GOVERNMENTAL POWERS

I. POLICE POWER
DELA CRUZ vs. PARAS
Subject Shall Be Expressed in the Title Police Power Not Validly Exercise
FACTS: Vicente De La Cruz et al were club & cabaret operators. They assail the constitutionality of Ord. No. 84,
Ser. of 1975 or the Prohibition and Closure Ordinance of Bocaue, Bulacan. De la Cruz averred that the said
Ordinance violates their right to engage in a lawful business for the said ordinance would close out their
business. That the hospitality girls they employed are healthy and are not allowed to go out with customers.
Judge Paras however lifted the TRO he earlier issued against Ord. 84 after due hearing declaring that Ord 84. is
constitutional for it is pursuant to RA 938 which reads AN ACT GRANTING MUNICIPAL OR CITY BOARDS
AND COUNCILS THE POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF
CERTAIN PLACES OF AMUSEMENT WITHIN THEIR RESPECTIVE TERRITORIAL JURISDICTIONS. Paras
ruled that the prohibition is a valid exercise of police power to promote general welfare. De la Cruz then appealed
citing that they were deprived of due process.
ISSUE: Whether or not a municipal corporation, Bocaue, Bulacan can, prohibit the exercise of a lawful trade, the
operation of night clubs, and the pursuit of a lawful occupation, such clubs employing hostesses pursuant to Ord
84 which is further in pursuant to RA 938.
HELD: The SC ruled against Paras. If night clubs were merely then regulated and not prohibited, certainly the
assailed ordinance would pass the test of validity. SC had stressed reasonableness, consonant with the general
powers and purposes of municipal corporations, as well as consistency with the laws or policy of the State. It
cannot be said that such a sweeping exercise of a lawmaking power by Bocaue could qualify under the term
reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure
that does not encompass too wide a field. Certainly the ordinance on its face is characterized by overbreadth.
The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an
absolute prohibition. Pursuant to the title of the Ordinance, Bocaue should and can only regulate not prohibit the
business of cabarets.
BINAY vs. DOMINGO
FACTS: Petitioner Municipality of Makati, through its Council, approved Resolution No. 60 which extends P500
burial assistance to bereaved families whose gross family income does not exceed P2,000.00 a month. The
funds are to be taken out of the unappropriated available funds in the municipal treasury. The Metro Manila
Commission approved the resolution. Thereafter, the municipal secretary certified a disbursement of
P400,000.00 for the implementation of the program. However, the Commission on Audit disapproved said
resolution and the disbursement of funds for the implementation thereof for the following reasons: (1) the
resolution has no connection to alleged public safety, general welfare, safety, etc. of the inhabitants of Makati; (2)
government funds must be disbursed for public purposes only; and, (3) it violates the equal protection clause
since it will only benefit a few individuals.
ISSUES: 1. Whether Resolution No. 60 is a valid exercise of the police power under the general welfare clause
2. Whether the questioned resolution is for a public purpose
3. Whether the resolution violates the equal protection clause
HELD: 1. The police power is a governmental function, an inherent attribute of sovereignty, which was born with
civilized government. It is founded largely on the maxims, "Sic utere tuo et ahenum non laedas and "Salus populi
est suprema lex. Its fundamental purpose is securing the general welfare, comfort and convenience of the
people.
Police power is inherent in the state but not in municipal corporations. Before a municipal corporation may
exercise such power, there must be a valid delegation of such power by the legislature which is the repository of
the inherent powers of the State.
Municipal governments exercise this power under the general welfare clause. Pursuant thereto they are clothed
with authority to "enact such ordinances and issue such regulations as may be necessary to carry out and
discharge the responsibilities conferred upon it by law, and such as shall be necessary and proper to provide for
the health, safety, comfort and convenience, maintain peace and order, improve public morals, promote the
prosperity and general welfare of the municipality and the inhabitants thereof, and insure the protection of
property therein.
2. Police power is not capable of an exact definition but has been, purposely, veiled in general terms to
underscore its all comprehensiveness. Its scope, over-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 assuring the greatest benefits.
The police power of a municipal corporation is broad, and has been said to be commensurate with, but not to
exceed, the duty to provide for the real needs of the people in their health, safety, comfort, and convenience as
consistently as may be with private rights. It extends to all the great public needs, and, in a broad sense includes
all legislation and almost every function of the municipal government. It covers a wide scope of subjects, and,
while it is especially occupied with whatever affects the peace, security, health, morals, and general welfare of
the community, it is not limited thereto, but is broadened to deal with conditions which exists so as to bring out of
them the greatest welfare of the people by promoting public convenience or general prosperity, and to everything

worthwhile for the preservation of comfort of the inhabitants of the corporation. Thus, it is deemed inadvisable to
attempt to frame any definition which shall absolutely indicate the limits of police power.
Public purpose is not unconstitutional merely because it incidentally benefits a limited number of persons. As
correctly pointed out by the Office of the Solicitor General, "the drift is towards social welfare legislation geared
towards state policies to provide adequate social services, the promotion of the general welfare, social justice as
well as human dignity and respect for human rights." The care for the poor is generally recognized as a public
duty. The support for the poor has long been an accepted exercise of police power in the promotion of the
common good.
