G.R. No.
199669, April 25, 2017 (a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
SOUTHERN LUZON DRUG CORPORATION, Petitioner, v. THE DEPARTMENT OF SOCIAL
WELFARE AND DEVELOPMENT, THE NATIONAL COUNCIL FOR THE WELFARE OF
DISABLED PERSONS, THE DEPARTMENT OF FINANCE, AND THE BUREAU OF INTERNAL
REVENUE, Respondents.
DECISION
REYES, J.:
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing
the Decision2 dated June 17, 2011, and Resolution3 dated November 25, 2011 of the Court of
Appeals (CA) in CA-G.R. SP No. 102486, which dismissed the petition for prohibition filed by
Southern Luzon Drug Corporation (petitioner) against the Department of Social Welfare and
Development (DSWD), the National Council for the Welfare of Disabled Persons (NCWDP) (now
National Council on Disability Affairs or NCDA), the Department of Finance (DOF) and the Bureau of
Internal Revenue (collectively, the respondents), which sought to prohibit the implementation of
Section 4(a) of Republic Act (R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act
of 2003" and Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled Persons,"
particularly the granting of 20% discount on the purchase of medicines by senior citizens and
persons with disability (PWD), respectively, and treating them as tax deduction.
The petitioner is a domestic corporation engaged in the business of drugstore operation in the
Philippines while the respondents are government agencies, office and bureau tasked to monitor
compliance with R.A. Nos. 9257 and 9442, promulgate implementing rules and regulations for their
effective implementation, as well as prosecute and revoke licenses of erring establishments.
Factual Antecedents
On April 23, 1992, R.A. No. 7432, entitled "An Act to Maximize the Contribution of Senior Citizens to
Nation-Building, Grant Benefits and Special Privileges and For Other Purposes," was enacted. Under
the said law, a senior citizen, who must be at least 60 years old and has an annual income of not
more than P60,000.00,4 may avail of the privileges provided in Section 4 thereof, one of which is
20% discount on the purchase of medicines. The said provision states:
Sec. 4. Privileges for the Senior Citizen. – x x x:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment, restaurants and recreation centers
and purchase of medicine anywhere in the country: Provided, That private establishments may
claim the cost as tax credit[.]
x x x x (Emphasis ours)
To recoup the amount given as discount to qualified senior citizens, covered establishments can
claim an equal amount as tax credit which can be applied against the income tax due from them.
On February 26, 2004, then President Gloria Macapagal-Arroyo signed R.A. No. 9257, amending
some provisions of R.A. No. 7432. The new law retained the 20% discount on the purchase of
medicines but removed the annual income ceiling thereby qualifying all senior citizens to the
privileges under the law. Further, R.A. No. 9257 modified the tax treatment of the discount granted to
senior citizens, from tax credit to tax deduction from gross income, computed based on the net cost
of goods sold or services rendered. The pertinent provision, as amended by R.A. No. 9257, reads as
follows:
SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
services in hotels and similar lodging establishments, restaurants and recreation centers, and
purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens,
including funeral and burial services for the death of senior citizens;
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction
based on the net cost of the goods sold or services rendered: Provided, That the cost of the
discount shall be allowed as deduction from gross income for the same taxable year that the
discount is granted. Provided, further, That the total amount of the claimed tax deduction net of value
added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation and to the provisions of the National Internal Revenue Code, as
amended. (Emphasis ours)
On May 28, 2004, the DSWD issued the Implementing Rules and Regulations (IRR) of R.A. No.
9257. Article 8 of Rule VI of the said IRR provides:
Article 8. Tax Deduction of Establishments. - The establishment may claim the discounts granted
under Rule V, Section 4 – Discounts for Establishments; Section 9, Medical and Dental Services in
Private Facilities and Sections 10 and 11 – Air, Sea and Land Transportation as tax deduction based
on the net cost of the goods sold or services rendered. Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same taxable year that the discount
is granted; Provided, further, That the total amount of the claimed tax deduction net of value-added
tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject
to proper documentation and to the provisions of the National Internal Revenue Code, as amended;
Provided, finally, that the implementation of the tax deduction shall be subject to the Revenue
Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department
of Finance (DOF). (Emphasis ours)
The change in the tax treatment of the discount given to senior citizens did not sit well with some
drug store owners and corporations, claiming it affected the profitability of their business. Thus, on
January 13, 2005, Carlos Superdrug Corporation (Carlos Superdrug), together with other corporation
and proprietors operating drugstores in the Philippines, filed a Petition for Prohibition with Prayer for
Temporary Restraining Order (TRO) and/or Preliminary Injunction before this Court, entitled Carlos
Superdrug Corporation v. DSWD,5 docketed as G.R. No. 166494, assailing the constitutionality of
Section 4(a) of R.A. No. 9257 primarily on the ground that it amounts to taking of private property
without payment of just compensation. In a Decision dated June 29, 2007, the Court upheld the
constitutionality of the assailed provision, holding that the same is a legitimate exercise of police
power. The relevant portions of the decision read, thus:
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits. Accordingly, it has been described as "the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs." It is "[t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same."
For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.
xxxx
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as a reminder that the
right to property can be relinquished upon the command of the State for the promotion of public
good.
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of
R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act.
WHEREFORE, the petition is DISMISSED for lack of merit.6 (Citations omitted)
On August 1, 2007, Carlos Superdrug filed a motion for reconsideration of the foregoing decision.
Subsequently, the Court issued Resolution dated August 21, 2007, denying the said motion with
finality.7
Meanwhile, on March 24, 1992, R.A. No. 7277 pertaining to the "Magna Carta for Disabled Persons"
was enacted, codifying the rights and privileges of PWDs. Thereafter, on April 30, 2007, R.A. No.
9442 was enacted, amending R.A. No. 7277. One of the salient amendments in the law is the
insertion of Chapter 8 in Title 2 thereof, which enumerates the other privileges and incentives of
PWDs, including the grant of 20% discount on the purchase of medicines. Similar to R.A. No. 9257,
covered establishments shall claim the discounts given to PWDs as tax deductions from the gross
income, based on the net cost of goods sold or services rendered. Section 32 of R.A. No. 9442
reads:
CHAPTER 8. Other Privileges and Incentives
SEC. 32. Persons with disability shall be entitled to the following:
xxxx
(c) At least twenty percent (20%) discount for the purchase of medicines in all drugstores for the
exclusive use or enjoyment of persons with disability;
xxxx
The establishments may claim the discounts granted in sub-sections (a), (b), (c), (e), (f) and
(g) as tax deductions based on the net cost of the goods sold or services rendered: Provided,
however, That the cost of the discount shall be allowed as deduction from gross income for the same
taxable year that the discount is granted:Provided, further, That the total amount of the claimed tax
deduction net of value-added tax if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the National Internal
Revenue Code (NIRC), as amended. (Emphasis ours)
Pursuant to the foregoing, the IRR of R.A. No. 9442 was promulgated by the DSWD, Department of
Education, DOF, Department of Tourism and the Department of Transportation and
Communications.8Sections 5.1 and 6.1.d thereof provide:
Sec. 5. Definition of Terms. For purposes of these Rules and Regulations, these terms are defined
as follows:
5.1. Persons with Disability are those individuals defined under Section 4 of RA 7277, "An Act
Providing for the Rehabilitation, Self-Development and Self-Reliance of Persons with Disability as
amended and their integration into the Mainstream of Society and for Other Purposes." This is
defined as a person suffering from restriction or different abilities, as a result of a mental, physical or
sensory impairment, to perform an activity in a manner or within the range considered normal for
human being. Disability shall mean: (1) a physical or mental impairment that substantially limits one
or more psychological, physiological or anatomical function of an individual or activities of such
individual; (2) a record of such an impairment; or (3) being regarded as having such an impairment.
xxxx
6.1.d Purchase of Medicine – At least twenty percent (20%) discount on the purchase of medicine
for the exclusive use and enjoyment of persons with disability. All drug stores, hospital, pharmacies,
clinics and other similar establishments selling medicines are required to provide at least twenty
percent (20%) discount subject to the guidelines issued by DOH and PHILHEALTH.
On February 26, 2008, the petitioner filed a Petition for Prohibition with Application for TRO and/or
Writ of Preliminary Injunction9 with the CA, seeking to declare as unconstitutional (a) Section 4(a) of
R.A. No. 9257, and (b) Section 32 of R.A. No. 9442 and Section 5.1 of its IRR, insofar as these
provisions only allow tax deduction on the gross income based on the net cost of goods sold or
services rendered as compensation to private establishments for the 20% discount that they are
required to grant to senior citizens and PWDs. Further, the petitioner prayed that the respondents be
permanently enjoined from implementing the assailed provisions.
Ruling of the CA
On June 17, 2011, the CA dismissed the petition, reiterating the ruling of the Court in Carlos
Superdrug10particularly that Section 4(a) of R.A. No. 9257 was a valid exercise of police power.
Moreover, the CA held that considering that the same question had been raised by parties similarly
situated and was resolved in Carlos Superdrug, the rule of stare decisis stood as a hindrance to any
further attempt to relitigate the same issue. It further noted that jurisdictional considerations also
compel the dismissal of the action. It particularly emphasized that it has no original or appellate
jurisdiction to pass upon the constitutionality of the assailed laws,11 the same pertaining to the
Regional Trial Court (RTC). Even assuming that it had concurrent jurisdiction with the RTC, the
principle of hierarchy of courts mandates that the case be commenced and heard by the lower
court.12 The CA further ruled that the petitioner resorted to the wrong remedy as a petition for
prohibition will not lie to restrain the actions of the respondents for the simple reason that they do not
exercise judicial, quasi-judicial or ministerial duties relative to the issuance or implementation of the
questioned provisions. Also, the petition was wanting of the allegations of the specific acts committed
by the respondents that demonstrate the exercise of these powers which may be properly challenged
in a petition for prohibition.13
The petitioner filed its Motion for Reconsideration14 of the Decision dated June 17, 2011 of the CA,
but the same was denied in a Resolution15 dated November 25, 2011.
Unyielding, the petitioner filed the instant petition, raising the following assignment of errors, to wit:
I
THE CA SERIOUSLY ERRED WHEN IT RULED THAT A PETITION FOR PROHIBITION FILED
WITH THE CA IS AN IMPROPER REMEDY TO ASSAIL THE CONSTITUTIONALITY OF THE 20%
SALES DISCOUNT FOR SENIOR CITIZENS AND PWDs;
II
THE CA SERIOUSLY ERRED WHEN IT HELD THAT THE SUPREME COURT'S RULING
IN CARLOS SUPERDRUG CONSTITUTES STARE DECISIS;
III
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
20% SALES DISCOUNT FOR SENIOR CITIZENS AND PWDs IS A VALID EXERCISE OF POLICE
POWER. ON THE CONTRARY, IT IS AN INVALID EXERCISE OF THE POWER OF EMINENT
DOMAIN BECAUSE IT FAILS TO PROVIDE JUST COMPENSATION TO THE PETITIONER AND
OTHER SIMILARLY SITUATED DRUGSTORES;
IV
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
20% SALES DISCOUNT FOR SENIOR CITIZENS AND PWDs DOES NOT VIOLATE THE
PETITIONER'S RIGHT TO EQUAL PROTECTION OF THE LAW; and
V 129,27 the CA was granted "original jurisdiction to issue writs of mandamus, prohibition, certiorari,
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
DEFINITIONS OF DISABILITIES AND PWDs ARE NOT VAGUE AND DO NOT VIOLATE THE
PETITIONER'S RIGHT TO DUE PROCESS OF LAW.16
Ruling of the Court
Prohibition may be filed to question
the constitutionality of a law
In the assailed decision, the CA noted that the action, although denominated as one for prohibition,
seeks the declaration of the unconstitutionality of Section 4(a) of R.A. No. 9257 and Section 32 of
R.A. No. 9442. It held that in such a case, the proper remedy is not a special civil action but a petition
for declaratory relief, which falls under the exclusive original jurisdiction of the RTC, in the first
instance, and of the Supreme Court, on appeal.17
The Court clarifies.
Generally, the office of prohibition is to prevent the unlawful and oppressive exercise of authority and
is directed against proceedings that are done without or in excess of jurisdiction, or with grave abuse
of discretion, there being no appeal or other plain, speedy, and adequate remedy in the ordinary
course of law. It is the remedy to prevent inferior courts, corporations, boards, or persons from
usurping or exercising a jurisdiction or power with which they have not been vested by law.18 This is,
however, not the lone office of an action for prohibition. In Diaz, et al. v. The Secretary of Finance, et
al.,19 prohibition was also recognized as a proper remedy to prohibit or nullify acts of executive
officials that amount to usurpation of legislative authority.20 And, in a number of jurisprudence,
prohibition was allowed as a proper action to assail the constitutionality of a law or prohibit its
implementation.
In Social Weather Stations, Inc. v. Commission on Elections,21 therein petitioner filed a petition for
prohibition to assail the constitutionality of Section 5.4 of R.A. No. 9006, or the "Fair Elections Act,"
which prohibited the publication of surveys within 15 days before an election for national candidates,
and seven days for local candidates. Included in the petition is a prayer to prohibit the Commission
on Elections from enforcing the said provision. The Court granted the petition and struck down the
assailed provision for being unconstitutional.22
In Social Justice Society (SJS) v. Dangerous Drugs Board, et al.,23 therein petitioner assailed the
constitutionality of paragraphs (c), (d), (f) and (g) of Section 36 of R.A. No. 9165, otherwise known as
the "Comprehensive Dangerous Drugs Act of 2002," on the ground that they constitute undue
delegation of legislative power for granting unbridled discretion to schools and private employers in
determining the manner of drug testing of their employees, and that the law constitutes a violation of
the right against unreasonable searches and seizures. It also sought to enjoin the Dangerous Drugs
Board and the Philippine Drug Enforcement Agency from enforcing the challenged provision.24 The
Court partially granted the petition by declaring Section 36(f) and (g) of R.A. No. 9165
unconstitutional, and permanently enjoined the concerned agencies from implementing them. 25
In another instance, consolidated petitions for prohibitions26 questioning the constitutionality of the
Priority Development Assistance Fund were deliberated upon by this Court which ultimately granted
the same.
Clearly, prohibition has been found an appropriate remedy to challenge the constitutionality of
various laws, rules, and regulations.
There is also no question regarding the jurisdiction of the CA to hear and decide a petition for
prohibition. By express provision of the law, particularly Section 9(1) of Batas Pambansa Bilang
habeas corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of its
appellate jurisdiction." This authority the CA enjoys concurrently with RTCs and this Court.
In the same manner, the supposed violation of the principle of the hierarchy of courts does not pose
any hindrance to the full deliberation of the issues at hand. It is well to remember that "the judicial
hierarchy of courts is not an iron-clad rule. It generally applies to cases involving warring factual
allegations. For this reason, litigants are required to [refer] to the trial courts at the first instance to
determine the truth or falsity of these contending allegations on the basis of the evidence of the
parties. Cases which depend on disputed facts for decision cannot be brought immediately before
appellate courts as they are not triers of facts. Therefore, a strict application of the rule of hierarchy
of courts is not necessary when the cases brought before the appellate courts do not involve factual
but legal questions."28
Moreover, the principle of hierarchy of courts may be set aside for special and important reasons,
such as when dictated by public welfare and the advancement of public policy, or demanded by the
broader interest of justice.29 Thus, when based on the good judgment of the court, the urgency and
significance of the issues presented calls for its intervention, it should not hesitate to exercise its duty
to resolve.
The instant petition presents an exception to the principle as it basically raises a legal question on
the constitutionality of the mandatory discount and the breadth of its rightful beneficiaries. More
importantly, the resolution of the issues will redound to the benefit of the public as it will put to rest
the questions on the propriety of the granting of discounts to senior citizens and PWDs amid the
fervent insistence of affected establishments that the measure transgresses their property rights. The
Court, therefore, finds it to the best interest of justice that the instant petition be resolved.
The instant case is not barred by
stare decisis
The petitioner contends that the CA erred in holding that the ruling in Carlos Superdrug constitutes
as stare decisis or law of the case which bars the relitigation of the issues that had been resolved
therein and had been raised anew in the instant petition. It argues that there are substantial
differences betweenCarlos Superdrug and the circumstances in the instant case which take it out
from the operation of the doctrine of stare decisis. It cites that in Carlos Superdrug, the Court denied
the petition because the petitioner therein failed to prove the confiscatory effect of the tax deduction
scheme as no proof of actual loss was submitted. It believes that its submission of financial
statements for the years 2006 and 2007 to prove the confiscatory effect of the law is a material fact
that distinguishes the instant case from that of Carlos Superdrug.30
The Court agrees that the ruling in Carlos Superdrug does not constitute stare decisis to the instant
case, not because of the petitioner's submission of financial statements which were wanting in the
first case, but because it had the good sense of including questions that had not been raised or
deliberated in the former case of Carlos Superdrug, i.e., validity of the 20% discount granted to
PWDs, the supposed vagueness of the provisions of R.A. No. 9442 and violation of the equal
protection clause.
Nonetheless, the Court finds nothing in the instant case that merits a reversal of the earlier ruling of
the Court in Carlos Superdrug. Contrary to the petitioner's claim, there is a very slim difference
between the issues in Carlos Superdrug and the instant case with respect to the nature of the senior
citizen discount. A perfunctory reading of the circumstances of the two cases easily discloses
marked similarities in the issues and the arguments raised by the petitioners in both cases that
semantics nor careful play of words can hardly obscure.
In both cases, it is apparent that what the petitioners are ultimately questioning is not the grant of the
senior citizen discount per se, but the manner by which they were allowed to recoup the said
discount. In particular, they are protesting the change in the tax treatment of the senior citizen
discount from tax credit to being merely a deduction from gross income which they claimed to have
significantly reduced their profits.
This question had been settled in Carlos Superdrug, where the Court ruled that the change in the tax
treatment of the discount was a valid exercise of police power, thus:
Theoretically, the treatment of the discount as a deduction reduces the net income of the private
establishments concerned. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments, were it not for R.A. No. 9257.
xxxx
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation.
Having said that, this raises the question of whether the State, in promoting the health and welfare of
a special group of citizens, can impose upon private establishments the burden of partly subsidizing
a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to
nation-building, and to grant benefits and privileges to them for their improvement and well-being as
the State considers them an integral part of our society.
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself.
Thus, the Act provides:
SEC. 2. [R.A.] No. 7432 is hereby amended to read as follows:
SEC. 1. Declaration of Policies and Objectives.— Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10 in the Declaration of Principles
and State Policies provides: "The State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and
comprehensive approach to health development which shall endeavor to make essential goods,
health and other social services available to all the people at affordable cost. There shall be priority
for the needs of the underprivileged sick, elderly, disabled, women and children." Consonant with
these constitutional principles the following are the declared policies of this Act:
xxxx
(f) To recognize the important role of the private sector in the improvement of the welfare of
senior citizens and to actively seek their partnership.
To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by
theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and
amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers; and purchases of medicines for the
exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that
business establishments extending the twenty percent discount to senior citizens may claim the
discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits. Accordingly, it has been described as "the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs." It is "[t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same."
For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.31 (Citations omitted and emphasis in the original)
Verily, it is the bounden duty of the State to care for the elderly as they reach the point in their lives
when the vigor of their youth has diminished and resources have become scarce. Not much because
of choice, they become needing of support from the society for whom they presumably spent their
productive days and for whose betterment they exhausted their energy, know-how and experience to
make our days better to live.
In the same way, providing aid for the disabled persons is an equally important State responsibility.
Thus, the State is obliged to give full support to the improvement of the total well-being of disabled
persons and their integration into the mainstream of society.32 This entails the creation of
opportunities for them and according them privileges if only to balance the playing field which had
been unduly tilted against them because of their limitations.
The duty to care for the elderly and the disabled lies not only upon the State, but also on the
community and even private entities. As to the State, the duty emanates from its role as parens
patriae which holds it under obligation to provide protection and look after the welfare of its people
especially those who cannot tend to themselves. Parens patriae means parent of his or her country,
and refers to the State in its role as "sovereign", or the State in its capacity as a provider of protection
to those unable to care for themselves.33 In fulfilling this duty, the State may resort to the exercise of
its inherent powers: police power, eminent domain and power of taxation.
In Gerochi v. Department of Energy,34 the Court passed upon one of the inherent powers of the
state, the police power, where it emphasized, thus:
[P]olice power is the power of the state to promote public welfare by restraining and regulating the
use of liberty and property. It is the most pervasive, the least limitable, and the most demanding of
the three fundamental powers of the State. The justification is found in the Latin maxim salus populi
est suprema lex (the welfare of the people is the supreme law) and sic utere tuo ut alienum non
laedas (so use your property as not to injure the property of others). As an inherent attribute of
sovereignty which virtually extends to all public needs, police power grants a wide panoply of
instruments through which the State, as parens patriae, gives effect to a host of its regulatory
powers. We have held that the power to "regulate" means the power to protect, foster, promote,
preserve, and control, with due regard for the interests, first and foremost, of the public, then of the
utility and of its patrons.35 (Citations omitted)
It is in the exercise of its police power that the Congress enacted R.A. Nos. 9257 and 9442, the laws
mandating a 20% discount on purchases of medicines made by senior citizens and PWDs. It is also
in further exercise of this power that the legislature opted that the said discount be claimed as tax
deduction, rather than tax credit, by covered establishments.
The petitioner, however, claims that the change in the tax treatment of the discount is illegal as it
constitutes taking without just compensation. It even submitted financial statements for the years
2006 and 2007 to support its claim of declining profits when the change in the policy was
implemented.
The Court is not swayed.
To begin with, the issue of just compensation finds no relevance in the instant case as it had already
been made clear in Carlos Superdrug that the power being exercised by the State in the imposition
of senior citizen discount was its police power. Unlike in the exercise of the power of eminent
domain, just compensation is not required in wielding police power. This is precisely because there is
no taking involved, but only an imposition of burden.
In Manila Memorial Park, Inc., et al. v. Secretary of the DSWD, et al.,36 the Court ruled that by
examining the nature and the effects of R.A. No. 9257, it becomes apparent that the challenged
governmental act was an exercise of police power. It was held, thus:
[W]e now look at the nature and effects of the 20% discount to determine if it constitutes an exercise
of police power or eminent domain.
The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less
likely to be gainfully employed, more prone to illnesses and other disabilities, and, thus, in need of
subsidy in purchasing basic commodities. It may not be amiss to mention also that the discount
serves to honor senior citizens who presumably spent the productive years of their lives on
contributing to the development and progress of the nation. This distinct cultural Filipino practice of
honoring the elderly is an integral part of this law.
As to its nature and effects, the 20% discount is a regulation affecting the ability of private
establishments to price their products and services relative to a special class of individuals, senior
citizens, for which the Constitution affords preferential concern. In turn, this affects the amount of
profits or income/gross sales that a private establishment can derive from senior citizens. In other
words, the subject regulation affects the pricing, and, hence, the profitability of a private
establishment. However, it does not purport to appropriate or burden specific properties, used in the
operation or conduct of the business of private establishments, for the use or benefit of the public, or
senior citizens for that matter, but merely regulates the pricing of goods and services relative to, and
the amount of profits or income/gross sales that such private establishments may derive from, senior
citizens.
The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures. x x x.37 (Citations omitted)
In the exercise of police power, "property rights of private individuals are subjected to restraints and
burdens in order to secure the general comfort, health, and prosperity of the State."38 Even then, the
State's claim of police power cannot be arbitrary or unreasonable. After all, the overriding purpose of
the exercise of the power is to promote general welfare, public health and safety, among others. It is
a measure, which by sheer necessity, the State exercises, even to the point of interfering with
personal liberties or property rights in order to advance common good. To warrant such interference,
two requisites must concur: (a) the interests of the public generally, as distinguished from those of a
particular class, require the interference of the State; and (b) the means employed are reasonably
necessary to the attainment of the object sought to be accomplished and not unduly oppressive upon
individuals. In other words, the proper exercise of the police power requires the concurrence of a
lawful subject and a lawful method.39
The subjects of R.A. Nos. 9257 and 9442, i.e., senior citizens and PWDs, are individuals whose well-
being is a recognized public duty. As a public duty, the responsibility for their care devolves upon the
concerted efforts of the State, the family and the community. In Article XIII, Section 1 of the
Constitution, the State is mandated to give highest priority to the enactment of measures that protect
and enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the
common good. The more apparent manifestation of these social inequities is the unequal distribution
or access to healthcare services. To abet in alleviating this concern, the State is committed to adopt
an integrated and comprehensive approach to health development which shall endeavor to make
essential goods, health and other social services available to all the people at affordable cost, with
priority for the needs of the underprivileged sick, elderly, disabled, women, and children.40
In the same manner, the family and the community have equally significant duties to perform in
reducing social inequality. The family as the basic social institution has the foremost duty to care for
its elderly members.41 On the other hand, the community, which include the private sector, is
recognized as an active partner of the State in pursuing greater causes. The private sector, being
recipients of the privilege to engage business in our land, utilize our goods as well as the services of
our people for proprietary purposes, it is only fitting to expect their support in measures that
contribute to common good. Moreover, their right to own, establish and operate economic
enterprises is always subject to the duty of the State to promote distributive justice and to intervene
when the common good so demands.42
The Court also entertains no doubt on the legality of the method taken by the legislature to
implement the declared policies of the subject laws, that is, to impose discounts on the medical
services and purchases of senior citizens and PWDs and to treat the said discounts as tax deduction
rather than tax credit. The measure is fair and reasonable and no credible proof was presented to
prove the claim that it was confiscatory. To be considered confiscatory, there must be taking of
property without just compensation.
Illuminating on this point is the discussion of the Court on the concept of taking in City of Manila v.
Hon. Laguio, Jr.,43viz.:
There are two different types of taking that can be identified. A "possessory" taking occurs when the
government confiscates or physically occupies property. A "regulatory" taking occurs when the
government's regulation leaves no reasonable economically viable use of the property.
xxxx
No formula or rule can be devised to answer the questions of what is too far and when regulation
becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of degree and
therefore cannot be disposed of by general propositions." On many other occasions as well, the U.S.
Supreme Court has said that the issue of when regulation constitutes a taking is a matter of
considering the facts in each case. x x x.
What is crucial in judicial consideration of regulatory takings is that government regulation is a taking
if it leaves no reasonable economically viable use of property in a manner that interferes with
reasonable expectations for use. A regulation that permanently denies all economically beneficial or
productive use of land is, from the owner's point of view, equivalent to a "taking" unless principles of
nuisance or property law that existed when the owner acquired the land make the use prohibitable.
When the owner of real property has been called upon to sacrifice all economically beneficial uses in
the name of the common good, that is, to leave his property economically idle, he has suffered a
taking.
xxxx
A restriction on use of property may also constitute a 'taking" if not reasonably necessary to the
effectuation of a substantial public purpose or if it has an unduly harsh impact on the distinct
investment-backed expectations of the owner.44 (Citations omitted)
The petitioner herein attempts to prove its claim that the pertinent provisions of R.A. Nos. 9257 and
9442 amount to taking by presenting financial statements purportedly showing financial losses
incurred by them due to the adoption of the tax deduction scheme.
For the petitioner's clarification, the presentation of the financial statement is not of compelling
significance in justifying its claim for just compensation. What is imperative is for it to establish that
there was taking in the constitutional sense or that, in the imposition of the mandatory discount, the
power exercised by the state was eminent domain.
According to Republic of the Philippines v. Vda. de Castellvi,45 five circumstances must be present in
order to qualify "taking" as an exercise of eminent domain. First, the expropriator must enter a private
property. Second, the entrance into private property must be for more than a momentary
period. Third, the entry into the property should be under warrant or color of legal authority. Fourth,
the property must be devoted to a public use or otherwise informally appropriated or injuriously
affected. Fifth, the utilization of the property for public use must be in such a way as to oust the
owner and deprive him of all beneficial enjoyment of the property.46
The first requirement speaks of entry into a private property which clearly does not obtain in this
case. There is no private property that is invaded or appropriated by the State. As it is, the petitioner
precipitately deemed future profits as private property and then proceeded to argue that the State
took it away without full compensation. This seemed preposterous considering that the subject of
what the petitioner supposed as taking was not even earned profits but merely an expectation of
profits, which may not even occur. For obvious reasons, there cannot be taking of a contingency or
of a mere possibility because it lacks physical existence that is necessary before there could be any
taking. Further, it is impossible to quantify the compensation for the loss of supposed profits before it
is earned.
The supposed taking also lacked the characteristics of permanence47 and consistency. The presence
of these characteristics is significant because they can establish that the effect of the questioned
provisions is the same on all establishments and those losses are indeed its unavoidable
consequence. But apparently these indications are wanting in this case. The reason is that the
impact on the establishments varies depending on their response to the changes brought about by
the subject provisions. To be clear, establishments are not prevented from adjusting their prices to
accommodate the effects of the granting of the discount and retain their profitability while being fully
compliant to the laws. It follows that losses are not inevitable because establishments are free to
take business measures to accommodate the contingency. Lacking in permanence and consistency,
there can be no taking in the constitutional sense. There cannot be taking in one establishment and
none in another, such that the former can claim compensation but the other may not. Simply told,
there is no taking to justify compensation; there is only poor business decision to blame.
There is also no ousting of the owner or deprivation of ownership. Establishments are neither
divested of ownership of any of their properties nor is anything forcibly taken from them. They remain
the owner of their goods and their profit or loss still depends on the performance of their sales.
Apart from the foregoing, covered establishments are also provided with a mechanism to recoup the
amount of discounts they grant the senior citizens and PWDs. It is provided in Section 4(a) of R.A.
No. 9257 and Section 32 of R.A. No. 9442 that establishments may claim the discounts as "tax
deduction based on the net cost of the goods sold or services rendered." Basically, whatever amount
was given as discount, covered establishments may claim an equal amount as an expense or tax
deduction. The trouble is that the petitioner, in protesting the change in the tax treatment of the
discounts, apparently seeks tax incentive and not merely a return of the amount given as discounts.
It premised its interpretation of financial losses in terms of the effect of the change in the tax
treatment of the discount on its tax liability; hence, the claim that the measure was confiscatory.
However, as mentioned earlier in the discussion, loss of profits is not the inevitable result of the
change in tax treatment of the discounts; it is more appropriately a consequence of poor business
decision.
It bears emphasizing that the law does not place a cap on the amount of mark up that covered
establishments may impose on their items. This rests on the discretion of the establishment which, of
course, is expected to put in the price of the overhead costs, expectation of profits and other
considerations into the selling price of an item. In a simple illustration, here is Drug A, with acquisition
cost of P8.00, and selling price of P10.00. Then comes a law that imposes 20% on senior citizens
and PWDs, which affected Establishments 1, 2 and 3. Let us suppose that the approximate number
of patrons who purchases Drug A is 100, half of which are senior citizens and PWDs. Before the
passage of the law, all of the establishments are earning the same amount from profit from the sale
of Drug A, viz.:
Before the passage of the law:
Drug A
Acquisition cost P8.00
Selling price P10.00
Number of Patrons 100
 Sales: Acquisition cost P8.00

100 x P10.00 = P1,000.00 Selling price P11.20

Profit: P200.00 Number of Patrons 100

After the passage of the law, the three establishments reacted differently. Establishment 1 was Senior Citizens/PWD 50
passive and maintained the price of Drug A at P8.00 which understandably resulted in diminution of
profits.
Establishment 1
Drug A Sale:

Acquisition cost P8.00 100 x P11.20 = P1,120.00

Selling price P10.00

Deduction: P112.00

Number of Patrons 100

Senior Citizens/PWD 50 Profit: P208.00

For its part, Establishment 3 raised the mark up on Drug A to only P3.00 just to even out the effect of
the law. This measure left a negligible effect on its profit, but Establishment 3 took it as a social duty
to share in the cause being promoted by the government while still maintaining profitability.
Sale: Establishment 3
100 x P10.00 = P1,000.00 Drug A

Acquisition cost P8.00

Deduction: P100.00 Selling price P11.00

Profit: P100.00 Number of Patrons 100

On the other hand, Establishment 2, mindful that the new law will affect the profitability of the Senior Citizens/PWD 50
business, made a calculated decision by increasing the mark up of Drug A to P3.20, instead of only
P2.00. This brought a positive result to the earnings of the company.
Establishment 2
Drug A Sale:

