G.R. No.

L-4406 October 23, 1908

ANTONIA VALENCIA Y ORUS, plaintiff-appellee,

vs.
JUAN JIMENEZ Y MIJARES and GABRIEL FUSTER Y FUSTER, defendants-appellants.

Kincaid and Hurd for appellants.

Haussermann and Cohn, and C. W. Ney for appellee.

TRACEY, J.:

MEMORANDUM ON MOTION TO DISCONTINUE.

After this case had been finally submitted to this court, and was awaiting decision, a petition was
presented in behalf of the plaintiff, not through her attorneys of record but through a new
attorney, in the following words:

The plaintiff, Doña Antonia Valencia y Orus, through her advocate, appears and
respectfully shows:

For weighty reasons now known to the plaintiff, but whereof she was ignorant when this
action was begun, she can not continue claiming either ownership or possession of the
lands in question in this suit.

Wherefore this plaintiff asks this honorable court to revoke the judgment appealed from
in all its parts, absolving the defendants fully from the demands in this suit, without
making any award of costs.

By the judgment of the court below the plaintiff had been awarded the real property in suit,
together with damages for its detention.

This motion must be denied, for several reasons.

First. The plaintiff is a resident of Barcelona, Spain, ad she originally authorized the bringing of
this action in correspondence direct between herself and her attorneys, Coudert Brothers of
Manila, at whose request she gave a power of management thereof to one of the assistants in
their office, Jose Moreno Lacalle. As a foundation for the present motion there was filed a later
power of attorney from her to Buenaventura Guamis, revoking the earlier power to Jose Moreno
Lacalle, which it fully recited, and empowering Guamis to revoke in her name the aforesaid
antecedent power, and secondly, "himself or through his substitutes, whom he may name, to
appear in legal from before the Supreme Court of the city of Manila, or any other tribunal which
may have cognizance of the case, and present a fitting instrument in writing discontinuing the
action brought nullify the sale of the lands aforesaid of Manila against Don Juan Jimenez y
Mijares and Don Gabriel Fuster y Fuster, with the power of ratification in the said petition
making manifest his wishes to renounce the continuance of the said suit."

The affidavit of Buenaventura Guamis says:

(4) As appears from the aforesaid document "A," at the foot of the sixth page (the power
of attorney to him), it is the intention and desire of the said Doña Antonia Valencia y
Orus to discontinue this action and renounce the continuation of the same. . . .

(6) By virtue of the powers conferred by the said document "A," this dependent hereby
confers power on Mr. C. W. Ney, practicing lawyer in this capital city, to make in the
 name and representation of the said Doña Antonia Valencia y Orus proceedings
necessary to procure the final discontinuance of this action.

It is obvious that the motion does not comply with the power granted by the plaintiff nor fall
within its terms. The notice of motion does not ask for the discontinuance or cessation or
abandonment of the suit, but on the contrary prays for a judgment absolving the defendants of
the claim set up in the complaint, without any costs. Such a judgment would be one upon the
merits and would preclude the plaintiff from any claim which she might hereafter, on fuller
devices, see fit to make against these defendants. Such action, possibly so prejudicial to her
interests, her power attorney has not authorized any person to take in her behalf. The two things,
a discontinuance and a judgment of absolution on the merits, are not only different in degree but
in kind, and in the opinion of the majority of this court the one does not include the other.

Second. If, however, it might be that the motion for a judgment upon the merits could be
considered as including the other kind of relief, that is, a mere discontinuance, on the principle
that the greater includes the less, then the relief asked for can not be granted, because it is tied up
with the condition that there shall be no award of costs. The award of costs is at the disposal of
the court, not of the parties, especially to the prejudice of the defendants, who are third persons,
not before us on this motion and whom we can not presume to accept terms to unfavorable to
them in their character as innocent purchasers.

Third. By the affidavit of Charles C. Cohn, one of the plaintiffs' original attorneys, it appears
that, after the entry of judgment in this action, the said attorneys caused to be entered upon the
records of the Court of First Instance in which the judgment was rendered a statement of their
claim to a lien thereon, with lawful fees and disbursements in this action, and caused written
notice thereof to be delivered to the adverse party. Under section 37 of the Code of Civil
Procedure this sufficed to give them a lien upon the judgment, inasmuch as the decree was one,
in part, for the payment of money. Their further claim thereon is expressed in that section in the
following words:

. . . and shall have the same right and power over such judgments, decrees, and
executions to enforce his client as his client had or may have to the extent that may be
necessary for the payment of his just fees and disbursements.

Under the American practice this clause gives the attorneys an interest in the judgment and
power over it and to enforce it to that of their clients. It must therefore entitle them to carry on
the action for the purpose of securing their proper compensation.

Without passing on the particular steps required to enable the attorneys to carry their lien into
effect or on the reasonableness of the fees claimed by them, or of the contract providing thereof,
we only hold that their lien is alleged to have been properly created so as to give them a right and
standing in the action which prevents its discontinuance against their protest and without a
suitable provision for their protection.

Fourth. The motion is not made by one of the attorneys of record. Certain motions, of their very
nature, maybe made by an attorney who has not appeared in the case, where the interest of the
client is adverse to that of the attorney of record. Of that character is a motion for substitution of
attorneys, but not such a motion as the present one, which go to the merits and final disposition
of the cause and which no one is entitled to make other than the attorney who duly appears of
record in this court. By section 32 of the Code of Civil Procedure the rights is secured to a party
to change attorneys. The method of such change is not indicated. The proper practice in this case
on the part of the plaintiff would have been a motion for a substitution of attorneys, on which the
question of their compensation would naturally have risen and on the determination of which the
attorney finally appearing on record could have moved a discontinuance.

The justice sitting in this case do not all agree on each of the aforesaid grounds, but they are not
unanimously of the opinion that the motion must be denied.
 DECISION.

This action was brought in the Court of First Instance of the city of Manila to set aside a sale of
real estate valued at P95,697.10 for unpaid taxes amounting to P2,934.76 to the defendant
Jimenez, and also the transfer of a one-half interest therein by him to the defendant Fuster, on
two grounds, first, that the defendants had secured title under the tax sale by conspiracy with one
Vicente Ablaza, plaintiff's agent, who allowed the property to go to sale while having in his
hands ample funds for the payment of taxes; and, second, that the tax sale was invalid by reason
of defects in the proceedings to impose the tax.

The first cause of action was opened up, but was not persisted in at the trial and the case comes
before us on the questions only of the irregularity of the proceedings for the sale. The most
serious of these are the following:

(1) The statement of the owner, filed by Ablaza, as her agent, gave her name as "Doña Antonia
Valencia y Orus." In the assessment roll for the year 1901 the name given was "Valencia,
Antonio." In the roll of 1902 it was "Valencia, Antonia," while the tax deed had it "Antonia
Valencia."

(2) The correct description given in the owner's filed statement read:

Bounded in front, on entering, 280.55 meters, by Calle de Lemery; on the right, on

entering, 142.40 meters, by the property of Don Nicolas del Rosario; on the left on
entering, 65.10 meters, by Calle Corcuera, and at the rear, 288.70 meters, by the estuary
and canal de le Reina.

In the roll of 1901 it is stated as —

A piece of land improvements, situated blocks 24, 25, 26, and 28 fronting Calle Lemery,
solar de Nicolas del Rosario, izquierda Calle Corcuera and espalda Canal de la Reina.

In the roll 1902:

A piece of land improvements, known as blocks 24, 25, 26, and 28 fronting izquierda
Calle Corcuera espalda Calle de la Reina, Calle Lemery, solar de Nicolas del Rosario.

In the notice of sale under "Description," "Kind of property — land and improvement;" "Street
and number," it reads, "Read of Canal de la Reina, left of Corcuera;" "Lots, 24, 25, 26 28;"
"Block, — ."

The description in the final deed is correct, whereas in the tax certificate it was copied from that
in the notice of sale, and is defective.

The words "Lots" and "Blocks" were proved to refer to a plan made by the assessor and collector
and kept in his office for his own use, but to which individuals might have access, on which it
was shown as lots 24, 25, 16, and part of 28 in block 1. This plan was made after the filing of the
declaration by the property owners but before the assessment.

(3) The amount of the taxes in these several document is set down in columns, the cents being
divided from the dollars, but without any dollar-mark.

(4) That only proof of the fixing of the notices of sale was a recital in the certificate of the city
assessor and collector that the notice was posted "at the main entrance of said municipal building
and at five other public places in the city of Manila," without specifying the places, and also a
recital in the deed that a copy was posted in the proper barrio.
(5) The tax certificate did not fully recite the proceedings and give the details required by
sections 78 and 80 of Act No. 82, but, on the contrary, showed the defects n the description and
notice of sale, whereas the final deed substantially complied with the statute.

The American law does not create a presumption of the regularity of any administrative action
which results in depriving a citizen or taxpayer of his property, but, on the contrary, the due
process of law to be followed in tax proceedings must be established by proof and the general
rule is that the purchaser of a tax title is bound to take upon himself the burden of showing the
regularity of all proceedings leading up to the sale. The difficulty of supplying such proof has
frequently lead to the efforts on the part of legislatures to avoid it by providing by statute that a
tax deed shall be deemed either conclusive or presumptive proof of such regularity.

Those statutes attributing to it a conclusive effect have been held invalid as operating to deprive
the owner of his property without due process of law. But those creating a presumption only
have been sustained as affecting a rule of evidence, changing but the burden of proof. (Turpin vs.
Lemon, 187 U.S., 51.)

The tax law applicable to Manila does not attempt to give any special probative effect to the deed
of the assessor and collector, and therefore leaves the purchaser to establish the regularity of all
vital steps in the assessment and sale. By section 84 and 86 of Act No. 82 it is enacted that no tax
shall be declared invalid for irregularities unless they "shall have impaired the substantial rights
of the taxpayer."

The first apparent defect in this assessment is the error in the name of the owner.

In Marx vs. Hanthorn (148 U.S., 172), where it does not even appear that under the law of the
State of Oregon the tax was a personal one, the tax was held bad because the owner's name had
been written in the roll as "Ida F. Hawthorn" instead of "Ida J. Hanthorn."

Under the Municipal Law of the Philippines, sections 74 to 78, the tax is primarily a personal
one and is enforcible against realty only in the event of a deficiency of personality, whereas in
the City of Manila its character is somewhat qualified by the provisions in section 47 of the
charter only. Nevertheless, the requirement of the statute in so imperative that the rule of the
Hanthorn case is manifestly applicable here.

But we deem it unnecessary to take up in detail the several irregularities and to determine the
effect of each one upon the validity of the tax sale. The most vital requisite of such an
assessment is that the property shall be so described as to be easily identified both by the owner
and by the persona desiring to bid therefor. The description prior to those in the deed are all more
or less defective, but those in the assessment roll for 1902 and in the final notice of the tax sale
are so confused and inadequate as not only to fail to give notice to a stranger of the location of
the property, but as to the incapable of verification by a person familiar with it. This is especially
true of the description in the notice of sale, which of all the steps in the procedure is the one
calling for a most definite and intelligible description. It is settled doctrine that, where one sale
embraces two different taxes, a vital defect in either tax invalidates the whole sale, so that,
considered apart from the notice of sale, the rather understandable description in the roll of 1901
does not cure the vice in that of 1902. We are satisfied that the failure to adequately describe the
property both in the substantials rights of the taxpayer, "within the meaning of sections 84 and 86
of the Municipal Code, and upon this failure we are content to rest our judgment, affirming the
part of the judgment of the Court of First Instance of the city of Manila to Juan Jimenez y
Mijares, and the deed of the latter to Gabriel Fuster y Fuster, invalid and awarding to the plaintiff
the possession of the property described in the complaint.

The judgment of the Court of First Instance not only awarded the plaintiff the real estate, but also
the rents and profits thereon, both from the time the defendants took possession until the
commencement of the action, and those accrued during the pendency of the action which have
been collected by the defendant Gabriel Fuster y Fuster as receiver. This part of the judgment
should be modified.

By article 451 of the Civil Code, the possessor of property in good faith is entitled to the profits
thereof until his possession is legally interrupted. By article 448, the possessor under claim of
ownership is presumed to have a just title. By article 434, good faith is always presumed, while
bad faith must be affirmatively proved. By article 435, possession acquired in good faith does
not lose that character until the occurrence of something showing that the possessor is not
ignorant of the weakness of his title.

That portion of the present action having been abandoned which involved the direct charge of
conspiracy on the part of the defendants, they are entitled, as the case stands, to the benefit of
these articles of the code unless they can be charged with actual bad faith. Applying the standard
of the Spanish law expressed in these articles, there is not sufficient in the case to establish such
a charge although it is somewhat indicated in the evidence. It may be urged, however, that the
tax deed derives its force from the law under which it is given and must take us an incident its
quality and effects from that law, so that the holder thereof acquires no other status in respect of
good faith than such as the American law attributes to him in that character. The rule of that law
is usually stated to good faith (Cooley on Taxation, pp. 218, 220), qualified, however, in this
important particular, that in respect of improvements he who, without actual knowledge of
defects, holds a deed regular on its face, is considered in good faith and is entitled to rely upon
that deed without an investigation of the proceedings upon which it is founded. But if the deed
itself exposes an irregularity, he must take notice of it. (Madland vs. Benland, 24 Min., 372;
O'Mulcahy vs. Florer, 27 Min., 499; Bedell vs. Shaw, 59 N.Y., 46; Lynch vs. Brudie, 63 Pa.,
206.) We have to seek the meaning of the term "good faith" in the cases on the subject of
improvements because, in the American system, it can not arise in connection with rents and
profits, which are recoverable by the successful plaintiff in any event without regard to it.

In the present instance, the final deed is regular on its face, and in the opinion of the majority of
the court, in the absence of actual notice, sufficed to protect the holders thereof, although the
preliminary certificate of sale which they had held and surrendered showed in its recital that the
sale was irregular. Therefore, applying either the Spanish or the American criterions as to good
faith, the plaintiff may not recover the rents and profits down to the time when it is plain that the
defendants were advised of the vice of their title.lawphil.net

This limit is fixed at the date on which, after being informed by the beginning of an action, they
voluntarily appear therein and assert their claim. (Judgments of the supreme court of Spain of
November 23, 1900, and October 12, 1901.)

The defendants' first pleading in this case, the demurrer, was served on the 16th of May, 1906,
and the plaintiff is entitled to recover the rents and profits from that date until the termination of
the action, and the receiver must account to her therefor.

In conclusion, so much of the judgment of the Court of First Instance as awards to the plaintiff
the possession of the property in suit, declaring void the deed from the city assessor and collector
to Juan Jimenez y Mijares, together with the deed of the latter to the defendant Gabriel Fuster y
Fuster, and also so much thereof as directs the payment to the plaintiff of the rents and profits of
the property from the 16th of May, 1906, and also awards to the defendants the sum of
P2,934.76, with interest from the 17th of December , 1904, to the 26th o f April, 1906, being the
amount of the tax with interest deposited under the statute as a condition to maintain the action,
but thereafter withdrawn under stipulation, is affirmed; but so much of said judgments as directs
payment to the plaintiff of the rents and profits of the real estate prior to the 16th of day of May,
1906, amounting to P4,337.73, is revoked.

This action is hereby remanded to the Court of First Instance for the purpose of taking such
accounts and conducting such other proceedings herein as may be necessary to carry out the
aforesaid judgment, but without costs of this instance. So ordered.
Arellano, C.J., Torres, Mapa and Carson, JJ., concur

Separate Opinions

WILLARD, J., concurring:

I agree to the denial of the motion, on the ground that the plaintiff is not entitled to have the case
dismissed without costs.

Upon the merits I agree to the declaration that the tax sale is invalid, but not to that part of the
opinion which allows the plaintiff to recover rents.

G.R. No. L-2678 December 29, 1949

ANTONIO C. ARAGON, Petitioner-Appellant, vs. MARCOS JORGE, Provincial Treasurer

of Zambales, Respondent-Appellee.

Antonio C. Aragon in his own behalf.

Office of the Solicitor General Felix Bautista Angelo and Solicitor Francisco Carreon for
appellee.

OZAETA, J.: chanrobles virtual law library

This is an appeal from a judgment of the Court of First Instance of Zambales denying appellant's
petition for mandamus to compel the respondent provincial treasurer to issue final bills of sale
covering numerous parcels of land situated in the municipalities of Santa Cruz and Candelaria,
Zambales, which the petitioner alleged to have purchased at auction sales made by the respective
municipal treasurers of said municipalities for tax delinquencies and which had not been
redeemed by the owners within one year.chanroblesvirtualawlibrary chanrobles virtual law
library

The provincial treasurer, supported by an opinion of the provincial fiscal, held the sales void for
irregularities and refused to issue the final bills of sale, but in his answer he alleged that he had
offered to refund the purchase price but that the petitioner thru his counsel refused to accept
it.chanroblesvirtualawlibrary chanrobles virtual law library

The trial court sustained the opinion of the fiscal and the provincial
treasurer.chanroblesvirtualawlibrary chanrobles virtual law library

The real properties located in the municipality of Santa Cruz were advertised for sale "at public
auction to be held at the main entrance of the municipal building of said municipality from
March 24, 1947, at 10 a.m. until all sold, to satisfy all taxes and penalties due thereon and the
cost of the sale, pursuant to the provisions of section 35 of Commonwealth Act No. 470, subject
to the conditions provided in section 36 of said Act." The sale did not take place on the date
above fixed but on May 12, 13, 14, and 15, 1947, without a new advertisement and without a
new notice to the owners concerned. On the dates last mentioned 253 parcels with an aggregate
assessed value of P67, 150 were sold for only P1,471.chanroblesvirtualawlibrary chanrobles
virtual law library
The real properties located in the municipality of Candelaria were originally advertised for sale
"at public auction to be held at the main entrance of the municipal building of said municipality
from May 5, 1947, at 10 A. M. until sold, to satisfy all taxes and penalties due thereon and the
cost of sale, pursuant to the provisions of section 35 of Commonwealth Act No. 470, subject to
the conditions provided in section 36 of said Act." Likewise the sale did not take place on the
date above fixed but on June 12, 1947, without a new advertisement and without a new notice to
the owners concerned. On said date 71 lots with an aggregate assessed value of P32,250 were
sold for only P820.19.chanroblesvirtualawlibrary chanrobles virtual law library

It was not the petitioner who bid at both auction sales but one Pedro Porras; and it was not the
latter who paid the purchase price but Public Defender Moises Ma. Buhain, who caused the
official receipts to be issued in the name of the herein petitioner Antonio c. Aragon. The latter is
a Manila resident who had no house and no interest any kind in Zambales. Public defender
Buhain was the one who appeared in the trial court as counsel and attorney-in-fact of the
petitioner. The trial court intimated that the petitioner was a dummy of the public defender, who
as a public official was prohibited by section 579 of the revised Administrative Code "from
purchasing, directly or indirectly, from the Government, any property sold by the Government
for the nonpayment of any public tax. Any such purchase by a public official or employee shall
be void."chanrobles virtual law library

While there is ground for suspension that said provision of the revised Administrative Code may
have been violated, in the absence of categorical finding by the trial court on that point we must
decide this case on the alleged nullity of sale for lack of notice. Notice of such sale to the
delinquent taxpayers and landowners in particular and to the public in general is an essential and
indispensable requirement of the law, the nonfulfilment of which vitiates and nullifies the sale.
(Section 35, Commonwealth Act No. 470, known as the Assessment Law; Cabrera vs. Provincial
Treasurer of Tayabas, 42 O. G. 1492.) 1 chanrobles virtual law library

The sale should have been made on a fixed date as originally advertised, or if that was not
practicable and if it was desired to postpone the sale indefinitely "to give a chance to the
taxpayers to pay their delinquent taxes," as was done in this case, new notices to the taxpayers
and to the public should have been made.chanroblesvirtualawlibrary chanrobles virtual law
library

The sales in question being void for lack of due notice, the respondent provincial treasurer
cannot be compelled to issue the final bills of sale demanded by the
petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

The judgment is affirmed, with costs against the appellants.chanroblesvirtualawlibra

G.R. No. L-11390 March 26, 1918

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,

vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca Tanquinyeng,
defendant-appellant.

Aitken and DeSelms for appellant.

Hartigan and Welch for appellee.

STREET, J.:

This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a
mortgage upon various parcels of real property situated in the city of Manila. The mortgage in
question is dated June 16, 1906, and was executed by the original defendant herein, Engracio
Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon
March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8 per
centum per annum, payable at the end of each quarter. It appears that the parties to this mortgage
at that time estimated the value of the property in question at P292,558, which was about
P75,000 in excess of the indebtedness. After the execution of this instrument by the mortgagor,
he returned to China which appears to have been his native country; and he there died, upon
January 29, 1810, without again returning to the Philippine Islands.

As the defendant was a nonresident at the time of the institution of the present action, it was
necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by
publication pursuant to section 399 of the Code of Civil Procedure. An order for publication was
accordingly obtained from the court, and publication was made in due form in a newspaper of
the city of Manila. At the same time that the order of the court should deposit in the post office in
a stamped envelope a copy of the summons and complaint directed to the defendant at his last
place of residence, to wit, the city of Amoy, in the Empire of China. This order was made
pursuant to the following provision contained in section 399 of the Code of Civil Procedure:

In case of publication, where the residence of a nonresident or absent defendant is known,

the judge must direct a copy of the summons and complaint to be forthwith deposited by
the clerk in the post-office, postage prepaid, directed to the person to be served, at his
place of residence

Whether the clerk complied with this order does not affirmatively appear. There is, however,
among the papers pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo
Chan y Garcia, an employee of the attorneys of the bank, showing that upon that date he had
deposited in the Manila post-office a registered letter, addressed to Engracio Palanca
Tanquinyeng, at Manila, containing copies of the complaint, the plaintiff's affidavit, the
summons, and the order of the court directing publication as aforesaid. It appears from the
postmaster's receipt that Bernardo probably used an envelope obtained from the clerk's office, as
the receipt purports to show that the letter emanated from the office.

The cause proceeded in usual course in the Court of First Instance; and the defendant not having
appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3, 1908, a
decision was rendered in favor of the plaintiff. In this decision it was recited that publication had
been properly made in a periodical, but nothing was said about this notice having been given
mail. The court, upon this occasion, found that the indebtedness of the defendant amounted to
P249,355. 32, with interest from March 31, 1908. Accordingly it was ordered that the defendant
should, on or before July 6, 1908, deliver said amount to the clerk of the court to be applied to
the satisfaction of the judgment, and it was declared that in case of the failure of the defendant to
satisfy the judgment within such period, the mortgage property located in the city of Manila
should be exposed to public sale. The payment contemplated in said order was never made; and
upon July 8, 1908, the court ordered the sale of the property. The sale took place upon July 30,
1908, and the property was bought in by the bank for the sum of P110,200. Upon August 7,
1908, this sale was confirmed by the court.

About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a
motion was made in this cause by Vicente Palanca, as administrator of the estate of the original
defendant, Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant requested the
court to set aside the order of default of July 2, 1908, and the judgment rendered upon July 3,
1908, and to vacate all the proceedings subsequent thereto. The basis of this application, as set
forth in the motion itself, was that the order of default and the judgment rendered thereon were
void because the court had never acquired jurisdiction over the defendant or over the subject of
the action.

At the hearing in the court below the application to vacate the judgment was denied, and from
this action of the court Vicente Planca, as administrator of the estate of the original defendant,
has appealed. No other feature of the case is here under consideration than such as related to the
action of the court upon said motion.

The case presents several questions of importance, which will be discussed in what appears to be
the sequence of most convenient development. In the first part of this opinion we shall, for the
purpose of argument, assume that the clerk of the Court of First Instance did not obey the order
of the court in the matter of mailing the papers which he was directed to send to the defendant in
Amoy; and in this connection we shall consider, first, whether the court acquired the necessary
jurisdiction to enable it to proceed with the foreclosure of the mortgage and, secondly, whether
those proceedings were conducted in such manner as to constitute due process of law.

The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several
different, though related, senses since it may have reference (1) to the authority of the court to
entertain a particular kind of action or to administer a particular kind of relief, or it may refer to
the power of the court over the parties, or (2) over the property which is the subject to the
litigation.

The sovereign authority which organizes a court determines the nature and extent of its powers
in general and thus fixes its competency or jurisdiction with reference to the actions which it may
entertain and the relief it may grant.

Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his
submission to its authority, or it is acquired by the coercive power of legal process exerted over
the person.

Jurisdiction over the property which is the subject of the litigation may result either from a
seizure of the property under legal process, whereby it is brought into the actual custody of the
law, or it may result from the institution of legal proceedings wherein, under special provisions
of law, the power of the court over the property is recognized and made effective. In the latter
case the property, though at all times within the potential power of the court, may never be taken
into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in
attachment proceedings, where the property is seized at the beginning of the action, or some
subsequent stage of its progress, and held to abide the final event of the litigation. An illustration
of what we term potential jurisdiction over the res, is found in the proceeding to register the title
of land under our system for the registration of land. Here the court, without taking actual
physical control over the property assumes, at the instance of some person claiming to be owner,
to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the
petitioner against all the world.

In the terminology of American law the action to foreclose a mortgage is said to be a proceeding
quasi in rem, by which is expressed the idea that while it is not strictly speaking an action in rem
yet it partakes of that nature and is substantially such. The expression "action in rem" is, in its
narrow application, used only with reference to certain proceedings in courts of admiralty
wherein the property alone is treated as responsible for the claim or obligation upon which the
proceedings are based. The action quasi rem differs from the true action in rem in the
circumstance that in the former an individual is named as defendant, and the purpose of the
proceeding is to subject his interest therein to the obligation or lien burdening the property. All
proceedings having for their sole object the sale or other disposition of the property of the
defendant, whether by attachment, foreclosure, or other form of remedy, are in a general way
thus designated. The judgment entered in these proceedings is conclusive only between the
parties.

In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has
said:

Though nominally against person, such suits are to vindicate liens; they proceed upon
seizure; they treat property as primarily indebted; and, with the qualification above-
 mentioned, they are substantially property actions. In the civil law, they are styled
hypothecary actions, and their sole object is the enforcement of the lien against the res; in
the common law, they would be different in chancery did not treat the conditional
conveyance as a mere hypothecation, and the creditor's right ass an equitable lien; so, in
both, the suit is real action so far as it is against property, and seeks the judicial
recognition of a property debt, and an order for the sale of the res. (Waples, Proceedings
In Rem. sec. 607.)

It is true that in proceedings of this character, if the defendant for whom publication is made
appears, the action becomes as to him a personal action and is conducted as such. This, however,
does not affect the proposition that where the defendant fails to appear the action is quasi in rem;
and it should therefore be considered with reference to the principles governing actions in rem.

There is an instructive analogy between the foreclosure proceeding and an action of attachment,
concerning which the Supreme Court of the United States has used the following language:

If the defendant appears, the cause becomes mainly a suit in personam, with the added
incident, that the property attached remains liable, under the control of the court, to
answer to any demand which may be established against the defendant by the final
judgment of the court. But, if there is no appearance of the defendant, and no service of
process on him, the case becomes, in its essential nature, a proceeding in rem, the only
effect of which is to subject the property attached to the payment of the defendant which
the court may find to be due to the plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.)

In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary
seizure is to, be considered necessary in order to confer jurisdiction upon the court. In this case
the lien on the property is acquired by the seizure; and the purpose of the proceedings is to
subject the property to that lien. If a lien already exists, whether created by mortgage, contract, or
statute, the preliminary seizure is not necessary; and the court proceeds to enforce such lien in
the manner provided by law precisely as though the property had been seized upon attachment.
(Roller vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere circumstance that
in an attachment the property may be seized at the inception of the proceedings, while in the
foreclosure suit it is not taken into legal custody until the time comes for the sale, does not
materially affect the fundamental principle involved in both cases, which is that the court is here
exercising a jurisdiction over the property in a proceeding directed essentially in rem.

Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage
foreclosure, it is evident that the court derives its authority to entertain the action primarily from
the statutes organizing the court. The jurisdiction of the court, in this most general sense, over
the cause of action is obvious and requires no comment. Jurisdiction over the person of the
defendant, if acquired at all in such an action, is obtained by the voluntary submission of the
defendant or by the personal service of process upon him within the territory where the process is
valid. If, however, the defendant is a nonresident and, remaining beyond the range of the
personal process of the court, refuses to come in voluntarily, the court never acquires jurisdiction
over the person at all. Here the property itself is in fact the sole thing which is impleaded and is
the responsible object which is the subject of the exercise of judicial power. It follows that the
jurisdiction of the court in such case is based exclusively on the power which, under the law, it
possesses over the property; and any discussion relative to the jurisdiction of the court over the
person of the defendant is entirely apart from the case. The jurisdiction of the court over the
property, considered as the exclusive object of such action, is evidently based upon the following
conditions and considerations, namely: (1) that the property is located within the district; (2) that
the purpose of the litigation is to subject the property by sale to an obligation fixed upon it by the
mortgage; and (3) that the court at a proper stage of the proceedings takes the property into
custody, if necessary, and expose it to sale for the purpose of satisfying the mortgage debt. An
obvious corollary is that no other relief can be granted in this proceeding than such as can be
enforced against the property.
We may then, from what has been stated, formulated the following proposition relative to the
foreclosure proceeding against the property of a nonresident mortgagor who fails to come in and
submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the court is
derived from the power which it possesses over the property; (II) that jurisdiction over the person
is not acquired and is nonessential; (III) that the relief granted by the court must be limited to
such as can be enforced against the property itself.

It is important that the bearing of these propositions be clearly apprehended, for there are many
expressions in the American reports from which it might be inferred that the court acquires
personal jurisdiction over the person of the defendant by publication and notice; but such is not
the case. In truth the proposition that jurisdiction over the person of a nonresident cannot be
acquired by publication and notice was never clearly understood even in the American courts
until after the decision had been rendered by the Supreme Court of the United States in the
leading case of Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and
of other decisions which have subsequently been rendered in that and other courts, the
proposition that jurisdiction over the person cannot be thus acquired by publication and notice is
no longer open to question; and it is now fully established that a personal judgment upon
constructive or substituted service against a nonresident who does not appear is wholly invalid.
This doctrine applies to all kinds of constructive or substituted process, including service by
publication and personal service outside of the jurisdiction in which the judgment is rendered;
and the only exception seems to be found in the case where the nonresident defendant has
expressly or impliedly consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A.
[N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312

The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process from
the tribunals of one State cannot run into other States or countries and that due process of law
requires that the defendant shall be brought under the power of the court by service of process
within the State, or by his voluntary appearance, in order to authorize the court to pass upon the
question of his personal liability. The doctrine established by the Supreme Court of the United
States on this point, being based upon the constitutional conception of due process of law, is
binding upon the courts of the Philippine Islands. Involved in this decision is the principle that in
proceedings in rem or quasi in rem against a nonresident who is not served personally within the
state, and who does not appear, the relief must be confined to the res, and the court cannot
lawfully render a personal judgment against him. (Dewey vs. Des Moines, 173 U. S., 193; 43 L.
ed., 665; Heidritter vs. Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore in an
action to foreclose a mortgage against a nonresident, upon whom service has been effected
exclusively by publication, no personal judgment for the deficiency can be entered. (Latta vs.
Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.)

It is suggested in the brief of the appellant that the judgment entered in the court below offends
against the principle just stated and that this judgment is void because the court in fact entered a
personal judgment against the absent debtor for the full amount of the indebtedness secured by
the mortgage. We do not so interpret the judgment.

In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all
cases of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of
Civil Procedure, and to make an order requiring the defendant to pay the money into court. This
step is a necessary precursor of the order of sale. In the present case the judgment which was
entered contains the following words:

Because it is declared that the said defendant Engracio Palanca Tanquinyeng y

Limquingco, is indebted in the amount of P249,355.32, plus the interest, to the 'Banco
Espanol-Filipino' . . . therefore said appellant is ordered to deliver the above amount etc.,
etc.

This is not the language of a personal judgment. Instead it is clearly intended merely as a
compliance with the requirement that the amount due shall be ascertained and that the evidence
of this it may be observed that according to the Code of Civil Procedure a personal judgment
against the debtor for the deficiency is not to be rendered until after the property has been sold
and the proceeds applied to the mortgage debt. (sec. 260).

The conclusion upon this phase of the case is that whatever may be the effect in other respects of
the failure of the clerk of the Court of First Instance to mail the proper papers to the defendant in
Amoy, China, such irregularity could in no wise impair or defeat the jurisdiction of the court, for
in our opinion that jurisdiction rest upon a basis much more secure than would be supplied by
any form of notice that could be given to a resident of a foreign country.

Before leaving this branch of the case, we wish to observe that we are fully aware that many
reported cases can be cited in which it is assumed that the question of the sufficiency of
publication or notice in a case of this kind is a question affecting the jurisdiction of the court, and
the court is sometimes said to acquire jurisdiction by virtue of the publication. This phraseology
was undoubtedly originally adopted by the court because of the analogy between service by the
publication and personal service of process upon the defendant; and, as has already been
suggested, prior to the decision of Pennoyer vs. Neff (supra) the difference between the legal
effects of the two forms of service was obscure. It is accordingly not surprising that the modes of
expression which had already been molded into legal tradition before that case was decided have
been brought down to the present day. But it is clear that the legal principle here involved is not
effected by the peculiar language in which the courts have expounded their ideas.

We now proceed to a discussion of the question whether the supposed irregularity in the
proceedings was of such gravity as to amount to a denial of that "due process of law" which was
secured by the Act of Congress in force in these Islands at the time this mortgage was foreclosed.
(Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of the
constitutional provisions relating to due process of law the Supreme Court of the United States
has refrained from attempting to define with precision the meaning of that expression, the reason
being that the idea expressed therein is applicable under so many diverse conditions as to make
any attempt ay precise definition hazardous and unprofitable. As applied to a judicial proceeding,
however, it may be laid down with certainty that the requirement of due process is satisfied if the
following conditions are present, namely; (1) There must be a court or tribunal clothed with
judicial power to hear and determine the matter before it; (2) jurisdiction must be lawfully
acquired over the person of the defendant or over the property which is the subject of the
proceeding; (3) the defendant must be given an opportunity to be heard; and (4) judgment must
be rendered upon lawful hearing.

Passing at once to the requisite that the defendant shall have an opportunity to be heard, we
observe that in a foreclosure case some notification of the proceedings to the nonresident owner,
prescribing the time within which appearance must be made, is everywhere recognized as
essential. To answer this necessity the statutes generally provide for publication, and usually in
addition thereto, for the mailing of notice to the defendant, if his residence is known. Though
commonly called constructive, or substituted service of process in any true sense. It is merely a
means provided by law whereby the owner may be admonished that his property is the subject of
judicial proceedings and that it is incumbent upon him to take such steps as he sees fit to protect
it. In speaking of notice of this character a distinguish master of constitutional law has used the
following language:

. . . if the owners are named in the proceedings, and personal notice is provided for, it is
rather from tenderness to their interests, and in order to make sure that the opportunity for
a hearing shall not be lost to them, than from any necessity that the case shall assume that
form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.)

It will be observed that this mode of notification does not involve any absolute assurance that the
absent owner shall thereby receive actual notice. The periodical containing the publication may
never in fact come to his hands, and the chances that he should discover the notice may often be
very slight. Even where notice is sent by mail the probability of his receiving it, though much
increased, is dependent upon the correctness of the address to which it is forwarded as well as
upon the regularity and security of the mail service. It will be noted, furthermore, that the
provision of our law relative to the mailing of notice does not absolutely require the mailing of
notice unconditionally and in every event, but only in the case where the defendant's residence is
known. In the light of all these facts, it is evident that actual notice to the defendant in cases of
this kind is not, under the law, to be considered absolutely necessary.

The idea upon which the law proceeds in recognizing the efficacy of a means of notification
which may fall short of actual notice is apparently this: Property is always assumed to be in the
possession of its owner, in person or by agent; and he may be safely held, under certain
conditions, to be affected with knowledge that proceedings have been instituted for its
condemnation and sale.

It is the duty of the owner of real estate, who is a nonresident, to take measures that in
some way he shall be represented when his property is called into requisition, and if he
fails to do this, and fails to get notice by the ordinary publications which have usually
been required in such cases, it is his misfortune, and he must abide the consequences. (6
R. C. L., sec. 445 [p. 450]).

It has been well said by an American court:

If property of a nonresident cannot be reached by legal process upon the constructive

notice, then our statutes were passed in vain, and are mere empty legislative declarations,
without either force, or meaning; for if the person is not within the jurisdiction of the
court, no personal judgment can be rendered, and if the judgment cannot operate upon the
property, then no effective judgment at all can be rendered, so that the result would be
that the courts would be powerless to assist a citizen against a nonresident. Such a result
would be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am. Rep., 662, 667.)

It is, of course universally recognized that the statutory provisions relative to publication or other
form of notice against a nonresident owner should be complied with; and in respect to the
publication of notice in the newspaper it may be stated that strict compliance with the
requirements of the law has been held to be essential. In Guaranty Trust etc. Co. vs. Green Cove
etc., Railroad Co. (139 U. S., 137, 138), it was held that where newspaper publication was made
for 19 weeks, when the statute required 20, the publication was insufficient.

With respect to the provisions of our own statute, relative to the sending of notice by mail, the
requirement is that the judge shall direct that the notice be deposited in the mail by the clerk of
the court, and it is not in terms declared that the notice must be deposited in the mail. We
consider this to be of some significance; and it seems to us that, having due regard to the
principles upon which the giving of such notice is required, the absent owner of the mortgaged
property must, so far as the due process of law is concerned, take the risk incident to the possible
failure of the clerk to perform his duty, somewhat as he takes the risk that the mail clerk or the
mail carrier might possibly lose or destroy the parcel or envelope containing the notice before it
should reach its destination and be delivered to him. This idea seems to be strengthened by the
consideration that placing upon the clerk the duty of sending notice by mail, the performance of
that act is put effectually beyond the control of the plaintiff in the litigation. At any rate it is
obvious that so much of section 399 of the Code of Civil Procedure as relates to the sending of
notice by mail was complied with when the court made the order. The question as to what may
be the consequences of the failure of the record to show the proof of compliance with that
requirement will be discussed by us further on.

The observations which have just been made lead to the conclusion that the failure of the clerk to
mail the notice, if in fact he did so fail in his duty, is not such an irregularity, as amounts to a
denial of due process of law; and hence in our opinion that irregularity, if proved, would not
avoid the judgment in this case. Notice was given by publication in a newspaper and this is the
only form of notice which the law unconditionally requires. This in our opinion is all that was
absolutely necessary to sustain the proceedings.

It will be observed that in considering the effect of this irregularity, it makes a difference
whether it be viewed as a question involving jurisdiction or as a question involving due process
of law. In the matter of jurisdiction there can be no distinction between the much and the little.
The court either has jurisdiction or it has not; and if the requirement as to the mailing of notice
should be considered as a step antecedent to the acquiring of jurisdiction, there could be no
escape from the conclusion that the failure to take that step was fatal to the validity of the
judgment. In the application of the idea of due process of law, on the other hand, it is clearly
unnecessary to be so rigorous. The jurisdiction being once established, all that due process of law
thereafter requires is an opportunity for the defendant to be heard; and as publication was duly
made in the newspaper, it would seem highly unreasonable to hold that failure to mail the notice
was fatal. We think that in applying the requirement of due process of law, it is permissible to
reflect upon the purposes of the provision which is supposed to have been violated and the
principle underlying the exercise of judicial power in these proceedings. Judge in the light of
these conceptions, we think that the provision of Act of Congress declaring that no person shall
be deprived of his property without due process of law has not been infringed.

In the progress of this discussion we have stated the two conclusions; (1) that the failure of the
clerk to send the notice to the defendant by mail did not destroy the jurisdiction of the court and
(2) that such irregularity did not infringe the requirement of due process of law. As a
consequence of these conclusions the irregularity in question is in some measure shorn of its
potency. It is still necessary, however, to consider its effect considered as a simple irregularity of
procedure; and it would be idle to pretend that even in this aspect the irregularity is not grave
enough. From this point of view, however, it is obvious that any motion to vacate the judgment
on the ground of the irregularity in question must fail unless it shows that the defendant was
prejudiced by that irregularity. The least, therefore, that can be required of the proponent of such
a motion is to show that he had a good defense against the action to foreclose the mortgage.
Nothing of the kind is, however, shown either in the motion or in the affidavit which
accompanies the motion.

An application to open or vacate a judgment because of an irregularity or defect in the

proceedings is usually required to be supported by an affidavit showing the grounds on which the
relief is sought, and in addition to this showing also a meritorious defense to the action. It is held
that a general statement that a party has a good defense to the action is insufficient. The
necessary facts must be averred. Of course if a judgment is void upon its face a showing of the
existence of a meritorious defense is not necessary. (10 R. C. L., 718.)

The lapse of time is also a circumstance deeply affecting this aspect of the case. In this
connection we quote the following passage from the encyclopedic treatise now in course of
publication:

Where, however, the judgment is not void on its face, and may therefore be enforced if
permitted to stand on the record, courts in many instances refuse to exercise their quasi
equitable powers to vacate a judgement after the lapse of the term ay which it was
entered, except in clear cases, to promote the ends of justice, and where it appears that the
party making the application is himself without fault and has acted in good faith and with
ordinary diligence. Laches on the part of the applicant, if unexplained, is deemed
sufficient ground for refusing the relief to which he might otherwise be entitled.
Something is due to the finality of judgments, and acquiescence or unnecessary delay is
fatal to motions of this character, since courts are always reluctant to interfere with
judgments, and especially where they have been executed or satisfied. The moving party
has the burden of showing diligence, and unless it is shown affirmatively the court will
not ordinarily exercise its discretion in his favor. (15 R. C. L., 694, 695.)
It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died
January 29, 1910. The mortgage under which the property was sold was executed far back in
1906; and the proceedings in the foreclosure were closed by the order of court confirming the
sale dated August 7, 1908. It passes the rational bounds of human credulity to suppose that a man
who had placed a mortgage upon property worth nearly P300,000 and had then gone away from
the scene of his life activities to end his days in the city of Amoy, China, should have long
remained in ignorance of the fact that the mortgage had been foreclosed and the property sold,
even supposing that he had no knowledge of those proceedings while they were being conducted.
It is more in keeping with the ordinary course of things that he should have acquired information
as to what was transpiring in his affairs at Manila; and upon the basis of this rational assumption
we are authorized, in the absence of proof to the contrary, to presume that he did have, or soon
acquired, information as to the sale of his property.

The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things
have happened according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive of
a situation more appropriate than this for applying the presumption thus defined by the lawgiver.
In support of this presumption, as applied to the present case, it is permissible to consider the
probability that the defendant may have received actual notice of these proceedings from the
unofficial notice addressed to him in Manila which was mailed by an employee of the bank's
attorneys. Adopting almost the exact words used by the Supreme Court of the United States in
Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-
known skill of postal officials and employees in making proper delivery of letters defectively
addressed, we think the presumption is clear and strong that this notice reached the defendant,
there being no proof that it was ever returned by the postal officials as undelivered. And if it was
delivered in Manila, instead of being forwarded to Amoy, China, there is a probability that the
recipient was a person sufficiently interested in his affairs to send it or communicate its contents
to him.

Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon
the mailing of the notice by the clerk, the reflections in which we are now indulging would be
idle and frivolous; but the considerations mentioned are introduced in order to show the propriety
of applying to this situation the legal presumption to which allusion has been made. Upon that
presumption, supported by the circumstances of this case, ,we do not hesitate to found the
conclusion that the defendant voluntarily abandoned all thought of saving his property from the
obligation which he had placed upon it; that knowledge of the proceedings should be imputed to
him; and that he acquiesced in the consequences of those proceedings after they had been
accomplished. Under these circumstances it is clear that the merit of this motion is, as we have
already stated, adversely affected in a high degree by the delay in asking for relief. Nor is it an
adequate reply to say that the proponent of this motion is an administrator who only qualified a
few months before this motion was made. No disability on the part of the defendant himself
existed from the time when the foreclosure was effected until his death; and we believe that the
delay in the appointment of the administrator and institution of this action is a circumstance
which is imputable to the parties in interest whoever they may have been. Of course if the minor
heirs had instituted an action in their own right to recover the property, it would have been
different.

It is, however, argued that the defendant has suffered prejudice by reason of the fact that the
bank became the purchaser of the property at the foreclosure sale for a price greatly below that
which had been agreed upon in the mortgage as the upset price of the property. In this
connection, it appears that in article nine of the mortgage which was the subject of this
foreclosure, as amended by the notarial document of July 19, 1906, the parties to this mortgage
made a stipulation to the effect that the value therein placed upon the mortgaged properties
should serve as a basis of sale in case the debt should remain unpaid and the bank should proceed
to a foreclosure. The upset price stated in that stipulation for all the parcels involved in this
foreclosure was P286,000. It is said in behalf of the appellant that when the bank bought in the
property for the sum of P110,200 it violated that stipulation.
It has been held by this court that a clause in a mortgage providing for a tipo, or upset price, does
not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure proceedings.
(Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Español Filipino vs.
Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the property was
purchased at the foreclosure sale, not by the creditor or mortgagee, but by a third party. Whether
the same rule should be applied in a case where the mortgagee himself becomes the purchaser
has apparently not been decided by this court in any reported decision, and this question need not
here be considered, since it is evident that if any liability was incurred by the bank by purchasing
for a price below that fixed in the stipulation, its liability was a personal liability derived from
the contract of mortgage; and as we have already demonstrated such a liability could not be the
subject of adjudication in an action where the court had no jurisdiction over the person of the
defendant. If the plaintiff bank became liable to account for the difference between the upset
price and the price at which in bought in the property, that liability remains unaffected by the
disposition which the court made of this case; and the fact that the bank may have violated such
an obligation can in no wise affect the validity of the judgment entered in the Court of First
Instance.

In connection with the entire failure of the motion to show either a meritorious defense to the
action or that the defendant had suffered any prejudice of which the law can take notice, we may
be permitted to add that in our opinion a motion of this kind, which proposes to unsettle judicial
proceedings long ago closed, can not be considered with favor, unless based upon grounds which
appeal to the conscience of the court. Public policy requires that judicial proceedings be upheld.
The maximum here applicable is non quieta movere. As was once said by Judge Brewer,
afterwards a member of the Supreme Court of the United States:

Public policy requires that judicial proceedings be upheld, and that titles obtained in those
proceedings be safe from the ruthless hand of collateral attack. If technical defects are
adjudged potent to destroy such titles, a judicial sale will never realize that value of the
property, for no prudent man will risk his money in bidding for and buying that title
which he has reason to fear may years thereafter be swept away through some occult and
not readily discoverable defect. (Martin vs. Pond, 30 Fed., 15.)

In the case where that language was used an attempt was made to annul certain foreclosure
proceedings on the ground that the affidavit upon which the order of publication was based
erroneously stated that the State of Kansas, when he was in fact residing in another State. It was
held that this mistake did not affect the validity of the proceedings.

In the preceding discussion we have assumed that the clerk failed to send the notice by post as
required by the order of the court. We now proceed to consider whether this is a proper
assumption; and the proposition which we propose to establish is that there is a legal
presumption that the clerk performed his duty as the ministerial officer of the court, which
presumption is not overcome by any other facts appearing in the cause.

In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a
presumption "that official duty has been regularly performed;" and in subsection 18 it is declared
that there is a presumption "that the ordinary course of business has been followed." These
presumptions are of course in no sense novelties, as they express ideas which have always been
recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium. There
is therefore clearly a legal presumption that the clerk performed his duty about mailing this
notice; and we think that strong considerations of policy require that this presumption should be
allowed to operate with full force under the circumstances of this case. A party to an action has
no control over the clerk of the court; and has no right to meddle unduly with the business of the
clerk in the performance of his duties. Having no control over this officer, the litigant must
depend upon the court to see that the duties imposed on the clerk are performed.

Other considerations no less potent contribute to strengthen the conclusion just stated. There is
no principle of law better settled than that after jurisdiction has once been required, every act of a
court of general jurisdiction shall be presumed to have been rightly done. This rule is applied to
every judgment or decree rendered in the various stages of the proceedings from their initiation
to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the
record is silent with respect to any fact which must have been established before the court could
have rightly acted, it will be presumed that such fact was properly brought to its knowledge. (The
Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.)

In making the order of sale [of the real state of a decedent] the court are presumed to have
adjudged every question necessary to justify such order or decree, viz: The death of the
owners; that the petitioners were his administrators; that the personal estate was
insufficient to pay the debts of the deceased; that the private acts of Assembly, as to the
manner of sale, were within the constitutional power of the Legislature, and that all the
provisions of the law as to notices which are directory to the administrators have been
complied with. . . . The court is not bound to enter upon the record the evidence on which
any fact was decided. (Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially
does all this apply after long lapse of time.

Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive
discussion in a case analogous to that which is now before us. It there appeared that in order to
foreclose a mortgage in the State of Kentucky against a nonresident debtor it was necessary that
publication should be made in a newspaper for a specified period of time, also be posted at the
front door of the court house and be published on some Sunday, immediately after divine
service, in such church as the court should direct. In a certain action judgment had been entered
against a nonresident, after publication in pursuance of these provisions. Many years later the
validity of the proceedings was called in question in another action. It was proved from the files
of an ancient periodical that publication had been made in its columns as required by law; but no
proof was offered to show the publication of the order at the church, or the posting of it at the
front door of the court-house. It was insisted by one of the parties that the judgment of the court
was void for lack of jurisdiction. But the Supreme Court of the United States said:

The court which made the decree . . . was a court of general jurisdiction. Therefore every
presumption not inconsistent with the record is to be indulged in favor of its jurisdiction. .
. . It is to be presumed that the court before making its decree took care of to see that its
order for constructive service, on which its right to make the decree depended, had been
obeyed.

It is true that in this case the former judgment was the subject of collateral , or indirect attack,
while in the case at bar the motion to vacate the judgment is direct proceeding for relief against
it. The same general presumption, however, is indulged in favor of the judgment of a court of
general jurisdiction, whether it is the subject of direct or indirect attack the only difference being
that in case of indirect attack the judgment is conclusively presumed to be valid unless the record
affirmatively shows it to be void, while in case of direct attack the presumption in favor of its
validity may in certain cases be overcome by proof extrinsic to the record.

The presumption that the clerk performed his duty and that the court made its decree with the
knowledge that the requirements of law had been complied with appear to be amply sufficient to
support the conclusion that the notice was sent by the clerk as required by the order. It is true that
there ought to be found among the papers on file in this cause an affidavit, as required by section
400 of the Code of Civil Procedure, showing that the order was in fact so sent by the clerk; and
no such affidavit appears. The record is therefore silent where it ought to speak. But the very
purpose of the law in recognizing these presumptions is to enable the court to sustain a prior
judgment in the face of such an omission. If we were to hold that the judgment in this case is
void because the proper affidavit is not present in the file of papers which we call the record, the
result would be that in the future every title in the Islands resting upon a judgment like that now
before us would depend, for its continued security, upon the presence of such affidavit among
the papers and would be liable at any moment to be destroyed by the disappearance of that piece
of paper. We think that no court, with a proper regard for the security of judicial proceedings and
for the interests which have by law been confided to the courts, would incline to favor such a
conclusion. In our opinion the proper course in a case of this kind is to hold that the legal
presumption that the clerk performed his duty still maintains notwithstanding the absence from
the record of the proper proof of that fact.

In this connection it is important to bear in mind that under the practice prevailing in the
Philippine Islands the word "record" is used in a loose and broad sense, as indicating the
collective mass of papers which contain the history of all the successive steps taken in a case and
which are finally deposited in the archives of the clerk's office as a memorial of the litigation. It
is a matter of general information that no judgment roll, or book of final record, is commonly
kept in our courts for the purpose of recording the pleadings and principal proceedings in actions
which have been terminated; and in particular, no such record is kept in the Court of First
Instance of the city of Manila. There is, indeed, a section of the Code of Civil Procedure which
directs that such a book of final record shall be kept; but this provision has, as a matter of
common knowledge, been generally ignored. The result is that in the present case we do not have
the assistance of the recitals of such a record to enable us to pass upon the validity of this
judgment and as already stated the question must be determined by examining the papers
contained in the entire file.

But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing
that upon April 4, 1908, he sent a notification through the mail addressed to the defendant at
Manila, Philippine Islands, should be accepted as affirmative proof that the clerk of the court
failed in his duty and that, instead of himself sending the requisite notice through the mail, he
relied upon Bernardo to send it for him. We do not think that this is by any means a necessary
inference. Of course if it had affirmatively appeared that the clerk himself had attempted to
comply with this order and had directed the notification to Manila when he should have directed
it to Amoy, this would be conclusive that he had failed to comply with the exact terms of the
order; but such is not this case. That the clerk of the attorneys for the plaintiff erroneously sent a
notification to the defendant at a mistaken address affords in our opinion very slight basis for
supposing that the clerk may not have sent notice to the right address.

There is undoubtedly good authority to support the position that when the record states the
evidence or makes an averment with reference to a jurisdictional fact, it will not be presumed
that there was other or different evidence respecting the fact, or that the fact was otherwise than
stated. If, to give an illustration, it appears from the return of the officer that the summons was
served at a particular place or in a particular manner, it will not be presumed that service was
also made at another place or in a different manner; or if it appears that service was made upon a
person other than the defendant, it will not be presumed, in the silence of the record, that it was
made upon the defendant also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97
U. S., 444, 449). While we believe that these propositions are entirely correct as applied to the
case where the person making the return is the officer who is by law required to make the return,
we do not think that it is properly applicable where, as in the present case, the affidavit was made
by a person who, so far as the provisions of law are concerned, was a mere intermeddler.

The last question of importance which we propose to consider is whether a motion in the cause is
admissible as a proceeding to obtain relief in such a case as this. If the motion prevails the
judgment of July 2, 1908, and all subsequent proceedings will be set aside, and the litigation will
be renewed, proceeding again from the date mentioned as if the progress of the action had not
been interrupted. The proponent of the motion does not ask the favor of being permitted to
interpose a defense. His purpose is merely to annul the effective judgment of the court, to the end
that the litigation may again resume its regular course.

There is only one section of the Code of Civil Procedure which expressly recognizes the
authority of a Court of First Instance to set aside a final judgment and permit a renewal of the
litigation in the same cause. This is as follows:
 SEC. 113. Upon such terms as may be just the court may relieve a party or legal
representative from the judgment, order, or other proceeding taken against him through
his mistake, inadvertence, surprise, or excusable neglect; Provided, That application
thereof be made within a reasonable time, but in no case exceeding six months after such
judgment, order, or proceeding was taken.

An additional remedy by petition to the Supreme Court is supplied by section 513 of the same
Code. The first paragraph of this section, in so far as pertinent to this discussion, provides as
follows:

When a judgment is rendered by a Court of First Instance upon default, and a party
thereto is unjustly deprived of a hearing by fraud, accident, mistake or excusable
negligence, and the Court of First Instance which rendered the judgment has finally
adjourned so that no adequate remedy exists in that court, the party so deprived of a
hearing may present his petition to the Supreme Court within sixty days after he first
learns of the rendition of such judgment, and not thereafter, setting forth the facts and
praying to have judgment set aside. . . .

It is evident that the proceeding contemplated in this section is intended to supplement the
remedy provided by section 113; and we believe the conclusion irresistible that there is no other
means recognized by law whereby a defeated party can, by a proceeding in the same cause,
procure a judgment to be set aside, with a view to the renewal of the litigation.

The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it
contains provisions describing with much fullness the various steps to be taken in the conduct of
such proceedings. To this end it defines with precision the method of beginning, conducting, and
concluding the civil action of whatever species; and by section 795 of the same Code it is
declared that the procedure in all civil action shall be in accordance with the provisions of this
Code. We are therefore of the opinion that the remedies prescribed in sections 113 and 513 are
exclusive of all others, so far as relates to the opening and continuation of a litigation which has
been once concluded.

The motion in the present case does not conform to the requirements of either of these
provisions; and the consequence is that in our opinion the action of the Court of First Instance in
dismissing the motion was proper.

If the question were admittedly one relating merely to an irregularity of procedure, we cannot
suppose that this proceeding would have taken the form of a motion in the cause, since it is clear
that, if based on such an error, the came to late for relief in the Court of First Instance. But as we
have already seen, the motion attacks the judgment of the court as void for want of jurisdiction
over the defendant. The idea underlying the motion therefore is that inasmuch as the judgment is
a nullity it can be attacked in any way and at any time. If the judgment were in fact void upon its
face, that is, if it were shown to be a nullity by virtue of its own recitals, there might possibly be
something in this. Where a judgment or judicial order is void in this sense it may be said to be a
lawless thing, which can be treated as an outlaw and slain at sight, or ignored wherever and
whenever it exhibits its head.

But the judgment in question is not void in any such sense. It is entirely regular in form, and the
alleged defect is one which is not apparent upon its face. It follows that even if the judgment
could be shown to be void for want of jurisdiction, or for lack of due process of law, the party
aggrieved thereby is bound to resort to some appropriate proceeding to obtain relief. Under
accepted principles of law and practice, long recognized in American courts, a proper remedy in
such case, after the time for appeal or review has passed, is for the aggrieved party to bring an
action to enjoin the judgment, if not already carried into effect; or if the property has already
been disposed of he may institute suit to recover it. In every situation of this character an
appropriate remedy is at hand; and if property has been taken without due process, the law
concedes due process to recover it. We accordingly old that, assuming the judgment to have been
void as alleged by the proponent of this motion, the proper remedy was by an original
proceeding and not by motion in the cause. As we have already seen our Code of Civil Procedure
defines the conditions under which relief against a judgment may be productive of conclusion for
this court to recognize such a proceeding as proper under conditions different from those defined
by law. Upon the point of procedure here involved, we refer to the case of People vs. Harrison
(84 Cal., 607) wherein it was held that a motion will not lie to vacate a judgment after the lapse
of the time limited by statute if the judgment is not void on its face; and in all cases, after the
lapse of the time limited by statute if the judgment is not void on its face; and all cases, after the
lapse of such time, when an attempt is made to vacate the judgment by a proceeding in court for
that purpose an action regularly brought is preferable, and should be required. It will be noted
taken verbatim from the California Code (sec. 473).

The conclusions stated in this opinion indicate that the judgment appealed from is without error,
and the same is accordingly affirmed, with costs. So ordered.

