POLICE POWER

1. AMELIA CABRERA v MANUEL LAPID

THIRD DIVISION
[G.R. No. 129098. December 6, 2006.]
AMELIA CABRERA, petitioner, vs. MANUEL LAPID, FERNANDO
BALTAZAR, REYNALDO F. CABRERA and DIONY
VENTURA, respondents.
DECISION
TINGA, J p:
The instant petition for review on certiorari seeks the reversal of the
Resolution 1 dated 13 May 1996 and the Order 2 dated 21 March 1997, both
issued by the Office of the Ombudsman. The Resolution dismissed the
complaint-affidavit filed by petitioner against respondents and the Order
denied her motion for reconsideration.
The instant petition originated from a Complaint-Affidavit 3 filed in November
1995 by petitioner Amelia M. Cabrera with the Office of the Ombudsman
("Ombudsman"). Named respondents were Manuel Lapid, Fernando Baltazar,
Reynaldo F. Cabrera and Superintendent Diony Ventura, respectively, in their
capacities as Governor of Pampanga, Mayor of Sasmuan, Pampanga, ViceMayor of Sasmuan, Pampanga and Superintendent of the Philippine National
Police (PNP)-Region 3, Pampanga. In her three(3)-page affidavit, petitioner
accused respondents of violating Section 3(e) of the Anti-Graft and Corrupt
Practices Act and Article 324 of the Revised Penal Code.
In her Complaint-Affidavit, petitioner stated that she entered into a lease
agreement with the Municipality of Sasmuan over a tract of land for the
purpose of devoting it to fishpond operations. According to petitioner, she had
spent approximately P5,000,000.00 for its construction before the fishpond
operations commenced in August 1995. A month later, petitioner learned from
newspaper reports of the impending demolition of her fishpond as it was
purportedly illegal and blocked the flow of the Pasak River. Thus, petitioner
sent the fishpond administrator to dissuade respondents from destroying her
property. 4
Despite pleas from petitioner, respondents ordered the destruction of
petitioner's fishpond. The property was demolished on 10 October 1995 by
dynamite blasting. Petitioner alleged that the demolition was purposely carried

out in the presence of media representatives and other government officials to

gain media mileage. Petitioner imputed evident bad faith on respondents
Mayor Baltazar and Vice-Mayor Cabrera in allowing the destruction of the
fishpond despite their prior knowledge of the existence of the lease
agreement. She also charged respondents Governor Lapid and Senior
Superintendent Ventura with gross inexcusable negligence for ordering the
destruction of the fishpond without first verifying its legality. 5
At the preliminary investigation, respondents, except Senior Superintendent
Ventura, submitted counter-affidavits, denying the accusations against them.
In the counter-affidavit jointly filed by Mayor Baltazar and Vice-Mayor Cabrera,
they insisted that contrary to petitioner's claim, the fishpond was an illegal
structure because it was erected on the seashore, at the mouth of the Pasak
River, and sat on an inalienable land. They claimed that the demolition was
done by the Task Force Bilis Daloy upon the directive of then President Fidel V.
Ramos. 6
In his Counter-Affidavit, 7 Governor Lapid averred that the contract of lease
between petitioner and the Municipality of Sasmuan, represented by then
Mayor Abelardo Panlaqui, was executed two weeks before respondent Mayor
Baltazar took his oath of office in 1995. Governor Lapid also argued that under
the law, the Department of Agriculture (DA) is the government agency
authorized to enter into licensing agreements for fishpond operations, and as
per certification by the DA Regional Director, petitioner's fishpond operation
was not covered by a fishpond lease agreement or application. Governor Lapid
also referred to the certification by the Municipal Health Officer of Sasmuan
issued before the actual demolition of the fishpond, describing it as a
nuisance per seand recommending its abatement. 8
On 13 May 1996, the Ombudsman issued the assailed Resolution, dismissing
petitioner's complaint. The dismissal was based on the declaration that the
fishpond was a nuisance per se and, thus, may be abated by respondents in
the exercise of the police power of the State. 9
Petitioner sought reconsideration of the Resolution, arguing that under Sec.
149 of Republic Act (R.A.) No. 7160, otherwise known as the Local Government
Code of 1991, the exclusive authority to grant fishery privileges is vested in
the municipalities. Petitioner also questioned the certification by the Municipal
Health Officer, alleging that the same was issued before the ocular inspection
of the property which took place only on the day of the demolition. Petitioner
also contended that a judicial proceeding was necessary to determine whether
the property indeed had caused the flooding. 10 Respondents filed separate
oppositions to petitioner's motion for reconsideration. 11 Petitioner filed a
reply to the opposition 12 and respondent Governor Lapid filed a rejoinder to
the reply. 13
In the Order dated 21 March 1997, the Ombudsman affirmed its 13 May 1996
Resolution. It ruled that the repealing clause of R.A. No. 7160 expressly

repealed only Sec. 2, 6 and 29 of Presidential Decree (P.D.) No. 704 so that in
harmonizing the remaining provisions of P.D. No. 704 and the provisions of R.A.
No. 7160 applicable to the grant of fishery privileges, the Bureau of Fisheries
and Aquatic Resources (BFAR) is the government agency authorized to grant
fishpond license or permit in areas not identified as municipal waters or not
declared as alienable or disposable by the Department of Environment and
Natural Resources (DENR). Since it appears from DENR records that the subject
property has not been declared disposable or included in areas devoted for
fishpond development, the Ombudsman concluded that the lease agreement
entered into by petitioner was void ab initio. In view of the illegality of the
lease agreement, the Ombudsman ruled that its demolition was justified. The
Ombudsman described the demolition as a valid exercise of police power and
in accordance with the provision of Sec. 28 of P.D. No. 704 directing the
removal of any fishpen or fishpond that obstructed the free navigation of a
stream or lake. It also upheld the authority of the district health officer to
determine the abatement of a nuisance without need of judicial
proceedings. 14
Petitioner elevated the matter to this Court via a petition for review
on certiorari under Rule 45 of the Rules of Court to assail the 13 May 1996
Resolution and 21 March 1997 Order of the Ombudsman. Petitioner
subsequently filed an amended petition for review on certiorari to implead the
Ombudsman as respondent, although in a petition for review on certiorari, the
tribunal whose issuance is assailed need not be impleaded as
respondent. acEHSI
The petition imputes the following errors on the Ombudsman:
I.
THE OFFICE OF THE OMBUDSMAN ERRED AND EXCEEDED ITS
AUTHORITY IN RULING THAT THE LEASE CONTRACT BETWEEN THE
MUNICIPALITY OF SASMUAN AND PETITIONER IS NULL AND VOID.
II.
THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT THE
DEMOLITION OF THE FISHPOND WAS VALIDLY MADE BY VIRTUE OF
THE DECLARATION BY THE HEALTH OFFICER THAT IT WAS A
NUISANCE PER SE.
III.
THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT THE
DEMOLITION IS PART OF THE PROPER EXERCISE OF THE POLICE
POWER OF THE STATE.
IV.

THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT

PETITIONER WAS GIVEN DUE NOTICE AND HEARING BEFORE THE
FISHPOND WAS BLASTED.
V.
THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT
PROBABLE CAUSE DOES NOT EXIST TO INDICT RESPONDENTS FOR
VIOLATION OF THE SUBJECT OFFENSES. 15
Clearly, this is an appeal from the questioned issuances of the Ombudsman.
However, such direct resort to this Court from a resolution or order of the
Ombudsman is not sanctioned by any rule of procedure.
Neither can petitioner avail of Sec. 27 16 of R.A. No. 6770, otherwise known
as The Ombudsman Act of 1989. The provision allowed direct appeals in
administrative disciplinary cases from the Office of the Ombudsman to the
Supreme Court. The right to appeal is granted only in respect to orders or
decisions of the Ombudsman in administrative cases. 17 The provision does
not cover resolutions of the Ombudsman in criminal cases. More importantly,
Sec. 27 of R.A. No. 6770 insofar as it allowed a direct appeal to this Court was
declared unconstitutional in Fabian v. Hon. Desierto. 18
However, an aggrieved party in criminal actions is not without any recourse.
Where grave abuse of discretion amounting to lack or excess of jurisdiction
taints the findings of the Ombudsman on the existence of probable cause, the
aggrieved party may file a petition for certiorari under Rule 65. 19 The remedy
from resolutions of the Ombudsman in preliminary investigations of criminal
cases is a petition for certiorari under Rule 65, not a petition for review
oncertiorari under Rule 45. 20
But in this case, petitioner has taken the position that the Ombudsman has
decided questions of substance contrary to law and the applicable decisions of
the Supreme Court. That is a ground under a Rule 45 petition. Indeed, from a
reading of the assignment of errors, it is clear that petitioner does not impute
grave abuse of discretion to the Ombudsman in issuing the assailed Resolution
and Order. Rather, she merely questions his findings and conclusions. As stated
earlier, direct appeal to the Supreme Court via a petition for review
on certiorari is not sanctioned by any rule of procedure. By availing of a wrong
remedy, the petition should be dismissed outright. TAIDHa
Even if the Court treats the instant appeal as a petition for certiorari under Rule
65, its dismissal is nevertheless warranted because petitioner failed to present,
much more substantiate, any grave abuse of discretion on the part of the
Ombudsman.
A careful reading of the questioned Resolution reveals that the Ombudsman
dismissed petitioner's criminal complaint because respondents had validly
resorted to the police power of the State when they effected the demolition of
the illegal fishpond in question following the declaration thereof as a

nuisanceper se. Thus, the Ombudsman was of the opinion that no violation of
Section 3(e) 21 of the Anti-Graft and Corrupt Practices Act or of Article
324 22 of the Revised Penal Code was committed by respondents. In the words
of the Ombudsman, "those who participated in the blasting of the subject
fishpond were only impelled by their desire to serve the best interest of the
general public; for the good and the highest good." 23
By grave abuse of discretion is meant capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not
enough. It must be grave abuse of discretion as when the power is exercised in
an arbitrary or despotic manner by reason of passion or personal hostility, and
must be so patent and so gross as to amount to an evasion of a positive duty
or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. 24
Grave abuse of discretion should be differentiated from an error in judgment.
An error of judgment is one which the court may commit in the exercise of its
jurisdiction, and which error is reversible only by an appeal. As long as the
court acts within its jurisdiction, any alleged errors committed in the exercise
of its discretion will amount to nothing more than mere errors of judgment,
correctible by an appeal or a petition for review under Rule 45 of the Rules of
Court. An error of jurisdiction is one where the act complained of was issued by
the court without or in excess of jurisdiction and which error is correctible only
by the extraordinary writ of certiorari. 25
The other errors raised by petitioner pertain to the Ombudsman's opinion on
the lack of probable cause to indict respondents. These are purported errors in
judgment which can be corrected by an appeal, although not via a direct
appeal to this Court. Direct resort to this Court may be had only through the
extraordinary writ of certiorari and upon showing that the Ombudsman
committed grave abuse of discretion, which petitioner failed to demonstrate.
Absent any grave abuse of discretion tainting it, the courts will not interfere
with the Ombudsman's supervision and control over the preliminary
investigation conducted by him. 26 It is beyond the ambit of this Court to
review the exercise of discretion of the Ombudsman in prosecuting or
dismissing a complaint filed before it. 27 The rule is based not only upon
respect for the investigatory and prosecutory powers granted by the
Constitution to the Office of the Ombudsman but upon practicality as well.
Otherwise, the functions of the courts will be grievously hampered by
innumerable petitions assailing the dismissal of investigatory proceedings
conducted by the Office of the Ombudsman with regard to complaints filed
before it, in much the same way that the courts would be extremely swamped
if they would be compelled to review the exercise of discretion on the part of
the fiscals or prosecuting attorneys each time they decide to file an
information in court or dismiss a complaint by a private complainant. 28

WHEREFORE, the instant petition for review on certiorari is DENIED. No

costs. ICTaEH
SO ORDERED.
Quisumbing, Carpio, Carpio Morales and Velasco, Jr., JJ., concur.
||| (Cabrera v. Lapid, G.R. No. 129098, [December 6, 2006], 539 PHIL 114-125)

2. CARLOS SUPERDRUG CORP. v DSWD

EN BANC
[G.R. No. 166494. June 29, 2007.]
CARLOS SUPERDRUG CORP., doing business under the name
and style "Carlos Superdrug", ELSIE M. CANO, doing
business under the name and style "Advance Drug", Dr.
SIMPLICIO L. YAP, JR., doing business under the name and
style "City Pharmacy", MELVIN S. DELA SERNA, doing
business under the name and style "Botica dela Serna", and
LEYTE SERV-WELL CORP., doing business under the name
and style "Leyte Serv-Well Drugstore", petitioners, vs.
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT
(DSWD), DEPARTMENT OF HEALTH (DOH), DEPARTMENT OF
FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ), and
DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT
(DILG), respondents.
DECISION
AZCUNA, J p:
This is a petition 1 for Prohibition with Prayer for Preliminary Injunction
assailing the constitutionality of Section 4 (a) of Republic Act (R.A.) No.
9257, 2otherwise known as the "Expanded Senior Citizens Act of 2003".
Petitioners are domestic corporations and proprietors operating drugstores in
the Philippines. TCcSDE
Public respondents, on the other hand, include the Department of Social
Welfare and Development (DSWD), the Department of Health (DOH), the
Department of Finance (DOF), the Department of Justice (DOJ), and the
Department of Interior and Local Government (DILG) which have been
specifically tasked to monitor the drugstores' compliance with the law;
promulgate the implementing rules and regulations for the effective
implementation of the law; and prosecute and revoke the licenses of erring
drugstore establishments.
The antecedents are as follows:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432, 3 was signed
into law by President Gloria Macapagal-Arroyo and it became effective on
March 21, 2004. Section 4 (a) of the Act states:

SEC. 4. Privileges for the Senior Citizens. The senior citizens

shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all
establishments relative to the utilization of services in hotels and
similar lodging establishments, restaurants and recreation centers,
and purchase of medicines in all establishments for the exclusive
use or enjoyment of senior citizens, including funeral and burial
services for the death of senior citizens;
xxx xxx xxx
The establishment may claim the discounts granted under (a), (f),
(g) and (h) as tax deduction based on the net cost of the goods
sold or services rendered:Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same
taxable year that the discount is granted. Provided, further, That
the total amount of the claimed tax deduction net of value added
tax if applicable, shall be included in their gross sales receipts for
tax purposes and shall be subject to proper documentation and to
the provisions of the National Internal Revenue Code, as
amended. 4
On May 28, 2004, the DSWD approved and adopted the Implementing Rules
and Regulations of R.A. No. 9257, Rule VI, Article 8 of which states:
Article 8. Tax Deduction of Establishments. The establishment
may claim the discounts granted under Rule V, Section 4
Discounts for Establishments; 5 Section 9, Medical and Dental
Services in Private Facilities[,] 6 and Sections 10 7 and 11 8 Air,
Sea and Land Transportation as tax deduction based on the net
cost of the goods sold or services rendered. Provided, That the cost
of the discount shall be allowed as deduction from gross income for
the same taxable year that the discount is granted; Provided,
further, That the total amount of the claimed tax deduction net of
value added tax if applicable, shall be included in their gross sales
receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal
Revenue Code, as amended; Provided, finally, that the
implementation of the tax deduction shall be subject to the
Revenue Regulations to be issued by the Bureau of Internal
Revenue (BIR) and approved by the Department of Finance
(DOF). 9 DSITEH
On July 10, 2004, in reference to the query of the Drug Stores Association of
the Philippines (DSAP) concerning the meaning of a tax deduction under the
Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B.
Recente, clarified as follows:

1) The difference between the Tax Credit (under the Old Senior
Citizens Act) and Tax Deduction (under the Expanded Senior
Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior
Citizens Act) grants twenty percent (20%) discount from all
establishments relative to the utilization of transportation
services, hotels and similar lodging establishment,
restaurants and recreation centers and purchase of medicines
anywhere in the country, the costs of which may be claimed
by the private establishments concerned as tax credit.
Effectively, a tax credit is a peso-for-peso deduction from a
taxpayer's tax liability due to the government of the amount
of discounts such establishment has granted to a senior
citizen. The establishment recovers the full amount of
discount given to a senior citizen and hence, the government
shoulders 100% of the discounts granted.
It must be noted, however, that conceptually, a tax
credit scheme under the Philippine tax system, necessitates
that prior payments of taxes have been made and the
taxpayer is attempting to recover this tax payment from
his/her income tax due. The tax credit scheme under R.A. No.
7432 is, therefore, inapplicable since no tax payments have
previously occurred.
1.2. The provision under R.A. No. 9257, on the other hand,
provides that the establishment concerned may claim the
discounts under Section 4 (a), (f), (g) and (h) as tax
deduction from gross income, based on the net cost of
goods sold or services rendered.
Under this scheme, the establishment concerned is allowed to
deduct from gross income, in computing for its tax liability,
the amount of discounts granted to senior citizens.
Effectively, the government loses in terms of foregone
revenues an amount equivalent to the marginal tax rate the
said establishment is liable to pay the government. This will
be an amount equivalent to 32% of the twenty percent (20%)
discounts so granted. The establishment shoulders the
remaining portion of the granted discounts.
It may be necessary to note that while the burden on [the]
government is slightly diminished in terms of its percentage
share on the discounts granted to senior citizens, the number
of potential establishments that may claim tax deductions,
have however, been broadened. Aside from the
establishments that may claim tax credits under the old law,

more establishments were added under the new law such as:
establishments providing medical and dental services,
diagnostic and laboratory services, including professional fees
of attending doctors in all private hospitals and medical
facilities, operators of domestic air and sea transport
services, public railways and skyways and bus transport
services. cDaEAS
A simple illustration might help amplify the points discussed
above, as follows:
Tax Deduction Tax Credit
Gross Sales x x x x x x x x x x x x
Less: Cost of goods sold x x x x x x x x x x

Net Sales x x x x x x x x x x x x
Less: Operating Expenses:
Tax Deduction on Discounts x x x x -Other deductions: x x x x x x x x

Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit -- x x

Net Tax Due -- x x

As shown above, under a tax deduction scheme, the tax
deduction on discounts was subtracted from Net Sales together
with other deductions which are considered as operating expenses
before the Tax Due was computed based on the Net Taxable
Income. On the other hand, under a tax credit scheme, the
amount of discounts which is the tax credit item, was deducted
directly from the tax due amount. 10
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or
the Policies and Guidelines to Implement the Relevant Provisions of Republic
Act 9257, otherwise known as the "Expanded Senior Citizens Act of
2003" 11 was issued by the DOH, providing the grant of twenty percent (20%)
discount in the purchase of unbranded generic medicines from all
establishments dispensing medicines for the exclusive use of the senior
citizens.
On November 12, 2004, the DOH issued Administrative Order No.
177 12 amending A.O. No. 171. Under A.O. No. 177, the twenty percent

discount shall not be limited to the purchase of unbranded generic medicines

only, but shall extend to both prescription and non-prescription medicines
whether branded or generic. Thus, it stated that "[t]he grant of twenty percent
(20%) discount shall be provided in the purchase of medicines from all
establishments dispensing medicines for the exclusive use of the senior
citizens".
Petitioners assail the constitutionality of Section 4 (a) of the Expanded Senior
Citizens Act based on the following grounds: 13
1) The law is confiscatory because it infringes Art. III, Sec. 9 of the
Constitution which provides that private property shall not be
taken for public use without just compensation; EAcHCI
2) It violates the equal protection clause (Art. III, Sec. 1) enshrined
in our Constitution which states that "no person shall be
deprived of life, liberty or property without due process of
law, nor shall any person be denied of the equal protection of
the laws;" and
3) The 20% discount on medicines violates the constitutional
guarantee in Article XIII, Section 11 that makes "essential
goods, health and other social services available to all people
at affordable cost." 14
Petitioners assert that Section 4 (a) of the law is unconstitutional because it
constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit and capital
because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will
be justly compensated for the discount.
Examining petitioners' arguments, it is apparent that what petitioners are
ultimately questioning is the validity of the tax deduction scheme as a
reimbursement mechanism for the twenty percent (20%) discount that they
extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a taxdeductible expense that is subtracted from the gross income and results in a
lower taxable income. Stated otherwise, it is an amount that is allowed by
law 15 to reduce the income prior to the application of the tax rate to compute
the amount of tax which is due. 16 Being a tax deduction, the discount does
not reduce taxes owed on a peso for peso basis but merely offers a fractional
reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net
income of the private establishments concerned. The discounts given would

have entered the coffers and formed part of the gross sales of the private
establishments, were it not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy
corresponding to the taking of private property for public use or
benefit. 17 This constitutes compensable taking for which petitioners would
ordinarily become entitled to a just compensation. TIcAaH
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. The measure is not the taker's gain
but the owner's loss. The word just is used to intensify the meaning of the
word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and
ample. 18
A tax deduction does not offer full reimbursement of the senior citizen
discount. As such, it would not meet the definition of just compensation. 19
Having said that, this raises the question of whether the State, in promoting
the health and welfare of a special group of citizens, can impose upon private
establishments the burden of partly subsidizing a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of
senior citizens to nation-building, and to grant benefits and privileges to them
for their improvement and well-being as the State considers them an integral
part of our society. 20
The priority given to senior citizens finds its basis in the Constitution as set
forth in the law itself. Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as
follows:
SECTION 1. Declaration of Policies and Objectives. Pursuant to
Article XV, Section 4 of the Constitution, it is the duty of the family
to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10
in the Declaration of Principles and State Policies provides: "The
State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "The State
shall adopt an integrated and comprehensive approach to health
development which shall endeavor to make essential goods, health
and other social services available to all the people at affordable
cost. There shall be priority for the needs of the underprivileged
sick, elderly, disabled, women and children." Consonant with these
constitutional principles the following are the declared policies of
this Act:
xxx xxx xxx

(f) To recognize the important role of the private sector in

the improvement of the welfare of senior citizens and to
actively seek their partnership. 21 DAEIHT
To implement the above policy, the law grants a twenty percent discount to
senior citizens for medical and dental services, and diagnostic and laboratory
fees; admission fees charged by theaters, concert halls, circuses, carnivals,
and other similar places of culture, leisure and amusement; fares for domestic
land, air and sea travel; utilization of services in hotels and similar lodging
establishments, restaurants and recreation centers; and purchases of
medicines for the exclusive use or enjoyment of senior citizens. As a form of
reimbursement, the law provides that business establishments extending the
twenty percent discount to senior citizens may claim the discount as a tax
deduction.
The law is a legitimate exercise of police power which, similar to the power of
eminent domain, has general welfare for its object. Police power is not capable
of an exact definition, but 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 to conditions and circumstances,
thus assuring the greatest benefits. 22 Accordingly, it has been described as
"the most essential, insistent and the least limitable of powers, extending as it
does to all the great public needs." 23 It is "[t]he power vested in the
legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with
penalties or without, not repugnant to the constitution, as they shall judge to
be for the good and welfare of the commonwealth, and of the subjects of the
same." 24
For this reason, when the conditions so demand as determined by the
legislature, property rights must bow to the primacy of police power because
property rights, though sheltered by due process, must yield to general
welfare. 25
Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of
earnings and capital, the questioned provision is invalidated. Moreover, in the
absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor. 26
Given these, it is incorrect for petitioners to insist that the grant of the senior
citizen discount is unduly oppressive to their business, because petitioners
have not taken time to calculate correctly and come up with a financial report,
so that they have not been able to show properly whether or not the tax
deduction scheme really works greatly to their disadvantage. 27
In treating the discount as a tax deduction, petitioners insist that they will incur
losses because, referring to the DOF Opinion, for every P1.00 senior citizen

discount that petitioners would give, P0.68 will be shouldered by them as only
P0.32 will be refunded by the government by way of a tax deduction. cIDHSC
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive
maintenance drug Norvasc as an example. According to the latter, it
acquiresNorvasc from the distributors at P37.57 per tablet, and retails it at
P39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens or
an amount equivalent to P7.92, then it would have to sell Norvasc at P31.68
which translates to a loss from capital of P5.89 per tablet. Even if the
government will allow a tax deduction, only P2.53 per tablet will be refunded
and not the full amount of the discount which is P7.92. In short, only 32% of
the 20% discount will be reimbursed to the drugstores. 28
Petitioners' computation is flawed. For purposes of reimbursement, the law
states that the cost of the discount shall be deducted from gross
income, 29 the amount of income derived from all sources before deducting
allowable expenses, which will result in net income. Here, petitioners tried to
show a loss on a per transaction basis, which should not be the case. An
income statement, showing an accounting of petitioners' sales, expenses, and
net profit (or loss) for a given period could have accurately reflected the effect
of the discount on their income. Absent any financial statement, petitioners
cannot substantiate their claim that they will be operating at a loss should they
give the discount. In addition, the computation was erroneously based on the
assumption that their customers consisted wholly of senior citizens. Lastly, the
32% tax rate is to be imposed on income, not on the amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot
raise the prices of their medicines given the cutthroat nature of the players in
the industry. It is a business decision on the part of petitioners to peg the
mark-up at 5%. Selling the medicines below acquisition cost, as alleged by
petitioners, is merely a result of this decision. Inasmuch as pricing is a property
right, petitioners cannot reproach the law for being oppressive, simply because
they cannot afford to raise their prices for fear of losing their customers to
competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and
the competitive pricing component of the business. While the Constitution
protects property rights, petitioners must accept the realities of business and
the State, in the exercise of police power, can intervene in the operations of a
business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the
Constitution provides the precept for the protection of property, various laws
and jurisprudence, particularly on agrarian reform and the regulation of
contracts and public utilities, continuously serve as a reminder that the right to
property can be relinquished upon the command of the State for the promotion
of public good. 30

Undeniably, the success of the senior citizens program rests largely on the
support imparted by petitioners and the other private establishments
concerned. This being the case, the means employed in invoking the active
participation of the private sector, in order to achieve the purpose or objective
of the law, is reasonably and directly related. Without sufficient proof that
Section 4 (a) of R.A. No. 9257 is arbitrary, and that the continued
implementation of the same would be unconscionably detrimental to
petitioners, the Court will refrain from quashing a legislative act. 31
WHEREFORE, the petition is DISMISSED for lack of merit. IDEScC
No costs.
SO ORDERED.
Puno, C.J., Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Tinga, Chico-Nazario, Garcia, Velasco, Jr. and Nachura, JJ., concur.
Quisumbing, J., is on official leave.
Sandoval-Gutierrez, J., is on leave.
||| (Carlos Superdrug Corp. v. Department of Social Welfare and Development,
G.R. No. 166494, [June 29, 2007], 553 PHIL 120-135)

3. CITY OF MANILA v HON. PERFECTO LAGUIO

EN BANC
[G.R. No. 118127. April 12, 2005.]
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the
City of Manila HON. JOSELITO L. ATIENZA, in his capacity as
Vice-Mayor of the City of Manila and Presiding Officer of the
City Council of Manila, HON. ERNESTO A. NIEVA, HON.
GONZALO P. GONZALES, HON. AVELINO S. CAILIAN, HON.
ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO, HON.
HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA, JR., HON.
ROMUALDO S. MARANAN, HON. NESTOR C. PONCE, JR.,
HON. HUMBERTO B. BASCO, HON. FLAVIANO F.
CONCEPCION, JR., HON. ROMEO G. RIVERA, HON. MANUEL
M. ZARCAL, HON. PEDRO S. DE JESUS, HON. BERNARDITO C.
ANG, HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON.
CHIKA G. GO, HON. VICTORIANO A. MELENDEZ, HON.
ERNESTO V.P. MACEDA, JR., HON. ROLANDO P. NIETO, HON.
DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON.
MA. PAZ E. HERRERA, HON. JOEY D. HIZON, HON.
FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG, HON.
ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON.
MA. CORAZON R. CABALLES, HON. CASIMIRO C. SISON,
HON. BIENVENIDO M. ABANTE, JR., HON. MA. LOURDES M.
ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F.
RIVERA, HON. LEONARDO L. ANGAT, and HON. JOCELYN B.
DAWIS, in their capacity as councilors of the City of
Manila, petitioners, vs. HON. PERFECTO A.S. LAGUIO, JR., as
Presiding Judge, RTC, Manila and MALATE TOURIST
DEVELOPMENT CORPORATION, respondents.
DECISION
TINGA, J p:
I know only that what is moral is what you feel good after and what
is immoral is what you feel bad after.
Ernest Hemingway
Death in the Afternoon, Ch. 1

It is a moral and political axiom that any dishonorable act, if

performed by oneself, is less immoral than if performed by
someone else, who would be well-intentioned in his dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch. I
The Court's commitment to the protection of morals is secondary to its fealty
to the fundamental law of the land. It is foremost a guardian of the Constitution
but not the conscience of individuals. And if it need be, the Court will not
hesitate to "make the hammer fall, and heavily" in the words of Justice Laurel,
and uphold the constitutional guarantees when faced with laws that, though
not lacking in zeal to promote morality, nevertheless fail to pass the test of
constitutionality.
The pivotal issue in this Petition 1 under Rule 45 (then Rule 42) of the Revised
Rules on Civil Procedure seeking the reversal of the Decision 2 in Civil Case No.
93-66511 of the Regional Trial Court (RTC) of Manila, Branch 18 (lower
court), 3 is the validity of Ordinance No. 7783 (the Ordinance) of the City of
Manila. 4
The antecedents are as follows:
Private respondent Malate Tourist Development Corporation (MTDC) is a
corporation engaged in the business of operating hotels, motels, hostels and
lodging houses. 5 It built and opened Victoria Court in Malate which was
licensed as a motel although duly accredited with the Department of Tourism
as a hotel. 6 On 28 June 1993, MTDC filed a Petition for Declaratory Relief with
Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining
Order 7(RTC Petition) with the lower court impleading as defendants, herein
petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza,
and the members of the City Council of Manila (City Council). MTDC prayed
that the Ordinance, insofar as it includes motels and inns as among its
prohibited establishments, be declared invalid and unconstitutional. 8
Enacted by the City Council 9 on 9 March 1993 and approved by petitioner City
Mayor on 30 March 1993, the said Ordinance is entitled
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION
OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT,
ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE
AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND FOR
OTHER PURPOSES. 10
The Ordinance is reproduced in full, hereunder:
SECTION 1.Any provision of existing laws and ordinances to the
contrary notwithstanding, no person, partnership, corporation or
entity shall, in the Ermita-Malate area bounded by Teodoro M.
Kalaw Sr. Street in the North, Taft Avenue in the East, Vito Cruz
Street in the South and Roxas Boulevard in the West, pursuant

to P.D. 499 be allowed or authorized to contract and engage in,

any business providing certain forms of amusement,
entertainment, services and facilities where women are used as
tools in entertainment and which tend to disturb the community,
annoy the inhabitants, and adversely affect the social and moral
welfare of the community, such as but not limited to:
1.Sauna Parlors EDSAac
2.Massage Parlors
3.Karaoke Bars
4.Beerhouses
5.Night Clubs
6.Day Clubs
7.Super Clubs
8.Discotheques
9.Cabarets
10.Dance Halls
11.Motels
12.Inns
SEC. 2.The City Mayor, the City Treasurer or any person acting in
behalf of the said officials are prohibited from issuing permits,
temporary or otherwise, or from granting licenses and accepting
payments for the operation of business enumerated in the
preceding section.
SEC. 3.Owners and/or operator of establishments engaged in, or
devoted to, the businesses enumerated in Section 1 hereof are
hereby given three (3) months from the date of approval of this
ordinance within which to wind up business operations or to
transfer to any place outside of the Ermita-Malate area or convert
said businesses to other kinds of business allowable within the
area, such as but not limited to:
1.Curio or antique shop
2.Souvenir Shops
3.Handicrafts display centers
4.Art galleries
5.Records and music shops
6.Restaurants
7.Coffee shops

8.Flower shops
9.Music lounge and sing-along restaurants, with well-defined
activities for wholesome family entertainment that cater to both
local and foreign clientele.
10.Theaters engaged in the exhibition, not only of motion pictures
but also of cultural shows, stage and theatrical plays, art
exhibitions, concerts and the like.
11.Businesses allowable within the law and medium intensity
districts as provided for in the zoning ordinances for Metropolitan
Manila, except new warehouse or open-storage depot, dock or
yard, motor repair shop, gasoline service station, light industry
with any machinery, or funeral establishments.
SEC. 4.Any person violating any provisions of this ordinance, shall
upon conviction, be punished by imprisonment of one (1) year or
fine of FIVE THOUSAND (P5,000.00) PESOS, or both, at the
discretion of the Court, PROVIDED, that in case of juridical person,
the President, the General Manager, or person-in-charge of
operation shall be liable thereof; PROVIDED FURTHER, that in case
of subsequent violation and conviction, the premises of the erring
establishment shall be closed and padlocked permanently.
SEC. 5.This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session today,
March 9, 1993.
Approved by His Honor, the Mayor on March 30, 1993. (Emphasis
supplied)
In the RTC Petition, MTDC argued that the Ordinance erroneously and
improperly included in its enumeration of prohibited establishments, motels
and inns such as MTDC's Victoria Court considering that these were not
establishments for "amusement" or "entertainment" and they were not
"services or facilities for entertainment," nor did they use women as "tools for
entertainment," and neither did they "disturb the community," "annoy the
inhabitants" or "adversely affect the social and moral welfare of the
community." 11
MTDC further advanced that the Ordinance was invalid and unconstitutional for
the following reasons: (1) The City Council has no power to prohibit the
operation of motels as Section 458 (a) 4 (iv) 12 of the Local Government Code
of 1991 (the Code) grants to the City Council only the power to regulate the
establishment, operation and maintenance of hotels, motels, inns, pension
houses, lodging houses and other similar establishments; (2) The Ordinance is
void as it is violative of Presidential Decree (P.D.) No. 499 13 which specifically
declared portions of the Ermita-Malate area as a commercial zone with certain
restrictions; (3) The Ordinance does not constitute a proper exercise of police

power as the compulsory closure of the motel business has no reasonable

relation to the legitimate municipal interests sought to be protected; (4)
The Ordinance constitutes an ex post facto law by punishing the operation of
Victoria Court which was a legitimate business prior to its enactment; (5)
The Ordinance violates MTDC's constitutional rights in that: (a) it is
confiscatory and constitutes an invasion of plaintiff's property rights; (b) the
City Council has no power to find as a fact that a particular thing is a
nuisance per se nor does it have the power to extrajudicially destroy it; and (6)
The Ordinance constitutes a denial of equal protection under the law as no
reasonable basis exists for prohibiting the operation of motels and inns, but not
pension houses, hotels, lodging houses or other similar establishments, and for
prohibiting said business in the Ermita-Malate area but not outside of this
area. 14
In their Answer 15 dated 23 July 1993, petitioners City of Manila and Lim
maintained that the City Council had the power to "prohibit certain forms of
entertainment in order to protect the social and moral welfare of the
community" as provided for in Section 458 (a) 4 (vii) of the Local Government
Code, 16which reads, thus:
Section 458.Powers, Duties, Functions and Compensation. (a)
The sangguniang panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions and appropriate funds
for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
xxx xxx xxx
(4)Regulate activities relative to the use of land, buildings and
structures within the city in order to promote the general welfare
and for said purpose shall:
xxx xxx xxx
(vii)Regulate the establishment, operation, and maintenance
of any entertainment or amusement facilities, including
theatrical performances, circuses, billiard pools, public
dancing schools, public dance halls, sauna baths, massage
parlors, and other places for entertainment or amusement;
regulate such other events or activities for amusement or
entertainment, particularly those which tend to disturb the
community or annoy the inhabitants, or require the
suspension or suppression of the same; or, prohibit certain
forms of amusement or entertainment in order to protect the
social and moral welfare of the community. cDIaAS

Citing Kwong Sing v. City of Manila, 17 petitioners insisted that the power of
regulation spoken of in the above-quoted provision included the power to
control, to govern and to restrain places of exhibition and amusement. 18
Petitioners likewise asserted that the Ordinance was enacted by the City
Council of Manila to protect the social and moral welfare of the community in
conjunction with its police power as found in Article III, Section 18(kk)
of Republic Act No. 409, 19 otherwise known as the Revised Charter of the City
of Manila (Revised Charter of Manila) 20 which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
xxx xxx xxx
Section 18.Legislative powers. The Municipal Board shall have
the following legislative powers:
xxx xxx xxx
(kk)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 may 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.
Further, the petitioners noted, the Ordinance had the presumption of validity;
hence, private respondent had the burden to prove its illegality or
unconstitutionality. 21
Petitioners also maintained that there was no inconsistency between P.D.
499 and the Ordinance as the latter simply disauthorized certain forms of
businesses and allowed the Ermita-Malate area to remain a commercial
zone. 22 The Ordinance, the petitioners likewise claimed, cannot be assailed
as ex post facto as it was prospective in operation. 23 The Ordinance also did
not infringe the equal protection clause and cannot be denounced as class
legislation as there existed substantial and real differences between the
Ermita-Malate area and other places in the City of Manila. 24
On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio)
issued an ex-parte temporary restraining order against the enforcement of
theOrdinance. 25 And on 16 July 1993, again in an intrepid gesture, he granted
the writ of preliminary injunction prayed for by MTDC. 26
After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision,
enjoining the petitioners from implementing the Ordinance. The dispositive
portion of said Decision reads: 27

WHEREFORE, judgment is hereby rendered declaring Ordinance No.