100 x P11.00 = P1,100.00
Deduction: P110.00
Profit: P190.00
The foregoing demonstrates that it is not the law per se which occasioned the losses in the covered
establishments but bad business judgment. One of the main considerations in making business
decisions is the law because its effect is widespread and inevitable. Literally, anything can be a
subject of legislation. It is therefore incumbent upon business managers to cover this contingency
and consider it in making business strategies. As shown in the illustration, the better responses were
exemplified by Establishments 2 and 3 which promptly put in the additional costs brought about by
the law into the price of Drug A. In doing so, they were able to maintain the profitability of the
business, even earning some more, while at the same time being fully compliant with the law. This is
not to mention that the illustration is even too simplistic and not the most ideal since it dealt only with
a single drug being purchased by both regular patrons and senior citizens and PWDs. It did not
consider the accumulated profits from the other medical and non-medical products being sold by the
establishments which are expected to further curb the effect of the granting of the discounts in the
business.
It is therefore unthinkable how the petitioner could have suffered losses due to the mandated
discounts in R.A. Nos. 9257 and 9442, when a fractional increase in the prices of items could bring
the business standing at a balance even with the introduction of the subject laws. A level adjustment
in the pricing of items is a reasonable business measure to take in order to adapt to the contingency.
This could even make establishments earn more, as shown in the illustration, since every fractional
increase n the price of covered items translates to a wider cushion to taper off the effect of the
granting of discounts and ultimately results to additional profits gained from the purchases of the
same items by regular patrons who are not entitled to the discount. Clearly, the effect of the subject
laws in the financial standing of covered companies depends largely on how they respond and forge
a balance between profitability and their sense of social responsibility. The adaptation is entirely up
to them and they are not powerless to make adjustments to accommodate the subject legislations.
Still, the petitioner argues that the law is confiscatory in the sense that the State takes away a portion
of its supposed profits which could have gone into its coffers and utilizes it for public purpose. The
petitioner claims that the action of the State amounts to taking for which it should be compensated.
To reiterate, the subject provisions only affect the petitioner's right to profit, and not earned profits.
Unfortunately for the petitioner, the right to profit is not a vested right or an entitlement that has
accrued on the person or entity such that its invasion or deprivation warrants compensation. Vested
rights are "fixed, unalterable, or irrevocable."48 More extensively, they are depicted as follows:
Rights which have so completely and definitely accrued to or settled in a person that they are not
subject to be defeated or cancelled by the act of any other private person, and which it is right and
equitable that the government should recognize and protect, as being lawful in themselves, and
settled according to the then current rules of law, and of which the individual could not be deprived
arbitrarily without injustice, or of which he could not justly be deprived otherwise than by the
established methods of procedure and for the public welfare. x x x A right is not 'vested' unless it is
more than a mere expectation based on the anticipated continuance of present laws; it must be an
established interest in property, not open to doubt. x x x To be vested in its accurate legal sense,
a right must be complete and consummated, and one of which the person to whom it belongs
cannot be divested without his consent. x x x.49 (Emphasis ours)
Right to profits does not give the petitioner the cause of action to ask for just compensation, it being
only an inchoate right or one that has not fully developed50 and therefore cannot be claimed as one's
own. An inchoate right is a mere expectation, which may or may not come into existence. It is
contingent as it only comes "into existence on an event or condition which may not happen or be
performed until some other event may prevent their vesting."51 Certainly, the petitioner cannot claim
confiscation or taking of something that has yet to exist. It cannot claim deprivation of profit before
the consummation of a sale and the purchase by a senior citizen or PWD.
Right to profit is not an accrued right; it is not fixed, absolute nor indefeasible. It does not come into
being until the occurrence or realization of a condition precedent. It is a mere "contingency that might
never eventuate into a right. It stands for a mere possibility of profit but nothing might ever be
payable under it."52
The inchoate nature of the right to profit precludes the possibility of compensation because it lacks
the quality or characteristic which is necessary before any act of taking or expropriation can be
effected. Moreover, there is no yardstick fitting to quantify a contingency or to determine
compensation for a mere possibility. Certainly, "taking" presupposes the existence of a subject that
has a quantifiable or determinable value, characteristics which a mere contingency does not
possess.
Anent the question regarding the shift from tax credit to tax deduction, suffice it is to say that it is
within the province of Congress to do so in the exercise of its legislative power. It has the authority to
choose the subject of legislation, outline the effective measures to achieve its declared policies and
even impose penalties in case of non-compliance. It has the sole discretion to decide which policies
to pursue and devise means to achieve them, and courts often do not interfere in this exercise for as
long as it does not transcend constitutional limitations. "In performing this duty, the legislature has no
guide but its judgment and discretion and the wisdom of experience."53 In Carter v. Carter Coal
Co.,54 legislative discretion has been described as follows:
Legislative congressional discretion begins with the choice of means, and ends with the adoption
of methods and details to carry the delegated powers into effect. x x x [W]hile the powers are rigidly
limited to the enumerations of the Constitution, the means which may be employed to carry the
powers into effect are not restricted, save that they must be appropriate, plainly adapted to the end,
and not prohibited by, but consistent with, the letter and spirit of the Constitution. x x x.55 (Emphasis
ours)
Corollary, whether to treat the discount as a tax deduction or tax credit is a matter addressed to the
wisdom of the legislature. After all, it is within its prerogative to enact laws which it deems sufficient to
address a specific public concern. And, in the process of legislation, a bill goes through rigorous tests
of validity, necessity and sufficiency in both houses of Congress before enrolment. It undergoes
close scrutiny of the members of Congress and necessarily had to surpass the arguments hurled
against its passage. Thus, the presumption of validity that goes with every law as a form of
deference to the process it had gone through and also to the legislature's exercise of discretion.
Thus, in Ichong, etc., et al. v. Hernandez, etc., and Sarmiento,56 the Court emphasized, thus:
It must not be overlooked, in the first place, that the legislature, which is the constitutional repository
of police power and exercises the prerogative of determining the policy of the State, is by force of
circumstances primarily the judge of necessity, adequacy or reasonableness and wisdom, of
any law promulgated in the exercise of the police power, or of the measures adopted to
implement the public policy or to achieve public interest. x x x.57 (Emphasis ours)
The legislature may also grant rights and impose additional burdens. It may also regulate industries,
in the exercise of police power, for the protection of the public. R.A. Nos. 9257 and 9442 are akin to
regulatory laws, the issuance of which is within the ambit of police power. The minimum wage law,
zoning ordinances, price control laws, laws regulating the operation of motels and hotels, laws
limiting the working hours to eight, and the like fall under this category.58
Indeed, regulatory laws are within the category of police power measures from which affected
persons or entities cannot claim exclusion or compensation. For instance, private establishments
cannot protest that the imposition of the minimum wage is confiscatory since it eats up a
considerable chunk of its profits or that the mandated remuneration is not commensurate for the
work done. The compulsory nature of the provision for minimum wages underlies the effort of the
State, as R.A. No. 672759 expresses it, to promote productivity-improvement and gain-sharing
measures to ensure a decent standard of living for the workers and their families; to guarantee the
rights of labor to its just share in the fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth, and as the Constitution expresses it, to affirm labor as a primary
social economic force.60
Similarly, the imposition of price control on staple goods in R.A. No. 758161 is likewise a valid
exercise of police power and affected establishments cannot argue that the law was depriving them
of supposed gains. The law seeks to ensure the availability of basic necessities and prime
commodities at reasonable prices at all times without denying legitimate business a fair return on
investment. It likewise aims to provide effective and sufficient protection to consumers against
hoarding, profiteering and cartels with respect to the supply, distribution, marketing and pricing of
said goods, especially during periods of calamity, emergency, widespread illegal price manipulation
and other similar situations.62
More relevantly, in Manila Memorial Park, Inc.,63 it was ruled that it is within the bounds of the police
power of the state to impose burden on private entities, even if it may affect their profits, such as in
the imposition of price control measures. There is no compensable taking but only a recognition of
the fact that they are subject to the regulation of the State and that all personal or private interests
must bow down to the more paramount interest of the State.
This notwithstanding, the regulatory power of the State does not authorize the destruction of the
business. While a business may be regulated, such regulation must be within the bounds of reason,
i.e., the regulatory ordinance must be reasonable, and its provision cannot be oppressive amounting
to an arbitrary interference with the business or calling subject of regulation. A lawful business or
calling may not, under the guise of regulation, be unreasonably interfered with even by the exercise
of police power.64 After all, regulation only signifies control or restraint, it does not mean suppression
or absolute prohibition. Thus, in Philippine Communications Satellite Corporation v. Alcuaz,65 the
Court emphasized:
The power to regulate is not the power to destroy useful and harmless enterprises, but is the power
to protect, foster, promote, preserve, and control with due regard for the interest, first and foremost,
of the public, then of the utility and of its patrons. Any regulation, therefore, which operates as an
effective confiscation of private property or constitutes an arbitrary or unreasonable infringement of
property rights is void, because it is repugnant to the constitutional guaranties of due process and
equal protection of the laws.66 (Citation omitted)
Here, the petitioner failed to show that R.A. Nos. 9257 and 9442, under the guise of regulation, allow
undue interference in an otherwise legitimate business. On the contrary, it was shown that the
questioned laws do not meddle in the business or take anything from it but only regulate its
realization of profits.
The subject laws do not violate the
equal protection clause
The petitioner argues that R.A. Nos. 9257 and 9442 are violative of the equal protection clause in
that it failed to distinguish between those who have the capacity to pay and those who do not, in
granting the 20% discount. R.A. No. 9257, in particular, removed the income qualification in R.A. No.
7432 of P60,000.00 per annum before a senior citizen may be entitled to the 20% discount.
The contention lacks merit.
The petitioner's argument is dismissive of the reasonable qualification on which the subject laws
were based. In City of Manila v. Hon. Laguio Jr.,67 the Court emphasized:
Equal protection requires that all persons or things similarly situated should be treated alike, both as
to rights conferred and responsibilities imposed. Similar subjects, in other words, should not be
treated differently, so as to give undue favor to some and unjustly discriminate against others. The
guarantee means that no person or class of persons shall be denied the same protection of laws
which is enjoyed by other persons or other classes in like circumstances.68 (Citations omitted)
"The equal protection clause is not infringed by legislation which applies only to those persons falling
within a specified class. If the groupings are characterized by substantial distinctions that make real
differences, one class may be treated and regulated differently from another."69 For a classification to
be valid, (1) it must be based upon substantial distinctions, (2) it must be germane to the purposes 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.70
To recognize all senior citizens as a group, without distinction as to income, is a valid classification.
The Constitution itself considered the elderly as a class of their own and deemed it a priority to
address their needs. When the Constitution declared its intention to prioritize the predicament of the
underprivileged sick, elderly, disabled, women, and children,71 it did not make any reservation as to
income, race, religion or any other personal circumstances. It was a blanket privilege afforded the
group of citizens in the enumeration in view of the vulnerability of their class.
R.A. No. 9257 is an implementation of the avowed policy of the Constitution to enact measures that
protect and enhance the right of all the people to human dignity, reduce social, economic, and
political inequalities.72 Specifically, it caters to the welfare of all senior citizens. The classification is
based on age and therefore qualifies all who have attained the age of 60. Senior citizens are a class
of their own, who are in need and should be entitled to government support, and the fact that they
may still be earning for their own sustenance should not disqualify them from the privilege.
It is well to consider that our senior citizens have already reached the age when work opportunities
have dwindled concurrently as their physical health. They are no longer expected to work, but there
are still those who continue to work and contribute what they can to the country. Thus, to single them
out and take them out of the privileges of the law for continuing to strive and earn income to fend for
themselves is inimical to a welfare state that the Constitution envisions. It is tantamount to penalizing
them for their persistence. It is commending indolence rather than rewarding diligence. It encourages
them to become wards of the State rather than productive partners.
Our senior citizens were the laborers, professionals and overseas contract workers of the past. While
some may be well to do or may have the capacity to support their sustenance, the discretion to avail
of the privileges of the law is up to them. But to instantly tag them as undeserving of the privilege
would be the height of ingratitude; it is an outright discrimination.
The same ratiocination may be said of the recognition of PWDs as a class in R.A. No. 9442 and in
granting them discounts. It needs no further explanation that PWDs have special needs which, for
most, last their entire lifetime. They constitute a class of their own, equally deserving of government
support as our elderlies. While some of them maybe willing to work and earn income for themselves,
their disability deters them from living their full potential. Thus, the need for assistance from the
government to augment the reduced income or productivity brought about by their physical or
intellectual limitations.
There is also no question that the grant of mandatory discount is germane to the purpose of R.A.
Nos. 9257 and 9442, that is, to adopt an integrated and comprehensive approach to health
development and make essential goods and other social services available to all the people at
affordable cost, with special priority given to the elderlies and the disabled, among others. The
privileges granted by the laws ease their concerns and allow them to live more comfortably.
The subject laws also address a continuing concern of the government for the welfare of the senior
citizens and PWDs. It is not some random predicament but an actual, continuing and pressing
concern that requires preferential attention. Also, the laws apply to all senior citizens and PWDs,
respectively, without further distinction or reservation. Without a doubt, all the elements for a valid
classification were met.
The definitions of "disabilities" and
"PWDs" are clear and unequivocal
Undeterred, the petitioner claims that R.A. No. 9442 is ambiguous particularly in defining the terms
"disability" and "PWDs," such that it lack comprehensible standards that men of common intelligence
must guess at its meaning. It likewise bewails the futility of the given safeguards to prevent abuse
since government officials who are neither experts nor practitioners of medicine are given the
authority to issue identification cards that authorizes the granting of the privileges under the law.
The Court disagrees.
Section 4(a) of R.A. No. 7277, the precursor of R.A. No. 9442, defines "disabled persons" as follows:
(a) Disabled persons are those suffering from restriction or different abilities, as a result of a mental,
physical or sensory impairment, to perform an activity in the manner or within the range considered
normal for a human being[.]
On the other hand, the term "PWDs" is defined in Section 5.1 of the IRR of R.A. No. 9442 as follows;
5.1. Persons with Disability are those individuals defined under Section 4 of [R.A. No.] 7277 [or] An
Act Providing for the Rehabilitation, Self-Development and Self-Reliance of Persons with Disability as
amended and their integration into the Mainstream of Society and for Other Purposes. This is defined
as a person suffering from restriction or different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in a manner or within the range considered normal for human
being. Disability shall mean (1) a physical or mental impairment that substantially limits one or more
psychological, physiological or anatomical function of an individual or activities of such individual; (2)
a record of such an impairment; or (3) being regarded as having such an impairment.
The foregoing definitions have a striking conformity with the definition of "PWDs" in Article 1 of
theUnited Nations Convention on the Rights of Persons with Disabilities which reads:
Persons with disabilities include those who have long-term physical, mental, intellectual or sensory
impairments which in interaction with various barriers may hinder their full and effective participation
in society on an equal basis with others. (Emphasis and italics ours)
The seemingly broad definition of the terms was not without good reasons. It recognizes that
"disability is an evolving concept"73 and appreciates the "diversity of PWDs."74 The terms were given
comprehensive definitions so as to accommodate the various forms of disabilities, and not confine it
to a particular case as this would effectively exclude other forms of physical, intellectual or
psychological impairments.
Moreover, in Estrada v. Sandiganbayan,75 it was declared, thus:
A statute is not rendered uncertain and void merely because general terms are used therein, or
because of the employment of terms without defining them; much less do we have to define every
word we use. Besides, there is no positive constitutional or statutory command requiring the
legislature to define each and every word in an enactment. Congress is not restricted in the form of
expression of its will, and its inability to so define the words employed in a statute will not necessarily
result in the vagueness or ambiguity of the law so long as the legislative will is clear, or at least, can
be gathered from the whole act x x x.76 (Citation omitted)
At any rate, the Court gathers no ambiguity in the provisions of R.A. No. 9442. As regards the
petitioner's claim that the law lacked reasonable standards in determining the persons entitled to the
discount, Section 32 thereof is on point as it identifies who may avail of the privilege and the manner
of its availment. It states:
Sec. 32. x x x
The abovementioned privileges are available only to persons with disability who are Filipino citizens
upon submission of any of the following as proof of his/her entitlement thereto:
(I) An identification card issued by the city or municipal mayor or the barangay captain of the place
where the persons with disability resides;
(II) The passport of the persons with disability concerned; or
(III) Transportation discount fare Identification Card (ID) issued by the National Council for the
Welfare of Disabled Persons (NCWDP).
It is, however, the petitioner's contention that the foregoing authorizes government officials who had
no medical background to exercise discretion in issuing identification cards to those claiming to be
PWDs. It argues that the provision lends to the indiscriminate availment of the privileges even by
those who are not qualified.
The petitioner's apprehension demonstrates a superficial understanding of the law and its
implementing rules. To be clear, the issuance of identification cards to PWDs does not depend on
the authority of the city or municipal mayor, the DSWD or officials of the NCDA (formerly NCWDP). It
is well to remember that what entitles a person to the privileges of the law is his disability, the fact of
which he must prove to qualify. Thus, in NCDA Administrative Order (A.O.) No. 001, series of
2008,77 it is required that the person claiming disability must submit the following requirements before
he shall be issued a PWD Identification Card:
1. Two "1x 1" recent ID pictures with the names, and signatures or thumb marks at the back
of the picture.
2. One (1) Valid ID
3. Document to confirm the medical or disability condition78
To confirm his disability, the person must obtain a medical certificate or assessment, as the case j) Authorization letter of the PWD x x x in case the medicine is bought by the representative or
maybe, issued by a licensed private or government physician, licensed teacher or head of a business caregiver of the PWD.
establishment attesting to his impairment. The issuing entity depends on whether the disability is The PWD identification card also has a validity period of only three years which facilitate in the
apparent or non-apparent. NCDA A.O. No. 001 further provides:79 monitoring of those who may need continued support and who have been relieved of their disability,
and therefore may be taken out of the coverage of the law.
DISABILITY DOCUMENT ISSUING ENTITY At any rate, the law has penal provisions which give concerned establishments the option to file a
case against those abusing the privilege. Section 46(b) of R.A. No. 9442 provides that "[a]ny person
Apparent Disability Medical Certificate Licensed Private or Government Physician who abuses the privileges granted herein shall be punished with imprisonment of not less than six
months or a fine of not less than Five Thousand pesos (P5,000.00), but not more than Fifty
School Assessment Licensed Teacher duly signed by the School Thousand pesos (P50,000.00), or both, at the discretion of the court." Thus, concerned
Principal establishments, together with the proper government agencies, must actively participate in
monitoring compliance with the law so that only the intended beneficiaries of the law can avail of the
Certificate of  Head of the Business Establishment privileges.
Disability  Head of Non-Government Organization Indubitably, the law is clear and unequivocal, and the petitioner's claim of vagueness to cast
uncertainty in the validity of the law does not stand.
Non-Apparent Medical Certificate Licensed Private or Government Physician WHEREFORE, in view of the foregoing disquisition, Section 4(a) of Republic Act No. 9257 and
Disability Section 32 of Republic Act No. 9442 are hereby declared CONSTITUTIONAL.
To provide further safeguard, the Department of Health issued A.O. No. 2009-0011, providing SO ORDERED.
guidelines for the availment of the 20% discount on the purchase of medicines by PWDs. In making __________________________________________________________________
a purchase, the individual must present the documents enumerated in Section VI(4)(b), to wit: FIRST DIVISION
i. PWD identification card x x x
ii. Doctor's prescription stating the name of the PWD, age, sex, address, date, generic name [G.R. NO. 156052 : March 7, 2007]
of the medicine, dosage form, dosage strength, quantity, signature over printed name of
physician, physician's address, contact number of physician or dentist, professional license SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR ALARIQUE T. CABIGAO, and BONIFACIO S.
number, professional tax receipt number and narcotic license number, if applicable. To TUMBOKON, Petitioners, v. HON. JOSE L. ATIENZA, JR., in his capacity as Mayor of the City of
safeguard the health of PWDs and to prevent abuse of [R.A. No.] 9257, a doctor's Manila, Respondent.
prescription is required in the purchase of over-the-counter medicines. x x x.
iii. Purchase booklet issued by the local social/health office to PWDs for free containing the DECISION
following basic information:
a) PWD ID number CORONA, J.:
b) Booklet control number
c) Name of PWD In this original petition for mandamus,1 petitioners Social Justice Society (SJS), Vladimir Alarique T.
d) Sex Cabigao and Bonifacio S. Tumbokon seek to compel respondent Hon. Jose L. Atienza, Jr., mayor of
e) Address the City of Manila, to enforce Ordinance No. 8027.
f) Date of Birth
g) Picture The antecedents are as follows.
h) Signature of PWD
i) Information of medicine purchased: On November 20, 2001, the Sangguniang Panlungsod of Manila enacted Ordinance No. 8027.2
i.1 Name of medicine Respondent mayor approved the ordinance on November 28, 2001.3 It became effective on
i.2 Quantity December 28, 2001, after its publication.4
i.3 Attending Physician
i.4 License Number Ordinance No. 8027 was enacted pursuant to the police power delegated to local government units,
i.5 Servicing drug store name a principle described as the power inherent in a government to enact laws, within constitutional limits,
i.6 Name of dispensing pharmacist to promote the order, safety, health, morals and general welfare of the society.5 This is evident from
Sections 1 and 3 thereof which state:
SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public safety,
and general welfare of the residents of Pandacan and Sta. Ana as well as its adjoining areas, the
land use of [those] portions of land bounded by the Pasig River in the north, PNR Railroad Track in
the east, Beata St. in the south, Palumpong St. in the southwest, and Estero de Pancacan in the
west[,] PNR Railroad in the northwest area, Estero de Pandacan in the [n]ortheast, Pasig River in the
southeast and Dr. M.L. Carreon in the southwest. The area of Punta, Sta. Ana bounded by the Pasig
River, Marcelino Obrero St., Mayo 28 St., and F. Manalo Street, are hereby reclassified from
Industrial II to Commercial I.
xxx
SEC. 3. Owners or operators of industries and other businesses, the operation of which are no
longer permitted under Section 1 hereof, are hereby given a period of six (6) months from the date of
effectivity of this Ordinance within which to cease and desist from the operation of businesses which
are hereby in consequence, disallowed.
Ordinance No. 8027 reclassified the area described therein from industrial to commercial and
directed the owners and operators of businesses disallowed under Section 1 to cease and desist
from operating their businesses within six months from the date of effectivity of the ordinance.
Among the businesses situated in the area are the so-called "Pandacan Terminals" of the oil
companies Caltex (Philippines), Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation.
However, on June 26, 2002, the City of Manila and the Department of Energy (DOE) entered into a
memorandum of understanding (MOU)6 with the oil companies in which they agreed that "the scaling
down of the Pandacan Terminals [was] the most viable and practicable option." Under the MOU, the
oil companies agreed to perform the following:
Section 1. - Consistent with the objectives stated above, the OIL COMPANIES shall, upon signing of
this MOU, undertake a program to scale down the Pandacan Terminals which shall include, among
others, the immediate removal/decommissioning process of TWENTY EIGHT (28) tanks starting with
the LPG spheres and the commencing of works for the creation of safety buffer and green zones
surrounding the Pandacan Terminals. xxx
Section 2. - Consistent with the scale-down program mentioned above, the OIL COMPANIES shall
establish joint operations and management, including the operation of common, integrated and/or
shared facilities, consistent with international and domestic technical, safety, environmental and
economic considerations and standards. Consequently, the joint operations of the OIL COMPANIES
in the Pandacan Terminals shall be limited to the common and integrated areas/facilities. A separate
agreement covering the commercial and operational terms and conditions of the joint operations,
shall be entered into by the OIL COMPANIES.
Section 3. - The development and maintenance of the safety and green buffer zones mentioned
therein, which shall be taken from the properties of the OIL COMPANIES and not from the
surrounding communities, shall be the sole responsibility of the OIL COMPANIES.
The City of Manila and the DOE, on the other hand, committed to do the following:
Section 1. - The City Mayor shall endorse to the City Council this MOU for its appropriate action with
the view of implementing the spirit and intent thereof.
Section 2. - The City Mayor and the DOE shall, consistent with the spirit and intent of this MOU,
enable the OIL COMPANIES to continuously operate in compliance with legal requirements, within
the limited area resulting from the joint operations and the scale down program.
Section 3. - The DOE and the City Mayor shall monitor the OIL COMPANIES' compliance with the
provisions of this MOU.
Section 4. - The CITY OF MANILA and the national government shall protect the safety buffer and
green zones and shall exert all efforts at preventing future occupation or encroachment into these
areas by illegal settlers and other unauthorized parties.
The Sangguniang Panlungsod ratified the MOU in Resolution No. 97.7 In the same resolution, the
Sanggunian declared that the MOU was effective only for a period of six months starting July 25,
2002.8 Thereafter, on January 30, 2003, the Sanggunian adopted Resolution No. 139 extending the
validity of Resolution No. 97 to April 30, 2003 and authorizing Mayor Atienza to issue special
business permits to the oil companies. Resolution No. 13, s. 2003 also called for a reassessment of
the ordinance.10
Meanwhile, petitioners filed this original action for mandamus on December 4, 2002 praying that
Mayor Atienza be compelled to enforce Ordinance No. 8027 and order the immediate removal of the
terminals of the oil companies.11
The issues raised by petitioners are as follows:
1. whether respondent has the mandatory legal duty to enforce Ordinance No. 8027 and order the
removal of the Pandacan Terminals, and
2. whether the June 26, 2002 MOU and the resolutions ratifying it can amend or repeal Ordinance
No. 8027.12
Petitioners contend that respondent has the mandatory legal duty, under Section 455 (b) (2) of the
Local Government Code (RA 7160),13 to enforce Ordinance No. 8027 and order the removal of the
Pandacan Terminals of the oil companies. Instead, he has allowed them to stay.
Respondent's defense is that Ordinance No. 8027 has been superseded by the MOU and the
resolutions.14 However, he also confusingly argues that the ordinance and MOU are not inconsistent
with each other and that the latter has not amended the former. He insists that the ordinance remains
valid and in full force and effect and that the MOU did not in any way prevent him from enforcing and
implementing it. He maintains that the MOU should be considered as a mere guideline for its full
implementation.15
Under Rule 65, Section 316 of the Rules of Court, a petition for mandamus may be filed when any
tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the
law specifically enjoins as a duty resulting from an office, trust or station. Mandamus is an
extraordinary writ that is employed to compel the performance, when refused, of a ministerial duty
that is already imposed on the respondent and there is no other plain, speedy and adequate remedy
in the ordinary course of law. The petitioner should have a well-defined, clear and certain legal right
to the performance of the act and it must be the clear and imperative duty of respondent to do the act
required to be done.17
Mandamus will not issue to enforce a right, or to compel compliance with a duty, which is
questionable or over which a substantial doubt exists. The principal function of the writ of mandamus
is to command and to expedite, not to inquire and to adjudicate; thus, it is neither the office nor the
aim of the writ to secure a legal right but to implement that which is already established. Unless the
right to the relief sought is unclouded, mandamus will not issue.18
To support the assertion that petitioners have a clear legal right to the enforcement of the ordinance,
petitioner SJS states that it is a political party registered with the Commission on Elections and has
its offices in Manila. It claims to have many members who are residents of Manila. The other
petitioners, Cabigao and Tumbokon, are allegedly residents of Manila.
We need not belabor this point. We have ruled in previous cases that when a mandamus proceeding
concerns a public right and its object is to compel a public duty, the people who are interested in the
execution of the laws are regarded as the real parties in interest and they need not show any specific
interest.19 Besides, as residents of Manila, petitioners have a direct interest in the enforcement of
the city's ordinances. Respondent never questioned the right of petitioners to institute this
proceeding.
On the other hand, the Local Government Code imposes upon respondent the duty, as city mayor, to
"enforce all laws and ordinances relative to the governance of the city.">20 One of these is
Ordinance No. 8027. As the chief executive of the city, he has the duty to enforce Ordinance No.
8027 as long as it has not been repealed by the Sanggunian or annulled by the courts.21 He has no
other choice. It is his ministerial duty to do so. In Dimaporo v. Mitra, Jr.,22 we stated the reason for
this:
These officers cannot refuse to perform their duty on the ground of an alleged invalidity of the statute
imposing the duty. The reason for this is obvious. It might seriously hinder the transaction of public
business if these officers were to be permitted in all cases to question the constitutionality of statutes
and ordinances imposing duties upon them and which have not judicially been declared
unconstitutional. Officers of the government from the highest to the lowest are creatures of the law
and are bound to obey it.23
The question now is whether the MOU entered into by respondent with the oil companies and the
subsequent resolutions passed by the Sanggunian have made the respondent's duty to enforce
Ordinance No. 8027 doubtful, unclear or uncertain. This is also connected to the second issue raised
by petitioners, that is, whether the MOU and Resolution Nos. 97, s. 2002 and 13, s. 2003 of the
Sanggunian can amend or repeal Ordinance No. 8027.
We need not resolve this issue. Assuming that the terms of the MOU were inconsistent with
Ordinance No. 8027, the resolutions which ratified it and made it binding on the City of Manila
expressly gave it full force and effect only until April 30, 2003. Thus, at present, there is nothing that
legally hinders respondent from enforcing Ordinance No. 8027.24
Ordinance No. 8027 was enacted right after the Philippines, along with the rest of the world,
witnessed the horror of the September 11, 2001 attack on the Twin Towers of the World Trade
Center in New York City. The objective of the ordinance is to protect the residents of Manila from the
catastrophic devastation that will surely occur in case of a terrorist attack25 on the Pandacan
Terminals. No reason exists why such a protective measure should be delayed.
WHEREFORE, the petition is hereby GRANTED. Respondent Hon. Jose L. Atienza, Jr., as mayor of
the City of Manila, is directed to immediately enforce Ordinance No. 8027.
SO ORDERED.
________________________________________________________________________________
___________________________________
EN BANC
[G.R. NO. 166494 : June 29, 2007]
CARLOS SUPERDRUG CORP., doing business under the name and style "Carlos Superdrug,"
ELSIE M. CANO, doing business under the name and style "Advance Drug," Dr. SIMPLICIO L. YAP,
JR., doing business under the name and style "City Pharmacy," MELVIN S. DELA SERNA, doing
business under the name and style "Botica dela Serna," and LEYTE SERV-WELL CORP., doing
business under the name and style "Leyte Serv-Well Drugstore," Petitioners, v. DEPARTMENT OF
SOCIAL WELFARE and DEVELOPMENT (DSWD), DEPARTMENT OF HEALTH (DOH),
DEPARTMENT OF FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ), and DEPARTMENT OF
INTERIOR and LOCAL GOVERNMENT (DILG), Respondents.
DECISION
AZCUNA, J.:
This is a petition1 for Prohibition with Prayer for Preliminary Injunction assailing the constitutionality
of Section 4(a) of Republic Act (R.A.) No. 9257,2 otherwise known as the "Expanded Senior Citizens
Act of 2003."
Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.
Public respondents, on the other hand, include the Department of Social Welfare and Development
(DSWD), the Department of Health (DOH), the Department of Finance (DOF), the Department of
Justice (DOJ), and the Department of Interior and Local Government (DILG) which have been
specifically tasked to monitor the drugstores' compliance with the law; promulgate the implementing
rules and regulations for the effective implementation of the law; and prosecute and revoke the
licenses of erring drugstore establishments.
The antecedents are as follows:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432,3 was signed into law by President
Gloria Macapagal-Arroyo and it became effective on March 21, 2004. Section 4(a) of the Act states:
SEC. 4. Privileges for the Senior Citizens. - The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers, and
purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens,
including funeral and burial services for the death of senior citizens;
...
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based
on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall
be allowed as deduction from gross income for the same taxable year that the discount is granted.
Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.4
On May 28, 2004, the DSWD approved and adopted the Implementing Rules and Regulations of
R.A. No. 9257, Rule VI, Article 8 of which states:
Article 8. Tax Deduction of Establishments. - The establishment may claim the discounts granted
under Rule V, Section 4 - Discounts for Establishments;5 Section 9, Medical and Dental Services in
Private Facilities[,]6 and Sections 107 and 118 - Air, Sea and Land Transportation as tax deduction
based on the net cost of the goods sold or services rendered. Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax deduction net of value added tax
if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended;
Provided, finally, that the implementation of the tax deduction shall be subject to the Revenue
Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department
of Finance (DOF).9
On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP)
concerning the meaning of a tax deduction under the Expanded Senior Citizens Act, the DOF,
through Director IV Ma. Lourdes B. Recente, clarified as follows:
1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction
(under the Expanded Senior Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent
(20%) discount from all establishments relative to the utilization of transportation services, hotels and
similar lodging establishment, restaurants and recreation centers and purchase of medicines
anywhere in the country, the costs of which may be claimed by the private establishments concerned
as tax credit.
Effectively, a tax credit is a peso-for-peso deduction from a taxpayer's tax liability due to the
government of the amount of discounts such establishment has granted to a senior citizen. The
establishment recovers the full amount of discount given to a senior citizen and hence, the
government shoulders 100% of the discounts granted.
It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system,
necessitates that prior payments of taxes have been made and the taxpayer is attempting to recover
this tax payment from his/her income tax due. The tax credit scheme under R.A. No. 7432 is,
therefore, inapplicable since no tax payments have previously occurred.
1.2. The provision under R.A. No. 9257, on the other hand, provides that the establishment
concerned may claim the discounts under Section 4(a), (f), (g) and (h) as tax deduction from gross
income, based on the net cost of goods sold or services rendered.
Under this scheme, the establishment concerned is allowed to deduct from gross income, in
computing for its tax liability, the amount of discounts granted to senior citizens. Effectively, the
government loses in terms of foregone revenues an amount equivalent to the marginal tax rate the
said establishment is liable to pay the government. This will be an amount equivalent to 32% of the
twenty percent (20%) discounts so granted. The establishment shoulders the remaining portion of
the granted discounts.
It may be necessary to note that while the burden on [the] government is slightly diminished in terms
of its percentage share on the discounts granted to senior citizens, the number of potential
establishments that may claim tax deductions, have however, been broadened. Aside from the
establishments that may claim tax credits under the old law, more establishments were added under
the new law such as: establishments providing medical and dental services, diagnostic and
laboratory services, including professional fees of attending doctors in all private hospitals and
medical facilities, operators of domestic air and sea transport services, public railways and skyways
and bus transport services.
A simple illustration might help amplify the points discussed above, as follows:
Tax Deduction Tax Credit
Gross Sales x x x x x x x x x x x x
Less : Cost of goods sold x x x x x x x x x x
Net Sales x x x x x x x x x x x x
Less: Operating Expenses:
Tax Deduction on Discounts x x x x - -
Other deductions: x x x x x x x x
Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit - - ______x x
Net Tax Due - - x x
As shown above, under a tax deduction scheme, the tax deduction on discounts was subtracted from
Net Sales together with other deductions which are considered as operating expenses before the
Tax Due was computed based on the Net Taxable Income. On the other hand, under a tax credit
scheme, the amount of discounts which is the tax credit item, was deducted directly from the tax due
amount.10
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and Guidelines
to Implement the Relevant Provisions of Republic Act 9257, otherwise known as the "Expanded
Senior Citizens Act of 2003"11 was issued by the DOH, providing the grant of twenty percent (20%)
discount in the purchase of unbranded generic medicines from all establishments dispensing
medicines for the exclusive use of the senior citizens.
On November 12, 2004, the DOH issued Administrative Order No 17712 amending A.O. No. 171.
Under A.O. No. 177, the twenty percent discount shall not be limited to the purchase of unbranded
generic medicines only, but shall extend to both prescription and non-prescription medicines whether
branded or generic. Thus, it stated that "[t]he grant of twenty percent (20%) discount shall be
provided in the purchase of medicines from all establishments dispensing medicines for the exclusive
use of the senior citizens."
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior Citizens Act based on
the following grounds:13
1) The law is confiscatory because it infringes Art. III, Sec. 9 of the Constitution which provides that
private property shall not be taken for public use without just compensation;
2) It violates the equal protection clause (Art. III, Sec. 1) enshrined in our Constitution which states
that "no person shall be deprived of life, liberty or property without due process of law, nor shall any
person be denied of the equal protection of the laws;" andcralawlibrary
3) The 20% discount on medicines violates the constitutional guarantee in Article XIII, Section 11 that
makes "essential goods, health and other social services available to all people at affordable cost."14
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of
private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and
2) the law failed to provide a scheme whereby drugstores will be justly compensated for the discount.

