G.R. No.

L-5060
January 26, 1910
THE
UNITED
STATES, plaintiff-appellee,
vs.
LUIS TORIBIO, defendant-appellant.
Rodriguez
&
Del
Rosario,
for
appellant.
Attorney-General Villamor, for appellee.
CARSON, J.:
The evidence of record fully sustains the findings of the trial court
that the appellant slaughtered or caused to be slaughtered for
human consumption, the carabao described in the information,
without a permit from the municipal treasure of the municipality
wherein it was slaughtered, in violation of the provisions of sections
30 and 33 of Act No. 1147, an Act regulating the registration,
branding, and slaughter of large cattle.
It appears that in the town of Carmen, in the Province of Bohol,
wherein the animal was slaughtered there is no municipal
slaughterhouse, and counsel for appellant contends that under
such circumstances the provisions of Act No. 1147 do not prohibit
nor penalize the slaughter of large cattle without a permit of the
municipal treasure. Sections 30, 31, 32, and 33 of the Act are as
follows:
SEC. 30. No large cattle shall be slaughtered or killed for
food at the municipal slaughterhouse except upon permit
secured from the municipal treasure. Before issuing the
permit for the slaughter of large cattle for human
consumption, the municipal treasurer shall require for
branded cattle the production of the original certificate of
ownership and certificates of transfer showing title in the
person applying for the permit, and for unbranded cattle
such evidence as may satisfy said treasurer as to the
ownership of the animals for which permit to slaughter has
been requested.
SEC. 31. No permit to slaughter has been carabaos shall be
granted by the municipal treasurer unless such animals are
unfit for agricultural work or for draft purposes, and in no
event shall a permit be given to slaughter for food any
animal of any kind which is not fit for human consumption.
SEC. 32. The municipal treasurer shall keep a record of all
permits for slaughter issued by him, and such record shall
show the name and residence of the owner, and the class,

sex, age, brands, knots of radiated hair commonly know as

remolinos or cowlicks, and other marks of identification of
the animal for the slaughter of which permit is issued and
the date on which such permit is issued. Names of owners
shall be alphabetically arranged in the record, together with
date of permit.
A copy of the record of permits granted for slaughter shall
be forwarded monthly to the provincial treasurer, who shall
file and properly index the same under the name of the
owner, together with date of permit.
SEC. 33. Any person slaughtering or causing to be
slaughtered for human consumption or killing for food at the
municipal slaughterhouse any large cattle except upon
permit duly secured from the municipal treasurer, shall be
punished by a fine of not less than ten nor more than five
hundred pesos, Philippine currency, or by imprisonment for
not less than one month nor more than six months, or by
both such fine and imprisonment, in the discretion of the
court.
It is contended that the proper construction of the language of
these provisions limits the prohibition contained in section 30 and
the penalty imposed in section 33 to cases (1) of slaughter of large
cattle for human consumptionin a municipal slaughter without a
permit duly secured from the municipal treasurer, and (2) cases of
killing of large cattle for food in a municipal slaughterhouse without
a permit duly secured from the municipal treasurer; and it is urged
that the municipality of Carmen not being provided with a
municipal slaughterhouse, neither the prohibition nor the penalty is
applicable to cases of slaughter of large cattle without a permit in
that municipality.
We are of opinion, however, that the prohibition contained in
section 30 refers (1) to the slaughter of large cattle for human
consumption, anywhere, without a permit duly secured from the
municipal treasurer, and (2) expressly and specifically to the killing
for food of large cattle at a municipal slaughterhouse without such
permit; and that the penalty provided in section 33 applies
generally to the slaughter of large cattle for human consumption,
anywhere, without a permit duly secured from the municipal
treasurer, and specifically to the killing for food of large cattle at a
municipal slaughterhouse without such permit.

It may be admitted at once, that the pertinent language of those

sections taken by itself and examined apart from the context fairly
admits of two constructions: one whereby the phrase "at the
municipal slaughterhouse" may be taken as limiting and restricting
both the word "slaughtered" and the words "killed for food" in
section 30, and the words "slaughtering or causing to be
slaughtered for human consumption" and the words "killing for
food" in section 33; and the other whereby the phrase "at the
municipal slaughterhouse" may be taken as limiting and restricting
merely the words "killed for food" and "killing for food" as used in
those sections. But upon a reading of the whole Act, and keeping in
mind the manifest and expressed purpose and object of its
enactment, it is very clear that the latter construction is that which
should be adopted.
The Act primarily seeks to protect the "large cattle" of the
Philippine Islands against theft and to make easy the recovery and
return of such cattle to their proper owners when lost, strayed, or
stolen. To this end it provides an elaborate and compulsory system
for the separate branding and registry of ownership of all such
cattle throughout the Islands, whereby owners are enabled readily
and easily to establish their title; it prohibits and invalidates all
transfers of large cattle unaccompanied by certificates of transfer
issued by the proper officer in the municipality where the contract
of sale is made; and it provides also for the disposition of thieves or
persons unlawfully in possession, so as to protect the rights of the
true owners. All this, manifestly, in order to make it difficult for any
one but the rightful owner of such cattle to retain them in his
possession or to dispose of them to others. But the usefulness of
this elaborate and compulsory system of identification, resting as it
does on the official registry of the brands and marks on each
separate animal throughout the Islands, would be largely impaired,
if not totally destroyed, if such animals were requiring proof of
ownership and the production of certificates of registry by the
person slaughtering or causing them to be slaughtered, and this
especially if the animals were slaughtered privately or in a
clandestine manner outside of a municipal slaughterhouse. Hence,
as it would appear, sections 30 and 33 prohibit and penalize the
slaughter for human consumption or killing for food at a municipal
slaughterhouse of such animals without a permit issued by the
municipal treasurer, and section 32 provides for the keeping of

detailed records of all such permits in the office of the municipal

and also of the provincial treasurer.
If, however, the construction be placed on these sections which is
contended for by the appellant, it will readily be seen that all these
carefully worked out provisions for the registry and record of the
brands and marks of identification of all large cattle in the Islands
would prove in large part abortion, since thieves and persons
unlawfully in possession of such cattle, and naturally would, evade
the provisions of the law by slaughtering them outside of municipal
slaughterhouses, and thus enjoy the fruits of their wrongdoing
without exposing themselves to the danger of detection incident to
the bringing of the animals to the public slaughterhouse, where the
brands and other identification marks might be scrutinized and
proof of ownership required.
Where the language of a statute is fairly susceptible of two or more
constructions, that construction should be adopted which will most
tend to give effect to the manifest intent of the lawmaker and
promote the object for which the statute was enacted, and a
construction should be rejected which would tend to render
abortive other provisions of the statute and to defeat the object
which the legislator sought to attain by its enactment. We are of
opinion, therefore, that sections 30 and 33 of the Act prohibit and
penalize the slaughtering or causing to be slaughtered for human
consumption of large cattle at any place without the permit
provided for in section 30.
It is not essential that an explanation be found for the express
prohibition in these sections of the "killing for food at a municipal
slaughterhouse" of such animals, despite the fact that this
prohibition is clearly included in the general prohibition of the
slaughter of such animals for human consumption anywhere; but it
is not improbable that the requirement for the issue of a permit in
such cases was expressly and specifically mentioned out of
superabundance of precaution, and to avoid all possibility of
misunderstanding in the event that some of the municipalities
should be disposed to modify or vary the general provisions of the
law by the passage of local ordinances or regulations for the control
of municipal slaughterhouse.
Similar reasoning applied to the specific provisions of section 31 of
the Act leads to the same conclusion. One of the secondary
purposes of the law, as set out in that section, is to prevent the
slaughter for food of carabaos fit for agricultural and draft

purposes, and of all animals unfit for human consumption. A

construction which would limit the prohibitions and penalties
prescribed in the statute to the killing of such animals in municipal
slaughterhouses, leaving unprohibited and unpenalized their
slaughter outside of such establishments, so manifestly tends to
defeat the purpose and object of the legislator, that unless
imperatively demanded by the language of the statute it should be
rejected; and, as we have already indicated, the language of the
statute is clearly susceptible of the construction which we have
placed upon it, which tends to make effective the provisions of this
as well as all the other sections of the Act.
It appears that the defendant did in fact apply for a permit to
slaughter his carabao, and that it was denied him on the ground
that the animal was not unfit "for agricultural work or for draft
purposes." Counsel for appellant contends that the statute, in so far
as it undertakes to penalize the slaughter of carabaos for human
consumption as food, without first obtaining a permit which can not
be procured in the event that the animal is not unfit "for
agricultural work or draft purposes," is unconstitutional and in
violation of the terms of section 5 of the Philippine Bill (Act of
Congress, July 1, 1902), which provides that "no law shall be
enacted which shall deprive any person of life, liberty, or property
without due process of law."
It is not quite clear from the argument of counsel whether his
contention is that this provision of the statute constitutes a taking
of property for public use in the exercise of the right of eminent
domain without providing for the compensation of the owners, or
that it is an undue and unauthorized exercise of the police power of
the State. But whatever may be the basis of his contention, we are
of opinion, appropriating, with necessary modifications understood,
the language of that great jurist, Chief Justice Shaw (in the case of
Com. vs. Tewksbury, 11 Met., 55, where the question involved was
the constitutionality of a statute prohibiting and penalizing the
taking or carrying away by any person, including the owner, of any
stones, gravel, or sand, from any of the beaches in the town of
Chesea,) that the law in question "is not a taking of the property for
public use, within the meaning of the constitution, but is a just and
legitimate exercise of the power of the legislature to regulate and
restrain such particular use of the property as would be
inconsistent with or injurious to the rights of the public. All property

is acquired and held under the tacit condition that it shall not be so
used as to injure the equal rights of others or greatly impair the
public rights and interest of the community."
It may be conceded that the benificial use and exclusive enjoyment
of the property of all carabao owners in these Islands is to a greater
or less degree interfered with by the provisions of the statute; and
that, without inquiring what quantum of interest thus passes from
the owners of such cattle, it is an interest the deprivation of which
detracts from their right and authority, and in some degree
interferes with their exclusive possession and control of their
property, so that if the regulations in question were enacted for
purely private purpose, the statute, in so far as these regulations
are concerned, would be a violation of the provisions of the
Philippine Bill relied on be appellant; but we are satisfied that it is
not such a taking, such an interference with the right and title of
the owners, as is involved in the exercise by the State of the right
of eminent domain, so as to entitle these owners to compensation,
and that it is no more than "a just restrain of an injurious private
use of the property, which the legislature had authority to impose."
In the case of Com. vs. Alger (7 Cush., 53, 84), wherein the doctrine
laid down in Com. vs. Tewksbury (supra) was reviewed and
affirmed, the same eminent jurist who wrote the former opinion, in
distinguishing the exercise of the right of eminent domain from the
exercise of the sovereign police powers of the State, said:
We think it is settled principle, growing out of the nature of
well-ordered civil society, that every holder of property,
however absolute and unqualified may be his title, holds it
under the implied liability that his use of it may be so
regulated that is shall not be injurious to the equal
enjoyment of others having an equal right to the enjoyment
of their property, nor injurious to the rights of the
community. . . . Rights of property, like all other social and
conventional rights, are subject to such reasonable
limitations in their enjoyment as shall prevent them from
being injurious, and to such reasonable restrain and
regulations establish by law, as the legislature, under the
governing and controlling power vested in them by the
constitution, may think necessary and expedient.
This is very different from the right of eminent domain, the
right of a government to take and appropriate private
property to public use, whenever the public exigency

requires it; which can be done only on condition of providing

a reasonable compensation therefor. The power we allude to
is rather the police power, the 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.
It is much easier to perceive and realize the existence and
sources of this power than to mark its boundaries or
prescribe limits to its exercise.
Applying these principles, we are opinion that the restrain placed
by the law on the slaughter for human consumption of carabaos fit
for agricultural work and draft purpose is not an appropriation of
property interests to a "public use," and is not, therefore, within the
principle of the exercise by the State of the right of eminent
domain. It is fact a mere restriction or limitation upon a private use,
which the legislature deemed to be determental to the public
welfare. And we think that an examination of the general provisions
of the statute in relation to the public interest which it seeks to
safeguard and the public necessities for which it provides, leaves
no room for doubt that the limitations and restraints imposed upon
the exercise of rights of ownership by the particular provisions of
the statute under consideration were imposed not for private
purposes but, strictly, in the promotion of the "general welfare" and
"the public interest" in the exercise of the sovereign police power
which every State possesses for the general public welfare and
which "reaches to every species of property within the
commonwealth."
For several years prior to the enactment of the statute a virulent
contagious or infectious disease had threatened the total extinction
of carabaos in these Islands, in many sections sweeping away
seventy, eighty, and in some cases as much as ninety and even
one hundred per cent of these animals. Agriculture being the
principal occupation of the people, and the carabao being the work
animal almost exclusively in use in the fields as well as for draft
purposes, the ravages of the disease with which they were infected
struck an almost vital blow at the material welfare of the country.
large areas of productive land lay waste for years, and the

production of rice, the staple food of the inhabitants of the Islands,

fell off to such an extent that the impoverished people were
compelled to spend many millions of pesos in its importation,
notwithstanding the fact that with sufficient work animals to
cultivate the fields the arable rice lands of the country could easily
be made to produce a supply more that sufficient for its own needs.
The drain upon the resources of the Islands was such that famine
soon began to make itself felt, hope sank in the breast of the
people, and in many provinces the energies of the breadwinners
seemed to be paralyzed by the apparently hopeless struggle for
existence with which they were confronted.
To meet these conditions, large sums of money were expended by
the Government in relieving the immediate needs of the starving
people, three millions of dollars were voted by the Congress of the
United States as a relief or famine fund, public works were
undertaken to furnish employment in the provinces where the need
was most pressing, and every effort made to alleviate the suffering
incident to the widespread failure of the crops throughout the
Islands, due in large measure to the lack of animals fit for
agricultural work and draft purposes.
Such measures, however, could only temporarily relieve the
situation, because in an agricultural community material progress
and permanent prosperity could hardly be hoped for in the absence
of the work animals upon which such a community must
necessarily rely for the cultivation of the fields and the
transportation of the products of the fields to market. Accordingly
efforts were made by the Government to increase the supply of
these animals by importation, but, as appears from the official
reports on this subject, hope for the future depended largely on the
conservation of those animals which had been spared from the
ravages of the diseased, and their redistribution throughout the
Islands where the need for them was greatest.
At large expense, the services of experts were employed, with a
view to the discovery and applications of preventive and curative
remedies, and it is hoped that these measures have proved in some
degree successful in protecting the present inadequate supply of
large cattle, and that the gradual increase and redistribution of
these animals throughout the Archipelago, in response to the
operation of the laws of supply and demand, will ultimately results

in practically relieving those sections which suffered most by the

loss of their work animals.
As was to be expected under such conditions, the price of carabaos
rapidly increase from the three to five fold or more, and it may
fairly be presumed that even if the conservative measures now
adopted prove entirely successful, the scant supply will keep the
price of these animals at a high figure until the natural increase
shall have more nearly equalized the supply to the demand.
Coincident with and probably intimately connected with this sudden
rise in the price of cattle, the crime of cattle stealing became
extremely prevalent throughout the Islands, necessitating the
enactment of a special law penalizing with the severest penalties
the theft of carabaos and other personal property by roving bands;
and it must be assumed from the legislative authority found that
the general welfare of the Islands necessitated the enactment of
special and somewhat burdensome provisions for the branding and
registration of large cattle, and supervision and restriction of their
slaughter for food. It will hardly be questioned that the provisions of
the statute touching the branding and registration of such cattle,
and prohibiting and penalizing the slaughter of diseased cattle for
food were enacted in the due and proper exercise of the police
power of the State; and we are of opinion that, under all the
circumstances, the provision of the statute prohibiting and
penalizing the slaughter for human consumption of carabaos fit for
work were in like manner enacted in the due and proper exercise of
that power, justified by the exigent necessities of existing
conditions, and the right of the State to protect itself against the
overwhelming disaster incident to the further reduction of the
supply of animals fit for agricultural work or draft purposes.
It is, we think, a fact of common knowledge in these Islands, and
disclosed by the official reports and records of the administrative
and legislative departments of the Government, that not merely
the material welfare and future prosperity of this agricultural
community were threatened by the ravages of the disease which
swept away the work animals during the years prior to the
enactment of the law under consideration, but that the very life
and existence of the inhabitants of these Islands as a civilized
people would be more or less imperiled by the continued
destruction of large cattle by disease or otherwise. Confronted by
such conditions, there can be no doubt of the right of the

Legislature to adopt reasonable measures for the preservation of

work animals, even to the extent of prohibiting and penalizing what
would, under ordinary conditions, be a perfectly legitimate and
proper exercise of rights of ownership and control of the private
property of the citizen. The police power rests upon necessity and
the right of self-protection and if ever the invasion of private
property by police regulation can be justified, we think that the
reasonable restriction placed upon the use of carabaos by the
provision of the law under discussion must be held to be authorized
as a reasonable and proper exercise of that power.
As stated by Mr. Justice Brown in his opinion in the case of Lawton
vs. Steele (152 U.S., 133, 136):
The extent and limits of what is known as the police power
have been a fruitful subject of discussion in the appellate
courts of nearly every State in the Union. It is universally
conceded to include everything essential to the public
safely, health, and morals, and to justify the destruction or
abatement, by summary proceedings, of whatever may be
regarded as a public nuisance. Under this power it has been
held that the State may order the destruction of a house
falling to decay or otherwise endangering the lives of
passers-by; the demolition of such as are in the path of a
conflagration; the slaughter of diseased cattle; the
destruction of decayed or unwholesome food; the
prohibition of wooden buildings in cities; the regulation of
railways and other means of public conveyance, and of
interments in burial grounds; the restriction of objectionable
trades to certain localities; the compulsary vaccination of
children; the confinement of the insane or those afficted
with contagious deceases; the restraint of vagrants,
beggars, and habitual drunkards; the suppression of
obscene publications and houses of ill fame; and the
prohibition of gambling houses and places where
intoxicating liquors are sold. Beyond this, however, 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 the interests of
the public require, but what measures are necessary for the
protection of such interests. (Barbier vs. Connolly, 113 U. S.,
27; Kidd vs. Pearson, 128 U. S., 1.) To justify the State in

thus interposing its authority in behalf of the public, it must

appear, first, that the interests of the public generally, as
distinguished from those of a particular class, require such
interference; and, second, that the means are reasonably
necessary for the accomplishment of the purpose, and not
unduly oppressive upon individuals. The legislature may not,
under the guise of protecting the public interests, arbitrarily
interfere with private business, or impose unusual and
unnecessary restrictions upon lawful occupations. In other
words, its determination as to what is a proper exercise of
its police powers is not final or conclusive, but is subject to
the supervision of the court.
From what has been said, we think it is clear that the enactment of
the provisions of the statute under consideration was required by
"the interests of the public generally, as distinguished from those of
a particular class;" and that the prohibition of the slaughter of
carabaos for human consumption, so long as these animals are fit
for agricultural work or draft purposes was a "reasonably
necessary" limitation on private ownership, to protect the
community from the loss of the services of such animals by their
slaughter by improvident owners, tempted either by greed of
momentary gain, or by a desire to enjoy the luxury of animal food,
even when by so doing the productive power of the community
may be measurably and dangerously affected.
Chief Justice Redfield, in Thorpe vs. Rutland & Burlington R. R. Co.
(27 Vt., 140), said (p. 149) that by this "general police power of the
State, persons and property are subjected to all kinds of restraints
and burdens, in order to secure the general comfort, health, and
prosperity of the State; of the perfect right in the legislature to do
which no question ever was, or, upon acknowledge and general
principles, ever can be made, so far as natural persons are
concerned."
And Cooley in his "Constitutional Limitations" (6th ed., p. 738) says:
It would be quite impossible to enumerate all the instances
in which the police power is or may be exercised, because
the various cases in which the exercise by one individual of
his rights may conflict with a similar exercise by others, or
may be detrimental to the public order or safety, are infinite
in number and in variety. And there are other cases where it
becomes necessary for the public authorities to interfere
with the control by individuals of their property, and even to

destroy it, where the owners themselves have fully observed

all their duties to their fellows and to the State, but where,
nevertheless, some controlling public necessity demands
the interference or destruction. A strong instance of this
description is where it becomes necessary to take, use, or
destroy the private property of individuals to prevent the
spreading of a fire, the ravages of a pestilence, the advance
of a hostile army, or any other great public calamity. Here
the individual is in no degree in fault, but his interest must
yield to that "necessity" which "knows no law." The
establishment of limits within the denser portions of cities
and villages within which buildings constructed of
inflammable materials shall not be erected or repaired may
also, in some cases, be equivalent to a destruction of
private property; but regulations for this purpose have been
sustained notwithstanding this result. Wharf lines may also
be established for the general good, even though they
prevent the owners of water-fronts from building out on soil
which constitutes private property. And, whenever the
legislature deem it necessary to the protection of a harbor
to forbid the removal of stones, gravel, or sand from the
beach, they may establish regulations to that effect under
penalties, and make them applicable to the owners of the
soil equally with other persons. Such regulations are only "a
just restraint of an injurious use of property, which the
legislature have authority" to impose.
So a particular use of property may sometimes be forbidden,
where, by a change of circumstances, and without the fault
of the power, that which was once lawful, proper, and
unobjectionable has now become a public nuisance,
endangering the public health or the public safety. Milldams
are sometimes destroyed upon this grounds; and
churchyards which prove, in the advance of urban
population, to be detrimental to the public health, or in
danger of becoming so, are liable to be closed against
further use for cemetery purposes.
These citations from some of the highest judicial and text-book
authorities in the United States clearly indicate the wide scope and
extent which has there been given to the doctrine us in our opinion
that the provision of the statute in question being a proper exercise

of that power is not in violation of the terms of section 5 of the

Philippine Bill, which provide that "no law shall be enacted which
shall deprive any person of life, liberty, or property without due
process of law," a provision which itself is adopted from the
Constitution of the United States, and is found in substance in the
constitution of most if not all of the States of the Union.
The judgment of conviction and the sentence imposed by the trial
court should be affirmed with the costs of this instance against the
appellant. So ordered.
Arellano, C.J., Torres, Johnson, Moreland and Elliott, JJ., concur.

G.R. No. L-6583

February 16, 1912
RAMON
FABIE,
ET
AL., plaintiffs-appellees,
vs.
THE CITY OF MANILA, defendant-appellant.
Acting
Attorney-General
Harvey
for
appellant.
Sanz & Opisso for appellees.
CARSON, J.:
Ordinance No. 124 of the city of Manila, enacted September 21,
1909, is an amendment of section 107 of the Revised Ordinances of
the city of Manila, enacted June 13, 1908 relating to the issuance of
permits for the erection of buildings. Section 107 so amended reads
as follows:
SEC. 107. Issuance of permits. When the application
plans, and specifications conform to the requirements of this
title and of title eleven hereof, the engineer shall issue a
permit for the erection of the building and shall approve
such plans and specifications in writing: Provided, That the
building shall about or face upon a public street or alley or
on a private street or alley which has been officially
approved. One copy of all approved plans and specifications
shall be returned to the owner or his agent and one copy
shall be retained by the engineer.
The appellees are the owners in common of a large tract of land
which forms a part of the estate known as theHacienda de Santa
Ana de Sapa and which is inclosed between Calle Herran of the
District of Paco and an estero known as Tripa de Gallina, and lying
within the corporate limits of the city of Manila.
On the 26th day of November, 1909, the plaintiffs and appellees
sought to obtain from the city of Manila a building permit
authorizing the construction of a small nipa house upon the
property in question. It was claimed that the purpose of the
building was to serve as a guard house in which watchmen might
be stationed in order to prevent the carrying away of zacate from
the premises. The permit was denied by the city authorities on the
ground that the site of the proposed building did not conform to the
requirements of section 107 of the Revised Ordinances of the city
of Manila, as amended by Ordinance No. 124, which provides: "That
the building shall abut or face upon a public street or alley or on a
private street or alley which has been officially approved." It is the
contention of the appellees herein that this provision is

unconstitutional and in violation of the fundamental rights of the

property owners of the city of Manila as guaranteed by the
established laws of these Islands and by the Constitution of the
United States, in that it constitutes an invasion of their property
rights without due process of law. The lower court found in favor of
appellees and declared the ordinance null and void, at least to the
extent of the above-cited provision. From this judgment this appeal
has been duly perfected. The only question submitted for the
adjudication on this appeal is the constitutionality of the ordinance,
and to this question alone was direct our attention in this opinion.
The appellant, the city of Manila, is a duly organized municipal
corporation having full power and authority to enact lawful
ordinances for the protection and security of the lives, health and
property of its citizens. Counsel for appellant insists that the
ordinance in question is a valid exercise of the police power of the
city, in that its sold purpose and aim is to effect these ends by
affording better sanitary regulations as well as increased facilities
for protection to property from loss by fire.
It is undoubtedly on of the fundamental duties of the city of Manila
to make all reasonable regulations looking to the preservation and
security of the general health of the community, and the protection
of life and property from loss or destruction by fire. All such
regulations have their sanction in what is termed the police power.
Much difficulty has been experienced by the courts and text writers
in the attempt to define the police power of the state, and to set
forth its precise limitations. In fact it has been said to be, from its
very nature incapable of any exact definition or limitation. Mr.
Thompson in his exhaustive treatise on Corporations summarizes
as follows the conclusions of the leading adjudicated cases and
authorities touching this subject. He says:
Its business is to regulate and protect the security of social
order, the life and health of the citizen, the comfort of an
existence in thickly populated communities, the enjoyment
of private and social life, and the beneficial use of property.
And again the same author says:
However courts may differ as to the extent and boundaries
of this power, and however difficult it may be of precise
definition, there is a general agreement that it extends to
the protection of the lives, health and property of the
citizens, and to the preservation of good order and the

public morals. In the absence of any constitutional

prohibition, a legislature may lawfully prevent all things
hurtful to the comfort, safety, and welfare of society though
the prohibition invades the right of liberty or property of an
individual. (Thompson on Corporations, 2d ed., vol. 1, sec.
421.)
In the case of U. S. vs. Toribio (15 Phil. Rep., 92) we had occasion to
discuss at length the police powers of the State, and in the opinion
in that case will be found a number of quotations from textbook
and judicial authority, developing and exemplifying the principles
on which the exercise of the police powers of the State have been
recognized and applied. But for the purpose of this opinion the
foregoing citations from Thompson's treatise on Corporations sets
forth the doctrine quite satisfactorily, and relying on the reasoning
of the opinion in the case of U. S. vs. Toribio (15 Phil. Rep., 92), it is
not necessary to enter at this time into an extended discussion of
the principles on which the doctrine rest.
In accord with the rule laid down in the case of Lawton vs. Steele
(152 U. S., 132-134), quoted at some length in the opinion in the
case of U. S. vs. Toribio, to justify the State in the exercise of it
police powers on behalf of the public, it must appear;
First, that the interests of the public generally, as
distinguished from those of a particular class, require such
interference; and, second, that the means are reasonably
necessary for the accomplishment of the purpose, and not
unduly oppressive upon individuals. The legislature may not,
under the guise of protecting the public interest, arbitrary
interfere with private business, or impose unusual and
unnecessary restrictions upon lawful occupations. In other
words, is determination as to what is a proper exercise of its
police powers is not conclusive, but is subject to the
supervision of the court.
It is very clear that the ordinance, if it be held to be reasonable,
prescribes a rule in the interest of the public of the city of Manila
generally, as distinguished from the interest of individuals or of a
particular class. In determining its validity, therefore, the only
questions which need be considered, are whether its provisions are
or are not reasonably necessary for the accomplishment of its
purposes, and whether they are or are not unduly oppressive upon
individuals.

The purpose and object of the ordinance is avowedly and

manifestly to protect and secure the health, lives and property of
the citizens of Manila against the ravages of fire and disease. The
provision that denies permits for the construction of buildings
within the city limits unless they "abut or face upon a public street
or alley or on a private street or alley which has been officially
approved," is in our opinion reasonably necessary to secure the end
in view.
In the first place it prevents the huddling and crowding of buildings
in irregular masses on single or adjoining tracts of land, and
secures an air space on at least one side of each new residence or
other building constructed in the city. The menace to the health
and safety of the residents of Manila resulting from the crowding of
nipa shakes, and even more substantial buildings upon small tracts
of land is a matter of common knowledge; and in a community,
exposed as this city is to destructive conflagrations and epidemic
diseases, a legislative measures which tends to prevent the
repitition of such unfortunate conditions should not be judicially
declared to be unreasonable, in the absence of the most compelling
reasons.
In the second place, the provisions of the ordinance in question
manifestly promote the safety and security of the citizens of Manila
and of their property against fire and disease, especially epidemic
disease, by securing the easy and unimpeded approach to all new
buildings: First, of fire engines, and other apparatus for fighting fire;
second, of ambulances, refuse wagons, and apparatus used by the
sanitary department in caring for the sanitation of the city; third, of
fire and health inspectors generally; of employees of the fire
department and others engaged in fighting fire; and of employees
of the Bureau of Health engaged in their duty as guardians of the
sanitary conditions and general health of the city.
There can be no question as to the intent an purpose of the
provision of the ordinance under discussion. It is manifestly
intended to subserve the public health and safety of the citizens of
Manila generally and was not conceived in favor of any class or of
particular individuals. Those charged with the public welfare and
safety of the city deemed the enactment of the ordinance
necessary to secure these purposes, and it cannot be doubted that
if its enactment was reasonably necessary to that end it was and is
a due and proper exercise of the police power. We are of opinion

that the enforcement of its provisions cannot fail to redound to the

public good, and that it should be sustained on the principle that
"the welfare of the people is the highest law" (salus populi suprema
est lex). Indeed having in mind the controlling public necessity
which demands the adoption of proper measures to secure the
ends sought to be attained by the enactment of this provisions of
the ordinances; and the large discretion necessarily vested in the
legislative authority to determine not only what the interests of the
public require, but what measures are necessary for the protection
of such interest; we are satisfied that we would not be justified in
an attempt to restrict or control the exercise of that discretion even
if the "reasonable necessity" for its exercise in the particular form
actually adopted were much less apparent than it is in this case.
That the ordinance is not "unduly oppressive upon individuals"
becomes very clear when the nature and extent of the limitations
imposed by its provisions upon the use of private property are
considered with relation to the public interests, the public health
and safety, which the ordinance seeks to secure. Discussing this
question in his opinion to the Municipal Board relative to the
validity and constitutionality of this ordinance, the Attorney-General
well said: "Under the ordinance before us rights in private property
are not arbitrary regulated. No person desiring to erect a building is
prohibited from doing so. He can, if necessary, lay out a private
street or the city can extend the public street system. The property
may thus be substantially increased in value rather than the
reverse, In brief, the owner's right to the enjoyment of his property
is only interfered with in so far as it is necessary to protect the
rights of others."
To this we may add the following citation from the opinion in the
case of Commonwelth vs. Alger (7 Cush., 53, 84) which to our
minds well states the principle in this regard on which the validity
of the of the ordinance in question must be sustained:
We think it is a settled principle, growing out of the nature of
well ordered civil society, that every holder of property,
however absolute and unqualified may be his title, holds it
under the implied liability that his use of it may be so
regulated that it shall not be injurious to the rights of the
community. . . . Rights of property, like all other social and
conventional rights, are subject to such reasonable
limitations in their enjoyment as shall prevent them from

being injurious, and to such reasonable restraints and

regulations established by law, as the legislature, under the
governing and controlling power vested in them by the
constitution, may think necessary and expedient.
We conclude that the proviso of the ordinance in question directing:
"That the building shall abut or face upon a public street or alley
which has been officially approved," is valid, and that the judgment
of the lower court should be reversed, without special
condemnation of costs. So ordered.
Torres, Johnson, Moreland and Trent, JJ., concur.