3. There is no violation of the equal protection clause. Paupers may be reasonably classified. Different groups
may receive varying treatment. Precious to the hearts of our legislators, down to our local councilors, is the
welfare of the paupers. Thus, statutes have been passed giving rights and benefits to the disabled, emancipating
the tenant-farmer from the bondage of the soil, housing the urban poor, etc. Resolution No. 60, re-enacted under
Resolution No. 243, of the Municipality of Makati is a paragon of the continuing program of our government
towards social justice. The Burial Assistance Program is a relief of pauperism, though not complete. The loss of a
member of a family is a painful experience, and it is more painful for the poor to be financially burdened by such
death. Resolution No. 60 vivifies the very words of the late President Ramon Magsaysay 'those who have less in
life, should have more in law." This decision, however must not be taken as a precedent, or as an official gosignal for municipal governments to embark on a philanthropic orgy of inordinate dole-outs for motives political or
otherwise. (Binay vs Domingo, G.R. No. 92389, September 11, 1991)
TANO vs. SOCRATES
FACTS: On Dec 15, 1992, the Sangguniang Panglungsod ng Puerto Princesa enacted an ordinance banning the
shipment of all live fish and lobster outside Puerto Princesa City from January 1, 1993 to January 1, 1998.
Subsequently the Sangguniang Panlalawigan, Provincial Government of Palawan enacted a resolution
prohibiting the catching , gathering, possessing, buying, selling, and shipment of a several species of live marine
coral dwelling aquatic organisms for 5 years, in and coming from Palawan waters.
Petitioners filed a special civil action for certiorari and prohibition, praying that the court declare the said
ordinances and resolutions as unconstitutional on the ground that the said ordinances deprived them of the due
process of law, their livelihood, and unduly restricted them from the practice of their trade, in violation of Section
2, Article XII and Sections 2 and 7 of Article XIII of the 1987 Constitution.
ISSUE: Are the challenged ordinances unconstitutional?
HELD: No. The Supreme Court found the petitioners contentions baseless and held that the challenged
ordinances did not suffer from any infirmity, both under the Constitution and applicable laws. There is absolutely
no showing that any of the petitioners qualifies as a subsistence or marginal fisherman. Besides, Section 2 of
Article XII aims primarily not to bestow any right to subsistence fishermen, but to lay stress on the duty of the
State to protect the nations marine wealth. The so-called preferential right of subsistence or marginal
fishermen to the use of marine resources is not at all absolute. In accordance with the Regalian Doctrine, marine
resources belong to the state and pursuant to the first paragraph of Section 2, Article XII of the Constitution, their
exploration, development and utilization...shall be under the full control and supervision of the State.
In addition, one of the devolved powers of the LCG on devolution is the enforcement of fishery laws in municipal
waters including the conservation of mangroves. This necessarily includes the enactment of ordinances to
effectively carry out such fishery laws within the municipal waters. In light of the principles of decentralization and
devolution enshrined in the LGC and the powers granted therein to LGUs which unquestionably involve the
exercise of police power, the validity of the questioned ordinances cannot be doubted.
WHITE LIGHT CORP vs. CITY OF MANILA
FACTS: On December 3, 1992, City Mayor Alfredo S. Lim signed into law 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). The ordinance sanctions any person or corporation who will allow the admission and
charging of room rates for less than 12 hours or the renting of rooms more than twice a day.
The petitioners White Light Corporation (WLC), Titanium Corporation (TC), and Sta. Mesa Tourist and
Development Corporation (STDC), who own and operate several hotels and motels in Metro Manila, filed a
motion to intervene and to admit attached complaint-in-intervention on the ground that the ordinance will affect
their business interests as operators. The respondents, in turn, alleged that the ordinance is a legitimate exercise
of police power.
RTC declared Ordinance No. 7774 null and void as it strikes at the personal liberty of the individual guaranteed
and jealously guarded by the Constitution. 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.
When elevated to CA, the respondents 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 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. Also, they
contended that under Art III Sec 18 of Revised Manila Charter, they have the power 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 to fix penalties for the violation of ordinances.
Petitioners argued that the ordinance is unconstitutional and void since it violates the right to privacy and
freedom of movement; it is an invalid exercise of police power; and it is unreasonable and oppressive
interference in their business.
CA, in turn, reversed the decision of RTC and affirmed the constitutionality of the ordinance. First, 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 wellbeing of its constituents in general. Hence, the petitioners appeared before the SC.
ISSUE: Whether Ordinance No. 7774 is a valid exercise of police power of the State.
HELD: No. Ordinance No. 7774 cannot be considered as a valid exercise of police power, and as such, it is
unconstitutional. The facts of this case will recall to mind not only the recent City of Manila v Laguio Jr ruling, but
the 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc., v. Hon. City Mayor of Manila.
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.
The ordinance in this case 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.
Police power is based upon the concept of necessity of the State and its corresponding right to protect itself and
its people. Police power has been used as justification for numerous and varied actions by the State.
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.
SC contended that if they 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 that they were
capacitated to act upon is the injury to property sustained by the petitioners. Yet, they also recognized 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. The rights
at stake herein fell within the same fundamental rights to liberty. 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,
Indeed, the right to privacy as a constitutional right must be recognized and the invasion of it should be justified
by a compelling state interest. Jurisprudence 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.
An ordinance which 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. 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.
Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary intrusion into
private rights. 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.
SC reiterated 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 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.
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.
SOCIAL JUSTICE SOCIETY vs. ATIENZA
FACTS: The Social Justice Society sought to compel respondent Hon. Jose L. Atienza, Jr., then mayor of the
City of Manila, to enforce Ordinance No. 8027 that was enacted by the Sangguniang Panlungsod of Manila in
2001. Ordinance No. 8027 reclassified the area described therein from industrial to commercial and directed the
owners and operators of businesses disallowed under the reclassification to cease and desist from operating
their businesses within six months from the date of effectivity of the ordinance. Among the businesses situated in
the area are the so-called Pandacan Oil Terminal of the oil companies.
In 2002, the City of Manila and the Department of Energy (DOE) entered into a memorandum of understanding
(MOU) with the oil companies. They agreed that the scaling down of the Pandacan Terminals was the most
viable and practicable option. The Sangguniang Panlungsod ratified the MOU in Resolution No. 97. In the same
resolution, the Sanggunian declared that the MOU was effective only for a period of six months starting 25 July
2002, which period was extended up to 30 April 2003.
This is the factual backdrop of the Supreme Courts 7 March 2007 Decision. The SC ruled that respondent had
the ministerial duty under the Local Government Code (LGC) to enforce all laws and ordinances relative to the
governance of the city, including Ordinance No. 8027. After the SC promulgated its Decision, Chevron
Philippines Inc. (Chevron), Petron Corporation (Petron) and Pilipinas Shell Petroleum Corporation (Shell) (the oil
companies) and the Republic of the Philippines, represented by the DOE, sought to intervene and ask for a
reconsideration of the decision.
Intervention of the oil companies and the DOE allowed in the interest of justice
Intervention is a remedy by which a third party, not originally impleaded in the proceedings, becomes a litigant
therein to enable him, her or it to protect or preserve a right or interest which may be affected by such
proceedings. The allowance or disallowance of a motion to intervene is addressed to the sound discretion of the
court. While the motions to intervene respectively filed by the oil companies and the DOE were filed out of time,
these motions were granted because they presented novel issues and arguments. DOEs intervention was also
allowed considering the transcendental importance of this case.
Ordinance No. 8119 did not impliedly repeal Ordinance No. 8027
Repeal by implication proceeds on the premise that where a statute of later date clearly reveals the intention of
the legislature to abrogate a prior act on the subject, that intention must be given effect. Implied repeals are not
favored and will not be so declared unless the intent of the legislators is manifest.
There are two kinds of implied repeal. The first is: where the provisions in the two acts on the same subject
matter are irreconcilably contradictory, the latter act, to the extent of the conflict, constitutes an implied repeal of
the earlier one. The second is: if the later act covers the whole subject of the earlier one and is clearly intended
as a substitute, it will operate to repeal the earlier law. The oil companies argue that the situation here falls under
the first category.
For the first kind of implied repeal, there must be an irreconcilable conflict between the two ordinances. However,
there was no legislative purpose to repeal Ordinance No. 8027. There is no conflict since both ordinances
actually have a common objective, i.e., to shift the zoning classification from industrial to commercial (Ordinance
No. 8027) or mixed residential/commercial (Ordinance No. 8119). While it is true that both ordinances relate to
the same subject matter, i.e., classification of the land use of the area where Pandacan oil depot is located, if
there is no intent to repeal the earlier enactment, every effort at reasonable construction must be made to
reconcile the ordinances so that both can be given effect.
Moreover, it is a well-settled rule in statutory construction that a subsequent general law does not repeal a prior
special law on the same subject unless it clearly appears that the legislature has intended by the latter general
act to modify or repeal the earlier special law. The special law must be taken as intended to constitute an
exception to, or a qualification of, the general act or provision. Ordinance No. 8027 is a special law since it deals
specifically with a certain area described therein (the Pandacan oil depot area) whereas Ordinance No. 8119 can
be considered a general law as it covers the entire city of Manila.
Mandamus lies to compel respondent Mayor to enforce Ordinance No. 8027

The oil companies insist that mandamus does not lie against respondent in consideration of the separation of
powers of the executive and judiciary. However, while it is true that Courts will not interfere by mandamus
proceedings with the legislative or executive departments of the government in the legitimate exercise of its
powers, there is an exception to enforce mere ministerial acts required by law to be performed by some officer
thereof. A writ of mandamus is the power to compel the performance of an act which the law specifically enjoins
as a duty resulting from office, trust or station.
The oil companies also argue that petitioners had a plain, speedy and adequate remedy to compel respondent to
enforce Ordinance No. 8027, which was to seek relief from the President of the Philippines through the Secretary
of the Department of Interior and Local Government (DILG) by virtue of the Presidents power of supervision over
local government units. This suggested process, however, would be unreasonably long, tedious and
consequently injurious to the interests of the local government unit (LGU) and its constituents whose welfare is
sought to be protected. A party need not go first to the DILG in order to compel the enforcement of an ordinance.
Besides, the resort to an original action for mandamus before the SC is undeniably allowed by the Constitution.
Ordinance No. 8027 is constitutional and valid
The tests of a valid ordinance are well established. For an ordinance to be valid, it must not only be within the
corporate powers of the LGU to enact and be passed according to the procedure prescribed by law, it must also
conform to the following substantive requirements: (1) must not contravene the Constitution or any statute; (2)
must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate
trade; (5) must be general and consistent with public policy and (6) must not be unreasonable. There is no
showing that the Ordinance is unconstitutional.
The City of Manila has the power to enact Ordinance No. 8027
Ordinance No. 8027 was passed by the Sangguniang Panlungsod of Manila in the exercise of its police power.
Police power is the plenary power vested in the legislature to make statutes and ordinances to promote the
health, morals, peace, education, good order or safety and general welfare of the people. This power flows from
the recognition that salus populi est suprema lex(the welfare of the people is the supreme law).
While police power rests primarily with the national legislature, such power may be delegated. Section 16 of the
LGC, known as the general welfare clause, encapsulates the delegated police power to local governments.
LGUs like the City of Manila exercise police power through their respective legislative bodies, in this case, the
Sangguniang Panlungsod or the city council. Specifically, the Sanggunian can enact ordinances for the general
welfare of the city.
This police power was also provided for in RA 409 or the Revised Charter of the City of Manila. Specifically, the
Sanggunian has the power to reclassify land within the jurisdiction of the city.
The enactment of Ordinance No. 8027 is a legitimate exercise of police power
As with the State, local governments may be considered as having properly exercised their police power only if
the following requisites are met: (1) the interests of the public generally, as distinguished from those of a
particular class, require its exercise; and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. In short, there must be a
concurrence of a lawful subject and a lawful method.
