G.R. No.

133640 November 25, 2005 x --------------------------------------------- x

RODOLFO S. BELTRAN, doing business G.R. No. 139147

under the name and style, OUR LADY OF
FATIMA BLOOD BANK, FELY G. MOSALE, RODOLFO S. BELTRAN, doing business
doing business under the name and style, under the name and style, OUR LADY OF
MOTHER SEATON BLOOD BANK; PEOPLES FATIMA BLOOD BANK, FELY G. MOSALE,
BLOOD BANK, INC.; MARIA VICTORIA T. doing business under the name and style,
VITO, M.D., doing business under the name MOTHER SEATON BLOOD BANK; PEOPLES
and style, AVENUE BLOOD BANK; JESUS M. BLOOD BANK, INC.; MARIA VICTORIA T.
GARCIA, M.D., doing business under the VITO, M.D., doing business under the name
name and style, HOLY REDEEMER BLOOD and style, AVENUE BLOOD BANK; JESUS M.
BANK, ALBERT L. LAPITAN, doing business GARCIA, M.D., doing business under the
under the name and style, BLUE CROSS name and style, HOLY REDEEMER BLOOD
BLOOD TRANSFUSION SERVICES; BANK, ALBERT L. LAPITAN, doing business
EDGARDO R. RODAS, M.D., doing business under the name and style, BLUE CROSS
under the name and style, RECORD BLOOD BLOOD TRANSFUSION SERVICES;
BANK, in their individual capacities and for EDGARDO R. RODAS, M.D., doing business
and in behalf of PHILIPPINE ASSOCIATION under the name and style, RECORD BLOOD
OF BLOOD BANKS, Petitioners, BANK, in their Individual capacities and for
vs. and in behalf of PHILIPPINE ASSOCIATION
THE SECRETARY OF HEALTH, Respondent. OF BLOOD BANKS, Petitioners,
vs.
x ------------------------------------------------ x THE SECRETARY OF HEALTH, Respondent.

G.R. No. 133661 DECISION

DOCTORS BLOOD CENTER, Petitioner, AZCUNA, J.:

vs.
DEPARTMENT OF HEALTH, Respondent.
Before this Court are petitions assailing primarily The above cases were consolidated in a
the constitutionality of Section 7 of Republic Act resolution of the Court En Banc dated June 2,
No. 7719, otherwise known as the "National 1998.3
Blood Services Act of 1994," and the validity of
Administrative Order (A.O.) No. 9, series of 1995 G.R. No. 139147,4 entitled "Rodolfo S. Beltran,
or the Rules and Regulations Implementing doing business under the name and style, Our
Republic Act No. 7719. Lady of Fatima Blood Bank, et al., vs. The
Secretary of Health," on the other hand, is a
G.R. No. 133640,1 entitled "Rodolfo S. Beltran, petition to show cause why respondent Secretary
doing business under the name and style, Our of Health should not be held in contempt of court.
Lady of Fatima Blood Bank, et al., vs. The
Secretary of Health" and G.R. No. This case was originally assigned to the Third
2
133661, entitled "Doctors Blood Bank Center Division of this Court and later consolidated with
vs. Department of Health" are petitions for G.R. Nos. 133640 and 133661 in a resolution
certiorari and mandamus, respectively, seeking dated August 4, 1999.5
the annulment of the following: (1) Section 7 of
Petitioners comprise the majority of the Board of
Republic Act No. 7719; and, (2) Administrative
Directors of the Philippine Association of Blood
Order (A.O.) No. 9, series of 1995. Both petitions
Banks, a duly registered non-stock and non-profit
likewise pray for the issuance of a writ of
association composed of free standing blood
prohibitory injunction enjoining the Secretary of
banks.
Health from implementing and enforcing the
aforementioned law and its Implementing Rules Public respondent Secretary of Health is being
and Regulations; and, for a mandatory injunction sued in his capacity as the public official directly
ordering and commanding the Secretary of involved and charged with the enforcement and
Health to grant, issue or renew petitioners implementation of the law in question.
license to operate free standing blood banks
(FSBB). The facts of the case are as follows:
Republic Act No. 7719 or the National Blood "Section 23. Process of Phasing Out. -- The
Services Act of 1994 was enacted into law on Department shall effect the phasing-out of all
April 2, 1994. The Act seeks to provide commercial blood banks over a period of two (2)
years, extendible for a maximum period of two
an adequate supply of safe blood by promoting (2) years after the effectivity of R.A. 7719. The
voluntary blood donation and by regulating blood decision to extend shall be based on the result of
banks in the country. It was approved by then a careful study and review of the blood supply
President Fidel V. Ramos on May 15, 1994 and and demand and public safety."8
was subsequently published in the Official
Gazette on August 18, 1994. The law took effect Blood banking and blood transfusion services in
on August 23, 1994. the country have been arranged in four (4)
categories: blood centers run by the Philippine
On April 28, 1995, Administrative Order No. 9, National Red Cross (PNRC), government-run
Series of 1995, constituting the Implementing blood services, private hospital blood banks, and
Rules and Regulations of said law was commercial blood services.
promulgated by respondent Secretary of the
Department of Health (DOH).6 Years prior to the passage of the National Blood
Services Act of 1994, petitioners have already
Section 7 of R.A. 7719 7 provides: been operating commercial blood banks under
Republic Act No. 1517, entitled "An Act
"Section 7. Phase-out of Commercial Blood Regulating the Collection, Processing and Sale
Banks - All commercial blood banks shall be of Human Blood, and the Establishment and
phased-out over a period of two (2) years after Operation of Blood Banks and Blood Processing
the effectivity of this Act, extendable to a Laboratories." The law, which was enacted on
maximum period of two (2) years by the June 16, 1956, allowed the establishment and
Secretary." operation by licensed physicians of blood banks
and blood processing laboratories. The Bureau
Section 23 of Administrative Order No. 9
of Research and Laboratories (BRL) was created
provides:
in 1958 and was given the power to regulate
clinical laboratories in 1966 under Republic Act principles that should be taken into
No. 4688. In 1971, the Licensure Section was consideration. By 1985, the ISBT had
created within the BRL. It was given the duty to disseminated guidelines requiring AIDS testing
enforce the licensure requirements for blood of blood and blood products for transfusion.10
banks as well as clinical laboratories. Due to this
development, Administrative Order No. 156, In 1989, another revision of the Blood Banking
Series of 1971, was issued. The new rules and Guidelines was made. The DOH issued
regulations triggered a stricter enforcement of Administrative Order No. 57, Series of 1989,
the Blood Banking Law, which was characterized which classified banks into primary, secondary
by frequent spot checks, immediate suspension and tertiary depending on the services they
and communication of such suspensions to provided. The standards were adjusted
hospitals, a more systematic record-keeping and according to this classification. For instance, floor
frequent communication with blood banks area requirements varied according to
through monthly information bulletins. classification level. The new guidelines likewise
Unfortunately, by the 1980s, financial difficulties required Hepatitis B and HIV testing, and that the
constrained the BRL to reduce the frequency of blood bank be headed by a pathologist or a
its supervisory visits to the blood banks.9 hematologist.11

Meanwhile, in the international scene, concern In 1992, the DOH issued Administrative Order
for the safety of blood and blood products No. 118-A institutionalizing the National Blood
intensified when the dreaded disease Acute Services Program (NBSP). The BRL was
Immune Deficiency Syndrome (AIDS) was first designated as the central office primarily
described in 1979. In 1980, the International responsible for the NBSP. The program paved
Society of Blood Transfusion (ISBT) formulated the way for the creation of a committee that will
the Code of Ethics for Blood Donation and implement the policies of the program and the
Transfusion. In 1982, the first case of formation of the Regional Blood Councils.
transfusion-associated AIDS was described in
In August 1992, Senate Bill No. 1011, entitled
an infant. Hence, the ISBT drafted in 1984, a
"An Act Promoting Voluntary Blood Donation,
model for a national blood policy outlining certain
Providing for an Adequate Supply of Safe Blood,
Regulating Blood Banks and Providing Penalties times more blood than the Red Cross and fifteen
for Violations Thereof, and for other Purposes" times more than the government-run blood
was introduced in the Senate.12 banks. The study, therefore, showed that the
Philippines heavily relied on commercial sources
Meanwhile, in the House of Representatives, of blood. The study likewise revealed that 99.6%
House Bills No. 384, 546, 780 and 1978 were of the donors of commercial blood banks and
being deliberated to address the issue of safety 77.0% of the donors of private-hospital based
of the Philippine blood bank system. blood banks are paid donors. Paid donors are
Subsequently, the Senate and House Bills were those who receive remuneration for donating
referred to the appropriate committees and their blood. Blood donors of the PNRC and
subsequently consolidated.13 government-run hospitals, on the other hand, are
mostly voluntary.14
In January of 1994, the New Tropical Medicine
Foundation, with the assistance of the U.S. It was further found, among other things, that
Agency for International Development (USAID) blood sold by persons to blood commercial
released its final report of a study on the banks are three times more likely to have any of
Philippine blood banking system entitled "Project the four (4) tested infections or blood transfusion
to Evaluate the Safety of the Philippine Blood transmissible diseases, namely, malaria,
Banking System." It was revealed that of the syphilis, Hepatitis B and Acquired Immune
blood units collected in 1992, 64.4 % were Deficiency Syndrome (AIDS) than those donated
supplied by commercial blood banks, 14.5% by to PNRC.15
the PNRC, 13.7% by government hospital-based
blood banks, and 7.4% by private hospital-based Commercial blood banks give paid donors
blood banks. During the time the study was varying rates around P50 to P150, and because
made, there were only twenty-four (24) of this arrangement, many of these donors are
registered or licensed free-standing or poor, and often they are students, who need
commercial blood banks in the country. Hence, cash immediately. Since they need the money,
with these numbers in mind, the study deduced these donors are not usually honest about their
that each commercial blood bank produces five medical or social history. Thus, blood from
healthy, voluntary donors who give their true On May 20, 1998, prior to the expiration of the
medical and social history are about three times licenses granted to petitioners, they filed a
much safer than blood from paid donors.16 petition for certiorari with application for the
issuance of a writ of preliminary injunction or
What the study also found alarming is that many temporary restraining order under Rule 65 of the
Filipino doctors are not yet fully trained on the Rules of Court assailing the constitutionality and
specific indications for blood component validity of the aforementioned Act and its
transfusion. They are not aware of the lack of Implementing Rules and Regulations. The case
blood supply and do not feel the need to adjust was entitled "Rodolfo S. Beltran, doing business
their practices and use of blood and blood under the name and style, Our Lady of Fatima
products. It also does not matter to them where Blood Bank," docketed as G.R. No. 133640.
the blood comes from.17
On June 1, 1998, petitioners filed an Amended
On August 23, 1994, the National Blood Services Petition for Certiorari with Prayer for Issuance of
Act providing for the phase out of commercial a Temporary Restraining Order, writ of
blood banks took effect. On April 28, 1995, preliminary mandatory injunction and/or status
Administrative Order No. 9, Series of 1995, quo ante order.18
constituting the Implementing Rules and
Regulations of said law was promulgated by In the aforementioned petition, petitioners assail
DOH. the constitutionality of the questioned legal
provisions, namely, Section 7 of Republic Act No.
The phase-out period was extended for two 7719 and Section 23 of Administrative Order No.
years by the DOH pursuant to Section 7 of 9, Series of 1995, on the following grounds: 19
Republic Act No. 7719 and Section 23 of its
Implementing Rules and Regulations. Pursuant 1. The questioned legal provisions of
to said Act, all commercial blood banks should the National Blood Services Act and its
have been phased out by May 28, 1998. Hence, Implementing Rules violate the equal protection
petitioners were granted by the Secretary of clause for irrationally discriminating against free
Health their licenses to open and operate a blood standing blood banks in a manner which is not
bank only until May 27, 1998. germane to the purpose of the law;
2. The questioned provisions of the National 2. Does it not amount to deprivation of property
Blood Services Act and its Implementing without due process?
Rules represent undue delegation if not outright
abdication of the police power of the state; and, 3. Does it not unlawfully impair the obligation of
contracts?
3. The questioned provisions of the National
Blood Services Act and its Implementing 4. With the commercial blood banks being
Rules are unwarranted deprivation of personal abolished and with no ready machinery to deliver
liberty. the same supply and services, does R.A. 7719
truly serve the public welfare?
On May 22, 1998, the Doctors Blood Center filed
a similar petition for mandamus with a prayer for On June 2, 1998, this Court issued a Resolution
the issuance of a temporary restraining order, directing respondent DOH to file a consolidated
preliminary prohibitory and mandatory injunction comment. In the same Resolution, the Court
before this Court entitled "Doctors Blood Center issued a temporary restraining order (TRO) for
vs. Department of Health," docketed as G.R. No. respondent to cease and desist from
133661. 20 This was consolidated with G.R. No. implementing and enforcing Section 7 of
133640.21 Republic Act No. 7719 and its implementing rules
and regulations until further orders from the
Similarly, the petition attacked the Court.23
constitutionality of Republic Act No. 7719 and its
implementing rules and regulations, thus, On August 26, 1998, respondent Secretary of
praying for the issuance of a license to operate Health filed a Consolidated Comment on the
commercial blood banks beyond May 27, 1998. petitions for certiorari and mandamus in G.R.
Specifically, with regard to Republic Act No. Nos. 133640 and 133661, with opposition to the
7719, the petition submitted the following issuance of a temporary restraining order.24
questions22 for resolution:
In the Consolidated Comment, respondent
1. Was it passed in the exercise of police power, Secretary of Health submitted that blood from
and was it a valid exercise of such power? commercial blood banks is unsafe and therefore
the State, in the exercise of its police power, can I am supporting Mr. President, the finding of a
close down commercial blood banks to protect study called "Project to Evaluate the Safety of the
the public. He cited the record of deliberations on Philippine Blood Banking System." This has
Senate Bill No. 1101 which later became been taken note of. This is a study done with the
Republic Act No. 7719, and the sponsorship assistance of the USAID by doctors under the
speech of Senator Orlando Mercado. New Tropical Medicine Foundation in Alabang.

The rationale for the closure of these commercial Part of the long-term measures proposed by this
blood banks can be found in the deliberations of particular study is to improve laws, outlaw buying
Senate Bill No. 1011, excerpts of which are and selling of blood and legally define good
quoted below: manufacturing processes for blood. This goes to
the very heart of my amendment which seeks to
Senator Mercado: I am providing over a period put into law the principle that blood should not be
of two years to phase out all commercial blood subject of commerce of man.
banks. So that in the end, the new section would
have a provision that states:

"ALL COMMERCIAL BLOOD BANKS SHALL BE The Presiding Officer [Senator Aquino]: What
PHASED OUT OVER A PERIOD OF TWO does the sponsor say?
YEARS AFTER THE EFFECTIVITY OF THIS
ACT. BLOOD SHALL BE COLLECTED FROM Senator Webb: Mr. President, just for clarity, I
VOLUNTARY DONORS ONLY AND THE would like to find out how the Gentleman defines
SERVICE FEE TO BE CHARGED FOR EVERY a commercial blood bank. I am at a loss at times
BLOOD PRODUCT ISSUED SHALL BE what a commercial blood bank really is.
LIMITED TO THE NECESSARY EXPENSES
Senator Mercado: We have a definition, I
ENTAILED IN COLLECTING AND
believe, in the measure, Mr. President.
PROCESSING OF BLOOD. THE SERVICE FEE
SHALL BE MADE UNIFORM THROUGH The Presiding Officer [Senator Aquino]: It is a
GUIDELINES TO BE SET BY THE business where profit is considered.
DEPARTMENTOF HEALTH."
Senator Mercado: If the Chairman of the voluntary blood donation, here is a success story
Committee would accept it, we can put a of a hospital that does not buy blood. All those
provision on Section 3, a definition of a who are operated on and need blood have to
commercial blood bank, which, as defined in this convince their relatives or have to get volunteers
law, exists for profit and engages in the buying who would donate blood
and selling of blood or its components.
If we give the responsibility of the testing of blood
Senator Webb: That is a good description, Mr. to those commercial blood banks, they will cut
President. corners because it will protect their profit.

In the first place, the people who sell their blood

are the people who are normally in the high-risk
Senator Mercado: I refer, Mr. President, to a category. So we should stop the system of selling
letter written by Dr. Jaime Galvez-Tan, the Chief and buying blood so that we can go into a
of Staff, Undersecretary of Health, to the good national voluntary blood program.
Chairperson of the Committee on Health.
It has been said here in this report, and I quote:
In recommendation No. 4, he says:
"Why is buying and selling of blood not safe?
"The need to phase out all commercial blood This is not safe because a donor who expects
banks within a two-year period will give the payment for his blood will not tell the truth about
Department of Health enough time to build up his illnesses and will deny any risky social
governments capability to provide an adequate behavior such as sexual promiscuity which
supply of blood for the needs of the nation...the increases the risk of having syphilis or AIDS or
use of blood for transfusion is a medical service abuse of intravenous addictive drugs. Laboratory
and not a sale of commodity." tests are of limited value and will not detect early
infections. Laboratory tests are required only for
Taking into consideration the experience of the
four diseases in the Philippines. There are other
National Kidney Institute, which has succeeded
blood transmissible diseases we do not yet
in making the hospital 100 percent dependent on
screen for and there could be others where there a commercial blood bank, extend their arms and
are no tests available yet. plead that their blood be bought. They will lie
about their age, their medical history. They will
A blood bank owner expecting to gain profit from lie about when they last sold their blood. For
selling blood will also try his best to limit his doing this, they will receive close to a hundred
expenses. Usually he tries to increase his profit pesos. This may tide them over for the next few
by buying cheaper reagents or test kits, hiring days. Of course, until the next bloodletting.
cheaper manpower or skipping some tests
altogether. He may also try to sell blood even This same blood will travel to the posh city
though these have infections in them. Because hospitals and urbane medical centers. This same
there is no existing system of counterchecking blood will now be bought by the rich at a price
these, the blood bank owner can usually get over 500% of the value for which it was sold.
away with many unethical practices. Between this buying and selling, obviously,
someone has made a very fast buck.
The experience of Germany, Mr. President is
illustrative of this issue. The reason why Every doctor has handled at least one
contaminated blood was sold was that there transfusion-related disease in an otherwise
were corners cut by commercial blood banks in normal patient. Patients come in for minor
the testing process. They were protecting their surgery of the hand or whatever and they leave
profits.25 with hepatitis B. A patient comes in for an
appendectomy and he leaves with malaria. The
The sponsorship speech of Senator Mercado worst nightmare: A patient comes in for a
further elucidated his stand on the issue: Caesarian section and leaves with AIDS.
We do not expect good blood from donors who
sell their blood because of poverty. The humane
Senator Mercado: Today, across the country,
dimension of blood transfusion is not in the act of
hundreds of poverty-stricken, sickly and weak
receiving blood, but in the act of giving it
Filipinos, who, unemployed, without hope and
without money to buy the next meal, will walk into
For years, our people have been at the mercy of Government can do it, and the Government must
commercial blood banks that lobby their interests do it."26
among medical technologists, hospital
administrators and sometimes even physicians On May 5, 1999, petitioners filed a Motion for
so that a proactive system for collection of blood Issuance of Expanded Temporary Restraining
from healthy donors becomes difficult, tedious Order for the Court to order respondent
and unrewarding. Secretary of Health to cease and desist from
announcing the closure of commercial blood
The Department of Health has never banks, compelling the public to source the
institutionalized a comprehensive national needed blood from voluntary donors only, and
program for safe blood and for voluntary blood committing similar acts "that will ultimately cause
donation even if this is a serious public health the shutdown of petitioners blood banks."27
concern and has fallen for the linen of
commercial blood bankers, hook, line and sinker On July 8, 1999, respondent Secretary filed his
because it is more convenient to tell the patient Comment and/or Opposition to the above motion
to buy blood. stating that he has not ordered the closure of
commercial blood banks on account of the
Commercial blood banks hold us hostage to their Temporary Restraining Order (TRO) issued on
threat that if we are to close them down, there will June 2, 1998 by the Court. In compliance with the
be no blood supply. This is true if the TRO, DOH had likewise ceased to distribute the
Government does not step in to ensure that safe health advisory leaflets, posters and flyers to the
supply of blood. We cannot allow commercial public which state that "blood banks are closed
interest groups to dictate policy on what is and or will be closed." According to respondent
what should be a humanitarian effort. This Secretary, the same were printed and circulated
cannot and will never work because their interest in anticipation of the closure of the commercial
in blood donation is merely monetary. We cannot blood banks in accordance with R.A. No. 7719,
expect commercial blood banks to take the lead and were printed and circulated prior to the
in voluntary blood donation. Only the issuance of the TRO.28
On July 15, 1999, petitioners in G.R. No. 133640 other conspicuous places in all government
filed a Petition to Show Cause Why Public hospitals as well as other medical and health
Respondent Should Not be Held in Contempt of centers.31
Court, docketed as G.R. No. 139147, citing
public respondents willful disobedience of or In respondent Secretarys Comment to the
resistance to the restraining order issued by the Petition to Show Cause Why Public Respondent
Court in the said case. Petitioners alleged that Should Not Be Held in Contempt of Court, dated
respondents act constitutes circumvention of the January 3, 2000, it was explained that nothing
temporary restraining order and a mockery of the was issued by the department ordering the
authority of the Court and the orderly closure of commercial blood banks. The subject
administration of justice.29 Petitioners added that health advisory leaflets pertaining to said closure
despite the issuance of the temporary restraining pursuant to Republic Act No. 7719 were printed
order in G.R. No. 133640, respondent, in his and circulated prior to the Courts issuance of a
effort to strike down the existence of commercial temporary restraining order on June 21, 1998.32
blood banks, disseminated misleading
Public respondent further claimed that the
information under the guise of health advisories,
primary purpose of the information campaign
press releases, leaflets, brochures and flyers
was "to promote the importance and safety of
stating, among others, that "this year [1998] all
voluntary blood donation and to educate the
commercial blood banks will be closed by 27
public about the hazards of patronizing blood
May. Those who need blood will have to rely on
supplies from commercial blood banks."33 In
government blood banks."30 Petitioners further
doing so, he was merely performing his regular
claimed that respondent Secretary of Health
functions and duties as the Secretary of Health
announced in a press conference during the
to protect the health and welfare of the public.
Blood Donors Week that commercial blood
Moreover, the DOH is the main proponent of the
banks are "illegal and dangerous" and that they
voluntary blood donation program espoused by
"are at the moment protected by a restraining
Republic Act No. 7719, particularly Section 4
order on the basis that their commercial interest
thereof which provides that, in order to ensure
is more important than the lives of the people."
the adequate supply of human blood, voluntary
These were all posted in bulletin boards and
blood donation shall be promoted through public powers and unwarranted deprivation of personal
education, promotion in schools, professional liberty.36
education, establishment of blood services
network, and walking blood donors. In a resolution, dated September 7, 1999, and
without giving due course to the aforementioned
Hence, by authority of the law, respondent petition, the Court granted the Motion for
Secretary contends that he has the duty to Intervention that was filed by the above
promote the program of voluntary blood intervenors on August 9, 1999.
donation. Certainly, his act of encouraging the
public to donate blood voluntarily and educating In his Comment to the petition-in-intervention,
the people on the risks associated with blood respondent Secretary of Health stated that the
coming from a paid donor promotes general sale of blood is contrary to the spirit and letter of
health and welfare and which should be given the Act that "blood donation is a humanitarian
more importance than the commercial act" and "blood transfusion is a professional
businesses of petitioners.34 medical service and not a sale of commodity
(Section 2[a] and [b] of Republic Act No. 7719).
On July 29, 1999, interposing personal and The act of selling blood or charging fees other
substantial interest in the case as taxpayers and than those allowed by law is even penalized
citizens, a Petition-in-Intervention was filed under Section 12."37
interjecting the same arguments and issues as
laid down by petitioners in G.R. No. 133640 and Thus, in view of these, the Court is now tasked
133661, namely, the unconstitutionality of the to pass upon the constitutionality of Section 7 of
Acts, and, the issuance of a writ of prohibitory Republic Act No. 7719 or the National Blood
injunction. The intervenors are the immediate Services Act of 1994 and its Implementing Rules
relatives of individuals who had died allegedly and Regulations.
because of shortage of blood supply at a critical
In resolving the controversy, this Court deems it
time.35
necessary to address the issues and/or
The intervenors contended that Republic Act No. questions raised by petitioners concerning the
7719 constitutes undue delegation of legislative
constitutionality of the aforesaid Act in G.R. No. WHETHER OR NOT R.A. 7719 IS A VALID
133640 and 133661 as summarized hereunder: EXERCISE OF POLICE POWER; and,

I VI

WHETHER OR NOT SECTION 7 OF R.A. 7719 WHETHER OR NOT SECTION 7 OF R.A. 7719
CONSTITUTES UNDUE DELEGATION OF AND ITS IMPLEMENTING RULES AND
LEGISLATIVE POWER; REGULATIONS TRULY SERVE PUBLIC
WELFARE.
II
As to the first ground upon which the
WHETHER OR NOT SECTION 7 OF R.A. 7719 constitutionality of the Act is being challenged, it
AND ITS IMPLEMENTING RULES AND is the contention of petitioners that the phase out
REGULATIONS VIOLATE THE EQUAL of commercial or free standing blood banks is
PROTECTION CLAUSE; unconstitutional because it is an improper and
unwarranted delegation of legislative power.
III
According to petitioners, the Act was incomplete
WHETHER OR NOT SECTION 7 OF R.A. 7719 when it was passed by the Legislature, and the
AND ITS IMPLEMENTING RULES AND latter failed to fix a standard to which the
REGULATIONS VIOLATE THE NON- Secretary of Health must conform in the
IMPAIRMENT CLAUSE; performance of his functions. Petitioners also
contend that the two-year extension period that
IV may be granted by the Secretary of Health for the
phasing out of commercial blood banks pursuant
WHETHER OR NOT SECTION 7 OF R.A. 7719 to Section 7 of the Act constrained the Secretary
AND ITS IMPLEMENTING RULES AND to legislate, thus constituting undue delegation of
REGULATIONS CONSTITUTE DEPRIVATION legislative power.
OF PERSONAL LIBERTY AND PROPERTY;
In testing whether a statute constitutes an undue
V delegation of legislative power or not, it is usual
to inquire whether the statute was complete in all authority to the Secretary of Health as to its
its terms and provisions when it left the hands of execution, to be exercised under and in
the Legislature so that nothing was left to the pursuance of the law.
judgment of the administrative body or any other
appointee or delegate of the Congress may validly delegate to administrative
38
Legislature. Except as to matters of detail that agencies the authority to promulgate rules and
may be left to be filled in by rules and regulations regulations to implement a given legislation and
to be adopted or promulgated by executive effectuate its policies.40 The Secretary of Health
officers and administrative boards, an act of the has been given, under Republic Act No. 7719,
Legislature, as a general rule, is incomplete and broad powers to execute the provisions of said
hence invalid if it does not lay down any rule or Act. Section 11 of the Act states:
definite standard by which the administrative
"SEC. 11. Rules and Regulations. The
board may be guided in the exercise of the
implementation of the provisions of the Act shall
discretionary powers delegated to it.39
be in accordance with the rules and regulations
Republic Act No. 7719 or the National Blood to be promulgated by the Secretary, within sixty
Services Act of 1994 is complete in itself. It is (60) days from the approval hereof"
clear from the provisions of the Act that the
This is what respondent Secretary exactly did
Legislature intended primarily to safeguard the
when DOH, by virtue of the administrative bodys
health of the people and has mandated several
authority and expertise in the matter, came out
measures to attain this objective. One of these is
with Administrative Order No.9, series of 1995 or
the phase out of commercial blood banks in the
the Rules and Regulations Implementing
country. The law has sufficiently provided a
Republic Act No. 7719. Administrative Order. No.
definite standard for the guidance of the
9 effectively filled in the details of the law for its
Secretary of Health in carrying out its provisions,
proper implementation.
that is, the promotion of public health by
providing a safe and adequate supply of blood Specifically, Section 23 of Administrative Order
through voluntary blood donation. By its No. 9 provides that the phase-out period for
provisions, it has conferred the power and commercial blood banks shall be extended for
another two years until May 28, 1998 "based on b) to lay down the legal principle that the
the result of a careful study and review of the provision of blood for transfusion is a medical
blood supply and demand and public safety." service and not a sale of commodity;
This power to ascertain the existence of facts
and conditions upon which the Secretary may c) to provide for adequate, safe, affordable and
effect a period of extension for said phase-out equitable distribution of blood supply and blood
can be delegated by Congress. The true products;
distinction between the power to make laws and
d) to inform the public of the need for voluntary
discretion as to its execution is illustrated by the
blood donation to curb the hazards caused by the
fact that the delegation of power to make the law,
commercial sale of blood;
which necessarily involves a discretion as to
what it shall be, and conferring an authority or e) to teach the benefits and rationale of voluntary
discretion as to its execution, to be exercised blood donation in the existing health subjects of
under and in pursuance of the law. The first the formal education system in all public and
cannot be done; to the latter no valid objection private schools as well as the non-formal system;
can be made.41
f) to mobilize all sectors of the community to
In this regard, the Secretary did not go beyond participate in mechanisms for voluntary and non-
the powers granted to him by the Act when said profit collection of blood;
phase-out period was extended in accordance
with the Act as laid out in Section 2 thereof: g) to mandate the Department of Health to
establish and organize a National Blood
"SECTION 2. Declaration of Policy In order to Transfusion Service Network in order to
promote public health, it is hereby declared the rationalize and improve the provision of
policy of the state: adequate and safe supply of blood;
a) to promote and encourage voluntary blood h) to provide for adequate assistance to
donation by the citizenry and to instill public institutions promoting voluntary blood donation
consciousness of the principle that blood and providing non-profit blood services, either
donation is a humanitarian act;
through a system of reimbursement for costs What may be regarded as a denial of the equal
from patients who can afford to pay, or donations protection of the laws is a question not always
from governmental and non-governmental easily determined. No rule that will cover every
entities; case can be formulated. Class legislation,
discriminating against some and favoring others
i) to require all blood collection units and blood is prohibited but classification on a reasonable
banks/centers to operate on a non-profit basis; basis and not made arbitrarily or capriciously is
permitted. The classification, however, to be
j) to establish scientific and professional
reasonable: (a) must be based on substantial
standards for the operation of blood collection
distinctions which make real differences; (b)
units and blood banks/centers in the Philippines;
must be germane to the purpose of the law; (c)
k) to regulate and ensure the safety of all must not be limited to existing conditions only;
activities related to the collection, storage and and, (d) must apply equally to each member of
banking of blood; and, the class.43

l) to require upgrading of blood banks/centers to Republic Act No. 7719 or The National Blood
include preventive services and education to Services Act of 1994, was enacted for the
control spread of blood transfusion transmissible promotion of public health and welfare. In the
diseases." aforementioned study conducted by the New
Tropical Medicine Foundation, it was revealed
Petitioners also assert that the law and its that the Philippine blood banking system is
implementing rules and regulations violate the disturbingly primitive and unsafe, and with its
equal protection clause enshrined in the current condition, the spread of infectious
Constitution because it unduly discriminates diseases such as malaria, AIDS, Hepatitis B and
against commercial or free standing blood banks syphilis chiefly from blood transfusion is
in a manner that is not germane to the purpose unavoidable. The situation becomes more
of the law.42 distressing as the study showed that almost 70%
of the blood supply in the country is sourced from
paid blood donors who are three times riskier
than voluntary blood donors because they are One, it was based on substantial distinctions.
unlikely to disclose their medical or social history The former operates for purely humanitarian
during the blood screening.44 reasons and as a medical service while the latter
is motivated by profit. Also, while the former
The above study led to the passage of Republic wholly encourages voluntary blood donation, the
Act No. 7719, to instill public consciousness of latter treats blood as a sale of commodity.
the importance and benefits of voluntary blood
donation, safe blood supply and proper blood Two, the classification, and the consequent
collection from healthy donors. To do this, the phase out of commercial blood banks is germane
Legislature decided to order the phase out of to the purpose of the law, that is, to provide the
commercial blood banks to improve the nation with an adequate supply of safe blood by
Philippine blood banking system, to regulate the promoting voluntary blood donation and treating
supply and proper collection of safe blood, and blood transfusion as a humanitarian or medical
so as not to derail the implementation of the service rather than a commodity. This
voluntary blood donation program of the necessarily involves the phase out of commercial
government. In lieu of commercial blood banks, blood banks based on the fact that they operate
non-profit blood banks or blood centers, in strict as a business enterprise, and they source their
adherence to professional and scientific blood supply from paid blood donors who are
standards to be established by the DOH, shall be considered unsafe compared to voluntary blood
set in place.45 donors as shown by the USAID-sponsored study
on the Philippine blood banking system.
Based on the foregoing, the Legislature never
intended for the law to create a situation in which Three, the Legislature intended for the general
unjustifiable discrimination and inequality shall application of the law. Its enactment was not
be allowed. To effectuate its policy, a solely to address the peculiar circumstances of
classification was made between nonprofit blood the situation nor was it intended to apply only to
banks/centers and commercial blood banks. the existing conditions.

We deem the classification to be valid and Lastly, the law applies equally to all commercial
reasonable for the following reasons: blood banks without exception.
Having said that, this Court comes to the inquiry In serving the interest of the public, and to give
as to whether or not Republic Act No. 7719 meaning to the purpose of the law, the
constitutes a valid exercise of police power. Legislature deemed it necessary to phase out
commercial blood banks. This action may
The promotion of public health is a fundamental seriously affect the owners and operators, as
obligation of the State. The health of the people well as the employees, of commercial blood
is a primordial governmental concern. Basically, banks but their interests must give way to serve
the National Blood Services Act was enacted in a higher end for the interest of the public.
the exercise of the States police power in order
to promote and preserve public health and The Court finds that the National Blood Services
safety. Act is a valid exercise of the States police power.
Therefore, the Legislature, under the
Police power of the state is validly exercised if (a) circumstances, adopted a course of action that is
the interest of the public generally, as both necessary and reasonable for the common
distinguished from those of a particular class, good. Police power is the State authority to enact
requires the interference of the State; and, (b) the legislation that may interfere with personal liberty
means employed are reasonably necessary to or property in order to promote the general
the attainment of the objective sought to be welfare.47
accomplished and not unduly oppressive upon
individuals.46 It is in this regard that the Court finds the related
grounds and/or issues raised by petitioners,
In the earlier discussion, the Court has namely, deprivation of personal liberty and
mentioned of the avowed policy of the law for the property, and violation of the non-impairment
protection of public health by ensuring an clause, to be unmeritorious.
adequate supply of safe blood in the country
through voluntary blood donation. Attaining this Petitioners are of the opinion that the Act is
objective requires the interference of the State unconstitutional and void because it infringes on
given the disturbing condition of the Philippine the freedom of choice of an individual in
blood banking system. connection to what he wants to do with his blood
which should be outside the domain of State
intervention. Additionally, and in relation to the Moreover, in the case of Philippine Association
issue of classification, petitioners asseverate of Service Exporters, Inc. v. Drilon,50 settled is
that, indeed, under the Civil Code, the human the rule that the non-impairment clause of the
body and its organs like the heart, the kidney and Constitution must yield to the loftier purposes
the liver are outside the commerce of man but targeted by the government. The right granted by
this cannot be made to apply to human blood this provision must submit to the demands and
because the latter can be replenished by the necessities of the States power of regulation.
body. To treat human blood equally as the While the Court understands the grave
human organs would constitute invalid implications of Section 7 of the law in question,
classification. 48 the concern of the Government in this case,
however, is not necessarily to maintain profits of
Petitioners likewise claim that the phase out of business firms. In the ordinary sequence of
the commercial blood banks will be events, it is profits that suffer as a result of
disadvantageous to them as it will affect their government regulation.
businesses and existing contracts with hospitals
and other health institutions, hence Section 7 of Furthermore, the freedom to contract is not
the Act should be struck down because it violates absolute; all contracts and all rights are subject
the non-impairment clause provided by the to the police power of the State and not only may
Constitution. regulations which affect them be established by
the State, but all such regulations must be
As stated above, the State, in order to promote subject to change from time to time, as the
the general welfare, may interfere with personal general well-being of the community may
liberty, with property, and with business and require, or as the circumstances may change, or
occupations. Thus, persons may be subjected to as experience may demonstrate the
certain kinds of restraints and burdens in order to 51
necessity. This doctrine was reiterated in the
secure the general welfare of the State and to case of Vda. de Genuino v. Court of Agrarian
this fundamental aim of government, the rights of Relations52 where the Court held that individual
the individual may be subordinated.49 rights to contract and to property have to give
way to police power exercised for public welfare.
As for determining whether or not the shutdown defiance of the court.55 There is nothing
of commercial blood banks will truly serve the contemptuous about the statements and
general public considering the shortage of blood information contained in the health advisory that
supply in the country as proffered by petitioners, were distributed by DOH before the TRO was
we maintain that the wisdom of the Legislature in issued by this Court ordering the former to cease
the lawful exercise of its power to enact laws and desist from distributing the same.
cannot be inquired into by the Court. Doing so
would be in derogation of the principle of In sum, the Court has been unable to find any
separation of powers.53 constitutional infirmity in the questioned
provisions of the National Blood Services Act of
That, under the circumstances, proper regulation 1994 and its Implementing Rules and
of all blood banks without distinction in order to Regulations.
achieve the objective of the law as contended by
petitioners is, of course, possible; but, this would The fundamental criterion is that all reasonable
be arguing on what the law may be or should doubts should be resolved in favor of the
be and not what the law is. constitutionality of a statute. Every law has in its
Between is and ought there is a far cry. The favor the presumption of constitutionality. For a
wisdom and propriety of legislation is not for this law to be nullified, it must be shown that there is
Court to pass upon.54 a clear and unequivocal breach of the
Constitution. The ground for nullity must be clear
Finally, with regard to the petition for contempt in and beyond reasonable doubt.56 Those who
G.R. No. 139147, on the other hand, the Court petition this Court to declare a law, or parts
finds respondent Secretary of Healths thereof, unconstitutional must clearly establish
explanation satisfactory. The statements in the the basis therefor. Otherwise, the petition must
flyers and posters were not aimed at influencing fail.
or threatening the Court in deciding in favor of the
constitutionality of the law. Based on the grounds raised by petitioners to
challenge the constitutionality of the National
Contempt of court presupposes a contumacious Blood Services Act of 1994 and its Implementing
attitude, a flouting or arrogant belligerence in Rules and Regulations, the Court finds that
petitioners have failed to overcome the
presumption of constitutionality of the law. As to
whether the Act constitutes a wise legislation,
considering the issues being raised by
petitioners, is for Congress to determine.57

WHEREFORE, premises considered, the Court

renders judgment as follows:

1. In G.R. Nos. 133640 and 133661, the

Court UPHOLDS THE VALIDITY of Section 7 of
Republic Act No. 7719, otherwise known as the
National Blood Services Act of 1994, and
Administrative Order No. 9, Series of 1995 or the
Rules and Regulations Implementing Republic
Act No. 7719. The petitions are DISMISSED.
Consequently, the Temporary Restraining Order
issued by this Court on June 2, 1998, is LIFTED.

2. In G.R. No. 139147, the petition seeking to cite

the Secretary of Health in contempt of court
is DENIED for lack of merit.

No costs.

SO ORDERED.
 This is a petition1 for Prohibition with Prayer for
Preliminary Injunction assailing the
constitutionality of Section 4(a) of Republic Act
(R.A.) No. 9257,2 otherwise known as the
G.R. No. 166494 June 29, 2007 "Expanded Senior Citizens Act of 2003."
CARLOS SUPERDRUG CORP., doing Petitioners are domestic corporations and
business under the name and style "Carlos proprietors operating drugstores in the
Superdrug," ELSIE M. CANO, doing business Philippines.
under the name and style "Advance Drug,"
Dr. SIMPLICIO L. YAP, JR., doing business Public respondents, on the other hand, include
under the name and style "City Pharmacy," the Department of Social Welfare and
MELVIN S. DELA SERNA, doing business Development (DSWD), the Department of Health
under the name and style "Botica dela (DOH), the Department of Finance (DOF), the
Serna," and LEYTE SERV-WELL CORP., Department of Justice (DOJ), and the
doing business under the name and style Department of Interior and Local Government
"Leyte Serv-Well Drugstore," petitioners, (DILG) which have been specifically tasked to
vs. monitor the drugstores compliance with the law;
DEPARTMENT OF SOCIAL WELFARE and promulgate the implementing rules and
DEVELOPMENT (DSWD), DEPARTMENT OF regulations for the effective implementation of
HEALTH (DOH), DEPARTMENT OF FINANCE the law; and prosecute and revoke the licenses
(DOF), DEPARTMENT OF JUSTICE (DOJ), of erring drugstore establishments.
and DEPARTMENT OF INTERIOR and LOCAL
GOVERNMENT (DILG), respondents. The antecedents are as follows:

DECISION On February 26, 2004, R.A. No. 9257, amending

R.A. No. 7432,3 was signed into law by President
AZCUNA, J.: Gloria Macapagal-Arroyo and it became effective
on March 21, 2004. Section 4(a) of the Act
states:
SEC. 4. Privileges for the Senior Citizens. The Regulations of R.A. No. 9257, Rule VI, Article 8
senior citizens shall be entitled to the following: of which states:

(a) the grant of twenty percent (20%) discount Article 8. Tax Deduction of Establishments.
from all establishments relative to the utilization The establishment may claim the discounts
of services in hotels and similar lodging granted under Rule V, Section 4 Discounts for
establishments, restaurants and recreation Establishments;5 Section 9, Medical and Dental
centers, and purchase of medicines in all Services in Private Facilities[,]6 and Sections
establishments for the exclusive use or 107 and 118 Air, Sea and Land Transportation
enjoyment of senior citizens, including funeral as tax deduction based on the net cost of the
and burial services for the death of senior goods sold or services rendered. Provided, That
citizens; ------ the cost of the discount shall be allowed as
deduction from gross income for the same
The establishment may claim the discounts taxable year that the discount is
granted under (a), (f), (g) and (h) as tax granted; Provided, further, That the total amount
deduction based on the net cost of the goods of the claimed tax deduction net of value added
sold or services rendered: Provided, That the tax if applicable, shall be included in their gross
cost of the discount shall be allowed as sales receipts for tax purposes and shall be
deduction from gross income for the same subject to proper documentation and to the
taxable year that the discount is provisions of the National Internal Revenue
granted. Provided, further, That the total amount Code, as amended; Provided, finally, that the
of the claimed tax deduction net of value added implementation of the tax deduction shall be
tax if applicable, shall be included in their gross subject to the Revenue Regulations to be issued
sales receipts for tax purposes and shall be by the Bureau of Internal Revenue (BIR) and
subject to proper documentation and to the approved by the Department of Finance (DOF).9
provisions of the National Internal Revenue
Code, as amended.4 On July 10, 2004, in reference to the query of the
Drug Stores Association of the Philippines
On May 28, 2004, the DSWD approved and (DSAP) concerning the meaning of a tax
adopted the Implementing Rules and
deduction under the Expanded Senior Citizens system, necessitates that prior payments of
Act, the DOF, through Director IV Ma. Lourdes B. taxes have been made and the taxpayer is
Recente, clarified as follows: attempting to recover this tax payment from
his/her income tax due. The tax credit scheme
1) The difference between the Tax Credit (under under R.A. No. 7432 is, therefore, inapplicable
the Old Senior Citizens Act) and Tax Deduction since no tax payments have previously occurred.
(under the Expanded Senior Citizens Act).
1.2. The provision under R.A. No. 9257, on the
1.1. The provision of Section 4 of R.A. No. 7432 other hand, provides that the establishment
(the old Senior Citizens Act) grants twenty concerned may claim the discounts under
percent (20%) discount from all establishments Section 4(a), (f), (g) and (h) as tax
relative to the utilization of transportation deduction from gross income, based on the net
services, hotels and similar lodging cost of goods sold or services rendered.
establishment, restaurants and recreation
centers and purchase of medicines anywhere in Under this scheme, the establishment concerned
the country, the costs of which may be claimed is allowed to deduct from gross income, in
by the private establishments concerned as tax computing for its tax liability, the amount of
credit. discounts granted to senior citizens. Effectively,
the government loses in terms of foregone
Effectively, a tax credit is a peso-for-peso revenues an amount equivalent to the marginal
deduction from a taxpayers tax liability due to the tax rate the said establishment is liable to pay the
government of the amount of discounts such government. This will be an amount equivalent to
establishment has granted to a senior citizen. 32% of the twenty percent (20%) discounts so
The establishment recovers the full amount of granted. The establishment shoulders the
discount given to a senior citizen and hence, the remaining portion of the granted discounts.
government shoulders 100% of the discounts
granted. It may be necessary to note that while the burden
on [the] government is slightly diminished in
It must be noted, however, that conceptually, a terms of its percentage share on the discounts
tax credit scheme under the Philippine tax granted to senior citizens, the number of
potential establishments that may claim tax Tax Due x x x x x x
deductions, have however, been broadened.
Aside from the establishments that may claim tax Less: Tax Credit -- ______x x
credits under the old law, more establishments
Net Tax Due -- x x
were added under the new law such as:
establishments providing medical and dental As shown above, under a tax
services, diagnostic and laboratory services, deduction scheme, the tax deduction on
including professional fees of attending doctors discounts was subtracted from Net Sales
in all private hospitals and medical facilities, together with other deductions which are
operators of domestic air and sea transport considered as operating expenses before the
services, public railways and skyways and bus Tax Due was computed based on the Net
transport services. Taxable Income. On the other hand, under a tax
credit scheme, the amount of discounts which is
A simple illustration might help amplify the points
the tax credit item, was deducted directly from
discussed above, as follows:
the tax due amount.10
Tax Deduction Tax Credit
Meanwhile, on October 1, 2004, Administrative
Gross Sales x x x x x x x x x x x x Order (A.O.) No. 171 or the Policies and
Guidelines to Implement the Relevant Provisions
Less : Cost of goods sold x x x x x x x x x x of Republic Act 9257, otherwise known as the
"Expanded Senior Citizens Act of 2003"11was
Net Sales x x x x x x x x x x x x issued by the DOH, providing the grant of twenty
percent (20%) discount in the purchase of
Less: Operating Expenses:
unbranded generic medicines from all
Tax Deduction on Discounts x x x x -- establishments dispensing medicines for the
exclusive use of the senior citizens.
Other deductions: x x x x x x x x
On November 12, 2004, the DOH issued
Net Taxable Income x x x x x x x x x x Administrative Order No 17712 amending A.O.
No. 171. Under A.O. No. 177, the twenty percent social services available to all people at
discount shall not be limited to the purchase of affordable cost."14
unbranded generic medicines only, but shall
extend to both prescription and non-prescription Petitioners assert that Section 4(a) of the law is
medicines whether branded or generic. Thus, it unconstitutional because it constitutes
stated that "[t]he grant of twenty percent (20%) deprivation of private property. Compelling
discount shall be provided in the purchase of drugstore owners and establishments to grant
medicines from all establishments dispensing the discount will result in a loss of profit
medicines for the exclusive use of the senior
and capital because 1) drugstores impose a
citizens."
mark-up of only 5% to 10% on branded
Petitioners assail the constitutionality of Section medicines; and 2) the law failed to provide a
4(a) of the Expanded Senior Citizens Act based scheme whereby drugstores will be justly
on the following grounds:13 compensated for the discount.

1) The law is confiscatory because it infringes Examining petitioners arguments, it is apparent

Art. III, Sec. 9 of the Constitution which provides that what petitioners are ultimately questioning is
that private property shall not be taken for public the validity of the tax deduction scheme as a
use without just compensation; reimbursement mechanism for the twenty
percent (20%) discount that they extend to senior
2) It violates the equal protection clause (Art. III, citizens.
Sec. 1) enshrined in our Constitution which
states that "no person shall be deprived of life, Based on the afore-stated DOF Opinion, the tax
liberty or property without due process of law, nor deduction scheme does not fully reimburse
shall any person be denied of the equal petitioners for the discount privilege accorded to
protection of the laws;" and senior citizens. This is because the discount is
treated as a deduction, a tax-deductible expense
3) The 20% discount on medicines violates the that is subtracted from the gross income and
constitutional guarantee in Article XIII, Section 11 results in a lower taxable income. Stated
that makes "essential goods, health and other otherwise, it is an amount that is allowed by
law15 to reduce the income prior to the A tax deduction does not offer full reimbursement
application of the tax rate to compute the amount of the senior citizen discount. As such, it would
of tax which is due.16 Being a tax deduction, the not meet the definition of just compensation.19
discount does not reduce taxes owed on a peso
for peso basis but merely offers a fractional Having said that, this raises the question of
reduction in taxes owed. whether the State, in promoting the health and
welfare of a special group of citizens, can impose
Theoretically, the treatment of the discount as a upon private establishments the burden of partly
deduction reduces the net income of the private subsidizing a government program.
establishments concerned. The discounts given
would have entered the coffers and formed part The Court believes so.
of the gross sales of the private establishments,
The Senior Citizens Act was enacted primarily to
were it not for R.A. No. 9257.
maximize the contribution of senior citizens to
The permanent reduction in their total revenues nation-building, and to grant benefits and
is a forced subsidy corresponding to the taking of privileges to them for their improvement and well-
private property for public use or benefit.17 This being as the State considers them an integral
constitutes compensable taking for which part of our society.20
petitioners would ordinarily become entitled to a
The priority given to senior citizens finds its basis
just compensation.
in the Constitution as set forth in the law itself.
Just compensation is defined as the full and fair Thus, the Act provides:
equivalent of the property taken from its owner
SEC. 2. Republic Act No. 7432 is hereby
by the expropriator. The measure is not the
amended to read as follows:
takers gain but the owners loss. The
word just is used to intensify the meaning of the SECTION 1. Declaration of Policies and
word compensation, and to convey the idea that Objectives. Pursuant to Article XV, Section 4 of
the equivalent to be rendered for the property to the Constitution, it is the duty of the family to take
be taken shall be real, substantial, full and care of its elderly members while the State may
ample.18
design programs of social security for them. In lodging establishments, restaurants and
addition to this, Section 10 in the Declaration of recreation centers; and purchases of medicines
Principles and State Policies provides: "The for the exclusive use or enjoyment of senior
State shall provide social justice in all phases of citizens. As a form of reimbursement, the law
national development." Further, Article XIII, provides that business establishments extending
Section 11, provides: "The State shall adopt an the twenty percent discount to senior citizens
integrated and comprehensive approach to may claim the discount as a tax deduction.
health development which shall endeavor to
make essential goods, health and other social The law is a legitimate exercise of police power
services available to all the people at affordable which, similar to the power of eminent domain,
cost. There shall be priority for the needs of the has general welfare for its object. Police power is
underprivileged sick, elderly, disabled, women not capable of an exact definition, but has been
and children." Consonant with these purposely veiled in general terms to underscore
constitutional principles the following are the its comprehensiveness to meet all exigencies
declared policies of this Act: and provide enough room for an efficient and
flexible response to conditions and
(f) To recognize the important role of the circumstances, thus assuring the greatest
private sector in the improvement of the benefits. 22 Accordingly, it has been described as
welfare of senior citizens and to actively seek "the most essential, insistent and the least
their partnership.21 limitable of powers, extending as it does to all the
great public needs."23 It is "[t]he power vested in
To implement the above policy, the law grants a the legislature by the constitution to make,
twenty percent discount to senior citizens for ordain, and establish all manner of wholesome
medical and dental services, and diagnostic and and reasonable laws, statutes, and ordinances,
laboratory fees; admission fees charged by either with penalties or without, not repugnant to
theaters, concert halls, circuses, carnivals, and the constitution, as they shall judge to be for the
other similar places of culture, leisure and good and welfare of the commonwealth, and of
amusement; fares for domestic land, air and sea the subjects of the same."24
travel; utilization of services in hotels and similar
For this reason, when the conditions so demand petitioners would give, P0.68 will be shouldered
as determined by the legislature, property rights by them as only P0.32 will be refunded by the
must bow to the primacy of police power because government by way of a tax deduction.
property rights, though sheltered by due process,
must yield to general welfare.25 To illustrate this point, petitioner Carlos Super
Drug cited the anti-hypertensive maintenance
Police power as an attribute to promote the drug Norvasc as an example. According to the
common good would be diluted considerably if latter, it acquires Norvasc from the distributors
on the mere plea of petitioners that they will at P37.57 per tablet, and retails it at P39.60 (or
suffer loss of earnings and capital, the at a margin of 5%). If it grants a 20% discount to
questioned provision is invalidated. Moreover, in senior citizens or an amount equivalent to P7.92,
the absence of evidence demonstrating the then it would have to sell Norvasc at P31.68
alleged confiscatory effect of the provision in which translates to a loss from capital of P5.89
question, there is no basis for its nullification in per tablet. Even if the government will allow a tax
view of the presumption of validity which every deduction, only P2.53 per tablet will be refunded
law has in its favor.26 and not the full amount of the discount which
is P7.92. In short, only 32% of the 20% discount
Given these, it is incorrect for petitioners to insist will be reimbursed to the drugstores.28
that the grant of the senior citizen discount is
unduly oppressive to their business, because Petitioners computation is flawed. For purposes
petitioners have not taken time to calculate of reimbursement, the law states that the cost of
correctly and come up with a financial report, so the discount shall be deducted from gross
that they have not been able to show properly income,29 the amount of income derived from all
whether or not the tax deduction scheme really sources before deducting allowable expenses,
works greatly to their disadvantage.27 which will result in net income. Here, petitioners
tried to show a loss on a per transaction basis,
In treating the discount as a tax deduction, which should not be the case. An income
petitioners insist that they will incur losses statement, showing an accounting of petitioners
because, referring to the DOF Opinion, for sales, expenses, and net profit (or loss) for a
every P1.00 senior citizen discount that
given period could have accurately reflected the State, in the exercise of police power, can
effect of the discount on their income. Absent any intervene in the operations of a business which
financial statement, petitioners cannot may result in an impairment of property rights in
substantiate their claim that they will be operating the process.
at a loss should they give the discount. In
addition, the computation was erroneously Moreover, the right to property has a social
based on the assumption that their customers dimension. While Article XIII of the Constitution
consisted wholly of senior citizens. Lastly, the provides the precept for the protection of
32% tax rate is to be imposed on income, not on property, various laws and jurisprudence,
the amount of the discount. particularly on agrarian reform and the regulation
of contracts and public utilities, continuously
Furthermore, it is unfair for petitioners to criticize serve as a reminder that the right to property can
the law because they cannot raise the prices of be relinquished upon the command of the State
their medicines given the cutthroat nature of the for the promotion of public good.30 ---
players in the industry. It is a business decision Undeniably, the success of the senior citizens
on the part of petitioners to peg the mark-up at program rests largely on the support imparted by
5%. Selling the medicines below acquisition cost, petitioners and the other private establishments
as alleged by petitioners, is merely a result of this concerned. This being the case, the means
decision. Inasmuch as pricing is a property right, employed in invoking the active participation of
petitioners cannot reproach the law for being the private sector, in order to achieve the
oppressive, simply because they cannot afford to purpose or objective of the law, is reasonably
raise their prices for fear of losing their customers and directly related. Without sufficient proof that
to competition. Section 4(a) of R.A. No. 9257 is arbitrary, and
that the continued implementation of the same
The Court is not oblivious of the retail side of the would be unconscionably detrimental to
pharmaceutical industry and the competitive petitioners, the Court will refrain from quashing a
pricing component of the business. While the legislative act.31
Constitution protects property rights, petitioners
must accept the realities of business and the
WHEREFORE, the petition is DISMISSED for Highway Act. Petitioners also seek to declare
lack of merit. Department Order No. 123 (DO 123) and
Administrative Order No. 1 (AO
G.R. No. 158793 June 8, 2006 1)2 unconstitutional.
JAMES MIRASOL, RICHARD SANTIAGO, and Antecedent Facts
LUZON MOTORCYCLISTS FEDERATION,
INC., Petitioners, The facts are not in dispute. As summarized by
vs. the Solicitor General, the facts are as follows:
DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS and TOLL REGULATORY 1. On January 10, 2001, petitioners filed
BOARD, Respondents. before the trial court a Petition for
Declaratory Judgment with Application for
DECISION Temporary Restraining Order and
Injunction docketed as Civil Case No. 01-
CARPIO, J.: 034. The petition sought the declaration of
nullity of the following administrative
This petition for review on certiorari1 seeks to
issuances for being inconsistent with the
reverse the Decision dated 10 March 2003 of the
provisions of Republic Act 2000, entitled
Regional Trial Court, Branch 147, Makati City
"Limited Access Highway Act" enacted in
(RTC) in Civil Case No. 01-034, as well as the
1957:
RTCs Order dated 16 June 2003 which denied
petitioners Motion for Reconsideration. a. DPWH Administrative Order No. 1,
Petitioners assert that Department of Public Series of 1968;
Works and Highways (DPWH) Department
Order No. 74 (DO 74), Department Order No. b. DPWH Department Order No. 74,
215 (DO 215), and the Revised Rules and Series of 1993;
Regulations on Limited Access Facilities of the
Toll Regulatory Board (TRB) violate Republic Act c. Art. II, Sec. 3(a) of the Revised
No. 2000 (RA 2000) or the Limited Access Rules on Limited Access Facilities
 promulgated in 199[8] by the DPWH which petitioners subsequently complied
thru the Toll Regulatory Board (TRB). with.

2. Previously, pursuant to its mandate 5. On July 18, 2001, the DPWH acting thru
under R.A. 2000, DPWH issued on June 25, the TRB, issued Department Order No. 123
1998 Department Order (DO) No. 215 allowing motorcycles with engine
declaring the Manila-Cavite (Coastal Road) displacement of 400 cubic centimeters
Toll Expressway as limited access facilities. inside limited access facilities (toll ways).