G.R. No. L-59234 September 30, 1982

TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO
CABIGAO
and
ACE
TRANSPORTATION
CORPORATION, petitioners,
vs.
THE BOARD OF TRANSPORTATION and THE DIRECTOR OF
THE BUREAU OF LAND TRANSPORTATION,respondents.
MELENCIO-HERRERA, J.:
This Petition for "Certiorari, Prohibition and mandamus with
Preliminary Injunction and Temporary Restraining Order" filed by
the Taxicab Operators of Metro Manila, Inc., Felicisimo Cabigao and
Ace Transportation, seeks to declare the nullity of Memorandum
Circular No. 77-42, dated October 10, 1977, of the Board of
Transportation, and Memorandum Circular No. 52, dated August 15,
1980, of the Bureau of Land Transportation.
Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a
domestic corporation composed of taxicab operators, who are
grantees of Certificates of Public Convenience to operate taxicabs
within the City of Manila and to any other place in Luzon accessible
to vehicular traffic. Petitioners Ace Transportation Corporation and
Felicisimo Cabigao are two of the members of TOMMI, each being
an operator and grantee of such certificate of public convenience.
On October 10, 1977, respondent Board of Transportation (BOT)
issued Memorandum Circular No. 77-42 which reads:
SUBJECT: Phasing out and Replacement of
Old and Dilapidated Taxis
WHEREAS, it is the policy of the government to
insure that only safe and comfortable units are used
as public conveyances;
WHEREAS, the riding public, particularly in MetroManila, has, time and again, complained against, and
condemned, the continued operation of old and
dilapidated taxis;
WHEREAS, in order that the commuting public may
be assured of comfort, convenience, and safety, a
program of phasing out of old and dilapidated taxis
should be adopted;
WHEREAS, after studies and inquiries made by the
Board of Transportation, the latter believes that in six
years of operation, a taxi operator has not only
covered the cost of his taxis, but has made
reasonable profit for his investments;
NOW, THEREFORE, pursuant to this policy, the Board
hereby declares that no car beyond six years shall be
operated as taxi, and in implementation of the same

hereby promulgates the following rules and

regulations:
1. As of December 31, 1977, all taxis of Model 1971
and earlier are ordered withdrawn from public service
and thereafter may no longer be registered and
operated as taxis. In the registration of cards for
1978, only taxis of Model 1972 and later shall be
accepted for registration and allowed for operation;
2. As of December 31, 1978, all taxis of Model 1972
are ordered withdrawn from public service and
thereafter may no longer be registered and operated
as taxis. In the registration of cars for 1979, only
taxis of Model 1973 and later shall be accepted for
registration and allowed for operation; and every
year thereafter, there shall be a six-year lifetime of
taxi, to wit:
1980 Model 1974
1981 Model 1975, etc.
All taxis of earlier models than those provided above
are hereby ordered withdrawn from public service as
of the last day of registration of each particular year
and their respective plates shall be surrendered
directly to the Board of Transportation for subsequent
turnover to the Land Transportation Commission.
For an orderly implementation of this Memorandum
Circular, the rules herein shall immediately be
effective in Metro-Manila. Its implementation outside
Metro- Manila shall be carried out only after the
project has been implemented in Metro-Manila and
only after the date has been determined by the
Board. 1
Pursuant to the above BOT circular, respondent Director of the
Bureau of Land Transportation (BLT) issued Implementing Circular
No. 52, dated August 15, 1980, instructing the Regional Director,
the MV Registrars and other personnel of BLT, all within the
National Capitol Region, to implement said Circular, and
formulating a schedule of phase-out of vehicles to be allowed and
accepted for registration as public conveyances. To quote said
Circular:
Pursuant to BOT Memo-Circular No. 77-42, taxi units
with year models over six (6) years old are now
banned from operating as public utilities in Metro
Manila. As such the units involved should be
considered as automatically dropped as public
utilities and, therefore, do not require any further
dropping order from the BOT.

Henceforth, taxi units within the National Capitol

Region having year models over 6 years old shall be
refused registration. The following schedule of phaseout is herewith prescribed for the guidance of all
concerned:
Year Model

Automatic
Phase-Out
Year
1980

1974

1981

1975

1982

1976

1983

1977
etc.

etc.

Strict compliance here is desired. 2

In accordance therewith, cabs of model 1971 were phase-out in
registration year 1978; those of model 1972, in 1979; those of
model 1973, in 1980; and those of model 1974, in 1981.
On January 27, 1981, petitioners filed a Petition with the BOT,
docketed as Case No. 80-7553, seeking to nullify MC No. 77-42 or to
stop its implementation; to allow the registration and operation in
1981 and subsequent years of taxicabs of model 1974, as well as
those of earlier models which were phased-out, provided that, at
the time of registration, they are roadworthy and fit for operation.
On February 16, 1981, petitioners filed before the BOT a
"Manifestation and Urgent Motion", praying for an early hearing of
their petition. The case was heard on February 20, 1981. Petitioners
presented testimonial and documentary evidence, offered the
same, and manifested that they would submit additional
documentary proofs. Said proofs were submitted on March 27, 1981
attached to petitioners' pleading entitled, "Manifestation,
Presentation of Additional Evidence and Submission of the Case for
Resolution." 3
On November 28, 1981, petitioners filed before the same Board a
"Manifestation and Urgent Motion to Resolve or Decide Main
Petition" praying that the case be resolved or decided not later than
December 10, 1981 to enable them, in case of denial, to avail of
whatever remedy they may have under the law for the protection
of their interests before their 1975 model cabs are phased-out on
January 1, 1982.

Petitioners, through its President, allegedly made personal followups of the case, but was later informed that the records of the case
could not be located.
On December 29, 1981, the present Petition was instituted wherein
the following queries were posed for consideration by this Court:
A. Did BOT and BLT promulgate the questioned
memorandum circulars in accord with the manner
required by Presidential Decree No. 101, thereby
safeguarding the petitioners' constitutional right to
procedural due process?
B. Granting, arguendo, that respondents did comply
with the procedural requirements imposed by
Presidential
Decree
No.
101,
would
the
implementation and enforcement of the assailed
memorandum circulars violate the petitioners'
constitutional rights to.
(1) Equal protection of
the law;
(2)
Substantive
due
process; and
(3) Protection against
arbitrary
and
unreasonable
classification
and
standard?
On Procedural and Substantive Due Process:
Presidential Decree No. 101 grants to the Board of Transportation
the power
4. To fix just and reasonable standards, classification,
regulations, practices, measurements, or service to
be furnished, imposed, observed, and followed by
operators of public utility motor vehicles.
Section 2 of said Decree provides procedural guidelines for said
agency to follow in the exercise of its powers:
Sec. 2. Exercise of powers. In the exercise of the
powers granted in the preceding section, the Board
shag proceed promptly along the method of
legislative inquiry.
Apart from its own investigation and studies, the
Board, in its discretion, may require the cooperation
and assistance of the Bureau of Transportation, the
Philippine Constabulary, particularly the Highway
Patrol Group, the support agencies within the
Department of Public Works, Transportation and
Communications, or any other government office or
agency that may be able to furnish useful

information or data in the formulation of the Board of

any policy, plan or program in the implementation of
this Decree.
The Board may also can conferences, require the
submission of position papers or other documents,
information, or data by operators or other persons
that may be affected by the implementation of this
Decree, or employ any other suitable means of
inquiry.
In support of their submission that they were denied procedural
due process, petitioners contend that they were not caged upon to
submit their position papers, nor were they ever summoned to
attend any conference prior to the issuance of the questioned BOT
Circular.
It is clear from the provision aforequoted, however, that the leeway
accorded the Board gives it a wide range of choice in gathering
necessary information or data in the formulation of any policy, plan
or program. It is not mandatory that it should first call a conference
or require the submission of position papers or other documents
from operators or persons who may be affected, this being only one
of the options open to the Board, which is given wide discretionary
authority. Petitioners cannot justifiably claim, therefore, that they
were deprived of procedural due process. Neither can they state
with certainty that public respondents had not availed of other
sources of inquiry prior to issuing the challenged Circulars.
operators of public conveyances are not the only primary sources
of the data and information that may be desired by the BOT.
Dispensing with a public hearing prior to the issuance of the
Circulars is neither violative of procedural due process. As held in
Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307
(1972):
Pevious notice and hearing as elements of due
process, are constitutionally required for the
protection of life or vested property rights, as well as
of liberty, when its limitation or loss takes place in
consequence
of
a
judicial
or
quasi-judicial
proceeding, generally dependent upon a past act or
event which has to be established or ascertained. It
is not essential to the validity of general rules or
regulations promulgated to govern future conduct of
a class or persons or enterprises, unless the law
provides otherwise. (Emphasis supplied)
Petitioners further take the position that fixing the ceiling at six (6)
years is arbitrary and oppressive because the roadworthiness of
taxicabs depends upon their kind of maintenance and the use to
which they are subjected, and, therefore, their actual physical

condition should be taken into consideration at the time of

registration. As public contend, however, it is impractical to subject
every taxicab to constant and recurring evaluation, not to speak of
the fact that it can open the door to the adoption of multiple
standards, possible collusion, and even graft and corruption. A
reasonable standard must be adopted to apply to an vehicles
affected uniformly, fairly, and justly. The span of six years supplies
that reasonable standard. The product of experience shows that by
that time taxis have fully depreciated, their cost recovered, and a
fair return on investment obtained. They are also generally
dilapidated and no longer fit for safe and comfortable service to the
public specially considering that they are in continuous operation
practically 24 hours everyday in three shifts of eight hours per shift.
With that standard of reasonableness and absence of arbitrariness,
the requirement of due process has been met.
On Equal Protection of the Law:
Petitioners alleged that the Circular in question violates their right
to equal protection of the law because the same is being enforced
in Metro Manila only and is directed solely towards the taxi industry.
At the outset it should be pointed out that implementation outside
Metro Manila is also envisioned in Memorandum Circular No. 77-42.
To repeat the pertinent portion:
For an orderly implementation of this Memorandum
Circular, the rules herein shall immediately be
effective in Metro Manila. Its implementation outside
Metro Manila shall be carried out only after the
project has been implemented in Metro Manila and
only after the date has been determined by the
Board. 4
In fact, it is the understanding of the Court that implementation of
the Circulars in Cebu City is already being effected, with the BOT in
the process of conducting studies regarding the operation of
taxicabs in other cities.
The Board's reason for enforcing the Circular initially in Metro
Manila is that taxicabs in this city, compared to those of other
places, are subjected to heavier traffic pressure and more constant
use. This is of common knowledge. Considering that traffic
conditions are not the same in every city, a substantial distinction
exists so that infringement of the equal protection clause can
hardly be successfully claimed.
As enunciated in the preambular clauses of the challenged BOT
Circular, the overriding consideration is the safety and comfort of
the riding public from the dangers posed by old and dilapidated
taxis. The State, in the exercise, of its police power, can prescribe
regulations to promote the health, morals, peace, good order,
safety and general welfare of the people. It can prohibit all things

hurtful to comfort, safety and welfare of society. 5 It may also

regulate property rights. 6 In the language of Chief Justice Enrique
M. Fernando "the necessities imposed by public welfare may justify
the exercise of governmental authority to regulate even if thereby
certain groups may plausibly assert that their interests are
disregarded". 7
In so far as the non-application of the assailed Circulars to other
transportation services is concerned, it need only be recalled that
the equal protection clause does not imply that the same treatment
be accorded all and sundry. It applies to things or persons
Identically or similarly situated. It permits of classification of the
object or subject of the law provided classification is reasonable or
based on substantial distinction, which make for real differences,
and that it must apply equally to each member of the class. 8 What
is required under the equal protection clause is the uniform
operation by legal means so that all persons under Identical or
similar circumstance would be accorded the same treatment both
in privilege conferred and the liabilities imposed. 9 The challenged
Circulars satisfy the foregoing criteria.
Evident then is the conclusion that the questioned Circulars do not
suffer from any constitutional infirmity. To declare a law
unconstitutional, the infringement of constitutional right must be
clear, categorical and undeniable. 10
WHEREFORE, the Writs prayed for are denied and this Petition is
hereby dismissed. No costs.
SO ORDERED.

G.R. No. L-50908 January 31, 1984

MARY
CONCEPCION
BAUTISTA
and
ENRIQUE
BAUTISTA, petitioners,
vs.
ALFREDO L. JUINIO, ROMEO F. EDU and FIDEL
RAMOS, respondents.
Mary Concepcion Bautista for and in his own behalf.
The Solicitor General for respondents.

D.

V.

FERNANDO, C.J.:
The validity of an energy conservation measure, Letter of
Instruction No. 869, issued on May 31, 1979 the response to the
protracted oil crisis that dates back to 1974 is put in issue in this
prohibition proceeding filed by petitioners, spouses Mary
Concepcion Bautista and Enrique D. Bautista, for being allegedly
violative of the due process and equal protection guarantees 1 of
the Constitution. The use of private motor vehicles with H and EH
plates on week-ends and holidays was banned from "[12:00] a.m.
Saturday morning to 5:00 a.m. Monday morning, or 1:00 a.m. of the
holiday to 5:00 a.m. of the day after the holiday." 2Motor vehicles of
the following classifications are exempted: (a) S (Service); (b) T
(Truck); (e) DPL (Diplomatic); (d) CC (Consular Corps); (e) TC
(Tourist Cars). 3 Pursuant thereto, respondent Alfredo L. Juinio, then
Minister of Public Works, Transportation and Communications and
respondent Romeo P. Edu, then Commissioner of Land
Transportation Commission issued on June 11, 1979, Memorandum
Circular No. 39, which imposed "the penalties of fine, confiscation
of vehicle and cancellation of registration on owners of the abovespecified vehicles" found violating such Letter of Instruction. 4It was
then alleged by petitioners that "while the purpose for the issuance
of the LOI 869 is laudable, to wit, energy conservation, the
provision banning the use of H and EH [vehicles] is unfair,
discriminatory, [amounting to an] arbitrary classification" and thus
in contravention of the equal protection clause. 5 Moreover, for
them, such Letter of Instruction is a denial of due process, more
specifically, "of their right to use and enjoy their private property
and of their freedom to travel and hold family gatherings, reunions
and outings on week-ends and holidays," inviting attention to the
fact that others not included in the ban enjoying "unrestricted
freedom." 6 It would follow, so they contend that Memorandum

Circular No. 39 imposing penalties of fine, confiscation of the

vehicle and cancellation of license is likewise unconstitutional, for
being violative of the doctrine of "undue delegation of legislative
power." 7 It is to be noted that such Memorandum Circular does not
impose the penalty of confiscation but merely that of impounding,
fine, and for the third offense that of cancellation of certificate of
registration and for the rest of the year or for ninety days
whichever is longer.
This Court gave due course to the petition requiring respondent to
answer. There was admission of the facts as substantially alleged
except, as previously noted, that the ban starts at 12:00 a.m.
rather than 1:00 a.m. of a Saturday or of a holiday and as to the
mention of a Willy's Kaiser jeep being registered in the name of a
certain Teresita Urbina, about which respondents had no
knowledge. There was a denial of the allegations that the
classification of vehicles into heavy H and extra heavy (EH) on the
other hand and light and bantam on the other hand was violative of
equal protection and the regulation as to the use of the former cars
on the dates specified a transgression of due process. The answer
likewise denied that there was an undue delegation of legislative
power, reference being made to the Land Transportation and Traffic
Code. 8 There was also a procedural objection raised, namely, that
what is sought amounts at most to an advisory opinion rather than
an ajudication of a case or controversy.
Petitioners filed a motion to be allowed to reply to the answer. It
was granted. The reply, considering its exhaustive character
serving as its memorandum, stressed anew what it emphasized as
the arbitrary, unreasonable, and oppressive aspects of the
challenged Letter of Instruction and Memorandum Circular No. 39.
It disputed what it characterized as an "erroneous and arbitrary
presumption that heavy car owners unnecessarily use and
therefore waste gasoline whenever they drive their cars on weekends and holidays;" 9 it stigmatized the ban as defeating its
"avowed purpose in the case of the affluent who own not only
heavy limousines but also many small cars [as] they may be
compelled to use at least two small cars;" 10 referred to the high
cost of taxis or other public transports for those "not able to afford
expensive small cars [possibly] only one heavy and possible old
model;" 11 cited the case of "many eight cylinder vehicles which

because of their weight have been registered as light but in fact

consume more or as much gasoline as the banned
vehicles." 12 Their conclusion is that "the ban imposed, in result
and effect is class legislation." 13
The parties were required to submit memoranda. Respondents did
so but not petitioners. They relied on their reply to the answer as
noted, a rather comprehensive pleading. For reasons to be set
forth, this Court holds that the petition cannot prosper.
1. First as to the procedural objection. In the memorandum for
respondents, one of the issues raised was whether "the power of
judicial review may be invoked considering the inadequacy of the
record and the highly abstract and academic questions raised by
the petitioners." 14 It is inaccurate to say that the record is
inadequate. It does not admit of doubt that the ban applies to
petitioners who are "the registered owners of an eight cylinder
1969 Buick, and the vendees of a six cylinder Willy's kaiser jeep,
which are both classified as heavy or H." 15 To that extent,
therefore, the enforcement of the assailed Letter of Instruction will
amount to a deprivation of what otherwise would be a valid
exercise of a property right. Thus they fall squarely within "the
unchallenged rule" as to who may raise a constitutional question,
namely, to quote the language of Justice Laurel in the leading case
of People v. Vera, 16 "that the person who impugns the validity of a
statute 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. 17 Moreover, that rule has been considerably
relaxed. 18 The question then is neither abstract nor academic as
contended by respondents.
2. There is, however, this formidable obstacle that confronts
petitioners. What they seek is for this Court to hold that a Letter of
Instruction, a regulatory measure precisely enacted to cope with
the serious and grave problem of energy conservation, is void on its
face. Such a task is rendered unusually difficult by what has been
referred to by Justice Laurel in the leading case of Angara v.
Electoral Commission 19 as the "presumption of constitutionality"
and by the same jurist in the case of People v. Vera 20 in slightly
different words "a presumption that such an act falls within
constitutional limitations." There is need then for a factual
foundation of invalidity. In the language of Ermita-Malate Hotel &
Motel Operations Association, Inc. v. City Mayor or Manila: "It

admits of no doubt therefore that there being a presumption of

validity, the necessity for evidence to rebut it is unavoidable,
unless the statute or ordinance is void on its face, which is not the
case here. The principle has been nowhere better expressed than in
the leading case of O'Gorman & Young v. Hartford Fire Insurance
Co., where the American Supreme Court through Justice Brandeis
tersely and succinctly summed up the matter thus: 'The statute
here questioned deals with a subject clearly within the scope of the
police power. We are asked to declare it void on the ground that the
specific method of regulation prescribed is unreasonable and hence
deprives the plaintiff of due process of law. As underlying questions
of fact may condition the constitutionality of legislation of this
character, the presumption of constitutionality must prevail in the
absence of some factual foundation of record for overthrowing the
statute.' " 21
3. It is true, of course, that there may be instances where a police
power measure may, because of its arbitrary, oppressive or unjust
character, be held offensive to the due process clause and,
therefore, may, when challenged in an appropriate legal
proceeding, be declared void on its face. This is not one of them. A
recital of the whereas clauses of the Letter of Instruction makes it
clear. Thus: "[Whereas], developments in the international
petroleum supply situation continue to follow a trend of limited
production and spiralling prices thereby precluding the possibility of
immediate relief in supplies within the foreseeable future;
[Whereas], the uncertainty of fuel supply availability underscores a
compelling need for the adoption of positive measures designed to
insure the viability of the country's economy and sustain its
developmental growth; [Whereas], to cushion the effect of
increasing oil prices and avoid fuel supply disruptions, it is
imperative to adopt a program directed towards the judicious use
of our energy resources complemented with intensified
conservation efforts and efficient utilization thereof; * * *." 22That is
undeniable is that the action taken is an appropriate response to a
problem that presses urgently for solution. It may not be the only
alternative, but its reasonableness is immediately apparent. Thus,
to repeat, substantive due process, which is the epitome of
reasonableness and fair play, is not ignored, much less infringed.
4. In the interplay between such a fundamental right and police
power, especially so where the assailed governmental action deals

with the use of one's property, the latter is accorded much leeway.
That is settled law. What is more, it is good law. Due process,
therefore, cannot be validly invoked. As stressed in the cited
Ermita-Malate Hotel decision: "To hold otherwise would be to unduly
restrict and narrow the scope of police power which has been
properly characterized as the most essential, insistent and the least
limitable of powers, extending as it does 'to all the great public
needs.' It would be, to paraphrase another leading decision, to
destroy the very purpose of the state if it could be deprived or
allowed itself to be deprived of its competence to promote public
health, public morals, public safety and the general welfare.
Negatively put, police power is 'that inherent and plenary power in
the State which enables it to prohibit all that is hurtful to the
comfort, safety, and welfare of society.' " 23
5. The due process question having been disposed of, there is still
the objection based on the equal protection clause to be
considered. A governmental act may not be offensive to the due
process clause, but may run counter to such a guarantee. Such is
the case when there is no rational basis for the classification
followed. That is the point raised by petitioners. For them, there is
no rational justification for the ban being imposed on vehicles
classified as heavy (H) and extra-heavy (EH), for precisely those
owned by them fall within such category. Tested by the applicable
standard that must be satisfied to avoid the charge of a denial of
equal protection, the objection of petitioners is shown to be lacking
in merit. Such a classification on its face cannot be characterized as
an affront to reason. A legal norm according to J.M. Tuason & Co.,
Inc. vs. Land Tenure Administration, 24 "whether embodied in a rule,
principle, or standard, constitutes a defense against anarchy at one
extreme and tyranny at the other. Thereby, people living together
in a community with its myriad and complex problems can
minimize the friction and reduce the conflicts, to assure, at the very
least, a peaceful ordering of existence. The Ideal situation is for the
law's benefits to be available to all, that none be placed outside the
sphere of its coverage. Only thus could chance and favor be
excluded and the affairs of men governed by that serene and
impartial uniformity, which is of the very essence of the Idea of law.
The actual, given things as they are and likely to continue to be,
cannot approximate the Ideal. Nor is the law susceptible to the
reproach that it does not take into account the realties of the

situation. * * * To assure that the general welfare be promoted,

which is the end of law, a regulatory measure may cut into the
rights to liberty and property. Those adversely affected may under
such circumstances invoke the equal protection clause only if they
can show that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by
the spirit of hostility, or at the very least, discrimination that finds
no support in reason. It suffices then that the laws operate equally
and uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not
being different, both in the privileges conferred and the liabilities
imposed. Favoritism and undue preference cannot be allowed. For
the principle is that equal protection and security shall be given to
every person under circumstances, which if not Identical are
analogous. If law be looked upon in terms of burden or charges,
those that fall within a class should be treated in the same fashion,
whatever restrictions cast on some in the group equally binding on
the rest." 25
6. Nor does it militate against the validity of the Letter of
Instruction just because the ban imposed does not go as far as it
could have and therefore could be less efficacious in character.
That was the solution which for the President expressing a power
validly lodged in him, recommended itself. There was a situation
that called for a corrective measure. He decided that what was
issued by him would do just that or, at the very least, help in easing
the situation. That it did not cover other matters which could very
well have been regulated does not call for a declaration of nullity.
The President, to paraphrase Lutz v. Araneta, 26 "is not required by
the Constitution to adhere to the policy of all or none." 27 It is quite
obvious then that no equal protection question arises.
7. It may not be amiss to refer to a 1981 American Supreme Court
decision, Minnesota
v.
Clover
Leaf
Creamery
28
Company. Respondent along with several other business
corporations adversely affected involved in the manufacture and
utilization of plastic milk containers filed suit in a Minnesota district
court seeking to enjoin enforcement of a Minnesota statute banning
the retail sale of milk in plastic nonreturnable, nonrefillable
containers, but permitting such sale in other nonreturnable,
nonrefillable containers, such as paperboard, milk cartons. After
conducting extensive evidentiary hearings, the Minnesota court

enjoined enforcement of the statute, finding that it violated among

others the equal protection clause of the Fourteenth Amendment to
the Federal Constitution. The Minnesota Supreme Court affirmed.
On certiorari, the United States Supreme Court reversed, with only
Justice Stevens dissenting. The opinion by Justice Brennan noted
that "proponents of the legislation argued that it would promote
resource conservation, ease solid waste disposal problems, and
conserve energy." 29 That sufficed for the Court to conclude "that
the ban on plastic nonreturnable milk containers bears a rational
relation to the State's objectives, and must be sustained under the
Equal Protection Clause." 30 It does show that notwithstanding the
"new equal protection approach" with its emphasis on "suspect
classification" and "fundamental rights and interests standard," a
concept so ably expounded by professor Gunther, the "rational
relation test" 31 still retains its validity. Not that there could be any
objection to the classification here followed as being in any way
susceptible to such a pejorative expression as "suspect" or that the
assailed Letter of Instruction does not qualify under "the
fundamental rights and interests" standard
8. There was set forth in the petition what were referred to as
"other reasonable measures which the authorities concerned with
energy conservation can take immediately, which are in fact
acceptable and obviously called for and should have been done
long ago, to wit: 1. require and establish taxi stands equipped with
efficient telephone and communication systems; 2. strict
implementation and observance of cargo truck hours on main
arteries; 3. strict observance of traffic rules; 4. effective solution of
traffic problems and decongestion of traffic through rerouting and
quick repair of roads and efficient operation of double decker
buses; 5. rationing of gasoline to avoid panic buying and give the
private car owner the option and responsibility of deciding on the
use of his allocation; 6. allow neon and electrically devised
advertising signs only from five o'clock p.m. to nine o'clock p.m. 7.
prohibit immediately the importation of heavy and luxury cars and
seriously
re-examine
the
car
manufacturing
program." 32Admittedly, such measures are conducive to energy
conservation. The question before us however is limited to whether
or not Letter of Instruction 869 as implemented by Memorandum
Circular No. 39 is violative of certain constitutional rights. It goes no
further than that. The determination of the mode and manner

through which the objective of minimizing the consumption of oil

products may be attained is left to the discretion of the political
branches. 33 Absent therefore the alleged infringement of
constitutional rights, more precisely the due process and equal
protection guarantees, this Court cannot adjudge Letter of
Instruction No. 869 as tainted by unconstitutionality.
9. It was likewise contended that Memorandum Circular No. 39,
issued by the then respondent Minister of Public Works,
Transportation and Communications, and then respondent Land
Transportation Commissioner, imposing the penalties "of fine,
confiscation of vehicle and cancellation of license is likewise
unconstitutional," petitioners invoking the principle of nondelegation of legislative power. 34 To that extent that a Letter of
Instruction may be viewed as an exercise of the decree-making
power of the President, then such an argument is futile. If, however,
viewed as a compliance with the duty to take care that the laws be
faithfully executed, as a consequence of which subordinate
executive officials may in turn issue implementing rules and
regulations, then the objection would properly be considered as
an ultra vires allegation. There is this relevant excerpt from Teoxon
v. Member of the Board of Administrators: 35 "1. The recognition of
the power of administrative officials to promulgate rules in the
implementation of the statute, necessarily limited to what is
provided for in the legislative enactment, may be found in the early
case of United States v. Barrias decided in 1908. Then came, in a
1914 decision, United States v. Tupasi Molina, a delineation of the
scope of such competence. Thus: 'Of course the regulations
adopted under legislative authority by a particular department
must be in harmony with the provisions of the law, and for the sole
purpose of carrying into effect its general provisions. By such
regulations, of course, the law itself can not be extended. So long,
however, as the regulations relate solely to carrying into effect the
provisions of the law, they are valid.' In 1936, in People v. Santos,
this Court expressed its disapproval of an administrative order that
would amount to an excess of the regulatory power vested in an
administrative official. We reaffirmed such a doctrine in a 1951
decision, where we again made clear that where an administrative
order betrays inconsistency or repugnancy to the provisions of the
Act, 'the mandate of the Act must prevail and must be followed.'
Justice Barrera, speaking for the Court in Victorias Milling Company,

Inc. v. Social Security Commission, citing Parker as well as Davis did

tersely sum up the matter thus: 'A rule is binding on tile courts so
long as the procedure fixed for its promulgation is followed and its
scope is within the statutory granted by the legislature, even if the
courts are not in agreement with the policy stated therein or its
innate wisdom * * *. On the other hand, administrative
interpretation of the law is at best merely advisory, for it is the
courts that finally determine what the law means.' It cannot be
otherwise as the Constitution limits the authority of the President,
in whom all executive power resides, to take care that the laws be
faithfully executed. No lesser administrative executive office or
agency then can, contrary to the express language of the
Constitution, assert for itself a more extensive prerogative." 36 It
was alleged in the Answer of Solicitor General Estelito P. Mendoza
that Letter of Instruction 869 and Memorandum Circular No. 39
were adopted pursuant to the Land Transportation and Traffic
Code. 37 It contains a specific provision as to penalties. 38 Thus: "For
violation of any provisions of this Act or regulations promulgated
pursuant hereto, not hereinbefore specifically punished, a fine of
not less than ten nor more than fifty pesos shall be
imposed." 39 Memorandum Circular No. 39 cannot be held to
beultra vires as long as the fine imposed is not less than ten nor
more than fifty pesos. As to suspension of registration, 40 the Code,
insofar as applicable, provides: "Whenever it shall appear from the
records of the Commission that during any twelve-month period
more than three warnings for violations of this Act have been given
to the owner of a motor vehicle, or that the said owner has been
convicted by a competent court more than once for violation of
such laws, the Commissioner may, in his discretion, suspend the
certificate of registration for a period not exceeding ninety days
and, thereupon, shall require the immediate surrender of the
number plates * * *." 41 It follows that while the imposition of a fine
or the suspension of registration under the conditions therein set
forth is valid under the Land Transportation and Traffic Code, the
impounding of a vehicle finds no statutory justification. To apply
that portion of Memorandum Circular No. 39 would be ultra vires. It
must likewise be made clear that a penalty even if warranted can
only be imposed in accordance with the procedure required by
law. 42
WHEREFORE, the petition is dismissed.