778[3], Series of 1993, of the City of Manila null and void, and
making permanent the writ of preliminary injunction that had been
issued by this Court against the defendant. No costs.
SO ORDERED. 28
Petitioners filed with the lower court a Notice of Appeal 29 on 12 December
1994, manifesting that they are elevating the case to this Court under then
Rule 42 on pure questions of law. 30
On 11 January 1995, petitioners filed the present Petition, alleging that the
following errors were committed by the lower court in its ruling: (1) It erred in
concluding that the subject ordinance is ultra vires, or otherwise, unfair,
unreasonable and oppressive exercise of police power; (2) It erred in holding
that the questioned Ordinance contravenes P.D. 499 31 which allows operators
of all kinds of commercial establishments, except those specified therein; and
(3) It erred in declaring the Ordinance void and unconstitutional. 32
In the Petition and in its Memorandum, 33 petitioners in essence repeat the
assertions they made before the lower court. They contend that the
assailedOrdinance was enacted in the exercise of the inherent and plenary
power of the State and the general welfare clause exercised by local
government units provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of
Manila and conjunctively, Section 458 (a) 4 (vii) of the Code. 34 They allege
that the Ordinance is a valid exercise of police power; it does not
contravene P.D. 499; and that it enjoys the presumption of validity. 35
In its Memorandum 36 dated 27 May 1996, private respondent maintains that
the Ordinance is ultra vires and that it is void for being repugnant to the
general law. It reiterates that the questioned Ordinance is not a valid exercise
of police power; that it is violative of due process, confiscatory and amounts to
an arbitrary interference with its lawful business; that it is violative of the equal
protection clause; and that it confers on petitioner City Mayor or any officer
unregulated discretion in the execution of the Ordinance absent rules to guide
and control his actions.
This is an opportune time to express the Court's deep sentiment and
tenderness for the Ermita-Malate area being its home for several decades. A
long-time resident, the Court witnessed the area's many turn of events. It
relished its glory days and endured its days of infamy. Much as the Court harks
back to the resplendant era of the Old Manila and yearns to restore its lost
grandeur, it believes that the Ordinance is not the fitting means to that end.
The Court is of the opinion, and so holds, that the lower court did not err in
declaring the Ordinance, as it did, ultra vires and therefore null and void.
The Ordinance is so replete with constitutional infirmities that almost every
sentence thereof violates a constitutional provision. The prohibitions and
sanctions therein transgress the cardinal rights of persons enshrined by the

Constitution. The Court is called upon to shelter these rights from attempts at
rendering them worthless.
The tests of a valid ordinance are well established. A long line of decisions 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 must 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. 37
Anent the first criterion, ordinances shall only be valid when they are not
contrary to the Constitution and to the laws. 38 The Ordinance must satisfy
two requirements: it must pass muster under the test of constitutionality and
the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The
requirement that the enactment must not violate existing law gives stress to
the precept that local government units are able to legislate only by virtue of
their derivative legislative power, a delegation of legislative power from the
national legislature. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. 39
This relationship between the national legislature and the local government
units has not been enfeebled by the new provisions in the Constitution
strengthening the policy of local autonomy. The national legislature is still the
principal of the local government units, which cannot defy its will or modify or
violate it. 40
The Ordinance was passed by the City Council in the exercise of its police
power, an enactment of the City Council acting as agent of Congress. Local
government units, as agencies of the State, are endowed with police power in
order to effectively accomplish and carry out the declared objects of their
creation. 41 This delegated police power is found in Section 16 of the Code,
known as the general welfare clause, viz:
SECTION 16.General Welfare. Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall
ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the
right of the people to a balanced ecology, encourage and support
the development of appropriate and self-reliant scientific and
technological capabilities, improve public morals, enhance

economic prosperity and social justice, promote full employment

among their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants. STCDaI
Local government units exercise police power through their respective
legislative bodies; in this case, the sangguniang panlungsod or the city council.
The Code empowers the legislative bodies to "enact ordinances, approve
resolutions and appropriate funds for the general welfare of the
province/city/municipality and its inhabitants pursuant to Section 16 of the
Code and in the proper exercise of the corporate powers of the
province/city/municipality provided under the Code." 42 The inquiry in
this Petition is concerned with the validity of the exercise of such delegated
power.
The Ordinance contravenes
the Constitution
The police power of the City Council, however broad and far-reaching, is
subordinate to the constitutional limitations thereon; and is subject to the
limitation that its exercise must be reasonable and for the public good. 43 In
the case at bar, the enactment of the Ordinance was an invalid exercise of
delegated power as it is unconstitutional and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5.The maintenance of peace and order, the protection of life,
liberty, and property, and the promotion of the general welfare are
essential for the enjoyment by all the people of the blessings of
democracy. 44
SEC. 14.The State recognizes the role of women in nation-building,
and shall ensure the fundamental equality before the law of
women and men. 45
SEC. 1.No person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the
equal protection of laws. 46
SEC. 9.Private property shall not be taken for public use without
just compensation. 47
A.The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is embodied in the fiat "(N)o
person shall be deprived of life, liberty or property without due process of law. .
. ." 48
There is no controlling and precise definition of due process. It furnishes
though a standard to which governmental action should conform in order that

deprivation of life, liberty or property, in each appropriate case, be valid. This

standard is aptly described as a responsiveness to the supremacy of reason,
obedience to the dictates of justice, 49 and as such it is a limitation upon the
exercise of the police power. 50
The purpose of the guaranty is to prevent governmental encroachment against
the life, liberty and property of individuals; to secure the individual from the
arbitrary exercise of the powers of the government, unrestrained by the
established principles of private rights and distributive justice; to protect
property from confiscation by legislative enactments, from seizure, forfeiture,
and destruction without a trial and conviction by the ordinary mode of judicial
procedure; and to secure to all persons equal and impartial justice and the
benefit of the general law. 51
The guaranty serves as a protection against arbitrary regulation, and private
corporations and partnerships are "persons" within the scope of the guaranty
insofar as their property is concerned. 52
This clause has been interpreted as imposing two separate limits on
government, usually called "procedural due process" and "substantive due
process."
Procedural due process, as the phrase implies, refers to the procedures that
the government must follow before it deprives a person of life, liberty, or
property. Classic procedural due process issues are concerned with what kind
of notice and what form of hearing the government must provide when it takes
a particular action. 53
Substantive due process, as that phrase connotes, asks whether the
government has an adequate reason for taking away a person's life, liberty, or
property. In other words, substantive due process looks to whether there is a
sufficient justification for the government's action. 54 Case law in the United
States (U.S.) tells us that whether there is such a justification depends very
much on the level of scrutiny used. 55 For example, if a law is in an area where
only rational basis review is applied, substantive due process is met so long as
the law is rationally related to a legitimate government purpose. But if it is an
area where strict scrutiny is used, such as for protecting fundamental rights,
then the government will meet substantive due process only if it can prove
that the law is necessary to achieve a compelling government purpose. 56
The police power granted to local government units must always be exercised
with utmost observance of the rights of the people to due process and equal
protection of the law. Such power cannot be exercised whimsically, arbitrarily
or despotically 57 as its exercise is subject to a qualification, limitation or
restriction demanded by the respect and regard due to the prescription of the
fundamental law, particularly those forming part of the Bill of Rights. Individual
rights, it bears emphasis, may be adversely affected only to the extent that
may fairly be required by the legitimate demands of public interest or public

welfare. 58 Due process requires the intrinsic validity of the law in interfering
with the rights of the person to his life, liberty and property. 59
Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as the rationale for the
enactment of the Ordinance, and to free it from the imputation of
constitutional infirmity, not only must it appear that the interests of the public
generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably
necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals. 60It must be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. A
reasonable relation must exist between the purposes of the police 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. 61
Lacking a concurrence of these two requisites, the police measure shall be
struck down as an arbitrary intrusion into private rights 62 a violation of the
due process clause. aSDHCT
The Ordinance was enacted to address and arrest the social ills purportedly
spawned by the establishments in the Ermita-Malate area which are allegedly
operated under the deceptive veneer of legitimate, licensed and tax-paying
nightclubs, bars, karaoke bars, girlie houses, cocktail lounges, hotels and
motels. Petitioners insist that even the Court in the case of Ermita-Malate Hotel
and Motel Operators Association, Inc. v. City Mayor of Manila 63 had already
taken judicial notice of the "alarming increase in the rate of prostitution,
adultery and fornication in Manila traceable in great part to existence of
motels, which provide a necessary atmosphere for clandestine entry, presence
and exit and thus become the ideal haven for prostitutes and thrillseekers." 64
The object of the Ordinance was, accordingly, the promotion and protection of
the social and moral values of the community. Granting for the sake of
argument that the objectives of the Ordinance are within the scope of the City
Council's police powers, the means employed for the accomplishment thereof
were unreasonable and unduly oppressive.
It is undoubtedly one of the fundamental duties of the City of Manila to make
all reasonable regulations looking to the promotion of the moral and social
values of the community. However, the worthy aim of fostering public morals
and the eradication of the community's social ills can be achieved through
means less restrictive of private rights; it can be attained by reasonable
restrictions rather than by an absolute prohibition. The closing down and
transfer of businesses or their conversion into businesses "allowed" under
the Ordinance have no reasonable relation to the accomplishment of its

purposes. Otherwise stated, the prohibition of the enumerated establishments

will not per se protect and promote the social and moral welfare of the
community; it will not in itself eradicate the alluded social ills of prostitution,
adultery, fornication nor will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area teems with houses of illrepute and establishments of the like which the City Council may lawfully
prohibit, 65 it is baseless and insupportable to bring within that classification
sauna parlors, massage parlors, karaoke bars, night clubs, day clubs, super
clubs, discotheques, cabarets, dance halls, motels and inns. This is not
warranted under the accepted definitions of these terms. The enumerated
establishments are lawful pursuits which are not per se offensive to the moral
welfare of the community.
That these are used as arenas to consummate illicit sexual affairs and
as venues to further the illegal prostitution is of no moment. We lay stress
on the acrid truth that sexual immorality, being a human frailty, may take
place in the most innocent of places that it may even take place in the
substitute establishments enumerated under Section 3 of the Ordinance. If
the flawed logic of the Ordinance were to be followed, in the remote
instance that an immoral sexual act transpires in a church cloister or a court
chamber, we would behold the spectacle of the City of Manila ordering the
closure of the church or court concerned. Every house, building, park, curb,
street or even vehicles for that matter will not be exempt from the
prohibition. Simply because there are no "pure" places where there are
impure men. Indeed, even the Scripture and the Tradition of Christians
churches continually recall the presence and universality of sin in man's
history. (Catechism of the Catholic Church, Definitive Edition, p. 101; ECCE
and Word & Life Publications, Don Bosco Compound, Makati)
The problem, it needs to be pointed out, is not the establishment, which by its
nature cannot be said to be injurious to the health or comfort of the community
and which in itself is amoral, but the deplorable human activity that may occur
within its premises. While a motel may be used as a venue for immoral sexual
activity, it cannot for that reason alone be punished. It cannot be classified as
a house of ill-repute or as a nuisance per se on a mere likelihood or a naked
assumption. If that were so and if that were allowed, then the Ermita-Malate
area would not only be purged of its supposed social ills, it would be
extinguished of its soul as well as every human activity, reprehensible or not,
in its every nook and cranny would be laid bare to the estimation of the
authorities.
The Ordinance seeks to legislate morality but fails to address the core issues of
morality. Try as the Ordinance may to shape morality, it should not foster the
illusion that it can make a moral man out of it because immorality is not a
thing, a building or establishment; it is in the hearts of men. The City Council

instead should regulate human conduct that occurs inside the establishments,
but not to the detriment of liberty and privacy which are covenants, premiums
and blessings of democracy.
While petitioners' earnestness at curbing clearly objectionable social ills is
commendable, they unwittingly punish even the proprietors and operators of
"wholesome," "innocent" establishments. In the instant case, there is a clear
invasion of personal or property rights, personal in the case of those
individuals desirous of owning, operating and patronizing those motels and
property in terms of the investments made and the salaries to be paid to those
therein employed. If the City of Manila so desires to put an end to prostitution,
fornication and other social ills, it can instead impose reasonable regulations
such as daily inspections of the establishments for any violation of the
conditions of their licenses or permits; it may exercise its authority to suspend
or revoke their licenses for these violations; 66 and it may even impose
increased license fees. In other words, there are other means to reasonably
accomplish the desired end.
Means employed are
constitutionally infirm
The Ordinance disallows the operation of sauna parlors, massage parlors,
karaoke bars, beerhouses, night clubs, day clubs, super clubs, discotheques,
cabarets, dance halls, motels and inns in the Ermita-Malate area. In Section 3
thereof, owners and/or operators of the enumerated establishments are given
three (3) months from the date of approval of the Ordinance within which "to
wind up business operations or to transfer to any place outside the ErmitaMalate area or convert said businesses to other kinds of business allowable
within the area." Further, it states in Section 4 that in cases of subsequent
violations of the provisions of the Ordinance, the "premises of the erring
establishment shall be closed and padlocked permanently."
It is readily apparent that the means employed by the Ordinance for the
achievement of its purposes, the governmental interference itself, infringes on
the constitutional guarantees of a person's fundamental right to liberty and
property. HCEcAa
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 faculties with which he has been endowed by his Creator,
subject only to such restraint as are necessary for the common welfare." 67 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. 68

The U.S. Supreme Court in the case of Roth v. Board of Regents, 69 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.
In another case, it also confirmed that liberty protected by the due process
clause includes personal decisions relating to marriage, procreation,
contraception, family relationships, child rearing, and education. In explaining
the respect the Constitution demands for the autonomy of the person in
making these choices, the U.S. Supreme Court explained:
These matters, involving the most intimate and personal choices a
person may make in a lifetime, choices central to personal dignity
and autonomy, are central to the liberty protected by the
Fourteenth Amendment. At the heart of liberty is the right to define
one's own concept of existence, of meaning, of universe, and of
the mystery of human life. Beliefs about these matters could not
define the attributes of personhood where they formed under
compulsion of the State. 70
Persons desirous to own, operate and patronize the enumerated
establishments under Section 1 of the Ordinance may seek autonomy for these
purposes.
Motel patrons who are single and unmarried may invoke this right to autonomy
to consummate their bonds in intimate sexual conduct within the motel's
premises be it stressed that their consensual sexual behavior does not
contravene any fundamental state policy as contained in the
Constitution. 71 Adults have a right to choose to forge such relationships with
others in the confines of their own private lives and still retain their dignity as
free persons. The liberty protected by the Constitution allows persons the right
to make this choice. 72 Their right to liberty under the due process clause
gives them the full right to engage in their conduct without intervention of the
government, as long as they do not run afoul of the law. Liberty should be the
rule and restraint the exception.
Liberty in the constitutional sense not only means freedom from unlawful
government restraint; it must include privacy as well, if it is to be a repository

of freedom. The right to be let alone is the beginning of all freedom it is the
most comprehensive of rights and the right most valued by civilized men. 73
The concept of liberty compels respect for the individual whose claim to
privacy and interference demands respect. As the case of Morfe
v. Mutuc, 74borrowing 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. Morfeaccorded 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. 75
There is a great temptation to have an extended discussion on these civil
liberties but the Court chooses to exercise restraint and restrict itself to the
issues presented when it should. The previous pronouncements of the Court
are not to be interpreted as a license for adults to engage in criminal conduct.
The reprehensibility of such conduct is not diminished. The Court only reaffirms
and guarantees their right to make this choice. Should they be prosecuted for
their illegal conduct, they should suffer the consequences of the choice they
have made. That, ultimately, is their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and oppressive as it substantially
divests the respondent of the beneficial use of its
property. 76 The Ordinance in Section 1 thereof forbids the running of the
enumerated businesses in the Ermita-Malate area and in Section 3 instructs its
owners/operators to wind up business operations or to transfer outside the
area or convert said businesses into allowed businesses. An ordinance which
permanently restricts the use of property that it can not be used for any
reasonable purpose goes beyond regulation and must be recognized as a
taking of the property without just compensation. 77 It is intrusive and
violative of the private property rights of individuals. EHTCAa

The Constitution expressly provides in Article III, Section 9, that "private

property shall not be taken for public use without just compensation." The
provision is the most important protection of property rights in the
Constitution. This is a restriction on the general power of the government to
take property. The constitutional provision is about ensuring that the
government does not confiscate the property of some to give it to others. In
part too, it is about loss spreading. If the government takes away a person's
property to benefit society, then society should pay. The principal purpose of
the guarantee is "to bar the Government from forcing some people alone to
bear public burdens which, in all fairness and justice, should be borne by the
public as a whole. 78
There are two different types of taking that can be identified. A "possessory"
taking occurs when the government confiscates or physically occupies
property. A "regulatory" taking occurs when the government's regulation
leaves no reasonable economically viable use of the property. 79
In the landmark case of Pennsylvania Coal v. Mahon, 80 it was held that a
taking also could be found if government regulation of the use of property went
"too far." When regulation reaches a certain magnitude, in most if not in all
cases there must be an exercise of eminent domain and compensation to
support the act. While property may be regulated to a certain extent, if
regulation goes too far it will be recognized as a taking. 81
No formula or rule can be devised to answer the questions of what is too far
and when regulation becomes a taking. In Mahon, Justice Holmes recognized
that it was "a question of degree and therefore cannot be disposed of by
general propositions." On many other occasions as well, the U.S. Supreme
Court has said that the issue of when regulation constitutes a taking is a
matter of considering the facts in each case. The Court asks whether justice
and fairness require that the economic loss caused by public action must be
compensated by the government and thus borne by the public as a whole, or
whether the loss should remain concentrated on those few persons subject to
the public action. 82
What is crucial in judicial consideration of regulatory takings is that
government regulation is a taking if it leaves no reasonable economically
viable use of property in a manner that interferes with reasonable expectations
for use. 83 A regulation that permanently denies all economically beneficial or
productive use of land is, from the owner's point of view, equivalent to a
"taking" unless principles of nuisance or property law that existed when the
owner acquired the land make the use prohibitable. 84 When the owner of real
property has been called upon to sacrifice all economically beneficial uses in
the name of the common good, that is, to leave his property economically idle,
he has suffered a taking. 85

A regulation which denies all economically beneficial or productive use of land

will require compensation under the takings clause. Where a regulation places
limitations on land that fall short of eliminating all economically beneficial use,
a taking nonetheless may have occurred, depending on a complex of factors
including the regulation's economic effect on the landowner, the extent to
which the regulation interferes with reasonable investment-backed
expectations and the character of government action. These inquiries are
informed by the purpose of the takings clause which is to prevent the
government from forcing some people alone to bear public burdens which, in
all fairness and justice, should be borne by the public as a whole. 86
A restriction on use of property may also constitute a "taking" if not reasonably
necessary to the effectuation of a substantial public purpose or if it has an
unduly harsh impact on the distinct investment-backed expectations of the
owner. 87
The Ordinance gives the owners and operators of the "prohibited"
establishments three (3) months from its approval within which to "wind up
business operations or to transfer to any place outside of the Ermita-Malate
area or convert said businesses to other kinds of business allowable within the
area." The directive to "wind up business operations" amounts to a closure of
the establishment, a permanent deprivation of property, and is practically
confiscatory. Unless the owner converts his establishment to accommodate an
"allowed" business, the structure which housed the previous business will be
left empty and gathering dust. Suppose he transfers it to another area, he will
likewise leave the entire establishment idle. Consideration must be given to
the substantial amount of money invested to build the edifices which the
owner reasonably expects to be returned within a period of time. It is apparent
that theOrdinance leaves no reasonable economically viable use of property in
a manner that interferes with reasonable expectations for use.
The second and third options to transfer to any place outside of the ErmitaMalate area or to convert into allowed businesses are confiscatory as well.
The penalty of permanent closure in cases of subsequent violations found in
Section 4 of the Ordinance is also equivalent to a "taking" of private property.
The second option instructs the owners to abandon their property and build
another one outside the Ermita-Malate area. In every sense, it qualifies as a
taking without just compensation with an additional burden imposed on the
owner to build another establishment solely from his coffers. The proffered
solution does not put an end to the "problem," it merely relocates it. Not only is
this impractical, it is unreasonable, onerous and oppressive. The conversion
into allowed enterprises is just as ridiculous. How may the respondent convert
a motel into a restaurant or a coffee shop, art gallery or music lounge without
essentially destroying its property? This is a taking of private property without
due process of law, nay, even without compensation.

The penalty of closure likewise constitutes unlawful taking that should be

compensated by the government. The burden on the owner to convert or
transfer his business, otherwise it will be closed permanently after a
subsequent violation should be borne by the public as this end benefits them
as a whole.
Petitioners cannot take refuge in classifying the measure as a zoning
ordinance. A zoning ordinance, although a valid exercise of police power, which
limits a "wholesome" property to a use which can not reasonably be made of it
constitutes the taking of such property without just compensation. Private
property which is not noxious nor intended for noxious purposes may not, by
zoning, be destroyed without compensation. Such principle finds no support in
the principles of justice as we know them. The police powers of local
government units which have always received broad and liberal interpretation
cannot be stretched to cover this particular taking.
Distinction should be made between destruction from necessity and eminent
domain. It needs restating that the property taken in the exercise of police
power is destroyed because it is noxious or intended for a noxious purpose
while the property taken under the power of eminent domain is intended for a
public use or purpose and is therefore "wholesome." 88 If it be of public benefit
that a "wholesome" property remain unused or relegated to a particular
purpose, then certainly the public should bear the cost of reasonable
compensation for the condemnation of private property for public use. 89
Further, the Ordinance fails to set up any standard to guide or limit the
petitioners' actions. It in no way controls or guides the discretion vested in
them. It provides no definition of the establishments covered by it and it fails
to set forth the conditions when the establishments come within its ambit of
prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted
power to close down establishments. Ordinances such as this, which make
possible abuses in its execution, depending upon no conditions or
qualifications whatsoever other than the unregulated arbitrary will of the city
authorities as the touchstone by which its validity is to be tested, are
unreasonable and invalid. The Ordinance should have established a rule by
which its impartial enforcement could be secured. 90
Ordinances placing restrictions upon the lawful use of property must, in order
to be valid and constitutional, specify the rules and conditions to be observed
and conduct to avoid; and must not admit of the exercise, or of an opportunity
for the exercise, of unbridled discretion by the law enforcers in carrying out its
provisions. 91
Thus, in Coates v. City of Cincinnati, 92 as cited in People v. Nazario, 93 the
U.S. Supreme Court struck down an ordinance that had made it illegal for
"three or more persons to assemble on any sidewalk and there conduct
themselves in a manner annoying to persons passing by." The ordinance was

nullified as it imposed no standard at all "because one may never know in

advance what 'annoys some people but does not annoy others.'"
Similarly, the Ordinance does not specify the standards to ascertain which
establishments "tend to disturb the community," "annoy the inhabitants," and
"adversely affect the social and moral welfare of the community." The cited
case supports the nullification of the Ordinance for lack of comprehensible
standards to guide the law enforcers in carrying out its provisions. EATCcI
Petitioners cannot therefore order the closure of the enumerated
establishments without infringing the due process clause. These lawful
establishments may be regulated, but not prevented from carrying on their
business. This is a sweeping exercise of police power that is a result of a lack of
imagination on the part of the City Council and which amounts to an
interference into personal and private rights which the Court will not
countenance. In this regard, we take a resolute stand to uphold the
constitutional guarantee of the right to liberty and property.
Worthy of note is an example derived from the U.S. of a reasonable regulation
which is a far cry from the ill-considered Ordinance enacted by the City
Council.
In FW/PBS, INC. v. Dallas, 94 the city of Dallas adopted a comprehensive
ordinance regulating "sexually oriented businesses," which are defined to
include adult arcades, bookstores, video stores, cabarets, motels, and theaters
as well as escort agencies, nude model studio and sexual encounter centers.
Among other things, the ordinance required that such businesses be licensed.
A group of motel owners were among the three groups of businesses that filed
separate suits challenging the ordinance. The motel owners asserted that the
city violated the due process clause by failing to produce adequate support for
its supposition that renting room for fewer than ten (10) hours resulted in
increased crime and other secondary effects. They likewise argued than the
ten (10)-hour limitation on the rental of motel rooms placed an unconstitutional
burden on the right to freedom of association. Anent the first contention, the
U.S. Supreme Court held that the reasonableness of the legislative judgment
combined with a study which the city considered, was adequate to support the
city's determination that motels permitting room rentals for fewer than ten (10)
hours should be included within the licensing scheme. As regards the second
point, the Court held that limiting motel room rentals to ten (10) hours will
have no discernible effect on personal bonds as those bonds that are formed
from the use of a motel room for fewer than ten (10) hours are not those that
have played a critical role in the culture and traditions of the nation by
cultivating and transmitting shared ideals and beliefs.
The ordinance challenged in the above-cited case merely regulated the
targeted businesses. It imposed reasonable restrictions; hence, its validity was
upheld.

The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City
Mayor of Manila, 95 it needs pointing out, is also different from this case in
that what was involved therein was a measure which regulated the mode in
which motels may conduct business in order to put an end to practices which
could encourage vice and immorality. Necessarily, there was no valid objection
on due process or equal protection grounds as the ordinance did not prohibit
motels. The Ordinance in this case however is not a regulatory measure but is
an exercise of an assumed power to prohibit. 96
The foregoing premises show that the Ordinance is an unwarranted and
unlawful curtailment of property and personal rights of citizens. For being
unreasonable and an undue restraint of trade, it cannot, even under the guise
of exercising police power, be upheld as valid.
B.The Ordinance violates Equal
Protection Clause
Equal protection requires that all persons or things similarly situated should be
treated alike, both as to rights conferred and responsibilities imposed. Similar
subjects, in other words, should not be treated differently, so as to give undue
favor to some and unjustly discriminate against others. 97 The guarantee
means that no person or class of persons shall be denied the same protection
of laws which is enjoyed by other persons or other classes in like
circumstances. 98 The "equal protection of the laws is a pledge of the
protection of equal laws." 99 It limits governmental discrimination. The equal
protection clause extends to artificial persons but only insofar as their property
is concerned. 100
The Court has explained the scope of the equal protection clause in this wise:
. . . What does it signify? To quote from J.M. Tuason & Co. v. Land
Tenure Administration: "The ideal situation is for the law's benefits
to be available to all, that none be placed outside the sphere of its
coverage. Only thus could chance and favor be excluded and the
affairs of men governed by that serene and impartial uniformity,
which is of the very essence of the idea of law." There is
recognition, however, in the opinion that what in fact exists
"cannot approximate the ideal. Nor is the law susceptible to the
reproach that it does not take into account the realities of the
situation. The constitutional guarantee then is not to be given a
meaning that disregards what is, what does in fact exist. To assure
that the general welfare be promoted, which is the end of law, a
regulatory measure may cut into the rights to liberty and property.
Those adversely affected may under such circumstances invoke
the equal protection clause only if they can show that the
governmental act assailed, far from being inspired by the
attainment of the common weal was prompted by the spirit of
hostility, or at the very least, discrimination that finds no support in

reason." Classification is thus not ruled out, it being sufficient to

quote from the Tuason decision anew "that the laws operate
equally and uniformly on all persons under similar circumstances
or that all persons must be treated in the same manner, the
conditions not being different, both in the privileges conferred and
the liabilities imposed. Favoritism and undue preference cannot be
allowed. For the principle is that equal protection and security shall
be given to every person under circumstances which, if not
identical, are analogous. If law be looked upon in terms of burden
or charges, those that fall within a class should be treated in the
same fashion, whatever restrictions cast on some in the group
equally binding on the rest. 101
Legislative bodies are allowed to classify the subjects of legislation. If the
classification is reasonable, the law may operate only on some and not all of
the people without violating the equal protection clause. 102 The classification
must, as an indispensable requisite, not be arbitrary. To be valid, it must
conform to the following requirements:
1)It must be based on substantial distinctions. IEAacS
2)It must be germane to the purposes of the law.
3)It must not be limited to existing conditions only.
4)It must apply equally to all members of the class. 103
In the Court's view, there are no substantial distinctions between motels, inns,
pension houses, hotels, lodging houses or other similar establishments. By
definition, all are commercial establishments providing lodging and usually
meals and other services for the public. No reason exists for prohibiting motels
and inns but not pension houses, hotels, lodging houses or other similar
establishments. The classification in the instant case is invalid as similar
subjects are not similarly treated, both as to rights conferred and obligations
imposed. It is arbitrary as it does not rest on substantial distinctions bearing a
just and fair relation to the purpose of the Ordinance.
The Court likewise cannot see the logic for prohibiting the business and
operation of motels in the Ermita-Malate area but not outside of this area. A
noxious establishment does not become any less noxious if located outside the
area.
The standard "where women are used as tools for entertainment" is also
discriminatory as prostitution one of the hinted ills the Ordinance aims to
banish is not a profession exclusive to women. Both men and women have
an equal propensity to engage in prostitution. It is not any less grave a sin
when men engage in it. And why would the assumption that there is an
ongoing immoral activity apply only when women are employed and be
inapposite when men are in harness? This discrimination based on gender

violates equal protection as it is not substantially related to important

government objectives. 104 Thus, the discrimination is invalid.
Failing the test of constitutionality, the Ordinance likewise failed to pass the
test of consistency with prevailing laws.
C.The Ordinance is repugnant
to general laws; it is ultra vires
The Ordinance is in contravention of the Code as the latter merely empowers
local government units to regulate, and not prohibit, the establishments
enumerated in Section 1 thereof.
The power of the City Council to regulate by ordinances the establishment,
operation, and maintenance of motels, hotels and other similar establishments
is found in Section 458 (a) 4 (iv), which provides that:
Section 458.Powers, Duties, Functions and Compensation. (a)
The sangguniang panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions and appropriate funds
for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
xxx xxx xxx
(4)Regulate activities relative to the use of land, buildings and
structures within the city in order to promote the general welfare
and for said purpose shall:
xxx xxx xxx
(iv)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. . . .
While its power to regulate the establishment, operation and maintenance of
any entertainment or amusement facilities, and to prohibit certain forms of
amusement or entertainment is provided under Section 458 (a) 4 (vii) of the
Code, which reads as follows:
Section 458.Powers, Duties, Functions and Compensation. (a)
The sangguniang panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions and appropriate funds
for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
xxx xxx xxx

(4)Regulate activities relative to the use of land, buildings and

structures within the city in order to promote the general welfare
and for said purpose shall:
xxx xxx xxx
(vii)Regulate the establishment, operation, and maintenance
of any entertainment or amusement facilities, including
theatrical performances, circuses, billiard pools, public
dancing schools, public dance halls, sauna baths, massage
parlors, and other places for entertainment or amusement;
regulate such other events or activities for amusement or
entertainment, particularly those which tend to disturb the
community or annoy the inhabitants, or require the
suspension or suppression of the same; or, prohibit certain
forms of amusement or entertainment in order to protect the
social and moral welfare of the community.
Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns,
pension houses, lodging houses, and other similar establishments, the only
power of the City Council to legislate relative thereto is to regulate them to
promote the general welfare. The Code still withholds from cities the power to
suppress and prohibit altogether the establishment, operation and
maintenance of such establishments. It is well to recall the rulings of the Court
in Kwong Sing v. City of Manila 105 that:
The word "regulate," as used in subsection (l), section 2444 of the
Administrative Code, means and includes the power to control, to
govern, and to restrain; but "regulate" should not be construed as
synonymous with "suppress" or "prohibit." Consequently, under the
power to regulate laundries, the municipal authorities could make
proper police regulations as to the mode in which the employment
or business shall be exercised. 106
And in People v. Esguerra, 107 wherein the Court nullified an ordinance of the
Municipality of Tacloban which prohibited the selling, giving and dispensing of
liquor ratiocinating that the municipality is empowered only to regulate the
same and not prohibit. The Court therein declared that:
(A)s a general rule when a municipal corporation is specifically
given authority or power to regulate or to license and regulate the
liquor traffic, power to prohibit is impliedly withheld. 108
These doctrines still hold contrary to petitioners' assertion 109 that they were
modified by the Code vesting upon City Councils prohibitory powers.
Similarly, the City Council exercises regulatory powers over public dancing
schools, public dance halls, sauna baths, massage parlors, and other places for
entertainment or amusement as found in the first clause of Section 458 (a) 4

(vii). Its powers to regulate, suppress and suspend "such other events or
activities for amusement or entertainment, particularly those which tend to
disturb the community or annoy the inhabitants" and to "prohibit certain forms
of amusement or entertainment in order to protect the social and moral
welfare of the community" are stated in the second and third clauses,
respectively of the same Section. The several powers of the City Council as
provided in Section 458 (a) 4 (vii) of the Code, it is pertinent to emphasize, are
separated by semi-colons (;), the use of which indicates that the clauses in
which these powers are set forth are independent of each other albeit closely
related to justify being put together in a single enumeration or
paragraph. 110 These powers, therefore, should not be confused, commingled
or consolidated as to create a conglomerated and unified power of regulation,
suppression and prohibition. 111
The Congress unequivocably specified the establishments and forms of
amusement or entertainment subject to regulation among which are
beerhouses, hotels, motels, inns, pension houses, lodging houses, and other
similar establishments (Section 458 (a) 4 (iv)), public dancing schools, public
dance halls, sauna baths, massage parlors, and other places for entertainment
or amusement (Section 458 (a) 4 (vii)). This enumeration therefore cannot be
included as among "other events or activities for amusement or entertainment,
particularly those which tend to disturb the community or annoy the
inhabitants" or "certain forms of amusement or entertainment" which the City
Council may suspend, suppress or prohibit. AEDcIH
The rule is that the City Council has only such powers as are expressly granted
to it and those which are necessarily implied or incidental to the exercise
thereof. By reason of its limited powers and the nature thereof, said powers are
to be construed strictissimi juris and any doubt or ambiguity arising out of the
terms used in granting said powers must be construed against the City
Council. 112 Moreover, it is a general rule in statutory construction that the
express mention of one person, thing, or consequence is tantamount to an
express exclusion of all others. Expressio unius est exclusio alterium. This
maxim is based upon the rules of logic and the natural workings of human
mind. It is particularly applicable in the construction of such statutes as create
new rights or remedies, impose penalties or punishments, or otherwise come
under the rule of strict construction. 113
The argument that the City Council is empowered to enact the Ordinance by
virtue of the general welfare clause of the Code and of Art. 3, Sec. 18 (kk) of
the Revised Charter of Manila is likewise without merit. On the first point, the
ruling of the Court in People v. Esguerra, 114 is instructive. It held that:
The powers conferred upon a municipal council in the general
welfare clause, or section 2238 of the Revised Administrative Code,
refers to matters not covered by the other provisions of the same
Code, and therefore it can not be applied to intoxicating liquors, for
the power to regulate the selling, giving away and dispensing

thereof is granted specifically by section 2242 (g) to municipal

councils. To hold that, under the general power granted by section
2238, a municipal council may enact the ordinance in question,
notwithstanding the provision of section 2242 (g), would be to
make the latter superfluous and nugatory, because the power to
prohibit, includes the power to regulate, the selling, giving away
and dispensing of intoxicating liquors.
On the second point, it suffices to say that the Code being a later expression of
the legislative will must necessarily prevail and override the earlier law, the
Revised Charter of Manila. Legis posteriores priores contrarias abrogant, or
later statute repeals prior ones which are repugnant thereto. As between two
laws on the same subject matter, which are irreconcilably inconsistent, that
which is passed later prevails, since it is the latest expression of legislative
will. 115If there is an inconsistency or repugnance between two statutes, both
relating to the same subject matter, which cannot be removed by any fair and
reasonable method of interpretation, it is the latest expression of the
legislative will which must prevail and override the earlier. 116
Implied repeals are those which take place when a subsequently enacted law
contains provisions contrary to those of an existing law but no provisions
expressly repealing them. Such repeals have been divided into two general
classes: those which occur where an act is so inconsistent or irreconcilable with
an existing prior act that only one of the two can remain in force and those
which occur when an act covers the whole subject of an earlier act and is
intended to be a substitute therefor. The validity of such a repeal is sustained
on the ground that the latest expression of the legislative will should
prevail. 117
In addition, Section 534(f) of the Code states that "All general and special laws,
acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with
any of the provisions of this Code are hereby repealed or modified accordingly."
Thus, submitting to petitioners' interpretation that the Revised Charter of
Manila empowers the City Council to prohibit motels, that portion of the
Charter stating such must be considered repealed by the Code as it is at
variance with the latter's provisions granting the City Council mere regulatory
powers. ESCacI
It is well to point out that petitioners also cannot seek cover under the general
welfare clause authorizing the abatement of nuisances without judicial
proceedings. That tenet applies to a nuisance per se, or one which affects the
immediate safety of persons and property and may be summarily abated
under the undefined law of necessity. It can not be said that motels are
injurious to the rights of property, health or comfort of the community. It is a
legitimate business. If it be a nuisance per accidens it may be so proven in a
hearing conducted for that purpose. A motel is not per se a nuisance
warranting its summary abatement without judicial intervention. 118

