ALEJANDRO R. SANTOS, Plaintiff-Appellee, v.

CATALINA DE ALVAREZ, CARLOS TANSECO, and

MANUEL ALVAREZ, Defendants-Appellants.

Quesada & Barbin for Appellants.

Ruperto C. Martin for Appellee.

. EJECTMENT; GROUNDS FOR; NON-PAYMENT OF RENTS; RENTAL LAW (COMMONWEALTH ACT NO. 689 AS
AMENDED BY REPUBLIC ACT NO. 66). — Under section 2 of Republic Act No. 689, amending Commonwealth
Act No. 689, a lessee cannot be ejected even for non-payment of rents, where such non-payment is not
willful and deliberate and the lessor does not need the property for himself and the lessee has never
subleased it without authority. In other words, a lessee who is unable to pay on time the agreed rents
because of poverty or of any other circumstance beyond his control cannot, under the present law, be
ejected from the leased property, if the other to circumstances are not present.

2. ID.; ID.; ID.; ID.; RETROACTIVE EFFECT. — By the very nature its purpose, this measure of social justice
(the Rental Law), which is temporary in character (four years), is applicable to all lessees or occupants at
the time the law was passed, regardless of the dates of their contracts.

3. ID.; ID.; LESSOR NEED OF BUILDING LEASED. — One of the exceptions provided by the Rental Law
under which a lessee or occupant may be ejected is "when the lessor has to occupy the building leased."
This exception refers only to the lessor. It does not apply when the lessor needs the building for others.

DECISION

MORAN, C.J. :

Alejandro R. Santos, plaintiff-appellee herein, filed a suit in ejectment for the premises designated as No.
22, Altura Street, Sta. Mesa, Manila, occupied since September 1942 by defendants-appellants, Catalina de
Alvarez, Carlos Tanseco, and Manuel Alvarez. Santos obtained judgment in his favor in the municipal court
of Manila, which was affirmed on appeal to the Court of First Instance. This appeal is now from the judgment
of the Court of First Instance wherein defendants Alvarez, Et. Al. are ordered to vacate the premises, to pay
the plaintiff back rent from April 1, 1945, at the rate of P35 a month up to the time the premises are
vacated, and to pay the costs of the suit.

Section 2 of Republic Act No. 66, amending Commonwealth Act No. 689, provides: jgc:chan rob les.com.ph

"In a suit for ejection or for the collection of rents due and payable by virtue of a contract of lease of
buildings destined solely dwelling, not being a room or rooms of an hotel, and lots, the that the rents are
unjust and unreasonable shall constitute a valid defense. Except as provided in section twelve of this Act, no
lessee or occupant shall be ejected in cases other than for willful and deliberate nonpayment of rents or
when the lessor has to occupy the building leased." (Emphasis ours.)

Under this provision, a lessee cannot be ejected even for non-payment of rents, where such non-payment is
not willful and deliberate and the lessor does not need the property for himself and the lessee has never
subleased it without authority. In other words, a lessee who is unable to pay on time the agreed rents
because of poverty or of any other circumstance beyond his control cannot, under the present law be
ejected from the leased property, if the other two circumstances are not present. The purpose of the law is
evidently to relieve the present situation arising from the scarcity of housing facilities by protecting
particularly the thousands of impoverished people who in the war of liberation lost their houses together
with almost all their belongings and found shelter in houses owned by others. By the very nature of its
purpose, this measure of social justice, which is temporary in character (four years), is applicable to all
lessees or occupants at the time the law was passed, regardless of the dates of their contracts. Manifestly
the law seeks to relieve an existing condition affecting the life and happiness of the people, a condition that
is not less important because of its age. Indeed, a poor lessee does not cease to be poor because his
contract bears an earlier date than that of the law. It is expressly ordained by said law that "no lessee or
occupant shall be ejected in cases other than for willful and deliberate non-payment of rents," a negative
and all-inclusive expression which is mandatory and embraces within its protection all lessees and occupants
without distinction at the time the law was passed. The only exceptions to the rule as above indicated are
(1) when the lessee or occupant subleased the property without the consent of the lessor; (2) when there
has been willful and deliberate non-payment of rents; or (3) when the lessor has to occupy the building
leased. Under the facts of the instant case, the first and second exceptions cannot be invoked. As regards
the third, the lessor, according to his testimony reiterated in his brief, wishes to secure the premises for his
two sons or near relatives. But the exception applies only when the lessor "has to occupy the building
leased." It does not apply when the lessor needs the building for others. In other words, the need
contemplated by law is only the lessor’s need. His sons or near relatives are not the lessors. The sons should
live with their father if they are minors, and if they are of age they are no longer dependents of their father.
The near relatives have no standing in the lease, hence their need cannot be considered.