Arellano, C.J., Torres, Carson, and Avanceña, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:

I dissent. It will not make me long to state my reasons. An immutable attribute — the
fundamental idea — of due process of law is that no man shall be condemned in his person or
property without notice and an opportunity of being heard in his defense. Protection of the
parties demands a strict and an exact compliance with this constitutional provision in our organic
law and of the statutory provisions in amplification. Literally hundreds of precedents could be
cited in support of these axiomatic principles. Where as in the instant case the defendant received
no notice and had no opportunity to be heard, certainly we cannot say that there is due process of
law. Resultantly, "A judgment which is void upon its face, and which requires only an inspection
of the judgment roll to demonstrate its want of vitality is a dead limb upon the judicial tree,
which should be lopped off, if the power so to do exists. It can bear no fruit to the plaintiff, but is
a constant menace to the defendant." (Mills vs. Dickons, 6 Rich [S. C.], 487.)

G.R. No. L-23174 September 18, 1967

CONCEPCION MACABINGKIL, petitioner,

vs.
HON. NICASIO YATCO, Judge of the Court First Instance of Rizal, Quezon City Branch,
PROVINCIAL SHERIFF OF RIZAL and SHERIFF OF QUEZON CITY, IRENE DE
LEON and her husband, VICENTE LLANES, respondents.

Teofilo V. Ogsime for petitioner.

Lea T. Castelo for respondents.

FERNANDO, J.:

The principal legal question posed by this original petition for a writ of certiorari and prohibition
with preliminary injunction is one of procedural due process. It arose from the applicability of an
order for demolition of April 18, 1964 to the house of petitioner, such order arising from the
finality of a judgment in Civil Case No. Q-5866 of the Court of First Instance of Quezon City,
thereafter affirmed by the Court of Appeals in CA-G.R. No. 31169-R, petitioner contending that
she has not a party to such a case and was denied a chance to intervene therein.
The petition for certiorari and prohibition with preliminary injunction was filed with this Court
on June 13, 1964, petitioner stating that she was a resident of and with postal address at Block-E-
148, East Avenue Subdivision, Pinahan Area, Diliman, Quezon City, Philippines. As
respondents, she named the then acting Judge of Court of First Instance of Rizal, Quezon City
Branch, the Hon. Nicasio Yatco; the then Provincial Sheriff of Rizal and the Sheriff of Quezon
City; and respondent spouses Irene de Leon and Vicente Llanes.1

It was then alleged that on February 26, 1964 when the Deputy Sheriff of Quezon City served
upon petitioner copy of an alias writ of execution, she learned for the first time that a decision
was rendered in a certain Civil Case No. Q-5866 with respondent spouses, plaintiffs therein,
being the prevailing parties against the People's Homesite and Housing Corporation (herein
referred to as the PHHC), a copy of which writ of execution as well as the final decision of the
Court of Appeals affirming the lower court decision being included as annexes.2 Then on April
15, 1964, respondent spouses as plaintiffs in the above Civil Case No. Q-5866 filed an ex-parte
motion for a special order of demolition, which motion was set for hearing on April 18, 1964, on
which very day, the order of the court granting the same was issued addressed to the Sheriff of
Quezon City "to demolish the houses existing in the premises of the land in question, which have
been erected or occupied by squatters, and thereafter deliver the same to the spouses."3

Upon being served with such order of demolition on June 13, 1964, petitioner the next day
immediately filed an urgent petition to lift the alias writ of execution and order of demolition
with preliminary injunction alleging that she "is not a squatter on the Lot in question, she having
acquired her rights and interest over the said Lot by virtue of Resolution No. 370 dated
December 18, 1959, and again by virtue of Resolution No. 550, dated May 16, 1961, and that all
of said Resolutions were duly passed upon by the Board of Directors of defendant PHHC, and
her house having been improved by virtue of the authority of the General Manager of the PHHC
to secure for herself a building permit from the authorities concerned, and that her rights over the
said Lot in question were acquired after due investigation of her qualification to acquire the same
with priority over any other person or persons who are not occupants of the subject Lot," more so
as to persons who are disqualified in accordance with law and that granting arguendo that
plaintiff spouses did have a conditional contract to sell executed by defendant PHHC, the same
was obtained through fraud and misrepresentation or in connivance with some well placed
employees of the PHHC and that such contract "is against the law," referring to the PHHC
Charter as amended, and the many established policies of the said Government Corporation,
"which facts could have been duly proved by petitioner if, only, she was impleaded in the
complaint, or given a chance to intervene . . . ."4

It was then asserted that although "a decision was rendered in the instant case, the same should
not bind petitioner because, as already stated, your petitioner had not been impleaded in the
plaintiff's complaint, or at least, given a chance to intervene . . . ." Petitioner, in the said urgent
petition, likewise invoked the principle that respondent spouses did not exhaust the
administrative remedies before filing the action and that the court was in error in declaring null
and void Resolution No. 550 of the PHHC in her favor as shown by an Executive Directive of
February 20, 1964 upholding her rights and interest on the lot in question, and ordering the
cancellation of the conditional contract to sell in favor of respondent Irene de Leon. She then
reiterated that the decision in Civil Case No. Q-5866 could not in any way bind her for not being
a party in such a case and that to allow respondent spouses to take possession of the lot in
question and remove petitioner's house and other improvements legally constructed thereon by
virtue of such order of demolition dated April 18, 1964, would not only cause great and
irreparable injury, but would also cause injustice to her by depriving her of her property without
due process of law. On the date originally set for the hearing of such urgent petition on June 20,
1954, respondent spouses through counsel requested deferment as well as permission to file a
written opposition, which was granted by the court, the hearing being reset on June 27, 1964, but
on such subsequent date, without petitioner having as yet been furnished with such written
opposition, a fact being made known to the court, respondent Judge "without hearing the matter
as alleged in said petition and consequently without any evidence received, denied her petition to
lift alias writ of execution and order of demolition with preliminary injunction."5
Under the above circumstances, it is petitioner's contention that she could not be bound by the
judgment and that the refusal to lift the alias writ of execution and the order of demolition,
without hearing the matter as alleged in said petition and without receiving any evidence and her
ejectment from the lot in question of which she was in actual possession "would constitute a
deprivation of property rights without due process of law."6 The Provincial Sheriff of Rizal and
the Sheriff of Quezon City were made respondents for they "threatened to enforce said writ of
execution and order of demolition," as a matter of fact advising petitioner that unless a
restraining order from a competent court could be secured, her house would be demolished.7 She
then alleged that to enforce the writ of execution and order of demolition would be "to work
unwarranted hardship and irreparable damage and injustice upon her without having been
accorded her day in court," reiterating that thereby she would be deprived of her property rights
without due process of law as she was a stranger to such a case never having been made a party
to it.8 She then filed this petition for a writ of certiorari and prohibition with preliminary
injunction, there being no appeal.9 She likewise expressed her willingness "to post a bond
sufficient in amount as may be determined by this Honorable Court conditioned for the payment
of damages that may be awarded in case the writ for preliminary injunction prayed for be found
unmeritorious."10

On July 15, 1964, a resolution giving due course to the above petition for a writ of certiorari and
prohibition, likewise granting the prayer for preliminary injunction upon posting a bond of
P1,000.00, was issued by this Court.

In the answer to the petition filed on August 7, 1964, respondents sought to meet the due process
question squarely by the allegation that in the aforesaid Case No. Q-5866, upon the finality of
which both the writ of execution and the order of demolition were issued "petitioner could have
appealed the order . . . denying the motion for leave to intervene . . . ." Moreover, respondents
deferred to another civil case, Q-5411, wherein respondent spouses as plaintiffs filed a complaint
against the PHHC to compel it to execute the conditional contract to sell covering the disputed
lot and restraining it from awarding or selling the same to one of the defendants, petitioner
herein, alleging further that after they sought to have the said case dismissed without prejudice,
the defendant PHHC having executed a conditional contract to sell in favor of the wife,
respondent Irene de Leon, which motion was granted in an order of respondent Judge Nicasio
Yatco on May 27, 1961, petitioner as defendant could have opposed such motion or could have
thereafter appealed. Accordingly, respondents after mentioning that petitioner failed to perfect an
appeal in both instances added: "It is therefore wrong to say now that in ejecting the petitioner
from this lot, she is unjustly deprived of her property without due process of law."11

For further clarification of the inter-relationship between petitioner and the PHHC on the one
hand and the respondent spouses and the PHHC on the other, with reference to the disputed lot,
the facts as found by the Court of Appeals in its decision of August 31, 1963, affirming the
decision in Civil Case No. Q-5866, should prove illuminating. Thus:

The basic facts are not seriously disputed.1awphîl.nèt

On January 30, 1957, Plaintiff Irene de Leon filed with the People's Homesite & Housing
Corporation, PHHC for convenience, an application to purchase the latter's lot 27, Block
E-148 of the East Avenue Subdivision, Quezon City. The application was approved by
defendant corporation on February 1, 1957, and accordingly plaintiff was issued an order
of payment requiring her to pay in advance 10% or the sum of P1,053.00, of the total
value of the property. The advance payment required of her was made and plaintiff was
issued a passbook, after which several installments were made.

On December 18, 1959, the PHHC Board of Directors passed and approved Resolution
No. 370 cancelling the award thus made in favor of plaintiff De Leon and, instead,
awarding the same property to one Concepcion Makabingkil who, as a squatter on the lot,
claims to have a preferential right in the matter of awards. But before this Resolution No.
370 could be implemented and the property formally awarded to Makabingkil, Plaintiff
 De Leon filed with the Court of First Instance of Quezon City a complaint for injunction
docketed as Civil Case No. Q-5411 against the PHHC, Makabingkil and three others.
Upon application, a Writ of preliminary injunction was issued by that Court temporarily
enjoining the PHHC from implementing said resolution.

At a pre-trial conference in said Civil Case Q-5411, the PHHC, duly represented by its
authorized officers and representatives, agreed to reconsider Res. 370 and to respect the
award previously made in favor of De Leon, and, pursuant thereto, passed and approved
Resolution No. 430 which authorizes the award of the lot in dispute to plaintiff De Leon.
Making good its commitment, the PHHC on March 27, 1961, executed a Conditional
Contract to Sell the property to plaintiff Irene de Leon, who, on the basis of that pre-trial
agreement and the Contract to Sell thus executed in her favor by the PHHC, moved to
dismiss Civil Case Q-5411 without prejudice and fulfilled partly her obligation under the
Contract by paying several installment more. Without objection on the part of either of
the defendants therein, the case, as prayed for, was ordered dismissed without prejudice.

Shortly after the dismissal of Civil Case No. Q-5411, or on May 16, 1961, the Board
again passed and approved Resolution No. 550 reconsidering altogether its commitments
to plaintiff De Leon, totally disregarding the Conditional Contract to Sell previously
executed, and reawarding the subject-property to Makabingkil.

It was precisely at that stage that the above decision of the Court of Appeals noted that
respondent spouses as plaintiffs instituted Civil Case Q-5866 for injunction with damages
"against the PHHC seeking, among others, to enjoin the latter, its officers, representatives, agents
or persons acting for and in its behalf from implementing PHHC Board Resolution No. 550 dated
May 16, 1961, or from awarding or selling the lot in question to Concepcion Makabingkil or any
other person or persons." What is even more noteworthy is that, as shown in the petition,
petitioner Makabingkil was at no time named a party and could not therefore be heard on a
matter wherein her vital rights were undoubtedly involved.

From the above recital of undisputed facts, the picture clearly emerges. Petitioner was indeed
denied due process. This petition for certiorari and prohibition possesses merit.

As far back as 1908, U.S. v. Ling Su Fan,12 this Court affixed the imprimatur of its approval on
Webster's definition of procedural due process. Thus: "By the law of the land is more clearly
intended the general law, a law which hears before it condemns, which proceeds upon inquiry
and renders judgment only after trial."13 This Court in a 1924 decision, Lopez v. Director of
Lands, after quoting the above added that due process "contemplates notice and opportunity to be
heard before judgment is rendered, affecting one's person or property." It is satisfied according to
another leading decision: "If the following conditions are present, namely: (1) There must be a
court or tribunal clothed with judicial power to hear and determine the matter before it; (2)
jurisdiction must be lawfully acquired over the person of the defendant or over the property
which is the subject of the proceeding; (3) the defendant must be given an opportunity to be
heard; and (4) judgment must be rendered upon lawful hearing."14

The due process concept is thus a vital living force in our jurisprudence. It was so announced in
an impressive number of decisions, not all of which need be recounted here. Fidelity to such a
view has been reinforced by time. Thus in Cuaycong v. Sengbengco,15 decided in 1960, this
Court through the then Justice, now Chief Justice, Concepcion declared that "acts of Congress, as
well as those of the Executive, can deny due process only under pain of nullity, and judicial
proceedings suffering from the same flaw are subject to the same sanction, any statutory
provision to the contrary notwithstanding." Only lately, this Court through Justice Bengzon
reiterated that the due process clause "is designed to secure justice as a living reality; not to
sacrifice it by paying undue homage to formality."16

A 1957 decision, Cruzcosa v. Concepcion,17 is even more illuminating in so far as the

availability of the remedy sought is concerned. In the language of this Court, speaking through
Justice J.B.L. Reyes: "The petition is clearly meritorious. Petitioners were conclusively found by
the Court of Appeals to be co-owners of the building in question. Having an interest therein, they
should have been made parties to the ejectment proceedings to give them a chance to protect
their rights; and not having been made parties thereto, they are not bound and can not be affected
by the judgment rendered therein against their co-owner Catalino Cruzcosa, Jr. . . . ." Two due
process cases deal specifically with a writ of execution that could not validly be enforced against
a party who was not given his day in court, Sicat v. Reyes,18 and Hamoy vs. Batingolo.19
According to the former: "The above agreement, which served as basis for the ejectment of
Alipio Sicat, cannot be binding and conclusive upon the latter, who is not a party to the case.
Indeed, that order, as well as the writ for execution, cannot legally be enforced against Alipio
Sicat for the simple reason that he was not given his day in court." From the latter: "The issue
raised in the motion to Rangar is not involved in the appeal for it concerns a right which he
claims over the property which has not so far been litigated for the reason that he was not made a
party to the case either as plaintiff or as defendant. He only came to know of the litigation when
it was forced out of the property by the sheriff, and so he filed the present motion to be heard and
prove his title to the property. This he has the right to do as the most expeditious manner to
protect his interest instead of filing a separate action which generally is long, tedious and
protracted."

Petitioner was therefore right in assertion that "the separate and collective effect of the Writ of
Execution and Order of Demolition . . . and the respondent Provincial Sheriff's threat to enforce
[the same] is to work unwarranted hardship and irreparable damage and injustice upon the
Petitioner who have not been accorded her day in court." It would as claimed be tantamount to a
deprivation of her property rights without due process of law. She is entitled to redress. This
petition for certiorari and prohibition must be granted.

Petitioner's right to due process must be respected. This Court could go even further. This
petition for certiorari and prohibition could be utilized to determine who has the right to the
disputed lot. This approach of resolving the issue is not without precedent. Francisco v. City of
Davao,20 decided by the then Justice, now Chief Justice, Concepcion, points the way: ". . . The
ends of justice would not be served, if we now dismiss the case — over nine (9) years after it has
been initiated — and bade the plaintiff to start all over again, following the procedure that the
defendants had asked the lower court, but which the latter refused, to require. At any rate, since
the legal question raised in the pleadings has reached this Court, and the assessment complained
of is manifestly violative of the clear and express provision of the law, it is best that we decide
said question, instead of further deferring its resolution." The records of the case however show
that another litigation involving petitioner, the PHHC, and the respondent spouses is still pending
adjudication. For that reason, any further pronouncement from this Court would be
inappropriate.

WHEREFORE, this petition for certiorari and prohibition is granted and the preliminary
injunction issued made permanent. With costs against respondent spouses, Irene de Leon and
Vicente Llanes.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Sanchez, Castro and Angeles,
JJ., concur.
Zaldivar, J., took no part.

G.R. No. L-59431 July 25, 1984

ANTERO M. SISON, JR., petitioner,

vs.
RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO
VILLA, Deputy Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO Deputy
Commissioner, Bureau of Internal Revenue; MANUEL ALBA, Minister of Budget,
FRANCISCO TANTUICO, Chairman, Commissioner on Audit, and CESAR E. A.
VIRATA, Minister of Finance, respondents.
Antero Sison for petitioner and for his own behalf.

The Solicitor General for respondents.

FERNANDO, C.J.:

The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1
on the validity of Section I of Batas Pambansa Blg. 135 depends upon a showing of its
constitutional infirmity. The assailed provision further amends Section 21 of the National
Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a)
taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings,
(d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes
and from trust fund and similar arrangements, (e) dividends and share of individual partner in the
net profits of taxable partnership, (f) adjusted gross income. 2 Petitioner 3 as taxpayer alleges
that by virtue thereof, "he would be unduly discriminated against by the imposition of higher
rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are
imposed upon fixed income or salaried individual taxpayers. 4 He characterizes the above sction
as arbitrary amounting to class legislation, oppressive and capricious in character 5 For
petitioner, therefore, there is a transgression of both the equal protection and due process clauses
6 of the Constitution as well as of the rule requiring uniformity in taxation. 7

The Court, in a resolution of January 26, 1982, required respondents to file an answer within 10
days from notice. Such an answer, after two extensions were granted the Office of the Solicitor
General, was filed on May 28, 1982. 8 The facts as alleged were admitted but not the allegations
which to their mind are "mere arguments, opinions or conclusions on the part of the petitioner,
the truth [for them] being those stated [in their] Special and Affirmative Defenses." 9 The answer
then affirmed: "Batas Pambansa Big. 135 is a valid exercise of the State's power to tax. The
authorities and cases cited while correctly quoted or paraghraph do not support petitioner's
stand." 10 The prayer is for the dismissal of the petition for lack of merit.

This Court finds such a plea more than justified. The petition must be dismissed.

1. It is manifest that the field of state activity has assumed a much wider scope, The reason was
so clearly set forth by retired Chief Justice Makalintal thus: "The areas which used to be left to
private enterprise and initiative and which the government was called upon to enter optionally,
and only 'because it was better equipped to administer for the public welfare than is any private
individual or group of individuals,' continue to lose their well-defined boundaries and to be
absorbed within activities that the government must undertake in its sovereign capacity if it is to
meet the increasing social challenges of the times." 11 Hence the need for more revenues. The
power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state
functions. It is the source of the bulk of public funds. To praphrase a recent decision, taxes being
the lifeblood of the government, their prompt and certain availability is of the essence. 12

2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It
is the strongest of all the powers of of government." 13 It is, of course, to be admitted that for all
its plenitude 'the power to tax is not unconfined. There are restrictions. The Constitution sets
forth such limits . Adversely affecting as it does properly rights, both the due process and equal
protection clauses inay properly be invoked, all petitioner does, to invalidate in appropriate cases
a revenue measure. if it were otherwise, there would -be truth to the 1803 dictum of Chief Justice
Marshall that "the power to tax involves the power to destroy." 14 In a separate opinion in
Graves v. New York, 15 Justice Frankfurter, after referring to it as an 1, unfortunate remark
characterized it as "a flourish of rhetoric [attributable to] the intellectual fashion of the times
following] a free use of absolutes." 16 This is merely to emphasize that it is riot and there cannot
be such a constitutional mandate. Justice Frankfurter could rightfully conclude: "The web of
unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice
Holmess pen: 'The power to tax is not the power to destroy while this Court sits." 17 So it is in
the Philippines.

3. This Court then is left with no choice. The Constitution as the fundamental law overrides any
legislative or executive, act that runs counter to it. In any case therefore where it can be
demonstrated that the challenged statutory provision — as petitioner here alleges — fails to
abide by its command, then this Court must so declare and adjudge it null. The injury thus is
centered on the question of whether the imposition of a higher tax rate on taxable net income
derived from business or profession than on compensation is constitutionally infirm.

4, The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere

allegation, as here. does not suffice. There must be a factual foundation of such unconstitutional
taint. Considering that petitioner here would condemn such a provision as void or its face, he has
not made out a case. This is merely to adhere to the authoritative doctrine that were the due
process and equal protection clauses are invoked, considering that they arc not fixed rules but
rather broad standards, there is a need for of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail. 18

5. It is undoubted that the due process clause may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution. An obvious example is where it can be
shown to amount to the confiscation of property. That would be a clear abuse of power. It then
becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an
authority not conferred. That properly calls for the application of the Holmes dictum. It has also
been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for
a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to
attack on due process grounds. 19

6. Now for equal protection. The applicable standard to avoid the charge that there is a denial of
this constitutional mandate whether the assailed act is in the exercise of the lice power or the
power of eminent domain is to demonstrated 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 circumtances 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." 20 That same formulation applies as well to taxation
measures. The equal protection clause is, of course, inspired by the noble concept of
approximating the Ideal of the laws benefits being available to all and the affairs of men being
governed by that serene and impartial uniformity, which is of the very essence of the Idea of law.
There is, however, wisdom, as well as realism in these words of Justice Frankfurter: "The
equality at which the 'equal protection' clause aims is not a disembodied equality. The Fourteenth
Amendment enjoins 'the equal protection of the laws,' and laws are not abstract propositions.
They do not relate to abstract units A, B and C, but are expressions of policy arising out of
specific difficulties, address to the attainment of specific ends by the use of specific remedies.
The Constitution does not require things which are different in fact or opinion to be treated in
law as though they were the same." 21 Hence the constant reiteration of the view that
classification if rational in character is allowable. As a matter of fact, in a leading case of Lutz V.
Araneta, 22 this Court, through Justice J.B.L. Reyes, went so far as to hold "at any rate, it is
inherent in the power to tax that a state be free to select the subjects of taxation, and it has been
repeatedly held that 'inequalities which result from a singling out of one particular class for
taxation, or exemption infringe no constitutional limitation.'" 23

7. Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution:
"The rule of taxation shag be uniform and equitable." 24 This requirement is met according to
Justice Laurel in Philippine Trust Company v. Yatco,25 decided in 1940, when the tax "operates
with the same force and effect in every place where the subject may be found. " 26 He likewise
added: "The rule of uniformity does not call for perfect uniformity or perfect equality, because
this is hardly attainable." 27 The problem of classification did not present itself in that case. It
did not arise until nine years later, when the Supreme Court held: "Equality and uniformity in
taxation means that all taxable articles or kinds of property of the same class shall be taxed at the
same rate. The taxing power has the authority to make reasonable and natural classifications for
purposes of taxation, ... . 28 As clarified by Justice Tuason, where "the differentiation"
complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory
within the meaning of this clause and is therefore uniform." 29 There is quite a similarity then to
the standard of equal protection for all that is required is that the tax "applies equally to all
persons, firms and corporations placed in similar situation."30

8. Further on this point. Apparently, what misled petitioner is his failure to take into
consideration the distinction between a tax rate and a tax base. There is no legal objection to a
broader tax base or taxable income by eliminating all deductible items and at the same time
reducing the applicable tax rate. Taxpayers may be classified into different categories. To repeat,
it. is enough that the classification must rest upon substantial distinctions that make real
differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the,
discernible basis of classification is the susceptibility of the income to the application of
generalized rules removing all deductible items for all taxpayers within the class and fixing a set
of reduced tax rates to be applied to all of them. Taxpayers who are recipients of compensation
income are set apart as a class. As there is practically no overhead expense, these taxpayers are e
not entitled to make deductions for income tax purposes because they are in the same situation
more or less. On the other hand, in the case of professionals in the practice of their calling and
businessmen, there is no uniformity in the costs or expenses necessary to produce their income.
It would not be just then to disregard the disparities by giving all of them zero deduction and
indiscriminately impose on all alike the same tax rates on the basis of gross income. There is
ample justification then for the Batasang Pambansa to adopt the gross system of income taxation
to compensation income, while continuing the system of net income taxation as regards
professional and business income.

9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1)
lack of factual foundation to show the arbitrary character of the assailed provision; 31 (2) the
force of controlling doctrines on due process, equal protection, and uniformity in taxation and (3)
the reasonableness of the distinction between compensation and taxable net income of
professionals and businessman certainly not a suspect classification,

WHEREFORE, the petition is dismissed. Costs against petitioner.

Makasiar, Concepcion, Jr., Guerero, Melencio-Herrera, Escolin, Relova, Gutierrez, Jr., De la

Fuente and Cuevas, JJ., concur.

Teehankee, J., concurs in the result.

Plana, J., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur in the result. The petitioner has no cause of action for prohibition.

ABAD SANTOS, J., dissenting:

This is a frivolous suit. While the tax rates for compensation income are lower than those for net
income such circumtance does not necessarily result in lower tax payments for these receiving
compensation income. In fact, the reverse will most likely be the case; those who file returns on
the basis of net income will pay less taxes because they claim all sort of deduction justified or
not I vote for dismissal.

Separate Opinions

AQUINO, J., concurring:

I concur in the result. The petitioner has no cause of action for prohibition.

ABAD SANTOS, J., dissenting:

This is a frivolous suit. While the tax rates for compensation income are lower than those for net
income such circumtance does not necessarily result in lower tax payments for these receiving
compensation income. In fact, the reverse will most likely be the case; those who file returns on
the basis of net income will pay less taxes because they claim all sort of deduction justified or
not I vote for dismissal.

G.R. No. L-3538 May 28, 1952

JUAN LUNA SUBDIVISION, INC., plaintiff-appellee,

vs.
M. SARMIENTO, ET AL., defendants-appellants.

Gibbs, Gibbs, Chuidian and Quasha for appellee.

City Fiscal Eugenio Angeles and Assistant Fiscal Cornelio S. Ruperto for appellant.
La O and Feria for defendant Philippine Trust Co.

TUASON, J.:

This is an appeal by the City Treasure of the City of Manila from the following judgment handed
down in the above-entitled cause:

POR TODAS CONSIDERACIONES, el Jugado dicta sentencia ordenado: que el

demandado Tesorero de la Ciudad de Manila pague a la demandante la cantidad de
P2,210.52 sin intereses; que la demandada Philippine Trust Companypague a la
demandante la suma de P105 sin intereses.

The Philippine Trust Company did not appeal.

The facts of the case, in so far as they are not in controversy, are these: The plaintiff was a
corporation duly organized and existing under the laws of the Philippines with principal office in
Manila. On December 29, 1941 it issued to the City Treasurer of Manila, and the City Treasurer
accepted checks No. 628334 for P2,210.52 drawn upon the Philippine Trust Company with
which it had a credit balance of P4,940.17 on its account. This check was to be applied to
plaintiff's land tax for the second semester of 1941 the exact amount of which was yet
undetermine and so it was entered in the ledger, Exhibit "F", as deposit by the taxpayer. On
February 20, 1942, presumably after the exact amount had been verified, which was P341.60, the
balance of P1,868.92, covered by voucher No. 1487 of the City Treasure's office, was noted in
the ledger as a credit to the Juan Luna Subdivision, Inc.

Further than this, the records of the City Treasurer's office do not show what was done with the
check. But the books of the Philippine Trust Company do reveal that it was deposited with the
Philippine National Bank, the City Treasurer's sole depository, on December 29, 1941, and that it
was presented by that Bank to the Philippine Trust Company on May 1, 1944 and was cashed by
the drawee. Manuel F. Garcia, Assistant Treasurer of the Philippine Trust Company, testified
that soon after his bank was authorized in March, 1942, to reopen for business (it had been
closed by order of the Japanese military authorities,) it received from the Philippine National
Bank a bundle of checks, including appellees check No. 628334, drawn upon the Philippine
Trust Company before the Japanese occupation and held in abeyance by the Philippine National
Bank pending resumption of operation by the Philippine Trust Company; that these checks,
including the appellee's check, were accepted and the amounts thereof debited against the
respective drawer's accounts; that with respect to check No. 628334, the operation was effected
on May 1, 1944.

The City refused after liberation to refund the plaintiff's deposit or apply it to such future taxes as
might be found due, while the Philippine Trust Company was unwilling to reverse its debit entry
against the Juan Luna Subdivision, Inc. It was upon this predicament that the Juan Luna
Subdivision, Inc. brought this suit against the City Treasurer and the Philippine Trust Company
as defendants in the alternative. The purpose of the action is determine which of the two
defendants is liable for plaintiff's check. There is a separate cause of action which concerns the
plaintiff and the City Treasurer alone.

On the main cause of action the burden of the City Treasurer's defense is that his office was not
benefited why the check. He denies that the said check was cashed "or rather there was no proof
that it was." It is pointed out that Mr. Gibbs, testifying in open court, admitted that he had never
received nor could he have received the cancelled checks;" that "the courts finding that sum
P2,210.52 was in fact and in truth added to the actual cash of the Treasurer of the City of Manila
is based on conjectures and surprises without any support of pertinent and competent proof;" that
"special ledger sheet of the City Treasurer . . . simply showed that some accounting transaction
in the book value was done or accomplished but these accounting processes did not show that
actual payment had been made (by the Philippine National Bank) to the City Treasurer, and that
the City Treasurer had in effect received said amount represented by said checks;" that "the
burden of proving that the check in question was in fact paid rest on the defendant Philippine
Trust Company." It is further argued that "there is a lot of difference between the book value and
the cash value of this check," that the acceptance by the City Treasurer and the issuance of the
Official Receipt No. 755402 on December 29, 1941 in favor of Juan Luna Subdivision, Inc. did
not simultaneously and automatically place in the hands of the City Treasurer the cash value
represented by the said checks in the amount of P2,210.52".

That the plaintiff's check was deposited by the City Treasurer with the Philippine National Bank,
and the latter was paid the cash equivalent thereof by the Philippine Trust Company, admits of
no doubt. The entries in the books of the latter bank are not in the least impugned. Whether the
City Treasurer was paid that amount by the Philippine National Bank or given credit for it, the
City Treasurer would neither admit nor deny. He said:

A. Not that I am not willing (to admit); I am willing, but I am not the right party to admit
that the check was actually collected by the City of Manila from the Philippine Trust
Company, The Philippine Trust Company never submitted any financial statement. To
my knowledge, the City Treasurer of Manila has never been informed by the Philippine
Trust Company or by the Philippine National Bank, which is the depository of the City of
Manila, that same check was collected by the City Manila from the Philippine National
Bank; by that I am not trying to say that the check was not actually collected by the City.
 xxx xxx xxx

Q. This particular check in question pertains to the revenue account of the City of Manila,
is that right?

A. Yes, sir.

Q. Ordinarily it would be deposited with the Philippine National Bank, is that right?

A. That is right.

Q. And the Philippine National Bank has not rendered you any account of its collections?

A. I would not say that; they probably gave us statement, but as we have lost our records
pertaining to the occupation and the pre-war years, I could not make a categorial
statement.

From the fact that the Philippine National Bank was open throughout the Japanese occupation
and the other facts heretofore admitted or not denied, it is to be presumed that the Philippine
National Bank credited the City Treasurer with the amount of the check in question, and that the
City Treasurer, taking ordinary care of his concerns, withdrew that amount. This is in accordance
with the presumption that things happened according to the ordinary course of business and
habits. The burden is on the City Treasurer, not on the plaintiff, to rebut these presumptions.

But the point is not material at all as far as the plaintiff is concerned. What became of the check
or where the money went is a matter between the City Treasurer and the Philippine National
Bank. The drawer of the check had funds on deposit to meet it; the City Treasurer accepted it and
deposited it with the Philippine National Bank, and the Philippine National Bank, collected the
equivalent amount from the drawee Bank. In the light of these circumstances, the City Treasurer
became the Philippine National Bank's creditor and the Juan Luna Subdivision, Inc. was released
from liability on its checks. If the City Treasurer did not collect his credit from the Philippine
National Bank or otherwise make use of it, he alone was to blame and should suffer the
consequences of his neglect. That the City Treasurer held the check merely in trust for plaintiff
does not alter the situation as far as his branch of the case goes.

The amount to be refunded to the plaintiff is the subject of another disagreement between the
Juan Luna Subdivision, Inc. and the City Treasurer. This is the ground of other cause of action
heretofore referred to.

The plaintiff claims the whole amount of the check contending that taxes for the last semester of
1941 have been remitted by Commonwealth Act No. 703.

Section 1 of this Act, which was approved on November 1, 1945, provides:

All land taxes and penalties due and payable for the years nineteen hundred and forty-two
nineteen hundred and forty-three nineteen hundred and forty-four and fifty per cent of the
tax due for nineteen hundred and forty-five, are hereby remitted. The land taxes and
penalties due and payable for the second semester of the year nineteen hundred and forty-
one shall also be remitted the if the remaining fifty per cent corresponding to the year
nineteen hundred and forty-five shall been paid on or before December thirty-first,
nineteen hundred and forty-five.

Does this provision cover taxes paid before its enactment as the plaintiff maintains and the court
below held, or does it refer, as the City Treasurer believes, only to taxes which were still unpaid?

There is no ambiguity in the language of the law. It says "taxes and penalties due and payable,"
the literal meaning of which taxes owned or owing. (See Webster's New International
Dictionary) Note that the provision speaks of penalties, and note that penalties accrue only when
taxes are not paid on time. The word "remit" underlined by the appellant does not help its theory,
for to remit to desist or refrain from exacting, inflicting, or enforcing something as well as to
restore what has already been taken. (Webster's New International Dictionary.)

We do not see that literal interpretation of Commonwealth Act No. 703 runs counter and does
violence to its spirit and intention , nor do we think that such interpretation would be
"constitutionally bad" in that "it would unduly discriminate against taxpayers who had paid in
favor of delinquent taxpayers."

The remission of taxes due and payable to the exclusion of taxes already collected does not
constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be open
to attack as class legislation only if all taxpayers belonging to one class were not treated alike.
They are not.

As to the justice of the measure, the confinement of the condonation to deliquent taxes was not
without good reason. The property owners who had paid their taxes before liberation and those
who had not were not on the same footing on the need of material relief. It is true that the
ravages and devastations wrought by was operations had rendered the bulk of the people
destitute or impoverished and that it was this situation which prompted the passage of
Commonwealth Act No. 703. But it is also true that the taxpayers who had been in arrears in
their obligation would have to satisfy their liability with genuine currency, while the taxes paid
during the occupation had been satisfied in Japanese military notes, many of them at a time when
those notes were well-nigh worthless. To refund those taxes with the restored currency, even if
the Government could afford to do so, would be unduly to enrich many of the payers at a greater
expense to the people at large. What is more, the process of refunding would entail a tremendous
amount of work and difficulties, what with the destruction of tax records and the great number of
claimants who would take advantage of such grace.

It is said that the plaintiff's check was in the nature of deposit, held trust by the City Treasurer,
and that for this reason, plaintiff's taxes are to be regarded as still due and payable. This
argument is well taken but only to the extent of P1,868.92. The amount of P341.60 as early as
February 20, 1942, had been applied to the second half of plaintiff's 1941 tax and become part of
the general funds of the city treasury. From that date that tax was legally and actually paid and
settled.

The appealed judgment should, therefore, be modified so that the defendant City Treasurer shall
refund to the plaintiff the sum of P1,868.92 instead P2,210.52, without costs. It is so ordered.

Paras, C.J., Feria, Pablo, Bengzon, Montemayor, Bautista Angelo and Labrador, JJ., concur.

G.R. No. L-2947 January 11, 1951

MANILA RACE HORSE TRAINERS ASSOCIATION, INC., and JUAN T. SORDAN,

plaintiffs-appellants,
vs.
MANUEL DE LA FUENTE, defendant-appellee.

Soriano, Garde and Cervania for appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Arsenio Nañawa for appellee.

TUASON, J.:

This action was instituted for a declaratory relief by the Manila Race Horses Trainers
Association, Inc., a non-stock corporation duly organized and existing under and by virtue of the
laws of the Philippines, who allege that they are owners of boarding stables for race horses and
that their rights as such are affected by Ordinance No. 3065 of the City of Manila approved on
July 1, 1947.1 They made the Mayor of Manila defendant and prayed that said ordinance be
declared invalid as violative of the Philippine Constitution.

The case was submitted on the pleadings, and the decision was that the ordinance in question "is
constitutional and valid and has been enacted in accordance with the powers of the Municipal
Board granted by the Charter of the City of Manila."

On appeal, the plaintiffs as appellants make three assignments of error, the first two of which are
discussed jointly in their brief under two separate topics.

First, it is maintained that the ordinance under consideration is a tax on race horses as distinct
from boarding stables. It is argued that by section 2 the basis of the license fees "is the number of
race horses kept or maintained in the boarding stables to be paid by the maintainers at the rate of
P10.00 a year for each race horse;" that "the fee is increased correspondingly P10 for each
additional race horse maintained or fed in the stable;" and that "by the same token, an empty
stable for race horse pays no license fee at all."

The spirit, rather than the letter, of an ordinance determines the construction thereof, and the
court looks less to its words and more to the context, subject matter, consequence and effect.
Accordingly, what is within the spirit is within the ordinance although it is not within the letter
thereof, while that which is in the letter, although not within the spirit, is not within the
ordinance. (62 C. J. S., 845.) From the context of Ordinance No. 3065, the intent to tax or license
stables and not horses is clearly manifest. The tax is assessed not on the owners of the horses but
on the owners of the stables, as counsel admit in their brief, although there is nothing, of course,
to stop stable owners from shifting the tax to the horse owners in the form of increased rents or
fees, which is generally the case.

It is also plain from the text of the whole ordinance that the number of horses is used in the
assessment purely as a method of fixing an equitable and practical distribution of the burden
imposed by the measure. Far from being obnoxious, the method is fair and just. It is but fair and
just that for a boarding stable where only one horse is maintained proportionately less amount
should be exacted than for a stable where more horses are kept and from which greater income is
derived.

We do not share plaintiff's opinion, apropos the second proposition, that the ordinance in
question is discriminatory and savors of class legislation. In taxing only boarding stables for race
horses, we do not believe that the ordinance, makes arbitrary classification. In the case of
Eastern Theatrical Co. Inc., vs. Alfonso, 46 Off. Gaz. Supp. to No. 11, p. 303,* it was said there
is equality and uniformity in taxation if all articles or kinds of property of the same class are
taxed at the same rate. Thus, it was held in that case, that "the fact that some places of
amusement are not taxed while others, such as cinematographs, theaters, vaudeville companies,
theatrical shows, and boxing exhibitions and other kinds of amusements or places of amusement
are taxed, is not argument at all against the equality and uniformity of tax imposition." Applying
this criterion to the present case, there would be discrimination if some boarding stables of the
same class used for the same number of horses were not taxed or were made to pay less or more
than others.

From the viewpoint of economics and public policy the taxing of boarding stables for race horses
to the exclusion of boarding stables for horses dedicated to other purposes is not indefensible.
The owners of boarding stables for race horses and, for that matter, the race horse owners
themselves, who in the scheme of shifting may carry the taxation burden, are a class by
themselves and appropriately taxed where owners of other kinds of horses are taxed less or not at
all, considering that equity in taxation is generally conceived in terms of ability to pay in relation
to the benefits received by the taxpayer and by the public from the business or property taxed.
Race horses are devoted to gambling if legalized, their owners derive fat income and the public
hardly any profit from horse racing, and this business demands relatively heavy police
supervision. Taking everything into account, the differentiation against which the plaintiffs
complain conforms to the practical dictates of justice and equity and is not discrimatory within
the meaning of the Constitution.

One ground of attack in the court below on the constitutionality of the ordinance — variance
between the title and the subject matter — apparently has been abandoned. In its place a new
question is brought up on the appeal in the third and last assignment of error. It is now
contended, for the first time, that "the Municipal Board of Manila (is) without power to enact
ordinance taxing private stables for race horses," and that the lower court erred in not so
declaring. This assignment of error has reference to Class B or the second sub-paragraph of
section 1 of the ordinance.

Not having been raised in the pleading, this question was properly ignored, not to say that even it
had been raised it would not have been available as basis for a declaration of nullity of the
ordinance. The clause of the ordinance taxing or licensing boarding stables for race horses does
not prejudice the plaintiffs in any material way, and it is well settled that a person who is not
adversely affected by a licensing ordinance may not attack its validity. Stated differently, he may
not complain that a licensing ordinance is invalid as against a class other than that to which he
belongs. (62 C. J. S.830, 831.) By analogy, where a municipal ordinance is valid in some of its
parts and invalid as to others and the valid parts are separable from the invalid ones — in which
latter case the valid provisions stand as operative — the plaintiff may contest the validity of the
provisions that injure his interest but not those that do not.

We are of the opinion that the trial court committed no error and the judgment is affirmed with
costs against the plaintiff-appellants.

Moran, C.J., Paras, Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista
Angelo, JJ., concur.

G.R. No. L-26521 December 28, 1968

EUSEBIO VILLANUEVA, ET AL., plaintiff-appellee,

vs.
CITY OF ILOILO, defendants-appellants.

Pelaez, Jalandoni and Jamir for plaintiff-appellees.

Assistant City Fiscal Vicente P. Gengos for defendant-appellant.

CASTRO, J.:

Appeal by the defendant City of Iloilo from the decision of the Court of First Instance of Iloilo
declaring illegal Ordinance 11, series of 1960, entitled, "An Ordinance Imposing Municipal
License Tax On Persons Engaged In The Business Of Operating Tenement Houses," and
ordering the City to refund to the plaintiffs-appellees the sums of collected from them under the
said ordinance.

On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, imposing
license tax fees as follows: (1) tenement house (casa de vecindad), P25.00 annually; (2) tenement
house, partly or wholly engaged in or dedicated to business in the streets of J.M. Basa, Iznart and
Aldeguer, P24.00 per apartment; (3) tenement house, partly or wholly engaged in business in any
other streets, P12.00 per apartment. The validity and constitutionality of this ordinance were
challenged by the spouses Eusebio Villanueva and Remedies Sian Villanueva, owners of four
tenement houses containing 34 apartments. This Court, in City of Iloilo vs. Remedios Sian
Villanueva and Eusebio Villanueva, L-12695, March 23, 1959, declared the ordinance ultra
vires, "it not appearing that the power to tax owners of tenement houses is one among those
clearly and expressly granted to the City of Iloilo by its Charter."
On January 15, 1960 the municipal board of Iloilo City, believing, obviously, that with the
passage of Republic Act 2264, otherwise known as the Local Autonomy Act, it had acquired the
authority or power to enact an ordinance similar to that previously declared by this Court as ultra
vires, enacted Ordinance 11, series of 1960, hereunder quoted in full:

AN ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON PERSONS

ENGAGED IN THE BUSINESS OF OPERATING TENEMENT HOUSES

Be it ordained by the Municipal Board of the City of Iloilo, pursuant to the provisions of
Republic Act No. 2264, otherwise known as the Autonomy Law of Local Government,
that:

Section 1. — A municipal license tax is hereby imposed on tenement houses in

accordance with the schedule of payment herein provided.

Section 2. — Tenement house as contemplated in this ordinance shall mean any building
or dwelling for renting space divided into separate apartments or accessorias.

Section 3. — The municipal license tax provided in Section 1 hereof shall be as follows:

I. Tenement houses:

(a) Apartment house made of strong materials P20.00 per door p.a.

(b) Apartment house made of mixed materials P10.00 per door p.a.

II Rooming house of strong materials P10.00 per door p.a.

Rooming house of mixed materials P5.00 per door p.a.

III. Tenement house partly or wholly engaged in or dedicated to

business in the following streets: J.M. Basa, Iznart, Aldeguer,
Guanco and Ledesma from Plazoleto Gay to Valeria. St. P30.00 per door p.a.

IV. Tenement house partly or wholly engaged in or dedicated to

business in any other street P12.00 per door p.a.

V. Tenement houses at the streets surrounding the super market

as soon as said place is declared commercial P24.00 per door p.a.

Section 4. — All ordinances or parts thereof inconsistent herewith are hereby amended.

Section 5. — Any person found violating this ordinance shall be punished with a fine
note exceeding Two Hundred Pesos (P200.00) or an imprisonment of not more than six
(6) months or both at the discretion of the Court.

Section 6 — This ordinance shall take effect upon approval.

ENACTED, January 15, 1960.

In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are owners of five
tenement houses, aggregately containing 43 apartments, while the other appellees and the same
Remedios S. Villanueva are owners of ten apartments. Each of the appellees' apartments has a
door leading to a street and is rented by either a Filipino or Chinese merchant. The first floor is
utilized as a store, while the second floor is used as a dwelling of the owner of the store. Eusebio
Villanueva owns, likewise, apartment buildings for rent in Bacolod, Dumaguete City, Baguio
City and Quezon City, which cities, according to him, do not impose tenement or apartment
taxes.
By virtue of the ordinance in question, the appellant City collected from spouses Eusebio
Villanueva and Remedios S. Villanueva, for the years 1960-1964, the sum of P5,824.30, and
from the appellees Pio Sian Melliza, Teresita S. Topacio, and Remedios S. Villanueva, for the
years 1960-1964, the sum of P1,317.00. Eusebio Villanueva has likewise been paying real estate
taxes on his property.

On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed a complaint, and an amended
complaint, respectively, against the City of Iloilo, in the aforementioned court, praying that
Ordinance 11, series of 1960, be declared "invalid for being beyond the powers of the Municipal
Council of the City of Iloilo to enact, and unconstitutional for being violative of the rule as to
uniformity of taxation and for depriving said plaintiffs of the equal protection clause of the
Constitution," and that the City be ordered to refund the amounts collected from them under the
said ordinance.

On March 30, 1966,1 the lower court rendered judgment declaring the ordinance illegal on the
grounds that (a) "Republic Act 2264 does not empower cities to impose apartment taxes," (b) the
same is "oppressive and unreasonable," for the reason that it penalizes owners of tenement
houses who fail to pay the tax, (c) it constitutes not only double taxation, but treble at that and
(d) it violates the rule of uniformity of taxation.

The issues posed in this appeal are:

1. Is Ordinance 11, series of 1960, of the City of Iloilo, illegal because it imposes double
taxation?

2. Is the City of Iloilo empowered by the Local Autonomy Act to impose tenement taxes?

3. Is Ordinance 11, series of 1960, oppressive and unreasonable because it carries a penal
clause?

4. Does Ordinance 11, series of 1960, violate the rule of uniformity of taxation?

1. The pertinent provisions of the Local Autonomy Act are hereunder quoted:

SEC. 2. Any provision of law to the contrary notwithstanding, all chartered cities,
municipalities and municipal districts shall have authority to impose municipal license
taxes or fees upon persons engaged in any occupation or business, or exercising
privileges in chartered cities, municipalities or municipal districts by requiring them to
secure licences at rates fixed by the municipal board or city council of the city, the
municipal council of the municipality, or the municipal district council of the municipal
district; to collect fees and charges for services rendered by the city, municipality or
municipal district; to regulate and impose reasonable fees for services rendered in
connection with any business, profession or occupation being conducted within the city,
municipality or municipal district and otherwise to levy for public purposes, just and
uniform taxes, licenses or fees; Provided, That municipalities and municipal districts
shall, in no case, impose any percentage tax on sales or other taxes in any form based
thereon nor impose taxes on articles subject to specific tax, except gasoline, under the
provisions of the National Internal Revenue Code; Provided, however, That no city,
municipality or municipal district may levy or impose any of the following:

(a) Residence tax;

(b) Documentary stamp tax;

(c) Taxes on the business of persons engaged in the printing and publication of any
newspaper, magazine, review or bulletin appearing at regular intervals and having fixed
 prices for for subscription and sale, and which is not published primarily for the purpose
of publishing advertisements;

(d) Taxes on persons operating waterworks, irrigation and other public utilities except
electric light, heat and power;

(e) Taxes on forest products and forest concessions;

(f) Taxes on estates, inheritance, gifts, legacies, and other acquisitions mortis causa;

(g) Taxes on income of any kind whatsoever;

(h) Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof;

(i) Customs duties registration, wharfage dues on wharves owned by the national
government, tonnage, and all other kinds of customs fees, charges and duties;

(j) Taxes of any kind on banks, insurance companies, and persons paying franchise tax;
and

(k) Taxes on premiums paid by owners of property who obtain insurance directly with
foreign insurance companies.

A tax ordinance shall go into effect on the fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided, however, That the Secretary of Finance
shall have authority to suspend the effectivity of any ordinance within one hundred and
twenty days after its passage, if, in his opinion, the tax or fee therein levied or imposed is
unjust, excessive, oppressive, or confiscatory, and when the said Secretary exercises this
authority the effectivity of such ordinance shall be suspended.

In such event, the municipal board or city council in the case of cities and the municipal
council or municipal district council in the case of municipalities or municipal districts
may appeal the decision of the Secretary of Finance to the court during the pendency of
which case the tax levied shall be considered as paid under protest.

It is now settled that the aforequoted provisions of Republic Act 2264 confer on local
governments broad taxing authority which extends to almost "everything, excepting those which
are mentioned therein," provided that the tax so levied is "for public purposes, just and uniform,"
and does not transgress any constitutional provision or is not repugnant to a controlling statute.2
Thus, when a tax, levied under the authority of a city or municipal ordinance, is not within the
exceptions and limitations aforementioned, the same comes within the ambit of the general rule,
pursuant to the rules of expressio unius est exclusio alterius, and exceptio firmat regulum in
casibus non excepti.

Does the tax imposed by the ordinance in question fall within any of the exceptions provided for
in section 2 of the Local Autonomy Act? For this purpose, it is necessary to determine the true
nature of the tax. The appellees strongly maintain that it is a "property tax" or "real estate tax,"3
and not a "tax on persons engaged in any occupation or business or exercising privileges," or a
license tax, or a privilege tax, or an excise tax.4 Indeed, the title of the ordinance designates it as
a "municipal license tax on persons engaged in the business of operating tenement houses,"
while section 1 thereof states that a "municipal license tax is hereby imposed on tenement
houses." It is the phraseology of section 1 on which the appellees base their contention that the
tax involved is a real estate tax which, according to them, makes the ordinance ultra vires as it
imposes a levy "in excess of the one per centum real estate tax allowable under Sec. 38 of the
Iloilo City Charter, Com. Act 158."5.
It is our view, contrary to the appellees' contention, that the tax in question is not a real estate tax.
Obviously, the appellees confuse the tax with the real estate tax within the meaning of the
Assessment Law,6 which, although not applicable to the City of Iloilo, has counterpart provisions
in the Iloilo City Charter.7 A real estate tax is a direct tax on the ownership of lands and
buildings or other improvements thereon, not specially exempted,8 and is payable regardless of
whether the property is used or not, although the value may vary in accordance with such factor.9
The tax is usually single or indivisible, although the land and building or improvements erected
thereon are assessed separately, except when the land and building or improvements belong to
separate owners.10 It is a fixed proportion11 of the assessed value of the property taxed, and
requires, therefore, the intervention of assessors.12 It is collected or payable at appointed times,13
and it constitutes a superior lien on and is enforceable against the property14 subject to such
taxation, and not by imprisonment of the owner.

The tax imposed by the ordinance in question does not possess the aforestated attributes. It is not
a tax on the land on which the tenement houses are erected, although both land and tenement
houses may belong to the same owner. The tax is not a fixed proportion of the assessed value of
the tenement houses, and does not require the intervention of assessors or appraisers. It is not
payable at a designated time or date, and is not enforceable against the tenement houses either by
sale or distraint. Clearly, therefore, the tax in question is not a real estate tax.

"The spirit, rather than the letter, or an ordinance determines the construction thereof, and the
court looks less to its words and more to the context, subject-matter, consequence and effect.
Accordingly, what is within the spirit is within the ordinance although it is not within the letter
thereof, while that which is in the letter, although not within the spirit, is not within the
ordinance."15 It is within neither the letter nor the spirit of the ordinance that an additional real
estate tax is being imposed, otherwise the subject-matter would have been not merely tenement
houses. On the contrary, it is plain from the context of the ordinance that the intention is to
impose a license tax on the operation of tenement houses, which is a form of business or calling.
The ordinance, in both its title and body, particularly sections 1 and 3 thereof, designates the tax
imposed as a "municipal license tax" which, by itself, means an "imposition or exaction on the
right to use or dispose of property, to pursue a business, occupation, or calling, or to exercise a
privilege."16.

"The character of a tax is not to be fixed by any isolated words that may beemployed in
the statute creating it, but such words must be taken in the connection in which they are
used and the true character is to be deduced from the nature and essence of the subject."17
The subject-matter of the ordinance is tenement houses whose nature and essence are
expressly set forth in section 2 which defines a tenement house as "any building or
dwelling for renting space divided into separate apartments or accessorias." The Supreme
Court, in City of Iloilo vs. Remedios Sian Villanueva, et al., L-12695, March 23, 1959,
adopted the definition of a tenement house18 as "any house or building, or portion thereof,
which is rented, leased, or hired out to be occupied, or is occupied, as the home or
residence of three families or more living independently of each other and doing their
cooking in the premises or by more than two families upon any floor, so living and
cooking, but having a common right in the halls, stairways, yards, water-closets, or
privies, or some of them." Tenement houses, being necessarily offered for rent or lease by
their very nature and essence, therefore constitute a distinct form of business or calling,
similar to the hotel or motel business, or the operation of lodging houses or boarding
houses. This is precisely one of the reasons why this Court, in the said case of City of
Iloilo vs. Remedios Sian Villanueva, et al., supra, declared Ordinance 86 ultra vires,
because, although the municipal board of Iloilo City is empowered, under sec. 21, par. j
of its Charter, "to tax, fix the license fee for, and regulate hotels, restaurants, refreshment
parlors, cafes, lodging houses, boarding houses, livery garages, public warehouses,
pawnshops, theaters, cinematographs," tenement houses, which constitute a different
business enterprise,19 are not mentioned in the aforestated section of the City Charter of
Iloilo. Thus, in the aforesaid case, this Court explicitly said:.
 "And it not appearing that the power to tax owners of tenement houses is one among
those clearly and expressly granted to the City of Iloilo by its Charter, the exercise of
such power cannot be assumed and hence the ordinance in question is ultra vires insofar
as it taxes a tenement house such as those belonging to defendants." .

The lower court has interchangeably denominated the tax in question as a tenement tax or an
apartment tax. Called by either name, it is not among the exceptions listed in section 2 of the
Local Autonomy Act. On the other hand, the imposition by the ordinance of a license tax on
persons engaged in the business of operating tenement houses finds authority in section 2 of the
Local Autonomy Act which provides that chartered cities have the authority to impose municipal
license taxes or fees upon persons engaged in any occupation or business, or exercising
privileges within their respective territories, and "otherwise to levy for public purposes, just and
uniform taxes, licenses, or fees." .

2. The trial court condemned the ordinance as constituting "not only double taxation but treble at
that," because "buildings pay real estate taxes and also income taxes as provided for in Sec. 182
(A) (3) (s) of the National Internal Revenue Code, besides the tenement tax under the said
ordinance." Obviously, what the trial court refers to as "income taxes" are the fixed taxes on
business and occupation provided for in section 182, Title V, of the National Internal Revenue
Code, by virtue of which persons engaged in "leasing or renting property, whether on their
account as principals or as owners of rental property or properties," are considered "real estate
dealers" and are taxed according to the amount of their annual income.20.

While it is true that the plaintiffs-appellees are taxable under the aforesaid provisions of the
National Internal Revenue Code as real estate dealers, and still taxable under the ordinance in
question, the argument against double taxation may not be invoked. The same tax may be
imposed by the national government as well as by the local government. There is nothing
inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation,
calling or activity by both the State and a political subdivision thereof.21.

The contention that the plaintiffs-appellees are doubly taxed because they are paying the real
estate taxes and the tenement tax imposed by the ordinance in question, is also devoid of merit. It
is a well-settled rule that a license tax may be levied upon a business or occupation although the
land or property used in connection therewith is subject to property tax. The State may collect an
ad valorem tax on property used in a calling, and at the same time impose a license tax on that
calling, the imposition of the latter kind of tax being in no sensea double tax.22.

"In order to constitute double taxation in the objectionable or prohibited sense the same
property must be taxed twice when it should be taxed but once; both taxes must be
imposed on the same property or subject-matter, for the same purpose, by the same State,
Government, or taxing authority, within the same jurisdiction or taxing district, during
the same taxing period, and they must be the same kind or character of tax."23 It has been
shown that a real estate tax and the tenement tax imposed by the ordinance, although
imposed by the sametaxing authority, are not of the same kind or character.

At all events, there is no constitutional prohibition against double taxation in the Philippines.24 It
is something not favored, but is permissible, provided some other constitutional requirement is
not thereby violated, such as the requirement that taxes must be uniform."25.

3. The appellant City takes exception to the conclusion of the lower court that the ordinance is
not only oppressive because it "carries a penal clause of a fine of P200.00 or imprisonment of 6
months or both, if the owner or owners of the tenement buildings divided into apartments do not
pay the tenement or apartment tax fixed in said ordinance," but also unconstitutional as it
subjects the owners of tenement houses to criminal prosecution for non-payment of an obligation
which is purely sum of money." The lower court apparently had in mind, when it made the above
ruling, the provision of the Constitution that "no person shall be imprisoned for a debt or non-
payment of a poll tax."26 It is elementary, however, that "a tax is not a debt in the sense of an
obligation incurred by contract, express or implied, and therefore is not within the meaning of
constitutional or statutory provisions abolishing or prohibiting imprisonment for debt, and a
statute or ordinance which punishes the non-payment thereof by fine or imprisonment is not, in
conflict with that prohibition."27 Nor is the tax in question a poll tax, for the latter is a tax of a
fixed amount upon all persons, or upon all persons of a certain class, resident within a specified
territory, without regard to their property or the occupations in which they may be engaged.28
Therefore, the tax in question is not oppressive in the manner the lower court puts it. On the
other hand, the charter of Iloilo City29 empowers its municipal board to "fix penalties for
violations of ordinances, which shall not exceed a fine of two hundred pesos or six months'
imprisonment, or both such fine and imprisonment for each offense." In Punsalan, et al. vs. Mun.
Board of Manila, supra, this Court overruled the pronouncement of the lower court declaring
illegal and void an ordinance imposing an occupation tax on persons exercising various
professions in the City of Manilabecause it imposed a penalty of fine and imprisonment for its
violation.30.

4. The trial court brands the ordinance as violative of the rule of uniformity of taxation.

"... because while the owners of the other buildings only pay real estate tax and income
taxes the ordinance imposes aside from these two taxes an apartment or tenement tax. It
should be noted that in the assessment of real estate tax all parts of the building or
buildings are included so that the corresponding real estate tax could be properly
imposed. If aside from the real estate tax the owner or owners of the tenement buildings
should pay apartment taxes as required in the ordinance then it will violate the rule of
uniformity of taxation.".

Complementing the above ruling of the lower court, the appellees argue that there is "lack of
uniformity" and "relative inequality," because "only the taxpayers of the City of Iloilo are singled
out to pay taxes on their tenement houses, while citizens of other cities, where their councils do
not enact a similar tax ordinance, are permitted to escape such imposition." .