Aquino, Guerrero, De Castro, Melencio-Herrera, Escolin, Relova and

Gutierrez, Jr., JJ., concur.
Makasiar and Concepcion J., took no part.

G.R. No. 51765 March 3, 1997

REPUBLIC
PLANTERS
BANK, petitioner,
vs.
HON. ENRIQUE A. AGANA, SR., as Presiding Judge, Court of
First Instance of Rizal, Branch XXVIII, Pasay City, ROBESFRANCISCO REALTY & DEVELOPMENT CORPORATION and
ADALIA F. ROBES, respondents.
HERMOSISIMA, JR., J.:
This is a petition for certiorari seeking the annulment of the
Decision 1 of the then Court of First Instance of Rizal 2 for having
been rendered in grave abuse of discretion. Private respondents
Robes-Francisco Realty and Development Corporation (hereafter,
"the Corporation") and Adalia F. Robes filed in the court a quo, an
action for specific performance to compel petitioner to redeem 800
preferred shares of stock with a face value of P8,000.00 and to pay
1% quarterly interest thereon as quarterly dividend owing them
under the terms and conditions of the certificates of stock.
The court a quo rendered judgment in favor of private respondents;
hence, this instant petition.
Herein parties debate only legal issues, no issues of fact having
been raised by them in the court a quo. For ready reference,
however, the following narration of pertinent transactions and
events is in order:
On September 18, 1961, private respondent Corporation secured a
loan from petitioner in the amount of P120,000.00. As part of the
proceeds of the loan, preferred shares of stocks were issued to
private respondent Corporation, through its officers then, private
respondent Adalia F. Robes and one Carlos F. Robes. In other words,
instead of giving the legal tender totaling to the full amount of the
loan, which is P120,000.00, petitioner lent such amount partially in
the form of money and partially in the form of stock certificates
numbered 3204 and 3205, each for 400 shares with a par value of
P10.00 per share, or for P4,000.00 each, for a total of P8,000.00.
Said stock certificates were in the name of private respondent
Adalia F. Robes and Carlos F. Robes, who subsequently, however,
endorsed his shares in favor of Adalia F. Robes.
Said certificates of stock bear the following terms and conditions:
The Preferred Stock shall have the following rights,
preferences, qualifications and limitations, to wit:

1. Of the right to receive a quarterly dividend of

One Per Centum (1%), cumulative and participating.
xxx xxx xxx
2. That such preferred shares may be redeemed, by
the system of drawing lots, at any time after two (2)
years from the date of issue at the option of the
Corporation. . . .
On January 31, 1979, private respondents proceeded against
petitioner and filed a Complaint anchored on private respondents'
alleged rights to collect dividends under the preferred shares in
question and to have petitioner redeem the same under the terms
and conditions of the stock certificates. Private respondents
attached to their complaint, a letter-demand dated January 5, 1979
which, significantly, was not formally offered in evidence.
Petitioner filed a Motion to Dismiss 3 private respondents' Complaint
on the following grounds: (1) that the trial court had no jurisdiction
over the subject-matter of the action; (2) that the action was
unenforceable under substantive law; and (3) that the action was
barred by the statute of limitations and/or laches.
Petitioner's Motion to Dismiss was denied by the trial court in an
Order dated March 16, 1979. 4 Petitioner then filed its Answer on
May 2, 1979. 5 Thereafter, the trial court gave the parties ten (10)
days from July 30, 1979 to submit their respective memoranda
after the submission of which the case would be deemed submitted
for resolution. 6
On September 7, 1979, the trial court rendered the herein assailed
decision in favor of private respondents. In ordering petitioner to
pay private respondents the face value of the stock certificates as
redemption price, plus 1% quarterly interest thereon until full
payment, the trial court ruled:
There being no issue of fact raised by either of the
parties who filed their respective memoranda
delineating their respective contentions, a judgment
on the pleadings, conformably with an earlier order
of the Court, appears to be in order.
From a further perusal of the pleadings, it appears
that the provision of the stock certificates in question
to the effect that the plaintiffs shall have the right to
receive a quarterly dividend of One Per Centum (1%),
cumulative
and
participating,
clearly
and

unequivocably [sic] indicates that the same are

"interest bearing stocks" which are stocks issued by
a corporation under an agreement to pay a certain
rate of interest thereon (5 Thompson, Sec. 3439). As
such, plaintiffs become entitled to the payment
thereof as a matter of right without necessity of a
prior declaration of dividend.
On the question of the redemption by the defendant
of said preferred shares of stock, the very wordings
of the terms and conditions in said stock certificates
clearly allows the same.
To allow the herein defendant not to redeem said
preferred shares of stock and/or pay the interest due
thereon despite the clear import of said provisions by
the mere invocation of alleged Central Bank Circulars
prohibiting the same is tantamount to an impairment
of the obligation of contracts enshrined in no less
than the fundamental law itself.
Moreover, the herein defendant is considered in
estoppel from taking shelter behind a General
Banking Act provision to the effect that it cannot buy
its own shares of stocks considering that the very
terms and conditions in said stock certificates
allowing their redemption are its own handiwork.
As to the claim by the defendant that plaintiffs' cause
of action is barred by prescription, suffice it to state
that the running of the prescriptive period was
considered interrupted by the written extrajudicial
demands made by the plaintiffs from the defendant. 7
Aggrieved by the decision of the trial court, petitioner elevated the
case before us essentially on pure questions of law. Petitioner's
statement of the issues that it submits for us to adjudicate upon, is
as follows:
A. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN ORDERING PETITIONER TO PAY
RESPONDENT ADALIA F. ROBES THE AMOUNT OF
P8213.69 AS INTERESTS FROM 1961 TO 1979 ON
HER PREFERRED SHARES.
B. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION IN ORDERING PETITIONER TO REDEEM

RESPONDENT ADALIA F. ROBES' PREFERRED SHARES
FOR P8,000.00.
C. RESPONDENT JUDGE COMMITTED A GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DISREGARDING THE ORDER OF THE
CENTRAL BANK TO PETITIONER TO DESIST FROM
REDEEMING ITS PREFERRED SHARES AND FROM
PAYING DIVIDENDS THEREON . . . .
D. THE TRIAL COURT ERRED IN NOT HOLDING THAT
THE COMPLAINT DOES NOT STATE A CAUSE OF
ACTION.
E. THE TRIAL COURT ERRED IN NOT HOLDING THAT
THE CLAIM OF RESPONDENT ADALIA F. ROBES IS
BARRED BY PRESCRIPTION OR LACHES. 8
The petition is meritorious.
Before passing upon the merits of this petition, it may be pertinent
to provide an overview on the nature of preferred shares and the
redemption thereof, considering that these issues lie at the heart of
the dispute.
A preferred share of stock, on one hand, is one which entitles the
holder thereof to certain preferences over the holders of common
stock. The preferences are designed to induce persons to subscribe
for shares of a corporation. 9 Preferred shares take a multiplicity of
forms. The most common forms may be classified into two: (1)
preferred shares as to assets; and (2) preferred shares as to
dividends. The former is a share which gives the holder thereof
preference in the distribution of the assets of the corporation in
case of liquidation; 10 the latter is a share the holder of which is
entitled to receive dividends on said share to the extent agreed
upon before any dividends at all are paid to the holders of common
stock. 11 There is no guaranty, however, that the share will receive
any dividends. Under the old Corporation Law in force at the time
the contract between the petitioner and the private respondents
was entered into, it was provided that "no corporation shall make or
declare any dividend except from the surplus profits arising from its
business, or distribute its capital stock or property other than actual
profits among its members or stockholders until after the payment
of its debts and the termination of its existence by limitation or
lawful
dissolution." 12 Similarly,
the
present
Corporation
13
Code provides that the board of directors of a stock corporation

may declare dividends only out of unrestricted retained

earnings. 14 The Code, in Section 43, adopting the change made in
accounting terminology, substituted the phrase "unrestricted
retained earnings," which may be a more precise term, in place of
"surplus profits arising from its business" in the former law. Thus,
the declaration of dividends is dependent upon the availability of
surplus profit or unrestricted retained earnings, as the case may be.
Preferences granted to preferred stockholders, moreover, do not
give them a lien upon the property of the corporation nor make
them creditors of the corporation, the right of the former being
always subordinate to the latter. Dividends are thus payable only
when there are profits earned by the corporation and as a general
rule, even if there are existing profits, the board of directors has the
discretion to determine whether or not dividends are to be
declared. 15 Shareholders, both common and preferred, are
considered risk takers who invest capital in the business and who
can look only to what is left after corporate debts and liabilities are
fully paid. 16
Redeemable shares, on the other hand, are shares usually
preferred, which by their terms are redeemable at a fixed date, or
at the option of either issuing corporation, or the stockholder, or
both at a certain redemption price. 17A redemption by the
corporation of its stock is, in a sense, a repurchase of it for
cancellation. 18 The present Code allows redemption of shares even
if there are no unrestricted retained earnings on the books of the
corporation. This is a new provision which in effect qualifies the
general rule that the corporation cannot purchase its own shares
except out of current retained earnings. 19 However, while
redeemable shares may be redeemed regardless of the existence
of unrestricted retained earnings, this is subject to the condition
that the corporation has, after such redemption, assets in its books
to cover debts and liabilities inclusive of capital stock. Redemption,
therefore, may not be made where the corporation is insolvent or if
such redemption will cause insolvency or inability of the
corporation to meet its debts as they mature. 20
We come now to the merits of the case. The petitioner argues that
it cannot be compelled to redeem the preferred shares issued to
the private respondent. We agree. Respondent judge, in ruling that
petitioner must redeem the shares in question, stated that:

On the question of the redemption by the defendant

of said preferred shares of stock, the very wordings
of the terms and conditions in said stock certificates
clearly allows the same. 21
What respondent judge failed to recognize was that while
the stock certificate does allow redemption, the option to do
so was clearly vested in the petitioner bank. The redemption
therefore is clearly the type known as "optional". Thus,
except as otherwise provided in the stock certificate, the
redemption rests entirely with the corporation and the
stockholder is without right to either compel or refuse the
redemption of its stock. 22Furthermore, the terms and
conditions set forth therein use the word "may". It is a
settled doctrine in statutory construction that the word
"may" denotes discretion, and cannot be construed as
having a mandatory effect. We fail to see how respondent
judge can ignore what, in his words, are the "very wordings
of the terms and conditions in said stock certificates" and
construe what is clearly a mere option to be his legal basis
for compelling the petitioner to redeem the shares in
question.
The redemption of said shares cannot be allowed. As pointed out by
the petitioner, the Central Bank made a finding that said petitioner
has been suffering from chronic reserve deficiency, 23 and that such
finding resulted in a directive, issued on January 31, 1973 by then
Gov. G.S. Licaros of the Central Bank, to the President and Acting
Chairman of the Board of the petitioner bank prohibiting the latter
from redeeming any preferred share, on the ground that said
redemption would reduce the assets of the Bank to the prejudice of
its depositors and creditors. 24 Redemption of preferred shares was
prohibited for a just and valid reason. The directive issued by the
Central Bank Governor was obviously meant to preserve the status
quo, and to prevent the financial ruin of a banking institution that
would have resulted in adverse repercussions, not only to its
depositors and creditors, but also to the banking industry as a
whole. The directive, in limiting the exercise of a right granted by
law to a corporate entity, may thus be considered as an exercise of
police power. The respondent judge insists that the directive
constitutes an impairment of the obligation of contracts. It has,
however, been settled that the Constitutional guaranty of non-

impairment of obligations of contract is limited by the exercise of

the police power of the state, the reason being that public welfare
is superior to private rights. 25
The respondent judge also stated that since the stock certificate
granted the private respondents the right to receive a quarterly
dividend of One Per Centum (1%) cumulative and participating, it
"clearly and unequivocably (sic) indicates that the same are
"interest bearing stocks" or stocks issued by a corporation under an
agreement to pay a certain rate of interest thereon. As such,
plaintiffs (private respondents herein) become entitled to the
payment thereof as a matter of right without necessity of a prior
declaration of dividend." 26 There is no legal basis for this
observation. Both Sec. 16 of the Corporation Law and Sec. 43 of the
present Corporation Code prohibit the issuance of any stock
dividend without the approval of stockholders, representing not less
than two-thirds (2/3) of the outstanding capital stock at a regular or
special meeting duly called for the purpose. These provisions
underscore the fact that payment of dividends to a stockholder is
not a matter of right but a matter of consensus. Furthermore,
"interest bearing stocks", on which the corporation agrees
absolutely to pay interest before dividends are paid to common
stockholders, is legal only when construed as requiring payment of
interest as dividends from net earnings or surplus only. 27 Clearly,
the respondent judge, in compelling the petitioner to redeem the
shares in question and to pay the corresponding dividends,
committed grave abuse of discretion amounting to lack or excess of
jurisdiction in ignoring both the terms and conditions specified in
the stock certificate, as well as the clear mandate of the law.
Anent the issue of prescription, this Court so holds that the claim of
private respondent is already barred by prescription as well as
laches. Art. 1144 of the New Civil Code provides that a right of
action that is founded upon a written contract prescribes in ten (10)
years. The letter-demand made by the private respondents to the
petitioner was made only on January 5, 1979, or almost eighteen
years after receipt of the written contract in the form of the stock
certificate. As noted earlier, this letter-demand, significantly, was
not formally offered in evidence, nor were any other evidence of
demand presented. Therefore, we conclude that the only time the
private respondents saw it fit to assert their rights, if any, to the
preferred shares of stock, was after the lapse of almost eighteen

years. The same clearly indicates that the right of the private
respondents to any relief under the law has already prescribed.
Moreover, the claim of the private respondents is also barred by
laches. Laches has been defined as the failure or neglect, for an
unreasonable length of time, to do that which by exercising due
diligence could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 28
Considering that the terms and conditions set forth in the stock
certificate clearly indicate that redemption of the preferred shares
may be made at any time after the lapse of two years from the
date of issue, private respondents should have taken it upon
themselves, after the lapse of the said period, to inquire from the
petitioner the reason why the said shares have not been redeemed.
As it is, not only two years had lapsed, as agreed upon, but an
additional sixteen years passed before the private respondents saw
it fit to demand their right. The petitioner, at the time it issued said
preferred shares to the private respondents in 1961, could not have
known that it would be suffering from chronic reserve deficiency
twelve years later. Had the private respondents been vigilant in
asserting their rights, the redemption could have been effected at a
time when the petitioner bank was not suffering from any financial
crisis.
WHEREFORE, the instant petition, being impressed with merit, is
hereby GRANTED. The challenged decision of respondent judge is
set aside and the complaint against the petitioner is dismissed.
Costs against the private respondents.
SO ORDERED.

G.R. No. 132922 April 21, 1998

TELECOMMUNICATIONS AND BROADCAST ATTORNEYS OF
THE PHILIPPINES, INC. and GMA NETWORK, INC., petitioners,
vs.
THE COMMISSION ON ELECTIONS, respondent.
MENDOZA, J.:
In Osmea v. COMELEC, G.R. No. 132231, decided March 31,
1998, 1 we upheld the validity of 11(b) of R.A. No. 6646 which
prohibits the sale or donation of print space or air time for political
ads, except to the Commission on Elections under 90, of B.P. No.
881, the Omnibus Election Code, with respect to print media, and
92, with respect to broadcast media. In the present case, we
consider the validity of 92 of B.P. Blg. No. 881 against claims that
the requirement that radio and television time be given free takes
property without due process of law; that it violates the eminent
domain clause of the Constitution which provides for the payment
of just compensation; that it denies broadcast media the equal
protection of the laws; and that, in any event, it violates the terms
of the franchise of petitioner GMA Network, Inc.
Petitioner Telecommunications and Broadcast Attorneys of the
Philippines, Inc. is an organization of lawyers of radio and television
broadcasting companies. They are suing as citizens, taxpayers, and
registered voters. The other petitioner, GMA Network, Inc., operates
radio and television broadcasting stations throughout the
Philippines under a franchise granted by Congress.
Petitioners challenge the validity of 92 on the ground (1) that it
takes property without due process of law and without just
compensation; (2) that it denies radio and television broadcast
companies the equal protection of the laws; and (3) that it is in
excess of the power given to the COMELEC to supervise or regulate
the operation of media of communication or information during the
period of election.
The Question of Standing
At the threshold of this suit is the question of standing of petitioner
Telecommunications and Broadcast Attorneys of the Philippines,
Inc. (TELEBAP). As already noted, its members assert an interest as
lawyers of radio and television broadcasting companies and as
citizens, taxpayers, and registered voters.

In those cases 2 in which citizens were authorized to sue, this Court

upheld their standing in view of the "transcendental importance" of
the constitutional question raised which justified the granting of
relief. In contrast, in the case at bar, as will presently be shown,
petitioner's substantive claim is without merit. To the extent,
therefore, that a party's standing is determined by the substantive
merit of his case or preliminary estimate thereof, petitioner
TELEBAP must be held to be without standing. Indeed, a citizen will
be allowed to raise a constitutional question only when he can
show that he has personally suffered some actual or threatened
injury as a result of the allegedly illegal conduct of the government;
the injury fairly is fairly traceable to the challenged action; and the
injury is likely to be redressed by a favorable action. 3 Members of
petitioner have not shown that they have suffered harm as a result
of the operation of 92 of B.P. Blg. 881.
Nor do members of petitioner TELEBAP have an interest as
registered voters since this case does not concern their right of
suffrage. Their interest in 92 of B.P. Blg. 881 should be precisely in
upholding its validity.
Much less do they have an interest as taxpayers since this case
does not involve the exercise by Congress of its taxing or spending
power. 4 A party suing as a taxpayer must specifically show that he
has a sufficient interest in preventing the illegal expenditure of
money raised by taxation and that he will sustain a direct injury as
a result of the enforcement of the questioned statute.
Nor indeed as a corporate entity does TELEBAP have standing to
assert the rights of radio and television broadcasting companies.
Standing jus tertii will be recognized only if it can be shown that the
party suing has some substantial relation to the third party, or that
the third party cannot assert his constitutional right, or that the
eight of the third party will be diluted unless the party in court is
allowed to espouse the third party's constitutional claim. None of
these circumstances is here present. The mere fact that TELEBAP is
composed of lawyers in the broadcast industry does not entitle
them to bring this suit in their name as representatives of the
affected companies.
Nevertheless, we have decided to take this case since the other
petitioner, GMA Network, Inc., appears to have the requisite
standing to bring this constitutional challenge. Petitioner operates
radio and television broadcast stations in the Philippines affected

by the enforcement of 92 of B.P. Blg. 881 requiring radio and

television broadcast companies to provide free air time to the
COMELEC for the use of candidates for campaign and other political
purposes.
Petitioner claims that it suffered losses running to several million
pesos in providing COMELEC Time in connection with the 1992
presidential election and the 1995 senatorial election and that it
stands to suffer even more should it be required to do so again this
year. Petitioner's allegation that it will suffer losses again because it
is required to provide free air time is sufficient to give it standing to
question the validity of 92. 5
Airing of COMELEC Time, a
Reasonable Condition for
Grant of Petitioner's
Franchise
As pointed out in our decision in Osmea v. COMELEC, 11(b) of
R.A. No. 6646 and 90 and 92 of the B.P. Blg. 881 are part and
parcel of a regulatory scheme designed to equalize the opportunity
of candidates in an election in regard to the use of mass media for
political campaigns. These statutory provisions state in relevant
parts:
R.A. No. 6646
Sec. 11. Prohibited Forms of Election Propaganda. In
addition to the forms of election propaganda prohibited
under Section 85 of Batas Pambansa Blg. 881, it shall be
unlawful:
xxx xxx xxx
(b) for any newspapers, radio broadcasting or television
station, or other mass media, or any person making use of
the mass media to sell or to give free of charge print space
or air time for campaign or other political purposes except
to the Commission as provided under Section 90 and 92 of
Batas Pambansa Blg. 881. Any mass media columnist,
commentator, announcer or personality who is a candidate
for any elective public office shall take a leave of absence
from his work as such during the campaign period.
B.P. Blg. 881, (Omnibus Election Code)
Sec. 90. Comelec space. The Commission shall procure
space in at least one newspaper of general circulation in
every province or city; Provided, however, That in the
absence of said newspaper, publication shall be done in any
other magazine or periodical in said province or city, which

shall be known as "Comelec Space" wherein candidates can

announce their candidacy. Said space shall be allocated,
free of charge, equally and impartially by the Commission
among all candidates within the area in which the
newspaper is circulated. (Sec. 45, 1978 EC).
Sec. 92. Comelec time. The commission shall procure
radio and television time to be known as "Comelec Time"
which shall be allocated equally and impartially among the
candidates within the area of coverage of all radio and
television stations. For this purpose, the franchise of all
radio broadcasting and television stations are hereby
amended so as to provide radio or television time, free of
charge, during the period of the campaign. (Sec. 46, 1978
EC)
Thus, the law prohibits mass media from selling or donating print
space and air time to the candidates and requires the COMELEC
instead to procure print space and air time for allocation to the
candidates. It will be noted that while 90 of B.P. Blg. 881 requires
the COMELEC to procure print space which, as we have held, should
be paid for, 92 states that air time shall be procured by the
COMELEC free of charge.
Petitioners contend that 92 of BP Blg. 881 violates the due process
clause 6 and the eminent domain provision 7 of the Constitution by
taking air time from radio and television broadcasting stations
without payment of just compensation. Petitioners claim that the
primary source of revenue of the radio and television stations is the
sale of air time to advertisers and that to require these stations to
provide free air time is to authorize a taking which is not "a de
minimis temporary limitation or restraint upon the use of private
property." According to petitioners, in 1992, the GMA Network, Inc.
lost P22,498,560.00 in providing free air time of one (1) hour every
morning from Mondays to Fridays and one (1) hour on Tuesdays and
Thursday from 7:00 to 8:00 p.m. (prime time) and, in this year's
elections, it stands to lose P58,980,850.00 in view of COMELEC'S
requirement that radio and television stations provide at least 30
minutes of prime time daily for the COMELEC Time. 8
Petitioners' argument is without merit, All broadcasting, whether by
radio or by television stations, is licensed by the government.
Airwave frequencies have to be allocated as there are more
individuals who want to broadcast than there are frequencies to
assign. 9 A franchise is thus a privilege subject, among other things,

to amended by Congress in accordance with the constitutional

provision that "any such franchise or right granted . . . shall be
subject to amendment, alteration or repeal by the Congress when
the common good so requires." 10
The idea that broadcast stations may be required to provide
COMELEC Time free of charge is not new. It goes back to the
Election Code of 1971 (R.A. No. 6388), which provided:
Sec. 49. Regulation of election propaganda through mass
media. (a) The franchise of all radio broadcasting and
television stations are hereby amended so as to require
each such station to furnish free of charge, upon request of
the Commission [on Elections], during the period of sixty
days before the election not more than fifteen minutes of
prime time once a week which shall be known as "Comelec
Time" and which shall be used exclusively by the
Commission to disseminate vital election information. Said
"Comelec Time" shall be considered as part of the public
service time said stations are required to furnish the
Government for the dissemination of public information and
education under their respective franchises or permits.
The provision was carried over with slight modification by the 1978
Election Code (P.D. No. 1296), which provided:
Sec. 46. COMELEC Time. The Commission [on Elections]
shall procure radio and television time to be known as
"COMELEC Time" which shall be allocated equally and
impartially among the candidates within the area of
coverage of said radio and television stations. For this
purpose, the franchises of all radio broadcasting and
television stations are hereby amended so as to require
such stations to furnish the Commission radio or television
time, free of charge, during the period of the campaign, at
least once but not oftener than every other day.
Substantially the same provision is now embodied in 92 of B.P. Blg.
881.
Indeed, provisions for COMELEC Tima have been made by
amendment of the franchises of radio and television broadcast
stations and, until the present case was brought, such provisions
had not been thought of as taking property without just
compensation. Art. XII, 11 of the Constitution authorizes the
amendment of franchises for "the common good." What better
measure can be conceived for the common good than one for free

air time for the benefit not only of candidates but even more of the
public, particularly the voters, so that they will be fully informed of
the issues in an election? "[I]t is the right of the viewers and
listeners, not the right of the broadcasters, which is paramount." 11
Nor indeed can there be any constitutional objection to the
requirement that broadcast stations give free air time. Even in the
United States, there are responsible scholars who believe that
government controls on broadcast media can constitutionally be
instituted to ensure diversity of views and attention to public affairs
to further the system of free expression. For this purpose,
broadcast stations may be required to give free air time to
candidates in an election. 12 Thus, Professor Cass R. Sunstein of the
University of Chicago Law School, in urging reforms in regulations
affecting the broadcast industry, writes:
Elections. We could do a lot to improve coverage of electoral
campaigns. Most important, government should ensure free
media time for candidates. Almost all European nations
make such provisions; the United States does not. Perhaps
government should pay for such time on its own. Perhaps
broadcasters should have to offer it as a condition for
receiving a license. Perhaps a commitment to provide free
time would count in favor of the grant of a license in the
first instance. Steps of this sort would simultaneously
promote attention to public affairs and greater diversity of
view. They would also help overcome the distorting effects
of "soundbites" and the corrosive financial pressures faced
by candidates in seeking time on the media. 13
In truth, radio and television broadcasting companies, which are
given franchises, do not own the airwaves and frequencies through
which they transmit broadcast signals and images. They are merely
given the temporary privilege of using them. Since a franchise is a
mere privilege, the exercise of the privilege may reasonably be
burdened with the performance by the grantee of some form of
public service. Thus, in De Villata v. Stanley, 14 a regulation
requiring interisland vessels licensed to engage in the interisland
trade to carry mail and, for this purpose, to give advance notice to
postal authorities of date and hour of sailings of vessels and of
changes of sailing hours to enable them to tender mail for
transportation at the last practicable hour prior to the vessel's
departure, was held to be a reasonable condition for the state grant

of license. Although the question of compensation for the carriage

of mail was not in issue, the Court strongly implied that such
service could be without compensation, as in fact under Spanish
sovereignty the mail was carried free. 15
In Philippine Long Distance Telephone Company v. NTC, 16 the Court
ordered the PLDT to allow the interconnection of its domestic
telephone system with the international gateway facility of Eastern
Telecom. The Court cited (1) the provisions of the legislative
franchise allowing such interconnection; (2) the absence of any
physical, technical, or economic basis for restricting the linking up
of two separate telephone systems; and (3) the possibility of
increase in the volume of international traffic and more efficient
service, at more moderate cost, as a result of interconnection.
Similarly, in the earlier case of PLDT v. NTC, 17 it was held:
Such
regulation
of
the
use
and
ownership
of
telecommunications systems is in the exercise of the
plenary police power of the State for the promotion of the
general welfare. The 1987 Constitution recognizes the
existence of that power when it provides:
Sec. 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 (Article XII).
The interconnection which has been required of PLDT is a
form of "intervention" with property rights dictated by "the
objective of government to promote the rapid expansion of
telecommunications services in all areas of the
Philippines, . . . to maximize the use of telecommunications
facilities available, . . . in recognition of the vital role of
communications in nation building . . . and to ensure that all
users of the public telecommunications service have access
to all other users of the service wherever they may be within
the Philippines at an acceptable standard of service and at
reasonable cost" (DOTC Circular No. 90-248). Undoubtedly,
the encompassing objective is the common good. The NTC,

as the regulatory agency of the State, merely exercised its

delegated
authority
to
regulate
the
use
of
telecommunications
networks
when
it
decreed
interconnection.
In the granting of the privilege to operate broadcast stations and
thereafter supervising radio and television stations, the state
spends considerable public funds in licensing and supervising such
stations. 18 It would be strange if it cannot even require the
licensees to render public service by giving free air time.
Considerable effort is made in the dissent of Mr. Justice Panganiban
to show that the production of television programs involves large
expenditure and requires the use of equipment for which huge
investments have to be made. The dissent cites the claim of GMA
Network that the grant of free air time to the COMELEC for the
duration of the 1998 campaign period would cost the company
P52,380,000, representing revenue it would otherwise earn if the
air time were sold to advertisers, and the amount of P6,600,850,
representing the cost of producing a program for the COMELEC
Time, or the total amount of P58,980,850.
The claim that petitioner would be losing P52,380,000 in unrealized
revenue from advertising is based on the assumption that air time
is "finished product" which, it is said, become the property of the
company, like oil produced from refining or similar natural
resources after undergoing a process for their production. But air
time is not owned by broadcast companies. As held in Red Lion
Broadcasting Co. v. F.C.C., 19 which upheld the right of a party
personally attacked to reply, "licenses to broadcast do not confer
ownership of designated frequencies, but only the temporary
privilege of using them." Consequently, "a license permits
broadcasting, but the license has no constitutional right to be the
one who holds the license or to monopolize a radio frequency to the
exclusion of his fellow citizens. There is nothing in the First
Amendment which prevents the Government from requiring a
licensee to share his frequency with others and to conduct himself
as a proxy or fiduciary with obligations to present those views and
voices which are representative of his community and which would
otherwise, by necessity, be barred from the airwaves." 20 As radio
and television broadcast stations do not own the airwaves, no
private property is taken by the requirement that they provide air
time to the COMELEC.

