UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW Consti Law II

Minette Megino (E2024) Prof. Loanzon

Manila Memorial Park, Inc. v. Secretary of DSWD

G.R. No. 175356 – December 3, 2013
EN BANC | Del Castillo, J.

Article/s Invoked:
Art. XV, Sec. 4 of the Constitution. The family has the duty to care for its elderly members but the State may also do
so through just programs of social security.
Art. XIII, Sec. 11 of the Constitution. The State shall adopt an integrated and comprehensive approach to health
development which shall endeavor to make essential goods, health and other social services available to all the people
at affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled, women and
children. […]

Case Summary:
Petitioners (business establishments) assailed the constitutionality of R.A. No. 7432 as amended by R.A. No. 9257,
imposing 20% discount to senior citizens since that they would suffer losses by way of permanent reduction in their
profits due to the discount and that allowing them to claim the discount as tax deductions is not a just compensation for
the taking of their property. This is on the premise that the law was an exercise of eminent domain. The Court ruled that
the discount is a mere price regulation measure and not a taking of property. Petitioners’ failure to establish that said
law was confiscatory as would result to a “taking”, validity of the exercise of police power was upheld.

FACTS OF THE CASE

• Manila Memorial Park and La Funeraria (petitioners) are both engaged in the business of providing funeral and
burial services.
• R.A. No. 7432 as amended by R.A. No. 9257 was passed which:
o Granted a 20% discount to senior citizens from establishments including funeral and burial services.
o As reimbursement to the establishments, such sales discounts were allowed as deduction from gross
income.
• Petitioners alleged that the tax deduction scheme is unconstitutional because it violates:
Provision Support
The 20% discount privilege constitutes taking of private
Art. III, Sec. 9 property for public use which requires just compensation.
Private property shall not be taken for public (Central Luzon Drug Corp. case)
use without just compensation. Tax deduction scheme does not meet the definition of just
compensation. (Carlos Superdrug Corp. case)
It shifts the State’s constitutional mandate of improving
Art. XV, Sec. 4 and Art. XIII, Sec. 11
welfare of elderly to the private sector.
o This is on the premise that said law was an exercise of the power of eminent domain.
o They also argued that eminent domain cannot be made less supreme than police power.
– Ruling in Carlos Superdrug Corp. which is similar to the case at bar justified the tax deduction
scheme as an exercise of police power over eminent domain.

ISSUE/S & RATIO/S

1. W/N the 20% senior citizen discount is an exercise of police power or eminent domain? — HELD: POLICE
POWER
• To determine which was exercised, we look at the nature and effects of the challenged governmental act
• The subject regulation affects the pricing, and, hence, the profitability of a private establishment.
o It does not purport to appropriate or burden specific properties, used in the operation or conduct of the
business of private establishments, for the use or benefit of the public (essence of eminent domain)
o Subject regulation may be said to be similar to, but with substantial distinctions from, price control or
rate of return on investment control laws which are traditionally regarded as police power measures.
– Distinctions of the 20% discount from price control:
1. the discount does not prevent the establishments from adjusting the level of prices of their
goods and services, and
2. the discount does not apply to all customers of a given establishment but only to the class
of senior citizens
 UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW Consti Law II
Minette Megino (E2024) Prof. Loanzon
• Obiter in Central Luzon Drug Corp. that 20% discount is an exercise of eminent domain since it would have
formed part of gross sales had it not been for the law and the tax credit (under the previous law), equivalent to
the discount, is the compensation, is flawed.
o The pricing which affected profitability is not a taking of private property.
o If it is, then it would mean that government cannot set prices or rates of investment limits, if no just
compensation is paid, even if measure is NOT confiscatory.
o This contradicts the well-settled doctrine that State can employ police power to regulate pricing of
goods and services, provided the regulation does not go too far as “taking”
– Whether the regulation becomes a “taking” must be determined on a case-to-case basis
– Whether the line between regulation and taking is crossed, it must be subject to proof and the
one assailing the constitutionality of the regulation carries the heavy burden of proving that
the measure is unreasonable, oppressive or confiscatory.
– Petitioners were not able to establish that they were forced to suffer enormous losses because
of the imposed discount by way of permanent reduction in their profits. They merely
presented a hypothetical computation of loss they would allegedly suffer.