Moreover, there is the defendant’s allegation that plaintiff has other properties which he has been leasing to
others rather than to his two sons and near relatives, which allegation is not denied and is indirectly
admitted in appellee’s brief.

In view of the foregoing, the judgment of the lower court is affirmed in so far as it fixes the monthly rent for
the premises in question at P35, and reversed in so far as it orders defendants-appellants to vacate said
premises and to pay the costs. Plaintiff-appellee will pay the costs of this suit.

Pablo, Bengzon Hontiveros and Tuason, JJ., concur.

G.R. No. L-6355-56 August 31, 1953

PASTOR M. ENDENCIA and FERNANDO JUGO,Plaintiffs-

Appellees, vs. SATURNINO DAVID, as Collector of Internal
Revenue, Defendant-Appellant.

Office of the Solicitor General Juan R. Liwag and Solicitor Jose P.

Alejandro for appellant.
Manuel O. Chan for appellees.

MONTEMAYOR, J.:

This is a joint appeal from the decision of the Court of First Instance
of Manila declaring section 13 of Republic Act No. 590
unconstitutional, and ordering the appellant Saturnino David as
Collector of Internal Revenue to re-fund to Justice Pastor M.
Endencia the sum of P1,744.45, representing the income tax
collected on his salary as Associate Justice of the Court of Appeals
in 1951, and to Justice Fernando Jugo the amount of P2,345.46,
representing the income tax collected on his salary from January
1,1950 to October 19, 1950, as Presiding Justice of the Court of
Appeals, and from October 20, 1950 to December 31,1950, as
Associate Justice of the Supreme Court, without special
pronouncement as to costs. chanroblesvi rtua lawlib rary cha nro bles vi rtua l law lib ra ry

Because of the similarity of the two cases, involving as they do the

same question of law, they were jointly submitted for determination
in the lower court. Judge Higinio B. Macadaeg presiding, in a rather
exhaustive and well considered decision found and held that under
the doctrine laid down by this Court in the case of Perfecto vs. Meer,
85 Phil., 552, the collection of income taxes from the salaries of
Justice Jugo and Justice Endencia was a diminution of their
compensation and therefore was in violation of the Constitution of
the Philippines, and so ordered the refund of said taxes. chanroblesv irtualawli bra ry chan roble s virtual law l ibra ry

We see no profit and necessity in again discussing and considering

the proposition and the arguments pro and cons involved in the
case of Perfecto vs. Meer, supra, which are raised, brought up and
presented here. In that case, we have held despite the ruling
enunciated by the United States Federal Supreme Court in the case
of O 'Malley vs. Woodrought 307 U. S., 277, that taxing the salary
of a judicial officer in the Philippines is a diminution of such salary
and so violates the Constitution. We shall now confine our-selves to
a discussion and determination of the remaining question of
whether or not Republic Act No. 590, particularly section 13, can
justify and legalize the collection of income tax on the salary of
judicial officers.
chanroblesvi rtua lawlib rary chanrob les vi rtual law lib rary

According to the brief of the Solicitor General on behalf of appellant

Collector of Internal Revenue, our decision in the case of Perfecto
vs. Meer, supra, was not received favorably by Congress, because
immediately after its promulgation, Congress enacted Republic Act
No. 590. To bring home his point, the Solicitor General reproduced
what he considers the pertinent discussion in the Lower House of
House Bill No. 1127 which became Republic Act No. 590. chanroblesvi rtualaw lib rary cha nrob les vi rtual law lib rary

For purposes of reference, we are reproducing section 9, Article VIII

of our Constitution:.

SEC. 9. The members of the Supreme Court and all judges of

inferior courts shall hold office during good behavior, until they
reach the age of seventy years, or become incapacitated to
discharge the duties of their office. They shall receive such
compensation as may be fixed by law, which shall not be diminished
during their continuance in office. Until the Congress shall provide
otherwise, the Chief Justice of the Supreme Court shall receive an
annual compensation of sixteen thousand pesos, and each Associate
Justice, fifteen thousand pesos.

As already stated construing and applying the above constitutional

provision, we held in the Perfecto case that judicial officers are
exempt from the payment of income tax on their salaries, because
the collection thereof by the Government was a decrease or
diminution of their salaries during their continuance in office, a thing
which is expressly prohibited by the Constitution. Thereafter,
according to the Solicitor General, because Congress did not
favorably receive the decision in the Perfecto case, Congress
promulgated Republic Act No. 590, if not to counteract the ruling in
that decision, at least now to authorize and legalize the collection of
income tax on the salaries of judicial officers. We quote section 13
of Republic Act No. 590:

SEC 13. No salary wherever received by any public officer of the

Republic of the Philippines shall be considered as exempt from the
income tax, payment of which is hereby declared not to be
dimunition of his compensation fixed by the Constitution or by law.

So we have this situation. The Supreme Court in a decision

interpreting the Constitution, particularly section 9, Article VIII, has
held that judicial officers are exempt from payment of income tax
on their salaries, because the collection thereof was a diminution of
such salaries, specifically prohibited by the Constitution. Now comes
the Legislature and in section 13, Republic Act No. 590, says that
"no salary wherever received by any public officer of the Republic
(naturally including a judicial officer) shall be considered as exempt
from the income tax," and proceeds to declare that payment of said
income tax is not a diminution of his compensation. Can the
Legislature validly do this? May the Legislature lawfully declare the
collection of income tax on the salary of a public official, specially a
judicial officer, not a decrease of his salary, after the Supreme Court
has found and decided otherwise? To determine this question, we
shall have to go back to the fundamental principles regarding
separation of powers. chanrob lesvi rtua lawlib rary cha nrob les vi rtua l law lib rary

Under our system of constitutional government, the Legislative

department is assigned the power to make and enact laws. The
Executive department is charged with the execution of carrying out
of the provisions of said laws. But the interpretation and application
of said laws belong exclusively to the Judicial department. And this
authority to interpret and apply the laws extends to the
Constitution. Before the courts can determine whether a law is
constitutional or not, it will have to interpret and ascertain the
meaning not only of said law, but also of the pertinent portion of the
Constitution in order to decide whether there is a conflict between
the two, because if there is, then the law will have to give way and
has to be declared invalid and unconstitutional.

Defining and interpreting the law is a judicial function and the

legislative branch may not limit or restrict the power granted to the
courts by the Constitution. (Bandy vs. Mickelson et al., 44N. W.,
2nd 341, 342.) chanrobles vi rt ual law li bra ry

When it is clear that a statute transgresses the authority vested in

the legislature by the Constitution, it is the duty of the courts to
declare the act unconstitutional because they cannot shrink from it
without violating their oaths of office. This duty of the courts to
maintain the Constitution as the fundamental law of the state is
imperative and unceasing; and, as Chief Justice Marshall said,
whenever a statute is in violation of the fundamental law, the courts
must so adjudge and thereby give effect to the Constitution. Any
other course would lead to the destruction of the Constitution. Since
the question as to the constitutionality of a statute is a judicial
matter, the courts will not decline the exercise of jurisdiction upon
the suggestion that action might be taken by political agencies in
disregard of the judgment of the judicial tribunals. (11 Am. Jur.,
714-715.) chanroble s virtual law l ibra ry

Under the American system of constitutional government, among

the most important functions in trusted to the judiciary are the
interpreting of Constitutions and, as a closely connected power, the
determination of whether laws and acts of the legislature are or are
not contrary to the provisions of the Federal and State
Constitutions. (11 Am. Jur., 905.).

By legislative fiat as enunciated in section 13, Republic Act NO. 590,

Congress says that taxing the salary of a judicial officer is not a
decrease of compensation. This is a clear example of interpretation
or ascertainment of the meaning of the phrase "which shall not be
diminished during their continuance in office," found in section 9,
Article VIII of the Constitution, referring to the salaries of judicial
officers. This act of interpreting the Constitution or any part thereof
by the Legislature is an invasion of the well-defined and established
province and jurisdiction of the Judiciary.

The rule is recognized elsewhere that the legislature cannot pass

any declaratory act, or act declaratory of what the law was before
its passage, so as to give it any binding weight with the courts. A
legislative definition of a word as used in a statute is not conclusive
of its meaning as used elsewhere; otherwise, the legislature would
be usurping a judicial function in defining a term. (11 Am. Jur., 914,
emphasis supplied) chan robles v irt ual law l ibra ry

The legislature cannot, upon passing a law which violates a

constitutional provision, validate it so as to prevent an attack
thereon in the courts, by a declaration that it shall be so construed
as not to violate the constitutional inhibition. (11 Am. Jur., 919,
emphasis supplied)