Notably, the City Council was conferred powers to prevent and prohibit certain
activities and establishments in another section of the Code which is
reproduced as follows:
Section 458.Powers, Duties, Functions and Compensation. (a)
The sangguniang panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions and appropriate funds
for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this Code,
and shall:
(1)Approve ordinances and pass resolutions necessary for an
efficient and effective city government, and in this connection,
shall:
xxx xxx xxx
(v)Enact ordinances intended to prevent, suppress and impose
appropriate penalties for habitual drunkenness in public places,
vagrancy, mendicancy, prostitution, establishment and
maintenance of houses of ill repute, gambling and other prohibited
games of chance, fraudulent devices and ways to obtain money or
property, drug addiction, maintenance of drug dens, drug pushing,
juvenile delinquency, the printing, distribution or exhibition of
obscene or pornographic materials or publications, and such other
activities inimical to the welfare and morals of the inhabitants of
the city;
xxx xxx xxx
If it were the intention of Congress to confer upon the City Council the power to
prohibit the establishments enumerated in Section 1 of the Ordinance, it would
have so declared in uncertain terms by adding them to the list of the matters it
may prohibit under the above-quoted Section. The Ordinance now vainly
attempts to lump these establishments with houses of ill-repute and expand
the City Council's powers in the second and third clauses of Section 458 (a) 4
(vii) of the Code in an effort to overreach its prohibitory powers. It is evident
that these establishments may only be regulated in their establishment,
operation and maintenance.
It is important to distinguish the punishable activities from the establishments
themselves. That these establishments are recognized legitimate enterprises
can be gleaned from another Section of the Code. Section 131 under the Title
on Local Government Taxation expressly mentioned proprietors or operators of
massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging
houses as among the "contractors" defined in paragraph (h) thereof. The same
Section also defined "amusement" as a "pleasurable diversion and
entertainment," "synonymous to relaxation, avocation, pastime or fun;" and

"amusement places" to include "theaters, cinemas, concert halls, circuses and

other places of amusement where one seeks admission to entertain oneself by
seeing or viewing the show or performances." Thus, it can be inferred that the
Code considers these establishments as legitimate enterprises and activities. It
is well to recall the maxim reddendo singula singulis which means that words
in different parts of a statute must be referred to their appropriate connection,
giving to each in its place, its proper force and effect, and, if possible,
rendering none of them useless or superfluous, even if strict grammatical
construction demands otherwise. Likewise, where words under consideration
appear in different sections or are widely dispersed throughout an act the
same principle applies. 119
Not only does the Ordinance contravene the Code, it likewise runs counter to
the provisions of P.D. 499. As correctly argued by MTDC, the statute had
already converted the residential Ermita-Malate area into a commercial area.
The decree allowed the establishment and operation of all kinds of commercial
establishments except warehouse or open storage depot, dump or yard, motor
repair shop, gasoline service station, light industry with any machinery or
funeral establishment. The rule is that for an ordinance to be valid and to have
force and effect, it must not only be within the powers of the council to enact
but the same must not be in conflict with or repugnant to the general
law. 120 As succinctly illustrated in Solicitor General v. Metropolitan Manila
Authority: 121
The requirement that the enactment must not violate existing law
explains itself. Local political subdivisions are able to legislate only
by virtue of a valid delegation of legislative power from the
national legislature (except only that the power to create their own
sources of revenue and to levy taxes is conferred by the
Constitution itself). They are mere agents vested with what is
called the power of subordinate legislation. As delegates of the
Congress, the local government units cannot contravene but must
obey at all times the will of their principal. In the case before us,
the enactment in question, which are merely local in origin cannot
prevail against the decree, which has the force and effect of a
statute. 122
Petitioners contend that the Ordinance enjoys the presumption of validity.
While this may be the rule, it has already been held that although the
presumption is always in favor of the validity or reasonableness of the
ordinance, such presumption must nevertheless be set aside when the
invalidity or unreasonableness appears on the face of the ordinance itself or is
established by proper evidence. The exercise of police power by the local
government is valid unless it contravenes the fundamental law of the land, or
an act of the legislature, or unless it is against public policy or is unreasonable,
oppressive, partial, discriminating or in derogation of a common right. 123

Conclusion
All considered, the Ordinance invades fundamental personal and property
rights and impairs personal privileges. It is constitutionally infirm.
The Ordinancecontravenes statutes; it is discriminatory and unreasonable in its
operation; it is not sufficiently detailed and explicit that abuses may attend the
enforcement of its sanctions. And not to be forgotten, the City Council under
the Code had no power to enact the Ordinance and is therefore ultra vires, null
and void. cHCSDa
Concededly, the challenged Ordinance was enacted with the best of motives
and shares the concern of the public for the cleansing of the Ermita-Malate
area of its social sins. Police power legislation of such character deserves the
full endorsement of the judiciary we reiterate our support for it. But inspite
of its virtuous aims, the enactment of the Ordinance has no statutory or
constitutional authority to stand on. Local legislative bodies, in this case, the
City Council, cannot prohibit the operation of the enumerated establishments
under Section 1 thereof or order their transfer or conversion without infringing
the constitutional guarantees of due process and equal protection of laws
not even under the guise of police power.
WHEREFORE, the Petition is hereby DENIED and the decision of the Regional
Trial Court declaring the Ordinance void is AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Sandoval-Gutierrez, Carpio, AustriaMartinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, ChicoNazario and Garcia, JJ.,concur.
Panganiban, J., concurs in the result.
Ynares-Santiago, J., concurs in the result only.
||| (City of Manila v. Laguio, Jr., G.R. No. 118127, [April 12, 2005], 495 PHIL
289-338)

4. POLLUTION ADJUDICATION BOARD V COURT OF APPEALS

THIRD DIVISION
[G.R. No. 93891. March 11, 1991.]
POLLUTION ADJUDICATION BOARD, petitioner, vs. COURT OF
APPEALS
and
SOLAR
TEXTILE
FINISHING
CORPORATION, respondents.
Oscar A. Pascua and Charemon Clio L. Borre for petitioner.
Leonardo A. Aurelio for respondent Solar Textile Finishing Corp.
SYLLABUS
1. ADMINISTRATIVE LAW; POLLUTION ADJUDICATION BOARD; MAY ISSUE CEASE
AND DESIST ORDERS EX-PARTE; BASIS. Section 7(a) of P.D. No.
984authorized petitioner Board to issue ex parte cease and desist orders.
An ex parte cease and desist order may be issued by the Board (a) whenever
the wastes discharged by an establishment pose an "immediate threat to life,
public health, safety or welfare, or to animal or plant life," or (b) whenever
such discharges or wastes exceed "the allowable standards set by the [NPCC]."
On the one hand, it is not essential that the Board prove that an "immediate
threat to life, public health, safety or welfare, or to animal or plant life" exists
before an ex parte cease and desist order may be issued. It is enough if the
Board finds that the wastes discharged do exceed "the allowable standards set
by the [NPCC]." In respect of discharges of wastes as to which allowable
standards have been set by the Commission, the Board may issue an ex
parte cease and desist order when there is prima facie evidence of an
establishment exceeding such allowable standards. Where, however, the
effluents or discharges have not yet been the subject matter of allowable
standards set by the Commission, then the Board may act on an ex parte basis
when it finds at least prima facie proof that the wastewater or material
involved presents an "immediate threat to life, public health, safety or welfare
or to animal or plant life." Since the applicable standards set by the
Commission existing at any given time may well not cover every possible or
imaginable kind of effluent or waste discharge, the general standard of an
"immediate threat to life public health, safety or welfare, or to animal and plant
life" remains necessary.
2. POLITICAL LAW; POLICE POWER; ENACTMENT OF POLLUTION CONTROL
STATUTES AND IMPLEMENTING REGULATIONS, AN EXERCISE THEREOF. The
relevant pollution control statute and implementing regulations were enacted

and promulgated in the exercise of that persuasive, sovereign power to protect

the safety, health, and general welfare and comfort of the public, as well as the
protection of plant and animal life, commonly designated as the police power.
3. CONSTITUTIONAL LAW; DUE PROCESS; YIELDS TO THE EXERCISE OF POLICE
POWER. It is a constitutional common place that the ordinary requirements
of procedural due process yield to the necessities of protecting vital public
interests like those here involved, through the exercise of police power.
4. ADMINISTRATIVE LAW; POLLUTION ADJUDICATION BOARD; DUE PROCESS;
HOLDING OF PUBLIC HEARING AFTER EX-PARTE ISSUANCE OF A CEASE AND
DESIST ORDER, SUFFICIENT COMPLIANCE WITH DUE PROCESS CLAUSE.
Where the establishment affected by an ex parte cease and desist order
contests the correctness of the prima facie findings of the Board, the Board
must hold a public hearing where such establishment would have an
opportunity to controvert the basis of such ex parte order. That such an
opportunity is subsequently available is really all that is required by the due
process clause of the Constitution in situations like that we have here.
5. REMEDIAL LAW; ACTIONS; APPEAL; PROPER REMEDY WHERE
QUESTIONED ORDER AND WRIT OF EXECUTION WHERE LAWFUL. Solar
claims finally that the petition for certiorari was the proper remedy as the
questioned Order and Writ of Execution issued by the Board were patent
nullities. Since we have concluded that Order and Writ of Execution were
entirely within the lawful authority of petitioner Board, the trial court did not
err when it dismissed Solar's petition for certiorari. It follows that the proper
remedy was an appeal from the trial court to the Court of Appeals, as Solar
did in fact appeal.
RESOLUTION
FELICIANO, J p:
Petitioner Pollution Adjudication Board ("Board") asks us to review the Decision
and Resolution promulgated on 7 February 1990 and 10 May 1990,
respectively, by the Court of Appeals in C.A.-G.R. No. SP 18821 entitled "Solar
Textile Finishing Corporation v. Pollution Adjudication Board." In that Decision
and Resolution, the Court of Appeals reversed an order of the Regional Trial
Court, Quezon City, Branch 77, in Civil Case No. Q-89-2287 dismissing private
respondent Solar Textile Finishing Corporation's ("Solar") petition for certiorari
and remanded the case to the trial court for further proceedings.
On 22 September 1988, petitioner Board issued an ex parte Order directing
Solar immediately to cease and desist from utilizing its wastewater pollution
source installations which were discharging untreated wastewater directly into

a canal leading to the adjacent Tullahan-Tinejeros River. The Order signed by

Hon. Fulgencio Factoran, Jr., as Board Chairman, reads in full as follows:
"Respondent, Solar Textile Finishing Corporation with plant and
place of business at 999 General Pascual Avenue, Malabon, Metro
Manila is involved in bleaching, rinsing and dyeing textiles with
wastewater of about 30 gpm. being directly discharged untreated
into the sewer. Based on findings in the Inspections conducted on
05 November 1986 and 15 November 1986, the volume of
untreated wastewater discharged in the final outfall outside of the
plant's compound was even greater. The result of inspection
conducted on 06 September 1988 showed that respondent's
Wastewater Treatment Plant was noted unoperational and the
combined wastewater generated from its operation was about 30
gallons per minute and 80% of the wastewater was being directly
discharged into a drainage canal leading to the Tullahan-Tinejeros
River by means of a by-pass and the remaining 20% was
channeled into the plant's existing Wastewater Treatment Plant
(WTP). Result of the analyses of the sample taken from the by pass showed that the wastewater is highly pollutive in terms of
Color units, BOD and Suspended Solids, among others. These acts
of respondent in spite of directives to comply with the
requirements are clearly in violation of Section 8 of Presidential
Decree No. 984 and Section 103 of its Implementing Rules and
Regulations and the 1982 Effluent Regulations.
WHEREFORE, pursuant to Section 7 of P.D. 984 and Section 38 of
its Implementing Rules and Regulations, respondent is hereby
ordered to cease and desist from utilizing its wastewater pollution
source installations and discharging its untreated wastewater
directly into the canal leading to the Tullahan-Tinejeros River
effective immediately upon receipt hereof and until such time
when it has fully complied with all the requirements and until
further orders from this Board.
SO ORDERED." 1
We note that the above Order was based on findings of several inspections of
Solar's plant:
a. inspections conducted on 5 November 1986 and 12 November
1986 by the National Pollution Control Commission ("NPCC"), the
predecessor of the Board; 2 and
b. the inspection conducted on 6 September 1988 by the
Department of Environment and Natural Resources ("DENR").
The findings of these two (2) inspections were that Solar's wastewater
treatment plant was non-operational and that its plant generated about 30

gallons per minute of wastewater, 80% of which was being directly

discharged into a drainage canal leading to the Tullahan-Tinejeros River. The
remaining 20% of the wastewater was being channeled through Solar's nonoperational wastewater treatment plant. Chemical analysis of samples of
Solar's effluents showed the presence of pollutants on a level in excess of
what was permissible under P.D. No. 984 and its Implementing Regulations.
A copy of the above Order was received by Solar on 26 September 1988. A Writ
of Execution issued by the Board was received by Solar on 31 March 1989.
Meantime, Solar filed a motion for reconsideration appeal with prayer for stay
of execution of the Order dated 22 September 1988. Acting on this motion, the
Board issued an Order dated 24 April 1989 allowing Solar to operate
temporarily, to enable the Board to conduct another inspection and evaluation
of Solar's wastewater treatment facilities. In the same Order, the Board
directed the Regional Executive Director of the DENR NCR to conduct the
inspection and evaluation within thirty (30) days.
On 21 April 1989, however, Solar went to the Regional Trial Court of Quezon
City, Branch 77, on petition for certiorari with preliminary injunction against the
Board, the petition being docketed as Civil Case No. Q-89-2287.
On 21 July 1989, the Regional Trial Court dismissed Solar's petition upon two
(2) grounds, i.e., that appeal and not certiorari from the questioned Order of
the Board as well as the Writ of Execution was the proper remedy, and that the
Board's subsequent Order allowing Solar to operate temporarily had rendered
Solar's petition moot and academic.
Dissatisfied, Solar went on appeal to the Court of Appeals which, in the
Decision here assailed, reversed the Order of dismissal of the trial court and
remanded the case to that court for further proceedings. In addition, the Court
of Appeals declared the Writ of Execution null and void. At the same time, the
Court of Appeals said in the dispositive portion of its Decision that:
". . . Still and all, this decision is without prejudice to whatever
action the appellee [Board] may take relative to the projected
'inspection and evaluation' of appellant's [Solar's] water treatment
facilities." 3
The Court of Appeals, in so ruling, held that certiorari was a proper remedy
since the Orders of petitioner Board may result in great and irreparable injury
to Solar; and that while the case might be moot and academic, "larger issues"
demanded that the question of due process be settled. Petitioner Board moved
for reconsideration, without success. prcd
The Board is now before us on a Petition for Review basically arguing that:

1. its ex parte Order dated 22 September 1988 and the Writ of

Execution were issued in accordance with law and were not
violative of the requirements of due process; and
2. the ex parte Order and the Writ of Execution are not the proper
subjects of a petition for certiorari.
The only issue before us at this time is whether or not the Court of Appeals
erred in reversing the trial court on the ground that Solar had been denied due
process by the Board. LibLex
Petitioner Board claims that under P.D. No. 984, Section 7(a), it has legal
authority to issue ex parte orders to suspend the operations of an
establishment when there is prima facie evidence that such establishment is
discharging effluents or wastewater, the pollution level of which exceeds the
maximum permissible standards set by the NPCC (now, the Board). Petitioner
Board contends that the reports before it concerning the effluent discharges of
Solar into the Tullahan-Tinejeros River provided prima facie evidence of
violation by Solar of Section 5 of the 1982 Effluent Code.
Solar, on the other hand, contends that under the Board's own rules and
regulations, an ex parte order may issue only if the effluents discharged pose
an "immediate threat to life, public health; safety or welfare, or to animal and
plant life." In the instant case, according to Solar, the inspection reports before
the Board made no finding that Solar's wastewater discharged posed such a
threat.
The Court is not persuaded by Solar's contention. Section 7(a) of P.D. No.
984 authorized petitioner Board to issue ex parte cease and desist orders
under the following circumstances:
"P.D. 984, Section 7, paragraph (a), provides:
(a) Public Hearing . . . Provided, That whenever the Commission
finds prima facie evidence that the discharged sewage or wastes
are of immediate threat to life, public health, safety or welfare, or
to animal or plant life, or exceeds the allowable standards set by
the Commission, the Commissioner may issue an ex-parte order
directing the discontinuance of the same or the temporary
suspension or cessation of operation of the establishment or
person generating such sewage or wastes without the necessity of
a prior public hearing. The said ex-parte order shall be
immediately executory and shall remain in force until said
establishment or person prevents or abates the said pollution
within the allowable standards or modified or nullified by a
competent court." (Emphasis supplied).
We note that under the above-quoted portion of Section 7(a) of P.D. No. 984,
an ex parte cease and desist order may be issued by the Board (a) whenever
the wastes discharged by an establishment pose an "immediate threat to life,

public health, safety or welfare, or to animal or plant life," or (b) whenever

such discharges or wastes exceed "the allowable standards set by the [NPCC]."
On the one hand, it is not essential that the Board prove that an "immediate
threat to life, public health, safety or welfare, or to animal or plant life" exists
before an ex parte cease and desist order may be issued. It is enough if the
Board finds that the wastes discharged do exceed "the allowable standards set
by the [NPCC]." In respect of discharges of wastes as to which allowable
standards have been set by the Commission, the Board may issue an ex
parte cease and desist order when there is prima facie evidence of an
establishment exceeding such allowable standards. Where, however, the
effluents or discharges have not yet been the subject matter of allowable
standards set by the Commission, then the Board may act on an ex parte basis
when it finds at least prima facie proof that the wastewater or material
involved presents an "immediate threat to life, public health, safety or welfare
or to animal or plant life." Since the applicable standards set by the
Commission existing at any given time may well not cover every possible or
imaginable kind of effluent or waste discharge, the general standard of an
"immediate threat to life public health, safety or welfare, or to animal and plant
life" remains necessary. Cdpr
Upon the other hand, the Court must assume that the extant allowable
standards have been set by the Commission or Board precisely in order to
avoid or neutralize an "immediate threat to life, public health, safety or
welfare, or to animal or plant life."
Section 5 of the Effluent Regulations of 1982 4 sets out the maximum
permissible levels of physical and chemical substances which effluents from
domestic wastewater treatment plants and industrial plants must not exceed
"when discharged into bodies of water classified as Class A, B, C, D, SB and SC
in accordance with the 1978 NPCC Rules and Regulations." The waters of
Tullahan-Tinejeros River are classified as inland waters Class D under Section
68 of the 1978 NPCC Rules and Regulations, 5 which in part provides that:
"Section 68. Water Usage and Classification. The quality of
Philippine waters shall be maintained in a safe and satisfactory
condition according to their best usages. For this purpose, all water
shall be classified according to the following beneficial usages:
(a) Fresh Surface Water.
Classification Best usage
xxx xxx xxx
Class
live
industrial
processing

D For
stock

agriculture,
watering
cooling
xxx xxx xxx

irrigation,
and
and

(Emphases supplied)
The reports on the inspections carried on Solar's wastewater treatment
facilities on 5 and 12 November 1986 and 6 September 1988 set forth the
following identical finding:
"a. For legal action in [view of] violation of Section 103 of the
implementing rules and regulations of P.D. No. 984 and Section 5 of
the Effluent Regulations of 1982." 6
Placing the maximum allowable standards set in Section 5 of the Effluent
Regulations of 1982 alongside the findings of the November 1986 and
September 1988 inspection reports, we get the following results:
"Inland November September
Waters 1986 1988
(Class C & D) 7 Report 8 Report 9
Station 1 Station 1
a) Color in 100 a) Color units 250 125
platinum (Apparent
cobalt Color)
units
b) p H 6-8.5 b) pH 9.3 8.7
c) Tempera- 40 c) Temperature
ture in C (C)
d) Phenols in 0.1 d) Phenols in
mg./l. mg./l.
e) Suspended 75 e) Suspended 340 80
solids in solids in
mg./l. mg./l.
f) BOD in 80 f) BOD (5-day) 1,100 152
mg./l mg./l.
g) oil/Grease 10 g) Oil/Grease
in mg./l. mg./l.
h) Detergents 5 h) Detergents 2.93
in mg./l." mg./l. MBAS
i) Dissolved 0
Oxygen, mg./l.

j) Settleable 0.4 1.5

Matter, mg./l.
k) Total Dis- 800 610
solved Solids
mg./l.
l) Total Solids 1,400 690
mg./l.
m) Turbidity
NTU/ppm. SiO3 70
The November 1986 inspections report concluded that:
"Records of the Commission show that the plant under its previous
owner, Fine Touch Finishing Corporation, was issued a Notice of
Violation on 20 December 1985 directing same to cease and desist
from conducting dyeing operation until such time the waste
treatment plant is already completed and operational. The new
owner Solar Textile Corporation informed the Commission of the
plant acquisition thru its letter dated March 1986 (sic).
The new owner was summoned to a hearing held on 13 October
1986 based on the adverse findings during the inspection/water
sampling test conducted on 08 August 1986. As per instruction of
the Legal Division a re-inspection/sampling test should be
conducted first before an appropriate legal action is instituted;
hence, this inspection.
Based on the above findings, it is clear that the new owner
continuously violates the directive of the Commission by
undertaking dyeing operation without completing first and
operating its existing WTP. The analysis of results on water
samples taken showed that the untreated wastewater from the
firm pollutes our water resources. In this connection, it is
recommended that appropriate legal action be instituted
immediately against the firm . . ." 10
The September 1988 inspection report's conclusions were:
"1. The plant was undertaking dyeing, bleaching and rinsing
operations during the inspection. The combined wastewater
generated from the said operations was estimated at about 30
gallons per minute. About 80% of the wastewater was traced
directly discharged into a drainage canal leading to the Tullahan Tinejeros river by means of a bypass. The remaining 20% was
channeled into the plant's existing wastewater treatment plant
(WTP).

2. The WTP was noted not yet fully operational some accessories
were not yet installed. Only the sump pit and the holding/collecting
tank are functional but appeared seldom used. The wastewater
mentioned channeled was noted held indefinitely into the
collection tank for primary treatment. There was no effluent
discharge [from such collection tank].
3. A sample from the bypass wastewater was collected for
laboratory analyses. Result of the analyses show that the bypass
wastewater is polluted in terms of color units, BOD and suspended
solids, among others. (Please see attached laboratory result)." 11
From the foregoing reports, it is clear to this Court that there was at
least prima facie evidence before the Board that the effluents emanating from
Solar's plant exceeded the maximum allowable levels of physical and chemical
substances set by the NPCC and that accordingly there was adequate basis
supporting the ex parte cease and desist order issued by the Board. It is also
well to note that the previous owner of the plant facility Fine Touch Finishing
Corporation had been issued a Notice of Violation on 20 December 1985
directing it to cease and refrain from carrying out dyeing operations until the
water treatment plant was completed and operational. Solar, the new owner,
informed the NPCC of the acquisition of the plant on March 1986. Solar was
summoned by the NPCC to a hearing on 13 October 1986 based on the results
of the sampling test conducted by the NPCC on 8 August 1986. Petitioner
Board refrained from issuing an ex parte cease and desist order until after the
November 1986 and September 1988 re-inspections were conducted and the
violation of applicable standards was confirmed. In other words, petitioner
Board appears to have been remarkably forbearing in its efforts to enforce the
applicable standards vis-a-vis Solar. Solar, on the other hand, seemed very
casual about its continued discharge of untreated, pollutive effluents into the
Tullahan-Tinejeros River, presumably loath to spend the money necessary to
put its Wastewater Treatment Plant ("WTP") in an operating condition. cdrep
In this connection, we note that in Technology Developers, Inc. v. Court of
Appeals, et al., 12 the Court very recently upheld the summary closure ordered
by the Acting Mayor of Sta. Maria, Bulacan, of a pollution-causing
establishment, after finding that the records showed that:
"1. No mayor's permit had been secured. While it is true that the
matter of determining whether there is a pollution of the
environment that requires control if not prohibition of the operation
of a business is essentially addressed to the then National Pollution
Control Commission of the Ministry of Human Settlements, now the
Environmental Management Bureau of the Department of
Environment and Natural Resources, it must be recognized that the
mayor of a town has as much responsibility to protect its

inhabitants from pollution, and by virtue of his police power, he

may deny the application for a permit to operate a business or
otherwise close the same unless appropriate measures are taken
to control and or avoid injury to the health of the residents of the
community from the emission in the operation of the business.
2. The Acting Mayor, in a letter of February 16, 1989, called the
attention of petitioner to the pollution emitted by the fumes of its
plant whose offensive odor "not only pollute the air in the locality
but also affect the health of the residents in the area," so that
petitioner was ordered to stop its operation until further orders and
it was required to bring the following:
xxx xxx xxx
(3) Region III-Department of Environment and Natural
Resources Anti-Pollution permit. (Annex A-2, petition).
3. This action of the Acting Mayor was in response to the complaint
of the residents of Barangay Guyong, Sta. Maria, Bulacan, directed
to the Provincial Governor through channels (Annex A-B, petition). .
..
4. The closure order of the Acting Mayor was issued only after an
investigation was made by Marivic Guina who in her report of
December 8, 1988 observed that the fumes emitted by the plant of
petitioner goes directly to the surrounding houses and that no
proper air pollution device has been installed. (Annex A-9, petition).
xxx xxx xxx
6. While petitioner was able to present a temporary permit to
operate by the then National Pollution Control Commission on
December 15, 1987, the permit was good only up to May 25, 1988
(Annex A-12, petition). Petitioner had not exerted any effort to
extend or validate its permit much less to install any device to
control the pollution and prevent any hazard to the health of the
residents of the community."
In the instant case, the ex parte cease and desist Order was issued not by a
local government official but by the Pollution Adjudication Board, the very
agency of the Government charged with the task of determining whether the
effluents of a particular industrial establishment comply with or violate
applicable anti-pollution statutory and regulatory provisions.
Ex parte cease and desist orders are permitted by law and regulations in
situations like that here presented precisely because stopping the continuous
discharge of pollutive and untreated effluents into the rivers and other inland
waters of the Philippines cannot be made to wait until protracted litigation over
the ultimate correctness or propriety of such orders has run its full course,
including multiple and sequential appeals such as those which Solar has taken,

which of course may take several years. The relevant pollution control statute
and implementing regulations were enacted and promulgated in the exercise
of that persuasive, sovereign power to protect the safety, health, and general
welfare and comfort of the public, as well as the protection of plant and animal
life, commonly designated as the police power. It is a constitutional common
place that the ordinary requirements of procedural due process yield to the
necessities of protecting vital public interests like those here involved, through
the exercise of police power. The Board's ex parte Order and Writ of Execution
would, of course, have compelled Solar temporarily to stop its plant operations,
a state of affairs Solar could in any case have avoided by simply absorbing the
bother and burden of putting its WTP on an operational basis. Industrial
establishments are not constitutionally entitled to reduce their capitals costs
and operating expenses and to increase their profits by imposing upon the
public threats and risks to its safety, health, general welfare and comfort, by
disregarding the requirements of anti-pollution statutes and their implementing
regulations. cdll
It should perhaps be made clear the Court is not here saying that the
correctness of the ex parte Order and Writ of Execution may not be contested
by Solar in a hearing before the Board itself. Where the establishment affected
by an ex parte cease and desist order contests the correctness of the prima
faciefindings of the Board, the Board must hold a public hearing where such
establishment would have an opportunity to controvert the basis of such ex
parteorder. That such an opportunity is subsequently available is really all that
is required by the due process clause of the Constitution in situations like that
we have here. The Board's decision rendered after the public hearing may then
be tested judicially by an appeal to the Court of Appeals in accordance with
Section 7(c) of P.D. No. 984 and Section 42 of the Implementing Rules and
Regulations. A subsequent public hearing is precisely what Solar should have
sought instead of going to court to seek nullification of the Board's Order and
Writ of Execution and instead of appealing to the Court of Appeals. It will be
recalled that the Board in fact gave Solar authority temporarily to continue
operations until still another inspection of its wastewater treatment facilities
and then another analysis of effluent samples could be taken and evaluated.
Solar claims finally that the petition for certiorari was the proper remedy as the
questioned Order and Writ of Execution issued by the Board were patent
nullities. Since we have concluded that Order and Writ of Execution were
entirely within the lawful authority of petitioner Board, the trial court did not
err when it dismissed Solar's petition for certiorari. It follows that the proper
remedy was an appeal from the trial court to the Court of Appeals, as Solar did
in fact appeal.
ACCORDINGLY, the Petition for Review is given DUE COURSE and the Decision
of the Court of Appeals dated 7 February 1990 and its Resolution dated 10 May
1990 in A.C.-G.R. No. SP 18821 are hereby SET ASIDE. The Order of petitioner
Board dated 22 September 1988 and the Writ of Execution, as well as the

decision of the trial court dated 21 July 1989, are hereby REINSTATED, without
prejudice to the right of Solar to contest the correctness of the basis of the
Board's Order and Writ of Execution at a public hearing before the Board.
Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.
||| (Pollution Adjudication Board v. Court of Appeals, G.R. No. 93891
(Resolution), [March 11, 1991], 272-A PHIL 66-80)

5. METROPOLITAN MANILA DEVT AUTHORITY v DANTE O. GARIN

SECOND DIVISION
[G.R. No. 130230. April 15, 2005.]
METROPOLITAN MANILA DEVELOPMENT
AUTHORITY, petitioner, vs. DANTE O. GARIN, respondent.
DECISION
CHICO-NAZARIO, J p:
At issue in this case is the validity of Section 5(f) of Republic Act No.
7924 creating the Metropolitan Manila Development Authority (MMDA), which
authorizes it to confiscate and suspend or revoke driver's licenses in the
enforcement of traffic laws and regulations.
The issue arose from an incident involving the respondent Dante O. Garin, a
lawyer, who was issued a traffic violation receipt (TVR) and his driver's license
confiscated for parking illegally along Gandara Street, Binondo, Manila, on 05
August 1995. The following statements were printed on the TVR:
YOU ARE HEREBY DIRECTED TO REPORT TO THE MMDA TRAFFIC
OPERATIONS CENTER PORT AREA MANILA AFTER 48 HOURS FROM
DATE OF APPREHENSION FOR DISPOSITION/APPROPRIATE ACTION
THEREON. CRIMINAL CASE SHALL BE FILED FOR FAILURE TO
REDEEM LICENSE AFTER 30 DAYS.
VALID AS TEMPORARY DRIVER'S LICENSE FOR SEVEN DAYS FROM
DATE OF APPREHENSION. 1
Shortly before the expiration of the TVR's validity, the respondent addressed a
letter 2 to then MMDA Chairman Prospero Oreta requesting the return of his
driver's license, and expressing his preference for his case to be filed in court.
Receiving no immediate reply, Garin filed the original complaint 3 with
application for preliminary injunction in Branch 260 of the Regional Trial Court
(RTC) of Paraaque, on 12 September 1995, contending that, in the absence of
any implementing rules and regulations, Sec. 5(f) of Rep. Act No. 7924 grants
the MMDA unbridled discretion to deprive erring motorists of their licenses,
pre-empting a judicial determination of the validity of the deprivation, thereby
violating the due process clause of the Constitution. The respondent further
contended that the provision violates the constitutional prohibition against
undue delegation of legislative authority, allowing as it does the MMDA to fix

and impose unspecified and therefore unlimited fines and other penalties
on erring motorists. SaHTCE
In support of his application for a writ of preliminary injunction, Garin alleged
that he suffered and continues to suffer great and irreparable damage because
of the deprivation of his license and that, absent any implementing rules from
the Metro Manila Council, the TVR and the confiscation of his license have no
legal basis.
For its part, the MMDA, represented by the Office of the Solicitor General,
pointed out that the powers granted to it by Sec. 5(f) of Rep. Act No. 7924 are
limited to the fixing, collection and imposition of fines and penalties for traffic
violations, which powers are legislative and executive in nature; the judiciary
retains the right to determine the validity of the penalty imposed. It further
argued that the doctrine of separation of powers does not preclude
"admixture" of the three powers of government in administrative agencies. 4
The MMDA also refuted Garin's allegation that the Metro Manila Council, the
governing board and policy making body of the petitioner, has as yet to
formulate the implementing rules for Sec. 5(f) of Rep. Act No. 7924 and
directed the court's attention to MMDA Memorandum Circular No. TT-95-001
dated 15 April 1995. Respondent Garin, however, questioned the validity of
MMDA Memorandum Circular No. TT-95-001, as he claims that it was passed by
the Metro Manila Council in the absence of a quorum.
Judge Helen Bautista-Ricafort issued a temporary restraining order on 26
September 1995, extending the validity of the TVR as a temporary driver's
license for twenty more days. A preliminary mandatory injunction was granted
on 23 October 1995, and the MMDA was directed to return the respondent's
driver's license.
On 14 August 1997, the trial court rendered the assailed decision 5 in favor of
the herein respondent and held that:
a. There was indeed no quorum in that First Regular Meeting of the
MMDA Council held on March 23, 1995, hence MMDA Memorandum
Circular No. TT-95-001, authorizing confiscation of driver's licenses
upon issuance of a TVR, is void ab initio.
b. The summary confiscation of a driver's license without first
giving the driver an opportunity to be heard; depriving him of a
property right (driver's license) without DUE PROCESS; not filling
(sic) in Court the complaint of supposed traffic infraction, cannot
be justified by any legislation (and is) hence unconstitutional.
WHEREFORE, the temporary writ of preliminary injunction is hereby
made permanent; th(e) MMDA is directed to return to plaintiff his
driver's license; th(e) MMDA is likewise ordered to desist from
confiscating driver's license without first giving the driver the
opportunity to be heard in an appropriate proceeding.

In filing this petition, 6 the MMDA reiterates and reinforces its argument in the
court below and contends that a license to operate a motor vehicle is neither a
contract nor a property right, but is a privilege subject to reasonable regulation
under the police power in the interest of the public safety and welfare. The
petitioner further argues that revocation or suspension of this privilege does
not constitute a taking without due process as long as the licensee is given the
right to appeal the revocation.
To buttress its argument that a licensee may indeed appeal the taking and the
judiciary retains the power to determine the validity of the confiscation,
suspension or revocation of the license, the petitioner points out that under the
terms of the confiscation, the licensee has three options:
1. To voluntarily pay the imposable fine,
2. To protest the apprehension by filing a protest with the MMDA
Adjudication Committee, or
3. To request the referral of the TVR to the Public Prosecutor's
Office.
The MMDA likewise argues that Memorandum Circular No. TT-95-001 was
validly passed in the presence of a quorum, and that the lower court's finding
that it had not was based on a "misapprehension of facts," which the petitioner
would have us review. Moreover, it asserts that though the circular is the basis
for the issuance of TVRs, the basis for the summary confiscation of licenses is
Sec. 5(f) of Rep. Act No. 7924 itself, and that such power is self-executory and
does not require the issuance of any implementing regulation or
circular. SHacCD
Meanwhile, on 12 August 2004, the MMDA, through its Chairman Bayani
Fernando, implemented Memorandum Circular No. 04, Series of 2004, outlining
the procedures for the use of the Metropolitan Traffic Ticket (MTT) scheme.
Under the circular, erring motorists are issued an MTT, which can be paid at
any Metrobank branch. Traffic enforcers may no longer confiscate drivers'
licenses as a matter of course in cases of traffic violations. All motorists with
unredeemed TVRs were given seven days from the date of implementation of
the new system to pay their fines and redeem their license or vehicle plates. 7
It would seem, therefore, that insofar as the absence of a prima facie case to
enjoin the petitioner from confiscating drivers' licenses is concerned, recent
events have overtaken the Court's need to decide this case, which has been
rendered moot and academic by the implementation of Memorandum Circular
No. 04, Series of 2004.
The petitioner, however, is not precluded from re-implementing Memorandum
Circular No. TT-95-001, or any other scheme, for that matter, that would entail
confiscating drivers' licenses. For the proper implementation, therefore, of the
petitioner's future programs, this Court deems it appropriate to make the
following observations:

1. A license to operate a motor vehicle is a privilege that the state may

withhold in the exercise of its police power.
The petitioner correctly points out that a license to operate a motor vehicle is
not a property right, but a privilege granted by the state, which may be
suspended or revoked by the state in the exercise of its police power, in the
interest of the public safety and welfare, subject to the procedural due process
requirements. This is consistent with our rulings in Pedro v. Provincial Board of
Rizal 8 on the license to operate a cockpit, Tan v. Director of
Forestry 9 andOposa v. Factoran 10 on timber licensing agreements,
and Surigao Electric Co., Inc. v. Municipality of Surigao 11 on a legislative
franchise to operate an electric plant.
Petitioner cites a long list of American cases to prove this point, such as State
ex. Rel. Sullivan, 12 which states in part that, "the legislative power to regulate
travel over the highways and thoroughfares of the state for the general welfare
is extensive. It may be exercised in any reasonable manner to conserve the
safety of travelers and pedestrians. Since motor vehicles are instruments of
potential danger, their registration and the licensing of their operators have
been required almost from their first appearance. The right to operate them in
public places is not a natural and unrestrained right, but a privilege subject to
reasonable regulation, under the police power, in the interest of the public
safety and welfare. The power to license imports further power to withhold or
to revoke such license upon noncompliance with prescribed conditions."
Likewise, the petitioner quotes the Pennsylvania Supreme Court
in Commonwealth v. Funk, 13 to the effect that: "Automobiles are vehicles of
great speed and power. The use of them constitutes an element of danger to
persons and property upon the highways. Carefully operated, an automobile is
still a dangerous instrumentality, but, when operated by careless or
incompetent persons, it becomes an engine of destruction. The Legislature, in
the exercise of the police power of the commonwealth, not only may, but must,
prescribe how and by whom motor vehicles shall be operated on the highways.
One of the primary purposes of a system of general regulation of the subject
matter, as here by the Vehicle Code, is to insure the competency of the
operator of motor vehicles. Such a general law is manifestly directed to the
promotion of public safety and is well within the police power."
The common thread running through the cited cases is that it is the legislature,
in the exercise of police power, which has the power and responsibility to
regulate how and by whom motor vehicles may be operated on the state
highways. HIAEcT
2. The MMDA is not vested with police power.
In Metro Manila Development Authority v. Bel-Air Village Association,
Inc., 14 we categorically stated that Rep. Act No. 7924 does not grant the

MMDA with police power, let alone legislative power, and that all its functions
are administrative in nature.
The said case also involved the herein petitioner MMDA which claimed that it
had the authority to open a subdivision street owned by the Bel-Air Village
Association, Inc. to public traffic because it is an agent of the state endowed
with police power in the delivery of basic services in Metro Manila. From this
premise, the MMDA argued that there was no need for the City of Makati to
enact an ordinance opening Neptune Street to the public.
Tracing the legislative history of Rep. Act No. 7924 creating the MMDA, we
concluded that the MMDA is not a local government unit or a public corporation
endowed with legislative power, and, unlike its predecessor, the Metro Manila
Commission, it has no power to enact ordinances for the welfare of the
community. Thus, in the absence of an ordinance from the City of Makati, its
own order to open the street was invalid.
We restate here the doctrine in the said decision as it applies to the case at
bar: police power, as an inherent attribute of sovereignty, is the power vested
by the Constitution in the legislature to make, ordain, and establish all manner
of wholesome and reasonable laws, statutes and ordinances, either with
penalties or without, not repugnant to the Constitution, as they shall judge to
be for the good and welfare of the commonwealth, and for the subjects of the
same.
Having been lodged primarily in the National Legislature, it cannot be
exercised by any group or body of individuals not possessing legislative power.
The National Legislature, however, may delegate this power to the president
and administrative boards as well as the lawmaking bodies of municipal
corporations or local government units (LGUs). Once delegated, the agents can
exercise only such legislative powers as are conferred on them by the national
lawmaking body.
Our Congress delegated police power to the LGUs in the Local Government
Code of 1991. 15 A local government is a "political subdivision of a nation or
state which is constituted by law and has substantial control of local
affairs." 16 Local government units are the provinces, cities, municipalities
and barangays, which exercise police power through their respective legislative
bodies.
Metropolitan or Metro Manila is a body composed of several local government
units. With the passage of Rep. Act No. 7924 in 1995, Metropolitan Manila was
declared as a "special development and administrative region" and the
administration of "metro-wide" basic services affecting the region placed under
"a development authority" referred to as the MMDA. Thus:
. . . [T]he powers of the MMDA are limited to the following acts:
formulation, coordination, regulation, implementation, preparation,
management, monitoring, setting of policies, installation of a

system and administration. There is no syllable in R. A. No.