Ordinance No. 8027 is a valid police power measure because there is a concurrence of lawful subject and lawful
method. It was enacted for the purpose of promoting sound urban planning, ensuring health, public safety and
general welfare of the residents of Manila. The Sanggunian was impelled to take measures to protect the
residents of Manila from catastrophic devastation in case of a terrorist attack on the Pandacan Terminals.
Towards this objective, the Sanggunian reclassified the area defined in the ordinance from industrial to
commercial.
The ordinance was intended to safeguard the rights to life, security and safety of all the inhabitants of Manila and
not just of a particular class. The depot is perceived, rightly or wrongly, as a representation of western interests
which means that it is a terrorist target. As long as it there is such a target in their midst, the residents of Manila
are not safe. It therefore became necessary to remove these terminals to dissipate the threat. Wide discretion is
vested on the legislative authority to determine not only what the interests of the public require but also what
measures are necessary for the protection of such interests. Clearly, the Sanggunian was in the best position to
determine the needs of its constituents.
In the exercise of police power, property rights of individuals may be subjected to restraints and burdens in order
to fulfill the objectives of the government. Otherwise stated, the government may enact legislation that may
interfere with personal liberty, property, lawful businesses and occupations to promote the general welfare.
However, the interference must be reasonable and not arbitrary. And to forestall arbitrariness, the methods or
means used to protect public health, morals, safety or welfare must have a reasonable relation to the end in
view.
The means adopted by the Sanggunian was the enactment of a zoning ordinance which reclassified the area
where the depot is situated from industrial to commercial. A zoning ordinance is defined as a local city or
municipal legislation which logically arranges, prescribes, defines and apportions a given political subdivision into
specific land uses as present and future projection of needs. As a result of the zoning, the continued operation of
the businesses of the oil companies in their present location will no longer be permitted. The power to establish
zones for industrial, commercial and residential uses is derived from the police power itself and is exercised for
the protection and benefit of the residents of a locality. Consequently, the enactment of Ordinance No. 8027 is
within the power of the Sangguniang Panlungsod of the City of Manila and any resulting burden on those
affected cannot be said to be unjust.

Ordinance No. 8027 is not unfair, oppressive or confiscatory which amounts to taking without
compensation
According to the oil companies, Ordinance No. 8027 is unfair and oppressive as it does not only regulate but also
absolutely prohibits them from conducting operations in the City of Manila. However, the oil companies are not
prohibited from doing business in other appropriate zones in Manila. The City of Manila merely exercised its
power to regulate the businesses and industries in the zones it established.
The oil companies also argue that the ordinance is unfair and oppressive because they have invested billions of
pesos in the depot, and the forced closure will result in huge losses in income and tremendous costs in
constructing new facilities. This argument has no merit. In the exercise of police power, there is a limitation on or
restriction of property interests to promote public welfare which involves no compensable taking. Compensation
is necessary only when the states power of eminent domain is exercised. In eminent domain, property is
appropriated and applied to some public purpose. Property condemned under the exercise of police power, on
the other hand, is noxious or intended for a noxious or forbidden purpose and, consequently, is not
compensable. The restriction imposed to protect lives, public health and safety from danger is not a taking. It is
merely the prohibition or abatement of a noxious use which interferes with paramount rights of the public. In the
regulation of the use of the property, nobody else acquires the use or interest therein, hence there is no
compensable taking.
In this case, the properties of the oil companies and other businesses situated in the affected area remain theirs.
Only their use is restricted although they can be applied to other profitable uses permitted in the commercial
zone.
Ordinance No. 8027 is not partial and discriminatory
The oil companies take the position that the ordinance has discriminated against and singled out the Pandacan
Terminals despite the fact that the Pandacan area is congested with buildings and residences that do not comply
with the National Building Code, Fire Code and Health and Sanitation Code.
An ordinance based on reasonable classification does not violate the constitutional guaranty of the equal
protection of the law. The requirements for a valid and reasonable classification are: (1) it must rest on
substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be limited to existing
conditions only; and (4) it must apply equally to all members of the same class. The law may treat and regulate
one class differently from another class provided there are real and substantial differences to distinguish one
class from another.
Here, there is a reasonable classification. What the ordinance seeks to prevent is a catastrophic devastation that
will result from a terrorist attack. Unlike the depot, the surrounding community is not a high-value terrorist target.
Any damage caused by fire or explosion occurring in those areas would be nothing compared to the damage
caused by a fire or explosion in the depot itself. Accordingly, there is a substantial distinction. The enactment of
the ordinance which provides for the cessation of the operations of these terminals removes the threat they pose.
Therefore it is germane to the purpose of the ordinance. The classification is not limited to the conditions existing
when the ordinance was enacted but to future conditions as well. Finally, the ordinance is applicable to all
businesses and industries in the area it delineated.
Ordinance No. 8027 is not inconsistent with RA 7638 and RA 8479
The oil companies and the DOE assert that Ordinance No. 8027 is unconstitutional because it contravenes RA
7638 (DOE Act of 1992) and RA 8479 (Downstream Oil Industry Deregulation Law of 1998).
It is true that ordinances should not contravene existing statutes enacted by Congress. However, a brief survey
of decisions where the police power measure of the LGU clashed with national laws shows that the common
dominator is that the national laws were clearly and expressly in conflict with the ordinances/resolutions of the
LGUs. The inconsistencies were so patent that there was no room for doubt. This is not the case here. The laws
cited merely gave DOE general powers to establish and administer programs for the exploration, transportation,
marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources and to encourage
certain practices in the [oil] industry which serve the public interest and are intended to achieve efficiency and
cost reduction, ensure continuous supply of petroleum products. These powers can be exercised without
emasculating the LGUs of the powers granted them. When these ambiguous powers are pitted against the
unequivocal power of the LGU to enact police power and zoning ordinances for the general welfare of its
constituents, it is not difficult to rule in favor of the latter. Considering that the powers of the DOE regarding the
Pandacan Terminals are not categorical, the doubt must be resolved in favor of the City of Manila.