Examining petitioners' arguments, it is apparent that what petitioners are ultimately questioning is the
validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent (20%)
discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse
petitioners for the discount privilege accorded to senior citizens. This is because the discount is
treated as a deduction, a tax-deductible expense that is subtracted from the gross income and
results in a lower taxable income. Stated otherwise, it is an amount that is allowed by law15 to
reduce the income prior to the application of the tax rate to compute the amount of tax which is
due.16 Being a tax deduction, the discount does not reduce taxes owed on a peso for peso basis but
merely offers a fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private
establishments concerned. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments, were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of
private property for public use or benefit.17 This constitutes compensable taking for which petitioners
would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. The measure is not the taker's gain but the owner's loss. The word just is used to
intensify the meaning of the word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample.18
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation.19
Having said that, this raises the question of whether the State, in promoting the health and welfare of
a special group of citizens, can impose upon private establishments the burden of partly subsidizing
a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to
nation-building, and to grant benefits and privileges to them for their improvement and well-being as
the State considers them an integral part of our society.20
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself.
Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. ' Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10 in the Declaration of Principles
and State Policies provides: "The State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and
comprehensive approach to health development which shall endeavor to make essential goods,
health and other social services available to all the people at affordable cost. There shall be priority
for the needs of the underprivileged sick, elderly, disabled, women and children." Consonant with
these constitutional principles the following are the declared policies of this Act:
...
(f) To recognize the important role of the private sector in the improvement of the welfare of senior
citizens and to actively seek their partnership.21
To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by
theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and
amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers; and purchases of medicines for the
exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that
business establishments extending the twenty percent discount to senior citizens may claim the
discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits.22 Accordingly, it has been described as "the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs."23 It is "[t]he
power vested in the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not
repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same."24
For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.25
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.26
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is
unduly oppressive to their business, because petitioners have not taken time to calculate correctly
and come up with a financial report, so that they have not been able to show properly whether or not
the tax deduction scheme really works greatly to their disadvantage.27
In treating the discount as a tax deduction, petitioners insist that they will incur losses because,
referring to the DOF Opinion, for every P1.00 senior citizen discount that petitioners would give,
P0.68 will be shouldered by them as only P0.32 will be refunded by the government by way of a tax
deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug
Norvasc as an example. According to the latter, it acquires Norvasc from the distributors at P37.57
per tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens
or an amount equivalent to P7.92, then it would have to sell Norvasc at P31.68 which translates to a
loss from capital of P5.89 per tablet. Even if the government will allow a tax deduction, only P2.53
per tablet will be refunded and not the full amount of the discount which is P7.92. In short, only 32%
of the 20% discount will be reimbursed to the drugstores.28
Petitioners' computation is flawed. For purposes of reimbursement, the law states that the cost of the
discount shall be deducted from gross income,29 the amount of income derived from all sources
before deducting allowable expenses, which will result in net income. Here, petitioners tried to show
a loss on a per transaction basis, which should not be the case. An income statement, showing an
accounting of petitioners' sales, expenses, and net profit (or loss) for a given period could have
accurately reflected the effect of the discount on their income. Absent any financial statement,
petitioners cannot substantiate their claim that they will be operating at a loss should they give the
discount. In addition, the computation was erroneously based on the assumption that their customers
consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the
amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision on
the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as
alleged by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right,
petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise
their prices for fear of losing their customers to competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights, petitioners must accept
the realities of business and the State, in the exercise of police power, can intervene in the
operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as a reminder that the
right to property can be relinquished upon the command of the State for the promotion of public
good.30
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of
R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act.31
WHEREFORE, the petition is DISMISSED for lack of merit.
No costs.
SO ORDERED.
________________________________________________________________________________
______________________________
G.R. No. 175356, December 03, 2013
MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT,
INC., Petitioners, v.SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, Respondent.
DECISION
DEL CASTILLO, J.:
When a party challenges the constitutionality of a law, the burden of proof rests upon him.1
Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by petitioners Manila
Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic corporations engaged in the
business of providing funeral and burial services, against public respondents Secretaries of the
Department of Social Welfare and Development (DSWD) and the Department of Finance (DOF).
Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432,3 as amended by
RA 9257,4 and the implementing rules and regulations issued by the DSWD and DOF insofar as
these allow business establishments to claim the 20% discount given to senior citizens as a tax
deduction.
Factual Antecedents
On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following privileges:
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment[s], restaurants and recreation
centers and purchase of medicine anywhere in the country: Provided, That private establishments
may claim the cost as tax credit;
b) a minimum of twenty percent (20%) discount on admission fees charged by theaters, cinema
houses and concert halls, circuses, carnivals and other similar places of culture, leisure, and
amusement;
c) exemption from the payment of individual income taxes: Provided, That their annual taxable
income does not exceed the property level as determined by the National Economic and
Development Authority (NEDA) for that year;
d) exemption from training fees for socioeconomic programs undertaken by the OSCA as part of its
work;
e) free medical and dental services in government establishment[s] anywhere in the country, subject
to guidelines to be issued by the Department of Health, the Government Service Insurance System
and the Social Security System;
f) to the extent practicable and feasible, the continuance of the same benefits and privileges given by
the Government Service Insurance System (GSIS), Social Security System (SSS) and PAG-IBIG, as
the case may be, as are enjoyed by those in actual service.
On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement RA 7432.
Sections 2(i) and 4 of RR No. 02-94 provide:
Sec. 2. DEFINITIONS. – For purposes of these regulations:
i. Tax Credit – refers to the amount representing the 20% discount granted to a qualified senior
citizen by all establishments relative to their utilization of transportation services, hotels and similar
lodging establishments, restaurants, drugstores, recreation centers, theaters, cinema houses,
concert halls, circuses, carnivals and other similar places of culture, leisure and amusement, which
discount shall be deducted by the said establishments from their gross income for income tax
purposes and from their gross sales for value-added tax or other percentage tax purposes.
xxx
Sec. 4. RECORDING/BOOKKEEPING REQUIREMENTS FOR PRIVATE ESTABLISHMENTS. –
Private establishments, i.e., transport services, hotels and similar lodging establishments,
restaurants, recreation centers, drugstores, theaters, cinema houses, concert halls, circuses,
carnivals and other similar places of culture[,] leisure and amusement, giving 20% discounts to
qualified senior citizens are required to keep separate and accurate record[s] of sales made to senior
citizens, which shall include the name, identification number, gross sales/receipts, discounts, dates
of transactions and invoice number for every transaction.
The amount of 20% discount shall be deducted from the gross income for income tax purposes and
from gross sales of the business enterprise concerned for purposes of the VAT and other percentage
taxes.
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court declared
Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene RA 7432,6 thus:
RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts
they grant. In turn, the Implementing Rules and Regulations, issued pursuant thereto, provide the
procedures for its availment. To deny such credit, despite the plain mandate of the law and the
regulations carrying out that mandate, is indefensible.
First, the definition given by petitioner is erroneous. It refers to tax credit as the amount representing
the 20 percent discount that “shall be deducted by the said establishments from their gross income
for income tax purposes and from their gross sales for value-added tax or other percentage tax
purposes.” In ordinary business language, the tax credit represents the amount of such discount.
However, the manner by which the discount shall be credited against taxes has not been clarified by
the revenue regulations.
By ordinary acceptation, a discount is an “abatement or reduction made from the gross amount or
value of anything.” To be more precise, it is in business parlance “a deduction or lowering of an
amount of money;” or “a reduction from the full amount or value of something, especially a price.” In
business there are many kinds of discount, the most common of which is that affecting the income
statement or financial report upon which the income tax is based.
xxx
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent
discount deductible from gross income for income tax purposes, or from gross sales for VAT or other
percentage tax purposes. In effect, the tax credit benefit under RA 7432 is related to a sales
discount. This contrived definition is improper, considering that the latter has to be deducted from
gross sales in order to compute the gross income in the income statement and cannot be deducted
again, even for purposes of computing the income tax.
When the law says that the cost of the discount may be claimed as a tax credit, it means that the
amount — when claimed — shall be treated as a reduction from any tax liability, plain and simple.
The option to avail of the tax credit benefit depends upon the existence of a tax liability, but to limit
the benefit to a sales discount — which is not even identical to the discount privilege that is granted
by law — does not define it at all and serves no useful purpose. The definition must, therefore, be
stricken down.
Laws Not Amended
by Regulations
Second, the law cannot be amended by a mere regulation. In fact, a regulation that “operates to
create a rule out of harmony with the statute is a mere nullity;” it cannot prevail.
It is a cardinal rule that courts “will and should respect the contemporaneous construction placed
upon a statute by the executive officers whose duty it is to enforce it x x x.” In the scheme of judicial
tax administration, the need for certainty and predictability in the implementation of tax laws is
crucial. Our tax authorities fill in the details that “Congress may not have the opportunity or
competence to provide.” The regulations these authorities issue are relied upon by taxpayers, who
are certain that these will be followed by the courts. Courts, however, will not uphold these
authorities’ interpretations when clearly absurd, erroneous or improper.
In the present case, the tax authorities have given the term tax credit in Sections 2.i and 4 of RR 2-
94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation has muddled x x x the
intent of Congress in granting a mere discount privilege, not a sales discount. The administrative
agency issuing these regulations may not enlarge, alter or restrict the provisions of the law it
administers; it cannot engraft additional requirements not contemplated by the legislature.
In case of conflict, the law must prevail. A “regulation adopted pursuant to law is law.” Conversely, a
regulation or any portion thereof not adopted pursuant to law is no law and has neither the force nor
the effect of law.7
On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers, and
purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens,
including funeral and burial services for the death of senior citizens;
xxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based
on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall
be allowed as deduction from gross income for the same taxable year that the discount is granted.
Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.
To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006, the
pertinent provision of which provides:
SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS DEDUCTION FROM
GROSS INCOME. – Establishments enumerated in subparagraph (6) hereunder granting sales
discounts to senior citizens on the sale of goods and/or services specified thereunder are entitled to
deduct the said discount from gross income subject to the following conditions:
(1) Only that portion of the gross sales EXCLUSIVELY USED, CONSUMED OR ENJOYED BY
THE SENIOR CITIZEN shall be eligible for the deductible sales discount.
(2) The gross selling price and the sales discount MUST BE SEPARATELY INDICATED IN THE
OFFICIAL RECEIPT OR SALES INVOICE issued by the establishment for the sale of goods or
services to the senior citizen.
(3) Only the actual amount of the discount granted or a sales discount not exceeding 20% of the
gross selling price can be deducted from the gross income, net of value added tax, if applicable,
for income tax purposes, and from gross sales or gross receipts of the business enterprise
concerned, for VAT or other percentage tax purposes.
(4) The discount can only be allowed as deduction from gross income for the same taxable year
that the discount is granted.
(5) The business establishment giving sales discounts to qualified senior citizens is required to
keep separate and accurate record[s] of sales, which shall include the name of the senior
citizen, TIN, OSCA ID, gross sales/receipts, sales discount granted, [date] of [transaction] and
invoice number for every sale transaction to senior citizen.
(6) Only the following business establishments which granted sales discount to senior citizens on
their sale of goods and/or services may claim the said discount granted as deduction from gross
income, namely:
xxx
(i) Funeral parlors and similar establishments – The beneficiary or any person who shall
shoulder the funeral and burial expenses of the deceased senior citizen shall claim the discount,
such as casket, embalmment, cremation cost and other related services for the senior citizen
upon payment and presentation of [his] death certificate.
The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, to wit:
RULE VI
DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS
Article 8. Tax Deduction of Establishments. – The establishment may claim the discounts granted
under Rule V, Section 4 – Discounts for Establishments, Section 9, Medical and Dental Services in
Private Facilities and Sections 10 and 11 – Air, Sea and Land Transportation as tax deduction based
on the net cost of the goods sold or services rendered. Provided, That the cost of the discount shall
be allowed as deduction from gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax deduction net of value added tax
if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended;
Provided, finally, that the implementation of the tax deduction shall be subject to the Revenue
Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department
of Finance (DOF).
Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying that
Section 4 of RA 7432, as amended by RA 9257, and the implementing rules and regulations issued
by the DSWD and the DOF be declared unconstitutional insofar as these allow business
establishments to claim the 20% discount given to senior citizens as a tax deduction; that the DSWD
and the DOF be prohibited from enforcing the same; and that the tax credit treatment of the 20%
discount under the former Section 4 (a) of RA 7432 be reinstated.
Issues
Petitioners raise the following issues:
A.
WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR CONTROVERSY.
B.
WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS IMPLEMENTING RULES
AND REGULATIONS, INSOFAR AS THEY PROVIDE THAT THE TWENTY PERCENT (20%)
DISCOUNT TO SENIOR CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE PRIVATE
ESTABLISHMENTS, ARE INVALID AND UNCONSTITUTIONAL.9
Petitioners’ Arguments
Petitioners emphasize that they are not questioning the 20% discount granted to senior citizens but
are only assailing the constitutionality of the tax deduction scheme prescribed under RA 9257 and
the implementing rules and regulations issued by the DSWD and the DOF.10
Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the Constitution,
which provides that: “[p]rivate property shall not be taken for public use without just
compensation.”11In support of their position, petitioners cite Central Luzon Drug Corporation,12 where
it was ruled that the 20% discount privilege constitutes taking of private property for public use which
requires the payment of just compensation,13 and Carlos Superdrug Corporation v. Department of
Social Welfare and Development,14 where it was acknowledged that the tax deduction scheme does
not meet the definition of just compensation.15
Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Corporation16 that the tax
deduction scheme adopted by the government is justified by police power.17 They assert that
“[a]lthough both police power and the power of eminent domain have the general welfare for their
object, there are still traditional distinctions between the two”18 and that “eminent domain cannot be
made less supreme than police power.”19 Petitioners further claim that the legislature, in amending
RA 7432, relied on an erroneous contemporaneous construction that prior payment of taxes is
required for tax credit.20
Petitioners also contend that the tax deduction scheme violates Article XV, Section 421 and Article
XIII, Section 1122 of the Constitution because it shifts the State’s constitutional mandate or duty of
improving the welfare of the elderly to the private sector.23 Under the tax deduction scheme, the
private sector shoulders 65% of the discount because only 35%24 of it is actually returned by the
government.25Consequently, the implementation of the tax deduction scheme prescribed under
Section 4 of RA 9257 affects the businesses of petitioners.26 Thus, there exists an actual case or
controversy of transcendental importance which deserves judicious disposition on the merits by the
highest court of the land.27ChanRoblesVirtualawlibrary
Respondents’ Arguments
Respondents, on the other hand, question the filing of the instant Petition directly with the Supreme
Court as this disregards the hierarchy of courts.28 They likewise assert that there is no justiciable
controversy as petitioners failed to prove that the tax deduction treatment is not a “fair and full
equivalent of the loss sustained” by them.29 As to the constitutionality of RA 9257 and its
implementing rules and regulations, respondents contend that petitioners failed to overturn its
presumption of constitutionality.30 More important, respondents maintain that the tax deduction
scheme is a legitimate exercise of the State’s police power.31chanroblesvirtualawlibrary
Our Ruling
The Petition lacks merit.
There exists an actual case or controversy.
We shall first resolve the procedural issue.
When the constitutionality of a law is put in issue, judicial review may be availed of only if the
following requisites concur: “(1) the existence of an actual and appropriate case; (2) the existence of
personal and substantial interest on the part of the party raising the [question of constitutionality]; (3)
recourse to judicial review is made at the earliest opportunity; and (4) the [question of
constitutionality] is the lis mota of the case.”32
In this case, petitioners are challenging the constitutionality of the tax deduction scheme provided in
RA 9257 and the implementing rules and regulations issued by the DSWD and the DOF.
Respondents, however, oppose the Petition on the ground that there is no actual case or
controversy. We do not agree with respondents.
An actual case or controversy exists when there is “a conflict of legal rights” or “an assertion of
opposite legal claims susceptible of judicial resolution.”33 The Petition must therefore show that “the
governmental act being challenged has a direct adverse effect on the individual challenging it.”34 In
this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on them.
Thus, it cannot be denied that there exists an actual case or controversy.
The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257, as
an exercise of police power of the State, has already been settled in Carlos Superdrug
Corporation.
Petitioners posit that the resolution of this case lies in the determination of whether the legally
mandated 20% senior citizen discount is an exercise of police power or eminent domain. If it is police
power, no just compensation is warranted. But if it is eminent domain, the tax deduction scheme is
unconstitutional because it is not a peso for peso reimbursement of the 20% discount given to senior
citizens. Thus, it constitutes taking of private property without payment of just compensation.
At the outset, we note that this question has been settled in Carlos Superdrug Corporation.35 In that
case, we ruled:
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of
private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount.
Examining petitioners’ arguments, it is apparent that what petitioners are ultimately questioning is the
validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent (20%)
discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse
petitioners for the discount privilege accorded to senior citizens. This is because the discount is
treated as a deduction, a tax-deductible expense that is subtracted from the gross income and
results in a lower taxable income. Stated otherwise, it is an amount that is allowed by law to reduce
the income prior to the application of the tax rate to compute the amount of tax which is due. Being a
tax deduction, the discount does not reduce taxes owed on a peso for peso basis but merely offers a
fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private
establishments concerned. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments, were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of
private property for public use or benefit. This constitutes compensable taking for which petitioners
would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. The measure is not the taker’s gain but the owner’s loss. The word just is used to
intensify the meaning of the word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample.
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation.
Having said that, this raises the question of whether the State, in promoting the health and welfare of
a special group of citizens, can impose upon private establishments the burden of partly subsidizing
a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to
nation-building, and to grant benefits and privileges to them for their improvement and well-being as
the State considers them an integral part of our society.
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself.
Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. — Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10 in the Declaration of Principles
and State Policies provides: “The State shall provide social justice in all phases of national
development.” Further, Article XIII, Section 11, provides: “The State shall adopt an integrated and
comprehensive approach to health development which shall endeavor to make essential goods,
health and other social services available to all the people at affordable cost. There shall be priority
for the needs of the underprivileged sick, elderly, disabled, women and children.” Consonant with
these constitutional principles the following are the declared policies of this Act:
………
(f) To recognize the important role of the private sector in the improvement of the welfare of
senior citizens and to actively seek their partnership.
To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by
theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and
amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers; and purchases of medicines for the
exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that
business establishments extending the twenty percent discount to senior citizens may claim the
discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits. Accordingly, it has been described as “the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs.” It is “[t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same.”

For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is
unduly oppressive to their business, because petitioners have not taken time to calculate correctly
and come up with a financial report, so that they have not been able to show properly whether or not
the tax deduction scheme really works greatly to their disadvantage.
In treating the discount as a tax deduction, petitioners insist that they will incur losses because,
referring to the DOF Opinion, for every P1.00 senior citizen discount that petitioners would give,
P0.68 will be shouldered by them as only P0.32 will be refunded by the government by way of a tax
deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance
drug Norvasc as an example. According to the latter, it acquires Norvasc from the distributors at
P37.57 per tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20% discount to senior
citizens or an amount equivalent to P7.92, then it would have to sell Norvasc at P31.68 which
translates to a loss from capital of P5.89 per tablet. Even if the government will allow a tax deduction,
only P2.53 per tablet will be refunded and not the full amount of the discount which is P7.92. In short,
only 32% of the 20% discount will be reimbursed to the drugstores.
Petitioners’ computation is flawed. For purposes of reimbursement, the law states that the cost of the
discount shall be deducted from gross income, the amount of income derived from all sources before
deducting allowable expenses, which will result in net income. Here, petitioners tried to show a loss
on a per transaction basis, which should not be the case. An income statement, showing an
accounting of petitioners’ sales, expenses, and net profit (or loss) for a given period could have
accurately reflected the effect of the discount on their income. Absent any financial statement,
petitioners cannot substantiate their claim that they will be operating at a loss should they give the
discount. In addition, the computation was erroneously based on the assumption that their customers
consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the
amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision on
the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as
alleged by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right,
petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise
their prices for fear of losing their customers to competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights, petitioners must accept
the realities of business and the State, in the exercise of police power, can intervene in the
operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as x x x reminder[s] that
the right to property can be relinquished upon the command of the State for the promotion of public
good.
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4 (a) of
R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative
act.36 (Bold in the original; underline supplied)
We, thus, found that the 20% discount as well as the tax deduction scheme is a valid exercise of the
police power of the State.
No compelling reason has been proffered to overturn, modify or abandon the ruling in Carlos
Superdrug Corporation.
Petitioners argue that we have previously ruled in Central Luzon Drug Corporation37 that the 20%
discount is an exercise of the power of eminent domain, thus, requiring the payment of just
compensation. They urge us to re-examine our ruling in Carlos Superdrug Corporation38 which
allegedly reversed the ruling in Central Luzon Drug Corporation.39 They also point out that Carlos
Superdrug Corporation40 recognized that the tax deduction scheme under the assailed law does not
provide for sufficient just compensation.
We agree with petitioners’ observation that there are statements in Central Luzon Drug
Corporation41describing the 20% discount as an exercise of the power of eminent domain, viz.:
[T]he privilege enjoyed by senior citizens does not come directly from the State, but rather from the
private establishments concerned. Accordingly, the tax credit benefit granted to these
establishments can be deemed as their just compensation for private property taken by the State for
public use.
The concept of public use is no longer confined to the traditional notion of use by the public, but held
synonymous with public interest, public benefit, public welfare, and public convenience. The discount
privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to
which these citizens belong. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments concerned, were it not for RA 7432. The permanent
reduction in their total revenues is a forced subsidy corresponding to the taking of private property
for public use or benefit.
As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just
compensation. This term refers not only to the issuance of a tax credit certificate indicating the
correct amount of the discounts given, but also to the promptness in its release. Equivalent to the
payment of property taken by the State, such issuance — when not done within a reasonable
time from the grant of the discounts — cannot be considered as just compensation. In effect,
respondent is made to suffer the consequences of being immediately deprived of its revenues while
awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with the
reduction in its revenues.
Besides, the taxation power can also be used as an implement for the exercise of the power of
eminent domain. Tax measures are but “enforced contributions exacted on pain of penal sanctions”
and “clearly imposed for a public purpose.” In recent years, the power to tax has indeed become a
most effective tool to realize social justice, public welfare, and the equitable distribution of wealth.
While it is a declared commitment under Section 1 of RA 7432, social justice “cannot be invoked to
trample on the rights of property owners who under our Constitution and laws are also entitled to
protection. The social justice consecrated in our [C]onstitution [is] not intended to take away rights
from a person and give them to another who is not entitled thereto.” For this reason, a just
compensation for income that is taken away from respondent becomes necessary. It is in the tax
credit that our legislators find support to realize social justice, and no administrative body can alter
that fact.
To put it differently, a private establishment that merely breaks even — without the discounts yet —
will surely start to incur losses because of such discounts. The same effect is expected if its mark-up
is less than 20 percent, and if all its sales come from retail purchases by senior citizens. Aside from
the observation we have already raised earlier, it will also be grossly unfair to an establishment if the
discounts will be treated merely as deductions from either its gross income or its gross sales.
Operating at a loss through no fault of its own, it will realize that the tax credit limitation under RR 2-
94 is inutile, if not improper. Worse, profit-generating businesses will be put in a better position if they
avail themselves of tax credits denied those that are losing, because no taxes are due from the
latter.42 (Italics in the original; emphasis supplied)
The above was partly incorporated in our ruling in Carlos Superdrug Corporation43 when we
stated preliminarily that—
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of
private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount.
Examining petitioners’ arguments, it is apparent that what petitioners are ultimately questioning is the
validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent (20%)
discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse
petitioners for the discount privilege accorded to senior citizens. This is because the discount is
treated as a deduction, a tax-deductible expense that is subtracted from the gross income and
results in a lower taxable income. Stated otherwise, it is an amount that is allowed by law to reduce
the income prior to the application of the tax rate to compute the amount of tax which is due. Being a
tax deduction, the discount does not reduce taxes owed on a peso for peso basis but merely offers a
fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private
establishments concerned. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments, were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of
private property for public use or benefit. This constitutes compensable taking for which petitioners
would ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. The measure is not the taker’s gain but the owner’s loss. The word just is used to
intensify the meaning of the word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample.
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not
meet the definition of just compensation.
Having said that, this raises the question of whether the State, in promoting the health and welfare of
a special group of citizens, can impose upon private establishments the burden of partly subsidizing
a government program.
The Court believes so.44
This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the 20% discount
and tax deduction scheme is a valid exercise of the police power of the State.
The present case, thus, affords an opportunity for us to clarify the above-quoted statements
in Central Luzon Drug Corporation46 and Carlos Superdrug Corporation.47
First, we note that the above-quoted disquisition on eminent domain in Central Luzon Drug
Corporation48is obiter dicta and, thus, not binding precedent. As stated earlier, in Central Luzon Drug
Corporation,49we ruled that the BIR acted ultra vires when it effectively treated the 20% discount as a
tax deduction, under Sections 2.i and 4 of RR No. 2-94, despite the clear wording of the previous law
that the same should be treated as a tax credit. We were, therefore, not confronted in that case with
the issue as to whether the 20% discount is an exercise of police power or eminent domain.
Second, although we adverted to Central Luzon Drug Corporation50 in our ruling in Carlos Superdrug
Corporation,51 this referred only to preliminary matters. A fair reading of Carlos Superdrug
Corporation52would show that we categorically ruled therein that the 20% discount is a valid exercise
of police power. Thus, even if the current law, through its tax deduction scheme (which abandoned
the tax credit scheme under the previous law), does not provide for a peso for peso reimbursement
of the 20% discount given by private establishments, no constitutional infirmity obtains because,
being a valid exercise of police power, payment of just compensation is not warranted.
We have carefully reviewed the basis of our ruling in Carlos Superdrug Corporation53 and we find no
cogent reason to overturn, modify or abandon it. We also note that petitioners’ arguments are a mere
reiteration of those raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos
Superdrug Corporation.55
Nonetheless, we deem it proper, in what follows, to amplify our explanation in Carlos Superdrug
Corporation56 as to why the 20% discount is a valid exercise of police power and why it may
not, under the specific circumstances of this case, be considered as an exercise of the power of
eminent domain contrary to the obiter in Central Luzon Drug
Corporation.57ChanRoblesVirtualawlibrary
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain the use of liberty and
property for public welfare.58 The only limitation is that the restriction imposed should be reasonable,
not oppressive.59 In other words, to be a valid exercise of police power, it must have a lawful subject
or objective and a lawful method of accomplishing the goal.60 Under the police power of the State,
“property rights of individuals may be subjected to restraints and burdens in order to fulfill the
objectives of the government.”61 The State “may interfere with personal liberty, property, lawful
businesses and occupations to promote the general welfare [as long as] the interference [is]
reasonable and not arbitrary.”62 Eminent domain, on the other hand, is the inherent power of the
State to take or appropriate private property for public use.63 The Constitution, however, requires that
private property shall not be taken without due process of law and the payment of just
compensation.64
Traditional distinctions exist between police power and eminent domain.
In the exercise of police power, a property right is impaired by regulation,65 or the use of property is
merely prohibited, regulated or restricted66 to promote public welfare. In such cases, there is no
compensable taking, hence, payment of just compensation is not required. Examples of these
regulations are property condemned for being noxious or intended for noxious purposes (e.g., a
building on the verge of collapse to be demolished for public safety, or obscene materials to be
destroyed in the interest of public morals)67 as well as zoning ordinances prohibiting the use of
property for purposes injurious to the health, morals or safety of the community (e.g., dividing a city’s
territory into residential and industrial areas).68 It has, thus, been observed that, in the exercise of
police power (as distinguished from eminent domain), although the regulation affects the right of
ownership, none of the bundle of rights which constitute ownership is appropriated for use by or for
the benefit of the public.69
On the other hand, in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the payment of just
compensation therefor. Normally, the title to and possession of the property are transferred to the
expropriating authority. Examples include the acquisition of lands for the construction of public
highways as well as agricultural lands acquired by the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries. However, it is a settled rule that the acquisition of title
or total destruction of the property is not essential for “taking” under the power of eminent domain to
be present.70 Examples of these include establishment of easements such as where the land owner
is perpetually deprived of his proprietary rights because of the hazards posed by electric
transmission lines constructed above his property71 or the compelled interconnection of the
telephone system between the government and a private company.72 In these cases, although the
private property owner is not divested of ownership or possession, payment of just compensation is
warranted because of the burden placed on the property for the use or benefit of the public.
The 20% senior citizen discount is an exercise of police power.
It may not always be easy to determine whether a challenged governmental act is an exercise of
police power or eminent domain. The very nature of police power as elastic and responsive to
various social conditions73 as well as the evolving meaning and scope of public use74 and just
compensation75 in eminent domain evinces that these are not static concepts. Because of the
exigencies of rapidly changing times, Congress may be compelled to adopt or experiment with
different measures to promote the general welfare which may not fall squarely within the traditionally
recognized categories of police power and eminent domain. The judicious approach, therefore, is to
look at the nature and effects of the challenged governmental act and decide, on the basis thereof,
whether the act is the exercise of police power or eminent domain. Thus, we now look at the nature
and effects of the 20% discount to determine if it constitutes an exercise of police power or eminent
domain.
The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less
likely to be gainfully employed, more prone to illnesses and other disabilities, and, thus, in need of
subsidy in purchasing basic commodities. It may not be amiss to mention also that the discount
serves to honor senior citizens who presumably spent the productive years of their lives on
contributing to the development and progress of the nation. This distinct cultural Filipino practice of
honoring the elderly is an integral part of this law.
As to its nature and effects, the 20% discount is a regulation affecting the ability of private
establishments to price their products and services relative to a special class of individuals, senior
citizens, for which the Constitution affords preferential concern.76 In turn, this affects the amount of
profits or income/gross sales that a private establishment can derive from senior citizens. In other
words, the subject regulation affects the pricing, and, hence, the profitability of a private
establishment. However, it does not purport to appropriate or burden specific properties, used in the
operation or conduct of the business of private establishments, for the use or benefit of the public, or
senior citizens for that matter, but merely regulates the pricing of goods and services relative to, and
the amount of profits or income/gross sales that such private establishments may derive from, senior
citizens.

The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures.77These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens. Nonetheless, to the
degree material to the resolution of this case, the 20% discount may be properly viewed as belonging
to the category of price regulatory measures which affect the profitability of establishments subjected
thereto.
On its face, therefore, the subject regulation is a police power measure.
The obiter in Central Luzon Drug Corporation,78 however, describes the 20% discount as an exercise
of the power of eminent domain and the tax credit, under the previous law, equivalent to the amount
of discount given as the just compensation therefor. The reason is that (1) the discount would have
formed part of the gross sales of the establishment were it not for the law prescribing the 20%
discount, and (2) the permanent reduction in total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit.
The flaw in this reasoning is in its premise. It presupposes that the subject regulation, which impacts
the pricing and, hence, the profitability of a private establishment, automatically amounts to a
deprivation of property without due process of law. If this were so, then all price and rate of return on
investment control laws would have to be invalidated because they impact, at some level, the
regulated establishment’s profits or income/gross sales, yet there is no provision for payment of just
compensation. It would also mean that government cannot set price or rate of return on investment
limits, which reduce the profits or income/gross sales of private establishments, if no just
compensation is paid even if the measure is not confiscatory. The obiter is, thus, at odds with the
settled doctrine that the State can employ police power measures to regulate the pricing of goods
and services, and, hence, the profitability of business establishments in order to pursue legitimate
State objectives for the common good, provided that the regulation does not go too far as to amount
to “taking.”79
In City of Manila v. Laguio, Jr.,80 we recognized that—
x x x a taking also could be found if government regulation of the use of property went “too far.”
When regulation reaches a certain magnitude, in most if not in all cases there must be an exercise of
eminent domain and compensation to support the act. While property may be regulated to a certain
extent, if regulation goes too far it will be recognized as a taking.
No formula or rule can be devised to answer the questions of what is too far and when regulation
becomes a taking. In Mahon, Justice Holmes recognized that it was “a question of degree and
therefore cannot be disposed of by general propositions.” On many other occasions as well, the U.S.
Supreme Court has said that the issue of when regulation constitutes a taking is a matter of
considering the facts in each case. The Court asks whether justice and fairness require that the
economic loss caused by public action must be compensated by the government and thus borne by
the public as a whole, or whether the loss should remain concentrated on those few persons subject
to the public action.81
The impact or effect of a regulation, such as the one under consideration, must, thus, be determined
on a case-to-case basis. Whether that line between permissible regulation under police power and
“taking” under eminent domain has been crossed must, under the specific circumstances of this
case, be subject to proof and the one assailing the constitutionality of the regulation carries the
heavy burden of proving that the measure is unreasonable, oppressive or confiscatory. The time-
honored rule is that the burden of proving the unconstitutionality of a law rests upon the one assailing
it and “the burden becomes heavier when police power is at issue.”82ChanRoblesVirtualawlibrary
The 20% senior citizen discount has not been shown to be unreasonable, oppressive or
confiscatory.
In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders of electric
plants, challenged the validity of a law limiting their allowable net profits to no more than 12% per
annum of their investments plus two-month operating expenses. In rejecting their plea, we ruled that,
in an earlier case, it was found that 12% is a reasonable rate of return and that petitioners failed to
prove that the aforesaid rate is confiscatory in view of the presumption of constitutionality. 84
We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we ruled that
petitioners therein failed to prove that the 20% discount is arbitrary, oppressive or confiscatory. We
noted that no evidence, such as a financial report, to establish the impact of the 20% discount on the
overall profitability of petitioners was presented in order to show that they would be operating at a
loss due to the subject regulation or that the continued implementation of the law would be
unconscionably detrimental to the business operations of petitioners. In the case at bar, petitioners
proceeded with a hypothetical computation of the alleged loss that they will suffer similar to what the
petitioners in Carlos Superdrug Corporation86 did. Petitioners went directly to this Court without first
establishing the factual bases of their claims. Hence, the present recourse must, likewise, fail.
Because all laws enjoy the presumption of constitutionality, courts will uphold a law’s validity if any
set of facts may be conceived to sustain it.87 On its face, we find that there are at least two
conceivable bases to sustain the subject regulation’s validity absent clear and convincing proof that it
is unreasonable, oppressive or confiscatory. Congress may have legitimately concluded that
business establishments have the capacity to absorb a decrease in profits or income/gross sales due
to the 20% discount without substantially affecting the reasonable rate of return on their investments
considering (1) not all customers of a business establishment are senior citizens and (2) the level of
its profit margins on goods and services offered to the general public. Concurrently, Congress may
have, likewise, legitimately concluded that the establishments, which will be required to extend the
20% discount, have the capacity to revise their pricing strategy so that whatever reduction in profits
or income/gross sales that they may sustain because of sales to senior citizens, can be recouped
through higher mark-ups or from other products not subject of discounts. As a result, the discounts
resulting from sales to senior citizens will not be confiscatory or unduly oppressive.