7924 that grants the MMDA police power, let alone
legislative power. Even the Metro Manila Council has not
been delegated any legislative power. Unlike the legislative
bodies of the local government units, there is no provision in R.
A. No. 7924 that empowers the MMDA or its Council to
"enact ordinances, approve resolutions and appropriate
funds for the general welfare" of the inhabitants of Metro
Manila. The MMDA is, as termed in the charter itself, a
"development authority." It is an agency created for the
purpose of laying down policies and coordinating with the
various national government agencies, people's
organizations, non-governmental organizations and the
private sector for the efficient and expeditious delivery of
basic services in the vast metropolitan area. All its
functions are administrative in nature and these are actually
summed up in the charter itself, viz:
"Sec. 2. Creation of the Metropolitan Manila Development
Authority. . . .
The MMDA shall perform planning, monitoring and
coordinative functions, and in the process exercise regulatory
and supervisory authority over the delivery of metro-wide
services within Metro Manila, without diminution of the
autonomy of the local government units concerning purely
local matters." IcHSCT
xxx xxx xxx
Clearly, the MMDA is not a political unit of government. The power
delegated to the MMDA is that given to the Metro Manila Council to
promulgate administrative rules and regulations in the
implementation of the MMDA's functions. There is no grant of
authority to enact ordinances and regulations for the
general welfare of the inhabitants of the
metropolis. 17 (footnotes omitted, emphasis supplied)
Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower
court and by the petitioner to grant the MMDA the power to confiscate and
suspend or revoke drivers' licenses without need of any other legislative
enactment, such is an unauthorized exercise of police power.
3. Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules
and regulations.
Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the
Metro Manila Development Authority." The contested clause in Sec. 5(f) states
that the petitioner shall "install and administer a single ticketing system, fix,

impose and collect fines and penalties for all kinds of violations of traffic rules
and regulations, whether moving or nonmoving in nature, and confiscate and
suspend or revoke drivers' licenses in the enforcement of such traffic laws and
regulations, the provisions of Rep. Act No. 4136 18 and P.D. No. 1605 19 to the
contrary notwithstanding," and that "(f)or this purpose, the Authority shall
enforce all traffic laws and regulations in Metro Manila, through its traffic
operation center, and may deputize members of the PNP, traffic enforcers of
local government units, duly licensed security guards, or members of nongovernmental organizations to whom may be delegated certain authority,
subject to such conditions and requirements as the Authority may impose."
Thus, where there is a traffic law or regulation validly enacted by the
legislature or those agencies to whom legislative powers have been delegated
(the City of Manila in this case), the petitioner is not precluded and in fact is
duty-bound to confiscate and suspend or revoke drivers' licenses in the
exercise of its mandate of transport and traffic management, as well as the
administration and implementation of all traffic enforcement operations, traffic
engineering services and traffic education programs. 20
This is consistent with our ruling in Bel-Air that the MMDA is a development
authority created for the purpose of laying down policies and coordinating with
the various national government agencies, people's organizations, nongovernmental organizations and the private sector, which may enforce, but
not enact, ordinances.
This is also consistent with the fundamental rule of statutory construction that
a statute is to be read in a manner that would breathe life into it, rather than
defeat it, 21 and is supported by the criteria in cases of this nature that all
reasonable doubts should be resolved in favor of the constitutionality of a
statute. 22
A last word. The MMDA was intended to coordinate services with metro-wide
impact that transcend local political boundaries or would entail huge
expenditures if provided by the individual LGUs, especially with regard to
transport and traffic management, 23 and we are aware of the valiant efforts
of the petitioner to untangle the increasingly traffic-snarled roads of Metro
Manila. But these laudable intentions are limited by the MMDA's enabling law,
which we can but interpret, and petitioner must be reminded that its efforts in
this respect must be authorized by a valid law, or ordinance, or regulation
arising from a legitimate source. AEDISC
WHEREFORE, the petition is dismissed.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
||| (Metropolitan Manila Development Authority v. Garin, G.R. No. 130230,
[April 15, 2005], 496 PHIL 82-97)

6. ORTIGAS & CO., LTD. v COURT OF APPEALS

SECOND DIVISION
[G.R. No. 126102. December 4, 2000.]
ORTIGAS & CO. LTD., petitioner, vs. THE COURT OF APPEALS
and ISMAEL G. MATHAY III, respondents.
Atty. Eulogio R. Rodriguez for petitioner.
Puhawan Aldon & Associates Law Offices for private respondent.
SYNOPSIS
Petitioner Ortigas sold to the Hermosos a parcel of land in Greenhills
Subdivision. The contract of sale provided that the lot will be used for singlefamily residential building only and this was annotated at the back of the title
of the lot. In 1981, the Metropolitan Commission enacted MMC Ordinance No.
81-01 reclassifying as a commercial zone the stretch of Ortigas Avenue from
Roosevelt Street to Madison Street. Subsequently in 1984, private respondent
Mathay III leased the lot from Hermoso and constructed a commercial building
for Greenhills Autohaus, Inc., a car sales company.
Petitioner filed Civil Case No. 4 seeking to enjoin the building by respondent of
structure on the lot and sought the demolition of the commercial structure for
having violated the terms and conditions of the Deed of Sale. The trial court
issued the injunctive order ruling that the ordinance should be given
prospective application. On certiorari, however, the CA granted the petition,
ruling that the trial court gravely abused its discretion in refusing to treat MMC
Ordinance No. 81-01 as applicable to Civil Case No. 64931. CA held that the
ordinance effectively nullified the restrictions allowing only residential use of
the property in question.
In this petition, petitioner claims that even with the zoning ordinance, the
seller and buyer of the re-classified lot can voluntarily agree to an exclusive
residential use thereof; and that respondent Mathay III as a mere lessee of the
lot in question, is a total stranger to the deed of sale and is thus barred from
questioning the condition of said deed.
The Supreme Court denied the petition, ruling: that while as a rule, laws are to
be construed as having only prospective operation, one exception is a law
which involves police power, which could be given retroactive effect and may
reasonably impair vested rights or contracts; that the MMC Ordinance No. 8101 has been held to be a legitimate police power measure to which the nonimpairment of contracts or vested rights clauses will have to yield; and that

Mathay III in this case is clearly a real party in interest because he holds the lot
pursuant to a valid lease and it is his building of a commercial structure which
petitioner seeks to enjoin.
SYLLABUS
1. STATUTORY CONSTRUCTION; LAWS ARE GENERALLY GIVEN PROSPECTIVE
APPLICATION; LAW WHICH INVOLVES POLICE POWER IS AN EXCEPTION. In
general, we agree that laws are to be construed as having only prospective
operation. Lex prospicit, non respicit. Equally settled, only laws existing at the
time of the execution of a contract are applicable thereto and are not later
statutes, unless the latter are specifically intended to have a retroactive effect.
A later law which enlarges, abridges, or in any manner changes the intent of
the parties to the contract necessarily impairs the contract itself and cannot be
given retroactive effect without violating the constitutional prohibition against
impairment of contracts. But, the foregoing principles do admit of certain
exceptions. One involves police power. A law enacted in the exercise of police
power to regulate or govern certain activities or transactions could be given
retroactive effect and may reasonably impair vested rights or contracts. Police
power legislation is applicable not only to future contracts, but equally to those
already in existence. Nonimpairment of contracts or vested rights clauses will
have to yield to the superior and legitimate exercise by the State of police
power to promote the health, morals, peace, education, good order, safety,
and general welfare of the people. Moreover, statutes in exercise of valid police
power must be read into every contract.
2. CONSTITUTIONAL LAW; POLICE POWER; CONTRACTUAL STIPULATIONS AND
VESTED RIGHTS MUST YIELD TO POLICE POWER; CASE AT BAR. Noteworthy,
in Sangalang vs. Intermediate Appellate Court, we already upheld MMC
Ordinance No. 81-01 as a legitimate police power measure. Following our ruling
in Ortigas & Co., Ltd. vs. Feati Bank & Trust Co., 94 SCRA 533 (1979), the
contractual stipulations annotated on the Torrens Title, on which Ortigas relies,
must yield to the ordinance. When that stretch of Ortigas Avenue from
Roosevelt Street to Madison Street was reclassified as a commercial zone by
the Metropolitan Manila Commission in March 1981, the restrictions in the
contract of sale between Ortigas and Hermoso, limiting all construction on the
disputed lot to single-family residential buildings, were deemed extinguished
by the retroactive operation of the zoning ordinance and could no longer be
enforced. While our legal system upholds the sanctity of contract so that a
contract is deemed law between the contracting parties, nonetheless,
stipulations in a contract cannot contravene "law, morals, good customs, public
order, or public policy." Otherwise such stipulations would be deemed null and
void.
3. REMEDIAL LAW; CIVIL PROCEDURE; REAL PARTY IN INTEREST; LESSEE WHO
BUILT COMMERCIAL STRUCTURE SOUGHT TO BE DEMOLISHED IS A REAL PARTY

IN INTEREST. By real interest is meant a present substantial interest, as

distinguished from a mere expectancy or a future, contingent, subordinate, or
consequential interest. Tested by the foregoing definition, private respondent
in this case is clearly a real party in interest. It is not disputed that he is in
possession of the lot pursuant to valid lease. He is a possessor in the concept
of a "holder of the thing" under Article 525 of the Civil Code. He was impleaded
as a defendant in the amended complaint in Civil Case No. 64931. Further,
what petitioner seeks to enjoin is the building by respondent of a commercial
structure on the lot. Clearly, it is private respondent's acts which are in issue,
and his interest in said issue cannot be a mere incidental interest. In its
amended complaint, petitioner prayed for, among others, judgment "ordering
the demolition of all improvements illegally built on the lot in question." These
show that it is petitioner Mathay III, doing business as "Greenhills Autohaus,
Inc.," and not only the Hermosos, who will be adversely affected by the court's
decree. ACEIac
DECISION
QUISUMBING, J p:
This petition seeks to reverse the decision of the Court of Appeals, dated March
25, 1996, in CA-G.R. SP No. 39193, which nullified the writ of preliminary
injunction issued by the Regional Trial Court of Pasig City, Branch 261, in Civil
Case No. 64931. It also assails the resolution of the appellate court, dated
August 13, 1996, denying petitioner's motion for reconsideration. ATcEDS
The facts of this case, as culled from the records, are as follows:
On August 25, 1976, petitioner Ortigas & Company sold to Emilia Hermoso, a
parcel of land known as Lot 1, Block 21, Psd-66759, with an area of 1,508
square meters, located in Greenhills Subdivision IV, San Juan, Metro Manila,
and covered by Transfer Certificate of Title No. 0737. The contract of sale
provided that the lot:
1. . . . (1) be used exclusively . . . for residential purposes only, and
not more than one single-family residential building will be
constructed thereon, . . .
xxx xxx xxx
6. The BUYER shall not erect . . . any sign or billboard on the roof . .
. for advertising purposes . . .
xxx xxx xxx
11. No single-family residential building shall be erected . . . until
the building plans, specification . . . have been approved by
the SELLER . . .

xxx xxx xxx

14. . . . restrictions shall run with the land and shall be construed
as real covenants until December 31, 2025 when they shall
cease and terminate . . . 1
These and the other conditions were duly annotated on the certificate of title
issued to Emilia.
In 1981, the Metropolitan Manila Commission (now Metropolitan Manila
Development Authority) enacted MMC Ordinance No. 81-01, also known as the
Comprehensive Zoning Area for the National Capital Region. The ordinance
reclassified as a commercial area a portion of Ortigas Avenue from Madison to
Roosevelt Streets of Greenhills Subdivision where the lot is located.
On June 8, 1984, private respondent Ismael Mathay III leased the lot from
Emilia Hermoso and J.P. Hermoso Realty Corp.. The lease contract did not
specify the purposes of the lease. Thereupon, private respondent constructed a
single story commercial building for Greenhills Autohaus, Inc., a car sales
company.
On January 18, 1995, petitioner filed a complaint against Emilia Hermoso with
the Regional Trial Court of Pasig, Branch 261. Docketed as Civil Case No.
64931, the complaint sought the demolition of the said commercial structure
for having violated the terms and conditions of the Deed of Sale. Complainant
prayed for the issuance of a temporary restraining order and a writ of
preliminary injunction to prohibit petitioner from constructing the commercial
building and/or engaging in commercial activity on the lot. The complaint was
later amended to implead Ismael G. Mathay III and J.P. Hermoso Realty Corp.,
which has a ten percent (10%) interest in the lot.
In his answer, Mathay III denied any knowledge of the restrictions on the use of
the lot and filed a cross-claim against the Hermosos.
On June 16, 1995, the trial court issued the writ of preliminary injunction. On
June 29, 1995, Mathay III moved to set aside the injunctive order, but the trial
court denied the motion.
Mathay III then filed with the Court of Appeals a special civil action
for certiorari, docketed as CA-G.R. SP No. 39193, ascribing to the trial court
grave abuse of discretion in issuing the writ of preliminary injunction. He
claimed that MMC Ordinance No. 81-01 classified the area where the lot was
located as commercial area and said ordinance must be read into the August
25, 1976 Deed of Sale as a concrete exercise of police power.
Ortigas and Company averred that inasmuch as the restrictions on the use of
the lot were duly annotated on the title it issued to Emilia Hermoso, said
restrictions must prevail over the ordinance, specially since these restrictions
were agreed upon before the passage of MMC Ordinance No. 81-01.

On March 25, 1996, the appellate court disposed of the case as follows:
WHEREFORE, in light of the foregoing, the petition is hereby
GRANTED. The assailed orders are hereby nullified and set aside.
SO ORDERED. 2
In finding for Mathay III, the Court of Appeals held that the MMC Ordinance No.
81-01 effectively nullified the restrictions allowing only residential use of the
property in question.
Ortigas seasonably moved for reconsideration, but the appellate court denied
it on August 13, 1996.
Hence, the instant petition.
In its Memorandum, petitioner now submits that the "principal issue in this
case is whether respondent Court of Appeals correctly set aside the Order
dated June 16, 1995 of the trial court which issued the writ of preliminary
injunction on the sole ground that MMC Ordinance No. 81-01 nullified the
building restriction imposing exclusive residential use on the property in
question." 3 It also asserts that "Mathay III lacks legal capacity to question the
validity of conditions of the deed of sale; and he is barred by estoppel or
waiver to raise the same question like his principals, the owners." 4 Lastly, it
avers that the appellate court "unaccountably failed to address" several
questions of fact.
Principally, we must resolve the issue of whether the Court of Appeals erred in
holding that the trial court committed grave abuse of discretion when it
refused to apply MMC Ordinance No. 81-01 to Civil Case No. 64931.
But first, we must address petitioner's allegation that the Court of Appeals
"unaccountably failed to address" questions of fact. For basic is the rule that
factual issues may not be raised before this Court in a petition for review and
this Court is not duty-bound to consider said questions. 5 CA-G.R. SP No. 39193
was a special civil action for certiorari, and the appellate court only had to
determine if the trial court committed grave abuse of discretion amounting to
want or excess of jurisdiction in issuing the writ of preliminary injunction. Thus,
unless vital to our determination of the issue at hand, we shall refrain from
further consideration of factual questions.
Petitioner contends that the appellate court erred in limiting its decision to the
cited zoning ordinance. It avers that a contractual right is not automatically
discarded once a claim is made that it conflicts with police power. Petitioner
submits that the restrictive clauses in the questioned contract is not in conflict
with the zoning ordinance. For one, according to petitioner, the MMC Ordinance
No. 81-01 did not prohibit the construction of residential buildings. Petitioner
argues that even with the zoning ordinance, the seller and buyer of the reclassified lot can voluntarily agree to an exclusive residential use thereof.
Hence, petitioner concludes that the Court of Appeals erred in holding that the

condition imposing exclusive residential use was effectively nullified by the

zoning ordinance. EcHAaS
In its turn, private respondent argues that the appellate court correctly ruled
that the trial court had acted with grave abuse of discretion in refusing to
subject the contract to the MMC Ordinance No. 81-01. He avers that the
appellate court properly held the police power superior to the non-impairment
of contract clause in the Constitution. He concludes that the appellate court did
not err in dissolving the writ of preliminary injunction issued by the trial court
in excess of its jurisdiction.
We note that in issuing the disputed writ of preliminary injunction, the trial
court observed that the contract of sale was entered into in August 1976, while
the zoning ordinance was enacted only in March 1981. The trial court reasoned
that since private respondent had failed to show that MMC Ordinance No. 8101 had retroactive effect, said ordinance should be given prospective
application only, 6 citing Co vs. Intermediate Appellate Court, 162 SCRA 390
(1988).
In general, we agree that laws are to be construed as having only prospective
operation. Lex prospicit, non respicit. Equally settled, only laws existing at the
time of the execution of a contract are applicable thereto and not later
statutes, unless the latter are specifically intended to have retroactive
effect. 7 A later law which enlarges, abridges, or in any manner changes the
intent of the parties to the contract necessarily impairs the contract
itself 8 and cannot be given retroactive effect without violating the
constitutional prohibition against impairment of contracts. 9
But, the foregoing principles do admit of certain exceptions. One involves
police power. A law enacted in the exercise of police power to regulate or
govern certain activities or transactions could be given retroactive effect and
may reasonably impair vested rights or contracts. Police power legislation is
applicable not only to future contracts, but equally to those already in
existence. 10 Non-impairment of contracts or vested rights clauses will have to
yield to the superior and legitimate exercise by the State of police power to
promote the health, morals, peace, education, good order, safety, and general
welfare of the people. 11 Moreover, statutes in exercise of valid police power
must be read into every contract. 12 Noteworthy, in Sangalang
vs. Intermediate Appellate Court,13 we already upheld MMC Ordinance No. 8101 as a legitimate police power measure.
The trial court's reliance on the Co vs. IAC, 14 is misplaced. In Co, the disputed
area was agricultural and Ordinance No. 81-01 did not specifically provide that
"it shall have retroactive effect so as to discontinue all rights previously
acquired over lands located within the zone which are neither residential nor
light industrial in nature," 15 and stated with respect to agricultural areas
covered that "the zoning ordinance should be given prospective operation
only." 16 The area in this case involves not agricultural but urban residential

land. Ordinance No. 81-01 retroactively affected the operation of the zoning
ordinance in Greenhills by reclassifying certain locations therein as
commercial.
Following our ruling in Ortigas & Co., Ltd. vs. Feati Bank & Trust Co., 94 SCRA
533 (1979), the contractual stipulations annotated on the Torrens Title, on
which Ortigas relies, must yield to the ordinance. When that stretch of Ortigas
Avenue from Roosevelt Street to Madison Street was reclassified as a
commercial zone by the Metropolitan Manila Commission in March 1981, the
restrictions in the contract of sale between Ortigas and Hermoso, limiting all
construction on the disputed lot to single-family residential buildings, were
deemed extinguished by the retroactive operation of the zoning ordinance and
could no longer be enforced. While our legal system upholds the sanctity of
contract so that a contract is deemed law between the contracting
parties, 17 nonetheless, stipulations in a contract cannot contravene "law,
morals, good customs, public order, or public policy." 18 Otherwise such
stipulations would be deemed null and void. Respondent court correctly found
that the trial court committed in this case a grave abuse of discretion
amounting to want of or excess of jurisdiction in refusing to treat Ordinance No.
81-01 as applicable to Civil Case No. 64931. In resolving matters in litigation,
judges are not only duty-bound to ascertain the facts and the applicable
laws, 19 they are also bound by their oath of office to apply the applicable
law. 20
As a secondary issue, petitioner contends that respondent Mathay III, as a
mere lessee of the lot in question, is a total stranger to the deed of sale and is
thus barred from questioning the conditions of said deed. Petitioner points out
that the owners of the lot voluntarily agreed to the restrictions on the use of
the lot and do not question the validity of these restrictions. Petitioner argues
that Mathay III as a lessee is merely an agent of the owners, and could not
override and rise above the status of his principals. Petitioner submits that he
could not have a higher interest than those of the owners, the Hermosos, and
thus had no locus standi to file CA-G.R. SP No. 39193 to dissolve the injunctive
writ issued by the RTC of Pasig City.
For his part, private respondent argues that as the lessee who built the
commercial structure, it is he and he alone who stands to be either benefited
or injured by the results of the judgment in Civil Case No. 64931. He avers he
is the party with real interest in the subject matter of the action, as it would be
his business, not the Hermosos', which would suffer had not the respondent
court dissolved the writ of preliminary injunction.
A real party in interest is defined as "the party who stands to be benefited or
injured by the judgment or the party entitled to the avails of the
suit." "Interest" within the meaning of the rule means material interest, an
interest in issue and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental interest. 21 By real

interest is meant a present substantial interest, as distinguished from a mere

expectancy or a future, contingent, subordinate, or consequential interest. 22
Tested by the foregoing definition, private respondent in this case is clearly a
real party in interest. It is not disputed that he is in possession of the lot
pursuant to a valid lease. He is a possessor in the concept of a "holder of the
thing" under Article 525 of the Civil Code. 23 He was impleaded as a defendant
in the amended complaint in Civil Case No. 64931. Further, what petitioner
seeks to enjoin is the building by respondent of a commercial structure on the
lot. Clearly, it is private respondent's acts which are in issue, and his interest in
said issue cannot be a mere incidental interest. In its amended complaint,
petitioner prayed for, among others, judgment "ordering the demolition of all
improvements illegally built on the lot in question." 24 These show that it is
petitioner Mathay III, doing business as "Greenhills Autohaus, Inc.," and not
only the Hermosos, who will be adversely affected by the court's decree.
Petitioner also cites the rule that a stranger to a contract has no rights or
obligations under it, 25 and thus has no standing to challenge its
validity. 26 But in seeking to enforce the stipulations in the deed of sale,
petitioner impleaded private respondent as a defendant. Thus petitioner must
recognize that where a plaintiff has impleaded a party as a defendant, he
cannot subsequently question the latter's standing in court. 27
WHEREFORE, the instant petition is DENIED. The challenged decision of the
Court of Appeals dated March 25, 1996, as well as the assailed resolution of
August 13, 1996, in CA-G.R. SP No. 39193 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Bellosillo, Mendoza, Buena, and De Leon, Jr., JJ ., concur.
||| (Ortigas & Co. Ltd. v. Court of Appeals, G.R. No. 126102, [December 4,
2000], 400 PHIL 615-626)

7. PHILIPPINE PRESS INSTITUTE v COMELEC

EN BANC
[G.R. No. 119694. May 22, 1995.]
PHILIPPINE PRESS INSTITUTE, INC., for and in behalf of 139
members, represented by its President Amado P. Macasaet
and its Executive Director Ermin F. Garcia, Jr., petitioner, vs.
COMMISSION ON ELECTIONS, respondent.
SYLLABUS
1. CONSTITUTIONAL LAW; BILL OF RIGHTS; PROHIBITION AGAINST TAKING OF
PRIVATE PROPERTY FOR PUBLIC USE WITHOUT JUST COMPENSATION;
COMPELLING PUBLISHERS TO "DONATE" COMELEC SPACE, A VIOLATION OF.
To compel print media companies to donate "Comelec space" of the
dimensions specified in Section 2 of Resolution No. 2722 (not less than one-half
page), amounts to "taking" of private personal property for public use or
purposes. Section 2 failed to specify the intended frequency of such
compulsory "donation": only once during the period from 6 March 1995 (or 21
March 1995) until 12 May 1995? or everyday or once a week? or as often as
Comelec may direct during the same period? The extent of the taking or
deprivation is not insubstantial; this is not a case of a de minimis temporary
limitation or restraint upon the use of private property. The monetary value of
the compulsory "donation," measured by the advertising rates ordinarily
charged by newspaper publishers whether in cities or in non-urban areas, may
be very substantial indeed. The taking of private property for public use is, of
course, authorized by the Constitution, but not without payment of "just
compensation" (Article III, Section 9). And apparently the necessity of paying
compensation for "Comelec space" is precisely what is sought to be avoided by
respondent Commission, whether Section 2 of Resolution No. 2772 is read as
petitioner PPI reads it, as an assertion of authority to require newspaper
publishers to "donate" free print space for Comelec purposes, or as an
exhortation, or perhaps an appeal, to publishers to donate free print space, as
Section 1 of Resolution No. 2772-A attempts to suggest. The threshold
requisites for a lawful taking of private property for public use need to be
examined here: one is the necessity for the taking; another is the legal
authority to effect the taking. The element of necessity for the taking has not
been shown by respondent Comelec. It has not been suggested that the
members of PPI are unwilling to sell print space at their normal rates to
Comelec for election purposes. Indeed, the unwillingness or reluctance of
Comelec to buy print space lies at the heart of the problem. Similarly, it has
not been suggested, let alone demonstrated, that Comelec has been granted

the power of eminent domain either by the Constitution or by the legislative

authority. A reasonable relationship between that power and the enforcement
and administration of election laws by Comelec must be shown; it is not
casually to be assumed. . . . Section 2 does not constitute a valid exercise of
the power of eminent domain.
2. ID.; ID.; ID.; ID.; PUBLIC FUNDS, NOT PUBLISHERS SOLELY, SHOULD BEAR
COSTS FOR PUBLIC INFORMATION OF ELECTORAL PROCESSES. The ruling
here laid down by the Court is entirely in line with the theory of democratic
representative government. The economic costs of informing the general
public about the qualifications and programs of those seeking elective office
are most appropriately distributed as widely as possible throughout our society
by the utilization of public funds, especially funds raised by taxation, rather
than cast solely on one small sector of society, i.e., print media enterprises.
The benefits which flow from a heightened level of information on and the
awareness of the electoral process are commonly thought to be communitywide; the burdens should be allocated on the same basis.
3. ID.; POLICE POWER; REQUISITES FOR A VALID EXERCISE THEREOF NOT
COMPLIED WITH IN CASE AT BAR. As earlier noted, the Solicitor General also
contended that Section 2 of Resolution No. 2772, even if read as compelling
publishers to "donate" "Comelec space," may be sustained as a valid exercise
of the police power of the state. This argument was, however, made too
casually to require prolonged consideration on our part. Firstly, there was no
effort (and apparently no inclination on the part of Comelec) to show that the
police power essentially a power of legislation has been constitutionally
delegated to respondent Commission. Secondly, while private property may
indeed be validly taken in the legitimate exercise of the police power of the
state, there was no attempt to show compliance in the instant case with the
requisites of a lawful taking under the police power. Section 2 of Resolution No.
2772 is a blunt and heavy instrument that purports, without a showing of
existence of a national emergency or other imperious public necessity,
indiscriminately and without regard to the individual business condition of
particular newspapers or magazines located in differing parts of the country, to
take private property of newspaper or magazine publishers. No attempt was
made to demonstrate that a real and palpable or urgent necessity for the
taking of print space confronted the Comelec and that Section 2 of Resolution
No. 2772 was itself the only reasonable and calibrated response to such
necessity available to the Comelec. Section 2 does not constitute a valid
exercise of the police power of the State.
4. ID.; SUPREME COURT; POWER OF JUDICIAL REVIEW; CONSTITUTIONALITY OF
SEC. 8 COMELEC RESOLUTION NO. 2772, WITHOUT ACTUAL CONTROVERSY, IS
NOT RIPE FOR JUDICIAL REVIEW; CASE AT BAR. Section 8 of Resolution No.
2772 should be viewed in the context of our decision inNational Press Club v.
Commission on Elections. There the Court sustained the constitutionality of
Section 11 (b) of R.A. No. 6646, known as the Electoral Reforms Law of 1987,

which prohibits the sale or donation of print space and airtime for campaign or
other political purposes, except to the Comelec. In doing so, the Court carefully
distinguished (a) paid political advertisements which are reached by the
prohibition of Section 11 (b), from (b) the reporting ofnews, commentaries and
expressions of belief or opinion by reporters, broadcasters, editors,
commentators or columnists which fall outside the scope of Section 11 (b) and
which are protected by the constitutional guarantees of freedom of speech and
of the press. . . . Section 8 of Resolution No. 2772 appears to represent the
effort of the Comelec to establish a guideline for implementation of the abovequoted distinction and doctrine in National Press Club, an effort not blessed
with evident success. Section 2 of Resolution No. 2772-A while possibly helpful,
does not add substantially to the utility of Section 8 of Resolution No. 2772.
The distinction between paid political advertisements on the one hand and
news reports, commentaries and expressions of belief or opinion by reporters,
broadcasters, editors, etc. on the other hand, can realistically be given
operative meaning only in actual cases or controversies, on a case-to-case
basis, in terms of very specific sets of facts. At all events, the Court is bound to
note that PPI has failed to allege any specific affirmative action on the part of
Comelec designed to enforce or implement Section 8. PPI has not claimed that
it or any of its members has sustained actual or imminent injury by reason of
Comelec action under Section 8. Put a little differently, the Court considers that
the precise constitutional issue here sought to be raised whether or not
Section 8 of Resolution No. 2772 constitutes a permissible exercise of the
Comelec's power under Article IX, Section 4 of the Constitution . . . is not ripe
for judicial review for lack of an actual case or controversy involving, as the
very lis mota thereof, the constitutionality of Section 8.
RESOLUTION
FELICIANO, J p:
The Philippine Press Institute, Inc. ("PPI") is before this Court assailing
the constitutional validity of Resolution No. 2772 issued by respondent
Commission on Elections ("Comelec") and its corresponding Comelec
directive dated 22 March 1995, through a Petition for Certiorari and
Prohibition. Petitioner PPI is a non-stock, non-profit organization of
newspaper and magazine publishers. cdphil
On 2 March 1995, Comelec promulgated Resolution No. 2772, which
reads in part:
xxx xxx xxx
Sec. 2. Comelec Space. The Commission shall procure free print
space of not less than one half (1/2) page in at least one

newspaper of general circulation in every province or city for use

as 'Comelec Space' from March 6, 1995 in the case of candidates
for senators and from March 21, 1995 until May 12, 1995. In the
absence of said newspaper, 'Comelec Space' shall be obtained
from any magazine or periodical of said province or city.
Sec. 3. Uses of Comelec Space. 'Comelec Space' shall be
allocated by the Commission, free of charge, among all
candidates within the area in which the newspaper, magazine or
periodical is circulated to enable the candidates to make known
their qualifications, their stand on public issues and their platforms
and programs of government.
'Comelec Space' shall also be used by the Commission for
dissemination of vital election information.
Sec. 4. Allocation of Comelec Space. (a) 'Comelec Space' shall
be available to all candidates during the periods stated in Section 2
hereof. Its allocation shall be equal and impartial among all
candidates for the same office. All candidates concerned shall be
furnished a copy of the allocation of 'Comelec Space' for their
information, guidance and compliance.
(b) Any candidate desiring to avail himself of 'Comelec Space' from
newspapers or publications based in the Metropolitan Manila Area
shall submit an application therefor, in writing, to the Committee
on Mass Media of the Commission. Any candidate desiring to avail
himself of 'Comelec Space' in newspapers or publications based in
the provinces shall submit his application therefor, in writing, to
the Provincial Election Supervisor concerned. Applications for
availment of 'Comelec Space' may be filed at any time from the
date of effectivity of this Resolution.
(c) The Committee on Mass Media and the Provincial Election
Supervisors shall allocate available 'Comelec Space' among the
candidates concerned by lottery of which said candidates shall be
notified in advance, in writing, to be present personally or by
representative to witness the lottery at the date, time and place
specified in the notice. Any party objecting to the result of the
lottery may appeal to the Commission.
(d) The candidates concerned shall be notified by the Committee
on Mass Media or the Provincial Election Supervisor, as the case
may be, sufficiently in advance and in writing of the date of issue
and the newspaper or publication allocated to him, and the time
within which he must submit the written material for publication in
the 'Comelec Space'.

xxx xxx xxx

Sec. 8. Undue Reference to Candidates/Political Parties in
Newspapers. No newspaper or publication shall allow to be
printed or published in the news, opinion, features, or other
sections of the newspaper or publication accounts or comments
which manifestly favor or oppose any candidate or political party
by unduly or repeatedly referring to or including therein said
candidate or political party. However, unless the facts and
circumstances clearly indicate otherwise, the Commission will
respect the determination by the publisher and/or editors of the
newspapers or publication that the accounts or views published are
significant, newsworthy and of public interest." (Emphasis
supplied)
Apparently in implementation of this Resolution, Comelec through
Commissioner Regalado E. Maambong sent identical letters, dated 22 March
1995, to various publishers of newspapers like the Business World,
the Philippine Star, the Malaya and the Philippine Times Journal, all members
of PPI. These letters read as follows:
"This is to advise you that pursuant to Resolution No. 2772 of the
Commission on Elections, you are directed to provide free print
space of not less than one half () page for use as 'Comelec
Space' or similar to the print support which you have extended
during the May 11, 1992 synchronized elections which was 2 full
pages for each political party fielding senatorial candidates, from
March 6, 1995 to May 6, 1995, to make known to their
qualifications, their stand on public issues and their platforms and
programs of government.
We shall be informing the political parties and candidates to
submit directly to you their pictures, biographical data, stand on
key public issues andplatforms of government, either as raw data
or in the form of positives or camera-ready materials.
Please be reminded that the political parties/candidates may be
accommodated in your publications any day upon receipt of their
materials until May 6, 1995 which is the day for campaigning.
We trust you to extend your full support and cooperation in this
regard." (Emphasis supplied)
In this Petition for Certiorari and Prohibition with prayer for the
issuance of a Temporary restraining order, PPI asks us to declare Comelec
Resolution No. 2772 unconstitutional and void on the ground that it violates
the prohibition imposed by the Constitution upon the government, and any
of its agencies, against the taking of private property for public use without
just compensation. Petitioner also contends that the 22 March 1995 letter

directives of Comelec requiring publishers to give free "Comelec Space" and

at the same time process raw data to make it camera-ready, constitute
impositions of involuntary servitude, contrary to the provisions of Section 18
(2), Article III of the 1987 Constitution. Finally, PPI argues that Section 8 of
Comelec Resolution No. 2772 is violative of the constitutionally guaranteed
freedom of speech, of the press and of expression. 1
On 20 April 1995, this Court issued a Temporary Restraining Order
enjoining Comelec from enforcing and implementing Section 2 of Resolution
No. 2772, as well as the Comelec directives addressed to various print
media enterprises all dated 22 March 1995. The Court also required the
respondent to file a Comment on the Petition. prcd
The Office of the Solicitor General filed its Comment on behalf of
respondent Comelec alleging that Comelec Resolution No. 2772
does not impose upon the publishers any obligation to provide free print
space in the newspapers as it does not provide any criminal or
administrative sanction for non-compliance with that Resolution. According
to the Solicitor General, the questioned Resolution merely established
guidelines to be followed in connection with the procurement of "Comelec
space," the procedure for and mode of allocation of such space to
candidates and the conditions or requirements for the candidate's utilization
of the "Comelec space" procured. At the same time, however, the Solicitor
General argues that even if the questioned Resolution and its implementing
letter directives are viewed as mandatory, the same would nevertheless be
valid as an exercise of the police power of the State. The Solicitor general
also maintains that Section 8 of Resolution No. 2772 is a permissible
exercise of the power of supervisor or regulation of the Comelec over the
communication and information operations of print media enterprises during
the election period to safeguard and ensure a fair, impartial and credible
election. 2
At the oral hearing of this case held on 28 April 1995, respondent
Comelec through its Chairman, Hon. Bernardo Pardo, in response to inquiries
from the Chief Justice and other Members of the Court, stated that
Resolution No. 2772, particularly Section 2 thereof and the 22 March 1995
letters dispatched to various members of petitioner PPI, were not intended
to compel those members to supply Comelec with free print space.
Chairman Pardo represented to the Court that that Resolution and the
related letter-directives were merely designed to solicit from the publishers
the same free print space which many publishers had voluntarily given to
Comelec during the election period relating to the 11 May 1992 elections.
Indeed, the Chairman stated that the Comelec would, that very afternoon,
meet and adopt an appropriate amending or clarifying resolution, a certified
true copy of which would forthwith be filed with the Court. cdrep

On 5 May 1995, the Court received from the Office of the Solicitor
general a manifestation which attached a copy of Comelec resolution No.
2772-A dated 4 May 1995. The operative portion of this Resolution follows:
NOW THEREFORE, pursuant to the powers vested in it by the
Constitution, the Omnibus Election Code, Republic Acts No. 6646
and 7166 and other election laws, the Commission on Elections
RESOLVED to clarify Sections 2 and 8 of Res. No. 2772 as follows:
1. Section 2 of Res. No. 2772 shall not be construed to mean
as requiring publishers of the different mass media print
publications to provide print space under pain of
prosecution, whether administrative, civil or criminal,
there being no sanction or penalty for violation of said
Section provided for either in said Resolution or in
Section 90 of Batas Pambansa Blg. 881, otherwise
known as the Omnibus Election Code, on the grant of
'Comelec Space.'
2. Section 8 of Res. No. 2772 shall not be construed to mean
as constituting prior restraint on the part of the
publishers with respect to the printing or publication of
materials in the news, opinion, features or other sections
of their respective publications or other accounts or
comments, it being clear from the last sentence of said
Section 8 that the Commission shall, 'unless the facts
and
circumstances
clearly
indicate
otherwise . . . respect the determination by the
publishers and/or editors of the newspapers or
publications that the accounts or views published are
significant, newsworthy and of public interest.'
This Resolution shall take effect upon approval." (Emphasis in the
original)
While, at this point, the Court could perhaps simply dismiss the petition
for Certiorari and Prohibition as having become moot and academic, we
consider it not inappropriate to pass upon the first constitutional issue raised
in this case. Our hope is to put this issue to rest and prevent its resurrection.
Section 2 of Resolution No. 2772 is not a model of clarity in
expression. Section 1 of Resolution No. 2772-A did not try to redraft Section
2; accordingly, Section 2 of resolution No. 2772 persists in its original form.
Thus, we must point out that, as presently worded, and in particular as
interpreted and applied by the Comelec itself in its 22 March 1995 letterdirectives to newspaper publishers, Section 2 of Resolution No. 2772 is
clearly susceptible of the reading that petitioner PPI has given it. That
Resolution No. 2772 does not, in express terms, threaten publishers who
would disregard it or its implementing letters with some criminal or other

sanction, does not by itself demonstrate that the Comelec's original

intention was simply to solicit or request voluntary donations of print space
from publishers. A written communication officially directing a print media
company to supply free print space, dispatched by government (here a
constitutional) agency and signed by member of the Commission
presumably legally authorized to do so, is bound to produce a coercive
effect upon the company so addressed. That the agency may not be legally
authorized to impose, or cause the imposition of, criminal or other sanctions
for disregard of such direction, only aggravates the constitutional difficulties
inhering in the present situation. The enactment or addition of such
sanctions by the legislative authority itself would be open to serious
constitutional objection.
To compel print media companies to donate "Comelec space" of the
dimensions specified in Section 2 of Resolution No. 2772 (not less than onehalf Page), amounts to "taking" of private personal property for public use or
purposes. Section 2 failed to specify the intended frequency of such
compulsory "donation:" only once during the period from 6 March 1995 (or
21 March 1995) until 12 May 1995? or everyday or once a week? or has
often as Comelec may direct during the same period? the extent of the
taking or deprivation is not insubstantial; this is not a case of a de
minimis temporary limitation or restraint upon the use of private property.
The monetary value of the compulsory "donation," measured by the
advertising rates ordinarily charged by newspaper publishers whether in
cities or in non-urban areas, may be very substantial indeed. LexLib
The taking of print space here sought to be effected may first be
appraised under the rubric of expropriation of private personal property for
public use. The threshold requisites for a lawful taking of private property for
public use need to be examined here: one is the necessity for the taking;
another is the legal authority to effect the taking. The element of necessity
for the taking has not been shown by respondent Comelec. It has not been
suggested that the members of PPI are unwilling to sell print space at their
normal rates to Comelec for election purposes. Indeed, the unwillingness or
reluctance of Comelec to buy print space lies at the heart of the
problem. 3 Similarly, it has not been suggested, let alone demonstrated,
that Comelec has been granted the power of imminent domain either by the
Constitution or by the legislative authority. A reasonable relationship
between that power and the enforcement and administration of election
laws by Comelec must be shown; it is not casually to be assumed.
That the taking is designed to subserve "public use" is not contested
by petitioner PPI. We note only that, under Section 3 of Resolution No. 2772,
the free "Comelec space" sought by the respondent Commission would be
used not only for informing the public about the identities, qualifications and
programs of government of candidates for elective office but also for

"dissemination of vital election information" (including, presumably,

circulars, regulations, notices, directives, etc. issued by Comelec). It seems
to the Court a matter of judicial notice that government offices and agencies
(including the Supreme Court) simply purchase print space, in the ordinary
course of events, when their rules and regulations, circulars, notices and so
forth need officially to be brought to the attention of the general public.
The taking of private property for public use is, of course, authorized
by the Constitution, but not without payment of "just compensation" (Article
III, Section 9). And apparently the necessity of paying compensation for
"Comelec space" is precisely what is sought to be avoided by respondent
Commission, whether Section 2 of Resolution No. 2772 is read as petitioner
PPI reads it, as an assertion of authority to require newspaper publishers to
"donate" free print space for Comelec purposes, or as an exhortion, or
perhaps an appeal, to publishers to donate free print space, as Section 1 of
Resolution No. 2772-A attempts to suggest. There is nothing at all to prevent
newspaper and magazine publishers from voluntarily giving free print space
to Comelec for the purposes contemplated in Resolution No. 2772. Section 2
of Resolution No. 2772 does not, however, provide a constitutional basis for
compelling publishers, against their will, in the kind of factual context here
present, to provide free print space for Comelec purposes. Section 2 does
not constitute a valid exercise of the power of eminent domain. Cdpr
We would note that the ruling here laid down by the Court is entirely in
line with the theory of democratic representative government. The
economic costs of informing the general public about the qualifications and
programs of those seeking elective office are most appropriately distributed
as widely as possible throughout our society by the utilization of public
funds, especially funds raised by taxation, rather than cast solely on one
small sector of society, i.e., print media enterprises. The benefits which flow
from a heightened level of information on and the awareness of the electoral
process are commonly thought to be community-wide; the burdens should
be allocated on the same basis.
As earlier noted, the Solicitor General also contended that Section 2 of
Resolution No. 2772, even if read as compelling publishers to "donate"
"Comelec space," may be sustained as a valid exercise of the police power
of the state. This argument was, however, made too casually to require
prolonged consideration on their part. Firstly, there was no effort (and
apparently no inclination on the part of Comelec) to show that the police
power essentially a power of legislation has been constitutionally
delegated to respondent Commission. 4 Secondly, while private property
may indeed be validly taken in the legitimate exercise of the police power of
the state, there was no attempt to show compliance in the instant case with
the requisites of a lawful taking under the police power. 5
Section 2 of Resolution No. 2772 is a blunt and heavy instrument that
purports, without a showing of existence of a national emergency or other

imperious public necessity, indiscriminately and without regard to the

individual business condition of particular newspapers or magazines located
in different parts of the country, to take private property of newspaper or
magazine publishers. No attempt was made to demonstrate that a real and
palpable or urgent necessity for the taking of print space confronted the
Comelec and that Section 2 of Resolution No. 2772 was itself the only
reasonable and calibrated response to such necessity available to Comelec.
Section 2 does not constitute a valid exercise of the police power of the
State.
We turn to Section 8 of Resolution No. 2772, which needs to be quoted
in full again:
Sec. 8. Undue Reference to Candidates/Political parties in
Newspaper. No newspaper or publication shall allow to be
printed or published in the news, opinion, features, or other
sections of the newspaper or publication accounts or comments
which manifest favor or oppose any candidate or political party by
unduly or repeatedly referring to or including therein said
candidate or political party. However, unless the facts and
circumstances clearly indicates otherwise, the Commission will
respect the determination by the publisher and/or editors of the
newspapers or publications that the accounts or views published
are significant, newsworthy and of public interest."
It is not easy to understand why Section 8 was included at all in
Resolution No 2772. In any case, Section 8 should be viewed in the context
of our decision in National Press Club v. Commission on Elections. 6 There
the Court sustained the constitutionality of Section 11 (b) of R.A. No. 6646,
known as the Electoral Reforms Law of 1987, which prohibits the sale or
donation of print space and airtime for campaign or other political purposes,
except to the Comelec. In doing so, the Court carefully distinguished
(a) paid political advertisements which are reached by the prohibition of
Section 11 (b), from (b) the reporting of news, commentaries and
expressions of belief or opinion by reporters, broadcasters, editors,
commentators or columnists which fall outsidethe scope of Section 11 (b)
and which are protected by the constitutional guarantees of freedom of
speech and of the press: LLjur
"Secondly, and more importantly, Section 11 (b) is limited in its
scope of application. Analysis of Section 11 (b) shows that
it purports to apply only to the purchase and sale, including
purchase and sale disguised as a donation, of print space and air
time for campaign or other political purposes. Section 11 (b) does
not
purport in
any
way to
restrict the reporting
by
newspapers or radio or television stations of
news
or
newsnoteworthy events relating to candidates, their qualifications,
political parties and programs of government. Moreover, Section

11 (b) does not reach commentaries and expressions of belief or

opinion by reporters or broadcasters or editors or commentators or
columnists in respect of candidates, their qualifications, and
programs and so forth, so long at least as such comments,
opinions and beliefs are not in fact advertisements for particular
candidates covertly paid for. In sum Section 11 (b) is not to be read
as reaching any report or commentary or other coverage that, in
responsible media, is not paid for by candidates for political
office. We read Section 11 (b) as designed to cover only paid
political advertisements of particular candidates.
The above limitation in scope of application of Section 11 (b)
that it does not restrict either the reporting of or the expression of
belief or opinion or comment upon the qualifications and programs
and activities of any and all candidates for office constitutes the
critical distinction which must be made between the instant case
and that of Sanidad v. Commission on Elections. . . ."7 (Citations
omitted; emphasis supplied)
Section 8 of Resolution No. 2772 appears to represent the
effort of the Comelec to establish a guidelines for implementation
of the above-quoted distinction and doctrine in National Press Club,
an effort not blessed with evident success. Section 2 of Resolution
No. 2772-A while possibly helpful, does not add substantially to the
utility of Section 8 of Resolution No. 2772. The distinction between
paid political advertisements on the one hand and news reports,
commentaries and expressions of belief or opinion by reporters,
broadcasters, editors, etc. on the other hand, can realistically be
given operative meaning only in actual cases or controversies, on a
case-to-case basis, in terms of very specific sets of facts.
At all events, the Court is bound to note that PPI has failed to
allege any specific affirmative action on the part of Comelec
designed to enforce or implement Section 8. PPI has not claimed
that it or any of its members has sustained actual or imminent
injury by reason of Comelec action under Section 8. Put a little
differently, the Court considers that the precise constitutional issue
here sought to be raised whether or not Section 8 of Resolution
No. 2772 constitutes a permissible exercise of the Comelec's power
under Article IX, Section 4 of the Constitution to
"supervise or regulate the enjoyment or utilization of all
franchise or permits for the operation of media of
communication or information [for the purpose of
ensuring] equal opportunity, time and space, and the right
of reply, including reasonable, equal rates therefor, for
public-information
campaigns
and
forums
among

candidates in connection with the objective of holding free,

orderly, honest, peaceful and credible elections "
is not ripe for judicial review for lack of an actual case or
controversy involving, as the very lis mota thereof, the
constitutionality of Section 8.
1. Section 2 of Resolution No. 2772, in its present form and as
interpreted by Comelec in its 22 March 1995 letter directives,
purports to require print media enterprises to "donate" free print
space to Comelec. As such, Section 2 suffers from fatal
constitutional vice and must be set aside and nullified. cdll
2. To the extent it pertains to Section 8 of Resolution No. 2772,
the Petition for Certiorari and Prohibition must be dismissed for
lack of an actual, justiciable case or controversy.
WHEREFORE, for all the foregoing, the Petition for Certiorari
and Prohibition is GRANTED in part and Section 2 of Resolution No.
2772 in its present from and the related letter-directives dated 22
March 1995 are hereby SET ASIDE as null and void, and the
Temporary Restraining Order is hereby MADE PERMANENT. The
Petition is DISMISSED in part, to the extent it relates to Section 8 of
Resolution No. 2772. No pronouncement as to costs.
Narvasa, C.J ., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.
Quiason, J., is on leave.
||| (Philippine Press Institute, Inc. v. Commission on Elections, G.R. No. 119694
(Resolution), [May 22, 1995], 314 PHIL 131-149)

8. PROFESSIONAL REGULATORY COMMISSION v ARLENE DE GUZMAN

SECOND DIVISION
[G.R. No. 144681. June 21, 2004.]
PROFESSIONAL REGULATION COMMISSION (PRC),
CHAIRMAN HERMOGENES P. POBRE, ASSOCIATE
COMMISSIONER ARMANDO PASCUAL, BOARD OF MEDICINE,
CHAIRMAN RODOLFO P. DE GUZMAN, JOSE S. RAMIREZ,
JUANITO B. BILLOTE, RUBEN R. POLICARPIO, EDGARDO T.
FERNANDO and RICARDO D. FULGENCIO II, petitioners, vs.
ARLENE V. DE GUZMAN, VIOLETA V. MENESES, CELERINA S.
NAVARRO, JOSE RAMONCITO P. NAVARRO, ARNEL V.
HERRERA and GERALDINE ELIZABETH M. PAGILAGAN,
ELNORA R. RAQUENO, MARISSA A. REGODON, LAURA M.
SANTOS, KARANGALAN D. SERRANO, DANILO A. VILLAVER,
MARIA ROSARIO L. LEONOR, ALICIA S. LIZANO, MARITEL M.
ECHIVERRI, BERNADETTE T. MENDOZA, FERNANDO F.
MANDAPAT, ALELI A. GOLLAYAN, ELCIN C. ARRIOLA,
HERMINIGILDA E. CONEJOS, SALLY B. BUNAGAN, ROGELIO B.
ANCHETA, OSCAR H. PADUA, JR., EVELYN D. GRAJO, EVELYN
S. ACOSTA, MARGARITA BELINDA L. VICENCIO, VALENTINO P.
ARBOLEDA, EVELYN O. RAMOS, ACHILLES J. PERALTA,
CORAZON M. CRUZ, LEUVINA P. CHICO, JOSEPH A. JAO, MA.
LUISA S. GUTIERREZ, LYDIA C. CHAN, OPHELIA C. HIDALGO,
FERNANDO T. CRUZ, MELVIN M. USITA, RAFAEL I.
TOLENTINO, GRACE E. UY, CHERYL R. TRIGUERO, MICHAEL L.
SERRANO, FEDERICO L. CASTILLO, MELITA J. CAEDO,
SAMUEL B. BANGOY, BERNARDITA B. SY, GLORIA T.
JULARBAL, FREDERICK D. FRANCISCO, CARLOS M.
BERNARDO, JR., HUBERT S. NAZARENO, CLARISSA B.
BACLIG, DAYMINDA G. BONTUYAN, BERNADETTE H.
CABUHAT, NANCY J. CHAVEZ, MARIO D. CUARESMA,
ERNESTO L. CUE, EVELYN C. CUNDANGAN, RHONEIL R.
DEVERATURDA, DERILEEN D. DORADO, SAIBZUR N. EDDING,
VIOLETA C. FELIPE, HERMINIO V. FERNANDEZ, JR., MARIA
VICTORIA M. LACSAMANA, NORMA G. LAFAVILLA, RUBY B.
LANTIN, MA. ELOISA Q. MALLARI, CLARISA SJ. NICOLAS,
PERCIVAL H. PANGILINAN, ARNULFO A. SALVADOR, ROBERT
B. SANCHEZ, MERLY D. STA. ANA and YOLANDA P.
UNICA, respondents.

DECISION
TINGA, J p:
This petition for review under Rule 45 of the 1997 Rules of Civil Procedure
seeks to nullify the Decision, 1 dated May 16, 2000, of the Court of Appeals in
CA-G.R. SP No. 37283. The appellate court affirmed the judgment 2 dated
December 19, 1994, of the Regional Trial Court (RTC) of Manila, Branch 52, in
Civil Case No. 93-66530. The trial court allowed the respondents to take their
physician's oath and to register as duly licensed physicians. Equally challenged
is theResolution 3 promulgated on August 25, 2000 of the Court of Appeals,
denying petitioners' Motion for Reconsideration.
The facts of this case are as follows:
The respondents are all graduates of the Fatima College of Medicine,
Valenzuela City, Metro Manila. They passed the Physician Licensure
Examination conducted in February 1993 by the Board of Medicine (Board).
Petitioner Professional Regulation Commission (PRC) then released their names
as successful examinees in the medical licensure examination.
Shortly thereafter, the Board observed that the grades of the seventy-nine
successful examinees from Fatima College in the two most difficult subjects in
the medical licensure exam, Biochemistry (Bio-Chem) and Obstetrics and
Gynecology (OB-Gyne), were unusually and exceptionally high. Eleven Fatima
examinees scored 100% in Bio-Chem and ten got 100% in OB-Gyne, another
eleven got 99% in Bio-Chem, and twenty-one scored 99% in OB-Gyne. The
Board also observed that many of those who passed from Fatima got marks of
95% or better in both subjects, and no one got a mark lower than 90%. A
comparison of the performances of the candidates from other schools was
made. The Board observed that strangely, the unusually high ratings were true
only for Fatima College examinees. It was a record-breaking phenomenon in
the history of the Physician Licensure Examination.
On June 7, 1993, the Board issued Resolution No. 19, withholding the
registration as physicians of all the examinees from the Fatima College of
Medicine. 4The PRC asked the National Bureau of Investigation (NBI) to
investigate whether any anomaly or irregularity marred the February 1993
Physician Licensure Examination.
Prior to the NBI investigation, the Board requested Fr. Bienvenido F. Nebres,
S.J., an expert mathematician and authority in statistics, and later president of
the Ateneo de Manila University, to conduct a statistical analysis of the results
in Bio-Chem and Ob-Gyne of the said examination.
On June 10, 1993, Fr. Nebres submitted his report. He reported that a
comparison of the scores in Bio-Chem and Ob-Gyne, of the Fatima College
examinees with those of examinees from De La Salle University and Perpetual

Help College of Medicine showed that the scores of Fatima College examinees
were not only incredibly high but unusually clustered close to each other. He
concluded that there must be some unusual reason creating the clustering of
scores in the two subjects. It must be a cause "strong enough to eliminate the
normal variations that one should expect from the examinees [of Fatima
College] in terms of talent, effort, energy, etc." 5
For its part, the NBI found that "the questionable passing rate of Fatima
examinees in the [1993] Physician Examination leads to the conclusion that
the Fatima examinees gained early access to the test questions." 6
On July 5, 1993, respondents Arlene V. De Guzman, Violeta V. Meneses,
Celerina S. Navarro, Jose Ramoncito P. Navarro, Arnel V. Herrera, and Geraldine
Elizabeth M. Pagilagan (Arlene V. De Guzman et al., for brevity) filed a special
civil action for mandamus, with prayer for preliminary mandatory injunction
docketed as Civil Case No. 93-66530 with the Regional Trial Court (RTC) of
Manila, Branch 52. Their petition was adopted by the other respondents as
intervenors.
Meanwhile, the Board issued Resolution No. 26, dated July 21, 1993, charging
respondents with "immorality, dishonest conduct, fraud, and deceit" in
connection with the Bio-Chem and Ob-Gyne examinations. It recommended
that the test results of the Fatima examinees be nullified. The case was
docketed as Adm. Case No. 1687 by the PRC.
On July 28, 1993, the RTC issued an Order in Civil Case No. 93-66530 granting
the preliminary mandatory injunction sought by the respondents. It ordered the
petitioners to administer the physician's oath to Arlene V. De Guzman et al.,
and enter their names in the rolls of the PRC.
The petitioners then filed a special civil action for certiorari with the Court of
Appeals to set aside the mandatory injunctive writ, docketed as CA-G.R. SP No.
31701.
On October 21, 1993, the appellate court decided CA-G.R. SP No. 31701, with
the dispositive portion of the Decision ordaining as follows:
WHEREFORE, this petition is GRANTED. Accordingly, the writ of
preliminary mandatory injunction issued by the lower court against
petitioners is hereby nullified and set aside.
SO ORDERED. 7
Arlene V. de Guzman, et al., then elevated the foregoing Decision to this Court
in G.R. No. 112315. In our Resolution dated May 23, 1994, we denied the
petition for failure to show reversible error on the part of the appellate
court. DcCEHI
Meanwhile, on November 22, 1993, during the pendency of the instant
petition, the pre-trial conference in Civil Case No. 93-66530 was held. Then, the
parties, agreed to reduce the testimonies of their respective witnesses to

sworn questions-and-answers. This was without prejudice to cross-examination

by the opposing counsel.
On December 13, 1993, petitioners' counsel failed to appear at the trial in the
mistaken belief that the trial was set for December 15. The trial court then
ruled that petitioners waived their right to cross-examine the witnesses.
On January 27, 1994, counsel for petitioners filed a Manifestation and
Motion stating the reasons for her non-appearance and praying that the crossexamination of the witnesses for the opposing parties be reset. The trial court
denied the motion for lack of notice to adverse counsel. It also denied
theMotion for Reconsideration that followed on the ground that adverse
counsel was notified less than three (3) days prior to the hearing.
Meanwhile, to prevent the PRC and the Board from proceeding with Adm. Case
No. 1687, the respondents herein moved for the issuance of a restraining
order, which the lower court granted in its Order dated April 4, 1994.
The petitioners then filed with this Court a petition for certiorari docketed as
G.R. No. 115704, to annul the Orders of the trial court dated November 13,
1993, February 28, 1994, and April 4, 1994. We referred the petition to the
Court of Appeals where it was docketed as CA-G.R. SP No. 34506.
On August 31, 1994, the appellate court decided CA-G.R. SP No. 34506 as
follows:
WHEREFORE, the present petition for certiorari with prayer for
temporary restraining order/preliminary injunction is GRANTED and
the Orders of December 13, 1993, February 7, 1994, February 28,
1994, and April 4, 1994 of the RTC-Manila, Branch 52, and all
further proceedings taken by it in Special Civil Action No. 93-66530
are hereby DECLARED NULL and VOID. The said RTC-Manila is
ordered to allow petitioners' counsel to cross-examine the
respondents' witnesses, to allow petitioners to present their
evidence in due course of trial, and thereafter to decide the case
on the merits on the basis of the evidence of the parties. Costs
against respondents.
IT IS SO ORDERED. 8
The trial was then set and notices were sent to the parties.
A day before the first hearing, on September 22, 1994, the petitioners filed
an Urgent Ex-Parte Manifestation and Motion praying for the partial
reconsideration of the appellate court's decision in CA-G.R. SP No. 34506, and
for the outright dismissal of Civil Case No. 93-66530. The petitioners asked for
the suspension of the proceedings.
In its Order dated September 23, 1994, the trial court granted the aforesaid
motion, cancelled the scheduled hearing dates, and reset the proceedings to
October 21 and 28, 1994.

Meanwhile, on October 25, 1994, the Court of Appeals denied the partial
motion for reconsideration in CA-G.R. SP No. 34506. Thus, petitioners filed with
the Supreme Court a petition for review docketed as G.R. No. 117817,
entitled Professional Regulation Commission, et al. v. Court of Appeals, et al.
On November 11, 1994, counsel for the petitioners failed to appear at the trial
of Civil Case No. 93-66530. Upon motion of the respondents herein, the trial
court ruled that herein petitioners waived their right to cross-examine the
herein respondents. Trial was reset to November 28, 1994.
On November 25, 1994, petitioners' counsel moved for the inhibition of the
trial court judge for alleged partiality. On November 28, 1994, the day
the Motion to Inhibit was to be heard, petitioners failed to appear. Thus, the
trial court denied the Motion to Inhibit and declared Civil Case No. 93-66530
deemed submitted for decision.
On December 19, 1994, the trial court handed down its judgment in Civil Case
No. 93-66530, the fallo of which reads:
WHEREFORE, judgment is rendered ordering the respondents to
allow the petitioners and intervenors (except those with asterisks
and footnotes in pages 1 & 2 of this decision) [sic], 9 to take the
physician's oath and to register them as physicians.
It should be made clear that this decision is without prejudice to
any administrative disciplinary action which may be taken against
any of the petitioners for such causes and in the manner provided
by law and consistent with the requirements of the Constitution as
any other professionals.
No costs.
SO ORDERED. 10
As a result of these developments, petitioners filed with this Court a petition
for review on certiorari docketed as G.R. No. 118437, entitled Professional
Regulation Commission v. Hon. David G. Nitafan, praying inter alia, that (1)
G.R. No. 118437 be consolidated with G.R. No. 117817; (2) the decision of the
Court of Appeals dated August 31, 1994 in CA-G.R. SP No. 34506 be nullified
for its failure to decree the dismissal of Civil Case No. 93-66530, and in the
alternative, to set aside the decision of the trial court in Civil Case No. 9366530, order the trial court judge to inhibit himself, and Civil Case No. 9366530 be re-raffled to another branch.
On December 26, 1994, the petitioners herein filed their Notice of Appeal 11 in
Civil Case No. 93-66530, thereby elevating the case to the Court of Appeals,
where it was docketed as CA-G.R. SP No. 37283.
In our Resolution of June 7, 1995, G.R. No. 118437 was consolidated with G.R.
No. 117817.

On July 9, 1998, we disposed of G.R. Nos. 117817 and 118437 in this wise:
WHEREFORE, the petition in G.R. No. 117817 is DISMISSED for
being moot. The petition in G.R. No. 118437 is likewise DISMISSED
on the ground that there is a pending appeal before the Court of
Appeals. Assistant Solicitor General Amparo M. Cabotaje-Tang is
advised to be more circumspect in her dealings with the courts as
a repetition of the same or similar acts will be dealt with
accordingly.
SO ORDERED. 12
While CA-G.R. SP No. 37283 was awaiting disposition by the appellate court,
Arnel V. Herrera, one of the original petitioners in Civil Case No. 93-66530,
joined by twenty-seven intervenors, to wit: Fernando F. Mandapat, Ophelia C.
Hidalgo, Bernadette T. Mendoza, Ruby B. Lantin-Tan, Fernando T. Cruz, Marissa
A. Regodon, Ma. Eloisa Q. Mallari-Largoza, Cheryl R. Triguero, Joseph A. Jao,
Bernadette H. Cabuhat, Evelyn S. Acosta-Cabanes, Laura M. Santos, Maritel M.
Echiverri, Bernadette C. Escusa, Carlosito C. Domingo, Alicia S. Lizano, Elnora
R. Raqueno-Rabaino, Saibzur N. Edding, Derileen D. Dorado-Edding, Robert B.
Sanchez, Maria Rosario L. Leonor-Lacandula, Geraldine Elizabeth M. PagilaganPalma, Margarita Belinda L. Vicencio-Gamilla, Herminigilda E. Conejos, Leuvina
P. Chico-Paguio, Elcin C. Arriola-Ocampo, and Jose Ramoncito P. Navarro,
manifested that they were no longer interested in proceeding with the case
and moved for its dismissal. A similar manifestation and motion was later filed
by intervenors Mary Jean I. Yeban-Merlan, Michael L. Serrano, Norma G.
Lafavilla, Arnulfo A. Salvador, Belinda C. Rabara, Yolanda P. Unica, Dayminda G.
Bontuyan, Clarissa B. Baclig, Ma. Luisa S. Gutierrez, Rhoneil R. Deveraturda,
Aleli A. Gollayan, Evelyn C. Cundangan, Frederick D. Francisco, Violeta V.
Meneses, Melita J. Caedo, Clarisa SJ. Nicolas, Federico L. Castillo, Karangalan
D. Serrano, Danilo A. Villaver, Grace E. Uy, Lydia C. Chan, and Melvin M. Usita.
The Court of Appeals ruled that its decision in CA-G.R. SP No. 37283 would not
apply to them.
On May 16, 2000, the Court of Appeals decided CA-G.R. SP No. 37283, with the
following fallo, to wit:
WHEREFORE, finding no reversible error in the decision appealed
from, We hereby AFFIRM the same and DISMISS the instant appeal.
No pronouncement as to costs.
SO ORDERED. 13
In sustaining the trial court's decision, the appellate court ratiocinated that the
respondents complied with all the statutory requirements for admission into
the licensure examination for physicians in February 1993. They all passed the
said examination. Having fulfilled the requirements of Republic Act No.
2382, 14 they should be allowed to take their oaths as physicians and be
registered in the rolls of the PRC. aSDHCT

Hence, this petition raising the following issues:

I
WHETHER OR NOT RESPONDENTS HAVE A VALID CAUSE OF ACTION
FOR MANDAMUS AGAINST PETITIONERS IN THE LIGHT OF THE
RESOLUTION OF THIS HONORABLE COURT IN G.R. NO. 112315
AFFIRMING THE COURT OF APPEALS' DECISION DECLARING THAT IF
EVER THERE IS SOME DOUBT AS TO THE MORAL FITNESS OF
EXAMINEES, THE ISSUANCE OF LICENSE TO PRACTICE MEDICINE IS
NOT AUTOMATICALLY GRANTED TO THE SUCCESSFUL EXAMINEES.
II
WHETHER OR NOT THE PETITION FOR MANDAMUS COULD
PROCEED DESPITE THE PENDENCY OF ADMINISTRATIVE CASE NO.
1687, WHICH WAS PRECISELY LODGED TO DETERMINE THE MORAL
FITNESS OF RESPONDENTS TO BECOME DOCTORS. 15
To our mind, the only issue is: Did the Court of Appeals commit a reversible
error of law in sustaining the judgment of the trial court that respondents are
entitled to a writ of mandamus?
The petitioners submit that a writ of mandamus will not lie in this case. They
point out that for a writ of mandamus to issue, the applicant must have a welldefined, clear and certain legal right to the thing demanded and it is the duty
of the respondent to perform the act required. Thus, mandamus may be
availed of only when the duty sought to be performed is a ministerial and not a
discretionary one. The petitioners argue that the appellate court's decision in
CA-G.R. SP No. 37283 upholding the decision of the trial court in Civil Case No.
93-66530 overlooked its own pronouncement in CA-G.R. SP No. 31701. The
Court of Appeals held in CA-G.R. SP No. 31701 that the issuance of a license to
engage in the practice of medicine becomes discretionary on the PRC if there
exists some doubt that the successful examinee has not fully met the
requirements of the law. The petitioners stress that this Court's Resolution
dated May 24, 1994 in G.R. No. 112315 held that there was no showing "that
the Court of Appeals had committed any reversible error in rendering the
questioned judgment" in CA-G.R. SP No. 31701. The petitioners point out that
our Resolution in G.R. No. 112315 has long become final and executory.
Respondents counter that having passed the 1993 licensure examinations for
physicians, the petitioners have the obligation to administer to them the oath
as physicians and to issue their certificates of registration as physicians
pursuant to Section 20 16 of Rep. Act No. 2382. The Court of Appeals in CAG.R. SP No. 37283, found that respondents complied with all the requirements
of Rep. Act No. 2382. Furthermore, respondents were admitted by the Medical
Board to the licensure examinations and had passed the same. Hence,
pursuant to Section 20 of Rep. Act No. 2382, the petitioners had the obligation
to administer their oaths as physicians and register them.

Mandamus is a command issuing from a court of competent jurisdiction, in the

name of the state or the sovereign, directed to some inferior court, tribunal, or
board, or to some corporation or person requiring the performance of a
particular duty therein specified, which duty results from the official station of
the party to whom the writ is directed, or from operation of law. 17 Section 3 of
Rule 65 18 of the 1997 Rules of Civil Procedure outlines two situations when a
writ of mandamus may issue, when any tribunal, corporation, board, officer or
person unlawfully (1) neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, trust, or station; or (2)
excludes another from the use and enjoyment of a right or office to which the
other is entitled.
We shall discuss the issues successively.
1. On The Existence of a Duty of the Board of Medicine To Issue Certificates of
Registration as Physicians under Rep. Act No. 2382.
For mandamus to prosper, there must be a showing that the officer, board, or
official concerned, has a clear legal duty, not involving discretion. 19 Moreover,
there must be statutory authority for the performance of the act, 20 and the
performance of the duty has been refused. 21 Thus, it must be pertinently
asked now: Did petitioners have the duty to administer the Hippocratic Oath
and register respondents as physicians under the Medical Act of 1959?
As found by the Court of Appeals, on which we agree on the basis of the
records:
It bears emphasizing herein that petitioner-appellees and
intervenor-appellees have fully complied with all the statutory
requirements for admission into the licensure examinations for
physicians conducted and administered by the respondentappellants on February 12, 14, 20 and 21, 1993. Stress, too, must
be made of the fact that all of them successfully passed the same
examinations. 22
The crucial query now is whether the Court of Appeals erred in concluding
that petitioners should allow the respondents to take their oaths as
physicians and register them, steps which would enable respondents to
practice the medical profession 23 pursuant to Section 20 of the Medical Act
of 1959?
The appellate court relied on a single provision, Section 20 of Rep. Act No.
2382, in concluding that the petitioners had the ministerial obligation to
administer the Hippocratic Oath to respondents and register them as
physicians. But it is a basic rule in statutory construction that each part of a
statute should be construed in connection with every other part to produce a
harmonious whole, not confining construction to only one section. 24 The
intent or meaning of the statute should be ascertained from the statute taken

as a whole, not from an isolated part of the provision. Accordingly, Section 20,
of Rep. Act No. 2382, as amended should be read in conjunction with the other
provisions of the Act. Thus, to determine whether the petitioners had the
ministerial obligation to administer the Hippocratic Oath to respondents and
register them as physicians, recourse must be had to the entirety of
the Medical Act of 1959.
A careful reading of Section 20 of the Medical Act of 1959 discloses that the
law uses the word "shall" with respect to the issuance of certificates of
registration. Thus, the petitioners "shall sign and issue certificates of
registration to those who have satisfactorily complied with the requirements of
the Board." In statutory construction the term "shall" is a word of command. It
is given imperative meaning. Thus, when an examinee satisfies the
requirements for the grant of his physician's license, the Board is obliged to
administer to him his oath and register him as a physician, pursuant to Section
20 and par. (1) of Section 22 25 of the Medical Act of 1959.
However, the surrounding circumstances in this case call for serious inquiry
concerning the satisfactory compliance with the Board requirements by the
respondents. The unusually high scores in the two most difficult subjects was
phenomenal, according to Fr. Nebres, the consultant of PRC on the matter, and
raised grave doubts about the integrity, if not validity, of the tests. These
doubts have to be appropriately resolved.
Under the second paragraph of Section 22, the Board is vested with the power
to conduct administrative investigations and "disapprove applications for
examination or registration," pursuant to the objectives of Rep. Act No. 2382 as
outlined in Section 1 26 thereof. In this case, after the investigation, the Board
filed before the PRC, Adm. Case No. 1687 against the respondents to ascertain
their moral and mental fitness to practice medicine, as required by Section
9 27of Rep. Act No. 2382. In its Decision dated July 1, 1997, the Board ruled:
WHEREFORE, the BOARD hereby CANCELS the respondents[']
examination papers in the Physician Licensure Examinations given
in February 1993 and further DEBARS them from taking any
licensure examination for a period of ONE (1) YEAR from the date
of the promulgation of this DECISION. They may, if they so desire,
apply for the scheduled examinations for physicians after the lapse
of the period imposed by the BOARD.
SO ORDERED. 28
Until the moral and mental fitness of the respondents could be ascertained,
according to petitioners, the Board has discretion to hold in abeyance the
administration of the Hippocratic Oath and the issuance of the certificates to
them. The writ of mandamus does not lie to compel performance of an act
which is not duly authorized.

The respondents nevertheless argue that under Section 20, the Board shall not
issue a certificate of registration only in the following instances: (1) to any
candidate who has been convicted by a court of competent jurisdiction of any
criminal offense involving moral turpitude; (2) or has been found guilty of
immoral or dishonorable conduct after the investigation by the Board; or (3)
has been declared to be of unsound mind. They aver that none of these
circumstances are present in their case.
Petitioners reject respondents' argument. We are informed that in Board
Resolution No. 26, 29 dated July 21, 1993, the Board resolved to file charges
against the examinees from Fatima College of Medicine for "immorality,
dishonesty, fraud, and deceit in the Obstetrics-Gynecology and Biochemistry
examinations." It likewise sought to cancel the examination results obtained by
the examinees from the Fatima College. cHaADC
Section 8 30 of Rep. Act No. 2382 prescribes, among others, that a person who
aspires to practice medicine in the Philippines, must have "satisfactorily
passed the corresponding Board Examination." Section 22, in turn, provides
that the oath may only be administered "to physicians who qualified in the
examinations." The operative word here is "satisfactorily," defined as
"sufficient to meet a condition or obligation" or "capable of dispelling doubt or
ignorance." 31 Gleaned from Board Resolution No. 26, the licensing authority
apparently did not find that the respondents "satisfactorily passed" the
licensure examinations. The Board instead sought to nullify the examination
results obtained by the respondents.
2. On the Right Of The Respondents To Be Registered As Physicians
The function of mandamus is not to establish a right but to enforce one that
has been established by law. If no legal right has been violated, there can be
no application of a legal remedy, and the writ of mandamus is a legal remedy
for a legal right. 32 There must be a well-defined, clear and certain legal right
to the thing demanded. 33 It is long established rule that a license to practice
medicine is a privilege or franchise granted by the government. 34
It is true that this Court has upheld the constitutional right 35 of every citizen
to select a profession or course of study subject to a fair, reasonable, and
equitable admission and academic requirements. 36 But like all rights and
freedoms guaranteed by the Charter, their exercise may be so regulated
pursuant to the police power of the State to safeguard health, morals, peace,
education, order, safety, and general welfare of the people. 37 Thus, persons
who desire to engage in the learned professions requiring scientific or technical
knowledge may be required to take an examination as a prerequisite to
engaging in their chosen careers. This regulation takes particular pertinence in
the field of medicine, to protect the public from the potentially deadly effects
of incompetence and ignorance among those who would practice medicine. In
a previous case, it may be recalled, this Court has ordered the Board of Medical
Examiners to annul both its resolution and certificate authorizing a Spanish

subject, with the degree of Licentiate in Medicine and Surgery from the
University of Barcelona, Spain, to practice medicine in the Philippines, without
first passing the examination required by the Philippine Medical Act. 38 In
another case worth noting, we upheld the power of the State to upgrade the
selection of applicants into medical schools through admission tests. 39
It must be stressed, nevertheless, that the power to regulate the exercise of a
profession or pursuit of an occupation cannot be exercised by the State or its
agents in an arbitrary, despotic, or oppressive manner. A political body that
regulates the exercise of a particular privilege has the authority to both forbid
and grant such privilege in accordance with certain conditions. Such conditions
may not, however, require giving up ones constitutional rights as a condition to
acquiring the license. 40 Under the view that the legislature cannot validly
bestow an arbitrary power to grant or refuse a license on a public agency or
officer, courts will generally strike down license legislation that vests in public
officials discretion to grant or refuse a license to carry on some ordinarily
lawful business, profession, or activity without prescribing definite rules and
conditions for the guidance of said officials in the exercise of their power. 41
In the present case, the aforementioned guidelines are provided for in Rep. Act
No. 2382, as amended, which prescribes the requirements for admission to the
practice of medicine, the qualifications of candidates for the board
examinations, the scope and conduct of the examinations, the grounds for
denying the issuance of a physician's license, or revoking a license that has
been issued. Verily, to be granted the privilege to practice medicine, the
applicant must show that he possesses all the qualifications and none of the
disqualifications. Furthermore, it must appear that he has fully complied with
all the conditions and requirements imposed by the law and the licensing
authority. Should doubt taint or mar the compliance as being less than
satisfactory, then the privilege will not issue. For said privilege is
distinguishable from a matter of right, which may be demanded if denied.
Thus, without a definite showing that the aforesaid requirements and
conditions have been satisfactorily met, the courts may not grant the writ
of mandamus to secure said privilege without thwarting the legislative will.
3. On the Ripeness of the Petition for Mandamus
Lastly, the petitioners herein contend that the Court of Appeals should have
dismissed the petition for mandamus below for being premature. They argue
that the administrative remedies had not been exhausted. The records show
that this is not the first time that petitioners have sought the dismissal of Civil
Case No. 93-66530. This issue was raised in G.R. No. 115704, which petition we
referred to the Court of Appeals, where it was docketed as CA-G.R. SP No.
34506. On motion for reconsideration in CA-G.R. SP No. 34506, the appellate
court denied the motion to dismiss on the ground that the prayers for the
nullification of the order of the trial court and the dismissal of Civil Case No. 9366530 were inconsistent reliefs. In G.R. No. 118437, the petitioners sought to
nullify the decision of the Court of Appeals in CA-G.R. SP No. 34506 insofar as it

did not order the dismissal of Civil Case No. 93-66530. In our consolidated
decision, dated July 9, 1998, in G.R. Nos. 117817 & 118437, this Court
speaking through Justice Bellosillo opined that:
Indeed, the issue as to whether the Court of Appeals erred in not
ordering the dismissal of Civil Case No. 93-66530 sought to be
resolved in the instant petition has been rendered meaningless by
an event taking place prior to the filing of this petition and denial
thereof should follow as a logical consequence. 42 There is no
longer any justiciable controversy so that any declaration thereon
would be of no practical use or value. 43 It should be recalled that
in its decision of 19 December 1994 the trial court granted the writ
of mandamus prayed for by private respondents, which decision
was received by petitioners on 20 December 1994. Three (3) days
after, or on 23 December 1994, petitioners filed the instant
petition. By then, the remedy available to them was to appeal the
decision to the Court of Appeals, which they in fact did, by filing a
notice of appeal on 26 December 1994. 44
The petitioners have shown no cogent reason for us to reverse the aforecited
ruling. Nor will their reliance upon the doctrine of the exhaustion of
administrative remedies in the instant case advance their cause any.
Section 26 45 of the Medical Act of 1959 provides for the administrative and
judicial remedies that respondents herein can avail to question Resolution No.
26 of the Board of Medicine, namely: (a) appeal the unfavorable judgment to
the PRC; (b) should the PRC ruling still be unfavorable, to elevate the matter on
appeal to the Office of the President; and (c) should they still be unsatisfied, to
ask for a review of the case or to bring the case to court via a special civil
action of certiorari. Thus, as a rule, mandamus will not lie when administrative
remedies are still available. 46 However, the doctrine of exhaustion of
administrative remedies does not apply where, as in this case, a pure question
of law is raised. 47 On this issue, no reversible error may, thus, be laid at the
door of the appellate court in CA-G.R. SP No. 37283, when it refused to dismiss
Civil Case No. 93-66530.
As we earlier pointed out, herein respondents Arnel V. Herrera, Fernando F.
Mandapat, Ophelia C. Hidalgo, Bernadette T. Mendoza, Ruby B. Lantin-Tan,
Fernando T. Cruz, Marissa A. Regodon, Ma. Eloisa Q. Mallari-Largoza, Cheryl R.
Triguero, Joseph A. Jao, Bernadette H. Cabuhat, Evelyn S. Acosta-Cabanes,
Laura M. Santos, Maritel M. Echiverri, Bernadette C. Escusa, Carlosito C.
Domingo, Alicia S. Lizano, Elnora R. Raqueno-Rabaino, Saibzur N. Edding,
Derileen D. Dorado-Edding, Robert B. Sanchez, Maria Rosario LeonorLacandula, Geraldine Elizabeth M. Pagilagan-Palma, Margarita Belinda L.
Vicencio-Gamilla, Herminigilda E. Conejos, Leuvina P. Chico-Paguio, Elcin C.
Arriola-Ocampo, and Jose Ramoncito P. Navarro manifested to the Court of

Appeals during the pendency of CA-G.R. SP No. 37283, that they were no
longer interested in proceeding with the case and moved for its dismissal
insofar as they were concerned. A similar manifestation and motion were later
filed by intervenors Mary Jean I. Yeban-Merlan, Michael L. Serrano, Norma G.
Lafavilla, Arnulfo A. Salvador, Belinda C. Rabarra, Yolanda P. Unica, Dayminda
G. Bontuyan, Clarissa B. Baclig, Ma. Luisa S. Gutierrez, Rhoneil R. Deveraturda,
Aleli A. Gollayan, Evelyn C. Cundangan, Frederick D. Francisco, Violeta V.
Meneses, Melita J. Caedo, Clarisa SJ. Nicolas, Federico L. Castillo, Karangalan
D. Serrano, Danilo A. Villaver, Grace E. Uy, Lydia C. Chan, and Melvin M. Usita.
Following these manifestations and motions, the appellate court in CA-G.R. SP
No. 37283 decreed that its ruling would not apply to them. Thus, inasmuch as
the instant case is a petition for review of the appellate court's ruling in CAG.R. SP No. 37283, a decision which is inapplicable to the aforementioned
respondents will similarly not apply to them.
As to Achilles J. Peralta, Evelyn O. Ramos, Sally B. Bunagan, Rogelio B. Ancheta,
Oscar H. Padua, Jr., Evelyn D. Grajo, Valentino P. Arboleda, Carlos M. Bernardo,
Jr., Mario D. Cuaresma, Violeta C. Felipe, Percival H. Pangilinan, Corazon M. Cruz
and Samuel B. Bangoy, herein decision shall not apply pursuant to the Orders
of the trial court in Civil Case No. 93-66530, dropping their names from the
suit.
Consequently, this Decision is binding only on the remaining respondents,
namely: Arlene V. de Guzman, Celerina S. Navarro, Rafael I. Tolentino,
Bernardita B. Sy, Gloria T. Jularbal, Hubert S. Nazareno, Nancy J. Chavez,
Ernesto L. Cue, Herminio V. Fernandez, Jr., Maria Victoria M. Lacsamana and
Merly D. Sta. Ana, as well as the petitioners.
WHEREFORE, the instant petition is GRANTED. Accordingly, (1) the assailed
decision dated May 16, 2000, of the Court of Appeals, in CA-G.R. SP No. 37283,
which affirmed the judgment dated December 19, 1994, of the Regional Trial
Court of Manila, Branch 52, in Civil Case No. 93-66530, ordering petitioners to
administer the physician's oath to herein respondents as well as the resolution
dated August 25, 2000, of the appellate court, denying the petitioners' motion
for reconsideration, are REVERSED and SET ASIDE; and (2) the writ
of mandamus, issued in Civil Case No. 93-66530, and affirmed by the appellate
court in CA-G.R. SP No. 37283 is NULLIFIED AND SET ASIDE. EcICDT
SO ORDERED.
Puno and Callejo, Sr., JJ ., concur.
Quisumbing, J ., took no part.
Austria-Martinez, J ., took no part is on leave.
||| (Professional Regulation Commission v. De Guzman, G.R. No. 144681, [June
21, 2004], 476 PHIL 596-623)

9. JMM PROMOTION & MANAGEMENT, INC. v COURT OF APPEALS

FIRST DIVISION
[G.R. No. 120095. August 5, 1996.]
JMM PROMOTION AND MANAGEMENT, INC., and KARY
INTERNATIONAL, INC., petitioners, vs. HON. COURT OF
APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of
the Department of Labor and Employment, HON. JOSE
BRILLANTES, in his capacity as acting Secretary of the
Department of Labor and Employment and HON.
FELICISIMO JOSON, in his capacity as Administrator of the
Philippine Overseas Employment
Administration, respondents.
Don P. Porciuncula for petitioner.
Ma. Bezen Ringpis Liban/Solicitor General for respondents.
SYLLABUS
1. POLITICAL LAW; INHERENT POWERS OF THE STATE; POLICE POWER; NATURE
AND SCOPE. The latin maxim salus populi est suprema lex embodies the
character of the entire spectrum of public laws aimed at promoting the general
welfare of the people under the State's police power. As an inherent attribute
of sovereignty which virtually "extends to all public needs," this "least
limitable" of governmental powers grants a wide panoply of instruments
through which the state, as parens patriae gives effect to a host of its
regulatory powers. Describing the nature and scope of the police power, Justice
Malcolm, in the early case of Rubi v. Provincial Board of Mindoro (89 Phil. 660,
708, [1919]) wrote: "The police power of the State," one court has said . . . 'is a
power coexistensive with self-protection, and is not inaptly termed 'the law of
overruling necessity.' It may be said to be that inherent and plenary power in
the state which enables it to prohibit all things hurtful to the comfort, safety
and welfare of society." Carried onward by the current of legislature. the
judiciary rarely attempts to dam the onrushing power of legislative discretion,
provided the purposes of the law do not go beyond the great principles that
mean security for the public welfare or do not arbitrarily interfere with the right
of the individual."
2. ID.; ID.; ID.; EXERCISE THEREOF ENJOYS A PRESUMED VALIDITY UNLESS IT IS
SHOWN THAT IT DOES NOT ENHANCE THE PUBLIC WELFARE OR WAS
EXERCISED ARBITRARILY OR UNREASONABLY. Thus, police power concerns

government enactments which precisely interfere with personal liberty or

property in order to promote the general welfare or the common good. As the
assailed Department Order enjoys a presumed validity, it follows that the
burden rests upon petitioners to demonstrate that the said order, particularly
its ARB requirement, does not enhance the public welfare or was exercised
arbitrarily or unreasonably.
3. ID.; ID.; ID.; THE PROPER REGULATION OF A PROFESSION, CALLING,
BUSINESS OR TRADE IS A VALID EXERCISE THEREOF. Nevertheless, no right
is absolute, and the proper regulation of a profession, calling business or trade
has always been upheld as a legitimate subject of a valid exercise of the police
power by the state particularly when their conduct affects either the execution
of legitimate governmental functions, the preservation of the State, the public
health and welfare and public morals. According to the maxim, sic utere tuo ut
alienum non laedas, it must of course be within the legitimate range of
legislative action to define the mode and manner in which every one may so
use his own property so as not to pose injury to himself or others.
4. ID.; ID.; ID.; WHERE THE LIBERTY CURTAILED AFFECTS AT MOST THE RIGHT
TO PROPERTY, THE PERMISSIBLE SCOPE OF REGULATORY MEASURES IS MUCH
WIDER. In any case, where the liberty curtailed affects at most the rights of
property, the permissible scope of regulatory measures is certainly much
wider. To pretend that licensing or accreditation requirements violates the due
process clause is to ignore the settled practice, under the mantle of the police
power, of regulating entry to the practice of various trades or professions.
Professionals leaving for abroad are required to pass rigid written and practical
exams before they are deemed fit to practice their trade. Seamen are required
to take tests determining their seamanship. Locally, the Professional
Regulation Commission has began to require previously licensed doctors and
other professionals to furnish documentary proof that they had either retrained or had undertaken continuing education courses as a requirement for
renewal of their licenses. It is not claimed that these requirements pose an
unwarranted deprivation of a property right under the due process clause. So
long as professionals and other workers meet reasonable regulatory standards
no such deprivation exists.
5. CONSTITUTIONAL LAW; STATE POLICIES; THE STATE SHALL AFFORD FULL
PROTECTION TO LABOR; ELUCIDATED. Protection to labor does not indicate
promotion of employment alone. Under the welfare and social justice
provisions of the Constitution, the promotion of full employment, while
desirable, cannot take a backseat to the government's constitutional duty to
provide mechanisms for the protection of our work-force, local or overseas. As
this Court explained in Philippine Association of Service Exporters (PASEI) v.
Drilon, in reference to the recurring problems faced by our overseas workers:
what concerns the Constitution more paramountly is that such an employment
be above all, decent, just, and humane. It is bad enough that the country has
to send its sons and daughters to strange lands because it cannot satisfy their

employment needs at home. Under these circumstances, the Government is

duty-bound to insure that our toiling expatriates have adequate protection,
personally and economically, while away from home. A profession, trade or
calling is a property right within the meaning of our constitutional guarantees.
One cannot be deprived of the right to work and the right to make a living
because these rights are property rights, the arbitrary and unwarranted
deprivation of which normally constitutes an actionable wrong.
6. ID.; BILL OF RIGHTS; NON-IMPAIRMENT OF OBLIGATIONS OF CONTRACTS;
MUST YIELD TO THE STATE'S POLICE POWER. It is a futile gesture on the part
of petitioners to invoke the non-impairment clause of the Constitution to
support their argument that the government cannot enact the assailed
regulatory measures because they abridge the freedom to contract.
In Philippine Association of Service Exporters, Inc. vs. Drilon, we held that
"(t)he non-impairment clause of the Constitution . . . must yield to the loftier
purposes targeted by the government." Equally important, into every contract
is read provisions of existing law, and always, a reservation of the police power
for so long as the agreement deals with a subject impressed with the public
welfare.
7. ID.; ID.; EQUAL PROTECTION CLAUSE; MERELY REQUIRES THAT ALL PERSONS
BE TREATED ALIKE UNDER LIKE CONDITIONS. The equal protection clause is
directed principally against undue favor and individual or class privilege. It is
not intended to prohibit legislation which is limited to the object to which it is
directed or by the territory in which it is to operate. It does not require absolute
equality, but merely that all persons be treated alike under like conditions both
as to privileges conferred and liabilities imposed. We have held, time and
again, that the equal protection clause of the Constitution does not forbid
classification for so long as such classification is based on real and substantial
differences having a reasonable relation to the subject of the particular
legislation. If classification is germane to the purpose of the law, concerns all
members of the class, and applies equally to present and future conditions, the
classification does not violate the equal protection guarantee.
DECISION
KAPUNAN, J p:
This limits of government regulation under the State's police power are once
again at the vortex of the instant controversy. Assailed is the government's
power to control deployment of female entertainers to Japan by requiring an
Artist Record Book (ARB) as a precondition to the processing by the POEA of
any contract for overseas employment. By contending that the right to
overseas employment is a property right within the meaning of the
Constitution, petitioners vigorously aver that deprivation thereof allegedly

through the onerous requirement of an ARB violates the due process clause
and constitutes an invalid exercise of the police power.
The factual antecedents are undisputed.
Following the much-publicized death of Maricris Sioson in 1991, former
President Corazon C. Aquino ordered a total ban against the deployment of
performing artists to Japan and other foreign destinations. The ban was,
however, rescinded after leaders of the overseas employment industry
promised to extend full support for a program aimed at removing kinks in the
system of deployment. In its place, the government, through the Secretary of
Labor and Employment, subsequently issued Department Order No. 28
creating the Entertainment Industry Advisory Council (EIAC). which was tasked
with issuing guidelines on the training, testing certification and deployment of
performing artists abroad.
Pursuant to the EIAC's recommendations, 1 the Secretary of Labor, on January
6, 1994, issued Department Order No. 3 establishing various procedures and
requirements for screening performing artists under a new system of training,
testing, certification and deployment of the former. Performing artists
successfully hurdling the test, training and certification requirement were to be
issued an Artist's Record Book (ARB), a necessary prerequisite to processing of
any contract of employment by the POEA. Upon request of the industry,
implementation of the process, originally scheduled for April 1, 1994, was
moved to October 1, 1994.
Thereafter, the Department of Labor, following the EIAC's recommendation,
issued a series of orders fine-tuning and implementing the new system.
Prominent among these orders were the following issuances:
1. Department Order No. 3-A, providing for additional guidelines on
the training, testing, certification and deployment of performing
artists.
2. Department Order No. 3-B, pertaining to the Artist Record Book
(ARB) requirement, which could be processed only after the artist
could show proof of academic and skills training and has passed
the required tests.
3. Department Order No. 3-E, providing the minimum salary a
performing artist ought to receive (not less than US$600.00 for
those bound for Japan) and the authorized deductions therefrom.
4. Department Order No. 3-F, providing for the guidelines on the
issuance and use of the ARB by returning performing artists who,
unlike new artists, shall only undergo a Special Orientation
Program (shorter than the basic program) although they must pass
the academic test.

In Civil No. 95-72750, the Federation of Entertainment Talent Managers of the

Philippines (FETMOP), on January 27, 1995 filed a class suit assailing these
department orders, principally contending that said orders 1) violated the
constitutional right to travel; 2) abridged existing contracts for employment;
and 3) deprived individual artists of their licenses without due process of law.
FETMOP, likewise, averred that the issuance of the Artist Record Book (ARB)
was discriminatory and illegal and "in gross violation of the constitutional
right . . . to life liberty and property." Said Federation consequently prayed for
the issuance of a writ of preliminary injunction against the aforestated orders.
On February 2, 1992, JMM Promotion and Management, Inc. and Kary
International, Inc., herein petitioners, filed a Motion for Intervention in said civil
case, which was granted by the trial court in an Order dated 15 February,
1995.
However, on February 21, 1995, the trial court issued an Order denying
petitioners' prayer for a writ of preliminary injunction and dismissed the
complaint.
On appeal from the trial court's Order, respondent court, in CA G.R. SP No.
36713 dismissed the same. Tracing the circumstances which led to the
issuance of the ARB requirement and the assailed Department Order,
respondent court concluded that the issuances constituted a valid exercise by
the state of the police power.
We agree.
The latin maxim salus populi est suprema lex embodies the character of the
entire spectrum of public laws aimed at promoting the general welfare of the
people under the State's police power. As an inherent attribute of sovereignty
which virtually "extends to all public needs," 2 this "least limitable" 3of
governmental powers grants a wide panoply of instruments through which the
state, as parens patriae gives effect to a host of its regulatory powers.
Describing the nature and scope of the police power, Justice Malcolm, in the
early case of Rubi v. Provincial Board of Mindoro 4 wrote:
"The police power of the State," one court has said . . . 'is a power
coextensive with self-protection, and is not inaptly termed 'the law
of overruling necessity.' It may be said to be that inherent and
plenary power in the state which enables it to prohibit all things
hurtful to the comfort, safety and welfare of society." Carried
onward by the current of legislature, the judiciary rarely attempts
to dam the onrushing power of legislative discretion, provided the
purposes of the law do not go beyond the great principles that
mean security for the public welfare or do not arbitrarily interfere
with the right of the individual." 5
Thus, police power concerns government enactments which precisely interfere
with personal liberty or property in order to promote the general welfare or the

common good. As the assailed Department Order enjoys a presumed validity,

it follows that the burden rests upon petitioners to demonstrate that the said
order, particularly, its ARB requirement, does not enhance the public welfare or
was exercised arbitrarily or unreasonably.
A through review of the facts and circumstances leading to the issuance of the
assailed orders compels us to rule that the Artist Record Book requirement and
the questioned Department Order related to its issuance were issued by the
Secretary of Labor pursuant to a valid exercise of the police power.
In 1984, the Philippines emerged as the largest labor sending country in Asia
dwarfing the labor export of countries with mammoth populations such as India
and China. According to the National Statistics Office, this diaspora was
augmented annually by over 450,000 documented and clandestine or illegal
(undocumented) workers who left the country for various destinations abroad,
lured by higher salaries, better work opportunities and sometimes better living
conditions.
Of the hundreds of thousands of workers who left the country for greener
pastures in the last few years, women composed slightly close to half of those
deployed, constituting 47% between 1987-1991, exceeding this proportion
(58%) by the end of 1991, 6 the year former President Aquino instituted the
ban on deployment of performing artists to Japan and other countries as a
result of the gruesome death of Filipino entertainer Maricris Sioson.
It was during the same period that this Court took judicial notice not only of the
trend, but also of the fact that most of our women, a large number employed
as domestic helpers and entertainers, worked under exploitative conditions
"marked by physical and personal abuse." 7 Even then, we noted that "[t]he
sordid tales of maltreatment suffered by migrant Filipina workers, even rape
and various forms of torture, confirmed by testimonies of returning workers"
compelled "urgent government action." 8
Pursuant to the alarming number of reports that a significant number of Filipina
performing artists ended up as prostitutes abroad (many of whom were
beaten, drugged and forced into prostitution), and following the deaths of a
number of these women, the government began instituting measures aimed at
deploying only those individuals who met set standards which would qualify
them as legitimate performing artists. In spite of these measures, however, a
number of our countrymen have nonetheless fallen victim to unscrupulous
recruiters, ending up as virtual slaves controlled by foreign crime syndicates
and forced into jobs other than those indicated in their employment contracts.
Worse, some of our women have been forced into prostitution.
Thus, after a number of inadequate and failed accreditation schemes, the
Secretary of Labor issued on August 16, 1993, D.O. No. 28, establishing the
Entertainment Industry Advisory Council (EIAC), the policy advisory body of
DOLE on entertainment industry matters. 9 Acting on the recommendations of
the said body, the Secretary of Labor, on January 6, 1994, issued the assailed

orders. These orders embodied EIAC's Resolution No. 1, which called for
guidelines on screening, testing and accrediting performing overseas Filipino
artists. Significantly, as the respondent court noted, petitioners were duly
represented in the EIAC, 10 which gave the recommendations on which the
ARB and other requirements were based.
Clearly, the welfare of Filipino performing artists, particularly the women was
paramount in the issuance of Department Order No. 3. Short of a total and
absolute ban against the deployment of performing artists to "high-risk"
destinations, a measure which would only drive recruitment further
underground, the new scheme at the very least rationalizes the method of
screening performing artists by requiring reasonable educational and artistic
skills from them and limits deployment to only those individuals adequately
prepared for the unpredictable demands of employment as artists abroad. It
cannot be gainsaid that this scheme at least lessens the room for exploitation
by unscrupulous individuals and agencies.
Moreover, here or abroad, selection of performing artists is usually
accomplished by auditions, where those deemed unfit are usually weeded out
through a process which is inherently subjective and vulnerable to bias and
differences in taste. The ARB requirement goes one step further, however,
attempting to minimize the subjectivity of the process by defining minimum
skills required from entertainers and performing artists. As the Solicitor General
observed, this should be easily met by experienced artists possessing merely
basic skills. The tests are aimed at segregating real artists or performers from
those passing themselves off as such, eager to accept any available job and
therefore exposing themselves to possible exploitation.
As to the other provisions of Department Order No. 3 questioned by
petitioners, we see nothing wrong with the requirement for document and
booking confirmation (D.O. 3-C), a minimum salary scale (D.O. 3-E), or the
requirement for registration of returning performers. The requirement for a
venue certificate or other documents evidencing the place and nature of work
allows the government closer monitoring of foreign employers and helps keep
our entertainers away from prostitution fronts and other worksites associated
with unsavory, immoral, illegal or exploitative practices. Parenthetically, none
of these issuances appear to us, by any stretch of the imagination, even
remotely unreasonable or arbitrary. They address a felt need of according
greater protection for an oft-exploited segment of our OCW's. They respond to
the industry's demand for clearer and more practicable rules and guidelines.
Many of these provisions were fleshed out following recommendations by, and
after consultations with, the affected sectors and non-government
organizations. On the whole, they are aimed at enhancing the safety and
security of entertainers and artists bound for Japan and other destinations,
without stifling the industry's concerns for expansion and growth.
In any event, apart from the State's police power, the Constitution itself
mandates government to extend the fullest protection to our overseas workers.

The basic constitutional statement on labor, embodied in Section 18 of Article

II of the Constitution provides:
Sec. 18. The State affirms labor as a primary social economic force.
It shall protect the rights of workers and promote their welfare.
More emphatically, the social justice provision on labor of the 1987
Constitution in its first paragraph states:
The State shall afford full protection to labor, local and overseas,
organized and unorganized and promote full employment and
equality of employment opportunities for all.
Obviously, protection to labor does not indicate promotion of employment
alone. Under the welfare and social justice provisions of the Constitution, the
promotion of full employment, while desirable, cannot take a backseat to the
government's constitutional duty to provide mechanisms for the protection of
our workforce, local or overseas. At this Court explained in Philippine
Association of Service Exporters (PASEI) v. Drilon, 11 in reference to the
recurring problems faced by our overseas workers:
What concerns the Constitution more paramountly is that such an
employment be above all, decent, just, and humane. It is bad
enough that the country has to send its sons and daughters to
strange lands because it cannot satisfy their employment needs at
home. Under these circumstances, the Government is duty-bound
to insure that our toiling expatriates have adequate protection,
personally and economically, while away from home.
We now go to petitioners' assertion that the police power cannot, nevertheless,
abridge the right of our performing workers to return to work abroad after
having earlier qualified under the old process, because, having previously been
accredited, their accreditation became a "property right," protected by the due
process clause. We find this contention untenable.
A profession, trade or calling is a property right within the meaning of our
constitutional guarantees. One cannot be deprived of the right to work and the
right to make a living because these rights are property rights, the arbitrary
and unwarranted deprivation of which normally constitutes an actionable
wrong. 12
Nevertheless, no right is absolute, and the proper regulation of a profession,
calling, business or trade has always been upheld as a legitimate subject of a
valid exercise of the police power by the state particularly when their conduct
affects either the execution of legitimate governmental functions, the
preservation of the State, the public health and welfare and public morals.
According to the maxim, sic utere tuo ut alienum non laedas, it must of course
be within the legitimate range of legislative action to define the mode and

manner in which every one may so use his own property so as not to pose
injury to himself or others. 13
In any case, where the liberty curtailed affects at most the rights of property,
the permissible scope of regulatory measures is certainly much wider. 14 To
pretend that licensing or accreditation requirements violates the due process
clause is to ignore the settled practice, under the mantle of the police power,
of regulating entry to the practice of various trades or professions.
Professionals leaving for abroad are required to pass rigid written and practical
exams before they are deemed fit to practice their trade. Seamen are required
to take tests determining their seamanship. Locally, the Professional
Regulation Commission has began to require previously licensed doctors and
other professionals to furnish documentary proof that they had either retrained or had undertaken continuing education courses as a requirement for
renewal of their licenses. It is not claimed that these requirements pose an
unwarranted deprivation of a property right under the due process clause. So
long as professionals and other workers meet reasonable regulatory standards
no such deprivation exists.
Finally, it is a futile gesture on the part of petitioners to invoke the nonimpairment clause of the Constitution to support their argument that the
government cannot enact the assailed regulatory measures because they
abridge the freedom to contract. In Philippine Association of Service Exporters,
Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution . .
. must yield to the loftier purposes targeted by the government." 15 Equally
important, into every contract is read provisions of existing law, and always, a
reservation of the police power for so long as the agreement deals with a
subject impressed with the public welfare.
A last point. Petitioners suggest that the singling out of entertainers and
performing artists under the assailed department orders constitutes class
legislation which violates the equal protection clause of the Constitution. We do
not agree.
The equal protection clause is directed principally against undue favor and
individual or class privilege. It is not intended to prohibit legislation which is
limited to the object to which it is directed or by the territory in which it is to
operate. It does not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges conferred and liabilities
imposed. 16 We have held, time and again, that the equal protection clause
of the Constitution does not forbid classification for so long as such
classification is based on real and substantial differences having a reasonable
relation to the subject of the particular legislation. 17 If classification is
germane to the purpose of the law, concerns all members of the class, and
applies equally to present and future conditions, the classification does not
violate the equal protection guarantee.

In the case at bar, the challenged Department Order clearly applies to all
performing artists and entertainers destined for jobs abroad. These orders, we
stressed hereinbefore, further the Constitutional mandate requiring
government to protect our workforce, particularly those who may be prone to
abuse and exploitation as they are beyond the physical reach of government
regulatory agencies. The tragic incidents must somehow stop, but short of
absolutely curtailing the right of these performers and entertainers to work
abroad, the assailed measures enable our government to assume a measure of
control.
WHEREFORE, finding no reversible error in the decision sought to be reviewed,
petition is hereby DENIED.
SO ORDERED.
Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ ., concur.
||| (JMM Promotion and Management, Inc. v. Court of Appeals, G.R. No. 120095,
[August 5, 1996], 329 PHIL 87-102)

EMINENT DOMAIN
1. PLDT v NATIONAL TELECOMMUNICATIONS COMMISSION
EN BANC
[G.R. No. 88404. October 18, 1990.]
PHILIPPINE
LONG
DISTANCE
TELEPHONE
CO.
[PLDT], petitioner, vs. THE NATIONAL TELECOMMUNICATIONS
COMMISSION AND
CELLCOM,
INC.,
(EXPRESS TELECOMMUNICATIONS CO.,
INC.
[ETCI]), respondents.
Alampan & Manhit Law Offices for petitioner.
Gozon, Fernandez, Defensor & Parel for private respondent.
DECISION
MELENCIO-HERRERA, J p:
Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way
of Certiorari and Prohibition under Rule 65, two (2) Orders of public
respondent National Telecommunications Commission (NTC), namely, the Order
of
12
December
1988
granting
private
respondent
Express Telecommunications Co., Inc. (ETCI) provisional authority to install,
operate and maintain a Cellular Mobile Telephone System in Metro-Manila
(Phase A) in accordance with specified conditions, and the Order, dated 8 May
1988, denying reconsideration.
On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act
Granting Felix Alberto and Company, Incorporated, a Franchise to Establish
Radio Stations for Domestic and Transoceanic Telecommunications." Felix
Alberto & Co., Inc. (FACI) was the original corporate name, which was changed
to ETCI with the amendment of the Articles of Incorporation in 1964. Much
later, "CELLCOM, Inc." was the name sought to be adopted before the
Securities and Exchange Commission, but this was withdrawn and abandoned.
On 13 May 1987, alleging urgent public need, ETCI filed an application with
public respondent NTC (docketed as NTC Case No. 87-89) for the issuance of a
Certificate of Public Convenience and Necessity (CPCN) to construct, install,
establish, operate and maintain a Cellular Mobile Telephone System and an
Alpha Numeric Paging System in Metro Manila and in the Southern Luzon

regions, with a prayer for provisional authority to operate Phase A of its

proposal within Metro Manila. llcd
PLDT filed an Opposition with a Motion to Dismiss, based primarily on the
following grounds: (1) ETCI is not capacitated or qualified under its legislative
franchise to operate a systemwide telephone or network of telephone service
such as the one proposed in its application; (2) ETCI lacks the facilities needed
and indispensable to the successful operation of the proposed cellular mobile
telephone system; (3) PLDT has itself a pending application with NTC, Case No.
86-86, to install and operate a Cellular Mobile Telephone System for domestic
and international service not only in Manila but also in the provinces and that
under the "prior operator" or "protection of investment" doctrine, PLDT has the
priority or preference in the operation of such service; and (4) the provisional
authority, if granted, will result in needless, uneconomical and harmful
duplication, among others.
In an Order, dated 12 November 1987, NTC overruled PLDT's Opposition and
declared that Rep. Act No. 2090 (1958) should be liberally construed as to
include among the services under said franchise the operation of a cellular
mobile telephone service.
In the same Order, ETCI was required to submit the certificate of registration of
its Articles of Incorporation with the Securities and Exchange Commission, the
present capital and ownership structure of the company and such other
evidence, oral or documentary, as may be necessary to prove its legal,
financial and technical capabilities as well as the economic justifications to
warrant the setting up of cellular mobile telephone and paging systems. The
continuance of the hearings was also directed.
After evaluating the reconsideration sought by PLDT, the NTC, in October 1988,
maintained its ruling that liberally construed, applicant's franchise carries with
it the privilege to operate and maintain a cellular mobile telephone service.
On 12 December 1988, NTC issued the first challenged Order. Opining that
"public interest, convenience and necessity further demand a second cellular
mobile telephone service provider and finds PRIMA FACIE evidence showing
applicant's legal, financial and technical capabilities to provide a cellular
mobile service using the AMPS system," NTC granted ETCI provisional authority
to install, operate and maintain a cellular mobile telephone system initially in
Metro Manila, Phase A only, subject to the terms and conditions set forth in the
same Order. One of the conditions prescribed (Condition No. 5) was that, within
ninety (90) days from date of the acceptance by ETCI of the terms and
conditions of the provisional authority, ETCI and PLDT "shall enter into an
interconnection agreement for the provision of adequate interconnection
facilities between applicant's cellular mobile telephone switch and the public
switched telephone network and shall jointly submit such interconnection
agreement to the Commission for approval."

In
a
"Motion
to
Set
Aside
the
Order"
granting
provisional
authority, PLDT alleged essentially that the interconnection ordered was in
violation of due process and that the grant of provisional authority was
jurisdictionally and procedurally infirm. On 8 May 1989, NTC denied
reconsideration and set the date for continuation of the hearings on the main
proceedings. This is the second questioned Order.
PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May
1989 and to order ETCI to desist from, suspend, and/or discontinue any and all
acts intended for its implementation.
On 15 June 1989, we resolved to dismiss the petition for its failure to comply
fully with the requirements of Circular No. 188. Upon satisfactory showing,
however, that there was, in fact, such compliance, we reconsidered the order,
reinstated the Petition, and required the respondents NTC and ETCI to submit
their respective Comments.
On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC
to "Cease and Desist from all or any of its on-going proceedings and ETCI from
continuing any and all acts intended or related to or which will amount to the
implementation/execution of its provisional authority." This was upon PLDT's
urgent manifestation that it had been served an NTC Order, dated 14 February
1990, directing immediate compliance with its Order of 12 December 1988,
"otherwise the Commission shall be constrained to take the necessary
measures and bring to bear upon PLDT the full sanctions provided by law."
We required PLDT to post a bond of P5M. It has complied, with the statement
that it was "post(ing) the same on its agreement and/or consent to have the
same forfeited in favor of Private Respondent ETCI/CELLCOM should the instant
Petition be dismissed for lack of merit." ETCI took exception to the sufficiency
of the bond considering its initial investment of approximately P225M, but
accepted the forfeiture proferred.
ETCI moved to have the TRO lifted, which we denied on 6 March 1990 We
stated, however, that the inaugural ceremony ETCI had scheduled for that day
could proceed, as the same was not covered by the TRO.
PLDT relies on the following grounds for the issuance of the Writs prayed for:
"1. Respondent NTC's subject order effectively licensed and/or
authorized a corporate entity without any franchise to operate a
public utility, legislative or otherwise, to establish and operate
a telecommunications system.
"2. The same order validated stock transactions of a public service
enterprise contrary to and/or in direct violation of Section 20(h) of
the Public Service Act.
"3. Respondent NTC adjudicated in the same order a controverted
matter that was not heard at all in the proceedings under which it
was promulgated."

As correctly pointed out by respondents, this being a special civil action for
Certiorari and Prohibition, we only need determine if NTC acted without
jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction in granting provisional authority to ETCI under the NTC questioned
Orders of 12 December 1988 and 8 May 1989.
The case was set for oral argument on 21 August 1990 with the parties
directed to address, but not limited to, the following issues: (1) the status and
coverage of Rep. Act No. 2090 as a franchise; (2) the transfer of shares of stock
of a corporation holding a CPCN; and (3) the principle and procedure of
interconnection. The parties were thereafter required to submit their respective
Memoranda, with which they have complied.
We find no grave abuse of discretion on the part of NTC, upon the following
considerations:
1. NTC Jurisdiction
There can be no question that the NTC is the regulatory agency of
the national government with jurisdiction over all telecommunications entities.
It is legally clothed with authority and given ample discretion to grant a
provisional permit or authority. In fact, NTC may, on its own initiative, grant
such relief even in the absence of a motion from an applicant.
"Sec. 3. Provisional Relief . Upon the filing of an application,
complaint or petition or at any stage thereafter, the Board may
grant on motion of the pleaders or on its own initiative, the relief
prayed for, based on the pleading, together with the affidavits and
supporting documents attached thereto, without prejudice to a
final decision after completion of the hearing which shall be called
within thirty (30) days from grant of authority asked for." (Rule 15,
Rules of Practice and Procedure Before the Board of
Communications (now NTC).
What the NTC granted was such a provisional authority, with a definite expiry
period of eighteen (18) months unless sooner renewed, and which may be
revoked, amended or revised by the NTC. It is also limited to Metro Manila only.
What is more, the main proceedings are clearly to continue as stated in the
NTC Order of 8 May 1989.
The provisional authority was issued after due hearing, reception of evidence
and evaluation thereof, with the hearings attended by various oppositors,
including PLDT. It was granted only after a prima facie showing that ETCI hag
the necessary legal, financial and technical capabilities and that public
interest, convenience and necessity so demanded.
PLDT argues, however, that a provisional authority is nothing short of a
Certificate of Public Convenience and Necessity (CPCN) and that it is merely a
"distinction without a difference." That is not so. Basic differences do exist,

which need not be elaborated on. What should be borne in mind is that
provisional authority would be meaningless if the grantee were not allowed to
operate. Moreover, it is clear from the very Order of 12 December 1988 itself
that its scope is limited only to the first phase, out of four, of the proposed
nationwide telephone system. The installation and operation of an alpha
numeric paging system was not authorized. The provisional authority is not
exclusive. Its lifetime is limited and may be revoked by the NTC at any time in
accordance with law. The initial expenditure of P130M more or less, is rendered
necessary even under a provisional authority to enable ETCI to prove its
capability. And as pointed out by the Solicitor General, on behalf of the NTC, if
what had been granted were a CPCN, it would constitute a final order or award
reviewable only by ordinary appeal to the Court of Appeals pursuant to Section
9(3) of BP Blg. 129, and not by Certiorari before this Court.
The final outcome of the application rests within the exclusive prerogative of
the NTC. Whether or not a CPCN would eventually issue would depend on the
evidence to be presented during the hearings still to be conducted, and only
after a full evaluation of the proof thus presented.
2. The Coverage of ETCI's Franchise
Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of
constructing, installing, establishing and operating in the entire Philippines
radio stations for reception and transmission of messages on radio stations in
the foreign and domestic public fixed point-to-point and public base,
aeronautical and land mobile stations, . . . with the corresponding relay
stations for the reception and transmission of wireless messages on
radiotelegraphy and/or radiotelephony . . . . " PLDT maintains that the scope of
the franchise is limited to "radio stations" and excludes telephone services
such as the establishment of the proposed Cellular Mobile Telephone System
(CMTS). However, in its Order of 12 November 1987, the NTC construed the
technical term "radiotelephony" liberally as to include the operation of a
cellular mobile telephone system. It said:
"In resolving the said issue, the Commission takes into
consideration the different definitions of the term "radiotelephony."
As defined by the New International Webster Dictionary the term
"radiotelephony" is defined as a telephony carried on by aid of
radiowaves
without
connecting
wires.
The
International Telecommunications Union
(ITU)
defines
a
"radiotelephone call" as a "telephone call, originating in or
intended on all or part of its route over the radio communications
channels of the mobile service or of the mobile satellite service."
From the above definitions, while under Republic Act 2090 a
system-wide telephone or network of telephone service by means
of connecting wires may not have been contemplated, it can be
construed liberally that the operation of a cellular mobile telephone
service which carries messages, either voice or record, with the aid

of radiowaves or a part of its route carried over radio

communication channels, is one included among the services
under said franchise for which a certificate of public convenience
and necessity may be applied for."
The foregoing is the construction given by an administrative agency possessed
of the necessary special knowledge, expertise and experience and deserves
great weight and respect (Asturias Sugar Central, Inc. v. Commissioner of
Customs, et al., L-19337, September 30, 1969, 29 SCRA 617). It can only be set
aside on proof of gross abuse of discretion, fraud, or error of law (Tupas Local
Chapter No. 979 v. NLRC, et al., L-60532-33, November 5, 1985, 139 SCRA
478). We discern none of those considerations sufficient to warrant judicial
intervention.
3. The Status of ETCI's Franchise
PLDT alleges that the ETCI franchise had lapsed into non-existence for failure of
the franchise holder to begin and complete construction of the radio system
authorized under the franchise as explicitly required in Section 4 of its
franchise, Rep. Act No. 2090. 1 PLDT also invokes Pres. Decree No. 36, enacted
on 2 November 1972, which legislates the mandatory cancellation or
invalidation of all franchises for the operation of communications services,
which have not been availed of or used by the party or parties in whose name
they were issued.
However, whether or not ETCI, and before it FACI, in contravention of its
franchise, started the first of its radio telecommunication stations within (2)
years from the grant of its franchise and completed the construction within ten
(10) years from said date; and whether or not its franchise had remained
unused from the time of its issuance, are questions of fact beyond the province
of this Court, besides the well-settled procedural consideration that factual
issues are not subjects of a special civil action for Certiorari (Central Bank of
the Philippines vs. Court of Appeals, G.R. No. 41859, 8 March 1989, 171 SCRA
49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985, 135 SCRA 78; Filipino
Merchant's Insurance Co., Inc. vs. Intermediate Appellate Court, G.R. No.
71640, 27 June 1988, 162 SCRA 669). Moreover, neither Section 4, Rep. Act No.
2090 nor Pres. Decree No. 36 should be construed as self-executing in working
a forfeiture. Franchise holders should be given an opportunity to be heard,
particularly so, where, as in this case, ETCI does not admit any breach, in
consonance with the rudiments of fair play. Thus, the factual situation of this
case differs from that in Angeles Ry Co. vs. City of Los Angeles (92 Pacific
Reporter 490) cited by PLDT, where the grantee therein admitted its failure to
complete the conditions of its franchise and yet insisted on a decree of
forfeiture.
More importantly, PLDT's allegation partakes of a collateral attack on a
franchise (Rep. Act No. 2090), which is not allowed. A franchise is a property
right and cannot be revoked or forfeited without due process of law. The

determination of the right to the exercise of a franchise, or whether the right to

enjoy such privilege has been forfeited by non-user, is more properly the
subject of the prerogative writ of quo warranto, the right to assert which, as a
rule, belongs to the State "upon complaint or otherwise" (Sections 1, 2 and 3,
Rule 66, Rules of Court), 2 the reason being that the abuse of a franchise is a
public wrong and not a private injury. A forfeiture of a franchise will have to be
declared in a direct proceeding for the purpose brought by the State because a
franchise is granted by law and its unlawful exercise is primarily a concern of
Government.
"A . . . franchise is . . . granted by law, and its . . . unlawful exercise
is the concern primarily of the Government. Hence, the latter as a
role is the party called upon to bring the action for such . . .
unlawful exercise of . . . franchise." (IV-B V. FRANCISCO, 298 [1963
ed.], citing Cruz vs. Ramos, 84 Phil. 226).
4. ETCI's Stock Transactions
ETCI admits that in 1964, the Albertos, as original owners of more than 40% of
the outstanding capital stock sold their holdings to the Orbes. In 1968, the
Albertos re-acquired the shares they had sold to the Orbes. In 1987, the
Albertos sold more than 40% of their shares to Horacio Yalung. Thereafter, the
present stockholders acquired their ETCI shares. Moreover, in 1964, ETCI had
increased its capital stock from P40,000.00 to P360,000.00; and in 1987, from
P360,000.00 to P40M.
PLDT contends that the transfers in 1987 of the shares of stock to the new
stockholders amount to a transfer of ETCI's franchise, which needs
Congressional approval pursuant to Rep. Act No. 2090, and since such approval
had not been obtained, ETCI's franchise had been invalidated. The provision
relied on reads, in part, as follows:
SECTION 10. The grantee shall not lease, transfer, grant the
usufruct of, sell or assign this franchise nor the rights and
privileges acquired thereunder to any person, firm, company,
corporation or other commercial or legal entity nor merge with any
other person, company or corporation organized for the same
purpose, without the approval of the Congress of the Philippines
first had. . . . . "
It should be noted, however, that the foregoing provision is, directed to the
"grantee" of the franchise, which is the corporation itself and refers to a sale,
lease, or assignment of that franchise. It does not include the transfer or sale
of shares of stock of a corporation by the latter's stockholders.
The sale of shares of stock of a public utility is governed by another law,
i.e., Section 20(h) of the Public Service Act (Commonwealth Act No. 146).
Pursuant thereto, the Public Service Commission (now the NTC) is the
government agency vested with the authority to approve the transfer of more

than 40% of the subscribed capital stock of a telecommunications company to

a single transferee, thus:
SEC. 20. Acts requiring the approval of the Commission. Subject to
established limitations and exceptions and saving provisions to the
contrary, it shall be unlawful for any public service or for the
owner, lessee or operator thereof, without the approval and
authorization of the Commission previously had
xxx xxx xxx
(h) To sell or register in its books the transfer or sale of shares of its
capital stock, if the result of that sale in itself or in connection with
another previous sale, shall be to vest in the transferee more than
forty per centum of the subscribed capital of said public service.
Any transfer made in violation of this provision shall be void and of
no effect and shall not be registered in the books of the public
service corporation. Nothing herein contained shall be construed to
prevent the holding of shares lawfully acquired. (As amended by
Com. Act No. 454)."
In other words, transfers of shares of a public utility corporation need only NTC
approval, not Congressional authorization. What transpired in ETCI were a
series of transfers of shares starting in 1964 until 1987. The approval of the
NTC may be deemed to have been met when it authorized the issuance of the
provisional authority to ETCI. There was full disclosure before the NTC of the
transfers. In fact, the NTC Order of 12 November 1987 required ETCI to submit
its "present capital and ownership structure." Further, ETCI even filed a Motion
before the NTC, dated 8 December 1987, or more than a year prior to the grant
of provisional authority, seeking approval of the increase in its capital stock
from P960,000.00 to P40M, and the stock transfers made by its
stockholders. LibLex
A distinction should be made between shares of stock, which are owned by
stockholders, the sale of which requires only NTC approval, and the franchise
itself which is owned by the corporation as the grantee thereof, the sale or
transfer of which requires Congressional sanction. Since stockholders own the
shares of stock, they may dispose of the same as they see fit. They may not,
however, transfer or assign the property of a corporation, like its franchise. In
other words, even if the original stockholders had transferred their shares to
another group of shareholders, the franchise granted to the corporation
subsists as long as the corporation, as an entity, continues to exist. The
franchise is not thereby invalidated by the transfer of the shares. A corporation
has a personality separate and distinct from that of each stockholder. It has the
right of continuity or perpetual succession (Corporation Code, Sec. 2).

To all appearances, the stock transfers were not just for the purpose of
acquiring the ETCI franchise, considering that, as heretofore stated, a series of
transfers was involved from 1964 to 1987. And, contrary to PLDT's assertion,
the franchise was not the only property of ETCI of meaningful value. The "zero"
book value of ETCI assets, as reflected in its balance sheet, was plausibly
explained as due to the accumulated depreciation over the years entered for
accounting purposes and was not reflective of the actual value that those
assets would command in the market.
But again, whether ETCI has offended against a provision of its franchise, or
has subjected it to misuse or abuse, may more properly be inquired into in quo
warranto proceedings instituted by the State. It is the condition of every
franchise that it is subject to amendment, alteration, or repeal when the
common good so requires (1987 Constitution, Article XII, Section 11).
5. The NTC Interconnection Order
In the provisional authority granted by NTC to ETCI, one of the conditions
imposed was that the latter and PLDT were to enter into an interconnection
agreement to be jointly submitted to NTC for approval.
PLDT vehemently opposes interconnection with its own public switched
telephone network. It contends: that while PLDT welcomes interconnections in
the furtherance of public interest, only parties who can establish that they
have valid and subsisting legislative franchises are entitled to apply for a CPCN
or provisional authority, absent which, NTC has no jurisdiction to grant them
the CPCN or interconnection with PLDT; that the 73 telephone systems
operating all over the Philippines have a viability and feasibility independent of
any interconnection with PLDT; that "the NTC is not empowered to compel such
a private raid on PLDT's legitimate income arising out of its gigantic
investment;" that "it is not public interest, but purely a private and selfish
interest which will be served by an interconnection under ETCI's terms;" and
that "to compel PLDT to interconnect merely to give viability to a prospective
competitor, which cannot stand on its own feet, cannot be justified in the name
of a non-existent public need" (PLDT Memorandum, pp. 48 and 50).
PLDT cannot justifiably refuse to interconnect.
Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8
February 1990, mandates interconnection providing as it does that "all
domestic telecommunications carriers or utilities . . . shall be interconnected to
the public switch telephone network." Such regulation of the use and
ownership of telecommunications systems is in the exercise of the plenary
police power of the State for the promotion of the general welfare. The 1987
Constitutionrecognizes the existence of that power when it provides:
"SEC. 6. The use of property bears a social function, and all
economic agents shall contribute to the common good. Individuals
and private groups, including corporations, cooperatives, and

similar collective organizations, shall have the right to own,

establish, and operate economic enterprises, subject to the duty of
the State to promote distributive justice and to intervene when the
common good so demands" (Article XII).
The interconnection which has been required of PLDT is a form of
"intervention" with property rights dictated by "the objective of government to
promote the rapid expansion of telecommunications services in all areas of the
Philippines, . . . to maximize the use of telecommunications facilities
available, . . . in recognition of the vital role of communications in nation
building
.
.
.
and to
ensure
that
all
users
of
the
public telecommunications service have access to all other users of the service
wherever they may be within the Philippines at an acceptable standard of
service and at reasonable cost" (DOTC Circular No. 90-248). Undoubtedly, the
encompassing objective is the common good. The NTC, as the regulatory
agency of the State, merely exercised its delegated authority to regulate the
use of telecommunications networks when it decreed interconnection.
The importance and emphasis given to interconnection dates back to Ministry
Circular No. 82-81, dated 6 December 1982, providing:
"Sec. 1. That the government encourages the provision and
operation of public mobile telephone service within local sub-base
stations, particularly, in the highly commercialized areas;
"Sec. 5. That, in the event the authority to operate said service be
granted to other applicants, other than the franchise holder, the
franchise operator shall be under obligation to enter into an
agreement with the domestic telephone network, under an
interconnection agreement;"
Department of Transportation and Communication (DOTC) Circular No. 87-188,
issued in 1987, also decrees:
"12. All public communications carriers shall interconnect their
facilities pursuant to comparatively efficient interconnection (CEI)
as defined by the NTC in the interest of economic efficiency."
The sharing of revenue was an additional feature considered in DOTC Circular
No. 90-248, dated 14 June 1990, laying down the "Policy on Interconnection
and Revenue Sharing by Public Communications Carriers," thus:
"WHEREAS, it is the objective of government to promote the rapid
expansion of telecommunications services in all areas of the
Philippines;
"WHEREAS,
there
is
s
need
to
maximize
the
use
of telecommunications facilities
available
and
encourage
investment
in telecommunications infrastructure
by
suitably
qualified service providers;

"WHEREAS, in recognition of the vital role of communications in

nation building, there is a need to ensure that all users of the
public telecommunicationsservice have access to all other users of
the service wherever they may be within the Philippines at an
acceptable standard of service and at reasonable cost.
"WHEREFORE, xxx the following Department policies
interconnection and revenue sharing are hereby promulgated:

on

1. All facilities offering public telecommunication

services
shall
be
interconnected
into
the
nationwide telecommunications network/s,
xxx xxx xxx
4. The interconnection of networks shall be effected in a
fair and non-discriminatory manner and within the shortest
timeframe practicable.
5. The precise points of interface between service
operators shall be as defined by the NTC; and the
apportionment of costs and division of revenues resulting
from interconnection of telecommunications networks shall be
as approved and/or prescribed by the NTC.
xxx xxx xxx"
Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-1390 prescribing the "Rules and Regulations Governing the Interconnection of
Local Telephone Exchanges and Public Calling Offices with the
Nationwide Telecommunications Network/s, the Sharing of Revenue Derived
Therefrom, and for Other Purposes."
The NTC order to interconnect allows the parties themselves to discuss and
agree upon the specific terms and conditions of the interconnection agreement
instead of the NTC itself laying down the standards of interconnection which it
can very well impose. Thus it is that PLDT cannot justifiably claim denial of due
process. It has been heard. It will continue to be heard in the main
proceedings. It will surely be heard in the negotiations concerning the
interconnection agreement.
As disclosed during the hearing, the interconnection sought by ETCI is by no
means a "parasitic dependence" on PLDT. The ETCI system can operate on its
own even without interconnection, but it will be limited to its own subscribers.
What interconnection seeks to accomplish is to enable the system to reach out
to the greatest number of people possible in line with governmental policies
laid down. Cellular phones can access PLDT units and vice versa in as wide an
area as attainable. With the broader reach, public interest and convenience will
be better served. To be sure, ETCI could provide no mean competition
(although PLDT maintains that it has nothing to fear from the "innocuous
interconnection"),
and
eat
into PLDT's
own
toll
revenue

("cream PLDT revenue," in its own words), but all for the eventual benefit of all
that the system can reach.
6. Ultimate Considerations
The decisive considerations are public need, public interest, and the common
good. Those were the overriding factors which motivated NTC in granting
provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution,
recognizes the vital role of communication and information in nation building. It
is likewise a State policy to provide the environment for the emergence of
communications structures suitable to the balanced flow of information into,
out of, and across the country (Article XVI, Section 10, ibid.). A modern and
dependable communications network rendering efficient and reasonably priced
services is also indispensable for accelerated economic recovery and
development. To these public and national interests, public utility companies
must bow and yield.
Despite the fact that there is a virtual monopoly of the telephone system in the
country at present, service is sadly inadequate. Customer demands are hardly
met, whether fixed or mobile. There is a unanimous cry to hasten the
development
of
a
modern,
efficient,
satisfactory
and
continuous telecommunicationsservice not only in Metro Manila but throughout
the archipelago. The need therefor was dramatically emphasized by the
destructive earthquake of 16 July 1990. It may be that users of the cellular
mobile telephone would initially be limited to a few and to highly
commercialized areas. However, it is a step in the right direction towards the
enhancement of the telecommunications infrastructure, the expansion
of telecommunications services in, hopefully, all areas of the country, with
chances of complete disruption of communications minimized. It will thus
impact on the total development of the country's telecommunications systems
and redound to the benefit of even those who may not be able to subscribe to
ETCI.
Free competition in the industry may also provide the answer to a muchdesired improvement in the quality and delivery of this type of public utility, to
improved technology, fast and handy mobile service, and reduced user
dissatisfaction. After all, neither PLDT nor any other public utility has a
constitutional right to a monopoly position in view of the Constitutional
proscription that no franchise certificate or authorization shall be exclusive in
character or shall last longer than fifty (50) years (ibid., Section 11; Article XIV,
Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution).
Additionally, the State is empowered to decide whether public interest
demands that monopolies be regulated or prohibited (1987 Constitution,
Article XII, Section 19).
WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or
excess
of
jurisdiction,
on
the
part
of

the National TelecommunicationsCommission in issuing its challenged Orders

of 12 December 1988 and 8 May 1989 in NTC Case No. 87-39, this Petition is
DISMISSED for lack of merit. The Temporary Restraining Order heretofore
issued is LIFTED. The bond issued as a condition for the issuance of said
restraining Order is declared forfeited in favor of private responder
Express Telecommunications Co., Inc.
Costs against petitioner.
SO ORDERED.
Paras, Feliciano, Padilla, Sarmiento, Cortes, Grio-Aquino and Regalado, JJ.,
concur.
Separate Opinions
GUTIERREZ, JR., J ., dissenting:
I share with the rest of the Court the desire to have a "modern, efficient,
satisfactory, and continuous telecommunications service" in the Philippines. I
register this dissent, however, because I believe that any frustrations over the
present state of telephone services do not justify our affirming an illegal and
inequitable order of the National Telecommunication Commission (NTC). More
so when it appears that the questioned order is not really a solution to the
problems bugging our telephone industry.
My dissent is based on three primary considerations, namely:
(1) The Court has sustained nothing less than the desire of respondent ETCI to
set-up a profitable business catering to an affluent clientele through the use of
billions of pesos worth of another company's properties. No issues of public
welfare, breaking up of monopolies, or other high sounding principles are
involved. The core question is purely and simply whether or not to grant ETCI's
desire for economic gains through riding on another firm's investments.
(2) The Court has permitted respondent ETCI to operate a telephone system
without a valid legislative franchise. It strains the imagination too much to
interpret a legislative franchise authorizing "radio stations" as including the
provisional permit for a sophisticated telephone system which has absolutely
nothing to do with radio broadcasts and transmissions. The Court subverts the
legislative will when it validates a provisional permit on the basis of authority
which never envisioned much less intended its use for a regular telephone
system catering to thousands of individual receiver units. There is nothing
in Rep. Act No. 2090 which remotely suggests a cellular mobile telephone
system.
(3) The authority given by Rep. Act No. 2090 has expired. ETCI is not only
riding on another company's investments and using legislative authority for a

purpose never dreamed of by the legislators but is also trying to extract life
from and resurrect an unused and dead franchise.
My principal objection to the disputed NTC order arises from the fact that
respondent Express Telecommunications Co. Inc. (ETCI) cannot exist without
using the facilities of Philippine Long Distance Telephone Co. (PLDT). Practically
all of its business will be conducted through another company's property.
While pretending to set up a separate phone company, ETCI's cellular phones
would be useless most of the time, if not all the time, unless they
use PLDTlines. It would be different if ETCI phone owners would primarily
communicate with one another and tap into PLDT lines only rarely or
occasionally.
To compare ETCI with the Government Telephone System (GTS) or with an
independent phone company serving a province or city is misleading. The
defunct GTS was set up to connect government offices and personnel with one
another. It could exist independently and was not primarily or wholly
dependent on PLDT connections. A provincial or city system serves the
residents of a province or city. It primarily relies on its own investments and
infrastructure. It asks for PLDT services only when long distance calls to
another country, city, or province have to be made.
I can, therefore, understand PLDT's reluctance since it has its own franchise to
operate exactly the same services which ETCI is endeavoring to
establish. PLDTwould be using its own existing lines. Under the Court's
decision, it would be compelled to allow another company to use those same
lines in direct competition with the lines' owner. The cellular system is actually
only an adjunct to a regular telephone system, not a separate and independent
system. As an adjunct and component unit or as a parasite (if a foreign body) it
must be fed by the mother organism or unit if it is to survive.
Under the disputed order, ETCI will be completely dependent upon its use of
the P16 billions worth of infrastructure which PLDT has built over several
decades. The vaunted payment of compensation everytime an ETCI phone taps
into a PLDT line, is illusory. There can be no adequate payment for the use of
billions of pesos of investments built up over 60 years. Moreover, it is actually
the phone owner or consumer who pays the fee. The rate will be fixed by
Government and will be based on the consumer's best interests and capacity,
ignoring or subordinating the petitioner's investments. Payment will depend on
how much the phone user should be charged for making a single phone call
and will disregard the millions of pesos that ETCI will earn through its use of
billions of pesos worth of another company's investments and properties.
The "hated monopoly" and "improved services" argument are not only
misleading but also illusory.
To sustain the questioned NTC order will not in any way improve telephone
services nor would any monopoly be dismantled. The answer to inadequate

telephone facilities is better administrative supervision. The NTC should pay

attention to its work and compel PLDT to improve its services instead of
saddling with the burden of carrying another company's system.
For better services, what the country needs is to improve the existing system
and provide enough telephone lines for all who really need them. The proposed
ETCI cellular phones will serve mostly those who can afford to ride in expensive
cars and who already have two or three telephones in their offices and
residences. Cellular phones should legally and fairly be provided by PLDT as
just another facet of its expansion program.
The mass of applicants for new telephones will not benefit from cellular
phones. In fact, if PLDT is required by NTC to open up new exchanges or
interconnections for the rich ETCI consumers, this will mean an equivalent
number of low income or middle income applicants who will have to wait
longer for their own PLDT lines. The Court's resolution favors the conveniences
of the rich at the expense of the necessities of the poor. **
I agree with the petitioner that what NTC granted is not merely provisional
authority but what is in effect a regular certificate of public convenience and
necessity or "CPCN"
Starting with seven cell sites for 3,000 subscribers in Metro Manila, the cellular
mobile system will establish 67 cell sites beginning October 1991. The initial
expenses alone will amount to P130 million. At page 8 of its Comment, ETCI
admits that "the provisional authority to operate will be useless to ETCI if it
does not put up the system and interconnect said system with the
existing PLDT network." (Emphasis supplied) The completion of interconnection
arrangements, the setting up of expensive installations, the requirements as to
maintenance and operation, and other conditions found in the NTC order are
anything but provisional.
The authority given to ETCI is entirely different from the provisional authority
given to MERALCO or oil companies to increase the price of oil or electricity or
to bus and jeepney operators to raise fares a few centavos. In these cases, the
need for increases is not only urgent but is usually a foregone conclusion
dictated by pressing circumstances. Further hearings are needed only to fix the
amount which will be finally authorized. The NTC orders can also be easily
revoked. Increased prices of oil or rates of transportation services can be
lowered or struck down if the preliminary determinations are wrong. In the
instant case, NTC has authorized a new company to start operations even if
the issues have not been thoroughly threshed out. There is no urgent need
which warrants operations before a final permit is granted. Once in operation,
there can be no cancelling or revocation of the authority to operate, no
dismantling of thousands of cellular phones and throwing to waste of over
P100 million worth of investments in fixed facilities. Theoretically, it can be
done but it is clear from the records that what was granted is really a CPCN.

There is no dispute that a legislative franchise is necessary for the operation of

a telephone system. The NTC has no jurisdiction to grant the authority. The fact
that ETCI has to rely on a 1958 legislative franchise shows that only Congress
can give the franchise which will empower NTC to issue the certificate or CPCN.
Rep. Act No. 2090 is a franchise for the construction and operation of radio
stations. Felix Alberto and Co. Inc. (FACI) was authorized in the operation of
those radio stations to acquire and handle transmitters, receivers, electrical
machinery and other related devises. The use of radio telephony was never
intended or envisioned for a regular telephone company. "Radio telephony" is
governed and circumscribed by the basic purpose of operating radio stations.
Telephony may be used only to enable communications between the stations,
to transmit a radio message to a station where it would be transcribed into a
form suitable for delivery to the intended recipient. FACI was authorized to
communicate to, between, and among its radio stations. There is no authority
for thousands of customers to be talking to PLDT subscribers directly. FACI was
never given authority by Rep. Act 2090 to operate switching facilities, wire-line
transmissions, and telecommunication stations of a telephone company. The
entire records can be scrutinized and they will show that ETCI has all but
ignored and kept silent about the purpose of its alleged franchise which is
for the real operation of radio stations. There can be no equating of "radio
stations" with a complete cellular mobile telephone system. The two are poles
apart.
The most liberal interpretation can not possibly read in a 1958 franchise for
radio stations, the authority for a mobile cellular system vintage 1990. No
amount of liberal interpretation can supply the missing requirement. And
besides, we are not interpreting a Constitution which is intended to cover
changing situations and must be read liberally. Legislative franchises are
always construed strictly against the franchise.
The remedy is for ETCI to go to Congress. I regret that in dismissing this
petition, we may be withholding from Congress the courtesy we owe to it as a
co-equal body and denigrating its power to examine whether or not ETCI really
deserves a legislative franchise.
My third point has to do with the sudden resurrection of a dead franchise and
its coming to life in an entirely different form no longer a radio station but a
modern telephone company.
I have searched the records in vain for any plan of ETCI to operate radio
stations. It has not operated and does not plan to operate radio stations. Its
sole objective is to set up a telephone company. For that purpose, it should go
to Congress and get a franchise for a telephone company. NTC cannot give it
such a franchise.
Section 10 of Rep. Act No. 2090 prohibits the transfer of the franchise and the
rights and privileges under that franchise without the express approval of
Congress. No amount of legal niceties can cloak the fact that ETCI is not FACI,

that the franchise was sold by FACI to ETCI, and that the permit given by NTC
to ETCI is based on a purchased franchise.
When the owners of FACI sold out their stocks, the 3,900 shares were on paper
worth only 35 centavos each. The company had no assets and physical
properties. All it had was the franchise, for whatever it was worth. The buyers
paid P4,618,185.00 for the company's stocks, almost all of the amount
intended for the franchise. It was, therefore, a sale or transfer of the franchise
in violation of the express terms of Rep. Act No. 2090 which call for approval by
Congress.
ETCI tried to show a series of transactions involving the sales of almost all of its
stocks. Not only are the circumstances surrounding the transfers quite
suspicious, but they were effected without the approval and authorization of
the Commission as required by law.
Sec. 4 of Rep. Act No. 2090 also provides that the franchise shall be void unless
the construction of radio stations is begun within two years or June 22, 1960
and completed within ten years or June 22, 1968.
As of April 14, 1987, ETCI formally admitted that it was still in the pre-operating
stage. Almost 30 years later, it had not even started the business authorized
by the franchise. It is only now that it proposes to construct, not radio stations,
but a telephone system.
During the oral arguments and in its memorandum, ETCI presented proof of
several radio station construction permits. A construction permit authorizes a
construction but does not prove it. There is no proof that the entire
construct}on of all stations was completed within ten years. In fact, there is
not the slightest intimation that ETCI, today, is operating radio stations. What it
wants is to set up a telephone system.
In addition to the franchise being void under its own charter, P.D. 36 on
November 2, 1972, cancelled all unused or dormant legislative franchises. Rep.
Act No. 2090, having been voided by its own Section 4, suffered a second
death if that is at all possible.
The violations of law (1) the giving of life to an already dead franchise, (2)
the transfer of ownership against an express statutory provision, and (3) the
use of a franchise for radio stations to justify the setting up of a cellular mobile
telephone system are too glaring for us to ignore on the basis of "respect"
for a questionable NTC order and other purely technical considerations. We
should not force PLDT to open its lines to enable a competitor to operate a
system which cannot survive unless it uses PLDT properties.
The NTC bases its order on alleged grounds of public need, public interest, and
the common good. There is no showing that these considerations will be
satisfied, at least sufficient to warrant a strained interpretation of legal
provisions. Any slight improvement which the expensive ETCI project will
accomplish cannot offset its violation of law and fair dealing.

I, THEREFORE, VOTE to GRANT the petition.

Fernan, C.J., Narvasa, Gancayco, Bidin and Medialdea, JJ., concur.
CRUZ, J ., concurring and dissenting:
As one of the many dissatisfied customers of PLDT, I should have no objection
to the grant of the provisional authority to ETCI. I have none. Its admission will
improve communication facilities in the country conformably to the
constitutional objective. It will also keep PLDT on its toes and encourage it to
correct its deficient service in view of the competition.
I fully agree with all the rulings in the ponencia except the approval of the
requirement for PLDT to interconnect with ETCI. I think it violates due process.
It reminds me of the story of the little red hen who found some rice and asked
who would help her plant it. None of the animals in the farm was willing and
neither did they help in watering, harvesting and finally cooking it. But when
she asked, "Who will help me eat the rice?" everyone wanted to join in. The
little red hen is like PLDT.
If ETCI wants to operate its own telephone system, it should rely on its own
resources instead of riding piggy-back on PLDT. It seems to me rather unfair for
the Government to require PLDT to share with a newcomer and potential rival
what it took PLDT tremendous effort and long years and billions of pesos to
build.
The case of Republic of the Philippines v. PLDT, 26 SCRA 620, is not applicable
because it was the Government itself that was there seeking interconnection of
its own telephone system with PLDT. The Court recognized the obvious public
purpose that justified the special exercise (by the Government) of the power of
eminent domain. But in the case before us, the intended beneficiary is a
private enterprise primarily organized for profit and, indeed, to compete
with PLDT. In effect, the Government is forcing PLDT to surrender its
competitive advantage and share its resources with ETCI, which may not only
supplement but, possibly, even ultimately supplant PLDT. I do not think
government authority extends that far.
The majority disposes of the question of due process by simply saying
that PLDT will have full opportunity to be heard in the ascertainment of the just
compensation ETCI will have to pay for the interconnection. That is not the
issue. What PLDT is objecting to is not the amount of the just compensation
but the interconnection itself that is being forced upon it.
I feel there is no due process where private property is taken by the
Government from one private person and given to another private person for
the latter's direct benefit. The fact that compensation is paid is immaterial; the
flaw lies in the taking itself (Davidson v. New Orleans, 90 U.S. 97). The
circumstance that PLDT is a public utility is no warrant for taking undue
liberties with its property, which is protected by the Bill of Rights. "Public need"

cannot be a blanket justification for favoring one investor against another in

contravention of the system of free enterprise. If PLDT has misused its
franchise, I should think the solution is to revoke its authority, not to force it to
share its resources with its private competitors.
The rule is that where it is the legislature itself that directly calls for the
expropriation of private property, its determination of the thing to be
condemned and the purpose of the taking is conclusive on the courts (City of
Manila v. Chinese Community, 40 Phil. 349). But where the power of eminent
domain is exercised only by a delegate of the legislature, like ETCI, the courts
may inquire into the necessity or propriety of the expropriation and, when
warranted, pronounce its invalidity (Republic of the Philippines v. La Orden de
PO Benedictinos de Filipinas, 1 SCRA 649). I think this is what the Court should
do in the case at bar.
A final point. It is argued that requiring ETCI to start from scratch (as PLDT did)
and import its own equipment would entail a tremendous outflow of foreign
currency we can ill afford at this time. Perhaps so. But we must remember that
the Bill of Rights is not a marketable commodity, like a piece of machinery. Due
process is an indispensable requirement that cannot be assessed in dollar and
cents.
Fernan, C.J. and Narvasa, J., concur.
||| (Philippine Long Distance Telephone Co. v. National Telecommunications
Commission, G.R. No. 88404, [October 18, 1990], 268 PHIL 784-815)

2. NATIONAL POWER CORPORATION v POBRE

FIRST DIVISION
[G.R. No. 106804. August 12, 2004.]
NATIONAL POWER CORPORATION, petitioner, vs. COURT OF
APPEALS and ANTONINO POBRE, respondents.
DECISION
CARPIO, J p:
The Case
Before us is a petition for review 1 of the 30 March 1992 Decision 2 and 14
August 1992 Resolution of the Court of Appeals in CA-G.R. CV No. 16930. The
Court of Appeals affirmed the Decision 3 of the Regional Trial Court, Branch 17,
Tabaco, Albay in Civil Case No. T-552.
The Antecedents
Petitioner National Power Corporation ("NPC") is a public corporation created to
generate geothermal, hydroelectric, nuclear and other power and to transmit
electric power nationwide. 4 NPC is authorized by law to acquire property and
exercise the right of eminent domain.
Private respondent Antonino Pobre ("Pobre") is the owner of a 68,969 squaremeter land ("Property") located in Barangay Bano, Municipality of Tiwi, Albay.
The Property is covered by TCT No. 4067 and Subdivision Plan 11-9709. SATDEI
In 1963, Pobre began developing the Property as a resort-subdivision, which he
named as "Tiwi Hot Springs Resort Subdivision." On 12 January 1966, the then
Court of First Instance of Albay approved the subdivision plan of the Property.
The Register of Deeds thus cancelled TCT No. 4067 and issued independent
titles for the approved lots. In 1969, Pobre started advertising and selling the
lots.
On 4 August 1965, the Commission on Volcanology certified that thermal
mineral water and steam were present beneath the Property. The Commission
on Volcanology found the thermal mineral water and steam suitable for
domestic use and potentially for commercial or industrial use.
NPC then became involved with Pobres Property in three instances.
First was on 18 February 1972 when Pobre leased to NPC for one year eleven
lots from the approved subdivision plan.