Justice Panganiban's dissent quotes from Tolentino on the Civil Code

which says that "the air lanes themselves 'are not property because
they cannot be appropriated for the benefit of any individual.'" (p.
5) That means neither the State nor the stations own the air lanes.
Yet the dissent also says that "The franchise holders can recover
their huge investments only by selling air time to advertisers." (p.
13) If air lanes cannot be appropriated, how can they be used to
produce air time which the franchise holders can sell to recover
their investment? There is a contradiction here.
As to the additional amount of P6,600,850, it is claimed that this is
the cost of producing a program and it is for such items as "sets
and props," "video tapes," "miscellaneous (other rental, supplies,
transportation, etc.)," and "technical facilities (technical crew such
as director and cameraman as well as 'on air plugs')." There is no
basis for this claim. Expenses for these items will be for the account
of the candidates. COMELEC Resolution No. 2983, 6(d) specifically
provides in this connection:
(d) Additional services such as tape-recording or videotaping of programs, the preparation of visual aids, terms
and condition thereof, and consideration to be paid therefor
may be arranged by the candidates with the radio/television
station concerned. However, no radio/television station shall
make any discrimination among candidates relative to
charges, terms, practices or facilities for in connection with
the services rendered.
It is unfortunate that in the effort to show that there is taking of
private property worth millions of pesos, the unsubstantiated
charge is made that by its decision the Court permits the "grand
larceny of precious time," and allows itself to become "the people's
unwitting oppressor." The charge is really unfortunate. In Jackson
v.Rosenbaun, 21 Justice Holmes was so incensed by the resistance
of property owners to the erection of party walls that he was led to
say in his original draft, "a statute, which embodies the
community's understanding of the reciprocal rights and duties of
neighboring landowners, does not need to invoke the penalty
larceny of the police power in its justification." Holmes's brethren
corrected his taste, and Holmes had to amend the passage so that
in the end it spoke only of invoking "the police power." 22 Justice
Holmes spoke of the "petty larceny" of the police power. Now we

are being told of the "grand larceny [by means of the police power]
of precious air time."
Giving Free Air Time a Duty
Assumed by Petitioner
Petitioners claim that 92 is an invalid amendment of R.A. No. 7252
which granted GMA Network, Inc. a franchise for the operation of
radio and television broadcasting stations. They argue that
although 5 of R.A. No. 7252 gives the government the power to
temporarily use and operate the stations of petitioner GMA Network
or to authorize such use and operation, the exercise of this right
must be compensated.
The cited provision of. R.A. No. 7252 states:
Sec. 5. Right of Government. A special right is hereby
reserved to the President of the Philippines, in times of
rebellion, public peril, calamity, emergency, disaster or
disturbance of peace and order, to temporarily take over
and operate the stations of the grantee, to temporarily
suspend the operation of any station in the interest of public
safety, security and public welfare, or to authorize the
temporary use and operation thereof by any agency of the
Government, upon due compensation to the grantee, for the
use of said stations during the period when they shall be so
operated.
The basic flaw in petitioner's argument is that it assumes that the
provision for COMELEC Time constitutes the use and operation of
the stations of the GMA Network, Inc., This is not so. Under 92 of
B.P. Blg. 881, the COMELEC does not take over the operation of
radio and television stations but only the allocation of air time to
the candidates for the purpose of ensuring, among other things,
equal opportunity, time, and the right to reply as mandated by the
Constitution. 23
Indeed, it is wrong to claim an amendment of petitioner's franchise
for the reason that B.P. Blg. 881, which is said to have amended
R.A. No. 7252, actually antedated it. 24 The provision of 92 of B.P.
Blg. 881 must be deemed instead to be incorporated in R.A. No.
7252. And, indeed, 4 of the latter statute does.
For the fact is that the duty imposed on the GMA Network, Inc. by
its franchise to render "adequate public service time" implements
92 of B.P. Blg. 881. Undoubtedly, its purpose is to enable the
government to communicate with the people on matters of public
interest. Thus, R.A. No. 7252 provides:

Sec. 4. Responsibility to the Public. The grantee shall

provide adequate public service time to enable the
Government, through the said broadcasting stations, to
reach the population on important public issues; provide at
all times sound and balanced programming; promote public
participation such as in community programming; assist in
the functions of public information and education; conform
to the ethics of honest enterprise; and not use its station for
the broadcasting of obscene and indecent language,
speech, act or scene, or for the dissemination of deliberately
false information or willful misrepresentation, or to the
detriment of the public interest, or to incite, encourage, or
assist in subversive or treasonable acts. (Emphasis added).
It is noteworthy that 40 of R.A. No. 6388, from which 92 of B.P.
Blg. 881 was taken, expressly provided that the COMELEC Time
should "be considered as part of the public service time said
stations are required to furnish the Government for the
dissemination of public information and education under their
respective franchises or permits." There is no reason to suppose
that 92 of B.P. Blg. 881 considers the COMELEC Time therein
provided to be otherwise than as a public service which petitioner
is required to render under 4 of its charter (R.A. No. 7252). In sum,
B.P. Blg. 881, 92 is not an invalid amendment of petitioner's
franchise but the enforcement of a duty voluntarily assumed by
petitioner in accepting a public grant of privilege.
Thus far, we have confined the discussion to the provision of 92 of
B.P. Blg. 881 for free air time without taking into account COMELEC
Resolution No. 2983-A, 2 of which states:
Sec. 2. Grant of "Comelec Time." Every radio
broadcasting and television station operating under
franchise shall grant the Commission, upon payment of just
compensation, at least thirty (30) minutes of prime time
daily, to be known as "Comelec Time", effective February
10, 1998 for candidates for President, Vice-President and
Senators, and effective March 27, 1998, for candidates for
local elective offices, until May 9, 1998. (Emphasis added).
This is because the amendment providing for the payment of "just
compensation" is invalid, being in contravention of 92 of B.P. Blg.
881 that radio and television time given during the period of the
campaign shall be "free of charge." Indeed, Resolution No. 2983
originally provided that the time allocated shall be "free of charge,"

just as 92 requires such time to be given "free of charge." The

amendment appears to be a reaction to petitioner's claim in this
case that the original provision was unconstitutional because it
allegedly authorized the taking of property without just
compensation.
The Solicitor General, relying on the amendment, claims that there
should be no more dispute because the payment of compensation
is now provided for. It is basic, however, that an administrative
agency cannot, in the exercise of lawmaking, amend a statute of
Congress. Since 2 of Resolution No. 2983-A is invalid, it cannot be
invoked by the parties.
Law Allows Flextime for Programming
by Stations, Not Confiscation of
Air Time by COMELEC
It is claimed that there is no standard in the law to guide the
COMELEC in procuring free air time and that "theoretically the
COMELEC can demand all of the air time of such
stations." 25 Petitioners do not claim that COMELEC Resolution No.
2983-A arbitrarily sequesters radio and television time. What they
claim is that because of the breadth of the statutory language, the
provision in question is susceptible of "unbridled, arbitrary and
oppressive exercise." 26
The contention has no basis. For one, the COMELEC is required to
procure free air time for candidates "within the area of coverage" of
a particular radio or television broadcaster so that it cannot, for
example, procure such time for candidates outside that area. At
what time of the day and how much time the COMELEC may
procure will have to be determined by it in relation to the overall
objective of informing the public about the candidates, their
qualifications and their programs of government. As stated
in Osmea v. COMELEC, the COMELEC Time provided for in 92, as
well as the COMELEC Space provided for in 90, is in lieu of paid
ads which candidates are prohibited to have under 11(b) of R.A.
No. 6646. Accordingly, this objective must be kept in mind in
determining the details of the COMELEC Time as well as those of
the COMELEC Space.
There would indeed be objection to the grant of power to the
COMELEC if 92 were so detailed as to leave no room for
accommodation of the demands of radio and television
programming. For were that the case, there could be an intrusion
into the editorial prerogatives of radio and television stations.

Differential Treatment of
Broadcast Media Justified
Petitioners complain that B.P. Blg. 881, 92 singles out radio and
television stations to provide free air time. They contend that
newspapers and magazines are not similarly required as, in fact,
in Philippine Press Institute v.COMELEC, 27 we upheld their right to
the payment of just compensation for the print space they may
provide under 90.
The argument will not bear analysis. It rests on the fallacy that
broadcast media are entitled to the same treatment under the free
speech guarantee of the Constitution as the print media. There are
important differences in the characteristics of the two media,
however, which justify their differential treatment for free speech
purposes. Because of the physical limitations of the broadcast
spectrum, the government must, of necessity, allocate broadcast
frequencies to those wishing to use them. There is no similar
justification for government allocation and regulation of the print
media. 28
In the allocation of limited resources, relevant conditions may
validly be imposed on the grantees or licensees. The reason for this
is that, as already noted, the government spends public funds for
the allocation and regulation of the broadcast industry, which it
does not do in the case of the print media. To require the radio and
television broadcast industry to provide free air time for the
COMELEC Time is a fair exchange for what the industry gets.
From another point of view, this Court has also held that because of
the unique and pervasive influence of the broadcast media,
"[n]ecessarily . . . the freedom of television and radio broadcasting
is somewhat lesser in scope than the freedom accorded to
newspaper and print media." 29
The broadcast media have also established a uniquely pervasive
presence in the lives of all Filipinos. Newspapers and current books
are found only in metropolitan areas and in the poblaciones of
municipalities accessible to fast and regular transportation. Even
here, there are low income masses who find the cost of books,
newspapers, and magazines beyond their humble means. Basic
needs like food and shelter perforce enjoy high priorities.
On the other hand, the transistor radio is found everywhere.
The television set is also becoming universal. Their message
may be simultaneously received by a national or regional
audience of listeners including the indifferent or unwilling

who happen to be within reach of a blaring radio or

television set. The materials broadcast over the airwaves
reach every person of every age, persons of varying
susceptibilities to persuasion, persons of different I.Q.s and
mental
capabilities,
persons
whose
reactions
to
inflammatory or offensive speech would he difficult to
monitor or predict. The impact of the vibrant speech is
forceful and immediate. Unlike readers of the printed work,
the radio audience has lesser opportunity to cogitate,
analyze, and reject the utterance. 30
Petitioners' assertion therefore that 92 of B.P. Blg. 881 denies
them the equal protection of the law has no basis. In addition, their
plea that 92 (free air time) and 11(b) of R.A. No. 6646 (ban on
paid political ads) should be invalidated would pave the way for a
return to the old regime where moneyed candidates could
monopolize media advertising to the disadvantage of candidates
with less resources. That is what Congress tried to reform in 1987
with the enactment of R.A. No. 6646. We are not free to set aside
the judgment of Congress, especially in light of the recent failure of
interested parties to have the law repealed or at least modified.
Requirement of COMELEC Time, a
Reasonable Exercise of the
State's Power to Regulate
Use of Franchises
Finally, it is argued that the power to supervise or regulate given to
the COMELEC under Art. IX-C, 4 of the Constitution does not
include the power to prohibit. In the first place, what the COMELEC
is authorized to supervise or regulate by Art. IX-C, 4 of the
Constitution, 31 among other things, is the use by media of
information of their franchises or permits, while what Congress (not
the COMELEC) prohibits is the sale or donation of print space or air
time for political ads. In other words, the object of supervision or
regulation is different from the object of the prohibition. It is
another fallacy for petitioners to contend that the power to regulate
does not include the power to prohibit. This may have force if the
object of the power were the same.
In the second place, the prohibition in 11(b) of R.A. No. 6646 is
only half of the regulatory provision in the statute. The other half is
the mandate to the COMELEC to procure print space and air time
for allocation to candidates. As we said in Osmea v. COMELEC:

The term political "ad ban" when used to describe 11(b) of

R.A. No. 6646, is misleading, for even as 11(b) prohibits the
sale or donation of print space and air time to political
candidates, it mandates the COMELEC to procure and itself
allocate to the candidates space and time in the media.
There is no suppression of political ads but only a regulation
of the time and manner of advertising.
xxx xxx xxx
. . . What is involved here is simply regulation of this nature.
Instead of leaving candidates to advertise freely in the mass
media, the law provides for allocation, by the COMELEC of
print space and air time to give all candidates equal time
and space for the purpose of ensuring "free, orderly, honest,
peaceful, and credible elections."
With the prohibition on media advertising by candidates
themselves, the COMELEC Time and COMELEC Space are about the
only means through which candidates can advertise their
qualifications and programs of government. More than merely
depriving their qualifications and programs of government. More
than merely depriving candidates of time for their ads, the failure of
broadcast stations to provide air time unless paid by the
government would clearly deprive the people of their right to know.
Art III, 7 of the Constitution provides that "the right of the people
to information on matters of public concern shall be recognized,"
while Art. XII, 6 states that "the use of property bears a social
function [and] the right to own, establish, and operate economic
enterprises [is] subject to the duty of the State to promote
distributive justice and to intervene when the common good so
demands."
To affirm the validity of 92 of B.P. Blg. 881 is to hold public
broadcasters to their obligation to see to it that the variety and
vigor of public debate on issues in an election is maintained. For
while broadcast media are not mere common carriers but entities
with free speech rights, they are also public trustees charged with
the duty of ensuring that the people have access to the diversity of
views on political issues. This right of the people is paramount to
the autonomy of broadcast media. To affirm the validity of 92,
therefore, is likewise to uphold the people's right to information on
matters of public concern. The use of property bears a social
function and is subject to the state's duty to intervene for the
common good. Broadcast media can find their just and highest

reward in the fact that whatever altruistic service they may render
in connection with the holding of elections is for that common
good.
For the foregoing reasons, the petition is dismissed.
SO ORDERED.

[G.R. No. 118127. April 12, 2005]

CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the
City of Manila, HON. JOSELITO L. ATIENZA, in his
capacity as Vice-Mayor of the City of Manila and
Presiding Officer of the City Council of Manila, HON.
ERNESTO A. NIEVA, HON. GONZALO P. GONZALES,
HON. AVELINO S. CAILIAN, HON. ROBERTO C.
OCAMPO, HON. ALBERTO DOMINGO, HON. HONORIO
U. LOPEZ, HON. FRANCISCO G. VARONA, JR., HON.
ROMUALDO S. MARANAN, HON. NESTOR C. PONCE,
JR., HON. HUMBERTO B. BASCO, HON. FLAVIANO F.
CONCEPCION, JR., HON. ROMEO G. RIVERA, HON.
MANUEL M. ZARCAL, HON. PEDRO S. DE JESUS, HON.
BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON.
JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON.
VICTORIANO A. MELENDEZ, HON. ERNESTO V.P.
MACEDA, JR., HON. ROLANDO P. NIETO, HON. DANILO
V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON.
MA. PAZ E. HERRERA, HON. JOEY D. HIZON, HON.
FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG,
HON. ROGELIO P. DELA PAZ, HON. BERNARDO D.
RAGAZA, HON. MA. CORAZON R. CABALLES, HON.
CASIMIRO C. SISON, HON. BIENVINIDO M. ABANTE,
JR., HON. MA. LOURDES M. ISIP, HON. ALEXANDER S.
RICAFORT,
HON.
ERNESTO
F.
RIVERA,
HON.
LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in
their capacity as councilors of the City of
Manila, petitioners, vs. HON. PERFECTO A.S. LAGUIO,
JR., as Presiding Judge, RTC, Manila and MALATE
TOURIST DEVELOPMENT CORPORATION, respondents.
DECISION
TINGA, J.:
I know only that what is moral is what you feel good after and what
is immoral is what you feel bad after.
Ernest Hermingway
Death in the Afternoon, Ch.
1
It is a moral and political axiom that any dishonorable act, if
performed by oneself, is less immoral than if performed by
someone else, who would be well-intentioned in his dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch.
I
The Courts commitment to the protection of morals is
secondary to its fealty to the fundamental law of the land. It is
foremost a guardian of the Constitution but not the conscience of

individuals. And if it need be, the Court will not hesitate to make
the hammer fall, and heavily in the words of Justice Laurel, and
uphold the constitutional guarantees when faced with laws that,
though not lacking in zeal to promote morality, nevertheless fail to
pass the test of constitutionality.
The pivotal issue in this Petition[1] under Rule 45 (then Rule 42)
of the Revised Rules on Civil Procedure seeking the reversal of
the Decision[2] in Civil Case No. 93-66511 of the Regional Trial Court
(RTC) of Manila, Branch 18 (lower court), [3] is the validity of
Ordinance No. 7783 (the Ordinance) of the City of Manila.[4]
The antecedents are as follows:
Private respondent Malate Tourist Development Corporation
(MTDC) is a corporation engaged in the business of operating
hotels, motels, hostels and lodging houses.[5] It built and opened
Victoria Court in Malate which was licensed as a motel although
duly accredited with the Department of Tourism as a hotel. [6] On 28
June 1993, MTDC filed a Petition for Declaratory Relief with Prayer
for a Writ of Preliminary Injunction and/or Temporary Restraining
Order[7] (RTC Petition) with the lower court impleading as
defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim
(Lim), Hon. Joselito L. Atienza, and the members of the City Council
of Manila (City Council). MTDC prayed that the Ordinance, insofar
as it includes motels and inns as among its prohibited
establishments, be declared invalid and unconstitutional. [8]
Enacted by the City Council[9] on 9 March 1993 and approved
by petitioner City Mayor on 30 March 1993, the said Ordinance is
entitled
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION
OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT,
ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE
AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND FOR
OTHER PURPOSES.[10]
The Ordinance is reproduced in full, hereunder:
SECTION 1. Any provision of existing laws and ordinances to the
contrary notwithstanding, no person, partnership, corporation
or entity shall, in the Ermita-Malate area bounded by Teodoro
M. Kalaw Sr. Street in the North, Taft Avenue in the East, Vito Cruz
Street in the South and Roxas Boulevard in the West, pursuant to
P.D. 499 be allowed or authorized to contract and engage in,
any business providing certain forms of amusement,
entertainment, services and facilities where women are
used as tools in entertainment and which tend to disturb
the community, annoy the inhabitants, and adversely affect
the social and moral welfare of the community, such as but
not limited to:
1. Sauna Parlors

2. Massage Parlors
3. Karaoke Bars
4. Beerhouses
5. Night Clubs
6. Day Clubs
7. Super Clubs
8. Discotheques
9. Cabarets
10. Dance Halls
11. Motels
12. Inns
SEC. 2 The City Mayor, the City Treasurer or any person acting
in behalf of the said officials are prohibited from issuing
permits, temporary or otherwise, or from granting licenses
and accepting payments for the operation of business
enumerated in the preceding section.
SEC. 3. Owners and/or operator of establishments engaged in,
or devoted to, the businesses enumerated in Section 1 hereof are
hereby given three (3) months from the date of approval of
this ordinance within which to wind up business operations
or to transfer to any place outside of the Ermita-Malate
area or convert said businesses to other kinds of business
allowable within the area,such as but not limited to:
1. Curio or antique shop
2. Souvenir Shops
3. Handicrafts display centers
4. Art galleries
5. Records and music shops
6. Restaurants
7. Coffee shops
8. Flower shops
9. Music lounge and sing-along restaurants,
with well-defined activities for wholesome family
entertainment that cater to both local and foreign
clientele.
10. Theaters engaged in the exhibition, not
only of motion pictures but also of cultural shows, stage
and theatrical plays, art exhibitions, concerts and the
like.
11. Businesses allowable within the law and
medium intensity districts as provided for in the zoning
ordinances for Metropolitan Manila, except new
warehouse or open-storage depot, dock or yard, motor
repair shop, gasoline service station, light industry with
any machinery, or funeral establishments.

SEC. 4. Any person violating any provisions of this

ordinance, shall upon conviction, be punished by
imprisonment of one (1) year or fine of FIVE THOUSAND
(P5,000.00) PESOS, or both, at the discretion of the Court,
PROVIDED, that in case of juridical person, the President, the
General Manager, or person-in-charge of operation shall be liable
thereof; PROVIDED FURTHER, that in case of subsequent
violation and conviction, the premises of the erring
establishment shall be closed and padlocked permanently.
SEC. 5. This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session today,
March 9, 1993.
Approved by His Honor, the Mayor on March 30, 1993. (Emphasis
supplied)
In
the RTC
Petition,
MTDC
argued
that
the Ordinance erroneously and improperly included in its
enumeration of prohibited establishments, motels and inns such as
MTDCs Victoria Court considering that these were not
establishments for amusement or entertainment and they were
not services or facilities for entertainment, nor did they use
women as tools for entertainment, and neither did they disturb
the community, annoy the inhabitants or adversely affect the
social and moral welfare of the community.[11]
MTDC further advanced that the Ordinance was invalid and
unconstitutional for the following reasons: (1) The City Council has
no power to prohibit the operation of motels as Section 458 (a) 4
(iv)[12] of the Local Government Code of 1991 (the Code) grants to
the City Council only the power to regulate the establishment,
operation and maintenance of hotels, motels, inns, pension houses,
lodging houses and other similar establishments; (2) The Ordinance
is void as it is violative of Presidential Decree (P.D.) No.
499[13] which specifically declared portions of the Ermita-Malate
area as a commercial zone with certain restrictions; (3)
The Ordinance does not constitute a proper exercise of police
power as the compulsory closure of the motel business has no
reasonable relation to the legitimate municipal interests sought to
be protected; (4) The Ordinance constitutes an ex post facto law by
punishing the operation of Victoria Court which was a legitimate
business prior to its enactment; (5) The Ordinance violates MTDCs
constitutional rights in that: (a) it is confiscatory and constitutes an
invasion of plaintiffs property rights; (b) the City Council has no
power to find as a fact that a particular thing is a nuisance per
se nor does it have the power to extrajudicially destroy it; and (6)
TheOrdinance constitutes a denial of equal protection under the
law as no reasonable basis exists for prohibiting the operation of
motels and inns, but not pension houses, hotels, lodging houses or

other similar establishments, and for prohibiting said business in

the Ermita-Malate area but not outside of this area.[14]
In their Answer[15] dated 23 July 1993, petitioners City of Manila
and Lim maintained that the City Council had the power to prohibit
certain forms of entertainment in order to protect the social and
moral welfare of the community as provided for in Section 458 (a)
4 (vii) of the Local Government Code,[16] which reads, thus:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for
the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
....
(4) Regulate activities relative to the use of land, buildings and
structures within the city in order to promote the general welfare
and for said purpose shall:
....
(vii) Regulate
the establishment, operation, and
maintenance of any entertainment or amusement
facilities, including theatrical performances, circuses,
billiard pools, public dancing schools, public dance halls,
sauna baths, massage parlors, and other places for
entertainment or amusement; regulate such other events
or activities for amusement or entertainment, particularly
those which tend to disturb the community or annoy the
inhabitants, or require the suspension or suppression of
the same; or, prohibit certain forms of amusement or
entertainment in order to protect the social and moral
welfare of the community.
Citing Kwong Sing v. City of Manila,[17] petitioners insisted that
the power of regulation spoken of in the above-quoted provision
included the power to control, to govern and to restrain places of
exhibition and amusement.[18]
Petitioners likewise asserted that the Ordinance was enacted
by the City Council of Manila to protect the social and moral welfare
of the community in conjunction with its police power as found in
Article III, Section 18(kk) of Republic Act No. 409, [19] otherwise
known as the Revised Charter of the City of Manila (Revised Charter
of Manila)[20] which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
. . .
Section 18. Legislative powers. The Municipal Board shall
have the following legislative powers:

. . .
(kk) To enact all ordinances it may deem necessary and
proper for the sanitation and safety, the furtherance of the
prosperity, and the promotion of the morality, peace, good
order, comfort, convenience, and general welfare of the
city and its inhabitants, and such others as may be
necessary to carry into effect and discharge the powers
and duties conferred by this chapter; and to fix penalties
for the violation of ordinances which shall not exceed two
hundred pesos fine or six months imprisonment, or both
such fine and imprisonment, for a single offense.
Further, the petitioners noted, the Ordinance had the
presumption of validity; hence, private respondent had the burden
to prove its illegality or unconstitutionality. [21]
Petitioners also maintained that there was no inconsistency
between P.D. 499 and the Ordinance as the latter simply
disauthorized certain forms of businesses and allowed the ErmitaMalate area to remain a commercial zone.[22] The Ordinance, the
petitioners likewise claimed, cannot be assailed as ex post facto as
it was prospective in operation. [23] The Ordinance also did not
infringe the equal protection clause and cannot be denounced as
class legislation as there existed substantial and real differences
between the Ermita-Malate area and other places in the City of
Manila.[24]
On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr.
(Judge Laguio) issued an ex-parte temporary restraining order
against the enforcement of the Ordinance.[25] And on 16 July 1993,
again in an intrepid gesture, he granted the writ of preliminary
injunction prayed for by MTDC.[26]
After trial, on 25 November 1994, Judge Laguio rendered the
assailed Decision, enjoining the petitioners from implementing
the Ordinance. The dispositive portion of said Decisionreads:[27]
WHEREFORE, judgment is hereby rendered declaring Ordinance No.
778[3], Series of 1993, of the City of Manila null and void, and
making permanent the writ of preliminary injunction that had been
issued by this Court against the defendant. No costs.
SO ORDERED.[28]
Petitioners filed with the lower court a Notice of Appeal[29] on 12
December 1994, manifesting that they are elevating the case to
this Court under then Rule 42 on pure questions of law.[30]
On 11 January 1995, petitioners filed the present Petition,
alleging that the following errors were committed by the lower
court in its ruling: (1) It erred in concluding that the subject
ordinance is ultra vires, or otherwise, unfair, unreasonable and
oppressive exercise of police power; (2) It erred in holding that the
questioned Ordinance contravenes
P.D.
499[31] which
allows

operators of all kinds of commercial establishments, except those

specified therein; and (3) It erred in declaring the Ordinance void
and unconstitutional.[32]
In the Petition and in its Memorandum,[33] petitioners in
essence repeat the assertions they made before the lower court.
They contend that the assailed Ordinance was enacted in the
exercise of the inherent and plenary power of the State and the
general welfare clause exercised by local government units
provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila
and conjunctively, Section 458 (a) 4 (vii) of the Code. [34] They allege
that the Ordinance is a valid exercise of police power; it does not
contravene P.D. 499; and that it enjoys the presumption of validity.
[35]

In its Memorandum[36] dated 27 May 1996, private respondent

maintains that the Ordinance is ultra vires and that it is void for
being repugnant to the general law. It reiterates that the
questioned Ordinance is not a valid exercise of police power; that it
is violative of due process, confiscatory and amounts to an
arbitrary interference with its lawful business; that it is violative of
the equal protection clause; and that it confers on petitioner City
Mayor or any officer unregulated discretion in the execution of
the Ordinance absent rules to guide and control his actions.
This is an opportune time to express the Courts deep
sentiment and tenderness for the Ermita-Malate area being its
home for several decades. A long-time resident, the Court
witnessed the areas many turn of events. It relished its glory days
and endured its days of infamy. Much as the Court harks back to
the resplendent era of the Old Manila and yearns to restore its lost
grandeur, it believes that the Ordinance is not the fitting means to
that end. The Court is of the opinion, and so holds, that the lower
court did not err in declaring theOrdinance, as it did, ultra vires and
therefore null and void.
The Ordinance is so replete with constitutional infirmities that
almost every sentence thereof violates a constitutional provision.
The prohibitions and sanctions therein transgress the cardinal
rights of persons enshrined by the Constitution. The Court is called
upon to shelter these rights from attempts at rendering them
worthless.
The tests of a valid ordinance are well established. A long line
of decisions has held that for an ordinance to be valid, it must not
only be within the corporate powers of the local government unit to
enact and must be passed according to the procedure prescribed
by law, it must also conform to the following substantive
requirements: (1) must not contravene the Constitution or any
statute; (2) must not be unfair or oppressive; (3) must not be
partial or discriminatory; (4) must not prohibit but may regulate

trade; (5) must be general and consistent with public policy; and
(6) must not be unreasonable.[37]
Anent the first criterion, ordinances shall only be valid when
they are not contrary to the Constitution and to the laws.
[38]
The Ordinance must satisfy two requirements: it must pass
muster under the test of constitutionality and the test of
consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the
Constitution. The requirement that the enactment must not violate
existing law gives stress to the precept that local government units
are able to legislate only by virtue of their derivative legislative
power, a delegation of legislative power from the national
legislature. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. [39]
This relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in
the Constitution strengthening the policy of local autonomy. The
national legislature is still the principal of the local government
units, which cannot defy its will or modify or violate it. [40]
The Ordinance was passed by the City Council in the exercise
of its police power, an enactment of the City Council acting as
agent of Congress. Local government units, as agencies of the
State, are endowed with police power in order to effectively
accomplish and carry out the declared objects of their creation.
[41]
This delegated police power is found in Section 16 of the Code,
known as the general welfare clause, viz:
SECTION 16. General Welfare.Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall
ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the
right of the people to a balanced ecology, encourage and support
the development of appropriate and self-reliant scientific and
technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants.
Local government units exercise police power through their
respective legislative bodies; in this case, the sangguniang
panlungsod or the city council. The Code empowers the legislative
bodies to enact ordinances, approve resolutions and appropriate
funds for the general welfare of the province/city/municipality and
its inhabitants pursuant to Section 16 of the Code and in the proper

exercise of the corporate powers of the province/city/ municipality

provided under the Code.[42] The inquiry in this Petition is concerned
with the validity of the exercise of such delegated power.
The Ordinance contravenes
the Constitution
The police power of the City Council, however broad and farreaching, is subordinate to the constitutional limitations thereon;
and is subject to the limitation that its exercise must be reasonable
and for the public good.[43] In the case at bar, the enactment of
the Ordinance was an invalid exercise of delegated power as it is
unconstitutional and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5. The maintenance of peace and order, the protection of life,
liberty, and property, and the promotion of the general welfare are
essential for the enjoyment by all the people of the blessings of
democracy.[44]
SEC. 14. The State recognizes the role of women in nation-building,
and shall ensure the fundamental equality before the law of women
and men.[45]
SEC. 1. No person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the
equal protection of laws.[46]
Sec. 9. Private property shall not be taken for public use without
just compensation.[47]
A. The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is embodied in the
fiat (N)o person shall be deprived of life, liberty or property
without due process of law. . . .[48]
There is no controlling and precise definition of due process. It
furnishes though a standard to which governmental action should
conform in order that deprivation of life, liberty or property, in each
appropriate case, be valid. This standard is aptly described as a
responsiveness to the supremacy of reason, obedience to the
dictates of justice,[49] and as such it is a limitation upon the exercise
of the police power.[50]
The purpose of the guaranty is to prevent governmental
encroachment against the life, liberty and property of individuals;
to secure the individual from the arbitrary exercise of the powers of
the government, unrestrained by the established principles of
private rights and distributive justice; to protect property from
confiscation by legislative enactments, from seizure, forfeiture, and
destruction without a trial and conviction by the ordinary mode of
judicial procedure; and to secure to all persons equal and impartial
justice and the benefit of the general law. [51]