The principle of local autonomy is enshrined in and zealously protected under the Constitution. An entire article
(Article X) of the Constitution has been devoted to guaranteeing and promoting the autonomy of LGUs. The LGC
was specially promulgated by Congress to ensure the autonomy of local governments as mandated by the
Constitution. There is no showing how the laws relied upon by the oil companies and DOE stripped the City of
Manila of its power to enact ordinances in the exercise of its police power and to reclassify the land uses within
its jurisdiction.
The DOE cannot exercise the power of control over LGUs
Another reason that militates against the DOEs assertions is that Section 4 of Article X of the Constitution
confines the Presidents power over LGUs to one of general supervision. Consequently, the Chief Executive or
his or her alter egos, cannot exercise the power of control over them. The President and his or her alter egos, the
department heads, cannot interfere with the activities of local governments, so long as they act within the scope
of their authority. Accordingly, the DOE cannot substitute its own discretion for the discretion exercised by the
sanggunian of the City of Manila. In local affairs, the wisdom of local officials must prevail as long as they are
acting within the parameters of the Constitution and the law.

Ordinance No. 8027 is not invalid for failure to comply with RA 7924 and EO 72
The oil companies argue that zoning ordinances of LGUs are required to be submitted to the Metropolitan Manila
Development Authority (MMDA) for review and if found to be in compliance with its metropolitan physical
framework plan and regulations, it shall endorse the same to the Housing and Land Use Regulatory Board
(HLURB). Their basis is Section 3 (e) of RA 7924 and Section 1 of E.O. 72. They argue that because Ordinance
No. 8027 did not go through this review process, it is invalid.
The argument is flawed. RA 7942 does not give MMDA the authority to review land use plans and zoning
ordinances of cities and municipalities. This was only found in its implementing rules which made a reference to
EO 72. EO 72 expressly refers to comprehensive land use plans (CLUPs) only. Ordinance No. 8027 is admittedly
not a CLUP nor intended to be one. Instead, it is a very specific ordinance which reclassified the land use of a
defined area in order to prevent the massive effects of a possible terrorist attack. It is Ordinance No. 8119 which
was explicitly formulated as the Manila [CLUP] and Zoning Ordinance of 2006. CLUPs are the ordinances which
should be submitted to the MMDA for integration in its metropolitan physical framework plan and approved by the
HLURB to ensure that they conform with national guidelines and policies. Moreover, even assuming that the
MMDA review and HLURB ratification are necessary, the oil companies did not present any evidence to show
that these were not complied with. In accordance with the presumption of validity in favor of an ordinance, its
constitutionality or legality should be upheld in the absence of proof showing that the procedure prescribed by
law was not observed.
Conclusion
Essentially, the oil companies are fighting for their right to property. They allege that they stand to lose billions of
pesos if forced to relocate. However, based on the hierarchy of constitutionally protected rights, the right to life
enjoys precedence over the right to property. The reason is obvious: life is irreplaceable, property is not. When
the state or LGUs exercise of police power clashes with a few individuals right to property, the former should
prevail.
Both law and jurisprudence support the constitutionality and validity of Ordinance No. 8027. Without a doubt,
there are no impediments to its enforcement and implementation. Any delay is unfair to the inhabitants of the City
of Manila and its leaders who have categorically expressed their desire for the relocation of the terminals. Their
power to chart and control their own destiny and preserve their lives and safety should not be curtailed by the
intervenors warnings of doomsday scenarios and threats of economic disorder if the ordinance is enforced.
Just the same, the Court noted that it is not about to provoke a crisis by ordering the immediate relocation of the
Pandacan Terminals out of its present site. The enforcement of a decision, specially one with far-reaching
consequences, should always be within the bounds of reason, in accordance with a comprehensive and wellcoordinated plan, and within a time-frame that complies with the letter and spirit of our resolution. To this end, the
oil companies have no choice but to obey the law.
2. TAXING POWER
MANILA INTERNATIONAL AIRPORT AUTHORITY
FACTS: Manila International Airport Authority (MIAA) is the operator of the Ninoy International Airport located at
Paranaque City. The Officers of Paranaque City sent notices to MIAA due to real estate tax delinquency. MIAA
then settled some of the amount. When MIAA failed to settle the entire amount, the officers of Paranaque city
threatened to levy and subject to auction the land and buildings of MIAA, which they did. MIAA sought for a
Temporary Restraining Order from the CA but failed to do so within the 60 days reglementary period, so the
petition was dismissed. MIAA then sought for the TRO with the Supreme Court a day before the public auction,
MIAA was granted with the TRO but unfortunately the TRO was received by the Paranaque City officers 3 hours
after the public auction. MIAA claims that although the charter provides that the title of the land and building are
with MIAA still the ownership is with the Republic of the Philippines. MIAA also contends that it is an
instrumentality of the government and as such exempted from real estate tax. That the land and buildings of
MIAA are of public dominion therefore cannot be subjected to levy and auction sale. On the other hand, the
officers of Paranaque City claim that MIAA is a government owned and controlled corporation therefore not
exempted to real estate tax.
ISSUES: Whether or not MIAA is an instrumentality of the government and not a government owned and
controlled corporation and as such exempted from tax. Whether or not the land and buildings of MIAA are part of
the public dominion and thus cannot be the subject of levy and auction sale.