It is our view that both assertions are undeserving of extended attention. This Court has already
ruled that tenement houses constitute a distinct class of property. It has likewise ruled that "taxes
are uniform and equal when imposed upon all property of the same class or character within the
taxing authority."31 The fact, therefore, that the owners of other classes of buildings in the City of
Iloilo do not pay the taxes imposed by the ordinance in question is no argument at all against
uniformity and equality of the tax imposition. Neither is the rule of equality and uniformity
violated by the fact that tenement taxesare not imposed in other cities, for the same rule does not
require that taxes for the same purpose should be imposed in different territorial subdivisions at
the same time.32 So long as the burden of the tax falls equally and impartially on all owners or
operators of tenement houses similarly classified or situated, equality and uniformity of taxation
is accomplished.33 The plaintiffs-appellees, as owners of tenement houses in the City of Iloilo,
have not shown that the tax burden is not equally or uniformly distributed among them, to
overthrow the presumption that tax statutes are intended to operate uniformly and equally.34.

5. The last important issue posed by the appellees is that since the ordinance in the case at bar is
a mere reproduction of Ordinance 86 of the City of Iloilo which was declared by this Court in L-
12695, supra, as ultra vires, the decision in that case should be accorded the effect of res
judicata in the present case or should constitute estoppel by judgment. To dispose of this
contention, it suffices to say that there is no identity of subject-matter in that case andthis case
because the subject-matter in L-12695 was an ordinance which dealt not only with tenement
houses but also warehouses, and the said ordinance was enacted pursuant to the provisions of the
City charter, while the ordinance in the case at bar was enacted pursuant to the provisions of the
Local Autonomy Act. There is likewise no identity of cause of action in the two cases because
the main issue in L-12695 was whether the City of Iloilo had the power under its charter to
impose the tax levied by Ordinance 11, series of 1960, under the Local Autonomy Act which
took effect on June 19, 1959, and therefore was not available for consideration in the decision in
L-12695 which was promulgated on March 23, 1959. Moreover, under the provisions of section
2 of the Local Autonomy Act, local governments may now tax any taxable subject-matter or
object not included in the enumeration of matters removed from the taxing power of local
governments.Prior to the enactment of the Local Autonomy Act the taxes that could be legally
levied by local governments were only those specifically authorized by law, and their power to
tax was construed in strictissimi juris. 35.

ACCORDINGLY, the judgment a quo is reversed, and, the ordinance in questionbeing valid, the
complaint is hereby dismissed. No pronouncement as to costs..

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,Fernando and

Capistrano, JJ., concur..

G.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-

appellants,
vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and
THE CITY MAYOR, all of the City of Manila, respondents-appellees.

Teotimo A. Roja for appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.

BAUTISTA ANGELO, J.:

This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the
Municipal Board of the City of Manila on March 24, 1950.

The Association of Customs Brokers, Inc., which is composed of all brokers and public service
operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said
association, also a public service operator of the trucks in said City, challenge the validity of said
ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license
tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance
offends against the rule of uniformity of taxation; and (3) it constitutes double taxation.

The respondents, represented by the city fiscal, contend on their part that the challenged
ordinance imposes a property tax which is within the power of the City of Manila to impose
under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question
does not violate the rule of uniformity of taxation, nor does it constitute double taxation.

The issues having been joined, the Court of First Instance of Manila sustained the validity of the
ordinance and dismissed the petition. Hence this appeal.

The disputed ordinance was passed by the Municipal Board of the City of Manila under the
authority conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the
municipal board the power "to tax motor and other vehicles operating within the City of Manila
the provisions of any existing law to the contrary notwithstanding." It is contended that this
power is broad enough to confer upon the City of Manila the power to enact an ordinance
imposing the property tax on motor vehicles operating within the city limits.

In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the
Motor Vehicles Law, as amended, (Act No. 3992) which has a bearing on the power of the
municipal corporation to impose tax on motor vehicles operating in any highway in the
Philippines. The pertinent provisions are contained in section 70 (b) which provide in part:

No further fees than those fixed in this Act shall be exacted or demanded by any public
highway, bridge or ferry, or for the exercise of the profession of chauffeur, or for the
 operation of any motor vehicle by the owner thereof: Provided, however, That nothing in
this Act shall be construed to exempt any motor vehicle from the payment of any lawful
and equitable insular, local or municipal property tax imposed thereupon. . . .

Note that under the above section no fees may be exacted or demanded for the operation of any
motor vehicle other than those therein provided, the only exception being that which refers to the
property tax which may be imposed by a municipal corporation. This provision is all-inclusive in
that sense that it applies to all motor vehicles. In this sense, this provision should be construed as
limiting the broad grant of power conferred upon the City of Manila by its Charter to impose
taxes. When section 18 of said Charter provides that the City of Manila can impose a tax on
motor vehicles operating within its limit, it can only refers to property tax as a different
interpretation would make it repugnant to the Motor Vehicle Law.

Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance
Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila", and that in
its section 1 it provides that the tax should be 1 per cent ad valorem per annum. It also provides
that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be
expended exclusively for the repair, maintenance and improvement of its streets and bridges."
Considering the wording used in the ordinance in the light in the purpose for which the tax is
created, can we consider the tax thus imposed as property tax, as claimed by respondents?

While as a rule an ad valorem tax is a property tax, and this rule is supported by some
authorities, the rule should not be taken in its absolute sense if the nature and purpose of the tax
as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been
held that "If a tax is in its nature an excise, it does not become a property tax because it is
proportioned in amount to the value of the property used in connection with the occupation,
privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by
property and so may be indirectly a tax upon property; but if it is really imposed upon the
performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be
considered an excise." (26 R. C. L., 35-36.) It has also been held that

The character of the tax as a property tax or a license or occupation tax must be
determined by its incidents, and from the natural and legal effect of the language
employed in the act or ordinance, and not by the name by which it is described, or by the
mode adopted in fixing its amount. If it is clearly a property tax, it will be so regarded,
even though nominally and in form it is a license or occupation tax; and, on the other
hand, if the tax is levied upon persons on account of their business, it will be construed as
a license or occupation tax, even though it is graduated according to the property used in
such business, or on the gross receipts of the business. (37 C.J., 172)

The ordinance in question falls under the foregoing rules. While it refers to property tax and it is
fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles
operating within the City of Manila with the main purpose of raising funds to be expended
exclusively for the repair, maintenance and improvement of the streets and bridges in said city.
This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason
that, under said Act, municipal corporation already participate in the distribution of the proceeds
that are raised for the same purpose of repairing, maintaining and improving bridges and public
highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent
duplication in the imposition of fees for the same purpose. It is for this reason that we believe
that the ordinance in question merely imposes a license fee although under the cloak of an ad
valorem tax to circumvent the prohibition above adverted to.

It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained
by our Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating
within the City of Manila. It does not distinguish between a motor vehicle for hire and one which
is purely for private use. Neither does it distinguish between a motor vehicle registered in the
City of Manila and one registered in another place but occasionally comes to Manila and uses its
streets and public highways. The distinction is important if we note that the ordinance intends to
burden with the tax only those registered in the City of Manila as may be inferred from the word
"operating" used therein. The word "operating" denotes a connotation which is akin to a
registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous
payment of the registration fees. There is no pretense that the ordinance equally applies to motor
vehicles who come to Manila for a temporary stay or for short errands, and it cannot be denied
that they contribute in no small degree to the deterioration of the streets and public highway. The
fact that they are benefited by their use they should also be made to share the corresponding
burden. And yet such is not the case. This is an inequality which we find in the ordinance, and
which renders it offensive to the Constitution.

Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.

Paras, C.J., Bengzon and Tuason, JJ., concur.

Montemayor, Reyes, Jugo and Labrador, JJ., concur in the result.

Separate Opinions

FERIA, J., concurring:

I concur on the ground that it is a license tax.

G.R. No. L-33693-94 May 31, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and THE FAIR TRADE

BOARD, petitioner,
vs.
HON. SERAFIN R. CUEVAS, as Judge of the Court of First Instance of Manila, Branch
IV, INSTITUTE OF EVAPORATED FILLED MILK MANUFACTURERS OF THE
PHILIPPINES, INC., CONSOLIDATED MILK COMPANY (PHIL.) INC., and MILK
INDUSTRIES, INC., respondents.

Solicitor General Felix Q. Antonio and Solicitor Bernardo P. Pardo for petitioners.

Sycip, Salazar, Luna, Manalo & Feliciano for private respondents.

DE CASTRO, J.:

This is a petition for certiorari with preliminary injunction to review the decision rendered by
respondent judge, in Civil Case No. 52276 and in Special Civil Action No. 52383 both of the
Court of First Instance of Manila.

Plaintiffs, in Civil Case No. 52276 private respondents herein, are engaged in the manufacture,
sale and distribution of filled milk products throughout the Philippines. The products of private
respondent, Consolidated Philippines Inc. are marketed and sold under the brand Darigold
whereas those of private respondent, General Milk Company (Phil.), Inc., under the brand
"Liberty;" and those of private respondent, Milk Industries Inc., under the brand "Dutch Baby."
Private respondent, Institute of Evaporated Filled Milk Manufacturers of the Philippines, is a
corporation organized for the principal purpose of upholding and maintaining at its highest the
standards of local filled milk industry, of which all the other private respondents are members.
Civil Case No. 52276 is an action for declaratory relief with ex-parte petition for preliminary
injunction wherein plaintiffs pray for an adjudication of their respective rights and obligations in
relation to the enforcement of Section 169 of the Tax Code against their filled milk products.

The controversy arose from the order of defendant, Commissioner of Internal Revenue now
petitioner herein, requiring plaintiffs- private respondents to withdraw from the market all of
their filled milk products which do not bear the inscription required by Section 169 of the Tax
Code within fifteen (15) days from receipt of the order with the explicit warning that failure of
plaintiffs' private respondents to comply with said order will result in the institution of the
necessary action against any violation of the aforesaid order. Section 169 of the Tax Code reads
as follows:

Section 169. Inscription to be placed on skimmed milk. — All condensed

skimmed milk and all milk in whatever form, from which the fatty part has been
removed totally or in part, sold or put on sale in the Philippines shall be clearly
and legibly marked on its immediate containers, and in all the language in which
such containers are marked, with the words, "This milk is not suitable for
nourishment for infants less than one year of age," or with other equivalent words.

The Court issued a writ of preliminary injunction dated February 16, 1963 restraining the
Commissioner of Internal Revenue from requiring plaintiffs' private respondents to print on the
labels of their rifled milk products the words, "This milk is not suitable for nourishment for
infants less than one year of age or words of similar import, " as directed by the above quoted
provision of Law, and from taking any action to enforce the above legal provision against the
plaintiffs' private respondents in connection with their rifled milk products, pending the final
determination of the case, Civil Case No. 52276, on the merits.

On July 25, 1969, however, the Office of the Solicitor General brought an appeal from the said
order by way of certiorari to the Supreme Court. 1 In view thereof, the respondent court in the
meantime suspended disposition of these cases but in view of the absence of any injunction or
restraining order from the Supreme Court, it resumed action on them until their final disposition
therein.

Special Civil Action No. 52383, on the other hand, is an action for prohibition and injunction
with a petition for preliminary injunction. Petitioners therein pray that the respondent Fair Trade
Board desist from further proceeding with FTB I.S. No. I . entitled "Antonio R. de Joya vs.
Institute of Evaporated Milk Manufacturers of the Philippines, etc." pending final determination
of Civil Case No. 52276. The facts of this special civil action show that on December 7, 1962,
Antonio R. de Joya and Sufronio Carrasco, both in their individual capacities and in their
capacities as Public Relations Counsel and President of the Philippine Association of Nutrition,
respectively, filed FTB I.S. No. 1 with Fair Trade Board for misleading advertisement,
mislabeling and/or misbranding. Among other things, the complaint filed include the charge of
omitting to state in their labels any statement sufficient to Identify their filled milk products as
"imitation milk" or as an imitation of genuine cows milk. and omitting to mark the immediate
containers of their filled milk products with the words: "This milk is not suitable for nourishment
for infants less than one year of age or with other equivalent words as required under Section 169
of the Tax Code. The Board proceeded to hear the complaint until it received the writ of
preliminary injunction issued by the Court of First Instance on March 19, 1963.

Upon agreement of the parties, Civil Case No. 52276 and Special Civil Action No. 52383 were
heard jointly being intimately related with each other, with common facts and issues being also
involved therein. On April 16, 1971, the respondent court issued its decision, the dispositive part
of which reads as follows:

Wherefore, judgment is hereby rendered:

In Civil Case No. 52276:

 (a) Perpetually restraining the defendant, Commissioner of Internal Revenue, his
agents, or employees from requiring plaintiffs to print on the labels of their filled
milk products the words: "This milk is not suitable for nourishment for infants
less than one year of age" or words with equivalent import and declaring as nun
and void and without authority in law, the order of said defendant dated
September 28, 1961, Annex A of the complaint, and the Ruling of the Secretary
of Finance, dated November 12, 1962, Annex G of the complaint; and

In Special Civil Action No. 52383:

(b) Restraining perpetually the respondent Fair Trade Board, its agents or
employees from continuing in the investigation of the complaints against
petitioners docketed as FTB I.S. No. 2, or any charges related to the manufacture
or sale by the petitioners of their filled milk products and declaring as null the
proceedings so far undertaken by the respondent Board on said complaints. (pp.
20- 21, Rollo).

From the above decision of the respondent court, the Commissioner of Internal Revenue and the
Fair Trade Board joined together to file the present petition for certiorari with preliminary
injunction, assigning the following errors:

I. THE LOWER COURT ERRED IN RULING THAT SEC. TION 169 OF THE
TAX CODE HAS BEEN REPEALED BY IMPLICATION.

II. THE LOWER COURT ERRED IN RULING THAT SECTION 169 OF THE
TAX CODE HAS LOST ITS TAX PURPOSE, AND THAT COMMISSIONER
NECESSARILY LOST HIS AUTHORITY TO ENFORCE THE SAME AND
THAT THE PROPER AUTHORITY TO PROMOTE THE HEALTH OF
INFANTS IS THE FOOD AND DRUG ADMINISTRATION, THE
SECRETARY OF HEALTH AND THE SECRETARY OF JUSTICE, AS
PROVIDED FOR IN RA 3720, NOT THE COMMISSIONER OF INTERNAL
REVENUE.

III. THE LOWER COURT ERRED IN RULING THAT THE POWER TO

INVESTIGATE AND TO PROSECUTE VIOLATIONS OF FOOD LAWS IS
ENTRUSTED TO THE FOOD AND DRUG INSPECTION, THE FOOD AND
DRUG ADMINISTRATION, THE SECRETARY OF HEALTH AND THE
SECRETARY OF JUSTICE, AND THAT THE FAIR TRADE BOARD IS
WITHOUT JURISDICTION TO INVESTIGATE AND PROSECUTE
ALLEGED MISBRANDING, MISLABELLING AND/OR MISLEADING
ADVERTISEMENT OF FILLED MILK PRODUCTS. (pp, 4-5, Rollo).

The lower court did not err in ruling that Section 169 of the Tax Code has been repealed by
implication. Section 169 was enacted in 1939, together with Section 141 (which imposed a
Specific tax on skimmed milk) and Section 177 (which penalized the sale of skimmed milk
without payment of the specific tax and without the legend required by Section 169). However,
Section 141 was expressly repealed by Section 1 of Republic Act No. 344, and Section 177, by
Section 1 of Republic Act No. 463. By the express repeal of Sections 141 and 177, Section 169
became a merely declaratory provision, without a tax purpose, or a penal sanction.

Moreover, it seems apparent that Section 169 of the Tax Code does not apply to filled milk. The
use of the specific and qualifying terms "skimmed milk" in the headnote and "condensed
skimmed milk" in the text of the cited section, would restrict the scope of the general clause "all
milk, in whatever form, from which the fatty pat has been removed totally or in part." In other
words, the general clause is restricted by the specific term "skimmed milk" under the familiar
rule of ejusdem generis that general and unlimited terms are restrained and limited by the
particular terms they follow in the statute.
Skimmed milk is different from filled milk. According to the "Definitions, Standards of Purity,
Rules and Regulations of the Board of Food Inspection," skimmed milk is milk in whatever form
from which the fatty part has been removed. Filled milk, on the other hand, is any milk, whether
or not condensed, evaporated concentrated, powdered, dried, dessicated, to which has been
added or which has been blended or compounded with any fat or oil other than milk fat so that
the resulting product is an imitation or semblance of milk cream or skim milk." The difference,
therefore, between skimmed milk and filled milk is that in the former, the fatty part has been
removed while in the latter, the fatty part is likewise removed but is substituted with refined
coconut oil or corn oil or both. It cannot then be readily or safely assumed that Section 169
applies both to skimmed milk and filled milk.

The Board of Food Inspection way back in 1961 rendered an opinion that filled milk does not
come within the purview of Section 169, it being a product distinct from those specified in the
said Section since the removed fat portion of the milk has been replaced with coconut oil and
Vitamins A and D as fortifying substances (p. 58, Rollo). This opinion bolsters the Court's stand
as to its interpretation of the scope of Section 169. Opinions and rulings of officials of the
government called upon to execute or implement administrative laws command much respect
and weight. (Asturias Sugar Central Inc. vs. Commissioner of Customs, G. R. No. L-19337,
September 30, 1969, 29 SCRA 617; Tan, et. al. vs. The Municipality of Pagbilao et. al., L-14264,
April 30, 1963, 7 SCRA 887; Grapilon vs. Municipal Council of Carigara L-12347, May 30,
1961, 2 SCRA 103).

This Court is, likewise, induced to the belief that filled milk is suitable for nourishment for
infants of all ages. The Petitioners themselves admitted that: "the filled milk products of the
petitioners (now private respondents) are safe, nutritious, wholesome and suitable for feeding
infants of all ages" (p. 44, Rollo) and that "up to the present, Filipino infants fed since birth with
filled milk have not suffered any defects, illness or disease attributable to their having been fed
with filled milk." (p. 45, Rollo).

There would seem, therefore, to be no dispute that filled milk is suitable for feeding infants of all
ages. Being so, the declaration required by Section 169 of the Tax Code that filled milk is not
suitable for nourishment for infants less than one year of age would, in effect, constitute a
deprivation of property without due. process of law.

Section 169 is being enforced only against respondent manufacturers of filled milk product and
not as against manufacturers, distributors or sellers of condensed skimmed milk such as
SIMILAC, SMA, BREMIL, ENFAMIL, OLAC, in which, as admitted by the petitioner, the fatty
part has been removed and substituted with vegetable or corn oil. The enforcement of Section
169 against the private respondents only but not against other persons similarly situated as the
private respondents amounts to an unconstitutional denial of the equal pro petition of the laws,
for the law, equally enforced, would similarly offend against the Constitution. Yick Wo vs.
Hopkins, 118 U.S. 356,30 L. ed. 220).

As stated in the early part of this decision, with the repeal of Sections 141 and 177 of the Tax
Code, Section 169 has lost its tax purpose. Since Section 169 is devoid of any tax purpose,
petitioner Commissioner necessarily lost his authority to enforce the same. This was so held by
his predecessor immediately after Sections 141 and 177 were repealed in General Circular No.
V-85 as stated in paragraph IX of the Partial Stipulation of facts entered into by the parties, to
wit:

... As the act of sewing skimmed milk without first paying the specific tax thereon
is no longer unlawful and the enforcement of the requirement in regard to the
placing of the proper legend on its immediate containers is a subject which does
not come within the jurisdiction of the Bureau of Internal Revenue, the penal
provisions of Section 177 of the said Code having been repealed by Republic Act
No. 463. (p. 102, Rollo).
Petitioner's contention that he still has jurisdiction to enforce Section 169 by virtue of Section 3
of the Tax Code which provides that the Bureau of Internal Revenue shall also "give effect to
and administer the supervisory and police power conferred to it by this Code or other laws" is
untenable. The Bureau of Internal Revenue may claim police power only when necessary in the
enforcement of its principal powers and duties consisting of the "collection of all national
internal revenue taxes, fees and charges, and the enforcement of all forfeitures, penalties and
fines connected therewith." The enforcement of Section 169 entails the promotion of the health
of the nation and is thus unconnected with any tax purpose. This is the exclusive function of the
Food and Drug Administration of the Department of Health as provided for in Republic Act No.
3720. In particular, Republic Act No. 3720 provides:

Section 9. ... It shall be the duty of the Board (Food and Drug Inspection),
conformably with the rules and regulations, to hold hearings and conduct
investigations relative to matters touching the Administration of this Act, to
investigate processes of food, drug and cosmetic manufacture and to subject
reports to the Food and Drug Administrator, recommending food and drug
standards for adoption. Said Board shall also perform such additional functions,
properly within the scope of the administration thereof, as maybe assigned to it by
the Food and Drug Administrator. The decisions of the Board shall be advisory to
the Food and Drug Administrator.

Section 26. ...

xxx xxx xxx

(c) Hearing authorized or required by this Act shall be conducted by the Board of
Food and Drug Inspection which shall submit recommendation to the Food and
Drug Administrator.

(d) When it appears to the Food and Drug Administrator from the reports of the
Food and Drug Laboratory that any article of food or any drug or cosmetic
secured pursuant to Section 28 of this Act is adulterated or branded he shall cause
notice thereof to be given to the person or persons concerned and such person or
persons shall be given an opportunity to subject evidence impeaching the
correctness of the finding or charge in question.

(e) When a violation of any provisions of this Act comes to the knowledge of the
Food and Drug Administrator of such character that a criminal prosecution ought
to be instituted against the offender, he shall certify the facts to the Secretary of
Justice through the Secretary of Health, together with the chemists' report, the
findings of the Board of Food and Drug Inspection, or other documentary
evidence on which the charge is based.

(f) Nothing in this Act shall be construed as requiring the Food and Drug
Administrator to certify for prosecution pursuant to subparagraph (e) hereof,
minor violations of this Act whenever he believes that public interest will be
adequately served by a suitable written notice or warning.

The aforequoted provisions of law clearly show that petitioners, Commissioner of Internal
Revenue and the Fair Trade Board, are without jurisdiction to investigate and to prosecute
alleged misbranding, mislabeling and/or misleading advertisements of filled milk. The
jurisdiction on the matters cited is vested upon the Board of Food and Drug inspection and the
Food and Drug Administrator, with the Secretary of Health and the Secretary of Justice, also
intervening in case criminal prosecution has to be instituted. To hold that the petitioners have
also jurisdiction as would be the result were their instant petition granted, would only cause
overlapping of powers and functions likely to produce confusion and conflict of official action
which is neither practical nor desirable.
WHEREFORE, the decision appealed from is hereby affirmed en toto. No costs.

SO ORDERED.

[G.R. No. 11572. September 22, 1916. ]

FRANCIS A. CHURCHILL and STEWART TAIT ET AL., Plaintiffs-Appellants, v.

VENANCIO CONCEPCION, as Acting Collector of Internal Revenue, Defendant-Appellee.

Aitken & DeSelms for Appellants.

Attorney-General Avanceña for Appellee.

SYLLABUS

1. REVENUE STATUTES; VALIDITY OF. — The validity of a revenue statute or the exercise
of the taxing power of the Legislature is not dependent upon the opinion of two interested
witnesses to the effect that a certain tax is confiscatory when it is agreed that a number of other
persons have paid such tax.

2. TAXATION; POWER OF THE PHILIPPINE LEGISLATURE; SIGNS AND

BILLBOARDS. — The Legislature having the power to impose a tax upon signs, signboards,
and billboards, the courts will not attempt to restrict such power in the absence of a showing that
the exercise thereof on the part of the Legislature was so abused as to make it clear to the judicial
mind that the power had been exercised for the sole purpose of destroying rights which could not
be rightfully destroyed consistently with the principles of freedom and justice.

3. ID.; UNIFORMITY OF. — Uniformity in taxation means that all taxable articles or kinds of
property of the same classes shall be taxed at the same rate. A tax is uniform when it operates
with the same force and effect in every place where the subject of it is found.

4. ID.; ID. — A tax of P2 a square meter or fraction thereof imposed upon every electric sign,
billboard, etc., wherever found in the Philippine Islands, satisfies the requirement of the
Philippine Bill "that the rule of taxation in said Islands shall be uniform."

DECISION

TRENT, J. :

Section 100 of Act No. 2339, passed February 27, 1914, effective July 1, 1914, imposed an
annual tax of P4 per square meter upon "electric signs, billboards, and spaces used for posting or
displaying temporary signs, and all signs displayed on premises not occupied by buildings." This
section was subsequently amended by Act No. 2432, effective January 1, 1915, by reducing the
tax on such signs, billboards, etc., to P2 per square meter or fraction thereof. Section 26 of Act
No. 2432 was in turn amended by Act No. 2445, but this amendment does not in any way affect
the questions involved in the case under consideration. The taxes imposed by Act No. 2432, as
amended, were ratified by the Congress of the United States on March 4, 1915. The ratifying
clause reads as follows:jgc:chanrobles.com.ph

"The internal-revenue taxes imposed by the Philippine Legislature under the law enacted by that
body on December twenty-third, nineteen hundred and fourteen (Act No. 2432), as amended by
the law enacted by it on January sixteenth, nineteen hundred and fifteen (Act No. 2445), are
hereby legalized and ratified, and the collection of all such taxes heretofore or hereafter is hereby
legalized, ratified and confirmed as fully to all intents and purposes as if the same had by prior
Act of Congress been specifically authorized and directed."cralaw virtua1aw library

Francis A. Churchill and Stewart Tait, copartners doing business under the firm name and style
of the Mercantile Advertising Agency, owners of a sign or billboard containing an area of 52
square meters constructed on private property in the city of Manila and exposed to public view,
were taxed thereon P104. The tax was paid under protest and the plaintiffs having exhausted all
their administrative remedies instituted the present action under section 140 of Act No. 2339
against the Collector of Internal Revenue to recover back the amount thus paid. From a judgment
dismissing the complaint upon the merits, with costs, the plaintiffs appealed.

It is now urged that the trial court erred:jgc:chanrobles.com.ph

"(1) In not holding that the tax as imposed by virtue of Act No. 2339, as amended by Act No.
2432, as amended by Act No. 2445, constitutes deprivation of property without compensation or
due process of law, because it is confiscatory and unjustly discriminatory and (2) in not holding
that the said tax is void for lack of uniformity, because it is not graded according to value;
because the classification on which it is based is mere arbitrary selection and not based on any
reasonable ground; and furthermore, because it constitutes double taxation."cralaw virtua1aw
library

We will first inquire whether the tax in question is confiscatory as to the business of the plaintiff.
Upon this point the lower court, in accepting the testimony of the plaintiff, Churchill, to the
effect that "the billboard in question cost P300 to construct, that its annual gross earning power is
P268, and that the annual tax is P104," found "that for a five years’ period the gross income from
the billboard would be P1,340, and that the expenditures for original construction and taxes
would amount to P820, leaving a balance of P520," held that "unless the tax equals or exceeds
the gross income, the court would hardly be justified in declaring the tax confiscatory." These
things of fact and conclusions of law are attacked upon the ground that the court failed to take
into consideration the pertinent facts that the annual depreciation of the billboard is 20 per cent;
that at the end of five years the capital of P300 would be completely lost; that the plaintiffs are
entitled to receive a reasonable rate of interest on this capital; and that there should be charged
against the billboard its proportion of the overhead charges such as labor, management,
maintenance, rental of office premises, rental or purchase of ground space for board, repair,
paints, oils, etc., resulting in an actual loss per year on the business, instead of an apparent profit
of P520 for five years, or P44 for one year. If these contentions rested upon a sound basis it
might be said that the tax is, in a sense, confiscatory; but they do not, as we will attempt to show
from the evidence of record.

The plaintiff Churchill testified in part as follows:jgc:chanrobles.com.ph

"Q. In your opinion, Mr. Churchill, state what you would think of the rates that are charged by
you for advertising purposes in connection with this board; could they be raised? — A. No.

"Q. Why? — A. The business wouldn’t allow it; the business wouldn’t afford it; and otherwise it
would mean bankruptcy to try to increase it.

"Q. Who couldn’t afford it? Explain it fully Mr. Churchill? — A. The merchants couldn’t afford
to pay more.

On cross-examination: "Q. It is a fact, is it not, Mr. Churchill, that since the passage of Act No.
2339 you have never made any attempt to raise the advertising rates? — A. It would be
impossible to raise them.

"Q. My question is: You have never made any attempt to raise them? — A. We have talked it
over with the merchants and talked over the price on the event of a tax being put at a reasonable
amount, about putting up some increase.
"Q. But you have never made an actual attempt to increase your rates? — A. I would consider
that an actual attempt.

"Q. You have never fixed the rate higher than it is now? — A. No; no."cralaw virtua1aw library

It was agreed that Tait, the other plaintiff, would testify to the same effect. The parties, plaintiffs
and defendant, further agreed "that a number of persons have voluntarily and without protest
paid the taxes imposed by section 100 of Act No. 2339, as amended by Act No. 2432, and in turn
amended by Act No. 2445."cralaw virtua1aw library

It will thus be seen that the contention that the rates charged for advertising cannot be raised is
purely hypothetical, based entirely upon the opinion of the plaintiffs, unsupported by actual test,
and that the plaintiffs themselves admit that a number of other persons have voluntarily and
without protest paid the tax herein complained of. Under these circumstances, can it be held as a
matter of fact that the tax is confiscatory or that, as a matter of law, the tax is unconstitutional? Is
the exercise of the taxing power of the Legislature dependent upon and restricted by the opinion
of two interested witnesses? There can be but one answer to these questions, especially in view
of the fact that others are paying the tax and presumably making a reasonable profit from their
business.

In Chicago and Grand Trunk Railway Co. v. Wellman (143 U. S., 339), a question similar to the
one now under consideration was raised and decided by the Supreme Court of the United States.
The principal contention made in that case was that an Act of the Legislature of Michigan fixing
the amount per mile to be charged by railways for the transportation of a passenger was
unconstitutional, on the ground that the rate so fixed was confiscatory. It was agreed in the
pleadings that the total earnings and income of the company from all sources for a given year
were less than the expenses for the same period. In addition to this agreed statement of facts, two
witnesses were called, one the traffic manager and the other the treasurer of the company. Their
testimony was to the effect that in view of the competition prevailing at Chicago for through
business, it was impossible to increase the freight rates then charged by the company because it
would throw the volume of business into the hands of competing roads. In overruling the
contention of the company that the act in question was unconstitutional on the ground that the
rate fixed thereby was confiscatory, the court said:jgc:chanrobles.com.ph

"Surely, before the courts are called upon to adjudge an act of the legislature fixing the
maximum passenger rates for railroad companies to be unconstitutional, on the ground that its
enforcement would prevent the stockholders from receiving any dividends on their investments,
or the bondholders any interest on their loans, they should be fully advised as to what is done
with the receipts and earnings of the company; for if so advised, it might clearly appear that a
prudent and honest management would, within the rates prescribed, secure to the bondholders
their interest, and to the stockholders reasonable dividends. While the protection of vested rights
of property is a supreme duty of the courts, it has not come to this, that the legislative power rests
subservient to the discretion of any railroad corporation which may, by exhorbitant and
unreasonable salaries, or in some other improper way, transfer its earnings into what it is pleased
to call ’operating expenses.’"

It is further alleged that the tax in question is unconstitutional because "the law herein
complained of was enacted for the sole purpose of destroying billboards and advertising business
depending on the use of signs or billboards." If it be conceded that the Legislature has the power
to impose a tax upon signs, signboards, and billboards, then "the judicial cannot prescribe to the
legislature department of the Government limitation upon the exercise of its acknowledged
powers." (Veazie Bank v. Fenno, 8 Wall., 533, 548.) That the Philippine Legislature has the
power to impose such taxes, we think there can be no serious doubt, because "the power to
impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely
venture to declare that it is subject to any restrictions whatever, except such as rest in the
discretion of the authority which exercises it. It reaches to every trade or occupation; to every
object of industry, use, or enjoyment; to every species of possession; and it imposes a burden
which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of
property. No attribute of sovereignty is more pervading, and at no point does the power of the
government affect more constantly and intimately all the relations of life than through the
exactions made under it." (Cooley’s Constitutional Limitations, 6th Edition, p. 587.)

In McCray v. U. S. (195 U. S., 27), the court, in ruling adversely to the contention that a federal
tax on oleomargarine artificially colored was void because the real purpose of Congress was not
to raise revenue but to tax out of existence a substance not harmful of itself and one which might
be lawfully manufactured and sold, said:jgc:chanrobles.com.ph

"Whilst, as a result of our written constitution, it is axiomatic that the judicial department of the
government is charged with the solemn duty of enforcing the Constitution, and therefore, in
cases properly presented, of determining whether a given manifestation of authority has
exceeded the power conferred by that instrument, no instance is afforded from the foundation of
the government where an act which was within a power conferred, was declared to be repugnant
to the Constitution, because it appeared to the judicial mind that the particular exertion of
constitutional power was either unwise or unjust. To announce such a principle would amount to
declaring that, in our constitutional system, the judiciary was not only charged with the duty of
upholding the Constitution, but also with the responsibility of correcting every possible abuse
arising from the exercise by the other departments of their conceded authority. So to hold would
be to overthrow the entire distinction between the legislative, judicial, and executive departments
of the government, upon which our system is founded, and would be a mere act of judicial
usurpation."cralaw virtua1aw library

If a case were presented where the abuse of the taxing power of the local legislature was so
extreme as to make it plain to the judicial mind that the power had been exercised for the sole
purpose of destroying rights which could not be rightfully destroyed consistently with the
principles of freedom and justice upon which the Philippine Government rests, then it would be
the duty of the courts to say that such an arbitrary act was not merely an abuse of the power, but
was the exercise of an authority not conferred. (McCray v. U. S., supra.) But the instant case is
not one of that character, for the reason that the tax herein complained of falls far short of being
confiscatory. Consequently, it cannot be held that the Legislature has gone beyond the power
conferred upon it by the Philippine Bill in so far as the amount of the tax is concerned.

Is the tax void for lack of uniformity or because it is not graded according to value or constitutes
double taxation, or because the classification upon which it is based is mere arbitrary selection
and not based on any reasonable grounds? The only limitation, in so far as these questions are
concerned, placed upon the Philippine Legislature in the exercise of its taxing power is that
found in section 5 of the Philippine Bill, wherein it is declared "that the rule of taxation in said
Islands shall be uniform."cralaw virtua1aw library

"Uniformity in taxation — says Black on Constitutional Law, page 292 — means that all taxable
articles or kinds of property, of the same class, shall be taxed at the same rate. It does not mean
that lands, chattels, securities, incomes, occupations, franchises, privileges, necessities, and
luxuries, shall all be assessed at the same rate. Different articles may be taxed at different
amounts, provided the rate is uniform on the same class everywhere, with all people, and at all
times."cralaw virtua1aw library

A tax is uniform when it operates with the same force and effect in every place where the subject
of it is found (State Railroad Tax Cases, 92 U. S., 575.) The words "uniform throughout the
United States," as required of a tax by the Constitution, do not signify an intrinsic, but simply a
geographical, uniformity, and such uniformity is therefore the only uniformity which is
prescribed by the Constitution. (Patton v. Brady, 184 U. S., 608; 46 L. Ed., 713.) A tax is
uniform, within the constitutional requirement, when it operates with the same force and effect in
every place where the subject of it is found. (Edye v. Robertson, 112 U. S., 580; 28 L. Ed., 798.)
"Uniformity," as applied to the constitutional provision that all taxes shall be uniform, means that
all property belonging to the same class shall be taxed alike. (Adams v. Mississippi State Bank,
23 South, 395, citing Mississippi Mills v. Cook, 56 Miss., 40.) The statute under consideration
imposes a tax of P2 per square meter or fraction thereof upon every electric sign, bill-board, etc.,
wherever found in the Philippine Islands. Or in other words, "the rule of taxation" upon such
signs is uniform throughout the Islands. The rule, which we have just quoted from the Philippine
Bill, does not require taxes to be graded according to the value of the subject or subjects upon
which they are imposed, especially those levied as privilege or occupation taxes. We can hardly
see wherein the tax in question constitutes double taxation. The fact that the land upon which the
billboards are located is taxed at so much per unit and the billboards at so much per square meter
does not constitute "double taxation." Double taxation, within the true meaning of that
expression, does not necessarily affect its validity. (1 Cooley on Taxation, 3d ed., 389.) And
again, it is not for the judiciary to say that the classification upon which the tax is based "is mere
arbitrary selection and not based upon any reasonable grounds." The Legislature selected signs
and billboards as a subject for taxation and it must be presumed that it, in so doing, acted with a
full knowledge of the situation.

For the foregoing reasons, the judgment appealed from is affirmed, with costs against the
appellants. So ordered.

[G.R. No. 9972. March 25, 1915. ]

THE UNITED STATES, Plaintiff-Appellant, v. JUAN SUMULONG, Defendant-Appellee.

Attorney-General Avanceña for Appellant.

Abundio David for Appellee.

SYLLABUS

1. MUNICIPALITIES; CLASSIFICATION OF LICENSE FEES AND OCCUPATION TAXES.

— Under a general power to impose and collect license fees and occupation taxes, a municipality
in this jurisdiction has the right to classify and graduate such fees according to the estimated
value of the privilege conferred, provided such classification is reasonable and does not
contravene the provisions of its municipal charter.

2. ID.; ID.; FISHING PRIVILEGES. — Section 5 of the Philippine Bill which provides "That
the rule of taxation in said Islands shall be uniform" is not contravened by a municipal ordinance
classifying and graduating license fees for fishing privileges by reference to the different classes
of apparatus in common use by those exercising such privileges.

DECISION

CARSON, J. :

This case comes before the court upon an appeal by the Government from an order of the Court
of First Instance of Laguna sustaining a demurrer to the information filed herein.

The defendant was charged with the violation of a municipal ordinance of the municipality of
Los Baños, Laguna, regulating the payment of license fees for fishing privileges.

The information filed by the fiscal was as follows:jgc:chanrobles.com.ph

"About the 24th day of October, 1913, in the municipality of Los Baños, Laguna Province, the
defendant did willfully, illegally and criminally violate an ordinance of the municipality by
engaging in fishing in public waters without being provided with a license from the municipality,
in violation of an ordinance of said municipality, made and enacted on the subject."cralaw
virtua1aw library

Article 1 of the ordinance in question classifies and graduates the license fees for fishing
privileges as follows:chanrob1es virtual 1aw library

For each fishery in public waters comprised within the jurisdiction of the municipality of Los
Baños, to wit:chanrob1es virtual 1aw library

For each drag-net, quarterly in advance, P20.

For each pante, quitang, and panilay, quarterly in advance, P0.50.

For each fish corral, quarterly in advance, P2.

A demurrer was interposed to the information on the ground that the facts alleged did not
constitute a public offense; first, because the municipal council was without power to impose the
license taxes in question, and second, on the ground that the ordinance was unconstitutional. The
lower court in passing upon the demurrer held that the ordinance in question was invalid for the
reason that the municipality was without the power to classify the license fees in the manner set
out in article 1 of the ordinance.

In discussing the question at issue the court said: "The law permits the municipality to collect a
tax for granting a license to fish, but it says nothing about a tax on fishing apparatus, nor on the
different kinds of such apparatus. So, in the opinion of the court, the ordinance in question is
illegal, for in enacting article 1 thereof the powers granted by law to municipalities were
exceeded."cralaw virtua1aw library

It is clear that the lower court was of the opinion that the ordinance in question imposed a tax
upon the different kinds of fishing apparatus and paraphernalia referred to in article 1 of the
ordinance; but we think a mere reading of the ordinance, bearing in mind its purpose, shows that
such was not the case. Clearly the municipal council had no such intention. The whole purpose
of the ordinance was to classify and graduate the license fees for fishing privileges according to
the kind of apparatus used. No tax is imposed upon the several kinds of apparatus; they are
referred to in the ordinance merely as a means of classification.

The authority of the municipality to impose a license for fishing privileges is found in subsection
3 of section 43 of the Municipal Code. A general power is conferred and nothing is said
regarding the classification or graduation of such fees. The question then is, whether the
municipality under this general grant of power may classify and graduate the license fees for
fishing privileges, or whether it is limited to the imposition of a single license tax, operating on
all persons alike, regardless of the apparatus used or the benefits derived from such a privilege.

Similar questions have frequently been before the American courts for determination, and the
weight of authority clearly indicates that, under a general power to impose and collect license
fees and occupation taxes, a municipality has the right to classify and graduate such fees
according to the value of the privilege conferred, so long as such classification is reasonable and
does not contravene constitutional rights.

The objection generally interposed to such ordinances is that they violate the constitutional
provisions requiring uniformity of taxation.

It has however been held that merchants may be classified according to the amount of their sales
or the value of their stocks, and a graduated license fee imposed accordingly. Such a tax is held
not to be a tax upon property, but a license tax imposed for the privilege of carrying on the
business in question. (Clark v. Titusville, 184 U. S., 329; 46 L. ed., 569.)
In ex parte Sisto Li Protti (68 Cal., 636), it was held that a city council may provide that the
license fee to be paid by laundrymen shall be in proportion to the number of persons employed
by them; and a similar ordinance relating to laundrymen was held valid in State v. French (17
Montana, 54; 30 L. R. A., 415).

Many of the adjudicated cases have laid down the rule that license fees are not subject to
criticism for lack of uniformity so long as the taxes imposed are the same upon all members of a
particular class.

A requirement of a license fee from peddlers, classifying them as foot peddlers, peddlers with
one-horse cart or wagon, and peddlers with two-horse cart or wagon, charging a different rate for
each, was upheld in Kneeland v. Pittsburgh ([Pa. ] 10 Cent. Rep., 421).

Likewise an ordinance charging a license fee upon vehicles, graded in amount from $3 to $25,
with reference to the character of the vehicle and the use to which it is to be put, and the number
of horses used therewith, was held not to be void for want of uniformity, as it operated uniformly
upon all the subjects of a particular class. (Smith v. Louisville [Ky. ], 68 S. W., 911.)

In Illinois it has been held that a municipality, under a charter authorizing it to license keepers of
livery stables, has full power to prescribe a rule that such license shall be paid in proportion to
the number of carriages kept for hire. (Howland v. Chicago, 108 III., 496.)

A license tax imposed upon hotels has been held not to be unreasonable or oppressive because
the amount required to be paid is graduated by the number of rooms which may be devoted to the
accommodation of the public. (St. Louis v. Bircher, 7 Mo. App., 169.)

In the case of Singer Mfg. Co. v. Wright (33 Fed., 121), the court, in discussing a similar
question, speaking through Justice Newman, said: "It will never be held anywhere, I imagine,
that the state may not classify business for taxation."cralaw virtua1aw library

State legislatures are usually limited in the exercise of their legislative powers touching taxation
by constitutional provisions; and the municipal authorities are in like manner limited by the
constitution, by general statutory provisions, and the terms of their municipal charters. A further
limitation is not infrequently found in the general principle requiring municipal ordinances to be
reasonable and in furtherance of the purposes of the power conferred.

In Singer Mfg. Co. v. Wright (supra) the court said further: "The power to tax business is
controlled only by the clause ’all taxation shall be uniform upon the same class of subjects.’ This
is a restriction upon the power to tax, but the restriction is as to uniformity, and this uniformity as
to ’the same class of subjects.’ The power to classify and arrange into classes of subjects is not
limited or restricted. This is left to the legislature. A mere arbitrary arrangement of the same
business precisely into separate classes, and discriminating taxes as to the classes, might not be
upheld. But where there is reasonable difference and distinction, the legislature is unrestricted in
the matter of classification."cralaw virtua1aw library

The Philippine Bill, section 5, provides: "That the rule of taxation in said Islands shall be
uniform."cralaw virtua1aw library

The authorities are conclusive upon the point that an arrangement of a business into classes,
providing a graduated scale of license fees for each class, does not violate the constitutional
provisions relating to uniformity of taxation.

In the case of Davis & Co. v. Macon (64 Ga., 128), the court held: A city may tax a butcher or
retailer of meats, upon the wagon or wagons used in his business, and this likewise is a part of
the business tax. The validity of this specific tax is not impaired by exempting the wagons used
in delivering milk from dairies on country farms, since the city may tax one class of business and
exempt another, or may tax different occupations and their instrumentalities unequally."cralaw
virtua1aw library

In the case of Stull v. DeMattos (23 Wash., 71), wherein the court had under consideration an
ordinance classifying auctioners and providing a separate license fee for each class, the following
language was used: ". . . we know of no reason why the city council may not classify single
kinds of business in- accordance with the different character and kind of property sold, and
graduate the license tax in any manner that the exercise of a sound discretion dictates."cralaw
virtua1aw library

Under the provision of section 43 (c) of the Municipal Code a municipality is authorized to
impose a license for fishing privileges. No restriction whatever is placed on this power. It is
therefore clearly within the legal powers of a municipality to make any reasonable classification
of the persons engaged in fishing and to graduate the license fees accordingly.

The appellee contends that, under the grant of power conferred by section 43 of the Municipal
Code, the municipality has only the right to impose a general license tax without regard to the
apparatus used or the benefits which are expected to result from the privilege. This contention
can not be sustained. In considering similar questions the courts have frequently said that it is
nothing to one person, belonging to a certain class, that some one else, belonging to another
class, pays more or less than he does, since all belonging to his class must pay the same. So far
as the record indicates the classification made by the municipality of Los Baños was a reasonable
one, and the license fees were graduated according to the value of the privilege conferred.

We find nothing objectionable in the ordinance, and the order entered in the court below
sustaining the demurrer should therefore be set aside; without costs in this instance. So ordered.

Arellano, C.J., Torres, Trent and Araullo, JJ., concur.

Separate Opinions

MORELAND, J., dissenting:chanrob1es virtual 1aw library

I do not believe that the information contains facts sufficient to show the commission of a crime
under sections 6 and 7 of the Code of Criminal Procedure; and I am accordingly of the opinion
that the demurrer, being based on that ground as well as others, was properly sustained.

G.R. No. L-6093 February 24, 1954

THE SHELL CO. OF P.I., LTD., plaintiff-appellant,

vs.
E. E. VAÑO, as Municipal Treasurer of the Municipality of Cordova, Province of Cebu,
defendant-appellee.

C.J. Johnston and A.P. Deen for appellant.

Provincial Fiscal Jose C. Borromeo and Assistant Provincial Fiscal Ananias V. Maribao for
appellee.

PADILLA, J.:

The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10,
series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the
privilege of installation manager; No. 9, series of 1947, which imposes an annual tax of P40 for
local deposits in drums of combustible and inflammable materials and an annual tax of P200 for
tin can factories; and No. 11, series of 1948, which imposes an annual tax of P150 on tin can
factories having a maximum output capacity of 30,000 tin cans. The Shell Co. of P.I. Ltd., a
foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the
ordinances imposing such taxes are ultra vires. The defendant denies that they are so. The
controversy was submitted for judgment upon stipulation of facts which reads as follows:

Come now the parties in the above-entitled case by their undersigned attorneys and
hereby agree to the following stipulation of facts:

1. That the parties admit the allegations contained in Paragraph 1 of the Amended
Complaint referring to residence, personality, and capacity of the parties except the fact
that E.E. Vaño is now replaced by F.A. Corbo as Municipal Treasurer of Cordova, Cebu;

2. That the parties admit the allegations contained in paragraph 2 of the Amended
Complaint. Official Receipts Nos. A-1280606, A-37607422, A-3769852 and A-
21030388 are herein marked as Exhibits A, B, C, and D, respectively for the plaintiff;

3. That the parties admit that payments made under Exhibits B, C, and D were all under
protest and plaintiff admits that Exhibit A was not paid under protest;

4. That the parties admit that Official Receipt No. A-1280606 for P40 and Official
Receipt No. A-3760742 for P200 were collected by the defendant by virtue of Ordinance
No. 9, (Secs. E-4 and E-6, respectively) under Resolution No. 31, series of 1947, enacted
December 15, 1947, approved by the Provincial Board of Cebu in its Resolution No. 644,
series of 1948. Copy of said Ordinance No. 9, series of 1947, is herein marked as Exhibit
"E" for the plaintiff, and as Exhibit "I" for the defendant;

5. That the parties admit that Official Receipt No. A-3760852 for P150 was paid for taxes
imposed on Installation Managers, collected by the defendant by virtue of Ordinance No.
10 (section 3, E-12) under Resolution No. 38, series of 1946, approved by the Provincial
Board of Cebu in its Resolution No. 1070, series of 1946. Copy of .said Ordinance No.
10, series of 1946 is marked as Exhibit "F" for the plaintiff and as Exhibit "2" for the
defendant;

6. That the parties admit that Official Receipt No. A-21030388 for P5,450 was paid by
plaintiff and that said amount was collected by defendant by virtue of Ordinance No. 11,
series of 1948 (under Resolution No. 46) enacted August 31, 1948 and approved by the
Provincial Board of Cebu in its Resolution No. 115, series of 1949, and same was
approved by the Honorable Secretary of Finance under the provisions of section 4 of
Commonwealth Act No. 472. Copy of said Ordinance No. 11, series of 1948 is herein
marked as Exhibit "G" for the plaintiff, and Exhibit "3" for the defendant. Copy of the
approval of the Honorable Secretary of Finance of the same Ordinance is herein marked
as Exhibit "4" for the defendant.

Wherefore, aside from oral evidence which may be offered by the parties and other points
not covered by this stipulation, this case is hereby submitted upon the foregoing agreed
facts and record of evidence.

Cebu City, Philippines, January 20, 1950.

THE SHELL CO. OF P.I. LTD. C.D. JOHNSTON & A.P. DEEN
(Sgd.) L. DE BLECHYNDEN (Sgd.) A.P. DEEN
Plaintiff Attys. for the plaintiff

THE MUNICIPALITY OF CORDOVA (Sgd.) JOSE C. BORROMEO

(Sgd.) F.A. CORBO Provincial Fiscal
Defendant Attorney for the defendant
 (Record on Appeal, pp. 15-18.)

The parties reserved the right to introduce parole evidence but no such evidence was submitted
by either party. From the judgment holding the ordinances valid and dismissing the complaint
the plaintiff has appealed.

It is contended that as the municipal ordinance imposing an annual tax of P40 for "minor local
deposit in drums of combustible and inflammable materials," and of P200 "for tin factory" was
adopted under and pursuant to section 2244 of the Revised Administrative Code, which provides
that the municipal council in the exercise of the regulative authority may require any person
engaged in any business or occupation, such as "storing combustible or explosive materials" or
"the conducting of any other business of an unwholesome, obnoxious, offensive, or dangerous
character," to obtain a permit for which a reasonable fee, in no case to exceed P10 per annum,
may be charged, the annual tax of P40 and P200 are unauthorized and illegal. The permit and the
fee referred to may be required and charged by the Municipal Council of Cordova in the exercise
of its regulative authority, whereas the ordinance which imposes the taxes in question was
adopted under and pursuant to the provisions of Commonwealth Act No. 472, which authorizes
municipal councils and municipal district councils "to impose license taxes upon persons
engaged in any occupation or business, or exercising privileges in the municipality or municipal
district, by requiring them to secure licenses at rates fixed by the municipal council or municipal
district council," which shall be just and uniform but not "percentage taxes and taxes on specified
articles." Likewise, Ordinance No. 10, series of 1946, which imposes an annual tax of P150 on
"installation manager" comes under the provisions of Commonwealth Act No. 472. But it is
claimed that "installation manager" is a designation made by the plaintiff and such designation
cannot be deemed to be a "calling" as defined in section 178 of the National Internal Revenue
Code (Com. Act No. 466), and that the installation manager employed by the plaintiff is a
salaried employee which may not be taxed by the municipal council under the provisions of
Commonwealth Act No. 472. This contention is without merit, because even if the installation
manager is a salaried employee of the plaintiff, still it is an occupation "and one occupation or
line of business does not become exempt by being conducted with some other occupation or
business for which such tax has been paid'1 and the occupation tax must be paid "by each
individual engaged in a calling subject thereto."2 And pursuant to section 179 of the National
Internal Revenue Code, "The payment of . . . occupation tax shall not exempt any person from
any tax, . . . provided by law or ordinance in places where such . . . occupation in . . . regulated
by municipal law, nor shall the payment of any such tax be held to prohibit any municipality
from placing a tax upon the same . . . occupation, for local purposes, where the imposition of
such tax is authorized by law." It is true that, according to the stipulation of facts, Ordinance No.
10, series of 1946, was approved by the Provincial Board of Cebu in its Resolution No. 1070,
series of 1946, and that it does not appear that it was approved by the Department of Finance, as
provided for and required in section 4, paragraph 2, of Commonwealth Act No. 472, the rate of
municipal tax being in excess of P50 per annum. But at this point on the approval of the
Department of Finance was not raised in the court below, it cannot be raised for the first time on
appeal. The issue joined by the parties in their pleadings and the point raised by the plaintiff is
that the municipal council was not empowered to adopt the ordinance and not that it was not
approved by the Department of Finance. The fact that it was not stated in the stipulation of facts
justifies the presumption that the ordinance was approved in accordance with law.

The contention that the ordinance is discriminatory and hostile because there is no other person
in the locality who exercises such "designation" or occupation is also without merit, because the
fact that there is no other person in the locality who exercises such a "designation" or calling
does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable
to any person or firm who exercises such calling or occupation named or designated as
"installation manager."

Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can
factories having a maximum annual output capacity of 30,000 tin cans which, according to the
stipulation of facts, was approved by the Provincial Board of Cebu and the Department of
Finance, is valid and lawful, because it is neither a percentage tax nor one on specified articles
which are the only exceptions provided in section 1, Commonwealth Act No. 472. Neither does
it fall under any of the prohibitions provided for in section 3 of the same Act. Specific taxes
enumerated in the National Internal Revenue Code are those that are imposed upon "things
manufactured or produced in the Philippines for domestic sale or consumption" and upon "things
imported from the United States and foreign countries," such as distilled spirits, domestic
denatured alcohol, fermented liquors, products of tobacco, cigars and cigarettes, matches,
mechanical lighters, firecrackers, skimmed milk, manufactured oils and other fuels, coal, bunker
fuel oil, diesel fuel oil, cinematographic films, playing cards, sacharine.3 And it is not a
percentage tax because it is tax on business and the maximum annual output capacity is not a
percentage, because it is not a share or a tax based on the amount of the proceeds realized out of
the sale of the tin cans manufactured therein but on the business of manufacturing tin cans
having a maximum annual output capacity of 30,000 tin cans.

In an action for refund of municipal taxes claimed to have been paid and collected under an
illegal ordinance, the real party in interest is not the municipal treasurer but the municipality
concerned that is empowered to sue and be sued.4

The judgment appealed from is hereby affirmed, with costs against the appellant.

G.R. No. L-4817 May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

Calanog and Alafriz for plaintiffs-appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno for defendants-appellants.

REYES, J.:

This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical
practitioner, a public accountant, a dental surgeon and a pharmacist, purportedly "in their own
behalf and in behalf of other professionals practising in the City of Manila who may desire to
join it." Object of the suit is the annulment of Ordinance No. 3398 of the City of Manila together
with the provision of the Manila charter authorizing it and the refund of taxes collected under the
ordinance but paid under protest.

The ordinance in question, which was approved by the municipal board of the City of Manila on
July 25, 1950, imposes a municipal occupation tax on persons exercising various professions in
the city and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or
by imprisonment of not more than six months, or by both such fine and imprisonment in the
discretion of the court." Among the professions taxed were those to which plaintiffs belong. The
ordinance was enacted pursuant to paragraph (1) of section 18 of the Revised Charter of the City
of Manila (as amended by Republic Act No. 409), which empowers the Municipal Board of said
city to impose a municipal occupation tax, not to exceed P50 per annum, on persons engaged in
the various professions above referred to.

Having already paid their occupation tax under section 201 of the National Internal Revenue
Code, plaintiffs, upon being required to pay the additional tax prescribed in the ordinance, paid
the same under protest and then brought the present suit for the purpose already stated. The
lower court upheld the validity of the provision of law authorizing the enactment of the
ordinance but declared the ordinance itself illegal and void on the ground that the penalty there in
provided for non-payment of the tax was not legally authorized. From this decision both parties
appealed to this Court, and the only question they have presented for our determination is
whether this ruling is correct or not, for though the decision is silent on the refund of taxes paid
plaintiffs make no assignment of error on this point.
To begin with defendants' appeal, we find that the lower court was in error in saying that the
imposition of the penalty provided for in the ordinance was without the authority of law. The last
paragraph (kk) of the very section that authorizes the enactment of this tax ordinance (section 18
of the Manila Charter) in express terms also empowers the Municipal Board "to fix penalties for
the violation of ordinances which shall not exceed to(sic) two hundred pesos fine or six months"
imprisonment, or both such fine and imprisonment, for a single offense." Hence, the
pronouncement below that the ordinance in question is illegal and void because it imposes a
penalty not authorized by law is clearly without basis.

As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing
it constitute class legislation, are unjust and oppressive, and authorize what amounts to double
taxation.

In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the
professions to which they respectively belong have been singled out for the imposition of this
municipal occupation tax; and in any event, the Legislature may, in its discretion, select what
occupations shall be taxed, and in the exercise of that discretion it may tax all, or it may select
for taxation certain classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed.,
pp. 3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of Manila to
impose the said tax, it has withheld that authority from other chartered cities, not to mention
municipalities. We do not think it is for the courts to judge what particular cities or
municipalities should be empowered to impose occupation taxes in addition to those imposed by
the National Government. That matter is peculiarly within the domain of the political
departments and the courts would do well not to encroach upon it. Moreover, as the seat of the
National Government and with a population and volume of trade many times that of any other
Philippine city or municipality, Manila, no doubt, offers a more lucrative field for the practice of
the professions, so that it is but fair that the professionals in Manila be made to pay a higher
occupation tax than their brethren in the provinces.

Plaintiffs brand the ordinance unjust and oppressive because they say that it creates
discrimination within a class in that while professionals with offices in Manila have to pay the
tax, outsiders who have no offices in the city but practice their profession therein are not subject
to the tax. Plaintiffs make a distinction that is not found in the ordinance. The ordinance imposes
the tax upon every person "exercising" or "pursuing" — in the City of Manila naturally — any
one of the occupations named, but does not say that such person must have his office in Manila.
What constitutes exercise or pursuit of a profession in the city is a matter of judicial
determination. The argument against double taxation may not be invoked where one tax is
imposed by the state and the other is imposed by the city (1 Cooley on Taxation, 4th ed., p. 492),
it being widely recognized that there is nothing inherently obnoxious in the requirement that
license fees or taxes be exacted with respect to the same occupation, calling or activity by both
the state and the political subdivisions thereof. (51 Am. Jur., 341.)