We have already said that the Legislature under our form of

government is assigned the task and the power to make and enact
laws, but not to interpret them. This is more true with regard to the
interpretation of the basic law, the Constitution, which is not within
the sphere of the Legislative department. If the Legislature may
declare what a law means, or what a specific portion of the
Constitution means, especially after the courts have in actual case
ascertain its meaning by interpretation and applied it in a decision,
this would surely cause confusion and instability in judicial
processes and court decisions. Under such a system, a final court
determination of a case based on a judicial interpretation of the law
of the Constitution may be undermined or even annulled by a
subsequent and different interpretation of the law or of the
Constitution by the Legislative department. That would be neither
wise nor desirable, besides being clearly violative of the
fundamental, principles of our constitutional system of government,
particularly those governing the separation of powers. chanro blesvi rt ualawlib ra ry chanrobles vi rt ual law li bra ry
So much for the constitutional aspect of the case. Considering the
practical side thereof, we believe that the collection of income tax
on a salary is an actual and evident diminution thereof. Under the
old system where the in-come tax was paid at the end of the year
or sometime thereafter, the decrease may not be so apparent and
clear. All that the official who had previously received his full salary
was called upon to do, was to fulfill his obligation and to exercise his
privilege of paying his income tax on his salary. His salary fixed by
law was received by him in the amount of said tax comes from his
other sources of income, he may not fully realize the fact that his
salary had been decreased in the amount of said income tax. But
under the present system of withholding the income tax at the
source, where the full amount of the income tax corresponding to
his salary is computed in advance and divided into equal portions
corresponding to the number of pay-days during the year and
actually deducted from his salary corresponding to each payday,
said official actually does not receive his salary in full, because the
income tax is deducted therefrom every payday, that is to say,
twice a month. Let us take the case of Justice Endencia. As
Associate Justice of the Court of Appeals, his salary is fixed at
p12,000 a year, that is to say, he should receive P1,000 a month or
P500 every payday, - fifteenth and end of month. In the present
case, the amount collected by the Collector of Internal Revenue on
said salary is P1,744.45 for one year. Divided by twelve (months)
we shall have P145.37 a month. And further dividing it by two
paydays will bring it down to P72.685, which is the income tax
deducted form the collected on his salary each half month. So, if
Justice Endencia's salary as a judicial officer were not exempt from
payment of the income tax, instead of receiving P500 every payday,
he would be actually receiving P427.31 only, and instead of
receiving P12,000 a year, he would be receiving but P10,255.55. Is
it not therefor clear that every payday, his salary is actually
decreased by P72.685 and every year is decreased by P1,744.45? chanroble s virtual law lib rary

Reading the discussion in the lower House in connection with House

Bill No. 1127, which became Republic Act No. 590, it would seem
that one of the main reasons behind the enactment of the law was
the feeling among certain legislators that members of the Supreme
Court should not enjoy any exemption and that as citizens, out of
patriotism and love for their country, they should pay income tax on
their salaries. It might be stated in this connection that the
exemption is not enjoyed by the members of the Supreme Court
alone but also by all judicial officers including Justices of the Court
of Appeals and judges of inferior courts. The exemption also
extends to other constitutional officers, like the President of the
Republic, the Auditor General, the members of the Commission on
Elections, and possibly members of the Board of Tax Appeals,
commissioners of the Public Service Commission, and judges of the
Court of Industrial Relations. Compares to the number of all these
officials, that of the Supreme Court Justices is relatively
insignificant. There are more than 990 other judicial officers
enjoying the exemption, including 15 Justices of the Court of
Appeals, about 107 Judges of First Instance, 38 Municipal Judges
and about 830 Justices of the Peace. The reason behind the
exemption in the Constitution, as interpreted by the United States
Federal Supreme Court and this Court, is to preserve the
independence of the Judiciary, not only of this High Tribunal but of
the other courts, whose present membership number more than
990 judicial officials.
chanro blesv irt ualawli bra ry chan robles v irt ual law l ibra ry

The exemption was not primarily intended to benefit judicial

officers, but was grounded on public policy. As said by Justice Van
Devanter of the United States Supreme Court in the case of Evans
vs. Gore (253 U. S., 245):