HELD: Under the Local government code, government owned and controlled corporations are notexempted from
real estate tax. MIAA is not a government owned and controlled corporation, for to become one MIAA should
either be a stock or non stock corporation. MIAA is not a stock corporation for its capital is not divided into
shares. It is not a non stock corporation since it has no members. MIAA is an instrumentality of the government
vested with corporate powers and government functions. Under the civil code, property may either be under
public dominion or private ownership. Those under public dominion are owned by the State and are utilized for
public use, public service and for the development of national wealth. The ports included in the public dominion
pertain either to seaports or airports. When properties under public dominion cease to be for public use and
service, they form part of the patrimonial property of the State. The court held that the land and buildings of MIAA
are part of the public dominion. Since the airport is devoted for public use, for the domestic and international
travel and transportation. Even if MIAA charge fees, this is for support of its operation and for regulation and
does not change the character of the land and buildings of MIAA as part of the public dominion. As part of the
public dominion the land and buildings of MIAA are outside the commerce of man. To subject them to levy and
public auction is contrary to public policy. Unless the President issues a proclamation withdrawing the airport
land and buildings from public use, these properties remain to be of public dominion and are inalienable. As
longas the land and buildings are for public use the ownership is with the Republic of the Philippines.

MACTAN CEBU INTL AIRPORT vs MARCOS

FACTS: Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A. 6958, mandated to
principally undertake the economical, efficient, and effective control, management, and supervision of the Mactan
International Airport and Lahug Airport, and such other airports as may be established in Cebu.
Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes
in accordance with Section 14 of its charter. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in
Charge, Office of the Treasurer of the City of Cebu, demanded payment from realty taxes in the total amount of
P2229078.79. Petitioner objected to such demand for payment as baseless and unjustified claiming in its favor
the afore cited Section 14 of R.A. 6958. It was also asserted that it is an instrumentality of the government
performing governmental functions, citing Section 133 of the Local Government Code of 1991.
Section 133. Common limitations on the Taxing Powers of Local Government Units.
The exercise of the taxing powers of the provinces, cities, barangays, municipalities shall not extend to the levi of
the following:
xxx Taxes, fees or charges of any kind in the National Government, its agencies and instrumentalities, and
LGUs. xxx
Respondent City refused to cancel and set aside petitioners realty tax account, insisting that the MCIAA is a
government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193
and 234 of Labor Code that took effect on January 1, 1992.
ISSUE: Whether the petitioner is a taxable person.
HELD: As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, 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 it. Nevertheless,
effective limitations thereon may be imposed by the people through their Constitutions. [13] Our Constitution, for
instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a
progressive system of taxation.[14] So potent indeed is the power that it was once opined that the power to tax
involves the power to destroy.[15] Verily, taxation is a destructive power which interferes with the personal and
property rights of the people and takes from them a portion of their property for the support of the
government. Accordingly, tax statutes must be construed strictly against the government and liberally in favor of
the taxpayer.[16] But since taxes are what we pay for civilized society,[17] or are the lifeblood of the nation, the law
frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi
juris against the taxpayer and liberally in favor of the taxing authority.[18] A claim of exemption from tax payments
must be clearly shown and based on language in the law too plain to be mistaken. [19] Elsewise stated, taxation is
the rule, exemption therefrom is the exception.[20] However, if the grantee of the exemption is a political
subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the
exemption is merely to reduce the amount of money that has to be handled by the government in the course of
its operations.[21]
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 by virtue of a valid delegation as before, but pursuant to direct authority
conferred by Section 5, Article X of the Constitution. [22] 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.
There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment
of realty taxes imposed by the National Government or any of its political subdivisions, agencies, and
instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the exception, the exemption
may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the
exemption was granted to private parties based on material consideration of a mutual nature, which then
becomes contractual and is thus covered by the non-impairment clause of the Constitution.[23]
The LGC, enacted pursuant to Section 3, Article X of the Constitution, provides for the exercise by local
government units of their power to tax, the scope thereof or its limitations, and the exemptions from taxation.
Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units
as follows:
SEC. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to
the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as
otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except wharfage on wharves constructed and
maintained by the local government unit concerned;
(e) Taxes, fees and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of local government units in the guise of charges for wharfage,
tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such
goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or
fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer
for a period of six (6) and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on
goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation
of passengers or freight by hire and common carriers by air, land or water, except as provided in
this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except, tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise
provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight
(R.A. No. 6938) otherwise known as the Cooperatives Code of the Philippines respectively; and
(o) TAXES, FEES OR CHARGES OF ANY KIND ON THE NATIONAL GOVERNMENT, ITS
AGENCIES AND INSTRUMENTALITIES, AND LOCAL GOVERNMENT UNITS. (emphasis
supplied)
Needless to say, the last item (item o) is pertinent to this case. The taxes, fees or charges referred to are of any
kind; hence, they include all of these, unless otherwise provided by the LGC. The term taxes is well understood
so as to need no further elaboration, especially in light of the above enumeration. The term fees means charges
fixed by law or ordinance for the regulation or inspection of business or activity, [24] while charges are pecuniary
liabilities such as rents or fees against persons or property.[25]
Among the taxes enumerated in the LGC is real property tax, which is governed by Section 232. It reads as
follows:
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 hereafter specifically exempted.
Section 234 of the LGC provides for the exemptions from payment of real property taxes and withdraws
previous exemptions therefrom granted to natural and juridical persons, including government-owned and
controlled corporations, except as provided therein. It provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property
tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof had been granted, for consideration or otherwise, to a taxable
person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit
or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively
used for religious, charitable or educational purposes;
(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 supply and distribution
of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations
are hereby withdrawn upon the effectivity of this Code.
