frame that complies with the letter and spirit of our resolution. To this end, the
oil companies have no choice but to obey the law.
A WARNING TO PETITIONERS' COUNSEL
We draw the attention of the parties to a matter of grave concern to the legal profession.
Petitioners and their counsel, Atty. Samson Alcantara, submitted a four-page memorandum
that clearly contained neither substance nor research. It is absolutely insulting to this Court.
We have always tended towards judicial leniency, temperance and compassion to those who
suffer from a wrong perception of what the majesty of the law means. But for a member of
the bar, an officer of the court, to file in this Court a memorandum of such unacceptable
quality is an entirely different matter.
It is indicative less of a personal shortcoming or contempt of this Court and more of a
lawyer's sorry descent from a high sense of duty and responsibility. As a member of the bar
and as an officer of the court, a lawyer ought to be keenly aware that the chief safeguard of
the body politic is respect for the law and its magistrates.
There is nothing more effective than the written word by which counsel can persuade this
Court of the righteousness of his cause. For if truth were self-evident, a memorandum would
be completely unnecessary and superfluous.
The inability of counsel to prepare a memorandum worthy of this Court's consideration is
an ejemplo malo to the legal profession as it betrays no genuine interest in the cause he
claims to espouse. Or did counsel think he can earn his moment of glory without the hard
work and dedication called for by his petition?
A FINAL WORD
On Wednesday, January 23, 2008, a defective tanker containing 2,000 liters of gasoline and
14,000 liters of diesel exploded in the middle of the street a short distance from the exit gate
of the Pandacan Terminals, causing death, extensive damage and a frightening conflagration
in the vicinity of the incident. Need we say anything about what will happen if it is the
estimated 162 to 211 million liters of petroleum products in the terminal complex which
blow up?
WHEREFORE, the motions for leave to intervene of Chevron Philippines, Inc.,Petron
Corporation and Pilipinas Shell Petroleum Corporation, and the Republic of the Philippines,
represented by the Department of Energy, are hereby GRANTED. Their respective motions
for reconsideration are hereby DENIED. The Regional Trial Court, Manila, Branch 39 is
ORDERED to DISMISS the consolidated cases of Civil Case No. 03-106377 and Civil Case
No. 03-106380.
We reiterate our order to respondent Mayor of the City of Manila to enforce Ordinance No.
8027. In coordination with the appropriate agencies and other parties involved, respondent
Mayor is hereby ordered to oversee the relocation and transfer of the Pandacan Terminals
out of its present site.
To ensure the orderly transfer, movement and relocation of assets and personnel, the
intervenors Chevron Philippines, Inc.,Petron Corporation and Pilipinas Shell Petroleum
Corporation shall, within a non-extendible period of ninety (90) days, submit to the
Regional Trial Court of Manila, Branch 39, the comprehensive plan and relocation schedule
which have allegedly been prepared. The presiding judge of Manila RTC, Branch 39 will
monitor the strict enforcement of this resolution.
Atty. Samson Alcantara is hereby ordered to explain within five (5) days from notice why he
should not be disciplined for his refusal, or inability, to file a memorandum worthy of the
consideration of this Court.Treble costs against petitioners' counsel, Atty. Samson
Alcantara.
TAXING POWER
MANILA INTL AIRPORT AUTHORITY VS CA
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino
International Airport (NAIA) Complex in Parañaque 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. 909 1 and 298 2 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 Parañaque 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 Parañaque 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 P624,506,725.42
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 P49,115.00
On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and
warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque
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 Parañaque 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 Parañaque posted notices of auction sale at the
Barangay Halls of Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public
market of Barangay La Huerta; and in the main lobby of the Parañaque City Hall. The City of
Parañaque 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 Parañaque 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 Parañaque, City Mayor of
Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer of Parañaque, and the
City Assessor of Parañaque ("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. DTSaIc
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 Parañaque, 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.
Marcos 8 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 Parañaque, 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 government-owned 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. — . . .
(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: . . . . (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 Charter 9 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 Code 10 defines a stock corporation as one whose "capital stock
is divided into shares and . . . authorized to distribute to the holders of such shares
dividends . . . ." 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. –– . . .
(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. . . . (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 authority 13 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 government-owned 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:
xxx xxx 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)
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. Whilethe 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). TAScID
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
inMunicipality 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:
. . . 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 Parañaque 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 encumber 26 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;
xxx xxx xxx. (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. DSAICa
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.
—...
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.
xxx xxx xxx.
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 . . . 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;
xxx xxx xxx. (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 . . . ." 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) ESacHC
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:
xxx xxx xxx
(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:
. . . Under Section 193, the exemption is limited to (a) local water
districts; (b) cooperatives duly registered under Republic Act No.
6938; and (c) non-stock 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, 37Cebu 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.
 xxx xxx xxx. (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:
. . . 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 assumesthat 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 presented a 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:
xxx xxx xxx
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 . . . 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. EcSCHD
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.
xxx xxx xxx
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 Bank 44 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. Government-owned 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 ofthe 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) DAEcIS
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 government-owned 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 fees 47 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. — . . .
(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. . . . (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 . . . 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 government-owned
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 Parañaque.
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 . . . 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 Parañaque. We declare VOID all the
real estate tax assessments, including the final notices of real estate tax delinquencies, issued
by the City of Parañaque 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.
MACTAN CEBU INTL AIRPORT AUTHORITY VS MARCOS
For review under Rule 45 of the Rules of Court on a pure question of law are
the decision of 22 March 1995 1 of the Regional Trial Court (RTC) of Cebu City, Branch
20, dismissing the petition for declaratory relief in Civil Case No. CEB-16900, entitled
"Mactan Cebu International Airport Authority vs. City of Cebu," and its order of 4 May
1995 2 denying the motion to reconsider the decision.
We resolved to give due course to this petition for it raises issues dwelling on
the scope of the taxing power of local government units and the limits of tax exemption
privileges of government-owned and controlled corporations.
The uncontradicted factual antecedents are summarized in the instant petition
as follows:
Petitioner Mactan Cebu International Airport Authority (MCIAA) was created
by virtue of Republic Act No. 6958, mandated to "principally undertake the economical,
efficient and effective control, management and supervision of the Mactan International
Airport in the Province of Cebu and the Lahug Airport in Cebu City, . . . and such other
airports as may be established in the Province of Cebu . . ." (Sec. 3, RA 6958). It is also
mandated to:
a) encourage, promote and develop international and domestic air
traffic in the Central Visayas and Mindanao regions as a
means of making the regions centers of international trade
and tourism, and accelerating the development of the means
of transportation and communication in the country; and,
b) upgrade the services and facilities of the airports and to formulate
internationally acceptable standards of airport
accommodation and service.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of
exemption from payment of realty taxes in accordance with Section 14 of its Charter:
Sec. 14. Tax Exemptions. — The Authority shall be exempt from realty
taxes imposed by the National Government or any of its political
subdivisions, agencies and instrumentalities . . ..
On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge,
Office of the Treasurer of the City of Cebu, demanded payment for realty taxes on several
parcels of land belonging to the petitioner (Lot Nos. 913-G, 743, 88 SWO, 948-A, 989-A,
474, 109(931), I-M, 918, 919, 913-F, 941, 942, 947, 77 Psd., 746 and 991-A), located at
Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the total amount of
P2,229,078.79.
Petitioner objected to such demand for payment as baseless and unjustified,
claiming in its favor the aforecited Section 14 of RA 6958 which exempts it from payment
of realty taxes. It was also asserted that it is an instrumentality of the government
performing governmental functions, citing Section 133 of the Local Government Code of
1991 which puts limitations on the taxing powers of local government units:
Section 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:
a) . . .
xxx xxx xxx
o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units. (italics
supplied)
Respondent City refused to cancel and set aside petitioner's realty tax account,
insisting that the MCIAA is a government-controlled corporation whose tax exemption
privilege has been withdrawn by virtue of Sections 193 and 234 of the Local Government
Code that took effect on January 1, 1992:
Section 193. Withdrawal of Tax Exemption Privilege. — 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 RA No.
6938, non-stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity of this Code.
(italics supplied)
xxx xxx xxx
Section 234. Exemptions from Real Property Taxes. — . . .
(a) . . .
xxx xxx xxx
(e) . . .
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 government-owned or controlled
corporations are hereby withdrawn upon the effectivity of
this Code.
As the City of Cebu was about to issue a warrant of levy against the
properties of petitioner, the latter was compelled to pay its tax account
"under protest" and thereafter filed a Petition for Declaratory Relief
with the Regional Trial Court of Cebu, Branch 20, on December 29,
1994. MCIAA basically contended that the taxing powers of local
 government units do not extend to the levy of taxes or fees of any kind
on an instrumentality of the national government. Petitioner insisted
that while it is indeed a government-owned corporation, it nonetheless
stands on the same footing as an agency or instrumentality of the
national government by the very nature of its powers and functions.
Respondent City, however, asserted that MCIAA is not an
instrumentality of the government but merely a government-owned
corporation performing proprietary functions. As such, all exemptions
previously granted to it were deemed withdrawn by operation of law,
as provided under Sections 193 and 234 of the Local Government
Code when it took effect on January 1, 1992. 3
The petition for declaratory relief was docketed as Civil Case No. CEB-16900.
In its decision of 22 March 1995, 4 the trial court dismissed the petition in light
of its findings, to wit:
A close reading of the New Local Government Code of 1991 or RA
7160 provides the express cancellation and withdrawal of exemption
of taxes by government-owned and controlled corporation per Sections
after the effectivity of said Code on January 1, 1992, to wit: [proceeds
to quote Sections 193 and 234]
Petitioners claimed that its real properties assessed by respondent City
Government of Cebu are exempted from paying realty taxes in view of
the exemption granted under RA 6958 to pay the same (citing Section
14 of RA 6958).
However, RA 7160 expressly provides that "All general and special
laws, acts, city charters, decrees [sic], executive orders, proclamations
and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed
or modified accordingly." (/f/, Section 534, RA 7160).
With that repealing clause in RA 7160, it is safe to infer and state that
the tax exemption provided for in RA 6958 creating petitioner had been
expressly repealed by the provisions of the NewLocal Government
Code of 1991.
So that petitioner in this case has to pay the assessed realty tax of its
properties effective after January 1, 1992 until the present.
This Court's ruling finds expression to give impetus and meaning to the
overall objectives of the New Local Government Code of 1991, RA
7160. "It is hereby declared the policy of the State that the territorial
and political subdivisions of the State shall enjoy genuine and
meaningful local autonomy to enable them to attain their fullest
development as self-reliant communities and make them more effective
partners in the attainment of national goals. Toward this end, the State
shall provide for a more responsive and accountable local government
structure instituted through a system of decentralization whereby local
government units shall be given more powers, authority,
responsibilities, and resources. The process of decentralization shall
proceed from the national government to the local government units. .
. ." 5
Its motion for reconsideration having been denied by the trial court in its 4 May
1995 order, the petitioner filed the instant petition based on the following assignment of
errors:
I. RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT
THE PETITIONER IS VESTED WITH GOVERNMENT
POWERS AND FUNCTIONS WHICH PLACE IT IN THE
SAME CATEGORY AS AN INSTRUMENTALITY OR
AGENCY OF THE GOVERNMENT.
II. RESPONDENT JUDGE ERRED IN RULING THAT
PETITIONER IS LIABLE TO PAY REAL PROPERTY
TAXES TO THE CITY OF CEBU.
Anent the first assigned error, the petitioner asserts that although it is a
government-owned or controlled corporation, it is mandated to perform functions in the
same category as an instrumentality of Government. An instrumentality of Government is
one created to perform governmental functions primarily to promote certain aspects of the
economic life of the people. 6 Considering its task "not merely to efficiently operate and
manage the Mactan-Cebu International Airport, but more importantly, to carry out the
Government policies of promoting and developing the Central Visayas and Mindanao
regions as centers of international trade and tourism, and accelerating the development of
the means of transportation and communication in the country," 7 and that it is an attached
agency of the Department of Transportation and Communication (DOTC), 8 the petitioner
"may stand in [sic] the same footing as an agency or instrumentality of the national
government." Hence, its tax exemption privilege under Section 14 of its Charter "cannot
be considered withdrawn with the passage of theLocal Government Code of
1991 (hereinafter LGC) because Section 133 thereof specifically states that the 'taxing
powers of local government units shall not extend to the levy of taxes or fees or charges of
any kind on the national government, its agencies and instrumentalities.'"
As to the second assigned error, the petitioner contends that being an
instrumentality of the National Government, respondent City of Cebu has no power nor
authority to impose realty taxes upon it in accordance with the aforesaid Section 133 of
the LGC, as explained in Basco vs. Philippine Amusement and Gaming Corporation: 9
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 stock
are owned by the National Government. . . .
PAGCOR has a dual role, to operate and 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. cdtai
 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. 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 USA 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)
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. (italics
supplied)
It then concludes that the respondent Judge "cannot therefore correctly say that
the questioned provisions of the Code do not contain any distinction between a government
corporation performing governmental functions as against one performing merely
proprietary ones such that the exemption privilege withdrawn under the said Code would
apply to allgovernment corporations." For it is clear from Section 133, in relation to Section
234, of the LGC that the legislature meant to exclude instrumentalities of the national
government from the taxing powers of the local government units. cdasia
In its comment, respondent City of Cebu alleges that as a local government unit
and a political subdivision, it has the power to impose, levy, assess, and collect taxes within
its jurisdiction. Such power is guaranteed by the Constitution 10 and enhanced further by
the LGC. While it may be true that under its Charter the petitioner was exempt from the
payment of realty taxes, 11 this exemption was withdrawn by Section 234 of the LGC. In
response to the petitioner's claim that such exemption was not repealed because being an
instrumentality of the National Government, Section 133 of the LGC prohibits local
government units from imposing taxes, fees, or charges of any kind on it, respondent City
of Cebu points out that the petitioner is likewise a government-owned corporation, and
Section 234 thereof does not distinguish between government-owned or controlled
corporations performing governmental and purely proprietary functions. Respondent City
of Cebu urges this Court to apply by analogy its ruling that the Manila International Airport
Authority is a government-owned corporation, 12 and to reject the application
of Basco because it was "promulgated . . . before the enactment and the signing into law
of R.A. No. 7160," and was not, therefore, decided "in the light of the spirit and intention
of the framers of" the said law.