3. Accordingly, petitioners filed an 6. Upon the assumption of Honorable

Amended Petition on February 8, 2001 Presiding Judge Ma. Cristina Cornejo, both
wherein petitioners sought the declaration the petitioners and respondents were
of nullity of the aforesaid administrative required to file their respective Memoranda.
issuances. Moreover, petitioners prayed for Petitioners likewise filed [their]
the issuance of a temporary restraining Supplemental Memorandum. Thereafter,
order and/or preliminary injunction to the case was deemed submitted for
prevent the enforcement of the total ban on decision.
motorcycles along the entire breadth of
North and South Luzon Expressways and 7. Consequently, on March 10, 2003, the
the Manila-Cavite (Coastal Road) Toll trial court issued the assailed decision
Expressway under DO 215. dismissing the petition but declaring invalid
DO 123. Petitioners moved for a
4. On June 28, 2001, the trial court, thru reconsideration of the dismissal of their
then Presiding Judge Teofilo Guadiz, after petition; but it was denied by the trial court
due hearing, issued an order granting in its Order dated June 16, 2003.3
petitioners application for preliminary
injunction. On July 16, 2001, a writ of Hence, this petition.
preliminary injunction was issued by the trial
The RTCs Ruling
court, conditioned upon petitioners filing of
cash bond in the amount of P100,000.00,
The dispositive portion of the RTCs Decision 3. WHETHER AO 1 AND DO 123 ARE
dated 10 March 2003 reads: UNCONSTITUTIONAL.5

WHEREFORE, [t]he Petition is denied/dismissed The Ruling of the Court

insofar as petitioners seek to declare null and
void ab initio DPWH Department Order No. 74, The petition is partly meritorious.
Series of 1993, Administrative Order No. 1, and
Whether the RTCs Decision Dismissing
Art. II, Sec. 3(a) of the Revised Rules on Limited
Petitioners Case is Barred by Res Judicata
Access Facilities promulgated by the DPWH thru
the TRB, the presumed validity thereof not Petitioners rely on the RTCs Order dated 28
having been overcome; but the petition is June 2001, which granted their prayer for a writ
granted insofar as DPWH Department Order No. of preliminary injunction. Since respondents did
123 is concerned, declaring the same to be not appeal from that Order, petitioners argue that
invalid for being violative of the equal protection the Order became "a final judgment" on the
clause of the Constitution. issues. Petitioners conclude that the RTC erred
when it subsequently dismissed their petition in
SO ORDERED.4
its Decision dated 10 March 2003.
The Issues
Petitioners are mistaken. As the RTC correctly
Petitioners seek a reversal and raise the stated, the Order dated 28 June 2001 was not an
following issues for resolution: adjudication on the merits of the case that would
trigger res judicata. A preliminary injunction does
1. WHETHER THE RTCS DECISION IS not serve as a final determination of the issues.
ALREADY BARRED BY RES JUDICATA; It is a provisional remedy, which merely serves
to preserve the status quo until the court could
2. WHETHER DO 74, DO 215 AND THE hear the merits of the case.6 Thus, Section 9 of
TRB REGULATIONS CONTRAVENE RA Rule 58 of the 1997 Rules of Civil Procedure
2000; AND requires the issuance of a final injunction to
confirm the preliminary injunction should the
court during trial determine that the acts and its determination of such design shall be
complained of deserve to be permanently final. In this connection, it is authorized to divide
enjoined. A preliminary injunction is a mere and separate any limited access facility into
adjunct, an ancillary remedy which exists only as separate roadways by the construction of raised
an incident of the main proceeding.7 curbings, central dividing sections, or other
physical separations, or by designating such
Validity of DO 74, DO 215 and the TRB separate roadways by signs, markers, stripes,
Regulations and the proper lane for such traffic by appropriate
signs, markers, stripes and other devices. No
Petitioners claim that DO 74,8 DO 215,9 and the
person, shall have any right of ingress or egress
TRBs Rules and Regulations issued under them
to, from or across limited access facilities to or
violate the provisions of RA 2000. They contend
from abutting lands, except at such designated
that the two issuances unduly expanded the
points at which access may be permitted, upon
power of the DPWH in Section 4 of RA 2000 to
such terms and conditions as may be specified
regulate toll ways. Petitioners assert that the
from time to time. (Emphasis supplied)
DPWHs regulatory authority is limited to acts like
redesigning curbings or central dividing sections. On 19 February 1968, Secretary Antonio V.
They claim that the DPWH is only allowed to re- Raquiza of the Department of Public Works
design the physical structure of toll ways, and not and Communications issued AO 1, which,
to determine "who or what can be qualified as toll among others, prohibited motorcycles on limited
way users."10 access highways. The pertinent provisions of AO
1 read:
Section 4 of RA 200011 reads:
SUBJECT: Revised Rules and Regulations
SEC. 4. Design of limited access facility.
Governing Limited Access Highways
The Department of Public Works and
Communications is authorized to so design By virtue of the authority granted the
any limited access facility and to so regulate, Secretary [of] Public Works and
restrict, or prohibit access as to best serve Communications under Section 3 of R.A.
the traffic for which such facility is intended; 2000, otherwise known as the Limited Access
Highway Act, the following rules and regulations of abutting land or other persons have no right or
governing limited access highways are hereby easement or only a limited right or easement of
promulgated for the guidance of all concerned: access, light, air or view by reason of the fact that
their proper[t]y abuts upon such limited access
xxxx facility or for any other reason. Such highways or
streets may be parkways, from which trucks,
Section 3 On limited access highways, it is
buses, and other commerical [sic] vehicles shall
unlawful for any person or group of persons
be excluded; or they may be free ways open to
to:
use by all customary forms of street and highway
xxxx traffic."

(h) Drive any bicycle, tricycle, Section 3 of the same Act authorizes the
pedicab, motorcycle or any vehicle (not Department of Public Works and
motorized); Communications (now Department of Public
Works and Highways) "to plan, designate,
x x x x12 (Emphasis supplied) establish, regulate, vacate, alter, improve,
maintain, and provide limited access facilities for
On 5 April 1993, Acting Secretary Edmundo V. public use wherever it is of the opinion that traffic
Mir of the Department of Public Works and conditions, present or future, will justify such
Highways issued DO 74: special facilities."
SUBJECT: Declaration of the North Luzon Therefore, by virtue of the authority granted
Expressway from Balintawak to Tabang and the above, the Department of Public Works and
South Luzon Expressway from Nichols to Highways hereby designates and declares the
Alabang as Limited Access Facilities Balintawak to Tabang Sections of the North
Luzon Expressway, and the Nichols to Alabang
Pursuant to Section 2 of Republic Act No. 2000,
Sections of the South Luzon Expressways, to be
a limited access facility is defined as "a highway LIMITED ACCESS HIGHWAYS/FACILITIES
or street especially designed for through traffic,
subject to such rules and regulations that may be
and over, from, or to which owners or occupants
imposed by the DPWH thru the Toll Regulatory and over, from, or to which owners or occupants
Board (TRB). of abutting land or other persons have no right or
easement or only a limited right or easement of
In view thereof, the National Capital Region access, light, air or view by reason of the fact that
(NCR) of this Department is hereby ordered, their property abuts upon such limited access
after consultation with the TRB and in facility or for any other reason. Such highways or
coordination with the Philippine National Police streets may be parkways, from which trucks,
(PNP), to close all illegal openings along the said buses, and other commercial vehicles shall be
Limited Access Highways/Facilities. In this excluded; or they may be free ways open to use
connection, the NCR is instructed to organize its by all customary forms of street and highway
own enforcement and security group for the traffic."
purpose of assuring the continued closure of the
right-of-way fences and the implementation of Section 3 of the same Act authorizes the
the rules and regulations that may be imposed by Department of Public Works and
the DPWH thru the TRB. Communications (now Department of Public
Works and Highways) "to plan, designate,
This Order shall take effect immediately.13 establish, regulate, vacate, alter, improve,
maintain, and provide limited access facilities for
On 25 June 1998, then DPWH Secretary
public use wherever it is of the opinion that traffic
Gregorio R. Vigilar issued DO 215:
conditions, present or future, will justify such
SUBJECT: Declaration of the R-1 Expressway, special facilities."
from Seaside drive to Zapote, C-5 Link
Therefore, by virtue of the authority granted
Expressway, from Zapote to Noveleta, of the
above, the Department of Public Works and
Manila Cavite Toll Expressway as Limited
Highways hereby designates and declares the R-
Access Facility.
1 Expressway, C-5 Link Expressway and the R-
Pursuant to Section 2 of Republic Act No. 2000, 1 Extension Expressway Sections of the Manila
a limited access facility is defined as "a highway Cavite Toll Expressway to be LIMITED ACCESS
or street especially designed for through traffic, HIGHWAYS/FACILITIES subject to such rules
and regulations that may be imposed by the or access to the limited access facilities, are not
DPWH thru the Toll Regulatory Board (TRB). inconsistent with RA 2000.

In view thereof, the National Capital Region RA 2000, otherwise known as the Limited
(NCR) of this Department is hereby ordered, Access Highway Act, was approved on 22 June
after consultation with the TRB and in 1957. Section 4 of RA 2000 provides that
coordination with the Philippine National Police "[t]he Department of Public Works and
(PNP), to close all illegal openings along the said Communications is authorized to so design any
Limited Access Highways/Facilities. In this limited access facility and to so regulate, restrict,
connection, the NCR is instructed to organize its or prohibit access as to best serve the traffic for
own enforcement and security group for the which such facility is intended." The RTC
purpose of assuring the continued closure of the construed this authorization to regulate, restrict,
right-of-way fences and the implementation of or prohibit access to limited access facilities to
the rules and regulations that may be imposed by apply to the Department of Public Works and
the DPWH thru the TRB. Highways (DPWH).

This Order shall take effect immediately.14 The RTCs ruling is based on a wrong premise.
The RTC assumed that the DPWH derived its
The RTC held that Section 4 of RA 2000 authority from its predecessor, the Department of
expressly authorized the DPWH to design limited Public Works and Communications, which is
access facilities and to regulate, restrict, or expressly authorized to regulate, restrict, or
prohibit access as to serve the traffic for which prohibit access to limited access facilities under
such facilities are intended. According to the Section 4 of RA 2000. However, such
RTC, such authority to regulate, restrict, or assumption fails to consider the evolution of the
prohibit logically includes the determination of Department of Public Works and
who and what can and cannot be permitted entry Communications.
or access into the limited access facilities. Thus,
the RTC concluded that AO 1, DO 74, and the Under Act No. 2711, otherwise known as the
Revised Rules and Regulations on Limited Revised Administrative Code, approved on 10
Access Facilities, which ban motorcycles entry March 1917, there were only seven executive
departments, namely: the Department of the renamed from Departments to Ministries. Thus,
Interior, the Department of Finance, the the Department of Public Works, Transportation
Department of Justice, the Department of and Communications became the Ministry of
Agriculture and Commerce, the Department of Public Works, Transportation and
Public Works and Communications, the Communications.
Department of Public Instruction, and the
Department of Labor.15 On 20 June 1964, On 23 July 1979, then President Ferdinand E.
Republic Act No. 413616 created the Land Marcos issued Executive Order No. 546 (EO
Transportation Commission under the 546), creating a Ministry of Public Works and
Department of Public Works and a Ministry of Transportation and
Communications. Later, the Department of Communications.17 Under Section 1 of EO 546,
Public Works and Communications was the Ministry of Public Works assumed
restructured into the Department of Public the public works functions of the Ministry of
Works, Transportation and Communications. Public Works, Transportation and
Communications. The functions of the Ministry
On 16 May 1974, Presidential Decree No. 458 of Public Works were the "construction,
(PD 458) separated the Bureau of Public maintenance and repair of port works, harbor
Highways from the Department of Public Works, facilities, lighthouses, navigational aids, shore
Transportation and Communications and protection works, airport buildings and
created it as a department to be known as associated facilities, public buildings and school
Department of Public Highways. Under Section 3 buildings, monuments and other related
of PD 458, the Department of Public Highways is structures, as well as undertaking harbor and
"responsible for developing and implementing river dredging works, reclamation of foreshore
programs on the construction and maintenance and swampland areas, water supply, and flood
of roads, bridges and airport runways." control and drainage works."18

With the amendment of the 1973 Philippine On the other hand, the Ministry of
Constitution in 1976, resulting in the shift in the Transportation and Communications became
form of government, national agencies were the "primary policy, planning, programming,
coordinating, implementing, regulating and d. Regulate, whenever necessary,
administrative entity of the executive branch of activities relative to transportation and
the government in the promotion, development, communications and prescribe and
and regulation of a dependable and coordinated collect fees in the exercise of such
network of transportation and communication power;
systems."19 The functions of the Ministry of
Transportation and Communications were: e. Assess, review and provide direction to
transportation and communications
a. Coordinate and supervise all activities of research and development programs of the
the Ministry relative to transportation and government in coordination with other
communications; institutions concerned; and

b. Formulate and recommend national f. Perform such other functions as may be

policies and guidelines for the necessary to carry into effect the provisions
preparation and implementation of an of this Executive Order.20 (Emphasis
integrated and comprehensive supplied)
transportation and communications
system at the national, regional and On 27 July 1981, then President Marcos issued
local levels; Executive Order No. 710 (EO 710), which
merged the Ministry of Public Works and the
c. Establish and administer comprehensive Ministry of Public Highways for "greater simplicity
and integrated programs for transportation and economy in operations."21 The restructured
and communication, and for this purpose, agency became known as the Ministry of
may call on any agency, corporation, or Public Works and Highways. Under Section 1
organization, whether government or of EO 710 the functions of the Ministry of Public
private, whose development programs Works and the Ministry of Public
22
include transportation and communications Highways were transferred to the Ministry of
as an integral part to participate and assist Public Works and Highways.
in the preparation and implementation of
such programs;
Upon the ratification of the 1987 Constitution in On the other hand, among the functions of
February 1987, the former Ministry of Public the Ministry of Transportation and
Works and Highways became the Department Communications (now Department of
of Public Works and Highways (DPWH) and Transportation and Communications
the former Ministry of Transportation and [DOTC]) were to (1) formulate and recommend
Communications became the Department of national policies and guidelines for the
Transportation and Communications (DOTC). preparation and implementation of an integrated
and comprehensive transportation and
DPWH issued DO 74 and DO 215 declaring communications systems at the national,
certain expressways as limited access facilities regional, and local levels; and (2) regulate,
on 5 April 1993 and 25 June 1998, respectively. whenever necessary, activities relative to
Later, the TRB, under the DPWH, issued the transportation and communications and
Revised Rules and Regulations on Limited prescribe and collect fees in the exercise of such
Access Facilities. However, on 23 July 1979, power. Clearly, under EO 546, it is the DOTC, not
long before these department orders and the DPWH, which has authority to regulate,
regulations were issued, the Ministry of Public restrict, or prohibit access to limited access
Works, Transportation and facilities.
Communications was divided into two agencies
the Ministry of Public Works and Even under Executive Order No. 125 (EO
the Ministry of Transportation and 125)24 and Executive Order No. 125-A (EO 125-
Communications by virtue of EO 546. The A),25 which further reorganized the DOTC, the
question is, which of these two agencies is now authority to administer and enforce all laws, rules
authorized to regulate, restrict, or prohibit access and regulations relative to transportation is
to limited access facilities?23 clearly with the DOTC.26

Under Section 1 of EO 546, the Ministry of Thus, DO 74 and DO 215 are void because the
Public Works (now DPWH) assumed the public DPWH has no authority to declare certain
works functions of the Ministry of Public expressways as limited access facilities. Under
Works, Transportation and Communications. the law, it is the DOTC which is authorized to
administer and enforce all laws, rules and 1. Administrative Order No. 1 dated February 19,
regulations in the field of transportation and to 1968, issued by the Secretary of the then
regulate related activities. Department of Public Works and
Communications, is hereby amended by deleting
Since the DPWH has no authority to regulate the word "motorcycles" mentioned in Section
activities relative to transportation, the 3(h) thereof. Therefore, motorcycles are
TRB27 cannot derive its power from the DPWH to hereby allowed to operate inside the toll
issue regulations governing limited access roads and limited access highways, subject
facilities. The DPWH cannot delegate a power or to the following:
function which it does not possess in the first
place. Since DO 74 and DO 215 are void, it a. Motorcycles shall have an engine
follows that the rules implementing them are displacement of at least 400 cubic
likewise void. centimeters (cc) provided that:

Whether AO 1 and DO 123 are Unconstitutional x x x x28 (Emphasis supplied)

DPWH Secretary Simeon A. Datumanong issued The RTCs Decision dated 10 March 2003
DO 123 on 18 July 2001. DO 123 reads in part: declared DO 123 unconstitutional on the ground
that it violates the equal protection clause by
SUBJECT: Revised Rules and Regulations allowing only motorcycles with at least 400 cubic
Governing Limited Access Highways centimeters engine displacement to use the toll
ways. The RTC reasoned that the creation of a
By virtue of the authority granted the
distinction within the class of motorcycles was
Secretary of Public Works and Highways
not based on real differences.
under Section 3 of R.A. 2000, otherwise
known as the Limited Access Highway Act, We need not pass upon the constitutionality of
the following revised rules and regulations the classification of motorcycles under DO 123.
governing limited access highways are hereby As previously discussed, the DPWH has no
promulgated for the guidance of all concerned: authority to regulate limited access highways
since EO 546 has devolved this function to the
DOTC. Thus, DO 123 is void for want of authority We emphasize that the Secretary of
of the DPWH to promulgate it. the Department of Public Works and
Communications issued AO 1 on 19 February
On the other hand, the assailed portion of AO 1 1968.
states:
Section 3 of RA 200029 authorized the issuance
Section 3. On limited access highways, it is of the guidelines. In contrast, DPWH issued DO
unlawful for any person or group of persons to: 74, DO 215 and DO 123 after EO 546 devolved
to the DOTC the authority to regulate limited
xxxx
access highways.
(h) Drive any bicycle, tricycle, pedicab,
We now discuss the constitutionality of AO 1.
motorcycle or any vehicle (not motorized);
Administrative issuances have the force and
xxxx effect of law.30 They benefit from the same
presumption of validity and constitutionality
Petitioners assail the DPWHs failure to provide enjoyed by statutes.31 These two precepts place
"scientific" and "objective" data on the danger of a heavy burden upon any party assailing
having motorcycles plying our highways. They governmental regulations. The burden of proving
attack this exercise of police power as baseless unconstitutionality rests on such party.32 The
and unwarranted. Petitioners belabor the fact burden becomes heavier when the police power
that there are studies that provide proof that is at issue.
motorcycles are safe modes of transport. They
also claim that AO 1 introduces an unreasonable The use of public highways by motor vehicles is
classification by singling-out motorcycles from subject to regulation as an exercise of the police
other motorized modes of transport. Finally, power of the state.33 The police power is far-
petitioners argue that AO 1 violates their right to reaching in scope and is the "most essential,
travel. insistent and illimitable" of all government
powers.34 The tendency is to extend rather than
Petitioners arguments do not convince us. to restrict the use of police power. The sole
standard in measuring its exercise is
reasonableness.35 What is "reasonable" is not assemble. The exercise of police power involves
subject to exact definition or scientific restriction, restriction being implicit in the power
formulation. No all-embracing test of itself. Thus, the test of constitutionality of a police
reasonableness exists,36 for its determination power measure is limited to an inquiry on
rests upon human judgment applied to the facts whether the restriction imposed on constitutional
and circumstances of each particular case.37 rights is reasonable, and not whether it imposes
a restriction on those rights.
We find that AO 1 does not impose unreasonable
restrictions. It merely outlines several None of the rules outlined in AO 1 strikes us as
precautionary measures, to which toll way users arbitrary and capricious. The DPWH, through the
must adhere. These rules were designed to Solicitor General, maintains that the toll ways
ensure public safety and the uninhibited flow of were not designed to accommodate motorcycles
traffic within limited access facilities. They cover and that their presence in the toll ways will
several subjects, from what lanes should be used compromise safety and traffic considerations.
by a certain vehicle, to maximum vehicle height. The DPWH points out that the same study the
The prohibition of certain types of vehicles is but petitioners rely on cites that the inability of other
one of these. None of these rules violates drivers to detect motorcycles is the predominant
reason. The purpose of these rules and the logic cause of accidents.39 Arguably, prohibiting the
behind them are quite evident. A toll way is not use of motorcycles in toll ways may not be the
an ordinary road. The special purpose for which "best" measure to ensure the safety and comfort
a toll way is constructed necessitates the of those who ply the toll ways.
imposition of guidelines in the manner of its use
and operation. Inevitably, such rules will restrict However, the means by which the government
certain rights. But the mere fact that certain rights chooses to act is not judged in terms of what is
are restricted does not invalidate the rules. "best," rather, on simply whether the act is
reasonable. The validity of a police power
Consider Section 3(g) of AO 1, which prohibits measure does not depend upon the absolute
the conduct of rallies inside toll ways.38 The assurance that the purpose desired can in fact
regulation affects the right to peaceably be probably fully accomplished, or upon the
certainty that it will best serve the purpose the existence of definitive studies to support its
intended.40 Reason, not scientific exactitude, is use. Indeed, no requirement exists that the
the measure of the validity of the governmental exercise of police power must first be
regulation. Arguments based on what is "best" conclusively justified by research. The yardstick
are arguments reserved for the Legislatures has always been simply whether the
discussion. Judicial intervention in such matters governments act is reasonable and not
will only be warranted if the assailed regulation is oppressive.42 The use of "reason" in this sense is
patently whimsical. We do not find the situation simply meant to guard against arbitrary and
in this case to be so. capricious government action. Scientific certainty
and conclusiveness, though desirable, may not
Neither do we find AO 1 oppressive. Petitioners be demanded in every situation. Otherwise, no
are not being deprived of their right to use the government will be able to act in situations
limited access facility. They are merely being demanding the exercise of its residual powers
required, just like the rest of the public, to adhere because it will be tied up conducting studies.
to the rules on how to use the facility. AO 1 does
not infringe upon petitioners right to travel but A police power measure may be assailed upon
merely bars motorcycles, bicycles, tricycles, proof that it unduly violates constitutional
pedicabs, and any non- limitations like due process and equal protection
of the law.43 Petitioners attempt to seek redress
motorized vehicles as the mode of traveling from the motorcycle ban under the aegis of equal
along limited access highways.41 Several cheap, protection must fail. Petitioners contention that
accessible and practical alternative modes of AO 1 unreasonably singles out motorcycles is
transport are open to petitioners. There is specious. To begin with, classification by itself is
nothing oppressive in being required to take a not prohibited.44
bus or drive a car instead of ones scooter,
bicycle, calesa, or motorcycle upon using a toll A classification can only be assailed if it is
way. deemed invidious, that is, it is not based on real
or substantial differences. As explained by Chief
Petitioners reliance on the studies they gathered Justice Fernando in Bautista v. Juinio:45
is misplaced. Police power does not rely upon
x x x To assure that the general welfare be motorized. Not all motorized vehicles are created
promoted, which is the end of law, a regulatory equal. A 16-wheeler truck is substantially
measure may cut into the rights to liberty and different from other light vehicles. The first may
property. Those adversely affected may under be denied access to some roads where the latter
such circumstances invoked the equal protection are free to drive. Old vehicles may be reasonably
clause only if they can show that the differentiated from newer models.46 We find that
governmental act assailed, far from being real and substantial differences exist between a
inspired by the attainment of the common weal motorcycle and other forms of transport sufficient
was prompted by the spirit of hostility, or at the to justify its classification among those prohibited
very least, discrimination that finds no support in from plying the toll ways. Amongst all types of
reason. It suffices then that the laws operate motorized transport, it is obvious, even to a child,
equally and uniformly on all persons under that a motorcycle is quite different from a car, a
similar circumstances or that all persons must be bus or a truck. The most obvious and troubling
treated in the same manner, the conditions not difference would be that a two-wheeled vehicle is
being different, both in the privileges conferred less stable and more easily overturned than a
and the liabilities imposed. Favoritism and undue four-wheeled vehicle.
preference cannot be allowed. For the principle
is that equal protection and security shall be A classification based on practical convenience
given to every person under circumstances, and common knowledge is not unconstitutional
which if not identical is analogous. If law be simply because it may lack purely theoretical or
looked upon in terms of burden or charges, those scientific uniformity. Moreover, we take note that
that fall within a class should be treated in the the Philippines is home to a host of unique
same fashion, whatever restrictions cast on motorized modes of transport ranging from
some in the group equally binding the rest. modified hand-carts (kuliglig) to bicycle
"sidecars" outfitted with a motor. To follow
We find that it is neither warranted nor petitioners argument to its logical conclusion
reasonable for petitioners to say that the only would open up toll ways to all these contraptions.
justifiable classification among modes of Both safety and traffic considerations militate
transport is the motorized against the non-
against any ruling that would bring about such a to the manner of using the toll way, a subject that
nightmare. can be validly limited by regulation.

Petitioners complain that the prohibition on the Petitioners themselves admit that alternative
use of motorcycles in toll ways unduly deprive routes are available to them. Their complaint is
them of their right to travel. that these routes are not the safest and most
convenient. Even if their claim is true, it hardly
We are not persuaded. qualifies as an undue curtailment of their
freedom of movement and travel. The right to
A toll way is not an ordinary road. As a facility
travel does not entitle a person to the best form
designed to promote the fastest access to certain
of transport or to the most convenient route to his
destinations, its use, operation, and
destination. The obstructions found in normal
maintenance require close regulation. Public
streets, which petitioners complain of (i.e.,
interest and safety require the imposition of
potholes, manholes, construction barriers, etc.),
certain restrictions on toll ways that do not apply
are not suffered by them alone.
to ordinary roads. As a special kind of road, it is
but reasonable that not all forms of transport Finally, petitioners assert that their possession of
could use it. a drivers license from the Land Transportation
Office (LTO) and the fact that their vehicles are
The right to travel does not mean the right to
registered with that office entitle them to use all
choose any vehicle in traversing a toll way. The
kinds of roads in the country. Again, petitioners
right to travel refers to the right to move from one
are mistaken. There exists no absolute right to
place to another. Petitioners can traverse the toll
drive. On the contrary, this privilege, is heavily
way any time they choose using private or public
regulated. Only a qualified group is allowed to
four-wheeled vehicles. Petitioners are not denied
drive motor vehicles: those who pass the tests
the right to move from Point A to Point B along
administered by the LTO. A drivers license
the toll way. Petitioners are free to access the toll
issued by the LTO merely allows one to drive a
way, much as the rest of the public can. The
particular mode of transport. It is not a license to
mode by which petitioners wish to travel pertains
drive or operate any form of transportation on
any type of road. Vehicle registration in the LTO
on the other hand merely signifies the
roadworthiness of a vehicle. This does not
preclude the government from prescribing which
roads are accessible to certain vehicles.

WHEREFORE, we PARTLY GRANT the

petition. We MODIFY the Decision dated 10
March 2003 of the Regional Trial Court, Branch
147, Makati City and its Order dated 16 June
2003 in Civil Case No. 01-034. We
declare VOID Department Order Nos. 74, 215,
and 123 of the Department of Public Works and
Highways, and the Revised Rules and
Regulations on Limited Access Facilities of the
Toll Regulatory Board. We
declare VALID Administrative Order No. 1 of the
Department of Public Works and
Communications.

SO ORDERED.
G.R. No. 187836 November 25, 2014 MAYOR ALFREDO S. LIM, VICE MAYOR
FRANCISCO DOMAGOSO, COUNCILORS
SOCIAL JUSTICE SOCIETY (SJS) OFFICERS, ARLENE W. KOA, MOISES T. LIM, JESUS
NAMELY, SAMSON S. ALCANTARA, and FAJARDO LOUISITO N. CHUA, VICTORIANO
VLADIMIR ALARIQUE T. A. MELENDEZ, JOHN MARVIN C. NIETO,
CABIGAO, Petitioners, ROLANDO M. VALERIANO, RAYMUNDO R.
vs. YUPANGCO, EDWARD VP MACEDA,
ALFREDO S. LIM, in his capacity as mayor of RODERICK D. V ALBUENA, JOSEFINA M.
the City of Manila, Respondent. SISCAR, SALVADOR PHILLIP H. LACUNA,
LUCIANO M. VELOSO, CARLO V. LOPEZ,
x-----------------------x
ERNESTO F. RIVERA,1 DANILO VICTOR H.
G.R. No. 187916 LACUNA, JR., ERNESTO G. ISIP, HONEY H.
LACUNA-PANGAN, ERNESTO M. DIONISO,
JOSE L. ATIENZA, JR., BIENVINIDO M. JR. and ERICK IAN O. NIEVA, Respondents.
ABANTE, MA. LOURDES M. ISIP-GARCIA,
RAFAEL P. BORROMEO JOCELYN DAWIS- x-----------------------x
ASUNCION, minors MARIAN REGINA B.
CHEVRON PHILIPPINES INC., PETRON
TARAN, MACAILA RICCI B. TARAN,
CORPORATION AND PILIPINAS SHELL
RICHARD KENNETH B. TARAN, represented
PETROLEUM CORPORATION, Intervenors.
and joined by their parents RICHARD AND
MARITES TARAN, minors CZARINA DECISION
ALYSANDRA C. RAMOS, CEZARAH
ADRIANNA C. RAMOS, and CRISTEN AIDAN PEREZ, J.:
C. RAMOS represented and joined by their
mother DONNA C. RAMOS, minors JAZMIN Challenged in these consolidated petitions2 is
SYLLITA T. VILA AND ANTONIO T. CRUZ IV, the validity of Ordinance No. 81873 entitled "AN
represented and joined by their mother ORDINANCE AMENDING ORDINANCE NO.
MAUREEN C. TOLENTINO, Petitioners, 8119, OTHERWISE KNOWN AS THE MANILA
vs. COMPREHENSIVE LAND USE PLAN AND
ZONING ORDINANCE OF 2006, BY SOUTHWEST, THE AREA OF PUNTA,
CREATING A MEDIUM INDUSTRIAL ZONE (1- STA.ANA BOUNDED BY THE PASIG RIVER,
2) AND HEAVY INDUSTRIAL ZONE (1-3), AND MARCELINO OBRERO ST., MAYO 28 ST. AND
PROVIDING FOR ITS ENFORCEMENT" THE F. MANALO STREET FROM INDUSTRIAL
enacted by the Sangguniang Panlungsod of II TO COMMERCIAL I," and Ordinance No.
Manila (Sangguniang Panlungsod) on 14 May 81195 entitled "AN ORDINANCE ADOPTING
2009. THE MANILA COMPREHENSIVE LAND USE
PLAN AND ZONING REGULATIONS OF 2006
The creation of a medium industrial zone (1-2) AND PROVIDING FOR THE
and heavy industrial zone (1-3) effectively lifted ADMINISTRATION, ENFORCEMENT AND
the prohibition against owners and operators of AMENDMENT THERETO."
businesses, including herein intervenors
Chevron Philippines, Inc. (Chevron), Pilipinas The Parties
Shell Petroleum Corporation (Shell), and Petron
Corporation (Petron), collectively referred to as Petitioners allege the parties respective capacity
the oil companies, from operating in the to sue and be sued, viz:
designated commercial zone an industrial zone
prior to the enactment of Ordinance Petitioners
No. Residence Suing capacity aside
80274 entitled "AN ORDINANCE in Manila residents of Ma
RECLASSIFYING THE LAND USE OF THAT personal circumstan
PORTION OF LAND BOUNDED BY THE
PASIGRIVER IN THE NORTH, PNR RAILROAD G.R. No. 187836
TRACK IN THE EAST, BEATA ST. IN THE
SOUTH, PALUMPONG ST. SJS IN Officer
THE Samson S. Not mentioned Manila
SOUTHWEST AND ESTERO DE PANDACAN Alcantara in the petition; One of the petitione
IN THE WEST, PNR RAILROAD (Alcantara)
IN THE holding office in Atienza (G.R. No.
NORTHWEST AREA, ESTERO DE PANDACAN Ermita, Manila Pesident of ABAKA
IN THE NORTHEAST, PASIG RIVER IN THE PARTY LIST with m
SOUTHEAST AND DR. M. L. CARREON IN THE
 areJocelyn
residents
Dawis-Asuncion
of the City of Sta. Mesa Incumbent City Cou
Manila City of Manila
Vladimir Alarique T. Pandacan OneMinors
of theMarian
petitioners
Regina
in B.
SJSTaran,
v. Paco Citizens, real estate
abigao) Atienza
Macalia(G.R.
RicciNo.B.156052)
Taran, Richard taxpayers
Kenneth B. Taran, represented
and Officer
* The allegation is inaccurate. SJS joined by their parents
Richard and
Alcantara is actually one of the counsels for Marites Taran
petitioner SJS in G.R. No. 156052. The
Minors Czarina Alysandra C. Tondo Citizens, real estate
petitioners in that case are the SJS itself,
Ramos, Cezarah Adrianna C. taxpayers
Cabigao and Bonifacio S. Tumbokon
Ramos, and Cristen Aidan C.
(Tumbokon).
Ramos represented and joined
G.R. No. 187916 by
their mother Donna c. Ramos
yor Jose L. Atienza, San Andres Former Mayor Syllita
Minors Jasmin of T.Manila;
Vila and Sta. Ana Citizens, real estate
tienza) Secretary of Department
Antonio T. Cruz IV, represented of taxpayers
Environment
and joined by and theirNatural
mother
Resources (DENR)
Maureen C. Tolentino
M. Abante Sta. Ana Citizen and taxpayer;
member of the House of
Respondents Sued in their capacit
Representatives
s M. Isip-Garcia San Miguel Incumbent City CouncilorG.R. Nos. 187836 and 187916
of the
City of Manila
Former Mayor Alfredo S. Lim (Mayor Lim) Incumbent Mayor o
orromeo Paco Incumbent City Councilor of the the time of the fi
City of Manila present petitions
 s Sued
Chevron
in their capacity asPhilippines, importing, distributing and marketing o
Inc. (CHEVRON) products in the Philippines since 1922
Pilipinas Shell Petroleum manufacturing, refining, importing,
Corporation (SHELL) and marketing of petroleum produ
G.R. No. 187916
Philippines
Francisco Domagoso (Vice-Mayor Vice-Mayor and (PETRON)
Petron Corporation Presiding manufacturing, refining, importing,
Officer and marketing of petroleum produ
of the City Council of Manila Philippines
Koa Principal author of City
They claim that their rights with respect to the oil
Ordinance No. 8187
depots in Pandacan would be directly affected by
im, Jesus Fajardo, Louisito N. Chua, Personal and officialthecapacities
outcome of these cases.
A. Melendez, John Marvin Nieto, as councilors who voted and
Valeriano, Raymondo R. Yupangco, approved City Ordinance The Antecedents
No.
Maceda, Roderick D. Valbuena, 8187
These petitions are a sequel to the case of Social
Siscar, Phillip H. Lacuna, Luciano M.
Justice Society v. Mayor Atienza,
Carlo V. Lopez, Ernesto F. 8
Jr. (hereinafter referred to asG.R. No. 156052),
nilo Victor H. Lacuna, Jr., Ernesto G.
where the Court found: (1) that the ordinance
y H. Lacuna-Pangan, Ernesto M.
subject thereof Ordinance No. 8027 was
, Erick Ian O. Nieva
enacted "to safeguard the rights to life, security
and safety of the inhabitants of Manila;"9 (2) that
The following intervenors, all of which are
it had passed the tests of a valid ordinance; and
corporations organized under Philippine laws,
(3) that it is not superseded by Ordinance No.
intervened:7
8119.10 Declaring that it is constitutional and
valid,11 the Court accordingly ordered its
Nature of Business immediate enforcement with a specific directive
on the relocation and transfer of the Pandacan Pandacan was unofficially designated as the
oil terminals.12 industrial center of Manila. The area, then largely
uninhabited, was ideal for various emerging
Highlighting that the Court has soruled that the industries as the nearby river facilitated the
Pandacan oil depots should leave, herein transportation of goods and products. In the
petitioners now seek the nullification of 1920s, it was classifiedas an industrial zone.
Ordinance No. 8187, which contains provisions Among its early industrial settlers werethe oil
contrary to those embodied in Ordinance No. companies. x x x On December 8, 1941, the
8027. Allegations of violation of the right to health Second World War reached the shores of the
and the right to a healthful and balanced Philippine Islands. x x x [I]n their zealous attempt
environment are also included. to fend off the Japanese Imperial Army, the
United States Army took control of the Pandacan
For a better perspective of the facts of these
Terminals and hastily made plans to destroy the
cases, we again trace the history of the
storage facilities to deprive the advancing
Pandacan oil terminals, aswell as the intervening
Japanese Army of a valuable logistics weapon.
events prior to the reclassification of the land use
The U.S. Army burned unused petroleum,
from Industrial II to Commercial I under
causing a frightening conflagration. Historian
Ordinance No. 8027 until the creation of Medium
Nick Joaquin recounted the events as follows:
Industrial Zone and Heavy Industrial Zone
pursuant to Ordinance No. 8187. After the USAFFE evacuated the City late in
December 1941, all army fuel storage dumps
History of the Pandacan
were set on fire. The flames spread, enveloping
Oil Terminals
the City in smoke, setting even the rivers ablaze,
We quote the following from the Resolution of the endangering bridges and all riverside buildings.
Court in G.R. No. 156052: For one week longer, the "open city" blazed
a cloud of smoke by day, a pillar of fire by night.
Pandacan (one of the districts of the City of
Manila) is situated along the banks of the Pasig
[R]iver. Atthe turn of the twentieth century,
The fire consequently destroyed the Pandacan The 36-hectare Pandacan Terminals house the
Terminals and rendered its network of depots oil companies distribution terminals and depot
and service stations inoperative. facilities.1wphi1 The refineries of Chevron and
Shell in Tabangao and Bauan, both in Batangas,
After the war, the oil depots were reconstructed. respectively, are connected to the Pandacan
Pandacan changed as Manila rebuilt itself. The Terminals through a 114-kilometer underground
three major oil companies resumed the operation pipeline system. Petrons refinery in Limay,
of their depots. But the district was no longer a Bataan, on the other hand, also services the
sparsely populated industrial zone; it had depot. The terminals store fuel and other
evolved into a bustling, hodgepodge community. petroleum products and supply 95% of the fuel
Today, Pandacan has become a densely requirements of Metro Manila, 50% of Luzons
populated area inhabited by about 84,000 consumption and 35% nationwide. Fuel can also
people, majority of whom are urban poor who call be transported through barges along the Pasig
it home. Aside from numerous industrial [R]iver ortank trucks via the South Luzon
installations, there are also small businesses, Expressway.13 (Citations omitted)
churches, restaurants, schools, daycare centers
and residences situated there. Malacaang Memorandum of Agreement (MOA)
Palace, the official residence of the President of dated 12 October 2001 between the oil
the Philippines and the seat of governmental companies
power, is just two kilometers away. There is a and the Department of Energy (DOE)
private school near the Petron depot. Along the
walls of the Shell facility are shanties of informal On 12 October 2001, the oil companies and the
settlers. More than 15,000 students are enrolled DOE entered into a MOA14 "in light of recent
in elementary and high schools situated near international developments involving acts of
these facilities. A university with a student terrorism on civilian and government
population of about 25,000 is located directly landmarks,"15 "potential new security risks
across the depot on the banks of the Pasig relating to the Pandacan oil terminals and the
[R]iver. impact on the surrounding community which may
be affected,"16 and "to address the perceived
risks posed by the proximity of communities, The owners and operators of the businesses
businesses and offices to the Pandacan oil thus affected by the reclassification were given
terminals, consistent with the principle of six months from the date of effectivity of the
sustainable development."17 The stakeholders Ordinance within which to stop the operation of
acknowledged that "there is a need for a their businesses.
comprehensive study to address the economic,
social, environmental and security concerns with Nevertheless, the oil companies weregranted an
the end in view of formulating a Master Plan to extension of until 30 April 2003 within which to
address and minimize the potential risks and comply with the Ordinance pursuant to the
hazards posed by the proximity of communities, following:
businesses and offices to the Pandacan oil
(1) Memorandum of Understanding
terminals without adversely affecting the security
(MOU)20 dated 26 June 2002 between the
and reliability of supply and distribution of
City of Manila and the Department of
petroleum products to Metro Manila and the rest
Energy (DOE), on the one hand, and the oil
of Luzon, and the interests of consumers and
companies, on the other, where the parties
users of such petroleum products in those
agreed that "the scaling down of the
areas."18
Pandacan Terminals [was] the most viable
The enactment of Ordinance No. 8027 and practicable option"21 and committed to
against the continued stay of the oil depots adopt specific measures22 consistent with
the said objective;
The MOA, however, was short-lived.
(2) Resolution No. 97 dated 25 July
On 20 November 2001, during the incumbency 200223 of the Sangguniang Panlungsod,
of former Mayor Jose L. Atienza, Jr. (Mayor which ratified the 26 June 2002 MOU but
Atienza) nowone of the petitioners in G.R. No. limited the extension of the period within
187916 the Sangguniang Panlungsod enacted which to comply to six months from 25 July
Ordinance No. 802719 reclassifying the use of 2002; and
the land in Pandacan, Sta. Ana, and its adjoining
areas from Industrial II to Commercial I.
 (3) Resolution No. 13 dated 30 January Unknown to the Court, during the pendency of
200324 of the Sanguniang Panlungsod, G.R. No. 156052, and before the expiration of the
which extended the validity of Resolution validity ofResolution No. 13, the oil companies
No. 97 to 30 April 2003, authorized then filed the following actions before the Regional
Mayor Atienza to issue special business Trial Court of Manila: (1) an action for the
permits to the oil companies, and called for annulment of Ordinance No. 8027 with
a reassessment of the ordinance. application for writs of preliminary prohibitory
injunction and preliminary mandatory injunction
Social Justice Society v. Atienza (G.R. No. by Chevron; (2) a petition for prohibition and
156052): mandamus also for the annulment of the
The filing of an action for mandamus Ordinance with application for writs of preliminary
before the Supreme Court prohibitory injunction and preliminary mandatory
to enforce Ordinance No. 8027 injunction by Shell; and (3) a petition assailing
the validity of the Ordinance with prayer for the
In the interim, an original action for mandamus
issuance of a writ of preliminary injunction and/or
entitled Social Justice Society v. Atienza, Jr.
temporary restraining order (TRO) by Petron.27
docketed as G.R. No. 15605225 was filed on 4
December 2002 by Tumbokon and herein Writs of preliminary prohibitory injunction and
petitioners SJS and Cabigao against then Mayor preliminary mandatory injunction were issued in
Atienza. The petitioners sought to compel former favor of Chevron and Shell on 19 May 2003.
Mayor Atienza to enforce Ordinance No. 8027 Petron, on the other hand, obtained a status quo
and cause the immediate removal of the order on 4 August 2004.28
terminals of the oil companies.26
The Enactment of Ordinance No. 8119 defining
Issuance by the Regional Trial Court (RTC) the Manila land use plan and zoning regulations
of writs of preliminary prohibitory injunction
and preliminary mandatory injunction, On 16 June 2006, then Mayor Atienza approved
and status quo order in favor of the oil companies Ordinance No. 8119 entitled "An Ordinance
Adopting the Manila Comprehensive Land Use
Plan and Zoning Regulations of 2006 and
Providing for the Administration, Enforcement Mayor Atienza to immediately enforce Ordinance
and Amendment thereto."29 No. 8027.33

Pertinent provisions relative to these cases are Confined to the resolution of the following issues
the following: raised by the petitioners, to wit:

(a) Article IV, Sec. 730 enumerating the 1. whether respondent [Mayor Atienza]has
existing zones or districts in the City of the mandatory legal duty to enforce
Manila; Ordinance No. 8027 and order the removal
of the Pandacan Terminals, and
(b) Article V, Sec. 2331 designating the
Pandacan oil depot area as a "Planned Unit 2. whether the June 26, 2002 MOU and the
Development/Overlay Zone" (O-PUD); and resolutions ratifying it can amend or repeal
Ordinance No. 8027.34
(c) the repealing clause, which reads:
the Court declared:
SEC. 84. Repealing Clause. All ordinances,
rules, regulations in conflict with the provisions of x x x [T]he Local Government Code imposes
this Ordinance are hereby repealed; upon respondent the duty, as city mayor, to
PROVIDED, That the rights that are vested upon "enforce all laws and ordinances relative to the
the effectivity of this Ordinance shall not be governance of the city." One of these is
impaired.32 Ordinance No. 8027. As the chief executive of
the city, he has the duty to enforce Ordinance
7 March 2007 Decision in G.R. No. 156052; No. 8027 as long as it has not been repealed by
The mayor has the mandatory legal duty to the Sanggunian or annulled by the courts. He
enforce has no other choice. It is his ministerial duty to do
Ordinance No. 8027 and order the removal of the so. x x x
Pandacan terminals
xxxx
On 7 March 2007, the Court granted the petition
for mandamus, and directed then respondent
The question now is whether the MOU entered 13 February 2008 Resolution in G.R. No.
into by respondent with the oil companies and 156052;
the subsequent resolutions passed by the Ordinance No. 8027 is constitutional
Sanggunianhave made the respondents duty to
enforce Ordinance No. 8027 doubtful, unclear or The oil companies and the Republic of the
uncertain. x x x Philippines, represented by the DOE, filed their
motions for leave to intervene and for
We need not resolve this issue. Assuming that reconsideration of the 7 March 2007 Decision.
the terms of the MOU were inconsistent with During the oral arguments, the parties submitted
Ordinance No. 8027, the resolutions which to the power of the Court torule on the
ratified it and made it binding on the Cityof Manila constitutionality and validity of the assailed
expressly gave it full force and effect only until Ordinance despite the pendency of the cases in
April 30, 2003. Thus, at present, there is nothing the RTC.36
that legally hinders respondent from enforcing
Ordinance No. 8027. On 13 February 2008, the Court granted the
motions for leave to intervene of the oil
Ordinance No. 8027 was enacted right after the companies and the Republic of the Philippines
Philippines, along with the rest of the world, but denied their respective motions for
witnessed the horror of the September 11, 2001 reconsideration. The dispositive portion of the
attack on the Twin Towers of the World Trade Resolution reads:
Center in New York City. The objective of the
ordinance is toprotect the residents of Manila WHEREFORE, x x x
from the catastrophic devastation that will surely
We reiterate our order to respondent Mayor of
occur in case of a terrorist attack on the
the City of Manila to enforce Ordinance No.
Pandacan Terminals. No reason exists why such
8027. In coordination with the appropriate
a protective measure should be
35 agencies and other parties involved, respondent
delayed. (Emphasis supplied; citations
Mayor is hereby ordered to oversee the
omitted)
relocation and transfer of the Pandacan
Terminals out of its present site.37
13 February 2008 Resolution in G.R. No. Ordinance No. 8119 can be considered a general
156052; law as it covers the entire city of Manila.
Ordinance No. 8027 was not impliedly repealed
by Ordinance No. 8119 xxxx

The Court also ruled that Ordinance No. 8027 x x x The repealing clause of Ordinance No. 8119
was not impliedly repealed by Ordinance No. cannot be taken to indicate the legislative intent
8119. On this score, the Court ratiocinated: to repeal all prior inconsistent laws on the subject
matter, including Ordinance No. 8027, a special
For the first kind of implied repeal, there must be enactment, since the aforequoted minutes (an
an irreconcilable conflict between the two official record of the discussions in the
ordinances. There is no conflict between the two Sanggunian) actually indicated the clear intent to
ordinances. Ordinance No. 8027 reclassified the preserve the provisions of Ordinance No. 8027.38
Pandacan area from Industrial II to Commercial
I. Ordinance No. 8119, Section 23, designated it Filing of a draft Resolution amending Ordinance
as a "Planned Unit Development/Overlay Zone No. 8027 effectively allowing
(O-PUD)." In its Annex "C" which defined the the oil depots to stay in the Pandacan area;
zone boundaries, the Pandacan area was shown Manifestation and
to be within the "High Density Residential/Mixed Motion to forestall the passing of the new
Use Zone (R-3/MXD)." x x x [B]oth ordinances Ordinance filed in G.R. No. 156052
actually have a common objective, i.e., to shift
On 5 March 2009, respondent then Councilor
the zoning classification from industrial to
Arlene W. Koa, filed with the Sangguniang
commercial (Ordinance No. 8027) or mixed
Panlungsod a draft resolution entitled "An
residential commercial (Ordinance No. 8119)
Ordinance Amending Ordinance No. 8119
xxxx Otherwise Known as The Manila
Comprehensive Land Use Plan and Zoning
Ordinance No. 8027 is a special law since it Ordinance of 2006 by Creating a Medium
deals specifically with a certain area described Industrial Zone (1-2) and Heavy Industrial Zone
therein (the Pandacan oil depot area) whereas (1-3) and Providing for its
Enforcement."39 Initially numbered as Draft Succeeding motions were thus deniedand/or
Ordinance No. 7177, this was later renumbered noted without action. And, after the "Very Urgent
as Ordinance No. 8187, the assailed Ordinance Motion to Stop the Mayor of the City of Manila
in these instant petitions. from Signing Draft Ordinance No. 7177 and to
Cite Him for Contempt if He Would Do So" filed
Considering that the provisions thereof run on 19 May 2009 was denied on 2 June 2009 for
contrary to Ordinance No. 8027, the petitioners being moot,43 all pleadings pertaining to the
in G.R. No. 156052 filed a "Manifestation and earlier motion against the drafting of an
Motion to: a) Stop the City Council of Manila from ordinance to amend Ordinance No. 8027 were
further hearing the amending ordinance to noted without action.44
Ordinance No. 8027; [and] b) Transfer the
monitoring of the enforcement of the Resolution The Enactment of Ordinance No. 8187
of the Honorable Court on this case dated 13 allowing the continued stay of the oil depots
February 2008 from Branch 39, Manila Regional
Trial Court to the Supreme Court."40 On 14 May 2009, during the incumbency of
former Mayor Alfredo S. Lim (Mayor Lim), who
28 April 2009 Resolution in G.R. No. 156052; succeeded Mayor Atienza, the Sangguniang
Second Motion for Reconsideration denied with Panlungsod enacted Ordinance No. 8187.45
finality;
succeeding motions likewise denied or otherwise The new Ordinance repealed, amended,
noted without action rescinded or otherwise modified Ordinance No.
8027, Section 23 of Ordinance No. 8119, and all
On 28 April 2009, pending the resolution of the other Ordinances or provisions inconsistent
Manifestation and Motion, the Court denied with therewith46 thereby allowing, once again, the
finalitythe second motion for reconsideration operation of "Pollutive/Non-Hazardous and
dated 27 February 2008 of the oil companies.41 Pollutive/Hazardous manufacturing and
processing establishments" and "Highly
It further ruled that no further pleadings shall be Pollutive/Non-Hazardous[,]
entertained in the case.42 Pollutive/Hazardous[,] Highly
Pollutive/Extremely Hazardous[,] Non-
Pollutive/Extremely Hazardous; and people within the contemplation of the
Pollutive/Extremely Hazardous; and following provisions of law:
Pollutive/Extremely Hazardous manufacturing
and processing establishments" within the newly a) Article III, Section 18 (kk)47 of
created Medium Industrial Zone (1-2) and Heavy Republic Act No. 409 otherwise known
Industrial Zone (1-3) in the Pandacan area. as the "Revised Charter of the City of
Manila," which provides that the
Thus, where the Industrial Zoneunder Ordinance Municipal Board shall have the
No. 8119 was limited to Light Industrial Zone (I- legislative power to enact all
1), Ordinance No. 8187 appended to the list a ordinances it may deem necessary
Medium Industrial Zone (I-2) and a Heavy and proper;
Industrial Zone (I-3), where petroleum refineries
and oil depots are now among those expressly b) Section 1648 of Republic Act No.
allowed. 7160 known as the Local Government
Code, which defines the scope of the
Hence these petitions. general welfare clause;

The Petitions 2. The conditions at the time the Court

declared Ordinance No. 8027 constitutional
G.R. No. 187836 in G.R. No. 156052 exist to this date;
To support their petition for prohibition against 3. Despite the finality of the Decision in G.R.
the enforcement of Ordinance No. 8187, the No. 156052, and notwithstanding that the
petitioner Social Justice Society (SJS) officers conditions and circumstances warranting
allege that: the validity of the Ordinance remain the
same, the Manila City Council passed a
1. The enactment of the assailed Ordinance
contrary Ordinance, thereby refusing to
is not a valid exercise of police power
recognize that "judicial decisions applying
because the measures provided therein do
or interpreting the laws or the Constitution
not promote the general welfare of the
 form part of the legal system of the Petitioners likewise claim that the Ordinance is in
Philippines;"49 and violation of the following health and environment-
related municipal laws, and international
4. Ordinance No. 8187 is violative of conventions and treaties to which the Philippines
Sections 15 and 16, Article II of the is a state party:
Constitution of the Philippines on the duty of
the State "to protect and promote the right 1. Municipal Laws
to health of the people"50 and "protect and
advance the right of the people to a (a) Sections 4,52 12,53 1954 and 3055 of
balanced and healthful Republic Act No. 8749 otherwise
ecology."51 Petitioners pray that Ordinance known as the Philippine Clean Air Act;
No. 8187 of the City of Manila be declared
(b) Environment Code (Presidential
null and void, and that respondent, and all
Decree No. 1152);
persons acting under him, be prohibited
from enforcing the same. (c) Toxic and Hazardous Wastes Law
(Republic Act No. 6969); and
G.R. No. 187916
(d) Civil Code provisions on nuisance
The petition for Prohibition, Mandamus and
and human relations;
Certiorari with Prayer for Temporary Restraining
Order and/or Injunction against the enforcement 2. International Conventions and Treaties to
of Ordinance No. 8187 of former Secretary of which the Philippines is a state party
Department of Environment and Natural
Resources and then Mayor Atienza, together a. Section 1 of the Universal
with other residents and taxpayers of the City of Declaration of Human Rights, which
Manila, also alleges violation of the right to health states that "[e]veryone has the right to
of the people and the right to a healthful and life, liberty and security of person;"
balanced environment under Sections 15 and 16
of the Constitution. b. Articles 6,56 2457 and 2758 of the
Convention on the Rights of the Child,
 summarized by the petitioners in the repeal Ordinance No. 8027. According to them,
following manner: Ordinance No. 8027 was never mentioned in the
title and the body of the new ordinance in
1. the human right to safe and healthy violation of Section 26, Article VI of the 1987
environment[;] Constitution, which provides that every bill
passed by Congress shall embrace only one
2. human right to the highest attainable
subject which shall be expressed in the title
standard of health[;]
thereof.
3. the human right to ecologically
Also pointed out by the petitioners is a specific
sustainable development[;]
procedure outlined in Ordinance No. 8119 that
4. the human right to an adequate standard should be observed when amending the zoning
of living, including access to safe food and ordinance. This is provided for under Section 81
water[;] thereof, which reads:

5. the human right of the child to live in an SEC. 81. Amendments to the Zoning Ordinance.
environment appropriate for physical and The proposed amendments to the Zoning
mental development[; and] Ordinance asreviewed and evaluated by the City
Planning and Development Office (CPDO)shall
6. the human right to full and equal be submitted to the City Council for approval of
participation for all persons in the majority of the Sangguniang Panlungsod
environmental decision-making and members. The amendments shall be acceptable
development planning, and in shaping and eventually approved: PROVIDED, That
decisions and policies affecting ones there is sufficient evidence and justification for
community, at the local, national and such proposal; PROVIDED FURTHER,That
international levels.59 such proposal is consistent with the development
goals, planning objectives, and strategies of the
Petitioners likewise posit that the title of Manila Comprehensive Land Use Plan. Said
Ordinance No. 8187 purports to amend or repeal
Ordinance No. 8119 when it actually intends to
amendments shall take effect immediately upon 5. x x x respondent City Mayor Alfredo S.
approval or after thirty (30) days from application. Lim [be enjoined] from issuing any permits
(business or otherwise) to all industries
Petitioners thus pray that: whose allowable uses are anchored under
the provisions of Manila Ordinance No.
1. upon filing of [the] petition, [the] case be
8187; and
referred to the Court [E]n Banc, and setting
(sic) the case for oral argument; 6. x x x respondent Mayor of Manila Alfredo
S. Lim [be ordered] to comply with the Order
2. upon the filing of [the] petition, a
of the Honorable Court in G.R. 156052
temporary restraining order be issued
dated February 13, 2008.60
enjoining the respondents from publishing
and posting Manila City Ordinance No. The Respondents Position on the Consolidated
8187 and/or posting of Manila City Petitions
Ordinance No. 8187; and/or taking any
steps to implementing (sic) and/or enforce Respondent former Mayor Lim
the same and after due hearing, the
temporary restraining order be converted to In his Memorandum,61 former Mayor Lim,
a permanent injunction; through the City Legal Officer, attacks the
petitioners lack of legal standing to sue. He
3. x x x Manila City Ordinance 8187 [be likewise points out that the petitioners failed to
declared] as null and void for being observe the principle of hierarchy of courts.
repugnant to the Constitution and existing
municipal laws and international covenants; Maintaining that Ordinance No. 8187 is valid and
constitutional, he expounds on the following
4. x x x the respondents [be ordered] to arguments:
refrain from enforcing and/or implementing
Manila City Ordinance No. 8187; On the procedural issues, he contends that: (1) it
is the function of the Sangguniang Panlungsod
to enact zoning ordinances, for which reason, it
may proceed to amend or repeal Ordinance No. Respondents Vice-Mayor Domagoso and the
8119 without prior referral to the Manila Zoning City Councilors who voted in favor of the assailed
Board of Adjustment and Appeals (MZBAA) as ordinance
prescribed under Section 80 (Procedure for Re-
Zoning) and the City Planning and Development On 14 September 2012, after the Court gave the
Office (CPDO) pursuant to Section 81 respondents several chances to submit their
(Amendments to the Zoning Ordinance) of Memorandum,62 they, through the Secretary of
Ordinance No. 8119, especially when the action the Sangguniang Panlungsod, prayed that the
actually originated from the Sangguniang Court dispense with the filing thereof.
Panlungsod itself; (2) the Sangguniang
In their Comment,63 however, respondents
Panlungsod may, in the later ordinance,
offered a position essentially similar to those
expressly repeal all or part of the zoning
proffered by former Mayor Lim.
ordinance sought to be modified; and (3) the
provision repealing Section 23 of Ordinance No. The Intervenors Position on the Consolidated
8119 is not violative of Section 26, Article VI of Petitions
the 1987 Constitution, which requires that every
bill must embrace only one subject and that such On the other hand, the oil companies sought the
shall be expressed in the title. outright dismissal of the petitions based on
alleged procedural infirmities, among others,
On the substantive issues, he posits that the incomplete requisites of judicial review, violation
petitions are based on unfounded fears; that the of the principle of hierarchy of courts, improper
assailed ordinance is a valid exercise of police remedy, submission of a defective verification
power; that it is consistent with the general and certification against forum shopping, and
welfare clause and public policy, and is not forum shopping.
unreasonable; that it does not run contrary to the
Constitution, municipal laws, and international As to the substantive issues, they maintain,
conventions; and that the petitioners failed to among others, that the assailed ordinance is
overcome the presumption of validity of the constitutional and valid; that the Sangguniang
assailed ordinance. Panlalawigan is in the best position to determine
the needs of its constituents; that it is a valid Intervening Events
exercise of legislative power; that it does not
violate health and environment-related On 28 August 2012, while the Court was awaiting
provisions of the Constitution, laws, and the submission of the Memorandum of
international conventions and treaties to which respondents Vice-Mayor Domagoso and the
the Philippines is a party; that the oil depots are councilors who voted in favor of the assailed
not likely targets of terrorists; that the scaling Ordinance, the Sangguniang Panlungsod, which
down of the operations in Pandacan pursuant to composition had already substantially changed,
the MOU has been followed; and that the people enacted Ordinance No. 828367 entitled "AN
are safe in view of the safety measures installed ORDINANCE AMENDING SECTION 2 OF
in the Pandacan terminals. ORDINANCE NO. 8187 BY RECLASSIFYING
THE AREA WHERE PETROLEUM
Incidentally, in its Manifestation dated 30 REFINERIES AND OIL DEPOTS ARE
November 2010,64 Petron informed the Court LOCATED FROM HEAVY INDUSTRIAL (1-3)
that it will "cease [the] operation of its petroleum TO HIGH INTENSITY COMMERCIAL/MIXED
product storage facilities"65 in the Pandacan oil USE ZONE (C3/MXD).
terminal not later than January 2016 on account
of the following: The new ordinance essentially amended the
assailed ordinance to exclude the area where
2.01 Environmental issues, many of which are petroleum refineries and oil depots are located
unfounded, continually crop up and tarnish the from the Industrial Zone.
Companys image.
Ordinance No. 8283 thus permits the operation
2.02. The location of its Pandacanterminal is of the industries operating within the Industrial
continually threatened, and made uncertain Zone. However, the oil companies, whose oil
preventing long-term planning, by the changing depots are located in the High Intensity
local government composition. Indeed, the Commercial/Mixed Use Zone (C3/MXD), are
relevant zoning ordinances have been amended given until the end of January 2016 within which
three (3) times, and their validity subjected to to relocate their terminals.
litigation.66
Former Mayor Lim, who was then the incumbent earlier directives71 to submit the said
mayor, did not support the amendment. respondents Memorandum.
Maintaining that the removal of the oil depots
was prejudicial to public welfare, and, on account In his Compliance/Explanation with Urgent
of the pending cases in the Supreme Court, he Manifestation72 dated 13 September 2012, Atty.
vetoed Ordinance No. 8283 on 11 September Gempis explained that it was not his intention to
2012.68 show disrespect to this Court or to delay or
prejudice the disposition of the cases.
On 28 November 2012, former Mayor Lim filed a
Manifestation informing this Court that the According to him, he signed the Comment
Sangguniang Panlungsod voted to override the prepared by respondents Vice-Mayor and the
veto, and that he, in turn, returned it again with City Councilors only to attest that the pleading
his veto. He likewise directed the Sangguniang was personally signed by the respondents. He
Panlungsod to append his written reasons for his clarified that he was not designated as the legal
veto of the Ordinance, so that the same will be counsel of the respondents as, in fact, he was of
forwarded to the President for his consideration the impression that, pursuant to Section
in the event that his veto is overridden again.69 481(b)(3) of the Local Government Code,73 it is
the City Legal Officer who isauthorized to
On 11 December 2012, Shell also filed a similar represent the local government unit or any official
Manifestation.70 thereof in a litigation. It was for the same reason
that he thought that the filing of a Memorandum
Meanwhile, three days after former Mayor Lim may already be dispensed with when the City
vetoed the new ordinance, Atty. Luch R. Gempis, Legal Officer filed its own on 8 February 2010.
Jr. (Atty. Gempis), Secretary of the Sangguniang He further explained that the Ordinance subject
Panlungsod, writing on behalf of respondents of these cases was passed during the 7th
Vice-Mayor Domagoso and the City Councilors Council (2007-2010); that the composition of the
of Manila who voted in favor of the assailed 8th Council (2010-2013) had already changed
Ordinance, finally complied with this Courts after the 2010 elections; and that steps were
Resolution dated 17 July 2012 reiterating its already taken to amend the ordinance again.
Hence, he was in a dilemma as to the position of Our Ruling
the Sangguniang Panlungsod at the time he
received the Courts Resolution of 31 May 2011. We see no reason why Ordinance No. 8187
should not be stricken down insofar as the
Atty. Gempis, thus, prayed that the Court presence of the oil depots in Pandacan is
dispense with the filing of the required concerned.
memorandum in view of the passing of
Ordinance No. 8283. I