The guaranty serves as a protection against arbitrary

regulation, and private corporations and partnerships are persons
within the scope of the guaranty insofar as their property is
concerned.[52]
This clause has been interpreted as imposing two separate
limits on government, usually called procedural due process and
substantive due process.
Procedural due process, as the phrase implies, refers to the
procedures that the government must follow before it deprives a
person of life, liberty, or property. Classic procedural due process
issues are concerned with what kind of notice and what form of
hearing the government must provide when it takes a particular
action.[53]
Substantive due process, as that phrase connotes, asks
whether the government has an adequate reason for taking away a
persons life, liberty, or property. In other words, substantive due
process looks to whether there is a sufficient justification for the
governments action.[54] Case law in the United States (U.S.) tells us
that whether there is such a justification depends very much on the
level of scrutiny used.[55] For example, if a law is in an area where
only rational basis review is applied, substantive due process is met
so long as the law is rationally related to a legitimate government
purpose. But if it is an area where strict scrutiny is used, such as
for protecting fundamental rights, then the government will meet
substantive due process only if it can prove that the law is
necessary to achieve a compelling government purpose.[56]
The police power granted to local government units must
always be exercised with utmost observance of the rights of the
people to due process and equal protection of the law. Such power
cannot be exercised whimsically, arbitrarily or despotically [57] as its
exercise is subject to a qualification, limitation or restriction
demanded by the respect and regard due to the prescription of the
fundamental law, particularly those forming part of the Bill of
Rights. Individual rights, it bears emphasis, may be adversely
affected only to the extent that may fairly be required by the
legitimate demands of public interest or public welfare. [58] Due
process requires the intrinsic validity of the law in interfering with
the rights of the person to his life, liberty and property.[59]
Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as the
rationale for the enactment of the Ordinance, and to free it from
the imputation of constitutional infirmity, not only must it appear
that the interests of the public generally, as distinguished from
those of a particular class, require an interference with private
rights, but the means adopted must be reasonably necessary for

the accomplishment of the purpose and not unduly oppressive

upon individuals.[60] It must be evident that no other alternative for
the accomplishment of the purpose less intrusive of private rights
can work. A reasonable relation must exist between the purposes
of the police measure and the means employed for its
accomplishment, for even under the guise of protecting the public
interest, personal rights and those pertaining to private property
will not be permitted to be arbitrarily invaded.[61]
Lacking a concurrence of these two requisites, the police
measure shall be struck down as an arbitrary intrusion into private
rights[62] a violation of the due process clause.
The Ordinance was enacted to address and arrest the social ills
purportedly spawned by the establishments in the Ermita-Malate
area which are allegedly operated under the deceptive veneer of
legitimate, licensed and tax-paying nightclubs, bars, karaoke bars,
girlie houses, cocktail lounges, hotels and motels. Petitioners insist
that even the Court in the case of Ermita-Malate Hotel and Motel
Operators Association, Inc. v. City Mayor of Manila [63] had already
taken judicial notice of the alarming increase in the rate of
prostitution, adultery and fornication in Manila traceable in great
part to existence of motels, which provide a necessary atmosphere
for clandestine entry, presence and exit and thus become the ideal
haven for prostitutes and thrill-seekers.[64]
The object of the Ordinance was, accordingly, the promotion
and protection of the social and moral values of the community.
Granting for the sake of argument that the objectives of
theOrdinance are within the scope of the City Councils police
powers, the means employed for the accomplishment thereof were
unreasonable and unduly oppressive.
It is undoubtedly one of the fundamental duties of the City of
Manila to make all reasonable regulations looking to the promotion
of the moral and social values of the community. However, the
worthy aim of fostering public morals and the eradication of the
communitys social ills can be achieved through means less
restrictive of private rights; it can be attained by reasonable
restrictions rather than by an absolute prohibition. The closing
down and transfer of businesses or their conversion into businesses
allowed under the Ordinance have no reasonable relation to the
accomplishment of its purposes. Otherwise stated, the prohibition
of the enumerated establishments will not per se protect and
promote the social and moral welfare of the community; it will not
in itself eradicate the alluded social ills of prostitution, adultery,
fornication nor will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area teems
with houses of ill-repute and establishments of the like which the
City Council may lawfully prohibit, [65] it is baseless and

insupportable to bring within that classification sauna parlors,

massage parlors, karaoke bars, night clubs, day clubs, super clubs,
discotheques, cabarets, dance halls, motels and inns. This is not
warranted under the accepted definitions of these terms. The
enumerated establishments are lawful pursuits which are not per
se offensive to the moral welfare of the community.
That these are used as arenas to consummate illicit sexual
affairs and as venues to further the illegal prostitution is of no
moment. We lay stress on the acrid truth that sexual immorality,
being a human frailty, may take place in the most innocent of
places that it may even take place in the substitute establishments
enumerated under Section 3 of the Ordinance. If the flawed logic
of the Ordinance were to be followed, in the remote instance that
an immoral sexual act transpires in a church cloister or a court
chamber, we would behold the spectacle of the City of Manila
ordering the closure of the church or court concerned. Every
house, building, park, curb, street or even vehicles for that matter
will not be exempt from the prohibition. Simply because there are
no pure places where there are impure men. Indeed, even the
Scripture and the Tradition of Christians churches continually recall
the presence and universality of sin in mans history.[66]
The problem, it needs to be pointed out, is not the
establishment, which by its nature cannot be said to be injurious to
the health or comfort of the community and which in itself is
amoral, but the deplorable human activity that may occur within its
premises. While a motel may be used as a venue for immoral
sexual activity, it cannot for that reason alone be punished. It
cannot be classified as a house of ill-repute or as a nuisance per
se on a mere likelihood or a naked assumption. If that were so and
if that were allowed, then the Ermita-Malate area would not only be
purged of its supposed social ills, it would be extinguished of its
soul as well as every human activity, reprehensible or not, in its
every nook and cranny would be laid bare to the estimation of the
authorities.
The Ordinance seeks to legislate morality but fails to address
the core issues of morality. Try as the Ordinance may to shape
morality, it should not foster the illusion that it can make a moral
man out of it because immorality is not a thing, a building or
establishment; it is in the hearts of men. The City Council instead
should regulate human conduct that occurs inside the
establishments, but not to the detriment of liberty and privacy
which are covenants, premiums and blessings of democracy.
While petitioners earnestness at curbing clearly objectionable
social ills is commendable, they unwittingly punish even the
proprietors
and
operators
of
wholesome,
innocent
establishments. In the instant case, there is a clear invasion of

personal or property rights, personal in the case of those

individuals desirous of owning, operating and patronizing those
motels and property in terms of the investments made and the
salaries to be paid to those therein employed. If the City of Manila
so desires to put an end to prostitution, fornication and other social
ills, it can instead impose reasonable regulations such as daily
inspections of the establishments for any violation of the conditions
of their licenses or permits; it may exercise its authority to suspend
or revoke their licenses for these violations; [67] and it may even
impose increased license fees. In other words, there are other
means to reasonably accomplish the desired end.
Means employed are
constitutionally infirm
The Ordinance disallows the operation of sauna parlors,
massage parlors, karaoke bars, beerhouses, night clubs, day clubs,
super clubs, discotheques, cabarets, dance halls, motels and inns in
the Ermita-Malate area. In Section 3 thereof, owners and/or
operators of the enumerated establishments are given three (3)
months from the date of approval of the Ordinancewithin which to
wind up business operations or to transfer to any place outside the
Ermita-Malate area or convert said businesses to other kinds of
business allowable within the area. Further, it states in Section 4
that in cases of subsequent violations of the provisions of the
Ordinance, the premises of the erring establishment shall be
closed and padlocked permanently.
It is readily apparent that the means employed by
the Ordinance for the achievement of its purposes, the
governmental interference itself, infringes on the constitutional
guarantees of a persons fundamental right to liberty and property.
Liberty as guaranteed by the Constitution was defined by
Justice Malcolm to include the right to exist and the right to be free
from arbitrary restraint or servitude. The term cannot be dwarfed
into mere freedom from physical restraint of the person of the
citizen, but is deemed to embrace the right of man to enjoy the
facilities with which he has been endowed by his Creator, subject
only to such restraint as are necessary for the common
welfare.[68] In accordance with this case, the rights of the citizen to
be free to use his faculties in all lawful ways; to live and work where
he will; to earn his livelihood by any lawful calling; and to pursue
any avocation are all deemed embraced in the concept of liberty. [69]
The U.S. Supreme Court in the case of Roth v. Board of
Regents,[70] sought to clarify the meaning of liberty. It said:
While the Court has not attempted to define with exactness the
liberty. . . guaranteed [by the Fifth and Fourteenth Amendments],
the term denotes not merely freedom from bodily restraint but also
the right of the individual to contract, to engage in any of the

common occupations of life, to acquire useful knowledge, to marry,

establish a home and bring up children, to worship God according
to the dictates of his own conscience, and generally to enjoy those
privileges long recognizedas essential to the orderly pursuit of
happiness by free men. In a Constitution for a free people, there
can be no doubt that the meaning of liberty must be broad
indeed.
In another case, it also confirmed that liberty protected by the
due process clause includes personal decisions relating to
marriage, procreation, contraception, family relationships, child
rearing, and education. In explaining the respect the Constitution
demands for the autonomy of the person in making these choices,
the U.S. Supreme Court explained:
These matters, involving the most intimate and personal choices a
person may make in a lifetime, choices central to personal dignity
and autonomy, are central to the liberty protected by the
Fourteenth Amendment. At the heart of liberty is the right to define
ones own concept of existence, of meaning, of universe, and of the
mystery of human life. Beliefs about these matters could not define
the attributes of personhood where they formed under compulsion
of the State.[71]
Persons desirous to own, operate and patronize the
enumerated establishments under Section 1 of the Ordinance may
seek autonomy for these purposes.
Motel patrons who are single and unmarried may invoke this
right to autonomy to consummate their bonds in intimate sexual
conduct within the motels premisesbe it stressed that their
consensual sexual behavior does not contravene any fundamental
state policy as contained in the Constitution.[72] Adults have a right
to choose to forge such relationships with others in the confines of
their own private lives and still retain their dignity as free persons.
The liberty protected by the Constitution allows persons the right to
make this choice.[73] Their right to liberty under the due process
clause gives them the full right to engage in their conduct without
intervention of the government, as long as they do not run afoul of
the law. Liberty should be the rule and restraint the exception.
Liberty in the constitutional sense not only means freedom
from unlawful government restraint; it must include privacy as well,
if it is to be a repository of freedom. The right to be let alone is the
beginning of all freedomit is the most comprehensive of rights
and the right most valued by civilized men.[74]
The concept of liberty compels respect for the individual whose
claim to privacy and interference demands respect. As the case
of Morfe v. Mutuc,[75] borrowing the words of Laski, so very aptly
stated:

Man is one among many, obstinately refusing reduction to unity. His

separateness, his isolation, are indefeasible; indeed, they are so
fundamental that they are the basis on which his civic obligations
are built. He cannot abandon the consequences of his isolation,
which are, broadly speaking, that his experience is private, and the
will built out of that experience personal to himself. If he surrenders
his will to others, he surrenders himself. If his will is set by the will
of others, he ceases to be a master of himself. I cannot believe that
a man no longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was
recognized in Morfe, the invasion of which should be justified by a
compelling state interest. Morfe accorded recognition to the right to
privacy independently of its identification with liberty; in itself it is
fully deserving of constitutional protection. Governmental powers
should stop short of certain intrusions into the personal life of the
citizen.[76]
There is a great temptation to have an extended discussion on
these civil liberties but the Court chooses to exercise restraint and
restrict itself to the issues presented when it should. The previous
pronouncements of the Court are not to be interpreted as a license
for adults to engage in criminal conduct. The reprehensibility of
such conduct is not diminished. The Court only reaffirms and
guarantees their right to make this choice. Should they be
prosecuted for their illegal conduct, they should suffer the
consequences of the choice they have made. That, ultimately, is
their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and oppressive as it
substantially divests the respondent of the beneficial use of its
property.[77] The Ordinance in Section 1 thereof forbids the running
of the enumerated businesses in the Ermita-Malate area and in
Section 3 instructs its owners/operators to wind up business
operations or to transfer outside the area or convert said
businesses into allowed businesses. An ordinance which
permanently restricts the use of property that it can not be used for
any reasonable purpose goes beyond regulation and must be
recognized as a taking of the property without just compensation.
[78]
It is intrusive and violative of the private property rights of
individuals.
The Constitution expressly provides in Article III, Section 9, that
private property shall not be taken for public use without just
compensation. The provision is the most important protection of
property rights in the Constitution. This is a restriction on the
general power of the government to take property. The
constitutional provision is about ensuring that the government does

not confiscate the property of some to give it to others. In part too,

it is about loss spreading. If the government takes away a persons
property to benefit society, then society should pay. The principal
purpose of the guarantee is to bar the Government from forcing
some people alone to bear public burdens which, in all fairness and
justice, should be borne by the public as a whole.[79]
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
governments regulation leaves no reasonable economically viable
use of the property.[80]
In the landmark case of Pennsylvania Coal v. Mahon,[81] it was
held that 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.[82]
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.[83]
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.[84] A regulation that permanently
denies all economically beneficial or productive use of land is, from
the owners 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.[85] 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. [86]
A regulation which denies all economically beneficial or
productive use of land will require compensation under the takings
clause. Where a regulation places limitations on land that fall short
of eliminating all economically beneficial use, a taking nonetheless
may have occurred, depending on a complex of factors including
the regulations economic effect on the landowner, the extent to

which the regulation interferes with reasonable investment-backed

expectations and the character of government action. These
inquiries are informed by the purpose of the takings clause which is
to prevent the government from forcing some people alone to bear
public burdens which, in all fairness and justice, should be borne by
the public as a whole.[87]
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.[88]
The Ordinance gives the owners and operators of the
prohibited establishments three (3) months from its approval
within which to wind up business operations or to transfer to any
place outside of the Ermita-Malate area or convert said businesses
to other kinds of business allowable within the area. The directive
to wind up business operations amounts to a closure of the
establishment, a permanent deprivation of property, and is
practically confiscatory.
Unless the owner converts his
establishment to accommodate an allowed business, the
structure which housed the previous business will be left empty and
gathering dust. Suppose he transfers it to another area, he will
likewise leave the entire establishment idle. Consideration must be
given to the substantial amount of money invested to build the
edifices which the owner reasonably expects to be returned within
a period of time. It is apparent that the Ordinance leaves no
reasonable economically viable use of property in a manner that
interferes with reasonable expectations for use.
The second and third options to transfer to any place outside
of the Ermita-Malate area or to convert into allowed
businessesare confiscatory as well. The penalty of permanent
closure in cases of subsequent violations found in Section 4 of
the Ordinance is also equivalent to a taking of private property.
The second option instructs the owners to abandon their
property and build another one outside the Ermita-Malate area. In
every sense, it qualifies as a taking without just compensation with
an additional burden imposed on the owner to build another
establishment solely from his coffers. The proffered solution does
not put an end to the problem, it merely relocates it. Not only is
this impractical, it is unreasonable, onerous and oppressive. The
conversion into allowed enterprises is just as ridiculous. How may
the respondent convert a motel into a restaurant or a coffee shop,
art gallery or music lounge without essentially destroying its
property? This is a taking of private property without due process of
law, nay, even without compensation.
The penalty of closure likewise constitutes unlawful taking that
should be compensated by the government. The burden on the

owner to convert or transfer his business, otherwise it will be closed

permanently after a subsequent violation should be borne by the
public as this end benefits them as a whole.
Petitioners cannot take refuge in classifying the measure as a
zoning ordinance. A zoning ordinance, although a valid exercise of
police power, which limits a wholesome property to a use which
can not reasonably be made of it constitutes the taking of such
property without just compensation. Private property which is not
noxious nor intended for noxious purposes may not, by zoning, be
destroyed without compensation. Such principle finds no support in
the principles of justice as we know them. The police powers of
local government units which have always received broad and
liberal interpretation cannot be stretched to cover this particular
taking.
Distinction should be made between destruction from necessity
and eminent domain. It needs restating that the property taken in
the exercise of police power is destroyed because it is noxious or
intended for a noxious purpose while the property taken under the
power of eminent domain is intended for a public use or purpose
and is therefore wholesome.[89] If it be of public benefit that a
wholesome property remain unused or relegated to a particular
purpose, then certainly the public should bear the cost of
reasonable compensation for the condemnation of private property
for public use.[90]
Further, the Ordinance fails to set up any standard to guide or
limit the petitioners actions. It in no way controls or guides the
discretion vested in them. It provides no definition of the
establishments covered by it and it fails to set forth the conditions
when the establishments come within its ambit of prohibition.
The Ordinance confers upon the mayor arbitrary and unrestricted
power to close down establishments. Ordinances such as this,
which make possible abuses in its execution, depending upon no
conditions or qualifications whatsoever other than the unregulated
arbitrary will of the city authorities as the touchstone by which its
validity is to be tested, are unreasonable and invalid.
The Ordinance should have established a rule by which its impartial
enforcement could be secured.[91]
Ordinances placing restrictions upon the lawful use of property
must, in order to be valid and constitutional, specify the rules and
conditions to be observed and conduct to avoid; and must not
admit of the exercise, or of an opportunity for the exercise, of
unbridled discretion by the law enforcers in carrying out its
provisions.[92]
Thus, in Coates v. City of Cincinnati,[93] as cited in People v.
Nazario,[94]
the U.S. Supreme Court struck down an ordinance
that had made it illegal for three or more persons to assemble on

any sidewalk and there conduct themselves in a manner annoying

to persons passing by. The ordinance was nullified as it imposed
no standard at all because one may never know in advance what
annoys some people but does not annoy others.
Similarly, the Ordinance does not specify the standards to
ascertain which establishments tend to disturb the community,
annoy the inhabitants, and adversely affect the social and moral
welfare of the community. The cited case supports the nullification
of the Ordinance for lack of comprehensible standards to guide the
law enforcers in carrying out its provisions.
Petitioners cannot therefore order the closure of the
enumerated establishments without infringing the due process
clause. These lawful establishments may be regulated, but not
prevented from carrying on their business. This is a sweeping
exercise of police power that is a result of a lack of imagination on
the part of the City Council and which amounts to an interference
into personal and private rights which the Court will not
countenance. In this regard, we take a resolute stand to uphold the
constitutional guarantee of the right to liberty and property.
Worthy of note is an example derived from the U.S. of a
reasonable regulation which is a far cry from the illconsidered Ordinance enacted by the City Council.
In FW/PBS, INC. v. Dallas,[95] the city of Dallas adopted a
comprehensive
ordinance
regulating
sexually
oriented
businesses, which are defined to include adult arcades,
bookstores, video stores, cabarets, motels, and theaters as well as
escort agencies, nude model studio and sexual encounter centers.
Among other things, the ordinance required that such businesses
be licensed. A group of motel owners were among the three groups
of businesses that filed separate suits challenging the ordinance.
The motel owners asserted that the city violated the due process
clause by failing to produce adequate support for its supposition
that renting room for fewer than ten (10) hours resulted in
increased crime and other secondary effects. They likewise argued
than the ten (10)-hour limitation on the rental of motel rooms
placed an unconstitutional burden on the right to freedom of
association. Anent the first contention, the U.S. Supreme Court held
that the reasonableness of the legislative judgment combined with
a study which the city considered, was adequate to support the
citys determination that motels permitting room rentals for fewer
than ten (10 ) hours should be included within the licensing
scheme. As regards the second point, the Court held that limiting
motel room rentals to ten (10) hours will have no discernible effect
on personal bonds as those bonds that are formed from the use of
a motel room for fewer than ten (10) hours are not those that have

played a critical role in the culture and traditions of the nation by

cultivating and transmitting shared ideals and beliefs.
The ordinance challenged in the above-cited case merely
regulated the targeted businesses. It imposed reasonable
restrictions; hence, its validity was upheld.
The case of Ermita Malate Hotel and Motel Operators
Association, Inc. v. City Mayor of Manila,[96] it needs pointing out, is
also different from this case in that what was involved therein was
a measure which regulated the mode in which motels may conduct
business in order to put an end to practices which could encourage
vice and immorality. Necessarily, there was no valid objection on
due process or equal protection grounds as the ordinance did not
prohibit motels. The Ordinance in this case however is not a
regulatory measure but is an exercise of an assumed power to
prohibit.[97]
The foregoing premises show that the Ordinance is an
unwarranted and unlawful curtailment of property and personal
rights of citizens. For being unreasonable and an undue restraint of
trade, it cannot, even under the guise of exercising police power,
be upheld as valid.
B. The Ordinance violates Equal
Protection Clause
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.[98] 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.[99] The equal protection of the laws is a pledge of
the protection of equal laws. [100] It limits governmental
discrimination. The equal protection clause extends to artificial
persons but only insofar as their property is concerned.[101]
The Court has explained the scope of the equal protection
clause in this wise:
What does it signify? To quote from J.M. Tuason & Co. v. Land
Tenure Administration: The ideal situation is for the laws benefits
to be available to all, that none be placed outside the sphere of its
coverage. Only thus could chance and favor be excluded and the
affairs of men governed by that serene and impartial uniformity,
which is of the very essence of the idea of law. There is
recognition, however, in the opinion that what in fact exists cannot
approximate the ideal. Nor is the law susceptible to the reproach
that it does not take into account the realities of the situation. The
constitutional guarantee then is not to be given a meaning that
disregards what is, what does in fact exist. To assure that the

general welfare be promoted, which is the end of law, a regulatory

measure may cut into the rights to liberty and property. Those
adversely affected may under such circumstances invoke the equal
protection clause only if they can show that the governmental act
assailed, far from being inspired by the attainment of the common
weal was prompted by the spirit of hostility, or at the very least,
discrimination that finds no support in reason. Classification is
thus not ruled out, it being sufficient to quote from the Tuason
decision anew that the laws operate equally and uniformly on all
persons under similar circumstances or that all persons must be
treated in the same manner, the conditions not being different,
both in the privileges conferred and the liabilities imposed.
Favoritism and undue preference cannot be allowed. For the
principle is that equal protection and security shall be given to
every person under circumstances which, if not identical, are
analogous. If law be looked upon in terms of burden or charges,
those that fall within a class should be treated in the same fashion,
whatever restrictions cast on some in the group equally binding on
the rest.[102]
Legislative bodies are allowed to classify the subjects of
legislation. If the classification is reasonable, the law may operate
only on some and not all of the people without violating the equal
protection clause.[103] The classification must, as an indispensable
requisite, not be arbitrary. To be valid, it must conform to the
following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class.[104]
In the Courts view, there are no substantial distinctions
between motels, inns, pension houses, hotels, lodging houses or
other similar establishments. By definition, all are commercial
establishments providing lodging and usually meals and other
services for the public. No reason exists for prohibiting motels and
inns but not pension houses, hotels, lodging houses or other similar
establishments. The classification in the instant case is invalid as
similar subjects are not similarly treated, both as to rights conferred
and obligations imposed. It is arbitrary as it does not rest on
substantial distinctions bearing a just and fair relation to the
purpose of the Ordinance.
The Court likewise cannot see the logic for prohibiting the
business and operation of motels in the Ermita-Malate area but not
outside of this area. A noxious establishment does not become any
less noxious if located outside the area.
The standard where women are used as tools for
entertainment is also discriminatory as prostitutionone of the

hinted ills the Ordinance aims to banishis not a profession

exclusive to women. Both men and women have an equal
propensity to engage in prostitution. It is not any less grave a sin
when men engage in it. And why would the assumption that there
is an ongoing immoral activity apply only when women are
employed and be inapposite when men are in harness? This
discrimination based on gender violates equal protection as it is not
substantially related to important government objectives. [105] Thus,
the discrimination is invalid.
Failing the test of constitutionality, the Ordinance likewise
failed to pass the test of consistency with prevailing laws.
C. The Ordinance is repugnant
to general laws; it is ultra vires
The Ordinance is in contravention of the Code as the latter
merely empowers local government units to regulate, and not
prohibit, the establishments enumerated in Section 1 thereof.
The power of the City Council to regulate by ordinances the
establishment, operation, and maintenance of motels, hotels and
other similar establishments is found in Section 458 (a) 4 (iv),
which provides that:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for
the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
. . .
(4) Regulate activities relative to the use of land, buildings and
structures within the city in order to promote the general welfare
and for said purpose shall:
. . .
(iv) Regulate the establishment, operation and maintenance of
cafes, restaurants, beerhouses, hotels, motels, inns, pension
houses, lodging houses, and other similar establishments, including
tourist guides and transports . . . .
While its power to regulate the establishment, operation and
maintenance of any entertainment or amusement facilities, and to
prohibit certain forms of amusement or entertainment is provided
under Section 458 (a) 4 (vii) of the Code, which reads as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for
the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate

powers of the city as provided for under Section 22 of this Code,

and shall:
. . .
(4) Regulate activities relative to the use of land, buildings and
structures within the city in order to promote the general welfare
and for said purpose shall:
. . .
(vii) Regulate the establishment, operation, and maintenance of
any entertainment or amusement facilities, including theatrical
performances, circuses, billiard pools, public dancing schools,
public dance halls, sauna baths, massage parlors, and other places
for entertainment or amusement; regulate such other events or
activities for amusement or entertainment, particularly those which
tend to disturb the community or annoy the inhabitants, or require
the suspension or suppression of the same; or, prohibit certain
forms of amusement or entertainment in order to protect the social
and moral welfare of the community.
Clearly, with respect to cafes, restaurants, beerhouses, hotels,
motels, inns, pension houses, lodging houses, and other similar
establishments, the only power of the City Council to legislate
relative thereto is to regulate them to promote the general welfare.
The Code still withholds from cities the power to suppress and
prohibit altogether the establishment, operation and maintenance
of such establishments. It is well to recall the rulings of the Court
in Kwong Sing v. City of Manila[106] that:
The word regulate, as used in subsection (l), section 2444 of the
Administrative Code, means and includes the power to control, to
govern, and to restrain; but regulate should not be construed as
synonymous with suppress or prohibit. Consequently, under the
power to regulate laundries, the municipal authorities could make
proper police regulations as to the mode in which the employment
or business shall be exercised.[107]
And in People v. Esguerra,[108] wherein the Court nullified an
ordinance of the Municipality of Tacloban which prohibited the
selling, giving and dispensing of liquor ratiocinating that the
municipality is empowered only to regulate the same and not
prohibit. The Court therein declared that:
(A)s a general rule when a municipal corporation is specifically
given authority or power to regulate or to license and regulate the
liquor traffic, power to prohibit is impliedly withheld. [109]
These
doctrines
still
hold
contrary
to
petitioners
assertion[110] that they were modified by the Code vesting upon City
Councils prohibitory powers.
Similarly, the City Council exercises regulatory powers over
public dancing schools, public dance halls, sauna baths, massage
parlors, and other places for entertainment or amusement as found

in the first clause of Section 458 (a) 4 (vii). Its powers to regulate,
suppress and suspend such other events or activities for
amusement or entertainment, particularly those which tend to
disturb the community or annoy the inhabitants and to prohibit
certain forms of amusement or entertainment in order to protect
the social and moral welfare of the community are stated in the
second and third clauses, respectively of the same Section. The
several powers of the City Council as provided in Section 458 (a) 4
(vii) of the Code, it is pertinent to emphasize, are separated by
semi-colons (;), the use of which indicates that the clauses in which
these powers are set forth are independent of each other albeit
closely related to justify being put together in a single enumeration
or paragraph.[111] These powers, therefore, should not be confused,
commingled or consolidated as to create a conglomerated and
unified power of regulation, suppression and prohibition.[112]
The Congress unequivocably specified the establishments and
forms of amusement or entertainment subject to regulation among
which are beerhouses, hotels, motels, inns, pension houses, lodging
houses, and other similar establishments (Section 458 (a) 4 (iv)),
public dancing schools, public dance halls, sauna baths, massage
parlors, and other places for entertainment or amusement (Section
458 (a) 4 (vii)). This enumeration therefore cannot be included as
among other events or activities for amusement or entertainment,
particularly those which tend to disturb the community or annoy
the inhabitants or certain forms of amusement or entertainment
which the City Council may suspend, suppress or prohibit.
The rule is that the City Council has only such powers as are
expressly granted to it and those which are necessarily implied or
incidental to the exercise thereof. By reason of its limited powers
and the nature thereof, said powers are to be construed strictissimi
juris and any doubt or ambiguity arising out of the terms used in
granting said powers must be construed against the City Council.
[113]
Moreover, it is a general rule in statutory construction that the
express mention of one person, thing, or consequence is
tantamount to an express exclusion of all others. Expressio unius
est exclusio alterium. This maxim is based upon the rules of logic
and the natural workings of human mind. It is particularly
applicable in the construction of such statutes as create new rights
or remedies, impose penalties or punishments, or otherwise come
under the rule of strict construction.[114]
The argument that the City Council is empowered to enact
the Ordinance by virtue of the general welfare clause of the Code
and of Art. 3, Sec. 18 (kk) of the Revised Charter of Manila is
likewise without merit. On the first point, the ruling of the Court
in People v. Esguerra,[115] is instructive. It held that:

The powers conferred upon a municipal council in the general

welfare clause, or section 2238 of the Revised Administrative Code,
refers to matters not covered by the other provisions of the same
Code, and therefore it can not be applied to intoxicating liquors, for
the power to regulate the selling, giving away and dispensing
thereof is granted specifically by section 2242 (g) to municipal
councils. To hold that, under the general power granted by section
2238, a municipal council may enact the ordinance in question,
notwithstanding the provision of section 2242 (g), would be to
make the latter superfluous and nugatory, because the power to
prohibit, includes the power to regulate, the selling, giving away
and dispensing of intoxicating liquors.
On the second point, it suffices to say that the Code being a
later expression of the legislative will must necessarily prevail and
override the earlier law, the Revised Charter of Manila.Legis
posteriores priores contrarias abrogant, or later statute repeals
prior ones which are repugnant thereto. As between two laws on
the same subject matter, which are irreconcilably inconsistent, that
which is passed later prevails, since it is the latest expression of
legislative will.[116] If there is an inconsistency or repugnance
between two statutes, both relating to the same subject matter,
which cannot be removed by any fair and reasonable method of
interpretation, it is the latest expression of the legislative will which
must prevail and override the earlier.[117]
Implied repeals are those which take place when a
subsequently enacted law contains provisions contrary to those of
an existing law but no provisions expressly repealing them. Such
repeals have been divided into two general classes: those which
occur where an act is so inconsistent or irreconcilable with an
existing prior act that only one of the two can remain in force and
those which occur when an act covers the whole subject of an
earlier act and is intended to be a substitute therefor. The validity
of such a repeal is sustained on the ground that the latest
expression of the legislative will should prevail.[118]
In addition, Section 534(f) of the Code states that All general
and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts
thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly. Thus,
submitting to petitioners interpretation that the Revised Charter of
Manila empowers the City Council to prohibit motels, that portion of
the Charter stating such must be considered repealed by the Code
as it is at variance with the latters provisions granting the City
Council mere regulatory powers.
It is well to point out that petitioners also cannot seek cover
under the general welfare clause authorizing the abatement of

nuisances without judicial proceedings. That tenet applies to a

nuisance per se, or one which affects the immediate safety of
persons and property and may be summarily abated under the
undefined law of necessity. It can not be said that motels are
injurious to the rights of property, health or comfort of the
community. It is a legitimate business. If it be a nuisance per
accidens it may be so proven in a hearing conducted for that
purpose. A motel is not per se a nuisance warranting its summary
abatement without judicial intervention.[119]
Notably, the City Council was conferred powers to prevent and
prohibit certain activities and establishments in another section of
the Code which is reproduced as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for
the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
(1) Approve ordinances and pass resolutions necessary for an
efficient and effective city government, and in this connection,
shall:
. . .
(v) Enact ordinances intended to prevent, suppress and impose
appropriate penalties for habitual drunkenness in public places,
vagrancy,
mendicancy,
prostitution,
establishment
and
maintenance of
houses of ill repute, gambling and other
prohibited games of chance, fraudulent devices and ways to obtain
money or property, drug addiction, maintenance of drug dens, drug
pushing, juvenile delinquency, the printing, distribution or
exhibition of obscene or pornographic materials or publications,
and such other activities inimical to the welfare and morals of the
inhabitants of the city;
. . .
If it were the intention of Congress to confer upon the City
Council the power to prohibit the establishments enumerated in
Section 1 of the Ordinance, it would have so declared in uncertain
terms by adding them to the list of the matters it may prohibit
under the above-quoted Section. The Ordinance now vainly
attempts to lump these establishments with houses of ill-repute
and expand the City Councils powers in the second and third
clauses of Section 458 (a) 4 (vii) of the Code in an effort to
overreach its prohibitory powers. It is evident that these
establishments may only be regulated in their establishment,
operation and maintenance.