The primary purpose of the prohibition against diminution was not

to benefit the judges, but, like the clause in respect of tenure, to
attract good and competent men to the bench and to promote that
independence of action and judgment which is essential to the
maintenance of the guaranties, limitations and pervading principles
of the Constitution and to the administration of justice without
respect to person and with equal concern for the poor and the rich.
Such being its purpose, it is to be construed, not as a private grant,
but as a limitation imposed in the public interest; in other words,
not restrictively, but in accord with its spirit and the principle on
which it proceeds.
Having in mind the limited number of judicial officers in the
Philippines enjoying this exemption, especially when the great bulk
thereof are justices of the peace, many of them receiving as low as
P200 a month, and considering further the other exemptions
allowed by the income tax law, such as P3,000 for a married person
and P600 for each dependent, the amount of national revenue to be
derived from income tax on the salaries of judicial officers, were if
not for the constitutional exemption, could not be large or
substantial. But even if it were otherwise, it should not affect, much
less outweigh the purpose and the considerations that prompted the
establishment of the constitutional exemption. In the same case
of Evans vs. Gore, supra, the Federal Supreme Court declared "that
they (fathers of the Constitution) regarded the independence of the
judges as far as greater importance than any revenue that could
come from taxing their salaries. chanrob lesvi rtua lawlib rary cha nrob les vi rt ual law lib rary

When a judicial officer assumed office, he does not exactly ask for
exemption from payment of income tax on his salary, as a privilege
. It is already attached to his office, provided and secured by the
fundamental law, not primarily for his benefit, but based on public
interest, to secure and preserve his independence of judicial
thought and action. When we come to the members of the Supreme
Court, this excemption to them is relatively of short duration.
Because of the limited membership in this High Tribunal, eleven,
and due to the high standards of experience, practice and training
required, one generally enters its portals and comes to join its
membership quite late in life, on the aver-age, around his sixtieth
year, and being required to retire at seventy, assuming that he does
not die or become incapacitated earlier, naturally he is not in a
position to receive the benefit of exemption for long. It is rather to
the justices of the peace that the exemption can give more benefit.
They are relatively more numerous, and because of the meager
salary they receive, they can less afford to pay the income tax on it
and its diminution by the amount of the income tax if paid would be
real, substantial and onerous.chanroble svirtualawl ibra ry chan rob les vi rtual law lib rary

Considering exemption in the abstract, there is nothing unusual or

abhorrent in it, as long as it is based on public policy or public
interest. While all other citizens are subject to arrest when charged
with the commission of a crime, members of the Senate and House
of Representatives except in cases of treason, felony and breach of
the peace are exempt from arrest, during their attendance in the
session of the Legislature; and while all other citizens are generally
liable for any speech, remark or statement, oral or written, tending
to cause the dishonor, discredit or contempt of a natural or juridical
person or to blacken the memory of one who is dead, Senators and
Congressmen in making such statements during their sessions are
extended immunity and exemption. chanro blesvi rt ualawlib ra ry chanrobles vi rt ual law li bra ry

And as to tax exemption, there are not a few citizens who enjoy this
exemption. Persons, natural and juridical, are exempt from taxes on
their lands, buildings and improvements thereon when used
exclusively for educational purposes, even if they derive income
therefrom. (Art. VI, Sec. 22 [3].) Holders of government bonds are
exempted from the payment of taxes on the income or interest they
receive therefrom (sec. 29 (b) [4], National Internal Revenue Code
as amended by Republic Act No. 566). Payments or income received
by any person residing in the Philippines under the laws of the
United States administered by the United States Veterans
Administration are exempt from taxation. (Republic Act No. 360).
Funds received by officers and enlisted men of the Philippine Army
who served in the Armed Forces of the United States, allowances
earned by virtue of such services corresponding to the taxable years
1942 to 1945, inclusive, are exempted from income tax. (Republic
Act No. 210). The payment of wages and allowances of officers and
enlisted men of the Army Forces of the Philippines sent to Korea are
also exempted from taxation. (Republic Act No. 35). In other words,
for reasons of public policy and public interest, a citizen may
justifiably by constitutional provision or statute be exempted from
his ordinary obligation of paying taxes on his income. Under the
same public policy and perhaps for the same it not higher
considerations, the framers of the Constitution deemed it wise and
necessary to exempt judicial officers from paying taxes on their
salaries so as not to decrease their compensation, thereby insuring
the independence of the Judiciary. chanro blesvi rt uala wlibra ry chan robles v irt ual law l ibra ry

In conclusion we reiterate the doctrine laid down in the case

of Perfecto vs. Meer, supra, to the effect that the collection of
income tax on the salary of a judicial officer is a diminution thereof
and so violates the Constitution. We further hold that the
interpretation and application of the Constitution and of statutes is
within the exclusive province and jurisdiction of the Judicial
department, and that in enacting a law, the Legislature may not
legally provide therein that it be interpreted in such a way that it
may not violate a Constitutional prohibition, thereby tying the hands
of the courts in their task of later interpreting said statute, specially
when the interpretation sought and provided in said statute runs
counter to a previous interpretation already given in a case by the
highest court of the land. chanroble svi rtualawl ib rary chan rob les vi rtual law lib rary

In the views of the foregoing considerations, the decision appealed

from is hereby affirmed, with no pronouncement as to costs. chanroble svirtualawl ibra ry chan roble s virtual law l ibrary

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-25386 October 20, 1926

ASIATIC PETROLEUM CO. (P.I.), LTD., plaintiff-appellee,

vs.
A. LLANES, provincial treasurer of Cebu, defendant-appellant.

Provincial Fiscal Diaz and Attorney-General Jaranilla for appellant.

Ross, Lawrence & Selph for appellee.

STREET, J.:

This action was instituted by the Asiatic Petroleum Co., Ltd., for the purpose of recovering from the
provincial treasurer of Cebu the sum of P3,523.02, which is alleged to have been illegally exacted
under protest from said company by the defendant for taxes covering the years 1923 to 1925,
inclusive, upon the land known as "Shell Island" near the City and upon certain improvements placed
thereon by the plaintiff. Upon hearing the cause the trial court gave judgment in favor of the plaintiff
to recover the amount claimed in the complaint, with the lawful interest from May 28, 1925, the date
of the filing of the complaint. From this judgment the defendant appealed.

It appears that on August 22, 1919, the Governor-General, acting on behalf of the Government of
the Philippine Islands, entered into a contract of lease with the plaintiff, the Asiatic Petroleum Co.
(P.I.) whereby Government leased to said company for the term of fifty years a piece of land, having
an area of one and one-half hectares, situated adjacent to the Island of Mactam, municipality of
Opon, Province of Cebu, said island being at a distance of about 600 meters from the lending place
of the port of Cebu. At the time of the making of the lease, the land referred to was accustomed to
be covered by water at high tide; but it was needed by the lessee as a site for tanks to be used in the
storage of petroleum. In order to reclaim the site and protect the improvements thereon from the
sea, it was necessary for the company to build a concrete and cement foundation, protected by
retaining walls of the same material.

The contract of lease recites that the lease is made pursuant to the provisions of Act No. 1654 of the
Philippine commission, as amended by Act No. 2570 of the Philippine Legislature; but an
examination of the contents of Act No. 1654 shows that the lease in question was made pursuant to
section 5 and 6 of Act No. 1654, since these sections alone relate particularly to the lease of land
under water. As pertinent to the discussion, we note that sections 2 to 4, inclusive of Act No. 1654
deal with the leasing of lands to have been made or reclaimed from the sea by the Government by
means of dredging or filing or otherwise; and in section 4 it is declared that all lands leased under
the preceding sections of the Act and all improvements on such lands shall be subject to local
taxation against the lessees, to the same extent as if such lessees were the owners of both land and
improvements. The portion of the same Act which deals with the subject of the leasing of lands
under water (sections 5 and 6) makes no mention of the liability of the lessee for taxes; and the
lease itself contains no stipulation making the lessee liable for taxes. However, after the lessee
obtained possession, the taxing authorities made an assessment against it with respect both to the
land and improvements thereon for the years 1923 to 1925, inclusive, which tax had been paid by
the plaintiff under protest, and for the recovery of the same, this action was instituted.

It is quite clear that the lessee is not liable for the tax assessed against it with respect to the land
which is the subject of the lease. That land is the property of the Government; and section 344 of the
Administrative Code especially exempts from local taxation property owned by the United States of
America or by the Government of the Philippine Islands. The circumstance that the plaintiff now
holds said land under a contract of lease with the Government by no means makes the plaintiff liable
for the tax on the land. This point was expressly ruled by this court in Fairchild vs. Sarmiento (47
Phil., 485), where we held that when the Government as owner of land leases it for a fixed rental,
under a contract not containing a stipulation for the payment of taxes by the lessee such land is
exempt in the hands of the lessee. This rule must be understood to apply to all property which is
exempt in the hands of the Government, whether it be of a public or patrimonial nature. In this
jurisdiction real property, whether consisting of land or the improvements thereon, is assessable
against the owner; and in the absence of special provision no liability for the tax attaches to any
other person that the owner.

We note that Act No. 1654 has been superseded by certain provisions in Act No. 2874; and in
section 113 of this Act there is a general provision that all the lands granted by virtue of said Act,
except homesteads, shall be subject to the ordinary taxes which shall be paid by the grantee even
though the title remains in the Government. This Act was approved November 29, 1919, a little more
than three months after the date when the lease now under consideration was made, but section
129 of Act No. 2874 contains provision to the effect that it shall take effect on July 1, 1919. Upon this
it is contended by the provincial fiscal of Cebu, as attorney for the Government, that Act No. 2874
should be given a retroactive effect, with the result that the lease under this contract is made liable
for the taxes upon Shell Island and improvements thereon, by virtue of said retroactive provision.
This view is untenable. While it may be conceded that the Act referred to could be given retroactive
effect with respect to the administrative and curative features of the statute, it could not be given
retroactive effect to the extent of impairing the obligation of an existing lease, since our Organic Law
prohibits the enactment of laws impairing the obligation of contracts ( Act of Congress of August 29,
1916, sec. 3).
It follows from what has been said that no error was committed by the lower court in giving judgment
in favor of the plaintiff to recover the taxes paid by it under protest the land which is the subject of
the lease.

Whether the plaintiff was liable for the tax assessed against it upon the value of the improvements
which it placed upon Shell Island is a question which is governed by different considerations. In this
connection we note that these improvements consist of oil tanks, wharf, warehouse, pump house,
and sheds together with an office and residence building and coolie quarters. These are not public
improvements, but are, of a private nature, constructed for the use of the lessee in conducting its
business as a purveyor of coal oil. Said improvements belong to the lessee and will remain its
property until the termination of the lease, when, under subsection (c) of section 6 of Act No. 1654,
the title to the same will vest in the Government of the Philippine Islands. The fact that the
improvements will thus ultimately belong to the Government in no wise alters the liability of the
lessee of taxes thereon, so long as the property belongs to it. Under section 343 of the
Administrative Code the tax on improvements on real property is assessable against the owner of
such improvements whether he is also the owner of the land, on which they are placed or not. The
case not infrequently happens that the land is assessed to one person and the improvements to
another; and as it should be, when the titles to the two different sorts of property are vested in
different persons.

Upon examining the provisions of Act No. 1654 relative to the leasing of lands reclaimed by the
Government, it will be noted that, by section 4, all lands leased under the preceding sections of the
Act, "and all improvements thereon" shall be subject to the local taxation. From the inclusion of
improvements in said section and the omission of all reference to taxation in the sections dealing
with the leasing of lands under water, an argument has been deduced to the effect that the lease
here should not be held liable for taxes on the improvements. We consider such implication to be too
weak to support the claim of exemption asserted by the lease, even supposing that the inference
drawn is in any wise legitimate. Exemptions from taxation are highly disfavored, so much so that
they may almost be said to be odious to the law. He who claims an exemption must be able to point
to some positive provision of law creating the right. It cannot be allowed to exist upon a vague
implication such as is supposed to arise in this case from the omission from Act No. 1654 of any
reference to liability for tax. The books are full of very strong expressions on this point. As was said
by the Supreme Court of Tennessee in Memphis vs. U. & P. Bank (91 Tenn., 546, 550), "The right of
taxation is inherent in the State, It is a prerogative essential to the perpetuity of the government; and
he who claims an exemption from the common burden, must justify his claim by the clearest grant of
organic or statute law." Other utterances equally or more emphatic come readily to hand from the
highest authority. In Ohio Life Ins. and Trust Co. vs. Debolt (16 Howard, 416), it was said by Chief
Justice Taney, that the right of taxation will not be held to have been surrendered, "unless the
intention to surrender is manifested by words too plain to be mistaken." In the case of the Delaware
Railroad Tax (18 Wallace, 206, 226), the Supreme Court of the United States said that the
surrender, when claimed, must be shown be clear, unambiguous language, which will admit of no
reasonable construction consistent with the reservation of the power. If a doubt arise to as to the
intent of the legislature, that doubt must be solved in favor of the State. In entire Railway Company
vs. Commonwealth of Pennsylvania, (21 Wallace, 492, 499), Mr. Justice Hunt, speaking of
exemptions observed that a State cannot strip itself of the most essential power of taxation by
doubtful words. "It cannot, by ambiguous language, be deprived of this highest attribute of
sovereignty." In Tennessee vs. Whitworth (117 U. S., 129, 136), it was said: "In all cases of this kind
the question is as to the intent of the legislature, the presumption always being against any
surrender of taxing power." In Farrington vs. Tennessee and County of Shelby (95 U. S., 679, 686),
Mr. Justice Swayne said: ". . . When exemption is claimed, it must be shown indubitably to exist. At
the outset, every presumption is against it. A well-founded doubt is fatal to the claim. It is only when
the terms of the concession are too explicit to admit fairly of any other construction that the
proposition can be supported."
Reliance is placed in the brief of the appellee upon the case of the City of Oakland vs. Albers Bros.'
Milling Co. (184 Pac., 868), where it was held that a dock and warehouse built by a lessee of public
land are not subject to taxation as improvements. But the lease there in question contained a
stipulation declaring that the dock and warehouse, when constructed by the lessee pursuant to the
terms of the lease, should become and remain the property of the lessor. In the case before us the
improvements upon which the assessment is now sustained certainty belong to the lessee; and, with
the assent of the officials mentioned in the contract, the lessee may assign the lease, or mortgage or
encumber the improvements, and its successors will have full enjoyment of both the lease and the
improvements during the term of the contract. It is true, as already stated, that the improvements
cannot be removed and that upon termination of the lease the improvements will become the
property of the Government. This change of ownership, which an only occur at the end of the life of
the lease, can no wise affect the liability of present owners for taxes. In Army and Navy Club vs.
Trinidad (44 Phil., 383), we held that the circumstance that at the end of a long term of years the
property now owned by the Army and Navy Club is subject to an option for the purchase of the same
by the city, at a very small valuation, does not affect the liability of the present owner for taxes upon
the full value of the property.