In view of the foregoing, the judgment appealed from is reversed in so far as it declares
Ordinance No. 3398 of the City of Manila illegal and void and affirmed in so far as it holds the
validity of the provision of the Manila charter authorizing it. With costs against plaintiffs-
appellants.

Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

Separate Opinions

PARAS, C.J., dissenting:

I am constrained to dissent from the decision of the majority upon the ground that the Municipal
Board of Manila cannot outlaw what Congress of the Philippines has already authorized. The
plaintiffs-appellants — two lawyers, a physician, an accountant, a dentist and a pharmacist —
had already paid the occupation tax under section 201 of the National Internal Revenue Code and
are thereby duly licensed to practice their respective professions throughout the Philippines; and
yet they had been required to pay another occupation tax under Ordinance No. 3398 for
practising in the City of Manila. This is a glaring example of contradiction — the license granted
by the National Government is in effect withdrawn by the City in case of non-payment of the tax
under the ordinance. I fit be argued that the national occupation tax is collected to allow the
professional residing in Manila to pursue his calling in other places in the Philippines, it should
then be exacted only from professionals practising simultaneously in and outside of Manila. At
any rate, we are confronted with the following situation: Whereas the professionals elsewhere
pay only one occupation tax, in the City of Manila they have to pay two, although all are on
equal footing insofar as opportunities for earning money out of their pursuits are concerned. The
statement that practice in Manila is more lucrative than in the provinces, may be true perhaps
with reference only to a limited few, but certainly not to the general mass of practitioners in any
field. Again, provincial residents who have occasional or isolated practice in Manila may have to
pay the city tax. This obvious discrimination or lack of uniformity cannot be brushed aside or
justified by any trite pronouncement that double taxation is legitimate or that legislation may
validly affect certain classes.

My position is that a professional who has paid the occupation tax under the National Internal
Revenue Code should be allowed to practice in Manila even without paying the similar tax
imposed by Ordinance No. 3398. The City cannot give what said professional already has. I
would not say that this Ordinance, enacted by the Municipal Board pursuant to paragraph 1 of
section 18 of the Revised Charter of Manila, as amended by Republic Act No. 409, empowering
the Board to impose a municipal occupation tax not to exceed P50 per annum, is invalid; but that
only one tax, either under the Internal Revenue Code or under Ordinance No. 3398, should be
imposed upon a practitioner in Manila.

G.R. No. 3473 March 22, 1907

J. CASANOVAS, plaintiff-appellant,
vs.
JNO. S. HORD, defendant-appellee.

F.G. Waite for appellant.

Attorney-General Araneta for appellee.

WILLARD, J.:

The plaintiff brought this action against the defendant, the Collector of Internal Revenue, to
recover the sum of P9,600, paid by him under protest as taxes on certain mining claims owned
by him in the Province of Ambos Camarines. Judgment was rendered in the court below in favor
of the defendant, and from that judgment the plaintiff appealed.

There is no dispute about the facts.

In January, 1897, the Spanish Government, in accordance with the provisions of the royal decree
of the 14th of May, 1867, granted to the plaintiff certain mines in the said Province of Ambos
Camarines, of which mines the plaintiff is now the owner.

That there were valid perfected mining concessions granted prior to the 11th of April, 1899, is
conceded. They were so considered by the Collector of Internal Revenue and were by him said to
fall within the provisions of section 134 of Act No. 1189, known as the Internal Revenue Act.
That section is as follows:
 SEC. 134. On all valid perfected mining concessions granted prior to April eleventh,
eighteen hundred and ninety-nine, there shall be levied and collected on the after January
first, nineteen hundred and five, the following taxes:

2. (a) On each claim containing an area of sixty thousand square meters, an annual tax of
one hundred pesos; (b) and at the same rate proportionately on each claim containing an
area in excess of, or less than, sixty thousand square meters.

3. On the gross output of each an ad valorem tax equal to three per centum of the actual
market value of such output.

The defendant accordingly imposed upon these properties the tax mentioned in section 134,
which tax, as has before been stated, plaintiff paid under protest.

The only question in the case is whether this section 134 is void or valid.

I. It is claimed by the plaintiff that it is void because it comes within the provision of section 5 of
the act of Congress of July 1, 19021 (32 U.S. Stat. L., 691), which provides "that no law
impairing the obligation of contracts shall be enacted." The royal decree of the 14th of May,
1867, provided, among other things, as follows:

ART. 76. On each pertenencia minera (mining claim) of the area prescribed in the first
paragraph of article 13 (sixty thousand square meters) there shall be paid annually a fixed
tax of forty escudos (about P20.00). The pertenencia referred to in the second paragraph
of the same article, though of greater area than the others (one hundred and fifty thousand
square meters), shall pay only twenty escudos (about P10.00).

ART. 78. Pertenencia of iron mines and mines of combustible minerals shall be exempt
from the annual tax for a period of thirty years from the date of publication of this decree.

ART. 80. A further tax of three per centum on the gross earnings shall be paid without
deduction of costs of any kind whatsoever. All substances enumerated in section one
shall be exempt from said tax of three per centum for a period of thirty years.

ART. 81. No other taxes than those herein mentioned shall be imposed upon mining and
metallurgical industries.

The royal decree and regulation for its enforcement provided that the deeds granted by the
Government should be in a particular form, which form was inserted in the regulations. It must
be presumed that the deeds granted to the plaintiff were made as provided by law, and, in fact,
one of such concessions was exhibited during the argument in this court, and was found to be in
exact conformity with the form prescribed by law. The deed is as follows:

Don Camilo Garcia de Polavieja, Marquez de Polavieja, Teniente General de los

Ejercitos Nacionales, Caballero Gran Cruz de la Real y Militar Orden de San
Hermenegildo, de la Real y distinguida de Isabel la Catolica, de la del Merito Militar
Roja, de la de la Corona de Italia, Comendador de Carlos Tercero, Bennemerito de la
Patria en grado eminente, condecorado con varias cruses de distincion por meritos de
guerra, Capitan General y Gobernador General de Filipinas.

Whereas I have granted to Don Joaquin Casanovas y Llovet and to Don Martin Buck the
concession of a gold mine entitled "Nueva California Segunda" in the jurisdiction of
Paracale, Province of Ambos Camarines: Now, therefore, in the name of His Majesty the
King (whom God preserve), and pursuant to the provisions of article 37 of the royal
decree of May 14, 1867, regulating mining in these Islands, I issue, this fifth day of
November, eighteen hundred and ninety-six, this title deed to four pertenencias,
comprising an area of two hundred and forty thousand square meters, as shown in the
 attached sketch map drafted by the engineer Don Enrique Abella y Casariego, and dated
at Manila December sixteenth of the said year, subject to the following general terms and
conditions:

1. That the mine shall be worked in conformity with the rules in mining, the grantee and
his laborers to be governed by the police rules established by existing regulations.

2. That the grantee shall be liable for all damages to third parties that may be caused by
his operations.

3. That the grantee shall likewise indemnify his neighbors for any damage they may
suffer by reason of water accumulated on his works, if, upon being requested, he fail to
drain the same within the time indicated.

4. That he shall contribute for the drainage of the adjacent mines and for the general
galleries for drainage or haulage in proportion to the benefit he derives therefrom,
whenever, by authority of the Governor-General, such works shall be opened for a group
of pertenencias or for the entire mining locality in which the mine is situated.

5. That he shall commence work on the mine immediately upon receipt of this concession
unless prevented by force majeure.

6. That he shall keep the mine in active operation by employing at the rate of at least four
laborers for each pertenencia for at least six months of each year.

7. That he shall strengthen the walls of the mine within the time indicated whenever, by
reason of mismanagement of the work, it threatens to cave in, unless he be prevented by
force majeure.

8. That he shall not render further profitable development of the mine difficult or
impossible by avaricious operation.

9. That he shall not suspend the operation of the mine with the intention of abandoning
the same without first informing the Governor of his intention, in which case he must
leave the mine in a good state of timbering.

10. That he shall pay taxes on the mine and its output as prescribed in the royal decree.

11. Finally, that he shall comply with all the requirements contained in the royal decree
and in the regulations for concessions of the same nature as the present.

Without special conditions.

Now, therefore, by virtue of this title deed, I grant to Don Joaquin Casanovas y Llovet
and to Don Martin Buck the ownership of the said mine for an unlimited period of time
so long as they shall comply with the foregoing terms and conditions, to the end that they
may develop the same and make free use and disposition of the output thereof, with the
right to alienate the said mine subject to the provisions of existing laws, and to enjoy all
the rights and benefits conceded to such grantees by the royal decree and by the mining
regulations. And for the prompt fulfillment and observance of the said conditions, both
on the part of the said grantees and by all authorities, courts, corporations, and private
persons whom it may concern, I have ordered this title deed to be issued — given under
my hand and the proper seal and countersigned by the undersigned Director-General of
Civil Administration.

It seems very clear to us that this deed constituted a contract between the Spanish Government
and the plaintiff, the obligation of which contract was impaired by the enactment of section 134
of the Internal Revenue Law above cited, thereby infringing the provisions above quoted from
section 5 of the act of Congress of July 1, 1902. This conclusion seems necessarily to result from
the decisions of the Supreme Court of the United States in similar cases. In the case of McGee
vs. Mathis (4 Wallace, 143), it appeared that the State of Arkansas, by an act of the legislature of
1851, provided for the sale of certain swamp lands granted to it by the United States; for the
issue of transferable scrip receivable for any lands not already taken up at the time of selection
by the holder; for contracts for the making of levees and drains, and for the payment of
contractors in scrip and otherwise. In the fourteenth section of this act it was provided that —

To encourage by all just means the progress and completion of the reclaiming of such
lands by offering inducements to purchasers and contractors to take up said lands, all said
swamp and overflowed lands shall be exempt from taxation for the term of ten years or
until they shall be reclaimed.

In 1855 this section was repealed and provision was made by law for the taxation of swamp and
overflowed lands, sold or to be sold, precisely as other lands. McGee, before this appeal, had
become the owner by transfer from contractors of a large amount of scrip issued under the Act of
1851, and with this scrip, after the repeal, took up and paid for many sections and parts of
sections of the granted lands. Taxes were levied by the State on the lands so taken up by McGee.
The Supreme Court held that these taxes could not be collected. The Court said at page 156:

It seems quite clear that the Act of 1851 authorizing the issue of land scrip constituted a
contract between the State and the holders of the land scrip issued under the act.

In the case of the Home of the Friendless vs. Rouse (8 Wallace, 430), it appeared that on the 3d
day of February, 1853, the legislature of Missouri passed on act to incorporate the Home of the
Friendless in the city of St. Louis. Section 1 of the act provided that —

All property of said corporation shall be exempt from taxation.

The court held that the State had no power afterwards to pass laws providing for the levying of
taxes upon this institution. The Court said among other things at page 438:

The validity of this contract is questioned at the bar on the ground that the legislature had
no authority to grant away the power of taxation. The answer to this position is, that the
question is no longer open for argument here, for it is settled by the repeated
adjudications of this court, that a State may be contract based on a consideration exempt
the property of an individual or corporation from taxation, either for a specified period or
permanently. And it is equally well settled that the exemption is presumed to be on
sufficient consideration, and binds the State if the charter containing it is accepted.

In the case of The Asylum vs. The City of New Orleans (105 U.S., 362), it appears that St.
Ariva's Asylum was incorporated by an act of the legislature of Louisiana, approved April 29,
1853. The law incorporating it provided that it should enjoy the same exemption from taxation
which was enjoyed by the Orphan Boys' Asylum of New Orleans. The law relating to the last
named institution provided (page 364):

That, from and after the passage of this act, all the property, real and personal, belonging
to the Orphan Boys' Asylum of New Orleans be, and the same is hereby exempted from
all taxation, either by the State, parish, or city in which it is situated, any law to the
contrary notwithstanding.

It was held that the State had no power by subsequent legislation to impose taxes upon the
property of this institution.

That the doctrine announced in these cases is still maintained in that court is apparent from the
case of Powers vs. The Detroit, Grand Haven and Milwaukee Railway which was decided on the
16th of April, 1906, and reported in 201 U. S., 543. Section 9 of the act of the legislature of
Michigan, incorporating the railway company, provided:

Said company shall, on or before the 1st day of July, pay to the State treasurer, an annual
tax of one per cent on the capital stock of said company, pain in, which tax shall be in
lieu of all other taxation.

The court said at page 556:

It has often been decided by this court, so often that a citation on authorities in
unnecessary, that the legislature of a State may, in the absence of special restrictions in its
constitution, make a valid contract with a corporation in respect to taxation, and that such
contract can be enforced against the State at the instance of the corporation.

The case at bar falls within the cases hereinbefore cited. It is to be distinguished from the case of
the Metropolitan Street Railway Company vs. The New York State Board of Tax Commissioners
(199 U.S., 1). In that case it was provided by various acts of the legislature, that the companies
therein referred to, should pay annually to the city of New York, a fixed amount or percentage,
varying from 2 to 8 per cent of their gross earnings additional taxes was sustained by the court. It
was sustained on the ground that the prior legislation did not expressly say that the taxes thus
provided for should be in lieu of all other taxes. The court said at page 37:

Applying these well-established rules to the several contracts, it will be perceived that
there was no express relinquishment of the right of taxation. The plaintiff in error must
rely upon some implication, and not upon any direct stipulation. In each contract there
was a grant of privileges, but the grant was specifically or privileges in respect to the
construction, operation and maintenance of the street railroad. These were all that in
terms were granted. As consideration for this grant, the grantees were to pay something,
and such payment is nowhere said to be in lieu of, or as an equivalent or substitute of
taxes. All that can be extracted from the language used, was a grant of privileges and a
payment therefor. Other words must be written into the contract before there can be
found any relinquishment of the power of taxation.

But in the case at bar, there is found not only the provisions for the payment of certain taxes
annually, but there is also found the provision contained in article 81, above quoted, which
expressly declares that no other taxes shall be imposed upon these mines.

The present case is to be distinguished also from that class of cases of which Grands Lodge vs.
The City of New Orleans (166 U.S., 143) is a type, and which includes Salt Company vs. East
Saginaw (13 Wall., 373) and Welch vs. Cook (97 U.S., 541). In these cases the exemption was a
mere bounty and did not form a part of any contract.

The fact that this concession was made by the Government of Spain, and not by the Government
of the United States, is not important. (Trustees of Dartmouth College vs. Woodward, 4
Wheaton, 518.)

Our conclusion is that the concessions granted by the Government of Spain to the plaintiff,
constitute contracts between the parties; that section 134 of the Internal Revenue Law impairs the
obligation of these contracts, and is therefore void as to them.

II. We think that this section is also void because in conflict with section 60 of the act of
Congress of July 1, 1902. This section is as follows:

That nothing in this Act shall be construed to effect the rights of any person, partnership,
or corporation, having a valid, perfected mining concession granted prior to April
eleventh, eighteen hundred and ninety-nine, but all such concessions shall be conducted
under the provisions of the law in force at the time they were granted, subject at all times
 to cancellation by reason of illegality in the procedure by which they were obtained, or
for failure to comply with the conditions prescribed as requisite to their retention in the
laws under which they were granted: Provided, That the owner or owners of every such
concession shall cause the corners made by its boundaries to be distinctly marked with
permanent monuments within six months after this act has been promulgated in the
Philippine Islands, and that any concessions, the boundaries of which are not so marked
within this period shall be free and open to explorations and purchase under the
provisions of this act.2

This section seems to indicate that concessions, like those in question, can be canceled only by
reason of illegality in the procedure by which they were obtained, or for failure to comply with
the conditions prescribed as requisite for their retention in the laws under which they were
granted. There is nothing in the section which indicates that they can be canceled for failure to
comply with the conditions prescribed by subsequent legislation. In fact, the real intention of the
act seems to be that such concession should be subject to the former legislation and not to any
subsequent legislation. There is no claim in this case that there was any illegality in the
procedure by which these concessions were obtained, nor is there any claim that the plaintiff has
not complied with the conditions prescribed in the said royal decree of 1867.

III. In view of the result at which we have arrived, it is not necessary to consider the further
claim made by the plaintiff that the taxes imposed by article 134 above quoted, are in violation of
the part of section 5 of the act of July 1, 1902, which declares "that the rule of taxation in said
Islands shall be uniform."

The judgment of the court below is reversed, and judgment is ordered in favor of the plaintiff and
against the defendant for P9,600, with interest thereon, at 6 per cent, from the 21st day of
February, 1906, and the costs of the Court of First Instance. No costs will be allowed to either
party in this court.

After the expiration of twenty days let judgment be entered in accordance herewith and ten days
thereafter let the case be remanded to the court from whence it came for proper action. So
ordered.

Arellano, C.J., Torres, Mapa, and Tracey, JJ., concur.

Johnson, J., dissents.

G.R. No. L-9637 April 30, 1957

AMERICAN BIBLE SOCIETY, plaintiff-appellant,

vs.
CITY OF MANILA, defendant-appellee.

City Fiscal Eugenio Angeles and Juan Nabong for appellant.

Assistant City Fiscal Arsenio Nañawa for appellee.

FELIX, J.:

Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly

registered and doing business in the Philippines through its Philippine agency established in
Manila in November, 1898, with its principal office at 636 Isaac Peral in said City. The
defendant appellee is a municipal corporation with powers that are to be exercised in conformity
with the provisions of Republic Act No. 409, known as the Revised Charter of the City of
Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles
and/or gospel portions thereof (except during the Japanese occupation) throughout the
Philippines and translating the same into several Philippine dialects. On May 29 1953, the acting
City Treasurer of the City of Manila informed plaintiff that it was conducting the business of
general merchandise since November, 1945, without providing itself with the necessary Mayor's
permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances
Nos. 2529, 3028 and 3364, and required plaintiff to secure, within three days, the corresponding
permit and license fees, together with compromise covering the period from the 4th quarter of
1945 to the 2nd quarter of 1953, in the total sum of P5,821.45 (Annex A).

Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff
deposit and pay under protest the sum of P5,891.45, if suit was to be taken in court regarding the
same (Annex B). To avoid the closing of its business as well as further fines and penalties in the
premises on October 24, 1953, plaintiff paid to the defendant under protest the said permit and
license fees in the aforementioned amount, giving at the same time notice to the City Treasurer
that suit would be taken in court to question the legality of the ordinances under which, the said
fees were being collected (Annex C), which was done on the same date by filing the complaint
that gave rise to this action. In its complaint plaintiff prays that judgment be rendered declaring
the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364
illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum
of P5,891.45 paid under protest, together with legal interest thereon, and the costs, plaintiff
further praying for such other relief and remedy as the court may deem just equitable.

Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the
Municipal Board of the City of Manila by virtue of the power granted to it by section 2444,
subsection (m-2) of the Revised Administrative Code, superseded on June 18, 1949, by section
18, subsection (1) of Republic Act No. 409, known as the Revised Charter of the City of Manila,
and praying that the complaint be dismissed, with costs against plaintiff. This answer was replied
by the plaintiff reiterating the unconstitutionality of the often-repeated ordinances.

Before trial the parties submitted the following stipulation of facts:

COME NOW the parties in the above-entitled case, thru their undersigned attorneys and
respectfully submit the following stipulation of facts:

1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac
Peral, Manila, Bibles, New Testaments, bible portions and bible concordance in English
and other foreign languages imported by it from the United States as well as Bibles, New
Testaments and bible portions in the local dialects imported and/or purchased locally; that
from the fourth quarter of 1945 to the first quarter of 1953 inclusive the sales made by the
plaintiff were as follows:

Quarter Amount of Sales

4th quarter 1945 P1,244.21

1st quarter 1946 2,206.85

2nd quarter 1946 1,950.38

3rd quarter 1946 2,235.99

4th quarter 1946 3,256.04

1st quarter 1947 13,241.07

2nd quarter 1947 15,774.55

3rd quarter 1947 14,654.13

4th quarter 1947 12,590.94

 1st quarter 1948 11,143.90

2nd quarter 1948 14,715.26

3rd quarter 1948 38,333.83

4th quarter 1948 16,179.90

1st quarter 1949 23,975.10

2nd quarter 1949 17,802.08

3rd quarter 1949 16,640.79

4th quarter 1949 15,961.38

1st quarter 1950 18,562.46

2nd quarter 1950 21,816.32

3rd quarter 1950 25,004.55

4th quarter 1950 45,287.92

1st quarter 1951 37,841.21

2nd quarter 1951 29,103.98

3rd quarter 1951 20,181.10

4th quarter 1951 22,968.91

1st quarter 1952 23,002.65

2nd quarter 1952 17,626.96

3rd quarter 1952 17,921.01

4th quarter 1952 24,180.72

1st quarter 1953 29,516.21

2. That the parties hereby reserve the right to present evidence of other facts not herein
stipulated.

WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties
may present further evidence on their behalf. (Record on Appeal, pp. 15-16).

When the case was set for hearing, plaintiff proved, among other things, that it has been in
existence in the Philippines since 1899, and that its parent society is in New York, United States
of America; that its, contiguous real properties located at Isaac Peral are exempt from real estate
taxes; and that it was never required to pay any municipal license fee or tax before the war, nor
does the American Bible Society in the United States pay any license fee or sales tax for the sale
of bible therein. Plaintiff further tried to establish that it never made any profit from the sale of
its bibles, which are disposed of for as low as one third of the cost, and that in order to maintain
its operating cost it obtains substantial remittances from its New York office and voluntary
contributions and gifts from certain churches, both in the United States and in the Philippines,
which are interested in its missionary work. Regarding plaintiff's contention of lack of profit in
the sale of bibles, defendant retorts that the admissions of plaintiff-appellant's lone witness who
testified on cross-examination that bibles bearing the price of 70 cents each from plaintiff-
appellant's New York office are sold here by plaintiff-appellant at P1.30 each; those bearing the
price of $4.50 each are sold here at P10 each; those bearing the price of $7 each are sold here at
P15 each; and those bearing the price of $11 each are sold here at P22 each, clearly show that
plaintiff's contention that it never makes any profit from the sale of its bible, is evidently
untenable.

After hearing the Court rendered judgment, the last part of which is as follows:

As may be seen from the repealed section (m-2) of the Revised Administrative Code and
the repealing portions (o) of section 18 of Republic Act No. 409, although they seemingly
differ in the way the legislative intent is expressed, yet their meaning is practically the
same for the purpose of taxing the merchandise mentioned in said legal provisions, and
that the taxes to be levied by said ordinances is in the nature of percentage graduated
taxes (Sec. 3 of Ordinance No. 3000, as amended, and Sec. 1, Group 2, of Ordinance No.
2529, as amended by Ordinance No. 3364).

IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and

so holds that this case should be dismissed, as it is hereby dismissed, for lack of merits,
with costs against the plaintiff.

Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified
the case to Us for the reason that the errors assigned to the lower Court involved only questions
of law.

Appellant contends that the lower Court erred:

1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not
unconstitutional;

2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code
under which Ordinances Nos. 2592 and 3000 were promulgated, was not repealed by
Section 18 of Republic Act No. 409;

3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in
order to be valid under the new Charter of the City of Manila, must first be approved by
the President of the Philippines; and

4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial
proportions, it cannot escape from the operation of said municipal ordinances under the
cloak of religious privilege.

The issues. — As may be seen from the proceeding statement of the case, the issues involved in
the present controversy may be reduced to the following: (1) whether or not the ordinances of the
City of Manila, Nos. 3000, as amended, and 2529, 3028 and 3364, are constitutional and valid;
and (2) whether the provisions of said ordinances are applicable or not to the case at bar.

Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines,
provides that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free
exercise thereof, and the free exercise and enjoyment of religious profession and worship,
without discrimination or preference, shall forever be allowed. No religion test shall be
required for the exercise of civil or political rights.

Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529
and 3000, as respectively amended, are unconstitutional and illegal in so far as its society is
concerned, because they provide for religious censorship and restrain the free exercise and
enjoyment of its religious profession, to wit: the distribution and sale of bibles and other
religious literature to the people of the Philippines.

Before entering into a discussion of the constitutional aspect of the case, We shall first consider
the provisions of the questioned ordinances in relation to their application to the sale of bibles,
etc. by appellant. The records, show that by letter of May 29, 1953 (Annex A), the City Treasurer
required plaintiff to secure a Mayor's permit in connection with the society's alleged business of
distributing and selling bibles, etc. and to pay permit dues in the sum of P35 for the period
covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's failure to
secure the permit required by Ordinance No. 3000 of the City of Manila, as amended. This
Ordinance is of general application and not particularly directed against institutions like the
plaintiff, and it does not contain any provisions whatever prescribing religious censorship nor
restraining the free exercise and enjoyment of any religious profession. Section 1 of Ordinance
No. 3000 reads as follows:

SEC. 1. PERMITS NECESSARY. — It shall be unlawful for any person or entity to

conduct or engage in any of the businesses, trades, or occupations enumerated in Section
3 of this Ordinance or other businesses, trades, or occupations for which a permit is
required for the proper supervision and enforcement of existing laws and ordinances
governing the sanitation, security, and welfare of the public and the health of the
employees engaged in the business specified in said section 3 hereof, WITHOUT FIRST
HAVING OBTAINED A PERMIT THEREFOR FROM THE MAYOR AND THE
NECESSARY LICENSE FROM THE CITY TREASURER.

The business, trade or occupation of the plaintiff involved in this case is not particularly
mentioned in Section 3 of the Ordinance, and the record does not show that a permit is required
therefor under existing laws and ordinances for the proper supervision and enforcement of their
provisions governing the sanitation, security and welfare of the public and the health of the
employees engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000
contains item No. 79, which reads as follows:

79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00

Therefore, the necessity of the permit is made to depend upon the power of the City to license or
tax said business, trade or occupation.

As to the license fees that the Treasurer of the City of Manila required the society to pay from
the 4th quarter of 1945 to the 1st quarter of 1953 in the sum of P5,821.45, including the sum of
P50 as compromise, Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028
prescribes the following:

SEC. 1. FEES. — Subject to the provisions of section 578 of the Revised Ordinances of
the City of Manila, as amended, there shall be paid to the City Treasurer for engaging in
any of the businesses or occupations below enumerated, quarterly, license fees based on
gross sales or receipts realized during the preceding quarter in accordance with the rates
herein prescribed: PROVIDED, HOWEVER, That a person engaged in any businesses or
occupation for the first time shall pay the initial license fee based on the probable gross
sales or receipts for the first quarter beginning from the date of the opening of the
business as indicated herein for the corresponding business or occupation.

xxx xxx xxx

GROUP 2. — Retail dealers in new (not yet used) merchandise, which dealers are not yet
subject to the payment of any municipal tax, such as (1) retail dealers in general
 merchandise; (2) retail dealers exclusively engaged in the sale of . . . books, including
stationery.

xxx xxx xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No.
2529, as amended, are not imposed directly upon any religious institution but upon those
engaged in any of the business or occupations therein enumerated, such as retail "dealers in
general merchandise" which, it is alleged, cover the business or occupation of selling bibles,
books, etc.

Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of
said legal body, as amended by Act No. 3659, approved on December 8, 1929, empowers the
Municipal Board of the City of Manila:

(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or
both, and (b) retail dealers in new (not yet used) merchandise, which dealers are not yet
subject to the payment of any municipal tax.

For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in
general merchandise, and (2) retail dealers exclusively engaged in the sale of (a) textiles .
. . (e) books, including stationery, paper and office supplies, . . .: PROVIDED,
HOWEVER, That the combined total tax of any debtor or manufacturer, or both,
enumerated under these subsections (m-1) and (m-2), whether dealing in one or all of the
articles mentioned herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS
PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were
enacted in virtue of the power that said Act No. 3669 conferred upon the City of Manila.
Appellant, however, contends that said ordinances are longer in force and effect as the law under
which they were promulgated has been expressly repealed by Section 102 of Republic Act No.
409 passed on June 18, 1949, known as the Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly
repealed the provisions of Chapter 60 of the Revised Administrative Code but in the opinion of
the trial Judge, although Section 2444 (m-2) of the former Manila Charter and section 18 (o) of
the new seemingly differ in the way the legislative intent was expressed, yet their meaning is
practically the same for the purpose of taxing the merchandise mentioned in both legal
provisions and, consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered
as still in full force and effect uninterruptedly up to the present.

Often the legislature, instead of simply amending the pre-existing statute, will repeal the
old statute in its entirety and by the same enactment re-enact all or certain portions of the
preexisting law. Of course, the problem created by this sort of legislative action involves
mainly the effect of the repeal upon rights and liabilities which accrued under the original
statute. Are those rights and liabilities destroyed or preserved? The authorities are divided
as to the effect of simultaneous repeals and re-enactments. Some adhere to the view that
the rights and liabilities accrued under the repealed act are destroyed, since the statutes
from which they sprang are actually terminated, even though for only a very short period
of time. Others, and they seem to be in the majority, refuse to accept this view of the
situation, and consequently maintain that all rights an liabilities which have accrued
under the original statute are preserved and may be enforced, since the re-enactment
neutralizes the repeal, therefore, continuing the law in force without interruption.
(Crawford-Statutory Construction, Sec. 322).

Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and
wider concept of taxation and is different from the provisions of Section 2444(m-2) that the
former cannot be considered as a substantial re-enactment of the provisions of the latter. We
have quoted above the provisions of section 2444(m-2) of the Revised Administrative Code and
We shall now copy hereunder the provisions of Section 18, subdivision (o) of Republic Act No.
409, which reads as follows:

(o) To tax and fix the license fee on dealers in general merchandise, including importers
and indentors, except those dealers who may be expressly subject to the payment of some
other municipal tax under the provisions of this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail
dealers. For purposes of the tax on retail dealers, general merchandise shall be classified
into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential
commodities, and (4) miscellaneous articles. A separate license shall be prescribed for
each class but where commodities of different classes are sold in the same establishment,
it shall not be compulsory for the owner to secure more than one license if he pays the
higher or highest rate of tax prescribed by ordinance. Wholesale dealers shall pay the
license tax as such, as may be provided by ordinance.

For purposes of this section, the term "General merchandise" shall include poultry and
livestock, agricultural products, fish and other allied products.

The only essential difference that We find between these two provisions that may have any
bearing on the case at bar, is that, while subsection (m-2) prescribes that the combined total tax
of any dealer or manufacturer, or both, enumerated under subsections (m-1) and (m-2), whether
dealing in one or all of the articles mentioned therein, shall not be in excess of P500 per annum,
the corresponding section 18, subsection (o) of Republic Act No. 409, does not contain any
limitation as to the amount of tax or license fee that the retail dealer has to pay per annum.
Hence, and in accordance with the weight of the authorities above referred to that maintain that
"all rights and liabilities which have accrued under the original statute are preserved and may be
enforced, since the reenactment neutralizes the repeal, therefore continuing the law in force
without interruption", We hold that the questioned ordinances of the City of Manila are still in
force and effect.

Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by
the President of the Philippines as per section 18, subsection (ii) of Republic Act No. 409, which
reads as follows:

(ii) To tax, license and regulate any business, trade or occupation being conducted within
the City of Manila, not otherwise enumerated in the preceding subsections, including
percentage taxes based on gross sales or receipts, subject to the approval of the
PRESIDENT, except amusement taxes.

but this requirement of the President's approval was not contained in section 2444 of the former
Charter of the City of Manila under which Ordinance No. 2529 was promulgated. Anyway, as
stated by appellee's counsel, the business of "retail dealers in general merchandise" is expressly
enumerated in subsection (o), section 18 of Republic Act No. 409; hence, an ordinance
prescribing a municipal tax on said business does not have to be approved by the President to be
effective, as it is not among those referred to in said subsection (ii). Moreover, the questioned
ordinances are still in force, having been promulgated by the Municipal Board of the City of
Manila under the authority granted to it by law.

The question that now remains to be determined is whether said ordinances are inapplicable,
invalid or unconstitutional if applied to the alleged business of distribution and sale of bibles to
the people of the Philippines by a religious corporation like the American Bible Society, plaintiff
herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028,
appellant contends that it is unconstitutional and illegal because it restrains the free exercise and
enjoyment of the religious profession and worship of appellant.

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the
freedom of religious profession and worship. "Religion has been spoken of as a profession of
faith to an active power that binds and elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil.,
201).It has reference to one's views of his relations to His Creator and to the obligations they
impose of reverence to His being and character, and obedience to His Will (Davis vs. Beason,
133 U.S., 342). The constitutional guaranty of the free exercise and enjoyment of religious
profession and worship carries with it the right to disseminate religious information. Any
restraints of such right can only be justified like other restraints of freedom of expression on the
grounds that there is a clear and present danger of any substantive evil which the State has the
right to prevent". (Tañada and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p.
297). In the case at bar the license fee herein involved is imposed upon appellant for its
distribution and sale of bibles and other religious literature:

In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a
license be obtained before a person could canvass or solicit orders for goods, paintings,
pictures, wares or merchandise cannot be made to apply to members of Jehovah's
Witnesses who went about from door to door distributing literature and soliciting people
to "purchase" certain religious books and pamphlets, all published by the Watch Tower
Bible & Tract Society. The "price" of the books was twenty-five cents each, the "price"
of the pamphlets five cents each. It was shown that in making the solicitations there was a
request for additional "contribution" of twenty-five cents each for the books and five
cents each for the pamphlets. Lesser sum were accepted, however, and books were even
donated in case interested persons were without funds.

On the above facts the Supreme Court held that it could not be said that petitioners were
engaged in commercial rather than a religious venture. Their activities could not be
described as embraced in the occupation of selling books and pamphlets. Then the Court
continued:

"We do not mean to say that religious groups and the press are free from all financial
burdens of government. See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L.
ed. 660, 668, 56 S. Ct. 444. We have here something quite different, for example, from a
tax on the income of one who engages in religious activities or a tax on property used or
employed in connection with activities. It is one thing to impose a tax on the income or
property of a preacher. It is quite another to exact a tax from him for the privilege of
delivering a sermon. The tax imposed by the City of Jeannette is a flat license tax,
payment of which is a condition of the exercise of these constitutional privileges. The
power to tax the exercise of a privilege is the power to control or suppress its enjoyment.
. . . Those who can tax the exercise of this religious practice can make its exercise so
costly as to deprive it of the resources necessary for its maintenance. Those who can tax
the privilege of engaging in this form of missionary evangelism can close all its doors to
all those who do not have a full purse. Spreading religious beliefs in this ancient and
honorable manner would thus be denied the needy. . . .

It is contended however that the fact that the license tax can suppress or control this
activity is unimportant if it does not do so. But that is to disregard the nature of this tax. It
is a license tax — a flat tax imposed on the exercise of a privilege granted by the Bill of
Rights . . . The power to impose a license tax on the exercise of these freedom is indeed
as potent as the power of censorship which this Court has repeatedly struck down. . . . It
is not a nominal fee imposed as a regulatory measure to defray the expenses of policing
the activities in question. It is in no way apportioned. It is flat license tax levied and
collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the
constitutional liberties of press and religion and inevitably tends to suppress their
 exercise. That is almost uniformly recognized as the inherent vice and evil of this flat
license tax."

Nor could dissemination of religious information be conditioned upon the approval of an

official or manager even if the town were owned by a corporation as held in the case of
Marsh vs. State of Alabama (326 U.S. 501), or by the United States itself as held in the
case of Tucker vs. Texas (326 U.S. 517). In the former case the Supreme Court expressed
the opinion that the right to enjoy freedom of the press and religion occupies a preferred
position as against the constitutional right of property owners.

"When we balance the constitutional rights of owners of property against those of the
people to enjoy freedom of press and religion, as we must here, we remain mindful of the
fact that the latter occupy a preferred position. . . . In our view the circumstance that the
property rights to the premises where the deprivation of property here involved, took
place, were held by others than the public, is not sufficient to justify the State's permitting
a corporation to govern a community of citizens so as to restrict their fundamental
liberties and the enforcement of such restraint by the application of a State statute."
(Tañada and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 304-306).

Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue
Code, provides:

SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. — The following

organizations shall not be taxed under this Title in respect to income received by them as
such —

(e) Corporations or associations organized and operated exclusively for religious,

charitable, . . . or educational purposes, . . .: Provided, however, That the income of
whatever kind and character from any of its properties, real or personal, or from any
activity conducted for profit, regardless of the disposition made of such income, shall be
liable to the tax imposed under this Code;

Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from
this tax and says that such exemption clearly indicates that the act of distributing and selling
bibles, etc. is purely religious and does not fall under the above legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets
was in some instances a little bit higher than the actual cost of the same but this cannot mean that
appellant was engaged in the business or occupation of selling said "merchandise" for profit. For
this reason We believe that the provisions of City of Manila Ordinance No. 2529, as amended,
cannot be applied to appellant, for in doing so it would impair its free exercise and enjoyment of
its religious profession and worship as well as its rights of dissemination of religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's
permit before any person can engage in any of the businesses, trades or occupations enumerated
therein, We do not find that it imposes any charge upon the enjoyment of a right granted by the
Constitution, nor tax the exercise of religious practices. In the case of Coleman vs. City of
Griffin, 189 S.E. 427, this point was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by
hand or otherwise, circulars, handbooks, advertising, or literature of any kind, whether
said articles are being delivered free, or whether same are being sold within the city limits
of the City of Griffin, without first obtaining written permission from the city manager of
the City of Griffin, shall be deemed a nuisance and punishable as an offense against the
City of Griffin, does not deprive defendant of his constitutional right of the free exercise
and enjoyment of religious profession and worship, even though it prohibits him from
 introducing and carrying out a scheme or purpose which he sees fit to claim as a part of
his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if
applied to plaintiff Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not
applicable to plaintiff-appellant and defendant-appellee is powerless to license or tax the
business of plaintiff Society involved herein for, as stated before, it would impair plaintiff's right
to the free exercise and enjoyment of its religious profession and worship, as well as its rights of
dissemination of religious beliefs, We find that Ordinance No. 3000, as amended is also
inapplicable to said business, trade or occupation of the plaintiff.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision
appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected
from it. Without pronouncement as to costs. It is so ordered.

Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion and Endencia, JJ.,
concur.

G.R. No. L-10405 December 29, 1960

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal,

petitioner-appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL.,
respondents-appellees.

Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.

Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for appellee.

CONCEPCION, J.:

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal,
dismissing the above entitled case and dissolving the writ of preliminary injunction therein
issued, without costs.

On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted
this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920,
entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained,
in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction,
repair, extension and improvement" of Pasig feeder road terminals (Gen. Roxas — Gen. Araneta
— Gen. Lucban — Gen. Capinpin — Gen. Segundo — Gen. Delgado — Gen. Malvar — Gen.
Lim)"; that, at the time of the passage and approval of said Act, the aforementioned feeder roads
were "nothing but projected and planned subdivision roads, not yet constructed, . . . within the
Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the tracings attached to the
petition as Annexes A and B, near Shaw Boulevard, not far away from the intersection between
the latter and Highway 54), which projected feeder roads "do not connect any government
property or any important premises to the main highway"; that the aforementioned Antonio
Subdivision (as well as the lands on which said feeder roads were to be construed) were private
properties of respondent Jose C. Zulueta, who, at the time of the passage and approval of said
Act, was a member of the Senate of the Philippines; that on May, 1953, respondent Zulueta,
addressed a letter to the Municipal Council of Pasig, Rizal, offering to donate said projected
feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the offer was accepted by
the council, subject to the condition "that the donor would submit a plan of the said roads and
agree to change the names of two of them"; that no deed of donation in favor of the municipality
of Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote another letter
to said council, calling attention to the approval of Republic Act. No. 920, and the sum of
P85,000.00 appropriated therein for the construction of the projected feeder roads in question;
that the municipal council of Pasig endorsed said letter of respondent Zulueta to the District
Engineer of Rizal, who, up to the present "has not made any endorsement thereon" that inasmuch
as the projected feeder roads in question were private property at the time of the passage and
approval of Republic Act No. 920, the appropriation of P85,000.00 therein made, for the
construction, reconstruction, repair, extension and improvement of said projected feeder roads,
was illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by
Congress because its members were made to believe that the projected feeder roads in question
were "public roads and not private streets of a private subdivision"'; that, "in order to give a
semblance of legality, when there is absolutely none, to the aforementioned appropriation",
respondents Zulueta executed on December 12, 1953, while he was a member of the Senate of
the Philippines, an alleged deed of donation — copy of which is annexed to the petition — of the
four (4) parcels of land constituting said projected feeder roads, in favor of the Government of
the Republic of the Philippines; that said alleged deed of donation was, on the same date,
accepted by the then Executive Secretary; that being subject to an onerous condition, said
donation partook of the nature of a contract; that, such, said donation violated the provision of
our fundamental law prohibiting members of Congress from being directly or indirectly
financially interested in any contract with the Government, and, hence, is unconstitutional, as
well as null and void ab initio, for the construction of the projected feeder roads in question with
public funds would greatly enhance or increase the value of the aforementioned subdivision of
respondent Zulueta, "aside from relieving him from the burden of constructing his subdivision
streets or roads at his own expense"; that the construction of said projected feeder roads was then
being undertaken by the Bureau of Public Highways; and that, unless restrained by the court, the
respondents would continue to execute, comply with, follow and implement the aforementioned
illegal provision of law, "to the irreparable damage, detriment and prejudice not only to the
petitioner but to the Filipino nation."

Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and
void; that the alleged deed of donation of the feeder roads in question be "declared
unconstitutional and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary
of Public Works and Communications, the Director of the Bureau of Public Works and
Highways and Jose C. Zulueta from ordering or allowing the continuance of the above-
mentioned feeder roads project, and from making and securing any new and further releases on
the aforementioned item of Republic Act No. 920, and the disbursing officers of the Department
of Public Works and Highways from making any further payments out of said funds provided for
in Republic Act No. 920; and that pending final hearing on the merits, a writ of preliminary
injunction be issued enjoining the aforementioned parties respondent from making and securing
any new and further releases on the aforesaid item of Republic Act No. 920 and from making
any further payments out of said illegally appropriated funds.

Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity
to sue", and that the petition did "not state a cause of action". In support to this motion,
respondent Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should
represent the Province of Rizal, pursuant to section 1683 of the Revised Administrative Code;
that said respondent is " not aware of any law which makes illegal the appropriation of public
funds for the improvements of . . . private property"; and that, the constitutional provision
invoked by petitioner is inapplicable to the donation in question, the same being a pure act of
liberality, not a contract. The other respondents, in turn, maintained that petitioner could not
assail the appropriation in question because "there is no actual bona fide case . . . in which the
validity of Republic Act No. 920 is necessarily involved" and petitioner "has not shown that he
has a personal and substantial interest" in said Act "and that its enforcement has caused or will
cause him a direct injury."

Acting upon said motions to dismiss, the lower court rendered the aforementioned decision,
dated October 29, 1953, holding that, since public interest is involved in this case, the Provincial
Governor of Rizal and the provincial fiscal thereof who represents him therein, "have the
requisite personalities" to question the constitutionality of the disputed item of Republic Act No.
920; that "the legislature is without power appropriate public revenues for anything but a public
purpose", that the instructions and improvement of the feeder roads in question, if such roads
where private property, would not be a public purpose; that, being subject to the following
condition:

The within donation is hereby made upon the condition that the Government of the
Republic of the Philippines will use the parcels of land hereby donated for street
purposes only and for no other purposes whatsoever; it being expressly understood that
should the Government of the Republic of the Philippines violate the condition hereby
imposed upon it, the title to the land hereby donated shall, upon such violation, ipso facto
revert to the DONOR, JOSE C. ZULUETA. (Emphasis supplied.)

which is onerous, the donation in question is a contract; that said donation or contract is
"absolutely forbidden by the Constitution" and consequently "illegal", for Article 1409 of the
Civil Code of the Philippines, declares in existence and void from the very beginning contracts
"whose cause, objector purpose is contrary to law, morals . . . or public policy"; that the legality
of said donation may not be contested, however, by petitioner herein, because his "interest are
not directly affected" thereby; and that, accordingly, the appropriation in question "should be
upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision granting the
aforementioned motions to dismiss, which as much, are deemed to have admitted hypothetically
the allegations of fact made in the petition of appellant herein. According to said petition,
respondent Zulueta is the owner of several parcels of residential land situated in Pasig, Rizal, and
known as the Antonio Subdivision, certain portions of which had been reserved for the projected
feeder roads aforementioned, which, admittedly, were private property of said respondent when
Republic Act No. 920, appropriating P85,000.00 for the "construction, reconstruction, repair,
extension and improvement" of said roads, was passed by Congress, as well as when it was
approved by the President on June 20, 1953. The petition further alleges that the construction of
said roads, to be undertaken with the aforementioned appropriation of P85,000.00, would have
the effect of relieving respondent Zulueta of the burden of constructing his subdivision streets or
roads at his own expenses, 1and would "greatly enhance or increase the value of the subdivision"
of said respondent. The lower court held that under these circumstances, the appropriation in
question was "clearly for a private, not a public purpose."

Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However,
respondent Zulueta contended, in his motion to dismiss that:

A law passed by Congress and approved by the President can never be illegal because
Congress is the source of all laws . . . Aside from the fact that movant is not aware of any
law which makes illegal the appropriation of public funds for the improvement of what
we, in the meantime, may assume as private property . . . (Record on Appeal, p. 33.)

The first proposition must be rejected most emphatically, it being inconsistent with the nature of
the Government established under the Constitution of the Republic of the Philippines and the
system of checks and balances underlying our political structure. Moreover, it is refuted by the
decisions of this Court invalidating legislative enactments deemed violative of the Constitution
or organic laws. 3

As regards the legal feasibility of appropriating public funds for a public purpose, the principle
according to Ruling Case Law, is this:

It is a general rule that the legislature is without power to appropriate public revenue for
anything but a public purpose. . . . It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude
of the interest to be affected nor the degree to which the general advantage of the
 community, and thus the public welfare, may be ultimately benefited by their promotion.
Incidental to the public or to the state, which results from the promotion of private
interest and the prosperity of private enterprises or business, does not justify their aid by
the use public money. (25 R.L.C. pp. 398-400; Emphasis supplied.)

The rule is set forth in Corpus Juris Secundum in the following language:

In accordance with the rule that the taxing power must be exercised for public purposes
only, discussed supra sec. 14, money raised by taxation can be expended only for public
purposes and not for the advantage of private individuals. (85 C.J.S. pp. 645-646;
emphasis supplied.)

Explaining the reason underlying said rule, Corpus Juris Secundum states:

Generally, under the express or implied provisions of the constitution, public funds may
be used only for public purpose. The right of the legislature to appropriate funds is
correlative with its right to tax, and, under constitutional provisions against taxation
except for public purposes and prohibiting the collection of a tax for one purpose and the
devotion thereof to another purpose, no appropriation of state funds can be made for
other than for a public purpose.

xxx xxx xxx

The test of the constitutionality of a statute requiring the use of public funds is whether
the statute is designed to promote the public interest, as opposed to the furtherance of the
advantage of individuals, although each advantage to individuals might incidentally serve
the public. (81 C.J.S. pp. 1147; emphasis supplied.)

Needless to say, this Court is fully in accord with the foregoing views which, apart from being
patently sound, are a necessary corollary to our democratic system of government, which, as
such, exists primarily for the promotion of the general welfare. Besides, reflecting as they do, the
established jurisprudence in the United States, after whose constitutional system ours has been
patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional
law.lawphil.net

This notwithstanding, the lower court felt constrained to uphold the appropriation in question,
upon the ground that petitioner may not contest the legality of the donation above referred to
because the same does not affect him directly. This conclusion is, presumably, based upon the
following premises, namely: (1) that, if valid, said donation cured the constitutional infirmity of
the aforementioned appropriation; (2) that the latter may not be annulled without a previous
declaration of unconstitutionality of the said donation; and (3) that the rule set forth in Article
1421 of the Civil Code is absolute, and admits of no exception. We do not agree with these
premises.

The validity of a statute depends upon the powers of Congress at the time of its passage or
approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter
consists of an amendment of the organic law, removing, with retrospective operation, the
constitutional limitation infringed by said statute. Referring to the P85,000.00 appropriation for
the projected feeder roads in question, the legality thereof depended upon whether said roads
were public or private property when the bill, which, latter on, became Republic Act 920, was
passed by Congress, or, when said bill was approved by the President and the disbursement of
said sum became effective, or on June 20, 1953 (see section 13 of said Act). Inasmuch as the
land on which the projected feeder roads were to be constructed belonged then to respondent
Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and
void. 4 The donation to the Government, over five (5) months after the approval and effectivity
of said Act, made, according to the petition, for the purpose of giving a "semblance of legality",
or legalizing, the appropriation in question, did not cure its aforementioned basic defect.
Consequently, a judicial nullification of said donation need not precede the declaration of
unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to
exceptions. For instance, the creditors of a party to an illegal contract may, under the conditions
set forth in Article 1177 of said Code, exercise the rights and actions of the latter, except only
those which are inherent in his person, including therefore, his right to the annulment of said
contract, even though such creditors are not affected by the same, except indirectly, in the
manner indicated in said legal provision.

Again, it is well-stated that the validity of a statute may be contested only by one who will
sustain a direct injury in consequence of its enforcement. Yet, there are many decisions
nullifying, at the instance of taxpayers, laws providing for the disbursement of public funds,
5
upon the theory that "the expenditure of public funds by an officer of the State for the purpose
of administering an unconstitutional act constitutes a misapplication of such funds," which may
be enjoined at the request of a taxpayer. 6Although there are some decisions to the contrary, 7the
prevailing view in the United States is stated in the American Jurisprudence as follows:

In the determination of the degree of interest essential to give the requisite standing to
attack the constitutionality of a statute, the general rule is that not only persons
individually affected, but also taxpayers, have sufficient interest in preventing the illegal
expenditure of moneys raised by taxation and may therefore question the constitutionality
of statutes requiring expenditure of public moneys. (11 Am. Jur. 761; emphasis supplied.)

However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs.
Mellon (262 U.S. 447), insofar as federal laws are concerned, upon the ground that the
relationship of a taxpayer of the U.S. to its Federal Government is different from that of a
taxpayer of a municipal corporation to its government. Indeed, under the composite system of
government existing in the U.S., the states of the Union are integral part of the Federation from
an international viewpoint, but, each state enjoys internally a substantial measure of sovereignty,
subject to the limitations imposed by the Federal Constitution. In fact, the same was made by
representatives of each state of the Union, not of the people of the U.S., except insofar as the
former represented the people of the respective States, and the people of each State has,
independently of that of the others, ratified said Constitution. In other words, the Federal
Constitution and the Federal statutes have become binding upon the people of the U.S. in
consequence of an act of, and, in this sense, through the respective states of the Union of which
they are citizens. The peculiar nature of the relation between said people and the Federal
Government of the U.S. is reflected in the election of its President, who is chosen directly, not by
the people of the U.S., but by electors chosen by each State, in such manner as the legislature
thereof may direct (Article II, section 2, of the Federal Constitution).lawphi1.net

The relation between the people of the Philippines and its taxpayers, on the other hand, and the
Republic of the Philippines, on the other, is not identical to that obtaining between the people
and taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to
that existing between the people and taxpayers of each state and the government thereof, except
that the authority of the Republic of the Philippines over the people of the Philippines is more
fully direct than that of the states of the Union, insofar as the simple and unitary type of our
national government is not subject to limitations analogous to those imposed by the Federal
Constitution upon the states of the Union, and those imposed upon the Federal Government in
the interest of the Union. For this reason, the rule recognizing the right of taxpayers to assail the
constitutionality of a legislation appropriating local or state public funds — which has been
upheld by the Federal Supreme Court (Crampton vs. Zabriskie, 101 U.S. 601) — has greater
application in the Philippines than that adopted with respect to acts of Congress of the United
States appropriating federal funds.

Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land
by the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose
of contesting the price being paid to the owner thereof, as unduly exorbitant. It is true that in
Custodio vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the
Government was not permitted to question the constitutionality of an appropriation for backpay
of members of Congress. However, in Rodriguez vs. Treasurer of the Philippines and Barredo vs.
Commission on Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the action of
taxpayers impugning the validity of certain appropriations of public funds, and invalidated the
same. Moreover, the reason that impelled this Court to take such position in said two (2) cases —
the importance of the issues therein raised — is present in the case at bar. Again, like the
petitioners in the Rodriguez and Barredo cases, petitioner herein is not merely a taxpayer. The
Province of Rizal, which he represents officially as its Provincial Governor, is our most
populated political subdivision, 8and, the taxpayers therein bear a substantial portion of the
burden of taxation, in the Philippines.

Hence, it is our considered opinion that the circumstances surrounding this case sufficiently
justify petitioners action in contesting the appropriation and donation in question; that this action
should not have been dismissed by the lower court; and that the writ of preliminary injunction
should have been maintained.

Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the
lower court for further proceedings not inconsistent with this decision, with the costs of this
instance against respondent Jose C. Zulueta. It is so ordered.

Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez
David, Paredes, and Dizon, JJ., concur.

G.R. No. 166006 March 14, 2008

PLANTERS PRODUCTS, INC., Petitioner,

vs.
FERTIPHIL CORPORATION, Respondent.

DECISION

REYES, R.T., J.:

THE Regional Trial Courts (RTC) have the authority and jurisdiction to consider the
constitutionality of statutes, executive orders, presidential decrees and other issuances. The
Constitution vests that power not only in the Supreme Court but in all Regional Trial Courts.

The principle is relevant in this petition for review on certiorari of the Decision1 of the Court of
Appeals (CA) affirming with modification that of the RTC in Makati City,2 finding petitioner
Planters Products, Inc. (PPI) liable to private respondent Fertiphil Corporation (Fertiphil) for the
levies it paid under Letter of Instruction (LOI) No. 1465.

The Facts

Petitioner PPI and private respondent Fertiphil are private corporations incorporated under
Philippine laws.3 They are both engaged in the importation and distribution of fertilizers,
pesticides and agricultural chemicals.

On June 3, 1985, then President Ferdinand Marcos, exercising his legislative powers, issued LOI
No. 1465 which provided, among others, for the imposition of a capital recovery component
(CRC) on the domestic sale of all grades of fertilizers in the Philippines.4 The LOI provides:
3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than ₱10 per bag. This capital contribution
shall be collected until adequate capital is raised to make PPI viable. Such capital contribution
shall be applied by FPA to all domestic sales of fertilizers in the Philippines.5 (Underscoring
supplied)

Pursuant to the LOI, Fertiphil paid ₱10 for every bag of fertilizer it sold in the domestic market
to the Fertilizer and Pesticide Authority (FPA). FPA then remitted the amount collected to the
Far East Bank and Trust Company, the depositary bank of PPI. Fertiphil paid ₱6,689,144 to FPA
from July 8, 1985 to January 24, 1986.6

After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the ₱10 levy. With
the return of democracy, Fertiphil demanded from PPI a refund of the amounts it paid under LOI
No. 1465, but PPI refused to accede to the demand.7

Fertiphil filed a complaint for collection and damages8 against FPA and PPI with the RTC in
Makati. It questioned the constitutionality of LOI No. 1465 for being unjust, unreasonable,
oppressive, invalid and an unlawful imposition that amounted to a denial of due process of law.9
Fertiphil alleged that the LOI solely favored PPI, a privately owned corporation, which used the
proceeds to maintain its monopoly of the fertilizer industry.

In its Answer,10 FPA, through the Solicitor General, countered that the issuance of LOI No. 1465
was a valid exercise of the police power of the State in ensuring the stability of the fertilizer
industry in the country. It also averred that Fertiphil did not sustain any damage from the LOI
because the burden imposed by the levy fell on the ultimate consumer, not the seller.

RTC Disposition

On November 20, 1991, the RTC rendered judgment in favor of Fertiphil, disposing as follows:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the
plaintiff and against the defendant Planters Product, Inc., ordering the latter to pay the former:

1) the sum of ₱6,698,144.00 with interest at 12% from the time of judicial demand;

2) the sum of ₱100,000 as attorney’s fees;

3) the cost of suit.

SO ORDERED.11

Ruling that the imposition of the ₱10 CRC was an exercise of the State’s inherent power of
taxation, the RTC invalidated the levy for violating the basic principle that taxes can only be
levied for public purpose, viz.:

It is apparent that the imposition of ₱10 per fertilizer bag sold in the country by LOI 1465 is
purportedly in the exercise of the power of taxation. It is a settled principle that the power of
taxation by the state is plenary. Comprehensive and supreme, the principal check upon its abuse
resting in the responsibility of the members of the legislature to their constituents. However,
there are two kinds of limitations on the power of taxation: the inherent limitations and the
constitutional limitations.

One of the inherent limitations is that a tax may be levied only for public purposes:

The power to tax can be resorted to only for a constitutionally valid public purpose. By the same
token, taxes may not be levied for purely private purposes, for building up of private fortunes, or
for the redress of private wrongs. They cannot be levied for the improvement of private property,
or for the benefit, and promotion of private enterprises, except where the aid is incident to the
public benefit. It is well-settled principle of constitutional law that no general tax can be levied
except for the purpose of raising money which is to be expended for public use. Funds cannot be
exacted under the guise of taxation to promote a purpose that is not of public interest. Without
such limitation, the power to tax could be exercised or employed as an authority to destroy the
economy of the people. A tax, however, is not held void on the ground of want of public interest
unless the want of such interest is clear. (71 Am. Jur. pp. 371-372)

In the case at bar, the plaintiff paid the amount of ₱6,698,144.00 to the Fertilizer and Pesticide
Authority pursuant to the ₱10 per bag of fertilizer sold imposition under LOI 1465 which, in
turn, remitted the amount to the defendant Planters Products, Inc. thru the latter’s depository
bank, Far East Bank and Trust Co. Thus, by virtue of LOI 1465 the plaintiff, Fertiphil
Corporation, which is a private domestic corporation, became poorer by the amount of
₱6,698,144.00 and the defendant, Planters Product, Inc., another private domestic corporation,
became richer by the amount of ₱6,698,144.00.

Tested by the standards of constitutionality as set forth in the afore-quoted jurisprudence, it is

quite evident that LOI 1465 insofar as it imposes the amount of ₱10 per fertilizer bag sold in the
country and orders that the said amount should go to the defendant Planters Product, Inc. is
unlawful because it violates the mandate that a tax can be levied only for a public purpose and
not to benefit, aid and promote a private enterprise such as Planters Product, Inc.12

PPI moved for reconsideration but its motion was denied.13 PPI then filed a notice of appeal with
the RTC but it failed to pay the requisite appeal docket fee. In a separate but related proceeding,
this Court14 allowed the appeal of PPI and remanded the case to the CA for proper disposition.

CA Decision

On November 28, 2003, the CA handed down its decision affirming with modification that of the
RTC, with the following fallo:

IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby AFFIRMED,
subject to the MODIFICATION that the award of attorney’s fees is hereby DELETED.15

In affirming the RTC decision, the CA ruled that the lis mota of the complaint for collection was
the constitutionality of LOI No. 1465, thus:

The question then is whether it was proper for the trial court to exercise its power to judicially
determine the constitutionality of the subject statute in the instant case.

As a rule, where the controversy can be settled on other grounds, the courts will not resolve the
constitutionality of a law (Lim v. Pacquing, 240 SCRA 649 [1995]). The policy of the courts is
to avoid ruling on constitutional questions and to presume that the acts of political departments
are valid, absent a clear and unmistakable showing to the contrary.

However, the courts are not precluded from exercising such power when the following requisites
are obtaining in a controversy before it: First, there must be before the court an actual case
calling for the exercise of judicial review. Second, the question must be ripe for adjudication.
Third, the person challenging the validity of the act must have standing to challenge. Fourth, the
question of constitutionality must have been raised at the earliest opportunity; and lastly, the
issue of constitutionality must be the very lis mota of the case (Integrated Bar of the Philippines
v. Zamora, 338 SCRA 81 [2000]).

Indisputably, the present case was primarily instituted for collection and damages. However, a
perusal of the complaint also reveals that the instant action is founded on the claim that the levy
imposed was an unlawful and unconstitutional special assessment. Consequently, the requisite
that the constitutionality of the law in question be the very lis mota of the case is present, making
it proper for the trial court to rule on the constitutionality of LOI 1465.16

The CA held that even on the assumption that LOI No. 1465 was issued under the police power
of the state, it is still unconstitutional because it did not promote public welfare. The CA
explained:

In declaring LOI 1465 unconstitutional, the trial court held that the levy imposed under the said
law was an invalid exercise of the State’s power of taxation inasmuch as it violated the inherent
and constitutional prescription that taxes be levied only for public purposes. It reasoned out that
the amount collected under the levy was remitted to the depository bank of PPI, which the latter
used to advance its private interest.

On the other hand, appellant submits that the subject statute’s passage was a valid exercise of
police power. In addition, it disputes the court a quo’s findings arguing that the collections under
LOI 1465 was for the benefit of Planters Foundation, Incorporated (PFI), a foundation created by
law to hold in trust for millions of farmers, the stock ownership of PPI.

Of the three fundamental powers of the State, the exercise of police power has been
characterized as the most essential, insistent and the least limitable of powers, extending as it
does to all the great public needs. It may be exercised as long as the activity or the property
sought to be regulated has some relevance to public welfare (Constitutional Law, by Isagani A.
Cruz, p. 38, 1995 Edition).

Vast as the power is, however, it must be exercised within the limits set by the Constitution,
which requires the concurrence of a lawful subject and a lawful method. Thus, our courts have
laid down the test to determine the validity of a police measure as follows: (1) the interests of the
public generally, as distinguished from those of a particular class, requires its exercise; and (2)
the means employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals (National Development Company v. Philippine Veterans
Bank, 192 SCRA 257 [1990]).

It is upon applying this established tests that We sustain the trial court’s holding LOI 1465
unconstitutional. To be sure, ensuring the continued supply and distribution of fertilizer in the
country is an undertaking imbued with public interest. However, the method by which LOI 1465
sought to achieve this is by no means a measure that will promote the public welfare. The
government’s commitment to support the successful rehabilitation and continued viability of PPI,
a private corporation, is an unmistakable attempt to mask the subject statute’s impartiality. There
is no way to treat the self-interest of a favored entity, like PPI, as identical with the general
interest of the country’s farmers or even the Filipino people in general. Well to stress,
substantive due process exacts fairness and equal protection disallows distinction where none is
needed. When a statute’s public purpose is spoiled by private interest, the use of police power
becomes a travesty which must be struck down for being an arbitrary exercise of government
power. To rule in favor of appellant would contravene the general principle that revenues derived
from taxes cannot be used for purely private purposes or for the exclusive benefit of private
individuals.17

The CA did not accept PPI’s claim that the levy imposed under LOI No. 1465 was for the benefit
of Planters Foundation, Inc., a foundation created to hold in trust the stock ownership of PPI. The
CA stated:

Appellant next claims that the collections under LOI 1465 was for the benefit of Planters
Foundation, Incorporated (PFI), a foundation created by law to hold in trust for millions of
farmers, the stock ownership of PFI on the strength of Letter of Undertaking (LOU) issued by
then Prime Minister Cesar Virata on April 18, 1985 and affirmed by the Secretary of Justice in
an Opinion dated October 12, 1987, to wit:
"2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to include
in its fertilizer pricing formula a capital recovery component, the proceeds of which will be used
initially for the purpose of funding the unpaid portion of the outstanding capital stock of Planters
presently held in trust by Planters Foundation, Inc. (Planters Foundation), which unpaid capital is
estimated at approximately ₱206 million (subject to validation by Planters and Planters
Foundation) (such unpaid portion of the outstanding capital stock of Planters being hereafter
referred to as the ‘Unpaid Capital’), and subsequently for such capital increases as may be
required for the continuing viability of Planters.

The capital recovery component shall be in the minimum amount of ₱10 per bag, which will be
added to the price of all domestic sales of fertilizer in the Philippines by any importer and/or
fertilizer mother company. In this connection, the Republic hereby acknowledges that the
advances by Planters to Planters Foundation which were applied to the payment of the Planters
shares now held in trust by Planters Foundation, have been assigned to, among others, the
Creditors. Accordingly, the Republic, through FPA, hereby agrees to deposit the proceeds of the
capital recovery component in the special trust account designated in the notice dated April 2,
1985, addressed by counsel for the Creditors to Planters Foundation. Such proceeds shall be
deposited by FPA on or before the 15th day of each month.

The capital recovery component shall continue to be charged and collected until payment in full
of (a) the Unpaid Capital and/or (b) any shortfall in the payment of the Subsidy Receivables, (c)
any carrying cost accruing from the date hereof on the amounts which may be outstanding from
time to time of the Unpaid Capital and/or the Subsidy Receivables and (d) the capital increases
contemplated in paragraph 2 hereof. For the purpose of the foregoing clause (c), the ‘carrying
cost’ shall be at such rate as will represent the full and reasonable cost to Planters of servicing its
debts, taking into account both its peso and foreign currency-denominated obligations."
(Records, pp. 42-43)

Appellant’s proposition is open to question, to say the least. The LOU issued by then Prime
Minister Virata taken together with the Justice Secretary’s Opinion does not preponderantly
demonstrate that the collections made were held in trust in favor of millions of farmers.
Unfortunately for appellant, in the absence of sufficient evidence to establish its claims, this
Court is constrained to rely on what is explicitly provided in LOI 1465 – that one of the primary
aims in imposing the levy is to support the successful rehabilitation and continued viability of
PPI.18

PPI moved for reconsideration but its motion was denied.19 It then filed the present petition with
this Court.

Issues

Petitioner PPI raises four issues for Our consideration, viz.:

THE CONSTITUTIONALITY OF LOI 1465 CANNOT BE COLLATERALLY ATTACKED

AND BE DECREED VIA A DEFAULT JUDGMENT IN A CASE FILED FOR COLLECTION
AND DAMAGES WHERE THE ISSUE OF CONSTITUTIONALITY IS NOT THE VERY LIS
MOTA OF THE CASE. NEITHER CAN LOI 1465 BE CHALLENGED BY ANY PERSON
OR ENTITY WHICH HAS NO STANDING TO DO SO.

II

LOI 1465, BEING A LAW IMPLEMENTED FOR THE PURPOSE OF ASSURING THE
FERTILIZER SUPPLY AND DISTRIBUTION IN THE COUNTRY, AND FOR BENEFITING
A FOUNDATION CREATED BY LAW TO HOLD IN TRUST FOR MILLIONS OF
FARMERS THEIR STOCK OWNERSHIP IN PPI CONSTITUTES A VALID LEGISLATION
PURSUANT TO THE EXERCISE OF TAXATION AND POLICE POWER FOR PUBLIC
PURPOSES.

III

THE AMOUNT COLLECTED UNDER THE CAPITAL RECOVERY COMPONENT WAS

REMITTED TO THE GOVERNMENT, AND BECAME GOVERNMENT FUNDS
PURSUANT TO AN EFFECTIVE AND VALIDLY ENACTED LAW WHICH IMPOSED
DUTIES AND CONFERRED RIGHTS BY VIRTUE OF THE PRINCIPLE OF "OPERATIVE
FACT" PRIOR TO ANY DECLARATION OF UNCONSTITUTIONALITY OF LOI 1465.

IV

THE PRINCIPLE OF UNJUST VEXATION (SHOULD BE ENRICHMENT) FINDS NO

APPLICATION IN THE INSTANT CASE.20 (Underscoring supplied)

Our Ruling

We shall first tackle the procedural issues of locus standi and the jurisdiction of the RTC to
resolve constitutional issues.

Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere
procedural technicality which may be waived.

PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No. 1465
because it does not have a "personal and substantial interest in the case or will sustain direct
injury as a result of its enforcement."21 It asserts that Fertiphil did not suffer any damage from
the CRC imposition because "incidence of the levy fell on the ultimate consumer or the farmers
themselves, not on the seller fertilizer company."22

We cannot agree. The doctrine of locus standi or the right of appearance in a court of justice has
been adequately discussed by this Court in a catena of cases. Succinctly put, the doctrine requires
a litigant to have a material interest in the outcome of a case. In private suits, locus standi
requires a litigant to be a "real party in interest," which is defined as "the party who stands to be
benefited or injured by the judgment in the suit or the party entitled to the avails of the suit."23

In public suits, this Court recognizes the difficulty of applying the doctrine especially when
plaintiff asserts a public right on behalf of the general public because of conflicting public policy
issues. 24 On one end, there is the right of the ordinary citizen to petition the courts to be freed
from unlawful government intrusion and illegal official action. At the other end, there is the
public policy precluding excessive judicial interference in official acts, which may unnecessarily
hinder the delivery of basic public services.

In this jurisdiction, We have adopted the "direct injury test" to determine locus standi in public
suits. In People v. Vera,25 it was held that a 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." The "direct injury test" in public suits is similar to the "real party in
interest" rule for private suits under Section 2, Rule 3 of the 1997 Rules of Civil Procedure.26

Recognizing that a strict application of the "direct injury" test may hamper public interest, this
Court relaxed the requirement in cases of "transcendental importance" or with "far reaching
implications." Being a mere procedural technicality, it has also been held that locus standi may
be waived in the public interest.27

Whether or not the complaint for collection is characterized as a private or public suit, Fertiphil
has locus standi to file it. Fertiphil suffered a direct injury from the enforcement of LOI No.
1465. It was required, and it did pay, the ₱10 levy imposed for every bag of fertilizer sold on the
domestic market. It may be true that Fertiphil has passed some or all of the levy to the ultimate
consumer, but that does not disqualify it from attacking the constitutionality of the LOI or from
seeking a refund. As seller, it bore the ultimate burden of paying the levy. It faced the possibility
of severe sanctions for failure to pay the levy. The fact of payment is sufficient injury to
Fertiphil.

Moreover, Fertiphil suffered harm from the enforcement of the LOI because it was compelled to
factor in its product the levy. The levy certainly rendered the fertilizer products of Fertiphil and
other domestic sellers much more expensive. The harm to their business consists not only in
fewer clients because of the increased price, but also in adopting alternative corporate strategies
to meet the demands of LOI No. 1465. Fertiphil and other fertilizer sellers may have shouldered
all or part of the levy just to be competitive in the market. The harm occasioned on the business
of Fertiphil is sufficient injury for purposes of locus standi.

Even assuming arguendo that there is no direct injury, We find that the liberal policy consistently
adopted by this Court on locus standi must apply. The issues raised by Fertiphil are of paramount
public importance. It involves not only the constitutionality of a tax law but, more importantly,
the use of taxes for public purpose. Former President Marcos issued LOI No. 1465 with the
intention of rehabilitating an ailing private company. This is clear from the text of the LOI. PPI
is expressly named in the LOI as the direct beneficiary of the levy. Worse, the levy was made
dependent and conditional upon PPI becoming financially viable. The LOI provided that "the
capital contribution shall be collected until adequate capital is raised to make PPI viable."

The constitutionality of the levy is already in doubt on a plain reading of the statute. It is Our
constitutional duty to squarely resolve the issue as the final arbiter of all justiciable
controversies. The doctrine of standing, being a mere procedural technicality, should be waived,
if at all, to adequately thresh out an important constitutional issue.

RTC may resolve constitutional issues; the constitutional issue was adequately raised in the
complaint; it is the lis mota of the case.

PPI insists that the RTC and the CA erred in ruling on the constitutionality of the LOI. It asserts
that the constitutionality of the LOI cannot be collaterally attacked in a complaint for
collection.28 Alternatively, the resolution of the constitutional issue is not necessary for a
determination of the complaint for collection.29

Fertiphil counters that the constitutionality of the LOI was adequately pleaded in its complaint. It
claims that the constitutionality of LOI No. 1465 is the very lis mota of the case because the trial
court cannot determine its claim without resolving the issue.30

It is settled that the RTC has jurisdiction to resolve the constitutionality of a statute, presidential
decree or an executive order. This is clear from Section 5, Article VIII of the 1987 Constitution,
which provides:

SECTION 5. The Supreme Court shall have the following powers:

xxxx

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of
Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is
in question. (Underscoring supplied)

In Mirasol v. Court of Appeals,31 this Court recognized the power of the RTC to resolve
constitutional issues, thus:
On the first issue. It is settled that Regional Trial Courts have the authority and jurisdiction to
consider the constitutionality of a statute, presidential decree, or executive order. The
Constitution vests the power of judicial review or the power to declare a law, treaty, international
or executive agreement, presidential decree, order, instruction, ordinance, or regulation not only
in this Court, but in all Regional Trial Courts.32

In the recent case of Equi-Asia Placement, Inc. v. Department of Foreign Affairs,33 this Court
reiterated:

There is no denying that regular courts have jurisdiction over cases involving the validity or
constitutionality of a rule or regulation issued by administrative agencies. Such jurisdiction,
however, is not limited to the Court of Appeals or to this Court alone for even the regional trial
courts can take cognizance of actions assailing a specific rule or set of rules promulgated by
administrative bodies. Indeed, the Constitution vests the power of judicial review or the power to
declare a law, treaty, international or executive agreement, presidential decree, order, instruction,
ordinance, or regulation in the courts, including the regional trial courts.34

Judicial review of official acts on the ground of unconstitutionality may be sought or availed of
through any of the actions cognizable by courts of justice, not necessarily in a suit for declaratory
relief. Such review may be had in criminal actions, as in People v. Ferrer35 involving the
constitutionality of the now defunct Anti-Subversion law, or in ordinary actions, as in Krivenko
v. Register of Deeds36 involving the constitutionality of laws prohibiting aliens from acquiring
public lands. The constitutional issue, however, (a) must be properly raised and presented in the
case, and (b) its resolution is necessary to a determination of the case, i.e., the issue of
constitutionality must be the very lis mota presented.37

Contrary to PPI’s claim, the constitutionality of LOI No. 1465 was properly and adequately
raised in the complaint for collection filed with the RTC. The pertinent portions of the complaint
allege:

6. The CRC of ₱10 per bag levied under LOI 1465 on domestic sales of all grades of fertilizer in
the Philippines, is unlawful, unjust, uncalled for, unreasonable, inequitable and oppressive
because:

xxxx

(c) It favors only one private domestic corporation, i.e., defendant PPPI, and imposed at the
expense and disadvantage of the other fertilizer importers/distributors who were themselves in
tight business situation and were then exerting all efforts and maximizing management and
marketing skills to remain viable;

xxxx

(e) It was a glaring example of crony capitalism, a forced program through which the PPI, having
been presumptuously masqueraded as "the" fertilizer industry itself, was the sole and anointed
beneficiary;

7. The CRC was an unlawful; and unconstitutional special assessment and its imposition is
tantamount to illegal exaction amounting to a denial of due process since the persons of entities
which had to bear the burden of paying the CRC derived no benefit therefrom; that on the
contrary it was used by PPI in trying to regain its former despicable monopoly of the fertilizer
industry to the detriment of other distributors and importers.38 (Underscoring supplied)

The constitutionality of LOI No. 1465 is also the very lis mota of the complaint for collection.
Fertiphil filed the complaint to compel PPI to refund the levies paid under the statute on the
ground that the law imposing the levy is unconstitutional. The thesis is that an unconstitutional
law is void. It has no legal effect. Being void, Fertiphil had no legal obligation to pay the levy.
Necessarily, all levies duly paid pursuant to an unconstitutional law should be refunded under the
civil code principle against unjust enrichment. The refund is a mere consequence of the law
being declared unconstitutional. The RTC surely cannot order PPI to refund Fertiphil if it does
not declare the LOI unconstitutional. It is the unconstitutionality of the LOI which triggers the
refund. The issue of constitutionality is the very lis mota of the complaint with the RTC.

The ₱10 levy under LOI No. 1465 is an exercise of the power of taxation.

At any rate, the Court holds that the RTC and the CA did not err in ruling against the
constitutionality of the LOI.

PPI insists that LOI No. 1465 is a valid exercise either of the police power or the power of
taxation. It claims that the LOI was implemented for the purpose of assuring the fertilizer supply
and distribution in the country and for benefiting a foundation created by law to hold in trust for
millions of farmers their stock ownership in PPI.

Fertiphil counters that the LOI is unconstitutional because it was enacted to give benefit to a
private company. The levy was imposed to pay the corporate debt of PPI. Fertiphil also argues
that, even if the LOI is enacted under the police power, it is still unconstitutional because it did
not promote the general welfare of the people or public interest.

Police power and the power of taxation are inherent powers of the State. These powers are
distinct and have different tests for validity. Police power is the power of the State to enact
legislation that may interfere with personal liberty or property in order to promote the general
welfare,39 while the power of taxation is the power to levy taxes to be used for public purpose.
The main purpose of police power is the regulation of a behavior or conduct, while taxation is
revenue generation. The "lawful subjects" and "lawful means" tests are used to determine the
validity of a law enacted under the police power.40 The power of taxation, on the other hand, is
circumscribed by inherent and constitutional limitations.

We agree with the RTC that the imposition of the levy was an exercise by the State of its
taxation power. While it is true that the power of taxation can be used as an implement of police
power,41 the primary purpose of the levy is revenue generation. If the purpose is primarily
revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is
properly called a tax.42

In Philippine Airlines, Inc. v. Edu,43 it was held that the imposition of a vehicle registration fee is
not an exercise by the State of its police power, but of its taxation power, thus:

It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61 of the
Land Transportation and Traffic Code that the legislative intent and purpose behind the law
requiring owners of vehicles to pay for their registration is mainly to raise funds for the
construction and maintenance of highways and to a much lesser degree, pay for the operating
expenses of the administering agency. x x x Fees may be properly regarded as taxes even though
they also serve as an instrument of regulation.

Taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148).
If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial
purposes, then the exaction is properly called a tax. Such is the case of motor vehicle registration
fees. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent
therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on
the registration, operation or ownership of a motor vehicle as a "tax or fee." x x x Simply put, if
the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448
need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special
permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of
registration (Sec. 11). These are not to be understood as taxes because such fees are very
minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes
like the motor vehicle registration fee and chauffeurs’ license fee. Such fees are to go into the
expenditures of the Land Transportation Commission as provided for in the last proviso of Sec.
61.44 (Underscoring supplied)

The ₱10 levy under LOI No. 1465 is too excessive to serve a mere regulatory purpose. The levy,
no doubt, was a big burden on the seller or the ultimate consumer. It increased the price of a bag
of fertilizer by as much as five percent.45 A plain reading of the LOI also supports the conclusion
that the levy was for revenue generation. The LOI expressly provided that the levy was imposed
"until adequate capital is raised to make PPI viable."

Taxes are exacted only for a public purpose. The ₱10 levy is unconstitutional because it was not
for a public purpose. The levy was imposed to give undue benefit to PPI.

An inherent limitation on the power of taxation is public purpose. Taxes are exacted only for a
public purpose. They cannot be used for purely private purposes or for the exclusive benefit of
private persons.46 The reason for this is simple. The power to tax exists for the general welfare;
hence, implicit in its power is the limitation that it should be used only for a public purpose. It
would be a robbery for the State to tax its citizens and use the funds generated for a private
purpose. As an old United States case bluntly put it: "To lay with one hand, the power of the
government on the property of the citizen, and with the other to bestow it upon favored
individuals to aid private enterprises and build up private fortunes, is nonetheless a robbery
because it is done under the forms of law and is called taxation."47

The term "public purpose" is not defined. It is an elastic concept that can be hammered to fit
modern standards. Jurisprudence states that "public purpose" should be given a broad
interpretation. It does not only pertain to those purposes which are traditionally viewed as
essentially government functions, such as building roads and delivery of basic services, but also
includes those purposes designed to promote social justice. Thus, public money may now be
used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.

While the categories of what may constitute a public purpose are continually expanding in light
of the expansion of government functions, the inherent requirement that taxes can only be
exacted for a public purpose still stands. Public purpose is the heart of a tax law. When a tax law
is only a mask to exact funds from the public when its true intent is to give undue benefit and
advantage to a private enterprise, that law will not satisfy the requirement of "public purpose."

The purpose of a law is evident from its text or inferable from other secondary sources. Here, We
agree with the RTC and that CA that the levy imposed under LOI No. 1465 was not for a public
purpose.

First, the LOI expressly provided that the levy be imposed to benefit PPI, a private company.
The purpose is explicit from Clause 3 of the law, thus:

3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than ₱10 per bag. This capital contribution
shall be collected until adequate capital is raised to make PPI viable. Such capital contribution
shall be applied by FPA to all domestic sales of fertilizers in the Philippines.48 (Underscoring
supplied)

It is a basic rule of statutory construction that the text of a statute should be given a literal
meaning. In this case, the text of the LOI is plain that the levy was imposed in order to raise
capital for PPI. The framers of the LOI did not even hide the insidious purpose of the law. They
were cavalier enough to name PPI as the ultimate beneficiary of the taxes levied under the LOI.
We find it utterly repulsive that a tax law would expressly name a private company as the
ultimate beneficiary of the taxes to be levied from the public. This is a clear case of crony
capitalism.
Second, the LOI provides that the imposition of the ₱10 levy was conditional and dependent
upon PPI becoming financially "viable." This suggests that the levy was actually imposed to
benefit PPI. The LOI notably does not fix a maximum amount when PPI is deemed financially
"viable." Worse, the liability of Fertiphil and other domestic sellers of fertilizer to pay the levy is
made indefinite. They are required to continuously pay the levy until adequate capital is raised
for PPI.

Third, the RTC and the CA held that the levies paid under the LOI were directly remitted and
deposited by FPA to Far East Bank and Trust Company, the depositary bank of PPI.49 This
proves that PPI benefited from the LOI. It is also proves that the main purpose of the law was to
give undue benefit and advantage to PPI.

Fourth, the levy was used to pay the corporate debts of PPI. A reading of the Letter of
Understanding50 dated May 18, 1985 signed by then Prime Minister Cesar Virata reveals that PPI
was in deep financial problem because of its huge corporate debts. There were pending petitions
for rehabilitation against PPI before the Securities and Exchange Commission. The government
guaranteed payment of PPI’s debts to its foreign creditors. To fund the payment, President
Marcos issued LOI No. 1465. The pertinent portions of the letter of understanding read:

Republic of the Philippines

Office of the Prime Minister
Manila

LETTER OF UNDERTAKING

May 18, 1985

TO: THE BANKING AND FINANCIAL INSTITUTIONS

LISTED IN ANNEX A HERETO WHICH ARE
CREDITORS (COLLECTIVELY, THE "CREDITORS")
OF PLANTERS PRODUCTS, INC. ("PLANTERS")

Gentlemen:

This has reference to Planters which is the principal importer and distributor of fertilizer,
pesticides and agricultural chemicals in the Philippines. As regards Planters, the Philippine
Government confirms its awareness of the following: (1) that Planters has outstanding
obligations in foreign currency and/or pesos, to the Creditors, (2) that Planters is currently
experiencing financial difficulties, and (3) that there are presently pending with the Securities
and Exchange Commission of the Philippines a petition filed at Planters’ own behest for the
suspension of payment of all its obligations, and a separate petition filed by Manufacturers
Hanover Trust Company, Manila Offshore Branch for the appointment of a rehabilitation
receiver for Planters.

In connection with the foregoing, the Republic of the Philippines (the "Republic") confirms that
it considers and continues to consider Planters as a major fertilizer distributor. Accordingly, for
and in consideration of your expressed willingness to consider and participate in the effort to
rehabilitate Planters, the Republic hereby manifests its full and unqualified support of the
successful rehabilitation and continuing viability of Planters, and to that end, hereby binds and
obligates itself to the creditors and Planters, as follows:

xxxx

2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to include
in its fertilizer pricing formula a capital recovery component, the proceeds of which will be used
initially for the purpose of funding the unpaid portion of the outstanding capital stock of Planters
presently held in trust by Planters Foundation, Inc. ("Planters Foundation"), which unpaid capital
is estimated at approximately ₱206 million (subject to validation by Planters and Planters
Foundation) such unpaid portion of the outstanding capital stock of Planters being hereafter
referred to as the "Unpaid Capital"), and subsequently for such capital increases as may be
required for the continuing viability of Planters.

xxxx

The capital recovery component shall continue to be charged and collected until payment in full
of (a) the Unpaid Capital and/or (b) any shortfall in the payment of the Subsidy Receivables, (c)
any carrying cost accruing from the date hereof on the amounts which may be outstanding from
time to time of the Unpaid Capital and/or the Subsidy Receivables, and (d) the capital increases
contemplated in paragraph 2 hereof. For the purpose of the foregoing clause (c), the "carrying
cost" shall be at such rate as will represent the full and reasonable cost to Planters of servicing its
debts, taking into account both its peso and foreign currency-denominated obligations.

REPUBLIC OF THE PHILIPPINES

By:

(signed)
CESAR E. A. VIRATA
Prime Minister and Minister of Finance51

It is clear from the Letter of Understanding that the levy was imposed precisely to pay the
corporate debts of PPI. We cannot agree with PPI that the levy was imposed to ensure the
stability of the fertilizer industry in the country. The letter of understanding and the plain text of
the LOI clearly indicate that the levy was exacted for the benefit of a private corporation.

All told, the RTC and the CA did not err in holding that the levy imposed under LOI No. 1465
was not for a public purpose. LOI No. 1465 failed to comply with the public purpose
requirement for tax laws.

The LOI is still unconstitutional even if enacted under the police power; it did not promote
public interest.

Even if We consider LOI No. 1695 enacted under the police power of the State, it would still be
invalid for failing to comply with the test of "lawful subjects" and "lawful means." Jurisprudence
states the test as follows: (1) the interest of the public generally, as distinguished from those of
particular class, requires its exercise; and (2) the means employed are reasonably necessary for
the accomplishment of the purpose and not unduly oppressive upon individuals.52

For the same reasons as discussed, LOI No. 1695 is invalid because it did not promote public
interest. The law was enacted to give undue advantage to a private corporation. We quote with
approval the CA ratiocination on this point, thus:

It is upon applying this established tests that We sustain the trial court’s holding LOI 1465
unconstitutional.1awphil To be sure, ensuring the continued supply and distribution of fertilizer
in the country is an undertaking imbued with public interest. However, the method by which LOI
1465 sought to achieve this is by no means a measure that will promote the public welfare. The
government’s commitment to support the successful rehabilitation and continued viability of PPI,
a private corporation, is an unmistakable attempt to mask the subject statute’s impartiality. There
is no way to treat the self-interest of a favored entity, like PPI, as identical with the general
interest of the country’s farmers or even the Filipino people in general. Well to stress,
substantive due process exacts fairness and equal protection disallows distinction where none is
needed. When a statute’s public purpose is spoiled by private interest, the use of police power
becomes a travesty which must be struck down for being an arbitrary exercise of government
power. To rule in favor of appellant would contravene the general principle that revenues derived
from taxes cannot be used for purely private purposes or for the exclusive benefit of private
individuals. (Underscoring supplied)

The general rule is that an unconstitutional law is void; the doctrine of operative fact is
inapplicable.

PPI also argues that Fertiphil cannot seek a refund even if LOI No. 1465 is declared
unconstitutional. It banks on the doctrine of operative fact, which provides that an
unconstitutional law has an effect before being declared unconstitutional. PPI wants to retain the
levies paid under LOI No. 1465 even if it is subsequently declared to be unconstitutional.

We cannot agree. It is settled that no question, issue or argument will be entertained on appeal,
unless it has been raised in the court a quo.53 PPI did not raise the applicability of the doctrine of
operative fact with the RTC and the CA. It cannot belatedly raise the issue with Us in order to
extricate itself from the dire effects of an unconstitutional law.

At any rate, We find the doctrine inapplicable. The general rule is that an unconstitutional law is
void. It produces no rights, imposes no duties and affords no protection. It has no legal effect. It
is, in legal contemplation, inoperative as if it has not been passed.54 Being void, Fertiphil is not
required to pay the levy. All levies paid should be refunded in accordance with the general civil
code principle against unjust enrichment. The general rule is supported by Article 7 of the Civil
Code, which provides:

ART. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall
not be excused by disuse or custom or practice to the contrary.

When the courts declare a law to be inconsistent with the Constitution, the former shall be void
and the latter shall govern.

The doctrine of operative fact, as an exception to the general rule, only applies as a matter of
equity and fair play.55 It nullifies the effects of an unconstitutional law by recognizing that the
existence of a statute prior to a determination of unconstitutionality is an operative fact and may
have consequences which cannot always be ignored. The past cannot always be erased by a new
judicial declaration.56

The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden
on those who have relied on the invalid law. Thus, it was applied to a criminal case when a
declaration of unconstitutionality would put the accused in double jeopardy57 or would put in
limbo the acts done by a municipality in reliance upon a law creating it.58

Here, We do not find anything iniquitous in ordering PPI to refund the amounts paid by Fertiphil
under LOI No. 1465. It unduly benefited from the levy. It was proven during the trial that the
levies paid were remitted and deposited to its bank account. Quite the reverse, it would be
inequitable and unjust not to order a refund. To do so would unjustly enrich PPI at the expense of
Fertiphil. Article 22 of the Civil Code explicitly provides that "every person who, through an act
of performance by another comes into possession of something at the expense of the latter
without just or legal ground shall return the same to him." We cannot allow PPI to profit from an
unconstitutional law. Justice and equity dictate that PPI must refund the amounts paid by
Fertiphil.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated November 28,
2003 is AFFIRMED.

SO ORDERED.

RUBEN T. REYES
Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

G.R. No. L-19201 June 16, 1965

REV. FR. CASIMIRO LLADOC, petitioner,

vs.
The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX APPEALS,
respondents.

Hilado and Hilado for petitioner.

Office of the Solicitor General for respondents.

PAREDES, J.:

Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev.
Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of herein
petitioner, for the construction of a new Catholic Church in the locality. The total amount was
actually spent for the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of
April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for
donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner
was the priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly
from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the return.

Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest
and the motion for reconsideration presented to the Commissioner of Internal Revenue were
denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the
petition for review, the Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the
donation, he was not the parish priest in Victorias; that there is no legal entity or juridical person
known as the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the
donee's gift tax. It was also asserted that the assessment of the gift tax, even against the Roman
Catholic Church, would not be valid, for such would be a clear violation of the provisions of the
Constitution.

After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below:

... . Parish priests of the Roman Catholic Church under canon laws are similarly situated
as its Archbishops and Bishops with respect to the properties of the church within their
parish. They are the guardians, superintendents or administrators of these properties, with
the right of succession and may sue and be sued.

xxx xxx xxx

The petitioner impugns the, fairness of the assessment with the argument that he should
not be held liable for gift taxes on donation which he did not receive personally since he
was not yet the parish priest of Victorias in the year 1957 when said donation was given.
It is intimated that if someone has to pay at all, it should be petitioner's predecessor, the
Rev. Fr. Crispin Ruiz, who received the donation in behalf of the Catholic parish of
Victorias or the Roman Catholic Church. Following petitioner's line of thinking, we
should be equally unfair to hold that the assessment now in question should have been
addressed to, and collected from, the Rev. Fr. Crispin Ruiz to be paid from income
derived from his present parish where ever it may be. It does not seem right to indirectly
burden the present parishioners of Rev. Fr. Ruiz for donee's gift tax on a donation to
which they were not benefited.

xxx xxx xxx

We saw no legal basis then as we see none now, to include within the Constitutional
exemption, taxes which partake of the nature of an excise upon the use made of the
properties or upon the exercise of the privilege of receiving the properties. (Phipps vs.
Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S. 742.)

It is a cardinal rule in taxation that exemptions from payment thereof are highly
disfavored by law, and the party claiming exemption must justify his claim by a clear,
positive, or express grant of such privilege by law. (Collector vs. Manila Jockey Club,
G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)

The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the
Constitution of the Philippines, should not be interpreted to mean exemption from all
kinds of taxes. Statutes exempting charitable and religious property from taxation should
be construed fairly though strictly and in such manner as to give effect to the main intent
of the lawmakers. (Roman Catholic Church vs. Hastrings 5 Phil. 701.)

xxx xxx xxx

WHEREFORE, in view of the foregoing considerations, the decision of the respondent

Commissioner of Internal Revenue appealed from, is hereby affirmed except with regard
to the imposition of the compromise penalty in the amount of P20.00 (Collector of
Internal Revenue v. U.S.T., G.R. No. L-11274, Nov. 28, 1958); ..., and the petitioner, the
Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the amount of
P900.00 as donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem
penalty under Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest
from May 15, 1958 to the date of actual payment. The surcharge of 25% provided in
 Section 120 for failure to file a return may not be imposed as the failure to file a return
was not due to willful neglect.( ... ) No costs.

The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly
committed by the Tax Court, all of which converge on the singular issue of whether or not
petitioner should be liable for the assessed donee's gift tax on the P10,000.00 donated for the
construction of the Victorias Parish Church.

Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries,
churches and parsonages or convents, appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious purposes. The exemption is only from the payment
of taxes assessed on such properties enumerated, as property taxes, as contra distinguished from
excise taxes. In the present case, what the Collector assessed was a donee's gift tax; the
assessment was not on the properties themselves. It did not rest upon general ownership; it was
an excise upon the use made of the properties, upon the exercise of the privilege of receiving the
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise
tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on
property used exclusively for religious purposes, does not constitute an impairment of the
Constitution. As well observed by the learned respondent Court, the phrase "exempt from
taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption
from all kinds of taxes. And there being no clear, positive or express grant of such privilege by
law, in favor of petitioner, the exemption herein must be denied.

The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a
tax liability exists, is, who should be called upon to pay the gift tax? Petitioner postulates that he
should not be liable, because at the time of the donation he was not the priest of Victorias. We
note the merit of the above claim, and in order to put things in their proper light, this Court, in its
Resolution of March 15, 1965, ordered the parties to show cause why the Head of the Diocese to
which the parish of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr.
Casimiro Lladoc it appearing that the Head of such Diocese is the real party in interest. The
Solicitor General, in representation of the Commissioner of Internal Revenue, interposed no
objection to such a substitution. Counsel for the petitioner did not also offer objection thereto.

On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal
issues and/or defenses he might wish to raise, to which resolution counsel for petitioner, who
also appeared as counsel for the Head of the Diocese, the Roman Catholic Bishop of Bacolod,
manifested that it was submitting itself to the jurisdiction and orders of this Court and that it was
presenting, by reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its own and for all
purposes.

In view here of and considering that as heretofore stated, the assessment at bar had been properly
made and the imposition of the tax is not a violation of the constitutional provision exempting
churches, parsonages or convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the
Diocese, to which the parish Victorias Pertains, is liable for the payment thereof.

The decision appealed from should be, as it is hereby affirmed insofar as tax liability is
concerned; it is modified, in the sense that petitioner herein is not personally liable for the said
gift tax, and that the Head of the Diocese, herein substitute petitioner, should pay, as he is
presently ordered to pay, the said gift tax, without special, pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon,
J.P., and Zaldivar, JJ., concur.
Barrera, J., took no part.

G.R. No. L-49336 August 31, 1981

THE PROVINCE OF ABRA, represented by LADISLAO ANCHETA, Provincial
Assessor, petitioner,
vs.
HONORABLE HAROLD M. HERNANDO, in his capacity as Presiding Judge of Branch I,
Court of First Instance Abra; THE ROMAN CATHOLIC BISHOP OF BANGUED, INC.,
represented by Bishop Odilo etspueler and Reverend Felipe Flores, respondents.

FERNANDO, C.J.:

On the face of this certiorari and mandamus petition filed by the Province of Abra, 1 it clearly
appears that the actuation of respondent Judge Harold M. Hernando of the Court of First Instance
of Abra left much to be desired. First, there was a denial of a motion to dismiss 2 an action for
declaratory relief by private respondent Roman Catholic Bishop of Bangued desirous of being
exempted from a real estate tax followed by a summary judgment 3 granting such exemption,
without even hearing the side of petitioner. In the rather vigorous language of the Acting
Provincial Fiscal, as counsel for petitioner, respondent Judge "virtually ignored the pertinent
provisions of the Rules of Court; ... wantonly violated the rights of petitioner to due process, by
giving due course to the petition of private respondent for declaratory relief, and thereafter
without allowing petitioner to answer and without any hearing, adjudged the case; all in total
disregard of basic laws of procedure and basic provisions of due process in the constitution,
thereby indicating a failure to grasp and understand the law, which goes into the competence of
the Honorable Presiding Judge." 4

It was the submission of counsel that an action for declaratory relief would be proper only before
a breach or violation of any statute, executive order or regulation. 5 Moreover, there being a tax
assessment made by the Provincial Assessor on the properties of respondent Roman Catholic
Bishop, petitioner failed to exhaust the administrative remedies available under Presidential
Decree No. 464 before filing such court action. Further, it was pointed out to respondent Judge
that he failed to abide by the pertinent provision of such Presidential Decree which provides as
follows: "No court shall entertain any suit assailing the validity of a tax assessed under this Code
until the taxpayer, shall have paid, under protest, the tax assessed against him nor shall any court
declare any tax invalid by reason of irregularities or informalities in the proceedings of the
officers charged with the assessment or collection of taxes, or of failure to perform their duties
within this time herein specified for their performance unless such irregularities, informalities or
failure shall have impaired the substantial rights of the taxpayer; nor shall any court declare any
portion of the tax assessed under the provisions of this Code invalid except upon condition that
the taxpayer shall pay the just amount of the tax, as determined by the court in the pending
proceeding." 6

When asked to comment, respondent Judge began with the allegation that there "is no question
that the real properties sought to be taxed by the Province of Abra are properties of the
respondent Roman Catholic Bishop of Bangued, Inc." 7 The very next sentence assumed the
very point it asked when he categorically stated: "Likewise, there is no dispute that the properties
including their procedure are actually, directly and exclusively used by the Roman Catholic
Bishop of Bangued, Inc. for religious or charitable purposes." 8 For him then: "The proper
remedy of the petitioner is appeal and not this special civil action." 9 A more exhaustive
comment was submitted by private respondent Roman Catholic Bishop of Bangued, Inc. It was,
however, unable to lessen the force of the objection raised by petitioner Province of Abra,
especially the due process aspect. it is to be admitted that his opposition to the petition, pressed
with vigor, ostensibly finds a semblance of support from the authorities cited. It is thus
impressed with a scholarly aspect. It suffers, however, from the grave infirmity of stating that
only a pure question of law is presented when a claim for exemption is made.

The petition must be granted.

1. Respondent Judge would not have erred so grievously had he merely compared the provisions
of the present Constitution with that appearing in the 1935 Charter on the tax exemption of
"lands, buildings, and improvements." There is a marked difference. Under the 1935
Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious, charitable, or educational
purposes shall be exempt from taxation." 10 The present Constitution added "charitable
institutions, mosques, and non-profit cemeteries" and required that for the exemption of ":lands,
buildings, and improvements," they should not only be "exclusively" but also "actually and
"directly" used for religious or charitable purposes. 11 The Constitution is worded differently.
The change should not be ignored. It must be duly taken into consideration. Reliance on past
decisions would have sufficed were the words "actually" as well as "directly" not added. There
must be proof therefore of the actual and direct use of the lands, buildings, and improvements
for religious or charitable purposes to be exempt from taxation. According to Commissioner of
Internal Revenue v. Guerrero: 12 "From 1906, in Catholic Church v. Hastings to 1966, in Esso
Standard Eastern, Inc. v. Acting Commissioner of Customs, it has been the constant and uniform
holding that exemption from taxation is not favored and is never presumed, so that if granted it
must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption
from taxation, hence, an exempting provision should be construed strictissimi juris." 13 In
Manila Electric Company v. Vera, 14 a 1975 decision, such principle was reiterated, reference
being made to Republic Flour Mills, Inc. v. Commissioner of Internal Revenue; 15 Commissioner
of Customs v. Philippine Acetylene Co. & CTA; 16 and Davao Light and Power Co., Inc. v.
Commissioner of Customs. 17

2. Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural
due process. If there is any case where proof is necessary to demonstrate that there is compliance
with the constitutional provision that allows an exemption, this is it. Instead, respondent Judge
accepted at its face the allegation of private respondent. All that was alleged in the petition for
declaratory relief filed by private respondents, after mentioning certain parcels of land owned by
it, are that they are used "actually, directly and exclusively" as sources of support of the parish
priest and his helpers and also of private respondent Bishop. 18 In the motion to dismiss filed on
behalf of petitioner Province of Abra, the objection was based primarily on the lack of
jurisdiction, as the validity of a tax assessment may be questioned before the Local Board of
Assessment Appeals and not with a court. There was also mention of a lack of a cause of action,
but only because, in its view, declaratory relief is not proper, as there had been breach or
violation of the right of government to assess and collect taxes on such property. It clearly
appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding
the case immediately in favor of private respondent, respondent Judge failed to abide by the
constitutional command of procedural due process.

WHEREFORE, the petition is granted and the resolution of June 19, 1978 is set aside.
Respondent Judge, or who ever is acting on his behalf, is ordered to hear the case on the merit.
No costs.

Barredo, Concepcion, Jr., and De Castro, JJ., concur.

Aquino, J., concur in the result.

Abad Santos, J., is on leave.

G.R. No. L-15270 September 30, 1961

JOSE V. HERRERA and ESTER OCHANGCO HERRERA, petitioners,

vs.
THE QUEZON CITY BOARD OF ASSESSMENT APPEALS, respondent.
Angel A. Sison for petitioners.
Jaime Agloro for respondent.

CONCEPCION, J.:

Appeal, by petitioners Jose V. Herrera and Ester Ochangco Herrera, from a decision of the Court
of Tax Appeals affirming that of the Board of Assessment Appeals of Quezon City, which held
that certain properties of said petitioners are subject to assessment for purposes of real estate tax.

The facts and the issue are set forth in the aforementioned decision of the Court of Tax Appeals,
from which we quote:

On July 24, 1952, the Director of the Bureau of Hospitals authorized the petitioners to
establish and operate the "St. Catherine's Hospital", located at 58 D. Tuazon, Sta. Mesa
Heights, Quezon City (Exhibit "F-1", p. 7, BIR rec.). On or about January 3, 1953, the
petitioners sent a letter to the Quezon City Assessor requesting exemption from payment
of real estate tax on the lot, building and other improvements comprising the hospital
stating that the same was established for charitable and humanitarian purposes and not for
commercial gain (Exhibit "F-2", pp. 8-9, BIR rec.). After an inspection of the premises in
question and after a careful study of the case, the exemption from real property taxes was
granted effective the years 1953, 1954 and 1955.

Subsequently, however, in a letter dated August 10, 1955 (Exhibit "E", p. 65, CTA rec.)
the Quezon City Assessor notified the petitioners that the aforesaid properties were re-
classified from exempt to "taxable" and thus assessed for real property taxes effective
1956, enclosing therewith copies of Tax Declarations Nos. 19321 to 19322 covering the
said properties. The petitioners appealed the assessment to the Quezon City Board of
Assessment Appeals, which, in a decision dated March 31, 1956 and received by the
former on May 17, 1956, affirmed the decision of the City Assessor. A motion for
reconsideration thereof was denied on March 8, 1957. From this decision, the petitioners
instituted the instant appeal.1awphîl.nèt

The building involved in this case is principally used as a hospital. It is mainly a surgical
and orthopedic hospital with emphasis on obstetrical cases, the latter constituting 90% of
the total number of cases registered therein. The hospital has thirty-two (32) beds, of
which twenty (20) are for charity-patients and twelve (12) for pay-patients. From the
evidence presented by petitioners, it is made to appear that there are two kinds of charity
patients — (a) those who come for consultation only ("out-charity patients"); and (b)
those who remain in the hospital for treatment ("lying-in-patients"). The out-charity
patients are given free consultation and prescription, although sometimes they are
furnished with free medicines which are not costly like aspirin, sulfatiazole, etc. The
charity lying-in-patients are given free medical service and medicine although the food
served to the pay-patients is very much better than that given to the former. Although no
condition is imposed by the hospital on the admission of charity lying-in-patients, they
however, usually give donations to the hospital. On the other hand, the pay-patients are
required to pay for hospital services ranging from the minimum charge of P5.00 to the
maximum of P40.00 for each day of stay in the hospital. The income realized from pay-
patients is spent for the improvement of the charity wards. The hospital personnel is
composed of three nurses, two graduate midwives, a resident physician receiving a salary
of P170.00 a month and the petitioner, Dr. Ester Ochangco Herrera, as directress. As such
directress, the latter does not receive any salary.

Petitioners also operate within the premises of the hospital the "St. Catherine's School of
Midwifery" which was granted government recognition by the Secretary of Education on
February 1, 1955 (Exhibit "F-3", p. 10, BIR rec.) This school has an enrollment of about
 two hundred students. The students are charged a matriculation fee of P300.00 for 1-½
years, plus P50.00 a month for board and lodging, which includes transportation to the St.
Mary's Hospital. The students practice in the St. Catherine's Hospital, as well as in the St.
Mary's Hospital, which is also owned by the petitioners. A separate set of accounting
books is maintained by the school for midwifery distinct from that kept by the hospital.
The petitioners alleged that the accounts of the school are not included in Exhibits "A",
"A-1", "A-2", "B", "B-1", "B-2", "C", "C-1" and "C-2" which relate to the hospital only.
However, the petitioners have refused to submit a separate statement of accounts of the
school. A brief tabulation indicating the amount of income of the hospital for the years
1954, 1955 and 1956, and its operational expenses, is as follows:

1954
Income Expenses Deficit
P 5,280.04 P1,303.80
Charity Ward P10,803.26
P14,779.50
Pay Ward
P16,083.30
(Exhibits "A", "A-1" and "A-2")

1955
Income Expenses Deficit
P 6,859.32
Charity Ward 14,038.92
P17,433.30 P3,464.94
Pay Ward
P20,898.24
(Exhibits "B", "B-1" and "B-2")

1956
Income Expenses Deficit
P 5,559.89 P 341.53
Charity Ward 16,249.04
P21,467.40
Pay Ward
P21,809.93
(Exhibits "C", "C-1" and "C-2")

Aside from the St. Catherine and St. Mary hospitals, the petitioners declared that they also own
lands and coconut plantations in Quezon Province, and other real estate in the City of Manila
consisting of apartments for rent. The petitioner, Jose V. Herrera, is an architect, actively
engaged in the practice of his profession, with office at Tuason Building, Escolta, Manila. He
was formerly Chairman, Board of Examiners for Architects and Chairman, Board of Architects
connected with the United Nations. He was also connected with the Allied Technologists which
constructed the Veterans Hospital in Quezon City.

The only issue raised, is whether or not the lot, building and other improvements occupied by the
St. Catherine Hospital are exempt from the real property tax. The resolution of this question boils
down to the corollary issue as to whether or not the said properties are used exclusively for
charitable or educational purposes. (Petitioners' brief, pp. 24-29).
The Court of Tax Appeals decided the issue in the negative, upon the ground that the St.
Catherine's Hospital "has a pay ward for ... pay-patients, who are charged for the use of the
private rooms, operating room, laboratory room, delivery room, etc., like other hospitals operated
for profit" and that "petitioners and their family occupy a portion of the building for their
residence." With respect to petitioners' claim for exemption based upon the operation of the
school of midwifery, the Court conceded that "the proposition might be proper if the property
used for the school of midwifery were separate and distinct from the hospital." It added,
however, that, "in the instant case, the portions of the building used for classrooms of the school
of midwifery have not been shown to be exclusively for school purposes"; that said portions
"rather ... have a dual use, i.e., for classroom and for hospital use, the latter not being a purpose
that renders the property tax exempt;" that part of the building and lot in question "is used as a
hospital, part as residence of the petitioners, part as garage, part as dormitory and part as school";
and that "the portion dedicated to educational and charitable purposes can not be identified from
those destined to other uses; and the building is itself an indivisible unit of property."

It should be noted, however, that, according to the very statement of facts made in the decision
appealed from, of the thirty-two (32) beds in the hospital, twenty (20) are for charity-patients;
that "the income realized from pay-patients is spent for improvement of the charity wards;" and
that "petitioners, Dr. Ester Ochangco Herrera, as directress" of said hospital, "does not receive
any salary," although its resident physician gets a monthly salary of P170.00. It is well settled, in
this connection, that the admission of pay-patients does not detract from the charitable character
of a hospital, if all its funds are devoted "exclusively to the maintenance of the institution" as a
"public charity" (84 C.J.S., 617; see, also, 51 Am. Jur. 607; Cooley on Taxation, Vol. 2, p. 1562;
144 A.L.R., 1489-1492). "In other words, where rendering charity is its primary object, and the
funds derived from payments made by patients able to pay are devoted to the benevolent
purposes of the institution, the mere fact that a profit has been made will not deprive the hospital
of its benevolent character" (Prairie Du Chien Sanitarium Co. vs. City of Prairie Du Chien, 242
Wis. 262, 7 NW [2d] 832, 144 A.L.R. 1480).

Thus, we have held that the U.S.T. Hospital was not established for profit-making purposes,
although it had 140 paying beds maintained only to partly finance the expenses of the free wards,
containing 203 beds for charity patients (U.S.T. Hospital Employees Association vs. Sto. Tomas
University Hospital, L-6988, May 24, 1954), that St. Paul's Hospital of Iloilo, a corporation
organized for "charitable educational and religious purposes" can not be considered as engaged
in business merely because its pharmacy department charges paying patients the cost of their
medicine, plus 10% thereof, to partly offset the cost of medicines supplied free of charge to
charity patients (Collector of Internal Revenue vs. St. Paul's Hospital of Iloilo, L-12127, May 25,
1959), and that the amendment of the original articles of incorporation of the University of
Visayas to convert it from a non-stock to a stock corporation and the increase of its assets from
P9,000 to P50,000, distributed among the members of the original non-stock corporation in terms
of shares of stock, as well as the subsequent move of its board of trustees to double the stock
dividends of the corporation, in view of a gain of P200,000.00 in property, besides good-will,
which was not carried out, does not justify the inference that the corporation has become one for
business and profit, none of its profits having inured to the benefit of any stockholder or
individual (Collector of Internal Revenue vs. University of Visayas, L-13554, February 28,
1961).

Moreover, the exemption in favor of property used exclusively for charitable or educational
purposes is "not limited to property actually indispensable" therefor (Cooley on Taxation, Vol. 2,
p. 1430), but extends to facilities which are "incidental to and reasonably necessary for" the
accomplishment of said purposes, such as, in the case of hospitals, "a school for training nurses,
a nurses' home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for student
nurses, interns and residents" (84 C.J.S., 621), such as "athletic fields," including "a farm used
for the inmates of the institution" (Cooley on Taxation, Vol. 2, p. 1430).
Within the purview of the Constitutional exemption from taxation, the St. Catherine's Hospital is,
therefore, a charitable institution, and the fact that it admits pay-patients does not bar it from
claiming that it is devoted exclusively to benevolent purposes, it being admitted that the income
derived from pay-patients is devoted to the improvement of the charity wards, which represent
almost two-thirds (2/3) of the bed capacity of the hospital, aside from "out-charity patients" who
come only for consultation.

Again, the existence of "St. Catherine's School of Midwifery", with an enrollment of about 200
students, who practice partly in St. Catherine's Hospital and partly in St. Mary's Hospital, which,
likewise, belongs to petitioners herein, does not, and cannot, affect the exemption to which St.
Catherine's Hospital is entitled under our fundamental law. On the contrary, it furnishes another
ground for exemption. Seemingly, the Court of Tax Appeals was impressed by the fact that the
size of said enrollment and the matriculation fee charged from the students of midwifery, aside
from the amount they paid for board and lodging, including transportation to St. Mary's Hospital,
warrants the belief that petitioners derive a substantial profit from the operation of the school
aforementioned. Such factor is, however, immaterial to the issue in the case at bar, for "all lands,
building and improvements used exclusively for religious, charitable or educational purposes
shall be exempt from taxation," pursuant to the Constitution, regardless of whether or not
material profits are derived from the operation of the institutions in question. In other words,
Congress may, if it deems fit to do so, impose taxes upon such "profits", but said "lands,
buildings and improvements" are beyond its taxing power.

Similarly, the garage in the building above referred to — which was obviously essential to the
operation of the school of midwifery, for the students therein enrolled practiced, not only in St.
Catherine's Hospital, but, also, in St. Mary's Hospital, and were entitled to transportation thereto
— for Mrs. Herrera received no compensation as directress of St. Catherine's Hospital — were
incidental to the operation of the latter and of said school, and, accordingly, did not affect the
charitable character of said hospital and the educational nature of said school.

WHEREFORE, the decision of the Court of Tax Appeals, as well as that of the Assessment
Board of Appeals of Quezon City, are hereby reversed and set aside, and another one entered
declaring that the lot, building and improvements constituting the St. Catherine's Hospital are
exempt from taxation under the provisions of the Constitution, without special pronouncement as
to costs. It is so ordered.

Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Paredes and De Leon, JJ., concur.

G.R. No. L-19371 February 28, 1966

HOSPITAL DE SAN JUAN DE DIOS, INC., plaintiff-appellant,

vs.
PASAY CITY, PABLO CUNETA, R. N. ASCAÑO and G. C. FUENTES, defendants-
appellees.

Teodoro Padilla for the plaintiff-appellant.

R. N. Ascaño and G. C. Fuentes for the defendants-appellees.

DIZON, J.:

Appeal taken by the Hospital de San Juan de Dios, Inc. from the decision of the Court of First
Instance of Rizal in Civil Case No. 1775-P dismissing its complaint against the City of Pasay -
hereinafter referred to as the City - Pablo Cuneta, R. N. Ascano and Ceferino Fuentes, in their
capacities as Mayor, City Engineer and City Treasurer, respectively, of said city.

It is admitted that on July 24, 1954 and May 27, 1957, appellant paid, under protest, to the City
the amounts of P829.60 and P879.90, respectively, representing electrical inspection fees
allegedly due it from appellant under Section 5, Ordinance No. 7, series of 1945, as amended by
Ordinance No. 22, series of 1947 and further amended by Ordinance No. 54, series of 1955,
which reads as follows:

That the City Electrician shall inspect all electric wires, poles, and other apparatus
whether electric crude oil, charcoal or gasoline installed or used for generating,
containing, conducting or measuring electricity or telephone service, issue to the owner
or user thereof a statement of the result of such inspection. . . . However, residential
houses with outlets not exceeding eight (8) in number shall be exempted from the
payment of the corresponding inspection fees. For the purpose of this ordinance, any
accessoria, irrespective of the number of doors or rooms it contains, is considered one
building. Churches and such other religious institutions and buildings housing charitable
organizations, are likewise subject to annual inspection but exempted from the payment
of inspection fees.

Although appellant claimed that, as a charitable institution, it was exempt from the payment of
the inspection fees provided for in the above-quoted section, it found itself compelled to pay the
amounts mentioned heretofore by reason of the refusal of appellees Pablo Cuneta, as Mayor, and
R. N. Ascaño, as City Engineer, to issue a building permit to make additional constructions
applied for by appellant until after the full payment of the electrical inspection fees assessed
against it by appellee Ascaño. As a result, appellant commenced the present action in the Court
of First Instance of Rizal (Civil Case No. 1775-P) to recover from appellees the above-
mentioned amounts it had paid as electrical inspection fees as well as the sum of P500.00 as
attorney's fees and the costs of suit.

After due trial the court rendered the appealed judgment.

The issue determinative of the present appeal is whether or not appellant is a charitable
institution and, as such exempt, under the provisions of the last sentence of Section 5 of the
ordinance in question, from the payment of the inspection fees provided for therein.

The trial court, while admitting that appellant was organized for charitable purposes, held that it
"is not actually being managed and operated as a charitable institution but one for profit" and, as
such, "is not entitled to the relief sought in the present action." This, We believe, is not correct.

It not being disputed that appellant was organized as a charitable institution, the presumption is
that it is operating as such, the burden of proof being on appellees to show that it is operating
otherwise. The record does not show that they have satisfactorily discharged this
burden.1äwphï1.ñët

But the lower court, disregarding the presumption mentioned above, claims that "plaintiff failed
to prove that it is actually engaged in charitable work" and that "No evidence whatsoever was
presented to show how it doles out charity, etc." This is also erroneous. Aside from the
appellant's Articles of Incorporation showing that it had no capital stock and that no part of its
net income, if any, could inure to the benefit of any private individual, there is Exhibit D, a
ruling of June 20, 1957 of the Workmen's Compensation Commissioner and the Undersecretary
of Labor to the effect that appellant is a charitable institution exempt from the scope of the
Workmen's Compensation Act; a written statement of appellant's cashier that the latter maintains
two free wards of sixty beds each; an admission by appellees to the effect that, in addition to the
free wards just mentioned, appellant also maintains six free beds in the Pediatrics Section
(transcript of June 16, 1960, pp. 2-4).

It is not therefore correct to say that there is no evidence whatsoever showing how appellant
doles out charity.

Moreover, the question of whether or not appellant and other institutions similarly situated and
operated are charitable institutions has been decided both here and in the United States. The
American rule is summarized in 51 American Jurisprudence, p. 607, as follows:
 636. Effect of Receipt of Pay from Patients.