It is important to distinguish the punishable activities from the

establishments themselves. That these establishments are
recognized legitimate enterprises can be gleaned from another
Section of the Code. Section 131 under the Title on Local
Government Taxation expressly mentioned proprietors or operators
of massage clinics, sauna, Turkish and Swedish baths, hotels,
motels and lodging houses as among the contractors defined in
paragraph (h) thereof.
The same Section also defined
amusement as a pleasurable diversion and entertainment,
synonymous to relaxation, avocation, pastime or fun; and
amusement places to include theaters, cinemas, concert halls,
circuses and other places of amusement where one seeks
admission to entertain oneself by seeing or viewing the show or
performances. Thus, it can be inferred that the Code considers
these establishments as legitimate enterprises and activities. It is
well to recall the maxim reddendo singula singulis which means
that words in different parts of a statute must be referred to their
appropriate connection, giving to each in its place, its proper force
and effect, and, if possible, rendering none of them useless or
superfluous, even if strict grammatical construction demands
otherwise. Likewise, where words under consideration appear in
different sections or are widely dispersed throughout an act the
same principle applies.[120]
Not only does the Ordinance contravene the Code, it likewise
runs counter to the provisions of P.D. 499. As correctly argued by
MTDC, the statute had already converted the residential ErmitaMalate area into a commercial area. The decree allowed the
establishment and operation of all kinds of commercial
establishments except warehouse or open storage depot, dump or
yard, motor repair shop, gasoline service station, light industry with
any machinery or funeral establishment. The rule is that for an
ordinance to be valid and to have force and effect, it must not only
be within the powers of the council to enact but the same must not
be in conflict with or repugnant to the general law. [121] As succinctly
illustrated in Solicitor General v. Metropolitan Manila Authority:[122]
The requirement that the enactment must not violate existing law
explains itself. Local political subdivisions are able to legislate only
by virtue of a valid delegation of legislative power from the national
legislature (except only that the power to create their own sources
of revenue and to levy taxes is conferred by the Constitution itself).
They are mere agents vested with what is called the power of
subordinate legislation. As delegates of the Congress, the local
government units cannot contravene but must obey at all times the
will of their principal. In the case before us, the enactment in
question, which are merely local in origin cannot prevail against the
decree, which has the force and effect of a statute.[123]

Petitioners contend that the Ordinance enjoys the presumption

of validity. While this may be the rule, it has already been held that
although the presumption is always in favor of the validity or
reasonableness of the ordinance, such presumption must
nevertheless be set aside when the invalidity or unreasonableness
appears on the face of the ordinance itself or is established by
proper evidence. The exercise of police power by the local
government is valid unless it contravenes the fundamental law of
the land, or an act of the legislature, or unless it is against public
policy or is unreasonable, oppressive, partial, discriminating or in
derogation of a common right.[124]
Conclusion: All considered, the Ordinance invades fundamental
personal and property rights and impairs personal privileges. It is
constitutionally infirm. The Ordinance contravenes statutes; it is
discriminatory and unreasonable in its operation; it is not
sufficiently detailed and explicit that abuses may attend the
enforcement of its sanctions. And not to be forgotten, the City
Council under the Code had no power to enact the Ordinance and is
therefore ultra vires, null and void.
Concededly, the challenged Ordinance was enacted with the
best of motives and shares the concern of the public for the
cleansing of the Ermita-Malate area of its social sins. Police power
legislation of such character deserves the full endorsement of the
judiciary we reiterate our support for it. But inspite of its virtuous
aims, the enactment of the Ordinance has no statutory or
constitutional authority to stand on. Local legislative bodies, in this
case, the City Council, cannot prohibit the operation of the
enumerated establishments under Section 1 thereof or order their
transfer or conversion without infringing the constitutional
guarantees of due process and equal protection of laws not even
under the guise of police power. WHEREFORE, the Petition is
hereby DENIED and the decision of the Regional Trial Court
declaring the Ordinance void is AFFIRMED.
Costs against
petitioners. SO ORDERED.
COMMISSIONER OF INTERNAL
G.R. No. 159647
REVENUE,
Petitioner,
Present:
CENTRAL LUZON DRUG
Promulgated:
CORPORATION,
Respondent.
April 15, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -x

DECISION

medicines pursuant to Republic Act No. [R.A.] 7432

and its Implementing Rules and Regulations. For the
said period, the amount allegedly representing the
20% sales discount granted by respondent to
qualified senior citizens totaled P904,769.00.

PANGANIBAN, J.:

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.
The Case
Before us is a Petition for Review[1] under Rule 45 of the
Rules of Court, seeking to set aside the August 29, 2002
Decision[2] and the August 11, 2003 Resolution[3] of the Court of
Appeals (CA) in CA-GR SP No. 67439. The assailed Decision reads
as follows:
WHEREFORE, premises considered, the
Resolution appealed from is AFFIRMED in toto. No
costs.[4]
The assailed
Reconsideration.

Resolution

denied

petitioners

Motion

The Facts
The CA narrated the antecedent facts as follows:
Respondent is a domestic corporation
primarily engaged in retailing of medicines and other
pharmaceutical products. In 1996, it operated six (6)
drugstores under the business name and style
Mercury Drug.
From January to December 1996, respondent
granted twenty (20%) percent sales discount to
qualified senior citizens on their purchases of

for

On April 15, 1997, respondent filed its Annual

Income Tax Return for taxable year 1996 declaring
therein that it incurred net losses from its operations.
On January 16, 1998, respondent filed with
petitioner a claim for tax refund/credit in the amount
of P904,769.00 allegedly arising from the 20% sales
discount granted by respondent to qualified senior
citizens in compliance with [R.A.] 7432. Unable to
obtain
affirmative
response
from
petitioner,
respondent elevated its claim to the Court of Tax
Appeals [(CTA or Tax Court)] via a Petition for Review.
On February 12, 2001, the Tax Court rendered
a Decision[5] dismissing respondents Petition for lack
of merit. In said decision, the [CTA] justified its ruling
with the following ratiocination:
x x x, if no tax has been paid
to the government, erroneously or
illegally, or if no amount is due and
collectible from the taxpayer, tax
refund or tax credit is unavailing.
Moreover, whether the recovery of the
tax is made by means of a claim for
refund or tax credit, before recovery is
allowed[,] it must be first established
that there was an actual collection and
receipt by the government of the tax
sought to be recovered. x x x.
x x x
xxx
xxx
Prescinding from the above, it
could logically be deduced that tax
credit is premised on the existence of
tax liability on the part of taxpayer. In
other words, if there is no tax liability,
tax credit is not available.

Respondent
lodged
a
Motion
for
Reconsideration. The [CTA], in its assailed resolution,
[6]
granted respondents motion for reconsideration
and ordered herein petitioner to issue a Tax Credit
Certificate in favor of respondent citing the decision
of the then Special Fourth Division of [the CA] in CA
G.R. SP No. 60057 entitled Central [Luzon] Drug
Corporation
vs.
Commissioner
of
Internal
Revenue promulgated on May 31, 2001, to wit:
However, Sec. 229 clearly
does not apply in the instant case
because the tax sought to be refunded
or credited by petitioner was not
erroneously paid or illegally collected.
We take exception to the CTAs
sweeping but unfounded statement
that both tax refund and tax credit are
modes of recovering taxes which are
either erroneously or illegally paid to
the government. Tax refunds or
credits do not exclusively pertain to
illegally collected or erroneously paid
taxes
as
they
may
be
other
circumstances where a refund is
warranted. The tax refund provided
under Section 229 deals exclusively
with illegally collected or erroneously
paid taxes but there are other possible
situations, such as the refund of
excess estimated corporate quarterly
income tax paid, or that of excess
input tax paid by a VAT-registered
person, or that of excise tax paid on
goods
locally
produced
or
manufactured but actually exported.
The standards and mechanics for the
grant of a refund or credit under these
situations are different from that under
Sec. 229. Sec. 4[.a)] of R.A. 7432, is
yet another instance of a tax credit
and it does not in any way refer to
illegally collected or erroneously paid
taxes, x x x.[7]

Ruling of the Court of Appeals

The CA affirmed in toto the Resolution of the Court of Tax
Appeals (CTA) ordering petitioner to issue a tax credit certificate in
favor of respondent in the reduced amount of P903,038.39. It
reasoned that Republic Act No. (RA) 7432 required neither a tax
liability nor a payment of taxes by private establishments prior to
the availment of a tax credit. Moreover, such credit is not
tantamount to an unintended benefit from the law, but rather a just
compensation for the taking of private property for public use.
Hence this Petition.[8]
The Issues
Petitioner raises the following issues for our consideration:
Whether the Court of Appeals erred in holding that
respondent may claim the 20% sales discount as a
tax credit instead of as a deduction from gross
income or gross sales.
Whether the Court of Appeals erred in holding that
respondent is entitled to a refund.[9]
These two issues may be summed up in only one: whether
respondent, despite incurring a net loss, may still claim the 20
percent sales discount as a tax credit.
The Courts Ruling
The Petition is not meritorious.
Sole Issue:
Claim of 20 Percent Sales Discount
as Tax Credit Despite Net Loss
Section 4a) of RA 7432[10] grants to senior citizens the
privilege of obtaining a 20 percent discount on their purchase of

medicine from any private establishment in the country. [11] The

latter may then claim the cost of the discount as a tax credit.[12]
But can such credit be claimed, even though an establishment
operates at a loss?
We answer in the affirmative.
Tax Credit versus
Tax Deduction
Although the term is not specifically defined in our Tax Code,
[13]
tax credit generally refers to an amount that is subtracted
directly from ones total tax liability. [14] It is an allowance against
the tax itself[15] or a deduction from what is owed [16] by a
taxpayer to the government. Examples of tax credits are withheld
taxes, payments of estimated tax, and investment tax credits.[17]
Tax credit should be understood in relation to other tax
concepts. One of these is tax deduction -- defined as a subtraction
from income for tax purposes,[18] or an amount that is allowed by
law to reduce income prior to [the] application of the tax rate to
compute the amount of tax which is due. [19] An example of a tax
deduction is any of the allowable deductions enumerated in Section
34[20] of the Tax Code.
A tax credit differs from a tax deduction. On the one hand,
a tax credit reduces the tax due, including -- whenever applicable -the income tax that is determined after applying the corresponding
tax rates to taxable income.[21] A tax deduction, on the other,
reduces the income that is subject to tax [22] in order to arrive
at taxable income.[23] To think of the former as the latter is to
avoid, if not entirely confuse, the issue. A tax credit is used
only after the tax has been computed; a tax deduction, before.
Tax Liability Required
for Tax Credit
Since a tax credit is used to reduce directly the tax that is
due, there ought to be a tax liability before the tax credit can be
applied. Without that liability, any tax credit application will be
useless. There will be no reason for deducting the latter when
there is, to begin with, no existing obligation to the government.
However, as will be presented shortly, the existence of a tax credit
or its grant by law is not the same as the availment or use of such
credit. While the grant is mandatory, the availment or use is not.

If a net loss is reported by, and no other taxes are currently

due from, a business establishment, there will obviously be no tax
liability against which any tax credit can be applied.[24] For the
establishment to choose the immediate availment of a tax
credit will be premature and impracticable. Nevertheless, the
irrefutable fact remains that, under RA 7432, Congress has granted
without
conditions
a tax
credit benefit
to
all
covered
establishments.
Although this tax credit benefit is available, it need not be
used by losing ventures, since there is no tax liability that calls for
its application. Neither can it be reduced to nil by the quick yet
callow stroke of an administrative pen, simply because no reduction
of taxes can instantly be effected. By its nature, the tax credit may
still be deducted from a future, not a present, tax liability, without
which it does not have any use. In the meantime, it need not
move. But it breathes.
Prior Tax Payments Not
Required for Tax Credit
While a tax liability is essential to the availment or use of
any tax credit, prior tax payments are not. On the contrary, for
the existence or grantsolely of such credit, neither a tax liability nor
a prior tax payment is needed. The Tax Code is in fact replete with
provisions granting or allowing tax credits, even though no taxes
have been previously paid.
For example, in computing the estate tax due, Section 86(E)
allows a tax credit -- subject to certain limitations -- for estate taxes
paid to a foreign country. Also found in Section 101(C) is a similar
provision for donors taxes -- again when paid to a foreign country
-- in computing for the donors tax due. The tax credits in both
instances allude to the prior payment of taxes, even if not made to
our government.
Under Section 110, a VAT (Value-Added Tax)- registered
person engaging in transactions -- whether or not subject to the
VAT -- is also allowed atax credit that includes a ratable portion of
any input tax not directly attributable to either activity. This input
tax may either be the VAT on the purchase or importation of goods
or services that is merely due from -- not necessarily paid by -- such
VAT-registered person in the course of trade or business; or the
transitional input tax determined in accordance with Section
111(A). The latter type may in fact be an amount equivalent to
only eight percent of the value of a VAT-registered persons

beginning inventory of goods, materials and supplies, when such

amount -- as computed -- is higher than the actual VAT paid on the
said items.[25] Clearly from this provision, the tax credit refers to an
input tax that is either due only or given a value by mere
comparison with the VAT actually paid -- then later prorated. No
tax is actually paid prior to the availment of such credit.
In Section 111(B), a one and a half percent input tax
credit that is merely presumptive is allowed. For the purchase of
primary agricultural products used as inputs -- either in the
processing of sardines, mackerel and milk, or in the manufacture of
refined sugar and cooking oil -- and for the contract price of public
work contracts entered into with the government, again, no prior
tax payments are needed for the use of the tax credit.
More important, a VAT-registered person whose sales are
zero-rated or effectively zero-rated may, under Section 112(A),
apply for the issuance of atax credit certificate for the amount of
creditable input taxes merely due -- again not necessarily paid to -the government and attributable to such sales, to the extent that
the input taxes have not been applied against output taxes. [26]
Where a taxpayer is engaged in zero-rated or effectively zero-rated
sales and also in taxable or exempt sales, the amount of creditable
input taxes due that are not directly and entirely attributable to any
one of these transactions shall be proportionately allocated on the
basis of the volume of sales. Indeed, in availing of such tax
credit for VAT purposes, this provision -- as well as the one earlier
mentioned -- shows that the prior payment of taxes is not a
requisite.
It may be argued that Section 28(B)(5)(b) of the Tax Code is
another illustration of a tax credit allowed, even though no prior tax
payments are not required. Specifically, in this provision, the
imposition of a final withholding tax rate on cash and/or property
dividends received by a nonresident foreign corporation from a
domestic corporation is subjected to the condition that a
foreign tax credit will be given by the domiciliary country in an
amount equivalent to taxes that are merely deemed paid. [27]
Although true, this provision actually refers to the tax credit as
a condition only for the imposition of a lower tax rate, not as
a deduction from the corresponding tax liability. Besides, it is not
our government but the domiciliary country that credits against the
income tax payable to the latter by the foreign corporation, the tax
to be foregone or spared.[28]

In contrast, Section 34(C)(3), in relation to Section 34(C)(7)

(b), categorically allows as credits, against the income tax
imposable under Title II, the amount of income taxes merely
incurred -- not necessarily paid -- by a domestic corporation during
a taxable year in any foreign country. Moreover, Section 34(C)(5)
provides that for such taxes incurred but not paid, a tax credit may
be allowed, subject to the condition precedent that the taxpayer
shall simply give a bond with sureties satisfactory to and approved
by petitioner, in such sum as may be required; and further
conditioned upon payment by the taxpayer of any tax found due,
upon petitioners redetermination of it.
In addition to the above-cited provisions in the Tax Code,
there are also tax treaties and special laws that grant or allow tax
credits, even though no prior tax payments have been made.
Under the treaties in which the tax credit method is used as
a relief to avoid double taxation, income that is taxed in the state
of source is also taxable in the state of residence, but the tax paid
in the former is merely allowed as a credit against the tax levied in
the latter.[29] Apparently, payment is made to the state of source,
not
the state
of
residence.
No
tax,
therefore,
has
been previously paid to the latter.
Under special laws that particularly affect businesses, there
can also be tax credit incentives. To illustrate, the incentives
provided for in Article 48 of Presidential Decree No. (PD) 1789, as
amended by Batas Pambansa Blg. (BP) 391, include tax
credits equivalent to either five percent of the net value earned, or
five or ten percent of the net local content of exports. [30] In order to
avail of such credits under the said law and still achieve its
objectives, no prior tax payments are necessary.
From all the foregoing instances, it is evident that prior tax
payments are not indispensable to the availment of a tax credit.
Thus, the CA correctly held that the availment under RA 7432 did
not require prior tax payments by private establishments
concerned.[31] However, we do not agree with its finding [32] that the
carry-over of tax credits under the said special law to succeeding
taxable periods, and even their application against internal revenue
taxes, did not necessitate the existence of a tax liability.
The examples above show that a tax liability is certainly
important in the availment or use, not the existence or grant, of
a tax credit. Regarding this matter, a private establishment
reporting a net loss in its financial statements is no different from

another that presents a net income. Both are entitled to thetax

credit provided for under RA 7432, since the law itself accords that
unconditional benefit. However, for the losing establishment to
immediately apply such credit, where no tax is due, will be an
improvident usance.
Sections 2.i and 4 of Revenue
Regulations No. 2-94 Erroneous
RA 7432 specifically allows private establishments to claim
as tax credit the amount of discounts they grant. [33] In turn, the
Implementing Rules and Regulations, issued pursuant thereto,
provide the procedures for its availment.[34] 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.[35] 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. [36] To
be more precise, it is in business parlance a deduction or lowering
of an amount of money;[37] or a reduction from the full amount or
value of something, especially a price.[38] In business there are
many kinds of discount, the most common of which is that affecting
the income statement[39] or financial report upon which the income
tax is based.
Business Discounts
Deducted from Gross Sales
A cash discount, for example, is one granted by business
establishments to credit customers for their prompt payment.[40] It
is a reduction in price offered to the purchaser if payment is made
within a shorter period of time than the maximum time
specified.[41] Also referred to as a sales discount on the part of the
seller and a purchase discount on the part of the buyer, it may be
expressed in such terms as 5/10, n/30.[42]

A quantity discount, however, is a reduction in price allowed

for purchases made in large quantities, justified by savings in
packaging, shipping, and handling.[43]
It is also called
a volume or bulk discount.[44]
A percentage reduction from the list price x x x allowed by
manufacturers to wholesalers and by wholesalers to retailers [45] is
known as a trade discount. No entry for it need be made in the
manual or computerized books of accounts, since the purchase or
sale is already valued at the net price actually charged the buyer.
[46]
The purpose for the discount is to encourage trading or increase
sales, and the prices at which the purchased goods may be resold
are also suggested.[47] Even a chain discount -- a series of
discounts from one list price -- is recorded at net.[48]
Finally, akin to a trade discount is a functional discount. It is
a suppliers price discount given to a purchaser based on the
[latters] role in the [formers] distribution system.[49] This role
usually involves warehousing or advertising.
Based on this discussion, we find that the nature of a sales
discount is peculiar. Applying generally accepted accounting
principles (GAAP) in the country, this type of discount is reflected in
the income statement[50] as a line item deducted -- along with
returns, allowances, rebates and other similar expenses -from gross sales to arrive at net sales.[51] This type of presentation
is resorted to, because the accounts receivable and sales figures
that arise from sales discounts, -- as well as from quantity,
volume or bulk discounts -- are recorded in the manual and
computerized books of accounts and reflected in the financial
statements at the gross amounts of the invoices. [52] This manner of
recording credit sales -- known as the gross method -- is most
widely used, because it is simple, more convenient to apply than
the net method, and produces no material errors over time.[53]
However,
under
the net
method used
in
recording trade, chain or functional discounts, only the net amounts
of the invoices -- after the discounts have been deducted -- are
recorded in the books of accounts[54] and reflected in the financial
statements. A separate line item cannot be shown,[55] because the
transactions
themselves
involving
both accounts
receivable and sales have already been entered into, net of the
said discounts.
The term sales discounts is not expressly defined in the Tax
Code, but one provision adverts to amounts whose sum -- along

with sales returns,allowances and cost of goods sold[56] -- is

deducted
from gross
sales to
come
up
with
the gross
income, profit or margin[57] derived from business.[58] In another
provision therein, sales discounts that are granted and indicated in
the invoices at the time of sale -- and that do not depend upon the
happening of any future event -- may be excluded from the gross
sales within the same quarter they were given. [59] While
determinative only of the VAT, the latter provision also appears as a
suitable reference point for income tax purposes already embraced
in the former. After all, these two provisions affirm thatsales
discounts are amounts that are always deductible from gross sales.
Reason for the Senior Citizen Discount:
The Law, Not Prompt Payment
A distinguishing feature of the implementing rules of RA 7432
is the private establishments outright deduction of the discount
from the invoice price of the medicine sold to the senior citizen. [60]
It is, therefore, expected that for each retail sale made under this
law, the discount period lasts no more than a day, because such
discount is given -- and the net amount thereof collected -immediately upon perfection of the sale.[61] Although prompt
payment is made for an arms-length transaction by the senior
citizen, the real and compelling reason for the private
establishment giving the discount is that the law itself makes it
mandatory.
What RA 7432 grants the senior citizen is a mere discount
privilege, not a sales discount or any of the above discounts in
particular. Prompt payment is not the reason for (although a
necessary consequence of) such grant. To be sure, the privilege
enjoyed by the senior citizen must be equivalent to the tax
credit benefit enjoyed by the private establishment granting the
discount. Yet, under the revenue regulations promulgated by our
tax authorities, this benefit has been erroneously likened and
confined to a sales discount.
To a senior citizen, the monetary effect of the privilege may
be the same as that resulting from a sales discount. However, to a
private establishment, the effect is different from a simple
reduction in price that results from such discount. In other words,
the tax credit benefit is not the same as a sales discount. To repeat
from our earlier discourse, this benefit cannot and should not be
treated as a tax deduction.

To stress, the effect of a sales discount on the income

statement and income tax return of an establishment covered by
RA 7432 is different from that resulting from the availment or use of
its tax credit benefit. While the former is a deduction before, the
latter is a deduction after, the income tax is computed. As
mentioned earlier, a discount is not necessarily a sales discount,
and a tax credit for a simple discount privilege should not be
automatically treated like a sales discount. Ubi lex non distinguit,
nec nos distinguere debemus. Where the law does not distinguish,
we ought not to distinguish.
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 taxpurposes, 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;[62] 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. [63] In the
scheme of judicial tax administration, the need for certainty and
predictability in the implementation of tax laws is crucial. [64] Our
tax authorities fill in the details that Congress may not have the
opportunity or competence to provide.[65] The regulations these
authorities issue are relied upon by taxpayers, who are certain that
these will be followed by the courts.[66] 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 up 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.[67]
In case of conflict, the law must prevail. [68] A regulation
adopted pursuant to law is law.[69] 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.[70]
Availment of Tax
Credit Voluntary
Third, the word may in the text of the statute[71] implies that
the availability of the tax credit benefit is neither unrestricted nor
mandatory.[72] There is no absolute right conferred upon
respondent, or any similar taxpayer, to avail itself of the tax
credit remedy whenever it chooses; neither does it impose a duty
on the part of the government to sit back and allow an important
facet of tax collection to be at the sole control and discretion of the
taxpayer.[73] For the tax authorities to compel respondent to
deduct the 20 percent discount from either its gross income or
its gross sales[74] is, therefore, not only to make an imposition
without basis in law, but also to blatantly contravene the law itself.
What Section 4.a of RA 7432 means is that the tax
credit benefit is merely permissive, not imperative. Respondent is
given two options -- either to claim or not to claim the cost of the
discounts as a tax credit. In fact, it may even ignore the credit and
simply consider the gesture as an act of beneficence, an expression
of its social conscience.
Granting that there is a tax liability and respondent claims such
cost as a tax credit, then the tax credit can easily be applied. If
there is none, the credit cannot be used and will just have to be
carried over and revalidated[75] accordingly. If, however, the
business continues to operate at a loss and no other taxes are due,
thus compelling it to close shop, the credit can never be applied
and will be lost altogether.

In other words, it is the existence or the lack of a tax liability

that determines whether the cost of the discounts can be used as
a tax credit. RA 7432 does not give respondent the unfettered right
to avail itself of the credit whenever it pleases. Neither does it
allow our tax administrators to expand or contract the legislative
mandate. The plain meaning rule or verba legis in statutory
construction is thus applicable x x x. Where the words of a statute
are clear, plain and free from ambiguity, it must be given its literal
meaning and applied without attempted interpretation.[76]
Tax Credit Benefit
Deemed Just Compensation
Fourth, Sections 2.i and 4 of RR 2-94 deny the exercise by
the State of its power of eminent domain. Be it stressed that the
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.[77]
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.[78] 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.[79]

Besides, the taxation power can also be used as an

implement for the exercise of the power of eminent domain. [80] Tax
measures are but enforced contributions exacted on pain of penal
sanctions[81] and clearly imposed for a public purpose.[82] 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.[83]
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. [84] 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[85] -- 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.
Grant of Tax Credit
Intended by the Legislature
Fifth, RA 7432 itself seeks to adopt measures whereby senior
citizens are assisted by the community as a whole and to establish
a program beneficial to them.[86] These objectives are consonant
with the constitutional policy of making health x x x services
available to all the people at affordable cost [87] and of giving
priority for the needs of the x x x elderly. [88] Sections 2.i and 4 of
RR 2-94, however, contradict these constitutional policies and
statutory objectives.

Furthermore, Congress has allowed all private establishments

a simple tax credit, not a deduction. In fact, no cash outlay is
required from the government for the availment or use of such
credit. The deliberations on February 5, 1992 of the Bicameral
Conference Committee Meeting on Social Justice, which finalized RA
7432, disclose the true intent of our legislators to treat the sales
discounts as a tax credit, rather than as a deduction from gross
income. We quote from those deliberations as follows:
"THE CHAIRMAN

(Rep. Unico).
By the way,
before
that
ano,
about
deductions
from
taxable
income. I think we incorporated
there a provision na - on the
responsibility of the private
hospitals and drugstores, hindi
ba?

SEN. ANGARA.

Oo.

THE CHAIRMAN.

(Rep. Unico), So, I think we have to

put in also a provision here
about the deductions from
taxable income of that private
hospitals, di ba ganon 'yan?

MS. ADVENTO.

Kaya lang po sir, and mga

discounts po nila affecting
government
and
public
institutions, so, puwede na po
nating hindi isama yung mga
less deductions ng taxable
income.

THE CHAIRMAN.

(Rep. Unico). Puwede na. Yung

about the private hospitals.
Yung isiningit natin?

MS. ADVENTO.

Singit na po ba yung 15% on

credit. (inaudible/did not use
the microphone).

SEN. ANGARA.
THE CHAIRMAN.

Hindi pa, hindi pa.

(Rep. Unico) Ah, 'di pa ba naisama
natin?

SEN. ANGARA.
THE

CHAIRMAN

SEN. ANGARA.

REP. AQUINO.

SEN. ANGARA.
REP.

AQUINO.

(Rep. Unico).
Yung ang
proposal ni Senator Shahani, e.
In the case of private hospitals
they got the grant of 15%
discount, provided that, the
private hospitals can claim the
expense as a tax credit.
Yah could be allowed as deductions
in
the
perpetrations
of
(inaudible) income.
I-tax credit na lang natin para
walang cash-out ano?
Oo, tax credit. Tama, Okay.
Hospitals ba o lahat ng
establishments na covered.

THE CHAIRMAN.

(Rep. Unico). Sa kuwan lang yon,

as private hospitals lang.

REP. AQUINO.

Ano ba yung establishments na

covered?

SEN.

ANGARA.

REP. AQUINO.
SEN. ANGARA.

REP. AQUINO.
SEN. ANGARA.

establishments - provided that

private establishments may
claim the cost as a tax credit.
Ganon ba 'yon?

Oo. You want to insert that?

Restaurant lodging
recreation centers.

houses,

All establishments covered siguro?

From all establishments. Alisin na
natin 'Yung kuwan kung ganon.
Can we go back to Section 4
ha?
Oho.
Letter A. To capture that thought,
we'll say the grant of 20%
discount
from
all
establishments et cetera, et
cetera, provided that said

REP. AQUINO.

Yah.

SEN. ANGARA.

Dahil kung government, they don't

need to claim it.

THE CHAIRMAN.

(Rep. Unico). Tax credit.

SEN. ANGARA.

As a tax credit [rather] than a

kuwan - deduction, Okay.

REP. AQUINO
SEN. ANGARA.

Okay.
Sige Okay. Di subject to style na
lang sa Letter A".[89]

Special Law
Over General Law
Sixth and last, RA 7432 is a special law that should prevail
over the Tax Code -- a general law. x x x [T]he rule is that on a
specific matter the special law shall prevail over the general law,
which shall be resorted to only to supply deficiencies in the
former.[90] In addition, [w]here there are two statutes, the earlier
special and the later general -- the terms of the general broad
enough to include the matter provided for in the special -- the fact
that one is special and the other is general creates a presumption
that the special is to be considered as remaining an exception to
the general,[91] one as a general law of the land, the other as the
law of a particular case.[92] It is a canon of statutory construction
that a later statute, general in its terms and not expressly repealing
a prior special statute, will ordinarily not affect the special
provisions of such earlier statute.[93]
RA 7432 is an earlier law not expressly repealed by, and
therefore remains an exception to, the Tax Code -- a later law.
When the former states that atax credit may be claimed, then the
requirement of prior tax payments under certain provisions of the
latter, as discussed above, cannot be made to apply. Neither can
the instances of or references to a tax deduction under the Tax

Code[94] be made to restrict RA 7432. No provision of any revenue

regulation can supplant or modify the acts of Congress.
WHEREFORE, the Petition is hereby DENIED. The assailed
Decision and Resolution of the Court of Appeals AFFIRMED. No
pronouncement as to costs.
SO ORDERED.

[G.R. No. 106440. January 29, 1996]

ALEJANDRO MANOSCA, ASUNCION MANOSCA and LEONICA
MANOSCA, petitioners, vs. HON. COURT OF APPEALS,
HON. BENJAMIN V. PELAYO, Presiding Judge, RTCPasig, Metro Manila, Branch 168, HON. GRADUACION
A. REYES CLARAVAL, Presiding Judge, RTC-Pasig,
Metro Manila,
Branch
71,
and REPUBLIC OF THE
PHILIPPINES, respondents.
DECISION
VITUG, J.:
In this appeal, via a petition for review on certiorari, from the
decision[1] of the Court of Appeals, dated 15 January 1992, in CAG.R. SP No. 24969 (entitled Alejandro Manosca, et al. v.Hon.
Benjamin V. Pelayo, et al.), this Court is asked to resolve whether
or not the public use requirement of Eminent Domain is extant in
the attempted expropriation by the Republic of a 492-square-meter
parcel of land so declared by the National Historical Institute
(NHI) as a national historical landmark.
The facts of the case are not in dispute.
Petitioners inherited a piece of land located at P. Burgos Street,
Calzada, Taguig, Metro Manila, with an area of about four hundred
ninety-two (492) square meters. When the parcel was ascertained
by the NHI to have been the birthsite of Felix Y. Manalo, the founder
of Iglesia Ni Cristo, it passed Resolution No. 1, Series of 1986,
pursuant to Section 4[2] of Presidential Decree No. 260, declaring
the land to be a national historical landmark. The resolution was,
on 06 January 1986, approved by the Minister of Education, Culture
and Sports. Later, the opinion of the Secretary of Justice was asked
on the legality of the measure. In his Opinion No. 133, Series of
1987, the Secretary of Justice replied in the affirmative; he
explained:

According to your guidelines, national landmarks are places or

objects that are associated with an event, achievement,
characteristic, or modification that makes a turning point or stage
in Philippine history. Thus, the birthsite of the founder of the Iglesia
ni Cristo, the late Felix Y. Manalo, who, admittedly, had made
contributions to Philippine history and culture has been declared as
a national landmark. It has been held that places invested with
unusual historical interest is a public use for which the power of
eminent domain may be authorized x x x.
In view thereof, it is believed that the National Historical Institute
as an agency of the Government charged with the maintenance
and care of national shrines, monuments and landmarks and the
development of historical sites that may be declared as national
shrines, monuments and/or landmarks, may initiate the institution
of condemnation proceedings for the purpose of acquiring the lot in
question in accordance with the procedure provided for in Rule 67
of the Revised Rules of Court. The proceedings should be instituted
by the Office of the Solicitor General in behalf of the Republic.
Accordingly, on 29 May 1989, the Republic, through the Office
of
the
Solicitor-General,
instituted
a
complaint
for
expropriation[3] before the Regional Trial Court of Pasig for and in
behalf of the NHI alleging, inter alia, that:
Pursuant to Section 4 of Presidential Decree No. 260, the National
Historical Institute issued Resolution No. 1, Series of 1986, which
was approved on January, 1986 by the then Minister of Education,
Culture and Sports, declaring the above described parcel of land
which is the birthsite of Felix Y. Manalo, founder of the Iglesia ni
Cristo, as a National Historical Landmark. The plaintiff perforce
needs the land as such national historical landmark which is a
public purpose.
At the same time, respondent Republic filed an urgent motion
for the issuance of an order to permit it to take immediate
possession of the property. The motion was opposed by
petitioners. After a hearing, the trial court issued, on 03 August
1989,[4] an order fixing the provisional market (P54,120.00) and

assessed (P16,236.00) values of the property and authorizing the

Republic to take over the property once the required sum would
have been deposited with the Municipal Treasurer of Taguig, Metro
Manila.
Petitioners moved to dismiss the complaint on the main thesis
that the intended expropriation was not for a public purpose and,
incidentally, that the act would constitute an application of public
funds, directly or indirectly, for the use, benefit, or support
of Iglesia ni Cristo, a religious entity, contrary to the provision of
Section 29(2), Article VI, of the 1987 Constitution. [5]Petitioners
sought, in the meanwhile, a suspension in the implementation of
the 03rd August 1989 order of the trial court.
On 15 February 1990, following the filing by respondent
Republic of its reply to petitioners motion seeking the dismissal of
the case, the trial court issued its denial of said motion to dismiss.
[6]
Five (5) days later, or on 20 February 1990,[7] another order
was issued by the trial court, declaring moot and academic the
motion for reconsideration and/or suspension of the order of 03
August 1989 with the rejection of petitioners motion to dismiss.
Petitioners motion for the reconsideration of the 20th February
1990 order was likewise denied by the trial court in its 16th April
1991 order.[8]
Petitioners then lodged a petition for certiorari and prohibition
with the Court of Appeals. In its now disputed 15th January
1992 decision, the appellate court dismissed the petition on the
ground that the remedy of appeal in the ordinary course of law was
an adequate remedy and that the petition itself, in any case, had
failed to show any grave abuse of discretion or lack of jurisdictional
competence on the part of the trial court. A motion for the
reconsideration of the decision was denied in the 23rd July 1992
resolution of the appellate court.
We begin, in this present recourse of petitioners, with a few
known postulates.
Eminent domain, also often referred to as expropriation and,
with less frequency, as condemnation, is, like police power and

taxation, an inherent power of sovereignty. It need not be clothed

with any constitutional gear to exist; instead, provisions in our
Constitution on the subject are meant more to regulate, rather than
to grant, the exercise of the power. Eminent domain is generally so
described as the highest and most exact idea of property
remaining in the government that may be acquired for some
public purpose through a method in the nature of a forced purchase
by the State.[9] It is a right to take or reassert dominion over
property within the state for public use or to meet a public
exigency. It is said to be an essential part of governance even in its
most primitive form and thus inseparable from sovereignty. [10] The
only direct constitutional qualification is that private property shall
not be taken for public use without just compensation. [11] This
proscription is intended to provide a safeguard against possible
abuse and so to protect as well the individual against whose
property the power is sought to be enforced.
Petitioners assert that the expropriation has failed to meet the
guidelines set by this Court in the case of Guido v. Rural Progress
Administration,[12] to wit: (a) the size of the land expropriated; (b)
the large number of people benefited; and, (c) the extent of social
and economic reform.[13] Petitioners suggest that we confine the
concept of expropriation only to the following public uses, [14] i.e.,
the x x x taking of property for military posts, roads, streets,
sidewalks, bridges, ferries, levees, wharves, piers, public buildings
including schoolhouses, parks, playgrounds, plazas, market places,
artesian wells, water supply and sewerage systems, cemeteries,
crematories, and railroads.
This view of petitioners is much too limitative and restrictive.
The court, in Guido, merely passed upon the issue of the extent
of the Presidents power under Commonwealth Act No. 539 to,
specifically, acquire private lands for subdivision into smaller home
lots or farms for resale to bona fide tenants or occupants. It was in
this particular context of the statute that the Court had made the
pronouncement. The guidelines in Guidowere not meant to be
preclusive in nature and, most certainly, the power of eminent

domain should not now be understood as being confined only to

the expropriation of vast tracts of land and landed estates.[15]
The term public use, not having been otherwise defined by
the constitution, must be considered in its general concept of
meeting a public need or a public exigency.[16] Black summarizes
the characterization given by various courts to the term; thus:
Public Use. Eminent domain. The constitutional and statutory
basis for taking property by eminent domain. For condemnation
purposes, public use is one which confers same benefit or
advantage to the public; it is not confined to actual use by
public. It is measured in terms of right of public to use proposed
facilities for which condemnation is sought and, as long as public
has right of use, whether exercised by one or many members of
public, a public advantage or public benefit accrues sufficient to
constitute a public use. Montana Power Co. vs. Bokma, Mont. 457 P.
2d 769, 772, 773.
Public use, in constitutional provisions restricting the exercise of
the right to take private property in virtue of eminent domain,
means a use concerning the whole community as distinguished
from particular individuals. But each and every member of society
need not be equally interested in such use, or be personally and
directly affected by it; if the object is to satisfy a great public want
or exigency, that is sufficient. Rindge Co. vs. Los Angeles County,
262 U.S. 700, 43 S.Ct. 689, 692, 67 L.Ed. 1186. The term may be
said to mean public usefulness, utility, or advantage, or what is
productive of general benefit. It may be limited to the inhabitants
of a small or restricted locality, but must be in common, and not for
a particular individual. The use must be a needful one for the
public, which cannot be surrendered without obvious general loss
and inconvenience. A public use for which land may be taken
defies absolute definition for it changes with varying conditions of
society, new appliances in the sciences, changing conceptions of
scope and functions of government, and other differing
circumstances brought about by an increase in population and new
modes of communication and transportation. Katz v.Brandon,
156 Conn., 521, 245 A.2d 579,586.[17]

The validity of the exercise of the power of eminent domain for

traditional purposes is beyond question; it is not at all to be said,
however, that public use should thereby be restricted to such
traditional uses. The idea that public use is strictly limited to
clear cases of use by the public has long been discarded. This
Court in Heirs of Juancho Ardona v. Reyes,[18] quoting from
Berman v. Parker (348 U.S. 25; 99 L. ed. 27), held:
We do not sit to determine whether a particular housing project is
or is not desirable. The concept of the public welfare is broad and
inclusive. See DayBrite Lighting, Inc. v. Missouri, 342 US 421, 424,
96 L. Ed. 469, 472, 72 S Ct 405. The values it represents are
spiritual as well as physical, aesthetic as well as monetary. It is
within the power of the legislature to determine that the
community should be beautiful as well as healthy, spacious as well
as clean, well-balanced as well as carefully patrolled. In the
present case, the Congress and its authorized agencies have made
determinations that take into account a wide variety of values. It is
not for us to reappraise them. If those who govern the District of
Columbia decide that the Nations Capital should be beautiful as
well as sanitary, there is nothing in the Fifth Amendment that
stands in the way.
Once the object is within the authority of Congress, the right to
realize it through the exercise of eminent domain is clear. For the
power of eminent domain is merely the means to the end. See
Luxton v.North River Bridge Co. 153 US 525, 529, 530, 38 L. ed.
808, 810, 14 S Ct 891; United States v. Gettysburg Electric R. Co.
160 US 668, 679, 40 L. ed. 576, 580, 16 S Ct 427.

[19]

It has been explained as early as Sea v. Manila Railroad Co.,

that:

x x x A historical research discloses the meaning of the term

public use to be one of constant growth. As society advances, its
demands upon the individual increase and each demand is a new
use to which the resources of the individual may be devoted. x x x
for whatever is beneficially employed for the community is a public
use.

Chief Justice Enrique M. Fernando states:

The taking to be valid must be for public use. There was a time
when it was felt that a literal meaning should be attached to such a
requirement. Whatever project is undertaken must be for the public
to enjoy, as in the case of streets or parks. Otherwise, expropriation
is not allowable. It is not so any more. As long as the purpose of the
taking is public, then the power of eminent domain comes into play.
As just noted, the constitution in at least two cases, to remove any
doubt, determines what is public use. One is the expropriation of
lands to be subdivided into small lots for resale at cost to
individuals. The other is the transfer, through the exercise of this
power, of utilities and other private enterprise to the government. It
is accurate to state then that at present whatever may be
beneficially employed for the general welfare satisfies the
requirement of public use.[20]
Chief Justice Fernando, writing the ponencia in J.M. Tuason &
Co. vs. Land Tenure Administration,[21] has viewed the Constitution a
dynamic instrument and one that is not to be construed narrowly
or pedantically so as to enable it to meet adequately whatever
problems the future has in store. Fr. Joaquin Bernas, a noted
constitutionalist himself, has aptly observed that what, in fact, has
ultimately emerged is a concept of public use which is just as broad
as public welfare.[22]
Petitioners ask: But (w)hat is the so-called unusual interest
that the expropriation of (Felix Manalos) birthplace become so vital
as to be a public use appropriate for the exercise of the power of
eminent domain when only members of the Iglesia ni Cristo would
benefit? This attempt to give some religious perspective to the
case deserves little consideration, for what should be significant is
the principal objective of, not the casual consequences that might
follow from, the exercise of the power. The purpose in setting up
the marker is essentially to recognize the distinctive contribution of
the late Felix Manalo to the culture of the Philippines, rather than to
commemorate his founding and leadership of the Iglesia ni
Cristo. The practical reality that greater benefit may be derived by
members of the Iglesia ni Cristo than by most others could well be
true but such a peculiar advantage still remains to be merely

incidental and secondary in nature. Indeed, that only a few would

actually benefit from the expropriation of property does not
necessarily diminish the essence and character of public use. [23]
Petitioners contend that they have been denied due process in
the fixing of the provisional value of their property. Petitioners
need merely to be reminded that what the law prohibits is the lack
of opportunity to be heard;[24] contrary to petitioners argument,
the records of this case are replete with pleadings [25] that could
have dealt, directly or indirectly, with the provisional value of the
property.
Petitioners, finally, would fault respondent appellate court in
sustaining the trial courts order which considered inapplicable the
case of Noble v. City of Manila.[26] Both courts held correctly. The
Republic was not a party to the alleged contract of exchange
between the Iglesia ni Cristo and petitioners which (the contracting
parties) alone, not the Republic, could properly be bound.
All considered, the Court finds the assailed decision to be in
accord with law and jurisprudence.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.

[G.R. No. 140160. January 13, 2004] LAND BANK OF THE

PHILIPPINES, petitioner, vs.
FELICIANO
F.
WYCOCO, respondent.
[G.R.
No.
146733. January
13,
2004]FELICIANO
F.
WYCOCO, petitioner, vs. THE HONORABLE RODRIGO S.
CASPILLO, Pairing Judge of the Regional Trial Court, Third
Judicial
Region,
Branch
23, Cabanatuan
City
and
the DEPARTMENT OF AGRARIAN REFORM, respondents.
DECISION
YNARES-SANTIAGO, J.:
Before the Court are consolidated petitions, the first seeking
the review of the February 9, 1999 Decision [1] and the September
22, 1999 Resolution[2] of the Court of Appeals in CA-G.R. No. SP No.
39913, which modified the Decision[3] of Regional Trial Court of
Cabanatuan City, Branch 23, acting as a Special Agrarian Court in
Agrarian Case No. 91 (AF); and the second for mandamus to
compel the said trial court to issue a writ of execution and to direct
Judge Rodrigo S. Caspillo to inhibit himself from Agrarian Case No.
91 (AF).
The undisputed antecedents show that Feliciano F. Wycoco is
the registered owner of a 94.1690 hectare unirrigated and
untenanted rice land, covered by Transfer Certificate of Title No. NT206422 and situated in the Sitios of Ablang, Saguingan and
Pinamunghilan, Barrio of San Juan, Licab, Nueva Ecija.[4]
In line with the Comprehensive Agrarian Reform Program
(CARP) of the government, Wycoco voluntarily offered to sell the
land to the Department of Agrarian Reform (DAR) for P14.9 million.
[5]
In November 1991, after the DARs evaluation of the application
and the determination of the just compensation by the Land Bank
of the Philippines (LBP), a notice of intention to acquire 84.5690
hectares of the property for P1,342,667.46[6] was sent to
Wycoco. The amount offered was later raised to P2,594,045.39
and, upon review, was modified to P2,280,159.82. [7] The area which
the DAR offered to acquire excluded idle lands, river and road
located therein. Wycoco rejected the offer, prompting the DAR to

indorse the case to the Department of Agrarian Reform

Adjudication Board (DARAB) for the purpose of fixing the just
compensation in a summary administrative proceeding.[8] The case
was docketed as DARAB VOS Case No. 232 NE 93. Thereafter, the
DARAB requested LBP to open a trust account in the name of
Wycoco and deposited the compensation offered by DAR. [9] In the
meantime, the property was distributed to farmer-beneficiaries.
On March 29, 1993, DARAB required the parties to submit their
respective memoranda or position papers in support of their claim.
[10]
Wycoco, however, decided to forego with the filing of the
required pleadings, and instead filed on April 13, 1993, the instant
case for determination of just compensation with the Regional Trial
Court of Cabanatuan City, Branch 23, docketed as Agrarian Case
No. 91 (AF).[11] Impleaded as party-defendants therein were DAR
and LBP.
On April 30, 1993, Wycoco filed a manifestation in VOS Case
No. 232 NE 93, informing the DARAB of the pendency of Agrarian
Case No. 91 (AF) with the Cabanatuan court, acting as a special
agrarian court.[12] On March 9, 1994, the DARAB issued an order
dismissing the case to give way to the determination of just
compensation by the Cabanatuan court. Pertinent portion thereof
states:
Admittedly, this Forum is vested with the jurisdiction to conduct
administrative proceeding to determine compensation. [H]owever,
a thorough perusal of petitioners complaint showed that he did not
only raise the issue of valuation but such other matters which are
beyond the competence of the Board. Besides, the petitioner has
the option to avail the administrative remedies or bring the matter
on just compensation to the Special Agrarian Court for final
determination.
WHEREFORE, premises considered, this case is hereby dismissed.
SO ORDERED.[13]

Meanwhile, DAR and LBP filed their respective answers before

the special agrarian court in Agrarian Case No. 91 (AF), contending
that the valuation of Wycocos property was in accordance with law
and that the latter failed to exhaust administrative remedies by not
participating in the summary administrative proceedings before the
DARAB which has primary jurisdiction over determination of land
valuation.[14]
After conducting a pre-trial on October 3, 1994, the trial court
issued a pre-trial order as follows:
The parties manifested that there is no possibility of amicable
settlement, neither are they willing to admit or stipulate on facts,
except those contained in the pleadings.
The only issue left is for the determination of just compensation or
correct valuation of the land owned by the plaintiff subject of this
case.
The parties then prayed to terminate the pre-trial conference.
AS PRAYED FOR, the pre-trial conference is considered terminated,
and instead of trial, the parties are allowed to submit their
respective memoranda.
WHEREFORE, the parties are given twenty (20) days from today
within which to file their simultaneous memoranda, and another ten
(10) days from receipt thereof to file their Reply/Rejoinder, if any,
and thereafter, this case shall be deemed submitted for decision.
SO ORDERED.[15]
The evidence presented by Wycoco in support of his claim were
the following: (1) Transfer Certificate of Title No. NT-206422; (2)
Notice of Land Valuation dated June 18, 1992; and (3) letter dated
July 10, 1992 rejecting the counter-offer of LBP and DAR. [16] On the
other hand, DAR and LBP presented the Land Valuation Worksheets.
[17]

On November 14, 1995, the trial court rendered a decision in

favor of Wycoco. It ruled that there is no need to present evidence
in support of the land valuation inasmuch as it is of public
knowledge that the prevailing market value of agricultural lands
sold in Licab, Nueva Ecija is from P135,000.00 to 150,000.00 per
hectare. The court thus took judicial notice thereof and fixed the
compensation for the entire 94.1690 hectare land at P142,500.00
per hectare or a total of P13,428,082.00. It also awarded Wycoco
actual damages for unrealized profits plus legal interest. The
dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered:
1.
Ordering the defendants to pay the amount of
P13,419,082.00 to plaintiff as just compensation for the property
acquired;
2.
Ordering the defendants to pay plaintiff the amount of
P29,663,235.00 representing the unrealized profits from the time of
acquisition of the subject property and the sum of P8,475,210.00
for every calendar year, until the amount of compensation is fully
paid including legal interest which had accrued thereon.
No pronouncement as to costs.
SO ORDERED.[18]
The DAR and the LBP filed separate petitions before the Court
of Appeals. The petition brought by DAR on jurisdictional and
procedural issues, docketed as CA-G.R. No. SP No. 39234, was
dismissed on May 29, 1997.[19] The dismissal became final and
executory on June 26, 1997.[20] This prompted Wycoco to file a
petition for mandamus before this Court, docketed as G.R. No.
146733, praying that the decision of the Regional Trial Court of
Cabanatuan City, Branch 23, in Agrarian Case No. 91 (AF) be
executed, and that Judge Rodrigo S. Caspillo, the now presiding
Judge of said court, be compelled to inhibit himself from hearing
the case.

The petition brought by LBP on both substantive and

procedural grounds, docketed as CA-G.R. No. SP No. 39913, was
likewise dismissed by the Court of Appeals on February 9, 1999.
[21]
On September 22, 1999, however, the Court of Appeals modified
its decision by deducting from the compensation due Wycoco the
amount corresponding to the 3.3672 hectare portion of the 94.1690
hectare land which was found to have been previously sold by
Wycoco to the Republic, thus

THAT THE JUST COMPENSATION DETERMINED BY THE TRIAL COURT

WAS SUPPORTED BY SUBSTANTIAL EVIDENCE, WHEN IT WAS BASED
ONLY ON JUDICIAL NOTICE OF THE PREVAILING MARKET VALUE OF
LAND BASED ON THE ALLEGED PRICE OF TRANSFER OF TENURAL
RIGHTS, TAKEN WITHOUT NOTICE AND HEARING IN VIOLATION OF
RULE 129 OF THE RULES OF COURT;

WHEREFORE, and conformably with the above, Our decision of

February 9, 1999 is hereby MODIFIED in the sense that the value
corresponding to the aforesaid 3.3672 hectares and all the awards
appertaining thereto in the decision a quo are ordered deducted
from the totality of the awards granted to the private
respondent. In all other respects, the decision sought to be
reconsidered is hereby RE-AFFIRMED and REITERATED.

THAT THE TRIAL COURT CAN REQUIRE THE PETITIONER TO

COMPENSATE THE PORTIONS OF RESPONDENTS PROPERTY WHICH
WERE NOT DECLARED BY THE DAR FOR ACQUISITION, NOR
SUITABLE FOR AGRICULTURE NOR CAPABLE OF DISTRIBUTION TO
FARMER BENEFICIARIES UNDER THE CARP;

SO ORDERED.[22]

THAT THE TRIAL COURT CAN AWARD AS PART OF JUST

COMPENSATION LEGAL INTEREST ON THE PRINCIPAL AND ALLEGED
UNREALIZED PROFITS OF P29,663,235.00 FROM THE TIME OF
ACQUISITION OF THE SUBJECT PROPERTY AND P8,475,210.00 FOR
EVERY CALENDAR YEAR THEREAFTER, CONSIDERING THAT THE
SAME HAS NO LEGAL BASIS AND THAT THE RESPONDENT RETAINED
THE TITLE TO HIS PROPERTY DESPITE THE DARS NOTICE OF
ACQUISITION;

In its petition, LBP contended that the Court of Appeals erred in

ruling:
I
THAT THE TRIAL COURT ACTING AS A SPECIAL AGRARIAN COURT
MAY ASSUME JURISDICTION OVER AGRARIAN CASE NO. 91 (AF) AND
RENDER
JUDGMENT
THEREON
WITHOUT
AN
INITIAL
ADMINISTRATIVE DETERMINATION OF JUST COMPENSATION BY THE
DARAB PURSUANT TO SECTION 16 OF RA 6657, OVER THE TIMELY
OBJECTION OF THE PETITIONER, AND IN VIOLATION OF THE RULE
ON EXHAUSTION OF ADMINISTRATIVE REMEDIES AND ON FORUM
SHOPPING;

III

IV

V
THAT THE TRIAL COURT HAD VALIDLY GRANTED EXECUTION
PENDING APPEAL ON THE ALLEGEDLY GOOD REASON OF THE
PETITIONERS ADVANCED AGE AND WEAK HEALTH, CONTRARY TO
THE APPLICABLE JURISPRUDENCE AND CONSIDERING THAT THE
RESPONDENT IS NOT DESTITUTE.[23]

II
The issues for resolution are as follows: (1) Did the Regional
Trial Court, acting as Special Agrarian Court, validly acquire
jurisdiction over the instant case for determination of just
compensation? (2) Assuming that it acquired jurisdiction, was the
compensation arrived at supported by evidence? (3) Can Wycoco
compel the DAR to purchase the entire land subject of the

voluntary offer to sell? (4) Were the awards of interest and

damages for unrealized profits valid?
Anent the issue of jurisdiction, the laws in point are Sections 50
and 57 of Republic Act No. 6657 (Comprehensive Agrarian Reform
Law of 1988) which, in pertinent part, provide:
Section 50. Quasi-judicial Powers of the DAR. The DAR is hereby
vested with primary jurisdiction to determine and adjudicate
agrarian reform matters and shall have exclusive original
jurisdiction over all matters involving the implementation of
agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the
Department of Environment and Natural Resources (DENR).
Section 57. Special Jurisdiction. The Special Agrarian Court shall
have original and exclusive jurisdiction over all petitions for the
determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act.
The Special Agrarian Courts shall decide all appropriate cases
under their special jurisdiction within thirty (30) days from
submission of the case for decision.
In Republic v. Court of Appeals,[24] it was held that Special
Agrarian Courts are given original and exclusive jurisdiction over
two categories of cases, to wit: (1) all petitions for the
determination of just compensation; and (2) the prosecution of all
criminal offenses under R.A. No. 6657. Section 50 must be
construed in harmony with Section 57 by considering cases
involving the determination of just compensation and criminal
cases for violations of R.A. No. 6657 as excepted from the plenitude
of power conferred to the DAR. Indeed, there is a reason for this
distinction. The DAR, as an administrative agency, cannot be
granted jurisdiction over cases of eminent domain and over
criminal cases. The valuation of property in eminent domain is
essentially a judicial function which is vested with the Special
Agrarian Courts and cannot be lodged with administrative agencies.
[25]
In fact, Rule XIII, Section 11 of the New Rules of Procedure of the
DARAB acknowledges this power of the court, thus

Section 11. Land Valuation and Preliminary Determination and

Payment of Just Compensation. The decision of the Adjudicator on
land valuation and preliminary determination and payment of just
compensation shall not be appealable to the Board but shall be
brought directly to the Regional Trial Courts designated as Special
Agrarian Courts within fifteen (15) days from receipt of the notice
thereof. Any party shall be entitled to only one motion for
reconsideration. (Emphasis supplied)
Under Section 1 of Executive Order No. 405, Series of 1990, the
Land Bank of the Philippines is charged with the initial responsibility
of determining the value of lands placed under land reform and the
just compensation to be paid for their taking.[26] Through a notice of
voluntary offer to sell (VOS) submitted by the landowner,
accompanied by the required documents, the DAR evaluates the
application
and
determines
the
lands
suitability
for
agriculture. The LBP likewise reviews the application and the
supporting documents and determines the valuation of the
land. Thereafter, the DAR issues the Notice of Land Valuation to
the landowner. In both voluntary and compulsory acquisition,
where the landowner rejects the offer, the DAR opens an account in
the name of the landowner and conducts a summary administrative
proceeding. If the landowner disagrees with the valuation, the
matter may be brought to the Regional Trial Court acting as a
special agrarian court. This in essence is the procedure for the
determination of just compensation.[27]
In Land Bank of the Philippines v. Court of Appeals,[28] the
landowner filed an action for determination of just compensation
without waiting for the completion of DARABs re-evaluation of the
land. This, notwithstanding, the Court held that the trial court
properly acquired jurisdiction because of its exclusive and original
jurisdiction over determination of just compensation, thus
It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian
Court, has original and exclusive jurisdiction over all petitions for
the determination of just compensation to landowners. This
original and exclusive jurisdiction of the RTC would be
undermined if the DAR would vest in administrative officials original
jurisdiction in compensation cases and make the RTC an appellate

court for the review of administrative decisions. Thus, although the

new rules speak of directly appealing the decision of adjudicators to
the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57
that the original and exclusive jurisdiction to determine such cases
is in the RTCs. Any effort to transfer such jurisdiction to the
adjudicators and to convert the original jurisdiction of the RTCs into
an appellate jurisdiction would be contrary to Sec. 57 and therefore
would be void. Thus, direct resort to the SAC [Special Agrarian
Court] by private respondent is valid. (Emphasis supplied)[29]
In the case at bar, therefore, the trial court properly acquired
jurisdiction over Wycocos complaint for determination of just
compensation. It must be stressed that although no summary
administrative proceeding was held before the DARAB, LBP was
able to perform its legal mandate of initially determining the value
of Wycocos land pursuant to Executive Order No. 405, Series of
1990. What is more, DAR and LBPs conformity to the pre-trial
order which limited the issue only to the determination of just
compensation estopped them from questioning the jurisdiction of
the special agrarian court. The pre-trial order limited the issues to
those not disposed of by admission or agreements; and the entry
thereof controlled the subsequent course of action.[30]
Besides, the issue of whether Wycoco violated the rule on
exhaustion of administrative remedies was rendered moot and
academic in view of the DARABs dismissal[31] of the administrative
case to give way to and in recognition of the courts power to
determine just compensation.[32]
In arriving at the valuation of Wycocos land, the trial court
took judicial notice of the alleged prevailing market value of
agricultural lands in Licab, Nueva Ecija without apprising the parties
of its intention to take judicial notice thereof. Section 3, Rule 129 of
the Rules on Evidence provides:
Sec. 3. Judicial Notice, When Hearing Necessary. During the trial,
the court, on its own initiative, or on request of a party, may
announce its intention to take judicial notice of any matter and
allow the parties to be heard thereon.

After trial and before judgment or on appeal, the proper court, on

its own initiative, or on request of a party, may take judicial notice
of any matter and allow the parties to be heard thereon if such
matter is decisive of a material issue in the case.
Inasmuch as the valuation of the property of Wycoco is the
very issue in the case at bar, the trial court should have allowed
the parties to present evidence thereon instead of practically
assuming a valuation without basis. While market value may be
one of the bases of determining just compensation, the same
cannot be arbitrarily arrived at without considering the factors to
be appreciated in arriving at the fair market value of the
property e.g., the cost of acquisition, the current value of like
properties, its size, shape, location, as well as the tax declarations
thereon.[33] Since these factors were not considered, a remand of
the case for determination of just compensation is necessary. The
power to take judicial notice is to be exercised by courts with
caution especially where the case involves a vast tract of
land. Care must be taken that the requisite notoriety exists; and
every reasonable doubt on the subject should be promptly resolved
in the negative. To say that a court will take judicial notice of a fact
is merely another way of saying that the usual form of evidence will
be dispensed with if knowledge of the fact can be otherwise
acquired. This is because the court assumes that the matter is so
notorious that it will not be disputed. But judicial notice is not
judicial knowledge. The mere personal knowledge of the judge is
not the judicial knowledge of the court, and he is not authorized to
make his individual knowledge of a fact, not generally or
professionally known, the basis of his action.[34]
Anent the third issue, the DAR cannot be compelled to
purchase the entire property voluntarily offered by Wycoco. The
power to determine whether a parcel of land may come within the
coverage of the Comprehensive Agrarian Reform Program is
essentially lodged with the DAR. That Wycoco will suffer damages
by the DARs non-acquisition of the approximately 10 hectare
portion of the entire land which was found to be not suitable for
agriculture is no justification to compel DAR to acquire the whole
area.

We find Wycocos claim for payment of interest partly

meritorious. In Land Bank of the Philippines v. Court of Appeals,
[35]
this Court struck down as void DAR Administrative Circular No. 9,
Series of 1990, which provides for the opening of trust accounts in
lieu of the deposit in cash or in bonds contemplated in Section 16
(e) of RA 6657.
It is very explicit from [Section 16 (e)] that the deposit must be
made only in cash or in LBP bonds. Nowhere does it appear nor
can it be inferred that the deposit can be made in any other form. If
it were the intention to include a trust account among the valid
modes of deposit, that should have been made express, or at least,
qualifying words ought to have appeared from which it can be fairly
deduced that a trust account is allowed. In sum, there is no
ambiguity in Section 16(e) of RA 6657 to warrant an expanded
construction of the term deposit.
xxx

xxx

xxx

In the present suit, the DAR clearly overstepped the limits of its
powers to enact rules and regulations when it issued Administrative
Circular No. 9. There is no basis in allowing the opening of a trust
account in behalf of the landowner as compensation for his
property because, as heretofore discussed, Section 16(e) of RA
6657 is very specific that the deposit must be made only in cash
or in LBP bonds. In the same vein, petitioners cannot invoke LRA
Circular Nos. 29, 29-A and 54 because these implementing
regulations can not outweigh the clear provision of the law.
Respondent court therefore did not commit any error in striking
down Administrative Circular No. 9 for being null and void. [36]
Pursuant to the forgoing decision, DAR issued Administrative
Order No. 2, Series of 1996, converting trust accounts in the name
of landowners into deposit accounts. The transitory provision
thereof states
VI.

TRANSITORY PROVISIONS

All trust accounts issued pursuant to Administrative Order No. 1, S.

1993 covering landholdings not yet transferred in the name of the

Republic of the Philippines as of July 5, 1996 shall immediately be

converted to deposit accounts in the name of the landowners
concerned.
All Provincial Agrarian Reform Officers and Regional Directors are
directed to immediately inventory the claim folders referred to in
the preceding paragraph, wherever they may be found and request
the LBP to establish the requisite deposit under this Administrative
Order and to issue a new certification to that effect. The Original
Certificate of Trust Deposit previously issued should be attached to
the request of the DAR in order that the same may be replaced with
a new one.
All previously established Trust Deposits which served as the basis
for the transfer of the landowners title to the Republic of the
Philippines shall likewise be converted to deposits in cash and in
bonds. The Bureau of Land Acquisition and Distribution shall
coordinate with the LBP for this purpose.
In light of the foregoing, the trust account opened by LBP in the
name of Wycoco as the mode of payment of just compensation
should be converted to a deposit account. Such conversion should
be retroactive in application in order to rectify the error committed
by the DAR in opening a trust account and to grant the landowners
the benefits concomitant to payment in cash or LBP bonds prior to
the ruling of the Court in Land Bank of the Philippines v. Court of
Appeals. Otherwise, petitioners right to payment of just and valid
compensation for the expropriation of his property would be
violated.[37] The interest earnings accruing on the deposit account
of landowners would suffice to compensate them pending payment
of just compensation.
In some expropriation cases, the Court imposed an interest of
12% per annum on the just compensation due the landowner. It
must be stressed, however, that in these cases, the imposition of
interest was in the nature of damages for delay in payment which
in effect makes the obligation on the part of the government one of
forbearance.[38] It follows that the interest in the form of damages
cannot be applied where there was prompt and valid payment of
just compensation. Conversely, where there was delay in tendering

a valid payment of just compensation, imposition of interest is in

order. This is because the replacement of the trust account with
cash or LBP bonds did not ipso facto cure the lack of compensation;
for essentially, the determination of this compensation was marred
by lack of due process.[39]
Accordingly, the just compensation due Wycoco should bear
12% interest per annum from the time LBP opened a trust account
in his name up to the time said account was actually converted into
cash and LBP bonds deposit accounts. The basis of the 12%
interest would be the just compensation that would be determined
by the Special Agrarian Court upon remand of the instant case. In
the same vein, the amount determined by the Special Agrarian
Court would also be the basis of the interest income on the cash
and bond deposits due Wycoco from the time of the taking of the
property up to the time of actual payment of just compensation.
The award of actual damages for unrealized profits should be
deleted. The amount of loss must not only be capable of proof, but
must be proven with a reasonable degree of certainty. The claim
must be premised upon competent proof or upon the best evidence
obtainable, such as receipts or other documentary proof. [40] None
having been presented in the instant case, the claim for unrealized
profits cannot be granted.
From the foregoing discussion, it is clear that Wycocos petition
for mandamus in G.R. No. 146733 should be dismissed. The
decision of the Regional Trial Court of Cabanatuan City, Branch 23,
acting as Special Agrarian Court in Agrarian Case No. 91 (AF),
cannot be enforced because there is a need to remand the case to
the trial court for determination of just compensation. Likewise,
the prayer for the inhibition of Judge Rodrigo S. Caspillo in Agrarian
Case No. 91 (AF) is denied for lack of basis.
WHEREFORE, in view of all the foregoing, the petition in G.R.
No. 140160 is PARTIALLY GRANTED. Agrarian Case No. 91 (AF)
is REMANDED to the Regional Trial Court of Cabanatuan City,
Branch 23, for the determination of just compensation. The
petition for mandamus in G.R. No. 146733 is DISMISSED.SO
ORDERED.

[G.R. No. 161656. June 29, 2005]

REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA,
COMMODORE
EDGARDO
GALEOS,
ANTONIO
CABALUNA,
DOROTEO
MANTOS
&
FLORENCIO
BELOTINDOS, petitioners,
vs.
VICENTE
G.
LIM, respondent.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
Justice is the first virtue of social institutions. [1] When the state
wields its power of eminent domain, there arises a correlative
obligation on its part to pay the owner of the expropriated property
a just compensation. If it fails, there is a clear case of injustice that
must be redressed. In the present case, fifty-seven (57) years have
lapsed from the time the Decision in the subject expropriation
proceedings became final, but still the Republic of the Philippines,
herein petitioner, has not compensated the owner of the property.
To tolerate such prolonged inaction on its part is to encourage
distrust and resentment among our people the very vices that
corrode the ties of civility and tempt men to act in ways they would
otherwise shun.
A revisit of the pertinent facts in the instant case is imperative.
On September 5, 1938, the Republic of the Philippines
(Republic) instituted a special civil action for expropriation with the
Court of First Instance (CFI) of Cebu, docketed as Civil Case No.
781, involving Lots 932 and 939 of the Banilad Friar Land Estate,
Lahug, Cebu City, for the purpose of establishing a military
reservation for the Philippine Army. Lot 932 was registered in the
name of Gervasia Denzon under Transfer Certificate of Title (TCT)
No. 14921 with an area of 25,137 square meters, while Lot 939 was
in the name of Eulalia Denzon and covered by TCT No. 12560
consisting of 13,164 square meters.

After depositing P9,500.00 with the Philippine National Bank,

pursuant to the Order of the CFI dated October 19, 1938, the
Republic took possession of the lots. Thereafter, or on May 14,
1940, the CFI rendered its Decision ordering the Republic to pay the
Denzons the sum of P4,062.10 as just compensation.
The Denzons interposed an appeal to the Court of Appeals but
it was dismissed on March 11, 1948. An entry of judgment was
made on April 5, 1948.
In 1950, Jose Galeos, one of the heirs of the Denzons, filed with
the National Airports Corporation a claim for rentals for the two
lots, but it denied knowledge of the matter. Another heir, Nestor
Belocura, brought the claim to the Office of then President Carlos
Garcia who wrote the Civil Aeronautics Administration and the
Secretary of National Defense to expedite action on said claim. On
September 6, 1961, Lt. Manuel Cabal rejected the claim but
expressed willingness to pay the appraised value of the lots within
a reasonable time.
For failure of the Republic to pay for the lots, on September 20,
1961, the Denzons successors-in-interest, Francisca GaleosValdehueza and Josefina Galeos-Panerio,[2] filed with the same
CFI an action for recovery of possession with damages against the
Republic and officers of the Armed Forces of the Philippines in
possession of the property. The case was docketed as Civil Case
No. R-7208.
In the interim or on November 9, 1961, TCT Nos. 23934 and
23935 covering Lots 932 and 939 were issued in the names of
Francisca Valdehueza and Josefina Panerio, respectively. Annotated
thereon was the phrase subject to the priority of the National
Airports Corporation to acquire said parcels of land, Lots 932 and
939 upon previous payment of a reasonable market value.
On July 31, 1962, the CFI promulgated its Decision in favor of
Valdehueza and Panerio, holding that they are the owners and have
retained their right as such over Lots 932 and 939 because of the
Republics failure to pay the amount of P4,062.10, adjudged in the

expropriation proceedings. However, in view of the annotation on

their land titles, they were ordered to execute a deed of sale in
favor of the Republic. In view of the differences in money value
from 1940 up to the present, the court adjusted the market value
at P16,248.40, to be paid with 6% interest per annum from April 5,
1948, date of entry in the expropriation proceedings, until full
payment.

further certified that the corresponding Vouchers and pertinent

Journal and Cash Book were destroyed during the last World War,
and therefore the names of the payees concerned cannot be
ascertained.) And the Government now admits that there is
no available record showing that payment for the value of
the lots in question has been made (Stipulation of Facts, par. 9,
Rec. on Appeal, p. 28).

After their motion for reconsideration was denied, Valdehueza

and Panerio appealed from the CFI Decision, in view of the amount
in controversy, directly to this Court. The case was docketed as No.
L-21032.[3] On May 19, 1966, this Court rendered its Decision
affirming the CFI Decision. It held that Valdehueza and Panerio are
still the registered owners of Lots 932 and 939, there having been
no payment of just compensation by the Republic. Apparently, this
Court found nothing in the records to show that the Republic paid
the owners or their successors-in-interest according to the CFI
decision. While it deposited the amount of P9,500,00, and said
deposit was allegedly disbursed, however, the payees could not be
ascertained.

The points in dispute are whether such payment can still be

made and, if so, in what amount. Said lots have been the
subject of expropriation proceedings.
By final and
executory judgment in said proceedings, they were
condemned for public use, as part of an airport, and
ordered
sold
to
the
Government.
In
fact,
the
abovementioned title certificates secured by plaintiffs over
said lots contained annotations of the right of the National
Airports Corporation (now CAA) to pay for and acquire
them. It follows that both by virtue of the judgment, long
final, in the expropriation suit, as well as the annotations
upon their title certificates, plaintiffs are not entitled to
recover possession of their expropriated lots which are
still devoted to the public use for which they were
expropriated but only to demand the fair market value of
the same.

Notwithstanding the above finding, this Court still ruled that

Valdehueza and Panerio are not entitled to recover possession of
the lots but may only demand the payment of their fair market
value, ratiocinating as follows:
Appellants would contend that: (1) possession of Lots 932 and 939
should be restored to them as owners of the same; (2) the Republic
should be ordered to pay rentals for the use of said lots, plus
attorneys fees; and (3) the court a quo in the present suit had no
power to fix the value of the lots and order the execution of the
deed of sale after payment.
It is true that plaintiffs are still the registered owners of the land,
there not having been a transfer of said lots in favor of the
Government. The records do not show that the Government paid
the owners or their successors-in-interest according to the 1940 CFI
decision although, as stated, P9,500.00 was deposited by it, and
said deposit had been disbursed. With the records lost, however, it
cannot be known who received the money (Exh. 14 says: It is

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot

932 to Vicente Lim, herein respondent,[4] as security for their
loans. For their failure to pay Lim despite demand, he had the
mortgage foreclosed in 1976. Thus, TCT No. 23934 was cancelled,
and in lieu thereof, TCT No. 63894 was issued in his name.
On August 20, 1992, respondent Lim filed a complaint
for quieting of title with the Regional Trial Court (RTC), Branch 10,
Cebu City, against General Romeo Zulueta, as Commander of the
Armed Forces of the Philippines, Commodore Edgardo Galeos, as
Commander of Naval District V of the Philippine Navy, Antonio
Cabaluna, Doroteo Mantos and Florencio Belotindos, herein
petitioners. Subsequently, he amended the complaint to implead
the Republic.

On May 4, 2001, the RTC rendered a decision in favor of

respondent, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff
Vicente Lim and against all defendants, public and private,
declaring plaintiff Vicente Lim the absolute and exclusive
owner of Lot No. 932 with all the rights of an absolute
owner including the right to possession. The monetary claims
in the complaint and in the counter claims contained in the answer
of defendants are ordered Dismissed.
Petitioners elevated the case to the Court of Appeals, docketed
therein as CA-G.R. CV No. 72915. In its Decision[5] dated September
18, 2003, the Appellate Court sustained the RTC Decision, thus:

Obviously, defendant-appellant Republic evaded its duty

of paying what was due to the landowners. The
expropriation proceedings had already become final in the
late 1940s and yet, up to now, or more than fifty (50) years
after, the Republic had not yet paid the compensation fixed
by the court while continuously reaping benefits from the
expropriated property to the prejudice of the landowner. x
x x. This is contrary to the rules of fair play because the
concept of just compensation embraces not only the correct
determination of the amount to be paid to the owners of
the land, but also the payment for the land within a
reasonable time from its taking. Without prompt payment,
compensation cannot be considered just for the property
owner is made to suffer the consequence of being
immediately deprived of his land while being made to wait
for a decade or more, in this case more than 50 years,
before actually receiving the amount necessary to cope
with the loss. To allow the taking of the landowners
properties, and in the meantime leave them empty-handed
by withholding payment of compensation while the
government speculates on whether or not it will pursue
expropriation, or worse, for government to subsequently
decide to abandon the property and return it to the
landowners, is undoubtedly an oppressive exercise of
eminent domain that must never be sanctioned. (Land Bank
of the Philippines vs. Court of Appeals, 258 SCRA 404).
x
x

x x
x x

An action to quiet title is a common law remedy for the removal of

any cloud or doubt or uncertainty on the title to real property. It is
essential for the plaintiff or complainant to have a legal or
equitable title or interest in the real property, which is the subject
matter of the action. Also the deed, claim, encumbrance or
proceeding that is being alleged as cloud on plaintiffs title must be
shown to be in fact invalid or inoperative despite its prima
facie appearance of validity or legal efficacy (Robles vs. Court of
Appeals, 328 SCRA 97). In view of the foregoing discussion,
clearly,
the
claim
of
defendant-appellant
Republic

constitutes a cloud, doubt or uncertainty on the title of

plaintiff-appellee Vicente Lim that can be removed by an
action to quiet title.
WHEREFORE, in view of the foregoing, and finding no reversible
error in the appealed May 4, 2001 Decision of Branch 9, Regional
Trial Court of Cebu City, in Civil Case No. CEB-12701, the said
decision is UPHELD AND AFFIRMED. Accordingly, the appeal
is DISMISSED for lack of merit.
Undaunted, petitioners, through the Office of the Solicitor
General, filed with this Court a petition for review on
certiorari alleging that the Republic has remained the owner of Lot
932 as held by this Court in Valdehueza vs. Republic.[6]
In our Resolution dated March 1, 2004, we denied the petition
outright on the ground that the Court of Appeals did not commit a
reversible error.
Petitioners filed an urgent motion for
reconsideration but we denied the same with finality in our
Resolution of May 17, 2004.
On May 18, 2004, respondent filed an ex-parte motion for the
issuance of an entry of judgment. We only noted the motion in our
Resolution of July 12, 2004.
On July 7, 2004, petitioners filed an urgent plea/motion for
clarification,
which
is
actually
a second
motion
for
reconsideration. Thus, in our Resolution of September 6, 2004,
we simply noted without action the motion considering that the
instant petition was already denied with finality in our Resolution
of May 17, 2004.
On October 29, 2004, petitioners filed a very urgent motion for
leave to file a motion for reconsideration of our Resolution dated
September 6, 2004 (with prayer to refer the case to theEn Banc).
They maintain that the Republics right of ownership has been
settled in Valdehueza.
The basic issue for our resolution is whether the Republic has
retained ownership of Lot 932 despite its failure to pay

respondents predecessors-in-interest the just compensation

therefor pursuant to the judgment of the CFI rendered as early as
May 14, 1940.
Initially, we must rule on the procedural obstacle.
While we commend the Republic for the zeal with which it
pursues the present case, we reiterate that its urgent motion for
clarification filed on July 7, 2004 is actually a second motion for
reconsideration. This motion is prohibited under Section 2, Rule 52,
of the 1997 Rules of Civil Procedure, as amended, which provides:
Sec. 2. Second motion for reconsideration. No second motion for
reconsideration of a judgment or final resolution by the same party
shall be entertained.
Consequently, as mentioned earlier, we simply noted without
action the motion since petitioners petition was already denied
with finality.
Considering the Republics urgent and serious insistence that it
is still the owner of Lot 932 and in the interest of justice, we take
another hard look at the controversial issue in order to determine
the veracity of petitioners stance.
One of the basic principles enshrined in our Constitution is that
no person shall be deprived of his private property without due
process of law; and in expropriation cases, an essential element of
due process is that there must be just compensation whenever
private property is taken for public use. [7] Accordingly, Section 9,
Article III, of our Constitution mandates: Private property shall not
be taken for public use without just compensation.
The Republic disregarded the foregoing provision when it failed
and refused to pay respondents predecessors-in-interest the just
compensation for Lots 932 and 939. The length of time and the
manner with which it evaded payment demonstrate its arbitrary
high-handedness and confiscatory attitude. The final judgment in
the expropriation proceedings (Civil Case No. 781) was entered
on April 5, 1948. More than half of a century has passed, yet, to

this day, the landowner, now respondent, has remained emptyhanded. Undoubtedly, over 50 years of delayed payment cannot, in
any way, be viewed as fair. This is more so when such delay is
accompanied
by
bureaucratic
hassles.
Apparent
from Valdehueza is the fact that respondents predecessors-ininterest were given a run around by the Republics officials and
agents. In 1950, despite the benefits it derived from the use of the
two lots, the National Airports Corporation denied knowledge of the
claim of respondents predecessors-in-interest. Even President
Garcia, who sent a letter to the Civil Aeronautics Administration and
the Secretary of National Defense to expedite the payment, failed
in granting relief to them. And, on September 6, 1961, while the
Chief of Staff of the Armed Forces expressed willingness to pay the
appraised value of the lots, nothing happened.
The Court of Appeals is correct in saying that Republics delay
is contrary to the rules of fair play, as just compensation
embraces not only the correct determination of the amount
to be paid to the owners of the land, but also the payment
for the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be
considered just. In jurisdictions similar to ours, where an entry
to the expropriated property precedes the payment of
compensation, it has been held that if the compensation is not paid
in a reasonable time, the party may be treated as a trespasser ab
initio.[8]
Corollarily, in Provincial Government of Sorsogon vs. Vda. De
Villaroya,[9] similar to the present case, this Court expressed its
disgust over the governments vexatious delay in the payment of
just compensation, thus:
The petitioners have been waiting for more than thirty
years to be paid for their land which was taken for use as a
public high school. As a matter of fair procedure, it is the duty of
the Government, whenever it takes property from private persons
against their will, to supply all required documentation and
facilitate payment of just compensation. The imposition of
unreasonable requirements and vexatious delays before
effecting payment is not only galling and arbitrary but a

rich source of discontent with government. There should be

some kind of swift and effective recourse against unfeeling
and uncaring acts of middle or lower level bureaucrats.
We feel the same way in the instant case.
More than anything else, however, it is the obstinacy of the
Republic that prompted us to dismiss its petition outright. As early
as May 19, 1966, in Valdehueza, this Court mandated the Republic
to pay respondents predecessors-in-interest the sum of P16,248.40
as reasonable market value of the two lots in question.
Unfortunately, it did not comply and allowed several decades to
pass without obeying this Courts mandate. Such prolonged
obstinacy bespeaks of lack of respect to private rights and to the
rule of law, which we cannot countenance. It is tantamount to
confiscation of private property. While it is true that all private
properties are subject to the need of government, and the
government may take them whenever the necessity or the
exigency of the occasion demands, however, the Constitution
guarantees that when this governmental right of expropriation is
exercised, it shall be attended by compensation.[10]From the taking
of private property by the government under the power of eminent
domain, there arises an implied promise to compensate the owner
for his loss.[11]
Significantly, the above-mentioned provision of Section 9,
Article III of the Constitution is not a grant but a limitation of
power. This limiting function is in keeping with the philosophy of
the Bill of Rights against the arbitrary exercise of governmental
powers to the detriment of the individuals rights. Given this
function, the provision should therefore be strictly interpreted
against the expropriator, the government, and liberally in favor of
the property owner.[12]
Ironically, in opposing respondents claim, the Republic is
invoking this Courts Decision in Valdehueza, a Decision it utterly
defied. How could the Republic acquire ownership over Lot 932
when it has not paid its owner the just compensation, required by
law, for more than 50 years? The recognized rule is that title to the
property expropriated shall pass from the owner to the expropriator

only upon full payment of the just compensation.

Jurisprudence on this settled principle is consistent both here and in
other democratic jurisdictions. In Association of Small Landowners
in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform,
[13]
thus:
Title to property which is the subject of condemnation
proceedings does not vest the condemnor until the
judgment fixing just compensation is entered and paid, but
the condemnors title relates back to the date on which the petition
under the Eminent Domain Act, or the commissioners report under
the Local Improvement Act, is filed.
x x x Although the right to appropriate and use land taken
for a canal is complete at the time of entry, title to the
property taken remains in the owner until payment is
actually made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several
cases holding that title to property does not pass to the condemnor
until just compensation had actually been made. In fact, the
decisions appear to be uniform to this effect. As early as 1838,
in Rubottom v. McLure, it was held that actual payment to the
owner of the condemned property was a condition
precedent to the investment of the title to the property in
the State albeit not to the appropriation of it to public
use. In Rexford v. Knight, the Court of Appeals of New York said
that the construction upon the statutes was that the fee did not
vest in the State until the payment of the compensation although
the authority to enter upon and appropriate the land was complete
prior to the payment. Kennedy further said that both on principle
and authority the rule is . . . that the right to enter on and
use the property is complete, as soon as the property is
actually appropriated under the authority of law for a public
use, but that the title does not pass from the owner without
his consent, until just compensation has been made to
him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus
and Paredes, that:

If the laws which we have exhibited or cited in the

preceding discussion are attentively examined it will be
apparent that the method of expropriation adopted in this
jurisdiction is such as to afford absolute reassurance that
no piece of land can be finally and irrevocably taken from
an unwilling owner until compensation is paid...(Emphasis
supplied.)
Clearly, without full payment of just compensation, there can
be no transfer of title from the landowner to the expropriator.
Otherwise stated, the Republics acquisition of ownership is
conditioned upon the full payment of just compensation within a
reasonable time.[14]
Significantly, in Municipality of Bian v. Garcia[15] this Court
ruled that the expropriation of lands consists of two stages, to wit:
x x x The first is concerned with the determination of the
authority of the plaintiff to exercise the power of eminent domain
and the propriety of its exercise in the context of the facts involved
in the suit. It ends with an order, if not of dismissal of the action,
of condemnation declaring that the plaintiff has a lawful right to
take the property sought to be condemned, for the public use or
purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the
complaint x x x.
The second phase of the eminent domain action is concerned with
the determination by the court of the just compensation for the
property sought to be taken. This is done by the court with the
assistance of not more than three (3) commissioners. x x x.
It is only upon the completion of these two stages that
expropriation is said to have been completed. In Republic v. Salem
Investment Corporation,[16] we ruled that, the process is not
completed until payment of just compensation. Thus, here, the
failure of the Republic to pay respondent and his predecessors-ininterest for a period of 57 years rendered the expropriation process
incomplete.

The Republic now argues that under Valdehueza, respondent is

not entitled to recover possession of Lot 932 but only to demand
payment of its fair market value. Of course, we are aware of the
doctrine that non-payment of just compensation (in an
expropriation proceedings) does not entitle the private landowners
to recover possession of the expropriated lots. This is our ruling in
the recent cases of Republic of the Philippines vs. Court of Appeals,
et al.,[17] and Reyes vs. National Housing Authority.[18] However, the
facts of the present case do not justify its application. It bears
stressing that the Republic was ordered to pay just
compensation twice, the first was in the expropriation proceedings
and the second, in Valdehueza. Fifty-seven (57) years have passed
since then. We cannot but construe the Republics failure to
pay just compensation as a deliberate refusal on its
part. Under such circumstance,recovery of possession is in
order. In several jurisdictions, the courts held that recovery of
possession may be had when property has been wrongfully taken
or is wrongfully retained by one claiming to act under the power of
eminent domain[19] or where a rightful entry is made and the
party condemning refuses to pay the compensation which
has been assessed or agreed upon; [20] or fails or refuses to
have the compensation assessed and paid.[21]
The Republic also contends that where there have been
constructions being used by the military, as in this case, public
interest demands that the present suit should not be sustained.
It must be emphasized that an individual cannot be deprived of
his property for the public convenience. [22] In Association of Small
Landowners in the Philippines, Inc. vs. Secretary of Agrarian
Reform,[23] we ruled:
One of the basic principles of the democratic system is that where
the rights of the individual are concerned, the end does not justify
the means. It is not enough that there be a valid objective; it is also
necessary that the means employed to pursue it be in keeping with
the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest
moral conviction or the most urgent public need, subject
only to a few notable exceptions, will excuse the bypassing

of an individual's rights. It is no exaggeration to say that a

person invoking a right guaranteed under Article III of the
Constitution is a majority of one even as against the rest of
the nation who would deny him that right.
The right covers the persons life, his liberty and his
property under Section 1 of Article III of the Constitution.
With regard to his property, the owner enjoys the added
protection of Section 9, which reaffirms the familiar rule
that private property shall not be taken for public use
without just compensation.
The Republics assertion that the defense of the State will be in
grave danger if we shall order the reversion of Lot 932 to
respondent is an overstatement. First, Lot 932 had ceased to
operate as an airport. What remains in the site is just the National
Historical Institutes marking stating that Lot 932 is the former
location of Lahug Airport. And second, there are only thirteen (13)
structures located on Lot 932, eight (8) of which are residence
apartments of military personnel. Only two (2) buildings are
actually used as training centers. Thus, practically speaking, the
reversion of Lot 932 to respondent will only affect a handful of
military personnel. It will not result to irreparable damage or
damage beyond pecuniary estimation, as what the Republic
vehemently claims.
We thus rule that the special circumstances prevailing in this
case entitle respondent to recover possession of the expropriated
lot from the Republic. Unless this form of swift and effective relief is
granted to him, the grave injustice committed against his
predecessors-in-interest, though no fault or negligence on their
part, will be perpetuated. Let this case, therefore, serve as a wakeup call to the Republic that in the exercise of its power of eminent
domain, necessarily in derogation of private rights, it must comply
with the Constitutional limitations. This Court, as the guardian of
the peoples right, will not stand still in the face of the Republics
oppressive and confiscatory taking of private property, as in this
case.

At this point, it may be argued that respondent Vicente Lim

acted in bad faith in entering into a contract of mortgage with
Valdehueza and Panerio despite the clear annotation in TCT No.
23934 that Lot 932 is subject to the priority of the National
Airports Corporation [to acquire said parcels of land] x x x
upon previous payment of a reasonable market value.
The issue of whether or not respondent acted in bad faith is
immaterial considering that the Republic did not complete the
expropriation process. In short, it failed to perfect its title over Lot
932 by its failure to pay just compensation. The issue of bad faith
would have assumed relevance if the Republic actually acquired
title over Lot 932. In such a case, even if respondents title was
registered first, it would be the Republics title or right of ownership
that shall be upheld. But now, assuming that respondent was
in bad faith, can such fact vest upon the Republic a better
title over Lot 932? We believe not. This is because in the first
place, the Republic has no title to speak of.
At any rate, assuming that respondent had indeed knowledge
of the annotation, still nothing would have prevented him from
entering into a mortgage contract involving Lot 932 while the
expropriation proceeding was pending. Any person who deals with
a property subject of an expropriation does so at his own risk,
taking into account the ultimate possibility of losing the property in
favor of the government. Here, the annotation merely served as
a caveat that the Republic had a preferential right to acquire Lot
932 upon its payment of a reasonable market value. It did
not proscribe Valdehueza and Panerio from exercising their rights of
ownership including their right to mortgage or even to dispose of
their property. In Republic vs. Salem Investment Corporation, [24] we
recognized the owners absolute right over his property pending
completion of the expropriation proceeding, thus:
It is only upon the completion of these two stages that
expropriation is said to have been completed. Moreover, it is only
upon payment of just compensation that title over the property
passes to the government. Therefore, until the action for
expropriation has been completed and terminated, ownership over
the property being expropriated remains with the registered

owner. Consequently,
the
latter
can
exercise all
rights pertaining to an owner, including the right to
dispose of his property subject to the power of the State
ultimately to acquire it through expropriation.
It bears emphasis that when Valdehueza and Panerio
mortgaged Lot 932 to respondent in 1964, they were still the
owners thereof and their title had not yet passed to the petitioner
Republic. In fact, it never did. Such title or ownership was rendered
conclusive when we categorically ruled in Valdehueza that: It is
true that plaintiffs are still the registered owners of the
land, there not having been a transfer of said lots in favor
of the Government.
For respondents part, it is reasonable to conclude that he
entered into the contract of mortgage with Valdehueza and Panerio
fully aware of the extent of his right as a mortgagee. A mortgage is
merely an accessory contract intended to secure the performance
of the principal obligation. One of its characteristics is that it
is inseparable from the property. It adheres to the property
regardless of who its owner may subsequently be. [25] Respondent
must have known that even if Lot 932 is ultimately expropriated by
the Republic, still, his right as a mortgagee is protected. In this
regard, Article 2127 of the Civil Code provides:
Art. 2127. The mortgage extends to the natural accessions, to
the improvements, growing fruits, and the rents or income not yet
received when the obligation becomes due, and to the amount of
the indemnity granted or owing to the proprietor from the
insurers of the property mortgaged, or in virtue of expropriation
for public use, with the declarations, amplifications, and
limitations established by law, whether the estate remains in
the possession of the mortgagor or it passes in the hands of
a third person.
In summation, while the prevailing doctrine is that the nonpayment of just compensation does not entitle the private
landowner to recover possession of the expropriated lots,
[26]
however, in cases where the government failed to pay just
compensation within five (5)[27] years from the finality of the

judgment in the expropriation proceedings, the owners

concerned shall have the right to recover possession of their
property. This is in consonance with the principle that the
government cannot keep the property and dishonor the
judgment.[28] To be sure, the five-year period limitation will
encourage the government to pay just compensation punctually.
This is in keeping with justice and equity. After all, it is the duty of
the government, whenever it takes property from private persons
against their will, to facilitate the payment of just compensation.
In Cosculluela v. Court of Appeals,[29] we defined just compensation
as not only the correct determination of the amount to be paid to
the property owner but also the payment of the property within
a reasonable time. Without prompt payment, compensation
cannot be considered just.

WHEREFORE, the assailed Decision of the Court of Appeals in

CA-G.R. CV No. 72915 is AFFIRMED in toto.
The Republics motion for reconsideration of our Resolution
dated March 1, 2004 is DENIED with FINALITY. No further pleadings
will be allowed.
Let an entry of judgment be made in this case.
SO ORDERED.