In sum, we sustain our ruling in Carlos Superdrug Corporation88 that the 20% senior citizen discount
and tax deduction scheme are valid exercises of police power of the State absent a clear showing
that it is arbitrary, oppressive or confiscatory.
Conclusion
In closing, we note that petitioners hypothesize, consistent with our previous ratiocinations, that the
discount will force establishments to raise their prices in order to compensate for its impact on overall
profits or income/gross sales. The general public, or those not belonging to the senior citizen class,
are, thus, made to effectively shoulder the subsidy for senior citizens. This, in petitioners’ view, is
unfair.
As already mentioned, Congress may be reasonably assumed to have foreseen this eventuality. But,
more importantly, this goes into the wisdom, efficacy and expediency of the subject law which is not
proper for judicial review. In a way, this law pursues its social equity objective in a non-traditional
manner unlike past and existing direct subsidy programs of the government for the poor and
marginalized sectors of our society. Verily, Congress must be given sufficient leeway in formulating
welfare legislations given the enormous challenges that the government faces relative to, among
others, resource adequacy and administrative capability in implementing social reform measures
which aim to protect and uphold the interests of those most vulnerable in our society. In the process,
the individual, who enjoys the rights, benefits and privileges of living in a democratic polity, must bear
his share in supporting measures intended for the common good. This is only fair.
In fine, without the requisite showing of a clear and unequivocal breach of the Constitution, the
validity of the assailed law must be sustained.
Refutation of the Dissent
The main points of Justice Carpio’s Dissent may be summarized as follows: (1) the discussion on
eminent domain in Central Luzon Drug Corporation89 is not obiter dicta; (2) allowable taking, in police
power, is limited to property that is destroyed or placed outside the commerce of man for public
welfare; (3) the amount of mandatory discount is private property within the ambit of Article III,
Section 990 of the Constitution; and (4) the permanent reduction in a private establishment’s total
revenue, arising from the mandatory discount, is a taking of private property for public use or benefit,
hence, an exercise of the power of eminent domain requiring the payment of just compensation.
I II
We maintain that the discussion on eminent domain in Central Luzon Drug Corporation91 is obiter
dicta.
As previously discussed, in Central Luzon Drug Corporation,92 the BIR, pursuant to Sections 2.i and
4 of RR No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax deduction
instead of a tax credit despite the clear provision in that law which stated –
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
a) The grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment, restaurants and recreation centers
and purchase of medicines anywhere in the country: Provided, That private establishments may
claim the cost as tax credit; (Emphasis supplied)
Thus, the Court ruled that the subject revenue regulation violated the law, viz:
The 20 percent discount required by the law to be given to senior citizens is a tax credit, not merely a
tax deduction from the gross income or gross sale of the establishment concerned. A tax credit is
used by a private establishment only after the tax has been computed; a tax deduction, before the
tax is computed. RA 7432 unconditionally grants a tax credit to all covered entities. Thus, the
provisions of the revenue regulation that withdraw or modify such grant are void. Basic is the rule
that administrative regulations cannot amend or revoke the law.93
As can be readily seen, the discussion on eminent domain was not necessary in order to arrive at
this conclusion. All that was needed was to point out that the revenue regulation contravened the law
which it sought to implement. And, precisely, this was done in Central Luzon Drug Corporation94 by
comparing the wording of the previous law vis-à-vis the revenue regulation; employing the rules of
statutory construction; and applying the settled principle that a regulation cannot amend the law it
seeks to implement.
A close reading of Central Luzon Drug Corporation95 would show that the Court went on to state that
the tax credit “can be deemed” as just compensation only to explain why the previous law provides
for a tax credit instead of a tax deduction. The Court surmised that the tax credit was a form of just
compensation given to the establishments covered by the 20% discount. However, the reason why
the previous law provided for a tax credit and not a tax deduction was not necessary to resolve the
issue as to whether the revenue regulation contravenes the law. Hence, the discussion on eminent
domain is obiter dicta.
A court, in resolving cases before it, may look into the possible purposes or reasons that impelled the
enactment of a particular statute or legal provision. However, statements made relative thereto are
not always necessary in resolving the actual controversies presented before it. This was the case
in Central Luzon Drug Corporation96 resulting in that unfortunate statement that the tax credit “can be
deemed” as just compensation. This, in turn, led to the erroneous conclusion, by deductive
reasoning, that the 20% discount is an exercise of the power of eminent domain. The Dissent
essentially adopts this theory and reasoning which, as will be shown below, is contrary to settled
principles in police power and eminent domain analysis.
The Dissent discusses at length the doctrine on “taking” in police power which occurs when private
property is destroyed or placed outside the commerce of man. Indeed, there is a whole class of
police power measures which justify the destruction of private property in order to preserve public
health, morals, safety or welfare. As earlier mentioned, these would include a building on the verge
of collapse or confiscated obscene materials as well as those mentioned by the Dissent with regard
to property used in violating a criminal statute or one which constitutes a nuisance. In such cases, no
compensation is required.

However, it is equally true that there is another class of police power measures which do not involve
the destruction of private property but merely regulate its use. The minimum wage law, zoning
ordinances, price control laws, laws regulating the operation of motels and hotels, laws limiting the
working hours to eight, and the like would fall under this category. The examples cited by the
Dissent, likewise, fall under this category: Article 157 of the Labor Code, Sections 19 and 18 of the
Social Security Law, and Section 7 of the Pag-IBIG Fund Law. These laws merely regulate or, to use
the term of the Dissent, burden the conduct of the affairs of business establishments. In such cases,
payment of just compensation is not required because they fall within the sphere of permissible
police power measures. The senior citizen discount law falls under this latter category.
III
The Dissent proceeds from the theory that the permanent reduction of profits or income/gross sales,
due to the 20% discount, is a “taking” of private property for public purpose without payment of just
compensation.
At the outset, it must be emphasized that petitioners never presented any evidence to establish that
they were forced to suffer enormous losses or operate at a loss due to the effects of the assailed law.
They came directly to this Court and provided a hypothetical computation of the loss they would
allegedly suffer due to the operation of the assailed law. The central premise of the Dissent’s
argument that the 20% discount results in a permanent reduction in profits or income/gross sales, or
forces a business establishment to operate at a loss is, thus, wholly unsupported by competent
evidence. To be sure, the Court can invalidate a law which, on its face, is arbitrary, oppressive or
confiscatory.97 But this is not the case here.
In the case at bar, evidence is indispensable before a determination of a constitutional violation can
be made because of the following reasons.
First, the assailed law, by imposing the senior citizen discount, does not take any of the properties
used by a business establishment like, say, the land on which a manufacturing plant is constructed
or the equipment being used to produce goods or services.
Second, rather than taking specific properties of a business establishment, the senior citizen
discount law merely regulates the prices of the goods or services being sold to senior citizens by
mandating a 20% discount. Thus, if a product is sold at P10.00 to the general public, then it shall be
sold at P8.00 (i.e., P10.00 less 20%) to senior citizens. Note that the law does not impose at
what specific price the product shall be sold, only that a 20% discount shall be given to senior
citizens based on the price set by the business establishment. A business establishment is, thus,
free to adjust the prices of the goods or services it provides to the general public. Accordingly, it can
increase the price of the above product to P20.00 but is required to sell it at P16.00 (i.e., P20.00 less
20%) to senior citizens.
Third, because the law impacts the prices of the goods or services of a particular establishment
relative to its sales to senior citizens, its profits or income/gross sales are affected. The extent of the
impact would, however, depend on the profit margin of the business establishment on a particular
good or service. If a product costs P5.00 to produce and is sold at P10.00, then the profit98 is
P5.0099 or a profit margin100 of 50%.101 Under the assailed law, the aforesaid product would have to
be sold at P8.00 to senior citizens yet the business would still earn P3.00102 or a 30%103 profit
margin. On the other hand, if the product costs P9.00 to produce and is required to be sold at P8.00
to senior citizens, then the business would experience a loss of P1.00.104 But note that since not all
customers of a business establishment are senior citizens, the business establishment may continue
to earn P1.00 from non-senior citizens which, in turn, can offset any loss arising from sales to senior
citizens.
Fourth, when the law imposes the 20% discount in favor of senior citizens, it does not prevent the
business establishment from revising its pricing strategy. By revising its pricing strategy, a business
establishment can recoup any reduction of profits or income/gross sales which would otherwise arise
from the giving of the 20% discount. To illustrate, suppose A has two customers: X, a senior citizen,
and Y, a non-senior citizen. Prior to the law, A sells his products at P10.00 a piece to X and Y
resulting in income/gross sales of P20.00 (P10.00 + P10.00). With the passage of the law, A must
now sell his product to X at P8.00 (i.e., P10.00 less 20%) so that his income/gross sales would be
P18.00 (P8.00 + P10.00) or lower by P2.00. To prevent this from happening, A decides to increase
the price of his products to P11.11 per piece. Thus, he sells his product to X at P8.89 (i.e., P11.11
less 20%) and to Y at P11.11. As a result, his income/gross sales would still be P20.00105 (P8.89 +
P11.11). The capacity, then, of business establishments to revise their pricing strategy makes it
possible for them not to suffer any reduction in profits or income/gross sales, or, in the alternative,
mitigate the reduction of their profits or income/gross sales even after the passage of the law. In
other words, business establishments have the capacity to adjust their prices so that they may
remain profitable even under the operation of the assailed law.
The Dissent, however, states that –
The explanation by the majority that private establishments can always increase their prices to
recover the mandatory discount will only encourage private establishments to adjust their prices
upwards to the prejudice of customers who do not enjoy the 20% discount. It was likewise suggested
that if a company increases its prices, despite the application of the 20% discount, the establishment
becomes more profitable than it was before the implementation of R.A. 7432. Such an economic
justification is self-defeating, for more consumers will suffer from the price increase than will benefit
from the 20% discount. Even then, such ability to increase prices cannot legally validate a violation of
the eminent domain clause.106
But, if it is possible that the business establishment, by adjusting its prices, will suffer no reduction in
its profits or income/gross sales (or suffer some reduction but continue to operate profitably) despite
giving the discount, what would be the basis to strike down the law? If it is possible that the business
establishment, by adjusting its prices, will not be unduly burdened, how can there be a finding that
the assailed law is an unconstitutional exercise of police power or eminent domain?
That there may be a burden placed on business establishments or the consuming public as a result
of the operation of the assailed law is not, by itself, a ground to declare it unconstitutional for this
goes into the wisdom and expediency of the law. The cost of most, if not all, regulatory measures of
the government on business establishments is ultimately passed on to the consumers but that, by
itself, does not justify the wholesale nullification of these measures. It is a basic postulate of our
democratic system of government that the Constitution is a social contract whereby the people have
surrendered their sovereign powers to the State for the common good.107 All persons may be
burdened by regulatory measures intended for the common good or to serve some important
governmental interest, such as protecting or improving the welfare of a special class of people for
which the Constitution affords preferential concern. Indubitably, the one assailing the law has the
heavy burden of proving that the regulation is unreasonable, oppressive or confiscatory, or has gone
“too far” as to amount to a “taking.” Yet, here, the Dissent would have this Court nullify the law
without any proof of such nature.
Further, this Court is not the proper forum to debate the economic theories or realities that impelled
Congress to shift from the tax credit to the tax deduction scheme. It is not within our power or
competence to judge which scheme is more or less burdensome to business establishments or the
consuming public and, thereafter, to choose which scheme the State should use or pursue. The shift
from the tax credit to tax deduction scheme is a policy determination by Congress and the Court will
respect it for as long as there is no showing, as here, that the subject regulation has transgressed
constitutional limitations.
Unavoidably, the lack of evidence constrains the Dissent to rely
on speculative and hypotheticalargumentation when it states that the 20% discount is a significant
amount and not a minimal loss (which erroneously assumes that the discount automatically results in
a loss when it is possible that the profit margin is greater than 20% and/or the pricing strategy can be
revised to prevent or mitigate any reduction in profits or income/gross sales as illustrated
above),108 and not all private establishments make a 20% profit margin (which conversely implies
that there are those who make more and, thus, would not be greatly affected by this regulation).109
In fine, because of the possible scenarios discussed above, we cannot assume that the 20%
discount results in a permanent reduction in profits or income/gross sales, much less that business
establishments are forced to operate at a loss under the assailed law. And, even if we gratuitously
assume that the 20% discount results in some degree of reduction in profits or income/gross sales,
we cannot assume that such reduction is arbitrary, oppressive or confiscatory. To repeat, there is no
actual proof to back up this claim, and it could be that the loss suffered by a business establishment
was occasioned through its fault or negligence in not adapting to the effects of the assailed law. The
law uniformly applies to all business establishments covered thereunder. There is, therefore, no
unjust discrimination as the aforesaid business establishments are faced with the same constraints.
The necessity of proof is all the more pertinent in this case because, as similarly observed by Justice
Velasco in his Concurring Opinion, the law has been in operation for over nine years now. However,
the grim picture painted by petitioners on the unconscionable losses to be indiscriminately suffered
by business establishments, which should have led to the closure of numerous business
establishments, has not come to pass.
Verily, we cannot invalidate the assailed law based on assumptions and conjectures. Without
adequate proof, the presumption of constitutionality must prevail.
IV
At this juncture, we note that the Dissent modified its original arguments by including a new
paragraph, to wit:
Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It
does not state that there should be profit before the taking of property is subject to just
compensation. The private property referred to for purposes of taking could be inherited, donated,
purchased, mortgaged, or as in this case, part of the gross sales of private establishments. They are
all private property and any taking should be attended by corresponding payment of just
compensation. The 20% discount granted to senior citizens belong to private establishments,
whether these establishments make a profit or suffer a loss. In fact, the 20% discount applies to non-
profit establishments like country, social, or golf clubs which are open to the public and not only for
exclusive membership. The issue of profit or loss to the establishments is immaterial.110
Two things may be said of this argument.
First, it contradicts the rest of the arguments of the Dissent. After it states that the issue of profit or
loss is immaterial, the Dissent proceeds to argue that the 20% discount is not a minimal loss111 and
that the 20% discount forces business establishments to operate at a loss.112 Even the obiter
in Central Luzon Drug Corporation,113 which the Dissent essentially adopts and relies on, is premised
on the permanent reduction of total revenues and the loss that business establishments will be
forced to suffer in arguing that the 20% discount constitutes a “taking” under the power of eminent
domain. Thus, when the Dissent now argues that the issue of profit or loss is immaterial, it
contradicts itself because it later argues, in order to justify that there is a “taking” under the power of
eminent domain in this case, that the 20% discount forces business establishments to suffer a
significant loss or to operate at a loss.
Second, this argument suffers from the same flaw as the Dissent’s original arguments. It is an
erroneous characterization of the 20% discount.
According to the Dissent, the 20% discount is part of the gross sales and, hence, private property
belonging to business establishments. However, as previously discussed, the 20% discount is not
private property actually owned and/or used by the business establishment. It should be
distinguished from properties like lands or buildings actually used in the operation of a business
establishment which, if appropriated for public use, would amount to a “taking” under the power of
eminent domain.
Instead, the 20% discount is a regulatory measure which impacts the pricing and, hence, the
profitability of business establishments. At the time the discount is imposed, no particular property of
the business establishment can be said to be “taken.” That is, the State does not acquire or take
anything from the business establishment in the way that it takes a piece of private land to build a
public road. While the 20% discount may form part of the potential profits or income/gross sales114 of
the business establishment, as similarly characterized by Justice Bersamin in his Concurring
Opinion, potential profits or income/gross sales are not private property, specifically cash or money,
already belonging to the business establishment. They are a mere expectancy because they are
potential fruits of the successful conduct of the business.
Prior to the sale of goods or services, a business establishment may be subject to State regulations,
such as the 20% senior citizen discount, which may impact the level or amount of profits or
income/gross sales that can be generated by such establishment. For this reason, the validity of the
discount is to be determined based on its overall effects on the operations of the business
establishment.
Again, as previously discussed, the 20% discount does not automatically result in a 20% reduction in
profits, or, to align it with the term used by the Dissent, the 20% discount does not mean that a 20%
reduction in gross sales necessarily results. Because (1) the profit margin of a product is not
necessarily less than 20%, (2) not all customers of a business establishment are senior citizens, and
(3) the establishment may revise its pricing strategy, such reduction in profits or income/gross sales
may be prevented or, in the alternative, mitigated so that the business establishment continues to
operate profitably. Thus, even if we gratuitously assume that some degree of reduction in profits or
income/gross sales occurs because of the 20% discount, it does not follow that the regulation is
unreasonable, oppressive or confiscatory because the business establishment may make the
necessary adjustments to continue to operate profitably. No evidence was presented by petitioners
to show otherwise. In fact, no evidence was presented by petitioners at all.
Justice Leonen, in his Concurring and Dissenting Opinion, characterizes “profits” (or income/gross
sales) as an inchoate right. Another way to view it, as stated by Justice Velasco in his Concurring
Opinion, is that the business establishment merely has a right to profits. The Constitution adverts to it
as the right of an enterprise to a reasonable return on investment.115 Undeniably, this right, like any
other right, may be regulated under the police power of the State to achieve important governmental
objectives like protecting the interests and improving the welfare of senior citizens.
It should be noted though that potential profits or income/gross sales are relevant in police power
and eminent domain analyses because they may, in appropriate cases, serve as an indicia when a
regulation has gone “too far” as to amount to a “taking” under the power of eminent domain. When
the deprivation or reduction of profits or income/gross sales is shown to be unreasonable, oppressive
or confiscatory, then the challenged governmental regulation may be nullified for being a “taking”
under the power of eminent domain. In such a case, it is not profits or income/gross sales which are
actually taken and appropriated for public use. Rather, when the regulation causes an establishment
to incur losses in an unreasonable, oppressive or confiscatory manner, what is actually taken is
capital and the right of the business establishment to a reasonable return on investment. If the
business losses are not halted because of the continued operation of the regulation, this eventually
leads to the destruction of the business and the total loss of the capital invested therein. But, again,
petitioners in this case failed to prove that the subject regulation is unreasonable, oppressive or
confiscatory.
V.
The Dissent further argues that we erroneously used price and rate of return on investment control
laws to justify the senior citizen discount law. According to the Dissent, only profits from industries
imbued with public interest may be regulated because this is a condition of their franchises. Profits of
establishments without franchises cannot be regulated permanently because there is no law
regulating their profits. The Dissent concludes that the permanent reduction of total revenues or
gross sales of business establishments without franchises is a taking of private property under the
power of eminent domain.
In making this argument, it is unfortunate that the Dissent quotes only a portion of the ponencia –
The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures. These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens. x x x116
The above paragraph, in full, states –
The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures. These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens. Nonetheless, to the
degree material to the resolution of this case, the 20% discount may be properly viewed as
belonging to the category of price regulatory measures which affects the profitability of
establishments subjected thereto.(Emphasis supplied)
The point of this paragraph is to simply show that the State has, in the past, regulated prices and
profits of business establishments. In other words, this type of regulatory measures is traditionally
recognized as police power measures so that the senior citizen discount may be considered as a
police power measure as well. What is more, the substantial distinctions between price and rate of
return on investment control laws vis-à-vis the senior citizen discount law provide greater reason to
uphold the validity of the senior citizen discount law. As previously discussed, the ability to adjust
prices allows the establishment subject to the senior citizen discount to prevent or mitigate any
reduction of profits or income/gross sales arising from the giving of the discount. In contrast,
establishments subject to price and rate of return on investment control laws cannot adjust prices
accordingly.
Certainly, there is no intention to say that price and rate of return on investment control laws are the
justification for the senior citizen discount law. Not at all. The justification for the senior citizen
discount law is the plenary powers of Congress. The legislative power to regulate business
establishments is broad and covers a wide array of areas and subjects. It is well within Congress’
legislative powers to regulate the profits or income/gross sales of industries and enterprises, even
those without franchises. For what are franchises but mere legislative enactments?
There is nothing in the Constitution that prohibits Congress from regulating the profits or
income/gross sales of industries and enterprises without franchises. On the contrary, the social
justice provisions of the Constitution enjoin the State to regulate the “acquisition, ownership, use, and
disposition” of property and its increments.117 This may cover the regulation of profits or
income/gross sales of all businesses, without qualification, to attain the objective of diffusing wealth
in order to protect and enhance the right of all the people to human dignity.118 Thus, under the social
justice policy of the Constitution, business establishments may be compelled to contribute to uplifting
the plight of vulnerable or marginalized groups in our society provided that the regulation is not
arbitrary, oppressive or confiscatory, or is not in breach of some specific constitutional limitation.
When the Dissent, therefore, states that the “profits of private establishments which are non-
franchisees cannot be regulated permanently, and there is no such law regulating their profits
permanently,”119 it is assuming what it ought to prove. First, there are laws which, in effect,
permanently regulate profits or income/gross sales of establishments without franchises, and RA
9257 is one such law. And, second, Congress can regulate such profits or income/gross sales
because, as previously noted, there is nothing in the Constitution to prevent it from doing so. Here,
again, it must be emphasized that petitioners failed to present any proof to show that the effects of
the assailed law on their operations has been unreasonable, oppressive or confiscatory.
The permanent regulation of profits or income/gross sales of business establishments, even those
without franchises, is not as uncommon as the Dissent depicts it to be.
For instance, the minimum wage law allows the State to set the minimum wage of employees in a
given region or geographical area. Because of the added labor costs arising from the minimum
wage, a permanent reduction of profits or income/gross sales would result, assuming that the
employer does not increase the prices of his goods or services. To illustrate, suppose it costs a
company P5.00 to produce a product and it sells the same at P10.00 with a 50% profit margin. Later,
the State increases the minimum wage. As a result, the company incurs greater labor costs so that it
now costs P7.00 to produce the same product. The profit per product of the company would be
reduced to P3.00 with a profit margin of 30%. The net effect would be the same as in the earlier
example of granting a 20% senior citizen discount. As can be seen, the minimum wage law could,
likewise, lead to a permanent reduction of profits. Does this mean that the minimum wage law
should, likewise, be declared unconstitutional on the mere plea that it results in a permanent
reduction of profits? Taking it a step further, suppose the company decides to increase the price of
its product in order to offset the effects of the increase in labor cost; does this mean that the
minimum wage law, following the reasoning of the Dissent, is unconstitutional because the
consuming public is effectively made to subsidize the wage of a group of laborers, i.e., minimum
wage earners?
The same reasoning can be adopted relative to the examples cited by the Dissent which, according
to it, are valid police power regulations. Article 157 of the Labor Code, Sections 19 and 18 of the
Social Security Law, and Section 7 of the Pag-IBIG Fund Law would effectively increase the labor
cost of a business establishment. This would, in turn, be integrated as part of the cost of its goods or
services. Again, if the establishment does not increase its prices, the net effect would be a
permanent reduction in its profits or income/gross sales. Following the reasoning of the Dissent that
“any form of permanenttaking of private property (including profits or income/gross sales)120 is an
exercise of eminent domain that requires the State to pay just compensation,”121 then these statutory
provisions would, likewise, have to be declared unconstitutional. It does not matter that these
benefits are deemed part of the employees’ legislated wages because the net effect is the same, that
is, it leads to higher labor costs and a permanent reduction in the profits or income/gross sales of the
business establishments.122
The point then is this – most, if not all, regulatory measures imposed by the State on business
establishments impact, at some level, the latter’s prices and/or profits or income/gross sales. 123 If the
Court were to sustain the Dissent’s theory, then a wholesale nullification of such measures would
inevitably result. The police power of the State and the social justice provisions of the Constitution
would, thus, be rendered nugatory.
There is nothing sacrosanct about profits or income/gross sales. This, we made clear in Carlos
Superdrug Corporation:124
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.
xxx
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights, petitioners must accept
the realities of business and the State, in the exercise of police power, can intervene in the
operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as a reminder that the
right to property can be relinquished upon the command of the State for the promotion of public
good.
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means
employed in invoking the active participation of the private sector, in order to achieve the purpose or
objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of
R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be
unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act. 125
In conclusion, we maintain that the correct rule in determining whether the subject regulatory
measure has amounted to a “taking” under the power of eminent domain is the one laid down
in Alalayan v. National Power Corporation126 and followed in Carlos Superdrug
Corporation127 consistent with long standing principles in police power and eminent domain analysis.
Thus, the deprivation or reduction of profits or income/gross sales must be clearly shown to be
unreasonable, oppressive or confiscatory. Under the specific circumstances of this case, such
determination can only be made upon the presentation of competent proof which petitioners failed to
do. A law, which has been in operation for many years and promotes the welfare of a group
accorded special concern by the Constitution, cannot and should not be summarily invalidated on a
mere allegation that it reduces the profits or income/gross sales of business establishments.
WHEREFORE, the Petition is hereby DISMISSED for lack of merit.chanRoblesvirtualLawlibrary
SO ORDERED.
________________________________________________________________________________
___________________________________
G.R. No. 194561, September 14, 2016
DRUGSTORES ASSOCIATION OF THE PHILIPPINES, INC. AND NORTHERN LUZON DRUG
CORPORATION, Petitioners, v. NATIONAL COUNCIL ON DISABILITY AFFAIRS; DEPARTMENT
OF HEALTH; DEPARTMENT OF FINANCE; BUREAU OF INTERNAL REVENUE; DEPARTMENT
OF THE INTERIOR AND LOCAL GOVERNMENT; AND DEPARTMENT OF SOCIAL WELFARE
AND DEVELOPMENT, Respondent.
DECISION
PERALTA, J.:
Before us is a Petition for Review on Certiorari1 with a Prayer for a Temporary Restraining Order
and/or Writ of Preliminary Injunction which seeks to annul and set aside the Decision2 dated July 26,
2010, and the Resolution3 dated November 19, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
109903. The CA dismissed petitioners' Petition for Prohibition4 and upheld the constitutionality of the
mandatory twenty percent (20%) discount on the purchase of medicine by persons with disability
(PWD).
The antecedents are as follows:
chanRoblesvirtualLawlibraryOn March 24, 1992, Republic Act (R.A.) No. 7277, entitled "An Act
Providing for the Rehabilitation, Self-Development and Self-Reliance of Disabled Persons and their
Integration into the Mainstream of Society and for Other Purposes," otherwise known as the "Magna
Carta for Disabled Persons," was passed into law.5 The law defines "disabled persons", "impairment"
and "disability" as follows:ChanRoblesVirtualawlibrary
SECTION 4. Definition of Terms. - For purposes of this Act, these terms are defined as follows:
chanRoblesvirtualLawlibrary(a) Disabled Persons are those suffering from restriction of different
abilities, as a result of a mental, physical or sensory impairment, to perform an activity in the manner
or within the range considered normal for a human being;
(b) Impairment is any loss, diminution or aberration of psychological, physiological, or anatomical
structure of function;
(c) Disability shall mean (1) a physical or mental impairment that substantially limits one or more
psychological, physiological or anatomical function of an individual or activities of such individual; (2)
a record of such an impairment; or (3) being regarded as having such an
impairment.6chanroblesvirtuallawlibrary
On April 30, 2007, Republic Act No. 94427 was enacted amending R.A. No. 7277. The Title of R.A.
No. 7277 was amended to read as "Magna Carta for Persons with Disability" and all references on
the law to "disabled persons" were amended to read as "persons with disability" (PWD).8 Specifically,
R.A. No. 9442 granted the PWDs a twenty (20) percent discount on the purchase of medicine, and a
tax deduction scheme was adopted wherein covered establishments may deduct the discount
granted from gross income based on the net cost of goods sold or services
rendered:ChanRoblesVirtualawlibrary
CHAPTER 8. Other Privileges and Incentives. SEC. 32. Persons with disability shall be entitled to the
following:
chanRoblesvirtualLawlibraryx x x x
(d) At least twenty percent (20%) discount for the purchase of medicines in all drugstores for the
exclusive use or enjoyment of persons with disability;
xxxx
The abovementioned privileges are available only to persons with disability who are Filipino citizens
upon submission of any of the following as proof of his/her entitlement thereto:
chanRoblesvirtualLawlibrary
(i) An identification card issued by the city or municipal mayor or the barangay captain of the place
where the person with disability resides;
(ii) The passport of the person with disability concerned; or
(ii) Transportation discount fare Identification Card (ID) issued by the National Council for the
Welfare of Disabled Persons (NCWDP).
xxxx
The establishments may claim the discounts granted in subsections (a), (b), (c), (f) and (g) as tax
deductions based on the net cost of the goods sold or services rendered: Provided, however, That
the cost of the discount shall be allowed as deduction from gross income for the same taxable year
that the discount is granted: Provided, further, That the total amount of the claimed tax deduction net
of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes and
shall be subject to proper documentation and to the provisions of the National Internal Revenue
Code (NIRC), as amended.9chanroblesvirtuallawlibrary
The Implementing Rules and Regulations (IRR) of R.A. No. 944210 was jointly promulgated by the
Department of Social Welfare and Development (DSWD), Department of Education, Department of
Finance (DOF), Department of Tourism, Department of Transportation and Communication,
Department of the Interior and Local Government (DILG) and Department of Agriculture. Insofar as
pertinent to this petition, the salient portions of the IRR are hereunder quoted:11
RULE III. DEFINITION OF TERMS
Section 5. Definition of Terms. For purposes of these Rules and Regulations, these terms are
defined as follows:
chanRoblesvirtualLawlibrary5.1. Persons with Disability - are those individuals defined under Section
4 of RA 7277 "An Act Providing for the Rehabilitation, Self-Development and Self-Reliance of
Persons with Disability as amended and their integration into the Mainstream of Society and for
Other Purposes". This is defined as a person suffering from restriction or different abilities, as a result
of a mental, physical or sensory impairment, to perform an activity in a manner or within the range
considered normal for human being. Disability shall mean (1) a physical or mental impairment that
substantially limits one or more psychological, physiological or anatomical function of an individual or
activities of such individual; (2) a record of such an impairment; or (3) being regarded as having such
an impairment.
Regulations, NCWDP will already adopt the Identification Card issued by the Local Government Unit
for purposes of uniformity in the implementation. NCWDP will provide the design and specification of
the identification card that will be issued by the Local Government Units.13chanroblesvirtuallawlibrary
6.14. Availmenl of Tax Deductions by Establishment Granting Twenty Percent. 20% Discount - The
establishments may claim the discounts granted in sub-sections (6.1), (6.2), (6.4), (6.5) and (6.6) as
tax deductions based on the net cost of the goods sold or services rendered: Provided, however, that
the cost of the discount shall be allowed as deduction from gross income for the same taxable year
that the discount is granted: Provided, further, That the total amount of the claimed tax deduction net
of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes and
shall be subject to proper documentation and to the provisions of the National Internal Revenue
Code, as amended.
On April 23, 2008, the National Council on Disability Affairs (NCDA)14 issued Administrative Order
(A.O.) No. 1, Series of 2008,15 prescribing guidelines which should serve as a mechanism for the
issuance of a PWD Identification Card (IDC) which shall be the basis for providing privileges and
discounts to bona fidePWDs in accordance with R.A. 9442:ChanRoblesVirtualawlibrary
IV. INSTITUTIONAL ARRANGEMENTS
A. The Local Government Unit of the City or Municipal Office shall implement these guidelines
in the issuance of the PWD-IDC
xxxx

xxxx D. Issuance of the appropriate document to confirm the medical condition of the applicant is as
follows:ChanRoblesVirtualawlibrary
RULE IV. PRIVILEGES AND INCENTIVES FOR THE PERSONS WITH DISABILITY
Disability Document Issuing Entity
Section 6. Other Privileges and Incentives. Persons with disability shall be entitled to the following:
Apparent
Medical Certificate Licensed Private or Government Physician
chanRoblesvirtualLawlibraryx x x x Disability