These exemptions are based on the ownership, character, and use of the property. Thus:
(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real
properties owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay,
and (vi) registered cooperatives.
(b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i)
charitable institutions, (ii) houses and temples of prayer like churches, parsonages or convents
appurtenant thereto, mosques, and (iii) non-profit or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and
exclusive use to which they are devoted are: (i) all lands, buildings and improvements which are
actually directly and exclusively used for religious, charitable or educational purposes; (ii) all
machineries and equipment actually, directly and exclusively used by local water districts or by
government-owned or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power; and (iii) all machinery and equipment used
for pollution control and environmental protection.
To help provide a healthy environment in the midst of the modernization of the country, all machinery and
equipment for pollution control and environmental protection may not be taxed by local governments.
2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical persons including
government-owned or controlled corporations are withdrawn upon the effectivity of the Code.[26]
Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. It provides:
SEC. 193. 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 governmentowned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938, nonstock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.
On the other hand, the LGC authorizes local government units to grant tax exemption privileges. Thus,
Section 192 thereof provides:
SEC. 192. Authority to Grant Tax Exemption Privileges.-- Local government units may, through ordinances duly
approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem
necessary.
The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government
units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The
use of exceptions or provisos in these sections, as shown by the following clauses:
(1) unless otherwise provided herein in the opening paragraph of Section 133;
(2) Unless otherwise provided in this Code in Section 193;
(3) not hereafter specifically exempted in Section 232; and
(4) Except as provided herein in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in Section 133
seems to be inaccurately worded. Instead of the clause unless otherwise provided herein, with the herein to
mean, of course, the section, it should have used the clause unless otherwise provided in this Code. The former

results in absurdity since the section itself enumerates what are beyond the taxing powers of local government
units and, where exceptions were intended, the exceptions are explicitly indicated in the next. For instance, in
item (a) which excepts income taxes when levied on banks and other financial institutions; item (d) which excepts
wharfage on wharves constructed and maintained by the local government unit concerned; and item (1) which
excepts taxes, fees and charges for the registration and issuance of licenses or permits for the driving of
tricycles. It may also be observed that within the body itself of the section, there are exceptions which can be
found only in other parts of the LGC, but the section interchangeably uses therein the clause except as otherwise
provided herein as in items (c) and (i), or the clause except as provided in this Code in item (j). These clauses
would be obviously unnecessary or mere surplusages if the opening clause of the section were Unless otherwise
provided in this Code instead of Unless otherwise provided herein. In any event, even if the latter is used, since
under Section 232 local government units have the power to levy real property tax, except those exempted
therefrom under Section 234, then Section 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid
down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, taxes,
fees and charges of any kind on the National Government, its agencies and instrumentalities, and local
government units; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan
Manila Area may impose the real property tax except on, inter alia, real property owned by the Republic of the
Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including
government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they
are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless
otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties
exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the
exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated
therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover,
even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by
item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property
has been granted to a taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC,
exemptions from payment of real property taxes granted to natural or juridical persons, including governmentowned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a
government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of
its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner
can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now
asserts, since, as shown above, the said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the
local government units cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local
government units.
It must show that the parcels of land in question, which are real property, are any one of those enumerated in
Section 234, either by virtue of ownership, character, or use of the property.Most likely, it could only be the first,
but not under any explicit provision of the said section, for none exists. In light of the petitioners theory that it is
an instrumentality of the Government, it could only be within the first item of the first paragraph of the section by
expanding the scope of the term Republic of the Philippines to embrace its instrumentalities and agencies. For
expediency, we quote:
(a) real property owned by the Republic of the Philippines, or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
This view does not persuade us. In the first place, the petitioners claim that it is an instrumentality of the
Government is based on Section 133(o), which expressly mentions the word instrumentalities; and, in the second
place, it fails to consider the fact that the legislature used the phrase National Government, its agencies and
instrumentalities in Section 133(o), but only the phrase Republic of the Philippines or any of its political
subdivisions in Section 234(a).
The terms Republic of the Philippines and National Government are not interchangeable. The former is
broader and synonymous with Government of the Republic of the Philippines which the Administrative Code of
1987 defines as the corporate governmental entity through which the functions of government are exercised
throughout the Philippines, including, save as the contrary appears from the context, the various arms through
which political authority is made affective in the Philippines, whether pertaining to the autonomous regions, the
provincial, city, municipal or barangay subdivisions or other forms of local government.[27] These autonomous
regions, provincial, city, municipal or barangay subdivisions are the political subdivisions.[28]

On the other hand, National Government refers to the entire machinery of the central government, as
distinguished from the different forms of local governments. [29] The National Government then is composed of the
three great departments: the executive, the legislative and the judicial.[30]
An agency of the Government refers to any of the various units of the Government, including a department,
bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct
unit therein;[31] while an instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and enjoying operational autonomy, usually through a
charter. This term includes regulatory agencies, chartered institutions and government-owned and controlled
corporations.[32]
If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment
of real property taxes under the last sentence of the said section to the agencies and instrumentalities of the
National Government mentioned in Section 133(o), then it should have restated the wording of the latter. Yet, it
did not. Moreover, that Congress did not wish to expand the scope of the exemption in Section 234(a) to include
real property owned by other instrumentalities or agencies of the government including government-owned and
controlled corporations is further borne out by the fact that the source of this exemption is Section 40(a) of P.D.
No. 464, otherwise known as The Real Property Tax Code, which reads:
SEC. 40. Exemptions from Real Property Tax. The exemption shall be as follows:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any
government-owned or controlled corporation so exempt by its charter: Provided, however, That this exemption
shall not apply to real property of the above-mentioned entities the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person.
Note that as reproduced in Section 234(a), the phrase and any government-owned or controlled corporation so
exempt by its charter was excluded. The justification for this restricted exemption in Section 234(a) seems
obvious: to limit further tax exemption privileges, especially in light of the general provision on withdrawal of tax
exemption privileges in Section 193 and the special provision on withdrawal of exemption from payment of real
property taxes in the last paragraph of Section 234. These policy considerations are consistent with the State
policy to ensure autonomy to local governments[33] and the objective of the LGC that they enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and
make them effective partners in the attainment of national goals. [34] The power to tax is the most effective
instrument to raise needed revenues to finance and support myriad activities of 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. It may also be relevant to recall that the original reasons for the
withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other
units of government were that such privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises, and there was a need for these entities to share in the requirements of
development, fiscal or otherwise, by paying the taxes and other charges due from them.[35]
The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the
Republic of the Philippines whose beneficial use has been granted to the petitioner, and (b) whether the
petitioner is a taxable person.
Section 15 of the petitioners Charter provides:
Sec. 15. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands,
buildings and other properties, movable or immovable, belonging to or presently administered by the airports,
and all assets, powers, rights, interests and privileges relating on airport works or air operations, including all
equipment which are necessary for the operations of air navigation, aerodrome control towers, crash, fire, and
rescue facilities are hereby transferred to the Authority: Provided, however, that the operations control of all
equipment necessary for the operation of radio aids to air navigation, airways communication, the approach
control office, and the area control center shall be retained by the Air Transportation Office. No equipment,
however, shall be removed by the Air Transportation Office from Mactan without the concurrence of the
Authority. The Authority may assist in the maintenance of the Air Transportation Office equipment.
The airports referred to are the Lahug Air Port in Cebu City and the Mactan International Airport in the
Province of Cebu,[36] which belonged to the Republic of the Philippines, then under the Air Transportation Office
(ATO).[37]
It may be reasonable to assume that the term lands refer to lands in Cebu City then administered by the
Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real property
taxes. This section involves a transfer of the lands, among other things, to the petitioner and not just the transfer
of the beneficial use thereof, with the ownership being retained by the Republic of the Philippines.
This transfer is actually an absolute conveyance of the ownership thereof because the petitioners
authorized capital stock consists of, inter alia, the value of such real estate owned and/or administered by the
airports.[38] Hence, the petitioner is now the owner of the land in question and the exception in Section 234(c) of
the LGC is inapplicable.

Moreover, the petitioner cannot claim that it was never a taxable person under its Charter. It was only
exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is
conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of
the foregoing disquisitions, it had already become, even if it be conceded to be an agency or instrumentality of
the Government, a taxable person for such purpose in view of the withdrawal in the last paragraph of Section
234 of exemptions from the payment of real property taxes, which, as earlier adverted to, applies to the
petitioner.
Accordingly, the position taken by the petitioner is untenable. Reliance on Basco vs. Philippine Amusement
and Gaming Corporation[39] is unavailing since it was decided before the effectivity of the LGC. Besides, nothing
can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing
governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and
national policy, no one can doubt its wisdom.
WHEREFORE, the instant petition is DENIED. The challenged decision and order of the Regional Trial
Court of Cebu, Branch 20, in Civil Case No. CEB-16900 are AFFIRMED.
No pronouncement as to costs.

CITY GOVERNMENT OF QUEZON CITY vs. BAYAN TELECOMMUNICATIONS, INC.

FACTS: Section 234 of the Local Government Code withdrew any exemption from realty tax granted to or
enjoyed by all persons, natural or juridical.
Thereafter, Congress enacted Rep. Act No. 7633, amending Bayantels original franchise. It provided that the
same, 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.
Within the territorial boundary of Quezon City, Bayantel owned several real properties on which it maintained
various telecommunications facilities.
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, in relation to Section 232 of the LGC, enacted City Ordinance No.
SP-91, S-93, otherwise known as the Quezon City Revenue Code (QCRC), 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. Furthermore, much like the LGC, the QCRC,
under its Section 230, withdrew tax exemptionprivileges in general.
Conformably with the Citys Revenue Code, new tax declarations for Bayantels real properties in Quezon City
were issued by the City Assessor. 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 , followed by the issuance of
several warrants of levy against Bayantels properties preparatory to their sale at a public auction.
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 urgentapplication for a temporary
restraining order (TRO) and/or writ of preliminary injunction.
In the eve of the public auction, the lower court issued a TRO, followed, after due hearing, by a writ of preliminary
injunction.
RTC: declared exempt from real estate taxation the properties of Bayantel in QC. Denied petitioner's motion for
reconsideration having been denied .
Petitioners elevated the case directly to the Supreme Court on pure questions of law.
Petitioners: Bayantel had failed to avail itself of the administrative remedies provided for under the LGC, thus the
trial court erred in giving due course to Bayantels petition for prohibition. The appeal mechanics under the LGC
constitute Bayantels plain and speedy remedy in this case.
ISSUE: Whether or not Bayantel's failure to appeal its case to the LBAA precludes its filing of a petition for
prohibition.
HELD: NO. With the reality that Bayantels real properties were already levied upon on account of its
nonpayment of real estate taxes thereon, 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.

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.
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.
2: YES. 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 must be
ruled in favor of the former. The grant of taxing powers to LGUs 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.
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 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.
Since R. A. No. 7633 was enacted subsequent to the LGC, perfectly aware that the LGC has already withdrawn
Bayantels former exemption from realty taxes, the Congress using, Section 11 thereof with exactly the same
defining phrase exclusive of this franchise is the basis for Bayantels exemption from realty taxes prior to the
LGC. In plain language, 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.