As a general rule, the power to tax is an incident of sovereignty and is unlimited
in its range, acknowledging in its very nature no limits, so that security against its abuse is
to be found only in the responsibility of the legislature which imposes the tax on the
constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed
by the people through their Constitutions. 13 Our Constitution,for instance, provides that
the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive
system of taxation.14 So potent indeed is the power that it was once opined that "the power
to tax involves the power to destroy." 15 Verily, taxation is a destructive power which
interferes with the personal and property rights of the people and takes from them a portion
of their property for the support of the government. Accordingly, tax statutes must be
construed strictly against the government and liberally in favor of the taxpayer. 16 But
since taxes are what we pay for civilized society, 17 or are the lifeblood of the nation, the
law frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayer and liberally in favor of the taxing
authority. 18 A claim of exemption from tax payments must be clearly shown and based
on language in the law too plain to be mistaken. 19 Elsewise stated, taxation is the rule,
exemption therefrom is the exception. 20 However, if the grantee of the exemption is a
political subdivision or instrumentality, the rigid rule of construction does not apply
because the practical effect of the exemption is merely to reduce the amount of money that
has to be handled by the government in the course of its operations. 21
The power to tax is primarily vested in the Congress; however, in our
jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of
a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article
X of the Constitution. 22 Under the latter, the exercise of the power may be subject to such
guidelines and limitations as the Congress may provide which, however, must be consistent
with the basic policy of local autonomy.
There can be no question that under Section 14 of R.A. No. 6958 the petitioner
is exempt from the payment of realty taxes imposed by the National Government or any of
its political subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is
the rule and exemption therefrom the exception, the exemption may thus be withdrawn at
the pleasure of the taxing authority. The only exception to this rule is where the exemption
was granted to private parties based on material consideration of a mutual nature, which
then becomes contractual and is thus covered by the non-impairment clause of
the Constitution. 23
The LGC, enacted pursuant to Section 3, Article X of the Constitution, provides
for the exercise by local government units of their power to tax, the scope thereof or its
limitations, and the exemptions from taxation.
Section 133 of the LGC prescribes the common limitations on the taxing
powers of local government units as follows:
SEC. 133. Common Limitations on the Taxing Power 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:
(a) Income tax, except when levied on banks and other
financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other
acquisitions mortis causa, except as otherwise
provided herein;
(d) Customs duties, registration fees of vessel and wharfage
on wharves, tonnage dues, and all other kinds of
customs fees, charges and dues except wharfage
on wharves constructed and maintained by the
local government unit concerned;
(e) Taxes, fees and charges and other impositions upon
goods carried into or out of, or passing through,
the territorial jurisdictions of local government
units in the guise of charges for wharfage, tolls
for bridges or otherwise, or other taxes, fees or
charges in any form whatsoever upon such
goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or
fishermen;
(g) Taxes on business enterprises certified to by the Board
of Investments as pioneer or non-pioneer for a
period of six (6) and four (4) years, respectively
from the date of registration;
(h) Excise taxes on articles enumerated under the National
Internal Revenue Code, as amended, and taxes,
fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or
exchanges or similar transactions on goods or
services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors
and persons engaged in the transportation of
passengers or freight by hire and common
carriers by air, land or water, except as provided
in this Code;
(k) Taxes on premiums paid by way of reinsurance or
retrocession;
(l) Taxes, fees or charges for the registration of motor
vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof,
except, tricycles;
(m) Taxes, fees, or other charges on Philippine products
actually exported, except as otherwise provided
herein;
(n) Taxes, fees, or charges, on Countryside and Barangay
Business Enterprises and cooperatives duly
registered under R.A. No. 6810 and Republic
Act Numbered Sixty-nine hundred thirty-eight
(R.A. No. 6938) otherwise known as the
"Cooperatives Code of the 'Philippines'
respectively; and
(o) TAXES, FEES OR CHARGES OF ANY KIND ON THE
NATIONAL GOVERNMENT, ITS AGENCIES
AND INSTRUMENTALITIES, AND LOCAL
GOVERNMENT UNITS. (italics supplied)
Needless to say, the last item (item o) is pertinent to this case. The "taxes, fees or
charges" referred to are "of any kind"; hence, they include all of these, unless otherwise
provided by theLGC. The term "taxes" is well understood so as to need no further
elaboration, especially in light of the above enumeration. The term "fees" means charges
fixed by law or ordinance for the regulation or inspection of business or
activity, 24 while "charges" are pecuniary liabilities such as rents or fees against persons
or property. 25
Among the "taxes" enumerated in the LGC is real property tax, which is
governed by Section 232. It reads as follows:
SEC. 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.
Section 234 of the LGC provides for the exemptions from payment of real
property taxes and withdraws previous exemptions therefrom granted to natural and
juridical persons, including government-owned and controlled corporations, except as
provided therein. It 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 had 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 or controlled corporations
engaged in the supply and 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.
These exemptions are based on the ownership, character, and use of the
property. Thus:
(a) Ownership Exemptions. Exemptions from real property taxes on the
basis of ownership are real properties owned by: (i) the
Republic, (ii) a province, (iii) a city, (iv) a municipality, (v)
a barangay, and (vi) registered cooperatives.
(b) Character Exemptions. Exempted from real property taxes on the
basis of their character are: (i) charitable institutions, (ii)
houses and temples of prayer like churches, parsonages or
convents appurtenant thereto, mosques, and (iii) non-profit
or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis
of the actual, direct and exclusive use to which they are
devoted are: (i) all lands, buildings and improvements
which are actually directly and exclusively used for
religious, charitable or educational purposes; (ii) all
machineries and equipment actually, directly and
exclusively used by local water districts or by government-
owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of
electric power; and (iii) all machinery and equipment used
for pollution control and environmental protection.
To help provide a healthy environment in the midst of the
modernization of the country, all machinery and equipment for
pollution control and environmental protection may not be taxed by
local governments.
2. Other Exemptions Withdrawn. All other exemptions previously
granted to natural or juridical persons including
government-owned or controlled corporations are
withdrawn upon the effectivity of the Code. 26
Section 193 of the LGC is the general provision on withdrawal of tax exemption
privileges. It 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. 6938, non-
stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.
On the other hand, the LGC authorizes local government units to grant tax
exemption privileges. Thus, Section 192 thereof provides:
SEC. 192. Authority to Grant Tax Exemption Privileges. — Local
government units may, through ordinances duly approved, grant tax
exemptions, incentives or reliefs under such terms and conditions as
they may deem necessary.
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 LGCprescribes 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, non-stock 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. LLphil
In short, the petitioner can no longer invoke the general rule in Section 133 that
the taxing powers of the local government units cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the National Government, its
agencies or instrumentalities, and local government units.
It must show that the parcels of land in question, which are real property, are
any one of those enumerated in Section 234, either by virtue of ownership, character, or
use of the property. Most likely, it could only be the first, but not under any explicit
provision of the said section, for none exists. In light of the petitioner's theory that it is an
"instrumentality of the Government," it could only be within the first item of the first
paragraph of the section by expanding the scope of the term "Republic of the Philippines"
to embrace its "instrumentalities" and "agencies." For expediency, we quote:
(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.
This view does not persuade us. In the first place, the petitioner's claim that it
is an instrumentality of the Government is based on Section 133(o), which expressly
mentions the word "instrumentalities"; and, in the second place, it fails to consider the fact
that the legislature used the phrase "National Government, its agencies and
instrumentalities" in Section 133(o), but only the phrase "Republic of the Philippines or
any of its political subdivisions" in Section 234(a).
The terms "Republic of the Philippines" and "National Government" are not
interchangeable. The former is broader and synonymous with "Government of the Republic
of the Philippines" which the Administrative Code of 1987 defines as the "corporate
governmental entity through which the functions of government are exercised throughout
the Philippines, including, save as the contrary appears from the context, the various arms
through which political authority is made effective in the Philippines, whether pertaining
to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other
forms of local government." 27 These "autonomous regions, provincial, city, municipal or
barangay subdivisions" are the political subdivisions. 28
On the other hand, "National Government" refers "to the entire machinery of
the central government, as distinguished from the different forms of local
governments." 29 The National Government then is composed of the three great
departments: the executive, the legislative and the judicial. 30
An "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;" 31 while an "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 government-owned and controlled
corporations." 32
If Section 234(a) intended to extend the exception therein to the withdrawal of
the exemption from payment of real property taxes under the last sentence of the said
section to the agencies and instrumentalities of the National Government mentioned in
Section 133(o), then it should have restated the wording of the latter. Yet, it did not.
Moreover, that Congress did not wish to expand the scope of the exemption in Section
234(a) to include real property owned by other instrumentalities or agencies of the
government including government-owned and controlled corporations is further borne out
by the fact that the source of this exemption is Section 40(a) of P.D. No. 464, otherwise
known as The Real Property Tax Code, which reads:
SEC. 40. Exemptions from Real Property Tax. — The exemption shall
be as follows:
 (a) Real property owned by the Republic of the Philippines or any of
its political subdivisions and any government-owned or
controlled corporation so exempt by its charter: Provided,
however, That this exemption shall not apply to real
property of the above-mentioned entities the beneficial use
of which has been granted, for consideration or otherwise,
to a taxable person.
Note that as reproduced in Section 234(a), the phrase "and any government-owned or
controlled corporation so exempt by its charter" was excluded. The justification for this
restricted exemption in Section 234(a) seems obvious: to limit further tax exemption
privileges, especially in light of the general provision on withdrawal of tax exemption
privileges in Section 193 and the special provision on withdrawal of exemption from
payment of real property taxes in the last paragraph of Section 234. These policy
considerations are consistent with the State policy to ensure autonomy to local
governments 33 and the objective of the LGC that they enjoy genuine and meaningful
local autonomy to enable them to attain their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals. 34 The
power to tax is the most effective instrument to raise needed revenues to finance and
support myriad activities of 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. It may also be relevant to recall that the original reasons for
the withdrawal of tax exemption privileges granted to government-owned and 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, and
there was a need for these entities to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due from them. 35
The crucial issues then to be addressed are: (a) whether the parcels of land in
question belong to the Republic of the Philippines whose beneficial use has been granted
to the petitioner, and (b) whether the petitioner is a "taxable person."
Section 15 of the petitioner's Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible
Assets. — All existing public airport facilities, runways, lands,
buildings and other properties, movable or immovable, belonging to
or presently administered by the airports, and all assets, powers,
rights, interests and privileges relating on airport works or air
operations, including all equipment which are necessary for the
operations of air navigation, aerodrome control towers, crash, fire,
and rescue facilities are hereby transferred to the Authority:
Provided, however, that the operations control of all equipment
necessary for the operation of radio aids to air navigation, airways
communication, the approach control office, and the area control
center shall be retained by the Air Transportation Office. No
equipment, however, shall be removed by the Air Transportation
Office from Mactan without the concurrence of the Authority. The
Authority may assist in the maintenance of the Air Transportation
Office equipment.
The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan
International Airport in the Province of Cebu," 36 which belonged to the Republic of the
Philippines, then under the Air Transportation Office (ATO). 37
It may be reasonable to assume that the term "lands" refer to "lands" in Cebu
City then administered by the Lahug Air Port and included the parcels of land the
respondent City of Cebu seeks to levy on for real property taxes. This section involves a
"transfer" of the "lands," among other things, to the petitioner and not just the transfer of
the beneficial use thereof, with the ownership being retained by the Republic of the
Philippines.
This "transfer" is actually an absolute conveyance of the ownership thereof
because the petitioner's authorized capital stock consists of, inter alia, "the value of such
real estate owned and/or administered by the airports." 38 Hence, the petitioner is now the
owner of the land in question and the exception in Section 234(c) of the LGC is
inapplicable.
Moreover, the petitioner cannot claim that it was never a "taxable person" under
its Charter. It was only exempted from the payment of real property taxes. The grant of the
privilege only in respect of this tax is conclusive proof of the legislative intent to make it a
taxable person subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes
of real property tax, in light of the foregoing disquisitions, it had already become, even if
it be conceded to be an "agency" or "instrumentality" of the Government, a taxable person
for such purpose in view of the withdrawal in the last paragraph of Section 234 of
exemptions from the payment of real property taxes, which, as earlier adverted to, applies
to the petitioner.
Accordingly, the position taken by the petitioner is untenable. Reliance
on Basco vs. Philippine Amusement and Gaming Corporation 39 is unavailing since it was
decided before the effectivity of the LGC. 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.
WHEREFORE, the instant petition is DENIED. The challenged decision and
order of the Regional Trial Court of Cebu, Branch 20, in Civil Case No. CEB-16900 are
AFFIRMED.
|||
CITY GOVT OF QC VS BAYAN TELECOM
Before the Court, on pure questions of law, is this petition for review on certiorari under Rule
45 of the Rules of Court to nullify and set aside the following issuances of the Regional Trial
Court (RTC) of Quezon City, Branch 227, in its Civil Case No. Q-02-47292, to wit:
1) Decision 1 dated June 6, 2003, declaring respondent Bayan
Telecommunications, Inc. exempt from real estate taxation
on its real properties located in Quezon City; and
 2) Order 2 dated December 30, 2003, denying petitioners' motion
for reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc. 3 (Bayantel) is a legislative franchise holder
under Republic Act (Rep. Act) No. 3259 4 to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep. Act No. 3259, embodied in
Section 14 thereof, which reads:
SECTION 14. (a) The grantee shall be liable to pay the same taxes on
its real estate, buildings and personal property, exclusive of the
franchise, as other persons or corporations are now or hereafter may
be required by law to pay. (b) The grantee shall further pay to the
Treasurer of the Philippines each year, within ten days after the audit
and approval of the accounts as prescribed in this Act, one and one-
half per centum of all gross receipts from the business transacted
under this franchise by the said grantee (Emphasis supplied).
On January 1, 1992, Rep. Act No. 7160, otherwise known as the "Local Government Code of
1991" (LGC), took effect. Section 232 of the Code grants local government units within the
Metro Manila Area the power to levy tax on real properties, thus:
SEC. 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 hereinafter specifically
exempted. caIDSH
Complementing the aforequoted provision is the second paragraph of Section 234 of the same
Code which withdrew any exemption from realty tax heretofore granted to or enjoyed by all
persons, natural or juridical, to wit:
SEC. 234 Exemptions from Real Property Tax. — The following are
exempted from payment of the real property tax:
xxx xxx xxx
Except as provided herein, any exemption from payment of real
property tax previously granted to, or enjoyed by, all persons, whether
natural or juridical, including government-owned-or-controlled
corporations is hereby withdrawn upon effectivity of this
Code (Emphasis supplied).
On July 20, 1992, barely few months after the LGC took effect, Congress enacted Rep. Act No.