6.1.d. Purchase of Medicine - at least twenty percent (20%) discount on the purchase of medicine for School
Licensed Teacher duly signed by the School Principal
the exclusive use and enjoyment of persons with disability. All drugstores, hospital, pharmacies, Assessment
clinics and other similar establishments selling medicines are required to provide at least twenty
percent (20%) discount subject to the guidelines issued by DOH and PHILHEALTH.12chanrobleslaw Certificate of Head of the Business Establishment or Head of Non-
Disability Government Organization
xxxx
Non-Apparent
Medical Certificate Licensed Private or Government Physician
Disability
6.11 The abovementioned privileges are available only to persons with disability who are Filipino
citizens upon submission of any of the following as proof of his/her entitlement thereto subject to the E. PWD Registration Forms and ID Cards shall be issued and signed by the City or Municipal Mayor,
guidelines issued by the NCWDP in coordination with DSWD, DOH and DILG. or Barangay Captain.
6.11.1 An identification card issued by the city or municipal mayor or the barangay captain of the
place where the person with disability resides; xxxx
V. IMPLEMENTING GUIDELINES AND PROCEDURES
6.11.2 The passport of the persons with disability concerned; or Any bonafide person with permanent disability can apply for the issuance of the PWD-IDC. His/her
caregiver can assist in the application process. Procedures for the issuance of the ID Cards are as
6.11.3 Transportation discount fare Identification Card (ID) issued by the National Council for the follows:
Welfare of Disabled Persons (NCWDP). However, upon effectivity of this Implementing Rules and
chanRoblesvirtualLawlibraryA. Completion of the Requirements. Complete and/or make available the
following requirements:ChanRoblesVirtualawlibrary
1. Two "1x1" recent ID pictures with the names, and signatures or thumbmarks at the back of
the picture
2. One (1) Valid ID
3. Document to confirm the medical or disability condition (See Section IV, D for the required
document).
On December 9, 2008, the DOF issued Revenue Regulations No. 1-200916 prescribing rules and
regulations to implement R.A. 9442 relative to the tax privileges of PWDs and tax incentives for
establishments granting the discount. Section 4 of Revenue Regulations No. 001-09 states that
drugstores can only deduct the 20% discount from their gross income subject to some
conditions.17chanrobleslaw
On May 20, 2009, the DOH issued A.O. No. 2009-001118 specifically stating that the grant of 20%
discount shall be provided in the purchase of branded medicines and unbranded generic medicines
from all establishments dispensing medicines for the exclusive use of the PWDs.19 It also detailed
the guidelines for the provision of medical and related discounts and special privileges to PWDs
pursuant to R.A. 9442.20chanrobleslaw
On July 28, 2009, petitioners filed a Petition for Prohibition with application for a Temporary
Restraining Order and/or a Writ of Preliminary Injunction21 before the Court of Appeals to annul and
enjoin the implementation of the following laws:ChanRoblesVirtualawlibrary
1) Section 32 of R.A. No. 7277 as amended by R.A. No. 9442;
2) Section 6, Rule IV of the Implementing Rules and Regulations of R.A. No. 9442;
3) NCDA A.O. No. 1;
4) DOF Revenue Regulation No. 1-2009;
5) DOH A.O. No. 2009-0011.
On July 26, 2010, the CA rendered a Decision upholding the constitutionality of R.A. 7277 as
amended, as well as the assailed administrative issuances. However, the CA suspended the
effectivity of NCDA A.O. No. 1 pending proof of respondent NCDA's compliance with filing of said
administrative order with the Office of the National Administrative Register (ONAR) and its
publication in a newspaper of general circulation. The dispositive portion of the Decision
states:ChanRoblesVirtualawlibrary
WHEREFORE, the petition is PARTLY GRANTED. The effectivity of NCDA Administrative Order No.
1 is hereby SUSPENDED pending Respondent's compliance with the proof of filing of NCDA
Administrative Order No. 1 with the Office of the National Administrative Register and its publication
in a newspaper of general circulation.
Respondent NCDA filed a motion for reconsideration before the CA to lift the suspension of the
implementation of NCDA A.O. No. 1 attaching thereto proof of its publication in the Philippine
Star and Daily Tribune on August 12, 2010, as well as a certification from the ONAR showing that the
same was filed with the said office on October 22, 2009.22 Likewise, petitioners filed a motion for
reconsideration of the CA Decision.
In a Resolution dated November 19, 2010, the CA dismissed petitioners' motion for reconsideration
and lifted the suspension of the effectivity of NCDA A.O. No. 1 considering the filing of the same with
ONAR and its publication in a newspaper of general circulation.
Hence, the instant petition raising the following issues:ChanRoblesVirtualawlibrary
I. THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE
MANDATED PWD DISCOUNT IS A VALID EXERCISE OF POLICE POWER. ON THE CONTRARY,
IT IS AN INVALID EXERCISE OF THE POWER OF EMINENT DOMAIN BECAUSE IT FAILS TO
PROVIDE JUST COMPENSATION TO PETITIONERS AND OTHER SIMILARLY SITUATED
DRUGSTORES;
II. THE CA SERIOUSLY ERRED WHEN IT RULED THAT SECTION 32 OF RA 7277 AS AMENDED
BY RA 9442, NCDA AO 1 AND THE OTHER IMPLEMENTING REGULATIONS DID NOT VIOLATE
THE DUE PROCESS CLAUSE;
III. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE DEFINITIONS OF DISABILITIES
UNDER SECTION 4(A), SECTION 4(B) AND SECTION 4(C) OF RA 7277 AS AMENDED BY RA
9442, RULE 1 OF THE IMPLEMENTING RULES AND REGULATIONS23 OF RA 7277, SECTION
5.1 OF THE IMPLEMENTING RULES AND REGULATIONS OF RA 9442, NCDA AO 1 AND DOH
AO 2009-11 ARE NOT VAGUE, AMBIGUOUS AND UNCONSTITUTIONAL;
IV. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE MANDATED PWD DISCOUNT
DOES NOT VIOLATE THE EQUAL PROTECTION CLAUSE.
We deny the petition.
The CA is correct when it applied by analogy the case of Carlos Superdrug Corporation et al. v.
DSWD, et al.24 wherein We pronouced that Section 4 of R.A. No. 9257 which grants 20% discount on
the purchase of medicine of senior citizens is a legitimate exercise of police
power:ChanRoblesVirtualawlibrary
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits.25cralawredAccordingly, it has been described as the most essential,
insistent and the least limitable of powers, extending as it does to all the great public needs.26 It is
[t]he power vested in the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not
repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same.27chanrobleslaw
For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.28chanrobleslaw
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.29chanroblesvirtuallawlibrary
Police power is the power of the state to promote public welfare by restraining and regulating the use
of liberty and property. On the other hand, the power of eminent domain is the inherent right of the
state (and of those entities to which the power has been lawfully delegated) to condemn private
property to public use upon payment of just compensation. In the exercise of police power, property
rights of private individuals are subjected to restraints and burdens in order to secure the general
comfort, health, and prosperity of the state.30 A legislative act based on the police power requires the
concurrence of a lawful subject and a lawful method. In more familiar words, (a) the interests of the
public generally, as distinguished from those of a particular class, should justify the interference of
the state; and (b) the means employed are reasonably necessary for the accomplishment of the
purpose and not unduly oppressive upon individuals.31chanrobleslaw
R.A. No. 7277 was enacted primarily to provide full support to the improvement of the total well-being
of PWDs and their integration into the mainstream of society. The priority given to PWDs finds its
basis in the Constitution:ChanRoblesVirtualawlibrary
ARTICLE XII
NATIONAL ECONOMY AND PATRIMONY
xxxx
Section 6. The use of property bears a social function, and all economic agents shall contribute to
the common good. Individuals and private groups, including corporations, cooperatives, and similar
collective organizations, shall have the right to own, establish, and operate economic enterprises,
subject to the duty of the State to promote distributive justice and to intervene when the common
good so demands.32chanrobleslaw
ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS
xxxx
Section 11. The State shall adopt an integrated and comprehensive approach to health
development which shall endeavor to make essential goods, health and other social services
available to all the people at affordable cost. There shall be priority for the needsof the
underprivileged, sick, elderly, disabled, women, and children. The State shall endeavor to provide
free medical care to paupers.33chanroblesvirtuallawlibrary
Thus, R.A. No. 7277 provides:ChanRoblesVirtualawlibrary
SECTION 2. Declaration of Policy. The grant of the rights and privileges for disabled persons shall
be guided by the following principles:
chanRoblesvirtualLawlibrary(a). Disabled persons are part of the Philippine society, thus the Senate
shall give full support to the improvement of the total well-being of disabled persons and their
integration into the mainstream of society.
Toward this end, the State shall adopt policies ensuring the rehabilitation, self-development and self-
reliance of disabled persons.
It shall develop their skills and potentials to enable them to compete favorably for available
opportunities.
(b). Disabled persons have the same rights as other people to take their proper place in society.
They should be able to live freely and as independently as possible. This must be the concern of
everyone - the family, community and all government and non-government organizations.
Disabled person's rights must never be perceived as welfare services by the Government.
xxxx
(d). The State also recognizes the role of the private sector in promoting the welfare of disabled
persons and shall encourage partnership in programs that address their needs and
concerns.34chanroblesvirtuallawlibrary
To implement the above policies, R.A. No. 9442 which amended R.A. No. 7277 grants incentives
and benefits including a twenty percent (20%) discount to PWDs in the purchase of medicines; fares
for domestic air, sea and land travels including public railways and skyways; recreation and
amusement centers including theaters, food chains and restaurants.35 This is specifically stated in
Section 4 of the IRR of R.A. No. 9442:ChanRoblesVirtualawlibrary
Section 4. Policies and Objectives - It is the objective of Republic Act No. 9442 to provide persons
with disability, the opportunity to participate fully into the mainstream of society by granting
them at least twenty percent (20%) discount in all basic services. It is a declared policy of RA
7277 that persons with disability are part of Philippine society, and thus the State shall give full
support to the improvement of their total wellbeing and their integration into the mainstream
of society. They have the same rights as other people to take their proper place in society. They
should be able to live freely and as independently as possible. This must be the concern of everyone
the family, community and all government and non-government organizations. Rights of persons with
disability must never be perceived as welfare services. Prohibitions on verbal, non-verbal ridicule and
vilification against persons with disability shall always be observed at all
times.36chanroblesvirtuallawlibrary
Hence, the PWD mandatory discount on the purchase of medicine is supported by a valid objective
or purpose as aforementioned. It has a valid subject considering that the concept of public use is no
longer confined to the traditional notion of use by the public, but held synonymous with public
interest, public benefit, public welfare, and public convenience. As in the case of senior citizens,37 the
discount privilege to which the PWDs are entitled is actually a benefit enjoyed by the general public
to which these citizens belong. The means employed in invoking the active participation of the
private sector, in order to achieve the purpose or objective of the law, is reasonably and directly
related.38 Also, the means employed to provide a fair, just and quality health care to PWDs are
reasonably related to its accomplishment, and are not oppressive, considering that as a form of
reimbursement, the discount extended to PWDs in the purchase of medicine can be claimed by the
establishments as allowable tax deductions pursuant to Section 32 of R.A. No. 9442 as implemented
in Section 4 of DOF Revenue Regulations No. 1-2009. Otherwise stated, the discount reduces
taxable income upon which the tax liability of the establishments is computed.
Further, petitioners aver that Section 32 of R.A. No. 7277 as amended by R.A. No. 9442 is
unconstitutional and void for violating the due process clause of the Constitution since entitlement to
the 20% discount is allegedly merely based on any of the three documents mentioned in the
provision, namely: (i) an identification card issued by the city or municipal mayor or the barangay
captain of the place where the PWD resides; (ii) the passport of the PWD; or (iii) transportation
discount fare identification card issued by NCDA. Petitioners, thus, maintain that none of the said
documents has any relation to a medical finding of disability, and the grant of the discount is
allegedly without any process for the determination of a PWD in accordance with law.
Section 32 of R.A. No. 7277, as amended by R.A. No. 9442, must be read with its IRR which stated
that upon its effectivity, NCWDP (which is the government agency tasked to ensure the
implementation of RA 7277), would adopt the IDC issued by the local government units for purposes
of uniformity in the implementation.39 Thus, NCDA A.O. No. 1 provides the reasonable guidelines in
the issuance of IDCs to PWDs as proof of their entitlement to the privileges and incentives under the
law40 and fills the details in the implementation of the law.
As stated in NCDA A.O. No. 1, before an IDC is issued by the city or municipal mayor or the
barangay captain,41 or the Chairman of the NCDA,42 the applicant must first secure a medical
certificate issued by a licensed private or government physician that will confirm his medical or
disability condition. If an applicant is an employee with apparent disability, a "certificate of disability"
issued by the head of the business establishment or the head of the non-governmental organization
is needed for him to be issued a PWD-IDC. For a student with apparent disability, the "school
assessment" issued by the teacher and signed by the school principal should be presented to avail of
a PWD-ID.
Petitioners' insistence that Part IV (D) of NCDA Administrative Order No. 1 is void because it allows
allegedly non-competent persons like teachers, head of establishments and heads of Non-
Governmental Organizations (NGOs) to confirm the medical condition of the applicant is misplaced.
It must be stressed that only for apparent disabilities can the teacher or head of a business
establishment validly issue the mentioned required document because, obviously, the disability is
easily seen or clearly visible. It is, therefore, not an unqualified grant of authority for the said non-
medical persons as it is simply limited to apparent disabilities. For a non-apparent disability or a
disability condition that is not easily seen or clearly visible, the disability can only be validated by a
licensed private or government physician, and a medical certificate has to be presented in the
procurement of an IDC. Relative to this issue, the CA validly ruled, thus:ChanRoblesVirtualawlibrary
We agree with the Office of the Solicitor General's (OSG) ratiocination that teachers, heads of
business establishments and heads of NGOs can validly confirm the medical condition of their
students/employees with apparent disability for obvious reasons as compared to non-apparent
disability which can only be determined by licensed physicians. Under the Labor Code, disabled
persons are eligible as apprentices or learners provided that their handicap are not as much as to
effectively impede the performance of their job. We find that heads of business establishments can
validly issue certificates of disability of their employees because aside from the fact that they can
obviously validate the disability, they also have medical records of the employees as a pre-
requisite in the hiring of employees. Hence, Part IV (D) of NCDA AO No. 1 is logical and
valid.43chanroblesvirtuallawlibrary
Furthermore, DOH A.O. No. 2009-11 prescribes additional guidelines for the 20% discount in the
purchase of all medicines for the exclusive use of PWD.44 To avail of the discount, the PWD must not
only present his I.D. but also the doctor's prescription stating, among others, the generic name of the
medicine, the physician's address, contact number and professional license number, professional tax
receipt number and narcotic license number, if applicable. A purchase booklet issued by the local
social/health office is also required in the purchase of over-the-counter medicines. Likewise, any
single dispensing of medicine must be in accordance with the prescription issued by the physician
and should not exceed a one (1) month supply. Therefore, as correctly argued by the respondents,
Section 32 of R.A. No. 7277 as amended by R.A. No. 9442 complies with the standards of
substantive due process.
We are likewise not persuaded by the argument of petitioners that the definition of "disabilities" under
the subject laws is vague and ambiguous because it is allegedly so general and broad that the
person tasked with implementing the law will undoubtedly arrive at different interpretations and
applications of the law. Aside from the definitions of a "person with disability" or "disabled persons"
under Section 4 of R.A. No. 7277 as amended by R.A. No. 9442 and in the IRR of RA 9442, NCDA
A.O. No. 1 also provides:ChanRoblesVirtualawlibrary
4. Identification Cards shall be issued to any bonafide PWD with permanent disabilities due to
any one or more of the following conditions: psychosocial, chronic illness, learning, mental,
visual, orthopedic, speech and hearing conditions. This includes persons suffering from
disabling diseases resulting to the person's limitations to do day to day activities as
normally as possible such as but not limited to those undergoing dialysis, heart disorders,
severe cancer cases and such other similar cases resulting to temporary or permanent
disability.45
Similarly, DOH A.O. No. 2009-0011 defines the different categories of disability as
follows:ChanRoblesVirtualawlibrary
Rule IV, Section 4, Paragraph B of the Implementing Rules and Regulations (IRR) of this Act
required the Department of Health to address the health concerns of seven (7) different categories of
disability, which include the following: (1) Psychological and behavioral disabilities (2) Chronic illness
with disabilities (3)Learning(cognitive or intellectual) disabilities (4) Mental disabilities (5)
Visual/seeing disabilities (6) Orthopedic/moving, and (7) communication
deficits.46chanroblesvirtuallawlibrary
Elementary is the rule that when laws or rules are clear, when the law is unambiguous and
unequivocal, application not interpretation thereof is imperative. However, where the language of a
statute is vague and ambiguous, an interpretation thereof is resorted to. A law is deemed ambiguous
when it is capable of being understood by reasonably well-informed persons in either of two or more
senses. The fact that a law admits of different interpretations is the best evidence that it is vague and
ambiguous.47chanrobleslaw
In the instant case, We do not find the aforestated definition of terms as vague and ambiguous.
Settled is the rule that courts will not interfere in matters which are addressed to the sound discretion
of the government agency entrusted with the regulation of activities coming under the special and
technical training and knowledge of such agency.48 As a matter of policy, We accord great respect to
the decisions and/or actions of administrative authorities not only because of the doctrine of
separation of powers but also for their presumed knowledge, ability, and expertise in the
enforcement of laws and regulations entrusted to their jurisdiction. The rationale for this rule relates
not only to the emergence of the multifarious needs of a modern or modernizing society and the
establishment of diverse administrative agencies for addressing and satisfying those needs; it also
relates to the accumulation of experience and growth of specialized capabilities by the administrative
agency charged with implementing a particular statute.49chanrobleslaw
Lastly, petitioners contend that R.A. No. 7227, as amended by R.A. No. 9442, violates the equal
protection clause of the Constitution because it fairly singles out drugstores to bear the burden of the
discount, and that it can hardly be said to "rationally" meet a legitimate government objective which is
the purpose of the law. The law allegedly targets only retailers such as petitioners, and that the other
enterprises in the drug industry are not imposed with similar burden. This same argument had been
raised in the case of Carlos Superdrug Corp., et al. v. DSWD, et al.,50 and We reaffirm and apply the
ruling therein in the case at bar:ChanRoblesVirtualawlibrary
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing
component of the business. While the Constitution protects property rights, petitioners must accept
the realities of business and the State, in the exercise of police power, can intervene in the
operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as a reminder that the
right to property can be relinquished upon the command of the State for the promotion of public
good.51chanroblesvirtuallawlibrary
Under the equal protection clause, all persons or things similarly situated must be treated alike, both
in the privileges conferred and the obligations imposed. Conversely, all persons or things differently
situated should be treated differently.52 In the case of ABAKADA Guro Party List, et al. v. Hon.
Purisima, et al.,53 We held:ChanRoblesVirtualawlibrary
Equality guaranteed under the equal protection clause is equality under the same conditions and
among persons similarly situated; it is equality among equals, not similarity of treatment of persons
who are classified based on substantial differences in relation to the object to be accomplished.
When things or persons are different in fact or circumstance, they may be treated in law differently.
In Victoriano v. Elizalde Rope Workers' Union, this Court declared:ChanRoblesVirtualawlibrary
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the
laws upon all citizens of the State. It is not, therefore, a requirement, in order to avoid the
constitutional prohibition against inequality, that every man, woman and child should be affected
alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not require that things which
are different in fact be treated in law as though they were the same. The equal protection
clause does not forbid discrimination as to things that are different. It does not prohibit
legislation which is limited either in the object to which it is directed or by the territory within
which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification in law,
as in the other departments of knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain particulars. A law is not invalid because of
simple inequality. The very idea of classification is that of inequality, so that it goes without saying
that the mere fact of inequality in no manner determines the matter of constitutionality. All that is
required of a valid classification is that it be reasonable, which means that the classification
should be based on substantial distinctions which make for real differences, that it must be
germane to the purpose of the law; that it must not be limited to existing conditions only; and
that it must apply equally to each member of the class. This Court has held that the standard
is satisfied if the classification or distinction is based on a reasonable foundation or rational
basis and is not palpably arbitrary.
In the exercise of its power to make classifications for the purpose of enacting laws over matters
within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not
necessary that the classification be based on scientific or marked differences of things or in their
relation. Neither is it necessary that the classification be made with mathematical nicety. Hence,
legislative classification may in many cases properly rest on narrow distinctions, for the equal
protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and
legislation is addressed to evils as they may appear.
The equal protection clause recognizes a valid classification, that is, a classification that has a
reasonable foundation or rational basis and not arbitrary.54 With respect to R.A. No. 9442, its
expressed public policy is the rehabilitation, self-development and self-reliance of PWDs. Persons
with disability form a class separate and distinct from the other citizens of the country. Indubitably,
such substantial distinction is germane and intimately related to the purpose of the law. Hence, the
classification and treatment accorded to the PWDs fully satisfy the demands of equal protection.
Thus, Congress may pass a law providing for a different treatment to persons with disability apart
from the other citizens of the country.
Subject to the determination of the courts as to what is a proper exercise of police power using the
due process clause and the equal protection clause as yardsticks, the State may interfere wherever
the public interests demand it, and in this particular, a large discretion is necessarily vested in the
legislature to determine, not only what interests of the public require, but what measures are
necessary for the protection of such interests.55 Thus, We are mindful of the fundamental criteria in
cases of this nature that all reasonable doubts should be resolved in favor of the constitutionality of a
statute.56 The burden of proof is on him who claims that a statute is unconstitutional. Petitioners
failed to discharge such burden of proof.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated July 26, 2010,
and the Resolution dated November 19, 2010, in CA-G.R. SP No. 109903 are AFFIRMED.
SO ORDERED.chanRobles