Issue We first rule on the procedural issues raised by

the respondents and the oil companies.
The petitioners arguments are primarily
anchored on the ruling of the Court in G. R. No. At the outset, let it be emphasized that the Court,
156052 declaring Ordinance No. 8027 in G.R. No. 156052, has already pronounced that
constitutional and valid after finding that the the matter of whether or not the oil depots should
presence of the oil terminals in Pandacan is a remain in the Pandacan area is of transcendental
threat to the life and security of the people of importance to the residents of Manila.74
Manila. From thence, the petitioners enumerated
We may, thus, brush aside procedural infirmities,
constitutional provisions, municipal laws and
if any, as we had in the past, and take
international treaties and conventions on health
cognizance of the cases75 if only to determine if
and environment protection allegedly violated by
the acts complained of are no longer within the
the enactment of the assailed Ordinance to
bounds of the Constitution and the laws in
support their position.
place.76
The resolution of the present controversy is,
Put otherwise, there can be no valid objection to
thus, confined to the determination of whether or
this Courts discretion to waive one or some
not the enactment of the assailed Ordinance
procedural requirements if only to remove any
allowing the continued stay of the oil companies
impediment to address and resolve the serious
in the depots is, indeed, invalid and
constitutional question77 raised in these petitions
unconstitutional.
of transcendental importance, the same having Shell argues that the petitioners should have
farreaching implications insofar as the safety and sought recourse before the first and second level
general welfare of the residents of Manila, and courts under the Rules of Procedure for
even its neighboring communities, are Environmental Cases,80 which govern "the
concerned. enforcement or violations of environmental and
other related laws, rules and
Proper Remedy 81
regulations." Petron additionally submits that
the most adequate remedy available to
Respondents and intervenors argue that the
petitioners is to have the assailed ordinance
petitions should be outrightly dismissed for
repealed by the Sangguniang Panlungsod. In the
failure on the part of the petitioners to properly
alternative, a local referendum may be had. And,
apply related provisions of the Constitution, the
assuming that there were laws violated, the
Rules of Court, and/or the Rules of Procedure for
petitioners may file an action for each alleged
Environmental Cases relative to the appropriate
violation of law against the particular individuals
remedy available to them.
that transgressed the law.
To begin with, questioned is the applicability of
It would appear, however, that the remedies
Rule 6578 of the Rules of Court to assail the
identified by the intervenors prove to be
validity and constitutionality of the Ordinance.
inadequate toresolve the present controversies
there is no appeal, or any plain, in their entirety owing to the intricacies of the
circumstances herein prevailing.
speedy, and adequate remedy
The scope of the Rules of Procedure for
in the ordinary course of law Environmental Cases is embodied in Sec. 2, Part
I, Rule I thereof. It states that the Rules shall
Rule 65 specifically requires that the remedy may govern the procedure in civil, criminal and special
be availed of only when "there is no appeal, or civil actions before the Metropolitan Trial Courts,
any plain, speedy, and adequate remedy in the Municipal Trial Courts in Cities, Municipal Trial
ordinary course of law."79 Courts and Municipal Circuit Trial Courts, and the
Regional Trial Courts involving enforcement or SEC. 3. Objectives.The objectives of these
violations of environmental and other related Rules are:
laws, rules and regulations such as but not
limited to the following: (a) To protect and advance the
constitutional right of the people to a
(k) R.A. No. 6969, Toxic Substances and balanced and healthful ecology;
Hazardous Waste Act;
(b) To provide a simplified, speedy and
xxxx inexpensive procedure for the enforcement
of environmental rights and duties
(r) R.A. No. 8749, Clean Air Act; recognized under the Constitution, existing
laws, rules and regulations, and
xxxx
international agreements;
(y) Provisions in C.A. No. 141, x x x; and
(c) To introduce and adopt innovations and
other existing laws that relate to the
best practices ensuring the effective
conservation, development, preservation,
enforcement of remedies and redress for
protection and utilization of the environment
violation of environmental laws; and
and natural resources.82 (Emphasis
supplied) (d) To enable the courts to monitor and
exact compliance with orders and
Notably, the aforesaid Rules are limited in scope.
judgments in environmental cases.83
While, indeed, there are allegations of violations
of environmental laws in the petitions, these only Surely, the instant petitions are not within the
serve as collateral attacks that would support the contemplation of these Rules.
other position of the petitioners the protection
of the rightto life, security and safety. Moreover, Relative to the position of Petron, it failed to
it bears emphasis that the promulgation of the consider that these petitions are already a sequel
said Rules was specifically intended to meet the to G.R. No. 156052, and that there are some
following objectives: issues herein raised that the remedies available
at the level of the Sangguniang Panlungsod To further support its position, it cites the case of
could not address. Neither could the filing of an Liga ng mga Barangay National v. City Mayor of
individual action for each law violated be Manila,85 where the petitioners sought the
harmonized with the essence of a "plain, speedy, nullification of the mayors executive order and
and adequate" remedy. the councils ordinance concerning certain
functions of the petitioners that are vested in
From another perspective, Shell finds fault with them by law. There, the Court held:
the petitioners direct recourse to this Court
when, pursuant to Section 5, Article VIII of the Second, although the instant petition is styled as
Constitution, the Supreme Court exercises only a petition for certiorari, in essence, it seeks the
appellate jurisdiction over cases involving the declaration by this Court of the unconstitutionality
constitutionality or validity of an or illegality of the questioned ordinance and
84
ordinance. Thus: executive order. It, thus, partakes of the nature
of a petition for declaratory relief over which this
Section 5.The Supreme Court shall have the Court has only appellate, not original,
following powers: jurisdiction.86 Section 5, Article VIII of the
Constitution provides: x x x
xxxx
As such, this petition must necessary fail, as this
2. Review, revise, reverse, modify, or affirm on
Court does not have original jurisdiction over a
appeal or certiorari, as the law or the Rules of
petition for declaratory relief even if only
Court may provide, final judgments and orders of
questions of law are involved.87
lower courtsin:
Assuming that a petition for declaratory relief is
a. All cases in which the constitutionality or
the proper remedy, and that the petitions should
validity of any treaty, international or executive
have been filed with the Regional Trial Court, we
agreement, law, presidential decree,
have, time and again, resolved to treat such a
proclamation, order, instruction, ordinance, or
petition as one for prohibition, provided that the
regulation is in question. (Emphasis supplied)
case has far-reaching implications and
transcendental issues that need to be persons aggrieved thereby
resolved,88 as in these present petitions.
As to who may file a petition for certiorari,
On a related issue, we initially found convincing prohibition or mandamus, Petron posits that
the argument that the petitions should have been petitioners are not among the "persons
filed with the Regional Trial Court, it having aggrieved" contemplated under Sections 1 to 3
concurrent jurisdiction with this Court over a of Rule 65 of the Rules of Court.
special civil action for prohibition, and original
jurisdiction over petitions for declaratory relief. Chevron argues that petitioners, whether as
However, as we have repeatedly said, the "citizens," taxpayers," or legislators," lack the
petitions at bar are of transcendental importance legal standing toassail the validity and
warranting a relaxation of the doctrine of constitutionality of Ordinance No. 8187. It further
hierarchy of courts.89 In the case of Jaworski v. claims that petitioners failed to show that they
PAGCOR,90 the Court ratiocinated: have suffered any injury and/or threatened injury
as a result of the act complained of.91
Granting arguendothat the present action cannot
be properly treated as a petition for prohibition, Shell also points out that the petitions cannot be
the transcendental importance of the issues considered taxpayers suit, for then, there should
involved in this case warrants that weset aside be a claim that public funds were illegally
the technical defects and take primary disbursed and that petitioners have sufficient
jurisdiction over the petition at bar. x x x This is interest concerning the prevention of illegal
in accordance with the well-entrenched principle expenditure of public money.92 In G.R. No.
that rules of procedure are not inflexible tools 187916, Shell maintains that the petitioners
designed to hinder or delay, but to facilitate and failed to show their personal interest in the case
promote the administration of justice.Their strict and/or to establish that they may represent the
and rigid application, which would result in general sentiments of the constituents of the City
technicalities that tend to frustrate, rather than of Manila so as to be treated as a class suit. Even
promote substantial justice, must always be the minors, it argues, are not numerous and
eschewed. (Emphasis supplied) representative enough for the petition to be
treated as a class suit. Asto the city councilors
who joined the petitioners in assailing the validity To support the assertion that petitioners have a
of Ordinance No. 8187, Shell posits that they clear legal right to the enforcement of the
cannot invoke the ruling in Prof. David v. Pres. ordinance, petitioner SJS states that it is a
Macapagal-Arroyo,93 where the Court held that political party registered with the Commission on
legislators may question the constitutionality of a Elections and has its offices in Manila. It claims
statute, if and when it infringes upon their to have many members who are residents of
prerogatives as legislators, because of the Manila. The other petitioners, Cabigao and
absence of the allegation that the assailed Tumbokon, are allegedly residents of Manila.
ordinance indeed infringes upon their
prerogatives. We need not belabor this point. We have ruled in
previous cases that when
Former Mayor Lim submitted a similar position a mandamus proceeding concerns a public right
supported by a number of cases on the concept and its object is to compel a public duty, the
of locus standi,94 the direct injury test,95 an people who are interested in the execution of the
outline of the stringent requirements of legal laws are regarded as the real parties in interest
standing when suing as a citizen,96 as a and they need not show any specific interest.
taxpayer,97 as a legislator and in cases where Besides, as residents of Manila, petitioners have
class suits are filed in behalf of all citizens.98 a direct interest in the enforcement of the citys
ordinances.99 x x x (Citations omitted)
Their arguments are misplaced.
No different are herein petitioners who seek to
In G.R. No. 156052, we ruled that the petitioners prohibit the enforcement of the assailed
in that case have a legal right to seek the ordinance, and who deal with the same subject
enforcement of Ordinance No. 8027 because the matter that concerns a public right. Necessarily,
subject of the petition concerns a public right, the people who are interested in the nullification
and they, as residents of Manila, have a direct of such an ordinance are themselves the real
interest in the implementation of the ordinances parties in interest, for which reason, they are no
of the city. Thus: longer required to show any specific interest
therein. Moreover, it is worth mentioning that
SJS, now represented by SJS Officer Alcantara, significance to the people, as when the issues
has been recognized by the Court in G.R. No. raised are of paramount importance to the public.
156052 to have legal standing to sue in Thus, when the proceeding involves the
connection with the same subject matter herein assertion of a public right, the mere fact that the
considered. The rest of the petitioners are petitioner is a citizen satisfies the requirement of
residents of Manila. Hence, all of them have a personal interest.
direct interest in the prohibition proceedings
against the enforcement of the assailed There can be no doubt that the matter of
ordinance. ensuring adequate water supply for domestic use
is one of paramount importance to the public.
In the case of Initiatives for Dialogue and That the continued availability of potable water in
Empowerment through Alternative Legal Metro Manila might be compromised if PSALM
Services, Inc. (IDEALS, INC.) v. Power Sector proceeds with the privatization of the
Assets and Liabilities Management Corporation hydroelectric power plant in the Angat Dam
(PSALM),100 involving a petition for certiorari and Complex confers upon petitioners such personal
prohibition to permanently enjoin PSALM from stake in the resolution of legal issues in a petition
selling the Angat Hydro-Electric Power Plant to stop its implementation.101 (Emphasis
(AHEPP) to Korea Water Resources Corporation supplied; citations omitted)
(K-Water), the Court ruled:
In like manner, the preservation of the life,
"Legal standing" or locus standihas been defined security and safety of the people is indisputably
as a personal and substantial interest in the case a right of utmost importance to the public.
such that the party has sustained or will sustain Certainly, the petitioners, as residents of Manila,
direct injury as a result of the governmental act have the required personal interest to seek relief
that is being challenged, alleging more than a from this Court to protect such right.
generalized grievance. x x x This Court,
however, has adopted a liberal attitude on the in excess of its or his jurisdiction,
locus standi of a petitioner where the petitioner is or with grave abuse of discretion
able to craft anissue of transcendental amounting to lack or excess of jurisdiction
Petron takes issue with the alleged failure of the issue absent any showing of grave abuse of
petitioners to establish the facts with certainty discretion in the exercise of judicial, quasi-
that would show that the acts of the respondents judicial or ministerial powers on the part of
fall within the parameters of the grave abuse of respondents and resulting prejudice on the part
discretion clause settled by jurisprudence, to wit: of petitioners.

x x x "[G]rave abuse of discretion" means such Respondents submission holds true in ordinary
capricious and whimsical exercise of judgment civil proceedings. When this Court exercises its
as is equivalent to lack of jurisdiction. The abuse constitutional power of judicial review, however,
of discretion must be grave as where the power we have, by tradition, viewed the writs of
is exercised in an arbitrary or despotic manner by certiorariand prohibition as proper remedial
reason of passion or personal hostility and must vehicles to test the constitutionality of
be so patent and gross asto amount to an statutes, and indeed, of acts of other
evasion of positive duty or to a virtual refusal to branches of government. Issues of
perform the duty enjoined by or to act all in constitutional importx x x carry such
contemplation of law.102 relevance in the life of this nation that the
Court inevitably finds itself constrained to
It is pointless to discuss the matter at length in take cognizance of the case and pass upon
these instant cases of transcendental the issues raised, noncompliance with the
importance in view of the Courts letter of procedural rules
pronouncement, in Magallona v. notwithstanding. The statute sought to be
103
Ermita. There it held that the writs of reviewed here is one such law.104 (Emphasis
certiorariand prohibition are proper remedies to supplied; citations omitted)
test the constitutionality of statutes,
notwithstanding the following defects: Requisites of judicial review

In praying for the dismissal of the petition on For a valid exercise of the power of judicial
preliminary grounds, respondents seek a strict review, the following requisites shall concur: (1)
observance of the offices of the writs of certiorari the existence of a legal controversy; (2) legal
and prohibition, noting that the writs cannot standing to sue of the party raising the
constitutional question; (3) a plea that judicial At the bottom of the Verification and Certification
review be exercised at the earliest opportunity; against Forum Shopping of the petition in G.R.
and (4) the constitutional question is the lis mota No. 187916 is the statement of the notary public
of the case.105 to the effect that the affiant, in his presence and
after presenting "an integrally competent proof of
Only the first two requisites are put in issue in identification with signature and
these cases. 106
photograph," signed the document under
oath.
On the matter of the existence of a legal
controversy, we reject the contention that the Citing Sec. 163 of the Local Government
petitions consist of bare allegations based on Code,107 which provides that an individual
speculations, surmises, conjectures and acknowledging any document before a notary
hypothetical grounds. public shall present his Community Tax
Certificate (CTC), Chevron posits that the
The Court declared Ordinance No. 8027 valid
petitioners failure to present his CTC rendered
and constitutional and ordered its
the petition fatally defective warranting the
implementation. Withthe passing of the new
outright dismissal of the petition.
ordinance containing the contrary provisions, it
cannot be any clearer that here lies an actual We disagree.
case or controversy for judicial review. The
allegation on this, alone, is sufficient for the The verification and certification against forum
purpose. shopping are governed specifically by Sections 4
and 5,Rule 7 of the Rules of Court.
The second requisite has already been
exhaustively discussed. Section 4 provides that a pleading, when
required to be verified, shall be treated as an
Proof of identification required in the notarization unsigned pleading if it lacks a proper verification
of the verification and certification against forum while Section 5 requires that the certification to
shopping in G.R. No. 187916 be executed by the plaintiff or principal party be
under oath.
These sections, in turn, should be read together office ID, certification from the National
with Sections 6 and 12, Rule 2 of the 2004 Rules Council for the Welfare of Disable
on Notarial Practice. Persons (NCWDP), Department of
Social Welfare and Development
Section 6108 of the latter Rules, specifically, (DSWD) certification; or
likewise provides that any competent evidence of
identity specified under Section 12 thereof may (b) x x x.109
now be presented before the notary public, to wit:
Forum shopping
SEC. 12. Competent Evidence of Identity. - The
phrase "competent evidence of identity" refers to Shell contends that the petitioners in G.R. No.
the identification of an individual based on: 187836 violated the rule against forum shopping
allegedly because all the elements thereof are
(a) at least one current identification present in relation to G.R. No. 156052, to wit:
document issued by an official agency
bearing the photograph and signature 1. "identity of parties, or at least such parties
of the individual, such as but not who represent the same interests in both
limited to passport, drivers license, actions" According to Shell, the interest of
Professional Regulations Commission petitioner SJS in G.R. No. 156052 and the
ID, National Bureau of Investigation officers of SJS in G.R. No. 187836 are
clearance, police clearance, postal ID, clearly the same. Moreover, both actions
voters ID, Barangay certification, implead the incumbent mayor of the City of
Government Service and Insurance Manila as respondent. Both then
System (GSIS) e-card, Social Security respondent Mayor Atienza in G.R. No.
System (SSS) card, Philhealth card, 156052 and respondent former Mayor Lim
senior citizen card, Overseas Workers in G.R. No. 187836 are sued in their
Welfare Administration (OWWA) ID, capacity as Manila mayor.
OFW ID, seamans book, alien
2. "identity of rights asserted and relief
certificate of registration/immigrant
prayed for, the relief being founded on the
certificate of registration, government
 same fact(s)" Shell contends that, in both In Spouses Cruz v. Spouses Caraos,111 the
actions, petitioners assert the same rights Court expounded on the nature of forum
to health and to a balanced and healthful shopping. Thus:
ecology relative to the fate of the Pandacan
terminal, and seek essentially the same Forum shopping is an act of a party, against
reliefs, that is, the removal of the oil depots whom an adverse judgment or order has been
from the present site. rendered in one forum, of seeking and possibly
getting a favorable opinion in another forum,
3. "the identity of the two preceding other than by appeal or special civil action for
particulars is such that any judgment certiorari. It may also be the institution of two or
rendered in the pending case, regardless of more actions or proceedings grounded on the
which party is successful, would amount to same cause on the supposition that one or the
res judicata in the other" Relative to the other court would make a favorable disposition.
filing of the Manifestation and Motion to: a) The established rule is that for forum shopping to
Stop the City Council of Manila from further exist, both actions must involve the same
hearing the amending ordinance to transactions, same essential facts and
Ordinance No. 8027 x x x (Manifestation circumstances and must raise identical causes of
and Motion) and Very Urgent Motion to Stop actions, subject matter, and issues. x x
the Mayor of the City of Manila from Signing x112 (Citations omitted) It bears to stress that the
Draft Ordinance No. 7177 [now Ordinance present petitions were initially filed, not to secure
No. 8187] and to Cite Him for Contempt if a judgment adverse to the first decision, but,
He Would Do So (Urgent Motion) both in precisely, to enforce the earlier ruling to relocate
G.R. No. 156052, Shell points out the the oil depots from the Pandacan area.
possibility that the Court would have
rendered conflicting rulings "on cases As to the matter of the denial of the petitioners
involving the same facts, parties, issues Manifestation and Urgent Motion in G.R. No.
and reliefs prayed for."110 156052, which wereboth incidental to the
enforcement of the decision favorable to them
We are not persuaded. brought about by the intervening events after the
judgment had become final and executory, and 20 November 1995, dismissing Civil Case No.
which involve the same Ordinance assailed in 95-1387 was an unqualified dismissal. More
these petitions, we so hold that the filing of the significantly, its dismissal was not based on
instant petitions is not barred by res judicata. grounds under paragraphs (f), (h), and (i) of
Section 1 of Rule 16 of the Rules of Court, which
In the same case of Spouses Cruz v. Spouses dismissal shall bar the refiling of the same action
Caraos involving the refiling of a complaint, or claim as crystallized in Section 5 of Rule 16
which had been earlier dismissed without thereof, thus:
qualification that the dismissal was with
prejudice, and which had not been decided on SEC. 5. Effect of dismissal. Subject to the right
the merits, the Court declared that such re-filing of appeal, an order granting a motion to dismiss
did not amount to forum shopping. It ratiocinated: based on paragraphs (f), (h), and (i) of section 1
hereof shall bar the refiling of the same action or
It is not controverted that the allegations of the claim.
respective complaints in both Civil Case No. 95-
1387 and Civil Case No. 96-0225 are similarly From the foregoing, it is clear that dismissals
worded, and are identical in all relevant details, under paragraphs (f), (h), and (i) of Section 1 of
including typographical errors, except for the Rule 16 of the Rules of Court constitute res
additional allegations in support of respondents judicata, to wit:
prayer for the issuance of preliminary injunction
in Civil Case No. 95-1387. It is similarly not (f) That the cause of action isbarred by a prior
disputed that both actions involve the same judgment or by the statute of limitations;
transactions; same essential facts and
xxxx
circumstances; and raise identical causes of
actions, subject matter, and issues. (h) That the claim or demand set forth in the
plaintiffs pleading has been paid, waived,
xxxx
abandoned, or otherwise extinguished;
x x x The dismissal of Civil Case No. 95-1387
was without prejudice. Indeed, the Order dated
(i) That the claim on which the action is founded sufficiently bar the refiling thereof in Civil Case
is unenforceable under the provisions of the No. 96-0225. As earlier underscored, the
statute of frauds. dismissal was one without prejudice. Verily, it
was not a judgment on the merits. It bears
Res judicata or bar by prior judgmentis a doctrine reiterating that a judgment on the merits is one
which holds that a matter that has been rendered after a determination of which party is
adjudicated by a court of competent jurisdiction right, as distinguished from a judgment rendered
must be deemed to have been finally and upon some preliminary or formal or merely
conclusively settled if it arises in any subsequent technical point. The dismissal of the case without
litigation between the same parties and for the prejudice indicates the absence of a decision on
same cause. Res judicata exists when the the merits and leaves the parties free to litigate
following elements are present: (a) the former the matter in a subsequent action asthough the
judgment must be final; (b) the court which dismissed action had not been
rendered judgment had jurisdiction over the commenced.115(Emphasis supplied; citations
parties and the subject matter; (3)it must be a omitted)
judgment on the merits; and (d) and there must
be, between the first and second actions, identity Considering that there is definitely no forum
ofparties, subject matter, and cause of shopping in the instant cases, we need not
action.113 (Emphasis supplied; citations omitted) discuss in detail the elements of forum shopping.

Here, it should be noted that this Court denied II

the said Manifestation and Urgent Motion, and
refused to act on the succeeding pleadings, for The Local Government Code of 1991 expressly
being moot.114 Clearly, the merits of the motion provides that the Sangguniang Panlungsod is
were not considered by the Court. The following vested with the power to "reclassify land within
disquisition of the Court in Spouses Cruz v. the jurisdiction of the city"116 subject to the
Spouses Caraosis further enlightening: pertinent provisions of the Code. It is also settled
that an ordinance may be modified or repealed
The judgment of dismissal in Civil Case No. 95- by another ordinance.117 These have been
1387 does not constitute res judicata to properly applied in G.R. No. 156052, where the
Court upheld the position of the Sangguniang No. 8187 was passed in favor of the retention of
Panlungsod to reclassify the land subject of the the oil depots. In 2012, again when some of the
Ordinance,118 and declared that the mayor has previous members were no longer re-elected, but
the duty to enforce Ordinance No. 8027, with the Vice-Mayor still holding the same seat,
provided that it has not been repealed by the and pending the resolution of these petitions,
Sangguniang Panlungsod or otherwise annulled Ordinance No. 8283 was enacted to give the oil
by the courts.119 In the same case, the Court also depots until the end of January 2016 within which
used the principle that the Sanguniang to transfer to another site. Former Mayor Lim
Panlungsod is in the best position to determine stood his groundand vetoed the last ordinance.
the needs of its Constituents120 that the
removal of the oil depots from the Pandacan area In its Comment, the 7th Council (2007-2010)
is necessary "to protect the residents of Manila alleged that the assailed Ordinance was enacted
from catastrophic devastation in case of a to alleviate the economic condition of its
terrorist attack on the Pandacan Terminals."121 constituents.122

Do all these principles equally apply to the cases Expressing the same position, former Mayor Lim
at bar involving the same subject matter to justify even went to the extent of detailing the
the contrary provisions of the assailed steps123 he took prior to the signing of the
Ordinance? Ordinance, if only to show his honest intention to
make the right decision.
We answer in the negative.
The fact remains, however, that notwithstanding
We summarize the position of the Sangguniang that the conditions with respect to the operations
Panlungsodon the matter subject of these of the oil depots existing prior to the enactment
petitions. In 2001, the Sanggunian found the of Ordinance No. 8027 do not substantially differ
relocation of the Pandacan oil depots necessary. to this day, as would later be discussed, the
Hence, the enactment of Ordinance No. 8027. position of the Sangguniang Panlungsod on the
matter has thrice changed, largely depending on
In 2009, when the composition of the the new composition of the council and/or
Sanggunian had already changed, Ordinance political affiliations. The foregoing, thus, shows
that its determination of the "general welfare" of authority under the Constitution and to establish
the city does not after all gear towards the for the parties in an actual controversy the rights
protection of the people in its true sense and which that instrument secures and guarantees to
meaning, but is, one way or another, dependent them.
on the personal preference of the members who
sit in the council as to which particular sector III
among its constituents it wishes to favor.
The measures taken by the intervenors to lend
Now that the City of Manila, through the mayor support to their position that Manila is now safe
and the city councilors, has changed its view on despite the presence of the oil terminals remain
the matter, favoring the citys economic related ineffective. These have not completely removed
benefits, through the continued stay of the oil the threat to the lives of the in habitants of Manila.
terminals, over the protection of the very lives
In G.R. No. 156052, the validity and
and safety of its constituents, it is imperative for
constitutionality of Ordinance No. 8027 was
this Court to make a final determination on the
declared as a guarantee for the protection of the
basis of the facts on the table as to which specific
constitutional right to life of the residents of
right of the inhabitants of Manila should prevail.
Manila. There, the Court said that the enactment
For, in this present controversy, history reveals
of the said ordinance was a valid exercise of
that there is truly no such thing as "the will of
police power with the concurrence of the two
Manila" insofar as the general welfare of the
requisites: a lawful subject "to safeguard the
people is concerned.
rights to life, security and safety of all the
If in sacrilege, in free translation of Angara124 by inhabitants of Manila;"125 and a lawful method
Justice Laurel, we say when the judiciary the enactment of Ordinance No. 8027
mediates we do notin reality nullify or invalidate reclassifying the land use from industrial to
an act of the Manila Sangguniang Panlungsod, commercial, which effectively ends the continued
but only asserts the solemn and sacred stay of the oil depots in Pandacan.126
obligation assigned to the Court by the
In the present petitions, the respondents and the
Constitution to determine conflicting claims of
oil companies plead that the Pandacan Terminal
has never been one of the targets of terrorist of Manila who conducted an ocular
attacks;127 that the petitions were based on inspection on 22 May 2009; and
unfounded fears and mere conjectures;128and
that the possibility that it would be picked by the 2. Referring to the old MOU entered into
terrorists is nil given the security measures between the City of Manila and the DOE, on
installed thereat.129 the one hand, and the oil companies, on the
other, where the parties thereto conceded
The intervenors went on to identify the measures and acknowledged that the scale-down
taken to ensure the safety of the people even option for the Pandacan Terminal
with the presence of the Pandacan Terminals. operations is the best alternative to the
Thus: relocation of the terminals, Shell
enumeratesthe steps taken to scale down
1. Chevron claims that it, together with Shell its operations.
and Petron, continues to enhance the
safety and security features of the As to the number of main fuel tanks, the entire
terminals. They likewise adopt fire and Pandacan Terminal has already
product spill prevention measures in decommissioned twenty-eight out of sixty-four
accordance with the local standards set by tanks. Speaking for Shell alone, its LPG
the Bureau of Fire Protection, among Spheres, which it claims is the only product that
others, and with the international standards may cause explosion, was part of those
of the American Petroleum Industry ("API") decommissioned, thereby allegedly removing
and the National Fire Prevention and Safety the danger of explosion. Safety buffer zones and
Association ("NFPSA"); that since 1914, the linear/green parks were likewise created to
oil depots had not experienced "any separate the terminal from the nearest residential
incident beyond the ordinary risks and area. Shells portion of the oil depot is likewise
expectations"130 of the residents of Manila; allegedly equipped with the latest technology to
and that it received a passing grade on the ensure air-quality control and waterquality
safety measures they installed in the control, and to prevent and cope with possible oil
facilities from the representatives of the City spills with a crisis management plan in place in
the event that an oil spill occurs. Finally, Shell flammable and highly volatile products,
claims that the recommendations of EQE regardless of whether ornot the composition may
International in its Quantitative Risk Assessment cause explosions, has no place in a densely
(QRA) study, which it says is one of the leading populated area. Surely, any untoward incident in
independent risk assessment providers in the the oil depots, beit related to terrorism of
world and largest risk management consultancy, whatever origin or otherwise, would definitely
were sufficiently complied with; and that, on its cause not only destruction to properties within
own initiative, it adopted additional measures for and among the neighboring communities but
the purpose, for which reason, "the individual risk certainly mass deaths and injuries.
level resulting from any incident occurring from
the Pandacan Terminal, per the QRA study, is With regard to the scaling down of the operations
twenty (20) times lower compared to the in the Pandacan Terminals, which the oil
individual risk level of an average working or companies continue to insist to have been
domestic environment."131 validated and recognized by the MOU, the
Court,in G.R. No. 156052, has already put this
We are not persuaded. issue to rest. It specifically declared that even
assuming that the terms of the MOU and
The issue of whether or not the Pandacan Ordinance No. 8027 were inconsistent, the
Terminal is not a likely target of terrorist attacks resolutions ratifying the MOU gave it full force
has already been passed upon in G. R. No. and effect only until 30 April 2003.133
156052. Based on the assessment of the
Committee on Housing, Resettlement and Urban The steps taken by the oil companies, therefore,
Development of the City of Manila and the then remain insufficient to convince the Court that the
position of the Sangguniang Panlungsod,132 the dangers posed by the presence of the terminals
Court was convinced that the threat of terrorism in a thickly populated area have already been
is imminent. It remains so convinced. completely removed.

Even assuming that the respondents and For, given that the threat sought to be prevented
intervenors were correct, the very nature of the may strike at one point or another, no matter how
depots where millions of liters of highly remote it is as perceived by one or some, we
cannot allow the right to life to bedependent on The following facts were found by the Committee
the unlikelihood of an event. Statistics and on Housing, Resettlement and Urban
theories of probability have no place in situations Development of the City of Manila which
where the very life of not just an individual but of recommended the approval of the ordinance:
residents of big neighborhoods is at stake.
(1) the depot facilities contained 313.5
IV million liters of highly flammable and highly
volatile products which include petroleum
It is the removal of the danger to life not the mere gas, liquefied petroleum gas, aviation fuel,
subdual of risk of catastrophe, that we saw in and diesel, gasoline, kerosene and fuel oil
made us favor Ordinance No. 8027. That reason, among others;
unaffected by Ordinance No. 8187, compels the
affirmance of our Decision in G.R. No. 156052. (2) the depot is open to attack through land,
water or air;
In striking down the contrary provisions of the
assailed Ordinance relative to the continued stay (3) it is situated in a densely populated
of the oil depots, we follow the same line of place and near Malacaang Palace; and
reasoning used in G.R. No. 156052, to wit:
Ordinance No. 8027 was enacted "for the (4) in case of an explosion or conflagration
purpose of promoting sound urban planning, in the depot, the fire could spread to the
ensuring health, public safety and general neighboring communities.
welfare" of the residents of Manila. The
The ordinance was intended to safeguard the
Sanggunian was impelled to take measures to
rights to life, security and safety of all the
protect the residents of Manila from catastrophic
inhabitants of Manila and not just of a particular
devastation in case of a terrorist attack on the
class. The depot is perceived, rightly or wrongly,
Pandacan Terminals. Towards this objective, the
as a representation of western interests which
Sanggunian reclassified the area defined in the
means that it is a terrorist target. As long as it
ordinance from industrial to commercial.
(sic) there is such a target in their midst, the
residents of Manila are not safe. It therefore
became necessary to remove these terminals to The same best interest of the public guides the
dissipate the threat. According to respondent: present decision. The Pandacan oil depot
remains a terrorist target even if the contents
Such a public need became apparent after the have been lessened. In the absence of any
9/11 incident which showed that what was convincing reason to persuade this Court that the
perceived to be impossible to happen, to the life, security and safety of the inhabitants of
most powerful country in the world at that, is Manila are no longer put at risk by the presence
actually possible. The destruction of property and of the oil depots, we hold that Ordinance No.
the loss of thousands of lives on that fateful day 8187 in relation to the Pandacan Terminals is
became the impetus for a public need. Inthe invalid and unconstitutional.
aftermath of the 9/11 tragedy, the threats of
terrorism continued [such] that it became There is, therefore, no need to resolve the rest of
imperative for governments to take measures to the issues.
combat their effects.
Neither is it necessary to discuss at length the
xxxx test of police power against the assailed
ordinance. Suffice it to state that the objective
Both law and jurisprudence support the adopted by the Sangguniang Panlungsod to
constitutionality and validity of Ordinance No. promote the constituents general welfare in
8027. Without a doubt, there are no impediments terms of economic benefits cannot override the
to its enforcement and implementation. Any very basic rights to life, security and safety of the
delay is unfair to the inhabitants of the City of people.
Manila and its leaders who have categorically
expressed their desire for the relocation of the In. G.R. No. 156052, the Court explained:
terminals. Their power to chart and control their
own destiny and preserve their lives and safety Essentially, the oil companies are fighting for
should not be curtailed by the intervenors their right to property. They allege that they stand
warnings of doomsday scenarios and threats of tolose billions of pesos if forced to relocate.
economic disorder if the ordinance is However, based on the hierarchy of
enforced.134 constitutionally protected rights, the right to life
enjoys precedence over the right to property. The scope and timing of the feasible location of the
reason is obvious: life is irreplaceable, property Pandacan oil terminals and all associated
is not. When the state or LGUs exercise of police facilities and infrastructure including government
power clashes with a few individuals right to support essential for the relocation such as the
property, the former should prevail.135 necessary transportation infrastructure, land and
right of way acquisition, resettlement of displaced
We thus conclude with the very final words in residents and environmental and social
G.R. No. 156052: acceptability which shall be based on mutual
benefit of the Parties and the public.
On Wednesday, January 23, 2008, a defective
tanker containing 2,000 liters of gasoline and such that:
14,000 liters of diesel exploded in the middle of
the street a short distance from the exit gate of Now that they are being compelled to discontinue
the Pandacan Terminals, causing death, their operations in the Pandacan Terminals, they
extensive damage and a frightening cannot feign unreadiness considering that they
conflagration in the vicinity of the incident. Need had years to prepare for this eventuality.137
we say anthing about what will happen if it is the
estimated 162 to 211 million liters [or whatever is On the matter of the details of the relocation, the
left of the 26 tanks] of petroleum products in the Court gave the oil companies the following time
terminal complex will blow up?136 frames for compliance:

V To ensure the orderly transfer, movement and

relocation of assets and personnel, the
As in the prequel case, we note that as early as intervenors Chevron Philippines Inc., Petron
October 2001, the oil companies signed a MOA Corporation and Pilipinas Shell Petroleum
with the DOE obliging themselves to: Corporation shall, within a nonextendible period
of ninety (90) days, submit to the Regional Trial
... undertake a comprehensive and comparative Court of Manila, Branch 39, the comprehensive
study ... [which] shall include the preparation ofa plan and relocation schedule which have
Master Plan, whose aim is to determine the allegedly been prepared. The presiding judge of
Manila RTC, Branch 39 will monitor the strict it is, the fate of the Pandacan Terminals remains
enforcement of this resolution.138 dependent on this final disposition of these
cases.
The periods were given in the Decision in G.R.
No. 156052 which became final on 23 April 2009. VI
Five years have passed, since then. The years
of non-compliance may be excused by the swing On the matter of the failure of Atty. Gempis to
of local legislative leads. We now stay the sway immediately comply with the directives of this
and begin a final count. Court to file the Memorandum for the Vice-Mayor
and the city councilors who voted in favor of the
A comprehensive and well-coordinated plan assailed Ordinance, the records do not bear
within a specific timeframe shall, therefore, be proof that he received a copy of any of the
observed in the relocation of the Pandacan resolutions pertaining to the filing of the
Terminals. The oil companies shall begiven a Memorandum.
fresh non-extendible period of forty-five (45) days
from notice within which to submit to the A narration of the events from his end would
Regional Trial Court, Branch 39, Manila an show, however, that he was aware of the
updated comprehensive plan and relocation directive issued in 2009 when he stated that
schedule. The relocation, inturn, shall be "when the City Legal Officer filed its
completed not later than six months from the Memorandum dated 8 February 2010, [he]
date of their submission. Finally, let it be thought the filing of a Memorandum for the other
underscored that after the last Manifestation filed respondent city officials could be dispensed
by Shell informing this Court that respondent with."139 There was also a categorical admission
former Mayor Lim vetoed Ordinance No. 8283 for that he received the later Resolution of 31 May
the second time, and was anticipating its referral 2011 but that he could not prepare a
to the President for the latters consideration, Memorandum defending the position of
nothing was heard from any of the parties until respondents vice-mayor and the city councilors
the present petitions as to the status of the who voted in favor of Ordinance No. 8187 in view
approval or disapproval of the said ordinance. As of the ongoing drafting of Ordinance No. 8283,
which would change the position of the In Sibulo v. Ilagan,142 which involves a lawyers
Sanggunian, if subsequently approved. repeated failure to comply with the directives of
the Court, the penalty recommended by the
The reasons he submitted are notimpressed with Integrated Bar of the Philippines was reduced
merit. from suspension to reprimand and a warning.
The Court ratiocinated:
That he was not officially designated as the
counsel for the vicemayor and the city councilors Considering, however, that respondent was
is beside the point. As an officer of the court, he absolved of the administrative charge against
cannot feign ignorance of the fact that"a him and is being taken to task for his
resolution of this Court is not a mere request but intransigence and lack of respect, the Court finds
an order which should be complied with promptly that the penalty of suspension would not be
and completely."140 As early as 2009, he should warranted under the circumstances.
have immediately responded and filed a
Manifestation and therein set forth his reasons xxxx
why he cannot represent the vice-mayor and the
city councilors. And, even assuming that the 31 To the Courts mind, a reprimand and a warning
May 2011 Resolution was the first directive he are sufficient sanctions for respondents
personally received, he had no valid excuse for disrespectful actuations directed against the
disregarding the same. Worse, the Court had to Court and the IBP. The imposition of these
issue a show cause order before he finally sanctions in the present case would be more
heeded. consistent with the avowed purpose of
disciplinary case, which is "not so much to punish
Atty. Gempis should "strive harderto live up to his the individual attorney as to protect the
duties of observing and maintaining the respect dispensation of justice by sheltering the judiciary
dueto the courts, respect for law and for legal and the public from the misconduct or
processes and of upholding the integrity and inefficiency of officers of the court."143
dignity of the legal profession in order to perform
his responsibilities asa lawyer effectively."141 We consider the participation of Atty. Gempis in
this case and opt to be lenient even as we
reiterate the objective of protecting the Branch 39 shall monitor the strict enforcement of
dispensation of justice. We deem it sufficient to this Decision.
remind Atty. Gempis to be more mindful of his
duty as a lawyer towards the Court. For failure to observe the respect due to the
Court, Atty. Luch R. Gempis, Jr., Secretary of the
WHEREFORE, in light of all the foregoing, Sangguniang Panlungsod, is REMINDED of his
Ordinance No. 8187 is hereby declared duties towards the Court and WARNED that a
UNCONSTITUTIONAL and INVALID with repetition of an act similar to that here committed
respect to the continued stay of the Pandacan Oil shall be dealt with more severely.
Terminals.
SO ORDERED.
The incumbent mayor of the City of Manila is
hereby ordered to CEASE and DESIST from
enforcing Ordinance No. 8187.1wphi1 In
coordination with the appropriate government
agencies and the parties herein involved, he is
further ordered to oversee the relocation and
transfer of the oil terminals out of the Pandacan
area.

As likewise required in G.R. No. 156052, the

intervenors Chevron Philippines, Inc., Pilipinas
Shell Petroleum Corporation, and Petron
Corporation shall, within a non-extendible period
of forty-five (45) days, submit to the Regional
Trial Court, Branch 39, Manila an updated
comprehensive plan and relocation schedule,
which relocation shall be completed not later
than six (6) months from the date the required
documents are submitted. The presiding judge of
 PARAS, J.:

A TV ad proudly announces:

"The new PAGCOR responding through

responsible gaming."

But the petitioners think otherwise, that is why,

they filed the instant petition seeking to annul the
Philippine Amusement and Gaming Corporation
(PAGCOR) Charter PD 1869, because it is
allegedly contrary to morals, public policy and
G.R. No. 91649 May 14, 1991 order, and because

ATTORNEYS HUMBERTO BASCO, A. It constitutes a waiver of a right

EDILBERTO BALCE, SOCRATES MARANAN prejudicial to a third person with a right
AND LORENZO SANCHEZ,petitioners, recognized by law. It waived the Manila City
vs. government's right to impose taxes and
PHILIPPINE AMUSEMENTS AND GAMING license fees, which is recognized by law;
CORPORATION (PAGCOR), respondent.
B. For the same reason stated in the
H.B. Basco & Associates for petitioners. immediately preceding paragraph, the law
Valmonte Law Offices collaborating counsel for has intruded into the local government's
petitioners. right to impose local taxes and license fees.
Aguirre, Laborte and Capule for respondent This, in contravention of the constitutionally
PAGCOR. enshrined principle of local autonomy;
 C. It violates the equal protection clause of The Philippine Amusements and Gaming
the constitution in that it legalizes PAGCOR Corporation (PAGCOR) was created by virtue of
conducted gambling, while most other P.D. 1067-A dated January 1, 1977 and was
forms of gambling are outlawed, together granted a franchise under P.D. 1067-B also
with prostitution, drug trafficking and other dated January 1, 1977 "to establish, operate and
vices; maintain gambling casinos on land or water
within the territorial jurisdiction of the
D. It violates the avowed trend of the Cory Philippines." Its operation was originally
government away from monopolistic and conducted in the well known floating casino
crony economy, and toward free enterprise "Philippine Tourist." The operation was
and privatization. (p. 2, Amended Petition; considered a success for it proved to be a
p. 7, Rollo) potential source of revenue to fund infrastructure
and socio-economic projects, thus, P.D. 1399
In their Second Amended Petition, petitioners
was passed on June 2, 1978 for PAGCOR to fully
also claim that PD 1869 is contrary to the
attain this objective.
declared national policy of the "new restored
democracy" and the people's will as expressed Subsequently, on July 11, 1983, PAGCOR was
in the 1987 Constitution. The decree is said to created under P.D. 1869 to enable the
have a "gambling objective" and therefore is Government to regulate and centralize all games
contrary to Sections 11, 12 and 13 of Article II, of chance authorized by existing franchise or
Sec. 1 of Article VIII and Section 3 (2) of Article permitted by law, under the following declared
XIV, of the present Constitution (p. 3, Second policy
Amended Petition; p. 21, Rollo).
Sec. 1. Declaration of Policy. It is hereby
The procedural issue is whether petitioners, as declared to be the policy of the State to
taxpayers and practicing lawyers (petitioner centralize and integrate all games of
Basco being also the Chairman of the Committee chance not heretofore authorized by
on Laws of the City Council of Manila), can existing franchises or permitted by law in
question and seek the annulment of PD 1869 on order to attain the following objectives:
the alleged grounds mentioned above.
(a) To centralize and integrate the right and government involvement. (Section 1, P.D.
authority to operate and conduct games of 1869)
chance into one corporate entity to be
controlled, administered and supervised by To attain these objectives PAGCOR is given
the Government. territorial jurisdiction all over the Philippines.
Under its Charter's repealing clause, all laws,
(b) To establish and operate clubs and decrees, executive orders, rules and regulations,
casinos, for amusement and recreation, inconsistent therewith, are accordingly repealed,
including sports gaming pools, (basketball, amended or modified.
football, lotteries, etc.) and such other forms
of amusement and recreation including It is reported that PAGCOR is the third largest
games of chance, which may be allowed by source of government revenue, next to the
law within the territorial jurisdiction of the Bureau of Internal Revenue and the Bureau of
Philippines and which will: (1) generate Customs. In 1989 alone, PAGCOR earned P3.43
sources of additional revenue to fund Billion, and directly remitted to the National
infrastructure and socio-civic projects, such Government a total of P2.5 Billion in form of
as flood control programs, beautification, franchise tax, government's income share, the
sewerage and sewage projects, Tulungan President's Social Fund and Host Cities' share.
ng Bayan Centers, Nutritional Programs, In addition, PAGCOR sponsored other socio-
Population Control and such other essential cultural and charitable projects on its own or in
public services; (2) create recreation and cooperation with various governmental
integrated facilities which will expand and agencies, and other private associations and
improve the country's existing tourist organizations. In its 3 1/2 years of operation
attractions; and (3) minimize, if not totally under the present administration, PAGCOR
eradicate, all the evils, malpractices and remitted to the government a total of P6.2 Billion.
corruptions that are normally prevalent on As of December 31, 1989, PAGCOR was
the conduct and operation of gambling employing 4,494 employees in its nine (9)
clubs and casinos without direct casinos nationwide, directly supporting the
livelihood of Four Thousand Four Hundred presumed to be valid. Every presumption must
Ninety-Four (4,494) families. be indulged in favor of its constitutionality. This is
not to say that We approach Our task with
But the petitioners, are questioning the validity of diffidence or timidity. Where it is clear that the
P.D. No. 1869. They allege that the same is "null legislature or the executive for that matter, has
and void" for being "contrary to morals, public over-stepped the limits of its authority under the
policy and public order," monopolistic and tends constitution, We should not hesitate to wield the
toward "crony economy", and is violative of the axe and let it fall heavily, as fall it must, on the
equal protection clause and local autonomy as offending statute (Lozano v. Martinez, supra).
well as for running counter to the state policies
enunciated in Sections 11 (Personal Dignity and In Victoriano v. Elizalde Rope Workers' Union, et
Human Rights), 12 (Family) and 13 (Role of al, 59 SCRA 54, the Court thru Mr. Justice
Youth) of Article II, Section 1 (Social Justice) of Zaldivar underscored the
Article XIII and Section 2 (Educational Values) of
Article XIV of the 1987 Constitution. . . . thoroughly established principle which
must be followed in all cases where
This challenge to P.D. No. 1869 deserves a questions of constitutionality as obtain in
searching and thorough scrutiny and the most the instant cases are involved. All
deliberate consideration by the Court, involving presumptions are indulged in favor of
as it does the exercise of what has been constitutionality; one who attacks a statute
described as "the highest and most delicate alleging unconstitutionality must prove its
function which belongs to the judicial department invalidity beyond a reasonable doubt; that a
of the government." (State v. Manuel, 20 N.C. law may work hardship does not render it
144; Lozano v. Martinez, 146 SCRA 323). unconstitutional; that if any reasonable
basis may be conceived which supports the
As We enter upon the task of passing on the statute, it will be upheld and the challenger
validity of an act of a co-equal and coordinate must negate all possible basis; that the
branch of the government We need not be courts are not concerned with the wisdom,
reminded of the time-honored principle, deeply justice, policy or expediency of a statute
ingrained in our jurisprudence, that a statute is
 and that a liberal interpretation of the Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA
constitution in favor of the constitutionality 371)
of legislation should be adopted. (Danner v.
Hass, 194 N.W. 2nd 534, 539; Spurbeck v. With particular regard to the requirement of
Statton, 106 N.W. 2nd 660, 663; 59 SCRA proper party as applied in the cases before
66; see also e.g. Salas v. Jarencio, 46 us, We hold that the same is satisfied by the
SCRA 734, 739 [1970]; Peralta v. petitioners and intervenors because each of
Commission on Elections, 82 SCRA 30, 55 them has sustained or is in danger of
[1978]; and Heirs of Ordona v. Reyes, 125 sustaining an immediate injury as a result of
SCRA 220, 241-242 [1983] cited in Citizens the acts or measures complained of. And
Alliance for Consumer Protection v. Energy even if, strictly speaking they are not
Regulatory Board, 162 SCRA 521, 540) covered by the definition, it is still within the
wide discretion of the Court to waive the
Of course, there is first, the procedural issue. The requirement and so remove the impediment
respondents are questioning the legal to its addressing and resolving the serious
personality of petitioners to file the instant constitutional questions raised.
petition.
In the first Emergency Powers Cases,
Considering however the importance to the ordinary citizens and taxpayers were
public of the case at bar, and in keeping with the allowed to question the constitutionality of
Court's duty, under the 1987 Constitution, to several executive orders issued by
determine whether or not the other branches of President Quirino although they were
government have kept themselves within the involving only an indirect and general
limits of the Constitution and the laws and that interest shared in common with the public.
they have not abused the discretion given to The Court dismissed the objection that they
them, the Court has brushed aside technicalities were not proper parties and ruled that "the
of procedure and has taken cognizance of this transcendental importance to the public of
petition. (Kapatiran ng mga Naglilingkod sa these cases demands that they be settled
promptly and definitely, brushing aside, if
 we must technicalities of procedure." We Its scope, ever-expanding to meet the exigencies
have since then applied the exception in of the times, even to anticipate the future where
many other cases. (Association of Small it could be done, provides enough room for an
Landowners in the Philippines, Inc. v. Sec. efficient and flexible response to conditions and
of Agrarian Reform, 175 SCRA 343). circumstances thus assuming the greatest
benefits. (Edu v. Ericta, supra)
Having disposed of the procedural issue, We will
now discuss the substantive issues raised. It finds no specific Constitutional grant for the
plain reason that it does not owe its origin to the
Gambling in all its forms, unless allowed by law, charter. Along with the taxing power and eminent
is generally prohibited. But the prohibition of domain, it is inborn in the very fact of statehood
gambling does not mean that the Government and sovereignty. It is a fundamental attribute of
cannot regulate it in the exercise of its police government that has enabled it to perform the
power. most vital functions of governance. Marshall, to
whom the expression has been credited, refers
The concept of police power is well-established
to it succinctly as the plenary power of the state
in this jurisdiction. It has been defined as the
"to govern its citizens". (Tribe, American
"state authority to enact legislation that may
Constitutional Law, 323, 1978). The police power
interfere with personal liberty or property in order
of the State is a power co-extensive with self-
to promote the general welfare." (Edu v. Ericta,
protection and is most aptly termed the "law of
35 SCRA 481, 487) As defined, it consists of (1)
overwhelming necessity." (Rubi v. Provincial
an imposition or restraint upon liberty or property,
Board of Mindoro, 39 Phil. 660, 708) It is "the
(2) in order to foster the common good. It is not
most essential, insistent, and illimitable of
capable of an exact definition but has been,
powers." (Smith Bell & Co. v. National, 40 Phil.
purposely, veiled in general terms to underscore
136) It is a dynamic force that enables the state
its all-comprehensive embrace. (Philippine
to meet the agencies of the winds of change.
Association of Service Exporters, Inc. v. Drilon,
163 SCRA 386). What was the reason behind the enactment of
P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of fees, charges or levies of whatever nature,
the government to "regulate and centralize thru whether National or Local."
an appropriate institution all games of chance
authorized by existing franchise or permitted by (2) Income and other taxes. a) Franchise
law" (1st whereas clause, PD 1869). As was Holder: No tax of any kind or form, income
subsequently proved, regulating and centralizing or otherwise as well as fees, charges or
gambling operations in one corporate entity levies of whatever nature, whether National
the PAGCOR, was beneficial not just to the or Local, shall be assessed and collected
Government but to society in general. It is a under this franchise from the Corporation;
reliable source of much needed revenue for the nor shall any form or tax or charge attach in
cash strapped Government. It provided funds for any way to the earnings of the Corporation,
social impact projects and subjected gambling to except a franchise tax of five (5%) percent
"close scrutiny, regulation, supervision and of the gross revenues or earnings derived
control of the Government" (4th Whereas by the Corporation from its operations
Clause, PD 1869). With the creation of PAGCOR under this franchise. Such tax shall be due
and the direct intervention of the Government, and payable quarterly to the National
the evil practices and corruptions that go with Government and shall be in lieu of all kinds
gambling will be minimized if not totally of taxes, levies, fees or assessments of any
eradicated. Public welfare, then, lies at the kind, nature or description, levied,
bottom of the enactment of PD 1896. established or collected by any municipal,
provincial or national government authority
Petitioners contend that P.D. 1869 constitutes a (Section 13 [2]).
waiver of the right of the City of Manila to impose
taxes and legal fees; that the exemption clause Their contention stated hereinabove is without
in P.D. 1869 is violative of the principle of local merit for the following reasons:
autonomy. They must be referring to Section 13
(a) The City of Manila, being a mere Municipal
par. (2) of P.D. 1869 which exempts PAGCOR,
corporation has no inherent right to impose taxes
as the franchise holder from paying any "tax of
(Icard v. City of Baguio, 83 Phil. 870; City of Iloilo
any kind or form, income or otherwise, as well as
v. Villanueva, 105 Phil. 337; Santos v.
Municipality of Caloocan, 7 SCRA 643). Thus, regulate gambling thru the grant of "franchise,
"the Charter or statute must plainly show an licenses or permits" was withdrawn by P.D. No.
intent to confer that power or the municipality 771 and was vested exclusively on the National
cannot assume it" (Medina v. City of Baguio, 12 Government, thus:
SCRA 62). Its "power to tax" therefore must
always yield to a legislative act which is superior Sec. 1. Any provision of law to the contrary
having been passed upon by the state itself notwithstanding, the authority of chartered
which has the "inherent power to tax" (Bernas, cities and other local governments to issue
the Revised [1973] Philippine Constitution, Vol. license, permit or other form of franchise to
1, 1983 ed. p. 445). operate, maintain and establish horse and
dog race tracks, jai-alai and other forms of
(b) The Charter of the City of Manila is subject to gambling is hereby revoked.
control by Congress. It should be stressed that
"municipal corporations are mere creatures of Sec. 2. Hereafter, all permits or franchises
Congress" (Unson v. Lacson, G.R. No. 7909, to operate, maintain and establish, horse
January 18, 1957) which has the power to and dog race tracks, jai-alai and other forms
"create and abolish municipal corporations" due of gambling shall be issued by the national
to its "general legislative powers" (Asuncion v. government upon proper application and
Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 verification of the qualification of the
SCRA 541). Congress, therefore, has the power applicant . . .
of control over Local governments (Hebron v.
Therefore, only the National Government has the
Reyes, G.R. No. 9124, July 2, 1950). And if
power to issue "licenses or permits" for the
Congress can grant the City of Manila the power
operation of gambling. Necessarily, the power to
to tax certain matters, it can also provide for
demand or collect license fees which is a
exemptions or even take back the power.
consequence of the issuance of "licenses or
(c) The City of Manila's power to impose license permits" is no longer vested in the City of Manila.
fees on gambling, has long been revoked. As
(d) Local governments have no power to tax
early as 1975, the power of local governments to
instrumentalities of the National Government.
PAGCOR is a government owned or controlled PAGCOR should be and actually is exempt from
corporation with an original charter, PD 1869. All local taxes. Otherwise, its operation might be
of its shares of stocks are owned by the National burdened, impeded or subjected to control by a
Government. In addition to its corporate powers mere Local government.
(Sec. 3, Title II, PD 1869) it also exercises
regulatory powers thus: The states have no power by taxation or
otherwise, to retard, impede, burden or in
Sec. 9. Regulatory Power. The any manner control the operation of
Corporation shall maintain a Registry of the constitutional laws enacted by Congress to
affiliated entities, and shall exercise all the carry into execution the powers vested in
powers, authority and the responsibilities the federal government. (MC Culloch v.
vested in the Securities and Exchange Marland, 4 Wheat 316, 4 L Ed. 579)
Commission over such affiliating entities
mentioned under the preceding section, This doctrine emanates from the "supremacy" of
including, but not limited to amendments of the National Government over local
Articles of Incorporation and By-Laws, governments.
changes in corporate term, structure,
Justice Holmes, speaking for the Supreme
capitalization and other matters concerning
Court, made reference to the entire
the operation of the affiliated entities, the
absence of power on the part of the States
provisions of the Corporation Code of the
to touch, in that way (taxation) at least, the
Philippines to the contrary notwithstanding,
instrumentalities of the United States
except only with respect to original
(Johnson v. Maryland, 254 US 51) and it
incorporation.
can be agreed that no state or political
PAGCOR has a dual role, to operate and to subdivision can regulate a federal
regulate gambling casinos. The latter role is instrumentality in such a way as to prevent
governmental, which places it in the category of it from consummating its federal
an agency or instrumentality of the Government. responsibilities, or even to seriously burden
Being an instrumentality of the Government, it in the accomplishment of them. (Antieau,
 Modern Constitutional Law, Vol. 2, p. 140, shall accrue exclusively to the local
emphasis supplied) government. (emphasis supplied)

Otherwise, mere creatures of the State can The power of local government to "impose taxes
defeat National policies thru extermination of and fees" is always subject to "limitations" which
what local authorities may perceive to be Congress may provide by law. Since PD 1869
undesirable activities or enterprise using the remains an "operative" law until "amended,
power to tax as "a tool for regulation" (U.S. v. repealed or revoked" (Sec. 3, Art. XVIII, 1987
Sanchez, 340 US 42). Constitution), its "exemption clause" remains as
an exception to the exercise of the power of local
The power to tax which was called by Justice governments to impose taxes and fees. It cannot
Marshall as the "power to destroy" (Mc Culloch therefore be violative but rather is consistent with
v. Maryland, supra) cannot be allowed to defeat the principle of local autonomy.
an instrumentality or creation of the very entity
which has the inherent power to wield it. Besides, the principle of local autonomy under
the 1987 Constitution simply means
(e) Petitioners also argue that the Local "decentralization" (III Records of the 1987
Autonomy Clause of the Constitution will be Constitutional Commission, pp. 435-436, as
violated by P.D. 1869. This is a pointless cited in Bernas, The Constitution of the Republic
argument. Article X of the 1987 Constitution (on of the Philippines, Vol. II, First Ed., 1988, p. 374).
Local Autonomy) provides: It does not make local governments sovereign
within the state or an "imperium in imperio."
Sec. 5. Each local government unit shall
have the power to create its own source of Local Government has been described as a
revenue and to levy taxes, fees, and other political subdivision of a nation or state
charges subject to such guidelines and which is constituted by law and has
limitation as the congress may provide, substantial control of local affairs. In a
consistent with the basic policy on local unitary system of government, such as the
autonomy. Such taxes, fees and charges government under the Philippine
Constitution, local governments can only be
 an intra sovereign subdivision of one Ex-Parte Solomon, 9, Cals. 440, 27 PAC
sovereign nation, it cannot be 757 following in re Ah You, 88 Cal. 99, 25
an imperium in imperio. Local government PAC 974, 22 Am St. Rep. 280, 11 LRA 480,
in such a system can only mean a measure as cited in Mc Quinllan Vol. 3 Ibid, p. 548,
of decentralization of the function of emphasis supplied)
government. (emphasis supplied)
Petitioners next contend that P.D. 1869 violates
As to what state powers should be the equal protection clause of the Constitution,
"decentralized" and what may be delegated to because "it legalized PAGCOR conducted
local government units remains a matter of gambling, while most gambling are outlawed
policy, which concerns wisdom. It is therefore a together with prostitution, drug trafficking and
political question. (Citizens Alliance for other vices" (p. 82, Rollo).
Consumer Protection v. Energy Regulatory
Board, 162 SCRA 539). We, likewise, find no valid ground to sustain this
contention. The petitioners' posture ignores the
What is settled is that the matter of regulating, well-accepted meaning of the clause "equal
taxing or otherwise dealing with gambling is a protection of the laws." The clause does not
State concern and hence, it is the sole preclude classification of individuals who may be
prerogative of the State to retain it or delegate it accorded different treatment under the law as
to local governments. long as the classification is not unreasonable or
arbitrary (Itchong v. Hernandez, 101 Phil. 1155).
As gambling is usually an offense against A law does not have to operate in equal force on
the State, legislative grant or express all persons or things to be conformable to Article
charter power is generally necessary to III, Section 1 of the Constitution (DECS v. San
empower the local corporation to deal with Diego, G.R. No. 89572, December 21, 1989).
the subject. . . . In the absence of express
grant of power to enact, ordinance The "equal protection clause" does not prohibit
provisions on this subject which are the Legislature from establishing classes of
inconsistent with the state laws are void. individuals or objects upon which different rules
(Ligan v. Gadsden, Ala App. 107 So. 733 shall operate (Laurel v. Misa, 43 O.G. 2847). The
Constitution does not require situations which the rule laid down were made
are different in fact or opinion to be treated in law mathematically exact. (Dominican Hotel v.
as though they were the same (Gomez v. Arizona, 249 US 2651).
Palomar, 25 SCRA 827).
Anent petitioners' claim that PD 1869 is contrary
Just how P.D. 1869 in legalizing gambling to the "avowed trend of the Cory Government
conducted by PAGCOR is violative of the equal away from monopolies and crony economy and
protection is not clearly explained in the petition. toward free enterprise and privatization" suffice it
The mere fact that some gambling activities like to state that this is not a ground for this Court to
cockfighting (P.D 449) horse racing (R.A. 306 as nullify P.D. 1869. If, indeed, PD 1869 runs
amended by RA 983), sweepstakes, lotteries and counter to the government's policies then it is for
races (RA 1169 as amended by B.P. 42) are the Executive Department to recommend to
legalized under certain conditions, while others Congress its repeal or amendment.
are prohibited, does not render the applicable
laws, P.D. 1869 for one, unconstitutional. The judiciary does not settle policy issues.
The Court can only declare what the law is
If the law presumably hits the evil where it and not what the law should
is most felt, it is not to be overthrown be.1wphi1 Under our system of
because there are other instances to which government, policy issues are within the
it might have been applied. (Gomez v. domain of the political branches of
Palomar, 25 SCRA 827) government and of the people themselves
as the repository of all state power.
The equal protection clause of the (Valmonte v. Belmonte, Jr., 170 SCRA
14th Amendment does not mean that all 256).
occupations called by the same name must
be treated the same way; the state may do On the issue of "monopoly," however, the
what it can to prevent which is deemed as Constitution provides that:
evil and stop short of those cases in which
harm to the few concerned is not less than Sec. 19. The State shall regulate or prohibit
the harm to the public that would insure if monopolies when public interest so
 requires. No combinations in restraint of the articles the available remedy was not
trade or unfair competition shall be allowed. judicial or political. The electorate could
(Art. XII, National Economy and Patrimony) express their displeasure with the failure of
the executive and the legislature through
It should be noted that, as the provision is the language of the ballot. (Bernas, Vol. II,
worded, monopolies are not necessarily p. 2)
prohibited by the Constitution. The state must still
decide whether public interest demands that Every law has in its favor the presumption of
monopolies be regulated or prohibited. Again, constitutionality (Yu Cong Eng v. Trinidad, 47
this is a matter of policy for the Legislature to Phil. 387; Salas v. Jarencio, 48 SCRA 734;
decide. Peralta v. Comelec, 82 SCRA 30; Abbas v.
Comelec, 179 SCRA 287). Therefore, for PD
On petitioners' allegation that P.D. 1869 violates 1869 to be nullified, it must be shown that there
Sections 11 (Personality Dignity) 12 (Family) and is a clear and unequivocal breach of the
13 (Role of Youth) of Article II; Section 13 (Social Constitution, not merely a doubtful and equivocal
Justice) of Article XIII and Section 2 (Educational one. In other words, the grounds for nullity must
Values) of Article XIV of the 1987 Constitution, be clear and beyond reasonable doubt. (Peralta
suffice it to state also that these are merely v. Comelec, supra) Those who petition this Court
statements of principles and, policies. As such, to declare a law, or parts thereof, unconstitutional
they are basically not self-executing, meaning a must clearly establish the basis for such a
law should be passed by Congress to clearly declaration. Otherwise, their petition must fail.
define and effectuate such principles. Based on the grounds raised by petitioners to
challenge the constitutionality of P.D. 1869, the
In general, therefore, the 1935 provisions
Court finds that petitioners have failed to
were not intended to be self-executing
overcome the presumption. The dismissal of this
principles ready for enforcement through
petition is therefore, inevitable. But as to whether
the courts. They were rather directives
P.D. 1869 remains a wise legislation considering
addressed to the executive and the
the issues of "morality, monopoly, trend to free
legislature. If the executive and the
enterprise, privatization as well as the state
legislature failed to heed the directives of
principles on social justice, role of youth and the political departments of government: the
educational values" being raised, is up for President and the Congress.
Congress to determine.
Parenthetically, We wish to state that gambling is
As this Court held in Citizens' Alliance for generally immoral, and this is precisely so when
Consumer Protection v. Energy Regulatory the gambling resorted to is excessive. This
Board, 162 SCRA 521 excessiveness necessarily depends not only on
the financial resources of the gambler and his
Presidential Decree No. 1956, as amended family but also on his mental, social, and spiritual
by Executive Order No. 137 has, in any outlook on life. However, the mere fact that some
case, in its favor the presumption of validity persons may have lost their material fortunes,
and constitutionality which petitioners mental control, physical health, or even their lives
Valmonte and the KMU have not does not necessarily mean that the same are
overturned. Petitioners have not directly attributable to gambling. Gambling may
undertaken to identify the provisions in the have been the antecedent, but certainly not
Constitution which they claim to have been necessarily the cause. For the same
violated by that statute. This Court, consequences could have been preceded by an
however, is not compelled to speculate and overdose of food, drink, exercise, work, and even
to imagine how the assailed legislation may sex.
possibly offend some provision of the
Constitution. The Court notes, further, in WHEREFORE, the petition is DISMISSED for
this respect that petitioners have in the main lack of merit.
put in question the wisdom, justice and
expediency of the establishment of the SO ORDERED.
OPSF, issues which are not properly
addressed to this Court and which this
Court may not constitutionally pass upon.
Those issues should be addressed rather to
G.R. No. L-34915 June 24, 1983 PROVIDING PENALTIES FOR THE
VIOLATION THEREOF" provides:
CITY GOVERNMENT OF QUEZON CITY and
CITY COUNCIL OF QUEZON CITY, petitioners, Sec. 9. At least six (6) percent of the
vs. total area of the memorial park
HON. JUDGE VICENTE G. ERICTA as Judge cemetery shall be set aside for charity
of the Court of First Instance of Rizal, Quezon burial of deceased persons who are
City, Branch XVIII; HIMLAYANG PILIPINO, paupers and have been residents of
INC., respondents. Quezon City for at least 5 years prior
to their death, to be determined by
City Fiscal for petitioners. competent City Authorities. The area
so designated shall immediately be
Manuel Villaruel, Jr. and Feliciano Tumale for
developed and should be open for
respondents.
operation not later than six months
from the date of approval of the
application.
GUTIERREZ, JR., J.:
For several years, the aforequoted section of the
This is a petition for review which seeks the Ordinance was not enforced by city authorities
reversal of the decision of the Court of First but seven years after the enactment of the
Instance of Rizal, Branch XVIII declaring Section ordinance, the Quezon City Council passed the
9 of Ordinance No. 6118, S-64, of the Quezon following resolution:
City Council null and void.
RESOLVED by the council of Quezon
Section 9 of Ordinance No. 6118, S-64, entitled assembled, to request, as it does
"ORDINANCE REGULATING THE hereby request the City Engineer,
ESTABLISHMENT, MAINTENANCE AND Quezon City, to stop any further selling
OPERATION OF PRIVATE MEMORIAL TYPE and/or transaction of memorial park
CEMETERY OR BURIAL GROUND WITHIN lots in Quezon City where the owners
THE JURISDICTION OF QUEZON CITY AND thereof have failed to donate the
 required 6% space intended for Petitioners argue that the taking of the
paupers burial. respondent's property is a valid and reasonable
exercise of police power and that the land is
Pursuant to this petition, the Quezon City taken for a public use as it is intended for the
Engineer notified respondent Himlayang Pilipino, burial ground of paupers. They further argue that
Inc. in writing that Section 9 of Ordinance No. the Quezon City Council is authorized under its
6118, S-64 would be enforced charter, in the exercise of local police power, " to
make such further ordinances and resolutions
Respondent Himlayang Pilipino reacted by filing
not repugnant to law as may be necessary to
with the Court of First Instance of Rizal Branch
carry into effect and discharge the powers and
XVIII at Quezon City, a petition for declaratory
duties conferred by this Act and such as it shall
relief, prohibition and mandamus with
deem necessary and proper to provide for the
preliminary injunction (Sp. Proc. No. Q-16002)
health and safety, promote the prosperity,
seeking to annul Section 9 of the Ordinance in
improve the morals, peace, good order, comfort
question The respondent alleged that the same
and convenience of the city and the inhabitants
is contrary to the Constitution, the Quezon City
thereof, and for the protection of property
Charter, the Local Autonomy Act, and the
therein."
Revised Administrative Code.
On the other hand, respondent Himlayang
There being no issue of fact and the questions
Pilipino, Inc. contends that the taking or
raised being purely legal both petitioners and
confiscation of property is obvious because the
respondent agreed to the rendition of a judgment
questioned ordinance permanently restricts the
on the pleadings. The respondent court,
use of the property such that it cannot be used
therefore, rendered the decision declaring
for any reasonable purpose and deprives the
Section 9 of Ordinance No. 6118, S-64 null and
owner of all beneficial use of his property.
void.
The respondent also stresses that the general
A motion for reconsideration having been
welfare clause is not available as a source of
denied, the City Government and City Council
power for the taking of the property in this case
filed the instant petition.
because it refers to "the power of promoting the and regulate such other business,
public welfare by restraining and regulating the trades, and occupation as may be
use of liberty and property." The respondent established or practised in the City.'
points out that if an owner is deprived of his (Subsections 'C', Sec. 12, R.A. 537).
property outright under the State's police power,
the property is generally not taken for public use The power to regulate does not include
but is urgently and summarily destroyed in order the power to prohibit (People vs.
to promote the general welfare. The respondent Esguerra, 81 PhiL 33, Vega vs.
cites the case of a nuisance per se or the Municipal Board of Iloilo, L-6765, May
destruction of a house to prevent the spread of a 12, 1954; 39 N.J. Law, 70, Mich. 396).
conflagration. A fortiori, the power to regulate does
not include the power to confiscate.
We find the stand of the private respondent as The ordinance in question not only
well as the decision of the respondent Judge to confiscates but also prohibits the
be well-founded. We quote with approval the operation of a memorial park
lower court's ruling which declared null and void cemetery, because under Section 13
Section 9 of the questioned city ordinance: of said ordinance, 'Violation of the
provision thereof is punishable with a
The issue is: Is Section 9 of the fine and/or imprisonment and that
ordinance in question a valid exercise upon conviction thereof the permit to
of the police power? operate and maintain a private
cemetery shall be revoked or
An examination of the Charter of
cancelled.' The confiscatory clause
Quezon City (Rep. Act No. 537), does
and the penal provision in effect deter
not reveal any provision that would
one from operating a memorial park
justify the ordinance in question
cemetery. Neither can the ordinance in
except the provision granting police
question be justified under sub-
power to the City. Section 9 cannot be
section "t", Section 12 of Republic Act
justified under the power granted to
Quezon City to tax, fix the license fee,
537 which authorizes the City Council (00) To make such further
to- ordinance and regulations
not repugnant to law as may
'prohibit the burial of the be necessary to carry into
dead within the center of effect and discharge the
population of the city and powers and duties
provide for their burial in conferred by this act and
such proper place and in such as it shall deem
such manner as the council necessary and proper to
may determine, subject to provide for the health and
the provisions of the general safety, promote, the
law regulating burial prosperity, improve the
grounds and cemeteries morals, peace, good order,
and governing funerals and comfort and convenience of
disposal of the dead.' (Sub- the city and the inhabitants
sec. (t), Sec. 12, Rep. Act thereof, and for the
No. 537). protection of property
therein; and enforce
There is nothing in the above provision
obedience thereto with such
which authorizes confiscation or as
lawful fines or penalties as
euphemistically termed by the
the City Council may
respondents, 'donation'
prescribe under the
We now come to the question whether provisions of subsection (jj)
or not Section 9 of the ordinance in of this section.
question is a valid exercise of police
We start the discussion with a
power. The police power of Quezon
restatement of certain basic principles.
City is defined in sub-section 00, Sec.
Occupying the forefront in the bill of
12, Rep. Act 537 which reads as
rights is the provision which states that
follows:
'no person shall be deprived of life, C.J. 623). It has been said that police
liberty or property without due process power is the most essential of
of law' (Art. Ill, Section 1 subparagraph government powers, at times the most
1, Constitution). insistent, and always one of the least
limitable of the powers of government
On the other hand, there are three (Ruby vs. Provincial Board, 39 PhiL
inherent powers of government by 660; Ichong vs. Hernandez, 1,7995,
which the state interferes with the May 31, 1957). This power embraces
property rights, namely-. (1) police the whole system of public regulation
power, (2) eminent domain, (3) (U.S. vs. Linsuya Fan, 10 PhiL 104).
taxation. These are said to exist The Supreme Court has said that
independently of the Constitution as police power is so far-reaching in
necessary attributes of sovereignty. scope that it has almost become
impossible to limit its sweep. As it
Police power is defined by Freund as
derives its existence from the very
'the power of promoting the public
existence of the state itself, it does not
welfare by restraining and regulating
need to be expressed or defined in its
the use of liberty and property'
scope. Being coextensive with self-
(Quoted in Political Law by Tanada
preservation and survival itself, it is the
and Carreon, V-11, p. 50). It is usually
most positive and active of all
exerted in order to merely regulate the
governmental processes, the most
use and enjoyment of property of the
essential insistent and illimitable
owner. If he is deprived of his property
Especially it is so under the modern
outright, it is not taken for public use
democratic framework where the
but rather to destroy in order to
demands of society and nations have
promote the general welfare. In police
multiplied to almost unimaginable
power, the owner does not recover
proportions. The field and scope of
from the government for injury
police power have become almost
sustained in consequence thereof (12
boundless, just as the fields of public
interest and public welfare have with the exception of a few cases
become almost all embracing and where there is a necessity to
have transcended human foresight. confiscate private property in order to
Since the Courts cannot foresee the destroy it for the purpose of protecting
needs and demands of public interest the peace and order and of promoting
and welfare, they cannot delimit the general welfare as for instance, the
beforehand the extent or scope of the confiscation of an illegally possessed
police power by which and through article, such as opium and firearms.
which the state seeks to attain or
achieve public interest and welfare. It seems to the court that Section 9 of
(Ichong vs. Hernandez, L-7995, May Ordinance No. 6118, Series of 1964 of
31, 1957). Quezon City is not a mere police
regulation but an outright confiscation.
The police power being the most It deprives a person of his private
active power of the government and property without due process of law,
the due process clause being the nay, even without compensation.
broadest station on governmental
power, the conflict between this power In sustaining the decision of the respondent
of government and the due process court, we are not unmindful of the heavy burden
clause of the Constitution is oftentimes shouldered by whoever challenges the validity of
inevitable. duly enacted legislation whether national or local
As early as 1913, this Court ruled in Case v.
It will be seen from the foregoing Board of Health (24 PhiL 250) that the courts
authorities that police power is usually resolve every presumption in favor of validity
exercised in the form of mere and, more so, where the ma corporation asserts
regulation or restriction in the use of that the ordinance was enacted to promote the
liberty or property for the promotion of common good and general welfare.
the general welfare. It does not involve
the taking or confiscation of property In the leading case of Ermita-Malate Hotel and
Motel Operators Association Inc. v. City Mayor of
Manila (20 SCRA 849) the Court speaking 111. There was an affirmation of the
through the then Associate Justice and now presumption of validity of municipal
Chief Justice Enrique M. Fernando stated ordinance as announced in the leading
Salaveria decision in Ebona v. Daet,
Primarily what calls for a reversal of [1950]85 Phil. 369.)
such a decision is the a of any
evidence to offset the presumption of We have likewise considered the
validity that attaches to a statute or principles earlier stated in Case v.
ordinance. As was expressed Board of Health supra :
categorically by Justice Malcolm 'The
presumption is all in favor of validity. ... ... Under the provisions of municipal
The action of the elected charters which are known as the
representatives of the people cannot general welfare clauses, a city, by
be lightly set aside. The councilors virtue of its police power, may adopt
must, in the very nature of things, be ordinances to the peace, safety,
familiar with the necessities of their health, morals and the best and
particular ... municipality and with all highest interests of the municipality. It
the facts and lances which surround is a well-settled principle, growing out
the subject and necessitate action. of the nature of well-ordered and
The local legislative body, by enacting society, that every holder of property,
the ordinance, has in effect given however absolute and may be his title,
notice that the regulations are holds it under the implied liability that
essential to the well-being of the his use of it shall not be injurious to the
people. ... The Judiciary should not equal enjoyment of others having an
lightly set aside legislative action when equal right to the enjoyment of their
there is not a clear invasion of property, nor injurious to the rights of
personal or property rights under the the community. An property in the
guise of police regulation. (U.S. v. state is held subject to its general
Salaveria (1918], 39 Phil. 102, at p. regulations, which are necessary to
 the common good and general area of an private cemeteries for charity burial
welfare. Rights of property, like all grounds of deceased paupers and the promotion
other social and conventional rights, of health, morals, good order, safety, or the
are subject to such reasonable general welfare of the people. The ordinance is
limitations in their enjoyment as shall actually a taking without compensation of a
prevent them from being injurious, and certain area from a private cemetery to benefit
to such reasonable restraints and paupers who are charges of the municipal
regulations, established by law, as the corporation. Instead of building or maintaining a
legislature, under the governing and public cemetery for this purpose, the city passes
controlling power vested in them by the burden to private cemeteries.
the constitution, may think necessary
and expedient. The state, under the The expropriation without compensation of a
police power, is possessed with portion of private cemeteries is not covered by
plenary power to deal with all matters Section 12(t) of Republic Act 537, the Revised
relating to the general health, morals, Charter of Quezon City which empowers the city
and safety of the people, so long as it council to prohibit the burial of the dead within the
does not contravene any positive center of population of the city and to provide for
inhibition of the organic law and their burial in a proper place subject to the
providing that such power is not provisions of general law regulating burial
exercised in such a manner as to grounds and cemeteries. When the Local
justify the interference of the courts to Government Code, Batas Pambansa Blg. 337
prevent positive wrong and provides in Section 177 (q) that a Sangguniang
oppression. panlungsod may "provide for the burial of the
dead in such place and in such manner as
but find them not applicable to the facts of this prescribed by law or ordinance" it simply
case. authorizes the city to provide its own city owned
land or to buy or expropriate private properties to
There is no reasonable relation between the construct public cemeteries. This has been the
setting aside of at least six (6) percent of the total law and practise in the past. It continues to the
present. Expropriation, however, requires acknowledged by the private respondent when it
payment of just compensation. The questioned accepted the permits to commence operations.
ordinance is different from laws and regulations
requiring owners of subdivisions to set aside WHEREFORE, the petition for review is hereby
certain areas for streets, parks, playgrounds, and DISMISSED. The decision of the respondent
other public facilities from the land they sell to court is affirmed.
buyers of subdivision lots. The necessities of
SO ORDERED.
public safety, health, and convenience are very
clear from said requirements which are intended
to insure the development of communities with
salubrious and wholesome environments. The
beneficiaries of the regulation, in turn, are made
to pay by the subdivision developer when
individual lots are sold to home-owners.

As a matter of fact, the petitioners rely solely on

the general welfare clause or on implied powers
of the municipal corporation, not on any express
provision of law as statutory basis of their
exercise of power. The clause has always
received broad and liberal interpretation but we
cannot stretch it to cover this particular taking.
Moreover, the questioned ordinance was passed
after Himlayang Pilipino, Inc. had incorporated.
received necessary licenses and permits and
commenced operating. The sequestration of six
percent of the cemetery cannot even be
considered as having been impliedly
 in the business of providing funeral and burial
services, against public respondents Secretaries
of the Department of Social Welfare and
Development (DSWD) and the Department of
Finance (DOF).

Petitioners assail the constitutionality of Section

4 of Republic Act (RA) No. 7432,3 as amended
by RA 9257,4 and the implementing rules and
G.R. No. 175356 December 3, 2013 regulations issued by the DSWD and DOF
insofar as these allow business establishments
MANILA MEMORIAL PARK, INC. AND LA to claim the 20% discount given to senior citizens
FUNERARIA PAZ-SUCAT, INC., Petitioners, as a tax deduction.
vs.
SECRETARY OF THE DEPARTMENT OF Factual Antecedents
SOCIAL WELFARE AND DEVELOPMENT and
THE SECRETARY OF THE DEPARTMENT OF On April 23, 1992, RA 7432 was passed into law,
FINANCE, Respondents. granting senior citizens the following privileges:

DECISION SECTION 4. Privileges for the Senior Citizens.

The senior citizens shall be entitled to the
DEL CASTILLO, J.: following:

When a party challeges the constitutionality of a a) the grant of twenty percent (20%) discount
law, the burden of proof rests upon him. from all establishments relative to utilization of
transportation services, hotels and similar
Before us is a Petition for Prohibition2 under Rule lodging establishment[s], restaurants and
65 of the Rules of Court filed by petitioners recreation centers and purchase of medicine
Manila Memorial Park, Inc. and La Funeraria anywhere in the country: Provided, That private
Paz-Sucat, Inc., domestic corporations engaged establishments may claim the cost as tax credit;
b) a minimum of twenty percent (20%) discount On August 23, 1993, Revenue Regulations (RR)
on admission fees charged by theaters, cinema No. 02-94 was issued to implement RA 7432.
houses and concert halls, circuses, carnivals and Sections 2(i) and 4 of RR No. 02-94 provide:
other similar places of culture, leisure, and
amusement; Sec. 2. DEFINITIONS. For purposes of these
regulations: i. Tax Credit refers to the amount
c) exemption from the payment of individual representing the 20% discount granted to a
income taxes: Provided, That their annual qualified senior citizen by all establishments
taxable income does not exceed the property relative to their utilization of transportation
level as determined by the National Economic services, hotels and similar lodging
and Development Authority (NEDA) for that year; establishments, restaurants, drugstores,
recreation centers, theaters, cinema houses,
d) exemption from training fees for concert halls, circuses, carnivals and other
socioeconomic programs undertaken by the similar places of culture, leisure and amusement,
OSCA as part of its work; which discount shall be deducted by the said
establishments from their gross income for
e) free medical and dental services in
income tax purposes and from their gross sales
government establishment[s] anywhere in the
for value-added tax or other percentage tax
country, subject to guidelines to be issued by the
purposes. x x x x Sec. 4.
Department of Health, the Government Service
RECORDING/BOOKKEEPING
Insurance System and the Social Security
REQUIREMENTS FOR PRIVATE
System;
ESTABLISHMENTS. Private establishments,
f) to the extent practicable and feasible, the i.e., transport services, hotels and similar lodging
continuance of the same benefits and privileges establishments, restaurants, recreation centers,
given by the Government Service Insurance drugstores, theaters, cinema houses, concert
System (GSIS), Social Security System (SSS) halls, circuses, carnivals and other similar places
and PAG-IBIG, as the case may be, as are of culture[,] leisure and amusement, giving 20%
enjoyed by those in actual service. discounts to qualified senior citizens are required
to keep separate and accurate record[s] of sales
made to senior citizens, which shall include the purposes." In ordinary business language, the
name, identification number, gross tax credit represents the amount of such
sales/receipts, discounts, dates of transactions discount. However, the manner by which the
and invoice number for every transaction. The discount shall be credited against taxes has not
amount of 20% discount shall be deducted from been clarified by the revenue regulations. By
the gross income for income tax purposes and ordinary acceptation, a discount is an
from gross sales of the business enterprise "abatement or reduction made from the gross
concerned for purposes of the VAT and other amount or value of anything." To be more
percentage taxes. precise, it is in business parlance "a deduction or
lowering of an amount of money;" or "a reduction
In Commissioner of Internal Revenue v. Central from the full amount or value of something,
Luzon Drug Corporation,5 the Court declared especially a price." In business there are many
Sections 2(i) and 4 of RR No. 02-94 as erroneous kinds of discount, the most common of which is
because these contravene RA 7432,6 thus: that affecting the income statement or financial
report upon which the income tax is based.
RA 7432 specifically allows private
establishments to claim as tax credit the amount xxxx
of discounts they grant. In turn, the Implementing
Rules and Regulations, issued pursuant thereto, Sections 2.i and 4 of Revenue Regulations No.
provide the procedures for its availment. To deny (RR) 2-94 define tax credit as the 20 percent
such credit, despite the plain mandate of the law discount deductible from gross income for
and the regulations carrying out that mandate, is income tax purposes, or from gross sales for
indefensible. First, the definition given by VAT or other percentage tax purposes. In effect,
petitioner is erroneous. It refers to tax credit as the tax credit benefit under RA 7432 is related to
the amount representing the 20 percent discount a sales discount. This contrived definition is
that "shall be deducted by the said improper, considering that the latter has to be
establishments from their gross income for deducted from gross sales in order to compute
income tax purposes and from their gross sales the gross income in the income statement and
for value-added tax or other percentage tax cannot be deducted again, even for purposes of
computing the income tax. When the law says who are certain that these will be followed by the
that the cost of the discount may be claimed as courts. Courts, however, will not uphold these
a tax credit, it means that the amount when authorities interpretations when clearly absurd,
claimed shall be treated as a reduction from erroneous or improper. In the present case, the
any tax liability, plain and simple. The option to tax authorities have given the term tax credit in
avail of the tax credit benefit depends upon the Sections 2.i and 4 of RR 2-94 a meaning utterly
existence of a tax liability, but to limit the benefit in contrast to what RA 7432 provides. Their
to a sales discount which is not even identical interpretation has muddled x x x the intent of
to the discount privilege that is granted by law Congress in granting a mere discount privilege,
does not define it at all and serves no useful not a sales discount. The administrative agency
purpose. The definition must, therefore, be issuing these regulations may not enlarge, alter
stricken down. or restrict the provisions of the law it administers;
it cannot engraft additional requirements not
Laws Not Amended by Regulations contemplated by the legislature.
Second, the law cannot be amended by a mere In case of conflict, the law must prevail. A
regulation. In fact, a regulation that "operates to "regulation adopted pursuant to law is law."
create a rule out of harmony with the statute is a Conversely, a regulation or any portion thereof
mere nullity;" it cannot prevail. It is a cardinal rule not adopted pursuant to law is no law and has
that courts "will and should respect the neither the force nor the effect of law.7
contemporaneous construction placed upon a
statute by the executive officers whose duty it is On February 26, 2004, RA 92578 amended
to enforce it x x x." In the scheme of judicial tax certain provisions of RA 7432, to wit:
administration, the need for certainty and
predictability in the implementation of tax laws is SECTION 4. Privileges for the Senior Citizens.
crucial. Our tax authorities fill in the details that The senior citizens shall be entitled to the
"Congress may not have the opportunity or following:
competence to provide." The regulations these
(a) the grant of twenty percent (20%) discount
authorities issue are relied upon by taxpayers,
from all establishments relative to the utilization
of services in hotels and similar lodging SEC. 8. AVAILMENT BY ESTABLISHMENTS
establishments, restaurants and recreation OF SALES DISCOUNTS AS DEDUCTION
centers, and purchase of medicines in all FROM GROSS INCOME. Establishments
establishments for the exclusive use or enumerated in subparagraph (6) hereunder
enjoyment of senior citizens, including funeral granting sales discounts to senior citizens on the
and burial services for the death of senior sale of goods and/or services specified
citizens; thereunder are entitled to deduct the said
discount from gross income subject to the
xxxx following conditions:
The establishment may claim the discounts (1) Only that portion of the gross sales
granted under (a), (f), (g) and (h) as tax EXCLUSIVELY USED, CONSUMED OR
deduction based on the net cost of the goods ENJOYED BY THE SENIOR CITIZEN shall be
sold or services rendered: Provided, That the eligible for the deductible sales discount.
cost of the discount shall be allowed as
deduction from gross income for the same (2) The gross selling price and the sales discount
taxable year that the discount is granted. MUST BE SEPARATELY INDICATED IN THE
Provided, further, That the total amount of the OFFICIAL RECEIPT OR SALES INVOICE
claimed tax deduction net of value added tax if issued by the establishment for the sale of goods
applicable, shall be included in their gross sales or services to the senior citizen.
receipts for tax purposes and shall be subject to
proper documentation and to the provisions of (3) Only the actual amount of the discount
the National Internal Revenue Code, as granted or a sales discount not exceeding 20%
amended. of the gross selling price can be deducted from
the gross income, net of value added tax, if
To implement the tax provisions of RA 9257, the applicable, for income tax purposes, and from
Secretary of Finance issued RR No. 4-2006, the gross sales or gross receipts of the business
pertinent provision of which provides: enterprise concerned, for VAT or other
percentage tax purposes.
(4) The discount can only be allowed as The DSWD likewise issued its own Rules and
deduction from gross income for the same Regulations Implementing RA 9257, to wit:
taxable year that the discount is granted.
RULE VI DISCOUNTS AS TAX DEDUCTION OF
(5) The business establishment giving sales ESTABLISHMENTS
discounts to qualified senior citizens is required
to keep separate and accurate record[s] of sales, Article 8. Tax Deduction of Establishments.
which shall include the name of the senior The establishment may claim the discounts
citizen, TIN, OSCA ID, gross sales/receipts, granted under Rule V, Section 4 Discounts for
sales discount granted, [date] of [transaction] Establishments, Section 9, Medical and Dental
and invoice number for every sale transaction to Services in Private Facilities and Sections 10 and
senior citizen. 11 Air, Sea and Land Transportation as tax
deduction based on the net cost of the goods
(6) Only the following business establishments sold or services rendered.
which granted sales discount to senior citizens
on their sale of goods and/or services may claim Provided, That the cost of the discount shall be
the said discount granted as deduction from allowed as deduction from gross income for the
gross income, namely: same taxable year that the discount is
granted; Provided, further, That the total amount
xxxx of the claimed tax deduction net of value added
tax if applicable, shall be included in their gross
(i) Funeral parlors and similar establishments sales receipts for tax purposes and shall be
The beneficiary or any person who shall shoulder subject to proper documentation and to the
the funeral and burial expenses of the deceased provisions of the National Internal Revenue
senior citizen shall claim the discount, such as Code, as amended; Provided, finally, that the
casket, embalmment, cremation cost and other implementation of the tax deduction shall be
related services for the senior citizen upon subject to the Revenue Regulations to be issued
payment and presentation of [his] death by the Bureau of Internal Revenue (BIR) and
certificate. approved by the Department of Finance (DOF).
Feeling aggrieved by the tax deduction scheme, CITIZENS MAY BE CLAIMED AS A TAX
petitioners filed the present recourse, praying DEDUCTION BY THE PRIVATE
that Section 4 of RA 7432, as amended by RA ESTABLISHMENTS, ARE INVALID AND
9257, and the implementing rules and UNCONSTITUTIONAL.9
regulations issued by the DSWD and the DOF be
declared unconstitutional insofar as these allow Petitioners Arguments
business establishments to claim the 20%
Petitioners emphasize that they are not
discount given to senior citizens as a tax
questioning the 20% discount granted to senior
deduction; that the DSWD and the DOF be
citizens but are only assailing the constitutionality
prohibited from enforcing the same; and that the
of the tax deduction scheme prescribed under
tax credit treatment of the 20% discount under
RA 9257 and the implementing rules and
the former Section 4 (a) of RA 7432 be
regulations issued by the DSWD and the DOF.10
reinstated.
Petitioners posit that the tax deduction scheme
Issues
contravenes Article III, Section 9 of the
Petitioners raise the following issues: Constitution, which provides that: "[p]rivate
property shall not be taken for public use without
A. just compensation."11

WHETHER THE PETITION PRESENTS AN In support of their position, petitioners cite

ACTUAL CASE OR CONTROVERSY. Central Luzon Drug Corporation,12 where it was
ruled that the 20% discount privilege constitutes
B. taking of private property for public use which
requires the payment of just
WHETHER SECTION 4 OF REPUBLIC ACT 13
compensation, and Carlos Superdrug
NO. 9257 AND X X X ITS IMPLEMENTING
Corporation v. Department of Social Welfare and
RULES AND REGULATIONS, INSOFAR AS
Development,14 where it was acknowledged that
THEY PROVIDE THAT THE TWENTY
the tax deduction scheme does not meet the
PERCENT (20%) DISCOUNT TO SENIOR
definition of just compensation.15
Petitioners likewise seek a reversal of the ruling Consequently, the implementation of the tax
in Carlos Superdrug Corporation16 that the tax deduction scheme prescribed under Section 4 of
deduction scheme adopted by the government is RA 9257 affects the businesses of petitioners.26
justified by police power.17
Thus, there exists an actual case or controversy
They assert that "[a]lthough both police power of transcendental importance which deserves
and the power of eminent domain have the judicious disposition on the merits by the highest
general welfare for their object, there are still court of the land.27
traditional distinctions between the two"18 and
that "eminent domain cannot be made less Respondents Arguments
supreme than police power."19
Respondents, on the other hand, question the
Petitioners further claim that the legislature, in filing of the instant Petition directly with the
amending RA 7432, relied on an erroneous Supreme Court as this disregards the hierarchy
contemporaneous construction that prior of courts.28
payment of taxes is required for tax credit.20
They likewise assert that there is no justiciable
Petitioners also contend that the tax deduction controversy as petitioners failed to prove that the
scheme violates Article XV, Section 421 and tax deduction treatment is not a "fair and full
Article XIII, Section 1122of the Constitution equivalent of the loss sustained" by them.29
because it shifts the States constitutional
As to the constitutionality of RA 9257 and its
mandate or duty of improving the welfare of the
implementing rules and regulations, respondents
elderly to the private sector.23
contend that petitioners failed to overturn its
Under the tax deduction scheme, the private presumption of constitutionality.30
sector shoulders 65% of the discount because
More important, respondents maintain that the
only 35%24 of it is actually returned by the
tax deduction scheme is a legitimate exercise of
government.25
the States police power.31

Our Ruling
The Petition lacks merit. The Petition must therefore show that "the
governmental act being challenged has a direct
There exists an actual case or controversy. adverse effect on the individual challenging it."34
We shall first resolve the procedural issue. When In this case, the tax deduction scheme
the constitutionality of a law is put in issue, challenged by petitioners has a direct adverse
judicial review may be availed of only if the effect on them. Thus, it cannot be denied that
following requisites concur: "(1) the existence of there exists an actual case or controversy.
an actual and appropriate case; (2) the existence
of personal and substantial interest on the part of The validity of the 20% senior citizen
the party raising the [question of discount and tax deduction scheme under RA
constitutionality]; (3) recourse to judicial review is 9257, as an exercise of police power of the
made at the earliest opportunity; and (4) the State, has already been settled in Carlos
[question of constitutionality] is the lis mota of the Superdrug Corporation.
case."32
Petitioners posit that the resolution of this case
In this case, petitioners are challenging the lies in the determination of whether the legally
constitutionality of the tax deduction scheme mandated 20% senior citizen discount is an
provided in RA 9257 and the implementing rules exercise of police power or eminent domain. If it
and regulations issued by the DSWD and the is police power, no just compensation is
DOF. Respondents, however, oppose the warranted. But if it is eminent domain, the tax
Petition on the ground that there is no actual deduction scheme is unconstitutional because it
case or controversy. We do not agree with is not a peso for peso reimbursement of the 20%
respondents. An actual case or controversy discount given to senior citizens. Thus, it
exists when there is "a conflict of legal rights" or constitutes taking of private property without
"an assertion of opposite legal claims susceptible payment of just compensation. At the outset, we
of judicial resolution."33 note that this question has been settled in Carlos
Superdrug Corporation.35

In that case, we ruled:

Petitioners assert that Section 4(a) of the law is the net income of the private establishments
unconstitutional because it constitutes concerned. The discounts given would have
deprivation of private property. Compelling entered the coffers and formed part of the gross
drugstore owners and establishments to grant sales of the private establishments, were it not
the discount will result in a loss of profit and for R.A. No. 9257. The permanent reduction in
capital because 1) drugstores impose a mark-up their total revenues is a forced subsidy
of only 5% to 10% on branded medicines; and 2) corresponding to the taking of private property for
the law failed to provide a scheme whereby public use or benefit. This constitutes
drugstores will be justly compensated for the compensable taking for which petitioners would
discount. Examining petitioners arguments, it is ordinarily become entitled to a just
apparent that what petitioners are ultimately compensation. Just compensation is defined as
questioning is the validity of the tax deduction the full and fair equivalent of the property taken
scheme as a reimbursement mechanism for the from its owner by the expropriator. The measure
twenty percent (20%) discount that they extend is not the takers gain but the owners loss. The
to senior citizens. Based on the afore-stated word just is used to intensify the meaning of the
DOF Opinion, the tax deduction scheme does word compensation, and to convey the idea that
not fully reimburse petitioners for the discount the equivalent to be rendered for the property to
privilege accorded to senior citizens. This is be taken shall be real, substantial, full and ample.
because the discount is treated as a deduction, A tax deduction does not offer full reimbursement
a tax-deductible expense that is subtracted from of the senior citizen discount. As such, it would
the gross income and results in a lower taxable not meet the definition of just compensation.
income. Stated otherwise, it is an amount that is Having said that, this raises the question of
allowed by law to reduce the income prior to the whether the State, in promoting the health and
application of the tax rate to compute the amount welfare of a special group of citizens, can impose
of tax which is due. Being a tax deduction, the upon private establishments the burden of partly
discount does not reduce taxes owed on a peso subsidizing a government program. The Court
for peso basis but merely offers a fractional believes so. The Senior Citizens Act was
reduction in taxes owed. Theoretically, the enacted primarily to maximize the contribution of
treatment of the discount as a deduction reduces senior citizens to nation-building, and to grant
benefits and privileges to them for their (f) To recognize the important role of the private
improvement and well-being as the State sector in the improvement of the welfare of senior
considers them an integral part of our society. citizens and to actively seek their partnership.
The priority given to senior citizens finds its basis
in the Constitution as set forth in the law itself. To implement the above policy, the law grants a
Thus, the Act provides: SEC. 2. Republic Act No. twenty percent discount to senior citizens for
7432 is hereby amended to read as follows: medical and dental services, and diagnostic and
laboratory fees; admission fees charged by
SECTION 1. Declaration of Policies and theaters, concert halls, circuses, carnivals, and
Objectives. Pursuant to Article XV, Section 4 other similar places of culture, leisure and
of the Constitution, it is the duty of the family to amusement; fares for domestic land, air and sea
take care of its elderly members while the State travel; utilization of services in hotels and similar
may design programs of social security for them. lodging establishments, restaurants and
In addition to this, Section 10 in the Declaration recreation centers; and purchases of medicines
of Principles and State Policies provides: "The for the exclusive use or enjoyment of senior
State shall provide social justice in all phases of citizens. As a form of reimbursement, the law
national development." Further, Article XIII, provides that business establishments extending
Section 11, provides: "The State shall adopt an the twenty percent discount to senior citizens
integrated and comprehensive approach to may claim the discount as a tax deduction. The
health development which shall endeavor to law is a legitimate exercise of police power
make essential goods, health and other social which, similar to the power of eminent domain,
services available to all the people at affordable has general welfare for its object. Police power is
cost. There shall be priority for the needs of the not capable of an exact definition, but has been
underprivileged sick, elderly, disabled, women purposely veiled in general terms to underscore
and children." Consonant with these its comprehensiveness to meet all exigencies
constitutional principles the following are the and provide enough room for an efficient and
declared policies of this Act: flexible response to conditions and
circumstances, thus assuring the greatest
benefits. Accordingly, it has been described as
"the most essential, insistent and the least able to show properly whether or not the tax
limitable of powers, extending as it does to all the deduction scheme really works greatly to their
great public needs." It is "[t]he power vested in disadvantage. In treating the discount as a tax
the legislature by the constitution to make, deduction, petitioners insist that they will incur
ordain, and establish all manner of wholesome losses because, referring to the DOF Opinion, for
and reasonable laws, statutes, and ordinances, every P1.00 senior citizen discount that
either with penalties or without, not repugnant to petitioners would give, P0.68 will be shouldered
the constitution, as they shall judge to be for the by them as only P0.32 will be refunded by the
good and welfare of the commonwealth, and of government by way of a tax deduction. To
the subjects of the same." For this reason, when illustrate this point, petitioner Carlos Super Drug
the conditions so demand as determined by the cited the anti-hypertensive maintenance drug
legislature, property rights must bow to the Norvasc as an example. According to the latter,
primacy of police power because property rights, it acquires Norvasc from the distributors
though sheltered by due process, must yield to at P37.57 per tablet, and retails it at P39.60 (or
general welfare. Police power as an attribute to at a margin of 5%). If it grants a 20% discount to
promote the common good would be diluted senior citizens or an amount equivalent to P7.92,
considerably if on the mere plea of petitioners then it would have to sell Norvasc at P31.68
that they will suffer loss of earnings and capital, which translates to a loss from capital of P5.89
the questioned provision is invalidated. per tablet. Even if the government will allow a tax
Moreover, in the absence of evidence deduction, only P2.53 per tablet will be refunded
demonstrating the alleged confiscatory effect of and not the full amount of the discount which
the provision in question, there is no basis for its is P7.92. In short, only 32% of the 20% discount
nullification in view of the presumption of validity will be reimbursed to the drugstores. Petitioners
which every law has in its favor. Given these, it is computation is flawed. For purposes of
incorrect for petitioners to insist that the grant of reimbursement, the law states that the cost of the
the senior citizen discount is unduly oppressive discount shall be deducted from gross income,
to their business, because petitioners have not the amount of income derived from all sources
taken time to calculate correctly and come up before deducting allowable expenses, which will
with a financial report, so that they have not been result in net income. Here, petitioners tried to
show a loss on a per transaction basis, which While the Constitution protects property rights,
should not be the case. An income statement, petitioners must accept the realities of business
showing an accounting of petitioners' sales, and the State, in the exercise of police power,
expenses, and net profit (or loss) for a given can intervene in the operations of a business
period could have accurately reflected the effect which may result in an impairment of property
of the discount on their income. Absent any rights in the process.
financial statement, petitioners cannot
substantiate their claim that they will be operating Moreover, the right to property has a social
at a loss should they give the discount. In dimension. While Article XIII of the Constitution
addition, the computation was erroneously provides the precept for the protection of
based on the assumption that their customers property, various laws and jurisprudence,
consisted wholly of senior citizens. Lastly, the particularly on agrarian reform and the regulation
32% tax rate is to be imposed on income, not on of contracts and public utilities, continuously
the amount of the discount. serve as x x x reminder[s] that the right to
property can be relinquished upon the command
Furthermore, it is unfair for petitioners to criticize of the State for the promotion of public good.
the law because they cannot raise the prices of Undeniably, the success of the senior citizens
their medicines given the cutthroat nature of the program rests largely on the support imparted by
players in the industry. It is a business decision petitioners and the other private establishments
on the part of petitioners to peg the mark-up at concerned. This being the case, the means
5%. Selling the medicines below acquisition cost, employed in invoking the active participation of
as alleged by petitioners, is merely a result of this the private sector, in order to achieve the
decision. Inasmuch as pricing is a property right, purpose or objective of the law, is reasonably
petitioners cannot reproach the law for being and directly related. Without sufficient proof that
oppressive, simply because they cannot afford to Section 4 (a) of R.A. No. 9257 is arbitrary, and
raise their prices for fear of losing their customers that the continued implementation of the same
to competition. The Court is not oblivious of the would be unconscionably detrimental to
retail side of the pharmaceutical industry and the petitioners, the Court will refrain from quashing a
competitive pricing component of the business.
legislative act.36 (Bold in the original; underline [T]he privilege enjoyed by senior citizens does
supplied) not come directly from the State, but rather from
the private establishments concerned.
We, thus, found that the 20% discount as well as Accordingly, the tax credit benefit granted to
the tax deduction scheme is a valid exercise of these establishments can be deemed as their
the police power of the State. just compensation for private property taken by
the State for public use. The concept of public
No compelling reason has been proffered to
use is no longer confined to the traditional notion
overturn, modify or abandon the ruling in
of use by the public, but held synonymous with
Carlos Superdrug Corporation.
public interest, public benefit, public welfare, and
Petitioners argue that we have previously ruled public convenience. The discount privilege to
in Central Luzon Drug Corporation37 that the which our senior citizens are entitled is actually a
20% discount is an exercise of the power of benefit enjoyed by the general public to which
eminent domain, thus, requiring the payment of these citizens belong. The discounts given would
just compensation. They urge us to re-examine have entered the coffers and formed part of the
our ruling in Carlos Superdrug gross sales of the private establishments
Corporation38 which allegedly reversed the ruling concerned, were it not for RA 7432. The
in Central Luzon Drug Corporation.39 permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of
They also point out that Carlos Superdrug private property for public use or benefit. As a
Corporation40 recognized that the tax deduction result of the 20 percent discount imposed by RA
scheme under the assailed law does not provide 7432, respondent becomes entitled to a just
for sufficient just compensation. We agree with compensation. This term refers not only to the
petitioners observation that there are statements issuance of a tax credit certificate indicating the
in Central Luzon Drug Corporation41 describing correct amount of the discounts given, but also
the 20% discount as an exercise of the power of to the promptness in its release. Equivalent to the
eminent domain, viz.: payment of property taken by the State, such
issuance when not done within a reasonable
time from the grant of the discounts cannot be
considered as just compensation. In effect, without the discounts yet will surely start to
respondent is made to suffer the consequences incur losses because of such discounts. The
of being immediately deprived of its revenues same effect is expected if its mark-up is less than
while awaiting actual receipt, through the 20 percent, and if all its sales come from retail
certificate, of the equivalent amount it needs to purchases by senior citizens. Aside from the
cope with the reduction in its revenues. Besides, observation we have already raised earlier, it will
the taxation power can also be used as an also be grossly unfair to an establishment if the
implement for the exercise of the power of discounts will be treated merely as deductions
eminent domain. Tax measures are but from either its gross income or its gross sales.
"enforced contributions exacted on pain of penal Operating at a loss through no fault of its own, it
sanctions" and "clearly imposed for a public will realize that the tax credit limitation under RR
purpose." In recent years, the power to tax has 2-94 is inutile, if not improper. Worse, profit-
indeed become a most effective tool to realize generating businesses will be put in a better
social justice, public welfare, and the equitable position if they avail themselves of tax credits
distribution of wealth. While it is a declared denied those that are losing, because no taxes
commitment under Section 1 of RA 7432, social are due from the latter.42 (Italics in the original;
justice "cannot be invoked to trample on the emphasis supplied)
rights of property owners who under our
Constitution and laws are also entitled to The above was partly incorporated in our ruling
protection. The social justice consecrated in our in Carlos Superdrug Corporation43 when we
[C]onstitution [is] not intended to take away rights stated preliminarily that
from a person and give them to another who is
Petitioners assert that Section 4(a) of the law is
not entitled thereto." For this reason, a just
unconstitutional because it constitutes
compensation for income that is taken away from
deprivation of private property. Compelling
respondent becomes necessary. It is in the tax
drugstore owners and establishments to grant
credit that our legislators find support to realize
the discount will result in a loss of profit and
social justice, and no administrative body can
capital because 1) drugstores impose a mark-up
alter that fact. To put it differently, a private
of only 5% to 10% on branded medicines; and 2)
establishment that merely breaks even
the law failed to provide a scheme whereby public use or benefit. This constitutes
drugstores will be justly compensated for the compensable taking for which petitioners would
discount. Examining petitioners arguments, it is ordinarily become entitled to a just
apparent that what petitioners are ultimately compensation. Just compensation is defined as
questioning is the validity of the tax deduction the full and fair equivalent of the property taken
scheme as a reimbursement mechanism for the from its owner by the expropriator. The measure
twenty percent (20%) discount that they extend is not the takers gain but the owners loss. The
to senior citizens. Based on the afore-stated word just is used to intensify the meaning of the
DOF Opinion, the tax deduction scheme does word compensation, and to convey the idea that
not fully reimburse petitioners for the discount the equivalent to be rendered for the property to
privilege accorded to senior citizens. This is be taken shall be real, substantial, full and ample.
because the discount is treated as a deduction, A tax deduction does not offer full reimbursement
a tax-deductible expense that is subtracted from of the senior citizen discount. As such, it would
the gross income and results in a lower taxable not meet the definition of just compensation.
income. Stated otherwise, it is an amount that is Having said that, this raises the question of
allowed by law to reduce the income prior to the whether the State, in promoting the health and
application of the tax rate to compute the amount welfare of a special group of citizens, can impose
of tax which is due. Being a tax deduction, the upon private establishments the burden of partly
discount does not reduce taxes owed on a peso subsidizing a government program. The Court
for peso basis but merely offers a fractional believes so.44
reduction in taxes owed. Theoretically, the
treatment of the discount as a deduction reduces This, notwithstanding, we went on to rule in
the net income of the private establishments Carlos Superdrug Corporation45 that the 20%
concerned. The discounts given would have discount and tax deduction scheme is a valid
entered the coffers and formed part of the gross exercise of the police power of the State. The
sales of the private establishments, were it not present case, thus, affords an opportunity for us
for R.A. No. 9257. The permanent reduction in to clarify the above-quoted statements in Central
their total revenues is a forced subsidy Luzon Drug Corporation46 and Carlos Superdrug
corresponding to the taking of private property for Corporation.47
First, we note that the above-quoted disquisition cogent reason to overturn, modify or abandon it.
on eminent domain in Central Luzon Drug We also note that petitioners arguments are a
Corporation48 is obiter dicta and, thus, not mere reiteration of those raised and resolved in
binding precedent. As stated earlier, in Central Carlos Superdrug Corporation.54 Thus, we
Luzon Drug Corporation,49 we ruled that the BIR sustain Carlos Superdrug Corporation.55
acted ultra vires when it effectively treated the
20% discount as a tax deduction, under Sections Nonetheless, we deem it proper, in what follows,
2.i and 4 of RR No. 2-94, despite the clear to amplify our explanation in Carlos Superdrug
wording of the previous law that the same should Corporation56 as to why the 20% discount is a
be treated as a tax credit. We were, therefore, valid exercise of police power and why it may not,
not confronted in that case with the issue as to under the specific circumstances of this case, be
whether the 20% discount is an exercise of police considered as an exercise of the power of
power or eminent domain. Second, although we eminent domain contrary to the obiter in Central
adverted to Central Luzon Drug Corporation50 in Luzon Drug Corporation.57
our ruling in Carlos Superdrug Corporation,51 this
Police power versus eminent domain.
referred only to preliminary matters. A fair
reading of Carlos Superdrug Corporation52would Police power is the inherent power of the State
show that we categorically ruled therein that the to regulate or to restrain the use of liberty and
20% discount is a valid exercise of police power. property for public welfare.58
Thus, even if the current law, through its tax
deduction scheme (which abandoned the tax The only limitation is that the restriction imposed
credit scheme under the previous law), does not should be reasonable, not oppressive.59
provide for a peso for peso reimbursement of the
20% discount given by private establishments, In other words, to be a valid exercise of police
no constitutional infirmity obtains because, being power, it must have a lawful subject or objective
a valid exercise of police power, payment of just and a lawful method of accomplishing the goal.60
compensation is not warranted. We have
Under the police power of the State, "property
carefully reviewed the basis of our ruling in
rights of individuals may be subjected to
Carlos Superdrug Corporation53 and we find no
restraints and burdens in order to fulfill the prohibiting the use of property for purposes
objectives of the government."61 injurious to the health, morals or safety of the
community (e.g., dividing a citys territory into
The State "may interfere with personal liberty, residential and industrial areas).68
property, lawful businesses and occupations to
promote the general welfare [as long as] the It has, thus, been observed that, in the exercise
interference [is] reasonable and not arbitrary."62 of police power (as distinguished from eminent
domain), although the regulation affects the right
Eminent domain, on the other hand, is the of ownership, none of the bundle of rights which
inherent power of the State to take or appropriate constitute ownership is appropriated for use by
private property for public use.63 or for the benefit of the public.69
The Constitution, however, requires that private On the other hand, in the exercise of the power
property shall not be taken without due process of eminent domain, property interests are
of law and the payment of just compensation.64 appropriated and applied to some public purpose
which necessitates the payment of just
Traditional distinctions exist between police
compensation therefor. Normally, the title to and
power and eminent domain. In the exercise of
possession of the property are transferred to the
police power, a property right is impaired by
expropriating authority. Examples include the
regulation,65 or the use of property is merely
acquisition of lands for the construction of public
prohibited, regulated or restricted66 to promote
highways as well as agricultural lands acquired
public welfare. In such cases, there is no
by the government under the agrarian reform law
compensable taking, hence, payment of just
for redistribution to qualified farmer beneficiaries.
compensation is not required. Examples of these
However, it is a settled rule that the acquisition of
regulations are property condemned for being
title or total destruction of the property is not
noxious or intended for noxious purposes (e.g., a
essential for "taking" under the power of eminent
building on the verge of collapse to be
domain to be present.70
demolished for public safety, or obscene
materials to be destroyed in the interest of public Examples of these include establishment of
morals)67 as well as zoning ordinances easements such as where the land owner is
perpetually deprived of his proprietary rights approach, therefore, is to look at the nature and
because of the hazards posed by electric effects of the challenged governmental act and
transmission lines constructed above his decide, on the basis thereof, whether the act is
property71 or the compelled interconnection of the exercise of police power or eminent domain.
the telephone system between the government Thus, we now look at the nature and effects of
and a private company.72 the 20% discount to determine if it constitutes an
exercise of police power or eminent domain. The
In these cases, although the private property 20% discount is intended to improve the welfare
owner is not divested of ownership or of senior citizens who, at their age, are less likely
possession, payment of just compensation is to be gainfully employed, more prone to illnesses
warranted because of the burden placed on the and other disabilities, and, thus, in need of
property for the use or benefit of the public. subsidy in purchasing basic commodities. It may
not be amiss to mention also that the discount
The 20% senior citizen discount is an
serves to honor senior citizens who presumably
exercise of police power.
spent the productive years of their lives on
It may not always be easy to determine whether contributing to the development and progress of
a challenged governmental act is an exercise of the nation. This distinct cultural Filipino practice
police power or eminent domain. The very nature of honoring the elderly is an integral part of this
of police power as elastic and responsive to law. As to its nature and effects, the 20%
various social conditions73 as well as the discount is a regulation affecting the ability of
evolving meaning and scope of public use74 and private establishments to price their products and
just compensation75 in eminent domain evinces services relative to a special class of individuals,
that these are not static concepts. Because of the senior citizens, for which the Constitution affords
exigencies of rapidly changing times, Congress preferential concern.76
may be compelled to adopt or experiment with
In turn, this affects the amount of profits or
different measures to promote the general
income/gross sales that a private establishment
welfare which may not fall squarely within the
can derive from senior citizens. In other words,
traditionally recognized categories of police
the subject regulation affects the pricing, and,
power and eminent domain. The judicious
hence, the profitability of a private establishment. establishment but only to the class of senior
However, it does not purport to appropriate or citizens. Nonetheless, to the degree material to
burden specific properties, used in the operation the resolution of this case, the 20% discount may
or conduct of the business of private be properly viewed as belonging to the category
establishments, for the use or benefit of the of price regulatory measures which affect the
public, or senior citizens for that matter, but profitability of establishments subjected thereto.
merely regulates the pricing of goods and On its face, therefore, the subject regulation is a
services relative to, and the amount of profits or police power measure. The obiter in Central
income/gross sales that such private Luzon Drug Corporation,78 however, describes
establishments may derive from, senior citizens. the 20% discount as an exercise of the power of
The subject regulation may be said to be similar eminent domain and the tax credit, under the
to, but with substantial distinctions from, price previous law, equivalent to the amount of
control or rate of return on investment control discount given as the just compensation therefor.
laws which are traditionally regarded as police The reason is that (1) the discount would have
power measures.77 formed part of the gross sales of the
establishment were it not for the law prescribing
These laws generally regulate public utilities or the 20% discount, and (2) the permanent
industries/enterprises imbued with public interest reduction in total revenues is a forced subsidy
in order to protect consumers from exorbitant or corresponding to the taking of private property for
unreasonable pricing as well as temper public use or benefit. The flaw in this reasoning
corporate greed by controlling the rate of return is in its premise. It presupposes that the subject
on investment of these corporations considering regulation, which impacts the pricing and, hence,
that they have a monopoly over the goods or the profitability of a private establishment,
services that they provide to the general public. automatically amounts to a deprivation of
The subject regulation differs therefrom in that property without due process of law. If this were
(1) the discount does not prevent the so, then all price and rate of return on investment
establishments from adjusting the level of prices control laws would have to be invalidated
of their goods and services, and (2) the discount because they impact, at some level, the
does not apply to all customers of a given regulated establishments profits or
income/gross sales, yet there is no provision for therefore cannot be disposed of by general
payment of just compensation. It would also propositions." On many other occasions as well,
mean that overnment cannot set price or rate of the U.S. Supreme Court has said that the issue
return on investment limits, which reduce the of when regulation constitutes a taking is a
profits or income/gross sales of private matter of considering the facts in each case. The
establishments, if no just compensation is paid Court asks whether justice and fairness require
even if the measure is not confiscatory. The that the economic loss caused by public action
obiter is, thus, at odds with the settled octrine that must be compensated by the government and
the State can employ police power measures to thus borne by the public as a whole, or whether
regulate the pricing of goods and services, and, the loss should remain concentrated on those
hence, the profitability of business few persons subject to the public action.81
establishments in order to pursue legitimate
State objectives for the common good, provided The impact or effect of a regulation, such as the
that the regulation does not go too far as to one under consideration, must, thus, be
amount to "taking."79 determined on a case-to-case basis. Whether
that line between permissible regulation under
In City of Manila v. Laguio, Jr.,80 we recognized police power and "taking" under eminent domain
that x x x a taking also could be found if has been crossed must, under the specific
government regulation of the use of property circumstances of this case, be subject to proof
went "too far." When regulation reaches a certain and the one assailing the constitutionality of the
magnitude, in most if not in all cases there must regulation carries the heavy burden of proving
be an exercise of eminent domain and that the measure is unreasonable, oppressive or
compensation to support the act. While property confiscatory. The time-honored rule is that the
may be regulated to a certain extent, if regulation burden of proving the unconstitutionality of a law
goes too far it will be recognized as a taking. No rests upon the one assailing it and "the burden
formula or rule can be devised to answer the becomes heavier when police power is at
questions of what is too far and when regulation issue."82
becomes a taking. In Mahon, Justice Holmes
recognized that it was "a question of degree and
The 20% senior citizen discount has not been hypothetical computation of the alleged loss that
shown to be unreasonable, oppressive or they will suffer similar to what the petitioners in
confiscatory. Carlos Superdrug Corporation86 did. Petitioners
went directly to this Court without first
In Alalayan v. National Power establishing the factual bases of their claims.
83
Corporation, petitioners, who were franchise Hence, the present recourse must, likewise, fail.
holders of electric plants, challenged the validity Because all laws enjoy the presumption of
of a law limiting their allowable net profits to no constitutionality, courts will uphold a laws validity
more than 12% per annum of their investments if any set of facts may be conceived to sustain
plus two-month operating expenses. In rejecting it.87
their plea, we ruled that, in an earlier case, it was
found that 12% is a reasonable rate of return and On its face, we find that there are at least two
that petitioners failed to prove that the aforesaid conceivable bases to sustain the subject
rate is confiscatory in view of the presumption of regulations validity absent clear and convincing
constitutionality.84 proof that it is unreasonable, oppressive or
confiscatory. Congress may have legitimately
We adopted a similar line of reasoning in Carlos concluded that business establishments have
Superdrug Corporation85 when we ruled that the capacity to absorb a decrease in profits or
petitioners therein failed to prove that the 20% income/gross sales due to the 20% discount
discount is arbitrary, oppressive or confiscatory. without substantially affecting the reasonable
We noted that no evidence, such as a financial rate of return on their investments considering (1)
report, to establish the impact of the 20% not all customers of a business establishment
discount on the overall profitability of petitioners are senior citizens and (2) the level of its profit
was presented in order to show that they would margins on goods and services offered to the
be operating at a loss due to the subject general public. Concurrently, Congress may
regulation or that the continued implementation have, likewise, legitimately concluded that the
of the law would be unconscionably detrimental establishments, which will be required to extend
to the business operations of petitioners. In the the 20% discount, have the capacity to revise
case at bar, petitioners proceeded with a their pricing strategy so that whatever reduction
in profits or income/gross sales that they may In a way, this law pursues its social equity
sustain because of sales to senior citizens, can objective in a non-traditional manner unlike past
be recouped through higher mark-ups or from and existing direct subsidy programs of the
other products not subject of discounts. As a government for the poor and marginalized
result, the discounts resulting from sales to sectors of our society. Verily, Congress must be
senior citizens will not be confiscatory or unduly given sufficient leeway in formulating welfare
oppressive. In sum, we sustain our ruling in legislations given the enormous challenges that
Carlos Superdrug Corporation88 that the 20% the government faces relative to, among others,
senior citizen discount and tax deduction scheme resource adequacy and administrative capability
are valid exercises of police power of the State in implementing social reform measures which
absent a clear showing that it is arbitrary, aim to protect and uphold the interests of those
oppressive or confiscatory. most vulnerable in our society. In the process,
the individual, who enjoys the rights, benefits and
Conclusion privileges of living in a democratic polity, must
bear his share in supporting measures intended
In closing, we note that petitioners hypothesize,
for the common good. This is only fair. In fine,
consistent with our previous ratiocinations, that
without the requisite showing of a clear and
the discount will force establishments to raise
unequivocal breach of the Constitution, the
their prices in order to compensate for its impact
validity of the assailed law must be sustained.
on overall profits or income/gross sales. The
general public, or those not belonging to the Refutation of the Dissent
senior citizen class, are, thus, made to effectively
shoulder the subsidy for senior citizens. This, in The main points of Justice Carpios Dissent may
petitioners view, is unfair. be summarized as follows: (1) the discussion on
eminent domain in Central Luzon Drug
As already mentioned, Congress may be Corporation89 is not obiter dicta ; (2) allowable
reasonably assumed to have foreseen this taking, in police power, is limited to property that
eventuality. But, more importantly, this goes into is destroyed or placed outside the commerce of
the wisdom, efficacy and expediency of the man for public welfare; (3) the amount of
subject law which is not proper for judicial review.
mandatory discount is private property within the establishments may claim the cost as tax credit;
ambit of Article III, Section 990 of the Constitution; (Emphasis supplied)
and (4) the permanent reduction in a private
establishments total revenue, arising from the Thus, the Court ruled that the subject revenue
mandatory discount, is a taking of private regulation violated the law, viz:
property for public use or benefit, hence, an
The 20 percent discount required by the law to
exercise of the power of eminent domain
be given to senior citizens is a tax credit, not
requiring the payment of just compensation. I We
merely a tax deduction from the gross income or
maintain that the discussion on eminent domain
gross sale of the establishment concerned. A tax
in Central Luzon Drug Corporation91 is obiter
credit is used by a private establishment only
dicta. As previously discussed, in Central Luzon
after the tax has been computed; a tax
Drug Corporation,92 the BIR, pursuant to
deduction, before the tax is computed. RA 7432
Sections 2.i and 4 of RR No. 2-94, treated the
unconditionally grants a tax credit to all covered
senior citizen discount in the previous law, RA
entities. Thus, the provisions of the revenue
7432, as a tax deduction instead of a tax credit
regulation that withdraw or modify such grant are
despite the clear provision in that law which
void. Basic is the rule that administrative
stated
regulations cannot amend or revoke the law.93
SECTION 4. Privileges for the Senior Citizens.
As can be readily seen, the discussion on
The senior citizens shall be entitled to the
eminent domain was not necessary in order to
following:
arrive at this conclusion. All that was needed was
a) The grant of twenty percent (20%) discount to point out that the revenue regulation
from all establishments relative to utilization of contravened the law which it sought to
transportation services, hotels and similar implement. And, precisely, this was done in
lodging establishment, restaurants and Central Luzon Drug Corporation94 by comparing
recreation centers and purchase of medicines the wording of the previous law vis--vis the
anywhere in the country: Provided, That private revenue regulation; employing the rules of
statutory construction; and applying the settled
principle that a regulation cannot amend the law
it seeks to implement. A close reading of Central be shown below, is contrary to settled principles
Luzon Drug Corporation95 would show that the in police power and eminent domain analysis. II
Court went on to state that the tax credit "can be The Dissent discusses at length the doctrine on
deemed" as just compensation only to explain "taking" in police power which occurs when
why the previous law provides for a tax credit private property is destroyed or placed outside
instead of a tax deduction. The Court surmised the commerce of man. Indeed, there is a whole
that the tax credit was a form of just class of police power measures which justify the
compensation given to the establishments destruction of private property in order to
covered by the 20% discount. However, the preserve public health, morals, safety or welfare.
reason why the previous law provided for a tax As earlier mentioned, these would include a
credit and not a tax deduction was not necessary building on the verge of collapse or confiscated
to resolve the issue as to whether the revenue obscene materials as well as those mentioned by
regulation contravenes the law. Hence, the the Dissent with regard to property used in
discussion on eminent domain is obiter dicta. violating a criminal statute or one which
constitutes a nuisance. In such cases, no
A court, in resolving cases before it, may look compensation is required. However, it is equally
into the possible purposes or reasons that true that there is another class of police power
impelled the enactment of a particular statute or measures which do not involve the destruction of
legal provision. However, statements made private property but merely regulate its use. The
relative thereto are not always necessary in minimum wage law, zoning ordinances, price
resolving the actual controversies presented control laws, laws regulating the operation of
before it. This was the case in Central Luzon motels and hotels, laws limiting the working
Drug Corporation96resulting in that unfortunate hours to eight, and the like would fall under this
statement that the tax credit "can be deemed" as category. The examples cited by the Dissent,
just compensation. This, in turn, led to the likewise, fall under this category: Article 157 of
erroneous conclusion, by deductive reasoning, the Labor Code, Sections 19 and 18 of the Social
that the 20% discount is an exercise of the power Security Law, and Section 7 of the Pag-IBIG
of eminent domain. The Dissent essentially Fund Law. These laws merely regulate or, to use
adopts this theory and reasoning which, as will the term of the Dissent, burden the conduct of the
affairs of business establishments. In such In the case at bar, evidence is indispensable
cases, payment of just compensation is not before a determination of a constitutional
required because they fall within the sphere of violation can be made because of the following
permissible police power measures. The senior reasons. First, the assailed law, by imposing the
citizen discount law falls under this latter senior citizen discount, does not take any of the
category. III The Dissent proceeds from the properties used by a business establishment like,
theory that the permanent reduction of profits or say, the land on which a manufacturing plant is
income/gross sales, due to the 20% discount, is constructed or the equipment being used to
a "taking" of private property for public purpose produce goods or services. Second, rather than
without payment of just compensation. At the taking specific properties of a business
outset, it must be emphasized that petitioners establishment, the senior citizen discount law
never presented any evidence to establish that merely regulates the prices of the goods or
they were forced to suffer enormous losses or services being sold to senior citizens by
operate at a loss due to the effects of the mandating a 20% discount. Thus, if a product is
assailed law. They came directly to this Court sold at P10.00 to the general public, then it shall
and provided a hypothetical computation of the be sold at P8.00 ( i.e., P10.00 less 20%) to
loss they would allegedly suffer due to the senior citizens. Note that the law does not
operation of the assailed law. The central impose at what specific price the product shall be
premise of the Dissents argument that the 20% sold, only that a 20% discount shall be given to
discount results in a permanent reduction in senior citizens based on the price set by the
profits or income/gross sales, or forces a business establishment. A business
business establishment to operate at a loss is, establishment is, thus, free to adjust the prices of
thus, wholly unsupported by competent the goods or services it provides to the general
evidence. To be sure, the Court can invalidate a public. Accordingly, it can increase the price of
law which, on its face, is arbitrary, oppressive or the above product to P20.00 but is required to
confiscatory.97 sell it at P16.00 (i.e. , P20.00 less 20%) to senior
citizens. Third, because the law impacts the
But this is not the case here. prices of the goods or services of a particular
establishment relative to its sales to senior
citizens, its profits or income/gross sales are or income/gross sales which would otherwise
affected. The extent of the impact would, arise from the giving of the 20% discount. To
however, depend on the profit margin of the illustrate, suppose A has two customers: X, a
business establishment on a particular good or senior citizen, and Y, a non-senior citizen. Prior
service. If a product costs P5.00 to produce and to the law, A sells his products at P10.00 a piece
is sold at P10.00, then the profit98 is P5.0099 or a to X and Y resulting in income/gross sales
profit margin100 of 50%.101 of P20.00 (P10.00 + P10.00). With the passage
of the law, A must now sell his product to X
Under the assailed law, the aforesaid product at P8.00 (i.e., P10.00 less 20%) so that his
would have to be sold at P8.00 to senior citizens income/gross sales would be P18.00 (P8.00
yet the business would still earn P3.00102 or a + P10.00) or lower by P2.00. To prevent this
30%103 profit margin. On the other hand, if the from happening, A decides to increase the price
product costs P9.00 to produce and is required of his products to P11.11 per piece. Thus, he
to be sold at P8.00 to senior citizens, then the sells his product to X at P8.89 (i.e. , P11.11 less
business would experience a loss of P1.00.104 20%) and to Y at P11.11. As a result, his
income/gross sales would still
But note that since not all customers of a 105
be P20.00 (P8.89 + P11.11). The capacity,
business establishment are senior citizens, the
then, of business establishments to revise their
business establishment may continue to
pricing strategy makes it possible for them not to
earn P1.00 from non-senior citizens which, in
suffer any reduction in profits or income/gross
turn, can offset any loss arising from sales to
sales, or, in the alternative, mitigate the reduction
senior citizens.
of their profits or income/gross sales even after
Fourth, when the law imposes the 20% discount the passage of the law. In other words, business
in favor of senior citizens, it does not prevent the establishments have the capacity to adjust their
business establishment from revising its pricing prices so that they may remain profitable even
strategy. under the operation of the assailed law.

By revising its pricing strategy, a business The Dissent, however, states that The
establishment can recoup any reduction of profits explanation by the majority that private
establishments can always increase their prices the assailed law is not, by itself, a ground to
to recover the mandatory discount will only declare it unconstitutional for this goes into the
encourage private establishments to adjust their wisdom and expediency of the law.
prices upwards to the prejudice of customers
who do not enjoy the 20% discount. It was The cost of most, if not all, regulatory measures
likewise suggested that if a company increases of the government on business establishments is
its prices, despite the application of the 20% ultimately passed on to the consumers but that,
discount, the establishment becomes more by itself, does not justify the wholesale
profitable than it was before the implementation nullification of these measures. It is a basic
of R.A. 7432. Such an economic justification is postulate of our democratic system of
self-defeating, for more consumers will suffer government that the Constitution is a social
from the price increase than will benefit from the contract whereby the people have surrendered
20% discount. Even then, such ability to increase their sovereign powers to the State for the
prices cannot legally validate a violation of the common good.107
eminent domain clause.106
All persons may be burdened by regulatory
But, if it is possible that the business measures intended for the common good or to
establishment, by adjusting its prices, will suffer serve some important governmental interest,
no reduction in its profits or income/gross sales such as protecting or improving the welfare of a
(or suffer some reduction but continue to operate special class of people for which the Constitution
profitably) despite giving the discount, what affords preferential concern. Indubitably, the one
would be the basis to strike down the law? If it is assailing the law has the heavy burden of proving
possible that the business establishment, by that the regulation is unreasonable, oppressive
adjusting its prices, will not be unduly burdened, or confiscatory, or has gone "too far" as to
how can there be a finding that the assailed law amount to a "taking." Yet, here, the Dissent
is an unconstitutional exercise of police power or would have this Court nullify the law without any
eminent domain? That there may be a burden proof of such nature.
placed on business establishments or the
Further, this Court is not the proper forum to
consuming public as a result of the operation of
debate the economic theories or realities that
impelled Congress to shift from the tax credit to 20% discount results in a permanent reduction in
the tax deduction scheme. It is not within our profits or income/gross sales, much less that
power or competence to judge which scheme is business establishments are forced to operate at
more or less burdensome to business a loss under the assailed law. And, even if we
establishments or the consuming public and, gratuitously assume that the 20% discount
thereafter, to choose which scheme the State results in some degree of reduction in profits or
should use or pursue. The shift from the tax income/gross sales, we cannot assume that such
credit to tax deduction scheme is a policy reduction is arbitrary, oppressive or confiscatory.
determination by Congress and the Court will To repeat, there is no actual proof to back up this
respect it for as long as there is no showing, as claim, and it could be that the loss suffered by a
here, that the subject regulation has business establishment was occasioned through
transgressed constitutional limitations. its fault or negligence in not adapting to the
Unavoidably, the lack of evidence constrains the effects of the assailed law. The law uniformly
Dissent to rely on speculative and hypothetical applies to all business establishments covered
argumentation when it states that the 20% thereunder. There is, therefore, no unjust
discount is a significant amount and not a discrimination as the aforesaid business
minimal loss (which erroneously assumes that establishments are faced with the same
the discount automatically results in a loss when constraints. The necessity of proof is all the more
it is possible that the profit margin is greater than pertinent in this case because, as similarly
20% and/or the pricing strategy can be revised to observed by Justice Velasco in his Concurring
prevent or mitigate any reduction in profits or Opinion, the law has been in operation for over
income/gross sales as illustrated above),108 and nine years now. However, the grim picture
not all private establishments make a 20% profit painted by petitioners on the unconscionable
margin (which conversely implies that there are losses to be indiscriminately suffered by
those who make more and, thus, would not be business establishments, which should have led
greatly affected by this regulation).109 to the closure of numerous business
establishments, has not come to pass. Verily, we
In fine, because of the possible scenarios cannot invalidate the assailed law based on
discussed above, we cannot assume that the assumptions and conjectures. Without adequate
proof, the presumption of constitutionality must that the 20% discount is not a minimal
prevail. IV At this juncture, we note that the loss111 and that the 20% discount forces
Dissent modified its original arguments by business establishments to operate at a loss.112
including a new paragraph, to wit:
Even the obiter in Central Luzon Drug
Section 9, Article III of the 1987 Constitution Corporation,113 which the Dissent essentially
speaks of private property without any adopts and relies on, is premised on the
distinction. It does not state that there should be permanent reduction of total revenues and the
profit before the taking of property is subject to loss that business establishments will be forced
just compensation. The private property referred to suffer in arguing that the 20% discount
to for purposes of taking could be inherited, constitutes a "taking" under the power of eminent
donated, purchased, mortgaged, or as in this domain. Thus, when the Dissent now argues that
case, part of the gross sales of private the issue of profit or loss is immaterial, it
establishments. They are all private property and contradicts itself because it later argues, in order
any taking should be attended by corresponding to justify that there is a "taking" under the power
payment of just compensation. The 20% of eminent domain in this case, that the 20%
discount granted to senior citizens belong to discount forces business establishments to
private establishments, whether these suffer a significant loss or to operate at a loss.
establishments make a profit or suffer a loss. In Second, this argument suffers from the same
fact, the 20% discount applies to non-profit flaw as the Dissent's original arguments. It is an
establishments like country, social, or golf clubs erroneous characterization of the 20% discount.
which are open to the public and not only for According to the Dissent, the 20% discount is
exclusive membership. The issue of profit or loss part of the gross sales and, hence, private
to the establishments is immaterial.110 property belonging to business establishments.
However, as previously discussed, the 20%
Two things may be said of this argument. First, it discount is not private property actually owned
contradicts the rest of the arguments of the and/or used by the business establishment. It
Dissent. After it states that the issue of profit or should be distinguished from properties like
loss is immaterial, the Dissent proceeds to argue lands or buildings actually used in the operation
of a business establishment which, if determined based on its overall effects on the
appropriated for public use, would amount to a operations of the business establishment.
"taking" under the power of eminent domain.
Instead, the 20% discount is a regulatory Again, as previously discussed, the 20%
measure which impacts the pricing and, hence, discount does not automatically result in a 20%
the profitability of business establishments. At reduction in profits, or, to align it with the term
the time the discount is imposed, no particular used by the Dissent, the 20% discount does not
property of the business establishment can be mean that a 20% reduction in gross sales
said to be "taken." That is, the State does not necessarily results. Because (1) the profit margin
acquire or take anything from the business of a product is not necessarily less than 20%, (2)
establishment in the way that it takes a piece of not all customers of a business establishment
private land to build a public road. While the 20% are senior citizens, and (3) the establishment
discount may form part of the potential profits or may revise its pricing strategy, such reduction in
income/gross sales114 of the business profits or income/gross sales may be prevented
establishment, as similarly characterized by or, in the alternative, mitigated so that the
Justice Bersamin in his Concurring Opinion, business establishment continues to operate
potential profits or income/gross sales are not profitably. Thus, even if we gratuitously assume
private property, specifically cash or money, that some degree of reduction in profits or
already belonging to the business establishment. income/gross sales occurs because of the 20%
They are a mere expectancy because they are discount, it does not follow that the regulation is
potential fruits of the successful conduct of the unreasonable, oppressive or confiscatory
business. Prior to the sale of goods or services, because the business establishment may make
a business establishment may be subject to the necessary adjustments to continue to
State regulations, such as the 20% senior citizen operate profitably. No evidence was presented
discount, which may impact the level or amount by petitioners to show otherwise. In fact, no
of profits or income/gross sales that can be evidence was presented by petitioners at all.
generated by such establishment. For this Justice Leonen, in his Concurring and Dissenting
reason, the validity of the discount is to be Opinion, characterizes "profits" (or income/gross
sales) as an inchoate right. Another way to view
it, as stated by Justice Velasco in his Concurring establishment to a reasonable return on
Opinion, is that the business establishment investment. If the business losses are not halted
merely has a right to profits. The Constitution because of the continued operation of the
adverts to it as the right of an enterprise to a regulation, this eventually leads to the
reasonable return on investment.115 destruction of the business and the total loss of
the capital invested therein. But, again,
Undeniably, this right, like any other right, may petitioners in this case failed to prove that the
be regulated under the police power of the State subject regulation is unreasonable, oppressive
to achieve important governmental objectives or confiscatory.
like protecting the interests and improving the
welfare of senior citizens. It should be noted V.
though that potential profits or income/gross
sales are relevant in police power and eminent The Dissent further argues that we erroneously
domain analyses because they may, in used price and rate of return on investment
appropriate cases, serve as an indicia when a control laws to justify the senior citizen discount
regulation has gone "too far" as to amount to a law. According to the Dissent, only profits from
"taking" under the power of eminent domain. industries imbued with public interest may be
When the deprivation or reduction of profits or regulated because this is a condition of their
income/gross sales is shown to be franchises. Profits of establishments without
unreasonable, oppressive or confiscatory, then franchises cannot be regulated permanently
the challenged governmental regulation may be because there is no law regulating their profits.
nullified for being a "taking" under the power of The Dissent concludes that the permanent
eminent domain. In such a case, it is not profits reduction of total revenues or gross sales of
or income/gross sales which are actually taken business establishments without franchises is a
and appropriated for public use. Rather, when taking of private property under the power of
the regulation causes an establishment to incur eminent domain. In making this argument, it is
losses in an unreasonable, oppressive or unfortunate that the Dissent quotes only a portion
confiscatory manner, what is actually taken is of the ponencia The subject regulation may be
capital and the right of the business said to be similar to, but with substantial
distinctions from, price control or rate of return on as temper corporate greed by controlling the rate
investment control laws which are traditionally of return on investment of these corporations
regarded as police power measures. These laws considering that they have a monopoly over the
generally regulate public utilities or goods or services that they provide to the general
industries/enterprises imbued with public interest public. The subject regulation differs therefrom in
in order to protect consumers from exorbitant or that (1) the discount does not prevent the
unreasonable pricing as well as temper establishments from adjusting the level of prices
corporate greed by controlling the rate of return of their goods and services, and (2) the discount
on investment of these corporations considering does not apply to all customers of a given
that they have a monopoly over the goods or establishment but only to the class of senior
services that they provide to the general public. citizens.
The subject regulation differs therefrom in that
(1) the discount does not prevent the Nonetheless, to the degree material to the
establishments from adjusting the level of prices resolution of this case, the 20% discount may be
of their goods and services, and (2) the discount properly viewed as belonging to the category of
does not apply to all customers of a given price regulatory measures which affects the
establishment but only to the class of senior profitability of establishments subjected thereto.
citizens. x x x116 (Emphasis supplied)

The above paragraph, in full, states The point of this paragraph is to simply show that
the State has, in the past, regulated prices and
The subject regulation may be said to be similar profits of business establishments. In other
to, but with substantial distinctions from, price words, this type of regulatory measures is
control or rate of return on investment control traditionally recognized as police power
laws which are traditionally regarded as police measures so that the senior citizen discount may
power measures. These laws generally regulate be considered as a police power measure as
public utilities or industries/enterprises imbued well. What is more, the substantial distinctions
with public interest in order to protect consumers between price and rate of return on investment
from exorbitant or unreasonable pricing as well control laws vis--vis the senior citizen discount
law provide greater reason to uphold the validity This may cover the regulation of profits or
of the senior citizen discount law. As previously income/gross sales of all businesses, without
discussed, the ability to adjust prices allows the qualification, to attain the objective of diffusing
establishment subject to the senior citizen wealth in order to protect and enhance the right
discount to prevent or mitigate any reduction of of all the people to human dignity.118
profits or income/gross sales arising from the
giving of the discount. In contrast, Thus, under the social justice policy of the
establishments subject to price and rate of return Constitution, business establishments may be
on investment control laws cannot adjust prices compelled to contribute to uplifting the plight of
accordingly. Certainly, there is no intention to say vulnerable or marginalized groups in our society
that price and rate of return on investment control provided that the regulation is not arbitrary,
laws are the justification for the senior citizen oppressive or confiscatory, or is not in breach of
discount law. Not at all. The justification for the some specific constitutional limitation. When the
senior citizen discount law is the plenary powers Dissent, therefore, states that the "profits of
of Congress. The legislative power to regulate private establishments which are non-
business establishments is broad and covers a franchisees cannot be regulated permanently,
wide array of areas and subjects. It is well within and there is no such law regulating their profits
Congress legislative powers to regulate the permanently,"119 it is assuming what it ought to
profits or income/gross sales of industries and prove. First, there are laws which, in effect,
enterprises, even those without franchises. For permanently regulate profits or income/gross
what are franchises but mere legislative sales of establishments without franchises, and
enactments? There is nothing in the Constitution RA 9257 is one such law. And, second,
that prohibits Congress from regulating the Congress can regulate such profits or
profits or income/gross sales of industries and income/gross sales because, as previously
enterprises without franchises. On the contrary, noted, there is nothing in the Constitution to
the social justice provisions of the Constitution prevent it from doing so. Here, again, it must be
enjoin the State to regulate the "acquisition, emphasized that petitioners failed to present any
ownership, use, and disposition" of property and proof to show that the effects of the assailed law
its increments.117 on their operations has been unreasonable,
oppressive or confiscatory. The permanent order to offset the effects of the increase in labor
regulation of profits or income/gross sales of cost; does this mean that the minimum wage law,
business establishments, even those without following the reasoning of the Dissent, is
franchises, is not as uncommon as the Dissent unconstitutional because the consuming public is
depicts it to be. For instance, the minimum wage effectively made to subsidize the wage of a group
law allows the State to set the minimum wage of of laborers, i.e., minimum wage earners? The
employees in a given region or geographical same reasoning can be adopted relative to the
area. Because of the added labor costs arising examples cited by the Dissent which, according
from the minimum wage, a permanent reduction to it, are valid police power regulations. Article
of profits or income/gross sales would result, 157 of the Labor Code, Sections 19 and 18 of the
assuming that the employer does not increase Social Security Law, and Section 7 of the Pag-
the prices of his goods or services. To illustrate, IBIG Fund Law would effectively increase the
suppose it costs a company P5.00 to produce a labor cost of a business establishment. This
product and it sells the same at P10.00 with a would, in turn, be integrated as part of the cost of
50% profit margin. Later, the State increases the its goods or services. Again, if the establishment
minimum wage. As a result, the company incurs does not increase its prices, the net effect would
greater labor costs so that it now costs P7.00 to be a permanent reduction in its profits or
produce the same product. The profit per product income/gross sales. Following the reasoning of
of the company would be reduced to P3.00 with the Dissent that "any form of permanent taking of
a profit margin of 30%. The net effect would be private property (including profits or
120
the same as in the earlier example of granting a income/gross sales) is an exercise of eminent
20% senior citizen discount. As can be seen, the domain that requires the State to pay just
minimum wage law could, likewise, lead to a compensation,"121 then these statutory
permanent reduction of profits. Does this mean provisions would, likewise, have to be declared
that the minimum wage law should, likewise, be unconstitutional. It does not matter that these
declared unconstitutional on the mere plea that it benefits are deemed part of the employees
results in a permanent reduction of profits? legislated wages because the net effect is the
Taking it a step further, suppose the company same, that is, it leads to higher labor costs and a
decides to increase the price of its product in permanent reduction in the profits or
income/gross sales of the business The Court is not oblivious of the retail side of the
122
establishments. pharmaceutical industry and the competitive
pricing component of the business. While the
The point then is this most, if not all, regulatory Constitution protects property rights petitioners
measures imposed by the State on business must the realities of business and the State, in
establishments impact, at some level, the latters the exercise of police power, can intervene in the
prices and/or profits or income/gross sales.123 operations of a business which may result in an
impairment of property rights in the process.
If the Court were to sustain the Dissents theory,
then a wholesale nullification of such measures Moreover, the right to property has a social
would inevitably result. The police power of the dimension. While Article XIII of the Constitution
State and the social justice provisions of the provides the percept for the protection of
Constitution would, thus, be rendered nugatory. property, various laws and jurisprudence,
There is nothing sacrosanct about profits or particularly on agrarian reform and the regulation
income/gross sales. This, we made clear in of contracts and public utilities, continously serve
Carlos Superdrug Corporation:124 as a reminder for the promotion of public good.
Police power as an attribute to promote the Undeniably, the success of the senior citizens
common good would be diluted considerably if program rests largely on the support imparted by
on the mere plea of petitioners that they will petitioners and the other private establishments
suffer loss of earnings and capital, the concerned. This being the case, the means
questioned provision is invalidated. Moreover, in employed in invoking the active participation of
the absence of evidence demonstrating the the private sector, in order to achieve the
alleged confiscatory effect of the provision in purpose or objective of the law, is reasonably
question, there is no basis for its nullification in and directly related. Without sufficient proof that
view of the presumption of validity which every Section 4(a) of R.A. No. 9257 is arbitrary, and
law has in its favor. that the continued implementation of the same
would be unconscionably detrimental to
xxxx
petitioners, the Court will refrain form quashing a
legislative act.125

In conclusion, we maintain that the correct rule in

determining whether the subject regulatory
measure has amounted to a "taking" under the
power of eminent domain is the one laid down
in Alalayan v. National Power Corporation126 and
followed in Carlos Superdurg
127
Corporation consistent with long standing
principles in police power and eminent domain
analysis. Thus, the deprivation or reduction of G.R. Nos. L-49839-46 April 26, 1991
profits or income. Gross sales must be clearly
JOSE B. L. REYES and EDMUNDO A.
shown to be unreasonable, oppressive or
REYES, petitioners,
confiscatory. Under the specific circumstances of
this case, such determination can only be made vs.
upon the presentation of competent proof which PEDRO ALMANZOR, VICENTE ABAD
SANTOS, JOSE ROO, in their capacities as
petitioners failed to do. A law, which has been in
operation for many years and promotes the appointed and Acting Members of the
welfare of a group accorded special concern by CENTRAL BOARD OF ASSESSMENT
APPEALS; TERESITA H. NOBLEJAS,
the Constitution, cannot and should not be
ROMULO M. DEL ROSARIO, RAUL C.
summarily invalidated on a mere allegation that
it reduces the profits or income/gross sales of FLORES, in their capacities as appointed and
business establishments. Acting Members of the BOARD OF
ASSESSMENT APPEALS of Manila; and
WHEREFORE, the Petition is hereby NICOLAS CATIIL in his capacity as City
DISMISSED for lack of merit. Assessor of Manila, respondents.

SO ORDERED. Barcelona, Perlas, Joven & Academia Law

Offices for petitioners.
 Republic Act No. 6359 prohibiting for one year
from its effectivity, an increase in monthly rentals
of dwelling units or of lands on which another's
PARAS, J.: dwelling is located, where such rentals do not
exceed three hundred pesos (P300.00) a month
This is a petition for review on certiorari to
but allowing an increase in rent by not more than
reverse the June 10, 1977 decision of the Central
10% thereafter. The said Act also suspended
Board of Assessment Appeals1 in CBAA Cases
paragraph (1) of Article 1673 of the Civil Code for
Nos. 72-79 entitled "J.B.L. Reyes, Edmundo
two years from its effectivity thereby disallowing
Reyes, et al. v. Board of Assessment Appeals of
the ejectment of lessees upon the expiration of
Manila and City Assessor of Manila" which
the usual legal period of lease. On October 12,
affirmed the March 29, 1976 decision of the
1972, Presidential Decree No. 20 amended R.A.
Board of Tax Assessment Appeals2 in BTAA
No. 6359 by making absolute the prohibition to
Cases Nos. 614, 614-A-J, 615, 615-A, B, E,
increase monthly rentals below P300.00 and by
"Jose Reyes, et al. v. City Assessor of Manila"
indefinitely suspending the aforementioned
and "Edmundo Reyes and Milagros Reyes v.
provision of the Civil Code, excepting leases with
City Assessor of Manila" upholding the
a definite period. Consequently, the Reyeses,
classification and assessments made by the City
petitioners herein, were precluded from raising
Assessor of Manila.
the rentals and from ejecting the tenants. In
The facts of the case are as follows: 1973, respondent City Assessor of Manila re-
classified and reassessed the value of the
Petitioners J.B.L. Reyes, Edmundo and Milagros subject properties based on the schedule of
Reyes are owners of parcels of land situated in market values duly reviewed by the Secretary of
Tondo and Sta. Cruz Districts, City of Manila, Finance. The revision, as expected, entailed an
which are leased and entirely occupied as increase in the corresponding tax rates
dwelling sites by tenants. Said tenants were prompting petitioners to file a Memorandum of
paying monthly rentals not exceeding three Disagreement with the Board of Tax Assessment
hundred pesos (P300.00) in July, 1971. On July Appeals. They averred that the reassessments
14, 1971, the National Legislature enacted made were "excessive, unwarranted,
inequitable, confiscatory and unconstitutional" submitted three (3) deeds of sale showing the
considering that the taxes imposed upon them different market values of the real property
greatly exceeded the annual income derived situated in the same vicinity where the subject
from their properties. They argued that the properties of petitioners are located. To better
income approach should have been used in appreciate the locational and physical features of
determining the land values instead of the the land, the Board of Hearing Commissioners
comparable sales approach which the City conducted an ocular inspection with the
Assessor adopted (Rollo, pp. 9-10-A). The Board presence of two representatives of the City
of Tax Assessment Appeals, however, Assessor prior to the healing of the case. Neither
considered the assessments valid, holding thus: the owners nor their authorized representatives
were present during the said ocular inspection
WHEREFORE, and considering that the despite proper notices served them. It was found
appellants have failed to submit concrete that certain parcels of land were below street
evidence which could overcome the level and were affected by the tides (Rollo, pp.
presumptive regularity of the classification 24-25).
and assessments appear to be in
accordance with the base schedule of On June 10, 1977, the Central Board of
market values and of the base schedule of Assessment Appeals rendered its decision, the
building unit values, as approved by the dispositive portion of which reads:
Secretary of Finance, the cases should be,
as they are hereby, upheld. WHEREFORE, the appealed decision
insofar as the valuation and assessment of
SO ORDERED. (Decision of the Board of the lots covered by Tax Declaration Nos.
Tax Assessment Appeals, Rollo, p. 22). (5835) PD-5847, (5839), (5831) PD-5844
and PD-3824 is affirmed.
The Reyeses appealed to the Central Board of
Assessment Appeals.1wphi1 They submitted, For the lots covered by Tax Declaration
among others, the summary of the yearly rentals Nos. (1430) PD-1432, PD-1509, 146 and
to show the income derived from the properties. (1) PD-266, the appealed Decision is
Respondent City Assessor, on the other hand, modified by allowing a 20% reduction in
 their respective market values and applying estate taxes would admittedly exceed the sum
therein the assessment level of 30% to total of the yearly rentals paid or payable by the
arrive at the corresponding assessed value. dweller tenants under P.D. 20. Hence, petitioners
protested against the levels of the values
SO ORDERED. (Decision of the Central assigned to their properties as revised and
Board of Assessment Appeals, Rollo, p. 27) increased on the ground that they were arbitrarily
excessive, unwarranted, inequitable,
Petitioner's subsequent motion for
confiscatory and unconstitutional (Rollo, p. 10-
reconsideration was denied, hence, this petition.
A).
The Reyeses assigned the following error:
On the other hand, while respondent Board of
THE HONORABLE BOARD ERRED IN Tax Assessment Appeals admits in its decision
ADOPTING THE "COMPARABLE SALES that the income approach is used in determining
APPROACH" METHOD IN FIXING THE land values in some vicinities, it maintains that
ASSESSED VALUE OF APPELLANTS' when income is affected by some sort of price
PROPERTIES. control, the same is rejected in the consideration
and study of land values as in the case of
The petition is impressed with merit. properties affected by the Rent Control Law for
they do not project the true market value in the
The crux of the controversy is in the method used open market (Rollo, p. 21). Thus, respondents
in tax assessment of the properties in question. opted instead for the "Comparable Sales
Petitioners maintain that the "Income Approach" Approach" on the ground that the value estimate
method would have been more realistic for in of the properties predicated upon prices paid in
disregarding the effect of the restrictions actual, market transactions would be a uniform
imposed by P.D. 20 on the market value of the and a more credible standards to use especially
properties affected, respondent Assessor of the in case of mass appraisal of properties (Ibid.).
City of Manila unlawfully and unjustifiably set Otherwise stated, public respondents would
increased new assessed values at levels so high have this Court completely ignore the effects of
and successive that the resulting annual real the restrictions of P.D. No. 20 on the market
value of properties within its coverage. In any (Fernando "The Constitution of the Philippines",
event, it is unquestionable that both the p. 221, Second Edition). Thus, the need to
"Comparable Sales Approach" and the "Income examine closely and determine the specific
Approach" are generally acceptable methods of mandate of the Constitution.
appraisal for taxation purposes (The Law on
Transfer and Business Taxation by Hector S. De Taxation is said to be equitable when its burden
Leon, 1988 Edition). However, it is conceded that falls on those better able to pay. Taxation is
the propriety of one as against the other would of progressive when its rate goes up depending on
course depend on several factors. Hence, as the resources of the person affected (Ibid.).
early as 1923 in the case of Army & Navy Club,
The power to tax "is an attribute of sovereignty".
Manila v. Wenceslao Trinidad, G.R. No. 19297
In fact, it is the strongest of all the powers of
(44 Phil. 383), it has been stressed that the
government. But for all its plenitude the power to
assessors, in finding the value of the property,
tax is not unconfined as there are restrictions.
have to consider all the circumstances and
Adversely effecting as it does property rights,
elements of value and must exercise a prudent
both the due process and equal protection
discretion in reaching conclusions.
clauses of the Constitution may properly be
Under Art. VIII, Sec. 17 (1) of the 1973 invoked to invalidate in appropriate cases a
Constitution, then enforced, the rule of taxation revenue measure. If it were otherwise, there
must not only be uniform, but must also be would be truth to the 1903 dictum of Chief Justice
equitable and progressive. Marshall that "the power to tax involves the
power to destroy." The web or unreality spun
Uniformity has been defined as that principle by from Marshall's famous dictum was brushed
which all taxable articles or kinds of property of away by one stroke of Mr. Justice Holmes pen,
the same class shall be taxed at the same rate thus: "The power to tax is not the power to
(Churchill v. Concepcion, 34 Phil. 969 [1916]). destroy while this Court sits. So it is in the
Philippines " (Sison, Jr. v. Ancheta, 130 SCRA
Notably in the 1935 Constitution, there was no 655 [1984]; Obillos, Jr. v. Commissioner of
mention of the equitable or progressive aspects Internal Revenue, 139 SCRA 439 [1985]).
of taxation required in the 1973 Charter
In the same vein, the due process clause may be lesser market value in view of the rental
invoked where a taxing statute is so arbitrary that restrictions.
it finds no support in the Constitution. An obvious
example is where it can be shown to amount to Ironically, in the case at bar, not even the factors
confiscation of property. That would be a clear determinant of the assessed value of subject
abuse of power (Sison v. Ancheta, supra). properties under the "comparable sales
approach" were presented by the public
The taxing power has the authority to make a respondents, namely: (1) that the sale must
reasonable and natural classification for represent a bonafide arm's length transaction
purposes of taxation but the government's act between a willing seller and a willing buyer and
must not be prompted by a spirit of hostility, or at (2) the property must be comparable property
the very least discrimination that finds no support (Rollo, p. 27). Nothing can justify or support their
in reason. It suffices then that the laws operate view as it is of judicial notice that for properties
equally and uniformly on all persons under covered by P.D. 20 especially during the time in
similar circumstances or that all persons must be question, there were hardly any willing buyers.
treated in the same manner, the conditions not As a general rule, there were no takers so that
being different both in the privileges conferred there can be no reasonable basis for the
and the liabilities imposed (Ibid., p. 662). conclusion that these properties were
comparable with other residential properties not
Finally under the Real Property Tax Code (P.D. burdened by P.D. 20. Neither can the given
464 as amended), it is declared that the first circumstances be nonchalantly dismissed by
Fundamental Principle to guide the appraisal and public respondents as imposed under distressed
assessment of real property for taxation conditions clearly implying that the same were
purposes is that the property must be "appraised merely temporary in character. At this point in
at its current and fair market value." time, the falsity of such premises cannot be more
convincingly demonstrated by the fact that the
By no strength of the imagination can the market
law has existed for around twenty (20) years with
value of properties covered by P.D. No. 20 be
no end to it in sight.
equated with the market value of properties not
so covered. The former has naturally a much
Verily, taxes are the lifeblood of the government Appeals of Manila and the City Assessor of
and so should be collected without unnecessary Manila are ordered to make a new assessment
hindrance. However, such collection should be by the income approach method to guarantee a
made in accordance with law as any arbitrariness fairer and more realistic basis of computation
will negate the very reason for government itself (Rollo, p. 71).
It is therefore necessary to reconcile the
apparently conflicting interests of the authorities SO ORDERED.
and the taxpayers so that the real purpose of
taxations, which is the promotion of the common
good, may be achieved (Commissioner of
Internal Revenue v. Algue Inc., et al., 158 SCRA
9 [1988]). Consequently, it stands to reason that
petitioners who are burdened by the government
by its Rental Freezing Laws (then R.A. No. 6359
and P.D. 20) under the principle of social justice
should not now be penalized by the same
government by the imposition of excessive taxes G.R. No. 167330 September 18, 2009
petitioners can ill afford and eventually result in
the forfeiture of their properties. PHILIPPINE HEALTH CARE PROVIDERS,
INC., Petitioner,
By the public respondents' own computation the vs.
assessment by income approach would amount COMMISSIONER OF INTERNAL
to only P10.00 per sq. meter at the time in REVENUE, Respondent.
question.
RESOLUTION
PREMISES CONSIDERED, (a) the petition is
GRANTED; (b) the assailed decisions of public CORONA, J.:
respondents are REVERSED and SET ASIDE;
and (e) the respondent Board of Assessment
ARTICLE II conduct and operate a prepaid group practice
Declaration of Principles and State Policies health care delivery system or a health
maintenance organization to take care of the sick
Section 15. The State shall protect and promote and disabled persons enrolled in the health care
the right to health of the people and instill health plan and to provide for the administrative, legal,
consciousness among them. and financial responsibilities of the organization."
Individuals enrolled in its health care programs
ARTICLE XIII
pay an annual membership fee and are entitled
Social Justice and Human Rights
to various preventive, diagnostic and curative
Section 11. The State shall adopt an integrated medical services provided by its duly licensed
and comprehensive approach to health physicians, specialists and other professional
development which shall endeavor to make technical staff participating in the group practice
essential goods, health and other social services health delivery system at a hospital or clinic
available to all the people at affordable cost. owned, operated or accredited by it.
There shall be priority for the needs of the
xxx xxx xxx
underprivileged sick, elderly, disabled, women,
and children. The State shall endeavor to provide On January 27, 2000, respondent Commissioner
free medical care to paupers.1 of Internal Revenue [CIR] sent petitioner a formal
demand letter and the corresponding
For resolution are a motion for reconsideration
assessment notices demanding the payment of
and supplemental motion for reconsideration
deficiency taxes, including surcharges and
dated July 10, 2008 and July 14, 2008,
interest, for the taxable years 1996 and 1997 in
respectively, filed by petitioner Philippine Health
the total amount of P224,702,641.18. xxxx
Care Providers, Inc.2
The deficiency [documentary stamp tax (DST)]
We recall the facts of this case, as follows:
assessment was imposed on petitioners health
Petitioner is a domestic corporation whose care agreement with the members of its health
primary purpose is "[t]o establish, maintain, care program pursuant to Section 185 of the
1997 Tax Code xxxx
xxx xxx xxx Respondent appealed the CTA decision to the
[Court of Appeals (CA)] insofar as it cancelled the
Petitioner protested the assessment in a letter DST assessment. He claimed that petitioners
dated February 23, 2000. As respondent did not health care agreement was a contract of
act on the protest, petitioner filed a petition for insurance subject to DST under Section 185 of
review in the Court of Tax Appeals (CTA) the 1997 Tax Code.
seeking the cancellation of the deficiency VAT
and DST assessments. On August 16, 2004, the CA rendered its
decision. It held that petitioners health care
On April 5, 2002, the CTA rendered a decision, agreement was in the nature of a non-life
the dispositive portion of which read: insurance contract subject to DST.
WHEREFORE, in view of the foregoing, the WHEREFORE, the petition for review is
instant Petition for Review is PARTIALLY GRANTED. The Decision of the Court of Tax
GRANTED. Petitioner is hereby ORDERED to Appeals, insofar as it cancelled and set aside the
PAY the deficiency VAT amounting 1996 and 1997 deficiency documentary stamp
to P22,054,831.75 inclusive of 25% surcharge tax assessment and ordered petitioner to desist
plus 20% interest from January 20, 1997 until from collecting the same is REVERSED and SET
fully paid for the 1996 VAT deficiency ASIDE.
and P31,094,163.87 inclusive of 25% surcharge
plus 20% interest from January 20, 1998 until Respondent is ordered to pay the amounts
fully paid for the 1997 VAT deficiency. of P55,746,352.19 and P68,450,258.73 as
Accordingly, VAT Ruling No. [231]-88 is declared deficiency Documentary Stamp Tax for 1996 and
void and without force and effect. The 1996 and 1997, respectively, plus 25% surcharge for late
1997 deficiency DST assessment against payment and 20% interest per annum from
petitioner is hereby CANCELLED AND SET January 27, 2000, pursuant to Sections 248 and
ASIDE. Respondent is ORDERED to DESIST 249 of the Tax Code, until the same shall have
from collecting the said DST deficiency tax. been fully paid.

SO ORDERED. SO ORDERED.
Petitioner moved for reconsideration but the CA imposed only on a company engaged in the
denied it. Hence, petitioner filed this case. business of fidelity bonds and other
insurance policies. Petitioner, as an HMO,
xxx xxx xxx is a service provider, not an insurance
company.
In a decision dated June 12, 2008, the Court
denied the petition and affirmed the CAs (b) The Court, in dismissing the appeal
decision. We held that petitioners health care in CIR v. Philippine National Bank, affirmed
agreement during the pertinent period was in the in effect the CAs disposition that health
nature of non-life insurance which is a contract of care services are not in the nature of an
indemnity, citing Blue Cross Healthcare, Inc. v. insurance business.
Olivares3 and Philamcare Health Systems, Inc.
v. CA.4We also ruled that petitioners contention (c) Section 185 should be strictly construed.
that it is a health maintenance organization
(HMO) and not an insurance company is (d) Legislative intent to exclude health care
irrelevant because contracts between agreements from items subject to DST is
companies like petitioner and the beneficiaries clear, especially in the light of the
under their plans are treated as insurance amendments made in the DST law in 2002.
contracts. Moreover, DST is not a tax on the
(e) Assuming arguendo that petitioners
business transacted but an excise on the
agreements are contracts of indemnity, they
privilege, opportunity or facility offered at
are not those contemplated under Section
exchanges for the transaction of the business.
185.
Unable to accept our verdict, petitioner filed the
(f) Assuming arguendo that petitioners
present motion for reconsideration and
agreements are akin to health insurance,
supplemental motion for reconsideration,
health insurance is not covered by Section
asserting the following arguments:
185.
(a) The DST under Section 185 of the
National Internal Revenue of 1997 is
 (g) The agreements do not fall under the the dispensation of the following medical
phrase "other branch of insurance" services to individuals who enter into health care
mentioned in Section 185. agreements with it:

(h) The June 12, 2008 decision should only Preventive medical services such as periodic
apply prospectively. monitoring of health problems, family planning
counseling, consultation and advices on diet,
(i) Petitioner availed of the tax amnesty exercise and other healthy habits, and
benefits under RA5 9480 for the taxable immunization;
year 2005 and all prior years. Therefore, the
questioned assessments on the DST are Diagnostic medical services such as routine
now rendered moot and academic.6 physical examinations, x-rays, urinalysis,
fecalysis, complete blood count, and the like and
Oral arguments were held in Baguio City on April
22, 2009. The parties submitted their Curative medical services which pertain to the
memoranda on June 8, 2009. performing of other remedial and therapeutic
processes in the event of an injury or sickness on
In its motion for reconsideration, petitioner the part of the enrolled member.10
reveals for the first time that it availed of a tax
amnesty under RA 94807(also known as the "Tax Individuals enrolled in its health care program
Amnesty Act of 2007") by fully paying the amount pay an annual membership fee. Membership is
of P5,127,149.08 representing 5% of its net on a year-to-year basis. The medical services
worth as of the year ending December 31, 2005.8 are dispensed to enrolled members in a hospital
or clinic owned, operated or accredited by
We find merit in petitioners motion for petitioner, through physicians, medical and
reconsideration. dental practitioners under contract with it. It
negotiates with such health care practitioners
Petitioner was formally registered and
regarding payment schemes, financing and other
incorporated with the Securities and Exchange
procedures for the delivery of health services.
Commission on June 30, 1987.9 It is engaged in
Except in cases of emergency, the professional
services are to be provided only by petitioner's We said in our June 12, 2008 decision that it is
physicians, i.e. those directly employed by it11 or irrelevant that petitioner is an HMO and not an
whose services are contracted by it.12 Petitioner insurer because its agreements are treated as
also provides hospital services such as room and insurance contracts and the DST is not a tax on
board accommodation, laboratory services, the business but an excise on the privilege,
operating rooms, x-ray facilities and general opportunity or facility used in the transaction of
nursing care.13 If and when a member avails of the business.15
the benefits under the agreement, petitioner
pays the participating physicians and other Petitioner, however, submits that it is of critical
health care providers for the services rendered, importance to characterize the business it is
at pre-agreed rates.14 engaged in, that is, to determine whether it is an
HMO or an insurance company, as this
To avail of petitioners health care programs, the distinction is indispensable in turn to the issue of
individual members are required to sign and whether or not it is liable for DST on its health
execute a standard health care agreement care agreements.16
embodying the terms and conditions for the
provision of the health care services. The same A second hard look at the relevant law and
agreement contains the various health care jurisprudence convinces the Court that the
services that can be engaged by the enrolled arguments of petitioner are meritorious.
member, i.e., preventive, diagnostic and curative
Section 185 of the National Internal Revenue
medical services. Except for the curative aspect
Code of 1997 (NIRC of 1997) provides:
of the medical service offered, the enrolled
member may actually make use of the health Section 185. Stamp tax on fidelity bonds and
care services being offered by petitioner at any other insurance policies. On all policies of
time. insurance or bonds or obligations of the nature
of indemnity for loss, damage, or liability
Health Maintenance Organizations Are Not
made or renewed by any person, association
Engaged In The Insurance Business
or company or corporation transacting the
business of accident, fidelity, employers
liability, plate, glass, steam boiler, burglar, interpretation which gives effect to the whole of
elevator, automatic sprinkler, or other branch of the statute its every word.18
insurance (except life, marine, inland, and fire
insurance), and all bonds, undertakings, or From the language of Section 185, it is evident
recognizances, conditioned for the performance that two requisites must concur before the DST
of the duties of any office or position, for the can apply, namely: (1) the document must be
doing or not doing of anything therein specified, a policy of insurance or an obligation in the
and on all obligations guaranteeing the validity or nature of indemnity and (2) the maker should
legality of any bond or other obligations issued be transacting the business of accident,
by any province, city, municipality, or other public fidelity, employers liability, plate, glass, steam
body or organization, and on all obligations boiler, burglar, elevator, automatic sprinkler, or
guaranteeing the title to any real estate, or other branch of insurance (except life, marine,
guaranteeing any mercantile credits, which may inland, and fire insurance).
be made or renewed by any such person,
Petitioner is admittedly an HMO. Under RA 7875
company or corporation, there shall be collected
(or "The National Health Insurance Act of 1995"),
a documentary stamp tax of fifty centavos
an HMO is "an entity that provides, offers or
(P0.50) on each four pesos (P4.00), or fractional
arranges for coverage of designated health
part thereof, of the premium charged. (Emphasis
services needed by plan members for a fixed
supplied)
prepaid premium."19 The payments do not vary
It is a cardinal rule in statutory construction that with the extent, frequency or type of services
no word, clause, sentence, provision or part of a provided.
statute shall be considered surplusage or
The question is: was petitioner, as an HMO,
superfluous, meaningless, void and insignificant.
engaged in the business of insurance during the
To this end, a construction which renders every
pertinent taxable years? We rule that it was not.
word operative is preferred over that which
makes some words idle and nugatory.17 This Section 2 (2) of PD20 1460 (otherwise known as
principle is expressed in the maxim Ut magis the Insurance Code) enumerates what
valeat quam pereat, that is, we choose the
constitutes "doing an insurance business" or Various courts in the United States, whose
"transacting an insurance business:" jurisprudence has a persuasive effect on our
decisions,21 have determined that HMOs are not
a) making or proposing to make, as insurer, in the insurance business. One test that they
any insurance contract; have applied is whether the assumption of risk
and indemnification of loss (which are elements
b) making or proposing to make, as surety,
of an insurance business) are the principal object
any contract of suretyship as a vocation and
and purpose of the organization or whether they
not as merely incidental to any other
are merely incidental to its business. If these are
legitimate business or activity of the surety;
the principal objectives, the business is that of
c) doing any kind of business, including a insurance. But if they are merely incidental and
reinsurance business, specifically service is the principal purpose, then the
recognized as constituting the doing of an business is not insurance.
insurance business within the meaning of
Applying the "principal object and purpose
this Code;
test,"22 there is significant American case law
d) doing or proposing to do any business in supporting the argument that a corporation (such
substance equivalent to any of the as an HMO, whether or not organized for profit),
foregoing in a manner designed to evade whose main object is to provide the members of
the provisions of this Code. a group with health services, is not engaged in
the insurance business.
In the application of the provisions of this Code,
the fact that no profit is derived from the making The rule was enunciated in Jordan v. Group
of insurance contracts, agreements or Health Association23 wherein the Court of
transactions or that no separate or direct Appeals of the District of Columbia Circuit held
consideration is received therefore, shall not be that Group Health Association should not be
deemed conclusive to show that the making considered as engaged in insurance activities
thereof does not constitute the doing or since it was created primarily for the distribution
transacting of an insurance business.
of health care services rather than the occurrences, such as death, disaster at sea,
assumption of insurance risk. fire and tornado. It is, in this instance, to take
care of colds, ordinary aches and pains, minor ills
xxx Although Group Healths activities may be and all the temporary bodily discomforts as well
considered in one aspect as creating security as the more serious and unusual illness. To
against loss from illness or accident more truly summarize, the distinctive features of the
they constitute the quantity purchase of well- cooperative are the rendering of service, its
rounded, continuous medical service by its extension, the bringing of physician and
members. xxx The functions of such an patient together, the preventive features, the
organization are not identical with those of regularization of service as well as payment,
insurance or indemnity companies. The latter the substantial reduction in cost by quantity
are concerned primarily, if not exclusively, with purchasing in short, getting the medical job
risk and the consequences of its descent, not done and paid for; not, except incidentally to
with service, or its extension in kind, quantity or these features, the indemnification for cost
distribution; with the unusual occurrence, not the after the services is rendered. Except the last,
daily routine of living. Hazard is predominant. On these are not distinctive or generally
the other hand, the cooperative is concerned characteristic of the insurance
principally with getting service rendered to arrangement. There is, therefore, a substantial
its members and doing so at lower prices difference between contracting in this way for the
made possible by quantity purchasing and rendering of service, even on the contingency
economies in operation. Its primary purpose that it be needed, and contracting merely to
is to reduce the cost rather than the risk of stand its cost when or after it is rendered.
medical care; to broaden the service to the
individual in kind and quantity; to enlarge the That an incidental element of risk distribution or
number receiving it; to regularize it as an assumption may be present should not outweigh
everyday incident of living, like purchasing all other factors. If attention is focused only on
food and clothing or oil and gas, rather than that feature, the line between insurance or
merely protecting against the financial loss indemnity and other types of legal arrangement
caused by extraordinary and unusual and economic function becomes faint, if not
extinct. This is especially true when the contract rather than indemnity is its principal object
is for the sale of goods or services on and purpose. Certainly the objects and
contingency. But obviously it was not the purposes of the corporation organized and
purpose of the insurance statutes to regulate all maintained by the California physicians have a
arrangements for assumption or distribution of wide scope in the field of social
risk. That view would cause them to engulf service. Probably there is no more impelling
practically all contracts, particularly conditional need than that of adequate medical care on a
sales and contingent service agreements. The voluntary, low-cost basis for persons of small
fallacy is in looking only at the risk element, income. The medical profession unitedly is
to the exclusion of all others present or their endeavoring to meet that need.
subordination to it. The question turns, not Unquestionably this is service of a high
on whether risk is involved or assumed, but order and not indemnity.26 (Emphasis
on whether that or something else to which it supplied)
is related in the particular plan is its principal
object purpose.24 (Emphasis supplied) American courts have pointed out that the main
difference between an HMO and an insurance
In California Physicians Service v. company is that HMOs undertake to provide or
25
Garrison, the California court felt that, after arrange for the provision of medical services
scrutinizing the plan of operation as a whole of through participating physicians while insurance
the corporation, it was service rather than companies simply undertake to indemnify the
indemnity which stood as its principal purpose. insured for medical expenses incurred up to a
pre-agreed limit. Somerset Orthopedic
There is another and more compelling reason for Associates, P.A. v. Horizon Blue Cross and Blue
holding that the service is not engaged in the Shield of New Jersey27 is clear on this point:
insurance business. Absence or presence of
assumption of risk or peril is not the sole test The basic distinction between medical service
to be applied in determining its status. The corporations and ordinary health and accident
question, more broadly, is whether, looking insurers is that the former undertake to provide
at the plan of operation as a whole, service prepaid medical services through participating
physicians, thus relieving subscribers of any Consequently, the mere presence of risk would
further financial burden, while the latter only be insufficient to override the primary purpose of
undertake to indemnify an insured for medical the business to provide medical services as
expenses up to, but not beyond, the schedule of needed, with payment made directly to the
rates contained in the policy. provider of these services.29 In short, even if
petitioner assumes the risk of paying the cost of
xxx xxx xxx these services even if significantly more than
what the member has prepaid, it nevertheless
The primary purpose of a medical service
cannot be considered as being engaged in the
corporation, however, is an undertaking to
insurance business.
provide physicians who will render services to
subscribers on a prepaid basis. Hence, if there By the same token, any indemnification resulting
are no physicians participating in the medical from the payment for services rendered in case
service corporations plan, not only will the of emergency by non-participating health
subscribers be deprived of the protection providers would still be incidental to petitioners
which they might reasonably have expected purpose of providing and arranging for health
would be provided, but the corporation will, care services and does not transform it into an
in effect, be doing business solely as a health insurer. To fulfill its obligations to its members
and accident indemnity insurer without having under the agreements, petitioner is required to
qualified as such and rendering itself subject to set up a system and the facilities for the delivery
the more stringent financial requirements of the of such medical services. This indubitably shows
General Insurance Laws. that indemnification is not its sole object.
A participating provider of health care services is In fact, a substantial portion of petitioners
one who agrees in writing to render health care services covers preventive and diagnostic
services to or for persons covered by a contract medical services intended to keep members from
issued by health service corporation in return for developing medical conditions or diseases.30 As
which the health service corporation agrees an HMO, it is its obligation to maintain the good
to make payment directly to the participating health of its members. Accordingly, its health
provider.28 (Emphasis supplied)
care programs are designed to prevent or to whole and not its mere components. This is of
minimize thepossibility of any assumption of course only prudent and appropriate, taking into
risk on its part. Thus, its undertaking under its account the burdensome and strict laws, rules
agreements is not to indemnify its members and regulations applicable to insurers and other
against any loss or damage arising from a entities engaged in the insurance business.
medical condition but, on the contrary, to provide Moreover, we are also not unmindful that there
the health and medical services needed to are other American authorities who have found
prevent such loss or damage.31 particular HMOs to be actually engaged in
insurance activities.32
Overall, petitioner appears to provide insurance-
type benefits to its members (with respect to Lastly, it is significant that petitioner, as an HMO,
its curative medical services), but these are is not part of the insurance industry. This is
incidental to the principal activity of providing evident from the fact that it is not supervised by
them medical care. The "insurance-like" aspect the Insurance Commission but by the
of petitioners business is miniscule compared to Department of Health.33 In fact, in a letter dated
its noninsurance activities. Therefore, since it September 3, 2000, the Insurance
substantially provides health care services rather Commissioner confirmed that petitioner is not
than insurance services, it cannot be considered engaged in the insurance business. This
as being in the insurance business. determination of the commissioner must be
accorded great weight. It is well-settled that the
It is important to emphasize that, in adopting the interpretation of an administrative agency which
"principal purpose test" used in the above-quoted is tasked to implement a statute is accorded
U.S. cases, we are not saying that petitioners great respect and ordinarily controls the
operations are identical in every respect to those interpretation of laws by the courts. The reason
of the HMOs or health providers which were behind this rule was explained in Nestle
parties to those cases. What we are stating is Philippines, Inc. v. Court of Appeals:34
that, for the purpose of determining what "doing
an insurance business" means, we have to The rationale for this rule relates not only to the
scrutinize the operations of the business as a emergence of the multifarious needs of a modern
or modernizing society and the establishment of we ruled that petitioners health care agreements
diverse administrative agencies for addressing are contracts of indemnity and are therefore
and satisfying those needs; it also relates to the insurance contracts:
accumulation of experience and growth of
specialized capabilities by the administrative It is incorrect to say that the health care
agency charged with implementing a particular agreement is not based on loss or damage
statute. In Asturias Sugar Central, Inc. vs. because, under the said agreement, petitioner
Commissioner of Customs,35 the Court stressed assumes the liability and indemnifies its member
that executive officials are presumed to have for hospital, medical and related expenses (such
familiarized themselves with all the as professional fees of physicians). The term
considerations pertinent to the meaning and "loss or damage" is broad enough to cover the
purpose of the law, and to have formed an monetary expense or liability a member will incur
independent, conscientious and competent in case of illness or injury.
expert opinion thereon. The courts give much
Under the health care agreement, the rendition
weight to the government agency officials
of hospital, medical and professional services to
charged with the implementation of the law, their
the member in case of sickness, injury or
competence, expertness, experience and
emergency or his availment of so-called "out-
informed judgment, and the fact that they
patient services" (including physical
frequently are the drafters of the law they
examination, x-ray and laboratory tests, medical
interpret.36
consultations, vaccine administration and family
A Health Care Agreement Is Not An Insurance planning counseling) is the contingent event
Contract Contemplated Under Section 185 Of which gives rise to liability on the part of the
The NIRC of 1997 member. In case of exposure of the member to
liability, he would be entitled to indemnification by
Section 185 states that DST is imposed on "all petitioner.
policies of insurance or obligations of the
nature of indemnity for loss, damage, or Furthermore, the fact that petitioner must relieve
liability." In our decision dated June 12, 2008, its member from liability by paying for expenses
arising from the stipulated contingencies belies
its claim that its services are prepaid. The because taxation is a destructive power which
expenses to be incurred by each member cannot interferes with the personal and property rights of
be predicted beforehand, if they can be predicted the people and takes from them a portion of their
at all. Petitioner assumes the risk of paying for property for the support of the
39
the costs of the services even if they are government. Hence, tax laws may not be
significantly and substantially more than what the extended by implication beyond the clear import
member has "prepaid." Petitioner does not bear of their language, nor their operation enlarged so
the costs alone but distributes or spreads them as to embrace matters not specifically
out among a large group of persons bearing a provided.40
similar risk, that is, among all the other members
of the health care program. This is insurance.37 We are aware that, in Blue
Cross and Philamcare, the Court pronounced
We reconsider. We shall quote once again the that a health care agreement is in the nature of
pertinent portion of Section 185: non-life insurance, which is primarily a contract
of indemnity. However, those cases did not
Section 185. Stamp tax on fidelity bonds and involve the interpretation of a tax provision.
other insurance policies. On all policies of Instead, they dealt with the liability of a health
insurance or bonds or obligations of the service provider to a member under the terms of
nature of indemnity for loss, damage, or their health care agreement. Such contracts, as
liability made or renewed by any person, contracts of adhesion, are liberally interpreted in
association or company or corporation favor of the member and strictly against the
transacting the business of accident, fidelity, HMO. For this reason, we reconsider our ruling
employers liability, plate, glass, steam boiler, that Blue Cross and Philamcare are applicable
burglar, elevator, automatic sprinkler, or other here.
branch of insurance (except life, marine, inland,
and fire insurance), xxxx (Emphasis supplied) Section 2 (1) of the Insurance Code defines a
contract of insurance as an agreement whereby
In construing this provision, we should be guided one undertakes for a consideration to indemnify
by the principle that tax statutes are strictly another against loss, damage or liability arising
construed against the taxing authority.38 This is
from an unknown or contingent event. An It does not necessarily follow however, that a
insurance contract exists where the following contract containing all the four elements
elements concur: mentioned above would be an insurance
contract. The primary purpose of the parties in
1. The insured has an insurable interest; making the contract may negate the
existence of an insurance contract. For
2. The insured is subject to a risk of loss by
example, a law firm which enters into contracts
the happening of the designed peril;
with clients whereby in consideration of
3. The insurer assumes the risk; periodical payments, it promises to represent
such clients in all suits for or against them, is not
4. Such assumption of risk is part of a engaged in the insurance business. Its contracts
general scheme to distribute actual losses are simply for the purpose of rendering personal
among a large group of persons bearing a services. On the other hand, a contract by which
similar risk and a corporation, in consideration of a stipulated
amount, agrees at its own expense to defend a
5. In consideration of the insurers promise, physician against all suits for damages for
the insured pays a premium.41 malpractice is one of insurance, and the
corporation will be deemed as engaged in the
Do the agreements between petitioner and its
business of insurance. Unlike the lawyers
members possess all these elements? They do
retainer contract, the essential purpose of such a
not.
contract is not to render personal services, but to
First. In our jurisdiction, a commentator of our indemnify against loss and damage resulting
insurance laws has pointed out that, even if a from the defense of actions for
contract contains all the elements of an malpractice.42 (Emphasis supplied)
insurance contract, if its primary purpose is the Second. Not all the necessary elements of a
rendering of service, it is not a contract of
contract of insurance are present in petitioners
insurance:
agreements. To begin with, there is no loss,
damage or liability on the part of the member that
should be indemnified by petitioner as an HMO. anytime, e.g. laboratory services, x-ray, routine
Under the agreement, the member pays annual physical examination and consultations,
petitioner a predetermined consideration in vaccine administration as well as family planning
exchange for the hospital, medical and counseling, even in the absence of any peril, loss
professional services rendered by the or damage on his or her part.
petitioners physician or affiliated physician to
him. In case of availment by a member of the Fourth. In case of emergency, petitioner is
benefits under the agreement, petitioner does obliged to reimburse the member who receives
not reimburse or indemnify the member as the care from a non-participating physician or
latter does not pay any third party. Instead, it is hospital. However, this is only a very minor part
the petitioner who pays the participating of the list of services available. The assumption
physicians and other health care providers for of the expense by petitioner is not confined to the
the services rendered at pre-agreed rates. The happening of a contingency but includes
member does not make any such payment. incidents even in the absence of illness or injury.

In other words, there is nothing in petitioner's In Michigan Podiatric Medical Association v.

agreements that gives rise to a monetary liability National Foot Care Program, Inc.,43 although the
on the part of the member to any third party- health care contracts called for the defendant to
provider of medical services which might in turn partially reimburse a subscriber for treatment
necessitate indemnification from petitioner. The received from a non-designated doctor, this did
terms "indemnify" or "indemnity" presuppose that not make defendant an insurer. Citing Jordan,
a liability or claim has already been incurred. the Court determined that "the primary activity of
There is no indemnity precisely because the the defendant (was) the provision of podiatric
member merely avails of medical services to be services to subscribers in consideration of
paid or already paid in advance at a pre-agreed prepayment for such services."44 Since
price under the agreements. indemnity of the insured was not the focal point
of the agreement but the extension of medical
Third. According to the agreement, a member services to the member at an affordable cost, it
can take advantage of the bulk of the benefits
did not partake of the nature of a contract of services at reduced cost, not to distribute risk like
insurance. an insurer.

Fifth. Although risk is a primary element of an In sum, an examination of petitioners

insurance contract, it is not necessarily true that agreements with its members leads us to
risk alone is sufficient to establish it. Almost conclude that it is not an insurance contract
anyone who undertakes a contractual obligation within the context of our Insurance Code.
always bears a certain degree of financial risk.
Consequently, there is a need to distinguish There Was No Legislative Intent To Impose
prepaid service contracts (like those of petitioner) DST On Health Care Agreements Of HMOs
from the usual insurance contracts.
Furthermore, militating in convincing fashion
Indeed, petitioner, as an HMO, undertakes a against the imposition of DST on petitioners
business risk when it offers to provide health health care agreements under Section 185 of the
services: the risk that it might fail to earn a NIRC of 1997 is the provisions legislative
reasonable return on its investment. But it is not history. The text of Section 185 came into U.S.
the risk of the type peculiar only to insurance law as early as 1904 when HMOs and health
companies. Insurance risk, also known as care agreements were not even in existence in
actuarial risk, is the risk that the cost of insurance this jurisdiction. It was imposed under Section
claims might be higher than the premiums paid. 116, Article XI of Act No. 1189 (otherwise known
The amount of premium is calculated on the as the "Internal Revenue Law of 1904")46enacted
basis of assumptions made relative to the on July 2, 1904 and became effective on August
insured.45 1, 1904. Except for the rate of tax, Section 185 of
the NIRC of 1997 is a verbatim reproduction of
However, assuming that petitioners commitment the pertinent portion of Section 116, to wit:
to provide medical services to its members can
be construed as an acceptance of the risk that it ARTICLE XI
will shell out more than the prepaid fees, it still Stamp Taxes on Specified Objects
will not qualify as an insurance contract because
petitioners objective is to provide medical
Section 116. There shall be levied, collected, and Section 116, Article XI of Act No. 1189 was
paid for and in respect to the several bonds, completely reproduced as Section 30 (l), Article
debentures, or certificates of stock and III of Act No. 2339. The very detailed and
indebtedness, and other documents, exclusive enumeration of items subject to DST
instruments, matters, and things mentioned and was thus retained.
described in this section, or for or in respect to
the vellum, parchment, or paper upon which such On December 31, 1916, Section 30 (l), Article III
instrument, matters, or things or any of them of Act No. 2339 was again reproduced as
shall be written or printed by any person or Section 1604 (l), Article IV of Act No. 2657
persons who shall make, sign, or issue the same, (Administrative Code). Upon its amendment on
on and after January first, nineteen hundred and March 10, 1917, the pertinent DST provision
five, the several taxes following: became Section 1449 (l) of Act No. 2711,
otherwise known as the Administrative Code of
xxx xxx xxx 1917.

Third xxx (c) on all policies of insurance or Section 1449 (1) eventually became Sec. 222 of
bond or obligation of the nature of indemnity Commonwealth Act No. 466 (the NIRC of 1939),
for loss, damage, or liability made or renewed which codified all the internal revenue laws of the
by any person, association, company, or Philippines. In an amendment introduced by RA
corporation transacting the business of 40 on October 1, 1946, the DST rate was
accident, fidelity, employers liability, plate increased but the provision remained
glass, steam boiler, burglar, elevator, substantially the same.
automatic sprinkle, or other branch of
insurance (except life, marine, inland, and fire Thereafter, on June 3, 1977, the same provision
insurance) xxxx (Emphasis supplied) with the same DST rate was reproduced in PD
1158 (NIRC of 1977) as Section 234. Under PDs
On February 27, 1914, Act No. 2339 (the Internal 1457 and 1959, enacted on June 11, 1978 and
Revenue Law of 1914) was enacted revising and October 10, 1984 respectively, the DST rate was
consolidating the laws relating to internal again increased.1avvphi1
revenue. The aforecited pertinent portion of
Effective January 1, 1986, pursuant to Section 45 registered HMOs with a total enrollment of more
of PD 1994, Section 234 of the NIRC of 1977 was than 2 million.49
renumbered as Section 198. And under Section
23 of EO47 273 dated July 25, 1987, it was again We can clearly see from these two histories (of
renumbered and became Section 185. the DST on the one hand and HMOs on the
other) that when the law imposing the DST was
On December 23, 1993, under RA 7660, Section first passed, HMOs were yet unknown in the
185 was amended but, again, only with respect Philippines. However, when the various
to the rate of tax. amendments to the DST law were enacted, they
were already in existence in the Philippines and
Notwithstanding the comprehensive amendment the term had in fact already been defined by RA
of the NIRC of 1977 by RA 8424 (or the NIRC of 7875. If it had been the intent of the legislature to
1997), the subject legal provision was retained impose DST on health care agreements, it could
as the present Section 185. In 2004, have done so in clear and categorical terms. It
amendments to the DST provisions were had many opportunities to do so. But it did not.
introduced by RA 924348 but Section 185 was The fact that the NIRC contained no specific
untouched. provision on the DST liability of health care
agreements of HMOs at a time they were already
On the other hand, the concept of an HMO was
known as such, belies any legislative intent to
introduced in the Philippines with the formation
impose it on them. As a matter of fact,
of Bancom Health Care Corporation in 1974. The
petitioner was assessed its DST liability only
same pioneer HMO was later reorganized and
on January 27, 2000, after more than a decade
renamed Integrated Health Care Services, Inc.
in the business as an HMO.50
(or Intercare). However, there are those who
claim that Health Maintenance, Inc. is the HMO Considering that Section 185 did not change
industry pioneer, having set foot in the since 1904 (except for the rate of tax), it would
Philippines as early as 1965 and having been be safe to say that health care agreements were
formally incorporated in 1991. Afterwards, HMOs never, at any time, recognized as insurance
proliferated quickly and currently, there are 36
contracts or deemed engaged in the business of The power of taxation is sometimes called also
insurance within the context of the provision. the power to destroy. Therefore it should be
exercised with caution to minimize injury to the
The Power To Tax Is Not The Power To proprietary rights of a taxpayer. It must be
Destroy exercised fairly, equally and uniformly, lest the
tax collector kill the "hen that lays the golden
As a general rule, the power to tax is an incident
egg."58
of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that Legitimate enterprises enjoy the constitutional
security against its abuse is to be found only in protection not to be taxed out of existence.
the responsibility of the legislature which Incurring losses because of a tax imposition may
imposes the tax on the constituency who is to be an acceptable consequence but killing the
pay it.51 So potent indeed is the power that it was business of an entity is another matter and
once opined that "the power to tax involves the should not be allowed. It is counter-productive
power to destroy."52 and ultimately subversive of the nations thrust
towards a better economy which will ultimately
Petitioner claims that the assessed DST to date
benefit the majority of our people.59
which amounts to P376 million53 is way beyond
its net worth of P259 million.54 Respondent never Petitioners Tax Liability Was Extinguished
disputed these assertions. Given the realities on Under The Provisions Of RA 9840
the ground, imposing the DST on petitioner
would be highly oppressive. It is not the purpose Petitioner asserts that, regardless of the
of the government to throttle private business. arguments, the DST assessment for taxable
On the contrary, the government ought to years 1996 and 1997 became moot and
encourage private enterprise.55 Petitioner, just academic60 when it availed of the tax amnesty
like any concern organized for a lawful economic under RA 9480 on December 10, 2007. It
activity, has a right to maintain a legitimate paid P5,127,149.08 representing 5% of its net
business.56 As aptly held in Roxas, et al. v. CTA, worth as of the year ended December 31, 2005
et al.:57 and complied with all requirements of the tax
amnesty. Under Section 6(a) of RA 9480, it is
entitled to immunity from payment of taxes as Furthermore, we held in a recent case that DST
well as additions thereto, and the appurtenant is one of the taxes covered by the tax amnesty
civil, criminal or administrative penalties under program under RA 9480.63 There is no other
the 1997 NIRC, as amended, arising from the conclusion to draw than that petitioners liability
failure to pay any and all internal revenue taxes for DST for the taxable years 1996 and 1997 was
for taxable year 2005 and prior years.61 totally extinguished by its availment of the tax
amnesty under RA 9480.
Far from disagreeing with petitioner, respondent
manifested in its memorandum: Is The Court Bound By A Minute Resolution
In Another Case?
Section 6 of [RA 9840] provides that availment of
tax amnesty entitles a taxpayer to immunity from Petitioner raises another interesting issue in its
payment of the tax involved, including the civil, motion for reconsideration: whether this Court is
criminal, or administrative penalties provided bound by the ruling of the CA64 in CIR v.
under the 1997 [NIRC], for tax liabilities arising in Philippine National Bank65 that a health care
2005 and the preceding years. agreement of Philamcare Health Systems is not
an insurance contract for purposes of the DST.
In view of petitioners availment of the benefits of
[RA 9840], and without conceding the merits of In support of its argument, petitioner cites the
this case as discussed above, respondent August 29, 2001 minute resolution of this Court
concedes that such tax amnesty dismissing the appeal in Philippine National
extinguishes the tax liabilities of petitioner. Bank (G.R. No. 148680).66 Petitioner argues that
This admission, however, is not meant to the dismissal of G.R. No. 148680 by minute
preclude a revocation of the amnesty granted in resolution was a judgment on the merits; hence,
case it is found to have been granted under the Court should apply the CA ruling there that a
circumstances amounting to tax fraud under health care agreement is not an insurance
Section 10 of said amnesty law.62 (Emphasis contract.
supplied)
It is true that, although contained in a minute
resolution, our dismissal of the petition was a
disposition of the merits of the case. When we Besides, there are substantial, not simply formal,
dismissed the petition, we effectively affirmed the distinctions between a minute resolution and a
CA ruling being questioned. As a result, our decision. The constitutional requirement under
ruling in that case has already become the first paragraph of Section 14, Article VIII of
final.67 When a minute resolution denies or the Constitution that the facts and the law on
dismisses a petition for failure to comply with which the judgment is based must be expressed
formal and substantive requirements, the clearly and distinctly applies only to decisions,
challenged decision, together with its findings of not to minute resolutions. A minute resolution is
fact and legal conclusions, are deemed signed only by the clerk of court by authority of
sustained.68 But what is its effect on other cases? the justices, unlike a decision. It does not require
the certification of the Chief Justice. Moreover,
With respect to the same subject matter and the unlike decisions, minute resolutions are not
same issues concerning the same parties, it published in the Philippine Reports. Finally, the
constitutes res judicata.69 However, if other proviso of Section 4(3) of Article VIII speaks of a
parties or another subject matter (even with the decision.73Indeed, as a rule, this Court lays down
same parties and issues) is involved, the minute doctrines or principles of law which constitute
resolution is not binding precedent. Thus, in CIR binding precedent in a decision duly signed by
v. Baier-Nickel,70 the Court noted that a previous the members of the Court and certified by the
case, CIR v. Baier-Nickel71 involving the same Chief Justice.
parties and the same issues, was previously
disposed of by the Court thru a minute resolution Accordingly, since petitioner was not a party in
dated February 17, 2003 sustaining the ruling of G.R. No. 148680 and since petitioners liability
the CA. Nonetheless, the Court ruled that the for DST on its health care agreement was not the
previous case "ha(d) no bearing" on the latter subject matter of G.R. No. 148680, petitioner
case because the two cases involved different cannot successfully invoke the minute resolution
subject matters as they were concerned with the in that case (which is not even binding
taxable income of different taxable years.72 precedent) in its favor. Nonetheless, in view of
the reasons already discussed, this does not
detract in any way from the fact that petitioners achieving its constitutional mandate of providing
health care agreements are not subject to DST. its citizens with affordable health services.

A Final Note The rate of DST under Section 185 is equivalent

to 12.5% of the premium charged.74 Its
Taking into account that health care agreements imposition will elevate the cost of health care
are clearly not within the ambit of Section 185 of services. This will in turn necessitate an increase
the NIRC and there was never any legislative in the membership fees, resulting in either
intent to impose the same on HMOs like placing health services beyond the reach of the
petitioner, the same should not be arbitrarily and ordinary wage earner or driving the industry to
unjustly included in its coverage. the ground. At the end of the day, neither side
wins, considering the indispensability of the
It is a matter of common knowledge that there is
services offered by HMOs.
a great social need for adequate medical
services at a cost which the average wage WHEREFORE, the motion for reconsideration
earner can afford. HMOs arrange, organize and is GRANTED. The August 16, 2004 decision of
manage health care treatment in the furtherance the Court of Appeals in CA-G.R. SP
of the goal of providing a more efficient and No. 70479 is REVERSED and SET ASIDE. The
inexpensive health care system made possible 1996 and 1997 deficiency DST assessment
by quantity purchasing of services and against petitioner is
economies of scale. They offer advantages over hereby CANCELLED and SET
the pay-for-service system (wherein individuals ASIDE. Respondent is ordered to desist from
are charged a fee each time they receive medical collecting the said tax.
services), including the ability to control costs.
They protect their members from exposure to the No costs.
high cost of hospitalization and other medical
expenses brought about by a fluctuating SO ORDERED.
economy. Accordingly, they play an important
role in society as partners of the State in
 (1) No merit in the Motion for reconsideration.

In the decision of this Court of July 31, 1967,

sought to be reconsidered, its basis was
G.R. No. L-24693 October 23, 1967 categorically set forth in the following language:
ERMITA-MALATE HOTEL AND MOTEL As noted at the outset, the judgment must
OPERATORS ASSOCIATION, INC., HOTEL be reversed. A decent regard for
DEL MAR, INC. and GO HIU, petitioners- constitutional doctrines of a fundamental
appellees, character ought to have admonished the
vs. lower court against such a sweeping
THE HONORABLE, CITY MAYOR OF condemnation of the challenged ordinance.
MANILA, respondent-appellant. Its decision cannot be allowed to stand,
VICTOR ALABANZA, intervenor-appellee. consistently with what has hitherto been the
accepted standards of constitutional
J. M. Aruego, A. Tenchavez and L. U. Go for
adjudication, in both procedural and
petitioners-appellees.
substantive aspects.
Panganiban, Abad and Associates for
respondent-appellant. Primarily what calls for a reversal of such a
decision is the absence of any evidence to
RESOLUTION
offset the presumption of validity that
FERNANDO, J.: attaches to a challenged statute or
ordinance. As was expressed categorically
A Motion for the reconsideration of our decision by Justice Malcolm: "The presumption is all
of July 31, 1967 was filed by petitioners, followed in favor of validity. . . . The action of the
by a Motion for new trial. As the Motion for elected representatives of the people
reconsideration is clearly without merit, there is cannot be lightly set aside. The councilors
no occasion for this sought-for new trial. must, in the very nature of things, be familiar
Consequently, both motions are denied. with the necessities of their particular
municipality and with all the facts and
circumstances which surround the subject questions of fact may condition the
and necessitates action. The local constitutionality of legislation of this
legislative body, by enacting the ordinance, character, the presumption of
has in effect given notice that the constitutionality must prevail in the absence
regulations are essential to the well being of of some factual foundation of record for
the people. . .. The Judiciary should not overthrowing the statute." No such factual
lightly set aside legislative action when foundation being laid in the present case,
there is not a clear invasion of personal or the lower court deciding the matter on the
property rights under the guise of police pleadings and the stipulation of facts, the
regulation. presumption of validity must prevail and the
judgment against the ordinance set aside.
It admits of no doubt therefore that there
being a presumption of validity, the The O'Gorman principle1 fails to meet the
necessity for evidence to rebut it is approval of counsel of petitioners. They would
unavoidable, unless the statute or restrain unduly and unjustifiably its operation. In
ordinance is void on its face, which is not the language of the motion for reconsideration:
the case here. The principle has been "The U. S. Supreme Court was not laying down
nowhere better expressed than in the as a general rule in constitutional cases that
leading case of O'Gorman & Young v. there must be a factual foundation of record to
Hartford Fire Insurance Co., where the offset the presumption of constitutionality of any
American Supreme Court through Justice and every law."
Brandeis tersely and succinctly summed up
the matter thus: "The statute here To paraphrase Justice Brandeis, this
questioned deals with a subject clearly interpretation is without support in authority or
within the scope of the police power. We are reason and rests upon a misconception. It is to
asked to declare it void on the ground that betray an almost total lack of awareness of the
the specific method of regulation prescribed import and significance of the O'Gorman doctrine
is unreasonable and hence deprives the in American constitutional law. Authorities on the
plaintiff of due process of law. As underlying subject of proven competence and knowledge
flatly reject such a view. petitioners. For him, the O'Gorman opinion was
2 3
Dodd, Dowling, Freund Sutherland, De Wolfe a manifestation of the jurist's art at its best:
Howe, and Brown,4 and Kauper5 in their
standard casebooks quote the same excerpt If the jurists have the feelings of other men,
from O'Gorman v. Hartford Fire Ins. Co. Monday, the fifth of January nineteen
appearing in the opinion of this Court. Dodd hundred and thirty one, must have been a
entertained no doubt: "The accepted view is that day of consequence in the life of Mr. Justice
stated by Mr. Justice Brandeis in the O'Gorman Brandeis. On that day he handed down the
case."6 judgment of the United States Supreme
Court in the O'Gorman case. The cause
Frankfurter and Landis were equally explicit in was a simple suit in contract: the result
their appreciation of what the O'Gorman dictum depended upon the validity of a New Jersey
means. "As doctrine, there is nothing new in the statute regulating the commissions to be
avowal of a need for concreteness in passing paid by insurance companies to their
judgment upon the legislative judgment. But agents for securing business. The more
perhaps last term marks a more sedulous general question was the tolerance to be
attention to its observance. Certainly the accorded to legislative price-fixing under
procedure followed by the Court in O'Gorman & the Fourteenth Amendment. And, as the
Young v. Hartford Fire Ins. Co., if regularly fortunes of litigation broke, the issue came
observed, will affect not a little the fate of to be the intellectual procedure by which the
legislation. If insisted upon, it will compel the bar constitutionality of the acts which make up
to argue questions of legislative validity in the the public control of business are to be
perspective of the circumstances which gave rise determined. Upon that day the views of
to a particular statute."7 Brandeis became "the opinion of the court,"
and a new chapter in judicial history began
The late Professor Hamilton of the Yale Law to be written.
School, one of the most distinguished
constitutionalists, would have been appalled by xxx xxx xxx
the unorthodoxy of the view of counsel of
In form "the opinion of the court" is a very This is not to discount the possibility of a situation
simple and unpretentious document. It where the nullity of a statute, executive order, or
begins with a statement of the issue and a ordinance may not be readily apparent but the
history of the case, continues with a brief threat to constitutional rights, especially those
summary of the reasons for the statute and involving the freedom of the mind, present and
a statement that "the business of insurance ominous. That in such an event there should not
is so affected with a public interest that the be a rigid insistence on the requirement that
state may regulate the rates," and evidence be presented does not argue against
concludes with a declaration of the test for the force of the above excerpts on the weight to
validity. As "underlying questions of fact be accorded the O'Gorman doctrine in this case.
may condition the constitutionality of
legislation of this character," it follows that The prop here failing, is there anything else in the
"the presumption of constitutionality must Motion for reconsideration that calls for a
prevail in the absence of some factual modification of the decision of this Court? The
foundation of record for overthrowing the answer must be in the negative. It ought not to
statute." It did not appear "upon the face of have escaped petitioners that the opinion of the
the statute, or from any facts of which the Court after noting the lack of factual foundation
court must take judicial notice" that in New to offset the presumption of constitutionality went
Jersey "evils did not exist," for which the on to discuss the due process aspects to make
statute was "an appropriate remedy." clear that on its face, the Ordinance cannot be
Accordingly the court was compelled to considered void.
declare the statute valid; in fact it was left
Nor may petitioners assert with plausibility
with no alternative.
that on its face the ordinance is fatally
Yet the simple lines of a short opinion defective as being repugnant to the due
present a superb example of the jurist's art. process clause of the Constitution. The
. . .8 mantle of protection associated with the due
process guaranty does not cover
petitioners. This particular manifestation of
a police power measure being specifically prostitution, adultery and fornication in
aimed to safeguard public morals is Manila, traceable in great part to the
immune from such imputation of nullity existence of motels, which "provide a
resting purely on conjecture and necessary atmosphere for clandestine
unsupported by anything of substance. To entry, presence and exit" and thus become
hold otherwise would be to unduly restrict the "ideal haven for prostitutes and thrill-
and narrow the scope of police power which seekers." The challenged ordinance then
has been properly characterized as the proposes to check the clandestine
most essential, insistent and the least harboring of transients and guests of these
limitable of powers, extending as it does "to establishments by requiring these
all the great public needs." It would be, to transients and guests to fill up a registration
paraphrase another leading decision, to form, prepared for the purpose, in a lobby
destroy the very purpose of the state if it open to public view at all times, and by
could be deprived or allowed itself to be introducing several other amendatory
deprived of its competence to promote provisions calculated to shatter the privacy
public health, public morals, public safety that characterizes the registration of
and the general welfare. Negatively put, transients and guests." Moreover, the
police power is "that inherent and plenary increase in the license fees was intended to
power in the State which enables it to discourage "establishments of the kind from
prohibit all that is hurtful to the comfort, operating for purpose other than legal" and
safety, and welfare of society." at the same time, to increase "the income of
the city government." It would appear
There is no question but that the challenged therefore that the stipulation of facts, far
ordinance was precisely enacted to from sustaining any attack against the
minimize certain practices hurtful to public validity of the ordinance, argues eloquently
morals. The explanatory note of the then for it.
Councilor Herminio Astorga included as
annex to the stipulation of facts speaks of There is nothing in the Motion for reconsideration
the alarming increase in the rate of that in any wise affects adversely or impairs the
force of the above conclusion. The task of its previously high state under the impact of the
proving that the challenged Ordinance is void on Nebbia,11 West Coast Hotel Co.12 and Olson
its face is one attended with difficulty. decisions.13
Nonetheless, with the persistence worthy of a
better cause, petitioners would cite as fatal That leaves only the alleged grievance that there
infirmity the alleged invasion of the rights against was an unconstitutional invasion of property
unreasonable search and seizure, to liberty, and rights. It goes without saying that petitioners
to property. themselves cannot ignore that one could,
consistently with the fundamental law, be
As the unchallenged rule, to paraphrase Laurel, deprived of his property as long as due process
is that unless a person is injuriously affected in is observed. The decision makes clear that such
any of his constitutional rights by the operation of indeed was the case as far as this Ordinance
statute or ordinance,9 he has no standing, the was concerned. To that aspect, a considerable
invocation of petitioners as motel operators of portion of the opinion was devoted, citing a
their alleged right to being free from number of applicable decisions of this Court, all
unreasonable search and seizure need not be tending to demonstrate that there was no due
taken seriously. Nor does their claim of the process infraction. The Motion for
alleged infringement of their liberty deserve any reconsideration is conspicuously barren of any
further thought, its implausibility being self- attempt to show that under our previous
evident, except perhaps as to the liberty to decisions referred to, the challenged Ordinance
contract, which is part and parcel of their right to could be successfully assailed. It would follow
the property. Unfortunately for them, in this then that this reiteration of an argument,
jurisdiction the liberty to contract, except in previously shown to be far from persuasive, is
the Pomar10 case as noted in the decision, has deserving of a similar fate.
never stood in the way of the enactment of police
power measures when called for by That is all there is to the Motion for
circumstances such as undoubtedly exist in this reconsideration. That and what Justice Cardozo
case. The same is true in the United States, aptly referred to as reference to "grotesque or
where such a concept has definitely fallen from fanciful situations," which if they would arise
could then be appropriately dealt with. As the The alleged denial of equal protection was
famed jurist aptly noted: "That they are predicated on the greater advantages that the
conceivable though improbable ought not to motels in the suburbs of Manila would enjoy as
govern our construction."14 That is not the way against those within the city limits. On its face,
then to impugn the validity of an ordinance. such argument is clearly unfounded. If the
Neither could it be rightfully looked upon as legislative power of the Municipal Board of the
laying a foundation for setting aside a decision. City of Manila were not limited to its boundaries,
The Motion for reconsideration, to repeat, is if it could apply to the suburban area, then
palpably lacking in merit. perhaps plausibility could be imparted to such a
claim. Since, as is undeniable, the challenged
(1) No occasion for new trial. Ordinance applies to all the motels in Manila, an
assertion that there is denial of equal protection
Subsequently, a supplemental Motion for new
would, to put it at its mildest, be extremely far-
trial dated September 25, 1967, was filed the
fetched.
same day. As earlier pointed out, with the Motion
for reconsideration having been shown to be Nor does the invocation of the laissez
devoid of merit, the supplemental Motion for new faire concept as bar against the enactment of
trial should likewise be denied. In the main, what regulatory measures, which undoubtedly would
was so unsuccessfully put forth by counsel for result in the diminution of income and the loss of
petitioners was adhered to. Additional counsel business, occasion any misgiving as to the
would bring in new points, namely, the alleged conformity of the decision arrived at by this Court
denial of equal protection and the repugnancy to with controlling constitutional law principles. Did
"the laissez faire principle underlying our not petitioners take note of the view announced
economic system, as it would substantially by Justice Laurel quoted in the decision to the
reduce return on the investment." Neither effect that the policy "of laissez faire has to some
suffices to justify any modification of the decision, extent given way to the assumption by the
much less its reconsideration. A new trial would government of the right of intervention even in
therefore be an exercise in futility. contractual relations affected with public
interest." The decision likewise cited this jurist,
speaking for the Court in Calalang v. conclusion. The United States Supreme Court in
Williams:15 "Public welfare, then, lies at the the leading case of West Virginia State Board of
bottom of the enactment of said law, and the Education v. Barnette,17 decided in 1943, was
state in order to promote the general welfare may equally explicit, saying "the laissez-faire concept
interfere with personal liberty, with property, and or principle of non-interference has withered at
with business and occupations. Perhaps and least as to economic affairs, and social
property may be subjected to all kinds of advancements are increasingly sought through
restraints and burdens, in order to secure, the closer integration of society and through
general comfort, health, and prosperity of the expanded and strengthened governmental
state. . . . To this fundamental aim of our controls." Two names of great repute, Freund
Government the rights of the individual are and Learned Hand, were cited by petitioners.
subordinated." That was in 1940. Then in 1955, Neither if properly understood, could help their
came Co Kiam v. City of Manila,16 where Justice cause at all. According to Freund: "In short, when
Reyes, A., for a unanimous Court categorically freedom of the mind is imperiled by law, it is
declared: "And surely, the mere fact that some freedom that commands a momentum of
individuals in the community may be deprived of respect, when property is imperiled, it is the
their present business or a particular mode of lawmakers' judgment that commands respect.
earning a living can not prevent the exercise of This dual standard may not precisely reverse the
the police power. As was said in a case, persons presumption of constitutionality in civil liberties
licensed to pursue occupations which may in the cases, but obviously it does set up a hierarchy of
public need and interest be affected by the values within the due process clause."18 The
exercise of the police power embark in those illustrious Learned Hand writing on Chief Justice
occupations subject to the disadvantages which Stone's concept of the judicial function had
may result from the legal exercise of that power. occasion to note the "discredited attitude" of what
(City of New Orleans v. Stafford, 27 L. Ann. he referred to "as the old apostles of the
417)." institution of property. . . ."19

Nor does the reference by new counsel to What then is left? Clearly nothing to call for the
American state court decisions call for a different reconsideration of our decision of July 31, 1967.
Nor is there the least justification for a new trial
and reception of evidence.

WHEREFORE, the Motion for reconsideration of

petitioners of September 16, 1967 and
supplemental Motion for new trial of September
25, 1967, are denied.

Concepcion, C.J., Reyes, J.B.L., Dizon,

Makalintal, Bengzon, J.P., Zaldivar, Sanchez,
Castro and Angeles, JJ., concur.
 merely a tax deduction from the gross income or
gross sale of the establishment concerned. A tax
credit is used by a private establishment only
after the tax has been computed; a tax
COMMISSIONER OF INTERNAL G.R. No.
deduction, before the tax is computed. RA 7432
159647
unconditionally grants a tax credit to all covered
REVENUE,
entities. Thus, the provisions of the revenue
Petitioner, Present:
regulation that withdraw or modify such grant are
Panganiban, J.,
void. Basic is the rule that administrative
Chairman,
regulations cannot amend or revoke the law.
Sandoval-Gutierrez,
- versus - Corona,
The Case
Carpio Morales, and
Garcia, JJ
Before us is a Petition for Review[1] under Rule
CENTRAL LUZON DRUG Promulgated:
45 of the Rules of Court, seeking to set aside the
CORPORATION,
August 29, 2002 Decision[2] and the August 11,
Respondent. April 15, 2005
2003 Resolution[3] of the Court of Appeals (CA)
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
in CA-GR SP No. 67439. The assailed Decision
-- -- -- -- -- -- x
reads as follows:

WHEREFORE, premises considered, the

DECISION
Resolution appealed from is AFFIRMED in
toto. No costs.[4]
PANGANIBAN, J.:
The assailed Resolution denied petitioners
Motion for Reconsideration.
T he 20 percent discount required by the law to
be given to senior citizens is a tax credit, not
 amount of P904,769.00 allegedly arising from
the 20% sales discount granted by respondent to
The Facts qualified senior citizens in compliance with [R.A.]
7432. Unable to obtain affirmative response from
The CA narrated the antecedent facts as follows: petitioner, respondent elevated its claim to the
Court of Tax Appeals [(CTA or Tax Court)] via a
Respondent is a domestic corporation primarily Petition for Review.
engaged in retailing of medicines and other
pharmaceutical products. In 1996, it operated six On February 12, 2001, the Tax Court rendered
(6) drugstores under the business name and a Decision[5] dismissing respondents Petition for
style Mercury Drug. lack of merit. In said decision, the [CTA] justified
its ruling with the following ratiocination:
From January to December 1996, respondent
granted twenty (20%) percent sales discount to x x x, if no tax has been paid to the government,
qualified senior citizens on their purchases of erroneously or illegally, or if no amount is due
medicines pursuant to Republic Act No. [R.A.] and collectible from the taxpayer, tax refund or
7432 and its Implementing Rules and tax credit is unavailing. Moreover, whether the
Regulations. For the said period, the amount recovery of the tax is made by means of a claim
allegedly representing the 20% sales discount for refund or tax credit, before recovery is
granted by respondent to qualified senior citizens allowed[,] it must be first established that there
totaled P904,769.00. was an actual collection and receipt by the
government of the tax sought to be recovered. x
On April 15, 1997, respondent filed its Annual x x.
Income Tax Return for taxable year 1996 xxxxxxxxx
declaring therein that it incurred net losses from
its operations. Prescinding from the above, it could logically be
deduced that tax credit is premised on the
On January 16, 1998, respondent filed with existence of tax liability on the part of taxpayer.
petitioner a claim for tax refund/credit in the
In other words, if there is no tax liability, tax credit excess estimated corporate quarterly income tax
is not available. paid, or that of excess input tax paid by a VAT-
registered person, or that of excise tax paid on
Respondent lodged a Motion for goods locally produced or manufactured but
Reconsideration. The [CTA], in its assailed actually exported. The standards and mechanics
resolution,[6] granted respondents motion for for the grant of a refund or credit under these
reconsideration and ordered herein petitioner to situations are different from that under Sec. 229.
issue a Tax Credit Certificate in favor of Sec. 4[.a)] of R.A. 7432, is yet another instance
respondent citing the decision of the then Special of a tax credit and it does not in any way refer to
Fourth Division of [the CA] in CA G.R. SP No. illegally collected or erroneously paid taxes, x x
60057 entitled Central [Luzon] Drug Corporation x.[7]
vs. Commissioner of Internal
Revenue promulgated on May 31, 2001, to wit:

However, Sec. 229 clearly does not apply in the

instant case because the tax sought to be Ruling of the Court of Appeals
refunded or credited by petitioner was not
erroneously paid or illegally collected. We take
exception to the CTAs sweeping but unfounded The CA affirmed in toto the Resolution of the
statement that both tax refund and tax credit are Court of Tax Appeals (CTA) ordering petitioner
modes of recovering taxes which are either to issue a tax credit certificate in favor of
erroneously or illegally paid to the government. respondent in the reduced amount
Tax refunds or credits do not exclusively pertain of P903,038.39. It reasoned that Republic Act
to illegally collected or erroneously paid taxes as No. (RA) 7432 required neither a tax liability nor
they may be other circumstances where a refund a payment of taxes by private establishments
is warranted. The tax refund provided under prior to the availment of a tax credit. Moreover,
Section 229 deals exclusively with illegally such credit is not tantamount to an unintended
collected or erroneously paid taxes but there are benefit from the law, but rather a just
other possible situations, such as the refund of
compensation for the taking of private property
for public use. Sole Issue:
Claim of 20 Percent Sales Discount
Hence this Petition.[8] as Tax Credit Despite Net Loss

The Issues
Section 4a) of RA 7432[10] grants to senior
citizens the privilege of obtaining a 20 percent
Petitioner raises the following issues for our discount on their purchase of medicine from any
consideration: private establishment in the country.[11] The latter
may then claim the cost of the discount as a tax
Whether the Court of Appeals erred in holding credit.[12] But can such credit be claimed, even
that respondent may claim the 20% sales though an establishment operates at a loss?
discount as a tax credit instead of as a deduction
from gross income or gross sales. We answer in the affirmative.

Whether the Court of Appeals erred in holding Tax Credit versus

that respondent is entitled to a refund.[9] Tax Deduction

Although the term is not specifically defined in

These two issues may be summed up in only our Tax Code,[13] tax credit generally refers to an
one: whether respondent, despite incurring a net amount that is subtracted directly from ones total
loss, may still claim the 20 percent sales discount tax liability.[14]It is an allowance against the tax
as a tax credit. itself[15] or a deduction from what is owed[16] by a
taxpayer to the government. Examples of tax
The Courts Ruling credits are withheld taxes, payments of
estimated tax, and investment tax credits.[17]
The Petition is not meritorious.
Tax credit should be understood in relation to Without that liability, any tax creditapplication will
other tax concepts. One of these is tax be useless. There will be no reason for deducting
deduction -- defined as a subtraction from the latter when there is, to begin with, no
income for tax purposes,[18] or an amount that is existing obligation to the government. However,
allowed by law to reduce income prior to [the] as will be presented shortly, the existence of a
application of the tax rate to compute the amount tax credit or its grant by law is not the same as
of tax which is due.[19] An example of a tax the availment or use of such credit. While the
deduction is any of the allowable deductions grant is mandatory, the availment or use is not.
enumerated in Section 34[20] of the Tax Code.
If a net loss is reported by, and no other taxes
A tax credit differs from a tax deduction. On the are currently due from, a business
one hand, a tax credit reduces the tax due, establishment, there will obviously be no tax
including -- whenever applicable -- the income liability against which any tax credit can be
tax that is determined after applying the applied.[24] For the establishment to choose the
corresponding tax rates to taxable immediate availment of a tax credit will be
[21]
income. A tax deduction, on the other, premature and impracticable. Nevertheless, the
reduces the income that is subject to tax[22] in irrefutable fact remains that, under RA 7432,
order to arrive at taxable income.[23] To think of Congress has granted without conditions a tax
the former as the latter is to avoid, if not entirely credit benefit to all covered establishments.
confuse, the issue. A tax credit is used
only after the tax has been computed; a tax Although this tax credit benefit is available, it
deduction, before. need not be used by losing ventures, since there
is no tax liability that calls for its application.
Tax Liability Required Neither can it be reduced to nil by the quick yet
for Tax Credit callow stroke of an administrative pen, simply
because no reduction of taxes can instantly be
Since a tax credit is used to reduce directly the effected. By its nature, the tax creditmay still be
tax that is due, there ought to be a tax deducted from a future, not a present, tax
liability before the tax credit can be applied. liability, without which it does not have any use.
In the meantime, it need not move. But it portion of any input tax not directly attributable to
breathes. either activity. This input tax may either be the
VAT on the purchase or importation of goods or
Prior Tax Payments Not services that is merely due from -- not
Required for Tax Credit necessarily paid by -- such VAT-registered
person in the course of trade or business; or the
While a tax liability is essential to the availment transitional input tax determined in accordance
or use of any tax credit, prior tax payments are with Section 111(A). The latter type may in fact
not. On the contrary, for the existence or be an amount equivalent to only eight percent of
grant solely of such credit, neither a tax liability the value of a VAT-registered persons beginning
nor a prior tax payment is needed. The Tax Code inventory of goods, materials and supplies, when
is in fact replete with provisions granting or such amount -- as computed -- is higher than the
allowing tax credits, even though no taxes have actual VAT paid on the said items.[25] Clearly
been previously paid. from this provision, the tax credit refers to an
input tax that is either due only or given a value
For example, in computing the estate tax due, by mere comparison with the VAT actually paid -
Section 86(E) allows a tax credit -- subject to - then later prorated. No tax is actually paid prior
certain limitations -- for estate taxes paid to a to the availment of such credit.
foreign country. Also found in Section 101(C) is
a similar provision for donors taxes -- again when In Section 111(B), a one and a half percent
paid to a foreign country -- in computing for input tax credit that is merely presumptive is
the donors tax due. The tax credits in both allowed. For the purchase of primary agricultural
instances allude to the prior payment of taxes, products used as inputs -- either in the
even if not made to our government. processing of sardines, mackerel and milk, or in
the manufacture of refined sugar and cooking oil
Under Section 110, a VAT (Value-Added Tax)- -- and for the contract price of public work
registered person engaging in transactions -- contracts entered into with the government,
whether or not subject to the VAT -- is also again, no prior tax payments are needed for the
allowed a tax credit that includes a ratable use of the tax credit.
 condition that a foreign tax credit will be given by
More important, a VAT-registered person whose the domiciliary country in an amount equivalent
sales are zero-rated or effectively zero-rated to taxes that are merely deemed
may, under Section 112(A), apply for the paid.[27] Although true, this provision actually
issuance of a tax creditcertificate for the amount refers to the tax credit as a condition only for the
of creditable input taxes merely due -- again not imposition of a lower tax rate, not as
necessarily paid to -- the government and a deduction from the corresponding tax liability.
attributable to such sales, to the extent that the Besides, it is not our government but the
input taxes have not been applied against output domiciliary country that credits against the
taxes.[26] Where a taxpayer income tax payable to the latter by the foreign
is engaged in zero-rated or effectively zero-rated corporation, the tax to be foregone or spared.[28]
sales and also in taxable or exempt sales, the
amount of creditable input taxes due that are not In contrast, Section 34(C)(3), in relation to
directly and entirely attributable to any one of Section 34(C)(7)(b), categorically allows as
these transactions shall be proportionately credits, against the income tax imposable under
allocated on the basis of the volume of sales. Title II, the amount of income taxes merely
Indeed, in availing of such tax credit for VAT incurred -- not necessarily paid -- by a domestic
purposes, this provision -- as well as the one corporation during a taxable year in any foreign
earlier mentioned -- shows that the prior payment country. Moreover, Section 34(C)(5) provides
of taxes is not a requisite. that for such taxes incurred but not paid, a tax
credit may be allowed, subject to the condition
It may be argued that Section 28(B)(5)(b) of the precedent that the taxpayer shall simply give a
Tax Code is another illustration of a tax bond with sureties satisfactory to and approved
credit allowed, even though no prior tax by petitioner, in such sum as may be required;
payments are not required. Specifically, in this and further conditioned upon payment by the
provision, the imposition of a final withholding tax taxpayer of any tax found due, upon petitioners
rate on cash and/or property dividends received redetermination of it.
by a nonresident foreign corporation from a
domestic corporation is subjected to the
In addition to the above-cited provisions in the From all the foregoing instances, it is evident that
Tax Code, there are also tax treaties and special prior tax payments are not indispensable to the
laws that grant or allow tax credits, even though availment of a tax credit. Thus, the CA correctly
no prior tax payments have been made. held that the availment under RA 7432 did not
require prior tax payments by private
Under the treaties in which the tax credit method establishments concerned.[31] However, we do
is used as a relief to avoid double not agree with its finding[32] that the carry-over
taxation, income that is taxed in the state of of tax credits under the said special law to
source is also taxable in the state of residence, succeeding taxable periods, and even their
but the tax paid in the former is merely allowed application against internal revenue taxes, did
as a credit against the tax levied in the not necessitate the existence of a tax liability.
latter.[29] Apparently, payment is made to
the state of source, not the state of residence. No The examples above show that a tax liability is
tax, therefore, has been previously paid to the certainly important in the availment or use, not
latter. the existence or grant, of a tax credit. Regarding
this matter, a private establishment reporting
Under special laws that particularly affect a net loss in its financial statements is no
businesses, there can also be tax different from another that presents a net
credit incentives. To illustrate, the incentives income. Both are entitled to the tax
provided for in Article 48 of Presidential Decree credit provided for under RA 7432, since the law
No. (PD) 1789, as amended by Batas Pambansa itself accords that unconditional benefit.
Blg. (BP) 391, include tax credits equivalent to However, for the losing establishment to
either five percent of the net value earned, or five immediately apply such credit, where no tax is
or ten percent of the net local content of due, will be an improvident usance.
exports.[30] In order to avail of such credits under
the said law and still achieve its objectives, no Sections 2.i and 4 of Revenue
prior tax payments are necessary. Regulations No. 2-94 Erroneous
RA 7432 specifically allows private there are many kinds of discount, the most
establishments to claim as tax credit the amount common of which is that affecting the income
of discounts they grant.[33] In turn, the statement[39] or financial report upon which
Implementing Rules and Regulations, issued the income tax is based.
pursuant thereto, provide the procedures for its
availment.[34] To deny such credit, despite the Business Discounts
plain mandate of the law and the regulations Deducted from Gross Sales
carrying out that mandate, is indefensible.
A cash discount, for example, is one granted by
First, the definition given by petitioner is business establishments to credit customers for
erroneous. It refers to tax credit as the amount their prompt payment.[40] It is a reduction in price
representing the 20 percent discount that shall offered to the purchaser if payment is made
be deducted by the said establishments from within a shorter period of time than the maximum
their gross income for income tax purposes and time specified.[41] Also referred to as a sales
from their gross sales for value-added tax or discount on the part of the seller and a purchase
other percentage tax purposes.[35] In ordinary discount on the part of the buyer, it may be
business language, the tax credit represents the expressed in such
[42]
amount of such discount. However, the manner terms as 5/10, n/30.
by which the discount shall be credited against
taxes has not been clarified by the revenue A quantity discount, however, is a reduction in
regulations. price allowed for purchases made in large
quantities, justified by savings in packaging,
By ordinary acceptation, a discount is an shipping, and handling.[43] It is also called
abatement or reduction made from the gross a volume or bulk discount.[44]
amount or value of anything.[36] To be more
precise, it is in business parlance a deduction or A percentage reduction from the list price x x x
lowering of an amount of money;[37] or a allowed by manufacturers to wholesalers and by
reduction from the full amount or value of wholesalers to retailers[45] is known as a trade
something, especially a price.[38] In business discount. No entry for it need be made in the
manual or computerized books of accounts, of accounts and reflected in the financial
since the purchase or sale is already valued at statements at the gross amounts of the
the net price actually charged the buyer.[46] The invoices.[52] This manner of recording credit sales
purpose for the discount is to encourage trading -- known as the gross method -- is most widely
or increase sales, and the prices at which the used, because it is simple, more convenient to
purchased goods may be resold are also apply than the net method, and produces no
suggested.[47] Even a chain discount -- a series material errors over time.[53]
of discounts from one list price -- is recorded at
net.[48] However, under the net method used in
recording trade, chain or functional discounts,
Finally, akin to a trade discount is a functional only the net amounts of the invoices -- after the
discount. It is a suppliers price discount given to discounts have been deducted -- are recorded in
a purchaser based on the [latters] role in the the books of accounts[54] and reflected in the
[formers] distribution system.[49] This role usually financial statements. A separate line item cannot
involves warehousing or advertising. be shown,[55] because the transactions
themselves involving both accounts
Based on this discussion, we find that the nature receivable and sales have already been entered
of a sales discount is peculiar. Applying into, net of the said discounts.
generally accepted accounting principles
(GAAP) in the country, this type of discount is The term sales discounts is not expressly
reflected in the income statement[50] as a line defined in the Tax Code, but one provision
item deducted -- along with returns, allowances, adverts to amounts whose sum -- along
rebates and other similar expenses -- from gross with sales returns, allowances and cost of goods
sales to arrive at net sales.[51] This type of sold[56] -- is deducted from gross sales to come
presentation is resorted to, because up with the gross
[57]
the accounts receivable and sales figures that income, profit or margin derived from
[58]
arise from sales discounts, -- as well as business. In another provision therein, sales
from quantity, volume or bulk discounts -- are discounts that are granted and indicated in the
recorded in the manual and computerized books invoices at the time of sale -- and that do not
depend upon the happening of any future event What RA 7432 grants the senior citizen is a mere
-- may be excluded from the gross sales within discount privilege, not a sales discount or any of
the same quarter they were given.[59] While the above discounts in particular. Prompt
determinative only of the VAT, the latter provision payment is not the reason for (although a
also appears as a suitable reference point for necessary consequence of) such grant. To be
income tax purposes already embraced in the sure, the privilege enjoyed by the senior citizen
former. After all, these two provisions affirm must be equivalent to the tax credit benefit
that sales discounts are amounts that are always enjoyed by the private establishment granting the
deductible from gross sales. discount. Yet, under the revenue regulations
promulgated by our tax authorities, this benefit
Reason for the Senior Citizen Discount: has been erroneously likened and confined to
The Law, Not Prompt Payment a sales discount.

A distinguishing feature of the implementing To a senior citizen, the monetary effect of the
rules of RA 7432 is the private establishments privilege may be the same as that resulting from
outright deduction of the discount from the a sales discount. However, to a private
invoice price of the medicine sold to the senior establishment, the effect is different from a
citizen.[60] It is, therefore, expected that for each simple reduction in price that results from such
retail sale made under this law, the discount discount. In other words, the tax credit benefit is
period lasts no more than a day, because such not the same as a sales discount. To repeat from
discount is given -- and the net amount thereof our earlier discourse, this benefit cannot and
collected -- immediately upon perfection of the should not be treated as a tax deduction.
sale.[61] Although prompt payment is made for an
arms-length transaction by the senior citizen, the To stress, the effect of a sales discount on
real and compelling reason for the private the income statement and income tax return of
establishment giving the discount is that the law an establishment covered by RA 7432 is different
itself makes it mandatory. from that resulting from the availment or use of
its tax credit benefit. While the former is a
deduction before, the latter is a deduction after,
the income tax is computed. As mentioned granted by law -- does not define it at all and
earlier, a discount is not necessarily a sales serves no useful purpose. The definition must,
discount, and a tax credit for a simple discount therefore, be stricken down.
privilege should not be automatically treated like
a sales discount. Ubi lex non distinguit, nec nos Laws Not Amended
distinguere debemus. Where the law does not by Regulations
distinguish, we ought not to distinguish.
Second, the law cannot be amended by a mere
Sections 2.i and 4 of Revenue Regulations No. regulation. In fact, a regulation that operates to
(RR) 2-94 define tax credit as the 20 percent create a rule out of harmony with
discount deductible from gross the statute is a mere nullity;[62] it cannot prevail.
income for income tax purposes, or from gross
sales for VAT or other percentage tax purposes. It is a cardinal rule that courts will and should
In effect, the tax credit benefit under RA 7432 is respect the contemporaneous construction
related to a sales discount. This contrived placed upon a statute by the executive officers
definition is improper, considering that the latter whose duty it is to enforce it x x x.[63] In the
has to be deducted from gross sales in order to scheme of judicial tax administration, the need
compute the gross income in the income for certainty and predictability in the
statement and cannot be deducted again, even implementation of tax laws is crucial.[64] Our tax
for purposes of computing the income tax. authorities fill in the details that Congress may
not have the opportunity or competence to
When the law says that the cost of the discount provide.[65] The regulations these authorities
may be claimed as a tax credit, it means that the issue are relied upon by taxpayers, who are
amount -- when claimed -- shall be treated as a certain that these will be followed by the
reduction from any tax liability, plain and simple. courts.[66] Courts, however, will not uphold these
The option to avail of the tax credit benefit authorities interpretations when clearly absurd,
depends upon the existence of a tax liability, but erroneous or improper.
to limit the benefit to a sales discount -- which is
not even identical to the discount privilege that is
In the present case, the tax authorities have sit back and allow an important facet of tax
given the term tax credit in Sections 2.i and 4 of collection to be at the sole control and discretion
RR 2-94 a meaning utterly in contrast to what RA of the taxpayer.[73] For the tax authorities to
7432 provides. Their interpretation has muddled compel respondent to deduct the 20 percent
up the intent of Congress in granting a mere discount from either its gross income or its gross
discount privilege, not a sales discount. The sales[74] is, therefore, not only to make an
administrative agency issuing these regulations imposition without basis in law, but also to
may not enlarge, alter or restrict the provisions of blatantly contravene the law itself.
the law it administers; it cannot engraft additional
requirements not contemplated by the What Section 4.a of RA 7432 means is that
legislature.[67] the tax credit benefit is merely permissive, not
imperative. Respondent is given two options --
In case of conflict, the law must prevail.[68] A either to claim or not to claim the cost of the
regulation adopted pursuant to law is discounts as a tax credit. In fact, it may even
law.[69] Conversely, a regulation or any portion ignore the credit and simply consider the gesture
thereof not adopted pursuant to law is no law and as an act of beneficence, an expression of its
has neither the force nor the effect of law.[70] social conscience.