The general rule that a charitable institution does not lose its charitable character and its
consequent exemption from taxation merely because recipients of its benefits who are
able to pay are required to do so, where funds derived in this manner are devoted to the
charitable purposes of the institution, applies to hospitals. A hospital owned and
conducted by a charitable organization, devoted for the most part to the gratuitous care of
charity patients, is exempt from taxation as a building used for "purposes purely
charitable", notwithstanding it receives and cares for pay patients, where any profit thus
derived is applied to the purposes of the institution. An institution established,
maintained, and operated for the purpose of taking care of the sick, without any profit or
view to profit, but at a loss, which is made up by benevolent contributions, the benefits of
which are open to the public generally, is a purely public charity within the meaning of a
statute exempting the property of institutions of purely public charity from taxation; the
fact that patients who are able to pay are charged for services rendered, according to their
ability, being of no importance upon the question of the character of the institution.

On the other hand, in Jesus Sacred Heart College vs. Collector, etc., G.R. No. L-6807, May 20,
1954, We overruled the contention of the Collector of Internal Revenue to the effect that the fact
that the appellant herein had a profit or net income was sufficient to show that it was an
institution "for profit and gain" and therefore no longer exempt from income tax as follows:

To hold that an educational institution is subject to income tax wherever it is so

administered as to reasonably assure that it will not incur a deficit, is to nullify and defeat
the aforementioned exemption. Indeed, the effect, in general, of the interpretation
advocated by appellant would be to deny the exemption whenever there is a net income,
contrary to the tenor of said Section 27 (e) which positively exempts from taxation those
corporations which, otherwise, would be subject thereto, because of the existence of said
net income.

Explaining our view that the making of profit does not destroy the tax exemption of a charitable,
benevolent or educational institution, We said:

Needless to say, every responsible organization must be so run as to at least, insure its
existence, by operating within the limits of its own resources, especially its regular
income. In other words, it should always strive, whenever possible, to have a surplus.
Upon the other hand, appellant's pretense, would limit the benefits of the exemption,
under said Section 27 (e), to institutions which do not hope, or propose, to have such
surplus. Under this view, the exemption would apply only to schools which are on the
verge of bankruptcy, for—unlike the United States, where a substantial number of
institutions of learning are dependent upon voluntary contributions and still enjoy
economic stability, such as Harvard, the trust fund of which has been steadily increasing
with the years—there are, and there have always been very few educational enterprises in
the Philippines which are supported by donations, and those organizations usually have a
very precarious existence. The final result of appellant's contention, if adopted, would be
to discourage the establishment of colleges in the Philippines, which is precisely the
opposite of the objective consistently sought by our laws.

In U.S.T. Hospital Employees Association vs. Sto. Tomas University Hospital, G.R. No. L-6988
(May 24, 1952), it was argued that the fact that the aforesaid hospital charged fees for 140
paying beds made it lose its character of a charitable institution. We likewise rejected this view
because the paying beds aforesaid were maintained to partly finance the expenses of the free
wards maintained by the hospital. We express the same view in Collector of Internal Revenue vs.
St. Paul's Hospital in Iloilo, G.R. No. L-12127 (May 25, 1959) where We said the following:

In this connection, it should be noted that respondent therein is a corporation organized

for "charitable, educational and religious purposes"; that no part of its net income inures
 to the benefit of any private individual; that it is exempt from paying income tax; that it
operates a hospital in which MEDICAL assistance is given to destitute persons free of
charge; that it maintains a pharmacy department within the premises of said hospital, to
supply drugs and medicines only to charity and paying patients confined therein; and that
only the paying patients are required to pay the medicines supplied to them, for which
they are charged the cost of the medicines, plus an additional 10% thereof, to partly offset
the cost of medicines supplied free of charge to charity patients. Under these facts, we are
of the opinion, and so hold, that the Hospital may not be regarded as engaged in
"business" by reason of said sale of medicines to its paying patients.

xxx xxx xxx

In line with the foregoing, in U.S.T. Hospital Employees Association vs. Santo Tomas University
Hospital (G.R. No. L-6988, decided May 24, 1954), we held that the U.S.T. Hospital was not
established for profit-making purposes, despite the fact that it had 140 paying beds, because the
same were maintained only to "partly finance the expenses of the free wards", containing 203
beds for charity patients. Although said case involved the interpretation of Republic Act No. 772,
it is patent from our decision therein that said institution was not considered engaged in
"business."

It is trite to say that a tax on the limited revenue of charitable institutions of this kind
tends to hamper its operation, and accordingly, to discourage the establishment and
maintenance thereof. In the absence of a clear legal provision thereon, we must not so
construe our laws as to lead to such result. In other words, the second, third and fourth
assignments of error are untenable.

In San Juan de Dios Hospital (the same party appellant herein) vs. Metropolitan Water District,
54 Phil. 174, this Court considered said hospital as a charitable institution in spite of the fact that
it maintained paying beds. From the decision in said case, We quote the following:

A hospital (referring to the San Juan de Dios Hospital) is generally considered to be a

charitable institution. It is good public policy to encourage works of charity. What
Carriedo did in his will was to make a beneficient grant not to a hospital thought of as a
building, but to a hospital thought of as an institution. The free water was for the good of
the hospital in this large sense. Should the hospital be enlarged or rebuilt, the water
concession would continue just the same. But a hospital cannot function without
personnel. And such personnel must have a place to live, which is the reason why a home
devoted exclusively to the needs of the nurses was founded. Free water for a nurses home
as an adjunct to a hospital is as beneficial to the charitable purposes of the hospital as is
free water for the hospital proper.

Finally, in Manila Sanitarium and Hospital vs. Gabuco, G.R. No. L-14331, January 31, 1963,
We held that the mere charging of medical and hospital fees from those who could afford to pay,
did not make the institution one established for profit or gain.

Upon all the foregoing, the appealed decision is reversed, and another is hereby rendered
ordering appellees to pay appellant the amount of P1,709.50, with interest at the legal rate from
the date of the filing of complaint in this case. With costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L. Regala, Makalintal, Bengzon, J.P.,
Zaldivar and Sanchez, JJ., concur.
Barrera, J., took no part.

G.R. No. L-39086 June 15, 1988

ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner,

vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA,
Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra;
HEIRS OF PATERNO MILLARE, respondents.

PARAS, J.:

This is a petition for review on certiorari of the decision * of the defunct Court of First Instance
of Abra, Branch I, dated June 14, 1974, rendered in Civil Case No. 656, entitled "Abra Valley
Junior College, Inc., represented by Pedro V. Borgonia, plaintiff vs. Armin M. Cariaga as
Provincial Treasurer of Abra, Gaspar V. Bosque as Municipal Treasurer of Bangued, Abra and
Paterno Millare, defendants," the decretal portion of which reads:

IN VIEW OF ALL THE FOREGOING, the Court hereby declares:

That the distraint seizure and sale by the Municipal Treasurer of Bangued, Abra,
the Provincial Treasurer of said province against the lot and building of the Abra
Valley Junior College, Inc., represented by Director Pedro Borgonia located at
Bangued, Abra, is valid;

That since the school is not exempt from paying taxes, it should therefore pay all
back taxes in the amount of P5,140.31 and back taxes and penalties from the
promulgation of this decision;

That the amount deposited by the plaintaff him the sum of P60,000.00 before the
trial, be confiscated to apply for the payment of the back taxes and for the
redemption of the property in question, if the amount is less than P6,000.00, the
remainder must be returned to the Director of Pedro Borgonia, who represents the
plaintiff herein;

That the deposit of the Municipal Treasurer in the amount of P6,000.00 also
before the trial must be returned to said Municipal Treasurer of Bangued, Abra;

And finally the case is hereby ordered dismissed with costs against the plaintiff.

SO ORDERED. (Rollo, pp. 22-23)

Petitioner, an educational corporation and institution of higher learning duly incorporated with
the Securities and Exchange Commission in 1948, filed a complaint (Annex "1" of Answer by
the respondents Heirs of Paterno Millare; Rollo, pp. 95-97) on July 10, 1972 in the court a quo to
annul and declare void the "Notice of Seizure' and the "Notice of Sale" of its lot and building
located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by Original
Certificate of Title No. Q-83 duly registered in the name of petitioner, plaintiff below, on July 6,
1972, by respondents Municipal Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon. The "Notice of Sale" was caused to be served
upon the petitioner by the respondent treasurers on July 8, 1972 for the sale at public auction of
said college lot and building, which sale was held on the same date. Dr. Paterno Millare, then
Municipal Mayor of Bangued, Abra, offered the highest bid of P6,000.00 which was duly
accepted. The certificate of sale was correspondingly issued to him.

On August 10, 1972, the respondent Paterno Millare (now deceased) filed through counstel a
motion to dismiss the complaint.

On August 23, 1972, the respondent Provincial Treasurer and Municipal Treasurer, through then
Provincial Fiscal Loreto C. Roldan, filed their answer (Annex "2" of Answer by the respondents
Heirs of Patemo Millare; Rollo, pp. 98-100) to the complaint. This was followed by an amended
answer (Annex "3," ibid, Rollo, pp. 101-103) on August 31, 1972.

On September 1, 1972 the respondent Paterno Millare filed his answer (Annex "5," ibid; Rollo,
pp. 106-108).

On October 12, 1972, with the aforesaid sale of the school premises at public auction, the
respondent Judge, Hon. Juan P. Aquino of the Court of First Instance of Abra, Branch I, ordered
(Annex "6," ibid; Rollo, pp. 109-110) the respondents provincial and municipal treasurers to
deliver to the Clerk of Court the proceeds of the auction sale. Hence, on December 14, 1972,
petitioner, through Director Borgonia, deposited with the trial court the sum of P6,000.00
evidenced by PNB Check No. 904369.

On April 12, 1973, the parties entered into a stipulation of facts adopted and embodied by the
trial court in its questioned decision. Said Stipulations reads:

STIPULATION OF FACTS

COME NOW the parties, assisted by counsels, and to this Honorable Court
respectfully enter into the following agreed stipulation of facts:

1. That the personal circumstances of the parties as stated in paragraph 1 of the

complaint is admitted; but the particular person of Mr. Armin M. Cariaga is to be
substituted, however, by anyone who is actually holding the position of Provincial
Treasurer of the Province of Abra;

2. That the plaintiff Abra Valley Junior College, Inc. is the owner of the lot and
buildings thereon located in Bangued, Abra under Original Certificate of Title No.
0-83;

3. That the defendant Gaspar V. Bosque, as Municipal treasurer of Bangued, Abra

caused to be served upon the Abra Valley Junior College, Inc. a Notice of Seizure
on the property of said school under Original Certificate of Title No. 0-83 for the
satisfaction of real property taxes thereon, amounting to P5,140.31; the Notice of
Seizure being the one attached to the complaint as Exhibit A;

4. That on June 8, 1972 the above properties of the Abra Valley Junior College,
Inc. was sold at public auction for the satisfaction of the unpaid real property
taxes thereon and the same was sold to defendant Paterno Millare who offered the
highest bid of P6,000.00 and a Certificate of Sale in his favor was issued by the
defendant Municipal Treasurer.

5. That all other matters not particularly and specially covered by this stipulation
of facts will be the subject of evidence by the parties.

WHEREFORE, it is respectfully prayed of the Honorable Court to consider and

admit this stipulation of facts on the point agreed upon by the parties.

Bangued, Abra, April 12, 1973.

Sgd.

Aside from the Stipulation of Facts, the trial court among others, found the following: (a) that the
school is recognized by the government and is offering Primary, High School and College
Courses, and has a school population of more than one thousand students all in all; (b) that it is
located right in the heart of the town of Bangued, a few meters from the plaza and about 120
meters from the Court of First Instance building; (c) that the elementary pupils are housed in a
two-storey building across the street; (d) that the high school and college students are housed in
the main building; (e) that the Director with his family is in the second floor of the main
building; and (f) that the annual gross income of the school reaches more than one hundred
thousand pesos.

From all the foregoing, the only issue left for the Court to determine and as agreed by the parties,
is whether or not the lot and building in question are used exclusively for educational purposes.
(Rollo, p. 20)

The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon. Eustaquio Z.
Montero, filed a Memorandum for the Government on March 25, 1974, and a Supplemental
Memorandum on May 7, 1974, wherein they opined "that based on the evidence, the laws
applicable, court decisions and jurisprudence, the school building and school lot used for
educational purposes of the Abra Valley College, Inc., are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).

Nonetheless, the trial court disagreed because of the use of the second floor by the Director of
petitioner school for residential purposes. He thus ruled for the government and rendered the
assailed decision.

After having been granted by the trial court ten (10) days from August 6, 1974 within which to
perfect its appeal (Per Order dated August 6, 1974; Annex "G" of Petition; Rollo, p. 57)
petitioner instead availed of the instant petition for review on certiorari with prayer for
preliminary injunction before this Court, which petition was filed on August 17, 1974 (Rollo,
p.2).

In the resolution dated August 16, 1974, this Court resolved to give DUE COURSE to the
petition (Rollo, p. 58). Respondents were required to answer said petition (Rollo, p. 74).

Petitioner raised the following assignments of error:

THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND SALE OF
THE COLLEGE LOT AND BUILDING USED FOR EDUCATIONAL PURPOSES OF THE
PETITIONER.

II

THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND
BUILDING OF THE PETITIONER ARE NOT USED EXCLUSIVELY FOR EDUCATIONAL
PURPOSES MERELY BECAUSE THE COLLEGE PRESIDENT RESIDES IN ONE ROOM
OF THE COLLEGE BUILDING.

III

THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND
BUILDING OF THE PETITIONER ARE NOT EXEMPT FROM PROPERTY TAXES AND
IN ORDERING PETITIONER TO PAY P5,140.31 AS REALTY TAXES.

IV

THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE P6,000.00

DEPOSIT MADE IN THE COURT BY PETITIONER AS PAYMENT OF THE P5,140.31
REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper interpretation of the phrase "used exclusively for
educational purposes."

Petitioner contends that the primary use of the lot and building for educational purposes, and not
the incidental use thereof, determines and exemption from property taxes under Section 22 (3),
Article VI of the 1935 Constitution. Hence, the seizure and sale of subject college lot and
building, which are contrary thereto as well as to the provision of Commonwealth Act No. 470,
otherwise known as the Assessment Law, are without legal basis and therefore void.

On the other hand, private respondents maintain that the college lot and building in question
which were subjected to seizure and sale to answer for the unpaid tax are used: (1) for the
educational purposes of the college; (2) as the permanent residence of the President and Director
thereof, Mr. Pedro V. Borgonia, and his family including the in-laws and grandchildren; and (3)
for commercial purposes because the ground floor of the college building is being used and
rented by a commercial establishment, the Northern Marketing Corporation (See photograph
attached as Annex "8" (Comment; Rollo, p. 90]).

Due to its time frame, the constitutional provision which finds application in the case at bar is
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, which expressly
grants exemption from realty taxes for "Cemeteries, churches and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious,
charitable or educational purposes ...

Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as amended by Republic
Act No. 409, otherwise known as the Assessment Law, provides:

The following are exempted from real property tax under the Assessment Law:

xxx xxx xxx

(c) churches and parsonages or convents appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious, charitable, scientific
or educational purposes.

xxx xxx xxx

In this regard petitioner argues that the primary use of the school lot and building is the basic and
controlling guide, norm and standard to determine tax exemption, and not the mere incidental use
thereof.

As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217 [1916], this
Court ruled that while it may be true that the YMCA keeps a lodging and a boarding house and
maintains a restaurant for its members, still these do not constitute business in the ordinary
acceptance of the word, but an institution used exclusively for religious, charitable and
educational purposes, and as such, it is entitled to be exempted from taxation.

In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51 Phil. 352 [1972],
this Court included in the exemption a vegetable garden in an adjacent lot and another lot
formerly used as a cemetery. It was clarified that the term "used exclusively" considers incidental
use also. Thus, the exemption from payment of land tax in favor of the convent includes, not
only the land actually occupied by the building but also the adjacent garden devoted to the
incidental use of the parish priest. The lot which is not used for commercial purposes but serves
solely as a sort of lodging place, also qualifies for exemption because this constitutes incidental
use in religious functions.

The phrase "exclusively used for educational purposes" was further clarified by this Court in the
cases of Herrera vs. Quezon City Board of assessment Appeals, 3 SCRA 186 [1961] and
Commissioner of Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991 [1965],
thus —

Moreover, the exemption in favor of property used exclusively for charitable or

educational purposes is 'not limited to property actually indispensable' therefor
(Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are
incidental to and reasonably necessary for the accomplishment of said purposes,
such as in the case of hospitals, "a school for training nurses, a nurses' home,
property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational
facilities for student nurses, interns, and residents' (84 CJS 6621), such as
"Athletic fields" including "a firm used for the inmates of the institution. (Cooley
on Taxation, Vol. 2, p. 1430).

The test of exemption from taxation is the use of the property for purposes mentioned in the
Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 Phil, 547 [1941]).

It must be stressed however, that while this Court allows a more liberal and non-restrictive
interpretation of the phrase "exclusively used for educational purposes" as provided for in Article
VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always
been made that exemption extends to facilities which are incidental to and reasonably necessary
for the accomplishment of the main purposes. Otherwise stated, the use of the school building or
lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while
the use of the second floor of the main building in the case at bar for residential purposes of the
Director and his family, may find justification under the concept of incidental use, which is
complimentary to the main or primary purpose—educational, the lease of the first floor thereof
to the Northern Marketing Corporation cannot by any stretch of the imagination be considered
incidental to the purpose of education.

It will be noted however that the aforementioned lease appears to have been raised for the first
time in this Court. That the matter was not taken up in the to court is really apparent in the
decision of respondent Judge. No mention thereof was made in the stipulation of facts, not even
in the description of the school building by the trial judge, both embodied in the decision nor as
one of the issues to resolve in order to determine whether or not said properly may be exempted
from payment of real estate taxes (Rollo, pp. 17-23). On the other hand, it is noteworthy that
such fact was not disputed even after it was raised in this Court.

Indeed, it is axiomatic that facts not raised in the lower court cannot be taken up for the first time
on appeal. Nonetheless, as an exception to the rule, this Court has held that although a factual
issue is not squarely raised below, still in the interest of substantial justice, this Court is not
prevented from considering a pivotal factual matter. "The Supreme Court is clothed with ample
authority to review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127 SCRA 645 [1984]).

Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school
building as well as the lot where it is built, should be taxed, not because the second floor of the
same is being used by the Director and his family for residential purposes, but because the first
floor thereof is being used for commercial purposes. However, since only a portion is used for
purposes of commerce, it is only fair that half of the assessed tax be returned to the school
involved.

PREMISES CONSIDERED, the decision of the Court of First Instance of Abra, Branch I, is
hereby AFFIRMED subject to the modification that half of the assessed tax be returned to the
petitioner.

SO ORDERED.
Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

G.R. No. L-45685 November 16, 1937

THE PEOPLE OF THE PHILIPPINE ISLANDS and HONGKONG & SHANGHAI

BANKING CORPORATION, petitioners,
vs.
JOSE O. VERA, Judge . of the Court of First Instance of Manila, and MARIANO CU
UNJIENG, respondents.

Office of the Solicitor General Tuason and City Fiscal Diaz for the Government.
De Witt, Perkins and Ponce Enrile for the Hongkong and Shanghai Banking Corporation.
Vicente J. Francisco, Feria and La O, Orense and Belmonte, and Gibbs and McDonough for
respondent Cu Unjieng.
No appearance for respondent Judge.

LAUREL, J.:

This is an original action instituted in this court on August 19, 1937, for the issuance of the writ
of certiorari and of prohibition to the Court of First Instance of Manila so that this court may
review the actuations of the aforesaid Court of First Instance in criminal case No. 42649 entitled
"The People of the Philippine Islands vs. Mariano Cu Unjieng, et al.", more particularly the
application of the defendant Mariano Cu Unjieng therein for probation under the provisions of
Act No. 4221, and thereafter prohibit the said Court of First Instance from taking any further
action or entertaining further the aforementioned application for probation, to the end that the
defendant Mariano Cu Unjieng may be forthwith committed to prison in accordance with the
final judgment of conviction rendered by this court in said case (G. R. No. 41200). 1

Petitioners herein, the People of the Philippine and the Hongkong and Shanghai Banking
Corporation, are respectively the plaintiff and the offended party, and the respondent herein
Mariano Cu Unjieng is one of the defendants, in the criminal case entitled "The People of the
Philippine Islands vs. Mariano Cu Unjieng, et al.", criminal case No. 42649 of the Court of First
Instance of Manila and G.R. No. 41200 of this court. Respondent herein, Hon. Jose O. Vera, is
the Judge ad interim of the seventh branch of the Court of First Instance of Manila, who heard
the application of the defendant Mariano Cu Unjieng for probation in the aforesaid criminal case.

The information in the aforesaid criminal case was filed with the Court of First Instance of
Manila on October 15, 1931, petitioner herein Hongkong and Shanghai Banking Corporation
intervening in the case as private prosecutor. After a protracted trial unparalleled in the annals of
Philippine jurisprudence both in the length of time spent by the court as well as in the volume in
the testimony and the bulk of the exhibits presented, the Court of First Instance of Manila, on
January 8, 1934, rendered a judgment of conviction sentencing the defendant Mariano Cu
Unjieng to indeterminate penalty ranging from four years and two months of prision correccional
to eight years of prision mayor, to pay the costs and with reservation of civil action to the
offended party, the Hongkong and Shanghai Banking Corporation. Upon appeal, the court, on
March 26, 1935, modified the sentence to an indeterminate penalty of from five years and six
months of prision correccional to seven years, six months and twenty-seven days of prision
mayor, but affirmed the judgment in all other respects. Mariano Cu Unjieng filed a motion for
reconsideration and four successive motions for new trial which were denied on December 17,
1935, and final judgment was accordingly entered on December 18, 1935. The defendant
thereupon sought to have the case elevated on certiorari to the Supreme Court of the United
States but the latter denied the petition for certiorari in November, 1936. This court,
on November 24, 1936, denied the petition subsequently filed by the defendant for leave
to file a second alternative motion for reconsideration or new trial and thereafter remanded the
case to the court of origin for execution of the judgment.
The instant proceedings have to do with the application for probation filed by the herein
respondent Mariano Cu Unjieng on November 27, 1936, before the trial court, under the
provisions of Act No. 4221 of the defunct Philippine Legislature. Herein respondent Mariano Cu
Unjieng states in his petition, inter alia, that he is innocent of the crime of which he was
convicted, that he has no criminal record and that he would observe good conduct in the future.
The Court of First Instance of Manila, Judge Pedro Tuason presiding, referred the application for
probation of the Insular Probation Office which recommended denial of the same June 18, 1937.
Thereafter, the Court of First Instance of Manila, seventh branch, Judge Jose O. Vera presiding,
set the petition for hearing on April 5, 1937.

On April 2, 1937, the Fiscal of the City of Manila filed an opposition to the granting of probation
to the herein respondent Mariano Cu Unjieng. The private prosecution also filed an opposition
on April 5, 1937, alleging, among other things, that Act No. 4221, assuming that it has not been
repealed by section 2 of Article XV of the Constitution, is nevertheless violative of section 1,
subsection (1), Article III of the Constitution guaranteeing equal protection of the laws for the
reason that its applicability is not uniform throughout the Islands and because section 11 of the
said Act endows the provincial boards with the power to make said law effective or otherwise in
their respective or otherwise in their respective provinces. The private prosecution also filed a
supplementary opposition on April 19, 1937, elaborating on the alleged unconstitutionality on
Act No. 4221, as an undue delegation of legislative power to the provincial boards of several
provinces (sec. 1, Art. VI, Constitution). The City Fiscal concurred in the opposition of the
private prosecution except with respect to the questions raised concerning the constitutionality of
Act No. 4221.

On June 28, 1937, herein respondent Judge Jose O. Vera promulgated a resolution with a finding
that "las pruebas no han establecido de unamanera concluyente la culpabilidad del peticionario y
que todos los hechos probados no son inconsistentes o incongrentes con su inocencia" and
concludes that the herein respondent Mariano Cu Unjieng "es inocente por duda racional" of the
crime of which he stands convicted by this court in G.R. No. 41200, but denying the latter's
petition for probation for the reason that:

. . . Si este Juzgado concediera la poblacion solicitada por las circunstancias y la historia

social que se han expuesto en el cuerpo de esta resolucion, que hacen al peticionario
acreedor de la misma, una parte de la opinion publica, atizada por los recelos y las
suspicacias, podria levantarse indignada contra un sistema de probacion que permite
atisbar en los procedimientos ordinarios de una causa criminal perturbando la quietud y la
eficacia de las decisiones ya recaidas al traer a la superficie conclusiones enteramente
differentes, en menoscabo del interes publico que demanda el respeto de las leyes y del
veredicto judicial.

On July 3, 1937, counsel for the herein respondent Mariano Cu Unjieng filed an exception to the
resolution denying probation and a notice of intention to file a motion for reconsideration. An
alternative motion for reconsideration or new trial was filed by counsel on July 13, 1937. This
was supplemented by an additional motion for reconsideration submitted on July 14, 1937. The
aforesaid motions were set for hearing on July 31, 1937, but said hearing was postponed at the
petition of counsel for the respondent Mariano Cu Unjieng because a motion for leave to
intervene in the case as amici curiae signed by thirty-three (thirty-four) attorneys had just been
filed with the trial court. Attorney Eulalio Chaves whose signature appears in the aforesaid
motion subsequently filed a petition for leave to withdraw his appearance as amicus curiae on
the ground that the motion for leave to intervene as amici curiae was circulated at a banquet
given by counsel for Mariano Cu Unjieng on the evening of July 30, 1937, and that he signed the
same "without mature deliberation and purely as a matter of courtesy to the person who invited
me (him)."

On August 6, 1937, the Fiscal of the City of Manila filed a motion with the trial court for the
issuance of an order of execution of the judgment of this court in said case and forthwith to
commit the herein respondent Mariano Cu Unjieng to jail in obedience to said judgment.
On August 7, 1937, the private prosecution filed its opposition to the motion for leave to
intervene as amici curiae aforementioned, asking that a date be set for a hearing of the same and
that, at all events, said motion should be denied with respect to certain attorneys signing the same
who were members of the legal staff of the several counsel for Mariano Cu Unjieng. On August
10, 1937, herein respondent Judge Jose O. Vera issued an order requiring all parties including the
movants for intervention as amici curiae to appear before the court on August 14, 1937. On the
last-mentioned date, the Fiscal of the City of Manila moved for the hearing of his motion for
execution of judgment in preference to the motion for leave to intervene as amici curiae but,
upon objection of counsel for Mariano Cu Unjieng, he moved for the postponement of the
hearing of both motions. The respondent judge thereupon set the hearing of the motion for
execution on August 21, 1937, but proceeded to consider the motion for leave to intervene as
amici curiae as in order. Evidence as to the circumstances under which said motion for leave to
intervene as amici curiae was signed and submitted to court was to have been heard on August
19, 1937. But at this juncture, herein petitioners came to this court on extraordinary legal process
to put an end to what they alleged was an interminable proceeding in the Court of First Instance
of Manila which fostered "the campaign of the defendant Mariano Cu Unjieng for delay in the
execution of the sentence imposed by this Honorable Court on him, exposing the courts to
criticism and ridicule because of the apparent inability of the judicial machinery to make
effective a final judgment of this court imposed on the defendant Mariano Cu Unjieng."

The scheduled hearing before the trial court was accordingly suspended upon the issuance of a
temporary restraining order by this court on August 21, 1937.

To support their petition for the issuance of the extraordinary writs of certiorari and prohibition,
herein petitioners allege that the respondent judge has acted without jurisdiction or in excess of
his jurisdiction:

I. Because said respondent judge lacks the power to place respondent Mariano Cu Unjieng under
probation for the following reason:

(1) Under section 11 of Act No. 4221, the said of the Philippine Legislature is
made to apply only to the provinces of the Philippines; it nowhere states that it is
to be made applicable to chartered cities like the City of Manila.

(2) While section 37 of the Administrative Code contains a proviso to the effect
that in the absence of a special provision, the term "province" may be construed to
include the City of Manila for the purpose of giving effect to laws of general
application, it is also true that Act No. 4221 is not a law of general application
because it is made to apply only to those provinces in which the respective
provincial boards shall have provided for the salary of a probation officer.

(3) Even if the City of Manila were considered to be a province, still, Act No.
4221 would not be applicable to it because it has provided for the salary of a
probation officer as required by section 11 thereof; it being immaterial that there
is an Insular Probation Officer willing to act for the City of Manila, said Probation
Officer provided for in section 10 of Act No. 4221 being different and distinct
from the Probation Officer provided for in section 11 of the same Act.

II. Because even if the respondent judge originally had jurisdiction to entertain the application
for probation of the respondent Mariano Cu Unjieng, he nevertheless acted without jurisdiction
or in excess thereof in continuing to entertain the motion for reconsideration and by failing to
commit Mariano Cu Unjieng to prison after he had promulgated his resolution of June 28, 1937,
denying Mariano Cu Unjieng's application for probation, for the reason that:

(1) His jurisdiction and power in probation proceedings is limited by Act No.
4221 to the granting or denying of applications for probation.
 (2) After he had issued the order denying Mariano Cu Unjieng's petition for
probation on June 28, 1937, it became final and executory at the moment of its
rendition.

(3) No right on appeal exists in such cases.

(4) The respondent judge lacks the power to grant a rehearing of said order or to
modify or change the same.

III. Because the respondent judge made a finding that Mariano Cu Unjieng is innocent of the
crime for which he was convicted by final judgment of this court, which finding is not only
presumptuous but without foundation in fact and in law, and is furthermore in contempt of this
court and a violation of the respondent's oath of office as ad interim judge of first instance.

IV. Because the respondent judge has violated and continues to violate his duty, which became
imperative when he issued his order of June 28, 1937, denying the application for probation, to
commit his co-respondent to jail.

Petitioners also avers that they have no other plain, speedy and adequate remedy in the ordinary
course of law.

In a supplementary petition filed on September 9, 1937, the petitioner Hongkong and Shanghai
Banking Corporation further contends that Act No. 4221 of the Philippine Legislature providing
for a system of probation for persons eighteen years of age or over who are convicted of crime, is
unconstitutional because it is violative of section 1, subsection (1), Article III, of the Constitution
of the Philippines guaranteeing equal protection of the laws because it confers upon the
provincial board of its province the absolute discretion to make said law operative or otherwise
in their respective provinces, because it constitutes an unlawful and improper delegation to the
provincial boards of the several provinces of the legislative power lodged by the Jones Law
(section 8) in the Philippine Legislature and by the Constitution (section 1, Art. VI) in the
National Assembly; and for the further reason that it gives the provincial boards, in
contravention of the Constitution (section 2, Art. VIII) and the Jones Law (section 28), the
authority to enlarge the powers of the Court of First Instance of different provinces without
uniformity. In another supplementary petition dated September 14, 1937, the Fiscal of the City of
Manila, in behalf of one of the petitioners, the People of the Philippine Islands, concurs for the
first time with the issues raised by other petitioner regarding the constitutionality of Act No.
4221, and on the oral argument held on October 6, 1937, further elaborated on the theory that
probation is a form of reprieve and therefore Act. No. 4221 is an encroachment on the exclusive
power of the Chief Executive to grant pardons and reprieves. On October 7, 1937, the City Fiscal
filed two memorandums in which he contended that Act No. 4221 not only encroaches upon the
pardoning power to the executive, but also constitute an unwarranted delegation of legislative
power and a denial of the equal protection of the laws. On October 9, 1937, two memorandums,
signed jointly by the City Fiscal and the Solicitor-General, acting in behalf of the People of the
Philippine Islands, and by counsel for the petitioner, the Hongkong and Shanghai Banking
Corporation, one sustaining the power of the state to impugn the validity of its own laws and the
other contending that Act No. 4221 constitutes an unwarranted delegation of legislative power,
were presented. Another joint memorandum was filed by the same persons on the same day,
October 9, 1937, alleging that Act No. 4221 is unconstitutional because it denies the equal
protection of the laws and constitutes an unlawful delegation of legislative power and, further,
that the whole Act is void: that the Commonwealth is not estopped from questioning the validity
of its laws; that the private prosecution may intervene in probation proceedings and may attack
the probation law as unconstitutional; and that this court may pass upon the constitutional
question in prohibition proceedings.

Respondents in their answer dated August 31, 1937, as well as in their oral argument and
memorandums, challenge each and every one of the foregoing proposition raised by the
petitioners.
As special defenses, respondents allege:

(1) That the present petition does not state facts sufficient in law to warrant the
issuance of the writ of certiorari or of prohibition.

(2) That the aforesaid petition is premature because the remedy sought by the
petitioners is the very same remedy prayed for by them before the trial court and
was still pending resolution before the trial court when the present petition was
filed with this court.

(3) That the petitioners having themselves raised the question as to the execution
of judgment before the trial court, said trial court has acquired exclusive
jurisdiction to resolve the same under the theory that its resolution denying
probation is unappealable.

(4) That upon the hypothesis that this court has concurrent jurisdiction with the
Court of First Instance to decide the question as to whether or not the execution
will lie, this court nevertheless cannot exercise said jurisdiction while the Court of
First Instance has assumed jurisdiction over the same upon motion of herein
petitioners themselves.

(5) That upon the procedure followed by the herein petitioners in seeking to
deprive the trial court of its jurisdiction over the case and elevate the proceedings
to this court, should not be tolerated because it impairs the authority and dignity
of the trial court which court while sitting in the probation cases is "a court of
limited jurisdiction but of great dignity."

(6) That under the supposition that this court has jurisdiction to resolve the
question submitted to and pending resolution by the trial court, the present action
would not lie because the resolution of the trial court denying probation is
appealable; for although the Probation Law does not specifically provide that an
applicant for probation may appeal from a resolution of the Court of First Instance
denying probation, still it is a general rule in this jurisdiction that a final order,
resolution or decision of an inferior court is appealable to the superior court.

(7) That the resolution of the trial court denying probation of herein respondent
Mariano Cu Unjieng being appealable, the same had not become final and
executory for the reason that the said respondent had filed an alternative motion
for reconsideration and new trial within the requisite period of fifteen days, which
motion the trial court was able to resolve in view of the restraining order
improvidently and erroneously issued by this court.lawphi1.net

(8) That the Fiscal of the City of Manila had by implication admitted that the
resolution of the trial court denying probation is not final and unappealable when
he presented his answer to the motion for reconsideration and agreed to the
postponement of the hearing of the said motion.

(9) That under the supposition that the order of the trial court denying probation is
not appealable, it is incumbent upon the accused to file an action for the issuance
of the writ of certiorari with mandamus, it appearing that the trial court, although
it believed that the accused was entitled to probation, nevertheless denied
probation for fear of criticism because the accused is a rich man; and that, before
a petition for certiorari grounded on an irregular exercise of jurisdiction by the
trial court could lie, it is incumbent upon the petitioner to file a motion for
reconsideration specifying the error committed so that the trial court could have
an opportunity to correct or cure the same.
 (10) That on hypothesis that the resolution of this court is not appealable, the trial
court retains its jurisdiction within a reasonable time to correct or modify it in
accordance with law and justice; that this power to alter or modify an order or
resolution is inherent in the courts and may be exercise either motu proprio or
upon petition of the proper party, the petition in the latter case taking the form of
a motion for reconsideration.

(11) That on the hypothesis that the resolution of the trial court is appealable as
respondent allege, said court cannot order execution of the same while it is on
appeal, for then the appeal would not be availing because the doors of probation
will be closed from the moment the accused commences to serve his sentence
(Act No. 4221, sec. 1; U.S. vs. Cook, 19 Fed. [2d], 827).

In their memorandums filed on October 23, 1937, counsel for the respondents maintain that Act
No. 4221 is constitutional because, contrary to the allegations of the petitioners, it does not
constitute an undue delegation of legislative power, does not infringe the equal protection clause
of the Constitution, and does not encroach upon the pardoning power of the Executive. In an
additional memorandum filed on the same date, counsel for the respondents reiterate the view
that section 11 of Act No. 4221 is free from constitutional objections and contend, in addition,
that the private prosecution may not intervene in probation proceedings, much less question the
validity of Act No. 4221; that both the City Fiscal and the Solicitor-General are estopped from
questioning the validity of the Act; that the validity of Act cannot be attacked for the first time
before this court; that probation in unavailable; and that, in any event, section 11 of the Act No.
4221 is separable from the rest of the Act. The last memorandum for the respondent Mariano Cu
Unjieng was denied for having been filed out of time but was admitted by resolution of this court
and filed anew on November 5, 1937. This memorandum elaborates on some of the
points raised by the respondents and refutes those brought up by the petitioners.

In the scrutiny of the pleadings and examination of the various aspects of the present case, we
noted that the court below, in passing upon the merits of the application of the respondent
Mariano Cu Unjieng and in denying said application assumed the task not only of considering
the merits of the application, but of passing upon the culpability of the applicant, notwithstanding
the final pronouncement of guilt by this court. (G.R. No. 41200.) Probation implies guilt be final
judgment. While a probation case may look into the circumstances attending the commission of
the offense, this does not authorize it to reverse the findings and conclusive of this court, either
directly or indirectly, especially wherefrom its own admission reliance was merely had on the
printed briefs, averments, and pleadings of the parties. As already observed by this court in Shioji
vs. Harvey ([1922], 43 Phil., 333, 337), and reiterated in subsequent cases, "if each and every
Court of First Instance could enjoy the privilege of overruling decisions of the Supreme Court,
there would be no end to litigation, and judicial chaos would result." A becoming modesty of
inferior courts demands conscious realization of the position that they occupy in the interrelation
and operation of the intergrated judicial system of the nation.

After threshing carefully the multifarious issues raised by both counsel for the petitioners and the
respondents, this court prefers to cut the Gordian knot and take up at once the two fundamental
questions presented, namely, (1) whether or not the constitutionality of Act No. 4221 has been
properly raised in these proceedings; and (2) in the affirmative, whether or not said Act is
constitutional. Considerations of these issues will involve a discussion of certain incidental
questions raised by the parties.

To arrive at a correct conclusion on the first question, resort to certain guiding principles is
necessary. It is a well-settled rule that the constitutionality of an act of the legislature will not be
determined by the courts unless that question is properly raised and presented inappropriate cases
and is necessary to a determination of the case; i.e., the issue of constitutionality must be the very
lis mota presented. (McGirr vs. Hamilton and Abreu [1915], 30 Phil., 563, 568; 6 R. C. L., pp.
76, 77; 12 C. J., pp. 780-782, 783.)
The question of the constitutionality of an act of the legislature is frequently raised in ordinary
actions. Nevertheless, resort may be made to extraordinary legal remedies, particularly where the
remedies in the ordinary course of law even if available, are not plain, speedy and adequate.
Thus, in Cu Unjieng vs. Patstone ([1922]), 42 Phil., 818), this court held that the question of the
constitutionality of a statute may be raised by the petitioner in mandamus proceedings (see, also,
12 C. J., p. 783); and in Government of the Philippine Islands vs. Springer ([1927], 50 Phil., 259
[affirmed in Springer vs. Government of the Philippine Islands (1928), 277 U. S., 189; 72 Law.
ed., 845]), this court declared an act of the legislature unconstitutional in an action of quo
warranto brought in the name of the Government of the Philippines. It has also been held that the
constitutionality of a statute may be questioned in habeas corpus proceedings (12 C. J., p. 783;
Bailey on Habeas Corpus, Vol. I, pp. 97, 117), although there are authorities to the contrary; on
an application for injunction to restrain action under the challenged statute (mandatory, see Cruz
vs. Youngberg [1931], 56 Phil., 234); and even on an application for preliminary injunction
where the determination of the constitutional question is necessary to a decision of the case. (12
C. J., p. 783.) The same may be said as regards prohibition and certiorari.(Yu Cong Eng vs.
Trinidad [1925], 47 Phil., 385; [1926], 271 U. S., 500; 70 Law. ed., 1059; Bell vs. First Judicial
District Court [1905], 28 Nev., 280; 81 Pac., 875; 113 A. S. R., 854; 6 Ann. Cas., 982; 1 L. R. A.
[N. S], 843, and cases cited). The case of Yu Cong Eng vs. Trinidad, supra, decided by this court
twelve years ago was, like the present one, an original action for certiorari and prohibition. The
constitutionality of Act No. 2972, popularly known as the Chinese Bookkeeping Law, was there
challenged by the petitioners, and the constitutional issue was not met squarely by the respondent
in a demurrer. A point was raised "relating to the propriety of the constitutional question being
decided in original proceedings in prohibition." This court decided to take up the constitutional
question and, with two justices dissenting, held that Act No. 2972 was constitutional. The case
was elevated on writ of certiorari to the Supreme Court of the United States which reversed the
judgment of this court and held that the Act was invalid. (271 U. S., 500; 70 Law. ed., 1059.) On
the question of jurisdiction, however, the Federal Supreme Court, though its Chief Justice, said:

By the Code of Civil Procedure of the Philippine Islands, section 516, the Philippine
supreme court is granted concurrent jurisdiction in prohibition with courts of first
instance over inferior tribunals or persons, and original jurisdiction over courts of first
instance, when such courts are exercising functions without or in excess of their
jurisdiction. It has been held by that court that the question of the validity of the criminal
statute must usually be raised by a defendant in the trial court and be carried regularly in
review to the Supreme Court. (Cadwallader-Gibson Lumber Co. vs. Del Rosario, 26
Phil., 192). But in this case where a new act seriously affected numerous persons and
extensive property rights, and was likely to cause a multiplicity of actions, the Supreme
Court exercised its discretion to bring the issue to the act's validity promptly before it and
decide in the interest of the orderly administration of justice. The court relied by analogy
upon the cases of Ex parte Young (209 U. S., 123;52 Law ed., 714; 13 L. R. A. [N. S.]
932; 28 Sup. Ct. Rep., 441; 14 Ann. Ca., 764; Traux vs. Raich, 239 U. S., 33; 60 Law.
ed., 131; L. R. A. 1916D, 545; 36 Sup. Ct. Rep., 7; Ann. Cas., 1917B, 283; and Wilson
vs. New, 243 U. S., 332; 61 Law. ed., 755; L. R. A. 1917E, 938; 37 Sup. Ct. Rep., 298;
Ann. Cas. 1918A, 1024). Although objection to the jurisdiction was raise by demurrer to
the petition, this is now disclaimed on behalf of the respondents, and both parties ask a
decision on the merits. In view of the broad powers in prohibition granted to that court
under the Island Code, we acquiesce in the desire of the parties.

The writ of prohibition is an extraordinary judicial writ issuing out of a court of superior
jurisdiction and directed to an inferior court, for the purpose of preventing the inferior tribunal
from usurping a jurisdiction with which it is not legally vested. (High, Extraordinary Legal
Remedies, p. 705.) The general rule, although there is a conflict in the cases, is that the merit of
prohibition will not lie whether the inferior court has jurisdiction independent of the statute the
constitutionality of which is questioned, because in such cases the interior court having
jurisdiction may itself determine the constitutionality of the statute, and its decision may be
subject to review, and consequently the complainant in such cases ordinarily has adequate
remedy by appeal without resort to the writ of prohibition. But where the inferior court or
tribunal derives its jurisdiction exclusively from an unconstitutional statute, it may be prevented
by the writ of prohibition from enforcing that statute. (50 C. J., 670; Ex parte Round tree [1874,
51 Ala., 42; In re Macfarland, 30 App. [D. C.], 365; Curtis vs. Cornish [1912], 109 Me., 384; 84
A., 799; Pennington vs. Woolfolk [1880], 79 Ky., 13; State vs. Godfrey [1903], 54 W. Va., 54;
46 S. E., 185; Arnold vs. Shields [1837], 5 Dana, 19; 30 Am. Dec., 669.)

Courts of First Instance sitting in probation proceedings derived their jurisdiction solely from
Act No. 4221 which prescribes in detailed manner the procedure for granting probation to
accused persons after their conviction has become final and before they have served their
sentence. It is true that at common law the authority of the courts to suspend temporarily the
execution of the sentence is recognized and, according to a number of state courts, including
those of Massachusetts, Michigan, New York, and Ohio, the power is inherent in the courts
(Commonwealth vs. Dowdican's Bail [1874], 115 Mass., 133; People vs. Stickel [1909], 156
Mich., 557; 121 N. W., 497; People ex rel. Forsyth vs. Court of Session [1894], 141 N. Y., 288;
Weber vs. State [1898], 58 Ohio St., 616). But, in the leading case of Ex parte United States
([1916], 242 U. S., 27; 61 Law. ed., 129; L. R. A., 1917E, 1178; 37 Sup. Ct. Rep., 72; Ann. Cas.
1917B, 355), the Supreme Court of the United States expressed the opinion that under the
common law the power of the court was limited to temporary suspension, and brushed aside the
contention as to inherent judicial power saying, through Chief Justice White:

Indisputably under our constitutional system the right to try offenses against the criminal
laws and upon conviction to impose the punishment provided by law is judicial, and it is
equally to be conceded that, in exerting the powers vested in them on such subject, courts
inherently possess ample right to exercise reasonable, that is, judicial, discretion to enable
them to wisely exert their authority. But these concessions afford no ground for the
contention as to power here made, since it must rest upon the proposition that the power
to enforce begets inherently a discretion to permanently refuse to do so. And the effect of
the proposition urged upon the distribution of powers made by the Constitution will
become apparent when it is observed that indisputable also is it that the authority to
define and fix the punishment for crime is legislative and includes the right in advance to
bring within judicial discretion, for the purpose of executing the statute, elements of
consideration which would be otherwise beyond the scope of judicial authority, and that
the right to relieve from the punishment, fixed by law and ascertained according to the
methods by it provided belongs to the executive department.

Justice Carson, in his illuminating concurring opinion in the case of Director of Prisons vs.
Judge of First Instance of Cavite (29 Phil., 265), decided by this court in 1915, also reached the
conclusion that the power to suspend the execution of sentences pronounced in criminal cases is
not inherent in the judicial function. "All are agreed", he said, "that in the absence of statutory
authority, it does not lie within the power of the courts to grant such suspensions." (at p. 278.)
Both petitioner and respondents are correct, therefore, when they argue that a Court of First
Instance sitting in probation proceedings is a court of limited jurisdiction. Its jurisdiction in such
proceedings is conferred exclusively by Act No. 4221 of the Philippine Legislature.

It is, of course, true that the constitutionality of a statute will not be considered on application for
prohibition where the question has not been properly brought to the attention of the court by
objection of some kind (Hill vs. Tarver [1901], 130 Ala., 592; 30 S., 499; State ex rel. Kelly vs.
Kirby [1914], 260 Mo., 120; 168 S. W., 746). In the case at bar, it is unquestionable that the
constitutional issue has been squarely presented not only before this court by the petitioners but
also before the trial court by the private prosecution. The respondent, Hon. Jose O Vera,
however, acting as judge of the court below, declined to pass upon the question on the ground
that the private prosecutor, not being a party whose rights are affected by the statute, may not
raise said question. The respondent judge cited Cooley on Constitutional Limitations (Vol. I, p.
339; 12 C. J., sec. 177, pp. 760 and 762), and McGlue vs. Essex County ([1916], 225 Mass., 59;
113 N. E., 742, 743), as authority for the proposition that a court will not consider any attack
made on the constitutionality of a statute by one who has no interest in defeating it because his
rights are not affected by its operation. The respondent judge further stated that it may not motu
proprio take up the constitutional question and, agreeing with Cooley that "the power to declare
a legislative enactment void is one which the judge, conscious of the fallibility of the human
judgment, will shrink from exercising in any case where he can conscientiously and with due
regard to duty and official oath decline the responsibility" (Constitutional Limitations, 8th ed.,
Vol. I, p. 332), proceeded on the assumption that Act No. 4221 is constitutional. While therefore,
the court a quo admits that the constitutional question was raised before it, it refused to consider
the question solely because it was not raised by a proper party. Respondents herein reiterates this
view. The argument is advanced that the private prosecution has no personality to appear in the
hearing of the application for probation of defendant Mariano Cu Unjieng in criminal case No.
42648 of the Court of First Instance of Manila, and hence the issue of constitutionality was not
properly raised in the lower court. Although, as a general rule, only those who are parties to a
suit may question the constitutionality of a statute involved in a judicial decision, it has been held
that since the decree pronounced by a court without jurisdiction is void, where the jurisdiction of
the court depends on the validity of the statute in question, the issue of the constitutionality will
be considered on its being brought to the attention of the court by persons interested in the effect
to be given the statute.(12 C. J., sec. 184, p. 766.) And, even if we were to concede that the issue
was not properly raised in the court below by the proper party, it does not follow that the issue
may not be here raised in an original action of certiorari and prohibitions. It is true that, as a
general rule, the question of constitutionality must be raised at the earliest opportunity, so that if
not raised by the pleadings, ordinarily it may not be raised at the trial, and if not raised in the trial
court, it will not considered on appeal. (12 C. J., p. 786. See, also, Cadwallader-Gibson Lumber
Co. vs. Del Rosario, 26 Phil., 192, 193-195.) But we must state that the general rule admits of
exceptions. Courts, in the exercise of sounds discretion, may determine the time when a question
affecting the constitutionality of a statute should be presented. (In re Woolsey [1884], 95 N. Y.,
135, 144.) Thus, in criminal cases, although there is a very sharp conflict of authorities, it is said
that the question may be raised for the first time at any stage of the proceedings, either in the trial
court or on appeal. (12 C. J., p. 786.) Even in civil cases, it has been held that it is the duty of a
court to pass on the constitutional question, though raised for the first time on appeal, if it
appears that a determination of the question is necessary to a decision of the case. (McCabe's
Adm'x vs. Maysville & B. S. R. Co., [1910], 136 ky., 674; 124 S. W., 892; Lohmeyer vs. St.
Louis Cordage Co. [1908], 214 Mo., 685; 113 S. W. 1108; Carmody vs. St. Louis Transit Co.,
[1905], 188 Mo., 572; 87 S. W., 913.) And it has been held that a constitutional question will be
considered by an appellate court at any time, where it involves the jurisdiction of the court below
(State vs. Burke [1911], 175 Ala., 561; 57 S., 870.) As to the power of this court to consider the
constitutional question raised for the first time before this court in these proceedings, we turn
again and point with emphasis to the case of Yu Cong Eng vs. Trinidad, supra. And on the
hypotheses that the Hongkong & Shanghai Banking Corporation, represented by the private
prosecution, is not the proper party to raise the constitutional question here — a point we do not
now have to decide — we are of the opinion that the People of the Philippines, represented by
the Solicitor-General and the Fiscal of the City of Manila, is such a proper party in the present
proceedings. The unchallenged rule is 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 sustained,
direct injury as a result of its enforcement. It goes without saying that if Act No. 4221 really
violates the constitution, the People of the Philippines, in whose name the present action is
brought, has a substantial interest in having it set aside. Of grater import than the damage caused
by the illegal expenditure of public funds is the mortal wound inflicted upon the fundamental law
by the enforcement of an invalid statute. Hence, the well-settled rule that the state can challenge
the validity of its own laws. In Government of the Philippine Islands vs. Springer ([1927]), 50
Phil., 259 (affirmed in Springer vs. Government of the Philippine Islands [1928], 277 U.S., 189;
72 Law. ed., 845), this court declared an act of the legislature unconstitutional in an action
instituted in behalf of the Government of the Philippines. In Attorney General vs. Perkins
([1889], 73 Mich., 303, 311, 312; 41 N. W. 426, 428, 429), the State of Michigan, through its
Attorney General, instituted quo warranto proceedings to test the right of the respondents to
renew a mining corporation, alleging that the statute under which the respondents base their right
was unconstitutional because it impaired the obligation of contracts. The capacity of the chief
law officer of the state to question the constitutionality of the statute was though, as a general
rule, only those who are parties to a suit may question the constitutionality of a statute involved
in a judicial decision, it has been held that since the decree pronounced by a court without
jurisdiction in void, where the jurisdiction of the court depends on the validity of the statute in
question, the issue of constitutionality will be considered on its being brought to the attention of
the court by persons interested in the effect to begin the statute. (12 C.J., sec. 184, p. 766.) And,
even if we were to concede that the issue was not properly raised in the court below by the
proper party, it does not follow that the issue may not be here raised in an original action of
certiorari and prohibition. It is true that, as a general rule, the question of constitutionality must
be raised at the earliest opportunity, so that if not raised by the pleadings, ordinarily it may not be
raised a the trial, and if not raised in the trial court, it will not be considered on appeal. (12 C.J.,
p. 786. See, also, Cadwallader-Gibson Lumber Co. vs. Del Rosario, 26 Phil., 192, 193-195.) But
we must state that the general rule admits of exceptions. Courts, in the exercise of sound
discretion, may determine the time when a question affecting the constitutionality of a statute
should be presented. (In re Woolsey [19884], 95 N.Y., 135, 144.) Thus, in criminal cases,
although there is a very sharp conflict of authorities, it is said that the question may be raised for
the first time at any state of the proceedings, either in the trial court or on appeal. (12 C.J., p.
786.) Even in civil cases, it has been held that it is the duty of a court to pass on the
constitutional question, though raised for first time on appeal, if it appears that a determination of
the question is necessary to a decision of the case. (McCabe's Adm'x vs. Maysville & B. S. R.
Co. [1910], 136 Ky., 674; 124 S. W., 892; Lohmeyer vs. St. Louis, Cordage Co. [1908], 214 Mo.
685; 113 S. W., 1108; Carmody vs. St. Louis Transit Co. [1905], 188 Mo., 572; 87 S. W., 913.)
And it has been held that a constitutional question will be considered by an appellate court at any
time, where it involves the jurisdiction of the court below (State vs. Burke [1911], 175 Ala., 561;
57 S., 870.) As to the power of this court to consider the constitutional question raised for the
first time before this court in these proceedings, we turn again and point with emphasis to the
case of Yu Cong Eng. vs. Trinidad, supra. And on the hypothesis that the Hongkong & Shanghai
Banking Corporation, represented by the private prosecution, is not the proper party to raise the
constitutional question here — a point we do not now have to decide — we are of the opinion
that the People of the Philippines, represented by the Solicitor-General and the Fiscal of the City
of Manila, is such a proper party in the present proceedings. The unchallenged rule is 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. It goes
without saying that if Act No. 4221 really violates the Constitution, the People of the Philippines,
in whose name the present action is brought, has a substantial interest in having it set aside. Of
greater import than the damage caused by the illegal expenditure of public funds is the mortal
wound inflicted upon the fundamental law by the enforcement of an invalid statute. Hence, the
well-settled rule that the state can challenge the validity of its own laws. In Government of the
Philippine Islands vs. Springer ([1927]), 50 Phil., 259 (affirmed in Springer vs. Government of
the Philippine Islands [1928], 277 U.S., 189; 72 Law. ed., 845), this court declared an act of the
legislature unconstitutional in an action instituted in behalf of the Government of the Philippines.
In Attorney General vs. Perkings([1889], 73 Mich., 303, 311, 312; 41 N.W., 426, 428, 429), the
State of Michigan, through its Attorney General, instituted quo warranto proceedings to test the
right of the respondents to renew a mining corporation, alleging that the statute under which the
respondents base their right was unconstitutional because it impaired the obligation of contracts.
The capacity of the chief law officer of the state to question the constitutionality of the statute
was itself questioned. Said the Supreme Court of Michigan, through Champlin, J.:

. . . The idea seems to be that the people are estopped from questioning the validity of a
law enacted by their representatives; that to an accusation by the people of Michigan of
usurpation their government, a statute enacted by the people of Michigan is an adequate
answer. The last proposition is true, but, if the statute relied on in justification is
unconstitutional, it is statute only in form, and lacks the force of law, and is of no more
saving effect to justify action under it than if it had never been enacted. The constitution
is the supreme law, and to its behests the courts, the legislature, and the people must bow
. . . The legislature and the respondents are not the only parties in interest upon such
constitutional questions. As was remarked by Mr. Justice Story, in speaking of an
acquiescence by a party affected by an unconstitutional act of the legislature: "The people
 have a deep and vested interest in maintaining all the constitutional limitations upon the
exercise of legislative powers." (Allen vs. Mckeen, 1 Sum., 314.)

In State vs. Doane ([1916], 98 Kan., 435; 158 Pac., 38, 40), an original action (mandamus) was
brought by the Attorney-General of Kansas to test the constitutionality of a statute of the state. In
disposing of the question whether or not the state may bring the action, the Supreme Court of
Kansas said:

. . . the state is a proper party — indeed, the proper party — to bring this action. The state
is always interested where the integrity of its Constitution or statutes is involved.

"It has an interest in seeing that the will of the Legislature is not
disregarded, and need not, as an individual plaintiff must, show grounds of
fearing more specific injury. (State vs. Kansas City 60 Kan., 518 [57 Pac.,
118])." (State vs. Lawrence, 80 Kan., 707; 103 Pac., 839.)

Where the constitutionality of a statute is in doubt the state's law officer, its Attorney-
General, or county attorney, may exercise his bet judgment as to what sort of action he
will bring to have the matter determined, either by quo warranto to challenge its validity
(State vs. Johnson, 61 Kan., 803; 60 Pac., 1068; 49 L.R.A., 662), by mandamus to
compel obedience to its terms (State vs. Dolley, 82 Kan., 533; 108 Pac., 846), or by
injunction to restrain proceedings under its questionable provisions (State ex rel. vs. City
of Neodesha, 3 Kan. App., 319; 45 Pac., 122).

Other courts have reached the same conclusion (See State vs. St. Louis S. W. Ry. Co. [1917],
197 S. W., 1006; State vs. S.H. Kress & Co. [1934], 155 S., 823; State vs. Walmsley [1935], 181
La., 597; 160 S., 91; State vs. Board of County Comr's [1934], 39 Pac. [2d], 286; First Const.
Co. of Brooklyn vs. State [1917], 211 N.Y., 295; 116 N.E., 1020; Bush vs. State {1918], 187
Ind., 339; 119 N.E., 417; State vs. Watkins [1933], 176 La., 837; 147 S., 8, 10, 11). In the case
last cited, the Supreme Court of Luisiana said:

It is contended by counsel for Herbert Watkins that a district attorney, being charged with
the duty of enforcing the laws, has no right to plead that a law is unconstitutional. In
support of the argument three decisions are cited, viz.: State ex rel. Hall, District
Attorney, vs. Judge of Tenth Judicial District (33 La. Ann., 1222); State ex rel. Nicholls,
Governor vs. Shakespeare, Mayor of New Orleans (41 Ann., 156; 6 So., 592); and State
ex rel., Banking Co., etc. vs. Heard, Auditor (47 La. Ann., 1679; 18 So., 746; 47 L. R. A.,
512). These decisions do not forbid a district attorney to plead that a statute is
unconstitutional if he finds if in conflict with one which it is his duty to enforce. In State
ex rel. Hall, District Attorney, vs. Judge, etc., the ruling was the judge should not, merely
because he believed a certain statute to be unconstitutional forbid the district attorney to
file a bill of information charging a person with a violation of the statute. In other words,
a judge should not judicially declare a statute unconstitutional until the question of
constitutionality is tendered for decision, and unless it must be decided in order to
determine the right of a party litigant. State ex rel. Nicholls, Governor, etc., is authority
for the proposition merely that an officer on whom a statute imposes the duty of
enforcing its provisions cannot avoid the duty upon the ground that he considers the
statute unconstitutional, and hence in enforcing the statute he is immune from
responsibility if the statute be unconstitutional. State ex rel. Banking Co., etc., is
authority for the proposition merely that executive officers, e.g., the state auditor and
state treasurer, should not decline to perform ministerial duties imposed upon them by a
statute, on the ground that they believe the statute is unconstitutional.