________________________________________________________________________________
____________________________________
G.R. No. 195145, February 10, 2016
MANILA ELECTRIC COMPANY, Petitioner, v. SPOUSES SULPICIO AND PATRICIA
RAMOS, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 assailing the July 30, 2010 decision2 of the Court of
Appeals (CA) in CA-G.R. CV No. 87843 entitled "Spouses Sulpicio and Patricia Ramos v. Manila
Electric Company" that affirmed the Regional Trial Court's (RTC) August 22, 2006 decision3 in Civil
Case No. 99-95975.
The August 22, 2006 RTC decision ordered the Manila Electric Company (MERALCO) to restore the
electric power connection of Spouses Sulpicio and Patricia Ramos (respondents) and awarded them
P2,000,000.00, with legal interest, in total damages.chanRoblesvirtualLawlibrary
The Factual Antecedents
MERALCO is a private corporation engaged in the business of selling and distributing electricity to its
customers in Metro Manila and other franchise areas. The respondents are registered customers of
MERALCO under Service Identification Number (SIN) 409076401.
MERALCO entered into a contract of service with the respondents agreeing to supply the latter with
electric power in their residence at 2760-B Molave St., Manuguit, Tondo, Manila. To measure the
respondents' electric consumption, it installed the electric meter with serial number 330ZN43953
outside the front wall of the property occupied by Patricia's brother, Isidoro Sales, and his wife,
Nieves Sales (Nieves), located beside the respondents' house.
On November 5, 1999, MERALCO's service inspector inspected the respondents' electrical facilities
and found an outside connection attached to their electric meter. The service inspector traced the
connection, an illegal one, to the residence and appliances of Nieves. Nieves was the only one
present during the inspection and she was the one who signed the Metering Facilities Inspection
Report.
Due to the discovery of the illegal connection, the service inspector disconnected the respondents'
electric services on the same day. The inspection and disconnection were done without the
knowledge of the respondents as they were not at home and their house was closed at the time.
The respondents denied that they had been, using an illegal electrical connection and they requested
MERALCO to immediately reconnect their electric services. Despite the respondents' request,
MERALCO instead demanded from them the payment of P179,231.70 as differential billing.
On December 20, 1999, the respondents filed a complaint for breach of contract with preliminary
mandatory injunction and damages against MERALCO before the RTC, Branch 40, City of Manila.
They prayed for the immediate reconnection of their electric service and the award of actual, moral,
and exemplary damages, attorney's fees, and litigation expenses.
In a decision dated August 22, 2006, the RTC ordered MERALCO to reconnect the respondents'
electric service and awarded damages as follows:ChanRoblesVirtualawlibrary
WHEREFORE, Judgment is rendered directing defendant MERALCO to permanently reconnect
immediately the plaintiffs electric services, and for said defendant to pay the
following:ChanRoblesVirtualawlibrary
1. P100,000.00 as actual or compensatory damages;
2. P1,500,000.00 as moral damages;
3. P300,000.00 as exemplary damages;
4. P100,000.00 as attorney's fees; and,
5. Costs of suit;
with legal interest on the total damages of P2,000,000.00 from the date of this Judgment until fully
paid.
SO ORDERED.4chanroblesvirtuallawlibrary
MERALCO appealed the RTC's decision to the CA.
In its assailed July 30, 2010 decision,5 the CA denied the appeal for lack of merit and affirmed the
RTC's order of reconnection and award for payment of damages. The appellate court held that
MERALCO failed to comply not only with its own contract of service, but also with the requirements
under Sections 4 and 6 of Republic Act No. 7832, or the Anti-Electricity and Electric Transmission
Lines/Materials Pilferage Act of 1994 (R.A. 7832), when it resorted to the immediate disconnection of
the respondents' electric service without due notice. It also ruled that the respondents were not liable
for the differential billing as it had not been established that they knew or consented to the illegal
connection or even benefited from it.
MERALCO moved for the reconsideration of the decision, but the CA denied its motion in a
resolution6dated January 3, 2011. The present petition for review on certiorari7 was filed with this
Court on March 4, 2011, as a consequence.chanRoblesvirtualLawlibrary
The Petition
MERALCO argues that under R.A. 7832, it had the right and authority to immediately disconnect the
electric service of the respondents after they were caught in flagrante delicto using a tampered
electrical installation.
MERALCO also claims that by virtue of their contract of service, the respondents are liable to pay the
differential billing regardless of whether the latter benefited from the illegal electric service or not. It
adds that this is true even if the respondents did not personally tamper with the electrical facilities.
Finally, MERALCO contends that there is no basis for the award of damages as the disconnection of
the respondents' electric service was done in good faith and in the lawful exercise of its rights as a
public utility company.chanRoblesvirtualLawlibrary
The Respondents' Comment
In their comment8 of June 29, 2011, the respondents pray for the denial of the present petition for
lack of merit. They argue that the discovery of an outside connection attached to their electric meter
does not give MERALCO the right to automatically disconnect their electric service as the law
provides certain mandatory requirements that should be observed before a disconnection could be
effected. They claim that MERALCO failed to comply with these statutory requirements.
Also, the respondents contend that MERALCO breached its contractual obligations when its service
inspector immediately disconnected their electric service without notice. They claim that this breach
of contract, coupled with MERALCO's failure to observe the requirements under R.A. 7832, entitled
them to damages which were sufficiently established with evidence and were rightfully awarded by
the RTC and affirmed by the CA.
Lastly, the respondents argue that they are not liable to MERALCO for the differential billing as they
were not the ones who illegally consumed the unbilled electricity through the illegal
connection.chanRoblesvirtualLawlibrary
The Court's Ruling
We DENY the petition for review on certiorari as we find no reversible error committed by the
CA in issuing its assailed decision.
The core issue in this case is whether MERALCO had the right to immediately disconnect the electric
service of the respondents upon discovery of an outside connection attached to their electric meter.
The distribution of electricity is a basic necessity that is imbued with public interest. Its provider is
considered as a public utility subject to the strict regulation by the State in the exercise of its police
power. Failure to comply with these regulations gives rise to the presumption of bad faith or
abuse of right.9chanroblesvirtuallawlibrary
Nevertheless, the State also recognizes that electricity is the property of the service provider. R.A.
7832 was enacted by Congress to afford electric service providers multiple remedies to. protect
themselves from electricity pilferage. These remedies include the immediate disconnection of the
electric service of an erring customer, criminal prosecution, and the imposition of
surcharges.10 However, the service provider must avail of any or all of these remedies within legal
bounds, in strict compliance with the requirements and/or conditions set forth by law.
Section 4(a) of R.A. 7832 provides that the discovery of an outside connection attached on the
electric meter shall constitute as prima facie evidence of illegal use of electricity by the person
who benefits from the illegal use if the discovery is personally witnessed and attested to by an
officer of the law or a duly authorized representative of the Energy Regulatory Board (ERB).
With the presence of such prima facie evidence, the electric service provider is within its rights to
immediately disconnect the electric service of the consumer after due notice.
This Court has repeatedly stressed the significance of the presence of an authorized government
representative during an inspection of electric facilities, viz.:ChanRoblesVirtualawlibrary
The presence of government agents who may authorize immediate disconnections go into the
essence of due process. Indeed, we cannot allow respondent to act virtually as prosecutor
and judge in imposing the penalty of disconnection due to alleged meter tampering. That
would not sit well in a democratic country. After all, Meralco is a monopoly that derives its power from
the government. Clothing it with unilateral authority to disconnect would be equivalent to giving it a
license to tyrannize its hapless customers.11 (Emphasis supplied)
Additionally, Section 6 of R.A. 7832 affords a private electric utility the right and authority to
immediately disconnect the electric service of a consumer who has been caught in flagrante
delicto doing any of the acts covered by Section 4(a). However, the law clearly states that the
disconnection may only be done after serving a written notice or warning to the consumer.
To reiterate, R.A. 7832 has two requisites for an electric service provider to be authorized to
disconnect its customer's electric service on the basis of alleged electricity pilferage: first, an officer
of the law or an authorized ERB representative must be present during the inspection of the electric
facilities; and second, even if there is prima facie evidence of illegal use of electricity and the
customer is caught in flagrante delicto committing the acts under Section 4(a), the customer must still
be given due notice prior to the disconnection.12chanroblesvirtuallawlibrary
In its defense, MERALCO insists that it observed due process when its service inspector
disconnected the respondents' electric service, viz.:ChanRoblesVirtualawlibrary
Under the present situation, there is no doubt that due process, as required by R.A. 7832, was
observed [when] the petitioner discontinued the electric supply of respondent: there was an
inspection conducted in the premises of respondent with the consent of their authorized
representative; it was discovered during the said inspection that private respondents were using
outside connection; the nature of the violation was explained to private respondents' representative;
the inspection and discovery was personally witnessed and attested to by private respondents'
representative; private respondents failed and refused to pay the differential billing amounting
to P179,231.70 beforetheir electric service was disconnected.13 (Emphasis supplied)
After a thorough examination of the records of the case, we find no proof that MERALCO complied
with these two requirements under R.A. 7832. MERALCO never even alleged in its submissions that
an ERB representative or an officer of the law was present during the inspection of the respondents'
electric meter. Also, it did not claim that the respondents were ever notified beforehand of the
impending disconnection of their electric service.
In view of MERALCO's failure to comply with the strict requirements under Sections 4 and 6 of R. A.
No. 7832, we hold that MERALCO had no authority to immediately disconnect the
respondents' electric service. As a result, the immediate disconnection of the respondents' electric
service is presumed to be in bad faith.
We point out, too, that MERALCO's allegation that the respondents refused to pay the differential
billing before the disconnection of their electric service is an obvious falsity. MERALCO never
disputed the fact that the respondents' electric service was disconnected on November 5, 1999 -the
same day as when the electric meter was inspected. Also, MERALCO's demand letter for payment of
the differential billing is dated December 4, 1999. Thus, there is no truth to the statement that the
respondents first failed to pay the differential billing and only then was their electric service
disconnected.
The disconnection of respondents' electric service is not supported by MERALCO's own
Terms and Conditions of Service.
In addition, we observe that MERALCO also failed to follow its own procedure for the discontinuance
of service under its contract of service with the respondents. We quote in this regard the relevant
terms of service:ChanRoblesVirtualawlibrary
DISCONTINUANCE OF SERVICE:
The Company reserves the right to discontinue service in case the customer is in arrears in the
payment of bills in those cases where the meter stopped or failed to register the correct amount of
energy consumed, or failure to comply with any of these terms and conditions or in case of or to
prevent fraud upon the Company. Before disconnection is made in case of or to prevent fraud,
the Company may adjust the bill of said customer accordingly and if the adjusted bill is not
paid, the Company may disconnect the same. In case of disconnection, the provisions of Revised
Order No. 1 of the former Public Service Commission (now ERC) shall be observed. Any such
suspension of service shall not terminate the contract between the Company and the
customer.14(Emphasis supplied)
There is nothing in its contract of service that gives MERALCO the authority to immediately
disconnect a customer's electric connection. MERALCO's contractual right to disconnect electric
service arises only after the customer has been notified of his adjusted bill and has been afforded the
opportunity to pay the differential billing.
In this case, the disconnection of the respondents' electric service happened on November 5, 1999,
while the demand for the payment of differential billing was made through a letter dated December 4,
1999. Thus, we hold that MERALCO breached its contract of service with the respondents as
it disconnected the latter's electric service before they were ever notified of the differential
billing.
Differential billing
Section 6 of R.A. 7832 defines differential billing as "the amount to be charged to the person
concerned for the unbilled electricity illegally consumed by him." Clearly, the law provides that the
person who actually consumed the electricity illegally shall be liable for the differential billing. It does
not ipso facto make liable for payment of the differential billing the registered customer whose
electrical facilities had been tampered with and utilized for the illegal use of electricity.
In this case, as the prima facie presumption afforded by Section 4 of R.A. 7832 does not apply, it
falls upon MERALCO to first prove that the respondents had actually installed the outside connection
attached on their electric meter and that they had benefited from the electricity consumed through
the outside connection before it could hold them liable for the differential billing.
The records show that MERALCO presented no proof that it ever caught the respondents, or anyone
acting in the respondents' behalf, in the act of tampering with their electric meter. As the CA correctly
held, the respondents could not have been caught in flagrante delicto committing the tampering since
they were not present during the inspection of the electric meter, nor were any of their
representatives at hand.15 Moreover, the presence of an outside connection attached to the electric
meter operates only as a prima facie evidence of electricity pilferage under R.A. 7832; it is not
enough to declare the respondents in flagrante delicto tampering with the electric meter.16 In fact,
MERALCO itself admitted in its submissions that Nieves was the illegal user of the outside
connection attached to the respondents' electric meter.17chanroblesvirtuallawlibrary
On this point, MERALCO argues that Nieves was an authorized representative of the respondents.
However, the records are bereft of any sufficient proof to support this claim. The fact that she is an
occupant of the premises where the electric meter was installed does not make her the respondents'
representative considering that the unit occupied by the respondents is separate and distinct from
the one occupied by Nieves and her family. Similarly, the fact that Nieves was able to show the
respondents' latest electric bill does not make her the latter's authorized representative.
While this Court recognizes the right of MERALCO as a public utility to collect system losses, the
courts cannot and will not blindly grant a public utility's claim for differential billing if there is no
sufficient evidence to prove entitlement.18As MERALCO failed to sufficiently prove its claim for
payment of the differential billing, we rule that the respondents cannot be held liable for the
billed amount.
On the issue of damages
With MERALCO in bad faith for its failure to follow the strict requirements under R.A. 7832 in the
disconnection of the respondents' electric service, we agree with the CA that the award of damages
is in order. However, we deem it proper to modify the award in accordance with prevailing
jurisprudence.
First, actual damages pertain to such injuries or losses that are actually sustained and are
susceptible of measurement. They are intended not to enrich the injured party but to put him in the
position in which he was in before he was injured.19chanroblesvirtuallawlibrary
In Viron Transportation Co., Inc. v. Delos Santos,20 we explained that in order to recover actual
damages, there must be pleading and proof of the damages
suffered, viz.:ChanRoblesVirtualawlibrary
Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved
with a reasonable degree of certainty. Courts cannot simply rely on speculation, conjecture or
guesswork in determining the fact and amount of damages. To justify an award of actual
damages, there must be competent proof of the actual amount of loss, credence can be given
only to claims which are duly supported by receipts.(Emphasis supplied)
In this case, Patricia stated that her family's food expenses doubled after MERALCO disconnected
their electric services as they could no longer cook at home. We note, however, that there is no-
sufficient proof presented to show the actual food expenses that the respondents incurred.
Nevertheless, Patricia also testified that they were forced to move to a new residence after living
without electricity for eight (8) months at their home in Tondo, Manila. They proved this allegation
through the presentation of a contract of lease and receipts for payment of monthly rentals for 42
months amounting to P210,000.00. Thus, we find it proper to increase the award of actual
damages from P100,000.00 to P210,000.00.
Second, moral damages are designed to compensate and alleviate the physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar harm unjustly caused to a person.21 They may be properly awarded to
persons who have been unjustly deprived of property without due process of
law.22chanroblesvirtuallawlibrary
In Regala v. Carin,23 we discussed the requisites for the award of moral
damages, viz:ChanRoblesVirtualawlibrary
In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation
or physical, mental or psychological suffering sustained by the claimant; 2) a culpable act or
omission factually established; 3) proof that the wrongful act or omission of the defendant is the
proximate cause of the damages sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the
Civil Code.
Applied to this case, after due consideration of the manner of disconnection of the respondents'
electric service and the length of time that the respondents had to endure without electricity, we find
the award of moral damages proper. Aside from having to spend eight (8) months in the dark at their
own residence, Patricia testified that they suffered extreme social humiliation, embarrassment, and
serious anxiety as they were subjected to gossip in their neighborhood of stealing electricity through
the use of an illegal connection. The damage to the respondents' reputation and social standing was
aggravated by their decision to move to a new residence following the absolute refusal of MERALCO
to restore their electric services.
However, we find the award of P1,500,000.00 in moral damages to be excessive. Moral damages
are not intended to enrich the complainant as a penalty for the defendant. It is awarded as a means
to ease the moral suffering the complainant suffered due to the defendant's culpable action. 24 While
prevailing jurisprudence deems it appropriate to award 100,000.00 in moral damages in cases where
MERALCO wrongfully disconnected electric service,25 we hold that such amount is not
________________________________________________________________________________
________________________________
EN BANC
[G.R. NO. 170656 : August 15, 2007]
commensurate with the injury suffered by the respondents. Thus, in view of the specific
circumstances present in this case, we reduce the award of moral damages from P1,500,000.00
to P300,000.00.
Third, exemplary or corrective damages are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated, or compensatory damages. The award of
exemplary damages is allowed by law as a warning to the public and as a deterrent against the
repetition of socially deleterious actions.26chanroblesvirtuallawlibrary
In numerous cases,27 this Court found that MERALCO failed to comply with the requirements under
R.A. 7832 before a disconnection of a customer's electric service could be effected. In these cases,
we aptly awarded exemplary damages against MERALCO to serve as a warning against repeating
the same actions.
In this case, MERALCO totally failed to comply with the two requirements under R.A. 7832 before
disconnecting the respondents' electric service. While MERALCO insists that R.A. 7832 gives it the
right to disconnect the respondents' electric service, nothing in the records indicates that it attempted
to comply with the statutory requirements before effecting the disconnection.
Under these circumstances, we find that the previous awards against MERALCO have not served
their purpose as a means to prevent the repetition of the same damaging actions that it has
committed in the past. Therefore, we increase the award of exemplary damages from
P300,000.00 to P500,000.00 in the hope that this will persuade MERALCO to be more prudent and
responsible in its observance of the requirements under the law in disconnecting a customer's
electrical supply.
Lastly, in view of the award of exemplary damages, we find the award of attorney's fees proper, in
accordance with Article 2208(1) of the Civil Code. We find the CA's award of attorney's fees in the
amount of P100,000.00 just and reasonable under the circumstances.
WHEREFORE, the petition is DENIED. The decision dated July 30,2010 and resolution dated
January 3,2011 of the Court of Appeals in CA-G.R. CV No. 87843 are AFFIRMED with the following
modifications: MERALCO is ordered to pay respondents Spouses Sulpicio and Patricia Ramos
P210,000.00 as actual damages, P300,000.00 as moral damages, P500,000.00 as exemplary
damages, and P100,000.00 as attorneys fees. Costs against Manila Electric Company.
SO ORDERED.cralawlawlibrary
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as
Chairman of the Metropolitan Manila Development Authority, Petitioners, v. VIRON
TRANSPORTATION CO., INC., Respondent.
[G.R. NO. 170657 : August 15, 2007]
HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA
DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila
Development Authority, Petitioners, v. MENCORP TRANSPORTATION SYSTEM, INC.,
Respondent.
DECISION
CARPIO MORALES, J.:
The following conditions in 1969, as observed by this Court:
Vehicles have increased in number. Traffic congestion has moved from bad to worse, from tolerable
to critical. The number of people who use the thoroughfares has multiplied x x x,1
have remained unchecked and have reverberated to this day. Traffic jams continue to clog the
streets of Metro Manila, bringing vehicles to a standstill at main road arteries during rush hour traffic
and sapping people's energies and patience in the process.
The present Petition for Review on Certiorari, rooted in the traffic congestion problem, questions the
authority of the Metropolitan Manila Development Authority (MMDA) to order the closure of provincial
bus terminals along Epifanio de los Santos Avenue (EDSA) and major thoroughfares of Metro
Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the Regional Trial
Court (RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850 and 03-106224.
The first assailed Order of September 8, 2005,2 which resolved a motion for reconsideration filed by
herein respondents, declared Executive Order (E.O.) No. 179, hereafter referred to as the E.O.,
"unconstitutional as it constitutes an unreasonable exercise of police power." The second assailed
Order of November 23, 20053 denied petitioners' motion for reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, "Providing for the
Establishment of Greater Manila Mass Transport System," the pertinent portions of which read:
WHEREAS, Metro Manila continues to be the center of employment opportunities, trade and
commerce of the Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila has affected the adjacent provinces of Bulacan,
Cavite, Laguna, and Rizal, owing to the continued movement of residents and industries to more
affordable and economically viable locations in these provinces;
WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to undertake
measures to ease traffic congestion in Metro Manila and ensure the convenient and efficient travel of
commuters within its jurisdiction;
WHEREAS, a primary cause of traffic congestion in Metro Manila has been the numerous buses
plying the streets that impedes [sic] the flow of vehicles and commuters due to the inefficient
connectivity of the different transport modes;
WHEREAS, the MMDA has recommended a plan to decongest traffic by eliminating the bus
terminals now located along major Metro Manila thoroughfares and providing more convenient
access to the mass transport system to the commuting public through the provision of mass transport
terminal facilities that would integrate the existing transport modes, namely the buses, the rail-based
systems of the LRT, MRT and PNR and to facilitate and ensure efficient travel through the improved
connectivity of the different transport modes;
WHEREAS, the national government must provide the necessary funding requirements to
immediately implement and render operational these projects; and extent to MMDA such other
assistance as may be warranted to ensure their expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, by virtue of
the powers vested in me by law, do hereby order:
Section 1. THE PROJECT. - The project shall be identified as GREATER MANILA TRANSPORT
SYSTEM Project.
Section 2. PROJECT OBJECTIVES. - In accordance with the plan proposed by MMDA, the project
aims to develop four (4) interim intermodal mass transport terminals to integrate the different
transport modes, as well as those that shall hereafter be developed, to serve the commuting public in
the northwest, north, east, south, and southwest of Metro Manila. Initially, the project shall
concentrate on immediately establishing the mass transport terminals for the north and south Metro
Manila commuters as hereinafter described.
Section 3. PROJECT IMPLEMENTING AGENCY. - The Metropolitan Manila Development Authority
(MMDA), is hereby designated as the implementing Agency for the project. For this purpose, MMDA
is directed to undertake such infrastructure development work as may be necessary and, thereafter,
manage the project until it may be turned-over to more appropriate agencies, if found suitable and
convenient. Specifically, MMDA shall have the following functions and responsibilities:
a) Cause the preparation of the Master Plan for the projects, including the designs and costing;
b) Coordinate the use of the land and/or properties needed for the project with the respective
agencies and/or entities owning them;
c) Supervise and manage the construction of the necessary structures and facilities;
d) Execute such contracts or agreements as may be necessary, with the appropriate government
agencies, entities, and/or private persons, in accordance with existing laws and pertinent regulations,
to facilitate the implementation of the project;
e) Accept, manage and disburse such funds as may be necessary for the construction and/or
implementation of the projects, in accordance with prevailing accounting and audit polices and
practice in government.
f) Enlist the assistance of any national government agency, office or department, including local
government units, government-owned or controlled corporations, as may be necessary;
g) Assign or hire the necessary personnel for the above purposes; andcralawlibrary
h) Perform such other related functions as may be necessary to enable it to accomplish the
objectives and purposes of this Executive Order.4 (Emphasis in the original; underscoring supplied)
As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion in Metro
Manila has been the numerous buses plying the streets and the inefficient connectivity of the
different transport modes;5 and the MMDA had "recommended a plan to decongest traffic by
eliminating the bus terminals now located along major Metro Manila thoroughfares and providing
more and convenient access to the mass transport system to the commuting public through the
provision of mass transport terminal facilities"6 which plan is referred to under the E.O. as the
Greater Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and policymaking body
of the MMDA, issued Resolution No. 03-07 series of 20037 expressing full support of the Project.
Recognizing the imperative to integrate the different transport modes via the establishment of
common bus parking terminal areas, the MMC cited the need to remove the bus terminals located
along major thoroughfares of Metro Manila.8
On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged in the
business of public transportation with a provincial bus operation,9 filed a petition for declaratory
relief10 before the RTC11 of Manila.
In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the MMDA,
through Chairman Fernando, was "poised to issue a Circular, Memorandum or Order closing, or
tantamount to closing, all provincial bus terminals along EDSA and in the whole of the Metropolis
under the pretext of traffic regulation."12 This impending move, it stressed, would mean the closure
of its bus terminal in Sampaloc, Manila and two others in Quezon City.
Alleging that the MMDA's authority does not include the power to direct provincial bus operators to
abandon their existing bus terminals to thus deprive them of the use of their property, Viron asked
the court to construe the scope, extent and limitation of the power of the MMDA to regulate traffic
under R.A. No. 7924, "An Act Creating the Metropolitan Manila Development Authority, Defining its
Powers and Functions, Providing Funds Therefor and For Other Purposes."
Viron also asked for a ruling on whether the planned closure of provincial bus terminals would
contravene the Public Service Act and related laws which mandate public utilities to provide and
maintain their own terminals as a requisite for the privilege of operating as common carriers.13
Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later filed a similar
petition for declaratory relief14 against Executive Secretary Alberto G. Romulo and MMDA Chairman
Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for transgressing the
possessory rights of owners and operators of public land transportation units over their respective
terminals.
Averring that MMDA Chairman Fernando had begun to implement a plan to close and eliminate all
provincial bus terminals along EDSA and in the whole of the metropolis and to transfer their
operations to common bus terminals,15 Mencorp prayed for the issuance of a temporary restraining
order (TRO) and/or writ of preliminary injunction to restrain the impending closure of its bus terminals
which it was leasing at the corner of EDSA and New York Street in Cubao and at the intersection of
Blumentritt, Laon Laan and Halcon Streets in Quezon City. The petition was docketed as Civil Case
No. 03-106224 and was raffled to Branch 47 of the RTC of Manila.
Mencorp's petition was consolidated on June 19, 2003 with Viron's petition which was raffled to
Branch 26 of the RTC, Manila.
Mencorp's prayer for a TRO and/or writ of injunction was denied as was its application for the
issuance of a preliminary injunction.16
In the Pre-Trial Order17 issued by the trial court, the issues were narrowed down to whether 1) the
MMDA's power to regulate traffic in Metro Manila included the power to direct provincial bus
operators to abandon and close their duly established and existing bus terminals in order to conduct
business in a common terminal; (2) the E.O. is consistent with the Public Service Act and the
Constitution; and (3) provincial bus operators would be deprived of their real properties without due
process of law should they be required to use the common bus terminals.
Upon the agreement of the parties, they filed their respective position papers in lieu of hearings.
By Decision18 of January 24, 2005, the trial court sustained the constitutionality and legality of the
E.O. pursuant to R.A. No. 7924, which empowered the MMDA to administer Metro Manila's basic
services including those of transport and traffic management.
The trial court held that the E.O. was a valid exercise of the police power of the State as it satisfied
the two tests of lawful subject matter and lawful means, hence, Viron's and Mencorp's property rights
must yield to police power.
On the separate motions for reconsideration of Viron and Mencorp, the trial court, by Order of
September 8, 2005, reversed its Decision, this time holding that the E.O. was "an unreasonable
exercise of police power"; that the authority of the MMDA under Section (5)(e) of R.A. No. 7924 does
not include the power to order the closure of Viron's and Mencorp's existing bus terminals; and that
the E.O. is inconsistent with the provisions of the Public Service Act.
Petitioners' motion for reconsideration was denied by Resolution of November 23, 2005.
Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites of declaratory
relief are not present, there being no justiciable controversy in Civil Case Nos. 03-105850 and 03-
106224; and (2) the President has the authority to undertake or cause the implementation of the
Project.19
Petitioners contend that there is no justiciable controversy in the cases for declaratory relief as
nothing in the body of the E.O. mentions or orders the closure and elimination of bus terminals along
the major thoroughfares of Metro Manila. Viron and Mencorp, they argue, failed to produce any letter
or communication from the Executive Department apprising them of an immediate plan to close
down their bus terminals.
And petitioners maintain that the E.O. is only an administrative directive to government agencies to
coordinate with the MMDA and to make available for use government property along EDSA and
South Expressway corridors. They add that the only relation created by the E.O. is that between the
Chief Executive and the implementing officials, but not between third persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged deficiency of the consolidated petitions to
meet the requirement of justiciability was not among the issues defined for resolution in the Pre-Trial
Order of January 12, 2004. It is equally true, however, that the question was repeatedly raised by
petitioners in their Answer to Viron's petition,20 their Comment of April 29, 2003 opposing Mencorp's
prayer for the issuance of a TRO,21 and their Position Paper of August 23, 2004.22
In bringing their petitions before the trial court, both respondents pleaded the existence of the
essential requisites for their respective petitions for declaratory relief,23 and refuted petitioners'
contention that a justiciable controversy was lacking.24 There can be no denying, therefore, that the
issue was raised and discussed by the parties before the trial court.
The following are the essential requisites for a declaratory relief petition: (a) there must be a
justiciable controversy; (b) the controversy must be between persons whose interests are adverse;
(c) the party seeking declaratory relief must have a legal interest in the controversy; and (d) the issue
invoked must be ripe for judicial determination.25
The requirement of the presence of a justiciable controversy is satisfied when an actual controversy
or the ripening seeds thereof exist between the parties, all of whom are sui juris and before the court,
and the declaration sought will help in ending the controversy.26 A question becomes justiciable
when it is translated into a claim of right which is actually contested.27
In the present cases, respondents' resort to court was prompted by the issuance of the E.O. The 4th
Whereas clause of the E.O. sets out in clear strokes the MMDA's plan to "decongest traffic by
eliminating the bus terminals now located along major Metro Manila thoroughfares and providing
more convenient access to the mass transport system to the commuting public through the provision
of mass transport terminal facilities x x x." (Emphasis supplied)cralawlibrary
Section 2 of the E.O. thereafter lays down the immediate establishment of common bus terminals for
north - and south-bound commuters. For this purpose, Section 8 directs the Department of Budget
and Management to allocate funds of not more than one hundred million pesos (P100,000,000) to
cover the cost of the construction of the north and south terminals. And the E.O. was made effective
immediately.
The MMDA's resolve to immediately implement the Project, its denials to the contrary
notwithstanding, is also evident from telltale circumstances, foremost of which was the passage by
the MMC of Resolution No. 03-07, Series of 2003 expressing its full support of the immediate
implementation of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the plan to "remove the bus
terminals located along major thoroughfares of Metro Manila and an urgent need to integrate the
different transport modes." The 7th Whereas clause proceeds to mention the establishment of the
North and South terminals.
As alleged in Viron's petition, a diagram of the GMA-MTS North Bus/Rail Terminal had been drawn
up, and construction of the terminal is already in progress. The MMDA, in its Answer28 and Position
Paper,29 in fact affirmed that the government had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is merely conjectural
or anticipatory.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order
for the closure of respondents' bus terminals would be foolhardy for, by then, the proper action to
bring would no longer be for declaratory relief which, under Section 1, Rule 6330 of the Rules of
Court, must be brought before there is a breach or violation of rights.
As for petitioners' contention that the E.O. is a mere administrative issuance which creates no
relation with third persons, it does not persuade. Suffice it to stress that to ensure the success of the
Project for which the concerned government agencies are directed to coordinate their activities and
resources, the existing bus terminals owned, operated or leased by third persons like respondents
would have to be eliminated; and respondents would be forced to operate from the common bus
terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The closure of their
bus terminals would mean, among other things, the loss of income from the operation and/or rentals
of stalls thereat. Precisely, respondents claim a deprivation of their constitutional right to property
without due process of law.
Respondents have thus amply demonstrated a "personal and substantial interest in the case such
that [they have] sustained, or will sustain, direct injury as a result of [the E.O.'s] enforcement."31
Consequently, the established rule that the constitutionality of a law or administrative issuance can
be challenged by one who will sustain a direct injury as a result of its enforcement has been satisfied
by respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order the elimination of their bus terminals
under the E.O. which, they argue, is unconstitutional because it violates both the Constitution and the
Public Service Act; and that neither is the MMDA clothed with such authority under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the President's authority to undertake or to
cause the implementation of the Project. They assert that the authority of the President is derived
from E.O. No. 125, "Reorganizing the Ministry of Transportation and Communications Defining its
Powers and Functions and for Other Purposes," her residual power and/or E.O. No. 292, otherwise
known as the Administrative Code of 1987. They add that the E.O. is also a valid exercise of the
police power.
E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of legislative powers,
reorganized the then Ministry (now Department) of Transportation and Communications. Sections 4,
5, 6 and 22 of E.O. 125, as amended by E.O. 125-A,33 read:
SECTION 4. Mandate. - The Ministry shall be the primary policy, planning, programming,
coordinating, implementing, regulating and administrative entity of the Executive Branch of the
government in the promotion, development and regulation of dependable and coordinated networks
of transportation and communication systems as well as in the fast, safe, efficient and reliable postal,
transportation and communications services.
To accomplish such mandate, the Ministry shall have the following objectives:
(a) Promote the development of dependable and coordinated networks of transportation and
communications systems;
(b) Guide government and private investment in the development of the country's intermodal
transportation and communications systems in a most practical, expeditious, and orderly fashion for
maximum safety, service, and cost effectiveness; (Emphasis and underscoring supplied)cralawlibrary
xxx
SECTION 5. Powers and Functions. - To accomplish its mandate, the Ministry shall have the
following powers and functions:
(a) Formulate and recommend national policies and guidelines for the preparation and
implementation of integrated and comprehensive transportation and communications systems at the
national, regional and local levels;
(b) Establish and administer comprehensive and integrated programs for transportation and
communications, and for this purpose, may call on any agency, corporation, or organization, whether
public or private, whose development programs include transportation and communications as an
integral part thereof, to participate and assist in the preparation and implementation of such program;
(c) Assess, review and provide direction to transportation and communications research and
development programs of the government in coordination with other institutions concerned;
(d) Administer all laws, rules and regulations in the field of transportation and communications;
(Emphasis and underscoring supplied)cralawlibrary
xxx
SECTION 6. Authority and Responsibility. - The authority and responsibility for the exercise of the
mandate of the Ministry and for the discharge of its powers and functions shall be vested in the
Minister of Transportation and Communications, hereinafter referred to as the Minister, who shall
have supervision and control over the Ministry and shall be appointed by the President. (Emphasis
and underscoring supplied)cralawlibrary
SECTION 22. Implementing Authority of Minister. - The Minister shall issue such orders, rules,
regulations and other issuances as may be necessary to ensure the effective implementation of the
provisions of this Executive Order. (Emphasis and underscoring supplied)cralawlibrary
It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended, that the
President, then possessed of and exercising legislative powers, mandated the DOTC to be the
primary policy, planning, programming, coordinating, implementing, regulating and administrative
entity to promote, develop and regulate networks of transportation and communications. The grant of
authority to the DOTC includes the power to establish and administer comprehensive and integrated
programs for transportation and communications.
As may be seen further, the Minister (now Secretary) of the DOTC is vested with the authority and
responsibility to exercise the mandate given to the department. Accordingly, the DOTC Secretary is
authorized to issue such orders, rules, regulations and other issuances as may be necessary to
ensure the effective implementation of the law.
Since, under the law, the DOTC is authorized to establish and administer programs and projects for
transportation, it follows that the President may exercise the same power and authority to order the
implementation of the Project, which admittedly is one for transportation.
Such authority springs from the President's power of control over all executive departments as well
as the obligation for the faithful execution of the laws under Article VII, Section 17 of the Constitution
which provides:
SECTION 17. The President shall have control of all the executive departments, bureaus and offices.
He shall ensure that the laws be faithfully executed.
This constitutional provision is echoed in Section 1, Book III of the Administrative Code of 1987.
Notably, Section 38, Chapter 37, Book IV of the same Code defines the President's power of
supervision and control over the executive departments, viz:
SECTION 38. Definition of Administrative Relationships. - Unless otherwise expressly stated in the
Code or in other laws defining the special relationships of particular agencies, administrative
relationships shall be categorized and defined as follows:
(1) Supervision and Control. - Supervision and control shall include authority to act directly whenever
a specific function is entrusted by law or regulation to a subordinate; direct the performance of duty;
restrain the commission of acts; review, approve, reverse or modify acts and decisions of
subordinate officials or units; determine priorities in the execution of plans and programs. Unless a
different meaning is explicitly provided in the specific law governing the relationship of particular
agencies the word "control" shall encompass supervision and control as defined in this paragraph. x
x x (Emphasis and underscoring supplied)cralawlibrary
Thus, whenever a specific function is entrusted by law or regulation to a subordinate, the President
may act directly or merely direct the performance of a duty.34
Respecting the President's authority to order the implementation of the Project in the exercise of the
police power of the State, suffice it to stress that the powers vested in the DOTC Secretary to
establish and administer comprehensive and integrated programs for transportation and
communications and to issue orders, rules and regulations to implement such mandate (which, as
previously discussed, may also be exercised by the President) have been so delegated for the good
and welfare of the people. Hence, these powers partake of the nature of police power.
Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome
and reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the good and
welfare of the people.35 This power to prescribe regulations to promote the health, morals,
education, good order or safety, and general welfare of the people 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 legislature, such power may be delegated, as it is in fact
increasingly being delegated.36 By virtue of a valid delegation, the power may be exercised by the
President and administrative boards37 as well as by the lawmaking bodies of municipal corporations
or local governments under an express delegation by the Local Government Code of 1991.38
The authority of the President to order the implementation of the Project notwithstanding, the
designation of the MMDA as the implementing agency for the Project may not be sustained. It is ultra
vires, there being no legal basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the
MMDA, which is authorized to establish and implement a project such as the one subject of the
cases at bar. Thus, the President, although authorized to establish or cause the implementation of
the Project, must exercise the authority through the instrumentality of the DOTC which, by law, is the
primary implementing and administrative entity in the promotion, development and regulation of
networks of transportation, and the one so authorized to establish and implement a project such as
the Project in question.
By designating the MMDA as the implementing agency of the Project, the President clearly
overstepped the limits of the authority conferred by law, rendering E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the absence of a specific grant of
authority to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area39 as a "special development and
administrative region" and placed the administration of "metro-wide" basic services affecting the
region under the MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning, monitoring and
coordinative functions, and in the process exercise regulatory and supervisory authority over the
delivery of metro-wide services," including transport and traffic management.40 Section 5 of the
same law enumerates the powers and functions of the MMDA as follows:
(a) Formulate, coordinate and regulate the implementation of medium and long-term plans and
programs for the delivery of metro-wide services, land use and physical development within
Metropolitan Manila, consistent with national development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term investment programs for
metro-wide services which shall indicate sources and uses of funds for priority programs and
projects, and which shall include the packaging of projects and presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific
services under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can
create appropriate project management offices;
(d) Coordinate and monitor the implementation of such plans, programs and projects in Metro
Manila; identify bottlenecks and adopt solutions to problems of implementation;
(e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and
regulate the implementation of all programs and projects concerning traffic management, specifically
pertaining to enforcement, engineering and education. Upon request, it shall be extended assistance
and cooperation, including but not limited to, assignment of personnel, by all other government
agencies and offices concerned;
(f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all
kinds of violations of traffic rules and regulations, whether moving or non-moving in nature, and
confiscate and suspend or revoke drivers' licenses in the enforcement of such traffic laws and
regulations, the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For this
purpose, the Authority shall impose all traffic laws and regulations in Metro Manila, through its traffic
operation center, and may deputize members of the PNP, traffic enforcers of local government units,
duly licensed security guards, or members of non-governmental organizations to whom may be
delegated certain authority, subject to such conditions and requirements as the Authority may
impose; andcralawlibrary
(g) Perform other related functions required to achieve the objectives of the MMDA, including the
undertaking of delivery of basic services to the local government units, when deemed necessary
subject to prior coordination with and consent of the local government unit concerned." (Emphasis
and underscoring supplied)cralawlibrary
The scope of the function of MMDA as an administrative, coordinating and policy-setting body has
been settled in Metropolitan Manila Development Authority (MMDA) v. Bel-Air Village Association,
Inc.41 In that case, the Court stressed:
Clearly, the scope of the MMDA's function is limited to the delivery of the seven (7) basic services.
One of these is transport and traffic management which includes the formulation and monitoring of
policies, standards and projects to rationalize the existing transport operations, infrastructure
requirements, the use of thoroughfares and promotion of the safe movement of persons and goods.
It also covers the mass transport system and the institution of a system of road regulation, the
administration of all traffic enforcement operations, traffic engineering services and traffic education
programs, including the institution of a single ticketing system in Metro Manila for traffic violations.
Under this service, the MMDA is expressly authorized to "to set the policies concerning traffic" and
"coordinate and regulate the implementation of all traffic management programs." In addition, the
MMDA may install and administer a single ticketing system," fix, impose and collect fines and
penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts: formulation,
coordination, regulation, implementation, preparation, management, monitoring, setting of policies,
installation of a system and administration. There is no syllable in R.A. No. 7924 that grants the
MMDA police power, let alone legislative power. Even the Metro Manila Council has not been
delegated any legislative power. Unlike the legislative bodies of the local government units, there is
no provision in R.A. No. 7924 that empowers the MMDA or its Council to 'enact ordinances, approve
resolutions and appropriate funds for the general welfare' of the inhabitants of Metro Manila. The
MMDA is, as termed in the charter itself, a 'development authority.' It is an agency created for the
purpose of laying down policies and coordinating with the various national government agencies,
people's organizations, non-governmental organizations and the private sector for the efficient and
expeditious delivery of basic services in the vast metropolitan area. All its functions are
administrative in nature and these are actually summed up in the charter itself, viz:
'SECTION 2. Creation of the Metropolitan Manila Development Authority. - . . .
The MMDA shall perform planning, monitoring and coordinative functions, and in the process
exercise regulatory and supervisory authority over the delivery of metro-wide services within Metro
Manila, without diminution of the autonomy of the local government units concerning purely local
matters.'42 (Emphasis and underscoring supplied)cralawlibrary
In light of the administrative nature of its powers and functions, the MMDA is devoid of authority to
implement the Project as envisioned by the E.O; hence, it could not have been validly designated by
the President to undertake the Project. It follows that the MMDA cannot validly order the elimination
of respondents' terminals.
Even the MMDA's claimed authority under the police power must necessarily fail in consonance with
the above-quoted ruling in MMDA v. Bel-Air Village Association, Inc. and this Court's subsequent
ruling in Metropolitan Manila Development Authority v. Garin43 that the MMDA is not vested with
police power.
Even assuming arguendo that police power was delegated to the MMDA, its exercise of such power
does not satisfy the two tests of a valid police power measure, viz: (1) the interest of the public
generally, as distinguished from that of a particular class, requires its exercise; and (2) the means
employed are reasonably necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals.44 Stated differently, the police power legislation must be firmly
grounded on public interest and welfare and a reasonable relation must exist between the purposes
and the means.
As early as Calalang v. Williams,45 this Court recognized that traffic congestion is a public, not
merely a private, concern. The Court therein held that public welfare underlies the contested statute
authorizing the Director of Public Works to promulgate rules and regulations to regulate and control
traffic on national roads.
Likewise, in Luque v. Villegas,46 this Court emphasized that public welfare lies at the bottom of any
regulatory measure designed "to relieve congestion of traffic, which is, to say the least, a menace to
public safety."47 As such, measures calculated to promote the safety and convenience of the people
using the thoroughfares by the regulation of vehicular traffic present a proper subject for the exercise
of police power.
Notably, the parties herein concede that traffic congestion is a public concern that needs to be
addressed immediately. Indeed, the E.O. was issued due to the felt need to address the worsening
traffic congestion in Metro Manila which, the MMDA so determined, is caused by the increasing
volume of buses plying the major thoroughfares and the inefficient connectivity of existing transport
systems. It is thus beyond cavil that the motivating force behind the issuance of the E.O. is the
interest of the public in general.
Are the means employed appropriate and reasonably necessary for the accomplishment of the
purpose. Are they not duly oppressive?cralaw library
With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to "eliminate[e] the
bus terminals now located along major Metro Manila thoroughfares and provid[e] more convenient
access to the mass transport system to the commuting public through the provision of mass transport
terminal facilities x x x."48 Common carriers with terminals along the major thoroughfares of Metro
Manila would thus be compelled to close down their existing bus terminals and use the MMDA-
designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city ordinances were passed by the
Sangguniang Panlungsod of Lucena, directing public utility vehicles to unload and load passengers
at the Lucena Grand Central Terminal, which was given the exclusive franchise to operate a single
common terminal. Declaring that no other terminals shall be situated, constructed, maintained or
established inside or within the city of Lucena, the sanggunian declared as inoperable all temporary
terminals therein.
The ordinances were challenged before this Court for being unconstitutional on the ground that, inter
alia, the measures constituted an invalid exercise of police power, an undue taking of private
property, and a violation of the constitutional prohibition against monopolies.
Citing De la Cruz v. Paras50 and Lupangco v. Court of Appeals,51 this Court held that the assailed
ordinances were characterized by overbreadth, as they went beyond what was reasonably
necessary to solve the traffic problem in the city. And it found that the compulsory use of the Lucena
Grand Terminal was unduly oppressive because it would subject its users to fees, rentals and
charges.
The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that
rights are exercised within the framework of the law and the laws are enacted with due deference to
rights.
A due deference to the rights of the individual thus requires a more careful formulation of solutions to
societal problems.
From the memorandum filed before this Court by petitioner, it is gathered that the Sangguniang
Panlungsod had identified the cause of traffic congestion to be the indiscriminate loading and
unloading of passengers by buses on the streets of the city proper, hence, the conclusion that the
terminals contributed to the proliferation of buses obstructing traffic on the city streets.
Bus terminals per se do not, however, impede or help impede the flow of traffic. How the outright
proscription against the existence of all terminals, apart from that franchised to petitioner, can be
considered as reasonably necessary to solve the traffic problem, this Court has not been
enlightened. If terminals lack adequate space such that bus drivers are compelled to load and unload
passengers on the streets instead of inside the terminals, then reasonable specifications for the size
of terminals could be instituted, with permits to operate the same denied those which are unable to
meet the specifications.
In the subject ordinances, however, the scope of the proscription against the maintenance of
terminals is so broad that even entities which might be able to provide facilities better than the
franchised terminal are barred from operating at all. (Emphasis and underscoring
supplied)cralawlibrary
As in Lucena, this Court fails to see how the prohibition against the existence of respondents'
terminals can be considered a reasonable necessity to ease traffic congestion in the metropolis. On
the contrary, the elimination of respondents' bus terminals brings forth the distinct possibility and the
equally harrowing reality of traffic congestion in the common parking areas, a case of transference
from one site to another.
Less intrusive measures such as curbing the proliferation of "colorum" buses, vans and taxis entering
Metro Manila and using the streets for parking and passenger pick-up points, as respondents
suggest, might even be more effective in easing the traffic situation. So would the strict enforcement
of traffic rules and the removal of obstructions from major thoroughfares.
As to the alleged confiscatory character of the E.O., it need only to be stated that respondents'
certificates of public convenience confer no property right, and are mere licenses or privileges.52 As
such, these must yield to legislation safeguarding the interest of the people.
Even then, for reasons which bear reiteration, the MMDA cannot order the closure of respondents'
terminals not only because no authority to implement the Project has been granted nor legislative or
police power been delegated to it, but also because the elimination of the terminals does not satisfy
the standards of a valid police power measure.
Finally, an order for the closure of respondents' terminals is not in line with the provisions of the
Public Service Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of Executive Order
No. 202, creating the Land Transportation Franchising and Regulatory Board or LFTRB) vested the
Public Service Commission (PSC, now the LTFRB) with "x x x jurisdiction, supervision and control
over all public services and their franchises, equipment and other properties x x x."
Consonant with such grant of authority, the PSC was empowered to "impose such conditions as to
construction, equipment, maintenance, service, or operation as the public interests and convenience
may reasonably require"53 in approving any franchise or privilege.

Further, Section 16 (g) and (h) of the Public Service Act54 provided that the Commission shall have
the power, upon proper notice and hearing in accordance with the rules and provisions of this Act,
subject to the limitations and exceptions mentioned and saving provisions to the contrary:
(g) To compel any public service to furnish safe, adequate, and proper service as regards the
manner of furnishing the same as well as the maintenance of the necessary material and equipment.
(h) To require any public service to establish, construct, maintain, and operate any reasonable
extension of its existing facilities, where in the judgment of said Commission, such extension is
reasonable and practicable and will furnish sufficient business to justify the construction and
maintenance of the same and when the financial condition of the said public service reasonably
warrants the original expenditure required in making and operating such extension.(Emphasis and
underscoring supplied)cralawlibrary
The establishment, as well as the maintenance of vehicle parking areas or passenger terminals, is
generally considered a necessary service to be provided by provincial bus operators like
respondents, hence, the investments they have poured into the acquisition or lease of suitable
terminal sites. Eliminating the terminals would thus run counter to the provisions of the Public Service
Act.
This Court commiserates with the MMDA for the roadblocks thrown in the way of its efforts at solving
the pestering problem of traffic congestion in Metro Manila. These efforts are commendable, to say
the least, in the face of the abominable traffic situation of our roads day in and day out. This Court
can only interpret, not change, the law, however. It needs only to be reiterated that it is the DOTC ─
as the primary policy, planning, programming, coordinating, implementing, regulating and
administrative entity to promote, develop and regulate networks of transportation and
communications ─ which has the power to establish and administer a transportation project like the
Project subject of the case at bar.
No matter how noble the intentions of the MMDA may be then, any plan, strategy or project which it
is not authorized to implement cannot pass muster.
WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No. 179 is declared
NULL and VOID for being ultra vires.
SO ORDERED.
________________________________________________________________________________
______________________________________
G.R. No. 207132, December 06, 2016
ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, INC., (AMCOW),
REPRESENTED HEREIN BY ITS PRESIDENT, DR. ROLANDO VILLOTE, Petitioner, v. GCC
APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND CHRISTIAN
CANGCO, Respondents.
G.R. No. 207205
HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF
HEALTH, Petitioner, v. GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND
CHRISTIAN E. CANGCO, Respondents.
DECISION
BRION, J.:
In these consolidated petitions for review on certiorari1 filed under Rule 45 of the Rules of Court,
by the Association of Medical Clinics for Overseas Workers, Inc. (AMCOW) in GR No. 207132, and
by Secretary Enrique T. Ona (Secretary Ona) of the Department of Health (DOH) in GR No. 207205,
we resolve the challenge to the August 10, 2012 decision2 and the April 12, 2013 order3 of the
Regional Trial Court (RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.4
The August 10, 2012 decision and April 12, 2013 order declared null and void ab initio the August
23, 2010 and November 2, 2010 orders issued by the DOH directing respondent GCC Approved
Medical Centers Association, Inc. (GAMCA) to cease and desist from implementing the referral
decking system (these orders shall be alternately referred to as DOH CDO letters).
I. The Antecedents
On March 8, 2001, the DOH issued Administrative Order No. 5, Series of 20015(AO 5-
01) which directed the decking or equal distribution of migrant workers among the several
clinics who are members of GAMCA.
AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States' requirement that
only GCC-accredited medical clinics/hospitals' examination results will be honored by the GCC
States' respective embassies. It required an OFW applicant to first go to a GAMCA Center which, in
turn, will refer the applicant to a GAMCA clinic or hospital.
Subsequently, the DOH issued AO No. 106, Series of 20026holding in abeyance the
implementation of the referral decking system. The DOH reiterated its directive suspending
the referral decking system in AO No. 159, Series of 2004.7
In 2004, the DOH issued AO No. 167, Series of 20048repealing AO 5-01, reasoning that the referral
decking system did not guarantee the migrant workers' right to safe and quality health service. AO
167-04 pertinently reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation about the
GAMCA referral decking system, the DOH believes that its mandate is to protect and promote the
health of the Filipino people by ensuring the rights to safe and quality health service and reliable
medical examination results through the stricter regulation of medical clinics and other health
facilities, which the referral decking system neither assures nor guarantees.
NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby withdraws, repeals
and/or revokes Administrative Order No. 5, series of 2001, concerning the referral decking system.
Hence, all other administrative issuances, bureau circulars and memoranda related to A.O. No. 5,
series of 2001, are hereby withdrawn, repealed and/revoked accordingly.
In Department Memorandum No. 2008-0210,9 dated September 26, 2008, then DOH Secretary
Francisco T. Duque III expressed his concern about the continued implementation of the referral
decking system despite the DOH's prior suspension directives. The DOH directed the "OFW clinics,
duly accredited/licensed by the DOH and/or by the Philippine Health Insurance Corporation
(PHILHEALTH) belonging to and identified with GAMCA x x x to forthwith stop, terminate,
withdraw or otherwise end the x x x 'referral decking system.'"10
GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of the President (OP).
In a decision11 dated January 14, 2010, the OP nullified Memorandum No. 2008-0210.
On March 8, 2010, Republic Act (RA) No. 1002212lapsed into law without the President's
signature. Section 16 of RA No. 10022 amended Section 23 of RA No. 8042, adding two new
paragraphs - paragraphs (c) and (d). The pertinent portions of the amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new paragraphs (c) and
(d) with their corresponding subparagraphs to read as follows:
(c) Department of Health. - The Department of Health (DOH) shall regulate the activities and
operations of all clinics which conduct medical, physical, optical, dental, psychological and
other similar examinations, hereinafter referred to as health examinations, on Filipino migrant
workers as requirement for their overseas employment. Pursuant to this, the DOH shall ensure
that:
(c.1) The fees for the health examinations are regulated, regularly monitored and duly published to
ensure that the said fees are reasonable and not exorbitant;
(c.2) The Filipino migrant worker shall only be required to undergo health examinations when there is
reasonable certainty that he or she will be hired and deployed to the jobsite and only those health
examinations which are absolutely necessary for the type of job applied for or those specifically
required by the foreign employer shall be conducted;
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting
health examinations on migrant workers for certain receiving countries;
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-
accredited or DOH-operated clinics that will conduct his/her health examinations and that his or
her rights as a patient are respected. The decking practice, which requires an overseas Filipino
worker to go first to an office for registration and then farmed out to a medical clinic located
elsewhere, shall not be allowed;
(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH regional and/or
provincial hospitals shall establish and operate clinics that can serve the health examination
requirements of Filipino migrant workers to provide them easy access to such clinics all over the
country and lessen their transportation and lodging expenses; and
(c.6) All DOH-accredited medical clinics, including the DOH operated clinics, conducting health
examinations for Filipino migrant workers shall observe the same standard operating procedures and
shall comply with internationally accepted standards in their operations to conform with the
requirements of receiving countries or of foreign employers/principals.
Any Foreign employer who does not honor the results of valid health examinations conducted by a
DOH-accredited or DOH-operated clinic shall be temporarily disqualified from participating in the
overseas employment program, pursuant to POEA rules and regulations.
In case an overseas Filipino worker is found to be not medically fit upon his/her immediate arrival in
the country of destination, the medical clinic that conducted the health examinations of such
overseas Filipino worker shall pay for his or her repatriation back to the Philippines and the cost of
deployment of such worker.
Any government official or employee who violates any provision of this subsection shall be removed
or dismissed from service with disqualification to hold any appointive public office for five (5) years.
Such penalty is without prejudice to any other liability which he or she may have incurred under
existing laws, rules or regulations. [emphases and underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations13 (IRR) of RA No. 8042, as amended
by RA No. 10022, took effect.
Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010 letter-
order,14directed GAMCA to cease and desist from implementing the referral decking
system and to wrap up their operations within three (3) days from receipt thereof. GAMCA received
its copy of the August 23, 2010 letter-order on August 25, 2010.
On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition for certiorari and prohibition
with prayer for a writ of preliminary injunction and/or temporary restraining order (GAMCA's
petition).15 It assailed: (1) the DOH's August 23, 2010 letter-order on the ground of grave abuse of
discretion; and (2) paragraphs c.3 and c.4, Section 16 of RA No. 10022, as well as Section 1 (c)
and (d), Rule XI of the IRR, as unconstitutional.
Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive that GAMCA
cease and desist from implementing the referral decking system.16
On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and to file an
opposition-in-intervention, attaching its opposition-in-intervention to its motion.17 In the hearing
conducted the following day, November 24, 2010, the RTC granted AMCOW's intervention; DOH and
GAMCA did not oppose AMCOW's motion.18 AMCOW subsequently paid the docket fees and
submitted its memorandum.19

In anorder20dated August 1, 2011, the RTC issued a writ of preliminary injunction21directing the
DOH to cease and desist from implementing its August 23, 2010 and November 2, 2010 orders. The
RTC likewise issued an order denying the motion for inhibition/disqualification filed by AMCOW.
On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011 order.
The assailed RTC rulings
In its August 10, 2012 decision,22 the RTC granted GAMCA's certiorari petition and declared null and
void ab initio the DOH CDO letters. It also issued a writ of prohibition directing "the DOH Secretary
and all persons acting on his behalf to cease and desist from implementing the assailed Orders
against the [GAMCA]."
The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending Section 23 of RA
No. 8042, but ruled that Section 16 of RA No. 10022 does not apply to GAMCA.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of
RA No. 10022 must be interpreted as applying only to clinics that conduct health examination on
migrant workers bound for countries that do not require the referral decking system for the issuance
of visas to job applicants.
It noted that the referral decking system is part of the application procedure in obtaining visas to
enter the GCC States, a procedure made in the exercise of the sovereign power of the GCC States
to protect their nationals from health hazards, and of their diplomatic power to regulate and screen
entrants to their territories. Under the principle of sovereign equality and independence of States, the
Philippines cannot interfere with this system and, in fact, must respect the visa-granting procedures
of foreign states in the same way that they respect our immigration procedures.
Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC States, is to
restrain the GCC States themselves. To the RTC, the Congress was aware of this limitation,
pursuant to the generally accepted principles of international law under Article II, Section 2 of the
1987 Constitution, when it enacted Section 16 of RA No. 10022.
The DOH and AMCOW separately sought reconsideration of the RTC's August 10, 2012 decision,
which motions the RTC denied.23 The DOH and AMCOW separately filed the present Rule 45
petitions.
On August 24, 2013, AMCOW filed a motion for consolidation24 of the two petitions; the Court
granted this motion and ordered the consolidation of the two petitions in a resolution dated
September 17, 2013.25cralawred
In the resolution26 of April 14, 2015, the Court denied: (1) GAMCA's most urgent motion for issuance
of temporary restraining order/writ of preliminary injunction/status quo ante order (with request for
immediate inclusion in the Honorable Court's agenda of March 3, 2015, its motion dated March 2,
2015);27 and (2) the most urgent reiterating motion for issuance of temporary restraining order/writ of
preliminary injunction/status quo ante order dated March 11, 2015.28
The Court also suspended the implementation of the permanent injunction issued by the RTC of
Pasay City, Branch 108 in its August 10, 2012 decision.
II. The Issues
The consolidated cases before us present the following issues:
First, whether the Regional Trial Court legally erred in giving due course to the petition
for certiorari and prohibition against the DOH CDO letters;
Second, whether the DOH CDO letters prohibiting GAMCA from implementing the referral decking
system embodied under Section 16 of Republic Act No. 10022 violates Section 3, Article II of the
1987 Constitution for being an undue taking of property;
Third, whether the application of Section 16 of Republic Act No.10022 to the GAMCA violates the
international customary principles of sovereign independence and equality.
III. Our Ruling
A. The RTC legally erred when it gave due course to GAMCA's petition for certiorari and
prohibition.
The present case reached us through an appeal by certiorari (pursuant to Rule 45) of an RTC ruling,
assailing the decision based solely on questions of law. The RTC decision, on the other hand,
involves the grant of the petitions for certiorari and prohibition (pursuant to Rule 65) assailing the
DOH CDO letters for grave abuse of discretion.
The question before us asks whether the RTC made a reversible error of law when it issued
writs of certiorari and prohibition against the DOH CDO letters.
AMCOW questions the means by which GAMCA raised the issue of the legality of RA No. 10022
before the RTC. AMCOW posits that GAMCA availed of an improper remedy, as certiorari and
prohibition lie only against quasi-judicial acts, and quasi-judicial and ministerial acts, respectively.
Since the disputed cease and desist order is neither, the RTC should have dismissed the petition
outright for being an improper remedy.
We agree with the petitioners' assertion that the RTC erred when it gave due course to GAMCA's
petition for certiorari and prohibition, but we do so for different reasons.
1. Certiorari under Rules of Court and under the courts' expanded jurisdiction under Art VIII,
Section 1 of the Constitution, as recognized by jurisprudence.
A.1.a. The Current Certiorari Situation
The use of petitions for certiorari and prohibition under Rule 65 is a remedy that judiciaries have
used long before our Rules of Court existed.29 As footnoted below, these writs - now recognized and
regulated as remedies under Rule 65 of our Rules of Court - have been characterized a "supervisory
writs" used by superior courts to keep lower courts within the confines of their granted jurisdictions,
thereby ensuring orderliness in lower courts' rulings.
We confirmed this characterization in Madrigal Transport v. Lapanday Holdings Corporation,30 when
we held that a writ is founded on the supervisory jurisdiction of appellate courts over inferior courts,
and is issued to keep the latter within the bounds of their jurisdiction. Thus, the writ corrects only
errors of jurisdiction of judicial and quasi-judicial bodies, and cannot be used to correct errors of law
or fact. For these mistakes of judgment, the appropriate remedy is an appeal.31
This situation changed after 1987 when the new Constitution "expanded" the scope of judicial power
by providing that -
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government. (italics supplied)32
In Francisco v. The House of Representatives,33 we recognized that this expanded jurisdiction was
meant "to ensure the potency of the power of judicial review to curb grave abuse of discretion by 'any
branch or instrumentalities of government.'" Thus, the second paragraph of Article VIII, Section 1
engraves, for the first time in its history, into black letter law the "expanded certiorari jurisdiction" of
this Court, whose nature and purpose had been provided in the sponsorship speech of its proponent,
former Chief Justice Constitutional Commissioner Roberto Concepcion:
xxxx
The first section starts with a sentence copied from former
Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it first and explain.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the government.
Fellow Members of this Commission, this is actually a product of our experience during martial law.
As a matter of fact, it has some antecedents in the past, but the role of the judiciary during the
deposed regime was marred considerably by the circumstance that in a number of cases against the
government, which then had no legal defense at all, the solicitor general set up the defense of
political question and got away with it. As a consequence, certain principles concerning particularly
the writ of habeas corpus, that is, the authority of courts to order the release of political detainees,
and other matters related to the operation and effect of martial law failed because the government
set up the defense of political question. And the Supreme Court said: "Well, since it is political, we
have no authority to pass upon it." The Committee on the Judiciary feels that this was not a proper
solution of the questions involved. It did not merely request an encroachment upon the rights of the
people, but it, in effect, encouraged further violations thereof during the martial law regime. x x x
xxxx
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the
government as well as those of its officers. In other words, the judiciary is the final arbiter on the
question whether or not a branch of government or any of its officials has acted without jurisdiction or
in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass
judgment on matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter
evade the duty to settle matters of this nature, by claiming that such matters constitute a political
question.34 (italics in the original; emphasis and underscoring supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this "expanded"
constitutional definition of judicial power and because of the commonality of "grave abuse of
discretion" as a ground for review under Rule 65 and the courts expanded jurisdiction, the Supreme
Court based on its power to relax its rules35 allowed Rule 65 to be used as the medium for petitions
invoking the courts' expanded jurisdiction based on its power to relax its Rules.36 This is however
an ad hoc approach that does not fully consider the accompanying implications, among them, that
Rule 65 is an essentially distinct remedy that cannot simply be bodily lifted for application under the
judicial power's expanded mode. The terms of Rule 65, too, are not fully aligned with what the
Court's expanded jurisdiction signifies and requires.37
On the basis of almost thirty years' experience with the courts' expanded jurisdiction, the Court
should now fully recognize the attendant distinctions and should be aware that the continued use of
Rule 65 on an ad hoc basis as the operational remedy in implementing its expanded jurisdiction may,
in the longer term, result in problems of uneven, misguided, or even incorrect application of the
courts' expanded mandate.
The present case is a prime example of the misguided reading that may take place in constitutional
litigation: the procedural issues raised apparently spring from the lack of proper understanding of
what a petition for certiorari assails under the traditional and expanded modes, and the impact of
these distinctions in complying with the procedural requirements for a valid petition.
2. The Basic Distinctions
A.2.a. Actual Case or Controversy

Basic in the exercise of judicial power whether under the traditional or in the expanded setting - is the
presence of an actual case or controversy. For a dispute to be justiciable, a legally demandable and
enforceable right must exist as basis, and must be shown to have been violated.38
Whether a case actually exists depends on the pleaded allegations, as affected by the elements
of standing (translated in civil actions as the status of being a "real-party-in-interest," in
criminal actions as "offended party" and in special proceedings as "interested
party"),39ripeness,40prematurity, and the moot and academic principle that likewise interact with
one another. These elements and their interactions are discussed m greater detail below.
The Court's expanded jurisdiction - itself an exercise of judicial power - does not do away with the
actual case or controversy requirement in presenting a constitutional issue, but effectively simplifies
this requirement by merely requiring a prima facie showing of grave abuse of discretion in the
assailed governmental act.
A.2.b. Actions Correctable by Certiorari
A basic feature of the expanded jurisdiction under the constitutional definition of judicial power, is the
authority and command for the courts to act on petitions involving the commission by any branch or
instrumentality of government of grave abuse of discretion amounting to lack or excess of
jurisdiction.
This command distinctly contrasts with the terms of Rule 65 which confines court certiorari action
solely to the review of judicial and quasi-judicial acts.41 These differing features create very basic
distinctions that must necessarily result in differences in the application of remedies.
While actions by lower courts do not pose a significant problem because they are necessarily acting
judicially when they adjudicate, a critical question comes up for the court acting on certiorari petitions
when governmental agencies are involved - under what capacity does the agency act?
This is a critical question as the circumstances of the present case show. When the government
entity acts quasi-judicially, the petition for certiorari challenging the action falls under Rule 65; in
other instances, the petition must be filed based on the courts' expanded jurisdiction.
A.2.c. Grave Abuse of Discretion
Another distinction, a seeming one as explained below, relates to the cited ground of
a certiorari petition under Rule 65 which speaks of lack or excess of jurisdiction or grave abuse of
discretion amounting to lack or excess of jurisdiction, as against the remedy under the courts'
expanded jurisdiction which expressly only mentions grave abuse of discretion amounting to lack or
excess of jurisdiction.
This distinction is apparently not legally significant when it is considered that action outside of or in
excess of the granted authority necessarily involves action with grave abuse of discretion: no
discretion is allowed in areas outside of an agency's granted authority so that any such action would
be a gravely abusive exercise of power. The constitutional grant of power, too, pointedly addresses
grave abuse of discretion when it amounts to lack or excess of jurisdiction,42 thus establishing that
the presence of jurisdiction is the critical element; failure to comply with this requirement necessarily
leads to the certiorari petition's immediate dismissal.43
As an added observation on a point that our jurisprudence has not fully explored, the result of the
action by a governmental entity (e.g., a law or an executive order) can be distinguished from the
perspective of its legality as tested against the terms of the Constitution or of another law (where
subordinate action like an executive order is involved), vis-a-vis the legality of the resulting action
where grave abuse of discretion attended the governmental action or the exercise of the
governmental function.
In the former, the conclusion may be plain illegality or legal error that characterized the law or exec
order (as tested, for example, under the established rules of interpretation); no consideration is made
of how the governmental entity exercised its function. In the latter case, on the other hand, it is the
governmental entity's exercise of its function that is examined and adjudged independently of the
result, with impact on the legality of the result of the gravely abusive action.
Where the dispute in a case relates to plain legal error, ordinary court action and traditional mode are
called for and this must be filed in the lower courts based on rules of jurisdiction while observing the
hierarchy of courts.
Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction is brought into
play based on the express wording of the Constitution and constitutional implications may be
involved (such as grave abuse of discretion because of plain oppression or discrimination), but this
must likewise be filed with the lowest court of concurrent jurisdiction, unless the court highest in the
hierarchy grants exemption. Note that in the absence of express rules, it is only the highest court, the
Supreme Court, that can only grant exemptions.
From these perspectives, the use of grave abuse of discretion can spell the difference in deciding
whether a case filed directly with the Supreme Court has been properly filed.
A.2.d. Exhaustion of Available Remedies
A basic requirement under Rule 65 is that there be "no other plain, speedy and adequate remedy
found in law,"44 which requirement the expanded jurisdiction provision does not expressly carry.
Nevertheless, this requirement is not a significant distinction in using the remedy of certiorari under
the traditional and the expanded modes. The doctrine of exhaustion of administrative remedies
applies to a petition for certiorari, regardless of the act of the administrative agency concerned, i.e.,
whether the act concerns a quasi-judicial, or quasi-legislative function, or is purely regulatory.45
Consider in this regard that once an administrative agency has been empowered by Congress to
undertake a sovereign function, the agency should be allowed to perform its function to the full extent
that the law grants. This full extent covers the authority of superior officers in the administrative
agencies to correct the actions of subordinates, or for collegial bodies to reconsider their own
decisions on a motion for reconsideration. Premature judicial intervention would interfere with this
administrative mandate, leaving administrative action incomplete; if allowed, such premature judicial
action through a writ of certiorari, would be a usurpation that violates the separation of powers
principle that underlies our Constitution.46
In every case, remedies within the agency's administrative process must be exhausted before
external remedies can be applied. Thus, even if a governmental entity may have committed a grave
abuse of discretion, litigants should, as a rule, first ask reconsideration from the body itself, or a
review thereof before the agency concerned. This step ensures that by the time the grave abuse of
discretion issue reaches the court, the administrative agency concerned would have fully exercised
its jurisdiction and the court can focus its attention on the questions of law presented before it.
Additionally, the failure to exhaust administrative remedies affects the ripeness to adjudicate
the constitutionality of a governmental act, which in turn affects the existence of the need for
an actual case or controversy for the courts to exercise their power of judicial review.47 The
need for ripeness - an aspect of the timing of a case or controversy does not change regardless of
whether the issue of constitutionality reaches the Court through the traditional means, or through the
Court's expanded jurisdiction. In fact, separately from ripeness, one other concept pertaining to
judicial review is intrinsically connected to it; the concept of a case being moot and academic.48
Both these concepts relate to the timing of the presentation of a controversy before the Court
ripeness relates to its prematurity, while mootness relates to a belated or unnecessary judgment on
the issues. The Court cannot preempt the actions of the parties, and neither should it (as a rule)
render judgment after the issue has already been resolved by or through external developments.
The importance of timing in the exercise of judicial review highlights and reinforces the need for an
actual case or controversy an act that may violate a party's right. Without any completed action or a
concrete threat of injury to the petitioning party, the act is not yet ripe for adjudication. It is merely a
hypothetical problem. The challenged act must have been accomplished or performed by either
branch or instrumentality of government before a court may come into the picture, and the petitioner
must allege the existence of an immediate or threatened injury to itself as a result of the challenged
action.
In these lights, a constitutional challenge, whether presented through the traditional route or through
the Court's expanded jurisdiction, requires compliance with the ripeness requirement. In the case of
administrative acts, ripeness manifests itself through compliance with the doctrine of exhaustion of
administrative remedies.
In like manner, an issue that was once ripe for resolution but whose resolution, since then, has been
rendered unnecessary, needs no resolution from the Court, as it presents no actual case or
controversy and likewise merely presents a hypothetical problem. In simpler terms, a case is moot
and academic when an event supervenes to render a judgment over the issues unnecessary and
superfluous.
Without the element of ripeness or a showing that the presented issue is moot and academic,
petitions challenging the constitutionality of a law or governmental act are vulnerable to dismissal.
Not to be forgotten is that jurisprudence also prohibits litigants from immediately seeking judicial
relief without first exhausting the available administrative remedies for practical reasons.49
From the perspective of practicality, immediate resort to the courts on issues that are within the
competence of administrative agencies to resolve, would unnecessarily clog the courts' dockets.
These issues, too, usually involve technical considerations that are within the agency's specific
competence and which, for the courts, would require additional time and resources to study and
consider.50 Of course, the Supreme Court cannot really avoid the issues that a petition for certiorari,
filed with the lower courts may present; the case may be bound ultimately to reach the Court, albeit
as an appeal from the rulings of the lower courts.
3. Situations Where a Petition for Certiorari May Be Used
There are two distinct situations where a writ of certiorari or prohibition may be sought. Each situation
carries requirements, peculiar to the nature of each situation, that lead to distinctions that should be
recognized in the use of certiorari under Rule 65 and under the courts' expanded jurisdiction.
The two situations differ in the type of questions raised. The first is the constitutional
situation where the constitutionality of acts are questioned. The second is the non-constitutional
situation where acts amounting to grave abuse of discretion are challenged without raising
constitutional questions or violations.
The process of questioning the constitutionality of a governmental action provides a notable area of
comparison between the use of certiorari in the traditional and the expanded modes.
Under the traditional mode, plaintiffs question the constitutionality of a governmental action through
the cases they file before the lower courts; the defendants may likewise do so when they interpose
the defense of unconstitutionality of the law under which they are being sued. A petition for
declaratory relief may also be used to question the constitutionality or application of a legislative (or
quasi-legislative) act before the court.51
For quasi-judicial actions, on the other hand, certiorari is an available remedy, as acts or exercise of
functions that violate the Constitution are necessarily committed with grave abuse of discretion for
being acts undertaken outside the contemplation of the Constitution. Under both remedies, the
petitioners should comply with the traditional requirements of judicial review, discussed below.52 In
both cases, the decisions of these courts reach the Court through an appeal by certiorari under Rule
45.
In contrast, existing Court rulings in the exercise of its expanded jurisdiction have allowed the
direct filing of petitions for certiorari and prohibition with the Court to question, for grave abuse of
discretion, actions or the exercise of a function that violate the Constitution.53 The governmental
action may be questioned regardless of whether it is quasi-judicial, quasi-legislative, or administrative
in nature. The Court's expanded jurisdiction does not do away with the actual case or controversy
requirement for presenting a constitutional issue, but effectively simplifies this requirement by merely
requiring a prima facie showing of grave abuse of discretion in the exercise of the governmental
act.54
To return to judicial review heretofore mentioned, in constitutional cases where the question of
constitutionality of a governmental action is raised, the judicial power the courts exercise is likewise
identified as the power of judicial review - the power to review the constitutionality of the actions of
other branches of government.55 As a rule, as required by the hierarchy of courts principle, these
cases are filed with the lowest court with jurisdiction over the matter. The judicial review that the
courts undertake requires:
1) there be an actual case or controversy calling for the exercise of judicial power;
(2) the person challenging the act must have "Standing" to challenge; he must have a personal
and substantial interest in the case such that he has sustained, or will sustain, direct injury as a
result of its enforcement;
(3) the question of constitutionality must be raised at the earliest possible opportunity; and
(4) the issue of constitutionality must be the very lis mota of the case.56
The lower court's decision under the constitutional situation reaches the Supreme Court through the
appeal process, interestingly, through a petition for review on certiorari under Rule 45 of the Rules of
Court.
In the non-constitutional situation, the same requirements essentially apply, less the requirements
specific to the constitutional issues. In particular, there must be an actual case or controversy and
the compliance with requirements of standing, as affected by the hierarchy of courts, exhaustion of
remedies, ripeness, prematurity, and the moot and academic principles.
A.3.a. The "Standing" Requirement
Under both situations, the party bringing suit must have the necessary "standing." This means that
this party has, in its favor, the demandable and enforceable right or interest giving rise to a justiciable
controversy after the right is violated by the offending party.
The necessity of a person's standing to sue derives from the very definition of judicial power. Judicial
power includes the duty of the courts to settle actual controversies involving rights which are legally
demandable and enforceable. Necessarily, the person availing of a judicial remedy must show that
he possesses a legal interest or right to it, otherwise, the issue presented would be purely
hypothetical and academic. This concept has been translated into the requirement to have "standing"
in judicial review,57or to be considered as a "real-party-in-interest" in civil actions,58 as the "offended
party" in criminal actions59 and the "interested party" in special proceedings.60
While the Court follows these terms closely in both non-constitutional cases and constitutional cases
under the traditional mode, it has relaxed the rule in constitutional cases harrdled under the
expanded jurisdiction mode. in the latter case, a prima facie showing that the questioned
governmental act violated the Constitution, effectively disputably shows an injury to the sovereign
Filipino nation who approved the Constitution and endowed it with authority, such that the challenged
act may be questioned by any Philippine citizen before the Supreme Court.61 In this manner, the
"standing" requirement is relaxed compared with the standard of personal stake or injury that the
traditional petition requires.
The relaxation of the standing requirement has likewise been achieved through the application of the
"transcendental importance doctrine" under the traditional mode for constitutional cases.62 (Under the
traditional mode, "transcendental importance" not only relaxes the standing requirement, but also
allows immediate access to this Court, thus exempting the petitioner from complying with the
hierarchy of courts requirement.)63
More importantly perhaps, the prima facie showing of grave abuse of discretion in constitutional
cases also implies that the injury alleged is actual or imminent, and not merely hypothetical.
Through this approach, the Court's attention is directed towards the existence of an actual case or
controversy - that is, whether the government indeed violated the Constitution to the detriment of the
Filipino people without the distractions of determining the existence of transcendental importance
indicators unrelated to the dispute and which do not at all determine whether the Court properly
exercises its power of judicial review.
Parenthetically, in the traditional mode, the determination of the transcendental importance of the
issue presented,64 aside from simply relaxing the standing requirement, may result in the dilution of
the actual case or controversy element because of the inextricable link between standing and the
existence of an actual case or controversy.
Consider, in this regard, that an actual case or controversy that calls for the exercise of judicial power
necessarily requires that the party presenting it possesses the standing to mount a challenge to a
governmental act. A case or controversy exists when there is an actual dispute between parties over
their legal rights, which remains in conflict at the time the dispute is presented before the
court.65Standing, on the other hand, involves a personal and substantial interest in the case because
the petitioner has sustained, or will sustain, direct injury as a result of the violation of its right.66
With the element of "standing" (or the petitioner's personal or substantial stake or interest in the
case) relaxed, the practical effect is to dilute the need to show that an immediate actual dispute over
legal rights did indeed take place and is now the subject of the action before the court.67
In both the traditional and the expanded modes, this relaxation carries a ripple effect under
established jurisprudential rulings,68 affecting not only the actual case or controversy requirement,
but compliance with the doctrine of hierarchy of courts, discussed in greater detail below.