2. W/N the 20% senior citizen discount is valid exercise of police power? — HELD: YES
• To be a valid exercise of police power, it must have a lawful subject or objective and a lawful method of
accomplishing the goal.
Lawful subject
• The Senior Citizen’s Act was enacted to maximize the contribution of senior citizens to nation-building and to
grant benefits and privileges to them for their improvement as the State considers them as integral part of society.
o Priority given to senior citizens finds its basis in:
Art. XV, Sec. 4 of the Constitution
– The family has the duty to care for its elderly members but the State may also do so through just
programs of social security.
Art. XIII, Sec. 11 of the Constitution
– The State shall adopt an integrated and comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all the people at
affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled,
women and children […]
Lawful means
• The State invoked the active participation of the private sector through R.A. No. 7432 by granting 20%
discount to senior citizens from business establishments.
• The State can intervene in the operations of a business which may result in an impairment of property rights in
the process.
• Police power as an attribute to promote the common good would be diluted if on mere plea of petitioners that
they will suffer loss of earnings and capital, it is invalidated.
o In the absence of evidence demonstrating that the law is unduly oppressive, its validity is presumed.
o Congress may have legitimately concluded that business establishments have the capacity to absorb a
decrease in profits or income/gross sales due to the 20% discount without substantially affecting the
reasonable rate of return on their investments considering:
– Not all customers of a business establishment are senior citizens
– the level of its profit margins on goods and services offered to the general public
– Establishments have the capacity to revise their pricing strategy so that whatever reduction in
profits or that they may sustain because of sales to senior citizens, can be recouped through
higher mark-ups or from other products not subject of discounts
o Petitioners have not taken time to submit a financial report to show that they will be operating at a loss
should they give a discount.
– They tried to show a computation of loss but on a transaction basis.
– Computation shown was flawed because it assumes all their customers are senior citizens.
o They cannot reproach the law as oppressive just because they can’t raise their prices for fear of losing
their customers to competition.

RULING
WHEREFORE, the Petition is hereby DISMISSED for lack of merit.
 UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW Consti Law II
Minette Megino (E2024) Prof. Loanzon
SEPARATE OPINION/S

NOTES
How petitioners viewed the regulation as an exercise of eminent domain
• Granting of 20% discount to senior citizens = Permanent reduction in total revenues = Taking of private
property
– This is a forced subsidy corresponding to the taking of private property for public use or benefit.
• Claiming discount as tax deduction = Compensation
– Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator.
– A tax deduction does not offer full reimbursement of the senior citizen discount
– It merely offers a fractional reduction of taxes owed.
– Hence, it does not meet the definition of just compensation.

Central Luzon Drug Corporation case

• We ruled that the BIR acted ultra vires when it effectively treated the 20% discount as a tax deduction when the
law said it must be tax credit.
• We were, therefore, not confronted in that case with the issue as to whether the 20% discount is an exercise of
police power or eminent domain.

Police power vs Eminent Domain

Police Power Eminent Domain

Property right is impaired by regulation or the use of There is a taking of private property. Normally, title to
property is merely prohibited, regulated or restricted. and possession of the property are transferred to the
expropriating authority but not essential for “taking” of
property to be present.
No compensable taking so payment of just compensation Property interests are appropriated and applied to some
not required. public purpose which necessitates the payment of just
The regulation affects the right of ownership, but not compensation.
appropriated for use by or for the benefit of the public.
It is for the public good. It is for the public good.
Example: building on the verge of collapse to be Examples: acquisition of lands for the construction of
demolished for public safety public highways as well as agricultural lands acquired by
the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries.