Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-53851 July 9, 1991
CHUA HUAT, ONG CHOAN, DOMINADOR FELINO, RUFINO CLEMENTE,
TEODORA CLEMENTE, and LOURDES MEMPIN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, JUDGE ELVIRO PERALTA, SHERIFF OF
MANILA, and THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, and MANUEL
UY AND SONS, INC., respondents.
G.R. No. L-63863 July 9, 1991
CHUA HUAT, LOURDES MEMPIN, RUFINO CLEMENTE, DOMINADOR FELINO,
MARIA GAMBOA, and ONG CHOAN, petitioners,
vs.
HON. RAMON D. BAGATSING, City Mayor of Manila; ROMULO M. DEL ROSARIO,
City Engineer and Building Official, City of Manila; and MANUEL UY AND SONS,
INC., respondents.
DAVIDE, JR., J.:p
In the resolution of 9 January 1984, this Court resolved to consolidate these cases as
they are related.
The first case, G.R. No. 53851, is a petition for review on certiorari of the decision of the
Court of Appeals of 29 February 1980 in C.A.-G.R. No. 09251 SP 1 and its resolutions
of 30 April 1980 and 8 July 1980 denying, respectively, petitioners' first and second
motions for the reconsideration of said decision.
The second case, G.R. No. 63863, 2 is a petition for prohibition, with prayer for
preliminary injunction and/or restraining order, directed against the notices of
condemnation and the demolition orders issued by the respondent City Engineer, upon
authority of the respondent City Mayor, concerning the buildings occupied by petitioners
at 1271 to 1277 Pedro Gil St. and 1553 to 1557 Paz St., Paco, Manila.
For sheer lack of merit, these cases must be dismissed.
The antecedent facts and proceedings are not disputed.
On 31 May 1972, a decision was rendered in Civil Case No. 74634 3 by the Court of
First Instance, Branch XVII, then presided by Honorable Judge now Associate
Justice of this Court Ameurfina Melencio-Herrera, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered, a) sentencing defendant
Dominador Felino, Lourdes Mempin, Chua Huat, Ong Choan, Francisco,
Rufino and Teodora, all surnamed Clemente, to pay plaintiff UY the
following monthly sums set out after their respective names beginning
January 1, 1963, until the date they have vacated the property, with
interest at 6% per annum from the date of this Decision as to the amounts
due on May 31, 1972:
DOMINADOR FELINO P 25.00/month
Page 1 of 102

LOURDES MEMPIN P 30.00/ "

CHUA HUAT P 100.00/ "
portion subleased by Gamboa P 38.00/ "
portion subleased by Kho Chong P 110.00/ "
portion subleased by Chua Chia P 55.00/ "
ONG CHOAN P 100.00/ "
FRANCISCO, RUFINO and
TEODORA CLEMENTE P 25.00/ "
b) Ordering said defendants, including Maximo Yambao or anyone
claiming under him, to vacate the hands respectively occupied by them
and to surrender the same to plaintiff UY; to remove their improvements
thereon or to abandon them within sixty (60) days from receipt of this
judgment. After the lapse of said sixty days, plaintiff can submit the
corresponding motion under Section 14, Rule 39;
c) On Ong Choan's Third-Party Complaint, sentencing third-party
defendant SY PUT to reimburse the former for whatever amount he shall
pay to UY pursuant to this judgment, with interest at the legal rate on the
total amount from the date of payment until fully paid. SY PUT shall either
remove all the improvements he has constructed on the land, or abandon
them in favor of plaintiff within sixty (60) days from receipt of this
judgment.
Costs against defendants proportionately.
SO ORDERED.
Not satisfied with the said decision, herein petitioners, as defendants therein, appealed
therefrom to the Court of Appeals which docketed it as C.A.-G.R. No. 51337-R. In its
decision of 19 January 1977, the Court of Appeals affirmed in toto the aforesaid
decision. 4 Petitioners, except Ong Choan, filed a Petition for Review on certiorari with
this Court (G.R. No. L-47603) on 8 February 1978 to set aside the decision of the Court
of Appeals. Petitioner Ong Choan separately filed a similar petition with this Court (G.R.
No. L-48649), arguing that: "the case was actually an unlawful detainer case and
therefore, the Court of First Instance had no jurisdiction over it, making the decision null
and void."
Both petitions for review on certiorari were denied by this Court. 5
On 15 November 1978, after the decision in Civil Case No. 74634 became final and
executory, the plaintiffs (private respondents herein) filed a motion to execute the same,
which was granted by the trial court (Branch XXVII) on 20 November 1978. 6
Re: G.R. No. 53851
On 21 November 1978, petitioner Chua Huat filed with the Court of First Instance of
Manila a complaint for the annulment of the judgment in Civil Case No. 74634. This
complaint was docketed as Civil Case No. 119751 and was assigned to Branch XXII.
Petitioner Ong Choan and others also filed a separate complaint for annulment of
judgment which was docketed as Civil Case No. 119884. Both complaints were based
on the ground that the Court of First Instance of Manila had no jurisdiction over Civil
Page 2 of 102

Case No. 74634 because the said action was one for ejectment and not for recovery of
possession (accion publiciana) which was, therefore, cognizable by the City Court of
Manila; hence, the decision in said Civil Case No. 74634 is null and void.
On 23 February 1979, despite the filing of the above cases for annulment of judgment,
the Court of First Instance of Manila ordered the execution of the judgment in Civil Case
No. 74634. Petitioners field a motion for reconsideration of the said order and to
suspend proceedings in Civil Case No. 74634 pending termination of the annulment
case which was, however, denied by the trial court in its Order of 5 April 1979, which
reads:
All the points raised in defendants' motion for reconsideration and to
suspend proceedings are already thoroughly covered in the order of
February 23, 1979 which in effect holds that Branch XXII, a coordinate
court, cannot interfere with this branch in its prerogative to carry out its
decision, long final and affirmed by the higher courts, into effect, and said
motion is hereby denied. It is only the superior court which can prohibit
this branch from executing its decision.
The Sheriff of Manila, unless restrained by either the Supreme Court or
the Court of Appeals, shall immediately implement the writ of execution
upon the expiration of thirty (30) days from receipt by the defendants of a
copy of the order, if to give them time to bring the incident up
on certiorari to said superior courts. 7
Petitioners then filed a Petition for Certiorari and Prohibition with the Court of Appeals,
docketed as C.A.-G.R. No. 09251 SP, to set aside the order of execution of judgment,
and to prohibit the respondents from executing the judgment until Civil Case No.
119751 pending in Branch XXII of the Court of First Instance of Manila is finally decided
and terminated.
In the Decision promulgated on 29 February 1980, the Court of Appeals denied the
petition for lack of merit, stating inter alia:
The instant petition must be denied for lack of merit.
1. The judgment in Civil Case No. 74634 is undisputedly final and
executory. As such, the issuance of a writ of execution thereof becomes
the ministerial duty of the respondent judge. . . .
2. Civil Case No. 119751 filed by petitioners herein to annul the judgment
in Civil Case No. 74634 cannot stop the execution thereof because of
finality of judgment or res judicata. A cursory reading of the questioned
judgment, Civil Case No. 74634, discloses that the issue raised in the
annulment of judgment case, C.C. No. 119751, has been decided in the
prior case when the court then presided by now Supreme Court Justice
Ameurfina Melencio-Herrera who penned the said decision stated, as
follows:
A. This is an accion publiciana and not one for unlawful
detainer, for which reason, it was rightfully brought before
this Court. What is involved is not the recovery of physical
possession only but the recovery of the right to possess.
We find application in the following doctrines:
A party may not, by changing the form of a lawsuit or
adopting a different method of presenting the matter, escape
the application of the principle that the same cause of action
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may not be litigated twice between the same parties. (Paz

vs. Indanan, 76 Phil. 608; Pascual vs. Palermo, L-2185, April
29, 1950, 47 O.G. 6184; Francisco vs. Blas, L-5078, May 4,
1953; Barrera vs. Del Rosario, L-8928, April 28, 1956).
Another aspect of the doctrine is that once an issue has
been raised and finally decided by a court of competent
jurisdiction, generally speaking it becomes res judicata or
can be made the basis of a plea of estoppel by judgment as
between the parties to that litigation, no matter in what
manner it was raised and Official or not it was the principal
issue or merely an incidental one. (Eugenio vs. Tiangco L2804, Sept. 20, 1949; Robis vs. Caspe, L-6166, Sept. 28,
1964.).
WHEREFORE, there being no finding of a capricious and whimsical
exercise of judgment by the respondent court equivalent to lack of
jurisdiction which may be the subject of a writ of certiorari, the instant
petition is hereby DENIED, with costs against petitioners. 8
The first and second motions for reconsideration filed by the petitioners were denied on
30 April 1980 and 8 July 1980, respectively, for the reason that the ground relied upon
was already discussed, taken up and passed upon by the Court. 9
Hence, this petition which was filed on 7 August 1980.
Petitioners claim that respondent Court of Appeals erred in holding that Civil Case No.
119751 cannot stop the execution of the judgment in Civil Case No. 74634 because of
the finality of such judgment, or on the ground ofres judicata, and it was the court's
ministerial duty to execute it; and in not finding that the pendency of Civil Case No.
119751 to annul the judgment in Civil Case No. 74634 on the ground of lack of
jurisdiction justifies the stay of execution of said judgment.
In the resolution of 3 September 1980, We required respondents to comment on the
petition which private respondents complied with on 14 October 1980. 10 To this
comment, petitioners filed a reply on 29 October 1980. 11
On 19 November 1980, We gave due course to the petition and required the parties to
submit simultaneously their memoranda which petitioners complied with on 12 January
1981 and the private respondents on 20 January 1981.
It further appears that Civil Case No. 119751 aforestated was dismissed by the trial
court in its Order of 24 September 1979. Herein petitioner Chua Huat appealed from
said Order to the Intermediate Appellate Court which docketed the same as A.C.-GR
CV No. 66303. 12 In its Decision of 12 March 1984, 13 the Intermediate Appellate Court
affirmed in toto the questioned order holding:
Plaintiff-appellant contends that the principle of res judicata does not apply
in the case at bar because "although there may be identity of parties and
of subject matter between Civil Case No. 74634" (which is for recovery of
possession) "and Civil Case No. 119751" (which is for annulment of
judgment) "there is no Identity of causes of action between these two
cases."
While there is, certainly on the face of the argument, merit in the
contention that there is no identity of causes of action between Civil Case
No. 74634 and this instant case, upon closer scrutiny, however, of the
records of the said two cases, We find the same to be utterly devoid of
merit.
Page 4 of 102

The records of the aforesaid two cases will bear it out that the issue of
lack of jurisdiction (which is the cause of action in Civil Case No. 119751)
has been squarely ruled upon, not only by the trial court in Civil Case No.
74634 but also by the Court of Appeals and by the Supreme Court.
Plaintiff-appellant further contends that since the issue of jurisdiction in
Civil Case No. 74634 was raised in their motion for reconsideration before
the Court of Appeals in CA-G.R. No. 51337-R, the Appellate Court did not,
in its resolution denying said motion, pass on the same and on appeal by
petition for review to the Supreme Court in L-47603 and L-48649, where
the same issue among others was raised, the High Court in its minutes'
(sic) did not rule squarely on said issue, "the court a quo should have
proceeded with the hearing of this case on the judgments and thereafter
decide (sic) the same based on the evidence adduced by the parties". We
find the same likewise untenable.
Issues raised by the parties in their brief and passed upon
subsilencio by the appellate court in a decision which has
become final and executory are considered closed and can
no longer be revived by the parties in a subsequent litigation
without doing violence to the principle of res judicata. (Corda
vs. Maglinti, G.R. No. L-17476, Nov. 30, 1961).
What more, neither the Supreme Court nor the Appellate Court is duty
bound to discuss the pros and cons of appellant's argument.
Lastly, in Kabigting vs. Acting Director of Prisons (116 Phil. 589; 1962) the
Supreme Court pointed out: "It need not be stated that the Supreme Court,
being the court of last resort, is the final arbiter of all legal questions
properly brought before it and that its decision in any given case
constitutes the law of that particular case. Once its judgment becomes
final, it is binding on all inferior courts, and hence beyond their power and
authority to alter or modify". The High Tribunal further pointed out that
"Nor is it to be lost sight of that such principle does not apply only to the
express terms of decision, but likewise to what is therein implicit, which
must be implemented faithfully, no circumvention or evasion being
allowed". (Sanchez vs. Court of Industrial Relations, L-26932, 27 SCRA
490).
Petitioners made no attempt to inform the Court of the dismissal of Civil Case No.
119751 and of the above action of the Intermediate Appellate Court.
Re: G.R. No. 63863
On 14 September 1982, Manuel Uy and Sons, Inc., respondent in G.R. No. 53851,
requested Romulo M. del Rosario the City Engineer and Building Officials, of Manila, to
condemn the dilapidated structures located at 1271 to 1277 Pedro Gil St. and 1553 to
1557 Paz St., Paco, Manila, all occupied by petitioners. 14
On 17 November 1982, said official issued notices of condemnation addressed to
petitioners Chua Huat, Maria Gamboa, Lourdes Mempin, Dominador Felino, Ong
Choan, Rufino Clements, and several other persons. The condemnation orders stated
that the subject buildings were found to be in dangerous condition and therefore
condemned, subject to the confirmation of the Mayor as required by Section 276 of the
Compilation of Ordinances of the City of Manila. It further stated that the notice is not an
order to demolish as the findings of the City Engineer is (sic) still subject to the approval
of the Mayor. 15 The orders were based on the inspection reports made by Architect
Oscar D. Andres and the Memorandum-Reports made by the Evaluation Committee of
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the Office of the City Engineer, which all showed that the subject buildings suffer from
structural deterioration by more than 50% and as much as 80%. 16
On 19 January 1983, Civil Engineer Romulo C. Molas, a private practitioner, inspected
the abovementioned structures upon the request of petitioners herein. In his evaluation
report dated 21 January 1983, he stated that although the buildings are old, they are still
structurally sound and have a remaining economic life of at least eight years. 17
On 22 February 1983, or three months after the notices of condemnation were issued,
petitioners formally protested against said notices of condemnation on the ground that
the buildings are still in good physical condition and are structurally sound based on the
abovementioned certification of Civil Engineer Romulo C. Molas dated 21 January
1983. 18
On 26 April 1983, Maria Gamboa, one of the petitioners herein, was informed of the
issuance by the City Engineer of the demolition order with respect to the building
located at 1565 Paz St., Paco, Manila, and was told to vacate the premises within 15
days from notice. 19
On 2 May 1983, petitioners filed the instant Petition for Prohibition, with Preliminary
Injunction and/or Restraining Order, against City Mayor Ramon Bagatsing, City
Engineer and Building Officer Romulo del Rosario and Manuel Uy and Sons, Inc.,
praying that a restraining order or preliminary injunction be issued enjoining
respondents from proceeding with the announced demolition of the subject buildings,
this petition be given due course, and after hearing, respondents be prohibited from
demolishing said buildings. 20 They allege in their petition that:
RESPONDENTS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN ISSUING THE
CONDEMNATION ORDERS.
THERE IS NO APPEAL OR ANY OTHER PLAIN, SPEEDY AND
ADEQUATE REMEDY.
On 9 May 1983, this Court directed respondents to comment on the petition and issued
a Temporary Restraining Order against the respondents City Mayor and City Engineer
restraining them from enforcing and/or carrying out the demolition order on the building
occupied by Maria Gamboa at 1565 Paz Street. 21
On 6 July 1983, the respondent Mayor of Manila confirmed the rest of the condemnation
orders issued by the respondent City Engineer. Pursuant thereto, the respondent City
Engineer, on 12 September 1983, issued demolition orders addressed to Chua Huat,
Ong Choan, Dominador Felino and Lourdes Mempin, whereby they were ordered to
vacate and commence the demolition and/or removal of the buildings occupied by them
after fifteen days from receipt of the order. 22
On 18 May 1983, respondents City Mayor and City Engineer filed their
Comment 23 praying that the petition be dismissed on the following grounds: (a) that it
involves questions of facts which should be ventilated before the Regional Trial Court of
Manila; (b) the subject buildings were condemned and ordered removed after it was
established that they had suffered from defects or deterioration thereby posing perils to
the lives and limbs not only of petitioners but also to the public in general; (c) the power
to condemn buildings and structures in the City of Manila falls within the exclusive
domain of the City Engineer pursuant to Sections 275 and 276 of its Compilation of
Ordinances (also Revised Ordinances 1600); (d) the power to condemn and remove
buildings and structures is an exercise of the police power granted the City of Manila to
promote public safety; and (e) administrative decisions falling within the executive
jurisdiction cannot be set aside by courts of justice except on proof of grave abuse of
discretion, fraud or error of law.
Page 6 of 102

On 20 May 1983, private respondent Manuel Uy and Sons, Inc. filed its
Comment 24 wherein it contends that the petition is premature, unreasonable and
deserves no consideration as petitioners have not exhausted readily-available
administrative remedies and that the validity of the questioned condemnation and
demolition orders entails questions of facts not entertainable in this petition. It alleges
that the condemnation orders were not immediately executory, as the finding of the City
Engineer/Building Officials, is still subject to the approval of the Mayor per Section 276
of the Compilation of Ordinances of the City of Manila. Moreover, under Section 5.3,
Rule VII of the Implementing Rules and Regulations of P.D. No. 1096, the owner of a
building may appeal to the Secretary of Public Works and Communications, whose
decision is final, the finding or declaration of the Building Officials, and ask that a reinspection or re-investigation of the building or structure be made; for not availing of this
remedy, petitioners failed to exhaust administrative remedies.
Petitioners filed a Reply on 3 October 1983,
14 November 1983. 26

25

to Which respondents filed a rejoinder on

On 4 January 1984, this case was consolidated with G.R. No. 53851.
On 30 July 1986, We gave due course to this petition and required the parties to submit
their respective memoranda. 27 Private respondent filed its Memorandum on 3 October
1986, while petitioners filed theirs on 3 November 1986. 28
On 18 January 1987, petitioners filed a rejoinder
respondents.

29

to the Memorandum of private

We now resolve these petitions.

A. The first, G.R. No. 53851, is frivolous and is dismally bereft of merit. The antecedent
facts stated above unmistakably disclose a clear pattern to make a mockery of the
judicial process, or to abuse it. The decision of the trial court in Civil Case No. 74634 of
31 May 1972, which was affirmed, first, by the Court of Appeals in its decision of 19
January 1977 (C.A.-G.R. No. 51337-R) and second, by this Court (G.R. No. L-47603
and G.R. No. L-48649), had long become firm and final. To maliciously stop its
execution pursuant to the Order of 20 March 1978, petitioner Chua Huat filed with the
trial court Civil Case No. 119751 to annul the decision, reviving therein issues which he
had squarely raised in C.A.-G.R. No. 51337-R. Then, he filed a motion in Civil Case No.
74634 to set aside the order of execution and to suspend proceedings therein in view of
the pendency of the annulment case.
Unfazed by his failure to hold the trial court hostage to his scheme, he went to the Court
of Appeals (C.A.-G.R. No. 09251 SP) to question the denial by the trial court of his
aforesaid motion, and when he failed again, he came to this Court via this petition with
issues which, as his counsel fully knew, had long been laid to rest.
At the same time, when Civil Case No. 119751 was dismissed on 24 September 1979,
petitioner went to the Court of Appeals (A.C.-G.R. CV No. 66303), also raising the same
issues. He, however, deliberately chose not to inform this Court of the unfavorable
decision of the Intermediate Appellate Court of 12 March 1984. The reason of course is
all too obvious, and in the light of his remarkable effort to frustrate or subvert the ends of
justice, petitioner cannot be expected to do so.
We find, therefore, the challenged decision of the respondent Court of Appeals to be in
full accord with law and jurisprudence But this should not be the end of this case. We
must state here for the petitioners and their counsel and on all others similarly inclined
to resort to the same or related scheme or stratagem that this Court cannot condone or
tolerate any abuse of the judicial process. We must, once again, remind counsel and
litigants, as We did in Cantelang, et al. vs. Medina, et al., 30 that "this Court win ever be
vigilant to nip in the bud any dilatory maneuver calculated to defeat or frustrate the ends
Page 7 of 102

of justice, fair play and the prompt implementation of final and executory judgments."
And, more particularly for lawyers, in Banogon, et al. vs. Zerna, et al., 31 We said in no
uncertain terms:
As officers of the court, lawyers have a responsibility to assist in the
proper administration of justice. They do not discharge this duty by filing
pointless petitions that only add to the workload of the judiciary, especially
this Court, which is burdened enough as it is. A judicious study of the facts
and the law should advise them when a case, such as this, should not be
permitted to be flied to merely clutter the already congested judicial
dockets. They do not advance the cause of law or their clients by
commencing litigations that for sheer lack of merit do not deserve the
attention of the courts.
In another portion of said decision, We said:
This Court has repeatedly reminded litigants and lawyers alike:
Litigation must end and terminate sometime and
somewhere, and it is essential to an effective and efficient
administration of justice that, once a judgment has become
final, the winning party be not, through a mere subterfuge,
deprived of the fruits of the verdict. Courts must therefore
guard against any scheme calculated to bring about that
result. Constituted as they are to put an end to
controversies, courts should frown upon any attempt to
prolong them. 32
There should be a greater awareness on the part of litigants
that the time of the judiciary, much more so of this Court, is
too valuable to be wasted or frittered away by efforts, far
from commendable, to evade the operation of a decision
final and executory, especially so, where, as shown in this
case, the clear and manifest absence of any right calling for
vindication, is quite obvious and indisputable. 33
This appeal, moreover, should fail, predicated as it is on an
insubstantial (sic) objection bereft of any persuasive force.
Defendants had to display ingenuity to conjure a technicality.
From Alonso v. Villamor, a 1910 decision, we have left no
doubt as to our disapproval of such a practice. The aim of a
lawsuit is to render justice to the parties according to law.
Procedural rules are precisely designed to accomplish such
a worthy objective. Necessarily, therefore, any attempt to
pervert the ends for which they are intended deserves
condemnation. We have done so before. We do so again. 34
B. G.R. No. 63863 must equally fall. It is patently obvious that petitioners have no valid
grievance for the remedy of certiorari under Rule 65 of the Rules of Court to be
available to them. It is explicitly clear from Section 1 of Rule 65 of the Rules of Court
that for certiorari to be available: (a) a tribunal, board or office exercising judicial
function acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion, and (b) that there is no appeal, nor any plain, speedy, and adequate remedy
in the ordinary course of law. Petitioners failed to show the presence of both elements.
The power to condemn buildings and structures in the City of Manila falls within the
exclusive jurisdiction of the City Engineer, who is at the same time the Building Officials,
(Sec. 206, P.D. 1096). Sections 275 and 276 of the Compilation of Ordinances of the
City of Manila (also Revised Ordinances 1600), provide:
Page 8 of 102

Sec. 275. Deterioration and Defects. All buildings or parts of buildings

which show defects in any essential parts shall be repaired and put in safe
condition at once, or if the deterioration be greater than fifty per centum of
the value of the building, as estimated by the city engineer, they shall be
removed.
Sec. 276. Condemnation Proceeding. Whenever in the judgment of the
City Engineer any building or portion of building has been damaged by
any cause to such an extent as to be dangerous for use, he may condemn
the same and shall immediately notify the owner and the Mayor of his
action. If the owner or his agent be not willing to abide by this order of
condemnation, he may make formal objection within the period of seven
days following such notification. The Mayor shall hear the owner or his
agent and his experts and also the city engineer, deciding the case on the
evidence presented. If the Mayor confirms the action of the city engineer,
the owner or his agent shall immediately proceed to remove the building
within fifteen days from the date on which he was notified of such final
action. Should the owner or his agent not comply with the decision of the
Mayor the building shall be removed at his expense and the city will
proceed to recover against him for the amount expended.
Section 215 of P.D. 1096, otherwise known as the National Building Code, also states
the authority of the Building Officials, with respect to dangerous buildings, to wit:
When any building or structure is found or declared to be dangerous or
ruinous, the Building Officials, shall order its repair, vacation
or demolition depending upon the degree of danger to life, health, or
safety. This is without prejudice to further action that may be taken under
the provisions of Articles 482 and 694 to 707 of the Civil Code of the
Philippines.
From the abovementioned provisions, it is unquestionable that the Building Officials,
has the authority to order the condemnation and demolition of buildings which are found
to be in a dangerous or ruinous condition. It is also clear from the Compilation of
Ordinances of the City of Manila that the Mayor has the power to confirm or deny the
action taken by the Building Officials, with respect to the dangerous or ruinous buildings.
Respondent City Engineer and Building Official, Romulo M. del Rosario, can, therefore,
validly issue the questioned condemnation and demolition orders. This is also true with
the respondent Mayor who can approve or deny the condemnation orders as provided
in Section 276 of the Compilation of Ordinances of the City of Manila.
The only issue then is Official or not said officials committed grave abuse of discretion in
the exercise of their aforesaid powers.
It is a settled doctrine that there is grave abuse of discretion amounting to lack of
jurisdiction "when there is a capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, such as where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it must be so patent and
gross so as to amount to an evasion of positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law." 35
We find no grave abuse of discretion on the part of the respondent City Engineer
because the orders were made only after thorough ocular inspections were conducted
by the City's Building Inspectors. The results of the inspections were set forth in a
memorandum dated 16 November 1982 where it was shown that all the buildings had
architectural, structural, sanitary, plumbing and electrical defects of up to 80%. 36

Page 9 of 102

The respondent Mayor's act of approving the condemnation orders was likewise done in
accordance with law. The protest made by petitioners was submitted only on 22
February 1983, or three months after the notices of condemnation were issued, and
clearly beyond the seven days prescribed under Section 276 of the Compilation of
Ordinances of the City of Manila.
Moreover, appeal was likewise available to petitioners. As correctly contended by
private respondents, the Implementing Rules and Regulations promulgated by the then
Ministry of Public Works to implement P.D. No. 1096, under the title
Abatement/Demolition of Buildings, provide:
5. Procedure for Demolition of Buildings. The following steps shall be
observed in the abatement/demolition of buildings under this Rule:
5.1. There must be a finding or declaration by the Building Officials, that
the building or structure is a nuisance, ruinous or dangerous,
...
5.3. Within the fifteen-day period the owner may if he so desires, appeal to
the Secretary the finding or declaration of the Building Official and ask that
a re-inspection or re-investigation of the building or structure be made. . . .
5.6. The decision of the Secretary on the appeal shall be final. (emphasis
supplied).
Certiorari will not he then because petitioners failed to exhaust all the administrative
remedies. This Court has long upheld the doctrine of exhaustion of administrative
remedies because it rests on the assumption that the administrative body, board or
officer, if given the chance to correct its/his mistake or error, may amend its/his decision
on a given matter. 37 Where the enabling statute indicates a procedure for administrative
review, and provides a system of administrative appeal, or reconsideration, the courts,
for reasons of law, comity and convenience, will not entertain a case unless the
available administrative remedies have been resorted to and the appropriate authorities
have been given opportunity to act and correct the errors committed in the
administrative forum. 38 There are, of course, exceptions to this rule, 39 but none is
available to petitioners.
IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered DISMISSING
these cases for lack of merit with treble costs against petitioners.
SO ORDERED.
Gutierrez, Jr. and Bidin, JJ., concur.
Fernan, C.J., Feliciano, J., took no part.

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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 40243 March 11, 1992
CELESTINO TATEL, petitioner,
vs.
MUNICIPALITY OF VIRAC, SALVADOR A. SURTIDA, in his capacity as Mayor of
Virac, Catanduanes; GAVINO V. GUERRERO, in his capacity as Vice-Mayor of
Virac, Catanduanes; JOSE T. BUEBOS, in his capacity as Councilor of Virac,
Catanduanes; ANGELES TABLIZO, in his capacity as Councilor of Virac,
Catanduanes; ELPIDIO T. ZAFE, in his capacity as Councilor of Virac,
Catanduanes; MARIANO ALBERTO, in his capacity as Councilor of Virac,
Catanduanes; JULIA A. GARCIA, in her capacity as Councilor of Virac,
Catanduanes; and PEDRO A. GUERRERO, in his capacity as Councilor of Virac,
Catanduanes,respondents.
NOCON, J.:
This is a Petition for Prohibition with Preliminary Injunction with the Court of First
Instance of Catanduanes filed by appellant, Celestino Tatel, a businessman engaged in
the import and export of abaca and other products against the Municipal Council of
Virac, Catanduanes and its municipal officials enjoining them from enforcing Resolution
No 29 1 of the Council, declaring the warehouse of petitioner in barrio Sta. Elena of the
said municipality a public nuisance within the purview of Article 694 of the Civil Code of
the Philippines and directing the petitioner to remove and transfer said warehouse to a
more suitable place within two (2) months from receipt of the said resolution.
It appears from the records that on the basis of complaints received from the residents
of barrio Sta. Elena on March 18, 1966 against the disturbance caused by the operation
of the abaca bailing machine inside the warehouse of petitioner which affected the
peace and tranquility of the neighborhood due to the smoke, obnoxious odor and dust
emitted by the machine, a committee was appointed by the municipal council of Virac to
investigate the matter. The committee noted the crowded nature of the neighborhood
with narrow roads and the surrounding residential houses, so much so that an
accidental fire within the warehouse of the petitioner occasioned by the continuance of
the activity inside the warehouse and the storing of inflammable materials created a
danger to the lives and properties of the people within the neighborhood.
Resultantly, Resolution No. 29 was passed by the Municipal Council of Virac on April
22, 1966 declaring the warehouse owned and operated by petitioner a public nuisance
within the purview of Article 694 of the New Civil Code. 2
His motion for reconsideration having been denied by the Municipal Council of Virac,
petitioner instituted the present petition for prohibition with preliminary injunction.
Respondent municipal officials contend that petitioner's warehouse was constructed in
violation of Ordinance No. 13, series of 1952, prohibiting the construction of
warehouses near a block of houses either in the poblacion or barrios without
maintaining the necessary distance of 200 meters from said block of houses to avoid
loss of lives and properties by accidental fire.
On the other hand, petitioner contends that said ordinance is unconstitutional, contrary
to the due process and equal protection clause of the Constitution and null and void for
not having been passed in accordance with law.
Page 11 of 102

The issue then boils down on whether petitioner's warehouse is a nuisance within the
meaning of Article 694 of the Civil Code and whether Ordinance No. 13, S. 1952 of the
Municipality of Virac is unconstitutional and void.
In a decision dated September 18, 1969, the court a quo ruled as follows:
1. The warehouse in question was legally constructed under a valid permit
issued by the municipality of Virac in accordance with existing regulations
and may not be destroyed or removed from its present location;
2. Ordinance No. 13, series of 1952, is a legitimate and valid exercise of
police power by the Municipal Council of Virac is not (sic) unconstitutional
and void as claimed by the petitioner;
3. The storage by the petitioner of abaca and copra in the warehouse is
not only in violation of the provisions of the ordinance but poses a grave
danger to the safety of the lives and properties of the residents of the
neighborhood due to accidental fire and constitutes a public nuisance
under the provisions of Article 694 of the New Civil code of the Philippines
and may be abated;
4. Accordingly, the petitioner is hereby directed to remove from the said
warehouse all abaca and copra and other inflammable articles stored
therein which are prohibited under the provisions of Ordinance No. 13,
within a period of two (2) months from the time this decision becomes final
and that henceforth, the petitioner is enjoined from storing such prohibited
articles in the warehouse. With costs against petitioner.
Seeking appellate review, petitioner raised as errors of the court a quo:
1. In holding that Ordinance No. 13, series of 1952, of the Municipality of
Virac, Catanduanes, is a legitimate and valid exercise of police power of
the Municipal Council, and therefore, constitutional;
2. In giving the ordinance a meaning other than and different from what
it provided by declaring that petitioner violated the same by using the
warehouse for storage of abaca and copra when what is prohibited and
penalized by the ordinance is the construction of warehouses.
3. In refusing to take judicial notice of the fact that in the municipality,
there are numerous establishments similarly situated as appellants'
warehouses but which are not prosecuted.
We find no merit in the Petition.
Ordinance No. 13, series of 1952, was passed by the Municipal Council of Virac in the
exercise of its police power. It is a settled principle of law that municipal corporations
are agencies of the State for the promotion and maintenance of local self-government
and as such are endowed with the police powers in order to effectively accomplish and
carry out the declared objects of their creation. 3 Its authority emanates from the general
welfare clause under the Administrative Code, which reads:
The municipal council shall enact such ordinances and make such
regulations, not repugnant to law, as may be necessary to carry into effect
and discharge the powers and duties conferred upon it by law and such as
shall seem necessary and proper to provide for the health and safety,
promote the prosperity, improve the morals, peace, good order, comfort
and convenience of the municipality and the inhabitants thereof, and for
the protection of property therein. 4
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For an ordinance to be valid, it must not only be within the corporate powers of the
municipality to enact but must also be passed according to the procedure prescribed by
law, and must be in consonance with certain well established and basic principles of a
substantive nature. These principles require that a municipal ordinance (1) must not
contravene the Constitution or any statute (2) must not be unfair or oppressive (3) must
not be partial or discriminatory (4) must not prohibit but may regulate trade (5) must be
general and consistent with public policy, and (6) must not be
unreasonable. 5 Ordinance No. 13, Series of 1952, meets these criteria.
As to the petitioner's second assignment of error, the trial court did not give the
ordinance in question a meaning other than what it says. Ordinance No. 13 passed by
the Municipal Council of Virac on December 29, 1952, 6reads:
AN ORDINANCE STRICTLY PROHIBITING THE CONSTRUCTION OF
WAREHOUSE IN ANY FORM NEAR A BLOCK OF HOUSES EITHER IN
POBLACION OR BARRIO WITH NECESSARY DISTANCE TO AVOID
GREAT LOSSES OF PROPERTY AND LIVES BY FIRE ACCIDENT.
Section 1 provides:
It is strictly prohibited to construct warehouses in any form to any person,
persons, entity, corporation or merchants, wherein to keep or store copra,
hemp, gasoline, petroleum, alcohol, crude oil, oil of turpentine and the like
products or materials if not within the distance of 200 meters from a block
of houses either in the poblacion or barrios to avoid great losses of
properties inclusive lives by fire accident.
Section 2 provides: 7
Owners of warehouses in any form, are hereby given advice to remove
their
said
warehouses
this
ordinance
by
the
Municipal
Council, provided however, that if those warehouses now in existence
should no longer be utilized as such warehouse for the above-described
products in Section 1 of this ordinance after a lapse of the time given for
the removal of the said warehouses now in existence, same warehouses
shall be exempted from the spirit of the provision of section 1 of this
ordinance,provided further, that these warehouses now in existence, shall
in the future be converted into non-inflammable products and materials
warehouses.
In spite of its fractured syntax, basically, what is regulated by the ordinance is the
construction of warehouses wherein inflammable materials are stored where such
warehouses are located at a distance of 200 meters from a block of houses and not the
construction per se of a warehouse. The purpose is to avoid the loss of life and property
in case of fire which is one of the primordial obligation of the government.
This was also the observation of the trial court:
A casual glance of the ordinance at once reveals a manifest disregard of
the elemental rules of syntax. Experience, however, will show that this is
not uncommon in law making bodies in small towns where local authorities
and in particular the persons charged with the drafting and preparation of
municipal resolutions and ordinances lack sufficient education and training
and are not well grounded even on the basic and fundamental elements of
the English language commonly used throughout the country in such
matters. Nevertheless, if one scrutinizes the terms of the ordinance, it is
clear that what is prohibited is the construction of warehouses by any
person, entity or corporation wherein copra, hemp, gasoline and other
inflammable products mentioned in Section 1 may be stored unless at a
Page 13 of 102

distance of not less than 200 meters from a block of houses either in the
poblacion or barrios in order to avoid loss of property and life due to fire.
Under Section 2, existing warehouses for the storage of the prohibited
articles were given one year after the approval of the ordinance within
which to remove them but were allowed to remain in operation if they had
ceased to store such prohibited articles.
The ambiguity therefore is more apparent than real and springs from
simple error in grammatical construction but otherwise, the meaning and
intent is clear that what is prohibited is the construction or maintenance of
warehouses for the storage of inflammable articles at a distance within
200 meters from a block of houses either in the poblacion or in the barrios.
And the purpose of the ordinance is to avoid loss of life and property in
case of accidental fire which is one of the primordial and basic obligation
of any government. 8
Clearly, the lower court did NOT add meaning other than or differrent from what
was provided in the ordinance in question. It merely stated the purpose of the ordinance
and what it intends to prohibit to accomplish its purpose.
As to the third assignment of error, that warehouses similarly situated as that of the
petitioner were not prosecuted, suffice it to say that the mere fact that the municipal
authorities of Virac have not proceeded against other warehouses in the municipality
allegedly violating Ordinance No. 13 is no reason to claim that the ordinance is
discriminatory. A distinction must be made between the law itself and the manner in
which said law is implemented by the agencies in charge with its administration and
enforcement. There is no valid reason for the petitioner to complain, in the absence of
proof that the other bodegas mentioned by him are operating in violation of the
ordinance and that the complaints have been lodged against the bodegas concerned
without the municipal authorities doing anything about it.
The objections interposed by the petitioner to the validity of the ordinance have not
been substantiated. Its purpose is well within the objectives of sound government. No
undue restraint is placed upon the petitioner or for anybody to engage in trade but
merely a prohibition from storing inflammable products in the warehouse because of the
danger of fire to the lives and properties of the people residing in the vicinity. As far as
public policy is concerned, there can be no better policy than what has been conceived
by the municipal government.
As to petitioner's contention of want of jurisdiction by the lower court we find no merit in
the same. The case is a simple civil suit for abatement of a nuisance, the original
jurisdiction of which falls under the then Court of First Instance.
WHEREFORE, for lack of merit, the petition is hereby DISMISSED. Costs against
petitioner.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

Page 14 of 102

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 169838

April 25, 2006

BAYAN, KARAPATAN, KILUSANG MAGBUBUKID NG PILIPINAS (KMP),

GABRIELA, Fr. Jose Dizon, Renato Constantino, Jr., Froyel Yaneza, and Fahima
Tajar, Petitioners,
vs.
EDUARDO ERMITA, in his capacity as Executive Secretary, Manila City Mayor
LITO ATIENZA, Chief of the Philippine National Police, Gen. ARTURO M.
LOMIBAO, NCRPO Chief Maj. Gen. VIDAL QUEROL, and Western Police District
Chief Gen. PEDRO BULAONG, Respondents.
DECISION
AZCUNA, J.:
Petitioners come in three groups.
The first petitioners, Bayan, et al., in G.R. No. 169838,1 allege that they are citizens
and taxpayers of the Philippines and that their rights as organizations and individuals
were violated when the rally they participated in on October 6, 2005 was violently
dispersed by policemen implementing Batas Pambansa (B.P.) No. 880.
The second group consists of 26 individual petitioners, Jess del Prado, et al., in G.R.
No. 169848,2 who allege that they were injured, arrested and detained when a peaceful
mass action they held on September 26, 2005 was preempted and violently dispersed
by the police. They further assert that on October 5, 2005, a group they participated in
marched to Malacaang to protest issuances of the Palace which, they claim, put the
country under an "undeclared" martial rule, and the protest was likewise dispersed
violently and many among them were arrested and suffered injuries.
The third group, Kilusang Mayo Uno (KMU), et al., petitioners in G.R. No.
169881,3 allege that they conduct peaceful mass actions and that their rights as
organizations and those of their individual members as citizens, specifically the right to
peaceful assembly, are affected by Batas Pambansa No. 880 and the policy of
"Calibrated Preemptive Response" (CPR) being followed to implement it.
KMU, et al., claim that on October 4, 2005, a rally KMU co-sponsored was to be
conducted at the Mendiola bridge but police blocked them along C.M. Recto and
Lepanto Streets and forcibly dispersed them, causing injuries to several of their
members. They further allege that on October 6, 2005, a multi-sectoral rally which KMU
also co-sponsored was scheduled to proceed along Espaa Avenue in front of the
University of Santo Tomas and going towards Mendiola bridge. Police officers blocked
them along Morayta Street and prevented them from proceeding further. They were
then forcibly dispersed, causing injuries on one of them.4 Three other rallyists were
arrested.
All petitioners assail Batas Pambansa No. 880, some of them in toto and others only
Sections 4, 5, 6, 12, 13(a), and 14(a), as well as the policy of CPR. They seek to stop
violent dispersals of rallies under the "no permit, no rally" policy and the CPR policy
recently announced.
B.P. No. 880, "The Public Assembly Act of 1985," provides:
Page 15 of 102

Batas Pambansa Blg. 880

An Act Ensuring The Free Exercise By The People Of Their Right Peaceably To
Assemble And Petition The Government [And] For Other Purposes
Be it enacted by the Batasang Pambansa in session assembled:
Section 1. Title. This Act shall be known as "The Public Assembly Act of 1985."
Sec. 2. Declaration of policy. The constitutional right of the people peaceably to
assemble and petition the government for redress of grievances is essential and vital to
the strength and stability of the State. To this end, the State shall ensure the free
exercise of such right without prejudice to the rights of others to life, liberty and equal
protection of the law.
Sec. 3. Definition of terms. For purposes of this Act:
(a) "Public assembly" means any rally, demonstration, march, parade,
procession or any other form of mass or concerted action held in a public place
for the purpose of presenting a lawful cause; or expressing an opinion to the
general public on any particular issue; or protesting or influencing any state of
affairs whether political, economic or social; or petitioning the government for
redress of grievances.
The processions, rallies, parades, demonstrations, public meetings and
assemblages for religious purposes shall be governed by local
ordinances; Provided, however, That the declaration of policy as provided in
Section 2 of this Act shall be faithfully observed.
The definition herein contained shall not include picketing and other concerted
action in strike areas by workers and employees resulting from a labor dispute as
defined by the Labor Code, its implementing rules and regulations, and by the
Batas Pambansa Bilang 227.
(b) "Public place" shall include any highway, boulevard, avenue, road, street,
bridge or other thoroughfare, park, plaza, square, and/or any open space of
public ownership where the people are allowed access.
(c) "Maximum tolerance" means the highest degree of restraint that the military,
police and other peace keeping authorities shall observe during a public
assembly or in the dispersal of the same.
(d) "Modification of a permit" shall include the change of the place and time of the
public assembly, rerouting of the parade or street march, the volume of loudspeakers or sound system and similar changes.
Sec. 4. Permit when required and when not required. A written permit shall be
required for any person or persons to organize and hold a public assembly in a public
place. However, no permit shall be required if the public assembly shall be done or
made in a freedom park duly established by law or ordinance or in private property, in
which case only the consent of the owner or the one entitled to its legal possession is
required, or in the campus of a government-owned and operated educational institution
which shall be subject to the rules and regulations of said educational institution.
Political meetings or rallies held during any election campaign period as provided for by
law are not covered by this Act.
Sec. 5. Application requirements. All applications for a permit shall comply with the
following guidelines:
Page 16 of 102

(a) The applications shall be in writing and shall include the names of the leaders
or organizers; the purpose of such public assembly; the date, time and duration
thereof, and place or streets to be used for the intended activity; and the
probable number of persons participating, the transport and the public address
systems to be used.
(b) The application shall incorporate the duty and responsibility of the applicant
under Section 8 hereof.
(c) The application shall be filed with the office of the mayor of the city or
municipality in whose jurisdiction the intended activity is to be held, at least five
(5) working days before the scheduled public assembly.
(d) Upon receipt of the application, which must be duly acknowledged in writing,
the office of the city or municipal mayor shall cause the same to immediately be
posted at a conspicuous place in the city or municipal building.
Sec. 6. Action to be taken on the application.
(a) It shall be the duty of the mayor or any official acting in his behalf to issue or
grant a permit unless there is clear and convincing evidence that the public
assembly will create a clear and present danger to public order, public safety,
public convenience, public morals or public health.
(b) The mayor or any official acting in his behalf shall act on the application within
two (2) working days from the date the application was filed, failing which, the
permit shall be deemed granted. Should for any reason the mayor or any official
acting in his behalf refuse to accept the application for a permit, said application
shall be posted by the applicant on the premises of the office of the mayor and
shall be deemed to have been filed.
(c) If the mayor is of the view that there is imminent and grave danger of a
substantive evil warranting the denial or modification of the permit, he shall
immediately inform the applicant who must be heard on the matter.
(d) The action on the permit shall be in writing and served on the applica[nt]
within twenty-four hours.
(e) If the mayor or any official acting in his behalf denies the application or
modifies the terms thereof in his permit, the applicant may contest the decision in
an appropriate court of law.
(f) In case suit is brought before the Metropolitan Trial Court, the Municipal Trial
Court, the Municipal Circuit Trial Court, the Regional Trial Court, or the
Intermediate Appellate court, its decisions may be appealed to the appropriate
court within forty-eight (48) hours after receipt of the same. No appeal bond and
record on appeal shall be required. A decision granting such permit or modifying
it in terms satisfactory to the applicant shall be immediately executory.
(g) All cases filed in court under this section shall be decided within twenty-four
(24) hours from date of filing. Cases filed hereunder shall be immediately
endorsed to the executive judge for disposition or, in his absence, to the next in
rank.
(h) In all cases, any decision may be appealed to the Supreme Court.
(i) Telegraphic appeals to be followed by formal appeals are hereby allowed.

Page 17 of 102

Sec. 7. Use of Public throroughfare. Should the proposed public assembly involve the
use, for an appreciable length of time, of any public highway, boulevard, avenue, road
or street, the mayor or any official acting in his behalf may, to prevent grave public
inconvenience, designate the route thereof which is convenient to the participants or
reroute the vehicular traffic to another direction so that there will be no serious or undue
interference with the free flow of commerce and trade.
Sec. 8. Responsibility of applicant. It shall be the duty and responsibility of the leaders
and organizers of a public assembly to take all reasonable measures and steps to the
end that the intended public assembly shall be conducted peacefully in accordance with
the terms of the permit. These shall include but not be limited to the following:
(a) To inform the participants of their responsibility under the permit;|avvphi|.net
(b) To police the ranks of the demonstrators in order to prevent nondemonstrators from disrupting the lawful activities of the public assembly;
(c) To confer with local government officials concerned and law enforcers to the
end that the public assembly may be held peacefully;
(d) To see to it that the public assembly undertaken shall not go beyond the time
stated in the permit; and
(e) To take positive steps that demonstrators do not molest any person or do any
act unduly interfering with the rights of other persons not participating in the
public assembly.
Sec. 9. Non-interference by law enforcement authorities. Law enforcement agencies
shall not interfere with the holding of a public assembly. However, to adequately ensure
public safety, a law enforcement contingent under the command of a responsible police
officer may be detailed and stationed in a place at least one hundred (100) meters away
from the area of activity ready to maintain peace and order at all times.
Sec. 10. Police assistance when requested. It shall be imperative for law enforcement
agencies, when their assistance is requested by the leaders or organizers, to perform
their duties always mindful that their responsibility to provide proper protection to those
exercising their right peaceably to assemble and the freedom of expression is
primordial. Towards this end, law enforcement agencies shall observe the following
guidelines:
(a) Members of the law enforcement contingent who deal with the demonstrators
shall be in complete uniform with their nameplates and units to which they belong
displayed prominently on the front and dorsal parts of their uniform and must
observe the policy of "maximum tolerance" as herein defined;
(b) The members of the law enforcement contingent shall not carry any kind of
firearms but may be equipped with baton or riot sticks, shields, crash helmets
with visor, gas masks, boots or ankle high shoes with shin guards;
(c) Tear gas, smoke grenades, water cannons, or any similar anti-riot device
shall not be used unless the public assembly is attended by actual violence or
serious threats of violence, or deliberate destruction of property.
Sec. 11. Dispersal of public assembly with permit. No public assembly with a permit
shall be dispersed. However, when an assembly becomes violent, the police may
disperse such public assembly as follows:

Page 18 of 102

(a) At the first sign of impending violence, the ranking officer of the law
enforcement contingent shall call the attention of the leaders of the public
assembly and ask the latter to prevent any possible disturbance;
(b) If actual violence starts to a point where rocks or other harmful objects from
the participants are thrown at the police or at the non-participants, or at any
property causing damage to such property, the ranking officer of the law
enforcement contingent shall audibly warn the participants that if the disturbance
persists, the public assembly will be dispersed;
(c) If the violence or disturbance prevailing as stated in the preceding
subparagraph should not stop or abate, the ranking officer of the law
enforcement contingent shall audibly issue a warning to the participants of the
public assembly, and after allowing a reasonable period of time to lapse, shall
immediately order it to forthwith disperse;
(d) No arrest of any leader, organizer or participant shall also be made during the
public assembly unless he violates during the assembly a law, statute, ordinance
or any provision of this Act. Such arrest shall be governed by Article 125 of the
Revised Penal Code, as amended;
(e) Isolated acts or incidents of disorder or breach of the peace during the public
assembly shall not constitute a ground for dispersal.
Sec. 12. Dispersal of public assembly without permit. When the public assembly is
held without a permit where a permit is required, the said public assembly may be
peacefully dispersed.
Sec. 13. Prohibited acts. The following shall constitute violations of the Act:
(a) The holding of any public assembly as defined in this Act by any leader or
organizer without having first secured that written permit where a permit is
required from the office concerned, or the use of such permit for such purposes
in any place other than those set out in said permit: Provided, however, That no
person can be punished or held criminally liable for participating in or attending
an otherwise peaceful assembly;
(b) Arbitrary and unjustified denial or modification of a permit in violation of the
provisions of this Act by the mayor or any other official acting in his behalf;
(c) The unjustified and arbitrary refusal to accept or acknowledge receipt of the
application for a permit by the mayor or any official acting in his behalf;
(d) Obstructing, impeding, disrupting or otherwise denying the exercise of the
right to peaceful assembly;
(e) The unnecessary firing of firearms by a member of any law enforcement
agency or any person to disperse the public assembly;
(f) Acts in violation of Section 10 hereof;
(g) Acts described hereunder if committed within one hundred (100) meters from
the area of activity of the public assembly or on the occasion thereof:
1. the carrying of a deadly or offensive weapon or device such as firearm,
pillbox, bomb, and the like;
2. the carrying of a bladed weapon and the like;
Page 19 of 102

3. the malicious burning of any object in the streets or thoroughfares;

4. the carrying of firearms by members of the law enforcement unit;
5. the interfering with or intentionally disturbing the holding of a public
assembly by the use of a motor vehicle, its horns and loud sound systems.
Sec. 14. Penalties. Any person found guilty and convicted of any of the prohibited acts
defined in the immediately preceding section shall be punished as follows:
(a) violation of subparagraph (a) shall be punished by imprisonment of one
month and one day to six months;
(b) violations of subparagraphs (b), (c), (d), (e), (f), and item 4, subparagraph (g)
shall be punished by imprisonment of six months and one day to six years;
(c) violation of item 1, subparagraph (g) shall be punished by imprisonment of six
months and one day to six years without prejudice to prosecution under
Presidential Decree No. 1866;
(d) violations of item 2, item 3, or item 5 of subparagraph (g) shall be punished by
imprisonment of one day to thirty days.
Sec. 15. Freedom parks. Every city and municipality in the country shall within six
months after the effectivity of this Act establish or designate at least one suitable
"freedom park" or mall in their respective jurisdictions which, as far as practicable, shall
be centrally located within the poblacion where demonstrations and meetings may be
held at any time without the need of any prior permit.
In the cities and municipalities of Metropolitan Manila, the respective mayors shall
establish the freedom parks within the period of six months from the effectivity this Act.
Sec. 16. Constitutionality. Should any provision of this Act be declared invalid or
unconstitutional, the validity or constitutionality of the other provisions shall not be
affected thereby.
Sec. 17. Repealing clause. All laws, decrees, letters of instructions, resolutions,
orders, ordinances or parts thereof which are inconsistent with the provisions of this Act
are hereby repealed, amended, or modified accordingly.
Sec. 18. Effectivity. This Act shall take effect upon its approval.
Approved, October 22, 1985.
CPR, on the other hand, is a policy set forth in a press release by Malacaang dated
September 21, 2005, shown in Annex "A" to the Petition in G.R. No. 169848, thus:
Malacaang Official
Manila, Philippines NEWS
Release No. 2 September 21, 2005
STATEMENT OF EXECUTIVE SECRETARY EDUARDO ERMITA
On Unlawful Mass Actions
In view of intelligence reports pointing to credible plans of anti-government groups to
inflame the political situation, sow disorder and incite people against the duly constituted
Page 20 of 102

authorities, we have instructed the PNP as well as the local government units to strictly
enforce a "no permit, no rally" policy, disperse groups that run afoul of this standard and
arrest all persons violating the laws of the land as well as ordinances on the proper
conduct of mass actions and demonstrations.
The rule of calibrated preemptive response is now in force, in lieu of maximum
tolerance. The authorities will not stand aside while those with ill intent are herding a
witting or unwitting mass of people and inciting them into actions that are inimical to
public order, and the peace of mind of the national community.
Unlawful mass actions will be dispersed. The majority of law-abiding citizens have the
right to be protected by a vigilant and proactive government.
We appeal to the detractors of the government to engage in lawful and peaceful
conduct befitting of a democratic society.
The Presidents call for unity and reconciliation stands, based on the rule of law.
Petitioners Bayan, et al., contend that Batas Pambansa No. 880 is clearly a violation of
the Constitution and the International Covenant on Civil and Political Rights and other
human rights treaties of which the Philippines is a signatory.5
They argue that B.P. No. 880 requires a permit before one can stage a public assembly
regardless of the presence or absence of a clear and present danger. It also curtails the
choice of venue and is thus repugnant to the freedom of expression clause as the time
and place of a public assembly form part of the message for which the expression is
sought. Furthermore, it is not content-neutral as it does not apply to mass actions in
support of the government. The words "lawful cause," "opinion," "protesting or
influencing" suggest the exposition of some cause not espoused by the government.
Also, the phrase "maximum tolerance" shows that the law applies to assemblies against
the government because they are being tolerated. As a content-based legislation, it
cannot pass the strict scrutiny test.
Petitioners Jess del Prado, et al., in turn, argue that B.P. No. 880 is unconstitutional as
it is a curtailment of the right to peacefully assemble and petition for redress of
grievances because it puts a condition for the valid exercise of that right. It also
characterizes public assemblies without a permit as illegal and penalizes them and
allows their dispersal. Thus, its provisions are not mere regulations but are actually
prohibitions.
Furthermore, the law delegates powers to the Mayor without providing clear standards.
The two standards stated in the laws (clear and present danger and imminent and grave
danger) are inconsistent.
Regarding the CPR policy, it is void for being an ultra vires act that alters the standard
of maximum tolerance set forth in B.P. No. 880, aside from being void for being vague
and for lack of publication.
Finally, petitioners KMU, et al., argue that the Constitution sets no limits on the right to
assembly and therefore B.P. No. 880 cannot put the prior requirement of securing a
permit. And even assuming that the legislature can set limits to this right, the limits
provided are unreasonable: First, allowing the Mayor to deny the permit on clear and
convincing evidence of a clear and present danger is too comprehensive. Second, the
five-day requirement to apply for a permit is too long as certain events require instant
public assembly, otherwise interest on the issue would possibly wane.
As to the CPR policy, they argue that it is preemptive, that the government takes action
even before the rallyists can perform their act, and that no law, ordinance or executive
order supports the policy. Furthermore, it contravenes the maximum tolerance policy of
Page 21 of 102

B.P. No. 880 and violates the Constitution as it causes a chilling effect on the exercise
by the people of the right to peaceably assemble.
Respondents in G.R. No. 169838 are Eduardo Ermita, as Executive Secretary, Manila
City Mayor Lito Atienza, Chief, of the Philippine National Police (PNP) Gen. Arturo
Lomibao, National Capital Region Police Office (NCRPO) Chief, PNP Maj. Gen. Vidal
Querol, and Manila Police District (MPD) Chief Gen. Pedro Bulaong.
Respondents in G.R. No. 169848 are Eduardo Ermita as Executive Secretary and in
his personal capacity;Angelo Reyes, as Secretary of the Interior and Local
Governments; Arturo Lomibao, as Chief Vidal Querol, as Chief, NCRPO; Pedro
Bulaong, as Chief, MPD, and all other public officers and private individuals acting
under their control, supervision and instruction.
Respondents in G.R. No. 169881 are the Honorable Executive Secretary,
PNP Director General Arturo Lomibao, the Honorable Mayor Joselito Atienza, and
PNP MPD Chief Pedro Bulaong.
Respondents argue that:
1. Petitioners have no standing because they have not presented evidence that
they had been "injured, arrested or detained because of the CPR," and that
"those arrested stand to be charged with violating Batas Pambansa [No.] 880
and other offenses."
2. Neither B.P. No. 880 nor CPR is void on its face. Petitioners cannot honestly
claim that the time, place and manner regulation embodied in B.P. No. 880
violates the three-pronged test for such a measure, to wit: (a) B.P. No. 880 is
content-neutral, i.e., it has no reference to content of regulated speech; (b) B.P.
No. 880 is narrowly tailored to serve a significant governmental interest, i.e., the
interest cannot be equally well served by a means that is less intrusive of free
speech interests; and (c) B.P. No. 880 leaves open alternative channels for
communication of the information.6
3. B.P. No. 880 is content-neutral as seen from the text of the law. Section 5
requires the statement of the public assemblys time, place and manner of
conduct. It entails traffic re-routing to prevent grave public inconvenience and
serious or undue interference in the free flow of commerce and trade.
Furthermore, nothing in B.P. No. 880 authorizes the denial of a permit on the
basis of a rallys program content or the statements of the speakers therein,
except under the constitutional precept of the "clear and present danger test."
The status of B.P. No. 880 as a content-neutral regulation has been recognized
in Osmea v. Comelec.7
4. Adiong v. Comelec8 held that B.P. No. 880 is a content-neutral regulation of
the time, place and manner of holding public assemblies and the law passes the
test for such regulation, namely, these regulations need only a substantial
governmental interest to support them.
5. Sangalang v. Intermediate Appellate Court9 held that a local chief executive
has the authority to exercise police power to meet "the demands of the common
good in terms of traffic decongestion and public convenience." Furthermore, the
discretion given to the mayor is narrowly circumscribed by Sections 5 (d), and 6
(a), (b), (c), (d), (e), 13 and 15 of the law.
6. The standards set forth in the law are not inconsistent. "Clear and convincing
evidence that the public assembly will create a clear and present danger to public
order, public safety, public convenience, public morals or public health" and
Page 22 of 102

"imminent and grave danger of a substantive evil" both express the meaning of
the "clear and present danger test."10
7. CPR is simply the responsible and judicious use of means allowed by existing
laws and ordinances to protect public interest and restore public order. Thus, it is
not accurate to call it a new rule but rather it is a more pro-active and dynamic
enforcement of existing laws, regulations and ordinances to prevent chaos in the
streets. It does not replace the rule of maximum tolerance in B.P. No. 880.
Respondent Mayor Joselito Atienza, for his part, submitted in his Comment that the
petition in G.R. No. 169838 should be dismissed on the ground that Republic Act No.
7160 gives the Mayor power to deny a permit independently of B.P. No. 880; that his
denials of permits were under the "clear and present danger" rule as there was a clamor
to stop rallies that disrupt the economy and to protect the lives of other people; that J. B.
L. Reyes v. Bagatsing,11 Primicias v. Fugoso,12 and Jacinto v. CA,13 have affirmed the
constitutionality of requiring a permit; that the permit is for the use of a public place and
not for the exercise of rights; and that B.P. No. 880 is not a content-based regulation
because it covers all rallies.
The petitions were ordered consolidated on February 14, 2006. After the submission of
all the Comments, the Court set the cases for oral arguments on April 4, 2006, 14 stating
the principal issues, as follows:
1. On the constitutionality of Batas Pambansa No. 880, specifically Sections 4, 5,
6, 12 13(a) and 14(a) thereof, and Republic Act No. 7160:
(a) Are these content-neutral or content-based regulations?
(b) Are they void on grounds of overbreadth or vagueness?
(c) Do they constitute prior restraint?
(d) Are they undue delegations of powers to Mayors?
(e) Do they violate international human rights treaties and the Universal
Declaration of Human Rights?
2. On the constitutionality and legality of the policy of Calibrated Preemptive
Response (CPR):
(a) Is the policy void on its face or due to vagueness?
(b) Is it void for lack of publication?
(c) Is the policy of CPR void as applied to the rallies of September 26 and
October 4, 5 and 6, 2005?
During the course of the oral arguments, the following developments took place and
were approved and/or noted by the Court:
1. Petitioners, in the interest of a speedy resolution of the petitions, withdrew the
portions of their petitions raising factual issues, particularly those raising the
issue of whether B.P. No. 880 and/or CPR is void as applied to the rallies of
September 20, October 4, 5 and 6, 2005.
2. The Solicitor General agreed with the observation of the Chief Justice that
CPR should no longer be used as a legal term inasmuch as, according to
respondents, it was merely a "catchword" intended to clarify what was thought to
be a misunderstanding of the maximum tolerance policy set forth in B.P. No. 880
Page 23 of 102

and that, as stated in the affidavit executed by Executive Secretary Eduardo

Ermita and submitted to the Ombudsman, it does not replace B.P. No. 880 and
the maximum tolerance policy embodied in that law.
The Court will now proceed to address the principal issues, taking into account the
foregoing developments.
Petitioners standing cannot be seriously challenged. Their right as citizens to engage in
peaceful assembly and exercise the right of petition, as guaranteed by the Constitution,
is directly affected by B.P. No. 880 which requires a permit for all who would publicly
assemble in the nations streets and parks. They have, in fact, purposely engaged in
public assemblies without the required permits to press their claim that no such permit
can be validly required without violating the Constitutional guarantee. Respondents, on
the other hand, have challenged such action as contrary to law and dispersed the public
assemblies held without the permit.
Section 4 of Article III of the Constitution provides:
Sec. 4. No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the government
for redress of grievances.
The first point to mark is that the right to peaceably assemble and petition for redress of
grievances is, together with freedom of speech, of expression, and of the press, a right
that enjoys primacy in the realm of constitutional protection. For these rights constitute
the very basis of a functional democratic polity, without which all the other rights would
be meaningless and unprotected. As stated in Jacinto v. CA,15 the Court, as early as the
onset of this century, in U.S. v. Apurado,16 already upheld the right to assembly and
petition, as follows:
There is no question as to the petitioners rights to peaceful assembly to petition the
government for a redress of grievances and, for that matter, to organize or form
associations for purposes not contrary to law, as well as to engage in peaceful
concerted activities. These rights are guaranteed by no less than the Constitution,
particularly Sections 4 and 8 of the Bill of Rights, Section 2(5) of Article IX, and Section
3 of Article XIII. Jurisprudence abounds with hallowed pronouncements defending and
promoting the peoples exercise of these rights. As early as the onset of this century,
this Court in U.S. vs. Apurado, already upheld the right to assembly and petition and
even went as far as to acknowledge:
"It is rather to be expected that more or less disorder will mark the public assembly of
the people to protest against grievances whether real or imaginary, because on such
occasions feeling is always wrought to a high pitch of excitement, and the greater, the
grievance and the more intense the feeling, the less perfect, as a rule will be the
disciplinary control of the leaders over their irresponsible followers. But if the
prosecution be permitted to seize upon every instance of such disorderly conduct by
individual members of a crowd as an excuse to characterize the assembly as a
seditious and tumultuous rising against the authorities, then the right to assemble and to
petition for redress of grievances would become a delusion and a snare and the attempt
to exercise it on the most righteous occasion and in the most peaceable manner would
expose all those who took part therein to the severest and most unmerited punishment,
if the purposes which they sought to attain did not happen to be pleasing to the
prosecuting authorities. If instances of disorderly conduct occur on such occasions, the
guilty individuals should be sought out and punished therefor, but the utmost discretion
must be exercised in drawing the line between disorderly and seditious conduct and
between an essentially peaceable assembly and a tumultuous uprising."

Page 24 of 102

Again, in Primicias v. Fugoso,17 the Court likewise sustained the primacy of freedom of
speech and to assembly and petition over comfort and convenience in the use of streets
and parks.
Next, however, it must be remembered that the right, while sacrosanct, is not absolute.
In Primicias, this Court said:
The right to freedom of speech, and to peacefully assemble and petition the government
for redress of grievances, are fundamental personal rights of the people recognized and
guaranteed by the constitutions of democratic countries. But it is a settled principle
growing out of the nature of well-ordered civil societies that the exercise of those rights
is not absolute for it may be so regulated that it shall not be injurious to the equal
enjoyment of others having equal rights, nor injurious to the rights of the community or
society. The power to regulate the exercise of such and other constitutional rights is
termed the sovereign "police power," which is the power to prescribe regulations, to
promote the health, morals, peace, education, good order or safety, and general welfare
of the people. This sovereign police power is exercised by the government through its
legislative branch by the enactment of laws regulating those and other constitutional
and civil rights, and it may be delegated to political subdivisions, such as towns,
municipalities and cities by authorizing their legislative bodies called municipal and city
councils to enact ordinances for the purpose.18
Reyes v. Bagatsing19 further expounded on the right and its limits, as follows:
1. It is thus clear that the Court is called upon to protect the exercise of the
cognate rights to free speech and peaceful assembly, arising from the denial of a
permit. The Constitution is quite explicit: "No law shall be passed abridging the
freedom of speech, or of the press, or the right of the people peaceably to
assemble and petition the Government for redress of grievances." Free speech,
like free press, may be identified with the liberty to discuss publicly and truthfully
any matter of public concern without censorship or punishment. There is to be
then no previous restraint on the communication of views or subsequent liability
whether in libel suits, prosecution for sedition, or action for damages, or contempt
proceedings unless there be a "clear and present danger of a substantive evil
that [the State] has a right to prevent." Freedom of assembly connotes the right
of the people to meet peaceably for consultation and discussion of matters of
public concern. It is entitled to be accorded the utmost deference and respect. It
is not to be limited, much less denied, except on a showing, as is the case with
freedom of expression, of a clear and present danger of a substantive evil that
the state has a right to prevent. Even prior to the 1935 Constitution, Justice
Malcolm had occasion to stress that it is a necessary consequence of our
republican institutions and complements the right of free speech. To paraphrase
the opinion of Justice Rutledge, speaking for the majority of the American
Supreme Court in Thomas v. Collins, it was not by accident or coincidence that
the rights to freedom of speech and of the press were coupled in a single
guarantee with the rights of the people peaceably to assemble and to petition the
government for redress of grievances. All these rights, while not identical, are
inseparable. In every case, therefore, where there is a limitation placed on the
exercise of this right, the judiciary is called upon to examine the effects of the
challenged governmental actuation. The sole justification for a limitation on the
exercise of this right, so fundamental to the maintenance of democratic
institutions, is the danger, of a character both grave and imminent, of a serious
evil to public safety, public morals, public health, or any other legitimate public
interest.
2. Nowhere is the rationale that underlies the freedom of expression and
peaceable assembly better expressed than in this excerpt from an opinion of
Justice Frankfurter: "It must never be forgotten, however, that the Bill of Rights
was the child of the Enlightenment. Back of the guaranty of free speech lay faith
Page 25 of 102

in the power of an appeal to reason by all the peaceful means for gaining access
to the mind. It was in order to avert force and explosions due to restrictions upon
rational modes of communication that the guaranty of free speech was given a
generous scope. But utterance in a context of violence can lose its significance
as an appeal to reason and become part of an instrument of force. Such
utterance was not meant to be sheltered by the Constitution." What was rightfully
stressed is the abandonment of reason, the utterance, whether verbal or printed,
being in a context of violence. It must always be remembered that this right
likewise provides for a safety valve, allowing parties the opportunity to give vent
to their views, even if contrary to the prevailing climate of opinion. For if the
peaceful means of communication cannot be availed of, resort to non-peaceful
means may be the only alternative. Nor is this the sole reason for the expression
of dissent. It means more than just the right to be heard of the person who feels
aggrieved or who is dissatisfied with things as they are. Its value may lie in the
fact that there may be something worth hearing from the dissenter. That is to
ensure a true ferment of ideas. There are, of course, well-defined limits. What is
guaranteed is peaceable assembly. One may not advocate disorder in the name
of protest, much less preach rebellion under the cloak of dissent. The
Constitution frowns on disorder or tumult attending a rally or assembly. Resort to
force is ruled out and outbreaks of violence to be avoided. The utmost calm
though is not required. As pointed out in an early Philippine case, penned in 1907
to be precise, United States v. Apurado: "It is rather to be expected that more or
less disorder will mark the public assembly of the people to protest against
grievances whether real or imaginary, because on such occasions feeling is
always wrought to a high pitch of excitement, and the greater the grievance and
the more intense the feeling, the less perfect, as a rule, will be the disciplinary
control of the leaders over their irresponsible followers." It bears repeating that
for the constitutional right to be invoked, riotous conduct, injury to property, and
acts of vandalism must be avoided. To give free rein to ones destructive urges is
to call for condemnation. It is to make a mockery of the high estate occupied by
intellectual liberty in our scheme of values.
There can be no legal objection, absent the existence of a clear and present
danger of a substantive evil, on the choice of Luneta as the place where the
peace rally would start. The Philippines is committed to the view expressed in the
plurality opinion, of 1939 vintage, of Justice Roberts in Hague v. CIO: "Whenever
the title of streets and parks may rest, they have immemorially been held in trust
for the use of the public and, time out of mind, have been used for purposes of
assembly, communicating thoughts between citizens, and discussing public
questions. Such use of the streets and public places has, from ancient times,
been a part of the privileges, immunities, rights and liberties of citizens. The
privilege of a citizen of the United States to use the streets and parks for
communication of views on national questions may be regulated in the interest of
all; it is not absolute, but relative, and must be exercised in subordination to the
general comfort and convenience, and in consonance with peace and good
order; but must not, in the guise of regulation, be abridged or denied." The above
excerpt was quoted with approval in Primicias v. Fugoso. Primicias made explicit
what was implicit in Municipality of Cavite v. Rojas, a 1915 decision, where this
Court categorically affirmed that plazas or parks and streets are outside the
commerce of man and thus nullified a contract that leased Plaza Soledad of
plaintiff-municipality. Reference was made to such plaza "being a promenade for
public use," which certainly is not the only purpose that it could serve. To repeat,
there can be no valid reason why a permit should not be granted for the
proposed march and rally starting from a public park that is the Luneta.
4. Neither can there be any valid objection to the use of the streets to the gates
of the US embassy, hardly two blocks away at the Roxas Boulevard. Primicias v.
Fugoso has resolved any lurking doubt on the matter. In holding that the then
Mayor Fugoso of the City of Manila should grant a permit for a public meeting at
Page 26 of 102

Plaza Miranda in Quiapo, this Court categorically declared: "Our conclusion finds
support in the decision in the case of Willis Cox v. State of New Hampshire, 312
U.S., 569. In that case, the statute of New Hampshire P.L. chap. 145, section 2,
providing that no parade or procession upon any ground abutting thereon, shall
be permitted unless a special license therefor shall first be obtained from the
selectmen of the town or from licensing committee, was construed by the
Supreme Court of New Hampshire as not conferring upon the licensing board
unfettered discretion to refuse to grant the license, and held valid. And the
Supreme Court of the United States, in its decision (1941) penned by Chief
Justice Hughes affirming the judgment of the State Supreme Court, held that a
statute requiring persons using the public streets for a parade or procession to
procure a special license therefor from the local authorities is not an
unconstitutional abridgment of the rights of assembly or of freedom of speech
and press, where, as the statute is construed by the state courts, the licensing
authorities are strictly limited, in the issuance of licenses, to a consideration of
the time, place, and manner of the parade or procession, with a view to
conserving the public convenience and of affording an opportunity to provide
proper policing, and are not invested with arbitrary discretion to issue or refuse
license, * * *. "Nor should the point made by Chief Justice Hughes in a
subsequent portion of the opinion be ignored: "Civil liberties, as guaranteed by
the Constitution, imply the existence of an organized society maintaining public
order without which liberty itself would be lost in the excesses of unrestricted
abuses. The authority of a municipality to impose regulations in order to assure
the safety and convenience of the people in the use of public highways has never
been regarded as inconsistent with civil liberties but rather as one of the means
of safeguarding the good order upon which they ultimately depend. The control of
travel on the streets of cities is the most familiar illustration of this recognition of
social need. Where a restriction of the use of highways in that relation is
designed to promote the public convenience in the interest of all, it cannot be
disregarded by the attempted exercise of some civil right which in other
circumstances would be entitled to protection."
xxx
6. x x x The principle under American doctrines was given utterance by Chief
Justice Hughes in these words: "The question, if the rights of free speech and
peaceable assembly are to be preserved, is not as to the auspices under which
the meeting is held but as to its purpose; not as to the relations of the speakers,
but whether their utterances transcend the bounds of the freedom of speech
which the Constitution protects." There could be danger to public peace and
safety if such a gathering were marked by turbulence. That would deprive it of its
peaceful character. Even then, only the guilty parties should be held accountable.
It is true that the licensing official, here respondent Mayor, is not devoid of
discretion in determining whether or not a permit would be granted. It is not,
however, unfettered discretion. While prudence requires that there be a realistic
appraisal not of what may possibly occur but of what mayprobably occur, given
all the relevant circumstances, still the assumption especially so where the
assembly is scheduled for a specific public place is that the permit must be for
the assembly being held there. The exercise of such a right, in the language of
Justice Roberts, speaking for the American Supreme Court, is not to be
"abridged on the plea that it may be exercised in some other place."
xxx
8. By way of a summary. The applicants for a permit to hold an assembly should
inform the licensing authority of the date, the public place where and the time
when it will take place. If it were a private place, only the consent of the owner or
the one entitled to its legal possession is required. Such application should be
filed well ahead in time to enable the public official concerned to appraise
Page 27 of 102

whether there may be valid objections to the grant of the permit or to its grant but
at another public place. It is an indispensable condition to such refusal or
modification that the clear and present danger test be the standard for the
decision reached. If he is of the view that there is such an imminent and grave
danger of a substantive evil, the applicants must be heard on the matter.
Thereafter, his decision, whether favorable or adverse, must be transmitted to
them at the earliest opportunity. Thus if so minded, they can have recourse to the
proper judicial authority. Free speech and peaceable assembly, along with the
other intellectual freedoms, are highly ranked in our scheme of constitutional
values. It cannot be too strongly stressed that on the judiciary, -- even more so
than on the other departments rests the grave and delicate responsibility of
assuring respect for and deference to such preferred rights. No verbal formula,
no sanctifying phrase can, of course, dispense with what has been so felicitiously
termed by Justice Holmes "as the sovereign prerogative of judgment."
Nonetheless, the presumption must be to incline the weight of the scales of
justice on the side of such rights, enjoying as they do precedence and primacy. x
x x.
B.P. No. 880 was enacted after this Court rendered its decision in Reyes.
The provisions of B.P. No. 880 practically codify the ruling in Reyes:

Reyes v. Bagatsing

B.P. No. 880

(G.R. No. L-65366, November 9, 1983,

Sec. 4. Permit when required and when

not required.-- A written permit shall be
required for any person or persons to
organize and hold a public assembly in a
public place. However, no permit shall be
required if the public assembly shall be
done or made in a freedom park duly
established by law or ordinance or in
private property, in which case only the
consent of the owner or the one entitled
to its legal possession is required, or in
the campus of a government-owned and
operated educational institution which
shall be subject to the rules and
regulations
of
said
educational
institution. Political meetings or rallies
held during any election campaign period
as provided for by law are not covered
by this Act.

125 SCRA 553, 569)

8. By way of a summary. The applicants
for a permit to hold an assembly should
inform the licensing authority of the date,
the public placewhere and the time when
it will take place. If it were a private
place, only the consent of the owner or
the one entitled to its legal possession is
required. Such application should be
filed well ahead in time to enable the
public official concerned to appraise
whether there may be valid objections to
the grant of the permit or to its grant but
at another public place. It is an
indispensable condition to such refusal
or modification that the clear and present
danger test be the standard for the
decision reached. If he is of the view that
there is such an imminent and grave
danger of a substantive evil, the
applicants must be heard on the matter.
Thereafter,
his
decision,
whether
favorable
or
adverse,
must
be
transmitted to them at the earliest
opportunity. Thus if so minded, they can
have recourse to the proper judicial
authority.

Sec. 5. Application requirements.-- All

applications for a permit shall comply
with the following guidelines:
(a) The applications shall be in
writing and shall include the
names of the leaders or
organizers; the purpose of such
public assembly; the date, time
and duration thereof, and place or
streets to be used for the intended
activity; and the probable number
of persons participating, the
Page 28 of 102

transport and the public address

systems to be used.
(b)
The
application
shall
incorporate
the
duty
and
responsibility of applicant under
Section 8 hereof.
(c) The application shall be filed
with the office of the mayor of the
city or municipality in whose
jurisdiction the intended activity is
to be held, at least five (5) working
days before the scheduled public
assembly.
(d)
Upon
receipt
of
the
application, which must be duly
acknowledged in writing, the office
of the city or municipal mayor
shall cause the same to
immediately be posted at a
conspicuous place in the city or
municipal building.
Sec. 6. Action to be taken on the
application.
(a) It shall be the duty of the
mayor or any official acting in his
behalf to issue or grant a permit
unless there is clear and
convincing evidence that the
public assembly will create a clear
and present danger to public
order, public safety, public
convenience, public morals or
public health.
(b) The mayor or any official
acting in his behalf shall act on
the application within two (2)
working days from the date the
application was filed, failing which,
the permit shall be deemed
granted. Should for any reason
the mayor or any official acting in
his behalf refuse to accept the
application for a permit, said
application shall be posted by the
applicant on the premises of the
office of the mayor and shall be
deemed to have been filed.
(c) If the mayor is of the view that
there is imminent and grave
danger of a substantive evil
Page 29 of 102

warranting
the
denial
or
modification of the permit, he shall
immediately inform the applicant
who must be heard on the matter.
(d) The action on the permit shall
be in writing and served on the
applica[nt]
within
twenty-four
hours.
(e) If the mayor or any official
acting in his behalf denies the
application or modifies the terms
thereof in his permit, the applicant
may contest the decision in an
appropriate court of law.
(f) In case suit is brought before
the Metropolitan Trial Court, the
Municipal
Trial
Court,
the
Municipal Circuit Trial Court, the
Regional Trial Court, or the
Intermediate Appellate Court, its
decisions may be appealed to the
appropriate court within forty-eight
(48) hours after receipt of the
same. No appeal bond and record
on appeal shall be required. A
decision granting such permit or
modifying it in terms satisfactory
to the applicant shall be
immediately executory.
(g) All cases filed in court under
this section shall be decided
within twenty-four (24) hours from
date of filing. Cases filed
hereunder shall be immediately
endorsed to the executive judge
for disposition or, in his absence,
to the next in rank.
(h) In all cases, any decision may
be appealed to the Supreme
Court.
(i) Telegraphic appeals to be
followed by formal appeals are
hereby allowed.

It is very clear, therefore, that B.P. No. 880 is not an absolute ban of public assemblies
but a restriction that simply regulates the time, place and manner of the assemblies.
This was adverted to in Osmea v. Comelec,20 where the Court referred to it as a
"content-neutral" regulation of the time, place, and manner of holding public
assemblies.21

Page 30 of 102

A fair and impartial reading of B.P. No. 880 thus readily shows that it refers to all kinds
of public assemblies22 that would use public places. The reference to "lawful cause"
does not make it content-based because assemblies really have to be for lawful causes,
otherwise they would not be "peaceable" and entitled to protection. Neither are the
words "opinion," "protesting" and "influencing" in the definition of public assembly
content based, since they can refer to any subject. The words "petitioning the
government for redress of grievances" come from the wording of the Constitution, so its
use cannot be avoided. Finally, maximum tolerance is for the protection and benefit of
all rallyists and is independent of the content of the expressions in the rally.
Furthermore, the permit can only be denied on the ground of clear and present danger
to public order, public safety, public convenience, public morals or public health. This is
a recognized exception to the exercise of the right even under the Universal Declaration
of Human Rights and the International Covenant on Civil and Political Rights, thus:
Universal Declaration of Human Rights
Article 20
1. Everyone has the right to freedom of peaceful assembly and association.
xxx
Article 29
1. Everyone has duties to the community in which alone the free and full
development of his personality is possible.
2. In the exercise of his rights and freedoms, everyone shall be subject only to
such limitations as are determined by law solely for the purpose of securing due
recognition and respect for the rights and freedoms of others and of meeting the
just requirements of morality, public order and the general welfare in a
democratic society.
3. These rights and freedoms may in no case be exercised contrary to the
purposes and principles of the United Nations.
The International Covenant on Civil and Political Rights
Article 19.
1. Everyone shall have the right to hold opinions without interference.
2. Everyone shall have the right to freedom of expression; this right shall include
freedom to seek, receive and impart information and ideas of all kinds,
regardless of frontiers, either orally, in writing or in print, in the form of art, or
through any other media of his choice.
3. The exercise of the rights provided for in paragraph 2 of this article carries with
it special duties and responsibilities. It may therefore be subject to certain
restrictions, but these shall only be such as are provided by law and are
necessary:
(a) For respect of the rights or reputations of others;
(b) For the protection of national security or of public order (ordre public),
or of public health or morals.

Page 31 of 102

Contrary to petitioners claim, the law is very clear and is nowhere vague in its
provisions. "Public" does not have to be defined. Its ordinary meaning is well-known.
Websters Dictionary defines it, thus:23
public, n, x x x 2a: an organized body of people x x x 3: a group of people distinguished
by common interests or characteristics x x x.
Not every expression of opinion is a public assembly. The law refers to "rally,
demonstration, march, parade, procession or any other form of mass or concerted
action held in a public place." So it does not cover any and all kinds of gatherings.
Neither is the law overbroad. It regulates the exercise of the right to peaceful assembly
and petition only to the extent needed to avoid a clear and present danger of the
substantive evils Congress has the right to prevent.
There is, likewise, no prior restraint, since the content of the speech is not relevant to
the regulation.
As to the delegation of powers to the mayor, the law provides a precise and sufficient
standard the clear and present danger test stated in Sec. 6(a). The reference to
"imminent and grave danger of a substantive evil" in Sec. 6(c) substantially means the
same thing and is not an inconsistent standard. As to whether respondent Mayor has
the same power independently under Republic Act No. 7160 24 is thus not necessary to
resolve in these proceedings, and was not pursued by the parties in their arguments.
Finally, for those who cannot wait, Section 15 of the law provides for an alternative
forum through the creation of freedom parks where no prior permit is needed for
peaceful assembly and petition at any time:
Sec. 15. Freedom parks. Every city and municipality in the country shall within six
months after the effectivity of this Act establish or designate at least one suitable
"freedom park" or mall in their respective jurisdictions which, as far as practicable, shall
be centrally located within the poblacion where demonstrations and meetings may be
held at any time without the need of any prior permit.
In the cities and municipalities of Metropolitan Manila, the respective mayors shall
establish the freedom parks within the period of six months from the effectivity this Act.
This brings up the point, however, of compliance with this provision.
The Solicitor General stated during the oral arguments that, to his knowledge, only
Cebu City has declared a freedom park Fuente Osmea.
That of Manila, the Sunken Gardens, has since been converted into a golf course, he
added.
If this is so, the degree of observance of B.P. No. 880s mandate that every city and
municipality set aside a freedom park within six months from its effectivity in 1985, or 20
years ago, would be pathetic and regrettable. The matter appears to have been taken
for granted amidst the swell of freedom that rose from the peaceful revolution of 1986.
Considering that the existence of such freedom parks is an essential part of the laws
system of regulation of the peoples exercise of their right to peacefully assemble and
petition, the Court is constrained to rule that after thirty (30) days from the finality of this
Decision, no prior permit may be required for the exercise of such right in any public
park or plaza of a city or municipality until that city or municipality shall have complied
with Section 15 of the law. For without such alternative forum, to deny the permit would
in effect be to deny the right. Advance notices should, however, be given to the
authorities to ensure proper coordination and orderly proceedings.
Page 32 of 102

The Court now comes to the matter of the CPR. As stated earlier, the Solicitor General
has conceded that the use of the term should now be discontinued, since it does not
mean anything other than the maximum tolerance policy set forth in B.P. No. 880. This
is stated in the Affidavit of respondent Executive Secretary Eduardo Ermita, submitted
by the Solicitor General, thus:
14. The truth of the matter is the policy of "calibrated preemptive response" is in
consonance with the legal definition of "maximum tolerance" under Section 3 (c) of B.P.
Blg. 880, which is the "highest degree of restraint that the military, police and other
peacekeeping authorities shall observe during a public assembly or in the dispersal of
the same." Unfortunately, however, the phrase "maximum tolerance" has acquired a
different meaning over the years. Many have taken it to mean inaction on the part of law
enforcers even in the face of mayhem and serious threats to public order. More so,
other felt that they need not bother secure a permit when holding rallies thinking this
would be "tolerated." Clearly, the popular connotation of "maximum tolerance" has
departed from its real essence under B.P. Blg. 880.
15. It should be emphasized that the policy of maximum tolerance is provided under the
same law which requires all pubic assemblies to have a permit, which allows the
dispersal of rallies without a permit, and which recognizes certain instances when water
cannons may be used. This could only mean that "maximum tolerance" is not in conflict
with a "no permit, no rally policy" or with the dispersal and use of water cannons under
certain circumstances for indeed, the maximum amount of tolerance required is
dependent on how peaceful or unruly a mass action is. Our law enforcers should
calibrate their response based on the circumstances on the ground with the view to
preempting the outbreak of violence.
16. Thus, when I stated that calibrated preemptive response is being enforced in lieu of
maximum tolerance I clearly was not referring to its legal definition but to the distorted
and much abused definition that it has now acquired. I only wanted to disabuse the
minds of the public from the notion that law enforcers would shirk their responsibility of
keeping the peace even when confronted with dangerously threatening behavior. I
wanted to send a message that we would no longer be lax in enforcing the law but
would henceforth follow it to the letter. Thus I said, "we have instructed the PNP as well
as the local government units to strictly enforce a no permit, no rally policy . . . arrest all
persons violating the laws of the land . . . unlawful mass actions will be dispersed."
None of these is at loggerheads with the letter and spirit of Batas Pambansa Blg. 880. It
is thus absurd for complainants to even claim that I ordered my co-respondents to
violate any law.25
At any rate, the Court rules that in view of the maximum tolerance mandated by B.P.
No. 880, CPR serves no valid purpose if it means the same thing as maximum
tolerance and is illegal if it means something else. Accordingly, what is to be followed is
and should be that mandated by the law itself, namely, maximum tolerance, which
specifically means the following:
Sec. 3. Definition of terms. For purposes of this Act:
xxx
(c) "Maximum tolerance" means the highest degree of restraint that the military, police
and other peace keeping authorities shall observe during a public assembly or in the
dispersal of the same.
xxx
Sec. 9. Non-interference by law enforcement authorities. Law enforcement agencies
shall not interfere with the holding of a public assembly. However, to adequately ensure
public safety, a law enforcement contingent under the command of a responsible police
Page 33 of 102

officer may be detailed and stationed in a place at least one hundred (100) meters away
from the area of activity ready to maintain peace and order at all times.
Sec. 10. Police assistance when requested. It shall be imperative for law enforcement
agencies, when their assistance is requested by the leaders or organizers, to perform
their duties always mindful that their responsibility to provide proper protection to those
exercising their right peaceably to assemble and the freedom of expression is
primordial.1avvphil.net Towards this end, law enforcement agencies shall observe the
following guidelines:
(a) Members of the law enforcement contingent who deal with the demonstrators
shall be in complete uniform with their nameplates and units to which they belong
displayed prominently on the front and dorsal parts of their uniform and must
observe the policy of "maximum tolerance" as herein defined;
(b) The members of the law enforcement contingent shall not carry any kind of
firearms but may be equipped with baton or riot sticks, shields, crash helmets
with visor, gas masks, boots or ankle high shoes with shin guards;
(c) Tear gas, smoke grenades, water cannons, or any similar anti-riot device
shall not be used unless the public assembly is attended by actual violence or
serious threats of violence, or deliberate destruction of property.
Sec. 11. Dispersal of public assembly with permit. No public assembly with a permit
shall be dispersed. However, when an assembly becomes violent, the police may
disperse such public assembly as follows:
(a) At the first sign of impending violence, the ranking officer of the law
enforcement contingent shall call the attention of the leaders of the public
assembly and ask the latter to prevent any possible disturbance;
(b) If actual violence starts to a point where rocks or other harmful objects from
the participants are thrown at the police or at the non-participants, or at any
property causing damage to such property, the ranking officer of the law
enforcement contingent shall audibly warn the participants that if the disturbance
persists, the public assembly will be dispersed;
(c) If the violence or disturbance prevailing as stated in the preceding
subparagraph should not stop or abate, the ranking officer of the law
enforcement contingent shall audibly issue a warning to the participants of the
public assembly, and after allowing a reasonable period of time to lapse, shall
immediately order it to forthwith disperse;
(d) No arrest of any leader, organizer or participant shall also be made during the
public assembly unless he violates during the assembly a law, statute, ordinance
or any provision of this Act. Such arrest shall be governed by Article 125 of the
Revised Penal Code, as amended;
(d) Isolated acts or incidents of disorder or breach of the peace during the public
assembly shall not constitute a ground for dispersal.
xxx
Sec. 12. Dispersal of public assembly without permit. When the public assembly is
held without a permit where a permit is required, the said public assembly may be
peacefully dispersed.
Sec. 13. Prohibited acts. The following shall constitute violations of the Act:
Page 34 of 102

(e) Obstructing, impeding, disrupting or otherwise denying the exercise of the right to
peaceful assembly;
(f) The unnecessary firing of firearms by a member of any law enforcement agency or
any person to disperse the public assembly;
(g) Acts described hereunder if committed within one hundred (100) meters from the
area of activity of the public assembly or on the occasion thereof:
xxx
4. the carrying of firearms by members of the law enforcement unit;
5. the interfering with or intentionally disturbing the holding of a public assembly by the
use of a motor vehicle, its horns and loud sound systems.
Furthermore, there is need to address the situation adverted to by petitioners where
mayors do not act on applications for a permit and when the police demand a permit
and the rallyists could not produce one, the rally is immediately dispersed. In such a
situation, as a necessary consequence and part of maximum tolerance, rallyists who
can show the police an application duly filed on a given date can, after two days from
said date, rally in accordance with their application without the need to show a permit,
the grant of the permit being then presumed under the law, and it will be the burden of
the authorities to show that there has been a denial of the application, in which case the
rally may be peacefully dispersed following the procedure of maximum tolerance
prescribed by the law.
In sum, this Court reiterates its basic policy of upholding the fundamental rights of our
people, especially freedom of expression and freedom of assembly. In several policy
addresses, Chief Justice Artemio V. Panganiban has repeatedly vowed to uphold the
liberty of our people and to nurture their prosperity. He said that "in cases involving
liberty, the scales of justice should weigh heavily against the government and in favor of
the poor, the oppressed, the marginalized, the dispossessed and the weak. Indeed,
laws and actions that restrict fundamental rights come to the courts with a heavy
presumption against their validity. These laws and actions are subjected
toheightened scrutiny."26
For this reason, the so-called calibrated preemptive response policy has no place in our
legal firmament and must be struck down as a darkness that shrouds freedom. It merely
confuses our people and is used by some police agents to justify abuses. On the other
hand, B.P. No. 880 cannot be condemned as unconstitutional; it does not curtail or
unduly restrict freedoms; it merely regulates the use of public places as to the time,
place and manner of assemblies. Far from being insidious, "maximum tolerance" is for
the benefit of rallyists, not the government. The delegation to the mayors of the power to
issue rally "permits" is valid because it is subject to the constitutionally-sound "clear and
present danger" standard.
In this Decision, the Court goes even one step further in safeguarding liberty by giving
local governments a deadline of 30 days within which to designate specific freedom
parks as provided under B.P. No. 880. If, after that period, no such parks are so
identified in accordance with Section 15 of the law, all public parks and plazas of the
municipality or city concerned shall in effect be deemed freedom parks; no prior permit
of whatever kind shall be required to hold an assembly therein. The only requirement
will be written notices to the police and the mayors office to allow proper coordination
and orderly activities.
WHEREFORE, the petitions are GRANTED in part, and respondents, more particularly
the Secretary of the Interior and Local Governments, are DIRECTED to take all
necessary steps for the immediate compliance with Section 15 of Batas Pambansa No.
Page 35 of 102

880 through the establishment or designation of at least one suitable freedom park or
plaza in every city and municipality of the country. After thirty (30) days from the finality
of this Decision, subject to the giving of advance notices, no prior permit shall be
required to exercise the right to peaceably assemble and petition in the public parks or
plazas of a city or municipality that has not yet complied with Section 15 of the law.
Furthermore, Calibrated Preemptive Response (CPR), insofar as it would purport to
differ from or be in lieu of maximum tolerance, is NULL and VOID and respondents
are ENJOINED to REFRAIN from using it and to STRICTLY OBSERVE the
requirements of maximum tolerance. The petitions are DISMISSED in all other respects,
and the constitutionality of Batas Pambansa No. 880 is SUSTAINED.
No costs.
SO ORDERED.

Page 36 of 102

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175241

February 24, 2010

INTEGRATED BAR OF THE PHILIPPINES represented by its National President,

Jose Anselmo I. Cadiz, H. HARRY L. ROQUE, and JOEL RUIZ
BUTUYAN, Petitioners,
vs.
HONORABLE MANILA MAYOR JOSE "LITO" ATIENZA, Respondent.
DECISION
CARPIO MORALES, J.:
Petitioners Integrated Bar of the Philippines1 (IBP) and lawyers H. Harry L. Roque and
Joel R. Butuyan appeal the June 28, 2006 Decision 2 and the October 26, 2006
Resolution3 of the Court of Appeals that found no grave abuse of discretion on the part
of respondent Jose "Lito" Atienza, the then mayor of Manila, in granting a permit to rally
in a venue other than the one applied for by the IBP.
On June 15, 2006, the IBP, through its then National President Jose Anselmo Cadiz
(Cadiz), filed with the Office of the City Mayor of Manila a letter application4 for a permit
to rally at the foot of Mendiola Bridge on June 22, 2006 from 2:30 p.m. to 5:30 p.m. to
be participated in by IBP officers and members, law students and multi-sectoral
organizations.
Respondent issued a permit5 dated June 16, 2006 allowing the IBP to stage a rally on
given date but indicated therein Plaza Miranda as the venue, instead of Mendiola
Bridge, which permit the IBP received on June 19, 2006.
Aggrieved, petitioners filed on June 21, 2006 before the Court of Appeals a petition for
certiorari docketed as CA-G.R. SP No. 94949.6 The petition having been unresolved
within 24 hours from its filing, petitioners filed before this Court on June 22, 2006 a
petition for certiorari docketed as G.R. No. 172951 which assailed the appellate courts
inaction or refusal to resolve the petition within the period provided under the Public
Assembly Act of 1985.7
The Court, by Resolutions of July 26, 2006, August 30, 2006 and November 20, 2006,
respectively, denied the petition for being moot and academic, denied the relief that the
petition be heard on the merits in view of the pendency of CA-G.R. SP No. 94949, and
denied the motion for reconsideration.
The rally pushed through on June 22, 2006 at Mendiola Bridge, after Cadiz discussed
with P/Supt. Arturo Paglinawan whose contingent from the Manila Police District (MPD)
earlier barred petitioners from proceeding thereto. Petitioners allege that the participants
voluntarily dispersed after the peaceful conduct of the program.
The MPD thereupon instituted on June 26, 2006 a criminal action, 8 docketed as I.S. No.
06I-12501, against Cadiz for violating the Public Assembly Act in staging a rally at a
venue not indicated in the permit, to which charge Cadiz filed a Counter-Affidavit of
August 3, 2006.
In the meantime, the appellate court ruled, in CA-G.R. SP No. 94949, by the first
assailed issuance, that the petition became moot and lacked merit. The appellate court
also denied petitioners motion for reconsideration by the second assailed issuance.
Page 37 of 102

Hence, the filing of the present petition for review on certiorari, to which respondent filed
his Comment of November 18, 2008 which merited petitioners Reply of October 2,
2009.
The main issue is whether the appellate court erred in holding that the modification of
the venue in IBPs rally permit does not constitute grave abuse of discretion.
Petitioners assert that the partial grant of the application runs contrary to the Pubic
Assembly Act and violates their constitutional right to freedom of expression and public
assembly.
The Court shall first resolve the preliminary issue of mootness.
Undoubtedly, the petition filed with the appellate court on June 21, 2006 became moot
upon the passing of the date of the rally on June 22, 2006.
A moot and academic case is one that ceases to present a justiciable controversy by
virtue of supervening events, so that a declaration thereon would be of no practical use
or value. Generally, courts decline jurisdiction over such case or dismiss it on ground of
mootness. However, even in cases where supervening events had made the cases
moot, this Court did not hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar and public. Moreover, as an
exception to the rule on mootness, courts will decide a question otherwise moot if it is
capable of repetition, yet evading review.9
In the present case, the question of the legality of a modification of a permit to rally will
arise each time the terms of an intended rally are altered by the concerned official, yet it
evades review, owing to the limited time in processing the application where the
shortest allowable period is five days prior to the assembly. The susceptibility of
recurrence compels the Court to definitively resolve the issue at hand.
Respecting petitioners argument that the issues presented in CA-G.R. SP No. 94949
pose a prejudicial question to the criminal case against Cadiz, the Court finds it
improper to resolve the same in the present case.
Under the Rules,10 the existence of a prejudicial question is a ground in a petition to
suspend proceedings in a criminal action. Since suspension of the proceedings in the
criminal action may be made only upon petition and not at the instance of the judge or
the investigating prosecutor,11 the latter cannot take cognizance of a claim of prejudicial
question without a petition to suspend being filed. Since a petition to suspend can be
filed only in the criminal action,12 the determination of the pendency of a prejudicial
question should be made at the first instance in the criminal action, and not before this
Court in an appeal from the civil action.
In proceeding to resolve the petition on the merits, the appellate court found no grave
abuse of discretion on the part of respondent because the Public Assembly Act does
not categorically require respondent to specify in writing the imminent and grave danger
of a substantive evil which warrants the denial or modification of the permit and merely
mandates that the action taken shall be in writing and shall be served on respondent
within 24 hours. The appellate court went on to hold that respondent is authorized to
regulate the exercise of the freedom of expression and of public assembly which are not
absolute, and that the challenged permit is consistent with Plaza Mirandas designation
as a freedom park where protest rallies are allowed without permit.
The Court finds for petitioners.
Section 6 of the Public Assembly Act reads:
Section 6. Action to be taken on the application Page 38 of 102

(a) It shall be the duty of the mayor or any official acting in his behalf to issue or
grant a permit unless there is clear and convincing evidence that the public
assembly will create a clear and present danger to public order, public safety,
public convenience, public morals or public health.
(b) The mayor or any official acting in his behalf shall act on the application within
two (2) working days from the date the application was filed, failing which, the
permit shall be deemed granted. Should for any reason the mayor or any official
acting in his behalf refuse to accept the application for a permit, said application
shall be posted by the applicant on the premises of the office of the mayor and
shall be deemed to have been filed.
(c) If the mayor is of the view that there is imminent and grave danger of a
substantive evil warranting the denial or modification of the permit, he shall
immediately inform the applicant who must be heard on the matter.
(d) The action on the permit shall be in writing and served on the application [sic]
within twenty-four hours.
(e) If the mayor or any official acting in his behalf denies the application or
modifies the terms thereof in his permit, the applicant may contest the decision in
an appropriate court of law.
(f) In case suit is brought before the Metropolitan Trial Court, the Municipal Trial
Court, the Municipal Circuit Trial Court, the Regional Trial Court, or the
Intermediate Appellate Court, its decisions may be appealed to the appropriate
court within forty-eight (48) hours after receipt of the same. No appeal bond and
record on appeal shall be required. A decision granting such permit or modifying
it in terms satisfactory to the applicant shall, be immediately executory.
(g) All cases filed in court under this Section shall be decided within twenty-four
(24) hours from date of filing. Cases filed hereunder shall be immediately
endorsed to the executive judge for disposition or, in his absence, to the next in
rank.
(h) In all cases, any decision may be appealed to the Supreme Court.
(i) Telegraphic appeals to be followed by formal appeals are hereby allowed.
(underscoring supplied)
In Bayan, Karapatan, Kilusang Magbubukid ng Pilipinas (KMP) v. Ermita,13 the Court
reiterated:
x x x Freedom of assembly connotes the right of the people to meet peaceably for
consultation and discussion of matters of public concern. It is entitled to be accorded the
utmost deference and respect. It is not to be limited, much less denied, except on a
showing, as is the case with freedom of expression, of a clear and present danger
of a substantive evil that the state has a right to prevent. Even prior to the 1935
Constitution, Justice Malcolm had occasion to stress that it is a necessary consequence
of our republican institutions and complements the right of free speech. To paraphrase
the opinion of Justice Rutledge, speaking for the majority of the American Supreme
Court in Thomas v. Collins, it was not by accident or coincidence that the rights to
freedom of speech and of the press were coupled in a single guarantee with the rights
of the people peaceably to assemble and to petition the government for redress of
grievances. All these rights, while not identical, are inseparable. In every case,
therefore, where there is a limitation placed on the exercise of this right, the judiciary is
called upon to examine the effects of the challenged governmental actuation. The sole
justification for a limitation on the exercise of this right, so fundamental to the
maintenance of democratic institutions, is the danger, of a character both grave
Page 39 of 102

and imminent, of a serious evil to public safety, public morals, public health, or
any other legitimate public interest.14 (emphasis supplied)
The Court in Bayan stated that the provisions of the Public Assembly Act of 1985
practically codified the 1983 ruling in Reyes v. Bagatsing.15 In juxtaposing Sections 4 to
6 of the Public Assembly Act with the pertinent portion of the Reyes case, the Court
elucidated as follows:
x x x [The public official concerned shall] appraise whether there may be valid
objections to the grant of the permit or to its grant but at another public place. It is an
indispensable condition to such refusal or modification that the clear and present danger
test be the standard for the decision reached. If he is of the view that there is such an
imminent and grave danger of a substantive evil, the applicants must be heard on the
matter. Thereafter, his decision, whether favorable or adverse, must be transmitted to
them at the earliest opportunity. Thus if so minded, they can have recourse to the
proper judicial authority.16 (italics and underscoring supplied)
In modifying the permit outright, respondent gravely abused his discretion when he did
not immediately inform the IBP who should have been heard first on the matter of his
perceived imminent and grave danger of a substantive evil that may warrant the
changing of the venue. The opportunity to be heard precedes the action on the permit,
since the applicant may directly go to court after an unfavorable action on the
permit.1avvphi1
Respondent failed to indicate how he had arrived at modifying the terms of the permit
against the standard of a clear and present danger test which, it bears repeating, is an
indispensable condition to such modification. Nothing in the issued permit adverts to an
imminent and grave danger of a substantive evil, which "blank" denial or modification
would, when granted imprimatur as the appellate court would have it, render illusory any
judicial scrutiny thereof.
It is true that the licensing official, here respondent Mayor, is not devoid of discretion in
determining whether or not a permit would be granted. It is not, however, unfettered
discretion. While prudence requires that there be a realistic appraisal not of what may
possibly occur but of what may probably occur, given all the relevant circumstances, still
the assumption especially so where the assembly is scheduled for a specific public
place is that the permit must be for the assembly being held there. The exercise of
such a right, in the language of Justice Roberts, speaking for the American
Supreme Court, is not to be "abridged on the plea that it may be exercised in
some other place."17 (emphasis and underscoring supplied)
Notably, respondent failed to indicate in his Comment any basis or explanation for his
action. It smacks of whim and caprice for respondent to just impose a change of venue
for an assembly that was slated for a specific public place. It is thus reversible error for
the appellate court not to have found such grave abuse of discretion and, under specific
statutory
provision, not to have modified the permit "in terms satisfactory to the applicant." 18
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CAG.R. SP No. 94949 areREVERSED. The Court DECLARES that respondent committed
grave abuse of discretion in modifying the rally permit issued on June 16, 2006 insofar
as it altered the venue from Mendiola Bridge to Plaza Miranda.
SO ORDERED.

Page 40 of 102

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 122846

January 20, 2009

WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA

TOURIST & DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S.
LIM, Respondent.
DECISION
Tinga, J.:
With another city ordinance of Manila also principally involving the tourist district as
subject, the Court is confronted anew with the incessant clash between government
power and individual liberty in tandem with the archetypal tension between law and
morality.
In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city ordinance
barring the operation of motels and inns, among other establishments, within the
Ermita-Malate area. The petition at bar assails a similarly-motivated city ordinance that
prohibits those same establishments from offering short-time admission, as well as prorated or "wash up" rates for such abbreviated stays. Our earlier decision tested the city
ordinance against our sacred constitutional rights to liberty, due process and equal
protection of law. The same parameters apply to the present petition.
This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the
reversal of the Decision3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals,
challenges the validity of Manila City Ordinance No. 7774 entitled, "An Ordinance
Prohibiting Short-Time Admission, Short-Time Admission Rates, and Wash-Up Rate
Schemes in Hotels, Motels, Inns, Lodging Houses, Pension Houses, and Similar
Establishments in the City of Manila" (the Ordinance).
I.
The facts are as follows:
On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the
Ordinance.4 The Ordinance is reproduced in full, hereunder:
SECTION 1. Declaration of Policy. It is hereby the declared policy of the City
Government to protect the best interest, health and welfare, and the morality of its
constituents in general and the youth in particular.
SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time
admission in hotels, motels, lodging houses, pension houses and similar establishments
in the City of Manila.
SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate
or other similarly concocted terms, are hereby prohibited in hotels, motels, inns, lodging
houses, pension houses and similar establishments in the City of Manila.
SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging
of room rate for less than twelve (12) hours at any given time or the renting out of rooms
Page 41 of 102

more than twice a day or any other term that may be concocted by owners or managers
of said establishments but would mean the same or would bear the same meaning.
SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of
this ordinance shall upon conviction thereof be punished by a fine of Five Thousand
(P5,000.00) Pesos or imprisonment for a period of not exceeding one (1) year or both
such fine and imprisonment at the discretion of the court; Provided, That in case of [a]
juridical person, the president, the manager, or the persons in charge of the operation
thereof shall be liable: Provided, further, That in case of subsequent conviction for the
same offense, the business license of the guilty party shall automatically be cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with
or contrary to this measure or any portion hereof are hereby deemed repealed.
SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval.
Enacted by the city Council of Manila at its regular session today, November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.
On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed
a complaint for declaratory relief with prayer for a writ of preliminary injunction and/or
temporary restraining order ( TRO)5 with the Regional Trial Court (RTC) of Manila,
Branch 9 impleading as defendant, herein respondent City of Manila (the City)
represented by Mayor Lim.6 MTDC prayed that the Ordinance, insofar as it includes
motels and inns as among its prohibited establishments, be declared invalid and
unconstitutional. MTDC claimed that as owner and operator of the Victoria Court in
Malate, Manila it was authorized by Presidential Decree (P.D.) No. 259 to admit
customers on a short time basis as well as to charge customers wash up rates for stays
of only three hours.
On December 21, 1992, petitioners White Light Corporation (WLC), Titanium
Corporation (TC) and Sta. Mesa Tourist and Development Corporation (STDC) filed a
motion to intervene and to admit attached complaint-in-intervention7 on the ground that
the Ordinance directly affects their business interests as operators of drive-in-hotels and
motels in Manila.8 The three companies are components of the Anito Group of
Companies which owns and operates several hotels and motels in Metro Manila. 9
On December 23, 1992, the RTC granted the motion to intervene. 10 The RTC also
notified the Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of
the Rules of Court. On the same date, MTDC moved to withdraw as plaintiff. 11
On December 28, 1992, the RTC granted MTDC's motion to withdraw. 12 The RTC
issued a TRO on January 14, 1993, directing the City to cease and desist from
enforcing the Ordinance.13 The City filed an Answer dated January 22, 1993 alleging
that the Ordinance is a legitimate exercise of police power.14
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to
desist from the enforcement of the Ordinance.15 A month later, on March 8, 1993, the
Solicitor General filed his Comment arguing that the Ordinance is constitutional.
During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for
decision without trial as the case involved a purely legal question. 16 On October 20,
1993, the RTC rendered a decision declaring the Ordinance null and void. The
dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is
hereby declared null and void.
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Accordingly, the preliminary injunction heretofor issued is hereby made permanent.

SO ORDERED.17
The RTC noted that the ordinance "strikes at the personal liberty of the individual
guaranteed and jealously guarded by the Constitution." 18 Reference was made to the
provisions of the Constitution encouraging private enterprises and the incentive to
needed investment, as well as the right to operate economic enterprises. Finally, from
the observation that the illicit relationships the Ordinance sought to dissuade could
nonetheless be consummated by simply paying for a 12-hour stay, the RTC likened the
law to the ordinance annulled in Ynot v. Intermediate Appellate Court,19 where the
legitimate purpose of preventing indiscriminate slaughter of carabaos was sought to be
effected through an inter-province ban on the transport of carabaos and carabeef.
The City later filed a petition for review on certiorari with the Supreme Court.20 The
petition was docketed as G.R. No. 112471. However in a resolution dated January 26,
1994, the Court treated the petition as a petition forcertiorari and referred the petition to
the Court of Appeals.21
Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of
police power pursuant to Section 458 (4)(iv) of the Local Government Code which
confers on cities, among other local government units, the power:
[To] regulate the establishment, operation and maintenance of cafes, restaurants,
beerhouses, hotels, motels, inns, pension houses, lodging houses and other similar
establishments, including tourist guides and transports.22
The Ordinance, it is argued, is also a valid exercise of the power of the City under
Article III, Section 18(kk) of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the sanitation and safety,
the furtherance of the prosperity and the promotion of the morality, peace, good order,
comfort, convenience and general welfare of the city and its inhabitants, and such
others as be necessary to carry into effect and discharge the powers and duties
conferred by this Chapter; and to fix penalties for the violation of ordinances which shall
not exceed two hundred pesos fine or six months imprisonment, or both such fine and
imprisonment for a single offense.23
Petitioners argued that the Ordinance is unconstitutional and void since it violates the
right to privacy and the freedom of movement; it is an invalid exercise of police power;
and it is an unreasonable and oppressive interference in their business.
The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality
of the Ordinance.24First, it held that the Ordinance did not violate the right to privacy or
the freedom of movement, as it only penalizes the owners or operators of
establishments that admit individuals for short time stays. Second, the virtually limitless
reach of police power is only constrained by having a lawful object obtained through a
lawful method. The lawful objective of the Ordinance is satisfied since it aims to curb
immoral activities. There is a lawful method since the establishments are still allowed to
operate. Third, the adverse effect on the establishments is justified by the well-being of
its constituents in general. Finally, as held in Ermita-Malate Motel Operators Association
v. City Mayor of Manila, liberty is regulated by law.
TC, WLC and STDC come to this Court via petition for review on certiorari. 25 In their
petition and Memorandum, petitioners in essence repeat the assertions they made
before the Court of Appeals. They contend that the assailed Ordinance is an invalid
exercise of police power.
II.
Page 43 of 102

We must address the threshold issue of petitioners standing. Petitioners allege that as
owners of establishments offering "wash-up" rates, their business is being unlawfully
interfered with by the Ordinance. However, petitioners also allege that the equal
protection rights of their clients are also being interfered with. Thus, the crux of the
matter is whether or not these establishments have the requisite standing to plead for
protection of their patrons' equal protection rights.
Standing or locus standi is the ability of a party to demonstrate to the court sufficient
connection to and harm from the law or action challenged to support that party's
participation in the case. More importantly, the doctrine of standing is built on the
principle of separation of powers,26 sparing as it does unnecessary interference or
invalidation by the judicial branch of the actions rendered by its co-equal branches of
government.
The requirement of standing is a core component of the judicial system derived directly
from the Constitution.27The constitutional component of standing doctrine incorporates
concepts which concededly are not susceptible of precise definition.28 In this jurisdiction,
the extancy of "a direct and personal interest" presents the most obvious cause, as well
as the standard test for a petitioner's standing.29 In a similar vein, the United States
Supreme Court reviewed and elaborated on the meaning of the three constitutional
standing requirements of injury, causation, and redressability in Allen v. Wright.30
Nonetheless, the general rules on standing admit of several exceptions such as the
overbreadth doctrine, taxpayer suits, third party standing and, especially in the
Philippines, the doctrine of transcendental importance.31
For this particular set of facts, the concept of third party standing as an exception and
the overbreadth doctrine are appropriate. In Powers v. Ohio,32 the United States
Supreme Court wrote that: "We have recognized the right of litigants to bring actions on
behalf of third parties, provided three important criteria are satisfied: the litigant must
have suffered an injury-in-fact, thus giving him or her a "sufficiently concrete interest" in
the outcome of the issue in dispute; the litigant must have a close relation to the third
party; and there must exist some hindrance to the third party's ability to protect his or
her own interests."33 Herein, it is clear that the business interests of the petitioners are
likewise injured by the Ordinance. They rely on the patronage of their customers for
their continued viability which appears to be threatened by the enforcement of the
Ordinance. The relative silence in constitutional litigation of such special interest groups
in our nation such as the American Civil Liberties Union in the United States may also
be construed as a hindrance for customers to bring suit.34
American jurisprudence is replete with examples where parties-in-interest were allowed
standing to advocate or invoke the fundamental due process or equal protection claims
of other persons or classes of persons injured by state action. In Griswold v.
Connecticut,35 the United States Supreme Court held that physicians had standing to
challenge a reproductive health statute that would penalize them as accessories as well
as to plead the constitutional protections available to their patients. The Court held that:
"The rights of husband and wife, pressed here, are likely to be diluted or adversely
affected unless those rights are considered in a suit involving those who have this kind
of confidential relation to them."36
An even more analogous example may be found in Craig v. Boren,37 wherein the United
States Supreme Court held that a licensed beverage vendor has standing to raise the
equal protection claim of a male customer challenging a statutory scheme prohibiting
the sale of beer to males under the age of 21 and to females under the age of 18. The
United States High Court explained that the vendors had standing "by acting as
advocates of the rights of third parties who seek access to their market or function." 38

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Assuming arguendo that petitioners do not have a relationship with their patrons for the
former to assert the rights of the latter, the overbreadth doctrine comes into play. In
overbreadth analysis, challengers to government actionare in effect permitted to raise
the rights of third parties. Generally applied to statutes infringing on the freedom of
speech, the overbreadth doctrine applies when a statute needlessly restrains even
constitutionally guaranteed rights.39 In this case, the petitioners claim that the Ordinance
makes a sweeping intrusion into the right to liberty of their clients. We can see that
based on the allegations in the petition, the Ordinance suffers from overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights of
their clients to patronize their establishments for a "wash-rate" time frame.
III.
To students of jurisprudence, the facts of this case will recall to mind not only the
recent City of Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel
Operations Association, Inc., v. Hon. City Mayor of Manila.40Ermita-Malate concerned
the City ordinance requiring patrons to fill up a prescribed form stating personal
information such as name, gender, nationality, age, address and occupation before they
could be admitted to a motel, hotel or lodging house. This earlier ordinance was
precisely enacted to minimize certain practices deemed harmful to public morals. A
purpose similar to the annulled ordinance in City of Manila which sought a blanket ban
on motels, inns and similar establishments in the Ermita-Malate area. However, the
constitutionality of the ordinance in Ermita-Malate was sustained by the Court.
The common thread that runs through those decisions and the case at bar goes beyond
the singularity of the localities covered under the respective ordinances. All three
ordinances were enacted with a view of regulating public morals including particular
illicit activity in transient lodging establishments. This could be described as the middle
case, wherein there is no wholesale ban on motels and hotels but the services offered
by these establishments have been severely restricted. At its core, this is another case
about the extent to which the State can intrude into and regulate the lives of its citizens.
The test of a valid ordinance is well established. A long line of decisions including City
of Manila has held that for an ordinance to be valid, it must not only be within the
corporate powers of the local government unit to enact and pass according to the
procedure prescribed by law, it must also conform to the following substantive
requirements: (1) must not contravene the Constitution or any statute; (2) must not be
unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but
may regulate trade; (5) must be general and consistent with public policy; and (6) must
not be unreasonable.41
The Ordinance prohibits two specific and distinct business practices, namely wash rate
admissions and renting out a room more than twice a day. The ban is evidently sought
to be rooted in the police power as conferred on local government units by the Local
Government Code through such implements as the general welfare clause.
A.
Police power, while incapable of an exact definition, has been purposely veiled in
general terms to underscore its comprehensiveness to meet all exigencies and provide
enough room for an efficient and flexible response as the conditions warrant. 42 Police
power is based upon the concept of necessity of the State and its corresponding right to
protect itself and its people.43 Police power has been used as justification for numerous
and varied actions by the State. These range from the regulation of dance halls, 44 movie
theaters,45 gas stations46 and cockpits.47 The awesome scope of police power is best
demonstrated by the fact that in its hundred or so years of presence in our nations legal
system, its use has rarely been denied.
Page 45 of 102

The apparent goal of the Ordinance is to minimize if not eliminate the use of the
covered establishments for illicit sex, prostitution, drug use and alike. These goals, by
themselves, are unimpeachable and certainly fall within the ambit of the police power of
the State. Yet the desirability of these ends do not sanctify any and all means for their
achievement. Those means must align with the Constitution, and our emerging
sophisticated analysis of its guarantees to the people. The Bill of Rights stands as a
rebuke to the seductive theory of Macchiavelli, and, sometimes even, the political
majorities animated by his cynicism.
Even as we design the precedents that establish the framework for analysis of due
process or equal protection questions, the courts are naturally inhibited by a due
deference to the co-equal branches of government as they exercise their political
functions. But when we are compelled to nullify executive or legislative actions, yet
another form of caution emerges. If the Court were animated by the same passing
fancies or turbulent emotions that motivate many political decisions, judicial integrity is
compromised by any perception that the judiciary is merely the third political branch of
government. We derive our respect and good standing in the annals of history by acting
as judicious and neutral arbiters of the rule of law, and there is no surer way to that end
than through the development of rigorous and sophisticated legal standards through
which the courts analyze the most fundamental and far-reaching constitutional
questions of the day.
B.
The primary constitutional question that confronts us is one of due process, as
guaranteed under Section 1, Article III of the Constitution. Due process evades a
precise definition.48 The purpose of the guaranty is to prevent arbitrary governmental
encroachment against the life, liberty and property of individuals. The due process
guaranty serves as a protection against arbitrary regulation or seizure. Even
corporations and partnerships are protected by the guaranty insofar as their property is
concerned.
The due process guaranty has traditionally been interpreted as imposing two related but
distinct restrictions on government, "procedural due process" and "substantive due
process." Procedural due process refers to the procedures that the government must
follow before it deprives a person of life, liberty, or property. 49 Procedural due process
concerns itself with government action adhering to the established process when it
makes an intrusion into the private sphere. Examples range from the form of notice
given to the level of formality of a hearing.
If due process were confined solely to its procedural aspects, there would arise absurd
situation of arbitrary government action, provided the proper formalities are followed.
Substantive due process completes the protection envisioned by the due process
clause. It inquires whether the government has sufficient justification for depriving a
person of life, liberty, or property.50
The question of substantive due process, moreso than most other fields of law, has
reflected dynamism in progressive legal thought tied with the expanded acceptance of
fundamental freedoms. Police power, traditionally awesome as it may be, is now
confronted with a more rigorous level of analysis before it can be upheld. The vitality
though of constitutional due process has not been predicated on the frequency with
which it has been utilized to achieve a liberal result for, after all, the libertarian ends
should sometimes yield to the prerogatives of the State. Instead, the due process
clause has acquired potency because of the sophisticated methodology that has
emerged to determine the proper metes and bounds for its application.
C.

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The general test of the validity of an ordinance on substantive due process grounds is
best tested when assessed with the evolved footnote 4 test laid down by the U.S.
Supreme Court in U.S. v. Carolene Products.51 Footnote 4 of the Carolene Products
case acknowledged that the judiciary would defer to the legislature unless there is a
discrimination against a "discrete and insular" minority or infringement of a "fundamental
right."52 Consequently, two standards of judicial review were established: strict scrutiny
for laws dealing with freedom of the mind or restricting the political process, and the
rational basis standard of review for economic legislation.
A third standard, denominated as heightened or immediate scrutiny, was later adopted
by the U.S. Supreme Court for evaluating classifications based on gender 53 and
legitimacy.54 Immediate scrutiny was adopted by the U.S. Supreme Court in
Craig,55 after the Court declined to do so in Reed v. Reed. 56 While the test may have
first been articulated in equal protection analysis, it has in the United States since been
applied in all substantive due process cases as well.
We ourselves have often applied the rational basis test mainly in analysis of equal
protection challenges.57 Using the rational basis examination, laws or ordinances are
upheld if they rationally further a legitimate governmental interest. 58 Under intermediate
review, governmental interest is extensively examined and the availability of less
restrictive measures is considered.59 Applying strict scrutiny, the focus is on the
presence of compelling, rather than substantial, governmental interest and on the
absence of less restrictive means for achieving that interest.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard
for determining the quality and the amount of governmental interest brought to justify
the regulation of fundamental freedoms.60 Strict scrutiny is used today to test the validity
of laws dealing with the regulation of speech, gender, or race as well as other
fundamental rights as expansion from its earlier applications to equal protection. 61 The
United States Supreme Court has expanded the scope of strict scrutiny to protect
fundamental rights such as suffrage,62 judicial access63 and interstate travel.64
If we were to take the myopic view that an Ordinance should be analyzed strictly as to
its effect only on the petitioners at bar, then it would seem that the only restraint
imposed by the law which we are capacitated to act upon is the injury to property
sustained by the petitioners, an injury that would warrant the application of the most
deferential standard the rational basis test. Yet as earlier stated, we recognize the
capacity of the petitioners to invoke as well the constitutional rights of their patrons
those persons who would be deprived of availing short time access or wash-up rates to
the lodging establishments in question.
Viewed cynically, one might say that the infringed rights of these customers were are
trivial since they seem shorn of political consequence. Concededly, these are not the
sort of cherished rights that, when proscribed, would impel the people to tear up their
cedulas. Still, the Bill of Rights does not shelter gravitas alone. Indeed, it is those
"trivial" yet fundamental freedoms which the people reflexively exercise any day
without the impairing awareness of their constitutional consequence that accurately
reflect the degree of liberty enjoyed by the people. Liberty, as integrally incorporated as
a fundamental right in the Constitution, is not a Ten Commandments-style enumeration
of what may or what may not be done; but rather an atmosphere of freedom where the
people do not feel labored under a Big Brother presence as they interact with each
other, their society and nature, in a manner innately understood by them as inherent,
without doing harm or injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty which we
upheld in City of Manila v. Hon. Laguio, Jr. We expounded on that most primordial of
rights, thus:
Page 47 of 102

Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include

"the right to exist and the right to be free from arbitrary restraint or servitude. The term
cannot be dwarfed into mere freedom from physical restraint of the person of the citizen,
but is deemed to embrace the right of man to enjoy the facilities with which he has been
endowed by his Creator, subject only to such restraint as are necessary for the common
welfare."[65] In accordance with this case, the rights of the citizen to be free to use his
faculties in all lawful ways; to live and work where he will; to earn his livelihood by any
lawful calling; and to pursue any avocation are all deemed embraced in the concept of
liberty.[66]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the
meaning of "liberty." It said:
While the Court has not attempted to define with exactness the liberty . . . guaranteed
[by the Fifth and Fourteenth Amendments], the term denotes not merely freedom from
bodily restraint but also the right of the individual to contract, to engage in any of the
common occupations of life, to acquire useful knowledge, to marry, establish a home
and bring up children, to worship God according to the dictates of his own conscience,
and generally to enjoy those privileges long recognized . . . as essential to the orderly
pursuit of happiness by free men. In a Constitution for a free people, there can be no
doubt that the meaning of "liberty" must be broad indeed. 67 [Citations omitted]
It cannot be denied that the primary animus behind the ordinance is the curtailment of
sexual behavior. The City asserts before this Court that the subject establishments
"have gained notoriety as venue of prostitution, adultery and fornications in Manila
since they provide the necessary atmosphere for clandestine entry, presence and exit
and thus became the ideal haven for prostitutes and thrill-seekers."68 Whether or not
this depiction of a mise-en-scene of vice is accurate, it cannot be denied that legitimate
sexual behavior among willing married or consenting single adults which is
constitutionally protected69 will be curtailed as well, as it was in the City of Manila case.
Our holding therein retains significance for our purposes:
The concept of liberty compels respect for the individual whose claim to privacy and
interference demands respect. As the case of Morfe v. Mutuc, borrowing the words of
Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his
isolation, are indefeasible; indeed, they are so fundamental that they are the basis on
which his civic obligations are built. He cannot abandon the consequences of his
isolation, which are, broadly speaking, that his experience is private, and the will built
out of that experience personal to himself. If he surrenders his will to others, he
surrenders himself. If his will is set by the will of others, he ceases to be a master of
himself. I cannot believe that a man no longer a master of himself is in any real sense
free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the
invasion of which should be justified by a compelling state interest. Morfe accorded
recognition to the right to privacy independently of its identification with liberty; in itself it
is fully deserving of constitutional protection. Governmental powers should stop short of
certain intrusions into the personal life of the citizen.70
We cannot discount other legitimate activities which the Ordinance would proscribe or
impair. There are very legitimate uses for a wash rate or renting the room out for more
than twice a day. Entire families are known to choose pass the time in a motel or hotel
whilst the power is momentarily out in their homes. In transit passengers who wish to
wash up and rest between trips have a legitimate purpose for abbreviated stays in
motels or hotels. Indeed any person or groups of persons in need of comfortable private
spaces for a span of a few hours with purposes other than having sex or using illegal
drugs can legitimately look to staying in a motel or hotel as a convenient alternative.
Page 48 of 102

E.
That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a
product and the petitioners of lucrative business ties in with another constitutional
requisite for the legitimacy of the Ordinance as a police power measure. It must appear
that the interests of the public generally, as distinguished from those of a particular
class, require an interference with private rights and the means must be reasonably
necessary for the accomplishment of the purpose and not unduly oppressive of private
rights.71 It must also be evident that no other alternative for the accomplishment of the
purpose less intrusive of private rights can work. More importantly, a reasonable relation
must exist between the purposes of the measure and the means employed for its
accomplishment, for even under the guise of protecting the public interest, personal
rights and those pertaining to private property will not be permitted to be arbitrarily
invaded.72
Lacking a concurrence of these requisites, the police measure shall be struck down as
an arbitrary intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police
power is subject to judicial review when life, liberty or property is affected. 73 However,
this is not in any way meant to take it away from the vastness of State police power
whose exercise enjoys the presumption of validity.74
Similar to the Comelec resolution requiring newspapers to donate advertising space to
candidates, this Ordinance is a blunt and heavy instrument. 75 The Ordinance makes no
distinction between places frequented by patrons engaged in illicit activities and patrons
engaged in legitimate actions. Thus it prevents legitimate use of places where illicit
activities are rare or even unheard of. A plain reading of section 3 of the Ordinance
shows it makes no classification of places of lodging, thus deems them all susceptible to
illicit patronage and subject them without exception to the unjustified prohibition.
The Court has professed its deep sentiment and tenderness of the Ermita-Malate area,
its longtime home,76 and it is skeptical of those who wish to depict our capital city the
Pearl of the Orient as a modern-day Sodom or Gomorrah for the Third World set.
Those still steeped in Nick Joaquin-dreams of the grandeur of Old Manila will have to
accept that Manila like all evolving big cities, will have its problems. Urban decay is a
fact of mega cities such as Manila, and vice is a common problem confronted by the
modern metropolis wherever in the world. The solution to such perceived decay is not to
prevent legitimate businesses from offering a legitimate product. Rather, cities revive
themselves by offering incentives for new businesses to sprout up thus attracting the
dynamism of individuals that would bring a new grandeur to Manila.
The behavior which the Ordinance seeks to curtail is in fact already prohibited and could
in fact be diminished simply by applying existing laws. Less intrusive measures such as
curbing the proliferation of prostitutes and drug dealers through active police work would
be more effective in easing the situation. So would the strict enforcement of existing
laws and regulations penalizing prostitution and drug use. These measures would have
minimal intrusion on the businesses of the petitioners and other legitimate merchants.
Further, it is apparent that the Ordinance can easily be circumvented by merely paying
the whole day rate without any hindrance to those engaged in illicit activities. Moreover,
drug dealers and prostitutes can in fact collect "wash rates" from their clientele by
charging their customers a portion of the rent for motel rooms and even apartments.
IV.
We reiterate that individual rights may be adversely affected only to the extent that may
fairly be required by the legitimate demands of public interest or public welfare. The
State is a leviathan that must be restrained from needlessly intruding into the lives of its
citizens. However well-intentioned the Ordinance may be, it is in effect an arbitrary and
whimsical intrusion into the rights of the establishments as well as their patrons. The
Ordinance needlessly restrains the operation of the businesses of the petitioners as well
Page 49 of 102

as restricting the rights of their patrons without sufficient justification. The Ordinance
rashly equates wash rates and renting out a room more than twice a day with immorality
without accommodating innocuous intentions.
The promotion of public welfare and a sense of morality among citizens deserves the
full endorsement of the judiciary provided that such measures do not trample rights this
Court is sworn to protect.77 The notion that the promotion of public morality is a function
of the State is as old as Aristotle.78 The advancement of moral relativism as a school of
philosophy does not de-legitimize the role of morality in law, even if it may foster wider
debate on which particular behavior to penalize. It is conceivable that a society with
relatively little shared morality among its citizens could be functional so long as the
pursuit of sharply variant moral perspectives yields an adequate accommodation of
different interests.79
To be candid about it, the oft-quoted American maxim that "you cannot legislate
morality" is ultimately illegitimate as a matter of law, since as explained by Calabresi,
that phrase is more accurately interpreted as meaning that efforts to legislate morality
will fail if they are widely at variance with public attitudes about right and wrong. 80 Our
penal laws, for one, are founded on age-old moral traditions, and as long as there are
widely accepted distinctions between right and wrong, they will remain so oriented.
Yet the continuing progression of the human story has seen not only the acceptance of
the right-wrong distinction, but also the advent of fundamental liberties as the key to the
enjoyment of life to the fullest. Our democracy is distinguished from non-free societies
not with any more extensive elaboration on our part of what is moral and immoral, but
from our recognition that the individual liberty to make the choices in our lives is innate,
and protected by the State. Independent and fair-minded judges themselves are under
a moral duty to uphold the Constitution as the embodiment of the rule of law, by reason
of their expression of consent to do so when they take the oath of office, and because
they are entrusted by the people to uphold the law.81
Even as the implementation of moral norms remains an indispensable complement to
governance, that prerogative is hardly absolute, especially in the face of the norms of
due process of liberty. And while the tension may often be left to the courts to relieve, it
is possible for the government to avoid the constitutional conflict by employing more
judicious, less drastic means to promote morality.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals
is REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9,
is REINSTATED. Ordinance No. 7774 is hereby declared UNCONSTITUTIONAL. No
pronouncement as to costs.
SO ORDERED.

Page 50 of 102

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 91649 May 14, 1991
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN
AND LORENZO SANCHEZ,petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
PARAS, J.:p
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 order, and because
A. It constitutes a waiver of a right prejudicial to a third person with a right
recognized by law. It waived the Manila City government's right to impose
taxes and license fees, which is recognized by law;
B. For the same reason stated in the immediately preceding paragraph,
the law has intruded into the local government's right to impose local taxes
and license fees. This, in contravention of the constitutionally enshrined
principle of local autonomy;
C. It violates the equal protection clause of the constitution in that it
legalizes PAGCOR conducted gambling, while most other forms of
gambling are outlawed, together with prostitution, drug trafficking and
other vices;
D. It violates the avowed trend of the Cory government away from
monopolistic and crony economy, and toward free enterprise and
privatization. (p. 2, Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the
declared national policy of the "new restored democracy" and the people's will as
expressed in the 1987 Constitution. The decree is said to have a "gambling objective"
and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and
Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second Amended Petition;
p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing lawyers
(petitioner Basco being also the Chairman of the Committee on Laws of the City Council
of Manila), can question and seek the annulment of PD 1869 on the alleged grounds
mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue
of P.D. 1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B
also dated January 1, 1977 "to establish, operate and maintain gambling casinos on
land or water within the territorial jurisdiction of the Philippines." Its operation was
originally conducted in the well known floating casino "Philippine Tourist." The operation
was considered a success for it proved to be a potential source of revenue to fund
Page 51 of 102

infrastructure and socio-economic projects, thus, P.D. 1399 was passed on June 2,
1978 for PAGCOR to fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the
Government to regulate and centralize all games of chance authorized by existing
franchise or permitted by law, under the following declared policy
Sec. 1. Declaration of Policy. It is hereby declared to be the policy of
the State to centralize and integrate all games of chance not heretofore
authorized by existing franchises or permitted by law in order to attain the
following objectives:
(a) To centralize and integrate the right and authority to operate and
conduct games of chance into one corporate entity to be controlled,
administered and supervised by the Government.
(b) To establish and operate clubs and casinos, for amusement and
recreation, including sports gaming pools, (basketball, football, lotteries,
etc.) and such other forms of amusement and recreation including games
of chance, which may be allowed by law within the territorial jurisdiction of
the Philippines and which will: (1) generate sources of additional revenue
to fund infrastructure and socio-civic projects, such as flood control
programs, beautification, sewerage and sewage projects, Tulungan ng
Bayan Centers, Nutritional Programs, Population Control and such other
essential public services; (2) create recreation and integrated facilities
which will expand and improve the country's existing tourist attractions;
and (3) minimize, if not totally eradicate, all the evils, malpractices and
corruptions that are normally prevalent on the conduct and operation of
gambling clubs and casinos without direct government involvement.
(Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders,
rules and regulations, inconsistent therewith, are accordingly repealed, amended or
modified.
It is reported that PAGCOR is the third largest source of government revenue, next to
the Bureau of Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR
earned P3.43 Billion, and directly remitted to the National Government a total of P2.5
Billion in form of franchise tax, government's income share, the President's Social Fund
and Host Cities' share. In addition, PAGCOR sponsored other socio-cultural and
charitable projects on its own or in cooperation with various governmental agencies,
and other private associations and organizations. In its 3 1/2 years of operation under
the present administration, PAGCOR remitted to the government a total of P6.2 Billion.
As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9)
casinos nationwide, directly supporting the livelihood of Four Thousand Four Hundred
Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the
same is "null and void" for being "contrary to morals, public policy and public order,"
monopolistic and tends toward "crony economy", and is violative of the equal protection
clause and local autonomy as well as for running counter to the state policies
enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family) and 13
(Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the
most deliberate consideration by the Court, involving as it does the exercise of what has
been described as "the highest and most delicate function which belongs to the judicial
Page 52 of 102

department of the government." (State v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146
SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and
coordinate branch of the government We need not be reminded of the time-honored
principle, deeply ingrained in our jurisprudence, that a statute is presumed to be valid.
Every presumption must be indulged in favor of its constitutionality. This is not to say
that We approach Our task with diffidence or timidity. Where it is clear that the
legislature or the executive for that matter, has over-stepped the limits of its authority
under the constitution, We should not hesitate to wield the axe and let it fall heavily, as
fall it must, on the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr.
Justice Zaldivar underscored the
. . . thoroughly established principle which must be followed in all cases
where questions of constitutionality as obtain in the instant cases are
involved. All presumptions are indulged in favor of constitutionality; one
who attacks a statute alleging unconstitutionality must prove its invalidity
beyond a reasonable doubt; that a law may work hardship does not render
it unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate all
possible basis; that the courts are not concerned with the wisdom, justice,
policy or expediency of a statute and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be
adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539; Spurbeck v. Statton,
106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46
SCRA 734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30,
55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983]
cited in Citizens Alliance for Consumer Protection v. Energy Regulatory
Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning the legal
personality of petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping
with the Court's duty, under the 1987 Constitution, to determine whether or not the other
branches of government have kept themselves within the limits of the Constitution and
the laws and that they have not abused the discretion given to them, the Court has
brushed aside technicalities of procedure and has taken cognizance of this petition.
(Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA
371)
With particular regard to the requirement of proper party as applied in the
cases before us, We hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures
complained of. And even if, strictly speaking they are not covered by the
definition, it is still within the wide discretion of the Court to waive the
requirement and so remove the impediment to its addressing and
resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers
were allowed to question the constitutionality of several executive orders
issued by President Quirino although they were involving only an indirect
and general interest shared in common with the public. The Court
dismissed the objection that they were not proper parties and ruled that
"the transcendental importance to the public of these cases demands that
they be settled promptly and definitely, brushing aside, if we must
Page 53 of 102

technicalities of procedure." We have since then applied the exception in

many other cases. (Association of Small Landowners in the Philippines,
Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues
raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the
prohibition of gambling does not mean that the Government cannot regulate it in the
exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been defined
as the "state authority to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As
defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in order
to foster the common good. It is not capable of an exact definition but has been,
purposely, veiled in general terms to underscore its all-comprehensive embrace.
(Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the
future where it could be done, provides enough room for an efficient and flexible
response to conditions and circumstances thus assuming the greatest benefits. (Edu v.
Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe its origin
to the charter. Along with the taxing power and eminent domain, it is inborn in the very
fact of statehood and sovereignty. It is a fundamental attribute of government that has
enabled it to perform the most vital functions of governance. Marshall, to whom the
expression has been credited, refers to it succinctly as the plenary power of the state "to
govern its citizens". (Tribe, American Constitutional Law, 323, 1978). The police power
of the State is a power co-extensive with self-protection and is most aptly termed the
"law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660,
708) It is "the most essential, insistent, and illimitable of powers." (Smith Bell & Co. v.
National, 40 Phil. 136) It is a dynamic force that enables the state to meet the agencies
of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and
centralize thru an appropriate institution all games of chance authorized by existing
franchise or permitted by law" (1st whereas clause, PD 1869). As was subsequently
proved, regulating and centralizing gambling operations in one corporate entity the
PAGCOR, was beneficial not just to the Government but to society in general. It is a
reliable source of much needed revenue for the cash strapped Government. It provided
funds for social impact projects and subjected gambling to "close scrutiny, regulation,
supervision and control of the Government" (4th Whereas Clause, PD 1869). With the
creation of PAGCOR and the direct intervention of the Government, the evil practices
and corruptions that go with gambling will be minimized if not totally eradicated. Public
welfare, then, lies at the bottom of the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila
to impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the
principle of local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869
which exempts PAGCOR, as the franchise holder from paying any "tax of any kind or
form, income or otherwise, as well as fees, charges or levies of whatever nature,
whether National or Local."
(2) Income and other taxes. a) Franchise Holder: No tax of any kind or
form, income or otherwise as well as fees, charges or levies of whatever
Page 54 of 102

nature, whether National or Local, shall be assessed and collected under

this franchise from the Corporation; nor shall any form or tax or charge
attach in any way to the earnings of the Corporation, except a franchise
tax of five (5%) percent of the gross revenues or earnings derived by the
Corporation from its operations under this franchise. Such tax shall be due
and payable quarterly to the National Government and shall be in lieu of
all kinds of taxes, levies, fees or assessments of any kind, nature or
description, levied, established or collected by any municipal, provincial or
national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to
impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil.
337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute
must plainly show an intent to confer that power or the municipality cannot assume it"
(Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must always yield
to a legislative act which is superior having been passed upon by the state itself which
has the "inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol.
1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be
stressed that "municipal corporations are mere creatures of Congress" (Unson v.
Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and abolish
municipal corporations" due to its "general legislative powers" (Asuncion v. Yriantes, 28
Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has the power of
control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if
Congress can grant the City of Manila the power to tax certain matters, it can also
provide for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been
revoked. As early as 1975, the power of local governments to regulate gambling thru
the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was
vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority
of chartered cities and other local governments to issue license, permit or
other form of franchise to operate, maintain and establish horse and dog
race tracks, jai-alai and other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and
establish, horse and dog race tracks, jai-alai and other forms of gambling
shall be issued by the national government upon proper application and
verification of the qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or permits"
for the operation of gambling. Necessarily, the power to demand or collect license fees
which is a consequence of the issuance of "licenses or permits" is no longer vested in
the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National
Government. PAGCOR is a government owned or controlled corporation with an
original charter, PD 1869. All of its shares of stocks are owned by the National
Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also
exercises regulatory powers thus:
Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of
the affiliated entities, and shall exercise all the powers, authority and the
responsibilities vested in the Securities and Exchange Commission over
Page 55 of 102

such affiliating entities mentioned under the preceding section, including,

but not limited to amendments of Articles of Incorporation and By-Laws,
changes in corporate term, structure, capitalization and other matters
concerning the operation of the affiliated entities, the provisions of the
Corporation Code of the Philippines to the contrary notwithstanding,
except only with respect to original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might be burdened,
impeded or subjected to control by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local
governments.
Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them. (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination
of what local authorities may perceive to be undesirable activities or enterprise using the
power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc
Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of
the very entity which has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be
violated by P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution
(on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its own
source of revenue and to levy taxes, fees, and other charges subject to
such guidelines and limitation as the congress may provide, consistent
with the basic policy on local autonomy. Such taxes, fees and charges
shall accrue exclusively to the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an "operative"
law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its
"exemption clause" remains as an exception to the exercise of the power of local
governments to impose taxes and fees. It cannot therefore be violative but rather is
consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means
"decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436, as
cited in Bernas, The Constitution of the Republic of the Philippines, Vol. II, First Ed.,
Page 56 of 102

1988, p. 374). It does not make local governments sovereign within the state or an
"imperium in imperio."
Local Government has been described as a political subdivision of a
nation or state which is constituted by law and has substantial control of
local affairs. In a unitary system of government, such as the government
under the Philippine Constitution, local governments can only be an intra
sovereign subdivision of one sovereign nation, it cannot be
an imperium in imperio. Local government in such a system can only
mean a measure of decentralization of the function of government.
(emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated to local
government units remains a matter of policy, which concerns wisdom. It is therefore a
political question. (Citizens Alliance for Consumer Protection v. Energy Regulatory
Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling
is a State concern and hence, it is the sole prerogative of the State to retain it or
delegate it to local governments.
As gambling is usually an offense against the State, legislative grant or
express charter power is generally necessary to empower the local
corporation to deal with the subject. . . . In the absence of express grant of
power to enact, ordinance provisions on this subject which are
inconsistent with the state laws are void. (Ligan v. Gadsden, Ala App. 107
So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah
You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited
in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the
Constitution, because "it legalized PAGCOR conducted gambling, while most
gambling are outlawed together with prostitution, drug trafficking and other vices" (p.
82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture
ignores the well-accepted meaning of the clause "equal protection of the laws." The
clause does not preclude classification of individuals who may be accorded different
treatment under the law as long as the classification is not unreasonable or arbitrary
(Itchong v. Hernandez, 101 Phil. 1155). A law does not have to operate in equal force
on all persons or things to be conformable to Article III, Section 1 of the Constitution
(DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes
of individuals or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G.
2847). The Constitution does not require situations which are different in fact or opinion
to be treated in law as though they were the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the
equal protection is not clearly explained in the petition. The mere fact that some
gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as amended by
RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are
legalized under certain conditions, while others are prohibited, does not render the
applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been
applied. (Gomez v. Palomar, 25 SCRA 827)
Page 57 of 102

The equal protection clause of the 14th Amendment does not mean that
all occupations called by the same name must be treated the same way;
the state may do what it can to prevent which is deemed as evil and stop
short of those cases in which harm to the few concerned is not less than
the harm to the public that would insure if the rule laid down were made
mathematically exact. (Dominican Hotel v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory
Government away from monopolies and crony economy and toward free enterprise and
privatization" suffice it to state that this is not a ground for this Court to nullify P.D. 1869.
If, indeed, PD 1869 runs counter to the government's policies then it is for the Executive
Department to recommend to Congress its repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare
what the law is and not what the law should be. Under our system of
government, policy issues are within the domain of the political branches
of government and of the people themselves as the repository of all state
power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public
interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed. (Art. XII, National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily
prohibited by the Constitution. The state must still decide whether public interest
demands that monopolies be regulated or prohibited. Again, this is a matter of policy for
the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12
(Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII
and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to
state also that these are merely statements of principles and, policies. As such, they are
basically not self-executing, meaning a law should be passed by Congress to clearly
define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be selfexecuting principles ready for enforcement through the courts. They were
rather directives addressed to the executive and the legislature. If the
executive and the legislature failed to heed the directives of the articles
the available remedy was not judicial or political. The electorate could
express their displeasure with the failure of the executive and the
legislature through the language of the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad,
47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas
v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be nullified, it must be shown
that there is a clear and unequivocal breach of the Constitution, not merely a doubtful
and equivocal one. In other words, the grounds for nullity must be clear and beyond
reasonable doubt. (Peralta v. Comelec, supra) Those who petition this Court to declare
a law, or parts thereof, unconstitutional must clearly establish the basis for such a
declaration. Otherwise, their petition must fail. Based on the grounds raised by
petitioners to challenge the constitutionality of P.D. 1869, the Court finds that petitioners
have failed to overcome the presumption. The dismissal of this petition is therefore,
inevitable. But as to whether P.D. 1869 remains a wise legislation considering the
issues of "morality, monopoly, trend to free enterprise, privatization as well as the state
principles on social justice, role of youth and educational values" being raised, is up for
Congress to determine.
Page 58 of 102

As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory
Board, 162 SCRA 521
Presidential Decree No. 1956, as amended by Executive Order No. 137
has, in any case, in its favor the presumption of validity and
constitutionality which petitioners Valmonte and the KMU have not
overturned. Petitioners have not undertaken to identify the provisions in
the Constitution which they claim to have been violated by that statute.
This Court, however, is not compelled to speculate and to imagine how
the assailed legislation may possibly offend some provision of the
Constitution. The Court notes, further, in this respect that petitioners have
in the main put in question the wisdom, justice and expediency of the
establishment of the 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 the political departments of
government: the President and the Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this is
precisely so when the gambling resorted to is excessive. This excessiveness
necessarily depends not only on the financial resources of the gambler and his family
but also on his mental, social, and spiritual outlook on life. However, the mere fact that
some persons may have lost their material fortunes, mental control, physical health, or
even their lives does not necessarily mean that the same are directly attributable to
gambling. Gambling may have been the antecedent,but certainly not necessarily the
cause. For the same consequences could have been preceded by an overdose of food,
drink, exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin, Sarmiento,
Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
Separate Opinions
PADILLA, J., concurring:
I concur in the result of the learned decision penned by my brother Mr. Justice Paras.
This means that I agree with the decision insofar as it holds that the prohibition, control,
and regulation of the entire activity known as gambling properly pertain to "state policy."
It is, therefore, the political departments of government, namely, the legislative and the
executive that should decide on what government should do in the entire area of
gambling, and assume full responsibility to the people for such policy.
The courts, as the decision states, cannot inquire into the wisdom, morality or
expediency of policies adopted by the political departments of government in areas
which fall within their authority, except only when such policies pose a clear and present
danger to the life, liberty or property of the individual. This case does not involve such a
factual situation.
However, I hasten to make of record that I do not subscribe to gambling in any form. It
demeans the human personality, destroys self-confidence and eviscerates one's selfrespect, which in the long run will corrode whatever is left of the Filipino moral
character. Gambling has wrecked and will continue to wreck families and homes; it is an
antithesis to individual reliance and reliability as well as personal industry which are the
touchstones of real economic progress and national development.

Page 59 of 102

Gambling is reprehensible whether maintained by government or privatized. The

revenues realized by the government out of "legalized" gambling will, in the long run, be
more than offset and negated by the irreparable damage to the people's moral values.
Also, the moral standing of the government in its repeated avowals against "illegal
gambling" is fatally flawed and becomes untenable when it itself engages in the very
activity it seeks to eradicate.
One can go through the Court's decision today and mentally replace the activity referred
to therein as gambling, which is legal only because it is authorized by law and run by
the government, with the activity known asprostitution. Would prostitution be any less
reprehensible were it to be authorized by law, franchised, and "regulated" by the
government, in return for the substantial revenues it would yield the government to carry
out its laudable projects, such as infrastructure and social amelioration? The question, I
believe, answers itself. I submit that the sooner the legislative department outlaws all
forms of gambling, as a fundamental state policy, and the sooner the executive
implements such policy, the better it will be for the nation.
Melencio-Herrera, J., concur.

Page 60 of 102

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 90776 June 3, 1991
PHILIPPINE
PETROLEUM
CORPORATION, petitioner,
vs.
MUNICIPALITY OF PILILLA, RIZAL, Represented by MAYOR NICOMEDES F.
PATENIA, respondent.
PARAS, J.:p
This is a petition for certiorari seeking to annul and set aside: (a) the March 17, 1989
decision * of the Regional Trial Court, Branch 80, Tanay, Rizal in Civil Case No. 057-T
entitled, "Municipality of Pililla, Rizal, represented by Mayor Nicomedes F. Patenia vs.
Philippine Petroleum Corporation", (PPC for short) upholding the legality of the taxes,
fees and charges being imposed in Pililla under Municipal Tax Ordinance No. 1 and
directing the herein petitioner to pay the amount of said taxes, fees and charges due the
respondent: and (b) the November 2, 1989 resolution of the same court denying
petitioner's motion for reconsideration of the said decision.
The undisputed facts of the case are:
Petitioner, Philippine Petroleum Corporation (PPC for short) is a business enterprise
engaged in the manufacture of lubricated oil basestock which is a petroleum product,
with its refinery plant situated at Malaya, Pililla, Rizal, conducting its business activities
within the territorial jurisdiction of the Municipality of Pililla, Rizal and is in continuous
operation up to the present (Rollo p. 60). PPC owns and maintains an oil refinery
including forty-nine storage tanks for its petroleum products in Malaya, Pililla, Rizal
(Rollo, p. 12).
Under Section 142 of the National Internal Revenue Code of 1939, manufactured oils
and other fuels are subject to specific tax.
On June 28, 1973, Presidential Decree No. 231, otherwise known as the Local Tax
Code was issued by former President Ferdinand E. Marcos governing the exercise by
provinces, cities, municipalities and barrios of their taxing and other revenue-raising
powers. Sections 19 and 19 (a) thereof, provide among others, that the municipality
may impose taxes on business, except on those for which fixed taxes are provided
on manufacturers, importers or producers of any article of commerce of whatever kind
or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors,
distilled spirits and/or wines in accordance with the schedule listed therein.
The Secretary of Finance issued Provincial Circular No. 26-73 dated December 27,
1973, directed to all provincial, city and municipal treasurers to refrain from collecting
any local tax imposed in old or new tax ordinances in the business of manufacturing,
wholesaling, retailing, or dealing in petroleum products subject to the specific tax under
the National Internal Revenue Code (Rollo, p. 76).
Likewise, Provincial Circular No. 26 A-73 dated January 9, 1973 was issued by the
Secretary of Finance instructing all City Treasurers to refrain from collecting any local
tax imposed in tax ordinances enacted before or after the effectivity of the Local Tax
Code on July 1, 1973, on the businesses of manufacturing, wholesaling, retailing, or
dealing in, petroleum products subject to the specific tax under the National Internal
Revenue Code (Rollo, p. 79).
Page 61 of 102

Respondent Municipality of Pililla, Rizal, through Municipal Council Resolution No. 25,
S-1974 enacted Municipal Tax Ordinance No. 1, S-1974 otherwise known as "The Pililla
Tax Code of 1974" on June 14, 1974, which took effect on July 1, 1974 (Rollo, pp. 181182). Sections 9 and 10 of the said ordinance imposed a tax on business, except for
those for which fixed taxes are provided in the Local Tax Code on manufacturers,
importers, or producers of any article of commerce of whatever kind or nature, including
brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits
and/or wines in accordance with the schedule found in the Local Tax Code, as well as
mayor's permit, sanitary inspection fee and storage permit fee for flammable,
combustible or explosive substances (Rollo, pp. 183-187), while Section 139 of the
disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges
(Ibid., p. 193).
On March 30, 1974, Presidential Decree No. 426 was issued amending certain
provisions of P.D. 231 but retaining Sections 19 and 19 (a) with adjusted rates and
22(b).
On April 13, 1974, P.D. 436 was promulgated increasing the specific tax on lubricating
oils, gasoline, bunker fuel oil, diesel fuel oil and other similar petroleum products levied
under Sections 142, 144 and 145 of the National Internal Revenue Code, as amended,
and granting provinces, cities and municipalities certain shares in the specific tax on
such products in lieu of local taxes imposed on petroleum products.
The questioned Municipal Tax Ordinance No. 1 was reviewed and approved by the
Provincial Treasurer of Rizal on January 13, 1975 (Rollo, p. 143), but was not
implemented and/or enforced by the Municipality of Pililla because of its having been
suspended up to now in view of Provincial Circular Nos. 26-73 and 26 A-73.
Provincial Circular No. 6-77 dated March 13, 1977 was also issued directing all city and
municipal treasurers to refrain from collecting the so-called storage fee on flammable or
combustible materials imposed under the local tax ordinance of their respective locality,
said fee partaking of the nature of a strictly revenue measure or service charge.
On June 3, 1977, P.D. 1158 otherwise known as the National Internal Revenue Code of
1977 was enacted, Section 153 of which specifically imposes specific tax on refined and
manufactured mineral oils and motor fuels.
Enforcing the provisions of the above-mentioned ordinance, the respondent filed a
complaint on April 4, 1986 docketed as Civil Case No. 057-T against PPC for the
collection of the business tax from 1979 to 1986; storage permit fees from 1975 to 1986;
mayor's permit and sanitary inspection fees from 1975 to 1984. PPC, however, have
already paid the last-named fees starting 1985 (Rollo, p. 74).
After PPC filed its answer, a pre-trial conference was held on August 24, 1988 where
the parties thru their respective counsel, after coming up with certain admissions and
stipulations agreed to the submission of the case for decision based on documentary
evidence offered with their respective comments (Rollo, p. 41).
On March 17, 1987, the trial court rendered a decision against the petitioner, the
dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court hereby renders judgment
in favor of the plaintiffs as against the defendants thereby directing the
defendants to 1) pay the plaintiffs the amount of P5,301,385.00
representing the Tax on Business due from the defendants under Sec. 9
(A) of the Municipal Tax Ordinance of the plaintiffs for the period from
1979 to 1983 inclusive plus such amount of tax that may accrue until final
determination of case; 2) to pay storage permit fee in the amount of
P3,321,730.00 due from the defendants under Sec. 10, par. z (13) (b) (1
Page 62 of 102

C) of the Municipal Tax Ordinance of the plaintiffs for the period from 1975
to 1986 inclusive plus such amount of fee that may accrue until final
determination of case; 3) to pay Mayor's Permit Fee due from the
defendants under Sec. 10, par. (P) (2) of the Municipal Tax Ordinance of
the plaintiffs from 1975 to 1984 inclusive in the amount of P12,120.00 plus
such amount of fee that may accrue until final determination of the case;
and 4) to pay sanitary inspection fee in the amount of P1,010.00 for the
period from 1975 to 1984 plus such amount that may accrue until final
determination of case and 5) to pay the costs of suit.
SO ORDERED. (Rollo, pp. 49-50)
PPC moved for reconsideration of the decision, but this was denied by the lower court in
a resolution of November 2, 1989, hence, the instant petition.
The Court resolved to give due course to the petition and required both parties to submit
simultaneous memoranda (June 21, 1990 Resolution; Rollo, p. 305).
PPC assigns the following alleged errors:
1. THE RTC ERRED IN ORDERING THE PAYMENT OF THE BUSINESS
TAX UNDER SECTION 9 (A) OF THE TAX ORDINANCE IN THE LIGHT
OF PROVINCIAL CIRCULARS NOS. 26-73 AND 26 A-73;.
2. THE RTC ERRED IN HOLDING THAT PETITIONER WAS LIABLE
FOR THE PAYMENT OF STORAGE PERMIT FEE UNDER SECTION 10
Z (13) (b) (1-c) OF THE TAX ORDINANCE CONSIDERING THE
ISSUANCE OF PROVINCIAL CIRCULAR NO. 6-77;
3. THE RTC ERRED IN FAILING TO HOLD THAT RESPONDENTS
COMPUTATION OF TAX LIABILITY HAS ABSOLUTELY NO BASIS;
4. THE RTC ERRED IN ORDERING THE PAYMENT OF MAYOR'S
PERMIT AND SANITARY INSPECTION FEES CONSIDERING THAT
THE SAME HAS BEEN VALIDLY AND LEGALLY WAIVED BY THE
MAYOR;
5. THE RTC ERRED IN FAILING TO HOLD THAT THE TAXES AND
DUTIES NOT COLLECTED FROM PETITIONER PRIOR TO THE FIVE
(5) YEAR PERIOD FROM THE FILING OF THIS CASE ON APRIL 4,
1986 HAS ALREADY PRESCRIBED.
The crucial issue in this case is whether or not petitioner PPC whose oil products are
subject to specific tax under the NIRC, is still liable to pay (a) tax on business and (b)
storage fees, considering Provincial Circular No. 6-77; and mayor's permit and sanitary
inspection fee unto the respondent Municipality of Pililla, Rizal, based on Municipal
Ordinance No. 1.
Petitioner PPC contends that: (a) Provincial Circular No. 2673 declared as contrary to
national economic policy the imposition of local taxes on the manufacture of petroleum
products as they are already subject to specific tax under the National Internal Revenue
Code; (b) the above declaration covers not only old tax ordinances but new ones, as
well as those which may be enacted in the future; (c) both Provincial Circulars (PC) 2673 and 26 A-73 are still effective, hence, unless and until revoked, any effort on the part
of the respondent to collect the suspended tax on business from the petitioner would be
illegal and unauthorized; and (d) Section 2 of P.D. 436 prohibits the imposition of local
taxes on petroleum products.

Page 63 of 102

PC No. 26-73 and PC No. 26 A-73 suspended the effectivity of local tax ordinances
imposing a tax on business under Section 19 (a) of the Local Tax Code (P.D. No. 231),
with regard to manufacturers, retailers, wholesalers or dealers in petroleum products
subject to the specific tax under the National Internal Revenue Code NIRC, in view of
Section 22 (b) of the Code regarding non-imposition by municipalities of taxes on
articles, subject to specific tax under the provisions of the NIRC.
There is no question that Pililla's Municipal Tax Ordinance No. 1 imposing the assailed
taxes, fees and charges is valid especially Section 9 (A) which according to the trial
court "was lifted in toto and/or is a literal reproduction of Section 19 (a) of the Local Tax
Code as amended by P.D. No. 426." It conforms with the mandate of said law.
But P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial
Circular Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19
and 19 (a), were carried over into P.D. No. 426 and no exemptions were given to
manufacturers, wholesalers, retailers, or dealers in petroleum products.
Well-settled is the rule that administrative regulations must be in harmony with the
provisions of the law. In case of discrepancy between the basic law and an
implementing rule or regulation, the former prevails (Shell Philippines, Inc. v. Central
Bank of the Philippines, 162 SCRA 628 [1988]). As aptly held by the court a quo:
Necessarily, there could not be any other logical conclusion than that the
framers of P.D. No. 426 really and actually intended to terminate the
effectivity and/or enforceability of Provincial Circulars Nos. 26-73 and 26
A-73 inasmuch as clearly these circulars are in contravention with Sec. 19
(a) of P.D. 426-the amendatory law to P.D. No. 231. That intention to
terminate is very apparent and in fact it is expressed in clear and
unequivocal terms in the effectivity and repealing clause of P.D. 426 . . .
Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on
petroleum products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as
amended by P.D. 426, wherein the municipality is granted the right to levy taxes on
business of manufacturers, importers, producers of any article of commerce of whatever
kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the
imposition of tax on business of manufacturers, etc. in petroleum products contravenes
a declared national policy, it should have been expressly stated in P.D. No. 436.
The exercise by local governments of the power to tax is ordained by the present
Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 2673 (1) would be tantamount to restricting their power to tax by mere administrative
issuances. Under Section 5, Article X of the 1987 Constitution, only guidelines and
limitations that may be established by Congress can define and limit such power of local
governments. Thus:
Each local government unit shall have the power to create its own sources
of revenues and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent with
the basic policy of local autonomy . . .
Provincial Circular No. 6-77 enjoining all city and municipal treasurers to refrain from
collecting the so-called storage fee on flammable or combustible materials imposed in
the local tax ordinance of their respective locality frees petitioner PPC from the payment
of storage permit fee.
The storage permit fee being imposed by Pililla's tax ordinance is a fee for the
installation and keeping in storage of any flammable, combustible or explosive
substances. Inasmuch as said storage makes use of tanks owned not by the
municipality of Pililla, but by petitioner PPC, same is obviously not a charge for any
Page 64 of 102

service rendered by the municipality as what is envisioned in Section 37 of the same

Code.
Section 10 (z) (13) of Pililla's Municipal Tax Ordinance No. 1 prescribing a permit fee is
a permit fee allowed under Section 36 of the amended Code.
As to the authority of the mayor to waive payment of the mayor's permit and sanitary
inspection fees, the trial court did not err in holding that "since the power to tax includes
the power to exempt thereof which is essentially a legislative prerogative, it follows that
a municipal mayor who is an executive officer may not unilaterally withdraw such an
expression of a policy thru the enactment of a tax." The waiver partakes of the nature of
an exemption. It is an ancient rule that exemptions from taxation are construed in
strictissimi juris against the taxpayer and liberally in favor of the taxing authority (Esso
Standard Eastern, Inc. v. Acting Commissioner of Customs, 18 SCRA 488 [1966]). Tax
exemptions are looked upon with disfavor (Western Minolco Corp. v. Commissioner of
Internal Revenue, 124 SCRA 121 [1983]). Thus, in the absence of a clear and express
exemption from the payment of said fees, the waiver cannot be recognized. As already
stated, it is the law-making body, and not an executive like the mayor, who can make an
exemption. Under Section 36 of the Code, a permit fee like the mayor's permit, shall be
required before any individual or juridical entity shall engage in any business or
occupation under the provisions of the Code.
However, since the Local Tax Code does not provide the prescriptive period for
collection of local taxes, Article 1143 of the Civil Code applies. Said law provides that an
action upon an obligation created by law prescribes within ten (10) years from the time
the right of action accrues. The Municipality of Pililla can therefore enforce the collection
of the tax on business of petitioner PPC due from 1976 to 1986, and NOT the tax that
had accrued prior to 1976.
PREMISES CONSIDERED, with the MODIFICATION that business taxes accruing
PRIOR to 1976 are not to be paid by PPC (because the same have prescribed) and that
storage fees are not also to be paid by PPC (for the storage tanks are owned by PPC
and not by the municipality, and therefore cannot be a charge for service by the
municipality), the assailed DECISION is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, Padilla and Regalado, JJ., concur.
Sarmiento, J., is on leave.

Footnotes

Page 65 of 102

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-46787 August 12, 1991
FLORO CEMENT CORPORATION, petitioner,
vs.
HON. BENJAMIN K. GOROSPE, Judge, CFI of Misamis Oriental, Branch I, and the
MUNICIPALITY OF LUGAIT, respondents.
BIDIN, J.:p
This is a petition for review on certiorari seeking to set aside and reverse the
decision * of the then Court of First Instance of Misamis Oriental in Civil Case No. 4867,
entitled "Municipality of Lugait, Misamis Oriental, (represented) by the Municipal
Treasurer and Provincial Treasurer vs. Floro Cement Corporation", ordering defendant
to pay unto plaintiff the amount of P161,875.00 as manufacturer's and exporter's taxes
plus surcharges for the period from January 1, 1974 to September 30, 1975 and that
herein petitioner Floro Cement Corporation be declared exempted from the coverage of
Ordinances Nos. 5 and 10 of the Municipality of Lugait and that the taxes and fees it
has paid pursuant to said ordinances be refunded.
The facts of the case, as summarized in the decision of the trial court, are as follows:
The municipality of Lugait, province of Misamis Oriental, represented
jointly in this action by its Municipal Treasurer and the Provincial Treasurer
of the said province, filed with this Court a verified complaint for collection
of taxes against the defendant Floro Cement Corporation, a domestic
corporation duly organized and existing under the laws of the Republic of
the Philippines with business establishment and office address at its
compound in the aforementioned municipality of Lugait. The taxes sought
to be collected by the plaintiff specifically refers to "manufacturers" and'
exporter's "taxes for the period from January 1, 1974 to September 30,
1975, inclusive, in the total amount of P161,875.00 plus 25% thereof as
surcharge. Plaintiff alleged that the imposition and collection of these
taxes" is based on its Municipal Ordinance No. 5, otherwise known as the
Municipal Revenue Code of 1974, which was passed pursuant to
Presidential Decree No. 231 dated June 28, 1973 and also Municipal
Ordinance No. 10 passed on June 11, 1974 pursuant to Presidential
Decree No. 426 dated March 30,1974, amending Presidential Decree No.
231.
In its answer to the complaint, the defendant set up the defense that it is
not liable to pay manufacturer's and exporter's taxes alleging among
others that the plaintiffs power to levy and collect taxes, fees, rentals,
royalties or charges of any kind whatsoever on defendant has been limited
or withdrawn by Section 52 of Presidential Decree No. 463 which
provides:
Sec. 52. Power to Levy Taxes on Mines, Mining Corporation
and Mineral Products.Any law to the contrary
notwithstanding, no province, city, municipality, barrio or
municipal district shall levy and collect taxes, fees, rentals,
royalties or charges of any kind whatsoever on mines,
mining claims, mineral products, or on any operation,
process or activity connected therewith.
Page 66 of 102

Defendant also set up several special/affirmative defenses, namely: (1)

that plaintiff has no legal capacity to sue; (2) that the complaint states no
cause; (3) that plaintiff has absolutely no cause of action against
defendant; (4) that defendant was granted by the Secretary of Agriculture
and Natural Resources a Certificate of Qualification for Tax Exemption,
CQTE No. 22, dated July 7, 1960, entitling defendant to exemption for a
period of five (5) years from April 30,1969 to April 29, 1974 from payment
of all taxes, except income tax, and which Certificate was amended on
November 5, 1974 CQTE P.D. 463-22), entitling defendant to exemption
from all taxes, duties and fees except income tax, for five (5) years from
the first date of actual commercial production of saleable mineral products
that is from May 17, 1974 to January 1, 1978; and (5) that Republic Act
No. 3823, as implemented by Mines Administrative Order No. V-25, and
P.D. No. 463 which are the basis for the exemption granted to defendant
are special laws whereas, the municipal ordinance mentioned in the
complaint which are based on P.D. No. 231 and P.D No. 426,
respectively, are general laws; and that it is axiomatic that a special law
can not be amended and/or repealed by a general law unless there is an
express intent to repeal or abrogate the provisions of the special law.
After the issues were joined, the parties submitted a written stipulation of
facts under date of May 21, 1976 the pertinent portion of which is quoted
in full as follows:
PLAINTIFF and DEFENDANT, by and through counsel,
most respectfully submit the following stipulation of facts:
1. That plaintiff is a political subdivision of the Republic of the
Philippines created pursuant to EXECUTIVE ORDER NO.
425, entitled "CREATING THE MUNICIPALITY OF LUGAIT
IN THE PROVINCE OF MISAMIS ORIENTAL", a xerox copy
of said executive order is attached hereto marked ANNEX
"A" and made an integral part hereof;
2. That defendant is a corporation day organized and
existing under and by virtue of the laws of the Philippines;
with plant and office at Lugait, Misamis Oriental, and is
engaged in the manufacture and selling, including exporting,
of cement, one of the essential ingredients of which is
limestone;
3. That defendant, as a mining operator of mineral land
lands situated at Lugait, Misamis Oriental, was granted by
the Secretary of Agriculture and Natural Resources a
Certificate of Qualification for Tax Exemption, CQTE No. 22,
dated July 7, 1960, entitling defendant to exemption for a
period of five (5) years from April 30, 1969 to April 29, 1974,
from the payment of all taxes, except income tax, a xerox
copy of which is attached marked ANNEX "A" to defendant's
answer and made an integral part hereof;
4. That the Certificate of Qualification for Tax Exemption
mentioned in the next preceding paragraph was amended on
November 5, 1974, when the Honorable Secretary of Natural
Resources, Mr. Jose J. Leido Jr., upon recommendation of
the Director of Mines, granted to defendant a Certificate of
Qualification for Tax Exemption, CQTE P.D. 463-22, which
entitled defendant to exemption from all taxes, duties, and
fees, except income tax, for five (5) years from May 17, 1974
Page 67 of 102

to January 1, 1978, a xerox copy of which is attached

marked ANNEX "B" to defendant's answer and made an
integral part hereof, and that a copy of the Certificate of
Qualification for Tax Exemption, CQTE P.D. 463-22 was
furnished the Municipal Treasurer of plaintiff on November
12, 1974, as shown by a xerox copy of the letter of the
Assistant Director of the Bureau of Mines, Mr. Francisco A.
Comsti, a copy of which is attached hereto marked ANNEX
"B" and made an integral part hereof;
5. That the Certificate of Qualification for Tax Exemption
mentioned in the next preceding paragraph was issued
pursuant to the provisions of Sec. 52, P.D. No. 463, which
reads as follows:
Sec. 52. Power to Levy Taxes on Mines,
Mining Operations and Mineral Products.Any
law to the contrary notwithstanding, no
province, City, municipality, barrio or municipal
district shall levy and collect taxes, fees,
rentals, royalties or charges of any kind
whatsoever on mines, mining claims, mineral
products, or on any operation, process, or
activity therewith.
6. That on or about July 3, 1974, plaintiff through its
Municipal Mayor, wired the Secretary of Finance, opposing
the application of defendant for the extension of its
exemption from all forms of taxation, including its application
for extension of its exemption from realty taxes, which
opposition was not favorably acted upon by the said
Secretary of Finance, as evidenced by a xerox copy of the
letter of the Honorable Secretary of Finance, Mr. Cesar
Virata, attached hereto marked ANNEX "C" and made an
integral part hereof;
7. That plaintiff pursuant to P.D.No. 231 promulgated on
June 28, 1973, passed Municipal Ordinance No. 5,
otherwise known as Municipal Revenue Code of 1974,
effective January 1, 1974, Section 3 of which is quoted in
paragraph 2 of the complaint and made integral part hereof
by reference;
8. That plaintiff pursuant to P.D.No. 426 promulgated on
March 30,1974, Municipal Revenue Ordinance No. 10,
effective fifteen (15) days after its passage, of which Section
4, Title I is quoted in paragraph 3 of the complaint and made
integral part hereof by reference;
9. That pursuant(to)Municipal Ordinances Nos. 5 and 10,
mentioned in paragraphs 7 and 8 hereof, respectively,
plaintiff demanded of defendant the payment of the
manufacturer's and exporter's taxes including surcharge for
the period covering January 1, 1974 to September 30, 1975,
broken down as shown in paragraph 5 of the complaint and
made integral part hereof by reference; but defendant
refused because of the allegations found in paragraphs 1, 2,
3, 4, 5 and 6 hereof.
Page 68 of 102

WHEREFORE, it is most respectfully prayed that the

foregoing stipulation of facts be made the basis of the
judgment of this Honorable Court, after the parties hereto
have submitted their respective memoranda.
Cagayan de Oro City, May 21,1976.
(CFI Decision, pp. 1-6; Rollo, pp. 54-59),
As aforementioned, the trial court rendered its decision on November 29, 1976, the
dispositive portion of which reads, as follows:
WHEREFORE, premises considered, judgment is hereby rendered
ordering defendant Floro Cement Corporation to pay unto plaintiff the
amount of P161,875.00 as manufacturer's and exporter's taxes and
surcharges for the period from January 1, 1974 to September 30, 1975,
inclusive, and to pay the costs.
SO ORDERED.
Hence, this appeal.
The petition was given due course by the First Division of this Court on January 6, 1978
and both parties were required to submit their simultaneous memoranda. Respondent
complied on February 17,1978 while petitioner filed its memorandum on March 9,1978.
The principal issue in this case is whether or not Ordinances Nos. 5 and 10 of Lugait,
Misamis Oriental apply to petitioner Floro Corporation notwithstanding the limitation on
the taxing power of local government as provided for in Sec. 52 of P.D. 231 and Sec. 52
of P.D. 463.
Petitioner Floro Cement Corporation holds that since Ordinances Nos. 5 and 10 were
enacted pursuant to P.D. No. 231 and P.D. No. 426, respectively, said ordinances do
not apply to its business in view of the limitation on the taxing power of local
government provided in Sec. 5m of P.D. No. 231, which reads:
Sec. 5. Common Limitations on the Taxing Powers of Local Governments.
The exercise of taxing power of provinces, cities, municipalities and
barrios shall not extend to the imposition of the following:
xxx xxx xxx
(m) Taxes on mines, mining operations and mineral products
and their by-products when sold domestically by the
operator.
Floro Cement Corporation likewise contends that cement is a mineral product, relying
on the case of Cebu Portland Cement Company vs. Commissioner of Internal Revenue,
G.R. No. L20563, October 29, 1968 (25 SCRA 789), and in the case of Philippine Pipes
and Merchandising Corporation vs. Commissioner of Internal Revenue, CTA Case No.
1858, dated July 29, 1970 decided by the Court of Tax Appeals (Memorandum for the
Petitioner, Rollo, pp. 89-90).
Petitioner further contends that the partial exemption aforementioned was rendered
absolute by Sec. 52 of P.D. No. 463 promulgated on May 17, 1974, which expressly
prohibits the province, city municipality, barrio and municipal district from levying and
collecting taxes, fees, rentals, royalties or charges of any kind whatsoever on mines,
mining claims and mineral products, any law to the contrary notwithstanding. Said
prohibition includes any operation, process or activity connected with its production. The
Page 69 of 102

manufacture of cement is a process inherently connected with the mining operation

undertaken by petitioner Floro Cement Corporation (Ibid., pp. 92-93).
On other hand, while respondent municipality admits that petitioner Floro Cement
Corporation undertakes exploration, development and exploitation of mineral products,
the taxes sought to be collected were not imposed on these activities in view of the
mentioned prohibition under Sec. 52 of P.D. No. 463. Said taxes were levied on the
corporation's business of manufacturing and exporting cement. The business of
manufacturing and exporting cement does not fall under exploration, development nor
exploitation of mineral resources as defined in Sec. 2 of P.D. No. 463, hence, it is
outside the scope of application of Sec. 52 of said decree (Memorandum for
Respondent, p. 10; Rollo, p. 85).
The municipality's power to levy taxes on manufacturers and exporters is provided in
Article 2, Sec. 19 of P.D. No. 231, as amended by P.D. No. 426 which provides that
"The municipality may impose a tax on business except those for which fixed taxes are
provided for in this Code:
(a) On manufacturers, importers, or producers of any article of commerce
of whatever kind or nature, including brewers, distillers, rectifiers,
repackers, and compounders of liquors, distilled spirits and/ or wines in
accordance with the following schedule:
xxx xxx xxx
(a-1) On retailers, independent wholesalers and distributors in accordance
with the following schedule:
xxx xxx xxx
(Comment of the Respondent, Rollo, p. 72)
The petition is without merit.
On the question of whether or not cement is a mineral product, this Court has
consistently held that it is not a mineral product but rather a manufactured product
(Commissioner of Internal Revenue vs. Cebu Portland Cement Company, 156 SCRA
535 [1987]; Commissioner of Internal Revenue vs. Philippine Pipes and Merchandising
Corporation, 153 SCRA 113 [1987]; Commissioner of Internal Revenue vs. Republic
Cement Corporation, 149 SCRA 487 [1987]). while cement is composed of 80'7c
minerals, it is not merely an admixture or blending of raw materials, as lime, silica, shale
and others. It is the result of a definite process-the crushing of minerals, grinding,
mixing, calcining adding of retarder or raw gypsum In short, before cement reaches its
saleable form, the minerals had already undergone a chemical change through
manufacturing process (Commissioner of Internal Revenue vs. Cebu Portland Cement
Company, supra, reiterating the ruling in Commissioner of Internal Revenue vs.
Republic Cement Corporation, 124 SCRA 46 [1983]). It appears evident that the
foregoing cases overruled the case of Cebu Portland Cement Company vs.
Commissioner of Internal Revenue, 25 SCRA 789 [1969] which was cited by petitioner.
On the exemption claimed by petitioner, this Court has laid down the rule that as the
power of taxation is a high prerogative of sovereignty, the relinquishment is never
presumed and any reduction or diminution thereof with respect to its mode or its rate,
must be strictly construed, and the same must be coached in clear and unmistakable
terms in order that it may be applied. More specifically stated, the general rule is that
any claim for exemption from the tax statute should be strictly construed against the
taxpayer (Luzon Stevedoring Corporation vs. Court of Appeals, 163 SCRA 647 [1988]).
He who claims an exemption must be able to point out some provision of law creating
the right; it cannot be allowed to exist upon a mere vague implication or inference. It
Page 70 of 102

must be shown indubitably to exist, for every presumption is against it, and a wellfounded doubt is fatal to the claim (Manila Electric Company vs. Ver, 67 SCRA 351
[1975]). The petitioner failed to meet this requirement.
As held by the lower court, the exemption mentioned in Sec. 52 of P.D. No. 463 refers
only to machineries, equipment, tools for production, etc., as provided in Sec. 53 of the
same decree. The manufacture and the export of cement does not fall under the said
provision for it is not a mineral product (CFI Decision, Rollo, p. 62). It is not cement that
is mined only the mineral products composing the finished product (Commissioner of
Internal Revenue vs. Republic Cement Corporation, supra).
Furthermore, by the parties' own stipulation of facts submitted before the court a quo, it
is admitted that Floro Cement Corporation is engaged in the manufacturing and selling,
including exporting of cement (CFI Decision, Rollo, p. 57). As such, and since the taxes
sought to be collected were levied on these activities pursuant to Sec. 19 of P.D. No.
231, Ordinances Nos. 5 and 10, which were enacted pursuant to P.D. No. 231 and P.D.
No. 426, respectively, properly apply to petitioner Floro Cement Corporation.
WHEREFORE, the petition is DENIED for lack of merit and the decision dated
November 29, 1976 of the then Court of First Instance of Misamis Oriental is Affirmed.
SO ORDERED.
Fernan, C.J., (Chairman), Gutierrez, Jr., Feliciano and Davide, Jr., JJ., concur.

Page 71 of 102

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23080

October 30, 1965

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,

vs.
CITY OF DAVAO and the PUBLIC SERVICE COMMISSION, respondents,
ITT PHILIPPINES, INC., intervenor.
R E S O L U T I O N*
BENGZON, J.P., J.:
The Philippine Legislature granted Philippine Long Distance Telephone Co., Inc. a
special franchise to establish and operate a telephone system throughout the country. It
wisely provided therein that the rights thereby granted shall not be exclusive.
Answering the clamor of the inhabitants of Davao City, the Davao City Council provided
for a city-owned and operated telephone system.1 Congress itself thereafter expressly
authorized the establishment of such a telephone system therein. 2
The executive, finding the legislation wisely taken, approved the same.
The Court, interpreting the broad powers granted to Davao City Council to legislate for
the general welfare, gave meaning and reality to the Resolutions and laws abovementioned, in its decision in this case promulgated September 20, 1965.
Petitioner filed a 53-page motion for reconsideration of said decision, presenting five
propositions.
The first proposition of movant is that Davao City's telephone system is proprietary in
nature and, therefore. cannot be undertaken under the general welfare clause. At the
outset it is well to remember that as stated inMendoza vs. De Leon, 33 Phil. 508, 515:
It often happens that the same agent or agency has both a governmental and a
corporate character. Such, for instance, are a municipal water system designed
both for protection against fire (a governmental function) and to supply water to
the inhabitants for profit (a corporate function) (Omaha Water Co. vs. Omaha, 12
L.R.A., N.S., 736; 77 C.C.A. 267, 147 Fed. 1; Judson vs. Borough of Winsted, 80
Conn. 384; 15 L.R.A., N. S., 91) ; a municipal light plant both for righting the
streets (a governmental function) and for furnishing light to the inhabitants at a
profit (a corporate function) (Fisher vs. New Bern, 140 N. C. 506; 111 Am. St.
Rep 857).
The same case recognized that: "The preservation of the health and peace of its
inhabitants and fire protections afforded the property owner, are government functions."
(Ibid., at 511-512.) Davao City's telephone system is designed to perform such
functions; to secure and regulate the peace and order situation of one of the world's
biggest cities; to safeguard the health and lives of its inhabitants; to afford reliable
equipment for the fighting and control of fires, floods and epidemics; to assure these
objectives by providing speedy and direct contact between Davao City's outlying
districts and its poblacion or seat of government. Such ends are undoubtedly within the
purview of the general welfare clause.

Page 72 of 102

The fact that in thereby promoting the general welfare of its inhabitants, the means
adopted by the city would likewise serve the public in a proprietary manner is no
argument that the city is powerless to adopt said measure. For as stated, it frequently
happens that from the same act both governmental and corporate functions arise. An
interpretation that would totally limit the general welfare clause to such governmental
functions only as are without proprietary aspects would thereby often cripple local
governments in the face of the very evils that said clause intended them to remedy.
A restrictive view of the general welfare clause is not favored. The policy of Congress in
this regard has been expressly stated in Section 12 of Republic Act 2264, the Local
Autonomy Act:
The general welfare clause shall be liberally interpreted in case of doubt so as to
give more power to local governments in promoting the economic condition,
social welfare and material progress of the people in the community.
The view of the movant that the scope of police power, and therefore of the general
welfare clause, has been fixed by traditional delineations is not quite accurate. Police
power has not received a full and complete definition; it is elastic and must be
responsive to various social conditions; it is not confined within the narrow
circumscriptions of precedents resting on past conditions; it must follow the legal
progress of a democratic way of life. Accordingly, the Court wisely said in Churchill vs.
Rafferty, 32 Phil. 580, 603-605:
In Chamber vs. Greencastle (138 Ind. 339), it was said: "The police power of the
State, so far, has not received a full and complete definition." ...
xxx

xxx

xxx

In People vs. Brazee ([Mich., 1914], 149 N. W. 1053), it was said: "it [the police
power] has for its object the improvement of social and economic conditions
affecting the community at large and collectively with a view to bring about "the
greatest good of the greatest number." Courts have consistently and wisely
declined to set any fixed limitations upon subjects calling for the exercise of this
power. It is elastic and is exercised from time to time as varying social conditions
demand correction.
xxx

xxx

xxx

Finally, the Supreme Court of the United States has said in Noble State Bank vs.
Haskell (219 U.S. [1911] 575): "It may be said in a general way that the police
power extends to all the great public needs. It may be put forth in aid of what is
sanctioned by usage, or held by the prevailing morality or strong and
preponderant opinion to be greatly and immediately necessary to the public
welfare."
xxx

xxx

xxx

It was said in Com. vs. Alger (7 Cush. 53, 85), per Shaw, C.J., that: "It is much
easier to perceive and realize the existence and sources of this police power
than to mark its boundaries, or to prescribe limits to its exercise." ...
CORPUS JURIS SECUNDUM states:
... The police power of a municipal corporation must be responsive, in the interest
of common welfare, to the changing conditions and developing needs of growing
communities, and is not confined within the narrow circumscription of precedents
resting on past conditions. That which may at one time be regarded as not within
such power may, at another time, by reason of changed conditions, be
Page 73 of 102

recognized as a legitimate exercise for the exercise of the power. Also, that
which may be regarded as within the police power of one municipal corporation
may not be so regarded as to another. ...3
Speaking thru Mr. Justice Malcolm, this Court explicitly said in U.S. vs. Salaveria, 39
Phil. 102, 109:
... the general welfare clause, delegates in statutory form the police power to a
municipality. As above stated, this clause has been given wide application by
municipal authorities and has in its relation to the particular circumstances of the
case been liberally construed by the courts. Such, it is well to recall, is the
progressive view of Philippine jurisprudence.
Advancing its second proposition, movant would find in the specific power of Davao City
to regulate telephone service (See. 14 (aa] of its Charter) an implied denial of power to
operate the same. People vs. Esguerra, 81 Phil. 33 is the authority relied upon for this.
Said case ruled that specific power to regulate implies withholding of power to prohibit.
The reason therein given is that by prohibiting, nothing would be left to regulate, thereby
rendering the power to regulate superfluous and nugatory. It is therefore different
where, as in this case, there is no suppression or prohibition but, on the contrary,
creation or giving existence to something that may be regulated.People vs. Esguerra,
supra, is no authority against the latter.
Still movant would press the argument that at any rate the general welfare clause does
not enlarge, but merely makes effectual, the specific powers granted. Suffice it to say
that in U.S. vs. Salaveria, supra, at pp. 109-110, we ruled otherwise:
The general welfare clause has two branches. One branch attaches itself to the
main trunk of municipal authority, and relates to such ordinances and regulations
as may be necessary to carry into effect and discharge the powers and duties
conferred upon the municipal council by law. With this class we are not here
directly concerned. The second branch of the clause is much more independent
of the specific functions of the council which are enumerated by law. It authorizes
such ordinances "as shall seem necessary and proper to provide for the health
and safety, promote the prosperity, improve the morals, peace, good order,
comfort, and convenience of the municipality and the inhabitants thereof, and for
the protection of property therein."
The general welfare clause suffices in proper cases to authorize public improvements
serving governmental functions (Saunders vs. Mayor of Arlington, 147 Ga. 581, 94 SE
1022). Contrary to movant's view, presence of the words "any public improvement" in
the general welfare clause is not indispensable for the purpose. Authorization in the
clause, similar to that in Davao City's Charter, to act for the "safety, benefit,
convenience and advantage" of the city (Frederick vs. Augusta, 5 Ga. 561) or "to do all
things for the benefit of the city," (Heilbron vs. Cuthbert, 96 Ga. 312, 23 SE 206) was
found sufficient for the purpose. As to the case of Hyatt vs. Williams,148 Cal. 585, 84 P.
41, cited by movant as authoritative, the same did not involve a general welfare clause.
In its third proposition movant alleges that the interpretation we followed would rewrite
the general welfare clause in all cities and municipalities into reservoirs of unlimited
powers, superior even to that of the State under the Constitution. As to this it must again
be emphasized that our decision was made in light of the special factual set-up
obtaining in this case. For one thing, the size of Davao City alone renders its situation
unique and apart from our other cities and municipalities. For another, as already
pointed out, the scope of police power varies according to different conditions and what
is within the police power of one municipal corporation may not be so regarded as to
another. No "far-reaching", effects need therefore, be feared by movant. Finally, we see
no point in the contention that the State under the Constitution would have lesser
powers than we hold Davao City to have, for there is no doubt that under Section 6 of
Page 74 of 102

Article XIII of the Constitution, the State may also, in the interest ofnational
welfare, establish and operate means of communication.4
Fourth of movant's propositions is that it has already installed facilities to take care of
Davao City's telephone needs. It is still admitted, however, that movant's telephone
system and its plan of expansion do not cover the outlying districts of the city. It cannot
therefore be claimed that movant has provided for the aforementioned needs or shown
an immediate plan to supply them adequately.
The fifth proposition is that any enabling provision in Davao City's Charter for the
operation of a telephone system is not enough; that a special legislative franchise is still
required. Since Congress has recently enacted Republic Act 4354 expressly providing
that Davao City has power to operate and maintain a telephone system, movant now
takes the extreme view that still another legislation, by way of a special franchise, is
required. Such a view would render the enabling provision's in Davao City's Charter
useless. It should be noted that such enabling provisions are granted as among
the legislative powers of the Davao City Council. Accordingly, there has been a
delegation to said Council of the legislative power to issue a franchise in favor of the
City.
The Philippine Commission's Act No. 667, invoked by movant, is an instance of
delegation of power to grant franchise. It provides that any person authorized to engage
in operating a telephone service has to obtain a franchise from the municipal council of
the municipality through which its lines will pass. Davao City does not have to follow the
procedure in Act No. 667, for, as stated, it has been empowered under its charter to
directly grant the franchise to itself. A contrary view would be absurd: Davao City would
have to file with its City Council an application for a franchise after said Council had
authorized it to operate the telephone system.
Finally, movant states that the competition between Davao City's telephone system and
its own would be economically wasteful. Sometimes, however, it is good for the public
service to provide room for a little competition. The fact that movant's own Charter, Act
No. 3436, provides in Section 14 that its right to operate a telephone system shall not
be exclusive and reserves the power to grant any other corporation, association or
person franchise to operate a telephone system shows that public policy is not always in
favor of monopoly in public utilities. In Benitez vs. Santos, L-12911-12 and Lopez vs.
Santos, L- 13073-74, February 29, 1960, this Court had occasion to remark: "A
monopolistic trend with its concomitant evils can only serve to prejudice public interest,
stifling as it does enthusiasm and initiative on the part of those eager to learn. Prior
experience, while itself useful, cannot create a vested right which could endanger the
economy." Republic Act 4354, in effect authorizing competition in the telephone service
in Davao City, conclusively shows the sense of Congress that under the prevailing
conditions in Davao City, the same will best inure to the public welfare therein. The
public interest and welfare should be paramount.
WHEREFORE, the motion for reconsideration is denied. So ordered.
Bengzon, C.J., Bautista Angelo, Dizon, Makalintal, and Zaldivar, JJ., concur.
Concepcion, J., concurs in the result.
Reyes, J.B.L., J., is on leave.
Regala, J., took no part.

Page 75 of 102

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162015

March 6, 2006

THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY TREASURER OF

QUEZON CITY, DR. VICTOR B. ENRIGA, Petitioners,
vs.
BAYAN TELECOMMUNICATIONS, INC., Respondent.
DECISION
GARCIA,J.:
Before the Court, on pure questions of law, is this petition for review on certiorari under
Rule 45 of the Rules of Court to nullify and set aside the following issuances of the
Regional Trial Court (RTC) of Quezon City, Branch 227, in its Civil Case No. Q-0247292, to wit:
1) Decision1 dated June 6, 2003, declaring respondent Bayan Telecommunications, Inc.
exempt from real estate taxation on its real properties located in Quezon City; and
2) Order2 dated December 30, 2003, denying petitioners motion for reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc.3 (Bayantel) is a legislative franchise
holder under Republic Act (Rep. Act) No. 32594 to establish and operate radio stations
for domestic telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep. Act No. 3259, embodied in
Section 14 thereof, which reads:
SECTION 14. (a) The grantee shall be liable to pay the same taxes on its real estate,
buildings and personal property, exclusive of the franchise, as other persons or
corporations are now or hereafter may be required by law to pay. (b) The grantee shall
further pay to the Treasurer of the Philippines each year, within ten days after the audit
and approval of the accounts as prescribed in this Act, one and one-half per centum of
all gross receipts from the business transacted under this franchise by the said grantee
(Emphasis supplied).
On January 1, 1992, Rep. Act No. 7160, otherwise known as the "Local Government
Code of 1991" (LGC), took effect. Section 232 of the Code grants local government
units within the Metro Manila Area the power to levy tax on real properties, thus:
SEC. 232. Power to Levy Real Property Tax. A province or city or a municipality
within the Metropolitan Manila Area may levy an annual ad valorem tax on real property
such as land, building, machinery and other improvements not hereinafter specifically
exempted.
Complementing the aforequoted provision is the second paragraph of Section 234 of
the same Code which withdrew any exemption from realty tax heretofore granted to or
enjoyed by all persons, natural or juridical, to wit:
SEC. 234 - Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
Page 76 of 102

xxx xxx xxx

Except as provided herein, any exemption from payment of real property tax previously
granted to, or enjoyed by, all persons, whether natural or juridical, including
government-owned-or-controlled corporations is hereby withdrawn upon effectivity of
this Code (Emphasis supplied).
On July 20, 1992, barely few months after the LGC took effect, Congress enacted Rep.
Act No. 7633, amending Bayantels original franchise. The amendatory law (Rep. Act
No. 7633) contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay the same taxes
on their real estate, buildings and personal property, exclusive of this franchise, as other
persons or corporations are now or hereafter may be required by law to pay. In addition
thereto, the grantee, its successors or assigns shall pay a franchise tax equivalent to
three percent (3%) of all gross receipts of the telephone or other telecommunications
businesses transacted under this franchise by the grantee, its successors or assigns
and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof.
Provided, That the grantee, its successors or assigns shall continue to be liable for
income taxes payable under Title II of the National Internal Revenue Code . xxx.
[Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City, Bayantel owned
several real properties on which it maintained various telecommunications facilities.
These real properties, as hereunder described, are covered by the following tax
declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-096-04072 and D-09604073 pertaining to Bayantels Head Office and Operations Center in Roosevelt
St., San Francisco del Monte, Quezon City allegedly the nerve center of
petitioners telecommunications franchise operations, said Operation Center
housing mainly petitioners Network Operations Group and switching,
transmission and related equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-00920 and D-12400941 covering Bayantels land, building and equipment in Maginhawa St.,
Barangay
East
Teachers
Village,
Quezon
City
which
houses
telecommunications facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-10811, and D-01111540 referring to Bayantels Exchange Center located in Proj. 8, Brgy. Bahay
Toro, Tandang Sora, Quezon City which houses the Network Operations Group
and cover switching, transmission and other related equipment.
In 1993, the government of Quezon City, pursuant to the taxing power vested on local
government units by Section 5, Article X of the 1987 Constitution, infra, in relation to
Section 232 of the LGC, supra, enacted City Ordinance No. SP-91, S-93, otherwise
known as the Quezon City Revenue Code (QCRC),5 imposing, under Section 5 thereof,
a real property tax on all real properties in Quezon City, and, reiterating in its Section 6,
the withdrawal of exemption from real property tax under Section 234 of the LGC,
supra. Furthermore, much like the LGC, the QCRC, under its Section 230, withdrew tax
exemption privileges in general, as follows:
SEC. 230. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this
Code, tax exemptions or incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government owned or controlled corporations,
except local water districts, cooperatives duly registered under RA 6938, non-stock and
non-profit hospitals and educational institutions, business enterprises certified by the
Board of Investments (BOI) as pioneer or non-pioneer for a period of six (6) and four (4)
Page 77 of 102

years, respectively, are hereby withdrawn effective upon approval of this Code
(Emphasis supplied).
Conformably with the Citys Revenue Code, new tax declarations for Bayantels real
properties in Quezon City were issued by the City Assessor and were received by
Bayantel on August 13, 1998, except one (Tax Declaration No. 124-01013) which was
received on July 14, 1999.
Meanwhile, on March 16, 1995, Rep. Act No. 7925, 6 otherwise known as the "Public
Telecommunications Policy Act of the Philippines," envisaged to level the playing field
among telecommunications companies, took effect. Section 23 of the Act provides:
SEC. 23. Equality of Treatment in the Telecommunications Industry. Any advantage,
favor, privilege, exemption, or immunity granted under existing franchises, or may
hereafter be granted, shall ipso facto become part of previously granted
telecommunications franchises and shall be accorded immediately and unconditionally
to the grantees of such franchises: Provided, however, That the foregoing shall neither
apply to nor affect provisions of telecommunications franchises concerning territory
covered by the franchise, the life span of the franchise, or the type of service authorized
by the franchise.
On January 7, 1999, Bayantel wrote the office of the City Assessor seeking the
exclusion of its real properties in the city from the roll of taxable real properties. With its
request having been denied, Bayantel interposed an appeal with the Local Board of
Assessment Appeals (LBAA). And, evidently on its firm belief of its exempt status,
Bayantel did not pay the real property taxes assessed against it by the Quezon City
government.
On account thereof, the Quezon City Treasurer sent out notices of delinquency for the
total amount ofP43,878,208.18, followed by the issuance of several warrants of levy
against Bayantels properties preparatory to their sale at a public auction set on July 30,
2002.
Threatened with the imminent loss of its properties, Bayantel immediately withdrew its
appeal with the LBAA and instead filed with the RTC of Quezon City a petition for
prohibition with an urgent application for a temporary restraining order (TRO) and/or writ
of preliminary injunction, thereat docketed as Civil Case No. Q-02-47292, which was
raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction scheduled the following day, the
lower court issued a TRO, followed, after due hearing, by a writ of preliminary injunction
via its order of August 20, 2002.
And, having heard the parties on the merits, the same court came out with its
challenged Decision of June 6, 2003, the dispositive portion of which reads:
WHEREFORE, premises considered, pursuant to the enabling franchise under Section
11 of Republic Act No. 7633, the real estate properties and buildings of petitioner [now,
respondent Bayantel] which have been admitted to be used in the operation of
petitioners franchise described in the following tax declarations are hereby DECLARED
exempt from real estate taxation:
(1) Tax Declaration No. D-096-04071
(2) Tax Declaration No. D-096-04074
(3) Tax Declaration No. D-124-01013
(4) Tax Declaration No. D-011-10810
Page 78 of 102

(5) Tax Declaration No. D-011-10811

(6) Tax Declaration No. D-011-10809
(7) Tax Declaration No. D-124-00941
(8) Tax Declaration No. D-124-00940
(9) Tax Declaration No. D-124-00939
(10) Tax Declaration No. D-096-04072
(11) Tax Declaration No. D-096-04073
(12) Tax Declaration No. D-011-11540
The preliminary prohibitory injunction issued in the August 20, 2002 Order of this Court
is hereby made permanent. Since this is a resolution of a purely legal issue, there is no
pronouncement as to costs.
SO ORDERED.
Their motion for reconsideration having been denied by the court in its Order dated
December 30, 2003, petitioners elevated the case directly to this Court on pure
questions of law, ascribing to the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt from real property taxes
notwithstanding the fact that the tax exemption granted to Bayantel in its original
franchise had been withdrawn by the [LGC] and that the said exemption was not
restored by the enactment of RA 7633.
II. [In] declaring the real properties of respondent exempt from real property taxes
notwithstanding the enactment of the [QCRC] which withdrew the tax exemption which
may have been granted by RA 7633.
III. [In] declaring the real properties of respondent exempt from real property taxes
notwithstanding the vague and ambiguous grant of tax exemption provided under
Section 11 of RA 7633.
IV. [In] declaring the real properties of respondent exempt from real property taxes
notwithstanding the fact that [it] had failed to exhaust administrative remedies in its
claim for real property tax exemption. (Words in bracket added.)
As we see it, the errors assigned may ultimately be reduced to two (2) basic issues,
namely:
1. Whether or not Bayantels real properties in Quezon City are exempt from real
property taxes under its legislative franchise; and
2. Whether or not Bayantel is required to exhaust administrative remedies before
seeking judicial relief with the trial court.
We shall first address the second issue, the same being procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the administrative remedies
provided for under the LGC, adding that the trial court erred in giving due course to
Bayantels petition for prohibition. To petitioners, the appeal mechanics under the LGC
constitute Bayantels plain and speedy remedy in this case.
Page 79 of 102

The Court does not agree.

Petitions for prohibition are governed by the following provision of Rule 65 of the Rules
of Court:
SEC. 2. Petition for prohibition. When the proceedings of any tribunal, are without
or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered commanding the respondent to desist from further proceedings in
the action or matter specified therein, or otherwise, granting such incidental reliefs as
law and justice may require.
With the reality that Bayantels real properties were already levied upon on account of
its nonpayment of real estate taxes thereon, the Court agrees with Bayantel that an
appeal to the LBAA is not a speedy and adequate remedy within the context of the
aforequoted Section 2 of Rule 65. This is not to mention of the auction sale of said
properties already scheduled on July 30, 2002.
Moreover, one of the recognized exceptions to the exhaustion- of-administrative
remedies rule is when, as here, only legal issues are to be resolved. In fact, the Court,
cognizant of the nature of the questions presently involved, gave due course to the
instant petition. As the Court has said in Ty vs. Trampe:7
xxx. Although as a rule, administrative remedies must first be exhausted before resort to
judicial action can prosper, there is a well-settled exception in cases where the
controversy does not involve questions of fact but only of law. xxx.
Lest it be overlooked, an appeal to the LBAA, to be properly considered, required prior
payment under protest of the amount of P43,878,208.18, a figure which, in the light of
the then prevailing Asian financial crisis, may have been difficult to raise up. Given this
reality, an appeal to the LBAA may not be considered as a plain, speedy and adequate
remedy. It is thus understandable why Bayantel opted to withdraw its earlier appeal with
the LBAA and, instead, filed its petition for prohibition with urgent application for
injunctive relief in Civil Case No. Q-02-47292. The remedy availed of by Bayantel under
Section 2, Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of whether or not Bayantels real
properties in Quezon City are, under its franchise, exempt from real property tax.
The lower court resolved the issue in the affirmative, basically owing to the phrase
"exclusive of this franchise" found in Section 11 of Bayantels amended franchise, Rep.
Act No. 7633. To petitioners, however, the language of Section 11 of Rep. Act No. 7633
is neither clear nor unequivocal. The elaborate and extensive discussion devoted by the
trial court on the meaning and import of said phrase, they add, suggests as much. It is
petitioners thesis that Bayantel was in no time given any express exemption from the
payment of real property tax under its amendatory franchise.
There seems to be no issue as to Bayantels exemption from real estate taxes by virtue
of the term "exclusive of the franchise" qualifying the phrase "same taxes on its real
estate, buildings and personal property," found in Section 14, supra, of its franchise,
Rep. Act No. 3259, as originally granted.
The legislative intent expressed in the phrase "exclusive of this franchise" cannot be
construed other than distinguishing between two (2) sets of properties, be they real or
personal, owned by the franchisee, namely, (a) those actually, directly and exclusively
used in its radio or telecommunications business, and (b) those properties which are not
Page 80 of 102

so used. It is worthy to note that the properties subject of the present controversy are
only those which are admittedly falling under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or
delegate to local governments of Congress inherent power to tax the franchisees
properties belonging to the second group of properties indicated above, that is, all
properties which, "exclusive of this franchise," are not actually and directly used in the
pursuit of its franchise. As may be recalled, the taxing power of local governments
under both the 1935 and the 1973 Constitutions solely depended upon an enabling law.
Absent such enabling law, local government units were without authority to impose and
collect taxes on real properties within their respective territorial jurisdictions. While
Section 14 of Rep. Act No. 3259 may be validly viewed as an implied delegation of
power to tax, the delegation under that provision, as couched, is limited to impositions
over properties of the franchisee which are not actually, directly and exclusively used in
the pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the
pursuit of its business are beyond the pale of the delegated taxing power of local
governments. In a very real sense, therefore, real properties of Bayantel, save those
exclusive of its franchise, are subject to realty taxes. Ultimately, therefore, the inevitable
result was that all realties which are actually, directly and exclusively used in the
operation of its franchise are "exempted" from any property tax.
Bayantels franchise being national in character, the "exemption" thus granted under
Section 14 of Rep. Act No. 3259 applies to all its real or personal properties found
anywhere within the Philippine archipelago.
However, with the LGCs taking effect on January 1, 1992, Bayantels "exemption" from
real estate taxes for properties of whatever kind located within the Metro Manila area
was, by force of Section 234 of the Code, supra, expressly withdrawn. But, not long
thereafter, however, or on July 20, 1992, Congress passed Rep. Act No. 7633
amending Bayantels original franchise. Worthy of note is that Section 11 of Rep. Act
No. 7633 is a virtual reenacment of the tax provision, i.e., Section 14, supra, of
Bayantels original franchise under Rep. Act No. 3259. Stated otherwise, Section 14 of
Rep. Act No. 3259 which was deemed impliedly repealed by Section 234 of the LGC
was expressly revived under Section 14 of Rep. Act No. 7633. In concrete terms, the
realty tax exemption heretofore enjoyed by Bayantel under its original franchise, but
subsequently withdrawn by force of Section 234 of the LGC, has been restored by
Section 14 of Rep. Act No. 7633.
The Court has taken stock of the fact that by virtue of Section 5, Article X of the 1987
Constitution,8 local governments are empowered to levy taxes. And pursuant to this
constitutional empowerment, juxtaposed with Section 232 9 of the LGC, the Quezon City
government enacted in 1993 its local Revenue Code, imposing real property tax on all
real properties found within its territorial jurisdiction. And as earlier stated, the Citys
Revenue Code, just like the LGC, expressly withdrew, under Section 230 thereof, supra,
all tax exemption privileges in general.
This thus raises the question of whether or not the Citys Revenue Code pursuant to
which the city treasurer of Quezon City levied real property taxes against Bayantels real
properties located within the City effectively withdrew the tax exemption enjoyed by
Bayantel under its franchise, as amended.
Bayantel answers the poser in the negative arguing that once again it is only "liable to
pay the same taxes, as any other persons or corporations on all its real or personal
properties, exclusive of its franchise."
Bayantels posture is well-taken. While the system of local government taxation has
changed with the onset of the 1987 Constitution, the power of local government units to
tax is still limited. As we explained in Mactan Cebu International Airport Authority: 10
Page 81 of 102

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may
be exercised by local legislative bodies, no longer merely be virtue of a valid delegation
as before, but pursuant to direct authority conferred by Section 5, Article X of the
Constitution. Under the latter, the exercise of the power may be subject to such
guidelines and limitations as the Congress may provide which, however, must be
consistent with the basic policy of local autonomy. (at p. 680; Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation now prevails in the sense
that the former doctrine of local government units delegated power to tax had been
effectively modified with Article X, Section 5 of the 1987 Constitution now in place, .the
basic doctrine on local taxation remains essentially the same. For as the Court stressed
in Mactan, "the power to tax is [still] primarily vested in the Congress."
This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself a
Commissioner of the 1986 Constitutional Commission which crafted the 1987
Constitution, thus:
What is the effect of Section 5 on the fiscal position of municipal corporations? Section
5 does not change the doctrine that municipal corporations do not possess inherent
powers of taxation. What it does is to confer municipal corporations a general power to
levy taxes and otherwise create sources of revenue. They no longer have to wait for a
statutory grant of these powers. The power of the legislative authority relative to the
fiscal powers of local governments has been reduced to the authority to impose
limitations on municipal powers. Moreover, these limitations must be "consistent with
the basic policy of local autonomy." The important legal effect of Section 5 is thus to
reverse the principle that doubts are resolved against municipal corporations.
Henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be
resolved in favor of municipal corporations. It is understood, however, that taxes
imposed by local government must be for a public purpose, uniform within a locality,
must not be confiscatory, and must be within the jurisdiction of the local unit to
pass.11(Emphasis supplied).
In net effect, the controversy presently before the Court involves, at bottom, a clash
between the inherent taxing power of the legislature, which necessarily includes the
power to exempt, and the local governments delegated power to tax under the aegis of
the 1987 Constitution.
Now to go back to the Quezon City Revenue Code which imposed real estate taxes on
all real properties within the citys territory and removed exemptions theretofore
"previously granted to, or presently enjoyed by all persons, whether natural or juridical
.,"12 there can really be no dispute that the power of the Quezon City Government to
tax is limited by Section 232 of the LGC which expressly provides that "a province or
city or municipality within the Metropolitan Manila Area may levy an annual ad valorem
tax on real property such as land, building, machinery, and other improvement not
hereinafter specifically exempted." Under this law, the Legislature highlighted its power
to thereafter exempt certain realties from the taxing power of local government units. An
interpretation denying Congress such power to exempt would reduce the phrase "not
hereinafter specifically exempted" as a pure jargon, without meaning whatsoever.
Needless to state, such absurd situation is unacceptable.
For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of
Davao,13 this Court has upheld the power of Congress to grant exemptions over the
power of local government units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units under the Constitution and
the LGC does not affect the power of Congress to grant exemptions to certain persons,
pursuant to a declared national policy. The legal effect of the constitutional grant to local
governments simply means that in interpreting statutory provisions on municipal taxing
Page 82 of 102

powers, doubts must be resolved in favor of municipal corporations. (Emphasis

supplied.)
As we see it, then, the issue in this case no longer dwells on whether Congress has the
power to exempt Bayantels properties from realty taxes by its enactment of Rep. Act
No. 7633 which amended Bayantels original franchise. The more decisive question
turns on whether Congress actually did exempt Bayantels properties at all by virtue of
Section 11 of Rep. Act No. 7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware
that the LGC has already withdrawn Bayantels former exemption from realty taxes,
Congress opted to pass Rep. Act No. 7633 using, under Section 11 thereof, exactly the
same defining phrase "exclusive of this franchise" which was the basis for Bayantels
exemption from realty taxes prior to the LGC. In plain language, Section 11 of Rep. Act
No. 7633 states that "the grantee, its successors or assigns shall be liable to pay the
same taxes on their real estate, buildings and personal property, exclusive of this
franchise, as other persons or corporations are now or hereafter may be required by law
to pay." The Court views this subsequent piece of legislation as an express and real
intention on the part of Congress to once again remove from the LGCs delegated
taxing power, all of the franchisees (Bayantels) properties that are actually, directly and
exclusively used in the pursuit of its franchise.
WHEREFORE, the petition is DENIED.
No pronouncement as to costs.
SO ORDERED.

Page 83 of 102

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168557

February 16, 2007

FELS ENERGY, INC., Petitioner,

vs.
THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No.
170628, which were filed by petitioners FELS Energy, Inc. (FELS) and National Power
Corporation (NPC), respectively. The first is a petition for review on certiorari assailing
the August 25, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490
and its Resolution2 dated June 20, 2005; the second, also a petition for review on
certiorari, challenges the February 9, 2005 Decision 3 and November 23, 2005
Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were dismissed on the
ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over
3x30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The
contract, denominated as an Energy Conversion Agreement 5 (Agreement), was for a
period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all
taxes, import duties, fees, charges and other levies imposed by the National
Government of the Republic of the Philippines or any agency or instrumentality thereof
to which POLAR may be or become subject to or in relation to the performance of their
obligations under this agreement (other than (i) taxes imposed or calculated on the
basis of the net income of POLAR and Personal Income Taxes of its employees and (ii)
construction permit fees, environmental permit fees and other similar fees and charges)
and (b) all real estate taxes and assessments, rates and other charges in respect of the
Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The
NPC initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the
Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power
barges from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax,
which likewise covered those due for 1994, amounted to P56,184,088.40 per annum.
FELS referred the matter to NPC, reminding it of its obligation under the Agreement to
pay all real estate taxes. It then gave NPC the full power and authority to represent it in
any conference regarding the real property assessment of the Provincial Assessor.
In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial
Assessors decision to assess real property taxes on the power barges. However, the
motion was denied on September 22, 1995, and the Provincial Assessor advised NPC
to pay the assessment.8 This prompted NPC to file a petition with the Local Board of
Assessment Appeals (LBAA) for the setting aside of the assessment and the
Page 84 of 102

declaration of the barges as non-taxable items; it also prayed that should LBAA find the
barges to be taxable, the Provincial Assessor be directed to make the necessary
corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real
property for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the
LBAA that the Department of Finance (DOF) had rendered an opinion 10 dated May 20,
1996, where it is clearly stated that power barges are not real property subject to real
property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo
reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate
tax in the amount ofP56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable
or personal property, are nevertheless considered real property for taxation purposes
because they are installed at a specific location with a character of permanency. The
LBAA also pointed out that the owner of the bargesFELS, a private corporationis the
one being taxed, not NPC. A mere agreement making NPC responsible for the payment
of all real estate taxes and assessments will not justify the exemption of FELS; such a
privilege can only be granted to NPC and cannot be extended to FELS. Finally, the
LBAA also ruled that the petition was filed out of time.
Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment
Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy
and Warrant by Distraint13over the power barges, seeking to collect real property taxes
amounting to P232,602,125.91 as of July 31, 1996. The notice and warrant was
officially served to FELS on November 8, 1996. It then filed a Motion to Lift Levy dated
November 14, 1996, praying that the Provincial Assessor be further restrained by the
CBAA from enforcing the disputed assessment during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the
properties of FELS in order not to preempt and render ineffectual, nugatory and illusory
any resolution or judgment which the Board would issue.
Meantime, the NPC filed a Motion for Intervention 15 dated August 7, 1998 in the
proceedings before the CBAA. This was approved by the CBAA in an Order16 dated
September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to admit
bond to guarantee the payment of real property taxes assessed by the Provincial
Assessor (in the event that the judgment be unfavorable to them). The bonds were duly
approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt
from real property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the
Province of Batangas is hereby reversed. Respondent-appellee Provincial Assessor of
the Province of Batangas is hereby ordered to drop subject property under ARP/Tax
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Declaration No. 018-00958 from the List of Taxable Properties in the Assessment Roll.
The Provincial Treasurer of Batangas is hereby directed to act accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to
NPC; since they are actually, directly and exclusively used by it, the power barges are
covered by the exemptions under Section 234(c) of R.A. No. 7160. 19 As to the other
jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from
pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160.
The Provincial Assessor filed a motion for reconsideration, which was opposed by FELS
and NPC.
In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its
earlier decision. The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is dismissed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is
hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of
Batangas is likewise hereby affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for reconsideration, which were timely opposed
by the Provincial Assessor. The CBAA denied the said motions in a Resolution 22 dated
October 19, 2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No.
67490. Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP
No. 67490 praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a
Resolution23 dated February 12, 2002, the appellate court directed NPC to re-file its
motion for consolidation with CA-G.R. SP No. 67491, since it is the ponente of the latter
petition who should resolve the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth
Division of the appellate court rendered judgment in CA-G.R. SP No. 67490 denying the
petition on the ground of prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed
Resolutions dated July 31, 2001 and October 19, 2001 of the Central Board of
Assessment Appeals are AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the
reversal of the appellate courts decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court,
docketed as G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP
No. 67490. The petition was, however, denied in this Courts Resolution 25 of November
Page 86 of 102

8, 2004, for NPCs failure to sufficiently show that the CA committed any reversible error
in the challenged decision. NPC filed a motion for reconsideration, which the Court
denied with finality in a Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held
that the right to question the assessment of the Provincial Assessor had already
prescribed upon the failure of FELS to appeal the disputed assessment to the LBAA
within the period prescribed by law. Since FELS had lost the right to question the
assessment, the right of the Provincial Government to collect the tax was already
absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of
the February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied
in a Resolution27 dated November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier
denied for lack of merit in a Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this
Court, raising the following issues:
A. Whether power barges, which are floating and movable, are personal properties and
therefore, not subject to real property tax.
B. Assuming that the subject power barges are real properties, whether they are exempt
from real estate tax under Section 234 of the Local Government Code ("LGC").
C. Assuming arguendo that the subject power barges are subject to real estate tax,
whether or not it should be NPC which should be made to pay the same under the law.
D. Assuming arguendo that the subject power barges are real properties, whether or not
the same is subject to depreciation just like any other personal properties.
E. Whether the right of the petitioner to question the patently null and void real property
tax assessment on the petitioners personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No.
170628), indicating the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO
THE LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER
BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN ACCORDANCE
WITH LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered
the consolidation of the two cases in a Resolution31 dated March 8, 2006.1awphi1.net

Page 87 of 102

In an earlier Resolution dated February 1, 2006, the Court had required the parties to
submit their respective Memoranda within 30 days from notice. Almost a year passed
but the parties had not submitted their respective memoranda. Considering that taxes
the lifeblood of our economyare involved in the present controversy, the Court was
prompted to dispense with the said pleadings, with the end view of advancing the
interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not
time-barred. FELS argues that when NPC moved to have the assessment reconsidered
on September 7, 1995, the running of the period to file an appeal with the LBAA was
tolled. For its part, NPC posits that the 60-day period for appealing to the LBAA should
be reckoned from its receipt of the denial of its motion for reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991,
provides:
SECTION 226. Local Board of Assessment Appeals. Any owner or person having
legal interest in the property who is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may, within sixty (60) days from
the date of receipt of the written notice of assessment, appeal to the Board of
Assessment Appeals of the province or city by filing a petition under oath in the form
prescribed for the purpose, together with copies of the tax declarations and such
affidavits or documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on
August 7, 1995, contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the
date of receipt hereof, appeal to the Board of Assessment Appeals of the province by
filing a petition under oath on the form prescribed for the purpose, together with copies
of ARP/Tax Declaration and such affidavits or documents submitted in support of the
appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC
opted to file a motion for reconsideration of the Provincial Assessors decision, a
remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the
provincial, city or municipal assessor in the assessment of the property. It follows then
that the determination made by the respondent Provincial Assessor with regard to the
taxability of the subject real properties falls within its power to assess properties for
taxation purposes subject to appeal before the LBAA.33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CAG.R. SP No. 67491. The two divisions of the appellate court cited the case of Callanta v.
Office of the Ombudsman,34 where we ruled that under Section 226 of R.A. No
7160,35 the last action of the local assessor on a particular assessment shall be the
notice of assessment; it is this last action which gives the owner of the property the right
to appeal to the LBAA. The procedure likewise does not permit the property owner the
remedy of filing a motion for reconsideration before the local assessor. The pertinent
holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought
their appeals before the LBAA. Unfortunately, despite the advice to this effect contained
in their respective notices of assessment, the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not sanctioned by the law. To
allow this procedure would indeed invite corruption in the system of appraisal and
Page 88 of 102

assessment. It conveniently courts a graft-prone situation where values of real property

may be initially set unreasonably high, and then subsequently reduced upon the request
of a property owner. In the latter instance, allusions of a possible covert, illicit trade-off
cannot be avoided, and in fact can conveniently take place. Such occasion for mischief
must be prevented and excised from our system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to
the owner or lawful possessor of real property of its revised assessed value, the former
shall no longer have any jurisdiction to entertain any request for a review or
readjustment. The appropriate forum where the aggrieved party may bring his appeal is
the LBAA as provided by law. It follows ineluctably that the 60-day period for making the
appeal to the LBAA runs without interruption. This is what We held in SP 67490 and
reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local
government to collect the taxes due with respect to the taxpayers property becomes
absolute upon the expiration of the period to appeal.38 It also bears stressing that the
taxpayers failure to question the assessment in the LBAA renders the assessment of
the local assessor final, executory and demandable, thus, precluding the taxpayer from
questioning the correctness of the assessment, or from invoking any defense that would
reopen the question of its liability on the merits.39
In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having
been filed out of time; the CBAA and the appellate court were likewise correct in
affirming the dismissal. Elementary is the rule that the perfection of an appeal within the
period therefor is both mandatory and jurisdictional, and failure in this regard renders
the decision final and executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is
barred by res judicata; that the final and executory judgment in G.R. No. 165113 (where
there was a final determination on the issue of prescription), effectively precludes the
claims herein; and that the filing of the instant petition after an adverse judgment in G.R.
No. 165113 constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced
since it was not a party to the erroneous petition which the NPC filed in G.R. No.
165113. It avers that it did not participate in the aforesaid proceeding, and the Supreme
Court never acquired jurisdiction over it. As to the issue of forum shopping, petitioner
claims that no forum shopping could have been committed since the elements of litis
pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon
two grounds embodied in various maxims of common law, namely: (1) public policy and
necessity, which makes it to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the
hardship on the individual of being vexed twice for the same cause nemo debet bis
vexari et eadem causa. A conflicting doctrine would subject the public peace and quiet
to the will and dereliction of individuals and prefer the regalement of the litigious
disposition on the part of suitors to the preservation of the public tranquility and
happiness.41 As we ruled in Heirs of Trinidad De Leon Vda. de Roxas v. Court of
Appeals:42
x x x An existing final judgment or decree rendered upon the merits, without fraud or
collusion, by a court of competent jurisdiction acting upon a matter within its authority
Page 89 of 102

is conclusive on the rights of the parties and their privies. This ruling holds in all other
actions or suits, in the same or any other judicial tribunal of concurrent jurisdiction,
touching on the points or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same
parties or their privies to litigate anew a question once it has been considered and
decided with finality. Litigations must end and terminate sometime and somewhere. The
effective and efficient administration of justice requires that once a judgment has
become final, the prevailing party should not be deprived of the fruits of the verdict by
subsequent suits on the same issues filed by the same parties.
This is in accordance with the doctrine of res judicata which has the following elements:
(1) the former judgment must be final; (2) the court which rendered it had jurisdiction
over the subject matter and the parties; (3) the judgment must be on the merits; and (4)
there must be between the first and the second actions, identity of parties, subject
matter and causes of action. The application of the doctrine of res judicata does not
require absolute identity of parties but merely substantial identity of parties. There is
substantial identity of parties when there is community of interest or privity of interest
between a party in the first and a party in the second case even if the first case did not
implead the latter.43
To recall, FELS gave NPC the full power and authority to represent it in any proceeding
regarding real property assessment. Therefore, when petitioner NPC filed its petition for
review docketed as G.R. No. 165113, it did so not only on its behalf but also on behalf
of FELS. Moreover, the assailed decision in the earlier petition for review filed in this
Court was the decision of the appellate court in CA-G.R. SP No. 67490, in which FELS
was the petitioner. Thus, the decision in G.R. No. 165116 is binding on petitioner FELS
under the principle of privity of interest. In fine, FELS and NPC are substantially
"identical parties" as to warrant the application of res judicata. FELSs argument that it is
not bound by the erroneous petition filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping
exists when, as a result of an adverse judgment in one forum, a party seeks another
and possibly favorable judgment in another forum other than by appeal or special civil
action or certiorari. There is also forum shopping when a party institutes two or more
actions or proceedings grounded on the same cause, on the gamble that one or the
other court would make a favorable disposition.44
Petitioner FELS alleges that there is no forum shopping since the elements of res
judicata are not present in the cases at bar; however, as already discussed, res judicata
may be properly applied herein. Petitioners engaged in forum shopping when they filed
G.R. Nos. 168557 and 170628 after the petition for review in G.R. No. 165116. Indeed,
petitioners went from one court to another trying to get a favorable decision from one of
the tribunals which allowed them to pursue their cases.
It must be stressed that an important factor in determining the existence of forum
shopping is the vexation caused to the courts and the parties-litigants by the filing of
similar cases to claim substantially the same reliefs.45 The rationale against forum
shopping is that a party should not be allowed to pursue simultaneous remedies in two
different fora. Filing multiple petitions or complaints constitutes abuse of court
processes, which tends to degrade the administration of justice, wreaks havoc upon
orderly judicial procedure, and adds to the congestion of the heavily burdened dockets
of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such
parties as represent the same interests in both actions, (b) identity of rights asserted
and relief prayed for, the relief being founded on the same facts, and (c) the identity of
Page 90 of 102

the two preceding particulars is such that any judgment rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the
consolidated cases, a discussion of the other issues is no longer necessary.
Nevertheless, for the peace and contentment of petitioners, we shall shed light on the
merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property
and are thus subject to real property tax. This is also the inevitable conclusion,
considering that G.R. No. 165113 was dismissed for failure to sufficiently show any
reversible error. Tax assessments by tax examiners are presumed correct and made in
good faith, with the taxpayer having the burden of proving otherwise.48 Besides, factual
findings of administrative bodies, which have acquired expertise in their field, are
generally binding and conclusive upon the Court; we will not assume to interfere with
the sensible exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed.49 We find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et
al.,50 a power company brought an action to review property tax assessment. On the
citys motion to dismiss, the Supreme Court of New York held that the barges on which
were mounted gas turbine power plants designated to generate electrical power, the
fuel oil barges which supplied fuel oil to the power plant barges, and the accessory
equipment mounted on the barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures
which, though floating, are intended by their nature and object to remain at a fixed place
on a river, lake, or coast" are considered immovable property. Thus, power barges are
categorized as immovable property by destination, being in the nature of machinery and
other implements intended by the owner for an industry or work which may be carried
on in a building or on a piece of land and which tend directly to meet the needs of said
industry or work.51
Petitioners maintain nevertheless that the power barges are exempt from real estate tax
under Section 234 (c) of R.A. No. 7160 because they are actually, directly and
exclusively used by petitioner NPC, a government- owned and controlled corporation
engaged in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is
petitioner FELS, which in fine, is the entity being taxed by the local government. As
stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the
fixtures, fittings, machinery and equipment on the Site used in connection with the
Power Barges which have been supplied by it at its own cost. POLAR shall operate,
manage and maintain the Power Barges for the purpose of converting Fuel of
NAPOCOR into electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by
invoking its exemption in Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
xxx
(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government-owned or controlled corporations engaged in the
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supply and distribution of water and/or generation and transmission of electric power; x
xx
Indeed, the law states that the machinery must be actually, directly and exclusively used
by the government owned or controlled corporation; nevertheless, petitioner FELS still
cannot find solace in this provision because Section 5.5, Article 5 of the Agreement
provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the
supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it
will operate the Power Barges to convert such Fuel into electricity in accordance with
Part A of Article 7.53
It is a basic rule that obligations arising from a contract have the force of law between
the parties. Not being contrary to law, morals, good customs, public order or public
policy, the parties to the contract are bound by its terms and conditions. 54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is
the exception.55 The law does not look with favor on tax exemptions and the entity that
would seek to be thus privileged must justify it by words too plain to be mistaken and
too categorical to be misinterpreted.56 Thus, applying the rule of strict construction of
laws granting tax exemptions, and the rule that doubts should be resolved in favor of
provincial corporations, we hold that FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it
shall be responsible for the payment of all real estate taxes and assessments, does not
justify the exemption. The privilege granted to petitioner NPC cannot be extended to
FELS. The covenant is between FELS and NPC and does not bind a third person not
privy thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted
in the local governments deprivation of revenues. The power to tax is an incident of
sovereignty and is unlimited in its magnitude, acknowledging in its very nature no
perimeter so that security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency who are to pay for it.57 The right of
local government units to collect taxes due must always be upheld to avoid severe tax
erosion. This consideration is consistent with the State policy to guarantee the
autonomy of local governments58 and the objective of the Local Government Code that
they enjoy genuine and meaningful local autonomy to empower them to achieve their
fullest development as self-reliant communities and make them effective partners in the
attainment of national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise
the needed revenues to finance and support myriad activities of the local government
units for the delivery of basic services essential to the promotion of the general welfare
and the enhancement of peace, progress, and prosperity of the people. 60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions
AFFIRMED.
SO ORDERED.

Page 92 of 102

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G. R. No. 152534

February 23, 2007

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,

vs.
PROVINCE OF PANGASINAN represented by RAMON A. CRISOSTOMO,
Pangasinan Provincial Treasurer,Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as
amended, seeking the reversal of the Decision1 dated 14 June 2001, and the
Resolution2 dated 15 February 2002, both rendered by the Regional Trial Court (RTC)
of Lingayen, Pangasinan, Branch 68 in Civil Case No. 18037, with the latter ruling in
favor of respondent Province of Pangasinan.
The present petition stemmed from a Complaint3 for Mandamus, Collection of Sum of
Money and Damages instituted by respondent Province of Pangasinan represented by
its Provincial Treasurer, Ramon A. Crisostomo, against petitioner Digital
Telecommunications Philippines, Inc. (DIGITEL) on 1 March 2000. Said complaint
docketed as Civil Case No. 18037, was filed before RTC, Br. 68 of Lingayen,
Pangasinan.
Republic Act No. 7160, otherwise known as the Local Government Code of 1991, took
effect on 1 January 1992. Of significance to the present petition are Sections 137 and
2324 of the Local Government Code. Section 137 of the Local Government Code, in
principle, withdrew any exemption5 from the payment of a tax on businesses enjoying a
franchise. Expressly, it authorized local governments to impose a franchise tax on
businesses enjoying a franchise within its territorial jurisdiction, to wit:
SECTION 137. Franchise Tax. Notwithstanding any exemption granted by any law or
other special law, the province may impose a tax on business enjoying a franchise, at
the rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year based on the income receipt, or realized, within
its territorial jurisdiction. (Emphasis supplied.)
Section 232 likewise authorizes the imposition of an ad valorem tax on real property by
the local government of a province, city or municipality within the Metropolitan Manila
Area wherein the land, building, machinery and other improvement not thereinafter
specifically exempted. The particular provision reads:
SECTION 232. Power to Levy Real Property Tax. A province or city or a municipality
within the Metropolitan Manila Arena may levy an annual ad valorem tax on real
property such as land, building, machinery, and other improvement not hereinafter
specially exempted. (Emphasis supplied.)
On 13 November 1992, petitioner DIGITEL was granted, under Provincial Ordinance
No. 18-92, a provincial franchise to install, maintain and operate a telecommunications
system within the territorial jurisdiction of respondent Province of Pangasinan. Under
the said provincial franchise, the grantee is required to pay franchise and real property
taxes, viz:
Page 93 of 102

SECTION 6. The grantee shall pay to the Province of Pangasinan the applicable
franchise tax as maybe provided by appropriate ordinances in accordance with the
Local Government Code and other existing laws. Except for the foregoing and the real
estate tax on its land and building, it shall be subject to no other tax. The telephone
posts, apparatus, equipment and communication facilities of the grantee are exempted
from the real estate tax. (Emphasis supplied.)
Pursuant to the mandate of Sections 137 and 232 of the Local Government Code, the
Sangguniang Panlalawigan of respondent Province of Pangasinan enacted on 29
December 1992, Provincial Tax Ordinance No. 1, entitled "The Real Property Tax
Ordinance of 1992." Section 4 thereof imposed a real property tax on real properties
located within the territorial jurisdiction of the province. The particular provision,
however, technically expanded the application of Sec. 6 of the provincial franchise of
petitioner DIGITEL to include machineries and other improvements, not thereinafter
exempted, to wit:
Section 4. Imposition of Real Property Tax. There shall be levied an annual AD
VALOREM tax on real property such as land, building, machinery, and other
improvement not hereinafter specifically exempted, situated or located within the
territorial jurisdiction of Pangasinan at the rate of one percent (1%) of the assessed
value of said real property. (Emphasis supplied.)6
On 10 September 1993, Provincial Tax Ordinance No. 4, otherwise known as "The
Pangasinan Franchising Ordinance of 1993," was similarly ratified. Sections 4, 5 and 6
thereof, positively imposed a franchise tax on businesses enjoying a franchise within the
territorial jurisdiction of respondent Province of Pangasinan.
Thereafter, petitioner DIGITEL was granted by Republic Act No. 7678, 7 a legislative
franchise authorizing the grantee to install, operate and maintain telecommunications
systems, this time, throughout the Philippines. Under its legislative franchise,
particularly Sec. 5 thereof, petitioner DIGITEL became liable for the payment of a
franchise tax "as may be prescribed by law of all gross receipts of the telephone or
other telecommunications businesses transacted under it by the grantee," 8 as well as
real property tax "on its real estate, and buildings "exclusive of this franchise." Sec. 5
reads in full that:
SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its
real estate, buildings, and personal property exclusive of this franchise as other persons
or corporations are now or hereafter may be required by law to pay. In addition thereto,
the grantee shall pay to the Bureau of Internal Revenue each year, within thirty (30)
days after the audit and approval of the accounts, franchise tax as may be prescribed
by law of all gross receipts of the telephone or other telecommunications business
transacted under this franchise by the grantee: Provided, that the grantee shall continue
to be liable for income taxes payable under Title II of the National Internal Revenue
Code pursuant to Section 2 of Executive Order No. 72 unless the latter enactment is
amended or repealed, in which case the amendment or repeal shall be applicable
thereto. The grantee shall file the return with and pay the tax due thereon to the
Commissioner of Internal Revenue or his duly authorized representative in accordance
with the National Internal Revenue Code and the return shall be subject to audit by the
Bureau of Internal Revenue. [Emphasis supplied.]1awphi1.net
Later, respondent Province of Pangasinan, in its examination of its record found that
petitioner DIGITEL had a franchise tax deficiency for the years 1992, 1993 and 1994. It
was alleged that apart from the Php40,000.00 deposit representing the grantees
acquiescence or acceptance of the franchise, as required by respondent Province of
Pangasinan, petitioner DIGITEL had never paid any franchise tax to respondent
Province of Pangasinan since the former started its operation in 1992. Accordingly, the
Sangguniang Panlalawigan passed Resolution No. 364 on 14 October 1994,
categorically directing petitioner DIGITEL to:
Page 94 of 102

[C]ommunicate its conformity to Ordinance No. 40 to the Sanggunian thru the

Sangguniang Panlalawigan Secretary and to pay the necessary and overdue franchise
taxes to the Provincial Treasurer of Pangasinan within fifteen (15) days from receipt
hereof otherwise its franchise shall be declared in operative (sic) and its operations
terminated;"
In the interregnum, on 16 March 1995, Congress passed Republic Act No. 7925,
otherwise known as "The Public Telecommunications Policy Act of the Philippines."
Section 23 of this law entitled Equality of Treatment in the Telecommunications
Industry, provided for the ipso facto application to any previously granted
telecommunications franchises of any advantage, favor, privilege, exemption or
immunity granted under existing franchises, or those still to be granted, to be accorded
immediately and unconditionally to earlier grantees. Section 23 reads below:
SECTION 23. Equality of Treatment in the Telecommunications Industry. Any
advantage, favor, privilege, exemption, or immunity granted under existing franchises,
or may hereafter be granted, shall ipso facto become part of previously granted
telecommunications franchises and shall be accorded immediately and unconditionally
to the grantees of such franchises x x x. (Emphasis supplied.)
The provincial franchise and real property taxes remained unpaid despite the foregoing
measures instituted. Consequently, in a letter9 dated 30 October 1998, the Provincial
Legal Officer of respondent Province of Pangasinan, Atty. Geraldine U. Baniqued,
demanded from petitioner DIGITEL compliance with Provincial Tax Ordinance No. 4.,
specifically the first paragraph of Section 4 thereof but which was wittingly or unwittingly
misquoted10 to read:
No persons shall establish and / or operate a public utility business enterprises (sic)
within the territorial jurisdiction of the Province of Pangasinan whether in one
municipality or group of municipalities, except by virtue of a franchise granted by the
Sangguniang Panlalawigan of Pangasinan.
On 17 November 1998, petitioner DIGITEL took exception to respondent Province of
Pangasinans claim on the ground that prior to the approval of its legislative franchise,
its operation of a telecommunications system was done under a Facilities Management
Agreement it had previously executed with the Department of Transportation and
Communication (DOTC). Such agreement was purportedly the result of a public bidding
wherein petitioner DIGITEL was "awarded the right to manage the operation,
maintenance and development of government telecommunications facilities under its
Regional Telecommunications Development Project Phases A and B x x x and National
Telephone Program Phase I Tranche 1 x x x covering Regions I to V." 11 It clarified that
since "the facilities in the Province of Pangasinan are just part of the government owned
facilities awarded to DIGITEL," not only did the DOTC retain ownership of said facilities,
the latter likewise "provided for the budget for (the) expenses under its allocation from
the government;" hence, "all revenues generated from the operation of the facilities
inured to the DOTC;" and all the fees received by petitioner DIGITEL were purely for
services rendered.
Further, it argued that under its legislative franchise, the payment of a franchise tax to
the Bureau of Internal Revenue (BIR) would be "in lieu of all taxes" on said franchise or
the earnings therefrom.
Unconvinced, on 8 December 1998, respondent Province of Pangasinan
countered12 the provisions of its franchise were subject not only to the provisions of the
Constitution, but to "applicable laws, rules and regulations" as well; that among
the applicable laws being referred to were Sec. 137 of the Local Government Code,
which authorizes it to "impose a tax on business enjoying a franchise x x x;" and Sec. 6
of Provincial Ordinance No. 4, which similarly imposes a tax on a business enjoying a
franchise.
Page 95 of 102

On 1 March 2000, no settlement having been made, respondent Province of

Pangasinan, represented by the latters Provincial Treasurer, Ramon A. Crisostomo,
filed a Complaint13 for Mandamus, Collection of Sum of Money and Damages before
Branch 68 of the RTC of Lingayen, Pangasinan, docketed as Civil Case No. 18037.
The Complaint prayed that petitioner DIGITEL be ordered:
1. to x x x open its books, records and other pertinent documents so that the
provincial government can make the proper assessment of the Taxes due.
2. after determination of the defendants capital investment and subsequent
gross receipts, to pay plaintiff the sum equivalent to 1/20th of one percent (1%) of
the total capital investment for the first year of its operation and thereafter, fifty
percent (50%) of one percent (1%) of the gross receipts realized during the
preceding calendar year for the year 1993, 1994, 1995, 1996, 1997, 1998 and up
to the present.
3. after determination of all of defendants real properties, to pay the Real
Property Tax due after its proper computation.
4. to pay legal interest of the amounts from the time it was due until the whole
amount is fully complied with.
5. to pay the cost of this suit.
On 14 June 2001, the court a quo rendered a Decision14 in favor of respondent Province
of Pangasinan, the dispositive part of which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of
the plaintiff, as follows:
1. Ordering the defendant to open its books, records and other pertinent
documents so that the provincial government can make the proper assessment
of the franchise tax and real property tax due;
2. After the determination of the defendants capital investment and subsequent
gross receipts, to pay plaintiff the sum equivalent to 1/20th of one percent (1%) of
the total capital investment for the first year of its operation (1993), and
thereafter, fifty percent (50%) of one percent (1%) of the gross receipts realized
during the preceding calendar year 1993, 1994, 1995, 1996, 1997, 1998 and up
to the present;
3. After determination of all of defendants real properties, to pay Real Property
Tax due after its proper computation, pursuant to Section 4 of the Real Property
Tax Ordinance of 1992 of the plaintiff;
4. To pay 1) A surcharge of twenty-five percent of the amount of the franchise tax
due or a fraction thereof until the delinquent tax shall have been fully paid; 2) To
pay an interest of two percent (2%) per month on the unpaid amount or a fraction
thereof, until the delinquent tax shall have been fully paid, but in no case shall the
total interest on the unpaid tax or proportion thereof exceed 36 months;
5. To pay the cost of this suit.
In ruling against the claimed exemption, the court a quo held that petitioner DIGITELs
legislative franchise does not work to exempt the latter from payment of provincial
franchise and real property taxes. The court a quo reasoned that the provincial and
legislative franchises are separate and distinct from each other; and, that prior to the
grant of its legislative franchise, petitioner DIGITEL had already benefited from the use
of it. Moreover, it pointed out that Section 137 of the Local Government Code had
Page 96 of 102

already withdrawn any exemption granted to anyone; as such, the local government of a
province may impose a tax on a business enjoying a franchise.
On the other hand, petitioner DIGITEL maintains that its legislative franchise being an
earlier enactment, by virtue of Section 23 of Republic Act No. 7925, the ipso
facto, immediate and unconditional application to it of the tax exemption found in the
franchises of Globe, Smart and Bell, i.e., in Section 9 (b) of Republic Act No. 7229,
Globes legislative franchise; in Section 9 of Republic Act No. 7294, Smarts legislative
franchise; and Section 9 of Republic Act No. 7294, Bells legislative franchise, all
basically or similarly containing the phrase "shall pay a franchise tax equivalent to x x x
of all gross receipts of the business transacted under this franchise by the grantee, its
successors or assigns and the said percentage shall be in lieu of all taxes on this
franchise or earnings thereof.
Stated simply, Section 23 of Republic Act No. 7925, in relation to the pertinent
provisions of the legislative franchises of Globe, Smart and Bell, "the national franchise
tax for which petitioner (DIGITEL) is liable to pay shall be in lieu of any and all taxes of
any kind, nature or description levied, established or collected by any authority
whatsoever, municipal, provincial, or national, from which the grantee is hereby
expressly granted.
Petitioner DIGITELs Motion for Reconsideration was denied in a Resolution dated 15
February 2002.
As the controversy involves pure questions of law, this Petition for Review on Certiorari
under Rule 45 of the Rules of Court, as amended, was filed directly with this Court,
predicated on the following arguments:
I.
THE HONORABLE COURT ERRED IN
GOVERNMENT CODE IS A SPECIAL LAW.

DECLARING

THAT

THE

LOCAL

II.
THE LOWER COURT ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY
REAL PROPERTY TAX AND FRANCHISE TAX.
III.
THE PROVISIONS OF THE LOCAL GOVERNMENT CODE MAY BE RECONCILED
WITH THOSE OF PETITIONERS LEGISLATIVE FRANCHISE.
IV.
THE HONORABLE COURT ERRED IN NOT RULING THAT PETITIONERS
LEGISLATIVE FRANCHISE, REPUBLIC ACT NO. 7678, IS IN CONFORMITY WITH
THE CONSTITUTION.
V.
THE HONORABLE COURT ERRED IN RULING THAT THE NON-IMPAIRMENT
CLAUSE OF THE CONSTITUTION DOES NOT EXTEND TO NOR COVER
FRANCHISES ISSUED BY CONGRESS.
VI.
ASSUMING ARGUENDO THAT PETITIONER SHOULD BE HELD LIABLE TO PAY
FRANCHISE AND REAL PROPERTY TAXES, IT IS NONETHELESS STILL EXEMPT
Page 97 of 102

FROM PAYMENT THEREOF IN VIEW OF ITS REGISTRATION WITH THE BOARD

OF INVESTMENTS AS A NON-PIONEER BUSINESS ENTERPRISE IN
ACCORDANCE WITH SECTION 133 (G) OF THE LOCAL GOVERNMENT CODE.
The plethora of arguments raised can be reduced to two basic but essential issues,
namely: 1) Whether or not petitioner DIGITEL is entitled to the exemption from the
payment of provincial franchise tax in view of Section 23 of Republic Act No.
7925,15 otherwise known as the "Public Telecommunications Policy Act of the
Philippines," in relation to the tax exemption provisions found in the legislative
franchises of Globe Mackay Cable and Radio Corporation, Smart Information
Technologies, Incorporated and Bell Telecommunication Philippines, Incorporated.
Stated otherwise, are the "in-lieu-of-all-taxes" clauses/provisos found in Republic Act
No. 7229, the legislative franchise of Globe; Republic Act No. 7294, the legislative
franchise of Smart; and Republic Act No. 7692, the legislative franchise of Bell, vis-vis Section 23 of Republic Act No. 7925, applicable to petitioner DIGITEL such that the
latter is now exempt from the payment of any other taxes except the national franchise
and income taxes? lavvphi1.net
And, 2) if answered in the negative, whether or not petitioner DIGITELs real properties
found within the territorial jurisdiction of respondent Province of Pangasinan are exempt
from the payment of real property taxes by virtue of the phrase "exclusive of this
franchise" found in Section 5 of its legislative franchise, Republic Act No. 7678?
At the outset, worth noting is the fact that prior to the enactment and effectivity of its
legislative franchise, with only a provincial franchise to speak of, petitioner DIGITEL did
not enjoy any exemption from the payment of franchise and real property taxes. In fact,
Provincial Ordinance No. 18-92, its provincial franchise, categorically made it liable for
the payment of such taxes. It was only with the enactment of Republic Act No. 7925 in
1995 and succeeding legislative franchises containing the "in-lieu-of-all-taxes"
clauses/provisos that petitioner DIGITEL can claim exemption to such tax liabilities.
The case at bar is actually not one of first impression. Indeed, as far back as 2001, this
Court has had the occasion to rule against the claim for tax exemption under Republic
Act No. 7925. In the case of Philippine Long Distance Telephone Company, Inc. v. City
of Davao,16 we already clarified the confusion brought about by the effect of Section 23
of Republic Act No. 7925 that the word "exemption" as used in the statute refers or
pertains merely to an exemption from regulatory or reporting requirements of the DOTC
or the NTC and not to the grantees tax liability.
The issue in the PLDT v. City of Davao case was whether or not, by virtue of Section 23
of Republic Act No. 7925 (Public Telecommunications Policy of the Philippines), PLDT
is again entitled to an exemption from the payment of local franchise tax in view of the
grant of a tax exemption to Globe and Smart telecommunications companies. Before
the enactment of Republic Act No. 7925 in 1995, the Congress of the Philippines
granted in favor of Globe17 and Smart18 franchises19 that contain "in-lieu-of-all-taxes"
clauses or provisos. Then came Republic Act No. 7925, particularly Section 23 thereof,
providing, more or less, that any advantage, favor, privilege, exemption, or immunity
granted under existing franchises, or may hereafter be granted, shall be made part of
previously enacted franchises and made automatically applicable to the grantees
thereof. Subsequently, in "January 1999, when PLDT applied for a mayors permit to
operate its Davao Metro Exchange, it was required to pay the local franchise tax for the
first to the fourth quarter of 1999 x x x. PLDT challenged the power of the city
government to collect the local franchise tax and demanded a refund of what it had paid
as local franchise tax for the year 1997 and for the first to the third quarters of
1998."20 The latter believed itself to be exempt from payment of such tax even though
Section 12 of its franchise (Republic Act No. 7082) containing the "in-lieu-of-all-taxes"
proviso had already been withdrawn by the provisions of the Local Government Code.
Its belief was anchored on the effect of the above-mentioned Section 23 of Republic Act
Page 98 of 102

No. 7925 that because the franchises of Globe and Smart contain "in-lieu-of-all-taxes"
clauses or provisos, the same grant of tax exemption must be regarded to have become
ipso facto part of PLDTs previously granted telecommunications franchise.
In denying PLDTs petition, this Court, speaking through Mr. Justice Vicente V.
Mendoza, held that in approving Section 23 of Republic Act No. 7925, Congress did not
intend it to operate as a blanket tax exemption to all telecommunications entities; thus, it
cannot be considered as having amended petitioner PLDTs franchise so as to entitle it
to exemption from the imposition of local franchise taxes. The ponencia went on further
to elucidate that:
To begin with, tax exemptions are highly disfavored. x x x
The tax exemption must be expressed in the statute in clear language that leaves no
doubt of the intention of the legislature to grant such exemption. And, even if it is
granted, the exemption must be interpreted in strictissimi juris against the taxpayer and
liberally in favor of the taxing authority. (Citation omitted.)
In the present case, petitioner justifies its claim of tax exemption by strained inferences.
First, it cites R.A. No. 7925, otherwise known as the Public Telecommunications Policy
Act of the Philippines, 23 x x x
xxxx
Petitioner then claims that Smart and Globe enjoy exemption from the payment of the
franchise tax by virtue of their legislative franchises per opinion of the Bureau of Local
Government Finance of the Department of Finance. Finally, it argues that because
Smart and Globe are exempt from the franchise tax, it follows that it must likewise be
exempt from the tax being collected by the City of Davao because the grant of tax
exemption to Smart and Globe ipso facto extended the same exemption to it.
The acceptance of petitioner's theory would result in absurd consequences. To
illustrate: In its franchise, Globe is required to pay a franchise tax of only one and onehalf percentum (1%) of all gross receipts from its transactions while Smart is required
to pay a tax of three percent (3%) on all gross receipts from business transacted.
Petitioner's theory would require that, to level the playing field, any advantage, favor,
privilege, exemption, or immunity granted to Globe must be extended to all
telecommunications companies, including Smart. If, later, Congress again grants a
franchise to another telecommunications company imposing, say, one percent (1%)
franchise tax, then all other telecommunications franchises will have to be adjusted to
level the playing field so to speak. This could not have been the intent of Congress in
enacting 23 of Rep. Act 7925. Petitioner's theory will leave the Government with the
burden of having to keep track of all granted telecommunications franchises, lest some
companies be treated unequally. It is different if Congress enacts a law specifically
granting uniform advantages, favor, privilege, exemption, or immunity to all
telecommunications entities.
The fact is that the term "exemption" in 23 is too general. A cardinal rule in statutory
construction is that legislative intent must be ascertained from a consideration of the
statute as a whole and not merely of a particular provision. x x x Hence, a consideration
of the law itself in its entirety and the proceedings of both Houses of Congress is in
order. [Citation omitted.]
xxxx
Art. VIII, entitled Telecommunications Development, where 23 is found, provides for
public ownership of telecommunications entities, privatization of existing facilities, and
the equality of treatment provision. (Citation omitted.)
Page 99 of 102

xxxx
R.A. No. 7925 is thus a legislative enactment designed to set the national policy on
telecommunications and provide the structures to implement it to keep up with the
technological advances in the industry and the needs of the public. The thrust of the law
is to promote gradually the deregulation of the entry, pricing, and operations of all public
telecommunications entities and thus promote a level playing field in the
telecommunications industry(citation omitted). There is nothing in the language of 23
nor in the proceedings of both the House of Representatives and the Senate in enacting
R.A. No. 7925 which shows that it contemplates the grant of tax exemptions to all
telecommunications entities, including those whose exemptions had been withdrawn by
the LGC.
x x x When exemption is claimed, it must be shown indubitably to exist. At the outset,
every presumption is against it. A well-founded doubt is fatal to the claim. It is only when
the terms of the concession are too explicit to admit fairly of any other construction that
the proposition can be supported. In this case, the word exemption in 23 of R.A. No.
7925 could contemplate exemption from certain regulatory or reporting requirements,
bearing in mind the policy of the law x x x.21
From the preceding discourse, there is nothing more left to be argued. The issue has
been settled. The Courts pronouncement in the above-discussed case has been
reiterated in a number of cases concerning the import of Section 23 of Republic Act No.
7925. Therefore, this Court has no recourse but to deny petitioner DIGITELs claim for
exemption from payment of provincial franchise tax.
The foregoing pronouncement notwithstanding, in view of the passage of Republic Act
No. 7716,22 abolishing the franchise tax imposed on telecommunications companies
effective 1 January 1996 and in its place is imposed a 10 percent Value-Added-Tax
(VAT),23 the "in-lieu-of-all-taxes" clause/provision in the legislative franchises of Globe,
Smart and Bell, among others, has now become functus officio, made inoperative for
lack of a franchise tax. Therefore, taking into consideration the above, from 1 January
1996, petitioner DIGITEL ceased to be liable for national franchise tax and in its
stead is imposed a 10% VAT in accordance with Section 108 of the Tax Code.
As to the issue relating to the claim of payment of real property taxes, of particular
import is Section 5 of Republic Act No. 7678, the legislative franchise of petitioner
DIGITEL. Sec. 5 of said law again states that:
SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its
real estate, buildings, and personal property exclusive of this franchise as other persons
or corporations are now or hereafter may be required by law to pay x x x. (Emphasis
supplied.)
Owing to the phrase "exclusive of this franchise," petitioner DIGITEL stands firm in its
position that it is equally exempt from the payment of real property tax. It maintains that
said phrase found in Section 5 above-quoted qualifies or delimits the scope of its liability
respecting real property tax that real property tax should only be imposed on its assets
that are actually, directly and exclusively used in the conduct of its business pursuant to
its franchise.
According to respondent Province of Pangasinan, however, "the phrase exclusive (of
this) franchise in the legislative franchise of Petitioner Digitel did not specifically or
categorically express that such franchise grant intended to provide privilege to the
extent of impliedly repealing Republic Act No. 7160."
Thus, the question is, whether or not petitioner DIGITELs real properties located within
the territorial jurisdiction of respondent Province of Pangasinan are exempt from real
property taxes by virtue of Section 5 of Republic Act No. 7678.
Page 100 of 102

We rule in the affirmative. However, it is with the caveat that such exemption solely
applies to those real properties actually, directly and exclusively used by the grantee in
its franchise.
The present issue actually boils down to a dispute between the inherent taxing power of
Congress and the delegated authority to tax of the local government borne by the 1987
Constitution. In the afore-quoted case of PLDT v. City of Davao, we already sustained
the power of Congress to grant exemptions over and above the power of the local
governments delegated taxing authority notwithstanding the source of such power. And
fairly recently, in the case of The City Government of Quezon City v. Bayan
Telecommunications, Inc.,24 we again had the opportunity to echo the ponencia of Mr.
Justice Vicente V. Mendoza that:
Indeed, the grant of taxing powers to local government units under the Constitution and
the LGC does not affect the power of Congress to grant exemptions to certain persons,
pursuant to a declared national policy. The legal effect of the constitutional grant to local
governments simply means that in interpreting statutory provisions on municipal taxing
powers, doubts must be resolved in favor of municipal corporations. [Emphasis
supplied.]
Succinctly put, had the Congress of the Philippines intended to tax each and every real
property of petitioner DIGITEL, regardless of whether or not it is used in the business or
operation of its franchise, it would not have incorporated a qualifying phrase, which such
manifestation admittedly is. And, to our minds, "the issue in this case no longer dwells
on whether Congress has the power to exempt" 25 petitioner DIGITELs properties from
realty taxes by its enactment of Republic Act No. 7678 which contains the phrase
"exclusive of this franchise," in the face of the mandate of the Local Government Code.
The more pertinent issue to consider is whether or not, by passing Republic Act No.
7678, Congress intended to exempt petitioner DIGITELs real properties actually,
directly and exclusively used by the grantee in its franchise.
The fact that Republic Act No. 7678 was a later piece of legislation can be taken to
mean that Congress, knowing fully well that the Local Government Code had already
withdrawn exemptions from real property taxes, chose to restore such immunity even to
a limited degree. Accordingly:
The Court views this subsequent piece of legislation as an express and real intention on
the part of Congress to once again remove from the LGC's delegated taxing power, all
of the franchisee's x x x properties that are actually, directly and exclusively used in the
pursuit of its franchise.26
In view of the unequivocal intent of Congress to exempt from real property tax those
real properties actually, directly and exclusively used by petitioner DIGITEL in the
pursuit of its franchise, respondent Province of Pangasinan can only levy real property
tax on the remaining real properties of the grantee located within its territorial jurisdiction
not part of the above-stated classification. Said exemption, however, merely applies
from the time of the effectivity of petitioner DIGITELs legislative franchise and not a
moment sooner.
In fine, petitioner DIGITEL is found accountable to respondent Province of Pangasinan
for the following tax liabilities: 1) as to provincial franchise tax, from 13 November 1992
until actually paid; and 2) as to real property tax, for the period starting from 13
November 1992 until 28 December 1992, it shall be imposed only on the lands and
buildings of petitioner DIGITEL located within the subject jurisdiction; for the period
commencing from 29 December 1992 until 16 February 1994, in addition to the lands
and buildings aforementioned, it shall similarly be imposed on machineries and other
improvements;27 and, by virtue of the National Franchise of petitioner DIGITEL or
Republic Act No. 7678, in accordance with the Courts ruling in the
abovementioned Bayantel case, from the date of effectivity on 17 February 1994 until
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the present, it shall be imposed only on real properties NOTactually, directly and
exclusively used in the franchise of petitioner DIGITEL. In addition to the foregoing
summary, pertinent provisions of law respecting interests, penalties and surcharges
shall also be made to apply to herein subject tax liabilities.
WHEREFORE, in view of the foregoing, the instant petition is DENIED. The
assailed Decision dated 14 June 2001, and the Resolution dated 15 February 2002,
both rendered by the RTC of Lingayen, Pangasinan, Branch 68 in Civil Case No. 18037,
are hereby AFFIRMED in so far as it finds petitioner DIGITEL liable for the payment of
provincial franchise and real property taxes. However, the amount of taxes owing to
respondent Province of Pangasinan must be recomputed in accordance with the
foregoing discussion. No costs.
SO ORDERED.

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