7633, amending Bayantel's original franchise. The amendatory law (Rep. Act No. 7633)
contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay
the same taxes on their real estate, buildings and personal
property, exclusive of this franchise, as other persons or corporations
are now or hereafter may be required by law to pay. In addition
thereto, the grantee, its successors or assigns shall pay a franchise tax
equivalent to three percent (3%) of all gross receipts of the telephone
or other telecommunications businesses transacted under this
franchise by the grantee, its successors or assigns and the said
percentage shall be in lieu of all taxes on this franchise or earnings
thereof. Provided, That the grantee, its successors or assigns shall
continue to be liable for income taxes payable under Title II of the
National Internal Revenue Code . . . . [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City, Bayantel owned several
real properties on which it maintained various telecommunications facilities. These real
properties, as hereunder described, are covered by the following tax declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-096-04072
and D-096-04073 pertaining to Bayantel's Head Office and
Operations Center in Roosevelt St., San Francisco del
Monte, Quezon City allegedly the nerve center of
petitioner's telecommunications franchise operations, said
Operation Center housing mainly petitioner's Network
Operations Group and switching, transmission and related
equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-00920
and D-124-00941 covering Bayantel's land, building and
equipment in Maginhawa St., Barangay East Teacher's
Village, Quezon City which houses telecommunications
facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-10811,
and D-011-11540 referring to Bayantel's Exchange Center
located in Proj. 8, Brgy. Bahay Toro, Tandang Sora,
Quezon City which houses the Network Operations Group
and cover switching, transmission and other related
equipment.
In 1993, the government of Quezon City, pursuant to the taxing power vested on local
government units by Section 5, Article X of the 1987 Constitution, infra, in relation to Section
232 of the LGC, supra, enacted City Ordinance No. SP-91, S-93, otherwise known as
the Quezon City Revenue Code (QCRC), 5 imposing, under Section 5 thereof, a real property
tax on all real properties in Quezon City, and, reiterating in its Section 6, the withdrawal of
exemption from real property tax under Section 234 of the LGC, supra. Furthermore, much
like the LGC, the QCRC, under its Section 230, withdrew tax exemption privileges in general,
as follows:
SEC. 230. 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 RA 6938, non-stock and non-profit hospitals and educational
 institutions, business enterprises certified by the Board of Investments (1) Tax Declaration No. D-096-04071 —
(BOI) as pioneer or non-pioneer for a period of six (6) and four (4)
years, respectively, . . . are hereby withdrawn effective upon (2) Tax Declaration No. D-096-04074 —
approval of this Code (Emphasis supplied). cSATDC
(3) Tax Declaration No. D-124-01013 —
Conformably with the City's Revenue Code, new tax declarations for Bayantel's real properties
in Quezon City were issued by the City Assessor and were received by Bayantel on August 13, (4) Tax Declaration No. D-011-10810 —
1998, except one (Tax Declaration No. 124-01013) which was received on July 14, 1999.
(5) Tax Declaration No. D-011-10811 —
Meanwhile, on March 16, 1995, Rep. Act No. 7925, 6 otherwise known as the "Public
(6) Tax Declaration No. D-011-10809 —
Telecommunications Policy Act of the Philippines," envisaged to level the playing field among
telecommunications companies, took effect. Section 23 of the Act provides: (7) Tax Declaration No. D-124-00941 —
SEC. 23. Equality of Treatment in the Telecommunications Industry. (8) Tax Declaration No. D-124-00940 —
— Any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall ipso (9) Tax Declaration No. D-124-00939 —
facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to (10) Tax Declaration No. D-096-04072 —
the grantees of such franchises:Provided, however, That the foregoing
shall neither apply to nor affect provisions of telecommunications (11) Tax Declaration No. D-096-04073 —
franchises concerning territory covered by the franchise, the life span
(12) Tax Declaration No. D-011-11540 —
of the franchise, or the type of service authorized by the franchise.
The preliminary prohibitory injunction issued in the August 20, 2002
On January 7, 1999, Bayantel wrote the office of the City Assessor seeking the exclusion of its
Order of this Court is hereby made permanent. Since this is a
real properties in the city from the roll of taxable real properties. With its request having been
resolution of a purely legal issue, there is no pronouncement as to
denied, Bayantel interposed an appeal with the Local Board of Assessment Appeals (LBAA).
costs. CTcSAE
And, evidently on its firm belief of its exempt status, Bayantel did not pay the real property
taxes assessed against it by the Quezon City government.

On account thereof, the Quezon City Treasurer sent out notices of delinquency for the total
amount of P43,878,208.18, followed by the issuance of several warrants of levy against
Bayantel's properties preparatory to their sale at a public auction set on July 30, 2002.
Threatened with the imminent loss of its properties, Bayantel immediately withdrew its appeal
with the LBAA and instead filed with the RTC of Quezon City a petition for prohibition with
an urgent application for a temporary restraining order (TRO) and/or writ of preliminary
injunction, thereat docketed as Civil Case No. Q-02-47292, which was raffled to Branch 227 of
the court.
On July 29, 2002, or in the eve of the public auction scheduled the following day, the lower
court issued a TRO, followed, after due hearing, by a writ of preliminary injunction via its
order of August 20, 2002.
And, having heard the parties on the merits, the same court came out with its challenged
Decision of June 6, 2003, the dispositive portion of which reads:
WHEREFORE, premises considered, pursuant to the enabling
franchise under Section 11 of Republic Act No. 7633, the real estate
properties and buildings of petitioner [now, respondent Bayantel]
which have been admitted to be used in the operation of petitioner's
franchise described in the following tax declarations are hereby
DECLARED exempt from real estate taxation:
SO ORDERED.
Their motion for reconsideration having been denied by the court in its Order dated December
30, 2003, petitioners elevated the case directly to this Court on pure questions of law, ascribing
to the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt from real
property taxes notwithstanding the fact that the tax
exemption granted to Bayantel in its original franchise had
been withdrawn by the [LGC] and that the said exemption
was not restored by the enactment of RA 7633.
II. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the enactment of the
[QCRC] which withdrew the tax exemption which may
have been granted by RA 7633.
III. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the vague and ambiguous
grant of tax exemption provided under Section 11 of RA
7633.
 IV. [In] declaring the real properties of respondent exempt from real
property taxes notwithstanding the fact that [it] had failed
to exhaust administrative remedies in its claim for real
property tax exemption. (Words in bracket added.
As we see it, the errors assigned may ultimately be reduced to two (2) basic issues, namely:
1. Whether or not Bayantel's real properties in Quezon City are
exempt from real property taxes under its legislative
franchise; and
2. Whether or not Bayantel is required to exhaust administrative
remedies before seeking judicial relief with the trial court.
We shall first address the second issue, the same being procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the administrative remedies provided
for under the LGC, adding that the trial court erred in giving due course to Bayantel's petition
for prohibition. To petitioners, the appeal mechanics under the LGC constitute Bayantel's plain
and speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following provision of Rule 65 of the Rules of
Court:
SEC. 2. Petition for prohibition. — When the proceedings of any
tribunal, . . . are without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may
file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter
specified therein, or otherwise, granting such incidental reliefs as law
and justice may require.
With the reality that Bayantel's real properties were already levied upon on account of its
nonpayment of real estate taxes thereon, the Court agrees with Bayantel that an appeal to the
LBAA is not a speedy and adequate remedy within the context of the aforequoted Section 2 of
Rule 65. This is not to mention of the auction sale of said properties already scheduled on July
30, 2002. aIAHcE
Moreover, one of the recognized exceptions to the exhaustion-of-administrative remedies rule
is when, as here, only legal issues are to be resolved. In fact, the Court, cognizant of the nature
of the questions presently involved, gave due course to the instant petition. As the Court has
said in Ty vs. Trampe: 7
. . . . Although as a rule, administrative remedies must first be
exhausted before resort to judicial action can prosper, there is a well-
settled exception in cases where the controversy does not involve
questions of fact but only of law. . . . .
Lest it be overlooked, an appeal to the LBAA, to be properly considered, required prior
payment under protest of the amount of P43,878,208.18, a figure which, in the light of the then
prevailing Asian financial crisis, may have been difficult to raise up. Given this reality, an
appeal to the LBAA may not be considered as a plain, speedy and adequate remedy. It is thus
understandable why Bayantel opted to withdraw its earlier appeal with the LBAA and, instead,
filed its petition for prohibition with urgent application for injunctive relief in Civil Case No.
Q-02-47292. The remedy availed of by Bayantel under Section 2, Rule 65 of the Rules of
Court must be upheld.
This brings the Court to the more weighty question of whether or not Bayantel's real properties
in Quezon City are, under its franchise, exempt from real property tax.
The lower court resolved the issue in the affirmative, basically owing to the phrase "exclusive
of this franchise" found in Section 11 of Bayantel's amended franchise, Rep. Act No. 7633. To
petitioners, however, the language of Section 11 of Rep. Act No. 7633 is neither clear nor
unequivocal. The elaborate and extensive discussion devoted by the trial court on the meaning
and import of said phrase, they add, suggests as much. It is petitioners' thesis that Bayantel was
in no time given any express exemption from the payment of real property tax under its
amendatory franchise.
There seems to be no issue as to Bayantel's exemption from real estate taxes by virtue of the
term "exclusive of the franchise" qualifying the phrase "same taxes on its real estate, buildings
and personal property," found in Section 14, supra, of its franchise, Rep. Act No. 3259, as
originally granted.
The legislative intent expressed in the phrase "exclusive of this franchise" cannot be construed
other than distinguishing between two (2) sets of properties, be they real or personal, owned by
the franchisee, namely, (a) those actually, directly and exclusively used in its radio or
telecommunications business, and (b) those properties which are not so used. It is worthy to
note that the properties subject of the present controversy are only those which are admittedly
falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or
delegate to local governments of Congress' inherent power to tax the franchisee's properties
belonging to the second group of properties indicated above, that is, all properties which,
"exclusive of this franchise," are not actually and directly used in the pursuit of its franchise.
As may be recalled, the taxing power of local governments under both the 1935 and the 1973
Constitutions solely depended upon an enabling law. Absent such enabling law, local
government units were without authority to impose and collect taxes on real properties within
their respective territorial jurisdictions. While Section 14 of Rep. Act No. 3259 may be validly
viewed as an implied delegation of power to tax, the delegation under that provision, as
couched, is limited to impositions over properties of the franchisee which are not actually,
directly and exclusively used in the pursuit of its franchise. Necessarily, other properties of
Bayantel directly used in the pursuit of its business are beyond the pale of the delegated taxing
power of local governments. In a very real sense, therefore, real properties of Bayantel, save
those exclusive of its franchise, are subject to realty taxes. Ultimately, therefore, the inevitable
result was that all realties which are actually, directly and exclusively used in the operation of
its franchise are "exempted" from any property tax. ISEHTa
Bayantel's franchise being national in character, the "exemption" thus granted under Section 14
of Rep. Act No. 3259 applies to all its real or personal properties found anywhere within the
Philippine archipelago.
However, with the LGC's taking effect on January 1, 1992, Bayantel's "exemption" from real
estate taxes for properties of whatever kind located within the Metro Manila area was, by force
of Section 234 of the Code, supra, expressly withdrawn. But, not long thereafter, however, or
on July 20, 1992, Congress passed Rep. Act No. 7633 amending Bayantel's original franchise.
Worthy of note is that Section 11 of Rep. Act No. 7633 is a virtual reenacment of the tax
provision, i.e., Section 14, supra, of Bayantel's original franchise under Rep. Act No. 3259.
Stated otherwise, Section 14 of Rep. Act No. 3259 which was deemed impliedly repealed by
Section 234 of the LGC was expressly revived under Section 14 of Rep. Act No. 7633. In
concrete terms, the realty tax exemption heretofore enjoyed by Bayantel under its original
franchise, but subsequently withdrawn by force of Section 234 of the LGC, has been restored
by Section 14 of Rep. Act No. 7633.
The Court has taken stock of the fact that by virtue of Section 5, Article X of the 1987
Constitution, 8 local governments are empowered to levy taxes. And pursuant to this
constitutional empowerment, juxtaposed with Section 232 9 of the LGC, the Quezon City
government enacted in 1993 its local Revenue Code, imposing real property tax on all real
properties found within its territorial jurisdiction. And as earlier stated, the City's Revenue
Code, just like the LGC, expressly withdrew, under Section 230 thereof, supra, all tax
exemption privileges in general.
This thus raises the question of whether or not the City's Revenue Code pursuant to which the
city treasurer of Quezon City levied real property taxes against Bayantel's real properties
located within the City effectively withdrew the tax exemption enjoyed by Bayantel under its
franchise, as amended.
Bayantel answers the poser in the negative arguing that once again it is only "liable to pay the
same taxes, as any other persons or corporations on all its real or personal
properties,exclusive of its franchise."
Bayantel's posture is well-taken. While the system of local government taxation has changed
with the onset of the 1987 Constitution, the power of local government units to tax is still
limited. As we explained in Mactan Cebu International Airport Authority: 10
The power to tax is primarily vested in the Congress; however, in our
jurisdiction, it may be exercised by local legislative bodies, no
longer merely be virtue of a valid delegation as before, but
pursuant to direct authority conferred by Section 5, Article X
of the Constitution. Under the latter, the exercise of the power may
be subject to such guidelines and limitations as the Congress may
provide which, however, must be consistent with the basic policy of
local autonomy. (at p. 680; Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that
the former doctrine of local government units' delegated power to tax had been effectively
modified with Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on
local taxation remains essentially the same. For as the Court stressed in Mactan, "the power to
tax is [still] primarily vested in the Congress."
This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself a Commissioner
of the 1986 Constitutional Commission which crafted the 1987 Constitution, thus:
What is the effect of Section 5 on the fiscal position of municipal
corporations? Section 5 does not change the doctrine that
municipal corporations do not possess inherent powers of
taxation. What it does is to confer municipal corporations a
general power to levy taxes and otherwise create sources of
revenue. They no longer have to wait for a statutory grant of these
powers. The power of the legislative authority relative to the fiscal
powers of local governments has been reduced to the authority to
impose limitations on municipal powers. Moreover, these limitations
must be "consistent with the basic policy of local autonomy." The
important legal effect of Section 5 is thus to reverse the principle
that doubts are resolved against municipal corporations.
Henceforth, in interpreting statutory provisions on municipal fiscal
powers, doubts will be resolved in favor of municipal corporations. It
is understood, however, that taxes imposed by local government must
be for a public purpose, uniform within a locality, must not be
confiscatory, and must be within the jurisdiction of the local unit to
pass. 11 (Emphasis supplied).
In net effect, the controversy presently before the Court involves, at bottom, a clash between
the inherent taxing power of the legislature, which necessarily includes the power to exempt,
and the local government's delegated power to tax under the aegis of the 1987
Constitution. DEHaTC
Now to go back to the Quezon City Revenue Code which imposed real estate taxes on all real
properties within the city's territory and removed exemptions theretofore "previously granted
to, or presently enjoyed by all persons, whether natural or juridical . . . .," 12 there can really be
no dispute that the power of the Quezon City Government to tax is limited by Section 232 of
the LGC which expressly provides that "a province or city or municipality within the
Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter specifically exempted." Under
this law, the Legislature highlighted its power to thereafter exempt certain realties from the
taxing power of local government units. An interpretation denying Congress such power to
exempt would reduce the phrase "not hereinafter specifically exempted" as a pure jargon,
without meaning whatsoever. Needless to state, such absurd situation is unacceptable.
For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of
Davao, 13 this Court has upheld the power of Congress to grant exemptions over the power of
local government units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units
under the Constitution and the LGC does not affect the power of
Congress to grant exemptions to certain persons, pursuant to a
declared national policy. The legal effect of the constitutional grant to
local governments simply means that in interpreting statutory
 provisions on municipal taxing powers, doubts must be resolved in
favor of municipal corporations. (Emphasis supplied.)
As we see it, then, the issue in this case no longer dwells on whether Congress has the power to
exempt Bayantel's properties from realty taxes by its enactment of Rep. Act No. 7633 which
amended Bayantel's original franchise. The more decisive question turns on whether
Congress actually did exempt Bayantel's properties at all by virtue of Section 11 of Rep.
Act No. 7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that the
LGC has already withdrawn Bayantel's former exemption from realty taxes, Congress opted to
pass Rep. Act No. 7633 using, under Section 11 thereof, exactly the same defining phrase
"exclusive of this franchise" which was the basis for Bayantel's exemption from realty taxes
prior to the LGC. In plain language, Section 11 of Rep. Act No. 7633 states that "the grantee,
its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and
personal property, exclusive of this franchise, as other persons or corporations are now or
hereafter may be required by law to pay." The Court views this subsequent piece of legislation
as an express and real intention on the part of Congress to once again remove from the
LGC's delegated taxing power, all of the franchisee's (Bayantel's) properties that are actually,
directly and exclusively used in the pursuit of its franchise. ACTEHI
WHEREFORE, the petition is DENIED.
DRILON VS LIM
The principal issue in this case is the constitutionality of Section 187 of the
Local Government Code reading as follows:
Procedure For Approval And Effectivity Of Tax Ordinances And
Revenue Measures; Mandatory Public Hearings. — The procedure
for approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided, That public
hearings shall be conducted for the purpose prior to the enactment
thereof; Provided, further, That any question on the constitutionality
or legality of tax ordinances or revenue measures may be raised on
appeal within thirty (30) days from the effectivity thereof to the
Secretary of Justice who shall render a decision within sixty (60) days
from the date of receipt of the appeal: Provided, however, That such
appeal shall not have the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax, fee, or charge
levied therein: Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party may
file appropriate proceedings with a court of competent
jurisdiction. llcd
Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companies and a
taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null
and void for non-compliance with the prescribed procedure in the enactment of tax ordinances
and for containing certain provisions contrary to law and public policy. 1
In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila
revoked the Secretary's resolution and sustained the ordinance, holding inter alia that the
procedural requirements had been observed. More importantly, it declared Section 187 of the
Local Government Code as unconstitutional because of its vesture in the Secretary of Justice of
the power of control over local governments in violation of the policy of local autonomy
mandated in the Constitution and of the specific provision therein conferring on the President
of the Philippines only the power of supervision over local governments. 2
The present petition would have us reverse that decision. The Secretary argues that the
annulled Section 187 is constitutional and that the procedural requirements for the enactment
of tax ordinances as specified in the Local Government Code has indeed not been
observed. cdtai
Parenthetically, this petition was originally dismissed by the Court for non-compliance with
Circular 1-88, the Solicitor General having failed to submit a certified true copy of the
challenged decision. 3 However, on motion for reconsideration with the required certified true
copy of the decision attached, the petition was reinstated in view of the importance of the
issues raised therein.
We stress at the outset that the lower court had jurisdiction to consider the constitutionality of
Section 187, this authority being embraced in the general definition of the judicial power to
determine what are the valid and binding laws by the criterion of their conformity to the
fundamental law. Specifically, BP 129 vests in the regional trial courts jurisdiction over all
civil cases in which the subject of the litigation is incapable of pecuniary estimation, 4 even as
the accused in a criminal action has the right to question in his defense the co institutionality of
a law he is charged with violating and of the proceedings taken against him, particularly as
they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests
in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in
all cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation
is in question. LibLex
In the exercise of this jurisdiction, lower courts are advised to act with the utmost
circumspection, bearing in mind the consequences of a declaration of unconstitutionality upon
the stability of laws, no less than on the doctrine of separation of powers. As the questioned act
is usually the handiwork of the legislative or the executive departments, or both, it will be
prudent for such courts, if only out of a becoming modesty, to defer to the higher judgment of
this Court in the consideration of its validity, which is better determined after a thorough
deliberation by a collegiate body and with the concurrence of the majority of those who
participated in its discussion. 5
It is also emphasized that every court, including this Court, is charged with the duty of a
purposeful hesitation before declaring a law unconstitutional, on the theory that the measure
was first carefully studied by the executive and the legislative departments and determined by
them to be in accordance with the fundamental law before it was finally approved. To doubt is
to sustain. The presumption of constitutionality can be overcome only by the clearest showing
that there was indeed an infraction of the Constitution, and only when such a conclusion is
reached by the requipped majority may the Court pronounce, in the discharge of the duty it
cannot escape, that the challenged act must be struck down. prcd
In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the Local Government
Code unconstitutional insofar as it empowered the Secretary of Justice to review tax ordinances
and, inferentially, to annul them. He cited the familiar distinction between control and
supervision, the first being "the power of an officer to alter or modify or set aside what a
subordinate officer had done in the performance of his duties and to substitute the judgment of
the former for the latter," while the second is "the power of a superior officer to see to it that
lower officers perform their functions is accordance with law." 6 His conclusion was that the
challenged section gave to the Secretary the power of control and not of supervision only as
vested by the Constitution in the President of the Philippines. This was, in his view, a violation
not only of Article X, specifically Section 4 thereof, 7 and of Section 5 on the taxing powers of
local governments, 8 and the policy of local autonomy in general. cda
We do not share that view. The lower court was rather hasty in invalidating the provision.
Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality
of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he
alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own
judgment for the judgment of the local government that enacted the measure. Secretary Drilon
did set aside the Manila Revenue Code, but he did not replace it with his own version of what
the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for
its annulment. He did not say that in his judgment it was a bad law. What he found only was
that it was illegal. All he did in reviewing the said measure was determine if the petitioners
were performing their functions is accordance with law, that is, with the prescribed procedure
for the enactment of tax ordinances and the grant of powers to the city government under the
Local Government Code. As we see it, that was an act not of control but of mere
supervision. llcd
An officer in control lays down the rules in the doing of an act. It they are not followed, he
may, in his discretion, order the act undone or re-done by his subordinate or he may even
decide to do it himself. Supervision does not cover such authority. The supervisor or
superintendent merely sees to it that the rules are followed, but he himself does not lay down
such rules, nor does he have the discretion to modify or replace them. If the rules are not
observed, he may order the work done or re-done but only to conform to the prescribed rules.
He may not prescribe his own manner for the doing of the act. He has no judgment on this
matter except to see to it that the rules are followed. In the opinion of the Court, Secretary
Drilon did precisely this, and no more nor less than this, and so performed an act not of control
but of mere supervision.
The case of Taule v. Santos 9 cited in the decision has no application here because the
jurisdiction claimed by the Secretary of Local Governments over election contests in the
Katipunan ng Mga Barangay was held to belong to the Commission on Elections by
constitutional provision. The conflict was over jurisdiction, not supervision or control. cdrep
Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which
provided in its Section 2 as follows:
A tax ordinance shall go into effect on the fifteenth day after its
passage, unless the ordinance shall provide otherwise: Provided,
however, That the Secretary of Finance shall have authority to
suspend the effectivity of any ordinance within one hundred and
twenty days after receipt by him of a copy thereof, if, in his opinion,
the tax or fee therein levied or imposed is unjust, excessive,
oppressive, or confiscatory, or when it is contrary to declared national
economy policy, and when the said Secretary exercises this authority
the effectivity of such ordinance shall suspended, either in part or as a
whole, for a period of thirty days within which period the local
legislative body may either modify the tax ordinance to meet the
objections thereto, or file an appeal with a court of competent
jurisdiction; otherwise, the tax ordinance or the part or parts thereof
declared suspended, shall be considered as revoked. Thereafter, the
local legislative body may not reimposed the same tax or fee until
such time as the grounds for the suspension thereof shall have ceased
to exist.
That section allowed the Secretary of Finance to suspend the effectivity of a tax ordinance if, in
his opinion, the tax or fee levied was unjust, excessive, oppressive or confiscatory.
Determination of these flaws would involve the exercise of judgment or discretion and not
merely an examination of whether or not the requirements or limitations of the law had been
observed; hence, it would smack of control rather than mere supervision. That power was never
questioned before this Court but, at any rate, the Secretary of Justice is not given the same
latitude under Section 187. All he is permitted to do is ascertain the constitutionality or legality
of the tax measure, without the right to declare that, in his opinion, it is unjust, excessive,
oppressive or confiscatory. He has no discretion on this matter. In fact, Secretary Drilon set
aside the Manila Revenue Code only on two grounds, to wit, the inclusion therein of
certain ultra vires provisions and non-compliance with the prescribed procedure in its
enactment. These grounds affected the legality, not the wisdom or reasonableness of the tax
measure. LLpr
The issue of non-compliance with the prescribed procedure in the enactment of the Manila
Revenue Code is another matter.
In his resolution, Secretary Drilon declared that there were no written notices of public
hearings on the proposed Manila Revenue Code that were sent to interested parties as required
byArt. 276(b) of the Implementing Rules of the Local Government Code nor were copies of the
proposed ordinance published in three successive issues of a newspaper of general circulation
pursuant to Art. 276(a). No minutes were submitted to show that the obligatory public hearings
had been held. Neither were copies of the measure as approved posted in prominent places in
the city in accordance with Sec. 511(a) of the Local Government Code. Finally, the Manila
Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people
for their information and guidance, conformably to Sec. 59(b) of the Code. prLL
Judge Palattao found otherwise. He declared that all the procedural requirements had been
observed in the enactment of the Manila Revenue Code and that the City of Manila had not
been able to prove such compliance before the Secretary only because he had given it only five
days within which to gather and present to him all the evidence (consisting of 25 exhibits) later
submitted to the trial court.
To get to the bottom of his question, the Court acceded to the motion of the respondents and
called for the elevation to it of the said exhibits. We have carefully examined every one of
these exhibits and agree with the trial court that the procedural requirements have indeed been
observed. Notices of the public hearings were sent to interested parties as evidenced by
Exhibits G-1 to 17. The minutes of the hearings are found in Exhibits M, M-1, M-2, and M-3.
Exhibits B and C show that the proposed ordinances were published in the Balita and the
Manila Standard on April 21 and 25, 1993, respectively, and the approved ordinance was
published in the July 3, 4, 5 1993 issues of the Manila Standard and in the July 6, 1993 issue
of Balita, as shown by Exhibits Q, Q-1, Q-2, and Q-3. prLL
The only exceptions are the posting of the ordinance as approved but this omission does not
affect its validity, considering that its publication in three successive issues of a newspaper of
general circulation will satisfy due process. It has also not been shown that the text of the
ordinance has been translated and disseminated, but this requirement applies to the approval of
local development plans and public investment programs of the local government unit and not
to tax ordinances.
We make no ruling on the substantive provisions of the Manila Revenue Code as their validity
has not been raised in issue in the present petition.
WHEREFORE, the judgment is hereby rendered REVERSING the challenged decision of the
Regional Trial Court insofar as it declared Section 187 of the Local Government Code
unconstitutional but AFFIRMING its finding that the procedural requirements in the enactment
of the Manila Revenue Code have been observed. No pronouncement as to costs.
||
BATANGAS CITY VS PILIPINAS SHELL
Before this Court is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court assailing the Decision 1 dated January 22, 2009 and Resolution 2 dated
April 13, 2009 of the Court of Tax Appeals (CTA) En Banc in CTA EB No. 350
which affirmed in toto the Amended Decision 3 dated July 31, 2007 and
Resolution 4 dated November 21, 2007 of the CTA Second Division in CTA AC Case No.
10.
The facts follow.
Petitioner Batangas City is a local government unit (LGU) with the capacity to
sue and be sued under its Charter and Section 22 (a) (2) of the Local Government
Code (LGC) of 1991. Petitioners Teodulfo A. Deguito and Benjamin E. Pargas are the City
Legal Officer and City Treasurer, respectively, of Batangas City.
Respondent Pilipinas Shell Petroleum Corporation operates an oil refinery and
depot in Tabagao, Batangas City, which manufactures and produces petroleum products
that are distributed nationwide.
In 2002, respondent was only paying the amount of P98,964.71 for fees and
other charges which include the amount of P1,180.34 as Mayor's Permit. However, on
February 20, 2001, petitioner Batangas City, through its City Legal Officer, sent a notice
of assessment to respondent demanding the payment of P92,373,720.50 and
P312,656,253.04 as business taxes for its manufacture and distribution of petroleum
products. In addition, respondent was also required and assessed to pay the amount of
P4,299,851.00 as Mayor's Permit Fee based on the gross sales of its Tabagao Refinery. The
assessment was allegedly pursuant of Section 134 of the LGC of 1991 and Section 23 of
its Batangas City Tax Code of 2002.
In response, respondent filed a protest on April 17, 2002 contending among
others that it is not liable for the payment of the local business tax either as a manufacturer
or distributor of petroleum products. It further argued that the Mayor's Permit Fees are
exorbitant, confiscatory, arbitrary, unreasonable and not commensurable with the cost of
issuing a license.
On May 13, 2002, petitioners denied respondent's protest and declared that
under Section 14 of the Batangas City Tax Code of 2002, they are empowered to withhold
the issuance of the Mayor's Permit for failure of respondent to pay the business taxes on its
manufacture and distribution of petroleum products.
On June 17, 2002, respondent filed a Petition for Review pursuant to Section
195 of the LGC of 1991 before the Regional Trial Court (RTC) of Batangas City.
In its petition, respondent maintained that petitioners have no authority to
impose the said taxes and fees, and argued that the levy of local business taxes on the
business of manufacturing and distributing gasoline and other petroleum products is
contrary to law and against national policy. It further contended that the Mayor's Permit
Fee levied by petitioners were unreasonable and confiscatory.
In its Answer, petitioners contended that the City of Batangas can legally
impose taxes on the business of manufacturing and distribution of petroleum products,
including the Mayor's Permit Fees upon respondent.