A.3.b. The Hierarchy of Courts Principle
Another requirement that a certiorari petition carries, springs from the principle of "hierarchy of
courts" which recognizes the various levels of courts in the country as they are established under the
Constitution and by law, their ranking and effect of their rulings in relation with one another, and how
these different levels of court interact with one another.69 Since courts are established and given their
defined jurisdictions by law, the hierarchy of the different levels of courts should leave very little
opening for flexibility (and potential legal questions), but for the fact that the law creates courts at
different and defined levels but with concurrent jurisdictions.
The Constitution itself has partially determined the judicial hierarchy in the Philippine legal system by
designating the Supreme Court as the highest court with irreducible powers; its rulings serve as
precedents that other courts must follow70 because they form part of the law of the land.71 As a rule,
the Supreme Court is not a trial court and rules only on questions of law, in contrast with the Court of
Appeals and other intermediate courts72 which rule on both questions of law and of fact. At the lowest
level of courts are the municipal and the regional trial courts which handle questions of fact and law
at the first instance according to the jurisdiction granted to them by law.
Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the regional trial courts
and the higher courts, all the way up to the Supreme Court. As a general rule, under the hierarchy of
courts principle, the petition must be brought to the lowest court with jurisdiction;73 the petition
brought to the higher courts may be dismissed based on the hierarchy principle. Cases, of course,
may ultimately reach the Supreme Court through the medium of an appeal.
The recognition of exceptions to the general rule is provided by the Supreme Court through
jurisprudence, i.e., through the cases that recognized the propriety of filing cases directly with the
Supreme Court. This is possible as the Supreme Court has the authority to relax the application of its
own rules.74
As observed above, this relaxation waters down other principles affecting the remedy of certiorari.
While the relaxation may result in greater and closer supervision by the Court over the lower courts
and quasi-judicial bodies under Rule 65, the effect may not always be salutary in the long term when
it is considered that this may affect the constitutional standards for the exercise of judicial power,
particularly the existence of an actual case or controversy.
The "transcendental importance" standard, in particular, is vague, open-ended and value-laden, and
should be limited in its use to exemptions from the application of the hierarchy of courts principle. It
should not carry any ripple effect on the constitutional requirement for the presence of an actual case
or controversy.
4. The petition for certiorari and prohibition against the DOH Letter was filed before the wrong
court.
In the present case, the act alleged to be unconstitutional refers to the cease and desist order that
the DOH issued against GAMCA's referral decking system. Its constitutionality was questioned
through a petition for certiorari and prohibition before the RTC. The case reached this Court through
a Rule 45 appeal by certiorari under the traditional route.
In using a petition for certiorari and prohibition to assail the DOHCDO letters, GAMCA committed
several procedural lapses that rendered its petition readily dismissible by the RTC. Not only did the
petitioner present a premature challenge against an administrative act; it also committed the
grave jurisdictional error of filing the petition before the wrong court.
A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-judicial functions,
and could be assailed through Rule 65 on certiorari and prohibition.
A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to an individual or
group within the coverage of the law containing the policy.
The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of Batangas,75 recognized
the difficulty of d fining the precise demarcation line between what are judicial and what are
administrative or ministerial functions, as the exercise of judicial functions may involve the
performance of legislative or administrative duties, and the performance of administrative or
ministerial duties may, to some extent, involve the exercise of functions judicial in character. Thus,
the Court held that the nature of the act to be performed, rather than of the office, board, or
body which performs it, should determine whether or not an action is in the discharge of a judicial
or a quasi-judicial function.76
Generally, the exercise of judicial functions involves the determination of what the law is, and what
the legal rights of parties are under this law with respect to a matter in controversy. Whenever an
officer is clothed with this authority and undertakes to determine those questions, he acts judicially. 77
In the administrative realm, a government officer or body exercises a quasi-judicial function when it
hears and determines questions of fact to which the legislative policy is to apply, and decide, based
on the law's standards, matters relating to the enforcement and administration of the law.78
The DOH CDO letter directed GAMCA to cease and desist from engaging in the referral decking
system practice within three days from receipt of the letter. By issuing this CDO letter implementing
Section 16 of RA No. 10022, the DOH (1) made the finding of fact that GAMCA implements the
referral decking system, and (2) applied Section 16 of RA No. 10022, to conclude that GAMCA's
practice is prohibited by law and should be stopped.
From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter determined a
question of fact, and applied the legislative policy prohibiting the referral decking system practice.
Notably, cease and desist orders have been described and treated as quasi-judicial acts in past
cases, and had even been described as similar to the remedy of injunction granted by the courts.79
A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters fall within the
jurisdiction of the Court of Appeals.
Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA assailed it before the
courts of law had been erroneous; the RTC should not have entertained GAMCA's petition.
First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy involves a Rule
43 appeal or a Rule 65 petition for certiorari, is cognizable by the Court of Appeals. In particular,
Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from
notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely
filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of
the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of
its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by
the Court of Appeals. (emphasis, italics, and underscoring supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial capacity, the
petition challenging its CDO letter should have been filed before the Court of Appeals. The RTC
thus did not have jurisdiction over the subject matter of the petitions and erred in giving due course to
the petition for certiorari and prohibition against the DOH CDO letters. In procedural terms, petitions
for certiorari and prohibition against a government agency are remedies avaiJable to assail its quasi-
judicial acts, and should thus have been filed before the CA.
The provision in Section 4, Rule 65 requiring that certiorari petitions challenging quasi-judicial acts to
be filed with the CA is in full accord with Section 9 of Batas Pambansa Blg. 12980 on the same point.
Section 9 provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:
1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and
quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;
xxxx
3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commission,
including the Securities and Exchange Commission, the Social Security Commission, the Employees
Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of
the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph 4 of the fourth paragraph of Section 17 of
the Judiciary Act of 1948.
xxxx
(emphases, italics, and underscoring supplied)
Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive original jurisdiction
to entertain petitions for certiorari and prohibition against quasi-judicial agencies. In short, GAMCA
filed its remedy with the wrong court.
A.4.c The petitions for certiorari and prohibition against the DOH CDO letters were premature
challenges - they failed to comply with the requirement that there be "no other plain, speedy
and adequate remedy" and with the doctrine of exhaustion of administrative remedies.
Second, the Regional Trial Court of Pasay City unduly disregarded the requirements that there be
"no other plain, speedy and adequate remedy at law" and the doctrine of exhaustion of administrative
remedies, when it gave due course to the certiorari and prohibition petition against the DOH's CDO.
Under Chapter 8, Book IV of Executive Order (EO) No. 292,81 series of 1987, the DOH Secretary
"shall have supervision and control over the bureaus, offices, and agencies under him"82 and "shall
have authority over and responsibility for x x x operation" of the Department.
Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, Sections 1 and 17 of
the Constitution,83 on the other hand, provides that the "President shall have control of all the
executive departments, bureaus, and offices."
These provisions both signify that remedies internal to the Executive Branch exist before resorting to
judicial remedies: GAMCA could ask the DOH Secretary to reconsider or clarify its letter-order, after
which it could appeal, should the ruling be unfavorable, to the Office of the President.
Significantly, this was what GAMCA did in the past when the DOH issued Memorandum Order No.
2008-0210 that prohibited the referral decking system. GAMCA then asked for the DOH Secretary's
reconsideration, and subsequently appealed the DOH's unfavorable decision with the Office of the
President. The OP then reversed Memorandum Order No. 2008-0210 and allowed the referral
decking system to continue.
That GAMCA had earlier taken this course indicates that it was not unaware of the administrative
remedies available to it; it simply opted to disregard the doctrine of exhaustion of administrative
remedies and the requirement that there be no other plain, speedy, and adequate remedy in law
when it immediately filed its petition for certiorari with the RTC.
This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition outside the
exceptions that we recognized in the past in relaxing strict compliance with the exhaustion of
administrative remedies requirement.
Jurisprudence84 shows that this Court never hesitated in the past in relaxing the application of the
rules of procedure to accommodate exceptional circumstances when their strict application would
result in injustice. These instances, founded as they are on equitable considerations, do not include
the undue disreiard of administrative remedies, particularly when they are readily available.85
A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters should have
been dismissed outright, as Rule 65 Petitions for Certiorari and Prohibition are extraordinary
remedies given due course only upon compliance with the formal and substantive
requirements.
Note, at this point, that Rule 65 petitions for certiorari and prohibition are discretionary writs, and that
the handling court possesses the authority to dismiss them outright for failure to comply with the form
and substance requirements. Section 6, Rule 65 of the Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance to justify suclr
process, the court shall issue an order requiring the respondent or respondents to comment on the
petition within ten (10) days from receipt of a copy thereof. Such order shall be served on the
respondents in such manner as the court may direct together with a copy of the petition and any
annexes thereto. (emphasis, italics, and underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the petition
for certiorariand prohibition for its compliance with the Rule 65 requirements. At that point, the
petition for certiorariand prohibition should have been dismissed outright, for failing to comply with
Section 1 and Section 4 of Rule 65. When the court instead took cognizance of the petition, it acted
on a matter outside its jurisdiction.
Consequently, the RTC's resulting judgment is void and carries no legal effect. The decision
exempting GAMCA from the application of the referral decking system should equally have no legal
effect.
Noncompliance with the Section 1, Rule 65 requirement that there be no other plain, speedy, and
adequate remedy in law, on the other hand, is more than just a pro-forma requirement in the present
case. Since the petitions for certiorari and prohibition challenge a governmental act - i.e. action under
the DOH CDO letters, as well as the validity of the instruments under which these letters were issued
- compliance with Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that
judicial review requires is also mandatory. To recall a previous discussion, the exhaustion of
administrative remedies is also an aspect of ripeness in deciding a constitutional issue.
Thus, GAMCA's disregard of the Rules of Court not only renders the petition dismissible for failure to
first exhaust administrative remedies; the constitutional issues GAMCA posed before the RTC were
not also ripe for adjudication.
5. The Regional Trial Court erred in finding grave abuse of discretion on the part of the DOH's
issuance of the DOH CDO letters.
On the merits, we find that the RTC of Pasay reversibly erred in law when it held that the DOH acted
with grave abuse of discretion m prohibiting GAMCA from implementing the referral decking system.
In exempting GAMCA from the referral decking system that RA No. 10022 prohibits, the RTC of
Pasay City noted that the regulation per se was not unconstitutional, but its application to GAMCA
would violate the principle of sovereign equality and independence.
While we agree with the RTC's ultimate conclusion upholding the constitutionality of the prohibition
against the referral decking system under RA No. 10022, our agreement proceeds from another
reason; we disagree that the prohibition does not apply to GAMCA and with the consequent ruling
nullifying the DOH's CDO Letter.
A.5.a. The prohibition against the referral decking system under Section 16, RA No. 10022, is
a valid exercise of police power.
In its comment, GAMCA asserts that implementing the prohibition against the referral decking system
would amount to an undue taking of property that violates Article II, Section 2 of the 1987
Constitution.
It submits that the Securities and Exchange Commission had in fact approved its Articles of
Incorporation and Bylaws that embody the referral decking system; thus, the DOH cannot validly
prohibit the implementation of this system.
GAMCA further claims that its members made substantial investments to upgrade their facilities and
equipment. From this perspective, the August 23, 2010 order constitutes taking of property without
due process of law as its implementation would deprive GAMCA members of their property.
AMCOW responded to these claims with the argument that the DOH CDO letters implementing RA
No. 10022 are consistent with the State's exercise of the police power to prescribe regulations to
promote the health, safety, and general welfare of the people. Public interest justifies the State's
interference in health matters, since the welfare of migrant workers is a legitimate public concern.
The DOH thus merely performed its duty of upholding the migrant workers' freedom to consult their
chosen clinics for the conduct of health examinations.
We agree with AMCOW.
The State's police power86 is vast and plenary87 and the operation of a business,88 especially one
that is imbued with public interest (such as healthcare services),89 falls within the scope of
governmental exercise of police power through regulation.
As defined, police power includes (1) the imposition of restraint on liberty or property, (2) in order to
foster the common good.90 The exercise of police power involves the "state authority to enact
legislation that may interfere with personal liberty or property in order to promote the general
welfare."91
By its very nature, the exercise of the State's police power limits individual rights and liberties, and
subjects them to the "far more overriding demands and requirements of the greater
number."92 Though vast and plenary, this State power also carries limitations, specifically, it may not
be exercised arbitrarily or unreasonably. Otherwise, it defeats the purpose for which it is exercised,
that is, the advancement of the public good.93
To be considered reasonable, the government's exercise of police power must satisfy the "valid
object and valid means" method of analysis: first, the interest of the public generally, as
distinguished from those of a particular class, requires interference; and second, the means
employed are reasonably necessary to attain the objective sought and not unduly oppressive upon
individuals.94
These two elements of reasonableness are undeniably present in Section 16 of RA No. 10022. The
prohibition against the referral decking system is consistent with the State's exercise of the police
power to prescribe regulations to promote the health, safety, and general welfare of the people.
Public interest demands State interference on health matters, since the welfare of migrant workers is
a legitimate public concern.
We note that RA No. 10022 expressly reflects the declared State policies to "uphold the dignity of its
citizens whether in the country or overseas, in general, and Filipino migrant workers," and to "afford
full protection to labor, local and overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all. Towards this end, the State shall provide adequate
and timely social, economic and legal services to Filipino migrant workers." The prohibition against
the referral decking system in Section 16 of RA No. 10022 is an expression and implementation of
these state policies.
The guarantee under Section 16 for OFWs to be given the option to choose a quality healthcare
service provider as expressed in Section 16 (c)95 of RA No. 10022 is guaranteed by the prohibition
against the decking practice and against monopoly practices in OFW health examinations.96
Section 16 likewise requires employers to accept health examinations from any DOH-accredited
health facility; a refusal could lead to their temporary disqualification under pertinent rules to be
formulated by the Philippine Overseas Employment Authority (POEA).97
These rules are part of the larger legal framework to ensure the Overseas Filipino Workers' (OFW)
access to quality healthcare services, and to curb existing practices that limit their choices to specific
clinics and facilities.
Separately from the Section 16 prohibition against the referral decking system, RA No. 10022 also
prohibits and penalizes the imposition of a compulsory exclusive arrangement requiring OFWs to
undergo health examinations only from specifically designated medical clinics, institutions, entities or
persons. Section 5, in relation to Section 6 of RA No. 10022, penalizes compulsory, exclusive
arrangements98 by imprisonment and fine and by the automatic revocation of the participating
medical clinic's license.
The DOH's role under this framework is to regulate the activities and operations of all clinics
conducting health examinations on Filipino migrant workers as a requirement for their overseas
employment. The DOH is tasked to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting health
examinations on migrant workers for certain receiving countries;
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-accredited or
DOH-operated clinics that will conduct his/her health examinations and that his or her rights as a
patient are respected. The decking practice, which requires an overseas Filipino worker to go first to
an office for registration and then farmed out to a medical clinic located elsewhere, shall not be
allowed;99
While Section 16 of RA No. 10022 does not specifically define the consequences of violating the
prohibition against the referral decking system, Republic Act No. 4226 (Hospital Licensure Act),
which governs the licensure and regulation of hospitals and health facilities, authorizes the DOH to
suspend, revoke, or refuse to renew the license of hospitals and clinics violating the law.100
These consequences cannot but apply to the violation of the prohibition against the referral decking
system under RA No. 10022. If, under the law, the DOH can suspend, revoke, or refuse to renew the
license of these hospitals upon the finding that they violated any provision of law (whether those
found in RA No. 4226 or in RA No. 10022), it follows- as a necessarily included lesser power - that
the DOH can likewise order these clinics and their association to cease and desist from practices
that the law deems to be undesirable.
A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH CDO letters.
As discussed above, the letter-order implementing the prohibition against the referral decking system
is quasi-judicial in nature. This characteristic requires that procedural due process be observed - that
is, that the clinics concerned be given the opportunity to be heard before the standard found in the
law can be applied to them.
Thus, prior to the issuance of the disputed CDO letter, the DOH should have given GAMCA the
opportunity to be heard on whether the prohibition applies to it. Lest this opportunity to be heard be
misunderstood, this DOH obligation raises an issue different from the question of whether Congress
can, under the exercise of police power, prohibit the referral decking system; this latter issue lies
outside the scope of the DOH to pass upon. The required hearing before the DOH relates solely to
whether it properly implemented, based on the given standards under the law, the prohibition that
Congress decreed under RA No. 10022.
Under normal circumstances, the issuance of a CDO without a prior hearing would violate GAMCA's
procedural due process rights, and would amount to more than a legal error, i.e., an error equivalent
to action without jurisdiction. Rendering a decision quasi-judicial in nature without providing the
opportunity to be heard amounts to a grave abuse of discretion that divests a quasi-judicial agency of
its jurisdiction.
Factual circumstances unique to the present case, however, lead us to conclude that while it was an
error of law for the DOH to issue a CDO without complying with the requirements of procedural due
process, its action did not amount to a grave abuse of discretion.
Grave abuse of discretion amounts to more than an error of law; it refers to an act that is so
capricious, arbitrary, and whimsical that it amounts to a clear evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and
despotic manner because of passion or hostility.101
Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to determine that
GAMCA practices the prohibited referral decking system under RA No. 10022. Notably, the DOH had
earlier allowed and recognized the referral decking system that GAMCA practiced through AO 5-01.
This recognition was made with GAMCA's practice in mind. The subsequent administrative orders
and department memorandum suspending and terminating the referral decking system, respectively,
all pertain to the practice that the DOH had authorized under AO 5-01. Even the subject matter of
these issuances do not just pertain to any other referral decking system, but to the "GAMCA referral
decking system."
GAMCA likewise had more than several opportunities to contest the suspension and eventual
revocation of the referral decking system initially pe1mitted under AO 5-01. Its appeal even reached
the Office of the President, which overturned the DOH Memorandum Order terminating the referral
decking system.
That the referral decking system had been subsequently prohibited by law shows the intent of
Congress to prevent and prohibit the practice that GAMCA initiated and which the President had
allowed. The President's duty under our political system is to implement the law; hence, when
Congress subsequently prohibited the practice that GAMCA initiated, the Executive - including the
President -has no choice but to implement it.
Based on these circumstances, while the DOH erred when it issued its CDO letters without first
giving GAMCA the opportunity to prove whether the practice conducted by GAMCA is the same
practice prohibited under RA No. 10022, the DOH conclusion to so act, in our view, did not constitute
grave abuse of discretion that would have divested it of jurisdiction.
We note that the DOH had sufficient basis when it determined that the referral decking system
prohibited under RA No. 10022 was the same decking system practiced by GAMCA. To reiterate, the
referral decking system was not something new; it was an old system that GAMCA practiced and
was known to all in its scope and operating details. That GAMCA had previously questioned the
DOH prohibition and had been given ample opportunity to be heard when it filed an appeal before
the OP, negate the conclusion that GAMCA had been aggrieved by precipitate and unfair DOH
action.
To be sure, these factual circumstances do not make the CDO letter compliant with procedural due
process. They mitigate, however, the error committed and render it less than the capricious, arbitrary,
and patent refusal to comply with a positive legal duty that characterizes an act committed with grave
abuse of discretion.
The Court furthermore, in several instances,102 has recognized that an administrative agency may
issue an ex parte cease and desist order, where vital public interests outweigh the need for
procedural due process." In these instances, the Court noted that the affected establishment may
contest the ex parteorder, upon which the administrative agency concerned must conduct a hearing
and allow the establishment to be heard. While jurisprudence has so far used the "vital public
interests" standard to pollution cases, it had not been a grave abuse of discretion on the part of the
DOH to consider that GAMCA's referral decking practice falls within this category. The DOH has long
made the factual finding that the referral decking system hinders our Filipino seafarers' access to
quality and affordable healthcare in its A.O. No. 106, series of 2002.
These circumstances further mitigate whatever legal error the DOH has committed and render the
conclusion that grave abuse of discretion had taken place misplaced.
Since the writs of certiorari and prohibition do not issue against legal errors, but to acts of grave
abuse of discretion, the RTC erred in issuing these writs against the DOH CDO letters.
6. The prohibition against the referral decking system against GAMCA does not violate the
principle of sovereign equality and independence.
The RTC based its decision to grant the writs of certiorari and prohibition against the DOH letter-
order on the principle of sovereign equality and independence; applying the referral decking system
prohibition against GAMCA violates this principle.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of
RA No. 10022 must be interpreted to apply only to clinics conducting health examinations on migrant
workers bound for countries that do not require the referral decking system for the issuance of visas
to job applicants.
The RTC observed, too, that the refer al decking system is part of the application procedure in
obtaining visas to enter the GCC States, a procedure made in the exercise of the sovereign power of
the GCC States to protect their nationals from health hazards, and of their diplomatic power to
regulate and screen entrants to their territories.
It also reasoned out that under the principle of sovereign equality and independence of States, the
Philippines cannot interfere with this system and in fact must respect the visa-granting procedures of
foreign states in the same way that they respect our immigration procedures. Moreover, to restrain
GAMCA which is a mere adjunct of HMC (an agent of GCC States) is to restrain the GCC States
themselves.
AMCOW contests the RTC's conclusion, arguing that the principles of sovereign equality and
independence of States do not apply to the present case. According to AMCOW, the subject matter
of this case pertains to a domestic concern as the law and the regulations that GAMCA assails relate
to the operation of medical clinics in the Philippines.
It points out that the Philippines gave GAMCA and its members the privilege of conducting their
businesses domestically; hence, their operations are governed by Philippine laws, specifically by RA
No. 10022 which serves as one of the limitations on the privilege granted to them. GAMCA's right to
engage in business should yield to the State's exercise of police power. In legal contemplation,
therefore, the DOH CDO letters did not prejudice GAMCA's right to engage in business; nor did they
hamper the GAMCA members' business operations.

AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are consistent with
the State's exercise of the police power to prescribe regulations to promote the health, safety, and
general welfare of the people. Public interest demands State interference on health matters, since
the welfare of migrant workers is a legitimate public concern. The DOH thus merely performed its
duty of upholding the migrant workers' freedom to choose any of its accredited or operated clinics
that will conduct health examinations.
The DOH, for its part, adds that the implementation of RA No. 10022 cannot be defeated by
agreements entered into by GAMCA with the GCC States. The GCC States, the DOH points out, are
not empowered to determine the Philippines' courses of action with respect to the operation, within
Philippine territory, of medical clinics; the conduct of health examinations; and the freedom of choice
of Filipino migrant workers.
GAMCA responds to these arguments by asserting that the referral decking system is a part of the
application procedure for obtaining visas to enter the GCC States. Hence, it is an exercise of the
sovereign power of the GCC States to protect their nationals from health hazards, and their
diplomatic power to regulate and screen entrants to their territories. To restrain an agent of the GCC
States under the control and acting in accordance with the direction of these GCC States, restrains
the GCC States.
GAMCA also points out that the OFWs would suffer grave and irreparable damage and injury if the
DOH CDO letters would be implemented as the GCC States would not issue working visas without
the GAMCA seal attesting that the OFWs had been medically examined by GAMCA member clinics.
After considering all these arguments, we find that the RTC's decision misapplied the principle of
sovereign independence and equality to the present case. While the principles of sovereign
independence and equality have been recognized in Philippine jurisprudence, our recogmtmn of this
principle does not extend to the exemption of States and their affiliates from compliance with
Philippine regulatory laws.
A.6. The principle of sovereign equality and independence of states does not exempt
GAMCAfrom the referral decking system prohibition under RA No. 10022.
In Republic of Indonesia v. Vinzon,103 we recognized the principle of sovereign independence and
equality as part of the law of the land. We used this principle to justify the recognition of the principle
of sovereign immunity which exempts the State - both our Government and foreign governments -
from suit. We held:
International law is founded largely upon the principles of reciprocity, comity, independence, and
equality of States which were adopted as part of the law of our land under Article II, Section 2 of the
1987 Constitution. The rule that a State may not be sued without its consent is a necessary
consequence of the principles of independence and equality of States. As enunciated in Sanders v.
Veridiano II, the practical justification for the doctrine of sovereign immunity is that there can be no
legal right against the authority that makes the law on which the right depends. In the case of foreign
States, the rule is derived from the principle of the sovereign equality of States, as expressed in the
maxim par in parem non habet imperium. All states are sovereign equals and cannot assert
jurisdiction over one another. A contrary attitude would "unduly vex the peace of nations."
Our recognition of sovereign immunity, however, has never been unqualified. While we recognized
the principles of independence and equality of States to justify a State's sovereign immunity from
suit, we also restricted state immunity to acts jus imperii, or public acts. We said that once a State
enters into commercial transactions (jus gestionis), then it descends to the level of a private
individual, and is thus not immune from the resulting liability and consequences of its actions.104
By this recognition, we acknowledge that a foreign government acting in its jus imperii function
cannot be held liable in a Philippine court. Philippine courts, as part of the Philippine government,
cannot and should not take jurisdiction over cases involving the public acts of a foreign government.
Taking jurisdiction would amount to authority over a foreign government, and would thus violate the
principle of sovereign independence and equality.105
This recognition is altogether different from exempting governments whose agents are in the
Philippines from complying with our domestic laws.106 We have yet to declare in a case that the
principle of sovereign independence and equality exempts agents of foreign governments from
compliance with the application of Philippine domestic law.
In the present case, GAMCA has not adduced any evidence in the court below, nor has it presented
any argument before us showing that the principle of sovereign equality and independence has
developed into an international custom shielding state agents from compliance with another state's
domestic laws. Under this situation, the Court is in no position to determine whether the practice that
GAMCA alleges has indeed crystallized into an international custom.
GAMCA has never proven in this case, too, that the GCC has extended its sovereign immunity to
GAMCA. Sovereign immunity belongs to the State, and it must first be extended to its agents before
the latter may be considered to possess sovereign immunity.
Significantly, the Court has even adopted a restrictive approach in recognizing state immunity, by
distinguishing between a State's jus imperii and jus gestionis. It is only when a State acts in its jus
imperii function that we recognize state immunity.107
We point out furthermore that the prohibition against the referral decking system applies to hospitals
and clinics, as well as to OFW employers, and does not seek to interfere with the GCC's visa
requirement processes. RA 10022 prohibits hospitals and clinics in the Philippines from practicing
the referral decking system, and employers from requiring OFWs to procure their medical
examinations from hospitals and clinics practicing the referral decking system.
The regulation applies to Philippine hospitals and clinics, as well as to employers of OFWs. It does
not apply to the GCCs and their visa processes. That the regulation could affect the OFWs'
compliance with the visa requirements imposed by GCCs does not place it outside the regulatory
powers of the Philippine government.
In the same manner, GCC states continue to possess the prerogative to apply their visa
requirements to any foreign national, including our OFWs, who seeks to enter their territory; they
may refuse to grant them entry for failure to comply with the referral decking system, or they may
adjust to the prohibition against the referral decking system that we have imposed. These
prerogatives lie with the GCC member-states and do not affect at all the legality of the prohibition
against the referral decking system.
Lastly, the effect of the prohibition against the referral decking system is beyond the authority of this
Court to consider. The wisdom of this prohibition has been decided by Congress, through the
enactment of RA No. 10022. Our role in this case is merely to determine whether our government
has the authority to enact the law's prohibition against the referral decking system, and whether this
prohibition is being implemented legally. Beyond these lies the realm of policy that, under our
Constitution's separation of powers, this Court cannot cross.
WHEREFORE, in the light of these considerations, we hereby GRANT the petitions. Accordingly,
we REVERSE and SET ASIDE the orders dated August 10, 2012 and April 12, 2013 of the Regional
Trial Court of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.
Costs against respondent GAMCA.
SO ORDERED. cralawlawlibrary
________________________________________________________________________________
_________________________
G.R. NO. 162053 : March 7, 2007]
ST. LUKE'S MEDICAL CENTER EMPLOYEE'S ASSOCIATION-AFW (SLMCEA-AFW) AND
MARIBEL S. SANTOS, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION (NLRC)
AND ST. LUKE'S MEDICAL CENTER, INC., Respondents.
DECISION
AZCUNA, J.:
Challenged in this Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA)
dated January 29, 2004 in CA-G.R. SP No. 75732 affirming the decision2 dated August 23, 2002
rendered by the National Labor Relations Commission (NLRC) in NLRC CA No. 026225-00.
The antecedent facts are as follows:
Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology department of private
respondent St. Luke's Medical Center, Inc. (SLMC) on October 13, 1984. She is a graduate of
Associate in Radiologic Technology from The Family Clinic Incorporated School of Radiologic
Technology.
On April 22, 1992, Congress passed and enacted Republic Act No. 7431 known as the "Radiologic
Technology Act of 1992." Said law requires that no person shall practice or offer to practice as a
radiology and/or x-ray technologist in the Philippines without having obtained the proper certificate of
registration from the Board of Radiologic Technology.
On September 12, 1995, the Assistant Executive Director-Ancillary Services and HR Director of
private respondent SLMC issued a final notice to all practitioners of Radiologic Technology to comply
with the requirement of Republic Act No. 7431 by December 31, 1995; otherwise, the unlicensed
employee will be transferred to an area which does not require a license to practice if a slot is
available.
On March 4, 1997, the Director of the Institute of Radiology issued a final notice to petitioner Maribel
S. Santos requiring the latter to comply with Republic Act. No. 7431 by taking and passing the
forthcoming examination scheduled in June 1997; otherwise, private respondent SLMC may be
compelled to retire her from employment should there be no other position available where she may
be absorbed.
On May 14, 1997, the Director of the Institute of Radiology, AED-Division of Ancillary Services issued
a memorandum to petitioner Maribel S. Santos directing the latter to submit her PRC Registration
form/Examination Permit per Memorandum dated March 4, 1997.
On March 13, 1998, the Director of the Institute of Radiology issued another memorandum to
petitioner Maribel S. Santos advising her that only a license can assure her of her continued
employment at the Institute of Radiology of the private respondent SLMC and that the latter is giving
her the last chance to take and pass the forthcoming board examination scheduled in June 1998;
otherwise, private respondent SLMC shall be constrained to take action which may include her
separation from employment.
On November 23, 1998, the Director of the Institute of Radiology issued a notice to petitioner Maribel
S. Santos informing the latter that the management of private respondent SLMC has approved her
retirement in lieu of separation pay.
On November 26, 1998, the Personnel Manager of private respondent SLMC issued a "Notice of
Separation from the Company" to petitioner Maribel S. Santos effective December 30, 1998 in view
of the latter's refusal to accept private respondent SLMC's offer for early retirement. The notice also
states that while said private respondent exerted its efforts to transfer petitioner Maribel S. Santos to
other position/s, her qualifications do not fit with any of the present vacant positions in the hospital.
In a letter dated December 18, 1998, a certain Jack C. Lappay, President of the Philippine
Association of Radiologic Technologists, Inc., wrote Ms. Judith Betita, Personnel Manager of private
respondent SLMC, requesting the latter to give "due consideration" to the organization's three (3)
regular members of his organization (petitioner Maribel S. Santos included) "for not passing yet the
Board of Examination for X-ray Technology," "by giving them an assignment in any department of
your hospital awaiting their chance to pass the future Board Exam."
On January 6, 1999, the Personnel Manager of private respondent SLMC again issued a "Notice of
Separation from the Company" to petitioner Maribel S. Santos effective February 5, 1999 after the
latter failed to present/ submit her appeal for rechecking to the Professional Regulation Commission
(PRC) of the recent board examination which she took and failed.
On March 2, 1999, petitioner Maribel S. Santos filed a complaint against private respondent SLMC
for illegal dismissal and non-payment of salaries, allowances and other monetary benefits. She
likewise prayed for the award of moral and exemplary damages plus attorney's fees.
In the meantime, petitioner Alliance of Filipino Workers (AFW), through its President and Legal
Counsel, in a letter dated September 22, 1999 addressed to Ms. Rita Marasigan, Human Resources
Director of private respondent SLMC, requested the latter to accommodate petitioner Maribel S.
Santos and assign her to the vacant position of CSS Aide in the hospital arising from the death of an
employee more than two (2) months earlier.
In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:
Gentlemen:
Thank you for your letter of September 22, 1999 formally requesting to fill up the vacant regular
position of a CSS Aide in Ms. Maribel Santos' behalf.
The position is indeed vacant. Please refer to our Recruitment Policy for particulars especially on
minimum requirements of the job and the need to meet said requirements, as well as other pre-
employment requirements, in order to be considered for the vacant position. As a matter of fact, Ms.
Santos is welcome to apply for any vacant position on the condition that she possesses the
necessary qualifications.
As to the consensus referred to in your letter, may I correct you that the agreement is, regardless of
the vacant position Ms. Santos decides to apply, she must go through the usual application
procedures. The formal letter, I am afraid, will not suffice for purposes of recruitment processing. As
you know, the managers requesting to fill any vacancy has a say on the matter and correctly so. The
manager's inputs are necessarily factored into the standard recruitment procedures. Hence, the need
to undergo the prescribed steps.
Indeed we have gone through the mechanics to accommodate Ms. Santos' transfer while she was
employed with SLMC given the prescribed period. She was given 30 days from issuance of the
notice of termination to look for appropriate openings which incidentally she wittingly declined to
utilize. She did this knowing fully well that the consequences would be that her application beyond
the 30-day period or after the effective date of her termination from SLMC would be considered a re-
application with loss of seniority and shall be subjected to the pertinent application procedures.
Needless to mention, one of the 3 X-ray Technologists in similar circumstances as Ms. Santos at the
time successfully managed to get herself transferred to E.R. because she opted to apply for the
appropriate vacant position and qualified for it within the prescribed 30-day period. The other X-ray
Technologist, on the other hand, as you may recall, was eventually terminated not just for his failure
to comply with the licensure requirement of the law but for cause (refusal to serve a customer).
Why Ms. Santos opted to file a complaint before the Labor Courts and not to avail of the opportunity
given her, or assuming she was not qualified for any vacant position even if she tried to look for one
within the prescribed period, I simply cannot understand why she also refused the separation pay
offered by Management in an amount beyond the minimum required by law only to re-apply at
SLMC, which option would be available to her anyway even (if she) chose to accept the separation
pay!
Well, here's hoping that our Union can timely influence our employees to choose their options well as
it has in the past.
(Signed)
RITA MARASIGAN
Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita, Personnel Manager of private
respondent SLMC wrote Mr. Angelito Calderon, President of petitioner union as follows:
Dear Mr. Calderon:
This is with regard to the case of Ms. Maribel Santos. Please recall that last Oct. 8, 1999, Ms. Rita
Marasigan, HR Director, discussed with you and Mr. Greg Del Prado the terms regarding the re-
hiring of Ms. Maribel Santos. Ms. Marasigan offered Ms. Santos the position of Secretary at the
Dietary Department. In that meeting, Ms. Santos replied that she would think about the offer. To
date, we still have no definite reply from her. Again, during the conference held on Dec. 14, 1999,
Atty. Martir promised to talk to Ms. Santos, and inform us of her reply by Dec. 21, 1999. Again we
failed to hear her reply through him.
Please be informed that said position is in need of immediate staffing. The Dietary Department has
already been experiencing serious backlog of work due to the said vacancy. Please note that more
than 2 months has passed since Ms. Marasigan offered this compromise. Management cannot afford
to wait for her decision while the operation of the said department suffers from vacancy.
Therefore, Management is giving Ms. Santos until the end of this month to give her decision. If we
fail to hear from her or from you as her representatives by that time, we will consider it as a waiver
and we will be forced to offer the position to other applicants so as not to jeopardize the Dietary
Department's operation.
For your immediate action.

(Signed)
JUDITH BETITA
Personnel Manager
On September 5, 2000, the Labor Arbiter came out with a Decision ordering private respondent
SLMC to pay petitioner Maribel S. Santos the amount of One Hundred Fifteen Thousand Five
Hundred Pesos (P115,500.00) representing her separation pay. All other claims of petitioner were
dismissed for lack of merit.
Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public respondent NLRC.
On August 23, 2002, public respondent NLRC promulgated its Decision affirming the Decision of the
Labor Arbiter. It likewise denied the Motion for Reconsideration filed by petitioners in its Resolution
promulgated on December 27, 2002.
Petitioner thereafter filed a petition for certiorari with the CA which, as previously mentioned, affirmed
the decision of the NLRC.
Hence, this petition raising the following issues:
I. Whether the CA overlooked certain material facts and circumstances on petitioners' legal claim in
relation to the complaint for illegal dismissal.
II. Whether the CA committed grave abuse of discretion and erred in not resolving with clarity the
issues on the merit of petitioner's constitutional right of security of tenure.3
For its part, private respondent St. Luke's Medical Center, Inc. (SLMC) argues in its comment 4 that:
1) the petition should be dismissed for failure of petitioners to file a motion for reconsideration; 2) the
CA did not commit grave abuse of discretion in upholding the NLRC and the Labor Arbiter's ruling
that petitioner was legally dismissed; 3) petitioner was legally and validly terminated in accordance
with Republic Act Nos. 4226 and 7431; 4) private respondent's decision to terminate petitioner
Santos was made in good faith and was not the result of unfair discrimination; and 5) petitioner
Santos' non-transfer to another position in the SLMC was a valid exercise of management
prerogative.
The petition lacks merit.
Generally, the Court has always accorded respect and finality to the findings of fact of the CA
particularly if they coincide with those of the Labor Arbiter and the NLRC and are supported by
substantial evidence.5 True this rule admits of certain exceptions as, for example, when the judgment
is based on a misapprehension of facts, or the findings of fact are not supported by the evidence on
record6 or are so glaringly erroneous as to constitute grave abuse of discretion.7 None of these
exceptions, however, has been convincingly shown by petitioners to apply in the present case.
Hence, the Court sees no reason to disturb such findings of fact of the CA.
Ultimately, the issue raised by the parties boils down to whether petitioner Santos was illegally
dismissed by private respondent SLMC on the basis of her inability to secure a certificate of
registration from the Board of Radiologic Technology.
The requirement for a certificate of registration is set forth under R.A. No. 7431 8 thus:
Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray Technology. - Unless
exempt from the examinations under Sections 16 and 17 hereof, no person shall practice or offer to
practice as a radiologic and/or x-ray technologist in the Philippines without having obtained the
proper certificate of registration from the Board.
It is significant to note that petitioners expressly concede that the sole cause for petitioner Santos'
separation from work is her failure to pass the board licensure exam for X-ray technicians, a
precondition for obtaining the certificate of registration from the Board. It is argued, though, that
petitioner Santos' failure to comply with the certification requirement did not constitute just cause for
termination as it violated her constitutional right to security of tenure. This contention is untenable.
While the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be
reasonably regulated pursuant to the police power of the State to safeguard health, morals, peace,
education, order, safety, and the general welfare of the people. Consequently, persons who desire to
engage in the learned professions requiring scientific or technical knowledge may be required to take
an examination as a prerequisite to engaging in their chosen careers.9 The most concrete example of
this would be in the field of medicine, the practice of which in all its branches has been closely
regulated by the State. It has long been recognized that the regulation of this field is a reasonable
method of protecting the health and safety of the public to protect the public from the potentially
deadly effects of incompetence and ignorance among those who would practice medicine.10 The
same rationale applies in the regulation of the practice of radiologic and x-ray technology. The clear
and unmistakable intention of the legislature in prescribing guidelines for persons seeking to practice
in this field is embodied in Section 2 of the law:
Sec. 2. Statement of Policy. - It is the policy of the State to upgrade the practice of radiologic
technology in the Philippines for the purpose of protecting the public from the hazards posed by
radiation as well as to ensure safe and proper diagnosis, treatment and research through the
application of machines and/or equipment using radiation.11
In this regard, the Court quotes with approval the disquisition of public respondent NLRC in its
decision dated August 23, 2002:
The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's inherent
police power. It should be noted that the police power embraces the power to prescribe regulations
to promote the health, morals, educations, good order, safety or general welfare of the people. The
state is justified in prescribing the specific requirements for x-ray technicians and/or any other
professions connected with the health and safety of its citizens. Respondent-appellee being engaged
in the hospital and health care business, is a proper subject of the cited law; thus, having in mind the
legal requirements of these laws, the latter cannot close its eyes and [let] complainant-appellant's
private interest override public interest.
Indeed, complainant-appellant cannot insist on her "sterling work performance without any
derogatory record" to make her qualify as an x-ray technician in the absence of a proper certificate of
Registration from the Board of Radiologic Technology which can only be obtained by passing the
required examination. The law is clear that the Certificate of Registration cannot be substituted by
any other requirement to allow a person to practice as a Radiologic Technologist and/or X-ray
Technologist (Technician).12
No malice or ill-will can be imputed upon private respondent as the separation of petitioner Santos
was undertaken by it conformably to an existing statute. It is undeniable that her continued
employment without the required Board certification exposed the hospital to possible sanctions and
even to a revocation of its license to operate. Certainly, private respondent could not be expected to
retain petitioner Santos despite the inimical threat posed by the latter to its business. This
notwithstanding, the records bear out the fact that petitioner Santos was given ample opportunity to
qualify for the position and was sufficiently warned that her failure to do so would result in her
separation from work in the event there were no other vacant positions to which she could be
transferred. Despite these warnings, petitioner Santos was still unable to comply and pass the
required exam. To reiterate, the requirement for Board certification was set by statute. Justice,
fairness and due process demand that an employer should not be penalized for situations where it
had no participation or control.13
It would be unreasonable to compel private respondent to wait until its license is cancelled and it is
materially injured before removing the cause of the impending evil. Neither can the courts step in to
force private respondent to reassign or transfer petitioner Santos under these circumstances.
Petitioner Santos is not in the position to demand that she be given a different work assignment
when what necessitated her transfer in the first place was her own fault or failing. The prerogative to
determine the place or station where an employee is best qualified to serve the interests of the
company on the basis of the his or her qualifications, training and performance belongs solely to the
employer.14 The Labor Code and its implementing Rules do not vest in the Labor Arbiters nor in the
different Divisions of the NLRC (nor in the courts) managerial authority.15
While our laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also
recognizes that management has rights which are also entitled to respect and enforcement in the
interest of fair play.16 Labor laws, to be sure, do not authorize interference with the employer's
judgment in the conduct of the latter's business. Private respondent is free to determine, using its
own discretion and business judgment, all elements of employment, "from hiring to firing" except in
cases of unlawful discrimination or those which may be provided by law. None of these exceptions is
present in the instant case.
The fact that another employee, who likewise failed to pass the required exam, was allowed by
private respondent to apply for and transfer to another position with the hospital does not constitute
unlawful discrimination. This was a valid exercise of management prerogative, petitioners not having
alleged nor proven that the reassigned employee did not qualify for the position where she was
transferred. In the past, the Court has ruled that an objection founded on the ground that one has
better credentials over the appointee is frowned upon so long as the latter possesses the minimum
qualifications for the position.17 Furthermore, the records show that Ms. Santos did not even
seriously apply for another position in the company.
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.