Availment of Tax
Credit Voluntary Granting that there is a tax liability and
respondent claims such cost as a tax credit, then
Third, the word may in the text of the the tax credit can easily be applied. If there is
statute[71] implies that the none, the credit cannot be used and will just have
availability of the tax credit benefit is neither to be carried over and revalidated[75] accordingly.
unrestricted nor mandatory.[72] There is no If, however, the business continues to operate at
absolute right conferred upon respondent, or any a loss and no other taxes are due, thus
similar taxpayer, to avail itself of the tax compelling it to close shop, the credit can never
credit remedy whenever it chooses; neither does be applied and will be lost altogether.
it impose a duty on the part of the government to
In other words, it is the existence or the lack of a
tax liability that determines whether the cost of The concept of public use is no longer confined
the discounts can be used as a tax credit. RA to the traditional notion of use by the public, but
7432 does not give respondent the unfettered held synonymous with public interest, public
right to avail itself of the credit whenever it benefit, public welfare, and public
[78]
pleases. Neither does it allow our tax convenience. The discount privilege to which
administrators to expand or contract the our senior citizens are entitled is actually a
legislative mandate. The plain meaning rule benefit enjoyed by the general public to which
or verba legis in statutory construction is thus these citizens belong. The discounts given would
applicable x x x. Where the words of a statute are have entered the coffers and formed part of
clear, plain and free from ambiguity, it must be the gross sales of the private establishments
given its literal meaning and applied without concerned, were it not for RA 7432. The
attempted interpretation.[76] permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of
private property for public use or benefit.

Tax Credit Benefit As a result of the 20 percent discount imposed

Deemed Just Compensation by RA 7432, respondent becomes entitled to
a just compensation. This term refers not only to
Fourth, Sections 2.i and 4 of RR 2-94 deny the the issuance of a tax credit certificate indicating
exercise by the State of its power of eminent the correct amount of the discounts given, but
domain. Be it stressed that the privilege enjoyed also to the promptness in its release. Equivalent
by senior citizens does not come directly from to the payment of property taken by the State,
the State, but rather from the private such issuance -- when not done within
establishments concerned. Accordingly, the tax a reasonable time from the grant of the discounts
credit benefit granted to these establishments -- cannot be considered as just compensation. In
can be deemed as their just compensation for effect, respondent is made to suffer the
private property taken by the State for public consequences of being immediately deprived of
use.[77] its revenues while awaiting actual receipt,
through the certificate, of the equivalent amount To put it differently, a private establishment that
it needs to cope with the reduction in its merely breaks even[85] -- without the discounts
revenues.[79] yet -- will surely start to incur losses because of
such discounts. The same effect is expected if its
Besides, the taxation power can also be used as mark-up is less than 20 percent, and if all its
an implement for the exercise of the power of sales come from retail purchases by senior
eminent domain.[80] Tax measures are but citizens. Aside from the observation we have
enforced contributions exacted on pain of penal already raised earlier, it will also be grossly unfair
sanctions[81] and clearly imposed for a public to an establishment if the discounts will be
purpose.[82] In recent years, the power to tax has treated merely as deductions from either
indeed become a most effective tool to realize its gross income or its gross sales. Operating at
social justice, public welfare, and the equitable a loss through no fault of its own, it will realize
distribution of wealth.[83] that the tax credit limitation under RR 2-94 is
inutile, if not improper. Worse, profit-generating
While it is a declared commitment under Section businesses will be put in a better position if they
1 of RA 7432, social justice cannot be invoked to avail themselves of tax credits denied those that
trample on the rights of property owners who are losing, because no taxes are due from the
under our Constitution and laws are also entitled latter.
to protection. The social justice consecrated in
our [C]onstitution [is] not intended to take away Grant of Tax Credit
rights from a person and give them to another Intended by the Legislature
who is not entitled thereto.[84] For this reason, a
just compensation for income that is taken away Fifth, RA 7432 itself seeks to adopt measures
from respondent becomes necessary. It is in whereby senior citizens are assisted by the
the tax credit that our legislators find support to community as a whole and to establish a
realize social justice, and no administrative body program beneficial to them.[86]These objectives
can alter that fact. are consonant with the constitutional policy of
making health x x x services available to all the
people at affordable cost[87] and of giving priority
for the needs of the x x x elderly.[88] Sections 2.i MS. ADVENTO. Kaya lang po sir, and mga
and 4 of RR 2-94, however, contradict these discounts po nila affecting government and
constitutional policies and statutory objectives. public institutions, so, puwede na po nating hindi
isama yung mga less deductions ng taxable
Furthermore, Congress has allowed all private income.
establishments a simple tax credit, not a
deduction. In fact, no cash outlay is required from THE CHAIRMAN. (Rep. Unico). Puwede na.
the government for the availment or use of such Yung about the private hospitals. Yung isiningit
credit. The deliberations on February 5, 1992 of natin?
the Bicameral Conference Committee Meeting
on Social Justice, which finalized RA 7432, MS. ADVENTO. Singit na po ba yung 15% on
disclose the true intent of our legislators to treat credit. (inaudible/did not use the microphone).
the sales discounts as a tax credit, rather than as
a deduction from gross income. We quote from SEN. ANGARA. Hindi pa, hindi pa.
those deliberations as follows:
THE CHAIRMAN. (Rep. Unico) Ah, 'di pa ba
"THE CHAIRMAN (Rep. Unico). By the way, naisama natin?
before that ano, about deductions from taxable
income. I think we incorporated there a provision SEN. ANGARA. Oo. You want to insert that?
na - on the responsibility of the private hospitals
and drugstores, hindi ba? THE CHAIRMAN (Rep. Unico). Yung ang
proposal ni Senator Shahani, e.
SEN. ANGARA. Oo.
SEN. ANGARA. In the case of private hospitals
THE CHAIRMAN. (Rep. Unico), So, I think we they got the grant of 15% discount, provided that,
have to put in also a provision here about the the private hospitals can claim the expense as a
deductions from taxable income of that private tax credit.
hospitals, di ba ganon 'yan?
REP. AQUINO. Yah could be allowed as SEN. ANGARA. Letter A. To capture that
deductions in the perpetrations of (inaudible) thought, we'll say the grant of 20% discount from
income. all establishments et cetera, et cetera, provided
that said establishments - provided that private
SEN. ANGARA. I-tax credit na lang natin para establishments may claim the cost as a tax
walang cash-out ano? credit. Ganon ba 'yon?

REP. AQUINO. Oo, tax credit. Tama, Okay. REP. AQUINO. Yah.
Hospitals ba o lahat ng establishments na
covered. SEN. ANGARA. Dahil kung government, they
don't need to claim it.
THE CHAIRMAN. (Rep. Unico). Sa kuwan lang
yon, as private hospitals lang. THE CHAIRMAN. (Rep. Unico). Tax credit.

REP. AQUINO. Ano ba yung establishments na SEN. ANGARA. As a tax credit [rather] than a
covered? kuwan - deduction, Okay.

SEN. ANGARA. Restaurant lodging houses, REP. AQUINO Okay.

recreation centers.
SEN. ANGARA. Sige Okay. Di subject to style na
REP. AQUINO. All establishments covered lang sa Letter A".[89]
siguro?

SEN. ANGARA. From all establishments. Alisin Special Law

na natin 'Yung kuwan kung ganon. Can we go Over General Law
back to Section 4 ha?
Sixth and last, RA 7432 is a special law that
REP. AQUINO. Oho. should prevail over the Tax Code -- a general
law. x x x [T]he rule is that on a specific matter
the special law shall prevail over the general law, regulation can supplant or modify the acts of
which shall Congress.
be resorted to only to supply deficiencies in the
former.[90] In addition, [w]here there are two WHEREFORE, the Petition is hereby DENIED.
statutes, the earlier special and the later general The assailed Decision and Resolution of the
-- the terms of the general broad enough to Court of Appeals AFFIRMED. No
include the matter provided for in the special -- pronouncement as to costs.
the fact that one is special and the other is
general creates a presumption that the special is SO ORDERED.
to be considered as remaining an exception to
the general,[91] one as a general law of the land,
the other as the law of a particular case.[92] It is a
canon of statutory construction that a
later statute, general in its terms and not
expressly repealing a prior special statute, will
ordinarily not affect the special provisions of such
earlier statute.[93]

RA 7432 is an earlier law not expressly repealed

by, and therefore remains an exception to, the
Tax Code -- a later law. When the former states
that a tax credit may be claimed, then the
requirement of prior tax payments under certain
provisions of the latter, as discussed above,
cannot be made to apply. Neither can the
instances of or references to a tax
[94]
deduction under the Tax Code be made to
restrict RA 7432. No provision of any revenue
G.R. No. 81561 January 18, 1991 of the "Manila Packing and Export
Forwarders" in the Pistang Pilipino
PEOPLE OF THE PHILIPPINES, plaintiff- Complex, Ermita, Manila, carrying with
appellee them four (4) gift wrapped packages. Anita
vs. Reyes (the proprietress and no relation to
ANDRE MARTI, accused-appellant. Shirley Reyes) attended to them. The
appellant informed Anita Reyes that he was
The Solicitor General for plaintiff-appellee.
sending the packages to a friend in Zurich,
Reynaldo B. Tatoy and Abelardo E. Rogacion for
Switzerland. Appellant filled up the contract
accused-appellant.
necessary for the transaction, writing
therein his name, passport number, the
date of shipment and the name and address
of the consignee, namely, "WALTER
BIDIN, J.: FIERZ, Mattacketr II, 8052 Zurich,
Switzerland" (Decision, p. 6)
This is an appeal from a decision * rendered by
the Special Criminal Court of Manila (Regional Anita Reyes then asked the appellant if she
Trial Court, Branch XLIX) convicting accused- could examine and inspect the packages.
appellant of violation of Section 21 (b), Article IV Appellant, however, refused, assuring her
in relation to Section 4, Article 11 and Section 2 that the packages simply contained books,
(e) (i), Article 1 of Republic Act 6425, as cigars, and gloves and were gifts to his
amended, otherwise known as the Dangerous friend in Zurich. In view of appellant's
Drugs Act. representation, Anita Reyes no longer
insisted on inspecting the packages. The
The facts as summarized in the brief of the four (4) packages were then placed inside a
prosecution are as follows: brown corrugated box one by two feet in
size (1' x 2'). Styro-foam was placed at the
On August 14, 1987, between 10:00 and
bottom and on top of the packages before
11:00 a.m., the appellant and his common- the box was sealed with masking tape, thus
law wife, Shirley Reyes, went to the booth
making the box ready for shipment Investigation (NBI), at about 1:30 o'clock in
(Decision, p. 8). the afternoon of that date, i.e., August 14,
1987. He was interviewed by the Chief of
Before delivery of appellant's box to the Narcotics Section. Job Reyes informed the
Bureau of Customs and/or Bureau of NBI that the rest of the shipment was still in
Posts, Mr. Job Reyes (proprietor) and his office. Therefore, Job Reyes and three
husband of Anita (Reyes), following (3) NBI agents, and a photographer, went to
standard operating procedure, opened the the Reyes' office at Ermita, Manila (tsn, p.
boxes for final inspection. When he opened 30, October 6, 1987).
appellant's box, a peculiar odor emitted
therefrom. His curiousity aroused, he Job Reyes brought out the box in which
squeezed one of the bundles allegedly appellant's packages were placed and, in
containing gloves and felt dried leaves the presence of the NBI agents, opened the
inside. Opening one of the bundles, he top flaps, removed the styro-foam and took
pulled out a cellophane wrapper protruding out the cellophane wrappers from inside the
from the opening of one of the gloves. He gloves. Dried marijuana leaves were found
made an opening on one of the cellophane to have been contained inside the
wrappers and took several grams of the cellophane wrappers (tsn, p. 38, October 6,
contents thereof (tsn, pp. 29-30, October 6, 1987; Emphasis supplied).
1987; Emphasis supplied).
The package which allegedly contained
Job Reyes forthwith prepared a letter books was likewise opened by Job Reyes.
reporting the shipment to the NBI and He discovered that the package contained
requesting a laboratory examination of the bricks or cake-like dried marijuana leaves.
samples he extracted from the cellophane The package which allegedly contained
wrapper (tsn, pp. 5-6, October 6, 1987). tabacalera cigars was also opened. It
turned out that dried marijuana leaves were
He brought the letter and a sample of neatly stocked underneath the cigars (tsn,
appellant's shipment to the Narcotics p. 39, October 6, 1987).
Section of the National Bureau of
 The NBI agents made an inventory and took In this appeal, accused/appellant assigns the
charge of the box and of the contents following errors, to wit:
thereof, after signing a "Receipt"
acknowledging custody of the said effects THE LOWER COURT ERRED IN
(tsn, pp. 2-3, October 7, 1987). ADMITTING IN EVIDENCE THE
ILLEGALLY SEARCHED AND SEIZED
Thereupon, the NBI agents tried to locate OBJECTS CONTAINED IN THE FOUR
appellant but to no avail. Appellant's stated PARCELS.
address in his passport being the Manila Central
Post Office, the agents requested assistance THE LOWER COURT ERRED IN
from the latter's Chief Security. On August 27, CONVICTING APPELLANT DESPITE THE
1987, appellant, while claiming his mail at the UNDISPUTED FACT THAT HIS RIGHTS
Central Post Office, was invited by the NBI to UNDER THE CONSTITUTION WHILE
shed light on the attempted shipment of the UNDER CUSTODIAL PROCEEDINGS
seized dried leaves. On the same day the WERE NOT OBSERVED.
Narcotics Section of the NBI submitted the dried
THE LOWER COURT ERRED IN NOT
leaves to the Forensic Chemistry Section for
GIVING CREDENCE TO THE
laboratory examination. It turned out that the
EXPLANATION OF THE APPELLANT ON
dried leaves were marijuana flowering tops as
HOW THE FOUR PARCELS CAME INTO
certified by the forensic chemist. (Appellee's
HIS POSSESSION (Appellant's Brief, p.
Brief, pp. 9-11, Rollo, pp. 132-134).
1; Rollo, p. 55)
Thereafter, an Information was filed against
1. Appellant contends that the evidence subject
appellant for violation of RA 6425, otherwise
of the imputed offense had been obtained in
known as the Dangerous Drugs Act.
violation of his constitutional rights against
After trial, the court a quo rendered the assailed unreasonable search and seizure and privacy of
decision. communication (Sec. 2 and 3, Art. III,
Constitution) and therefore argues that the same
should be held inadmissible in evidence (Sec. 3 Our present constitutional provision on the
(2), Art. III). guarantee against unreasonable search and
seizure had its origin in the 1935 Charter which,
Sections 2 and 3, Article III of the Constitution worded as follows:
provide:
The right of the people to be secure in their
Sec. 2. The right of the people to be secure persons, houses, papers and effects
in their persons, houses, papers and effects against unreasonable searches and
against unreasonable searches and seizures shall not be violated, and no
seizures of whatever nature and for any warrants shall issue but
purpose shall be inviolable, and no search upon probable cause, to be determined by
warrant or warrant of arrest shall issue the judge after examination under oath or
except upon probable cause to be affirmation of the complainant and the
determined personally by the judge after witnesses he may produce, and particularly
examination under oath or affirmation of the describing the place to be searched, and
complainant and the witnesses he may the persons or things to be seized. (Sec. 1
produce, and particularly describing the [3], Article III)
place to be searched and the persons or
things to be seized. was in turn derived almost verbatim from the
Fourth Amendment ** to the United States
Sec. 3. (1) The privacy of communication Constitution. As such, the Court may turn to the
and correspondence shall be inviolable pronouncements of the United States Federal
except upon lawful order of the court, or Supreme Court and State Appellate Courts
when public safety or order requires which are considered doctrinal in this jurisdiction.
otherwise as prescribed by law.
Thus, following the exclusionary rule laid down
(2) Any evidence obtained in violation of this in Mapp v. Ohio by the US Federal Supreme
or the preceding section shall be Court (367 US 643, 81 S.Ct. 1684, 6 L.Ed. 1081
inadmissible for any purpose in any [1961]), this Court, in Stonehill v. Diokno (20
proceeding. SCRA 383 [1967]), declared as inadmissible any
evidence obtained by virtue of a defective search be excluded was primarily discovered and
and seizure warrant, abandoning in the process obtained by a private person, acting in a private
the ruling earlier adopted in Moncado v. People's capacity and without the intervention and
Court (80 Phil. 1 [1948]) wherein the admissibility participation of State authorities. Under the
of evidence was not affected by the illegality of circumstances, can accused/appellant validly
its seizure. The 1973 Charter (Sec. 4 [2], Art. IV) claim that his constitutional right against
constitutionalized the Stonehill ruling and is unreasonable searches and seizure has been
carried over up to the present with the advent of violated? Stated otherwise, may an act of a
the 1987 Constitution. private individual, allegedly in violation of
appellant's constitutional rights, be invoked
In a number of cases, the Court strictly adhered against the State?
to the exclusionary rule and has struck down the
admissibility of evidence obtained in violation of We hold in the negative. In the absence of
the constitutional safeguard against governmental interference, the liberties
unreasonable searches and seizures. (Bache & guaranteed by the Constitution cannot be
Co., (Phil.), Inc., v. Ruiz, 37 SCRA 823 [1971]; invoked against the State.
Lim v. Ponce de Leon, 66 SCRA 299 [1975];
People v. Burgos, 144 SCRA 1 [1986]; Roan v. As this Court held in Villanueva v. Querubin (48
Gonzales, 145 SCRA 687 [1987]; See SCRA 345 [1972]:
also Salazar v. Hon. Achacoso, et al., GR No.
1. This constitutional right (against
81510, March 14, 1990).
unreasonable search and seizure) refers to
It must be noted, however, that in all those cases the immunity of one's person, whether
adverted to, the evidence so obtained were citizen or alien, from interference by
invariably procured by the State acting through government, included in which is his
the medium of its law enforcers or other residence, his papers, and other
authorized government agencies. possessions. . . .

On the other hand, the case at bar assumes a . . . There the state, however powerful, does
peculiar character since the evidence sought to not as such have the access except under
 the circumstances above noted, for in the to the right of seizure by process duly
traditional formulation, his house, however served.
humble, is his castle. Thus is outlawed any
unwarranted intrusion by government, The above ruling was reiterated in State v.
which is called upon to refrain from any Bryan (457 P.2d 661 [1968]) where a parking
invasion of his dwelling and to respect the attendant who searched the automobile to
privacies of his life. . . . (Cf. Schermerber v. ascertain the owner thereof found marijuana
California, 384 US 757 [1966] and Boyd v. instead, without the knowledge and participation
United States, 116 US 616 [1886]; of police authorities, was declared admissible in
Emphasis supplied). prosecution for illegal possession of narcotics.

In Burdeau v. McDowell (256 US 465 (1921), 41 And again in the 1969 case of Walker v.
S Ct. 547; 65 L.Ed. 1048), the Court there in State (429 S.W.2d 121), it was held that the
construing the right against unreasonable search and seizure clauses are restraints upon
searches and seizures declared that: the government and its agents, not upon private
individuals (citing People v. Potter, 240 Cal.
(t)he Fourth Amendment gives protection App.2d 621, 49 Cap. Rptr, 892 (1966); State v.
against unlawful searches and seizures, Brown, Mo., 391 S.W.2d 903 (1965); State v.
and as shown in previous cases, its Olsen, Or., 317 P.2d 938 (1957).
protection applies to governmental action.
Its origin and history clearly show that it was Likewise appropos is the case of Bernas v.
intended as a restraint upon the activities of US (373 F.2d 517 (1967). The Court there said:
sovereign authority, and was not intended
The search of which appellant complains,
to be a limitation upon other than
however, was made by a private citizen
governmental agencies; as against such
the owner of a motel in which appellant
authority it was the purpose of the Fourth
stayed overnight and in which he left behind
Amendment to secure the citizen in the right
a travel case containing the
of unmolested occupation of his dwelling
evidence***complained of. The search was
and the possession of his property, subject
made on the motel owner's own initiative.
 Because of it, he became suspicious, called First, the factual considerations of the case at bar
the local police, informed them of the bag's readily foreclose the proposition that NBI agents
contents, and made it available to the conducted an illegal search and seizure of the
authorities. prohibited merchandise. Records of the case
clearly indicate that it was Mr. Job Reyes, the
The fourth amendment and the case law proprietor of the forwarding agency, who made
applying it do not require exclusion of search/inspection of the packages. Said
evidence obtained through a search by a inspection was reasonable and a standard
private citizen. Rather, the amendment only operating procedure on the part of Mr. Reyes as
proscribes governmental action." a precautionary measure before delivery of
packages to the Bureau of Customs or the
The contraband in the case at bar having come
Bureau of Posts (TSN, October 6 & 7, 1987, pp.
into possession of the Government without the
15-18; pp. 7-8; Original Records, pp. 119-122;
latter transgressing appellant's rights against
167-168).
unreasonable search and seizure, the Court
sees no cogent reason why the same should not It will be recalled that after Reyes opened the box
be admitted against him in the prosecution of the containing the illicit cargo, he took samples of the
offense charged. same to the NBI and later summoned the agents
to his place of business. Thereafter, he opened
Appellant, however, would like this court to
the parcel containing the rest of the shipment and
believe that NBI agents made an illegal search
entrusted the care and custody thereof to the NBI
and seizure of the evidence later on used in
agents. Clearly, the NBI agents made no search
prosecuting the case which resulted in his
and seizure, much less an illegal one, contrary to
conviction.
the postulate of accused/appellant.
The postulate advanced by accused/appellant
Second, the mere presence of the NBI agents did
needs to be clarified in two days. In both
not convert the reasonable search effected by
instances, the argument stands to fall on its own
Reyes into a warrantless search and seizure
weight, or the lack of it.
proscribed by the Constitution. Merely to observe
and look at that which is in plain sight is not a speech in the Bill of Rights answers the query
search. Having observed that which is open, which he himself posed, as follows:
where no trespass has been committed in aid
thereof, is not search (Chadwick v. State, 429 First, the general reflections. The protection
SW2d 135). Where the contraband articles are of fundamental liberties in the essence of
identified without a trespass on the part of the constitutional democracy. Protection
arresting officer, there is not the search that is against whom? Protection against the state.
prohibited by the constitution (US v. Lee 274 US The Bill of Rights governs the relationship
559, 71 L.Ed. 1202 [1927]; Ker v. State of between the individual and the state. Its
California 374 US 23, 10 L.Ed.2d. 726 [1963]; concern is not the relation between
Moore v. State, 429 SW2d 122 [1968]). individuals, between a private individual
and other individuals. What the Bill of Rights
In Gandy v. Watkins (237 F. Supp. 266 [1964]), does is to declare some forbidden zones in
it was likewise held that where the property was the private sphere inaccessible to any
taken into custody of the police at the specific power holder. (Sponsorship Speech of
request of the manager and where the search Commissioner Bernas , Record of the
was initially made by the owner there is no Constitutional Commission, Vol. 1, p. 674;
unreasonable search and seizure within the July 17, 1986; Emphasis supplied)
constitutional meaning of the term.
The constitutional proscription against unlawful
That the Bill of Rights embodied in the searches and seizures therefore applies as a
Constitution is not meant to be invoked against restraint directed only against the government
acts of private individuals finds support in the and its agencies tasked with the enforcement of
deliberations of the Constitutional Commission. the law. Thus, it could only be invoked against
True, the liberties guaranteed by the the State to whom the restraint against arbitrary
fundamental law of the land must always be and unreasonable exercise of power is imposed.
subject to protection. But protection against
whom? Commissioner Bernas in his sponsorship If the search is made upon the request of law
enforcers, a warrant must generally be first
secured if it is to pass the test of constitutionality.
However, if the search is made at the behest or individuals. Moreover, it must be emphasized
initiative of the proprietor of a private that the modifications introduced in the 1987
establishment for its own and private purposes, Constitution (re: Sec. 2, Art. III) relate to the
as in the case at bar, and without the intervention issuance of either a search warrant or warrant of
of police authorities, the right against arrest vis-a-vis the responsibility of the judge in
unreasonable search and seizure cannot be the issuance thereof (See Soliven v. Makasiar,
invoked for only the act of private individual, not 167 SCRA 393 [1988]; Circular No. 13 [October
the law enforcers, is involved. In sum, the 1, 1985] and Circular No. 12 [June 30, 1987]. The
protection against unreasonable searches and modifications introduced deviate in no manner as
seizures cannot be extended to acts committed to whom the restriction or inhibition against
by private individuals so as to bring it within the unreasonable search and seizure is directed
ambit of alleged unlawful intrusion by the against. The restraint stayed with the State and
government. did not shift to anyone else.

Appellant argues, however, that since the Corolarilly, alleged violations against
provisions of the 1935 Constitution has been unreasonable search and seizure may only be
modified by the present phraseology found in the invoked against the State by an individual
1987 Charter, expressly declaring as unjustly traduced by the exercise of sovereign
inadmissible any evidence obtained in violation authority. To agree with appellant that an act of
of the constitutional prohibition against illegal a private individual in violation of the Bill of Rights
search and seizure, it matters not whether the should also be construed as an act of the State
evidence was procured by police authorities or would result in serious legal complications and
private individuals (Appellant's Brief, p. 8, Rollo, an absurd interpretation of the constitution.
p. 62).
Similarly, the admissibility of the evidence
The argument is untenable. For one thing, the procured by an individual effected through
constitution, in laying down the principles of the private seizure equally applies, in pari passu, to
government and fundamental liberties of the the alleged violation, non-governmental as it is,
people, does not govern relationships between
of appellant's constitutional rights to privacy and did you investigate the accused together
communication. with the girl?

2. In his second assignment of error, appellant WITNESS:

contends that the lower court erred in convicting
him despite the undisputed fact that his rights Yes, we have interviewed the accused
under the constitution while under custodial together with the girl but the accused
investigation were not observed. availed of his constitutional right not to give
any written statement, sir. (TSN, October 8,
Again, the contention is without merit, We have 1987, p. 62; Original Records, p. 240)
carefully examined the records of the case and
found nothing to indicate, as an "undisputed The above testimony of the witness for the
fact", that appellant was not informed of his prosecution was not contradicted by the defense
constitutional rights or that he gave statements on cross-examination. As borne out by the
without the assistance of counsel. The law records, neither was there any proof by the
enforcers testified that accused/appellant was defense that appellant gave uncounselled
informed of his constitutional rights. It is confession while being investigated. What is
presumed that they have regularly performed more, we have examined the assailed judgment
their duties (See. 5(m), Rule 131) and their of the trial court and nowhere is there any
testimonies should be given full faith and reference made to the testimony of appellant
credence, there being no evidence to the while under custodial investigation which was
contrary. What is clear from the records, on the utilized in the finding of conviction. Appellant's
other hand, is that appellant refused to give any second assignment of error is therefore
written statement while under investigation as misplaced.
testified by Atty. Lastimoso of the NBI, Thus:
3. Coming now to appellant's third assignment of
Fiscal Formoso: error, appellant would like us to believe that he
was not the owner of the packages which
You said that you investigated Mr. and Mrs. contained prohibited drugs but rather a certain
Job Reyes. What about the accused here, Michael, a German national, whom appellant met
in a pub along Ermita, Manila: that in the course and convincing evidence, are negative self-
of their 30-minute conversation, Michael serving evidence which deserve no weight in law
requested him to ship the packages and gave and cannot be given greater evidentiary weight
him P2,000.00 for the cost of the shipment since than the testimony of credible witnesses who
the German national was about to leave the testify on affirmative matters (People v. Esquillo,
country the next day (October 15, 1987, TSN, pp. 171 SCRA 571 [1989]; People vs. Sariol, 174
2-10). SCRA 237 [1989]).

Rather than give the appearance of veracity, we Appellant's bare denial is even made more
find appellant's disclaimer as incredulous, self- suspect considering that, as per records of the
serving and contrary to human experience. It can Interpol, he was previously convicted of
easily be fabricated. An acquaintance with a possession of hashish by the Kleve Court in the
complete stranger struck in half an hour could not Federal Republic of Germany on January 1,
have pushed a man to entrust the shipment of 1982 and that the consignee of the frustrated
four (4) parcels and shell out P2,000.00 for the shipment, Walter Fierz, also a Swiss national,
purpose and for appellant to readily accede to was likewise convicted for drug abuse and is just
comply with the undertaking without first about an hour's drive from appellant's residence
ascertaining its contents. As stated by the trial in Zurich, Switzerland (TSN, October 8, 1987, p.
court, "(a) person would not simply entrust 66; Original Records, p. 244; Decision, p.
contraband and of considerable value at that as 21; Rollo, p. 93).
the marijuana flowering tops, and the cash
amount of P2,000.00 to a complete stranger like Evidence to be believed, must not only proceed
the Accused. The Accused, on the other hand, from the mouth of a credible witness, but it must
would not simply accept such undertaking to take be credible in itself such as the common
custody of the packages and ship the same from experience and observation of mankind can
a complete stranger on his mere say-so" approve as probable under the circumstances
(Decision, p. 19, Rollo, p. 91). As to why he (People v. Alto, 26 SCRA 342
readily agreed to do the errand, appellant failed [1968], citing Daggers v. Van Dyke, 37 N.J. Eg.
to explain. Denials, if unsubstantiated by clear 130; see also People v. Sarda, 172 SCRA 651
[1989]; People v. Sunga, 123 SCRA 327 [1983]);
Castaares v. CA, 92 SCRA 567 [1979]). As
records further show, appellant did not even
bother to ask Michael's full name, his complete
address or passport number. Furthermore, if
indeed, the German national was the owner of
the merchandise, appellant should have so
indicated in the contract of shipment (Exh. "B",
Original Records, p. 40). On the contrary,
appellant signed the contract as the owner and
shipper thereof giving more weight to the
presumption that things which a person
possesses, or exercises acts of ownership over,
are owned by him (Sec. 5 [j], Rule 131). At this
point, appellant is therefore estopped to claim
otherwise.

Premises considered, we see no error committed

by the trial court in rendering the assailed
judgment.

WHEREFORE, the judgment of conviction

finding appellant guilty beyond reasonable doubt
of the crime charged is hereby AFFIRMED. No
costs.

SO ORDERED.
G.R. No. 187417, February 24, 2016
 CHRISTINE JOY CAPIN- Inc. (Brent) at the time of her indefinite
CADIZ, Petitioner, v. BRENT HOSPITAL suspension from employment in 2006.
AND COLLEGES, INC., Respondent. The cause of suspension was Cadiz's
Unprofessionalism and Unethical Behavior
DECISION Resulting to Unwed Pregnancy. It appears
that Cadiz became pregnant out of
REYES, J.:
wedlock, and Brent imposed the
This is a petition for review suspension until such time that she
on certiorari1 under Rule 45 of the Rules marries her boyfriend in accordance with
of Court assailing the Resolutions dated law.
July 22, 20082 and February 24, 20093 of
the Court of Appeals (CA) in CA-G.R. SP Cadiz then filed with the Labor Arbiter
No. 02373-MIN, which dismissed the (LA) a complaint for Unfair Labor Practice,
petition filed by petitioner Christine Joy Constructive Dismissal, Non-Payment of
Capin-Cadiz (Cadiz) on the following Wages and Damages with prayer for
grounds: (1) incomplete statement of Reinstatement.4
material dates; (2) failure to attach
Ruling of the Labor Tribunals
registry receipts; and (3) failure to
indicate the place of issue of counsel's
In its Decision5 dated April 12, 2007, the
Professional Tax Receipt (PTR) and
LA found that Cadiz's indefinite
Integrated Bar of the Philippines (IBP)
suspension amounted to a constructive
official receipts.
dismissal; nevertheless, the LA ruled that
Antecedent Facts Cadiz was not illegally dismissed as there
was just cause for her dismissal, that is,
Cadiz was the Human Resource Officer of she engaged in premarital sexual
respondent Brent Hospital and Colleges, relations with her boyfriend resulting in a
pregnancy out of wedlock.6 The LA further
stated that her "immoral conduct x x x
[was] magnified as serious misconduct Cadiz appealed to the National Labor
not only by heir getting pregnant as a Relations Commission (NLRC), which
result thereof before and without affirmed the LA decision in its
marriage, but more than that, also by the Resolution9 dated December 10, 2007.
fact that Brent is an institution of the Her motion for reconsideration having
Episcopal Church in the Philippines been denied by the NLRC in its
operating both a hospital and college Resolution10 dated February 29, 2008,
where [Cadiz] was employed."7 The LA Cadiz elevated her case to the CA on
also ruled that she was not entitled to petition for certiorari under Rule 65.
reinstatement "at least until she marries
her boyfriend," to backwages and Ruling of the CA
vacation/sick leave pay. Brent, however,
manifested that it was willing to pay her The CA, however, dismissed her petition
1311 month pay. The dispositive portion outright due to technical defects in the
of the decision reads: petition: (1) incomplete statement of
material dates; (2) failure to attach
WHEREFORE, judgment is hereby registry receipts; and (3) failure to
rendered, ordering [Brent] to pay [Cadiz] indicate the place of issue of counsel's
13th month pay in the sum of Seven PTR and IBP official receipts.11 Cadiz
Thousand Nine Hundred Seventy & sought reconsideration of the assailed CA
11/100 Pesos (P7,970.11). Resolution dated July 22, 2008 but it was
denied in the assailed Resolution dated
All other charges and claims are hereby February 24, 2009.12The CA further ruled
dismissed for lack of merit. that "a perusal of the petition will reveal
that public respondent NLRC committed
SO no grave abuse of discretion amounting to
ORDERED.8ChanRoblesVirtualawlibrary lack or excess of jurisdiction x x x holding
[Cadiz's] dismissal from employment
valid."13 RESPONDENT [NLRC] GRAVELY ABUSED
ITS DISCRETION WHEN IT DENIED
Hence, the present petition. Cadiz argues [CADIZ'S] CLAIM FOR BACKWAGES,
that - ALLOWANCES, SICK LEAVE PAY,
MATERNITY PAY AND MORAL AND
I EXEMPLARY DAMAGES AND ATTORNEY'S
FEES16
THE HONORABLE [NLRC] GRAVELY
ABUSED ITS DISCRETION WHEN IT HELD IV
TFIAT [CADIZ'S] IMPREGNATION
OUTSIDE OF WEDLOCK IS A GROUND THE [CA] MISPLACED APPLICATION OF
FOR THE TERMINATION OF [CADIZ'S] THE MATERIAL DATA RULE RESULTING
EMPLOYMENT14 TO GRAVE ABUSE OF DISCRETION WHEN
IT DISMISSED THE APPEAL17
II
Cadiz contends, among others, that
THE [NLRC] COMMITTED GRAVE ABUSE getting pregnant outside of wedlock is not
OF DISCRETION WHEN IT UPHELD THE grossly immoral, especially when both
DISMISSAL OF [CADIZ] ON THE GROUND partners do not have any legal
THAT THE INDEFINITE SUSPENSION WAS impediment to marry. Cadiz surmises that
VALID AND REQUIRED [CADIZ] TO FIRST the reason for her suspension was not
ENTER INTO MARRIAGE BEFORE SHE CAN because of her relationship with her then
BE ADMITTED BACK TO HER boyfriend but because of the resulting
EMPLOYMENT15 pregnancy. Cadiz also lambasts Brent's
III condition for her reinstatement - that she
gets married to her boyfriend - saying
that this violates the stipulation against
marriage under Article 136 of the Labor the substantial grounds raised herein.
Code. Finally, Cadiz contends that there
was substantial compliance with the rules The issue to be resolved is whether the
of procedure, and the CA should not have CA committed a reversible error in ruling
dismissed the petition.18 that: (1) Cadiz's petition is dismissible on
ground of technical deficiencies; and (2)
Brent, meanwhile, adopts and reiterates the NLRC did not commit grave abuse of
its position before the LA and the NLRC discretion in upholding her dismissal from
that Cadiz's arguments are irrational and employment.
out of context. Brent argues, among
others, that for Cadiz to limit acts of Rules of procedure are mere
immorality only to extra-marital affairs is tools designed to facilitate the
to "change the norms, beliefs, teachings attainment of justice
and practices of BRENT as a Church
institution of the x x x Episcopal Church in In dismissing outright Cadiz's petition, the
the Philippines."19 CA found the following defects: (1)
incomplete statement of material dates;
Ruling of the Court (2) failure to attach registry receipts; and
(3) failure to indicate the place of issue of
Ordinarily, the Court will simply gloss counsel's PTR and IBP official receipts.
over the arguments raised by Cadiz,
given that the main matter dealt with by Rule 46, Section 3 of the Rules of Court
the CA were the infirmities found in the states the contents of a petition filed with
petition and which caused the dismissal of the CA under Rule 65, viz, "the petition
her case before it. In view, however, of shall x x x indicate the material dates
the significance of the issues involved in showing when notice of the judgment or
Cadiz's dismissal from employment, the final order or resolution subject thereof
Court will resolve the petition including
was received, when a motion for new trial suffice. In fact, the absence of the
or reconsideration, if any, was filed and registry receipts amounts to lack of proof
when notice of the denial thereof was of service.25 Nevertheless, despite this
received." The rationale for this is to defect, the Court finds that the ends of
enable the CA to determine whether the substantial justice would be better served
petition was filed within the period fixed by relaxing the application of technical
in the rules.20 Cadiz's failure to state the rules of procedure.26 With regard to
date of receipt of the copy of the NLRC counsel's failure to indicate the place
decision, however, is not fatal to her case where the IBP and PTR receipts were
since the more important material date issued, there was substantial compliance
which must be duly alleged in a petition is with the requirement since it was
the date of receipt of the resolution of indicated in the verification and
denial of the motion for certification of non-forum shopping, as
reconsideration,21 which she has duly correctly argued by Cadiz's
complied with.22 lawyer.27cralawred

The CA also dismissed the petition for Time and again, the Court has
failure to attach the registry receipt in the emphasized that rules of procedure are
affidavit of service.23Cadiz points out, on designed to secure substantial justice.
the other hand, that the registry receipt These are mere tools to expedite the
number was indicated in the petition and decision or resolution of cases and if their
this constitutes substantial compliance strict and rigid application would frustrate
with the requirement. What the rule rather than promote substantial justice,
requires, however, is that the registry then it must be avoided.28
receipt must be appended to the paper
being served.24 Clearly, mere indication of Immorality as a just cause for
the registry receipt numbers will not termination of employment
 serious misconduct not only by her
Both the LA and the NLRC upheld Cadiz's getting pregnant as a result thereof
dismissal as. one attended with just before and without marriage, but more
cause. The LA, while ruling that Cadiz's than that, also by the fact that Brent is an
indefinite suspension was tantamount to a institution of the Episcopal Church in the
constructive dismissal, nevertheless found Philippines xxx committed to "developing
that there was just cause for her competent and dedicated professionals
dismissal. According to the LA, "there was xxx and in providing excellent medical
just cause therefor, consisting in her and other health services to the
engaging in premarital sexual relations community for the Glory of God and
with Carl Cadiz, allegedly her boyfriend, Service to Humanity." x x x As if these
resulting in her becoming pregnant out of were not enough, [Cadiz] was Brent's
wedlock."29 The LA deemed said act to be Human Resource Officer charged with,
immoral, which was punishable by among others, implementing the rules of
dismissal under Brent's rules and which Brent against immoral conduct, including
likewise constituted serious misconduct premarital sexual relations, or fornication
under Article 282(a) of the Labor Code. xxx. She should have been the epitome of
The LA also opined that since Cadiz was proper conduct, but miserably failed. She
Brent's ITuman Resource Officer in charge herself engaged in premarital sexual
of implementing its rules against immoral relations, which surely scandalized the
conduct, she should have been the Brent community, x x x.31
"epitome of proper conduct."30 The LA
ruled: The NLRC, for its part, sustained the LA's
conclusion.
[Cadiz's] immoral conduct by having
premarital sexual relations with her The Court, however, cannot subscribe to
alleged boy friend, a former Brent worker the labor tribunals' conclusions.
and her co-employee, is magnified as
Admittedly, one of the grounds for c. Immorality, concubinage,
disciplinary action under Brent's policies is bigamy.34ChanRoblesVirtualawlibrary
immorality, which is punishable by
dismissal at first offense32 Brent's Policy Its Employee's Manual of Policies,
Manual provides: meanwhile, enumerates "[a]cts of
immorality such as scandalous behaviour,
CATEGORY IV acts of lasciviousness against any person
(patient, visitors, co-workers) within
In accordance with Republic Act No. hospital premises"35 as a ground for
1052,33 the following are just cause for discipline and discharge. Brent also relied
terminating an employment of an on Section 94 of the Manual of
employee without a definite period: Regulations for Private Schools (MRPS),
which lists "disgraceful or immoral
xxxx conduct" as a cause for terminating
employment.36
2. Serious misconduct or willful
disobedience by the employee of the Thus, the question that must be resolved
orders of his employer or representative is whether Cadiz's premarital relations
in connection with his work, such as, but with her boyfriend and the resulting
not limited to the following: pregnancy out of wedlock constitute
chanRoblesvirtualLawlibrary immorality. To resolve this, the Court
xxxx makes reference to the recently
promulgated case of Cheryll Santos Lens
b. Commission of immoral conduct or v. St. Scholastica 's College Westgrove
indecency within the company premises, and/or Sr. Edna Quiambao, OSB37
such as an act of lasciviousness or any
act which is sinful and vulgar in nature.
Leus involved the same personal time were both single; they engaged in
circumstances as the case at bench, albeit premarital sexual relations, which
the employer was a Catholic and resulted into pregnancy. The labor
sectarian educational institution and the tribunals characterized these as
petitioner, Cheryl 1 Santos Leus (Leus), constituting disgraceful or immoral
worked as an assistant to the school's conduct. They also sweepingly concluded
Director of the Lay Apostolate and that as Human Resource Officer, Cadiz
Community Outreach Directorate. Leus should have been the epitome of proper
was dismissed from employment by the conduct and her indiscretion "surely
school for having borne a child out of scandalized the Brent community."38
wedlock. The Court ruled in Leus that the
determination of whether a conduct is The foregoing circumstances, however, do
disgraceful or immoral involves a two- not readily equate to disgraceful and
step process: first, a consideration of the immoral conduct. Brent's Policy Manual
totality of the circumstances surrounding and Employee's Manual of Policies do not
the conduct; and second, an assessment define what constitutes immorality; it
of the said circumstances vis-a-vis the simply stated immorality as a ground for
prevailing norms of conduct, i.e., what disciplinary action. Instead, Brent
the society generally considers moral and erroneously relied on the standard
respectable. dictionary definition of fornication as a
form of illicit relation and proceeded to
In this case, the surrounding facts leading conclude that Cadiz's acts fell under such
to Cadiz's dismissal are straightforward - classification, thus constituting
she was employed as a human resources immorality.39
officer in an educational and medical
institution of the Episcopal Church of the Jurisprudence has already set the
Philippines; she and her boyfriend at that standard of morality with which an act
should be gauged - it is public and impediment to marry at the time she
secular, not religious.40 Whether a committed the alleged immoral conduct.
conduct is considered disgraceful or In fact, they eventually married on April
immoral should be made in accordance 15, 2008.42 Aside from these, the labor
with the prevailing norms of conduct, tribunals' respective conclusion that
which, as stated in Leus, refer to those Cadiz's "indiscretion" "scandalized the
conducts which are proscribed because Brent community" is speculative, at most,
they are detrimental to conditions and there is no proof adduced by Brent to
upon which depend the existence and support such sweeping conclusion. Even
progress of human society. The fact Brent admitted that it came to know of
that a particular act does not conform to Cadiz's "situation" only when her
the traditional moral views of a certain pregnancy became manifest.43 Brent also
sectarian institution is not sufficient conceded that "[a]t the time [Cadiz] and
reason to qualify such act as immoral Carl R. Cadiz were just carrying on their
unless it, likewise, does not conform to boyfriend-girlfriend relationship, there
public and secular standards. More was no knowledge or evidence by [Brent]
importantly, there must be substantial that they were engaged also in premarital
evidence to establish that premarital sex."44 This only goes to show that Cadiz
sexual relations and pregnancy out of did not flaunt her premarital relations
wedlock is considered disgraceful or with her boyfriend and it was not carried
immoral.41 on under scandalous or disgraceful
circumstances. As declared in Leus,
The totality of the circumstances of this "there is no law which penalizes an
case does not justify the conclusion that unmarried mother by reason of her sexual
Cadiz committed acts of immorality. conduct or proscribes the consensual
Similar to Leus, Cadiz and her boyfriend sexual activity between two unmarried
were both single and had no legal persons; that neither does such situation
contravene[s] any fundamental state The doctrine of management prerogative
policy enshrined in the gives an employer the right to "regulate,
Constitution."45 The fact that Brent is a according to his own discretion and
sectarian institution does not judgment, all aspects of employment,
automatically subject Cadiz to its religious including hiring, work assignments,
standard of morality absent an express working methods, the time, place and
statement in its manual of personnel manner of work, work supervision,
policy and regulations, prescribing such transfer of employees, lay-off of workers,
religious standard as gauge as these and discipline, dismissal, and recall of
regulations create the obligation on both employees."48 In this case, Brent imposed
the employee and the employer to abide on Cadiz the condition that she
by the same.46 subsequently contract marriage with her
then boyfriend for her to be reinstated.
Brent, likewise, cannot resort to the MRPS According to Brent, this is "in consonance
because the Court already stressed in with the policy against encouraging illicit
Leus that "premarital sexual relations or common-law relations that would
between two consenting adults who have subvert the sacrament of marriage."49
no impediment to marry each other, and,
consequently, conceiving a child out of Statutory law is replete with legislation
wedlock, gauged from a purely public and protecting labor and promoting equal
secular view of morality, does not amount opportunity in employment. No less than
to a disgraceful or immoral conduct under the 1987 Constitution mandates that the
Section 94(e) of the 1992 MRPS."47 "State shall afford full protection to labor,
local and overseas, organized and
Marriage as a condition for unorganized, and promote full
reinstatement employment and equality of employment
opportunities for all."50 The Labor Code of discriminatory. There is no rhyme or
the Philippines, meanwhile, provides: reason for it. It forces Cadiz to marry for
economic reasons and deprives her of the
Art. 136. Stipulation against marriage. It freedom to choose her status, which is a
shall be unlawful for an employer to privilege that inheres in her as an
require as a condition of employment or intangible and inalienable right.53 While a
continuation of employment that a marriage or no-marriage qualification
woman employee shall not get married, may be justified as a "bona fide
or to stipulate expressly or tacitly that occupational qualification," Brent must
upon getting married, a woman employee prove two factors necessitating its
shall be deemed resigned or separated, or imposition, viz: (1) that the employment
to actually dismiss, discharge, qualification is reasonably related to
discriminate or otherwise prejudice a the essential operation of the job
woman employee merely by reason of her involved; and (2) that there is a factual
marriage. basis for believing that all or substantially
all persons meeting the qualification
With particular regard to women, Republic would be unable to properly perform the
Act No. 9710 or the Magna Carta of duties of the job.54 Brent has not shown
Women51 protects women against the presence of neither of these factors.
discrimination in all matters relating to Perforce, the Court cannot uphold the
marriage and family relations, including validity of said condition.
the right to choose freely a spouse
and to enter into marriage only with Given the foregoing, Cadiz, therefore, is
their free and full consent.52 entitled to reinstatement without loss of
seniority rights, and payment of
Weighed against these safeguards, it backwages computed from the time
becomes apparent that Brent's condition compensation was withheld up to the date
is coercive, oppressive and
of actual reinstatement. Where multiplied by number of x
reinstatement is no longer viable as an years
option, separation pay should be awarded
as an alternative and as a form of in service (Aug 02 to Nov 4
financial assistance.55 In the computation 06)
of separation pay, the Court stresses
that it should not go beyond the date P36,434.80
an employee was deemed to have
The Court also finds that Cadiz is only
been actually separated from
entitled to limited backwages. Generally,
employment, or beyond the date
the computation of backwages is
when reinstatement was rendered
reckoned from the date of illegal dismissal
impossible.56 In this case, the records
until actual reinstatement.59 In case
do not show whether Cadiz already
separation pay is ordered in lieu of
severed her employment with Brent or
reinstatement or reinstatement is waived
whether she is gainfully employed
by the employee, backwages is computed
elsewhere; thus, the computation of
from the time of dismissal until the
separation pay shall be pegged based on
finality of the decision ordering separation
the findings that she was employed on
pay.60Jurisprudence further clarified that
August 16, 2002, on her own admission
the period for computing the backwages
in her complaint that she was dismissed
during the period of appeal should end on
on November 17, 2006, and that she was
the date that a higher court reversed the
earning a salary of P9,108.70 per
labor arbitration ruling of illegal
month,57 which shall then be computed at
dismissal.61 If applied in Cadiz's case,
a rate of one (1) month salary for every
then the computation of backwages
year of service,58 as follows:
should be from November 17, 2006,
which was the time of her illegal
Monthly salary P9,108.70 dismissal, until the date of promulgation
of this decision. Nevertheless, the Court finds the same without merit. A finding of
has also recognized that the constitutional illegal dismissal, by itself, does not
policy of providing full protection to labor establish bad faith to entitle an employee
is not intended to oppress or destroy to moral damages.63 Absent clear and
management.62 The Court notes that at convincing evidence showing that Cadiz's
the time of Cadiz's indefinite suspension dismissal from Brent's employ had been
from employment, Leus was yet to be carried out in an arbitrary, capricious and
decided by the Court. Moreover, Brent malicious manner, moral and exemplary
was acting in good faith and on its honest damages cannot be awarded. The Court
belief that Cadiz's pregnancy out of nevertheless grants the award of
wedlock constituted immorality. Thus, attorney's fees in the amount often
fairness and equity dictate that the award percent (10%) of the total monetary
of backwages shall only be equivalent to award, Cadiz having been forced to
one (1) year or P109,304.40, computed litigate in order to seek redress of her
as follows: grievances.64

Monthly salary P9,108.70 WHEREFORE, the petition is GRANTED.

The Resolutions dated July 22, 2008 and
multiplied by one year x February 24, 2009 of the Court of Appeals
x in CA-G.R. SP No. 02373-M1N
are REVERSED and SET ASIDE, and
or 12 months 12 a NEW ONE ENTERED finding petitioner
Christine Joy Capin-Cadiz to have been
P109,304.40
dismissed without just cause.