Trial thereafter ensued.
In the interim, respondent paid under protest the Mayor's Permit Fees for the
year 2003 amounting to P774,840.50 as manufacturer and P3,525,010.50 as distributor.
When respondent applied for the issuance of the Mayor's Permit in 2004, it offered the
amount of P150,000.00 as compromise Mayor's Permit Fee without prejudice to the
outcome of the case then pending, which was rejected by petitioners.
On October 29, 2004, the RTC of Batangas City rendered a
Decision 5 sustaining the imposition of business taxes by petitioners upon the manufacture
and distribution of petroleum products by respondent. However, the RTC withheld the
imposition of Mayor's Permit Fee in deference to the provisions of Section 147 of the LGC,
in relation to Section 143 (h) of the same Code, which imposed a limit to the power of
petitioners to collect the said business taxes. The fallo of said decision reads:
WHEREFORE, in view of the foregoing premises, this
Court hereby renders judgment as follows:
1. The taxes on the privilege of engaging in the business of
manufacturing, distribution or dealing in
petroleum products in the amount of
P92,373,750.50 and P312,656,253.04,
respectively, imposed by Batangas City on
Pilipinas Shell, is VALID.
2. Declaring the Mayor's Permit Fee in the amount of
P4,299,851.00 based on gross receipts/sales as
grossly excessive and unreasonable considering
the aforesaid business taxes.
 ACCORDINGLY, THE PETITIONER, PILIPINAS Since [petitioners] failed to
SHELL PETROLEUM CORPORATION (PSPC),IS HEREBY modify the computation of the mayor's permit
ORDERED TO PAY THE AMOUNT OF PHP405,030,003.54 AS fee and based on justice and equity,
TAX ON ITS BUSINESS OF ENGAGING IN THE [respondent] should be refunded with the
MANUFACTURE AND DISTRIBUTION OF PETROLEUM mayor's permit fees ordered revoked by the
PRODUCTS, WHILE THE ASSESSMENT OF PHP4,299,851.00 court a quo.
AS MAYOR'S PERMIT FEE IS HEREBY ORDERED REVOKED
WITHOUT PREJUDICE TO ITS MODIFICATION BY THE The details of the additional
RESPONDENTS, BATANGAS CITY, ET AL. amount of P4,299,851.00 mayor's permit fees
are as follows:
SO ORDERED. 6
Manufacturer Distributor
Unsatisfied, respondent filed a "Motion for Partial Reconsideration."
In an Order 7 dated February 28, 2005, the RTC denied respondent's motion for Mayor's Permit Fee P704,305.00 P3,166,555.00
lack of merit. License Fee 70,535.50
Hence, respondent filed a Petition for Review with Extremely Urgent Prot. Fee Res/Bus 25,000.00
Application for a Temporary Restraining Order and/or a Writ of Preliminary Injunction Fire Insp. Fee 1,000.00
with the CTA Second Division on April 27, 2005. SDHTEC
Occ./Prof. Tax
Considering the urgency of the resolution of respondent's Application for the San Permit & San Insp. Fee 12,000.00
Issuance of a Writ of Preliminary Injunction, the CTA Second Division granted the said
application and ordered petitioners to hold in abeyance the collection of the questioned Fire Code Fee 320,455.00
manufacturer and distributor's taxes, conditioned upon the filing of respondent of a surety ––––––––––– ––––––––––––
bond in the amount of P500,000,000.00. Total Amount P774,840.50 P3,525,010.50
In a Decision dated June 21, 2007, the CTA Second Division granted
respondent's petition. It held that respondent is not subject to the business taxes on the ========== ===========
manufacture and distribution of petroleum products because of the express limitation
provided under Section 133 (h) of the LGC.The dispositive portion of said Decision reads:
WHEREFORE, premises considered, the The amount to be refunded is not
judgment/order of the RTC Branch II of Batangas City is hereby the full amount of P4,299,851.00 but the
MODIFIED. As to the business taxes on the manufacture and excessive mayor's permit for manufacturing
distribution of petroleum products, We find the [respondent] not and distributing in the amount of
liable for the same. As to the Mayor's permit, We find that it is P704,305.00 and P3,166,555.00,
excessive. Accordingly, the [petitioner] is hereby (a) declared respectively, or in the total amount of
legally proscribed from imposing business taxes on the manufacture P3,870,860.00.
and distribution of petroleum products and (b) to refund in the form
of tax credit the excessive mayor's permit in the amount of THREE To conform to this aforequoted pronouncement, the
MILLION FIVE HUNDRED TWENTY FIVE THOUSAND TEN dispositive portion of the assailed decision should be amended so
PESOS and FIFTY CENTAVOS (P3,525,010.50) that the exact amount of the Mayor's Permit Fees to be refunded be
changed from P3,525,010.50 to P3,870,860.00.
SO ORDERED.
Section 2, Rule 36 of the Rules of Court reads as follows:
On July 13, 2007, respondent filed a "Motion for Clarification" on the exact
amount to be refunded by petitioners as regards the Mayor's Permit Fees. After a perusal SEC. 2. Entry of Judgments and
of the "Motion for Clarification," the CTA Second Division found the motion partly final orders.— If no appeal or motion for new
meritorious. Thus: trial or reconsideration is filed within the time
provided in these Rules, the judgment or final
Indeed, there is a discrepancy in the amount to be order shall forthwith be entered by the clerk
refunded and to clarify, the amount should be P3,870,860.00 as in the book of entries of judgments. The date
written in the body of the decisions as follows:
 of finality of the judgment or final order shall
be deemed to be the date of its entry.
In this case, PSPC received the Decision on June 28,
2007 and it filed its motion for clarification (treated as a motion for
reconsideration) on July 13, 2007 which is within the period allowed
by law. In effect, our Decision has not yet become final and
executory. Hence, our Decision may be amended.
Moreover, pursuant to Section 5(g), Rule 135 of
the Revised Rules of Court that every court shall have the power to
amend or control its process and orders so as to make them
conformable to law and justice, the Second Division of this Court
resolves to amend its Decision dated June 21, 2007 by making the
necessary corrections.
WHEREFORE, in view of the foregoing, [respondent]'s
Motion for Clarification is partly GRANTED. Accordingly, the
dispositive portion of this Court's Decision dated June 21, 2007 is
hereby AMENDED as follows:
WHEREFORE, premises
considered, the judgment/order of the RTC
Branch II of Batangas City is hereby
MODIFIED. As to the business taxes on the
manufacture and distribution of petroleum
products, We find the [respondent] not liable
for the same. As to the mayor's permit, We
find that it is excessive. Accordingly, the
[petitioner] is hereby (a) declared legally
proscribed from imposing business taxes on
the manufacture and distribution of
petroleum products and (b) to refund in the
form of tax credit the excessive mayor's
permit in the amount of THREE MILLION
EIGHT HUNDRED SEVENTY
THOUSAND EIGHT HUNDRED SIXTY
PESOS (P3,870,860.00).
SO ORDERED.
SO ORDERED. 9
Petitioners filed a motion for reconsideration against said decision but the same
was denied by the CTA Second Division in a Resolution dated November 21, 2007.
Not satisfied, petitioners filed a Petition for Review praying for the reversal of
the Amended Decision and Resolution of the CTA Second Division.
On January 22, 2009, the CTA En Banc promulgated a Decision affirming in
toto the Amended Decision of the CTA Second Division. The CTA En Banc found no
cogent reason to disturb the findings and conclusions of the CTA Second Division. The
dispositive portion of said Decision reads:
WHEREFORE, the instant Petition for Review is hereby
DENIED DUE COURSE and DISMISSED for lack of merit.
Accordingly, the July 31, 2007 Amended Decision and November
21, 2007 Resolution of the CTA Second Division in CTA AC Case
No. 10 entitled, "PILIPINAS SHELL PETROLEUM
CORPORATION, petitioner vs. BATANGAS CITY, BENJAMIN
E. PARGAS in his capacity as CITY TREASURER and
TEODULFO A. DEGUITO in his capacity as CITY LEGAL
OFFICER OF BATANGAS CITY, [petitioners]," are hereby
AFFIRMED in toto.
SO ORDERED. 10 AScHCD
Unfazed, petitioners filed a motion for reconsideration.
In a Resolution dated April 13, 2009, the CTA En Banc denied petitioners'
motion for reconsideration for lack of merit.
Hence, this petition.
Petitioner raises the following assignment of errors:
1. THE COURT OF TAX APPEALS EN BANC ERRED IN NOT
RULING THAT THE POWER OF LOCAL
GOVERNMENT UNITS TO TAX BUSINESS IS
SOLELY GOVERNED BY SEC. 143 AND 143(h) OF
THE LOCAL GOVERNMENT CODE OF 1991.
2. THE COURT OF TAX APPEALS EN BANC ERRED IN NOT
RULING THAT THE WORD "TAXES" IN SEC. 133(h)
DOES NOT INCLUDE BUSINESS TAXES.
3. THE COURT OF TAX APPEALS EN BANC ERRED IN
DISREGARDING THE DISTINCTION BETWEEN
TAXES ON ARTICLES AND TAXES ON BUSINESS.
4. THE COURT OF TAX APPEALS EN BANC INCORRECTLY
CONSTRUED A CLEAR PROVISION OF LAW,
SPECIFICALLY SECTION 133(h) OF THE LOCAL
GOVERNMENT CODE OF 1991, AS AN EXPRESS
LIMITATION ON THE POWER OF LOCAL
GOVERNMENT UNITS TO IMPOSE TAXES ON THE
BUSINESS OF MANUFACTURE AND DISTRIBUTION
OF PETROLEUM PRODUCTS.
In essence, the issue is whether a LGU is empowered under the LGC to impose
business taxes on persons or entities engaged in the business of manufacturing and
distribution of petroleum products.
It its petition, petitioners assert that any activity that involves the production or
manufacture and the distribution or selling of any kind or nature as a means of livelihood
or with a view to profit can be taxed by the LGUs. They posit that the authority granted to
them by Section 143 (h) of the LGC is so broad that it practically covers any business that
the sanggunianconcerned may deem proper to tax, even including businesses which are
already subject to excise, value-added or percentage tax under the National Internal
Revenue Code (NIRC)provided that the same shall not exceed two percent of the gross
sales or receipts of the preceding calendar year.
We do not agree.
At the outset, it must be emphasized that although the power to tax is inherent
in the State, the same is not true for LGUs because although the mandate to impose taxes
granted to LGUs is categorical and long established in the 1987 Philippine Constitution,
the same is not all encompassing as it is subject to limitations as explicitly stated in Section
5, Article X ofthe 1987 Constitution, viz.:
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.
In the consolidated cases of City of Manila, et al. v. Hon. Colet and Malaysian
Airline System; Maersk-Filipinas, Inc.,et al. v. City of Manila, et al.;Eastern Shipping
Lines, Inc. v. City Council of Manila, et al.; William Lines, Inc.,et al. v. Regional Trial
Court of Manila, et al.; PNOC Shipping and Transport Corporation v. Hon. Nabong, et
al.; Maersk-Filipinas, Inc., et al. v. City of Manila, et al., and with Intervenors William
Lines, Inc., et al.; Cosco Container Lines and HEUNG-A Shipping Co., Ltd., et al. v. City
of Manila; Sulpicio Lines, Inc. v. Regional Trial Court of Manila, et al.;Association of
International Shipping Lines, Inc. v. City of Manila, et al.; Dongnama Shipping Co., Ltd.,
et al. v. Court of Appeals, et al.12 this Court expounded that the LGUs' power to tax is
subject to the limitations set forth under Section 133 of the LGC.Thus:
It is already well-settled that although the power to tax is
inherent in the State, the same is not true for the LGUs to whom the
power must be delegated by Congress and must be exercised within
the guidelines and limitations that Congress may provide. The Court
expounded in Pelizloy Realty Corporation v. The Province of
Benguet that:
The power to tax "is an attribute
of sovereignty," and as such, inheres in the
State. Such, however, is not true for
provinces, cities, municipalities
and barangays as they are not the sovereign;
rather, there are mere "territorial and political
subdivisions of the Republic of the
Philippines."
The rule governing the taxing power of provinces, cities,
municipalities and barangays is summarized in Icard v. City
Council of Baguio:
It is settled that a municipal
corporation unlike a sovereign state is clothed
with no inherent power of taxation. The
charter or statute must plainly show an intent
to confer that power or the municipality,
cannot assume it. And the power when
granted is to be construed in strictissimi
juris.Any doubt or ambiguity arising out of
the term used in granting that power must be
resolved against the municipality. Inferences,
implication, deductions — all these — have
no place in the interpretation of the taxing
power of a municipal corporation.
Therefore, the power of a province to tax is limited to the
extent that such power is delegated to it either by the Constitution or
by statute. Section 5, Article X of the 1987 Constitutionis clear on
this point:
xxx xxx xxx
Per Section 5, Article X of the 1987 Constitution, "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." Nevertheless, such authority is "subject to such
guidelines and limitations as the Congress may provide."
In conformity with Section 3, Article X of the 1987
Constitution, Congress enacted Republic Act No. 7160, otherwise
known as the Local Government Code of 1991.Book II of the LGC
governs local taxation and fiscal matters.
Relevant provisions of Book II of the LGC establish the
parameters of the taxing powers of LGUs found below.
First, Section 130 provides for the following
fundamental principles governing the taxing powers of LGUs:
1. Taxation shall be uniform in each LGU.
2. Taxes, fees, charges and other impositions shall:
a. be equitable and based as far as practicable on
the taxpayer's ability to pay;
b. be levied and collected only for public
purposes;
c. not be unjust, excessive, oppressive or
confiscatory;
d. not be contrary to law, public policy, national
economic policy, or in the restraint
of trade.
3. The collection of local taxes, fees, charges and other
impositions shall in no case be left to any private
person.
 4. The revenue collected pursuant to the provisions of the
LGC shall inure solely to the benefit of, and be
subject to the disposition by, the LGU levying
the tax, fee, charge or other imposition unless
otherwise specifically provided by the LGC.
5. Each LGU shall, as far as practicable, evolve a
progressive system of taxation.
Second, Section 133 provides for the common
limitations on the taxing powers of LGUs.
Among the common limitations on the taxing powers of LGUs under Section
133 of the LGC is paragraph (h) which states:
SECTION 133. Common Limitations on the Taxing
Powers of Local Government Units.— Unless otherwise provided
herein, the exercise of taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the
following:
xxx xxx xxx
(h) Excise taxes on articles enumerated under
the National Internal Revenue Code, as
amended, and taxes, fees or charges on
petroleum products.;
From the foregoing, Section 133 (h) clearly specifies the two kinds of taxes
which cannot be imposed by LGUs: (1) excise taxes on articles enumerated under
the NIRC,as amended; and (2) taxes, fees or charges on petroleum products.