But it is also said that the irremovable nature of these improvements determines their character as
realty, with the result that the improvements, like the land itself, should be held exempt. We see no
necessity for thus ignoring the fact of the present ownership of the improvements by the lessee.
Improvements are taxable separately in this jurisdiction and there is neither difficulty not injustice in
allowing the tax laws to operate against the owner of the improvements, while relieving it from
liability for the tax on the land.
1awph!l.net

The result of the discussion is that while the lessee is not taxable in respect to the land which is the
subject of the lease, it is subject to taxation with respect to the improvements. The appealed
judgment must therefore be modified by reducing the recovery to the amount paid upon the land,
namely, P2,270.88; and this refund must, under section 1579 of the Administrative Code, be made
without interest.

It being understood that the recovery is limited to the amount last above stated, without interest, the
same is affirmed, without costs. So ordered.

Villamor, Ostrand, Johns and Villa-Real, JJ., concur.

Separate Opinions

AVANCEÑA, C. J., with whom concurs ROMUALDEZ, J., dissenting:

I dissent. If the land involved in this case is exempt from taxation by reason of being Government
property, the improvements thereon must likewise be exempt, being also Government property.
According to articles 358 of the Civil Code, whatever is built on another's land and any
improvements made thereon belong to the owner of the same. It is true that this rule is modified in
regard to the usufructuary and to the lessee (articles 487 and 1573, Civil Cod), who have the right to
remove whatever was built and the improvements made on the land if it is possible to do so without
injury to the latter. But, according to Act No. 1654, governing the lease in question, and the terms of
the contract executed by the plaintiff, as lessee, the improvements on the land shall become the
property of the Government at the expiration of the lease. This means that once the improvements
have been made by the plaintiff it cannot dispose of them because it must conserve them for the
purposes of the law and the terms of the contract and cannot remove them. According to this, the
modification of the rule established in article 353 of the Civil Code does not apply in the present case
by express provision of a special law and at express agreement of the parties and, consequently,
said rule strictly applies here, and these improvements must be considered Government property as
it is the owner of the land.

It is said, however, that as, according to the law and the contract, these improvements shall become
the property of the Government at the expiration of the lease, it follows that during the lease they are
the property of the lessee. This inference is not justified if it is taken into consideration that this
provision of the law and this clause of the contract have for their purpose only the elimination of the
sole modification of the rule established in article 358, in favor of the lessee, so as to make it strictly
applicable. In fact, taking into consideration this condition of the lease, the lessee, even before the
expiration of the contract, cannot be considered the owner of the improvements which he may make
on the land, because he lacks one of the principal attributes of ownership, which is the power to
dispose.

This must have been the intention of Act No. 1654 which, in making inapplicable, in leases of
reclaimed seashore land, the exemption in favor of the Government from taxation, has made
reference not only to, the land but also to the improvements thereon. If these improvements made by
the lessee were to be considered the property of the lessee during the lease, the law would not have
referred to them inasmuch seven without this reference said improvements would be subject to
taxation. For this reason, undoubtedly, it is provided in the law that the lessee of reclaimed seashore
land shall pay the taxes, not on account of being the owner, but in the same manner as if we were
the owner of the land and the improvements.

In other words, it is my opinion that the Government, being the owner of the land on which the
improvements were made, upon which taxes are sought to be levied, and as these improvements
have been by the plaintiff, as lessee, without the right to remove them, they must be held to be
Government property and are also exempt from taxation.