It is the duty of a district attorney to enforce the criminal laws of the state, and, above all,
to support the Constitution of the state. If, in the performance of his duty he finds two
statutes in conflict with each other, or one which repeals another, and if, in his judgment,
one of the two statutes is unconstitutional, it is his duty to enforce the other; and, in order
 to do so, he is compelled to submit to the court, by way of a plea, that one of the statutes
is unconstitutional. If it were not so, the power of the Legislature would be free from
constitutional limitations in the enactment of criminal laws.

The respondents do not seem to doubt seriously the correctness of the general proposition that
the state may impugn the validity of its laws. They have not cited any authority running clearly
in the opposite direction. In fact, they appear to have proceeded on the assumption that the rule
as stated is sound but that it has no application in the present case, nor may it be invoked by the
City Fiscal in behalf of the People of the Philippines, one of the petitioners herein, the principal
reasons being that the validity before this court, that the City Fiscal is estopped from attacking
the validity of the Act and, not authorized challenge the validity of the Act in its application
outside said city. (Additional memorandum of respondents, October 23, 1937, pp. 8,. 10, 17 and
23.)

The mere fact that the Probation Act has been repeatedly relied upon the past and all that time
has not been attacked as unconstitutional by the Fiscal of Manila but, on the contrary, has been
impliedly regarded by him as constitutional, is no reason for considering the People of the
Philippines estopped from nor assailing its validity. For courts will pass upon a constitutional
questions only when presented before it in bona fide cases for determination, and the fact that the
question has not been raised before is not a valid reason for refusing to allow it to be raised later.
The fiscal and all others are justified in relying upon the statute and treating it as valid until it is
held void by the courts in proper cases.

It remains to consider whether the determination of the constitutionality of Act No. 4221 is
necessary to the resolution of the instant case. For, ". . . while the court will meet the question
with firmness, where its decision is indispensable, it is the part of wisdom, and just respect for
the legislature, renders it proper, to waive it, if the case in which it arises, can be decided on
other points." (Ex parte Randolph [1833], 20 F. Cas. No. 11, 558; 2 Brock., 447. Vide, also
Hoover vs. wood [1857], 9 Ind., 286, 287.) It has been held that the determination of a
constitutional question is necessary whenever it is essential to the decision of the case (12 C. J.,
p. 782, citing Long Sault Dev. Co. vs. Kennedy [1913], 158 App. Div., 398; 143 N. Y. Supp.,
454 [aff. 212 N.Y., 1: 105 N. E., 849; Ann. Cas. 1915D, 56; and app dism 242 U.S., 272]; Hesse
vs. Ledesma, 7 Porto Rico Fed., 520; Cowan vs. Doddridge, 22 Gratt [63 Va.], 458; Union Line
Co., vs. Wisconsin R. Commn., 146 Wis., 523; 129 N. W., 605), as where the right of a party is
founded solely on a statute the validity of which is attacked. (12 C.J., p. 782, citing Central Glass
Co. vs. Niagrara F. Ins. Co., 131 La., 513; 59 S., 972; Cheney vs. Beverly, 188 Mass., 81; 74
N.E., 306). There is no doubt that the respondent Cu Unjieng draws his privilege to probation
solely from Act No. 4221 now being assailed.

Apart from the foregoing considerations, that court will also take cognizance of the fact that the
Probation Act is a new addition to our statute books and its validity has never before been passed
upon by the courts; that may persons accused and convicted of crime in the City of Manila have
applied for probation; that some of them are already on probation; that more people will likely
take advantage of the Probation Act in the future; and that the respondent Mariano Cu Unjieng
has been at large for a period of about four years since his first conviction. All wait the decision
of this court on the constitutional question. Considering, therefore, the importance which the
instant case has assumed and to prevent multiplicity of suits, strong reasons of public policy
demand that the constitutionality of Act No. 4221 be now resolved. (Yu Cong Eng vs. Trinidad
[1925], 47 Phil., 385; [1926], 271 U.S., 500; 70 Law. ed., 1059. See 6 R.C.L., pp. 77, 78; People
vs. Kennedy [1913], 207 N.Y., 533; 101 N.E., 442, 444; Ann. Cas. 1914C, 616; Borginis vs.
Falk Co. [1911], 147 Wis., 327; 133 N.W., 209, 211; 37 L.R.A. [N.S.] 489; Dimayuga and
Fajardo vs. Fernandez [1922], 43 Phil., 304.) In Yu Cong Eng vs. Trinidad, supra, an analogous
situation confronted us. We said: "Inasmuch as the property and personal rights of nearly twelve
thousand merchants are affected by these proceedings, and inasmuch as Act No. 2972 is a new
law not yet interpreted by the courts, in the interest of the public welfare and for the
advancement of public policy, we have determined to overrule the defense of want of jurisdiction
in order that we may decide the main issue. We have here an extraordinary situation which calls
for a relaxation of the general rule." Our ruling on this point was sustained by the Supreme Court
of the United States. A more binding authority in support of the view we have taken can not be
found.

We have reached the conclusion that the question of the constitutionality of Act No. 4221 has
been properly raised. Now for the main inquiry: Is the Act unconstitutional?

Under a doctrine peculiarly American, it is the office and duty of the judiciary to enforce the
Constitution. This court, by clear implication from the provisions of section 2, subsection 1, and
section 10, of Article VIII of the Constitution, may declare an act of the national legislature
invalid because in conflict with the fundamental lay. It will not shirk from its sworn duty to
enforce the Constitution. And, in clear cases, it will not hesitate to give effect to the supreme law
by setting aside a statute in conflict therewith. This is of the essence of judicial duty.

This court is not unmindful of the fundamental criteria in cases of this nature that all reasonable
doubts should be resolved in favor of the constitutionality of a statute. An act of the legislature
approved by the executive, is presumed to be within constitutional limitations. The responsibility
of upholding the Constitution rests not on the courts alone but on the legislature as well. "The
question of the validity of every statute is first determined by the legislative department of the
government itself." (U.S. vs. Ten Yu [1912], 24 Phil., 1, 10; Case vs. Board of Health and Heiser
[1913], 24 Phil., 250, 276; U.S. vs. Joson [1913], 26 Phil., 1.) And a statute finally comes before
the courts sustained by the sanction of the executive. The members of the Legislature and the
Chief Executive have taken an oath to support the Constitution and it must be presumed that they
have been true to this oath and that in enacting and sanctioning a particular law they did not
intend to violate the Constitution. The courts cannot but cautiously exercise its power to overturn
the solemn declarations of two of the three grand departments of the governments. (6 R.C.L., p.
101.) Then, there is that peculiar political philosophy which bids the judiciary to reflect the
wisdom of the people as expressed through an elective Legislature and an elective Chief
Executive. It follows, therefore, that the courts will not set aside a law as violative of the
Constitution except in a clear case. This is a proposition too plain to require a citation of
authorities.

One of the counsel for respondents, in the course of his impassioned argument, called attention
to the fact that the President of the Philippines had already expressed his opinion against the
constitutionality of the Probation Act, adverting that as to the Executive the resolution of this
question was a foregone conclusion. Counsel, however, reiterated his confidence in the integrity
and independence of this court. We take notice of the fact that the President in his message dated
September 1, 1937, recommended to the National Assembly the immediate repeal of the
Probation Act (No. 4221); that this message resulted in the approval of Bill No. 2417 of the
Nationality Assembly repealing the probation Act, subject to certain conditions therein
mentioned; but that said bill was vetoed by the President on September 13, 1937, much against
his wish, "to have stricken out from the statute books of the Commonwealth a law . . . unfair and
very likely unconstitutional." It is sufficient to observe in this connection that, in vetoing the bill
referred to, the President exercised his constitutional prerogative. He may express the reasons
which he may deem proper for taking such a step, but his reasons are not binding upon us in the
determination of actual controversies submitted for our determination. Whether or not the
Executive should express or in any manner insinuate his opinion on a matter encompassed within
his broad constitutional power of veto but which happens to be at the same time pending
determination in this court is a question of propriety for him exclusively to decide or determine.
Whatever opinion is expressed by him under these circumstances, however, cannot sway our
judgment on way or another and prevent us from taking what in our opinion is the proper course
of action to take in a given case. It if is ever necessary for us to make any vehement affirmance
during this formative period of our political history, it is that we are independent of the
Executive no less than of the Legislative department of our government — independent in the
performance of our functions, undeterred by any consideration, free from politics, indifferent to
popularity, and unafraid of criticism in the accomplishment of our sworn duty as we see it and as
we understand it.
The constitutionality of Act No. 4221 is challenged on three principal grounds: (1) That said Act
encroaches upon the pardoning power of the Executive; (2) that its constitutes an undue
delegation of legislative power and (3) that it denies the equal protection of the laws.

1. Section 21 of the Act of Congress of August 29, 1916, commonly known as the Jones Law, in
force at the time of the approval of Act No. 4221, otherwise known as the Probation Act, vests in
the Governor-General of the Philippines "the exclusive power to grant pardons and reprieves and
remit fines and forfeitures". This power is now vested in the President of the Philippines. (Art.
VII, sec. 11, subsec. 6.) The provisions of the Jones Law and the Constitution differ in some
respects. The adjective "exclusive" found in the Jones Law has been omitted from the
Constitution. Under the Jones Law, as at common law, pardon could be granted any time after
the commission of the offense, either before or after conviction (Vide Constitution of the United
States, Art. II, sec. 2; In re Lontok [1922], 43 Phil., 293). The Governor-General of the
Philippines was thus empowered, like the President of the United States, to pardon a person
before the facts of the case were fully brought to light. The framers of our Constitution thought
this undesirable and, following most of the state constitutions, provided that the pardoning power
can only be exercised "after conviction". So, too, under the new Constitution, the pardoning
power does not extend to "cases of impeachment". This is also the rule generally followed in the
United States (Vide Constitution of the United States, Art. II, sec. 2). The rule in England is
different. There, a royal pardon can not be pleaded in bar of an impeachment; "but," says
Blackstone, "after the impeachment has been solemnly heard and determined, it is not
understood that the king's royal grace is further restrained or abridged." (Vide, Ex parte Wells
[1856], 18 How., 307; 15 Law. ed., 421; Com. vs. Lockwood [1872], 109 Mass., 323; 12 Am.
Rep., 699; Sterling vs. Drake [1876], 29 Ohio St., 457; 23 am. Rep., 762.) The reason for the
distinction is obvious. In England, Judgment on impeachment is not confined to mere "removal
from office and disqualification to hold and enjoy any office of honor, trust, or profit under the
Government" (Art. IX, sec. 4, Constitution of the Philippines) but extends to the whole
punishment attached by law to the offense committed. The House of Lords, on a conviction may,
by its sentence, inflict capital punishment, perpetual banishment, perpetual banishment, fine or
imprisonment, depending upon the gravity of the offense committed, together with removal from
office and incapacity to hold office. (Com. vs. Lockwood, supra.) Our Constitution also makes
specific mention of "commutation" and of the power of the executive to impose, in the pardons
he may grant, such conditions, restrictions and limitations as he may deem proper. Amnesty may
be granted by the President under the Constitution but only with the concurrence of the National
Assembly. We need not dwell at length on the significance of these fundamental changes. It is
sufficient for our purposes to state that the pardoning power has remained essentially the same.
The question is: Has the pardoning power of the Chief Executive under the Jones Law been
impaired by the Probation Act?

As already stated, the Jones Law vests the pardoning power exclusively in the Chief Executive.
The exercise of the power may not, therefore, be vested in anyone else.
". . . The benign prerogative of mercy reposed in the executive cannot be taken away nor fettered
by any legislative restrictions, nor can like power be given by the legislature to any other officer
or authority. The coordinate departments of government have nothing to do with the pardoning
power, since no person properly belonging to one of the departments can exercise any powers
appertaining to either of the others except in cases expressly provided for by the constitution."
(20 R.C.L., pp., , and cases cited.) " . . . where the pardoning power is conferred on the executive
without express or implied limitations, the grant is exclusive, and the legislature can neither
exercise such power itself nor delegate it elsewhere, nor interfere with or control the proper
exercise thereof, . . ." (12 C.J., pp. 838, 839, and cases cited.) If Act No. 4221, then, confers any
pardoning power upon the courts it is for that reason unconstitutional and void. But does it?

In the famous Killitts decision involving an embezzlement case, the Supreme Court of the United
States ruled in 1916 that an order indefinitely suspending sentenced was void. (Ex parte United
States [1916], 242 U.S., 27; 61 Law. ed., 129; L.R.A. 1917E, 1178; 37 Sup. Ct. Rep., 72; Ann.
Cas. 1917B, 355.) Chief Justice White, after an exhaustive review of the authorities, expressed
the opinion of the court that under the common law the power of the court was limited to
temporary suspension and that the right to suspend sentenced absolutely and permanently was
vested in the executive branch of the government and not in the judiciary. But, the right of
Congress to establish probation by statute was conceded. Said the court through its Chief Justice:
". . . and so far as the future is concerned, that is, the causing of the imposition of penalties as
fixed to be subject, by probation legislation or such other means as the legislative mind may
devise, to such judicial discretion as may be adequate to enable courts to meet by the exercise of
an enlarged but wise discretion the infinite variations which may be presented to them for
judgment, recourse must be had Congress whose legislative power on the subject is in the very
nature of things adequately complete." (Quoted in Riggs vs. United States [1926], 14 F. [2d], 5,
6.) This decision led the National Probation Association and others to agitate for the enactment
by Congress of a federal probation law. Such action was finally taken on March 4, 1925 (chap.
521, 43 Stat. L. 159, U.S.C. title 18, sec. 724). This was followed by an appropriation to defray
the salaries and expenses of a certain number of probation officers chosen by civil service.
(Johnson, Probation for Juveniles and Adults, p. 14.)

In United States vs. Murray ([1925], 275 U.S., 347; 48 Sup. Ct. Rep., 146; 72 Law. ed., 309), the
Supreme Court of the United States, through Chief Justice Taft, held that when a person
sentenced to imprisonment by a district court has begun to serve his sentence, that court has no
power under the Probation Act of March 4, 1925 to grant him probation even though the term at
which sentence was imposed had not yet expired. In this case of Murray, the constitutionality of
the probation Act was not considered but was assumed. The court traced the history of the Act
and quoted from the report of the Committee on the Judiciary of the United States House of
Representatives (Report No. 1377, 68th Congress, 2 Session) the following statement:

Prior to the so-called Killitts case, rendered in December, 1916, the district courts
exercised a form of probation either, by suspending sentence or by placing the defendants
under state probation officers or volunteers. In this case, however (Ex parte United States,
242 U.S., 27; 61 L. Ed., 129; L.R.A., 1917E, 1178; 37 Sup. Ct. Rep., 72 Ann. Cas.
1917B, 355), the Supreme Court denied the right of the district courts to suspend
sentenced. In the same opinion the court pointed out the necessity for action by Congress
if the courts were to exercise probation powers in the future . . .

Since this decision was rendered, two attempts have been made to enact probation
legislation. In 1917, a bill was favorably reported by the Judiciary Committee and passed
the House. In 1920, the judiciary Committee again favorably reported a probation bill to
the House, but it was never reached for definite action.

If this bill is enacted into law, it will bring the policy of the Federal government with
reference to its treatment of those convicted of violations of its criminal laws in harmony
with that of the states of the Union. At the present time every state has a probation law,
and in all but twelve states the law applies both to adult and juvenile offenders. (see, also,
Johnson, Probation for Juveniles and Adults [1928], Chap. I.)

The constitutionality of the federal probation law has been sustained by inferior federal courts. In
Riggs vs. United States supra, the Circuit Court of Appeals of the Fourth Circuit said:

Since the passage of the Probation Act of March 4, 1925, the questions under
consideration have been reviewed by the Circuit Court of Appeals of the Ninth Circuit (7
F. [2d], 590), and the constitutionality of the act fully sustained, and the same held in no
manner to encroach upon the pardoning power of the President. This case will be found
to contain an able and comprehensive review of the law applicable here. It arose under
the act we have to consider, and to it and the authorities cited therein special reference is
made (Nix vs. James, 7 F. [2d], 590, 594), as is also to a decision of the Circuit Court of
Appeals of the Seventh Circuit (Kriebel vs. U.S., 10 F. [2d], 762), likewise construing the
Probation Act.
We have seen that in 1916 the Supreme Court of the United States; in plain and unequivocal
language, pointed to Congress as possessing the requisite power to enact probation laws, that a
federal probation law as actually enacted in 1925, and that the constitutionality of the Act has
been assumed by the Supreme Court of the United States in 1928 and consistently sustained by
the inferior federal courts in a number of earlier cases.

We are fully convinced that the Philippine Legislature, like the Congress of the United States,
may legally enact a probation law under its broad power to fix the punishment of any and all
penal offenses. This conclusion is supported by other authorities. In Ex parte Bates ([1915], 20
N. M., 542; L.R.A. 1916A, 1285; 151 Pac., 698, the court said: "It is clearly within the province
of the Legislature to denominate and define all classes of crime, and to prescribe for each a
minimum and maximum punishment." And in State vs. Abbott ([1910], 87 S.C., 466; 33 L.R.A.
[N. S.], 112; 70 S. E., 6; Ann. Cas. 1912B, 1189), the court said: "The legislative power to set
punishment for crime is very broad, and in the exercise of this power the general assembly may
confer on trial judges, if it sees fit, the largest discretion as to the sentence to be imposed, as to
the beginning and end of the punishment and whether it should be certain or indeterminate or
conditional." (Quoted in State vs. Teal [1918], 108 S. C., 455; 95 S. E., 69.) Indeed, the
Philippine Legislature has defined all crimes and fixed the penalties for their violation.
Invariably, the legislature has demonstrated the desire to vest in the courts — particularly the
trial courts — large discretion in imposing the penalties which the law prescribes in particular
cases. It is believed that justice can best be served by vesting this power in the courts, they being
in a position to best determine the penalties which an individual convict, peculiarly
circumstanced, should suffer. Thus, while courts are not allowed to refrain from imposing a
sentence merely because, taking into consideration the degree of malice and the injury caused by
the offense, the penalty provided by law is clearly excessive, the courts being allowed in such
case to submit to the Chief Executive, through the Department of Justice, such statement as it
may deem proper (see art. 5, Revised Penal Code), in cases where both mitigating and
aggravating circumstances are attendant in the commission of a crime and the law provides for a
penalty composed of two indivisible penalties, the courts may allow such circumstances to offset
one another in consideration of their number and importance, and to apply the penalty according
to the result of such compensation. (Art. 63, rule 4, Revised Penal Code; U.S. vs. Reguera and
Asuategui [1921], 41 Phil., 506.) Again, article 64, paragraph 7, of the Revised Penal Code
empowers the courts to determine, within the limits of each periods, in case the penalty
prescribed by law contains three periods, the extent of the evil produced by the crime. In the
imposition of fines, the courts are allowed to fix any amount within the limits established by law,
considering not only the mitigating and aggravating circumstances, but more particularly the
wealth or means of the culprit. (Art. 66, Revised Penal Code.) Article 68, paragraph 1, of the
same Code provides that "a discretionary penalty shall be imposed" upon a person under fifteen
but over nine years of age, who has not acted without discernment, but always lower by two
degrees at least than that prescribed by law for the crime which he has committed. Article 69 of
the same Code provides that in case of "incomplete self-defense", i.e., when the crime committed
is not wholly excusable by reason of the lack of some of the conditions required to justify the
same or to exempt from criminal liability in the several cases mentioned in article 11 and 12 of
the Code, "the courts shall impose the penalty in the period which may be deemed proper, in
view of the number and nature of the conditions of exemption present or lacking." And, in case
the commission of what are known as "impossible" crimes, "the court, having in mind the social
danger and the degree of criminality shown by the offender," shall impose upon him either
arresto mayor or a fine ranging from 200 to 500 pesos. (Art. 59, Revised Penal Code.)

Under our Revised Penal Code, also, one-half of the period of preventive imprisonment is
deducted form the entire term of imprisonment, except in certain cases expressly mentioned (art.
29); the death penalty is not imposed when the guilty person is more than seventy years of age,
or where upon appeal or revision of the case by the Supreme Court, all the members thereof are
not unanimous in their voting as to the propriety of the imposition of the death penalty (art. 47,
see also, sec. 133, Revised Administrative Code, as amended by Commonwealth Act No. 3); the
death sentence is not to be inflicted upon a woman within the three years next following the date
of the sentence or while she is pregnant, or upon any person over seventy years of age (art. 83);
and when a convict shall become insane or an imbecile after final sentence has been pronounced,
or while he is serving his sentenced, the execution of said sentence shall be suspended with
regard to the personal penalty during the period of such insanity or imbecility (art. 79).

But the desire of the legislature to relax what might result in the undue harshness of the penal
laws is more clearly demonstrated in various other enactments, including the probation Act.
There is the Indeterminate Sentence Law enacted in 1933 as Act No. 4103 and subsequently
amended by Act No. 4225, establishing a system of parole (secs. 5 to 100 and granting the courts
large discretion in imposing the penalties of the law. Section 1 of the law as amended provides;
"hereafter, in imposing a prison sentence for an offenses punished by the Revised Penal Code, or
its amendments, the court shall sentence the accused to an indeterminate sentence the maximum
term of which shall be that which, in view of the attending circumstances, could be properly
imposed under the rules of the said Code, and to a minimum which shall be within the range of
the penalty next lower to that prescribed by the Code for the offense; and if the offense is
punished by any other law, the court shall sentence the accused to an indeterminate sentence, the
maximum term of which shall not exceed the maximum fixed by said law and the minimum shall
not be less than the minimum term prescribed by the same." Certain classes of convicts are, by
section 2 of the law, excluded from the operation thereof. The Legislature has also enacted the
Juvenile Delinquency Law (Act No. 3203) which was subsequently amended by Act No. 3559.
Section 7 of the original Act and section 1 of the amendatory Act have become article 80 of the
Revised Penal Code, amended by Act No. 4117 of the Philippine Legislature and recently
reamended by Commonwealth Act No. 99 of the National Assembly. In this Act is again
manifested the intention of the legislature to "humanize" the penal laws. It allows, in effect, the
modification in particular cases of the penalties prescribed by law by permitting the suspension
of the execution of the judgment in the discretion of the trial court, after due hearing and after
investigation of the particular circumstances of the offenses, the criminal record, if any, of the
convict, and his social history. The Legislature has in reality decreed that in certain cases no
punishment at all shall be suffered by the convict as long as the conditions of probation are
faithfully observed. It this be so, then, it cannot be said that the Probation Act comes in conflict
with the power of the Chief Executive to grant pardons and reprieves, because, to use the
language of the Supreme Court of New Mexico, "the element of punishment or the penalty for
the commission of a wrong, while to be declared by the courts as a judicial function under and
within the limits of law as announced by legislative acts, concerns solely the procedure and
conduct of criminal causes, with which the executive can have nothing to do." (Ex parte Bates,
supra.) In Williams vs. State ([1926], 162 Ga., 327; 133 S.E., 843), the court upheld the
constitutionality of the Georgia probation statute against the contention that it attempted to
delegate to the courts the pardoning power lodged by the constitution in the governor alone is
vested with the power to pardon after final sentence has been imposed by the courts, the power
of the courts to imposed any penalty which may be from time to time prescribed by law and in
such manner as may be defined cannot be questioned."

We realize, of course, the conflict which the American cases disclose. Some cases hold it
unlawful for the legislature to vest in the courts the power to suspend the operation of a
sentenced, by probation or otherwise, as to do so would encroach upon the pardoning power of
the executive. (In re Webb [1895], 89 Wis., 354; 27 L.R.A., 356; 46 Am. St. Rep., 846; 62 N.W.,
177; 9 Am. Crim., Rep., 702; State ex rel. Summerfield vs. Moran [1919], 43 Nev., 150; 182
Pac., 927; Ex parte Clendenning [1908], 22 Okla., 108; 1 Okla. Crim. Rep., 227; 19 L.R.A.
[N.S.], 1041; 132 Am. St. Rep., 628; 97 Pac., 650; People vs. Barrett [1903], 202 Ill, 287; 67
N.E., 23; 63 L.R.A., 82; 95 Am. St. Rep., 230; Snodgrass vs. State [1912], 67 Tex. Crim. Rep.,
615; 41 L. R. A. [N. S.], 1144; 150 S. W., 162; Ex parte Shelor [1910], 33 Nev., 361;111 Pac.,
291; Neal vs. State [1898], 104 Ga., 509; 42 L. R. A., 190; 69 Am. St. Rep., 175; 30 S. E. 858;
State ex rel. Payne vs. Anderson [1921], 43 S. D., 630; 181 N. W., 839; People vs. Brown, 54
Mich., 15; 19 N. W., 571; States vs. Dalton [1903], 109 Tenn., 544; 72 S. W., 456.)

Other cases, however, hold contra. (Nix vs. James [1925; C. C. A., 9th], 7 F. [2d], 590; Archer
vs. Snook [1926; D. C.], 10 F. [2d], 567; Riggs. vs. United States [1926; C. C. A. 4th], 14]) [2d],
5; Murphy vs. States [1926], 171 Ark., 620; 286 S. W., 871; 48 A. L. R., 1189; Re Giannini
[1912], 18 Cal. App., 166; 122 Pac., 831; Re Nachnaber [1928], 89 Cal. App., 530; 265 Pac.,
392; Ex parte De Voe [1931], 114 Cal. App., 730; 300 Pac., 874; People vs. Patrick [1897], 118
Cal., 332; 50 Pac., 425; Martin vs. People [1917], 69 Colo., 60; 168 Pac., 1171; Belden vs. Hugo
[1914], 88 Conn., 50; 91 A., 369, 370, 371; Williams vs. State [1926], 162 Ga., 327; 133 S. E.,
843; People vs. Heise [1913], 257 Ill., 443; 100 N. E., 1000; Parker vs. State [1893], 135 Ind.,
534; 35 N. E., 179; 23 L. R. A., 859; St. Hillarie, Petitioner [1906], 101 Me., 522; 64 Atl., 882;
People vs. Stickle [1909], 156 Mich., 557; 121 N. W., 497; State vs. Fjolander [1914], 125
Minn., 529; State ex rel. Bottomnly vs. District Court [1925], 73 Mont., 541; 237 Pac., 525; State
vs. Everitt [1913], 164 N. C., 399; 79 S. E., 274; 47 L. R. A. [N. S.], 848; State ex rel. Buckley
vs. Drew [1909], 75 N. H., 402; 74 Atl., 875; State vs. Osborne [1911], 79 N. J. Eq., 430; 82 Atl.
424; Ex parte Bates [1915], 20 N. M., 542; L. R. A., 1916 A. 1285; 151 Pac., 698; People vs. ex
rel. Forsyth vs. Court of Session [1894], 141 N. Y., 288; 23 L. R. A., 856; 36 N. E., 386; 15 Am.
Crim. Rep., 675; People ex rel. Sullivan vs. Flynn [1907], 55 Misc., 639; 106 N. Y. Supp., 928;
People vs. Goodrich [1914], 149 N. Y. Supp., 406; Moore vs. Thorn [1935], 245 App. Div., 180;
281 N. Y. Supp., 49; Re Hart [1914], 29 N. D., 38; L. R. A., 1915C, 1169; 149 N. W., 568; Ex
parte Eaton [1925], 29 Okla., Crim. Rep., 275; 233 P., 781; State vs. Teal [1918], 108 S. C., 455;
95 S. E., 69; State vs. Abbot [1910], 87 S. C., 466; 33 L.R.A., [N. S.], 112; 70 S. E., 6; Ann.
Cas., 1912B, 1189; Fults vs. States [1854],34 Tenn., 232; Woods vs. State [1814], 130 Tenn.,
100; 169 S. W., 558; Baker vs. State [1814], 130 Tenn., 100; 169 S. W., 558; Baker vs. State
[1913],70 Tex., Crim. Rep., 618; 158 S. W., 998; Cook vs. State [1914], 73 Tex. Crim. Rep.,
548; 165 S. W., 573; King vs. State [1914], 72 Tex. Crim. Rep., 394; 162 S. W., 890; Clare vs.
State [1932], 122 Tex. Crim. Rep., 394; 162 S. W., 890; Clare vs. State [1932], 122 Tex. Crim.
Rep., 211; 54 S. W. [2d], 127; Re Hall [1927], 100 Vt., 197; 136 A., 24; Richardson vs. Com.
[1921], 131 Va., 802; 109 S.E., 460; State vs. Mallahan [1911], 65 Wash., 287; 118 Pac., 42;
State ex rel. Tingstand vs. Starwich [1922], 119 Wash., 561; 206 Pac., 29; 26 A. L. R., 393; 396.)
We elect to follow this long catena of authorities holding that the courts may be legally
authorized by the legislature to suspend sentence by the establishment of a system of probation
however characterized. State ex rel. Tingstand vs. Starwich ([1922], 119 Wash., 561; 206 Pac.,
29; 26 A. L. R., 393), deserved particular mention. In that case, a statute enacted in 1921 which
provided for the suspension of the execution of a sentence until otherwise ordered by the court,
and required that the convicted person be placed under the charge of a parole or peace officer
during the term of such suspension, on such terms as the court may determine, was held
constitutional and as not giving the court a power in violation of the constitutional provision
vesting the pardoning power in the chief executive of the state. (Vide, also, Re Giannini [1912],
18 Cal App., 166; 122 Pac., 831.)

Probation and pardon are not coterminous; nor are they the same. They are actually district and
different from each other, both in origin and in nature. In People ex rel. Forsyth vs. Court of
Sessions ([1894], 141 N. Y., 288, 294; 36 N. E., 386, 388; 23 L. R. A., 856; 15 Am. Crim. Rep.,
675), the Court of Appeals of New York said:

. . . The power to suspend sentence and the power to grant reprieves and pardons, as
understood when the constitution was adopted, are totally distinct and different in their
nature. The former was always a part of the judicial power; the latter was always a part of
the executive power. The suspension of the sentence simply postpones the judgment of
the court temporarily or indefinitely, but the conviction and liability following it, and the
civil disabilities, remain and become operative when judgment is rendered. A pardon
reaches both the punishment prescribed for the offense and the guilt of the offender. It
releases the punishment, and blots out of existence the guilt, so that in the eye of the law,
the offender is as innocent as if he had never committed the offense. It removes the
penalties and disabilities, and restores him to all his civil rights. It makes him, as it were,
a new man, and gives him a new credit and capacity. (Ex parte Garland, 71 U. S., 4
Wall., 333; 18 Law. ed., 366; U. S. vs. Klein, 80 U. S., 13 Wall., 128; 20 Law. ed., 519;
Knote vs. U. S., 95 U. S., 149; 24 Law. ed., 442.)

The framers of the federal and the state constitutions were perfectly familiar with the
principles governing the power to grant pardons, and it was conferred by these
 instruments upon the executive with full knowledge of the law upon the subject, and the
words of the constitution were used to express the authority formerly exercised by the
English crown, or by its representatives in the colonies. (Ex parte Wells, 59 U. S., 18
How., 307; 15 Law. ed., 421.) As this power was understood, it did not comprehend any
part of the judicial functions to suspend sentence, and it was never intended that the
authority to grant reprieves and pardons should abrogate, or in any degree restrict, the
exercise of that power in regard to its own judgments, that criminal courts has so long
maintained. The two powers, so distinct and different in their nature and character, were
still left separate and distinct, the one to be exercised by the executive, and the other by
the judicial department. We therefore conclude that a statute which, in terms, authorizes
courts of criminal jurisdiction to suspend sentence in certain cases after conviction, — a
power inherent in such courts at common law, which was understood when the
constitution was adopted to be an ordinary judicial function, and which, ever since its
adoption, has been exercised of legislative power under the constitution. It does not
encroach, in any just sense, upon the powers of the executive, as they have been
understood and practiced from the earliest times. (Quoted with approval in Directors of
Prisons vs. Judge of First Instance of Cavite [1915], 29 Phil., 265, Carson, J., concurring,
at pp. 294, 295.)

In probation, the probationer is in no true sense, as in pardon, a free man. He is not finally and
completely exonerated. He is not exempt from the entire punishment which the law inflicts.
Under the Probation Act, the probationer's case is not terminated by the mere fact that he is
placed on probation. Section 4 of the Act provides that the probation may be definitely
terminated and the probationer finally discharged from supervision only after the period of
probation shall have been terminated and the probation officer shall have submitted a report, and
the court shall have found that the probationer has complied with the conditions of probation.
The probationer, then, during the period of probation, remains in legal custody — subject to the
control of the probation officer and of the court; and, he may be rearrested upon the non-
fulfillment of the conditions of probation and, when rearrested, may be committed to prison to
serve the sentence originally imposed upon him. (Secs. 2, 3, 5 and 6, Act No. 4221.)

The probation described in the act is not pardon. It is not complete liberty, and may be far
from it. It is really a new mode of punishment, to be applied by the judge in a proper
case, in substitution of the imprisonment and find prescribed by the criminal laws. For
this reason its application is as purely a judicial act as any other sentence carrying out the
law deemed applicable to the offense. The executive act of pardon, on the contrary, is
against the criminal law, which binds and directs the judges, or rather is outside of and
above it. There is thus no conflict with the pardoning power, and no possible
unconstitutionality of the Probation Act for this cause. (Archer vs. Snook [1926], 10 F.
[2d], 567, 569.)

Probation should also be distinguished from reprieve and from commutation of the sentence.
Snodgrass vs. State ([1912], 67 Tex. Crim. Rep., 615;41 L. R. A. [N. S.], 1144; 150 S. W., 162),
is relied upon most strongly by the petitioners as authority in support of their contention that the
power to grant pardons and reprieves, having been vested exclusively upon the Chief Executive
by the Jones Law, may not be conferred by the legislature upon the courts by means of probation
law authorizing the indefinite judicial suspension of sentence. We have examined that case and
found that although the Court of Criminal Appeals of Texas held that the probation statute of the
state in terms conferred on the district courts the power to grant pardons to persons convicted of
crime, it also distinguished between suspensions sentence on the one hand, and reprieve and
commutation of sentence on the other. Said the court, through Harper, J.:

That the power to suspend the sentence does not conflict with the power of the Governor
to grant reprieves is settled by the decisions of the various courts; it being held that the
distinction between a "reprieve" and a suspension of sentence is that a reprieve postpones
the execution of the sentence to a day certain, whereas a suspension is for an indefinite
time. (Carnal vs. People, 1 Parker, Cr. R., 262; In re Buchanan, 146 N. Y., 264; 40 N. E.,
 883), and cases cited in 7 Words & Phrases, pp. 6115, 6116. This law cannot be hold in
conflict with the power confiding in the Governor to grant commutations of punishment,
for a commutations is not but to change the punishment assessed to a less punishment.

In State ex rel. Bottomnly vs. District Court ([1925], 73 Mont., 541; 237 Pac., 525), the Supreme
Court of Montana had under consideration the validity of the adult probation law of the state
enacted in 1913, now found in sections 12078-12086, Revised Codes of 1921. The court held the
law valid as not impinging upon the pardoning power of the executive. In a unanimous decision
penned by Justice Holloway, the court said:

. . . . the term "pardon", "commutation", and "respite" each had a well understood
meaning at the time our Constitution was adopted, and no one of them was intended to
comprehend the suspension of the execution of the judgment as that phrase is employed
in sections 12078-12086. A "pardon" is an act of grace, proceeding from the power
intrusted with the execution of the laws which exempts the individual on whom it is
bestowed from the punishment the law inflicts for a crime he has committed (United
States vs. Wilson, 7 Pet., 150; 8 Law. ed., 640); It is a remission of guilt (State vs. Lewis,
111 La., 693; 35 So., 816), a forgiveness of the offense (Cook vs. Middlesex County, 26
N. J. Law, 326; Ex parte Powell, 73 Ala., 517; 49 Am. Rep., 71). "Commutation" is a
remission of a part of the punishment; a substitution of a less penalty for the one
originally imposed (Lee vs. Murphy, 22 Grat. [Va.] 789; 12 Am. Rep., 563; Rich vs.
Chamberlain, 107 Mich., 381; 65 N. W., 235). A "reprieve" or "respite" is the
withholding of the sentence for an interval of time (4 Blackstone's Commentaries, 394), a
postponement of execution (Carnal vs. People, 1 Parker, Cr. R. [N. Y.], 272), a temporary
suspension of execution (Butler vs. State, 97 Ind., 373).

Few adjudicated cases are to be found in which the validity of a statute similar to our
section 12078 has been determined; but the same objections have been urged against
parole statutes which vest the power to parole in persons other than those to whom the
power of pardon is granted, and these statutes have been upheld quite uniformly, as a
reference to the numerous cases cited in the notes to Woods vs. State (130 Tenn., 100;
169 S. W.,558, reported in L. R. A., 1915F, 531), will disclose. (See, also, 20 R. C. L.,
524.)

We conclude that the Probation Act does not conflict with the pardoning power of the Executive.
The pardoning power, in respect to those serving their probationary sentences, remains as full
and complete as if the Probation Law had never been enacted. The President may yet pardon the
probationer and thus place it beyond the power of the court to order his rearrest and
imprisonment. (Riggs vs. United States [1926],
14 F. [2d], 5, 7.)

2. But while the Probation Law does not encroach upon the pardoning power of the executive
and is not for that reason void, does section 11 thereof constitute, as contended, an undue
delegation of legislative power?

Under the constitutional system, the powers of government are distributed among three
coordinate and substantially independent organs: the legislative, the executive and the judicial.
Each of these departments of the government derives its authority from the Constitution which,
in turn, is the highest expression of popular will. Each has exclusive cognizance of the matters
within its jurisdiction, and is supreme within its own sphere.

The power to make laws — the legislative power — is vested in a bicameral Legislature by the
Jones Law (sec. 12) and in a unicamiral National Assembly by the Constitution (Act. VI, sec. 1,
Constitution of the Philippines). The Philippine Legislature or the National Assembly may not
escape its duties and responsibilities by delegating that power to any other body or authority.
Any attempt to abdicate the power is unconstitutional and void, on the principle that potestas
delegata non delegare potest. This principle is said to have originated with the glossators, was
introduced into English law through a misreading of Bracton, there developed as a principle of
agency, was established by Lord Coke in the English public law in decisions forbidding the
delegation of judicial power, and found its way into America as an enlightened principle of free
government. It has since become an accepted corollary of the principle of separation of powers.
(5 Encyc. of the Social Sciences, p. 66.) The classic statement of the rule is that of Locke,
namely: "The legislative neither must nor can transfer the power of making laws to anybody else,
or place it anywhere but where the people have." (Locke on Civil Government, sec. 142.) Judge
Cooley enunciates the doctrine in the following oft-quoted language: "One of the settled maxims
in constitutional law is, that the power conferred upon the legislature to make laws cannot be
delegated by that department to any other body or authority. Where the sovereign power of the
state has located the authority, there it must remain; and by the constitutional agency alone the
laws must be made until the Constitution itself is charged. The power to whose judgment,
wisdom, and patriotism this high prerogative has been intrusted cannot relieve itself of the
responsibilities by choosing other agencies upon which the power shall be devolved, nor can it
substitute the judgment, wisdom, and patriotism of any other body for those to which alone the
people have seen fit to confide this sovereign trust." (Cooley on Constitutional Limitations, 8th
ed., Vol. I, p. 224. Quoted with approval in U. S. vs. Barrias [1908], 11 Phil., 327.) This court
posits the doctrine "on the ethical principle that such a delegated power constitutes not only a
right but a duty to be performed by the delegate by the instrumentality of his own judgment
acting immediately upon the matter of legislation and not through the intervening mind of
another. (U. S. vs. Barrias, supra, at p. 330.)

The rule, however, which forbids the delegation of legislative power is not absolute and
inflexible. It admits of exceptions. An exceptions sanctioned by immemorial practice permits the
central legislative body to delegate legislative powers to local authorities. (Rubi vs. Provincial
Board of Mindoro [1919], 39 Phil., 660; U. S. vs. Salaveria [1918], 39 Phil., 102; Stoutenburgh
vs. Hennick [1889], 129 U. S., 141; 32 Law. ed., 637; 9 Sup. Ct. Rep., 256; State vs. Noyes
[1855], 30 N. H., 279.) "It is a cardinal principle of our system of government, that local affairs
shall be managed by local authorities, and general affairs by the central authorities; and hence
while the rule is also fundamental that the power to make laws cannot be delegated, the creation
of the municipalities exercising local self government has never been held to trench upon that
rule. Such legislation is not regarded as a transfer of general legislative power, but rather as the
grant of the authority to prescribed local regulations, according to immemorial practice, subject
of course to the interposition of the superior in cases of necessity." (Stoutenburgh vs. Hennick,
supra.) On quite the same principle, Congress is powered to delegate legislative power to such
agencies in the territories of the United States as it may select. A territory stands in the same
relation to Congress as a municipality or city to the state government. (United States vs.
Heinszen [1907], 206 U. S., 370; 27 Sup. Ct. Rep., 742; 51 L. ed., 1098; 11 Ann. Cas., 688; Dorr
vs. United States [1904], 195 U.S., 138; 24 Sup. Ct. Rep., 808; 49 Law. ed., 128; 1 Ann. Cas.,
697.) Courts have also sustained the delegation of legislative power to the people at large. Some
authorities maintain that this may not be done (12 C. J., pp. 841, 842; 6 R. C. L., p. 164, citing
People vs. Kennedy [1913], 207 N. Y., 533; 101 N. E., 442; Ann. Cas., 1914C, 616). However,
the question of whether or not a state has ceased to be republican in form because of its adoption
of the initiative and referendum has been held not to be a judicial but a political question (Pacific
States Tel. & Tel. Co. vs. Oregon [1912], 223 U. S., 118; 56 Law. ed., 377; 32 Sup. Cet. Rep.,
224), and as the constitutionality of such laws has been looked upon with favor by certain
progressive courts, the sting of the decisions of the more conservative courts has been pretty well
drawn. (Opinions of the Justices [1894], 160 Mass., 586; 36 N. E., 488; 23 L. R. A., 113;
Kiernan vs. Portland [1910], 57 Ore., 454; 111 Pac., 379; 1132 Pac., 402; 37 L. R. A. [N. S.],
332; Pacific States Tel. & Tel. Co. vs. Oregon, supra.) Doubtless, also, legislative power may be
delegated by the Constitution itself. Section 14, paragraph 2, of article VI of the Constitution of
the Philippines provides that "The National Assembly may by law authorize the President,
subject to such limitations and restrictions as it may impose, to fix within specified limits, tariff
rates, import or export quotas, and tonnage and wharfage dues." And section 16 of the same
article of the Constitution provides that "In times of war or other national emergency, the
National Assembly may by law authorize the President, for a limited period and subject to such
restrictions as it may prescribed, to promulgate rules and regulations to carry out a declared
national policy." It is beyond the scope of this decision to determine whether or not, in the
absence of the foregoing constitutional provisions, the President could be authorized to exercise
the powers thereby vested in him. Upon the other hand, whatever doubt may have existed has
been removed by the Constitution itself.

The case before us does not fall under any of the exceptions hereinabove mentioned.

The challenged section of Act No. 4221 in section 11 which reads as follows:

This Act shall apply only in those provinces in which the respective provincial boards
have provided for the salary of a probation officer at rates not lower than those now
provided for provincial fiscals. Said probation officer shall be appointed by the Secretary
of Justice and shall be subject to the direction of the Probation Office. (Emphasis ours.)

In testing whether a statute constitute an undue delegation of legislative power or not, it is usual
to inquire whether the statute was complete in all its terms and provisions when it left the hands
of the legislature so that nothing was left to the judgment of any other appointee or delegate of
the legislature. (6 R. C. L., p. 165.) In the United States vs. Ang Tang Ho ([1922], 43 Phil., 1),
this court adhered to the foregoing rule when it held an act of the legislature void in so far as it
undertook to authorize the Governor-General, in his discretion, to issue a proclamation fixing the
price of rice and to make the sale of it in violation of the proclamation a crime. (See and cf.
Compañia General de Tabacos vs. Board of Public Utility Commissioners [1916], 34 Phil., 136.)
The general rule, however, is limited by another rule that to a certain extent matters of detail may
be left to be filled in by rules and regulations to be adopted or promulgated by executive officers
and administrative boards. (6 R. C. L., pp. 177-179.)

For the purpose of Probation Act, the provincial boards may be regarded as administrative bodies
endowed with power to determine when the Act should take effect in their respective provinces.
They are the agents or delegates of the legislature in this respect. The rules governing delegation
of legislative power to administrative and executive officers are applicable or are at least
indicative of the rule which should be here adopted. An examination of a variety of cases on
delegation of power to administrative bodies will show that the ratio decidendi is at variance but,
it can be broadly asserted that the rationale revolves around the presence or absence of a standard
or rule of action — or the sufficiency thereof — in the statute, to aid the delegate in exercising
the granted discretion. In some cases, it is held that the standard is sufficient; in others that is
insufficient; and in still others that it is entirely lacking. As a rule, an act of the legislature is
incomplete and hence invalid if it does not lay down any rule or definite standard by which the
administrative officer or board may be guided in the exercise of the discretionary powers
delegated to it. (See Schecter vs. United States [1925], 295 U. S., 495; 79 L. ed., 1570; 55 Sup.
Ct. Rep., 837; 97 A.L.R., 947; People ex rel. Rice vs. Wilson Oil Co. [1936], 364 Ill., 406; 4 N.
E. [2d], 847; 107 A.L.R., 1500 and cases cited. See also R. C. L., title "Constitutional Law", sec
174.) In the case at bar, what rules are to guide the provincial boards in the exercise of their
discretionary power to determine whether or not the Probation Act shall apply in their respective
provinces? What standards are fixed by the Act? We do not find any and none has been pointed
to us by the respondents. The probation Act does not, by the force of any of its provisions, fix
and impose upon the provincial boards any standard or guide in the exercise of their
discretionary power. What is granted, if we may use the language of Justice Cardozo in the
recent case of Schecter, supra, is a "roving commission" which enables the provincial boards to
exercise arbitrary discretion. By section 11 if the Act, the legislature does not seemingly on its
own authority extend the benefits of the Probation Act to the provinces but in reality leaves the
entire matter for the various provincial boards to determine. In other words, the provincial boards
of the various provinces are to determine for themselves, whether the Probation Law shall apply
to their provinces or not at all. The applicability and application of the Probation Act are entirely
placed in the hands of the provincial boards. If the provincial board does not wish to have the
Act applied in its province, all that it has to do is to decline to appropriate the needed amount for
the salary of a probation officer. The plain language of the Act is not susceptible of any other
interpretation. This, to our minds, is a virtual surrender of legislative power to the provincial
boards.

"The true distinction", says Judge Ranney, "is between the delegation of power to make the law,
which necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot
be done; to the latter no valid objection can be made." (Cincinnati, W. & Z. R. Co. vs. Clinton
County Comrs. [1852]; 1 Ohio St., 77, 88. See also, Sutherland on Statutory Construction, sec
68.) To the same effect are the decision of this court in Municipality of Cardona vs. Municipality
of Binangonan ([1917], 36 Phil., 547); Rubi vs. Provincial Board of Mindoro ([1919],39 Phil.,
660) and Cruz vs. Youngberg ([1931], 56 Phil., 234). In the first of these cases, this court
sustained the validity of the law conferring upon the Governor-General authority to adjust
provincial and municipal boundaries. In the second case, this court held it lawful for the
legislature to direct non-Christian inhabitants to take up their habitation on unoccupied lands to
be selected by the provincial governor and approved by the provincial board. In the third case, it
was held proper for the legislature to vest in the Governor-General authority to suspend or not, at
his discretion, the prohibition of the importation of the foreign cattle, such prohibition to be
raised "if the conditions of the country make this advisable or if deceased among foreign cattle
has ceased to be a menace to the agriculture and livestock of the lands."

It should be observed that in the case at bar we are not concerned with the simple transference of
details of execution or the promulgation by executive or administrative officials of rules and
regulations to carry into effect the provisions of a law. If we were, recurrence to our own
decisions would be sufficient. (U. S. vs. Barrias [1908], 11 Phil., 327; U.S. vs. Molina [1914], 29
Phil., 119; Alegre vs. Collector of Customs [1929], 53 Phil., 394; Cebu Autobus Co. vs. De Jesus
[1931], 56 Phil., 446; U. S. vs. Gomez [1915], 31 Phil., 218; Rubi vs. Provincial Board of
Mindoro [1919], 39 Phil., 660.)

It is connected, however, that a legislative act may be made to the effect as law after it leaves the
hands of the legislature. It is true that laws may be made effective on certain contingencies, as by
proclamation of the executive or the adoption by the people of a particular community (6 R. C.
L., 116, 170-172; Cooley, Constitutional Limitations, 8th ed., Vol. I, p. 227). In Wayman vs.
Southard ([1825], 10 Wheat. 1; 6 Law. ed., 253), the Supreme Court of the United State ruled
that the legislature may delegate a power not legislative which it may itself rightfully
exercise.(Vide, also, Dowling vs. Lancashire Ins. Co. [1896], 92 Wis., 63; 65 N. W., 738; 31 L.
R. A., 112.) The power to ascertain facts is such a power which may be delegated. There is
nothing essentially legislative in ascertaining the existence of facts or conditions as the basis of
the taking into effect of a law. That is a mental process common to all branches of the
government. (Dowling vs. Lancashire Ins. Co., supra; In re Village of North Milwaukee [1896],
93 Wis., 616; 97 N.W., 1033; 33 L.R.A., 938; Nash vs. Fries [1906], 129 Wis., 120; 108 N.W.,
210; Field vs. Clark [1892], 143 U.S., 649; 12 Sup. Ct., 495; 36 Law. ed., 294.) Notwithstanding
the apparent tendency, however, to relax the rule prohibiting delegation of legislative authority
on account of the complexity arising from social and economic forces at work in this modern
industrial age (Pfiffner, Public Administration [1936] ch. XX; Laski, "The Mother of
Parliaments", foreign Affairs, July, 1931, Vol. IX, No. 4, pp. 569-579; Beard, "Squirt-Gun
Politics", in Harper's Monthly Magazine, July, 1930, Vol. CLXI, pp. 147, 152), the orthodox
pronouncement of Judge Cooley in his work on Constitutional Limitations finds restatement in
Prof. Willoughby's treatise on the Constitution of the United States in the following language —
speaking of declaration of legislative power to administrative agencies: "The principle which
permits the legislature to provide that the administrative agent may determine when the
circumstances are such as require the application of a law is defended upon the ground that at the
time this authority is granted, the rule of public policy, which is the essence of the legislative act,
is determined by the legislature. In other words, the legislature, as it its duty to do, determines
that, under given circumstances, certain executive or administrative action is to be taken, and
that, under other circumstances, different of no action at all is to be taken. What is thus left to the
administrative official is not the legislative determination of what public policy demands, but
simply the ascertainment of what the facts of the case require to be done according to the terms
of the law by which he is governed." (Willoughby on the Constitution of the United States, 2nd
ed., Vol. II, p. 1637.) In Miller vs. Mayer, etc., of New York [1883], 109 U.S., 3 Sup. Ct. Rep.,
228; 27 Law. ed., 971, 974), it was said: "The efficiency of an Act as a declaration of legislative
will must, of course, come from Congress, but the ascertainment of the contingency upon which
the Act shall take effect may be left to such agencies as it may designate." (See, also, 12 C.J., p.
864; State vs. Parker [1854], 26 Vt., 357; Blanding vs. Burr [1859], 13 Cal., 343, 258.) The
legislature, then may provide that a contingencies leaving to some other person or body the
power to determine when the specified contingencies has arisen. But, in the case at bar, the
legislature has not made the operation of the Prohibition Act contingent upon specified facts or
conditions to be ascertained by the provincial board. It leaves, as we have already said, the entire
operation or non-operation of the law upon the provincial board. the discretion vested is arbitrary
because it is absolute and unlimited. A provincial board need not investigate conditions or find
any fact, or await the happening of any specified contingency. It is bound by no rule, — limited
by no principle of expendiency announced by the legislature. It may take into consideration
certain facts or conditions; and, again, it may not. It may have any purpose or no purpose at all. It
need not give any reason whatsoever for refusing or failing to appropriate any funds for the
salary of a probation officer. This is a matter which rest entirely at its pleasure. The fact that at
some future time — we cannot say when — the provincial boards may appropriate funds for the
salaries of probation officers and thus put the law into operation in the various provinces will not
save the statute. The time of its taking into effect, we reiterate, would yet be based solely upon
the will of the provincial boards and not upon the happening of a certain specified contingency,
or upon the ascertainment of certain facts or conditions by a person or body other than legislature
itself.

The various provincial boards are, in practical effect, endowed with the power of suspending the
operation of the Probation Law in their respective provinces. In some jurisdiction, constitutions
provided that laws may be suspended only by the legislature or by its authority. Thus, section 28,
article I of the Constitution of Texas provides that "No power of suspending laws in this state
shall be exercised except by the legislature"; and section 26, article I of the Constitution of
Indiana provides "That the operation of the laws shall never be suspended, except by authority of
the General Assembly." Yet, even provisions of this sort do not confer absolute power of
suspension upon the legislature. While it may be undoubted that the legislature may suspend a
law, or the execution or operation of a law, a law may not be suspended as to certain individuals
only, leaving the law to be enjoyed by others. The suspension must be general, and cannot be
made for individual cases or for particular localities. In Holden vs. James ([1814], 11 Mass., 396;
6 Am. Dec., 174, 177, 178), it was said:

By the twentieth article of the declaration of rights in the constitution of this

commonwealth, it is declared that the power of suspending the laws, or the execution of
the laws, ought never to be exercised but by the legislature, or by authority derived from
it, to be exercised in such particular cases only as the legislature shall expressly provide
for. Many of the articles in that declaration of rights were adopted from the Magna Charta
of England, and from the bill of rights passed in the reign of William and Mary. The bill
of rights contains an enumeration of the oppressive acts of James II, tending to subvert
and extirpate the protestant religion, and the laws and liberties of the kingdom; and the
first of them is the assuming and exercising a power of dispensing with and suspending
the laws, and the execution of the laws without consent of parliament. The first article in
the claim or declaration of rights contained in the statute is, that the exercise of such
power, by legal authority without consent of parliament, is illegal. In the tenth section of
the same statute it is further declared and enacted, that "No dispensation by non obstante
of or to any statute, or part thereof, should be allowed; but the same should be held void
and of no effect, except a dispensation be allowed of in such statute." There is an implied
reservation of authority in the parliament to exercise the power here mentioned; because,
according to the theory of the English Constitution, "that absolute despotic power, which
must in all governments reside somewhere," is intrusted to the parliament: 1 Bl. Com.,
160.
 The principles of our government are widely different in this particular. Here the
sovereign and absolute power resides in the people; and the legislature can only exercise
what is delegated to them according to the constitution. It is obvious that the exercise of
the power in question would be equally oppressive to the subject, and subversive of his
right to protection, "according to standing laws," whether exercised by one man or by a
number of men. It cannot be supposed that the people when adopting this general
principle from the English bill of rights and inserting it in our constitution, intended to
bestow by implication on the general court one of the most odious and oppressive
prerogatives of the ancient kings of England. It is manifestly contrary to the first
principles of civil liberty and natural justice, and to the spirit of our constitution and laws,
that any one citizen should enjoy privileges and advantages which are denied to all others
under like circumstances; or that ant one should be subject to losses, damages, suits, or
actions from which all others under like circumstances are exempted.

To illustrate the principle: A section of a statute relative to dogs made the owner of any dog
liable to the owner of domestic animals wounded by it for the damages without proving a
knowledge of it vicious disposition. By a provision of the act, power was given to the board of
supervisors to determine whether or not during the current year their county should be governed
by the provisions of the act of which that section constituted a part. It was held that the
legislature could not confer that power. The court observed that it could no more confer such a
power than to authorize the board of supervisors of a county to abolish in such county the days of
grace on commercial paper, or to suspend the statute of limitations. (Slinger vs. Henneman
[1875], 38 Wis., 504.) A similar statute in Missouri was held void for the same reason in State
vs. Field ([1853, 17 Mo., 529;59 Am. Dec., 275.) In that case a general statute formulating a road
system contained a provision that "if the county court of any county should be of opinion that the
provisions of the act should not be enforced, they might, in their discretion, suspend the
operation of the same for any specified length of time, and thereupon the act should become
inoperative in such county for the period specified in such order; and thereupon order the roads
to be opened and kept in good repair, under the laws theretofore in force." Said the court: ". . .
this act, by its own provisions, repeals the inconsistent provisions of a former act, and yet it is
left to the county court to say which act shall be enforce in their county. The act does not submit
the question to the county court as an original question, to be decided by that tribunal, whether
the act shall commence its operation within the county; but it became by its own terms a law in
every county not excepted by name in the act. It did not, then, require the county court to do any
act in order to give it effect. But being the law in the county, and having by its provisions
superseded and abrogated the inconsistent provisions of previous laws, the county court is . . .
empowered, to suspend this act and revive the repealed provisions of the former act. When the
question is before the county court for that tribunal to determine which law shall be in force, it is
urge before us that the power then to be exercised by the court is strictly legislative power, which
under our constitution, cannot be delegated to that tribunal or to any other body of men in the
state. In the present case, the question is not presented in the abstract; for the county court of
Saline county, after the act had been for several months in force in that county, did by order
suspend its operation; and during that suspension the offense was committed which is the subject
of the present indictment . . . ." (See Mitchell vs. State [1901], 134 Ala., 392; 32 S., 687.)