Indisputably, the power of LGUs to impose business taxes derives from Section
143 14 of the LGC.However, the same is subject to the explicit statutory impediment
provided for under Section 133 (h) of the same Code which prohibits LGUs from imposing
"taxes, fees or charges on petroleum products." It can, therefore, be deduced that although
petroleum products are subject to excise tax, the same is specifically excluded from the
broad power granted to LGUs under Section 143 (h) of the LGC to impose business taxes.
Additionally, Section 133 (h) of the LGC makes plain that the prohibition with
respect to petroleum products extends not only to excise taxes thereon, but all "taxes, fees
or charges." The earlier reference in paragraph 143 (h) to excise taxes comprehends a wider
range of subject of taxation: all articles already covered by excise taxation under
the NIRC,such as alcohol products, tobacco products, mineral products, automobiles, and
such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts
and other vessels intended for pleasure or sports. In contrast, the later reference to "taxes,
fees and charges" pertains only to one class of articles of the many subjects of excise taxes,
specifically, "petroleum products." While LGUs are authorized to burden all such other
class of goods with "taxes, fees and charges," excepting excise taxes, a specific prohibition
is imposed barring the levying of any other type of taxes with respect to petroleum
products.
It is likewise irrefutable that the specific exemption provided under Section 133
of the LGC prevails over Section 143 of the same Code.
|||
First, Section 133 of the LGC is a specific provision that explicitly withhold
from LGUs the power to impose taxes, fees and charges on petroleum products.
Strictly speaking, as long as the subject matter of the taxing powers of the LGUs
is the petroleum products per se or even the activity or privilege related to the petroleum
products, such as manufacturing and distribution of said products, it is covered by the said
limitation and thus, no levy can be imposed.
On the contrary, Section 143 of the LGC defines the general power of LGUs to
tax businesses within its jurisdiction. Thus, the omnibus grant of power to LGUs under
Section 143 (h) of the LGC cannot overcome the specific exception or exemption in Section
133 (h) of the same Code. This is in accord with the rule on statutory construction that
specific provisions must prevail over general ones. A special and specific provision
prevails over a general provision irrespective of their relative positions in the
statute. Generalia specialibus non derogant.Where there is in the same statute a particular
enactment and also a general one which in its most comprehensive sense would include
what is embraced in the former, the particular enactment must be operative, and the general
enactment must be taken to affect only such cases within its general language as are not
within the provisions of the particular enactment.
Second, Article 232 (h) of the Implementing Rules and Regulations (IRR) of
the LGC of 1991 states:
ARTICLE 232. Tax on Business.— The Municipality
may impose taxes on the following businesses:
xxx xxx xxx
(h) On any business not otherwise specified in the
preceding paragraphs which
the sanggunian concerned may deem proper to
tax provided that that on any business subject to
the excise tax, VAT or percentage tax under
the NIRC,as amended, the rate of tax shall not
exceed two percent (2%) of gross sales or
receipts of the preceding calendar year
andprovided further, that in line with existing
national policy, any business engaged in the
production, manufacture, refining,
distribution or sale of oil, gasoline, and other
petroleum products shall not be subject to
any local tax imposed in this Article.18
Article 232 defines with more particularity the capacity of a municipality to
impose taxes on businesses. However, it admits of certain exceptions, specifically, that
businesses engaged in the production, manufacture, refining, distribution or sale of oil,
gasoline, and other petroleum products, shall not be subject to any local tax imposed by
Article 232.
WHEREFORE,in view of the foregoing, the Court hereby resolves
to DENY present petition. The Decision dated January 22, 2009 and Resolution dated
April 13, 2009 of the Court of Tax Appeals En Banc in CTA EB No. 350 are AFFIRMED.
CITY GOVT OF QC VS ERICTA
This is a petition for review which seeks the reversal of the decision of the Court of First Instance
of Rizal, Branch XVIII declaring Section 9 of Ordinance No. 6118, S-64, of the Quezon City
Council null and void.
Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE REGULATING THE
ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE MEMORIAL
TYPE CEMETERY OR BURIAL GROUND WITHIN THE JURISDICTION OF QUEZON
CITY AND PROVIDING PENALTIES FOR THE VIOLATION THEREOF" provides:
"Sec. 9. At least six (6) percent of the total area of the memorial park
cemetery shall be set aside for charity burial of deceased persons who
are paupers and have been residents of Quezon City for at least 5 years
prior to their death, to be determined by competent City Authorities.
The area so designated shall immediately be developed and should be
open for operation not later than six months from the date of approval
of the application."
For several years, the aforequoted section of the Ordinance was not enforced by city authorities
but seven years after the enactment of the ordinance, the Quezon City Council passed the
following resolution: LexLib
"RESOLVED by the council of Quezon assembled, to request, as it does
hereby request the City Engineer, Quezon City, to stop any further
selling and/or transaction of memorial park lots in Quezon City where
the owners thereof have failed to donate the required 6% space intended
for paupers burial."
Pursuant to this petition, the Quezon City Engineer notified respondent Himlayang
Pilipino, Inc. in writing that Section 9 of Ordinance No. 6118, S-64 would be enforced.
Respondent Himlayang Pilipino reacted by filing with the Court of First Instance of Rizal,
Branch XVIII at Quezon City, a petition for declaratory relief, prohibition and mandamus with
preliminary injunction (Sp. Proc. No. Q-16002) seeking to annul Section 9 of the Ordinance in
question. The respondent alleged that the same is contrary to the Constitution, the Quezon City
Charter, the Local Autonomy Act, and the Revised Administrative Code.
There being no issue of fact and the questions raised being purely legal, both petitioners and
respondent agreed to the rendition of a judgment on the pleadings. The respondent court,
therefore, rendered the decision declaring Section 9 of Ordinance No. 6118, S-64 null and void.
A motion for reconsideration having been denied, the City Government and City Council filed
the instant petition. cdlex
Petitioners argue that the taking of the respondent's property is a valid and reasonable exercise
of police power and that the land is taken for a public use as it is intended for the burial ground
of paupers. They further argue that the Quezon City Council is authorized under its charter, in
the exercise of local police power, "to make such further ordinances and resolutions not
repugnant to law as may be necessary to carry into effect and discharge the powers and duties
conferred by this Act and such as it shall deem necessary and proper to provide for the health
and safety, promote the prosperity, improve the morals, peace, good order, comfort and
convenience of the city and the inhabitants thereof, and for the protection of property therein."
On the other hand, respondent Himlayang Pilipino, Inc. contends that the taking or confiscation
of property is obvious because the questioned ordinance permanently restricts the use of the
property such that it cannot be used for any reasonable purpose and deprives the owner of all
beneficial use of his property.
The respondent also stresses that the general welfare clause is not available as a source of power
for the taking of the property in this case because it refers to "the power of promoting the public
welfare by restraining and regulating the use of liberty and property." The respondent points out
that if an owner is deprived of his property outright under the State's police power, the property
is generally not taken for public use but is urgently and summarily destroyed in order to promote
the general welfare. The respondent cites the case of a nuisance per se or the destruction of a
house to prevent the spread of a conflagration.
We find the stand of the private respondent as well as the decision of the respondent Judge to be
well-founded. We quote with approval the lower court's ruling which declared null and void
Section 9 of the questioned city ordinance:
"The issue is: Is Section 9 of the ordinance in question a valid exercise
of the police power?
"An examination of the Charter of Quezon City (Rep. Act No. 5371),
does not reveal any provision that would justify the ordinance in
question except the provision granting police power to the City. Section
9 cannot be justified under the power granted to Quezon City to tax, fix
the license fee, and regulate such other business, trades, and
occupation as may be established or practiced in the City.' (Sub-
sections 'C', Sec. 12, R.A. 537).
"The power to regulate does not include the power to prohibit (People
vs. Esguerra, 81 Phil. 33, Vega vs. Municipal Board of Iloilo, L-6765,
May 12, 1954; 39 N.J. Law, 70, Mich. 396). A fortiori, the power to
regulate does not include the power to confiscate. The ordinance in
question not only confiscates but also prohibits the operation of a
memorial park cemetery, because under Section 13 of said ordinance,
'Violation of the provision thereof is punishable with a fine and/or
imprisonment and that upon conviction thereof the permit to operate
and maintain a private cemetery shall be revoked or cancelled.' The
confiscatory clause and the penal provision in effect deter one from
operating a memorial park cemetery. Neither can the ordinance in
question be justified under sub-section 't', Section 12 of Republic Act
537 which authorizes the City Council to —
"'prohibit the burial of the dead within the center
of population of the city and provide for their burial in such
proper place and in such manner as the council may
determine, subject to the provisions of the general law
regulating burial grounds and cemeteries and governing
funerals and disposal of the dead.'(Sub-sec. (t), Sec.
12, Rep. Act No. 537).
There is nothing in the above provision which authorizes
confiscation or as euphemistically termed by the respondents,
'donation.'
We now come to the question whether or not Section 9 of the ordinance
in question is a valid exercise of police power. The police power of
Quezon City is defined in sub-section 00, Sec. 12,Rep. Act 537 which
reads as follows:
"(00) To make such further ordinance and
regulations not repugnant to law as may be necessary to
carry into effect and discharge the powers and duties
conferred by this act and such as it shall deem necessary and
proper to provide for the health and safety, promote, the
prosperity, improve the morals, peace, good order, comfort
and convenience of the city and the inhabitants thereof, and
for the protection of property therein; and enforce
obedience thereto with such lawful fines or penalties as the
City Council may prescribe under the provisions of
subsection (jj) of this section.'
"We start the discussion with a restatement of certain basic principles.
Occupying the forefront in the bill of rights is the provision which
states that 'no person shall be deprived of life, liberty or property
without due process of law' (Art. III, Section 1 subparagraph 1,
Constitution).
"On the other hand, there are three inherent powers of government by
which the state interferes with the property rights, namely (1) police
power, (2) eminent domain, (3) taxation. These are said to exist
independently of the Constitution as necessary attributes of
sovereignty.
"Police power is defined by Freund as 'the power of promoting the
public welfare by restraining and regulating the use of liberty and
property' (Quoted in Political Law by Tañada and Carreon, V-II, p. 50).
It is usually exerted in order to merely regulate the use and enjoyment
of property of the owner. If he is deprived of his property outright, it is
not taken for public use but rather to destroy in order to promote the
general welfare. In police power, the owner does not recover from the
government for injury sustained in consequence thereof. (12 C.J. 623).
It has been said that police power is the most essential of government
powers, at times the most insistent, and always one of the least limitable
of the powers of government (Ruby vs. Provincial Board, 39 Phil. 660;
Ichong vs. Hernandez, L-7995, May 31, 1957). This power embraces
the whole system of public regulation (U.S. vs. Linsuya Fan, 10 Phil.
104). The Supreme Court has said that police power is so far-reaching
in scope that it has almost become impossible to limit its sweep. As it
derives its existence from the very existence of the state itself, it does
not need to be expressed or defined in its scope. Being coextensive with
self-preservation and survival itself, it is the most positive and active
of all governmental processes, the most essential, insistent and
illimitable. Especially it is so under the modern democratic framework
where the demands of society and nations have multiplied to almost
unimaginable proportions. The field and scope of police power have
become almost boundless, just as the fields of public interest and public
welfare have become almost all embracing and have transcended
human foresight. Since the Courts cannot foresee the needs and
demands of public interest and welfare, they cannot delimit beforehand
the extent or scope of the police power by which and through which
the state seeks to attain or achieve public interest and welfare. (Ichong
vs. Hernandez, L-7995, May 31, 1957).
"The police power being the most active power of the government and
the due process clause being the broadest limitation on governmental
power, the conflict between this power of government and the due
process clause of the Constitution is oftentimes inevitable.
"It will be seen from the foregoing authorities that police power is
usually exercised in the form of mere regulation or restriction in the use
of liberty or property for the promotion of the general welfare. It does
not involve the taking or confiscation of property with the exception of
a few cases where there is a necessity to confiscate private property in
order to destroy it for the purpose of protecting the peace and order and
of promoting the general welfare as for instance, the confiscation of an
illegally possessed article, such as opium and firearms.
"It seems to the court that Section 9 of Ordinance No. 6118, Series of
1964 of Quezon City is not a mere police regulation but an outright
confiscation. It deprives a person of his private property without due
process of law, nay, even without compensation."
In sustaining the decision of the respondent court, we are not unmindful of the heavy burden
shouldered by whoever challenges the validity of duly enacted legislation, whether national or
local. As early as 1913, this Court ruled in Case v. Board of Health (24 Phil. 250) that the courts
resolve every presumption in favor of validity and, more 90, where the municipal corporation
asserts that the ordinance was enacted to promote the common good and general welfare. LLpr
In the leading case of Ermita-Malate Hotel and Motel Operators Association Inc. v. City Mayor
of Manila (20 SCRA 849) the Court speaking through the then Associate Justice and now Chief
Justice Enrique M. Fernando stated:
"Primarily what calls for a reversal of such a decision is the absence of
any evidence to offset the presumption of validity that attaches to a
challenged statute or ordinance. As was expressed categorically by
Justice Malcolm: 'The presumption is all in favor of validity. . . . The
action of the elected representatives of the people cannot be lightly set
aside. The councilors must, in the very nature of things, be familiar
with the necessities of their particular municipality and with all the
facts and circumstances which surround the subject and necessitate
action. The local legislative body, by enacting the ordinance, has in
effect given notice that the regulations are essential to the well-being
of the people. . . . The Judiciary should not lightly set aside legislative
 action when there is not a clear invasion of personal or property rights
under the guise of police regulation.' (U.S. v. Salaveria [1918], 39 Phil.
102, at p. 111. There was an affirmation of the presumption of validity
of municipal ordinance as announced in the leading Salaveria decision
in Eboña v. Daet, [1950] 85 Phil. 369.).
We have likewise considered the principles earlier stated in Case v. Board of Health supra:
". . . Under the provisions of municipal charters which are known as
the general welfare clauses, a city, by virtue of its police power, may
adopt ordinances to secure the peace, safety, health, morals and the best
and highest interests of the municipality. It is a well-settled principle,
growing out of the nature of well-ordered and civilized society, that
every holder of property, however absolute and unqualified may be his
title, holds it under the implied liability that his use of it shall not be
injurious to the equal enjoyment of others having an equal right to the
enjoyment of their property, nor injurious to the rights of the
community. All property in the state is held subject to its general
regulations, which are necessary to the common good and general
welfare. Rights of property, like all other social and conventional
rights, are subject to such reasonable limitations in their enjoyment as
shall prevent them from being injurious, and to such reasonable
restraints and regulations, established by law, as the legislature, under
the governing and controlling power vested in them by the constitution,
may think necessary and expedient. The state, under the police power,
is possessed with plenary power to deal with all matters relating to the
general health, morals, and safety of the people, so long as it does not
contravene any positive inhibition of the organic law and providing that
such power is not exercised in such a manner as to justify the
interference of the courts to prevent positive wrong and oppression."
but find them not applicable to the facts of this case.
There is no reasonable relation between the setting aside of at least six (6) percent of the total
area of all private cemeteries for charity burial grounds of deceased paupers and the promotion
of health, morals, good order, safety, or the general welfare of the people. The ordinance is
actually a taking without compensation of a certain area from a private cemetery to benefit
paupers who are charges of the municipal corporation. Instead of building or maintaining a public
cemetery for this purpose, the city passes the burden to private cemeteries. LLphil
The expropriation without compensation of a portion of private cemeteries is not covered by
Section 12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers the city
council to prohibit the burial of the dead within the center of population of the city and to provide
for their burial in a proper place subject to the provisions of general law regulating burial grounds
and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in
Section 177 (q) that a Sangguniang panlungsod may "provide for the burial of the dead in such
place and in such manner as prescribed by law or ordinance" it simply authorizes the city to
provide its own city owned land or to buy or expropriate private properties to construct public
cemeteries. This has been the law and practice in the past. It continues to the present.
Expropriation, however, requires payment of just compensation. The questioned ordinance is
different from laws and regulations requiring owners of subdivisions to set aside certain areas
for streets, parks, playgrounds, and other public facilities from the land they sell to buyers of
subdivision lots. The necessities of public safety, health, and convenience are very clear from
said requirements which are intended to insure the development of communities with salubrious
and wholesome environments. The beneficiaries of the regulation, in turn, are made to pay by
the subdivision developer when individual lots are sold to homeowners.
As a matter of fact, the petitioners rely solely on the general welfare clause or on implied powers
of the municipal corporation, not on any express provision of law as statutory basis of their
exercise of power. The clause has always received broad and liberal interpretation but we cannot
stretch it to cover this particular taking. Moreover, the questioned ordinance was passed after
Himlayang Pilipino, Inc. had incorporated, received necessary licenses and permits, and
commenced operating. The sequestration of six percent of the cemetery cannot even be
considered as having been impliedly acknowledged by the private respondent when it accepted
the permits to commence operations.
WHEREFORE, the petition for review is hereby DISMISSED. The decision of the respondent
court is affirmed.
CITY OF CEBU VS SPS APOLONIO
In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CA-
G.R. CV No. 59204 1 affirming the judgment of 7 May 1996 of the Regional Trial Court,
Branch 13, Cebu City, in Civil Case No. CEB-14632, a case for eminent domain, which fixed
the valuation of the land subject thereof on the basis of the recommendation of the
commissioners appointed by it.
The material operative facts are not disputed.
On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint
for eminent domain against respondents spouses Apolonio and Blasa Dedamo. The petitioner
alleged therein that it needed the following parcels of land of respondents, to wit:
Lot No. 1527
Area 1,146 square meters
Tax Declaration 03472
Title No. 31833
Market value P240,660.00
Assessed Value P72,200.00
Lot No. 1528
Area 793 square meters
Area sought to be 478 square meters
expropriated
 Tax Declaration 03450
Title No. 31832
Market value for the whole lot P1,666,530.00
Market value of the
Area to be expropriated P100,380.00
Assessed Value P49,960.00
for a public purpose, i.e., for the construction of a public road which shall serve as an
access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and the
back of Magellan International Hotel Roads in Cebu City. The lots are the most suitable
site for the purpose. The total area sought to be expropriated is 1,624 square meters with
an assessed value of P1,786,400. Petitioner deposited with the Philippine National Bank
the amount of P51,156 representing 15% of the fair market value of the property to
enable the petitioner to take immediate possession of the property pursuant to Section 19
of R.A. No. 7160. 2
Respondents, filed a motion to dismiss the complaint because the purpose for which their
property was to be expropriated was not for a public purpose but for benefit of a single private
entity, the Cebu Holdings, Inc. Petitioner could simply buy directly from them the property at
its fair market value if it wanted to, just like what it did with the neighboring lots. Besides, the
price offered was very low in light of the consideration of P20,000 per square meter, more or
less, which petitioner paid to the neighboring lots. Finally, respondents alleged that they have
no other land in Cebu City.
A pre-trial was thereafter had.
On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession pursuant
to Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21 September
1994. 3
On 14 December 1994, the parties executed and submitted to the trial court an
Agreement 4 wherein they declared that they have partially settled the case and in
consideration thereof they agreed:
1. That the SECOND PARTY hereby conforms to the intention to
[sic] the FIRST PARTY in expropriating their parcels of
land in the above-cited case as for public purpose and for
the benefit of the general public;
2. That the SECOND PARTY agrees to part with the ownership of
the subject parcels of land in favor of the FIRST PARTY
provided the latter will pay just compensation for the same
in the amount determined by the court after due notice and
hearing;
3. That in the meantime the SECOND PARTY agrees to receive the
amount of ONE MILLION SEVEN HUNDRED EIGHTY
SIX THOUSAND FOUR HUNDRED PESOS
(1,786,400.00) as provisional payment for the subject
parcels of land, without prejudice to the final valuation as
may be determined by the court;
4. That the FIRST PARTY in the light of the issuance of the Writ of
Possession Order dated September 21, 1994 issued by the
Honorable Court, agreed to take possession over that
portion of the lot sought to be expropriated where the
house of the SECOND PARTY was located only after
fifteen (15) days upon the receipt of the SECOND PARTY
of the amount of P1,786,400.00;
5. That the SECOND PARTY upon receipt of the aforesaid
provisional amount, shall turn over to the FIRST PARTY
the title of the lot and within the lapse of the fifteen (15)
days grace period will voluntarily demolish their house
and the other structure that may be located thereon at their
own expense;
6. That the FIRST PARTY and the SECOND PARTY jointly petition
the Honorable Court to render judgment in said Civil Case
No. CEB-14632 in accordance with this AGREEMENT;
7. That the judgment sought to be rendered under this agreement shall
be followed by a supplemental judgment fixing the just
compensation for the property of the SECOND PARTY
after the Commissioners appointed by this Honorable
Court to determine the same shall have rendered their
report and approved by the court.
Pursuant to said agreement, the trial court appointed three commissioners to determine the just
compensation of the lots sought to be expropriated. The commissioners were Palermo M.
Lugo, who was nominated by petitioner and who was designated as Chairman; Alfredo
Cisneros, who was nominated by respondents; and Herbert E. Buot, who was designated by the
trial court. The parties agreed to their appointment.
Thereafter, the commissioners submitted their report, which contained their respective
assessments of and recommendation as to the valuation of the property.
On the basis of the commissioners' report and after due deliberation thereon, the trial court
rendered its decision on 7 May 1996, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered in accordance with the report of the commissioners.
Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa
Dedamo the sum of pesos: TWENTY FOUR MILLION EIGHT
HUNDRED SIXTY-FIVE THOUSAND AND NINE HUNDRED
THIRTY (P24,865,930.00) representing the compensation mentioned
in the Complaint.
 Plaintiff and defendants are directed to pay the following
commissioner's fee;
1. To Palermo Lugo - P21,000.00
2. To Herbert Buot - P19,000.00
3. To Alfredo Cisneros - P19,000.00
Without pronouncement as to cost.
SO ORDERED.
Petitioner filed a motion for reconsideration on the ground that the commissioners' report was
inaccurate since it included an area which was not subject to expropriation. More specifically,
it contended that Lot No. 1528 contains 793 square meters but the actual area to be
expropriated is only 478 square meters. The remaining 315 square meters is the subject of a
separate expropriation proceeding in Civil Case No. CEB-8348, then pending before Branch 9
of the Regional Trial Court of Cebu City.
On 16 August 1996, the commissioners submitted an amended assessment for the 478 square
meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount of
P20,826,339.50. The assessment was approved as the just compensation thereof by the trial
court in its Order of 27 December 1996. 6 Accordingly, the dispositive portion of the decision
was amended to reflect the new valuation.
Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV
No. 59204. Petitioner alleged that the lower court erred in fixing the amount of just
compensation at P20,826,339.50. The just compensation should be based on the prevailing
market price of the property at the commencement of the expropriation proceedings.
The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999, 7 the
Court of Appeals affirmed in toto the decision of the trial court.
Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises the
sole issue of whether just compensation should be determined as of the date of the filing of the
complaint. It asserts that it should be, which in this case should be 17 September 1993 and not
at the time the property was actually taken in 1994, pursuant to the decision in "National
Power Corporation vs. Court of Appeals."
In their Comment, respondents maintain that the Court of Appeals did not err in affirming the
decision of the trial court because (1) the trial court decided the case on the basis of the
agreement of the parties that just compensation shall be fixed by commissioners appointed by
the court; (2) petitioner did not interpose any serious objection to the commissioners' report of
12 August 1996 fixing the just compensation of the 1,624-square meter lot at P20,826,339.50;
hence, it was estopped from attacking the report on which the decision was based; and (3) the
determined just compensation fixed is even lower than the actual value of the property at the
time of the actual taking in 1994.
Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the
Government's right to appropriate, in the nature of a compulsory sale to the State, private
property for public use or purpose. However, the Government must pay the owner thereof just
compensation as consideration therefor.
In the case at bar, the applicable law as to the point of reckoning for the determination of just
compensation is Section 19 of R.A. No. 7160, which expressly provides that just compensation
shall be determined as of the time of actual taking. The Section reads as follows:
SECTION 19. Eminent Domain. — A local government unit may,
through its chief executive and acting pursuant to an ordinance,
exercise the power of eminent domain for public use, or purpose or
welfare for the benefit of the poor and the landless, upon payment of
just compensation, pursuant to the provisions of the Constitution and
pertinent laws: Provided, however, That the power of eminent domain
may not be exercised unless a valid and definite offer has been
previously made to the owner, and such offer was not
accepted: Provided, further, That the local government unit may
immediately take possession of the property upon the filing of the
expropriation proceedings and upon making a deposit with the proper
court of at least fifteen percent (15%) of the fair market value of the
property based on the current tax declaration of the property to be
expropriated: Provided finally, That, the amount to be paid for the
expropriated property shall be determined by the proper court, based
on the fair market value at the time of the taking of the property.
The petitioner has misread our ruling in The National Power Corp. vs. Court of
Appeals. 10 We did not categorically rule in that case that just compensation should be
determined as of the filing of the complaint. We explicitly stated therein that although the
general rule in determining just compensation in eminent domain is the value of the property as
of the date of the filing of the complaint, the rule "admits of an exception: where this Court
fixed the value of the property as of the date it was taken and not at the date of the
commencement of the expropriation proceedings."
Also, the trial court followed the then governing procedural law on the matter, which was
Section 5 of Rule 67 of the Rules of Court, which provided as follows:
SEC. 5. Ascertainment of compensation. — Upon the entry of the
order of condemnation, the court shall appoint not more than three (3)
competent and disinterested persons as commissioners to ascertain
and report to the court the just compensation for the property sought
to be taken. The order of appointment shall designate the time and
place of the first session of the hearing to be held by the
commissioners and specify the time within which their report is to be
filed with the court.
More than anything else, the parties, by a solemn document freely and voluntarily agreed upon
by them, agreed to be bound by the report of the commission and approved by the trial court.
The agreement is a contract between the parties. It has the force of law between them and
should be complied with in good faith. Article 1159 and 1315 of the Civil Code explicitly
provides:
Art. 1159. Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good
faith.
 Art. 1315. Contracts are perfected by mere consent, and from that
moment the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage
and law.
Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a serious
objection. 11 It is therefore too late for petitioner to question the valuation now without
violating the principle of equitable estoppel. Estoppel in pais arises when one, by his acts,
representations or admissions, or by his own silence when he ought to speak out, intentionally
or through culpable negligence, induces another to believe certain facts to exist and such other
rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted
to deny the existence of such facts. Records show that petitioner consented to conform with the
valuation recommended by the commissioners. It cannot detract from its agreement now and
assail correctness of the commissioner's assessment.
Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be
determined at the time of the filing of the complaint for expropriation, such law cannot prevail
over R.A. 7160, which is a substantive law.
WHEREFORE, finding no reversible error in the assailed judgment of the Court of Appeals in
CA-G.R. CV No. 59204, the petition in this case is hereby DENIED.
REPUBLIC VS CA
Petitioner instituted expropriation proceedings on 19 September 1969 before the Regional Trial
Court ("RTC") of Bulacan, docketed as Civil Cases No. 3839-M, No. 3840-M, No. 3841-M
and No. 3842-M, covering a total of 544,980 square meters of contiguous land situated along
MacArthur Highway, Malolos, Bulacan, to be utilized for the continued broadcast operation
and use of radio transmitter facilities for the "Voice of the Philippines" project. Petitioner,
through the Philippine Information Agency ("PIA"), took over the premises after the previous
lessee, the "Voice of America," had ceased its operations thereat. Petitioner made a deposit of
P517,558.80, the sum provisionally fixed as being the reasonable value of the property. On 26
February 1979, or more than nine years after the institution of the expropriation proceedings,
the trial court issued this order — DAHaTc
WHEREFORE, premises considered, judgment is hereby
rendered: IDASHa
"Condemning the properties of the defendants in Civil Cases Nos.
3839-M to 3842-M located at KM 43, MacArthur Highway, Malolos,
Bulacan and covered by several transfer certificates of title appearing
in the Commissioners' Appraisal Report consisting of the total area of
544,980 square meters, as indicated in plan, Exhibit A, for plaintiff,
also marked as Exhibit I for the defendants, and as Appendix 'A'
attached to the Commissioners' Appraisal Report, for the purpose
stated by the plaintiff in its complaint;
"Ordering the plaintiff to pay the defendants the just compensation for
said property which is the fair market value of the land condemned,
computed at the rate of six pesos (P6.00) per square meter, with legal
rate of interest from September 19, 1969, until fully paid; and
"Ordering the plaintiff to pay the costs of suit, which includes the
aforesaid fees of commissioners, Atty. Victorino P. Evangelista and
Mr. Pablo Domingo."
The bone of contention in the instant controversy is the 76,589-square meter property
previously owned by Luis Santos, predecessor-in-interest of herein respondents, which forms
part of the expropriated area.
It would appear that the national government failed to pay to herein respondents the
compensation pursuant to the foregoing decision, such that a little over five years later, or on
09 May 1984, respondents filed a manifestation with a motion seeking payment for the
expropriated property. On 07 June 1984, the Bulacan RTC, after ascertaining that the heirs
remained unpaid in the sum of P1,058,655.05, issued a writ of execution served on the
plaintiff, through the Office of the Solicitor General, for the implementation thereof. When the
order was not complied with, respondents again filed a motion urging the trial court to direct
the provincial treasurer of Bulacan to release to them the amount of P72,683.55, a portion of
the sum deposited by petitioner at the inception of the expropriation proceedings in 1969,
corresponding to their share of the deposit. The trial court, in its order of 10 July 1984, granted
the motion.
In the meantime, President Joseph Ejercito Estrada issued Proclamation No. 22, 2 transferring
20 hectares of the expropriated property to the Bulacan State University for the expansion of its
facilities and another 5 hectares to be used exclusively for the propagation of the Philippine
carabao. The remaining portion was retained by the PIA. This fact notwithstanding, and despite
the 1984 court order, the Santos heirs remained unpaid, and no action was taken on their case
until 16 September 1999 when petitioner filed its manifestation and motion to permit the
deposit in court of the amount of P4,664,000.00 by way of just compensation for the
expropriated property of the late Luis Santos subject to such final computation as might be
approved by the court. This time, the Santos heirs, opposing the manifestation and motion,
submitted a counter-motion to adjust the compensation from P6.00 per square meter previously
fixed in the 1979 decision to its current zonal valuation pegged at P5,000.00 per square meter
or, in the alternative, to cause the return to them of the expropriated property. On 01 March
2000, the Bulacan RTC ruled in favor of respondents and issued the assailed order, vacating its
decision of 26 February 1979 and declaring it to be unenforceable on the ground of
prescription —
"WHEREFORE, premises considered, the court hereby:
"1) declares the decision rendered by this Court on February 26, 1979
no longer enforceable, execution of the same by either a motion or an
independent action having already prescribed in accordance with
Section 6, Rule 39 of both the 1964 Revised Rules of Court and the
1997 Rules of Civil Procedure;
"2) denies the plaintiff's Manifestation and Motion to Permit Plaintiff
to Deposit in Court Payment for Expropriated Properties dated
 September 16, 1999 for the reason stated in the next preceding
paragraph hereof; and
"3) orders the return of the expropriated property of the late defendant
Luis Santos to his heirs conformably with the ruling of the Supreme
Court in Government of Sorsogon vs. Vda. De Villaroya, 153 SCRA
291, without prejudice to any case which the parties may deem
appropriate to institute in relation with the amount already paid to
herein oppositors and the purported transfer of a portion of the said
realty to the Bulacan State University pursuant to Proclamation No.
22 issued by President Joseph Ejercito."
Petitioner brought the matter up to the Court of Appeals but the petition was outrightly denied.
It would appear that the denial was based on Section 4, Rule 65, of the 1997 Rules of Civil
Procedure which provided that the filing of a motion for reconsideration in due time after filing
of the judgment, order or resolution interrupted the running of the sixty-day period within
which to file a petition for certiorari; and that if a motion for reconsideration was denied, the
aggrieved party could file the petition only within the remaining period, but which should not
be less than five days in any event, reckoned from the notice of such denial. The reglementary
period, however, was later modified by A.M. No. 00-2-03 S.C., now reading thusly:
"Sec. 4. When and where petition filed. — The petition shall be filed
not later than sixty (60) days from notice of the judgment, order or
resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty (60) day period
shall be counted from notice of the denial of said motion."
The amendatory provision, being curative in nature, should be made applicable to all
cases still pending with the courts at the time of its effectivity.
In Narzoles vs. NLRC, the Court has said:
The Court has observed that Circular No. 39-98 has generated
tremendous confusion resulting in the dismissal of numerous cases for
late filing. This may have been because, historically, i.e., even before
the 1997 revision to the Rules of Civil Procedure, a party had a fresh
period from receipt of the order denying the motion for
reconsideration to file a petition for certiorari. Were it not for the
amendments brought about by Circular No. 39-98, the cases so
dismissed would have been resolved on the merits. Hence, the Court
deemed it wise to revert to the old rule allowing a party a fresh 60-day
period from notice of the denial of the motion for reconsideration to
file a petition for certiorari. . . .
"The latest amendments took effect on September 1, 2000, following
its publication in the Manila Bulletin on August 4, 2000 and in the
Philippine Daily Inquirer on August 7, 2000, two newspapers of
general circulation.
"In view of its purpose, the Resolution further amending Section 4,
Rule 65, can only be described as curative in nature, and the
principles governing curative statutes are applicable.
"Curative statutes are enacted to cure defects in a prior law or to
validate legal proceedings which would otherwise be void for want of
conformity with certain legal requirements. (Erectors, Inc. vs.
National Labor Relations Commission, 256 SCRA 629 [1996].) They
are intended to supply defects, abridge superfluities and curb certain
evils. They are intended to enable persons to carry into effect that
which they have designed or intended, but has failed of expected legal
consequence by reason of some statutory disability or irregularity in
their own action. They make valid that which, before the enactment of
the statute was invalid. Their purpose is to give validity to acts done
that would have been invalid under existing laws, as if existing laws
have been complied with. (Batong Buhay Gold Mines, Inc. vs. Dela
Serna, 312 SCRA 22 [1999].) Curative statutes, therefore, by their
very essence, are retroactive. (Municipality of San Narciso, Quezon
vs. Mendez, Sr., 239 SCRA 11 [1994].)"
At all events, petitioner has a valid point in emphasizing the "public nature" of the expropriated
property. The petition being imbued with public interest, the Court has resolved to give it due
course and to decide the case on its merits.
Assailing the finding of prescription by the trial court, petitioner here posited that a motion
which respondents had filed on 17 February 1984, followed up by other motions subsequent
thereto, was made within the reglementary period that thereby interrupted the 5-year
prescriptive period within which to enforce the 1979 judgment. Furthermore, petitioner
claimed, the receipt by respondents of partial compensation in the sum of P72,683.55 on 23
July 1984 constituted partial compliance on the part of petitioners and effectively estopped
respondents from invoking prescription expressed in Section 6, Rule 39, of the Rules of
Court. 6
In opposing the petition, respondents advanced the view that pursuant to Section 6, Rule 39, of
the Rules of Court, the failure of petitioner to execute the judgment, dated 26 February 1979,
within five years after it had become final and executory, rendered it unenforceable by mere
motion. The motion for payment, dated 09 May 1984, as well as the subsequent disbursement
to them of the sum of P72,683.55 by the provincial treasurer of Bulacan, could not be
considered as having interrupted the five-year period, since a motion, to be considered
otherwise, should instead be made by the prevailing party, in this case by petitioner.
Respondents maintained that the P72,683.55 paid to them by the provincial treasurer of
Bulacan pursuant to the 1984 order of the trial court was part of the initial deposit made by
petitioner when it first entered possession of the property in 1969 and should not be so
regarded as a partial payment. Respondents further questioned the right of PIA to transfer
ownership of a portion of the property to the Bulacan State University even while the just
compensation due the heirs had yet to be finally settled.
The right of eminent domain is usually understood to be an ultimate right of the sovereign
power to appropriate any property within its territorial sovereignty for a public
purpose. 7Fundamental to the independent existence of a State, it requires no recognition by
the Constitution, whose provisions are taken as being merely confirmatory of its presence and
as being regulatory, at most, in the due exercise of the power. In the hands of the legislature,
the power is inherent, its scope matching that of taxation, even that of police power itself, in
many respects. It reaches to every form of property the State needs for public use and, as an old
case so puts it, all separate interests of individuals in property are held under a tacit agreement
or implied reservation vesting upon the sovereign the right to resume the possession of the
property whenever the public interest so requires it.
The ubiquitous character of eminent domain is manifest in the nature of the expropriation
proceedings. Expropriation proceedings are not adversarial in the conventional sense, for the
condemning authority is not required to assert any conflicting interest in the property. Thus, by
filing the action, the condemnor in effect merely serves notice that it is taking title and
possession of the property, and the defendant asserts title or interest in the property, not to
prove a right to possession, but to prove a right to compensation for the taking.
Obviously, however, the power is not without its limits: first, the taking must be for public use,
and second, that just compensation must be given to the private owner of the property. These
twin proscriptions have their origin in the recognition of the necessity for achieving balance
between the State interests, on the one hand, and private rights, upon the other hand, by
effectively restraining the former and affording protection to the latter. In determining "public
use," two approaches are utilized — the first is public employment or the actual use by the
public, and the second is public advantage or benefit. It is also useful to view the matter as
being subject to constant growth, which is to say that as society advances, its demands upon the
individual so increases, and each demand is a new use to which the resources of the individual
may be devoted.
The expropriated property has been shown to be for the continued utilization by the PIA, a
significant portion thereof being ceded for the expansion of the facilities of the Bulacan State
University and for the propagation of the Philippine carabao, themselves in line with the
requirements of public purpose. Respondents question the public nature of the utilization by
petitioner of the condemned property, pointing out that its present use differs from the purpose
originally contemplated in the 1969 expropriation proceedings. The argument is of no moment.
The property has assumed a public character upon its expropriation. Surely, petitioner, as the
condemnor and as the owner of the property, is well within its rights to alter and decide the use
of that property, the only limitation being that it be for public use, which, decidedly, it is.
In insisting on the return of the expropriated property, respondents would exhort on the
pronouncement in Provincial Government of Sorsogon vs. Vda. de Villaroya 14 where the
unpaid landowners were allowed the alternative remedy of recovery of the property there in
question. It might be borne in mind that the case involved the municipal government of
Sorsogon, to which the power of eminent domain is not inherent, but merely delegated and of
limited application. The grant of the power of eminent domain to local governments
under Republic Act No. 7160 15 cannot be understood as being the pervasive and all-
encompassing power vested in the legislative branch of government. For local governments to
be able to wield the power, it must, by enabling law, be delegated to it by the national
legislature, but even then, this delegated power of eminent domain is not, strictly speaking, a
power of eminent, but only of inferior, domain or only as broad or confined as the real
authority would want it to be.
Thus, in Valdehueza vs. Republic where the private landowners had remained unpaid ten years
after the termination of the expropriation proceedings, this Court ruled —
"The points in dispute are whether such payment can still be made
and, if so, in what amount. Said lots have been the subject of
expropriation proceedings. By final and executory judgment in said
proceedings, they were condemned for public use, as part of an
airport, and ordered sold to the government. . . . It follows that both
by virtue of the judgment, long final, in the expropriation suit, as well
as the annotations upon their title certificates, plaintiffs are not
entitled to recover possession of their expropriated lots — which are
still devoted to the public use for which they were expropriated — but
only to demand the fair market value of the same.
"Said relief may be granted under plaintiffs' prayer for: 'such other
remedies, which may be deemed just and equitable under the
premises.'"
The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City where the
recovery of possession of property taken for public use prayed for by the unpaid
landowner was denied even while no requisite expropriation proceedings were first
instituted. The landowner was merely given the relief of recovering compensation for his
property computed at its market value at the time it was taken and appropriated by the
State.
The judgment rendered by the Bulacan RTC in 1979 on the expropriation proceedings provides
not only for the payment of just compensation to herein respondents but likewise adjudges the
property condemned in favor of petitioner over which parties, as well as their privies, are
bound. 20 Petitioner has occupied, utilized and, for all intents and purposes, exercised
dominion over the property pursuant to the judgment. The exercise of such rights vested to it as
the condemnee indeed has amounted to at least a partial compliance or satisfaction of the 1979
judgment, thereby preempting any claim of bar by prescription on grounds of non-execution. In
arguing for the return of their property on the basis of non-payment, respondents ignore the fact
that the right of the expropriatory authority is far from that of an unpaid seller in ordinary sales,
to which the remedy of rescission might perhaps apply. An in rem proceeding, condemnation
acts upon the property. After condemnation, the paramount title is in the public under a new
and independent title; thus, by giving notice to all claimants to a disputed title, condemnation
proceedings provide a judicial process for securing better title against all the world than may be
obtained by voluntary conveyance.
Respondents, in arguing laches against petitioner did not take into account that the same
argument could likewise apply against them. Respondents first instituted proceedings for
payment against petitioner on 09 May 1984, or five years after the 1979 judgment had become
final. The unusually long delay in bringing the action to compel payment against herein
petitioner would militate against them. Consistently with the rule that one should take good
care of his own concern, respondents should have commenced the proper action upon the
finality of the judgment which, indeed, resulted in a permanent deprivation of their ownership
and possession of the property.
The constitutional limitation of "just compensation" is considered to be the sum equivalent to
the market value of the property, broadly described to be the price fixed by the seller in open
market in the usual and ordinary course of legal action and competition or the fair value of the
property as between one who receives, and one who desires to sell, it fixed at the time of the
actual taking by the government. Thus, if property is taken for public use before compensation
is deposited with the court having jurisdiction over the case, the final compensation must
include interests on its just value to be computed from the time the property is taken to the time
when compensation is actually paid or deposited with the court. In fine, between the taking of
the property and the actual payment, legal interests accrue in order to place the owner in a
position as good as (but not better than) the position he was in before the taking occurred.

The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal
value of the property to be computed from the time petitioner instituted condemnation
proceedings and "took" the property in September 1969. This allowance of interest on the
amount found to be the value of the property as of the time of the taking computed, being an
effective forbearance, at 12% per annum should help eliminate the issue of the constant
fluctuation and inflation of the value of the currency over time. Article 1250 of the Civil Code,
providing that, in case of extraordinary inflation or deflation, the value of the currency at the
time of the establishment of the obligation shall be the basis for the payment when no
agreement to the contrary is stipulated, has strict application only to contractual obligations. In
other words, a contractual agreement is needed for the effects of extraordinary inflation to be
taken into account to alter the value of the currency.

All given, the trial court of Bulacan in issuing its order, dated 01 March 2000, vacating its
decision of 26 February 1979 has acted beyond its lawful cognizance, the only authority left to
it being to order its execution. Verily, private respondents, although not entitled to the return of
the expropriated property, deserve to be paid promptly on the yet unpaid award of just
compensation already fixed by final judgment of the Bulacan RTC on 26 February 1979 at
P6.00 per square meter, with legal interest thereon at 12% per annum computed from the date
of "taking" of the property, i.e., 19 September 1969, until the due amount shall have been fully
paid.

WHEREFORE, the petition is GRANTED. The resolution, dated 31 July 2000, of the Court of
Appeals dismissing the petition for certiorari, as well as its resolution of 04 January 2001
denying the motion for reconsideration, and the decision of the Regional Trial Court of
Bulacan, dated 01 March 2000, are SET ASIDE. Let the case be forthwith remanded to the
Regional Trial Court of Bulacan for the proper execution of its decision promulgated on 26
February 1979 which is hereby REINSTATED. No costs.