Finally, with regard to Cadiz's prayer for Respondent Brent Hospital and Colleges,
moral and exemplary damages, the Court
Inc. is hereby ORDERED TO
PAY petitioner Christine Joy Capin-Cadiz:
Liberty is a right enshrined in the
(1) One Hundred Nine Thousand Three Constitution. However, as a testament to
Hundred Four Pesos and 40/100 the impossibility of determining what it
(P109,304.40) as backwages; truly means to be free, neither the
Constitution nor our jurisprudence has
(2) Thirty-Six Thousand Four Hundred attempted to define its metes and
Thirty-Four Pesos and 80/100 bounds. This case challenges this Court to
(P36,434.80) as separation pay; and ascertain the extent of the protection of
the right to liberty. This Court is called to
(3) Attorney's fees equivalent to ten answer the question of how free a woman
percent (10%) of the total award. is in this country to design the course of
her own life. The Constitution must be
The monetary awards granted shall earn read to grant her this freedom.
legal interest at the rate of six percent
(6%) per annum from the date of the Petitioner Christine Joy Capin-Cadiz
finality of this Decision until fully paid. (Christine Joy) worked as the Human
Resources Officer of respondent Brent
SO ORDERED Hospital and Colleges, Inc. ("Brent"). In
the course of her employment, she met
and fell in love with another Brent
CONCURRING OPINION
employee. Both Christine Joy and her
boyfriend were single and with no legal
impediment to marry. While in the
relationship but before their marriage,
JARDELEZA, J.: Christine Joy became pregnant with her
boyfriend's child. This prompted Brent to this just cause was that Christine Joy
issue an indefinite suspension against engaged in premarital sexual relations
her. Brent cited as a ground her with her boyfriend resulting in pregnancy
unprofessionalism and unethical behavior out of wedlock. The LA also ruled that she
resulting to unwed pregnancy. Brent also was not entitled to reinstatement until
told Christine Joy that she will be she marries her boyfriend. Christine Joy
reinstated on the condition that she gets appealed the LA decision before the
married to her boyfriend who was, at that NLRC. The NLRC affirmed the LA.
time, no longer a Brent employee. Christine Joy then filed a special civil
Christine Joy eventually married her action for certiorari under Rule 65 of the
boyfriend. This notwithstanding, Christine Rules of Court before the Court of
Joy felt that Brent's condition that she get Appeals. However, the CA dismissed her
married first before it reinstates her is petition on procedural grounds.
unacceptable and an affront to the
provision of the Labor Code concerning Brent and the labor tribunals argue that
stipulations against marriage. there was just cause for Christine Joy's
dismissal because Brent's Policy Manual
Claiming that this indefinite suspension identifies acts of immorality as a ground
amounted to constructive dismissal, for disciplinary action. Brent also invokes
Christine Joy filed a complaint for illegal Section 94 of the Manual of Regulations
dismissal before the National Labor for Private Schools (MRPS) which lists
Relations Commission (NLRC). The Labor disgraceful or immoral conduct as a
Arbiter (LA) found that while the ground for terminating an employee.
indefinite suspension was indeed a
constructive dismissal, there was just I agree with my esteemed colleague
cause for Brent to terminate Christine Justice Bienvenido L. Reyes' application of
Joy's employment. According to the LA, the doctrine in Leus v. St. Scholastica's
College Westgrove.1 I take this Joy's dismissal. The MRPS is a
opportunity to contribute to the analysis department order issued by the
for cases similar to this and Leus where Department of Education (DepEd) in the
women's fundamental rights are pitted exercise of its power to regulate private
against an employer's management schools. It is thus a government issuance
prerogatives. While the ponencia views which the DepEd is authorized to issue in
the issue from the perspective of public accordance with law. Further, the labor
and secular morality, there is also a tribunals also invoke the Labor Code
constitutional dimension to this case that which provides for the just causes for
should be considered. This is a woman's termination. The Labor Code is a
right to personal autonomy as a presidential decree and has the status of
fundamental right. law. The Constitution is deemed written
into every law and government issuance.
The Constitution protects personal Hence, in the application of laws and
autonomy as part of the Due Process governmental regulations, their provisions
Clause in the Bill of Rights. Indeed, the should not be interpreted in a manner
Bill of Rights cannot be invoked against that will violate the fundamental law of
private employers.2 However, the values the land.
expressed in the Constitution cannot be
completely ignored in the just Further, the relationship between labor
adjudication of labor cases. and management is a matter imbued with
public interest. The Constitution accords
In this case, Brent's reliance on laws and protection to labor through various
governmental issuances justifies the view provisions identifying the rights of
that the Constitution should permeate a laborers. This Court has also persistently
proper adjudication of the issue. Brent emphasized the constitutional protection
invokes the MRPS to support Christine accorded to labor. In Philippine Telegraph
and Telephone Company v. NLRC,3 this and ratified it. Its bill of rights, in
Court held that the constitutional particular, is an embodiment of the most
guarantee of protection to labor and important values of the people enacting a
security of tenure are "paramount in the Constitution. Values that find expression
due process scheme."4 Thus, in that case, in a society's Constitution are not only
this Court found that the employer's accepted as moral, they are also
dismissal of a female employee because fundamental. Thus, I propose that in
of her marriage runs afoul of the right ascertaining whether an act is moral or
against discrimination afforded to women immoral, a due consideration of
workers by no less than the Constitution.5 constitutional values must be made. In
Christine Joy's case, her decision to
Finally, Leus and the ponencia explain continue her pregnancy outside of
that in determining whether a particular wedlock is a constitutionally protected
conduct may be considered as immoral in right. It is therefore not only moral, it is
the public and secular sense, courts must also a constitutional value that this Court
follow a two-step process. First, courts is duty bound to uphold.
must consider the totality of the
circumstances surrounding the conduct It is within this framework of analysis that
and second, courts must assess these I view the issue in this case.
circumstances vis-a-vis the prevailing
norms of conduct or what society Due Process and the Constitutional
generally considers as moral. I propose Right to Personal Liberty and Privacy
that in ascertaining whether the public
holds a particular conduct as moral, the Section 1 of Article III of the Bill of Rights
Constitution is a necessary and inevitable provides that no person shall be deprived
guide. The Constitution is an expression of liberty without due process of law. The
of the ideals of the society that enacted concept of the constitutional right to
liberty accepts of no precise definition and long array of authorities including epoch-
finds no specific boundaries. Indeed, making decisions of the United States
there is no one phrase or combination of Supreme Court, liberty includes the right
words that can capture what it means to of the citizen to be free to use his faculties
be free. This Court, nevertheless, as early in lawful ways; to live and work where he
as the case of Rubi v. Provincial Board of will; to earn his livelihood by any lawful
Mindoro,6 explained that liberty is not calling; to pursue any avocation, and for
merely freedom from imprisonment or that purpose, to enter into all contracts
restraint. This Court, speaking through which may be proper, necessary, and
Justice George Malcolm, said - essential to his carrying out these
purposes to a successful conclusion. The
chief elements of the guaranty are the
Civil liberty may be said to mean that right to contract, the right to choose one's
measure of freedom which may be enjoyed employment, the right to labor, and the
in a civilized community, consistently with right of locomotion.
the peaceful enjoyment of like freedom in
others. The right to liberty guaranteed by In general, it may be said that liberty
the Constitution includes the right to exist means the opportunity to do those things
and the right to be free from arbitrary which are ordinarily done by free
personal restraint or servitude. The term men.7ChanRoblesVirtualawlibrary
cannot be dwarfed into mere freedom from
physical restraint of the person of the In Morfe v. Mutuc,8 this Court held that
citizen, but is deemed to embrace the right the constitutional right to liberty includes
of man to enjoy the faculties with which he the concept of privacy. Quoting US
has been endowed by his Creator, subject Supreme Court Justice Louis Brandeis,
only to such restraints as are necessary for this Court explained that the right to be
the common welfare. As enunciated in a let alone is "the most comprehensive of
rights and the right most valued by of privacy protected under various
civilized men."9 Justice Enrique Fernando, provisions of the Constitution such as the
in his ponencia, even went a step further Due Process Clause, the right against
and adopted the ruling in the US Supreme unreasonable searches and seizures, the
Court case Griswold v. Connecticut.10 He liberty of abode and of changing the
said that the right to privacy is "accorded same, the right of association and the
recognition independently of its right against self-incrimination.
identification with liberty."11 He also
added that "[t]he concept of liberty would Jurisprudence directs us to the conclusion
be emasculated if it does not likewise that the constitutional right to liberty
compel respect for his personality as a does not merely refer to freedom from
unique individual whose claim to privacy physical restraint. It also includes the
and interference demands respect."12 right to be free to choose to be, in the
words of Justice Fernando, a "unique
Ople v. Torresu13 reveals how this Court individual."14 This necessarily includes the
has come to recognize privacy as a freedom to choose how a person defines
component of liberty under the Due her personhood and how she decides to
Process Clause and as a constitutional live her life. Liberty, as a constitutional
right arising from zones created by right, involves not just freedom from
several other provisions of the unjustified imprisonment. It also pertains
Constitution. Chief Justice Reynato S. to the freedom to make choices that are
Puno, for this Court, explained that intimately related to a person's own
privacy finds express recognition in definition of her humanity. The
Section 3 of Article III of the Constitution constitutional protection extended to this
which speaks of the privacy of right mandates that beyond a certain
communication and correspondence. He point, personal choices must not be
further stated that there are other facets interfered with or unduly burdened as
such interference with or burdening of the
right to choose is a breach of the right to Eisenstadt v. Baird16 extended this right
be free. to privacy to unmarried persons. In this
case, the US Supreme Court also held
In the United States, whose Constitution invalid a law prohibiting the distribution of
has heavily influenced ours, jurisprudence contraceptives to unmarried
on the meaning of personal liberty is persons. Einstadt explained that "[i]f the
much more detailed and expansive. Their right of privacy means anything, it is the
protection of the constitutional right to right of the individual, married or single,
privacy has covered marital privacy, the to be free from unwarranted
right of a woman to choose to terminate governmental intrusion into matters so
her pregnancy and sexual conduct fundamentally affecting a person as the
between unmarried persons. decision whether to bear or beget a
child."17
In Griswold v. Connecticut,15 the US
Supreme Court held that privacy is a right In the celebrated case Roe v. Wade,18 the
protected under the US Constitution. US Supreme Court again explored the
Griswold explained that the US concept of the constitutional right to
Constitution's Bill of Rights creates zones privacy. In this case, the US Supreme
of privacy which prevents interference Court affirmed that while the US
save for a limited exception. Thus, Constitution does not expressly mention a
Griswold invalidated a statute which right to privacy, its provisions create such
criminalizes the sale of contraceptives to zones of privacy which warrant
married persons, holding that marital constitutional protection. Roe added to
privacy falls within the penumbra of the the growing jurisprudence on the right to
right to privacy under the US privacy by stating that prior US Supreme
Constitution's Bill of Rights. Court cases reveal that "only personal
rights that can be deemed 'fundamental' Constitution, the American Constitutional
or 'implicit in the concept of ordered law equivalent of our Due Process Clause.
liberty,' are included in this guarantee of Affirming that a woman has the right to
personal privacy. They also make it clear choose to terminate her pregnancy as a
that the right has some extension to component of her right to
activities relating to marriage, privacy, Planned Parenthood stated that
procreation, contraception, family "[t]he destiny of the woman must be
relationships, and [child rearing] and shaped to a large extent on her own
education."19 In Roe, the US Supreme conception of her spiritual imperatives
Court held that the constitutional right to and her place in society."21
privacy also encompasses a woman's
choice whether to terminate her The US Supreme Court also ruled that the
pregnancy. right to privacy includes sexual conduct
between consenting adults. Thus,
Planned Parenthood of Southeastern Pa. in Lawrence v. Texas,22 the US Supreme
v. Casey,20 which affirmed the essential Court invalidated a law criminalizing
ruling in Roe, added to this discussion on sodomy. Lawrence held that "[t]he
the right to privacy. The US Supreme petitioners are entitled to respect for their
Court repeated that the constitutional private lives. The State cannot demean
right to privacy means a protection from their existence or control their destiny by
interference so that people, married or making their private sexual conduct a
single, may be free to make the most crime. Their right to liberty under the Due
intimate and personal choices of a Process Clause gives them the full right to
lifetime. These choices, which are central engage in their conduct without
to personal dignity and autonomy, are intervention of the government."23
also central to the protection given under
the Fourteenth Amendment of the US The right to privacy as a component of
personal liberty in the Due Process Clause without marriage. These are personal
also includes the freedom to choose decisions that go into the core of how
whom to marry. This was the import of Christine Joy chooses to live her life. This
the US Supreme Court's ruling in Loving Court cannot countenance any undue
v. Virginia24 which invalidated a law burden that prejudices her right to be
prohibiting interracial marriages. This was free.
also one of the essential rulings
in Obergefell v. Hodges25 which held The Right to Choose Marriage
same-sex marriage as constitutional.
The Labor Code contains provisions
I propose that our reading of the pertaining to stipulations against
constitutional right to personal liberty and marriage. Specifically, Article 134 states
privacy should approximate how personal that it is unlawful for employers to require
liberty as a concept has developed in the as a condition for employment or
US as adopted in our jurisprudence. continuation of employment that a
woman employee shall not get married.
At the heart of this case are two rights This provision also prohibits the dismissal
that are essential to the concept of of a woman employee by reason of her
personal liberty and privacy, if they are to marriage. This Court, in the case
be given any meaning at all. Brent's act of Philippine Telegraph and Telephone
of dismissing Christine Joy because of her Company v. NLRC,26 has applied this
pregnancy out of wedlock, with the provision and found illegal the dismissal
condition that she will be reinstated if she of a woman employee because of a
marries her then boyfriend, unduly condition in her contract that she remains
burdens first, her right to choose whether single during her employment. Christine
to marry, and second, her right to decide Joy's case involves the reverse, albeit the
whether she will bear and rear her child effect is as burdensome and as odious.
 by jurisprudence. These rights pertain to
In constructively dismissing Christine Joy the freedom to make personal choices
and promising her reinstatement provided that define a human being's life and
she marries her boyfriend, Brent has personhood. The decision to marry and to
breached not a mere statutory prohibition whom are two of the most important
but a constitutional right. While as I have choices that a woman can make in her
already explained, there is jurisprudence life. In the words of the US Supreme
to the effect that the Bill of Rights cannot Court in Obergefell "[n]o union is more
be invoked against a private employer, profound than marriage, for it embodies
Brent's act of invoking the MRPS and the the highest ideals of love, fidelity,
Labor Code brings this case within the devotion, sacrifice, and family. In forming
ambit of the Constitution. In arguing that a marital union, two people become
immorality is a just cause for dismissal something greater than once they
under the MRPS and the Labor Code, were."27 The State has no business
Brent is effectively saying that these interfering with this choice. Neither can it
government issuances violate the sanction any undue burden of the right to
constitutional right to personal liberty and make these choices. Brent, in
privacy. This interpretation cannot be conditioning Christine Joy's reinstatement
countenanced. The Constitution is on her marriage, has effectively burdened
deemed written into these government her freedom. She was forced to choose to
issuances and as such, they must be lose her job or marry in order to keep it.
construed to recognize the protection By invoking the MRPS and the Labor
vested by the Bill of Rights. Code, Brent is, in effect, saying that this
kind of compelled choice is sanctioned by
As I have already discussed, the rights to the State. Contrary to this position, the
personal liberty and privacy are embodied State cannot countenance placing a
in the Due Process Clause and expounded woman employee in a situation where she
will have to give up one right (the right to Code and the MRPS that disregards the
marry as a component of personal liberty Constitution.
and privacy) for another (the right to
employment). This is not the kind of Christine Joy has the right to decide how
State that we are in. Nor is it the kind of she will rear her child. If this choice
values that our Constitution stands for. involves being a single mother for now or
for good, no law or government issuance
The Right to Bear and Rear may be used to interfere with this
a Child outside of Marriage decision. Christine Joy, and all other
women similarly situated, should find
The Labor Code prohibits the refuge in the protection extended by the
discriminatory act of discharging a woman Constitution.
on account of her pregnancy.28Brent, in
constructively dismissing Christine Joy The Constitution highlights the value of
because of her pregnancy, violated this the family as the foundation of the
prohibition. Brent, however, attempts to nation.29 Complementary to this, the
evade this prohibition by claiming that it Family Code of the Philippines provides
was not the mere fact of Christine Joy's that marriage is the foundation of the
pregnancy that caused her dismissal. family.30 Indeed, our laws and tradition
Rather, according to Brent, it is her recognize that children are usually reared
pregnancy outside of wedlock that and families built within the confines of
justified her termination as immorality is marriage. The Constitution and the laws,
a just cause under the MRPS and the however, merely express an ideal. While
Labor Code. In doing so, Brent not only marriage is the ideal starting point of a
violated the law, it even went further and family, there is no constitutional or
asked the labor tribunals and the judiciary statutory provision limiting the definition
to lend an interpretation to the Labor of a family or preventing any attempt to
deviate from our traditional template of In my proposed reading of the
what a family should be. constitutional right to personal liberty and
privacy, Christine Joy and other women
In other jurisdictions, there is a growing similarly situated are free to be single
clamor for laws to be readjusted to suit mothers by choice. This cannot be
the needs of a rising class of women - curtailed in the workplace through
single mothers by choice. These countries discriminatory policies against pregnancy
are faced with the same predicament that out of wedlock. The Constitution allows
Brent confronted in this case - their rules women in this country to design the
have lagged behind the demands of the course of their own lives. They are free to
times. Nevertheless, in our jurisdiction, chart their own destinies.
the Constitution remains as the guide to
ascertain how new situations are to be Constitution and Public Secular Morality
dealt with. In Christine Joy's case, the
Constitution tells us that her right to I finally propose that in applying the two-
personal liberty and privacy protects her tier test in Leus and in the ponencia, the
choice as to whether she will raise her Constitution should be considered as a
child in a marriage. Brent, in dismissing gauge of what the public deems as moral.
Christine Joy because of her pregnancy In this case, there is a constitutionally
outside of wedlock, unduly burdened her declared value to protecting the right to
right to choose. Again, the MRPS and the choose to marry and the right to be a
Labor Code cannot be used to justify single mother by choice. This is our
Brent's acts. These government issuances people's determination of what is moral.
respect the Constitution and abide by it. Thus, in the incisive analysis of Justice
Any contrary interpretation cannot be Reyes, whenever this right to choose is
countenanced. involved, the Constitution compels us to
find that the act is constitutionally
protected, and as such, is necessarily Josephus Q. Ramas and Elizabeth
moral in the public and secular sense. Dimaano, respondents.

DECISION
ACCORDINGLY, I vote to grant the
Petition.chanroblesvirtuallawlibrary CARPIO, J.:

The Case

Before this Court is a petition for review

on certiorari seeking to set aside the Resolutions
of the Sandiganbayan (First Division)[1] dated 18
November 1991 and 25 March 1992 in Civil Case
No. 0037. The first Resolution dismissed
petitioners Amended Complaint and ordered the
return of the confiscated items to respondent
Elizabeth Dimaano, while the second Resolution
denied petitioners Motion for
Reconsideration. Petitioner prays for the grant of
the reliefs sought in its Amended Complaint, or
in the alternative, for the remand of this case to
the Sandiganbayan (First Division) for further
proceedings allowing petitioner to complete the
[G.R. No. 104768. July 21, 2003] presentation of its evidence.

Republic of the Philippines, petitioner, vs. Antecedent Facts

Sandiganbayan, Major General
 Immediately upon her assumption to office unexplained wealth of Ramas. The relevant part
following the successful EDSA Revolution, then of the Resolution reads:
President Corazon C. Aquino issued Executive
Order No. 1 (EO No. 1) creating the Presidential III. FINDINGS and EVALUATION:
Commission on Good Government (PCGG). EO
Evidence in the record showed that respondent
No. 1 primarily tasked the PCGG to recover all
is the owner of a house and lot located at 15-
ill-gotten wealth of former President Ferdinand E.
Yakan St., La Vista, Quezon City. He is also the
Marcos, his immediate family, relatives,
owner of a house and lot located in Cebu
subordinates and close associates. EO No. 1
City. The lot has an area of 3,327 square meters.
vested the PCGG with the power (a) to conduct
investigation as may be necessary in order to The value of the property located in Quezon City
accomplish and carry out the purposes of this may be estimated modestly at P700,000.00.
order and the power (h) to promulgate such rules
and regulations as may be necessary to carry out The equipment/items and communication
the purpose of this order. Accordingly, the facilities which were found in the premises of
PCGG, through its then Chairman Jovito R. Elizabeth Dimaano and were confiscated by
Salonga, created an AFP Anti-Graft Board (AFP elements of the PC Command of Batangas were
Board) tasked to investigate reports of all covered by invoice receipt in the name of
unexplained wealth and corrupt practices by AFP CAPT. EFREN SALIDO, RSO Command Coy,
personnel, whether in the active service or MSC, PA. These items could not have been in
retired.[2] the possession of Elizabeth Dimaano if not given
Based on its mandate, the AFP Board for her use by respondent Commanding General
investigated various reports of alleged of the Philippine Army.
unexplained wealth of respondent Major General Aside from the military equipment/items and
Josephus Q. Ramas (Ramas). On 27 July 1987, communications equipment, the raiding team
the AFP Board issued a Resolution on its was also able to confiscate money in the amount
findings and recommendation on the reported of P2,870,000.00 and $50,000 US Dollars in the
house of Elizabeth Dimaano on 3 March 1986.
Affidavits of members of the Military Security This money was never declared in the Statement
Unit, Military Security Command, Philippine of Assets and Liabilities of respondent. There
Army, stationed at Camp Eldridge, Los Baos, was an intention to cover the existence of these
Laguna, disclosed that Elizabeth Dimaano is the money because these are all ill-gotten and
mistress of respondent. That respondent usually unexplained wealth.Were it not for the affidavits
goes and stays and sleeps in the alleged house of the members of the Military Security Unit
of Elizabeth Dimaano in Barangay Tengga, Itaas, assigned at Camp Eldridge, Los Baos, Laguna,
Batangas City and when he arrives, Elizabeth the existence and ownership of these money
Dimaano embraces and kisses respondent. That would have never been known.
on February 25, 1986, a person who rode in a car
went to the residence of Elizabeth Dimaano with The Statement of Assets and Liabilities of
four (4) attache cases filled with money and respondent were also submitted for scrutiny and
owned by MGen Ramas. analysis by the Boards consultant. Although the
amount of P2,870,000.00 and $50,000 US
Sworn statement in the record disclosed also that Dollars were not included, still it was disclosed
Elizabeth Dimaano had no visible means of that respondent has an unexplained wealth
income and is supported by respondent for she of P104,134. 60.
was formerly a mere secretary.
IV. CONCLUSION:
Taking in toto the evidence, Elizabeth Dimaano
could not have used the military equipment/items In view of the foregoing, the Board finds that a
seized in her house on March 3, 1986 without the prima facie case exists against respondent for ill-
consent of respondent, he being the gotten and unexplained wealth in the amount
Commanding General of the Philippine Army. It of P2,974,134.00 and $50,000 US Dollars.
is also impossible for Elizabeth Dimaano to claim
V. RECOMMENDATION:
that she owns the P2,870,000.00 and $50,000
US Dollars for she had no visible source of Wherefore it is recommended that Maj. Gen.
income. Josephus Q. Ramas (ret.) be prosecuted and
tried for violation of RA 3019, as amended,
otherwise known as Anti-Graft and Corrupt of the Armed Forces of the Philippines and as a
Practices Act and RA 1379, as amended, subordinate and close associate of the deposed
otherwise known as The Act for the Forfeiture of President Ferdinand Marcos.[5]
Unlawfully Acquired Property.[3] The Amended Complaint also alleged that the
Thus, on 1 August 1987, the PCGG filed a AFP Board, after a previous inquiry, found
petition for forfeiture under Republic Act No. reasonable ground to believe that respondents
1379 (RA No. 1379) [4] against Ramas. have violated RA No. 1379.[6] The Amended
Complaint prayed for, among others, the
Before Ramas could answer the petition, then forfeiture of respondents properties, funds and
Solicitor General Francisco I. Chavez filed an equipment in favor of the State.
Amended Complaint naming the Republic of the
Philippines (petitioner), represented by the Ramas filed an Answer with Special and/or
PCGG, as plaintiff and Ramas as defendant. The Affirmative Defenses and Compulsory
Amended Complaint also impleaded Elizabeth Counterclaim to the Amended Complaint. In his
Dimaano (Dimaano) as co-defendant. Answer, Ramas contended that his property
consisted only of a residential house at La Vista
The Amended Complaint alleged that Ramas Subdivision, Quezon City, valued at P700,000,
was the Commanding General of the Philippine which was not out of proportion to his salary and
Army until 1986. On the other hand, Dimaano other legitimate income. He denied ownership of
was a confidential agent of the Military Security any mansion in Cebu City and the cash,
Unit, Philippine Army, assigned as a clerk-typist communications equipment and other items
at the office of Ramas from 1 January 1978 to confiscated from the house of Dimaano.
February 1979. The Amended Complaint further
alleged that Ramas acquired funds, assets and Dimaano filed her own Answer to the
properties manifestly out of proportion to his Amended Complaint. Admitting her employment
salary as an army officer and his other income as a clerk-typist in the office of Ramas from
from legitimately acquired property by taking January-November 1978 only, Dimaano claimed
undue advantage of his public office and/or using ownership of the monies, communications
his power, authority and influence as such officer equipment, jewelry and land titles taken from her
house by the Philippine Constabulary raiding After presenting only three witnesses,
team. petitioner asked for a postponement of the trial.
After termination of the pre-trial,[7] the court On 28 September 1989, during the
set the case for trial on the merits on 9-11 continuation of the trial, petitioner manifested its
November 1988. inability to proceed to trial because of the
On 9 November 1988, petitioner asked for a absence of other witnesses or lack of further
deferment of the hearing due to its lack of evidence to present. Instead, petitioner
preparation for trial and the absence of witnesses reiterated its motion to amend the complaint to
and vital documents to support its case. The conform to the evidence already presented or to
court reset the hearing to 17 and 18 April 1989. change the averments to show that Dimaano
alone unlawfully acquired the monies or
On 13 April 1989, petitioner filed a motion for properties subject of the forfeiture.
leave to amend the complaint in order to charge
the delinquent properties with being subject to The Sandiganbayan noted that petitioner had
forfeiture as having been unlawfully acquired by already delayed the case for over a year mainly
defendant Dimaano alone x x x.[8] because of its many postponements. Moreover,
petitioner would want the case to revert to its
Nevertheless, in an order dated 17 April 1989, preliminary stage when in fact the case had long
the Sandiganbayan proceeded with petitioners been ready for trial. The Sandiganbayan ordered
presentation of evidence on the ground that the petitioner to prepare for presentation of its
motion for leave to amend complaint did not state additional evidence, if any.
when petitioner would file the amended
complaint. The Sandiganbayan further stated During the trial on 23 March 1990, petitioner
that the subject matter of the amended complaint again admitted its inability to present further
was on its face vague and not related to the evidence. Giving petitioner one more chance to
existing complaint. The Sandiganbayan also present further evidence or to amend the
held that due to the time that the case had been complaint to conform to its evidence, the
pending in court, petitioner should proceed to Sandiganbayan reset the trial to 18 May
present its evidence. 1990. The Sandiganbayan, however, hinted that
the re-setting was without prejudice to any action
that private respondents might take under the The records of this case are hereby remanded
circumstances. and referred to the Hon. Ombudsman, who has
However, on 18 May 1990, petitioner again primary jurisdiction over the forfeiture cases
expressed its inability to proceed to trial because under R.A. No. 1379, for such appropriate action
it had no further evidence to present. Again, in as the evidence warrants. This case is also
the interest of justice, the Sandiganbayan referred to the Commissioner of the Bureau of
granted petitioner 60 days within which to file an Internal Revenue for a determination of any tax
appropriate pleading. The Sandiganbayan, liability of respondent Elizabeth Dimaano in
however, warned petitioner that failure to act connection herewith.
would constrain the court to take drastic action. SO ORDERED.
Private respondents then filed their motions to
dismiss based on Republic v. Migrino.[9] The On 4 December 1991, petitioner filed its
Court held in Migrino that the PCGG does not Motion for Reconsideration.
have jurisdiction to investigate and prosecute In answer to the Motion for Reconsideration,
military officers by reason of mere position held private respondents filed a Joint
without a showing that they are subordinates of Comment/Opposition to which petitioner filed its
former President Marcos. Reply on 10 January 1992.
On 18 November 1991, the Sandiganbayan On 25 March 1992, the Sandiganbayan
rendered a resolution, the dispositive portion of rendered a Resolution denying the Motion for
which states: Reconsideration.
WHEREFORE, judgment is hereby rendered
dismissing the Amended Complaint, without Ruling of the Sandiganbayan
pronouncement as to costs. The counterclaims
are likewise dismissed for lack of merit, but the The Sandiganbayan dismissed the Amended
confiscated sum of money, communications Complaint on the following grounds:
equipment, jewelry and land titles are ordered
returned to Elizabeth Dimaano.
 (1.) The actions taken by the PCGG are not in THAT THERE WAS NO
accordance with the rulings of the SHOWING OF
Supreme Court in Cruz, Jr. v. CONSPIRACY, COLLUSION
Sandiganbayan[10] and Republic v. OR RELATIONSHIP BY
[11]
Migrino which involve the same CONSANGUINITY OR
issues. AFFINITY BY AND
BETWEEN RESPONDENT
(2.) No previous inquiry similar to preliminary RAMAS AND RESPONDENT
investigations in criminal cases was DIMAANO
conducted against Ramas and NOTWITHSTANDING THE
Dimaano. FACT THAT SUCH
CONCLUSIONS WERE
(3.) The evidence adduced against Ramas
CLEARLY UNFOUNDED
does not constitute a prima facie case
AND PREMATURE, HAVING
against him.
BEEN RENDERED PRIOR
(4.) There was an illegal search and seizure TO THE COMPLETION OF
of the items confiscated. THE PRESENTATION OF
THE EVIDENCE OF THE
PETITIONER.
The Issues
B. RESPONDENT COURT
SERIOUSLY ERRED IN
Petitioner raises the following issues: HOLDING THAT THE
A. RESPONDENT COURT ACTIONS TAKEN BY THE
SERIOUSLY ERRED IN PETITIONER, INCLUDING
CONCLUDING THAT THE FILING OF THE
PETITIONERS EVIDENCE ORIGINAL COMPLAINT AND
CANNOT MAKE A CASE THE AMENDED
FOR FORFEITURE AND COMPLAINT, SHOULD BE
STRUCK OUT IN LINE WITH of the petitioner and even
THE RULINGS OF THE before the latter was
SUPREME COURT IN CRUZ, allowed to formally offer its
JR. v. SANDIGANBAYAN, evidence and rest its case;
194 SCRA 474 AND
REPUBLIC v. MIGRINO, 189 C. RESPONDENT COURT
SCRA 289, SERIOUSLY ERRED IN
NOTWITHSTANDING THE HOLDING THAT THE
FACT THAT: ARTICLES AND THINGS
SUCH AS SUMS OF MONEY,
1. The cases of Cruz, Jr. v. COMMUNICATIONS
Sandiganbayan, supra, and EQUIPMENT, JEWELRY
Republic v. Migrino, supra, AND LAND TITLES
are clearly not applicable to CONFISCATED FROM THE
this case; HOUSE OF RESPONDENT
DIMAANO WERE
2. Any procedural defect in the ILLEGALLY SEIZED AND
institution of the complaint in THEREFORE EXCLUDED
Civil Case No. 0037 was AS EVIDENCE.[12]
cured and/or waived by
respondents with the filing
of their respective answers The Courts Ruling
with counterclaim; and

3. The separate motions to First Issue: PCGGs Jurisdiction to

dismiss were evidently Investigate Private Respondents
improper considering that
they were filed after This case involves a revisiting of an old issue
commencement of the already decided by this Court in Cruz, Jr. v.
presentation of the evidence Sandiganbayan[13] and Republic v. Migrino.[14]
 The primary issue for resolution is whether the the Philippines or abroad, including
PCGG has the jurisdiction to investigate and the takeover and sequestration of all
cause the filing of a forfeiture petition against business enterprises and entities
Ramas and Dimaano for unexplained wealth owned or controlled by them, during
under RA No. 1379. his administration, directly or through
We hold that PCGG has no such jurisdiction. nominees, by taking undue
advantage of their public office and/
The PCGG created the AFP Board to or using their powers, authority,
investigate the unexplained wealth and corrupt influence, connections or
practices of AFP personnel, whether in the active relationship.
service or retired.[15] The PCGG tasked the AFP
Board to make the necessary recommendations (b) The investigation of such cases of graft
to appropriate government agencies on the and corruption as the President may
action to be taken based on its findings.[16] The assign to the Commission from time
PCGG gave this task to the AFP Board pursuant to time.
to the PCGGs power under Section 3 of EO No.
1 to conduct investigation as may be necessary x x x.
in order to accomplish and to carry out the The PCGG, through the AFP Board, can only
purposes of this order. EO No. 1 gave the PCGG investigate the unexplained wealth and corrupt
specific responsibilities, to wit: practices of AFP personnel who fall under either
of the two categories mentioned in Section 2 of
SEC. 2. The Commission shall be charged with EO No. 1. These are: (1) AFP personnel who
the task of assisting the President in regard to the have accumulated ill-gotten wealth during the
following matters: administration of former President Marcos by
(a) The recovery of all ill-gotten wealth being the latters immediate family, relative,
accumulated by former President subordinate or close associate, taking undue
Ferdinand E. Marcos, his immediate advantage of their public office or using their
family, relatives, subordinates and powers, influence x x x;[17] or (2) AFP personnel
close associates, whether located in involved in other cases of graft and corruption
provided the President assigns their cases to the contemplated within the term subordinate. The
PCGG.[18] Whereas Clauses of EO No. 1 express the
Petitioner, however, does not claim that the urgent need to recover the ill-gotten wealth
President assigned Ramas case to the amassed by former President Ferdinand E.
PCGG. Therefore, Ramas case should fall under Marcos, his immediate family, relatives, and
the first category of AFP personnel before the close associates both here and abroad.
PCGG could exercise its jurisdiction over EO No. 2 freezes all assets and properties in the
him. Petitioner argues that Ramas was Philippines in which former President Marcos
undoubtedly a subordinate of former President and/or his wife, Mrs. Imelda Marcos, their close
Marcos because of his position as the relatives, subordinates, business associates,
Commanding General of the Philippine dummies, agents, or nominees have any interest
Army. Petitioner claims that Ramas position or participation.
enabled him to receive orders directly from his
commander-in-chief, undeniably making him a Applying the rule in statutory construction known
subordinate of former President Marcos. as ejusdem generis that is-
We hold that Ramas was not a subordinate of
[W]here general words follow an enumeration of
former President Marcos in the sense
persons or things by words of a particular and
contemplated under EO No. 1 and its
specific meaning, such general words are not to
amendments.
be construed in their widest extent, but are to be
Mere position held by a military officer does held as applying only to persons or things of the
not automatically make him a subordinate as this same kind or class as those specifically
term is used in EO Nos. 1, 2, 14 and 14-A absent mentioned [Smith, Bell & Co, Ltd. vs. Register of
a showing that he enjoyed close association with Deeds of Davao, 96 Phil. 53, 58, citing Black on
former President Marcos. Migrino discussed Interpretation of Laws, 2nd Ed., 203].
this issue in this wise:
[T]he term subordinate as used in EO Nos. 1 & 2
A close reading of EO No. 1 and related refers to one who enjoys a close association with
executive orders will readily show what is former President Marcos and/or his wife, similar
to the immediate family member, relative, and Marcos acquiescence in Ramas own
close associate in EO No. 1 and the close accumulation of ill-gotten wealth if any.
relative, business associate, dummy, agent, This, the PCGG failed to do.
or nominee in EO No. 2.
Petitioners attempt to differentiate the instant
xxx case from Migrino does not convince
us. Petitioner argues that unlike in Migrino, the
It does not suffice, as in this case, that the AFP Board Resolution in the instant case states
respondent is or was a government official or that the AFP Board conducted the investigation
employee during the administration of former pursuant to EO Nos. 1, 2, 14 and 14-A in relation
President Marcos. There must be a prima facie to RA No. 1379. Petitioner asserts that there is a
showing that the respondent unlawfully presumption that the PCGG was acting within its
accumulated wealth by virtue of his close jurisdiction of investigating crony-related cases
association or relation with former Pres. of graft and corruption and that Ramas was truly
Marcos and/or his wife. (Emphasis supplied) a subordinate of the former President. However,
the same AFP Board Resolution belies this
Ramas position alone as Commanding
contention. Although the Resolution begins with
General of the Philippine Army with the rank of
such statement, it ends with the following
Major General[19] does not suffice to make him a
recommendation:
subordinate of former President Marcos for
purposes of EO No. 1 and its amendments. The V. RECOMMENDATION:
PCGG has to provide a prima facie showing that
Ramas was a close associate of former Wherefore it is recommended that Maj. Gen.
President Marcos, in the same manner that Josephus Q. Ramas (ret.) be prosecuted and
business associates, dummies, agents or tried for violation of RA 3019, as amended,
nominees of former President Marcos were close otherwise known as Anti-Graft and Corrupt
to him. Such close association is manifested Practices Act and RA 1379, as amended,
either by Ramas complicity with former President otherwise known as The Act for the Forfeiture of
Marcos in the accumulation of ill-gotten wealth by Unlawfully Acquired Property.[20]
the deposed President or by former President
Thus, although the PCGG sought to investigate 10. While it is true that the resolution of the
and prosecute private respondents under EO Anti-Graft Board of the New Armed Forces of
Nos. 1, 2, 14 and 14-A, the result yielded a the Philippines did not categorically find
finding of violation of Republic Acts Nos. 3019 a prima facie evidence showing that
and 1379 without any relation to EO Nos. 1, 2, 14 respondent Ramas unlawfully accumulated
and 14-A. This absence of relation to EO No. 1 wealth by virtue of his close association or
and its amendments proves fatal to petitioners relation with former President Marcos and/or
case. EO No. 1 created the PCGG for a specific his wife, it is submitted that such omission
and limited purpose, and necessarily its powers was not fatal. The resolution of the Anti-Graft
must be construed to address such specific and Board should be read in the context of the law
limited purpose. creating the same and the objective of the
Moreover, the resolution of the AFP Board investigation which was, as stated in the above,
and even the Amended Complaint do not show pursuant to Republic Act Nos. 3019 and 1379 in
that the properties Ramas allegedly owned were relation to Executive Order Nos. 1, 2, 14 and 14-
accumulated by him in his capacity as a a;[21] (Emphasis supplied)
subordinate of his commander-in- Such omission is fatal. Petitioner forgets that
chief. Petitioner merely enumerated the it is precisely a prima facie showing that the ill-
properties Ramas allegedly owned and gotten wealth was accumulated by a subordinate
suggested that these properties were of former President Marcos that vests jurisdiction
disproportionate to his salary and other on PCGG. EO No. 1[22] clearly premises the
legitimate income without showing that Ramas creation of the PCGG on the urgent need to
amassed them because of his close association recover all ill-gotten wealth amassed by former
with former President Marcos. Petitioner, in President Marcos, his immediate family,
fact, admits that the AFP Board resolution does relatives, subordinates and close
not contain a finding that Ramas accumulated his associates. Therefore, to say that such omission
wealth because of his close association with was not fatal is clearly contrary to the intent
former President Marcos, thus: behind the creation of the PCGG.
 In Cruz, Jr. v. Sandiganbayan,[23] the Court (b) the investigation and prosecution of
outlined the cases that fall under the jurisdiction such offenses committed in the
of the PCGG pursuant to EO Nos. 1, acquisition of said ill-gotten wealth as
2,[24] 14,[25] 14-A:[26] contemplated under Section 2(a) of
Executive Order No. 1.
A careful reading of Sections 2(a) and 3 of
Executive Order No. 1 in relation with Sections 1, However, other violations of the Anti-Graft
2 and 3 of Executive Order No. 14, shows what and Corrupt Practices Act not otherwise
the authority of the respondent PCGG to falling under the foregoing categories,
investigate and prosecute covers: require a previous authority of the President
for the respondent PCGG to investigate and
(a) the investigation and prosecution of the prosecute in accordance with Section 2 (b) of
civil action for the recovery of ill-gotten Executive Order No. 1. Otherwise,
wealth under Republic Act No. jurisdiction over such cases is vested in the
1379, accumulated by former Ombudsman and other duly authorized
President Marcos, his immediate investigating agencies such as the provincial
family, relatives, subordinates and and city prosecutors, their assistants, the
close associates, whether located in Chief State Prosecutor and his assistants and
the Philippines or abroad, including the state prosecutors. (Emphasis supplied)
the take-over or sequestration of all
business enterprises and entities The proper government agencies, and not the
owned or controlled by them, during PCGG, should investigate and prosecute
his administration, directly or through forfeiture petitions not falling under EO No. 1 and
his nominees, by taking undue its amendments. The preliminary investigation of
advantage of their public office unexplained wealth amassed on or before 25
and/or using their powers, authority February 1986 falls under the jurisdiction of the
and influence, connections or Ombudsman, while the authority to file the
relationships; and corresponding forfeiture petition rests with the
Solicitor General.[27] The Ombudsman Act or
Republic Act No. 6770 (RA No. 6770) vests in the proper prosecutory agency. The rule of law
Ombudsman the power to conduct preliminary mandates that an agency of government be
investigation and to file forfeiture proceedings allowed to exercise only the powers granted to it.
involving unexplained wealth amassed after 25
February 1986.[28] Petitioners argument that private respondents
have waived any defect in the filing of the
After the pronouncements of the Court forfeiture petition by submitting their respective
in Cruz, the PCGG still pursued this case despite Answers with counterclaim deserves no merit as
the absence of a prima facie finding that Ramas well.
was a subordinate of former President Marcos.
The petition for forfeiture filed with the Petitioner has no jurisdiction over private
Sandiganbayan should be dismissed for lack of respondents. Thus, there is no jurisdiction to
authority by the PCGG to investigate waive in the first place. The PCGG cannot
respondents since there is no prima exercise investigative or prosecutorial powers
facie showing that EO No. 1 and its amendments never granted to it. PCGGs powers are specific
apply to respondents. The AFP Board Resolution and limited. Unless given additional assignment
and even the Amended Complaint state that by the President, PCGGs sole task is only to
there are violations of RA Nos. 3019 and recover the ill-gotten wealth of the Marcoses,
1379. Thus, the PCGG should have their relatives and cronies.[29] Without these
recommended Ramas case to the Ombudsman elements, the PCGG cannot claim jurisdiction
who has jurisdiction to conduct the preliminary over a case.
investigation of ordinary unexplained wealth and Private respondents questioned the authority
graft cases. As stated in Migrino: and jurisdiction of the PCGG to investigate and
prosecute their cases by filing their Motion to
[But] in view of the patent lack of authority of the Dismiss as soon as they learned of the
PCGG to investigate and cause the prosecution pronouncement of the Court in Migrino. This
of private respondent for violation of Rep. Acts case was decided on 30 August 1990, which
Nos. 3019 and 1379, the PCGG must also be explains why private respondents only filed their
enjoined from proceeding with the case, without Motion to Dismiss on 8 October
prejudice to any action that may be taken by the
1990.Nevertheless, we have held that the parties Based on the findings of the Sandiganbayan
may raise lack of jurisdiction at any stage of the and the records of this case, we find that
proceeding.[30] Thus, we hold that there was no petitioner has only itself to blame for non-
waiver of jurisdiction in this case. Jurisdiction is completion of the presentation of its
vested by law and not by the parties to an evidence. First, this case has been pending for
action.[31] four years before the Sandiganbayan dismissed
Consequently, the petition should be it. Petitioner filed its Amended Complaint on 11
dismissed for lack of jurisdiction by the PCGG to August 1987, and only began to
conduct the preliminary investigation. The present its evidence on 17 April 1989. Petitioner
Ombudsman may still conduct the proper had almost two years to prepare its evidence.
preliminary investigation for violation of RA No. However, despite this sufficient time, petitioner
1379, and if warranted, the Solicitor General may still delayed the presentation of the rest of its
file the forfeiture petition with the evidence by filing numerous motions for
[32]
Sandiganbayan. The right of the State to postponements and extensions. Even before the
forfeit unexplained wealth under RA No. 1379 is date set for the presentation of its evidence,
not subject to prescription, laches or estoppel.[33] petitioner filed, on 13 April 1989, a Motion for
Leave to Amend the Complaint.[34] The motion
sought to charge the delinquent properties
Second Issue: Propriety of Dismissal of Case (which comprise most of petitioners evidence)
Before Completion of Presentation of with being subject to forfeiture as having been
Evidence unlawfully acquired by defendant Dimaano alone
x x x.
Petitioner also contends that the The Sandiganbayan, however, refused to
Sandiganbayan erred in dismissing the case defer the presentation of petitioners evidence
before completion of the presentation of since petitioner did not state when it would file
petitioners evidence. the amended complaint. On 18 April 1989, the
We disagree. Sandiganbayan set the continuation of the
presentation of evidence on 28-29 September
and 9-11 October 1989, giving petitioner ample investigation on the unexplained wealth of
time to prepare its evidence. Still, on 28 private respondents as mandated by RA No.
September 1989, petitioner manifested its 1379.[36]The PCGG prayed for an additional four
inability to proceed with the presentation of its months to conduct the preliminary investigation.
evidence. The Sandiganbayan issued an Order The Sandiganbayan granted this request and
expressing its view on the matter, to wit: scheduled the presentation of evidence on 26-29
March 1990. However, on the scheduled date,
The Court has gone through extended inquiry petitioner failed to inform the court of the result of
and a narration of the above events because this the preliminary investigation the PCGG
case has been ready for trial for over a year and supposedly conducted. Again, the
much of the delay hereon has been due to the Sandiganbayan gave petitioner until 18 May
inability of the government to produce on 1990 to continue with the presentation of its
scheduled dates for pre-trial and for trial evidence and to inform the court of what lies
documents and witnesses, allegedly upon the ahead insofar as the status of the case is
failure of the military to supply them for the concerned x x x.[37] Still on the date set, petitioner
preparation of the presentation of evidence failed to present its evidence. Finally, on 11 July
thereon.Of equal interest is the fact that this 1990, petitioner filed its Re-Amended
Court has been held to task in public about its [38]
Complaint. The Sandiganbayan correctly
alleged failure to move cases such as this one observed that a case already pending for years
beyond the preliminary stage, when, in view of would revert to its preliminary stage if the court
the developments such as those of today, this were to accept the Re-Amended Complaint.
Court is now faced with a situation where a case
already in progress will revert back to the Based on these circumstances, obviously
preliminary stage, despite a five-month pause petitioner has only itself to blame for failure to
where appropriate action could have been complete the presentation of its evidence. The
undertaken by the plaintiff Republic.[35] Sandiganbayan gave petitioner more than
sufficient time to finish the presentation of its
On 9 October 1989, the PCGG manifested in evidence. The Sandiganbayan overlooked
court that it was conducting a preliminary petitioners delays and yet petitioner ended the
long-string of delays with the filing of a Re- private respondents if these properties are
Amended Complaint, which would only prolong inadmissible in evidence.
even more the disposition of the case. On 3 March 1986, the Constabulary raiding
Moreover, the pronouncements of the Court team served at Dimaanos residence a search
in Migrino and Cruz prompted the warrant captioned Illegal Possession of Firearms
Sandiganbayan to dismiss the case since the and Ammunition. Dimaano was not present
PCGG has no jurisdiction to investigate and during the raid but Dimaanos cousins witnessed
prosecute the case against private respondents. the raid. The raiding team seized the items
This alone would have been sufficient legal basis detailed in the seizure receipt together with other
for the Sandiganbayan to dismiss the forfeiture items not included in the search warrant. The
case against private respondents. raiding team seized these items: one baby
Thus, we hold that the Sandiganbayan did not armalite rifle with two magazines; 40 rounds of
err in dismissing the case before completion of 5.56 ammunition; one pistol, caliber .45;
the presentation of petitioners evidence. communications equipment, cash consisting
of P2,870,000 and US$50,000, jewelry, and land
titles.
Third Issue: Legality of the Search and
Petitioner wants the Court to take judicial
Seizure notice that the raiding team conducted the
search and seizure on March 3, 1986 or five days
Petitioner claims that the Sandiganbayan after the successful EDSA
erred in declaring the properties confiscated from [39]
revolution. Petitioner argues that a
Dimaanos house as illegally seized and therefore revolutionary government was operative at that
inadmissible in evidence. This issue bears a time by virtue of Proclamation No. 1 announcing
significant effect on petitioners case since these that President Aquino and Vice President Laurel
properties comprise most of petitioners evidence were taking power in the name and by the will of
against private respondents. Petitioner will not the Filipino people.[40] Petitioner asserts that the
have much evidence to support its case against revolutionary government effectively withheld the
operation of the 1973 Constitution which
guaranteed private respondents exclusionary The correct issues are: (1) whether the
right. revolutionary government was bound by the Bill
Moreover, petitioner argues that the of Rights of the 1973 Constitution during
exclusionary right arising from an illegal search the interregnum, that is, after the actual and
applies only beginning 2 February 1987, the date effective take-over of power by the revolutionary
of ratification of the 1987 Constitution. Petitioner government following the cessation of resistance
contends that all rights under the Bill of Rights by loyalist forces up to 24 March 1986
had already reverted to its embryonic stage at (immediately before the adoption of the
the time of the search. Therefore, the Provisional Constitution); and (2) whether the
government may confiscate the monies and protection accorded to individuals under the
items taken from Dimaano and use the same in International Covenant on Civil and Political
evidence against her since at the time of their Rights (Covenant) and the Universal Declaration
seizure, private respondents did not enjoy any of Human Rights (Declaration) remained in effect
constitutional right. during the interregnum.

Petitioner is partly right in its arguments. We hold that the Bill of Rights under the 1973
Constitution was not operative during the
The EDSA Revolution took place on 23-25 interregnum. However, we rule that the
February 1986. As succinctly stated in President protection accorded to individuals under the
Aquinos Proclamation No. 3 dated 25 March Covenant and the Declaration remained in effect
1986, the EDSA Revolution was done in during the interregnum.
defiance of the provisions of the 1973
Constitution.[41] The resulting government was During the interregnum, the directives and
indisputably a revolutionary government bound orders of the revolutionary government were the
by no constitution or legal limitations except supreme law because no constitution limited the
treaty obligations that the revolutionary extent and scope of such directives and
government, as the de jure government in the orders. With the abrogation of the 1973
Philippines, assumed under international law. Constitution by the successful revolution, there
was no municipal law higher than the directives
and orders of the revolutionary
government. Thus, during the interregnum, a of a people to cast out their rulers, change their
person could not invoke any exclusionary right policy or effect radical reforms in their system of
under a Bill of Rights because there was neither government or institutions by force or a general
a constitution nor a Bill of Rights during the uprising when the legal and constitutional
interregnum. As the Court explained in Letter of methods of making such change have proved
Associate Justice Reynato S. Puno:[42] inadequate or are so obstructed as to be
unavailable. It has been said that the locus of
A revolution has been defined as the complete positive law-making power lies with the people of
overthrow of the established government in any the state and from there is derived the right of the
country or state by those who were previously people to abolish, to reform and to alter any
subject to it or as a sudden, radical and existing form of government without regard to the
fundamental change in the government or existing constitution.
political system, usually effected with violence or
at least some acts of violence. In Kelsen's book, xxx
General Theory of Law and State, it is defined as
that which occurs whenever the legal order of a It is widely known that Mrs. Aquinos rise to
community is nullified and replaced by a new the presidency was not due to constitutional
order . . . a way not prescribed by the first order processes; in fact, it was achieved in
itself. violation of the provisions of the 1973
Constitution as a Batasang Pambansa
It was through the February 1986 revolution, a resolution had earlier declared Mr. Marcos as
relatively peaceful one, and more popularly the winner in the 1986 presidential
known as the people power revolution that the election. Thus it can be said that the
Filipino people tore themselves away from an organization of Mrs. Aquinos Government which
existing regime. This revolution also saw the was met by little resistance and her control of the
unprecedented rise to power of the Aquino state evidenced by the appointment of the
government. Cabinet and other key officers of the
administration, the departure of the Marcos
From the natural law point of view, the right of Cabinet officials, revamp of the Judiciary and the
revolution has been defined as an inherent right
Military signaled the point where the legal Government,[43] petitioner Baseco, while
system then in effect, had ceased to be conceding there was no Bill of Rights during the
obeyed by the Filipino. (Emphasis supplied) interregnum, questioned the continued validity of
the sequestration orders upon adoption of the
To hold that the Bill of Rights under the 1973 Freedom Constitution in view of the due process
Constitution remained operative during the clause in its Bill of Rights. The Court ruled that
interregnum would render void all sequestration the Freedom Constitution, and later the 1987
orders issued by the Philippine Commission on Constitution, expressly recognized the validity
Good Government (PCGG) before the adoption of sequestration orders, thus:
of the Freedom Constitution. The sequestration
orders, which direct the freezing and even the If any doubt should still persist in the face of the
take-over of private property by mere executive foregoing considerations as to the validity and
issuance without judicial action, would violate the propriety of sequestration, freeze and takeover
due process and search and seizure clauses of orders, it should be dispelled by the fact that
the Bill of Rights. these particular remedies and the authority of the
During the interregnum, the government in PCGG to issue them have received constitutional
power was concededly a revolutionary approbation and sanction. As already
government bound by no constitution. No one mentioned, the Provisional or Freedom
could validly question the sequestration orders Constitution recognizes the power and duty of
as violative of the Bill of Rights because there the President to enact measures to achieve the
was no Bill of Rights during the mandate of the people to . . . (r)ecover ill-gotten
interregnum. However, upon the adoption of the properties amassed by the leaders and
Freedom Constitution, the sequestered supporters of the previous regime and protect the
companies assailed the sequestration orders as interest of the people through orders of
contrary to the Bill of Rights of the Freedom sequestration or freezing of assets or accounts.
Constitution. And as also already adverted to, Section 26,
Article XVIII of the 1987 Constitution treats of,
In Bataan Shipyard & Engineering Co. Inc. and ratifies the authority to issue sequestration
vs. Presidential Commission on Good
or freeze orders under Proclamation No. 3 dated should be allowed to make some legal
March 25, 1986. shortcuts, another word for niceties or
exceptions.
The framers of both the Freedom Constitution Now, if everything the PCGG is doing is
and the 1987 Constitution were fully aware that legal, why is it asking the CONCOM for
the sequestration orders would clash with the Bill special protection? The answer is
of Rights. Thus, the framers of both constitutions clear. What they are doing will not stand
had to include specific language recognizing the the test of ordinary due process, hence
validity of the sequestration orders. The following they are asking for protection, for
discourse by Commissioner Joaquin G. Bernas exceptions. Grandes malos, grandes
during the deliberations of the Constitutional remedios, fine, as the saying stands, but
Commission is instructive: let us not say grandes malos, grande y
malos remedios. That is not an allowable
FR. BERNAS: Madam President, there is
extrapolation. Hence, we should not give
something schizophrenic about the arguments in
the exceptions asked for, and let me
defense of the present amendment.
elaborate and give three reasons:
For instance, I have carefully studied
First, the whole point of the February
Minister Salongas lecture in the Gregorio
Revolution and of the work of the
Araneta University Foundation, of which all
CONCOM is to hasten constitutional
of us have been given a copy. On the one
normalization. Very much at the heart of
hand, he argues that everything the
the constitutional normalization is the full
Commission is doing is traditionally legal.
effectivity of the Bill of Rights. We cannot,
This is repeated by Commissioner Romulo
in one breath, ask for constitutional
also. Minister Salonga spends a major
normalization and at the same time ask for
portion of his lecture developing that
a temporary halt to the full functioning of
argument. On the other hand, almost as an
what is at the heart of constitutionalism.
afterthought, he says that in the end what
That would be hypocritical; that would be a
matters are the results and not the legal
repetition of Marcosian protestation of due
niceties, thus suggesting that the PCGG
process and rule of law. The New Society
word for that is backsliding. It is tragic repeated verbatim by another staunch
when we begin to backslide even before Christian like Commissioner Tingson, it
we get there. becomes doubly disturbing and even
Second, this is really a corollary of the first. discombobulating. The argument makes
Habits tend to become ingrained. The the PCGG an auctioneer, placing the Bill of
committee report asks for extraordinary Rights on the auction block. If the price is
exceptions from the Bill of Rights for six right, the search and seizure clause will be
months after the convening of Congress, sold. Open your Swiss bank account to us
and Congress may even extend this and we will award you the search and
longer. seizure clause. You can keep it in your
Good deeds repeated ripen into virtue; bad private safe.
deeds repeated become vice. What the Alternatively, the argument looks on the
committee report is asking for is that we present government as hostage to the
should allow the new government to hoarders of hidden wealth. The hoarders
acquire the vice of disregarding the Bill of will release the hidden health if the ransom
Rights. price is paid and the ransom price is the
Vices, once they become ingrained, Bill of Rights, specifically the due process
become difficult to shed. The practitioners in the search and seizure clauses. So,
of the vice begin to think that they have a there is something positively revolving
vested right to its practice, and they will about either argument. The Bill of Rights is
fight tooth and nail to keep the franchise. not for sale to the highest bidder nor can it
That would be an unhealthy way of be used to ransom captive dollars. This
consolidating the gains of a democratic nation will survive and grow strong, only if
revolution. it would become convinced of the values
Third, the argument that what matters are enshrined in the Constitution of a price that
the results and not the legal niceties is an is beyond monetary estimation.
argument that is very disturbing. When it For these reasons, the honorable course
comes from a staunch Christian like for the Constitutional Commission is to
Commissioner Salonga, a Minister, and delete all of Section 8 of the committee
 report and allow the new Constitution to adopted the amendment as Section 26,[44] Article
take effect in full vigor. If Section 8 is XVIII of the 1987 Constitution. The framers of the
deleted, the PCGG has two options. First, Constitution were fully aware that absent Section
it can pursue the Salonga and the Romulo 26, sequestration orders would not stand the test
argument that what the PCGG has been of due process under the Bill of Rights.
doing has been completely within the pale Thus, to rule that the Bill of Rights of the 1973
of the law. If sustained, the PCGG can go Constitution remained in force during the
on and should be able to go on, even interregnum, absent a constitutional provision
without the support of Section 8. If not excepting sequestration orders from such Bill of
sustained, however, the PCGG has only Rights, would clearly render all sequestration
one honorable option, it must bow to the orders void during the
majesty of the Bill of Rights. interregnum. Nevertheless, even during the
The PCGG extrapolation of the law is interregnum the Filipino people continued to
defended by staunch Christians. Let me enjoy, under the Covenant and the Declaration,
conclude with what another Christian almost the same rights found in the Bill of Rights
replied when asked to toy around with the of the 1973 Constitution.
law. From his prison cell, Thomas More
said, "I'll give the devil benefit of law for my The revolutionary government, after installing
nations safety sake. I ask the Commission itself as the de jure government, assumed
to give the devil benefit of law for our responsibility for the States good faith
nations sake. And we should delete compliance with the Covenant to which the
Section 8. Philippines is a signatory. Article 2(1) of the
Thank you, Madam President. (Emphasis Covenant requires each signatory State to
supplied) respect and to ensure to all individuals within its
territory and subject to its jurisdiction the
Despite the impassioned plea by rights[45] recognized in the present
Commissioner Bernas against the amendment Covenant. Under Article 17(1) of the Covenant,
excepting sequestration orders from the Bill of R the revolutionary government had the duty to
ights, the Constitutional Commission still insure that [n]o one shall be subjected to arbitrary
or unlawful interference with his privacy, family, jure government, the revolutionary government
home or correspondence. could not escape responsibility for the States
The Declaration, to which the Philippines is good faith compliance with its treaty obligations
also a signatory, provides in its Article 17(2) that under international law.
[n]o one shall be arbitrarily deprived of his It was only upon the adoption of the
property. Although the signatories to the Provisional Constitution on 25 March 1986 that
Declaration did not intend it as a legally binding the directives and orders of the revolutionary
document, being only a declaration, the Court government became subject to a higher
has interpreted the Declaration as part of the municipal law that, if contravened, rendered such
generally accepted principles of international law directives and orders void. The Provisional
and binding on the State.[46] Thus, the Constitution adopted verbatim the Bill of Rights
revolutionary government was also obligated of the 1973 Constitution.[48] The Provisional
under international law to observe the rights[47] of Constitution served as a self-limitation by the
individuals under the Declaration. revolutionary government to avoid abuses of the
The revolutionary government did not absolute powers entrusted to it by the people.
repudiate the Covenant or the Declaration during During the interregnum when no constitution
the interregnum. Whether the revolutionary or Bill of Rights existed, directives and orders
government could have repudiated all its issued by government officers were valid so long
obligations under the Covenant or the as these officers did not exceed the authority
Declaration is another matter and is not the issue granted them by the revolutionary government.
here. Suffice it to say that the Court considers the The directives and orders should not have also
Declaration as part of customary international violated the Covenant or the Declaration. In this
law, and that Filipinos as human beings are case, the revolutionary government
proper subjects of the rules of international law presumptively sanctioned the warrant since the
laid down in the Covenant. The fact is the revolutionary government did not repudiate
revolutionary government did not repudiate the it. The warrant, issued by a judge upon proper
Covenant or the Declaration in the same way it application, specified the items to be searched
repudiated the 1973 Constitution. As the de
and seized. The warrant is thus valid with respect A. During the conversation right after
to the items specifically described in the warrant. the conduct of said raid, I was
However, the Constabulary raiding team informed that the reason why they
seized items not included in the warrant. As also brought the other items not
admitted by petitioners witnesses, the raiding included in the search warrant was
team confiscated items not included in the because the money and other
warrant, thus: jewelries were contained in attach
cases and cartons with markings
Direct Examination of Capt. Rodolfo Sebastian Sony Trinitron, and I think three (3)
AJ AMORES vaults or steel safes. Believing that
the attach cases and the steel
Q. According to the search warrant, safes were containing firearms,
you are supposed to seize only for they forced open these containers
weapons. What else, aside from only to find out that they contained
the weapons, were seized from the money.
house of Miss Elizabeth Dimaano?
xxx
A. The communications equipment,
money in Philippine currency and Q. You said you found money instead
US dollars, some jewelries, land of weapons, do you know the
titles, sir. reason why your team seized this
Q. Now, the search warrant speaks money instead of weapons?
only of weapons to be seized from A. I think the overall team leader and
the house of Elizabeth the other two officers assisting him
Dimaano. Do you know the reason decided to bring along also the
why your team also seized other money because at that time it was
properties not mentioned in said already dark and they felt most
search warrant? secured if they will bring that
because they might be suspected
 also of taking money out of those Q. And this party believed there were
items, your Honor.[49] weapons deposited in the house of
Miss Elizabeth Dimaano?
Cross-examination A. Yes, your Honor.
Atty. Banaag
Q. And they so swore before the
Q. Were you present when the search Municipal Trial Judge?
warrant in connection with this case A. Yes, your Honor.
was applied before the Municipal Q. But they did not mention to you, the
Trial Court of Batangas, Branch 1? applicant for the
A. Yes, sir. search warrant, any other
Q. And the search warrant applied for properties or contraband which
by you was for the search and could be found in the residence of
seizure of five (5) baby armalite Miss Elizabeth Dimaano?
rifles M-16 and five (5) boxes of A. They just gave us still unconfirmed
ammunition? report about some hidden items, for
A. Yes, sir. instance, the communications
equipment and money. However, I
xxx did not include that in the
application for search warrant
AJ AMORES considering that we have not
Q. Before you applied for a search established concrete evidence
warrant, did you conduct about that. So when
surveillance in the house of Miss Q. So that when you applied for search
Elizabeth Dimaano? warrant, you had reason to believe
A. The Intelligence Operatives that only weapons were in the
conducted surveillance house of Miss Elizabeth Dimaano?
together with the MSU elements, A. Yes, your Honor.[50]
your Honor.
xxx the search warrant, like for
instance, jewelries. Why did you
Q. You stated that a .45 caliber pistol seize the jewelries?
was seized along with one A. I think it was the decision of the
armalite rifle M-16 and how many overall team leader and his
ammunition? assistant to bring along also the
A. Forty, sir. jewelries and other items, sir. I do
Q. And this became the subject of your not really know where it was taken
complaint with the issuing Court, but they brought along also these
with the fiscals office who charged articles. I do not really know their
Elizabeth Dimaano for Illegal reason for bringing the same, but I
Possession of Firearms and just learned that these were taken
Ammunition? because they might get lost if they
A. Yes, sir. will just leave this behind.
Q. Do you know what happened to that xxx
case?
A. I think it was dismissed, sir. Q. How about the money seized by
Q. In the fiscals office? your raiding team, they were not
A. Yes, sir. also included in the search
warrant?
Q. Because the armalite rifle you A. Yes sir, but I believe they were also
seized, as well as the .45 caliber taken considering that the money
pistol had a Memorandum Receipt was discovered to be contained in
in the name of Felino Melegrito, is attach cases. These attach cases
that not correct? were suspected to be containing
A. I think that was the reason, sir. pistols or other high powered
Q. There were other articles seized firearms, but in the course of the
which were not included in search the contents turned out to
 be money. So the team leader also them.However, we do not declare that such
decided to take this considering person is the lawful owner of these items, merely
that they believed that if they will that the search and seizure warrant could not be
just leave the money behind, it used as basis to seize and withhold these items
might get lost also. from the possessor. We thus hold that these
Q. That holds true also with respect to items should be returned immediately to
the other articles that were seized Dimaano.
by your raiding team, like Transfer WHEREFORE, the petition for certiorari
Certificates of Title of lands? is DISMISSED. The questioned Resolutions of
A. Yes, sir. I think they were contained the Sandiganbayan dated 18 November 1991
in one of the vaults that were and 25 March 1992 in Civil Case No. 0037,
opened.[51] remanding the records of this case to the
It is obvious from the testimony of Captain Ombudsman for such appropriate action as the
Sebastian that the warrant did not include the evidence may warrant, and referring this case to
monies, communications equipment, jewelry and the Commissioner of the Bureau of Internal
land titles that the raiding team confiscated. The Revenue for a determination of any tax liability of
search warrant did not particularly describe these respondent Elizabeth Dimaano, are AFFIRMED.
items and the raiding team confiscated them on SO ORDERED.
its own authority. The raiding team had no legal
basis to seize these items without showing that
these items could be the subject of warrantless
search and seizure.[52] Clearly, the raiding team
exceeded its authority when it seized these
items.
The seizure of these items was therefore void,
and unless these items are contraband per
se,[53] and they are not, they must be returned to
the person from whom the raiding seized