True, the legislature may enact laws for a particular locality different from those applicable to
other localities and, while recognizing the force of the principle hereinabove expressed, courts in
may jurisdiction have sustained the constitutionality of the submission of option laws to the vote
of the people. (6 R.C.L., p. 171.) But option laws thus sustained treat of subjects purely local in
character which should receive different treatment in different localities placed under different
circumstances. "They relate to subjects which, like the retailing of intoxicating drinks, or the
running at large of cattle in the highways, may be differently regarded in different localities, and
they are sustained on what seems to us the impregnable ground, that the subject, though not
embraced within the ordinary powers of municipalities to make by-laws and ordinances, is
nevertheless within the class of public regulations, in respect to which it is proper that the local
judgment should control." (Cooley on Constitutional Limitations, 5th ed., p. 148.) So that, while
we do not deny the right of local self-government and the propriety of leaving matters of purely
local concern in the hands of local authorities or for the people of small communities to pass
upon, we believe that in matters of general of general legislation like that which treats of
criminals in general, and as regards the general subject of probation, discretion may not be
vested in a manner so unqualified and absolute as provided in Act No. 4221. True, the statute
does not expressly state that the provincial boards may suspend the operation of the Probation
Act in particular provinces but, considering that, in being vested with the authority to appropriate
or not the necessary funds for the salaries of probation officers, they thereby are given absolute
discretion to determine whether or not the law should take effect or operate in their respective
provinces, the provincial boards are in reality empowered by the legislature to suspend the
operation of the Probation Act in particular provinces, the Act to be held in abeyance until the
provincial boards should decide otherwise by appropriating the necessary funds. The validity of a
law is not tested by what has been done but by what may be done under its provisions. (Walter E.
Olsen & Co. vs. Aldanese and Trinidad [1922], 43 Phil., 259; 12 C. J., p. 786.)

It in conceded that a great deal of latitude should be granted to the legislature not only in the
expression of what may be termed legislative policy but in the elaboration and execution thereof.
"Without this power, legislation would become oppressive and yet imbecile." (People vs.
Reynolds, 5 Gilman, 1.) It has been said that popular government lives because of the
inexhaustible reservoir of power behind it. It is unquestionable that the mass of powers of
government is vested in the representatives of the people and that these representatives are no
further restrained under our system than by the express language of the instrument imposing the
restraint, or by particular provisions which by clear intendment, have that effect. (Angara vs.
Electoral Commission [1936], 35 Off. Ga., 23; Schneckenburger vs. Moran [1936], 35 Off. Gaz.,
1317.) But, it should be borne in mind that a constitution is both a grant and a limitation of
power and one of these time-honored limitations is that, subject to certain exceptions, legislative
power shall not be delegated.

We conclude that section 11 of Act No. 4221 constitutes an improper and unlawful delegation of
legislative authority to the provincial boards and is, for this reason, unconstitutional and void.

3. It is also contended that the Probation Act violates the provisions of our Bill of Rights which
prohibits the denial to any person of the equal protection of the laws (Act. III, sec. 1 subsec. 1.
Constitution of the Philippines.)

This basic individual right sheltered by the Constitution is a restraint on all the tree grand
departments of our government and on the subordinate instrumentalities and subdivision thereof,
and on many constitutional power, like the police power, taxation and eminent domain. The
equal protection of laws, sententiously observes the Supreme Court of the United States, "is a
pledge of the protection of equal laws." (Yick Wo vs. Hopkins [1886], 118 U. S., 356; 30 Law.
ed., 220; 6 Sup. Ct. Rep., 10464; Perley vs. North Carolina, 249 U. S., 510; 39 Sup. Ct. Rep.,
357; 63 Law. ed., 735.) Of course, what may be regarded as a denial of the equal protection of
the laws in a question not always easily determined. No rule that will cover every case can be
formulated. (Connolly vs. Union Sewer Pipe Co. [1902], 184, U. S., 540; 22 Sup. Ct., Rep., 431;
46 Law. ed., 679.) Class legislation discriminating against some and favoring others in
prohibited. But classification on a reasonable basis, and nor made arbitrarily or capriciously, is
permitted. (Finely vs. California [1911], 222 U. S., 28; 56 Law. ed., 75; 32 Sup. Ct. Rep., 13;
Gulf. C. & S. F. Ry Co. vs. Ellis [1897], 165 U. S., 150; 41 Law. ed., 666; 17 Sup. Ct. Rep., 255;
Smith, Bell & Co. vs. Natividad [1919], 40 Phil., 136.) The classification, however, to be
reasonable must be based on substantial distinctions which make real differences; it must be
germane to the purposes of the law; it must not be limited to existing conditions only, and must
apply equally to each member of the class. (Borgnis vs. Falk. Co. [1911], 147 Wis., 327, 353;
133 N. W., 209; 3 N. C. C. A., 649; 37 L. R. A. [N. S.], 489; State vs. Cooley, 56 Minn., 540;
530-552; 58 N. W., 150; Lindsley vs. Natural Carbonic Gas Co.[1911], 220 U. S., 61, 79, 55
Law. ed., 369, 377; 31 Sup. Ct. Rep., 337; Ann. Cas., 1912C, 160; Lake Shore & M. S. R. Co.
vs. Clough [1917], 242 U.S., 375; 37 Sup. Ct. Rep., 144; 61 Law. ed., 374; Southern Ry. Co. vs.
Greene [1910], 216 U. S., 400; 30 Sup. Ct. Rep., 287; 54 Law. ed., 536; 17 Ann. Cas., 1247;
Truax vs. Corrigan [1921], 257 U. S., 312; 12 C. J., pp. 1148, 1149.)
In the case at bar, however, the resultant inequality may be said to flow from the unwarranted
delegation of legislative power, although perhaps this is not necessarily the result in every case.
Adopting the example given by one of the counsel for the petitioners in the course of his oral
argument, one province may appropriate the necessary fund to defray the salary of a probation
officer, while another province may refuse or fail to do so. In such a case, the Probation Act
would be in operation in the former province but not in the latter. This means that a person
otherwise coming within the purview of the law would be liable to enjoy the benefits of
probation in one province while another person similarly situated in another province would be
denied those same benefits. This is obnoxious discrimination. Contrariwise, it is also possible for
all the provincial boards to appropriate the necessary funds for the salaries of the probation
officers in their respective provinces, in which case no inequality would result for the obvious
reason that probation would be in operation in each and every province by the affirmative action
of appropriation by all the provincial boards. On that hypothesis, every person coming within the
purview of the Probation Act would be entitled to avail of the benefits of the Act. Neither will
there be any resulting inequality if no province, through its provincial board, should appropriate
any amount for the salary of the probation officer — which is the situation now — and, also, if
we accept the contention that, for the purpose of the Probation Act, the City of Manila should be
considered as a province and that the municipal board of said city has not made any
appropriation for the salary of the probation officer. These different situations suggested show,
indeed, that while inequality may result in the application of the law and in the conferment of the
benefits therein provided, inequality is not in all cases the necessary result. But whatever may be
the case, it is clear that in section 11 of the Probation Act creates a situation in which
discrimination and inequality are permitted or allowed. There are, to be sure, abundant
authorities requiring actual denial of the equal protection of the law before court should assume
the task of setting aside a law vulnerable on that score, but premises and circumstances
considered, we are of the opinion that section 11 of Act No. 4221 permits of the denial of the
equal protection of the law and is on that account bad. We see no difference between a law
which permits of such denial. A law may appear to be fair on its face and impartial in
appearance, yet, if it permits of unjust and illegal discrimination, it is within the constitutional
prohibitions. (By analogy, Chy Lung vs. Freeman [1876], 292 U. S., 275; 23 Law. ed., 550;
Henderson vs. Mayor [1876], 92 U. S., 259; 23 Law. ed., 543; Ex parte Virginia [1880], 100 U.
S., 339; 25 Law. ed., 676; Neal vs. Delaware [1881], 103 U. S., 370; 26 Law. ed., 567; Soon
Hing vs. Crowley [1885], 113 U. S., 703; 28 Law. ed., 1145, Yick Wo vs. Hopkins [1886],118
U. S., 356; 30 Law. ed., 220; Williams vs. Mississippi [1897], 170 U. S., 218; 18 Sup. Ct. Rep.,
583; 42 Law. ed., 1012; Bailey vs. Alabama [1911], 219 U. S., 219; 31 Sup. Ct. Rep. 145; 55
Law. ed., Sunday Lake Iron Co. vs. Wakefield [1918], 247 U. S., 450; 38 Sup. Ct. Rep., 495; 62
Law. ed., 1154.) In other words, statutes may be adjudged unconstitutional because of their
effect in operation (General Oil Co. vs. Clain [1907], 209 U. S., 211; 28 Sup. Ct. Rep., 475; 52
Law. ed., 754; State vs. Clement Nat. Bank [1911], 84 Vt., 167; 78 Atl., 944; Ann. Cas., 1912D,
22). If the law has the effect of denying the equal protection of the law it is unconstitutional. (6
R. C. L. p. 372; Civil Rights Cases, 109 U. S., 3; 3 Sup. Ct. Rep., 18; 27 Law. ed., 835; Yick Wo
vs. Hopkins, supra; State vs. Montgomery, 94 Me., 192; 47 Atl., 165; 80 A. S. R., 386; State vs.
Dering, 84 Wis., 585; 54 N. W., 1104; 36 A. S. R., 948; 19 L. R. A., 858.) Under section 11 of
the Probation Act, not only may said Act be in force in one or several provinces and not be in
force in other provinces, but one province may appropriate for the salary of the probation officer
of a given year — and have probation during that year — and thereafter decline to make further
appropriation, and have no probation is subsequent years. While this situation goes rather to the
abuse of discretion which delegation implies, it is here indicated to show that the Probation Act
sanctions a situation which is intolerable in a government of laws, and to prove how easy it is,
under the Act, to make the guaranty of the equality clause but "a rope of sand". (Brewer, J. Gulf
C. & S. F. Ry. Co. vs. Ellis [1897], 165 U. S., 150 154; 41 Law. ed., 666; 17 Sup. Ct. Rep.,
255.)lawph!1.net

Great reliance is placed by counsel for the respondents on the case of Ocampo vs. United States
([1914], 234 U. S., 91; 58 Law. ed., 1231). In that case, the Supreme Court of the United States
affirmed the decision of this court (18 Phil., 1) by declining to uphold the contention that there
was a denial of the equal protection of the laws because, as held in Missouri vs. Lewis (Bowman
vs. Lewis) decided in 1880 (101 U. S., 220; 25 Law. ed., 991), the guaranty of the equality clause
does not require territorial uniformity. It should be observed, however, that this case concerns the
right to preliminary investigations in criminal cases originally granted by General Orders No. 58.
No question of legislative authority was involved and the alleged denial of the equal protection
of the laws was the result of the subsequent enactment of Act No. 612, amending the charter of
the City of Manila (Act No. 813) and providing in section 2 thereof that "in cases triable only in
the court of first instance of the City of Manila, the defendant . . . shall not be entitled as of right
to a preliminary examination in any case where the prosecuting attorney, after a due
investigation of the facts . . . shall have presented an information against him in proper form . . .
." Upon the other hand, an analysis of the arguments and the decision indicates that the
investigation by the prosecuting attorney — although not in the form had in the provinces — was
considered a reasonable substitute for the City of Manila, considering the peculiar conditions of
the city as found and taken into account by the legislature itself.

Reliance is also placed on the case of Missouri vs. Lewis, supra. That case has reference to a
situation where the constitution of Missouri permits appeals to the Supreme Court of the state
from final judgments of any circuit court, except those in certain counties for which counties the
constitution establishes a separate court of appeals called St. Louis Court of Appeals. The
provision complained of, then, is found in the constitution itself and it is the constitution that
makes the apportionment of territorial jurisdiction.

We are of the opinion that section 11 of the Probation Act is unconstitutional and void because it
is also repugnant to equal-protection clause of our Constitution.

Section 11 of the Probation Act being unconstitutional and void for the reasons already stated,
the next inquiry is whether or not the entire Act should be avoided.

In seeking the legislative intent, the presumption is against any mutilation of a statute,
and the courts will resort to elimination only where an unconstitutional provision is
interjected into a statute otherwise valid, and is so independent and separable that its
removal will leave the constitutional features and purposes of the act substantially
unaffected by the process. (Riccio vs. Hoboken, 69 N. J. Law., 649, 662; 63 L. R. A.,
485; 55 Atl., 1109, quoted in Williams vs. Standard Oil Co. [1929], 278 U.S., 235, 240;
73 Law. ed., 287, 309; 49 Sup. Ct. Rep., 115; 60 A. L. R., 596.) In Barrameda vs. Moir
([1913], 25 Phil., 44, 47), this court stated the well-established rule concerning partial
invalidity of statutes in the following language:

. . . where part of the a statute is void, as repugnant to the Organic Law, while another
part is valid, the valid portion, if separable from the valid, may stand and be enforced.
But in order to do this, the valid portion must be in so far independent of the invalid
portion that it is fair to presume that the Legislative would have enacted it by itself if they
had supposed that they could not constitutionally enact the other. (Mutual Loan Co. vs.
Martell, 200 Mass., 482; 86 N. E., 916; 128 A. S. R., 446; Supervisors of Holmes Co. vs.
Black Creek Drainage District, 99 Miss., 739; 55 Sou., 963.) Enough must remain to
make a complete, intelligible, and valid statute, which carries out the legislative intent.
(Pearson vs. Bass. 132 Ga., 117; 63 S. E., 798.) The void provisions must be eliminated
without causing results affecting the main purpose of the Act, in a manner contrary to the
intention of the Legislature. (State vs. A. C. L. R., Co., 56 Fla., 617, 642; 47 Sou., 969;
Harper vs. Galloway, 58 Fla., 255; 51 Sou., 226; 26 L. R. A., N. S., 794; Connolly vs.
Union Sewer Pipe Co., 184 U. S., 540, 565; People vs. Strassheim, 240 Ill., 279, 300; 88
N. E., 821; 22 L. R. A., N. S., 1135; State vs. Cognevich, 124 La., 414; 50 Sou., 439.)
The language used in the invalid part of a statute can have no legal force or efficacy for
any purpose whatever, and what remains must express the legislative will, independently
of the void part, since the court has no power to legislate. (State vs. Junkin, 85 Neb., 1;
122 N. W., 473; 23 L. R. A., N. S., 839; Vide, also,. U. S., vs. Rodriguez [1918], 38 Phil.,
759; Pollock vs. Farmers' Loan and Trust Co. [1895], 158 U. S., 601, 635; 39 Law. ed.,
1108, 1125; 15 Sup. Ct. Rep., 912; 6 R.C.L., 121.)
It is contended that even if section 11, which makes the Probation Act applicable only in those
provinces in which the respective provincial boards provided for the salaries of probation
officers were inoperative on constitutional grounds, the remainder of the Act would still be valid
and may be enforced. We should be inclined to accept the suggestions but for the fact that said
section is, in our opinion, is inseparably linked with the other portions of the Act that with the
elimination of the section what would be left is the bare idealism of the system, devoid of any
practical benefit to a large number of people who may be deserving of the intended beneficial
result of that system. The clear policy of the law, as may be gleaned from a careful examination
of the whole context, is to make the application of the system dependent entirely upon the
affirmative action of the different provincial boards through appropriation of the salaries for
probation officers at rates not lower than those provided for provincial fiscals. Without such
action on the part of the various boards, no probation officers would be appointed by the
Secretary of Justice to act in the provinces. The Philippines is divided or subdivided into
provinces and it needs no argument to show that if not one of the provinces — and this is the
actual situation now — appropriate the necessary fund for the salary of a probation officer,
probation under Act No. 4221 would be illusory. There can be no probation without a probation
officer. Neither can there be a probation officer without the probation system.

Section 2 of the Acts provides that the probation officer shall supervise and visit the probationer.
Every probation officer is given, as to the person placed in probation under his care, the powers
of the police officer. It is the duty of the probation officer to see that the conditions which are
imposed by the court upon the probationer under his care are complied with. Among those
conditions, the following are enumerated in section 3 of the Act:

That the probationer (a) shall indulge in no injurious or vicious habits;

(b) Shall avoid places or persons of disreputable or harmful character;

(c) Shall report to the probation officer as directed by the court or probation officers;

(d) Shall permit the probation officer to visit him at reasonable times at his place of abode
or elsewhere;

(e) Shall truthfully answer any reasonable inquiries on the part of the probation officer
concerning his conduct or condition; "(f) Shall endeavor to be employed regularly; "(g)
Shall remain or reside within a specified place or locality;

(f) Shall make reparation or restitution to the aggrieved parties for actual damages or
losses caused by his offense;

(g) Shall comply with such orders as the court may from time to time make; and

(h) Shall refrain from violating any law, statute, ordinance, or any by-law or regulation,
promulgated in accordance with law.

The court is required to notify the probation officer in writing of the period and terms of
probation. Under section 4, it is only after the period of probation, the submission of a report of
the probation officer and appropriate finding of the court that the probationer has complied with
the conditions of probation that probation may be definitely terminated and the probationer
finally discharged from supervision. Under section 5, if the court finds that there is non-
compliance with said conditions, as reported by the probation officer, it may issue a warrant for
the arrest of the probationer and said probationer may be committed with or without bail. Upon
arraignment and after an opportunity to be heard, the court may revoke, continue or modify the
probation, and if revoked, the court shall order the execution of the sentence originally imposed.
Section 6 prescribes the duties of probation officers: "It shall be the duty of every probation
officer to furnish to all persons placed on probation under his supervision a statement of the
period and conditions of their probation, and to instruct them concerning the same; to keep
informed concerning their conduct and condition; to aid and encourage them by friendly advice
and admonition, and by such other measures, not inconsistent with the conditions imposed by
court as may seem most suitable, to bring about improvement in their conduct and condition; to
report in writing to the court having jurisdiction over said probationers at least once every two
months concerning their conduct and condition; to keep records of their work; make such report
as are necessary for the information of the Secretary of Justice and as the latter may require; and
to perform such other duties as are consistent with the functions of the probation officer and as
the court or judge may direct. The probation officers provided for in this Act may act as parole
officers for any penal or reformatory institution for adults when so requested by the authorities
thereof, and, when designated by the Secretary of Justice shall act as parole officer of persons
released on parole under Act Number Forty-one Hundred and Three, without additional
compensation."

It is argued, however, that even without section 11 probation officers maybe appointed in the
provinces under section 10 of Act which provides as follows:

There is hereby created in the Department of Justice and subject to its supervision and
control, a Probation Office under the direction of a Chief Probation Officer to be
appointed by the Governor-General with the advise and consent of the Senate who shall
receive a salary of four eight hundred pesos per annum. To carry out this Act there is
hereby appropriated out of any funds in the Insular Treasury not otherwise appropriated,
the sum of fifty thousand pesos to be disbursed by the Secretary of Justice, who is hereby
authorized to appoint probation officers and the administrative personnel of the probation
officer under civil service regulations from among those who possess the qualifications,
training and experience prescribed by the Bureau of Civil Service, and shall fix the
compensation of such probation officers and administrative personnel until such positions
shall have been included in the Appropriation Act.

But the probation officers and the administrative personnel referred to in the foregoing section
are clearly not those probation officers required to be appointed for the provinces under section
11. It may be said, reddendo singula singulis, that the probation officers referred to in section 10
above-quoted are to act as such, not in the various provinces, but in the central office known as
the Probation Office established in the Department of Justice, under the supervision of the Chief
Probation Officer. When the law provides that "the probation officer" shall investigate and make
reports to the court (secs. 1 and 4); that "the probation officer" shall supervise and visit the
probationer (sec. 2; sec. 6, par. d); that the probationer shall report to the "probationer officer"
(sec. 3, par. c.), shall allow "the probationer officer" to visit him (sec. 3, par. d), shall truthfully
answer any reasonable inquiries on the part of "the probation officer" concerning his conduct or
condition (sec. 3, par. 4); that the court shall notify "the probation officer" in writing of the
period and terms of probation (sec. 3, last par.), it means the probation officer who is in charge of
a particular probationer in a particular province. It never could have been intention of the
legislature, for instance, to require the probationer in Batanes, to report to a probationer officer in
the City of Manila, or to require a probation officer in Manila to visit the probationer in the said
province of Batanes, to place him under his care, to supervise his conduct, to instruct him
concerning the conditions of his probation or to perform such other functions as are assigned to
him by law.

That under section 10 the Secretary of Justice may appoint as many probation officers as there
are provinces or groups of provinces is, of course possible. But this would be arguing on what
the law may be or should be and not on what the law is. Between is and ought there is a far cry.
The wisdom and propriety of legislation is not for us to pass upon. We may think a law better
otherwise than it is. But much as has been said regarding progressive interpretation and judicial
legislation we decline to amend the law. We are not permitted to read into the law matters and
provisions which are not there. Not for any purpose — not even to save a statute from the doom
of invalidity.
Upon the other hand, the clear intention and policy of the law is not to make the Insular
Government defray the salaries of probation officers in the provinces but to make the provinces
defray them should they desire to have the Probation Act apply thereto. The sum of P50,000,
appropriated "to carry out the purposes of this Act", is to be applied, among other things, for the
salaries of probation officers in the central office at Manila. These probation officers are to
receive such compensations as the Secretary of Justice may fix "until such positions shall have
been included in the Appropriation Act". It was the intention of the legislature to empower the
Secretary of Justice to fix the salaries of the probation officers in the provinces or later on to
include said salaries in an appropriation act. Considering, further, that the sum of P50,000
appropriated in section 10 is to cover, among other things, the salaries of the administrative
personnel of the Probation Office, what would be left of the amount can hardly be said to be
sufficient to pay even nominal salaries to probation officers in the provinces. We take judicial
notice of the fact that there are 48 provinces in the Philippines and we do not think it is seriously
contended that, with the fifty thousand pesos appropriated for the central office, there can be in
each province, as intended, a probation officer with a salary not lower than that of a provincial
fiscal. If this a correct, the contention that without section 11 of Act No. 4221 said act is
complete is an impracticable thing under the remainder of the Act, unless it is conceded that in
our case there can be a system of probation in the provinces without probation officers.

Probation as a development of a modern penology is a commendable system. Probation laws

have been enacted, here and in other countries, to permit what modern criminologist call the
"individualization of the punishment", the adjustment of the penalty to the character of the
criminal and the circumstances of his particular case. It provides a period of grace in order to aid
in the rehabilitation of a penitent offender. It is believed that, in any cases, convicts may be
reformed and their development into hardened criminals aborted. It, therefore, takes advantage of
an opportunity for reformation and avoids imprisonment so long as the convicts gives promise of
reform. (United States vs. Murray [1925], 275 U. S., 347 357, 358; 72 Law. ed., 309; 312, 313;
48 Sup. Ct. Rep., 146; Kaplan vs. Hecht, 24 F. [2d], 664, 665.) The Welfare of society is its chief
end and aim. The benefit to the individual convict is merely incidental. But while we believe that
probation is commendable as a system and its implantation into the Philippines should be
welcomed, we are forced by our inescapable duty to set the law aside because of the repugnancy
to our fundamental law.

In arriving at this conclusion, we have endeavored to consider the different aspects presented by
able counsel for both parties, as well in their memorandums as in their oral argument. We have
examined the cases brought to our attention, and others we have been able to reach in the short
time at our command for the study and deliberation of this case. In the examination of the cases
and in then analysis of the legal principles involved we have inclined to adopt the line of action
which in our opinion, is supported better reasoned authorities and is more conducive to the
general welfare. (Smith, Bell & Co. vs. Natividad [1919], 40 Phil., 136.) Realizing the conflict of
authorities, we have declined to be bound by certain adjudicated cases brought to our attention,
except where the point or principle is settled directly or by clear implication by the more
authoritative pronouncements of the Supreme Court of the United States. This line of approach is
justified because:

(a) The constitutional relations between the Federal and the State governments of the
United States and the dual character of the American Government is a situation which
does not obtain in the Philippines;

(b) The situation of s state of the American Union of the District of Columbia with
reference to the Federal Government of the United States is not the situation of the
province with respect to the Insular Government (Art. I, sec. 8 cl. 17 and 10th
Amendment, Constitution of the United States; Sims vs. Rives, 84 Fed. [2d], 871),

(c) The distinct federal and the state judicial organizations of the United States do not
embrace the integrated judicial system of the Philippines (Schneckenburger vs. Moran
[1936], 35 Off. Gaz., p. 1317);
 (d) "General propositions do not decide concrete cases" (Justice Holmes in Lochner vs.
New York [1904], 198 U. S., 45, 76; 49 Law. ed., 937, 949) and, "to keep pace with . . .
new developments of times and circumstances" (Chief Justice Waite in Pensacola Tel.
Co. vs. Western Union Tel. Co. [1899], 96 U. S., 1, 9; 24 Law. ed., 708; Yale Law
Journal, Vol. XXIX, No. 2, Dec. 1919, 141, 142), fundamental principles should be
interpreted having in view existing local conditions and environment.

Act No. 4221 is hereby declared unconstitutional and void and the writ of prohibition is,
accordingly, granted. Without any pronouncement regarding costs. So ordered.

Avanceña, C.J., Imperial, Diaz and Concepcion, JJ., concur.

Villa-real and Abad Santos, JJ., concur in the result.

G.R. No. L-31685 July 31, 1975

RAMON A. GONZALES, petitioner,

vs.
IMELDA R. MARCOS, as Chairman of the Cultural Center of the Philippines, Father
HORACIO DE LA COSTA, I. P. SOLIONGCO, ERNESTO RUFINO, ANTONIO
MADRIGAL, and ANDRES SORIANO, as Members thereof, respondents.

Ramon A. Gonzales in his own behalf.

Acting Solicitor General Hugo E. Gutierrez; Jr. and Assistant Solicitor General Reynato S. Puno
for respondent Imelda R. Marcos.

Siguion Reyna, Montecillo, Beto and Ongsiako for respondents.

FERNANDO, J.:

It was the novelty of the constitutional question raised, there being an imputation by petitioner
Ramon A. Gonzales of an impermissible encroachment by the President of the Philippines on the
legislative prerogative, that led this Tribunal to give due course to an appeal by certiorari from
an order of dismissal by the Court of First Instance of Manila.1 More specifically, the issue
centered on the validity of the creation in Executive Order No. 30 of a trust for the benefit of the
Filipino people under the name and style of the Cultural Center of the Philippines entrusted with
the task to construct a national theatre, a national music hall, an arts building and facilities, to
awaken our people's consciousness in the nation's cultural heritage and to encourage its
assistance in the preservation, promotion, enhancement and development thereof, with the Board
of Trustees to be appointed by the President, the Center having as its estate the real and personal
property vested in it as well as donations received, financial commitments that could thereafter
be collected, and gifts that may be forthcoming in the future. 2 It was likewise alleged that the
Board of Trustees did accept donations from the private sector and did secure from the Chemical
Bank of New York a loan of $5 million guaranteed by the National Investment & Development
Corporation as well as $3.5 million received from President Johnson of the United States in the
concept of war damage funds, all intended for the construction of the Cultural Center building
estimated to cost P48 million. The Board of Trustees has as its Chairman the First Lady, Imelda
Romualdez Marcos, who is named as the principal respondent.3 In an order of dismissal by the
then Judge, now Justice of the Court of Appeals, Jose G. Bautista of a suit for prohibition filed in
the Court of First Instance of Manila, stress was laid on the funds administered by the Center as
coming from donations and contributions, with not a single centavo raised by taxation, and the
absence of any pecuniary or monetary interest of petitioner that could in any wise be prejudiced
distinct from those of the general public. Moreover, reference was made to the admission by
petitioner of the desirability of the objective of Executive Order No. 30, his objection arising
from the alleged illegality of its issuance.4
There was a motion of respondents to file a motion to dismiss this appeal by certiorari, and it
was granted in a resolution of March 5, 1970. Such a pleading was submitted to this Court
twelve days later, where it was contended that Executive Order No. 30 represented the legitimate
exercise of executive power, there being no invasion of the legislative domain and that it was
supplementary to rather than a disregard of Republic Act No. 4165 creating the National
Commission on Culture. In this exhaustive motion to dismiss, the point was likewise raised that
petitioner did not have the requisite personality to contest as a taxpayer the validity of the
executive order in question, as the funds held by the Cultural Center came from donations and
contributions, not one centavo being raised by taxation.5 Thereafter, a manifestation was filed by
the then Solicitor General, now Associate Justice, Felix Q. Antonio, adopting "the Motion to
Dismiss the Petition dated February 25, 1970, filed by respondents with this Honorable Court."6
There was an opposition to such motion to dismiss on the part of petitioner.7 That was the status
of the case, there being no further pleadings filed except two motions for extension of time to file
answer submitted by the Solicitor General and granted by this Court, when on July 22, 1975,
there was a second motion to dismiss on the part of respondents through the Acting Solicitor
General Hugo E. Gutierrez Jr. and Assistant Solicitor General Reynato S. Puno. It is therein set
forth: "(1) As stated in the petition itself its undeniable quintessence is [the allegation of] "an
executive usurpation of legislative powers, hence, respondents in enforcing the same, are acting
without jurisdiction, hence, are restrainable by prohibition." ... (2) On October 5, 1972,
Presidential Decree No. 15 ... was promulgated creating the Cultural Center of the Philippines,
defining its objectives, powers and functions and other purposes. Section 4, thereof was amended
by Presidential Decree No. 179 ... enacted on April 26, 1973. It is submitted that it is now moot
and academic to discuss the constitutionality of Executive Order No. 30 considering the
promulgation of PD Nos. 15 and 179, done by the President in the exercise of legislative powers
under martial law. Executive Order No. 30 has ceased to exist while PD Nos. 15 and 179 meet
all the constitutional arguments raised in the petition at bar."8

It would thus appear that the petition cannot succeed. There is no justification for setting aside
the order of dismissal. Notwithstanding the exhaustive and scholarly pleadings submitted by
petitioner on his own behalf, the burden of persuasion to warrant a reversal of the action of the
lower court was not met. Both on procedural and substantive grounds, a case for prohibition was
not made out, notwithstanding the valiant efforts of petitioner. With this latest manifestation, that
Executive Order No. 30 had been superseded by Presidential Decree Nos. 15 and 179, the moot
and academic character of this appeal by certiorari became rather obvious. To repeat, the petition
must fail.

1. It may not be amiss though to consider briefly both the procedural and substantive grounds
that led to the lower court's order of dismissal. It was therein pointed out as "one more valid
reason" why such an outcome was unavoidable that "the funds administered by the President of
the Philippines came from donations [and] contributions [not] by taxation." Accordingly, there
was that absence of the "requisite pecuniary or monetary interest." 9 The stand of the lower court
finds support in judicial precedents. 10 This is not to retreat from the liberal approach followed
in Pascual v. Secretary of Public Works, 11 foreshadowed by People v. Vera, 12 where the
doctrine of standing was first fully discussed. It is only to make clear that petitioner, judged by
orthodox legal learning, has not satisfied the elemental requisite for a taxpayer's suit. Moreover,
even on the assumption that public funds raised by taxation were involved, it does not
necessarily follow that such kind of an action to assail the validity of a legislative or executive
act has to be passed upon. This Court, as held in the recent case of Tan v. Macapagal, 13 "is not
devoid of discretion as to whether or not it should be entertained." 14 The lower court thus did
not err in so viewing the situation.

2. Nor was the lower court any more impressed by the contention that there was an
encroachment on the legislative prerogative discernible in the issuance of Executive Order No.
30. It first took note of the exchange of diplomatic notes between the Republic of the Philippines
and the United States as to the use of a special fund coming from the latter for a Philippine
cultural development project. Then, as set forth in the order of dismissal, it explained why no
constitutional objection could be validly interposed. Thus: "When the President, therefore, acted
by disposing of a matter of general concern (Section 63, Rev. Adm. Code) in accord with the
constitutional injunction to promote arts and letters (Section 4, Article XIV, Constitution of the
Philippines) and issued Executive Order No. 30, he simply carried out the purpose of the trust in
establishing the Cultural Center of the Philippines as the instrumentality through which this
agreement between the two governments would be realized. Needless to state, the President
alone cannot and need not personally handle the duties of a trustee for and in behalf of the
Filipino people in relation with this trust. He can do this by means of an executive order by
creating as he did, a group of persons, who would receive and administer the trust estate,
responsible to the President. As head of the State, as chief executive, as spokesman in domestic
and foreign affairs, in behalf of the estate as parens patriae, it cannot be successfully questioned
that the President has authority to implement for the benefit of the Filipino people by creating the
Cultural Center consisting of private citizens to administer the private contributions and
donations given not only by the United States government but also by private persons." 15

There is impressive juridical support for the stand taken by the lower court. Justice Malcolm in
Government of the Philippine Islands v. Springer 16 took pains to emphasize: "Just as surely as
the duty of caring for governmental property is neither judicial nor legislative in character is it as
surely executive." 17 It Would be an unduly narrow or restrictive view of such a principle if the
public funds that accrued by way of donation from the United States and financial contributions
for the Cultural Center project could not be legally considered as "governmental property." They
may be acquired under the concept of dominium, the state as a persona in law not being deprived
of such an attribute, thereafter to be administered by virtue of its prerogative of imperium. 18
What is a more appropriate agency for assuring that they be not wasted or frittered away than the
Executive, the department precisely entrusted with management functions? It would thus appear
that for the President to refrain from taking positive steps and await the action of the then
Congress could be tantamount to dereliction of duty. He had to act; time was of the essence.
Delay was far from conducive to public interest. It was as simple as that. Certainly then, it could
be only under the most strained construction of executive power to conclude that in taking the
step he took, he transgressed on terrain constitutionally reserved for Congress.

This is not to preclude legislative action in the premises. While to the Presidency under the 1935
Constitution was entrusted the responsibility for administering public property, the then
Congress could provide guidelines for such a task. Relevant in this connection is the excerpt
from an opinion of Justice Jackson in Youngstown Sheet & Tube Co. v. Sawyer: 19 "When the
President acts in absence of either a congressional grant or denial of authority, he can only rely
upon his own independent powers, but there is a zone of twilight in which he and Congress may
have concurrent authority, or in which its distribution is uncertain. Therefore, congressional
inertia, indifference or quiescence may sometimes, at least as a practical matter, enable, if not
invite, measures on independent presidential responsibility. In this area, any actual test of power
is likely to depend on the imperative of events and contemporary imponderables rather than on
abstract theories of law." 20 To vary the phraseology, to recall Thomas Reed Powell, if Congress
would continue to keep its peace notwithstanding the action taken by the executive department, it
may be considered as silently vocal. In plainer language, it could be an instance of silence
meaning consent. The Executive Order assailed was issued on June 25, 1966. Congress until the
time of the filing of the petition on August 26, 1969 remained quiescent. Parenthetically, it may
be observed that petitioner waited until almost the day of inaugurating the Cultural Center on
September 11, 1969 before filing his petition in the lower court. However worthy of
commendation was his resolute determination to keep the Presidency within the bounds of its
competence, it cannot be denied that the remedy, if any, could be supplied by Congress asserting
itself in the premises. Instead, there was apparent conformity on its part to the way the President
saw fit to administer such governmental property.

3. The futility of this appeal by certiorari becomes even more apparent with the issuance of
Presidential Decree No. 15 on October 5, 1972. As contended by the Solicitor General, the
matter, as of that date, became moot and academic. Executive Order No. 30 was thus superseded.
The institution known as the Cultural Center is other than that assailed in this suit. In that sense a
coup de grace was administered to this proceeding. The labored attempt of petitioner could thus
be set at rest. This particular litigation is at an end. There is, too, relevance in the observation that
the aforesaid decree is part of the law of the land. So the Constitution provides. 21

4. It only remains to be added that respondents as trustees lived up fully to the weighty
responsibility entrusted to them. The task imposed on them was performed with competence,
fidelity, and dedication. That was to be expected. From the inception of the Marcos
Administration, the First Lady has given unsparingly of herself in the encouragement and
support of literary, musical, and artistic endeavors and in the appreciation of our rich and diverse
cultural heritage. The rest of the then Board of Trustees, named as the other respondents, were
equally deserving of their being chosen for this worthy project. One of them, the late I.P
Soliongco, was in his lifetime one of the most gifted men of letters. Father Horacio de la Costa is
a historian and scholar of international repute. Respondents Ernesto Rufino, Antonio Madrigal
and Andres Soriano, all men of substance, have contributed in time and money to civic efforts. It
is not surprising then that the Cultural Center became a reality, the massive and imposing
structure constructed at a shorter period and at a lower cost than at first thought possible. What is
of even greater significance, with a portion thereof being accessible at modest admission prices,
musical and artistic performances of all kinds are within reach of the lower-income groups. Only
thus may meaning be imparted to the Constitutional provision that arts and letters shall be under
State patronage. 22 For equally important as the encouragement and support for talented
Filipinos with a creative spark is the diffusion of the opportunity for the rest of their countrymen
to savour the finer things in life. Who knows, if state efforts along these lines are diligently
pursued, that what was said by Justice Holmes about France could apply to the Philippines.
Thus: "We have not that respect for art that is one of the glories of France." 23 In justice to
petitioner Gonzales, it may be noted that he did not question the wisdom or soundness of the goal
of having a Cultural Center or the disbursement of the funds by respondents. It is the absence of
statutory authority that bothered him. The lower court did not see things in the same light. It is
easily understandable why, as the preceding discussion has made clear, it cannot be said that
such a conclusion suffered from legal infirmity. What is more, with the issuance of Presidential
Decree No. 15, the suit, to repeat, has assumed a moot and academic character.

WHEREFORE, this appeal by certiorari to review the lower court's order of dismissal dated
December 4, 1969 is dismissed.

No costs.

Makalintal, C.J., Barredo, Esguerra, Muñoz Palma, Aquino, Concepcion Jr. and Martin JJ.,
concur.

Castro and Makasiar, JJ., took no part.

Teehankee and Antonio, JJ., are on leave.

G.R. No. L-31156 February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL.,
defendant appellees.

Sabido, Sabido & Associates for appellant.

Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and
Assistant Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.:
This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No.
3294, which was certified to Us by the Court of Appeals on October 6, 1969, as involving only
pure questions of law, challenging the power of taxation delegated to municipalities under the
Local Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).

On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines,
Inc., commenced a complaint with preliminary injunction before the Court of First Instance of
Leyte for that court to declare Section 2 of Republic Act No. 2264.1 otherwise known as the
Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to
declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null
and void.

On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which
state that, first, both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and
the production tax rates imposed therein are practically the same, and second, that on January 17,
1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the
Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by
the latter of the provisions of said Ordinance No. 27, series of 1962.

Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962,
levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of
a centavo for every bottle of soft drink corked." 2 For the purpose of computing the taxes due,
the person, firm, company or corporation producing soft drinks shall submit to the Municipal
Treasurer a monthly report, of the total number of bottles produced and corked during the month.
3

On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962,
levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of
this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity." 4 For the purpose of computing the taxes due, the person, fun company,
partnership, corporation or plant producing soft drinks shall submit to the Municipal Treasurer a
monthly report of the total number of gallons produced or manufactured during the month. 5

The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production
tax.'

On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the
complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring
Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due
under the oft the said Ordinances; and to pay the costs."

From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of
Appeals, which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of
1948, as amended.

There are three capital questions raised in this appeal:

1. — Is Section 2, Republic Act No. 2264 an undue delegation of power,

confiscatory and oppressive?

2. — Do Ordinances Nos. 23 and 27 constitute double taxation and impose

percentage or specific taxes?

3. — Are Ordinances Nos. 23 and 27 unjust and unfair?

1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a

matter of right to every independent government, without being expressly conferred by the
people. 6 It is a power that is purely legislative and which the central legislative body cannot
delegate either to the executive or judicial department of the government without infringing upon
the theory of separation of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. 7 This is sanctioned by immemorial practice.
8 By necessary implication, the legislative power to create political corporations for purposes of
local self-government carries with it the power to confer on such local governmental agencies the
power to tax. 9 Under the New Constitution, local governments are granted the autonomous
authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides:
"Each local government unit shall have the power to create its sources of revenue and to levy
taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that
Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to
enact and vest in local governments the power of local taxation.

The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense,
would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the
authority, the State is not limited 6 the exact measure of that which is exercised by itself. When it
is said that the taxing power may be delegated to municipalities and the like, it is meant that
there may be delegated such measure of power to impose and collect taxes as the legislature may
deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of
public policy the State has not deemed wise to tax for more general purposes. 10 This is not to
say though that the constitutional injunction against deprivation of property without due process
of law may be passed over under the guise of the taxing power, except when the taking of the
property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose;
(2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is
within the jurisdiction of the government levying the tax; and (4) in the assessment and
collection of certain kinds of taxes notice and opportunity for hearing are provided. 11 Due
process is usually violated where the tax imposed is for a private as distinguished from a public
purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation; and
arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax does not
violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax
will result in an injury rather than a benefit to such taxpayer. Due process does not require that
the property subject to the tax or the amount of tax to be raised should be determined by judicial
inquiry, and a notice and hearing as to the amount of the tax and the manner in which it shall be
apportioned are generally not necessary to due process of law. 12

There is no validity to the assertion that the delegated authority can be declared unconstitutional
on the theory of double taxation. It must be observed that the delegating authority specifies the
limitations and enumerates the taxes over which local taxation may not be exercised. 13 The
reason is that the State has exclusively reserved the same for its own prerogative. Moreover,
double taxation, in general, is not forbidden by our fundamental law, since We have not adopted
as part thereof the injunction against double taxation found in the Constitution of the United
States and some states of the Union.14 Double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity 15 or by the same
jurisdiction for the same purpose, 16 but not in a case where one tax is imposed by the State and
the other by the city or municipality. 17

2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation,
because these two ordinances cover the same subject matter and impose practically the same tax
rate. The thesis proceeds from its assumption that both ordinances are valid and legally
enforceable. This is not so. As earlier quoted, Ordinance No. 23, which was approved on
September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax of one-
sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the
bottle used. When it was discovered that the producer or manufacturer could increase the volume
contents of the bottle and still pay the same tax rate, the Municipality of Tanauan enacted
Ordinance No. 27, approved on October 28, 1962, imposing a tax of one centavo (P0.01) on each
gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the two ordinances
clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a
centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan
in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior
Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. 18
Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce
Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting
Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant
of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows
that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the
Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of
Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter
are inconsistent with the provisions of the former."

That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage
or a specific tax. Undoubtedly, the taxing authority conferred on local governments under
Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting
those which are mentioned therein." As long as the text levied under the authority of a city or
municipal ordinance is not within the exceptions and limitations in the law, the same comes
within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio
firmat regulum in cabisus non excepti 19 The limitation applies, particularly, to the prohibition
against municipalities and municipal districts to impose "any percentage tax or other taxes in any
form based thereon nor impose taxes on articles subject to specific tax except gasoline, under the
provisions of the National Internal Revenue Code." For purposes of this particular limitation, a
municipal ordinance which prescribes a set ratio between the amount of the tax and the volume
of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the
municipality to enact. 20 But, the imposition of "a tax of one centavo (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity" on all soft drinks produced or manufactured under
Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or other taxes in
any form based thereon. The tax is levied on the produce (whether sold or not) and not on the
sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for
purposes of determining the tax rate on the products, but there is not set ratio between the
volume of sales and the amount of the tax.21

Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified
articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars
and cigarettes, matches firecrackers, manufactured oils and other fuels, coal, bunker fuel oil,
diesel fuel oil, cinematographic films, playing cards, saccharine, opium and other habit-forming
drugs. 22 Soft drink is not one of those specified.

3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all
softdrinks, produced or manufactured, or an equivalent of 1-½ centavos per case, 23 cannot be
considered unjust and unfair. 24 an increase in the tax alone would not support the claim that the
tax is oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion in
determining the reates of imposable taxes. 25 This is in line with the constutional policy of
according the widest possible autonomy to local governments in matters of local taxation, an
aspect that is given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the
amount is so excessive as to be prohibitive, courts will go slow in writing off an ordinance as
unreasonable. 27 Reluctance should not deter compliance with an ordinance such as Ordinance
No. 27 if the purpose of the law to further strengthen local autonomy were to be realized. 28

Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than
ten crowners or P2,000.00 with ten but not more than twenty crowners imposed on
manufacturers, producers, importers and dealers of soft drinks and/or mineral waters under
Ordinance No. 54, series of 1964, as amended by Ordinance No. 41, series of 1968, of defendant
Municipality, 29 appears not to affect the resolution of the validity of Ordinance No. 27.
Municipalities are empowered to impose, not only municipal license taxes upon persons engaged
in any business or occupation but also to levy for public purposes, just and uniform taxes. The
ordinance in question (Ordinance No. 27) comes within the second power of a municipality.

ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known
as the Local Autonomy Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of
the Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23,
same series, is hereby declared of valid and legal effect. Costs against petitioner-appellant.

SO ORDERED.

Castro, C.J., Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino and
Concepcion, Jr., JJ., concur.

Separate Opinions

FERNANDO, J., concurring:

The opinion of the Court penned by Justice Martin is impressed with a scholarly and
comprehensive character. Insofar as it shows adherence to tried and tested concepts of the law of
municipal taxation, I am only in agreement. If I limit myself to concurrence in the result, it is
primarily because with the article on Local Autonomy found in the present Constitution, I feel a
sense of reluctance in restating doctrines that arose from a different basic premise as to the scope
of such power in accordance with the 1935 Charter. Nonetheless it is well-nigh unavoidable that
I do so as I am unable to share fully what for me are the nuances and implications that could
arise from the approach taken by my brethren. Likewise as to the constitutional aspect of the
thorny question of double taxation, I would limit myself to what has been set forth in City of
Baguio v. De Leon.1

1. The present Constitution is quite explicit as to the power of taxation vested in local and
municipal corporations. It is therein specifically provided: "Each local government unit shall
have the power to create its own sources of revenue and to levy taxes subject to such limitations
as may be provided by law. 2 That was not the case under the 1935 Charter. The only limitation
then on the authority, plenary in character of the national government, was that while the
President of the Philippines was vested with the power of control over all executive departments,
bureaus, or offices, he could only . It exercise general supervision over all local governments as
may be provided by law ... 3 As far as legislative power over local government was concerned,
no restriction whatsoever was placed on the Congress of the Philippines. It would appear
therefore that the extent of the taxing power was solely for the legislative body to decide. It is
true that in 1939, there was a statute that enlarged the scope of the municipal taxing power. 4
Thereafter, in 1959 such competence was further expanded in the Local Autonomy Act. 5
Nevertheless, as late as December of 1964, five years after its enactment of the Local Autonomy
Act, this Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of Butuan, 6
reaffirmed the traditional concept in these words: "The rule is well-settled that municipal
corporations, unlike sovereign states, after clothed with no power of taxation; that its charter or a
statute must clearly show an intent to confer that power or the municipal corporation cannot
assume and exercise it, and that any such power granted must be construed strictly, any doubt or
ambiguity arising from the terms of the grant to be resolved against the municipality."7

Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao,8 "is
an attribute of sovereignty which municipal corporations do not enjoy." 9 That case left no doubt
either as to weakness of a claim "based merely by inferences, implications and deductions, [as
they have no place in the interpretation of the power to tax of a municipal corporation." 10 As
the conclusion reached by the Court finds support in such grant of the municipal taxing power, I
concur in the result. 2. As to any possible infirmity based on an alleged double taxation, I would
prefer to rely on the doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus:
"As to why double taxation is not violative of due process, Justice Holmes made clear in this
language: 'The objection to the taxation as double may be laid down on one side. ... The 14th
Amendment [the due process clause) no more forbids double taxation than it does doubling the
amount of a tax, short of (confiscation or proceedings unconstitutional on other grouse With that
decision rendered at a time when American sovereignty in the Philippines was recognized, it
possesses more than just a persuasive effect. To some, it delivered the coup justice to the bogey
of double taxation as a constitutional bar to the exercise of the taxing power. It would seem
though that in the United States, as with us, its ghost, as noted by an eminent critic, still stalks
the juridical stage. 'In a 1947 decision, however, we quoted with approval this excerpt from a
leading American decision: 'Where, as here, Congress has clearly expressed its intention, the
statute must be sustained even though double taxation results. 12

So I would view the issues in this suit and accordingly concur in the result.

Separate Opinions

FERNANDO, J., concurring:

The opinion of the Court penned by Justice Martin is impressed with a scholarly and
comprehensive character. Insofar as it shows adherence to tried and tested concepts of the law of
municipal taxation, I am only in agreement. If I limit myself to concurrence in the result, it is
primarily because with the article on Local Autonomy found in the present Constitution, I feel a
sense of reluctance in restating doctrines that arose from a different basic premise as to the scope
of such power in accordance with the 1935 Charter. Nonetheless it is well-nigh unavoidable that
I do so as I am unable to share fully what for me are the nuances and implications that could
arise from the approach taken by my brethren. Likewise as to the constitutional aspect of the
thorny question of double taxation, I would limit myself to what has been set forth in City of
Baguio v. De Leon.1

1. The present Constitution is quite explicit as to the power of taxation vested in local and
municipal corporations. It is therein specifically provided: "Each local government unit shall
have the power to create its own sources of revenue and to levy taxes subject to such limitations
as may be provided by law. 2 That was not the case under the 1935 Charter. The only limitation
then on the authority, plenary in character of the national government, was that while the
President of the Philippines was vested with the power of control over all executive departments,
bureaus, or offices, he could only . It exercise general supervision over all local governments as
may be provided by law ... 3 As far as legislative power over local government was concerned,
no restriction whatsoever was placed on the Congress of the Philippines. It would appear
therefore that the extent of the taxing power was solely for the legislative body to decide. It is
true that in 1939, there was a statute that enlarged the scope of the municipal taxing power. 4
Thereafter, in 1959 such competence was further expanded in the Local Autonomy Act. 5
Nevertheless, as late as December of 1964, five years after its enactment of the Local Autonomy
Act, this Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of Butuan, 6
reaffirmed the traditional concept in these words: "The rule is well-settled that municipal
corporations, unlike sovereign states, after clothed with no power of taxation; that its charter or a
statute must clearly show an intent to confer that power or the municipal corporation cannot
assume and exercise it, and that any such power granted must be construed strictly, any doubt or
ambiguity arising from the terms of the grant to be resolved against the municipality."7
Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao,8 "is
an attribute of sovereignty which municipal corporations do not enjoy." 9 That case left no doubt
either as to weakness of a claim "based merely by inferences, implications and deductions, [as
they have no place in the interpretation of the power to tax of a municipal corporation." 10 As
the conclusion reached by the Court finds support in such grant of the municipal taxing power, I
concur in the result. 2. As to any possible infirmity based on an alleged double taxation, I would
prefer to rely on the doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus:
"As to why double taxation is not violative of due process, Justice Holmes made clear in this
language: 'The objection to the taxation as double may be laid down on one side. ... The 14th
Amendment [the due process clause) no more forbids double taxation than it does doubling the
amount of a tax, short of (confiscation or proceedings unconstitutional on other grouse With that
decision rendered at a time when American sovereignty in the Philippines was recognized, it
possesses more than just a persuasive effect. To some, it delivered the coup justice to the bogey
of double taxation as a constitutional bar to the exercise of the taxing power. It would seem
though that in the United States, as with us, its ghost, as noted by an eminent critic, still stalks
the juridical stage. 'In a 1947 decision, however, we quoted with approval this excerpt from a
leading American decision: 'Where, as here, Congress has clearly expressed its intention, the
statute must be sustained even though double taxation results. 12

So I would view the issues in this suit and accordingly concur in the result.

G.R. No. L-4043 May 26, 1952

CENON S. CERVANTES, petitioner,

vs.
THE AUDITOR GENERAL, respondent.

Cenon Cervantes in his own behalf.

Office of the Solicitor General Pompeyo Diaz and Solicitor Felix V. Makasiar for respondent.

REYES, J.:

This is a petition to review a decision of the Auditor General denying petitioner's claim for
quarters allowance as manager of the National Abaca and Other Fibers Corporation, otherwise
known as the NAFCO.

It appears that petitioner was in 1949 the manager of the NAFCO with a salary of P15,000 a
year. By a resolution of the Board of Directors of this corporation approved on January 19 of that
year, he was granted quarters allowance of not exceeding P400 a month effective the first of that
month. Submitted the Control Committee of the Government Enterprises Council for approval,
the said resolution was on August 3, 1949, disapproved by the said Committee on strenght of the
recommendation of the NAFCO auditor, concurred in by the Auditor General, (1) that quarters
allowance constituted additional compensation prohibited by the charter of the NAFCO, which
fixes the salary of the general manager thereof at the sum not to exceed P15,000 a year, and (2)
that the precarious financial condition of the corporation did not warrant the granting of such
allowance.

On March 16, 1949, the petitioner asked the Control Committee to reconsider its action and
approve his claim for allowance for January to June 15, 1949, amounting to P1,650. The claim
was again referred by the Control Committee to the auditor General for comment. The latter, in
turn referred it to the NAFCO auditor, who reaffirmed his previous recommendation and
emphasized that the fact that the corporation's finances had not improved. In view of this, the
auditor General also reiterated his previous opinion against the granting of the petitioner's claim
and so informed both the Control Committee and the petitioner. But as the petitioner insisted on
his claim the Auditor General Informed him on June 19, 1950, of his refusal to modify his
decision. Hence this petition for review.
The NAFCO was created by the Commonwealth Act No. 332, approved on June 18, 1939, with a
capital stock of P20,000,000, 51 per cent of which was to be able to be subscribed by the
National Government and the remainder to be offered to provincial, municipal, and the city
governments and to the general public. The management the corporation was vested in a board of
directors of not more than 5 members appointed by the president of the Philippines with the
consent of the Commission on Appointments. But the corporation was made subject to the
provisions of the corporation law in so far as they were compatible with the provisions of its
charter and the purposes of which it was created and was to enjoy the general powers mentioned
in the corporation law in addition to those granted in its charter. The members of the board were
to receive each a per diem of not to exceed P30 for each day of meeting actually attended, except
the chairman of the board, who was to be at the same time the general manager of the
corporation and to receive a salary not to exceed P15,000 per annum.

On October 4, 1946, Republic Act No. 51 was approved authorizing the President of the
Philippines, among other things, to effect such reforms and changes in government owned and
controlled corporations for the purpose of promoting simplicity, economy and efficiency in their
operation Pursuant to this authority, the President on October 4, 1947, promulgated Executive
Order No. 93 creating the Government Enterprises Council to be composed of the President of
the Philippines as chairman, the Secretary of Commerce and Industry as vice-chairman, the
chairman of the board of directors and managing heads of all such corporations as ex-officio
members, and such additional members as the President might appoint from time to time with the
consent of the Commission on Appointments. The council was to advise the President in the
excercise of his power of supervision and control over these corporations and to formulate and
adopt such policy and measures as might be necessary to coordinate their functions and
activities. The Executive Order also provided that the council was to have a Control Committee
composed of the Secretary of Commerce and Industry as chairman, a member to be designated
by the President from among the members of the council as vice-chairman and the secretary as
ex-officio member, and with the power, among others —

(1) To supervise, for and under the direction of the President, all the corporations owned
or controlled by the Government for the purpose of insuring efficiency and economy in
their operations;

(2) To pass upon the program of activities and the yearly budget of expenditures
approved by the respective Boards of Directors of the said corporations; and

(3) To carry out the policies and measures formulated by the Government Enterprises
Council with the approval of the President. (Sec. 3, Executive Order No. 93.)

With its controlling stock owned by the Government and the power of appointing its directors
vested in the President of the Philippines, there can be no question that the NAFCO is
Government controlled corporation subject to the provisions of Republic Act No. 51 and the
executive order (No. 93) promulgated in accordance therewith. Consequently, it was also subject
to the powers of the Control Committee created in said executive order, among which is the
power of supervision for the purpose of insuring efficiency and economy in the operations of the
corporation and also the power to pass upon the program of activities and the yearly budget of
expenditures approved by the board of directors. It can hardly be questioned that under these
powers the Control Committee had the right to pass upon, and consequently to approve or
disapprove, the resolution of the NAFCO board of directors granting quarters allowance to the
petitioners as such allowance necessarily constitute an item of expenditure in the corporation's
budget. That the Control Committee had good grounds for disapproving the resolution is also
clear, for, as pointed out by the Auditor General and the NAFCO auditor, the granting of the
allowance amounted to an illegal increase of petitioner's salary beyond the limit fixed in the
corporate charter and was furthermore not justified by the precarious financial condition of the
corporation.
It is argued, however, that Executive Order No. 93 is null and void, not only because it is based
on a law that is unconstitutional as an illegal delegation of legislature power to executive, but
also because it was promulgated beyond the period of one year limited in said law.

The second ground ignores the rule that in the computation of the time for doing an act, the first
day is excluded and the last day included (Section 13 Rev. Ad. Code.) As the act was approved
on October 4, 1946, and the President was given a period of one year within which to promulgate
his executive order and that the order was in fact promulgated on October 4, 1947, it is obvious
that under the above rule the said executive order was promulgated within the period given.

As to the first ground, the rule is that so long as the Legislature "lays down a policy and a
standard is established by the statute" there is no undue delegation. (11 Am. Jur. 957). Republic
Act No. 51 in authorizing the President of the Philippines, among others, to make reforms and
changes in government-controlled corporations, lays down a standard and policy that the purpose
shall be to meet the exigencies attendant upon the establishment of the free and independent
government of the Philippines and to promote simplicity, economy and efficiency in their
operations. The standard was set and the policy fixed. The President had to carry the mandate.
This he did by promulgating the executive order in question which, tested by the rule above
cited, does not constitute an undue delegation of legislative power.

It is also contended that the quarters allowance is not compensation and so the granting of it to
the petitioner by the NAFCO board of directors does not contravene the provisions of the
NAFCO charter that the salary of the chairman of said board who is also to be general manager
shall not exceed P15,000 per anum. But regardless of whether quarters allowance should be
considered as compensation or not, the resolution of the board of the directors authorizing
payment thereof to the petitioner cannot be given effect since it was disapproved by the Control
Committee in the exercise of powers granted to it by Executive Order No. 93. And in any event,
petitioner's contention that quarters allowance is not compensation, a proposition on which
American authorities appear divided, cannot be insisted on behalf of officers and employees
working for the Government of the Philippines and its Instrumentalities, including, naturally,
government-controlled corporations. This is so because Executive Order No. 332 of 1941, which
prohibits the payment of additional compensation to those working for the Government and its
Instrumentalities, including government-controlled corporations, was in 1945 amended by
Executive Order No. 77 by expressly exempting from the prohibition the payment of quarters
allowance "in favor of local government officials and employees entitled to this under existing
law." The amendment is a clear indication that quarters allowance was meant to be included in
the term "additional compensation", for otherwise the amendment would not have expressly
excepted it from the prohibition. This being so, we hold that, for the purpose of the executive
order just mentioned, quarters allowance is considered additional compensation and, therefore,
prohibited.

In view of the foregoing, the petition for review is dismissed, with costs.

Paras, C.J., Feria, Pablo, Bengzon, Tuason, Montemayor and Bautista Angelo, JJ., concur.