Second was sometime in 1977, the first time that NPC filed its expropriation
case against Pobre to acquire an 8,311.60 square-meter portion of the
Property.5 On 23 October 1979, the trial court ordered the expropriation of the
lots upon NPCs payment of P25 per square meter or a total amount of
P207,790. NPC began drilling operations and construction of steam wells. While
this first expropriation case was pending, NPC dumped waste materials beyond
the site agreed upon by NPC with Pobre. The dumping of waste materials
altered the topography of some portions of the Property. NPC did not act on
Pobres complaints and NPC continued with its dumping. IAEcCa
Third was on 1 September 1979, when NPC filed its second expropriation case
against Pobre to acquire an additional 5,554 square meters of the Property.
This is the subject of this petition. NPC needed the lot for the construction and
maintenance of Naglagbong Well Site F-20, pursuant to Proclamation No.
739 6and Republic Act No. 5092. 7 NPC immediately deposited P5,546.36 with
the Philippine National Bank. The deposit represented 10% of the total market
value of the lots covered by the second expropriation. On 6 September 1979,
NPC entered the 5,554 square-meter lot upon the trial courts issuance of a
writ of possession to NPC.
On 10 December 1984, Pobre filed a motion to dismiss the second complaint
for expropriation. Pobre claimed that NPC damaged his Property. Pobre prayed
for just compensation of all the lots affected by NPCs actions and for the
payment of damages.
On 2 January 1985, NPC filed a motion to dismiss the second expropriation
case on the ground that NPC had found an alternative site and that NPC had
already abandoned in 1981 the project within the Property due to Pobres
opposition.
On 8 January 1985, the trial court granted NPCs motion to dismiss but the trial
court allowed Pobre to adduce evidence on his claim for damages. The trial
court admitted Pobres exhibits on the damages because NPC failed to
object. HCacTI
On 30 August 1985, the trial court ordered the case submitted for decision
since NPC failed to appear to present its evidence. The trial court denied NPCs
motion to reconsider the submission of the case for decision.
NPC filed a petition for certiorari 8 with the then Intermediate Appellate Court,
questioning the 30 August 1985 Order of the trial court. On 12 February 1987,
the Intermediate Appellate Court dismissed NPCs petition but directed the
lower court to rule on NPCs objections to Pobres documentary exhibits.
On 27 March 1987, the trial court admitted all of Pobres exhibits and upheld
its Order dated 30 August 1985. The trial court considered the case submitted
for decision.
On 29 April 1987, the trial court issued its Decision in favor of Pobre. The
dispositive portion of the decision reads: EDIHSC

WHEREFORE, premises considered, judgment is hereby rendered in

favor of the defendant and against the plaintiff, ordering the
plaintiff to pay unto the defendant:
(1) The sum of THREE MILLION FOUR HUNDRED FORTY EIGHT
THOUSAND FOUR HUNDRED FIFTY (P3,448,450.00)
PESOS which is the fair market value of the subdivision
of defendant with an area of sixty eight thousand nine
hundred sixty nine (68,969) square meters, plus legal
rate of interest per annum from September 6, 1979 until
the whole amount is paid, and upon payment thereof by
the plaintiff the defendant is hereby ordered to execute
the necessary Deed of Conveyance or Absolute Sale of
the property in favor of the plaintiff;
(2) The sum of ONE HUNDRED FIFTY THOUSAND
(P150,000.00) PESOS for and as attorneys fees.
Costs against the plaintiff.
SO ORDERED. 9
On 13 July 1987, NPC filed its motion for reconsideration of the decision. On 30
October 1987, the trial court issued its Order denying NPCs motion for
reconsideration. EHIcaT
NPC appealed to the Court of Appeals. On 30 March 1992, the Court of Appeals
upheld the decision of the trial court but deleted the award of attorneys fees.
The dispositive portion of the decision reads:
WHEREFORE, by reason of the foregoing, the Decision appealed
from is AFFIRMED with the modification that the award of
attorneys fees is deleted. No pronouncement as to costs.
SO ORDERED. 10
The Court of Appeals denied NPCs motion for reconsideration in a Resolution
dated 14 August 1992.
The Ruling of the Trial Court
In its 69-page decision, the trial court recounted in great detail the scale and
scope of the damage NPC inflicted on the Property that Pobre had developed
into a resort-subdivision. Pobres Property suffered "permanent injury" because
of the noise, water, air and land pollution generated by NPCs geothermal
plants. The construction and operation of the geothermal plants drastically
changed the topography of the Property making it no longer viable as a resortsubdivision. The chemicals emitted by the geothermal plants damaged the
natural resources in the Property and endangered the lives of the
residents. TCaEAD

NPC did not only take the 8,311.60 square-meter portion of the Property, but
also the remaining area of the 68,969 square-meter Property. NPC had
rendered Pobres entire Property useless as a resort-subdivision. The Property
has become useful only to NPC. NPC must therefore take Pobres entire
Property and pay for it.
The trial court found the following badges of NPCs bad faith: (1) NPC allowed
five years to pass before it moved for the dismissal of the second expropriation
case; (2) NPC did not act on Pobres plea for NPC to eliminate or at least reduce
the damage to the Property; and (3) NPC singled out Pobres Property for
piecemeal expropriation when NPC could have expropriated other properties
which were not affected in their entirety by NPCs operation.
The trial court found the just compensation to be P50 per square meter or a
total of P3,448,450 for Pobres 68,969 square-meter Property. NPC failed to
contest this valuation. Since NPC was in bad faith and it employed dilatory
tactics to prolong this case, the trial court imposed legal interest on the
P3,448,450 from 6 September 1979 until full payment. The trial court awarded
Pobre attorneys fees of P150,000.
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. However, the
appellate court deleted the award of attorneys fees because Pobre did not
properly plead for it. AEIHCS
The Issues
NPC claims that the Court of Appeals committed the following errors that
warrant reversal of the appellate courts decision:
1. In not annulling the appealed Decision for having been rendered
by the trial court with grave abuse of discretion and without
jurisdiction;
2. In holding that NPC had "taken" the entire Property of Pobre;
3. Assuming arguendo that there was "taking" of the entire
Property, in not excluding from the Property the 8,311.60
square-meter portion NPC had previously expropriated and
paid for;
4. In holding that the amount of just compensation fixed by the
trial court at P3,448,450.00 with interest from September 6,
1979 until fully paid, is just and fair;
5. In not holding that the just compensation should be fixed at
P25.00 per square meter only as what NPC and Pobre had
previously mutually agreed upon; and
6. In not totally setting aside the appealed Decision of the trial
court. 11

Procedural Issues
NPC, represented by the Office of the Solicitor General, insists that at the time
that it moved for the dismissal of its complaint, Pobre had yet to serve an
answer or a motion for summary judgment on NPC. Thus, NPC as plaintiff had
the right to move for the automatic dismissal of its complaint. NPC relies on
Section 1, Rule 17 of the 1964 Rules of Court, the Rules then in effect. NPC
argues that the dismissal of the complaint should have carried with it the
dismissal of the entire case including Pobres counterclaim. TcIAHS
NPCs belated attack on Pobres claim for damages must fail. The trial courts
reservation of Pobres right to recover damages in the same case is already
beyond review. The 8 January 1985 Order of the trial court attained finality
when NPC failed to move for its reconsideration within the 15-day
reglementary period. NPC opposed the order only on 27 May 1985 or more
than four months from the issuance of the order.
We cannot fault the Court of Appeals for not considering NPCs objections
against the subsistence of Pobres claim for damages. NPC neither included
this issue in its assignment of errors nor discussed it in its appellants brief.
NPC also failed to question the trial courts 8 January 1985 Order in the petition
for certiorari 12 it had earlier filed with the Court of Appeals. It is only before
this Court that NPC now vigorously assails the preservation of Pobres claim for
damages. Clearly, NPCs opposition to the existence of Pobres claim for
damages is a mere afterthought. Rules of fair play, justice and due process
dictate that parties cannot raise an issue for the first time on appeal. 13
We must correct NPCs claim that it filed the notice of dismissal just "shortly"
after it had filed the complaint for expropriation. While NPC had intimated
several times to the trial court its desire to dismiss the expropriation case it
filed on 5 September 1979, 14 it was only on 2 January 1985 that NPC filed its
notice of dismissal. 15 It took NPC more than five years to actually file the
notice of dismissal. Five years is definitely not a short period of time. NPC
obviously dilly-dallied in filing its notice of dismissal while NPC meanwhile
burdened Pobres property rights.
Even a timely opposition against Pobres claim for damages would not yield a
favorable ruling for NPC. It is not Section 1, Rule 17 of the 1964 Rules of Court
that is applicable to this case but Rule 67 of the same Rules, as well as
jurisprudence on expropriation cases. Rule 17 referred to dismissal of civil
actions in general while Rule 67 specifically governed eminent domain cases.
Eminent domain is the authority and right of the state, as sovereign, to take
private property for public use upon observance of due process of law and
payment of just compensation. 16 The power of eminent domain may be
validly delegated to the local governments, other public entities and public
utilities 17such as NPC. Expropriation is the procedure for enforcing the right of

eminent domain. 18 "Eminent Domain" was the former title of Rule 67 of the
1964 Rules of Court. In the 1997 Rules of Civil Procedure, which took effect on
1 July 1997, the prescribed method of expropriation is still found in Rule 67, but
its title is now "Expropriation." DaScAI
Section 1, Rule 17 of the 1964 Rules of Court provided the exception to the
general rule that the dismissal of the complaint is addressed to the sound
discretion of the court. 19 For as long as all of the elements of Section 1, Rule
17 were present the dismissal of the complaint rested exclusively on the
plaintiffs will. 20 The defending party and even the courts were powerless to
prevent the dismissal. 21 The courts could only accept and record the
dismissal. 22
A plain reading of Section 1, Rule 17 of the 1964 Rules of Court makes it
obvious that this rule was not intended to supplement Rule 67 of the same
Rules. Section 1, Rule 17 of the 1964 Rules of Court, provided that:
SECTION 1. Dismissal by the plaintiff. An action may be
dismissed by the plaintiff without order of court by filing a notice of
dismissal at any time before service of the answer or of a motion
for summary judgment. Unless otherwise stated in the notice, the
dismissal is without prejudice, except that a notice operates as an
adjudication upon the merits when filed by a plaintiff who has once
dismissed in a competent court an action based on or including the
same claim. A class suit shall not be dismissed or compromised
without approval of the court.
While Section 1, Rule 17 spoke of the "service of answer or summary
judgment," the Rules then did not require the filing of an answer or summary
judgment in eminent domain cases. 23 In lieu of an answer, Section 3 of Rule
67 required the defendant to file a single motion to dismiss where he should
present all of his objections and defenses to the taking of his property for the
purpose specified in the complaint. 24 In short, in expropriation cases under
Section 3 of Rule 67, the motion to dismiss took the place of the answer.
The records show that Pobre had already filed and served on NPC his "motion
to dismiss/answer" 25 even before NPC filed its own motion to dismiss. NPC
filed its notice of dismissal of the complaint on 2 January 1985. However, as
early as 10 December 1984, Pobre had already filed with the trial court
andserved on NPC his "motion to dismiss/answer." A certain Divina Cerela
received Pobres pleading on behalf of NPC. 26 Unfortunately for NPC, even
Section 1, Rule 17 of the 1964 Rules of Court could not save its cause. SCHIcT
NPC is in no position to invoke Section 1, Rule 17 of the 1964 Rules of Court. A
plaintiff loses his right under this rule to move for the immediate dismissal of
the complaint once the defendant had served on the plaintiff the answer or a
motion for summary judgment before the plaintiff could file his notice of
dismissal of the complaint. 27 Pobres "motion to dismiss/answer," filed and

served way ahead of NPCs motion to dismiss, takes the case out of Section 1,
Rule 17 assuming the same applies.
In expropriation cases, there is no such thing as the plaintiffs matter of right to
dismiss the complaint precisely because the landowner may have already
suffered damages at the start of the taking. The plaintiffs right in expropriation
cases to dismiss the complaint has always been subject to court approval and
to certain conditions. 28 The exceptional right that Section 1, Rule 17 of the
1964 Rules of Court conferred on the plaintiff must be understood to have
applied only to other civil actions. The 1997 Rules of Civil Procedure abrogated
this exceptional right. 29
The power of eminent domain is subject to limitations. A landowner cannot be
deprived of his right over his land until expropriation proceedings are instituted
in court. 30 The court must then see to it that the taking is for public use,
there is payment of just compensation and there is due process of law. 31
If the propriety of the taking of private property through eminent domain is
subject to judicial scrutiny, the dismissal of the complaint must also pass
judicial inquiry because private rights may have suffered in the meantime. The
dismissal, withdrawal or abandonment of the expropriation case cannot be
made arbitrarily. If it appears to the court that the expropriation is not for some
public use, 32 then it becomes the duty of the court to dismiss the
action. 33However, when the defendant claims that his land suffered damage
because of the expropriation, the dismissal of the action should not foreclose
the defendants right to have his damages ascertained either in the same case
or in a separate action. 34
Thus, NPCs theory that the dismissal of its complaint carried with it the
dismissal of Pobres claim for damages is baseless. There is nothing in Rule 67
of the 1964 Rules of Court that provided for the dismissal of the defendants
claim for damages, upon the dismissal of the expropriation case. Case law
holds that in the event of dismissal of the expropriation case, the claim for
damages may be made either in a separate or in the same action, for all
damages occasioned by the institution of the expropriation case. 35 The
dismissal of the complaint can be made under certain conditions, such as the
reservation of the defendants right to recover damages either in the same or
in another action. 36 The trial court in this case reserved Pobres right to prove
his claim in the same case, a reservation that has become final due to NPCs
own fault.
Factual Findings of the Trial and Appellate Courts Bind the Court
The trial and appellate courts held that even before the first expropriation
case, Pobre had already established his Property as a resort-subdivision. NPC
had wrought so much damage to the Property that NPC had made the Property
uninhabitable as a resort-subdivision. NPCs facilities such as steam wells, nag
wells, power plants, power lines, and canals had hemmed in Pobres Property.

NPCs operations of its geothermal project also posed a risk to lives and
properties.
We uphold the factual findings of the trial and appellate courts. Questions of
facts are beyond the pale of Rule 45 of the Rules of Court as a petition for
review may only raise questions of law. 37 Moreover, factual findings of the
trial court, particularly when affirmed by the Court of Appeals, are generally
binding on this Court. 38 We thus find no reason to set aside the two courts
factual findings. ACTEHI
NPC points out that it did not take Pobres 68,969 square-meter Property. NPC
argues that assuming that it is liable for damages, the 8,311.60 square-meter
portion that it had successfully expropriated and fully paid for should have
been excluded from the 68,969 square-meter Property that Pobre claims NPC
had damaged.
We are not persuaded.
In its 30 October 1987 Order denying NPCs motion for reconsideration, the
trial court pointed out that the Property originally had a total area of 141,300
square meters. 39 Pobre converted the Property into a resort-subdivision and
sold lots to the public. What remained of the lots are the 68,969 square meters
of land. 40 Pobre no longer claimed damages for the other lots that he had
before the expropriation.
Pobre identified in court the lots forming the 68,969 square-meter Property.
NPC had the opportunity to object to the identification of the lots. 41 NPC,
however, failed to do so. Thus, we do not disturb the trial and appellate courts
finding on the total land area NPC had damaged.
NPC must Pay Just Compensation for the Entire Property
Ordinarily, the dismissal of the expropriation case restores possession of the
expropriated land to the landowner. 42 However, when possession of the land
cannot be turned over to the landowner because it is neither convenient nor
feasible anymore to do so, the only remedy available to the aggrieved
landowner is to demand payment of just compensation. 43
In this case, we agree with the trial and appellate courts that it is no longer
possible and practical to restore possession of the Property to Pobre. The
Property is no longer habitable as a resort-subdivision. The Property is
worthless to Pobre and is now useful only to NPC. Pobre has completely lost the
Property as if NPC had physically taken over the entire 68,969 square-meter
Property. TDCaSE
In United States v. Causby, 44 the U.S. Supreme Court ruled that when private
property is rendered uninhabitable by an entity with the power to exercise
eminent domain, the taking is deemed complete. Such taking is thus
compensable.

In this jurisdiction, the Court has ruled that if the government takes property
without expropriation and devotes the property to public use, after many years
the property owner may demand payment of just compensation. 45 This
principle is in accord with the constitutional mandate that private property
shall not be taken for public use without just compensation. 46
In the recent case of National Housing Authority v. Heirs of Isidro
Guivelondo, 47 the Court compelled the National Housing Authority ("NHA") to
pay just compensation to the landowners even after the NHA had already
abandoned the expropriation case. The Court pointed out that a government
agency could not initiate expropriation proceedings, seize a persons property,
and then just decide not to proceed with the expropriation. Such a complete
turn-around is arbitrary and capricious and was condemned by the Court in the
strongest possible terms. NHA was held liable to the landowners for the
prejudice that they had suffered.
In this case, NPC appropriated Pobres Property without resort to expropriation
proceedings. NPC dismissed its own complaint for the second expropriation. At
no point did NPC institute expropriation proceedings for the lots outside the
5,554 square-meter portion subject of the second expropriation. The only
issues that the trial court had to settle were the amount of just compensation
and damages that NPC had to pay Pobre.
This case ceased to be an action for expropriation when NPC dismissed its
complaint for expropriation. Since this case has been reduced to a simple case
of recovery of damages, the provisions of the Rules of Court on the
ascertainment of the just compensation to be paid were no longer applicable. A
trial before commissioners, for instance, was dispensable. TcSaHC
We have held that the usual procedure in the determination of just
compensation is waived when the government itself initially violates
procedural requirements. 48 NPCs taking of Pobres property without filing the
appropriate expropriation proceedings and paying him just compensation is a
transgression of procedural due process.
From the beginning, NPC should have initiated expropriation proceedings for
Pobres entire 68,969 square-meter Property. NPC did not. Instead, NPC
embarked on a piecemeal expropriation of the Property. Even as the second
expropriation case was still pending, NPC was well aware of the damage that it
had unleashed on the entire Property. NPC, however, remained impervious to
Pobres repeated demands for NPC to abate the damage that it had wrought on
his Property.
NPC moved for the dismissal of the complaint for the second expropriation on
the ground that it had found an alternative site and there was stiff opposition
from Pobre. 49 NPC abandoned the second expropriation case five years after
it had already deprived the Property virtually of all its value. NPC has
demonstrated its utter disregard for Pobres property rights.

Thus, it would now be futile to compel NPC to institute expropriation

proceedings to determine the just compensation for Pobres 68,969 squaremeter Property. Pobre must be spared any further delay in his pursuit to
receive just compensation from NPC.
Just compensation is the fair and full equivalent of the loss. 50 The trial and
appellate courts endeavored to meet this standard. The P50 per square meter
valuation of the 68,969 square-meter Property is reasonable considering that
the Property was already an established resort-subdivision. NPC has itself to
blame for not contesting the valuation before the trial court. Based on the P50
per square meter valuation, the total amount of just compensation that NPC
must pay Pobre is P3,448,450. cEHSTC
The landowner is entitled to legal interest on the price of the land from the
time of the taking up to the time of full payment by the government. 51 In
accord with jurisprudence, we fix the legal interest at six per cent (6%) per
annum. 52 The legal interest should accrue from 6 September 1979, the date
when the trial court issued the writ of possession to NPC, up to the time that
NPC fully pays Pobre. 53
NPCs abuse of its eminent domain authority is appalling. However, we cannot
award moral damages because Pobre did not assert his right to it. 54 We also
cannot award attorneys fees in Pobres favor since he did not appeal from the
decision of the Court of Appeals denying recovery of attorneys fees. 55
Nonetheless, we find it proper to award P50,000 in temperate damages to
Pobre. The court may award temperate or moderate damages, which are more
than nominal but less than compensatory damages, if the court finds that a
party has suffered some pecuniary loss but its amount cannot be proved with
certainty from the nature of the case. 56 As the trial and appellate courts
noted, Pobres resort-subdivision was no longer just a dream because Pobre
had already established the resort-subdivision and the prospect for it was
initially encouraging. That is, until NPC permanently damaged Pobres Property.
NPC did not just destroy the property. NPC dashed Pobres hope of seeing his
Property achieve its full potential as a resort-subdivision.
The lesson in this case must not be lost on entities with eminent domain
authority. Such entities cannot trifle with a citizens property rights. The power
of eminent domain is an extraordinary power they must wield with
circumspection and utmost regard for procedural requirements. Thus, we hold
NPC liable for exemplary damages of P100,000. Exemplary damages or
corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory
damages. 57
WHEREFORE, we DENY the petition for lack of merit. The appealed Decision of
the Court of Appeals dated 30 March 1992 in CA-G.R. CV No. 16930 is
AFFIRMED with MODIFICATION. National Power Corporation is ordered to pay
Antonino Pobre P3,448,450 as just compensation for the 68,969 square-meter

Property at P50 per square meter. National Power Corporation is directed to

pay legal interest at 6% per annum on the amount adjudged from 6 September
1979 until fully paid. Upon National Power Corporations payment of the full
amount, Antonino Pobre is ordered to execute a Deed of Conveyance of the
Property in National Power Corporations favor. National Power Corporation is
further ordered to pay temperate and exemplary damages of P50,000 and
P100,000, respectively. No costs. IaESCH
SO ORDERED.
Davide, Jr., C .J ., Quisumbing, Ynares-Santiago and Azcuna, JJ ., concur.
||| (National Power Corp. v. Court of Appeals, G.R. No. 106804, [August 12,
2004], 479 PHIL 850-870)

3. LAGCAO v LABRA
EN BANC
[G.R. No. 155746. October 13, 2004.]
DIOSDADO LAGCAO, DOROTEO LAGCAO and URSULA
LAGCAO, petitioners, vs. JUDGE GENEROSA G. LABRA, Branch
23, Regional Trial Court, Cebu, and the CITY OF
CEBU, respondent.
DECISION
CORONA, J p:
Before us is a petition for review of the decision dated July 1, 2002 of the
Regional Trial Court, Branch 23, Cebu City 1 upholding the validity of the City
of Cebu's Ordinance No. 1843, as well as the lower court's order dated August
26, 2002 denying petitioner's motion for reconsideration.
In 1964, the Province of Cebu donated 210 lots to the City of Cebu. One of
these lots was Lot 1029, situated in Capitol Hills, Cebu City, with an area of
4,048 square meters. In 1965, petitioners purchased Lot 1029 on installment
basis. But then, in late 1965, the 210 lots, including Lot 1029, reverted to the
Province of Cebu. 2 Consequently, the province tried to annul the sale of Lot
1029 by the City of Cebu to the petitioners. This prompted the latter to sue the
province for specific performance and damages in the then Court of First
Instance.
On July 9, 1986, the court a quo ruled in favor of petitioners and ordered the
Province of Cebu to execute the final deed of sale in favor of petitioners. On
June 11, 1992, the Court of Appeals affirmed the decision of the trial court.
Pursuant to the ruling of the appellate court, the Province of Cebu executed on
June 17, 1994 a deed of absolute sale over Lot 1029 in favor of petitioners.
Thereafter, Transfer Certificate of Title (TCT) No. 129306 was issued in the
name of petitioners and Crispina Lagcao. 3
After acquiring title, petitioners tried to take possession of the lot only to
discover that it was already occupied by squatters. Thus, on June 15, 1997,
petitioners instituted ejectment proceedings against the squatters. The
Municipal Trial Court in Cities (MTCC), Branch 1, Cebu City, rendered a decision
on April 1, 1998, ordering the squatters to vacate the lot. On appeal, the RTC
affirmed the MTCC's decision and issued a writ of execution and order of
demolition. CDaSAE

However, when the demolition order was about to be implemented, Cebu City
Mayor Alvin Garcia wrote two letters 4 to the MTCC, requesting the deferment
of the demolition on the ground that the City was still looking for a relocation
site for the squatters. Acting on the mayor's request, the MTCC issued two
orders suspending the demolition for a period of 120 days from February 22,
1999. Unfortunately for petitioners, during the suspension period,
theSangguniang Panlungsod (SP) of Cebu City passed a resolution which
identified Lot 1029 as a socialized housing site pursuant to RA 7279. 5 Then,
on June 30, 1999, the SP of Cebu City passed Ordinance No. 1772 6 which
included Lot 1029 among the identified sites for socialized housing. On July, 19,
2000, Ordinance No. 1843 7 was enacted by the SP of Cebu City authorizing
the mayor of Cebu City to initiate expropriation proceedings for the acquisition
of Lot 1029 which was registered in the name of petitioners. The intended
acquisition was to be used for the benefit of the homeless after its subdivision
and sale to the actual occupants thereof. For this purpose, the ordinance
appropriated the amount of P6,881,600 for the payment of the subject lot. This
ordinance was approved by Mayor Garcia on August 2, 2000.
On August 29, 2000, petitioners filed with the RTC an action for declaration of
nullity of Ordinance No. 1843 for being unconstitutional. The trial court
rendered its decision on July 1, 2002 dismissing the complaint filed by
petitioners whose subsequent motion for reconsideration was likewise denied
on August 26, 2002.
In this appeal, petitioners argue that Ordinance No. 1843 is unconstitutional as
it sanctions the expropriation of their property for the purpose of selling it to
the squatters, an endeavor contrary to the concept of "public use"
contemplated in the Constitution. 8 They allege that it will benefit only a
handful of people. The ordinance, according to petitioners, was obviously
passed for politicking, the squatters undeniably being a big source of votes.
In sum, this Court is being asked to resolve whether or not the intended
expropriation by the City of Cebu of a 4,048-square-meter parcel of land owned
by petitioners contravenes the Constitution and applicable laws.
Under Section 48 of RA 7160, 9 otherwise known as the Local Government
Code of 1991, 10 local legislative power shall be exercised by
the Sangguniang Panlungsod of the city. The legislative acts of
the Sangguniang Panlungsod in the exercise of its lawmaking authority are
denominated ordinances. cEAHSC
Local government units have no inherent power of eminent domain and can
exercise it only when expressly authorized by the legislature. 11 By virtue of
RA 7160, Congress conferred upon local government units the power to
expropriate. Ordinance No. 1843 was enacted pursuant to Section 19 of RA
7160:
SEC. 19. Eminent Domain. A local government unit may, through
its chief executive and acting pursuant to an ordinance, exercise

the power of eminent domain for public use, or purpose, or welfare

for the benefit of the poor and the landless, upon payment of just
compensation, pursuant to the provisions of the Constitution and
pertinent laws . . .. (italics supplied).
Ordinance No. 1843 which authorized the expropriation of petitioners' lot was
enacted by the SP of Cebu City to provide socialized housing for the homeless
and low-income residents of the City.
However, while we recognize that housing is one of the most serious social
problems of the country, local government units do not possess unbridled
authority to exercise their power of eminent domain in seeking solutions to this
problem.
There are two legal provisions which limit the exercise of this power: (1) no
person shall be deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the laws; 12 and (2)
private property shall not be taken for public use without just
compensation. 13Thus, the exercise by local government units of the power of
eminent domain is not absolute. In fact, Section 19 of RA 7160 itself explicitly
states that such exercise must comply with the provisions of the
Constitution and pertinent laws.
The exercise of the power of eminent domain drastically affects a landowner's
right to private property, which is as much a constitutionally-protected right
necessary for the preservation and enhancement of personal dignity and
intimately connected with the rights to life and liberty. 14 Whether directly
exercised by the State or by its authorized agents, the exercise of eminent
domain is necessarily in derogation of private rights. 15 For this reason, the
need for a painstaking scrutiny cannot be overemphasized.
The due process clause cannot be trampled upon each time an ordinance
orders the expropriation of a private individual's property. The courts cannot
even adopt hands-off policy simply because public use or public purpose is
invoked by an ordinance, or just compensation has been fixed and determined.
In De Knecht vs. Bautista, 16 we said:
It is obvious then that a land-owner is covered by the mantle of
protection due process affords. It is a mandate of reason. It frowns
on arbitrariness, it is the antithesis of any governmental act that
smacks of whim or caprice. It negates state power to act in an
oppressive manner. It is, as had been stressed so often, the
embodiment of the sporting idea of fair play. In that sense, it
stands as a guaranty of justice. That is the standard that must be
met by any governmental agency in the exercise of whatever
competence is entrusted to it. As was so emphatically stressed by
the present Chief Justice, "Acts of Congress, as well as those of the
Executive, can deny due process only under pain of nullity. . . ..

The foundation of the right to exercise eminent domain is genuine necessity

and that necessity must be of public character. 17 Government may not
capriciously or arbitrarily choose which private property should be
expropriated. In this case, there was no showing at all why petitioners'
property was singled out for expropriation by the city ordinance or what
necessity impelled the particular choice or selection. Ordinance No. 1843
stated no reason for the choice of petitioners' property as the site of a
socialized housing project. HTDAac
Condemnation of private lands in an irrational or piecemeal fashion or the
random expropriation of small lots to accommodate no more than a few
tenants or squatters is certainly not the condemnation for public use
contemplated by the Constitution. This is depriving a citizen of his property for
the convenience of a few without perceptible benefit to the public. 18
RA 7279 is the law that governs the local expropriation of property for
purposes of. urban land reform and housing. Sections 9 and 10 thereof provide:
SEC 9. Priorities in the Acquisition of Land. Lands for socialized
housing shall be acquired in the following order:
(a) Those owned by the Government or any of its
subdivisions, instrumentalities, or agencies, including
government-owned or controlled corporations and their
subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas or Priority Development,
Zonal Improvement Program sites, and Slum
Improvement and Resettlement Program sites which
have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or
BLISS which have not yet been acquired; and
(f) Privately-owned lands.
Where on-site development is found more practicable and
advantageous to the beneficiaries, the priorities mentioned in this
section shall not apply. The local government units shall give
budgetary priority to on-site development of government lands.
(Emphasis supplied).
SEC. 10. Modes of Land Acquisition. The modes of acquiring
lands for purposes of this Act shall include, among others,
community mortgage, land swapping, land assembly or
consolidation, land banking, donation to the Government, joint

venture agreement, negotiated purchase, and expropriation:

Provided, however, That expropriation shall be resorted to only
when other modes of acquisition have been exhausted: Provided
further, That where expropriation is resorted to, parcels of land
owned by small property owners shall be exempted for purposes of
this Act: . . . (Emphasis supplied).
In the recent case of Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes et al.
vs. City of Manila, 19 we ruled that the above-quoted provisions are strict
limitations on the exercise of the power of eminent domain by local
government units, especially with respect to (1) the order of priority in
acquiring land for socialized housing and (2) the resort to expropriation
proceedings as a means to acquiring it. Private lands rank last in the order of
priority for purposes of socialized housing. In the same vein, expropriation
proceedings may be resorted to only after the other modes of acquisition are
exhausted. Compliance with these conditions is mandatory because these are
the only safeguards of oftentimes helpless owners of private property against
what may be a tyrannical violation of due process when their property is
forcibly taken from them allegedly for public use. SacTCA
We have found nothing in the records indicating that the City of Cebu complied
strictly with Sections 9 and 10 of RA 7279. Ordinance No. 1843 sought to
expropriate petitioners' property without any attempt to first acquire the lands
listed in (a) to (e) of Section 9 of RA 7279. Likewise, Cebu City failed to
establish that the other modes of acquisition in Section 10 of RA 7279 were
first exhausted. Moreover, prior to the passage of Ordinance No. 1843, there
was no evidence of a valid and definite offer to buy petitioners' property as
required by Section 19 of RA 7160. 20 We therefore find Ordinance No. 1843 to
be constitutionally infirm for being violative of the petitioners' right to due
process.
It should also be noted that, as early as 1998, petitioners had already obtained
a favorable judgment of eviction against the illegal occupants of their property.
The judgment in this ejectment case had, in fact, already attained finality, with
a writ of execution and an order of demolition. But Mayor Garcia requested the
trial court to suspend the demolition on the pretext that the City was still
searching for a relocation site for the squatters. However, instead of looking for
a relocation site during the suspension period, the city council suddenly
enacted Ordinance No. 1843 for the expropriation of petitioners' lot. It was
trickery and bad faith, pure and simple. The unconscionable manner in which
the questioned ordinance was passed clearly indicated that respondent City
transgressed the Constitution, RA 7160 and RA 7279.
For an ordinance to be valid, it must not only be within the corporate powers of
the city or municipality to enact but must also be passed according to the
procedure prescribed by law. It must be in accordance with certain wellestablished basic principles of a substantive nature. These principles require
that an 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. 21
Ordinance No. 1843 failed to comply with the foregoing substantive
requirements. A clear case of constitutional infirmity having been thus
established, this Court is constrained to nullify the subject ordinance. We
recapitulate:
first, as earlier discussed, the questioned ordinance is repugnant to
the pertinent provisions of the Constitution, RA 7279 and RA 7160;
second, the precipitate manner in which it was enacted was plain
oppression masquerading as a pro-poor ordinance;
third, the fact that petitioners' small property was singled out for
expropriation for the purpose of awarding it to no more than a few
squatters indicated manifest partiality against petitioners, and
fourth, the ordinance failed to show that there was a reasonable
relation between the end sought and the means adopted. While
the objective of the City of Cebu was to provide adequate housing
to slum dwellers, the means it employed in pursuit of such
objective fell short of what was legal, sensible and called for by the
circumstances.
Indeed, experience has shown that the disregard of basic liberties and the use
of short-sighted methods in expropriation proceedings have not achieved the
desired results. Over the years, the government, has tried to remedy the
worsening squatter problem. Far from solving it, however, government's kidglove approach has only resulted in the multiplication and proliferation of
squatter colonies and blighted areas. A pro-poor program that is well-studied,
adequately funded, genuinely sincere and truly respectful of everyone's basic
rights is what this problem calls for, not the improvident enactment of politicsbased ordinances targeting small private lots in no rational fashion. ATCaDE
WHEREFORE, the petition is hereby GRANTED. The July 1, 2002 decision of
Branch 23 of the Regional Trial Court of Cebu City is RESERVED and SET ASIDE.
SO ORDERED.
Davide, Jr., C. J. , Puno, Panganiban, Quisumbing, Ynares-Santiago, SandovalGutierrez, Carpio, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Carpio Morales, Azcuna and Chico-Nazario, JJ., on leave.
||| (Lagcao v. Labra, G.R. No. 155746, [October 13, 2004], 483 PHIL 303-315)

4. REPUBLIC v CASTELVI
EN BANC

G.R. No. L-20620 August 15, 1974

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
CARMEN M. VDA. DE CASTELLVI, ET AL., defendants-appellees.
Office of the Solicitor General for plaintiff-appellant.
C.A. Mendoza & A. V. Raquiza and Alberto Cacnio & Associates for
defendant-appellees.

ZALDIVAR, J.:p
Appeal from the decision of the Court of First Instance of Pampanga in its
Civil Case No. 1623, an expropriation proceeding.
Plaintiff-appellant, the Republic of the Philippines, (hereinafter referred to
as the Republic) filed, on June 26, 1959, a complaint for eminent domain
against defendant-appellee, Carmen M. Vda. de Castellvi, judicial
administratrix of the estate of the late Alfonso de Castellvi (hereinafter
referred to as Castellvi), over a parcel of land situated in the barrio of San
Jose, Floridablanca, Pampanga, described as follows:
A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo 23666.
Bounded on the NE by Maria Nieves Toledo-Gozun; on the SE by
national road; on the SW by AFP reservation, and on the NW by AFP
reservation. Containing an area of 759,299 square meters, more or
less, and registered in the name of Alfonso Castellvi under TCT No.
13631 of the Register of Pampanga ...;
and against defendant-appellee Maria Nieves Toledo Gozun (hereinafter
referred to as Toledo-Gozun over two parcels of land described as follows:
A parcel of land (Portion Lot Blk-1, Bureau of Lands Plan Psd, 26254.
Bounded on the NE by Lot 3, on the SE by Lot 3; on the SW by Lot 1-

B, Blk. 2 (equivalent to Lot 199-B Swo 23666; on the NW by AFP

military reservation. Containing an area of 450,273 square meters,
more or less and registered in the name of Maria Nieves ToledoGozun under TCT No. 8708 of the Register of Deeds of Pampanga. ...,
and
A parcel of land (Portion of lot 3, Blk-1, Bureau of Lands Plan Psd
26254. Bounded on the NE by Lot No. 3, on the SE by school lot and
national road, on the SW by Lot 1-B Blk 2 (equivalent to Lot 199-B
Swo 23666), on the NW by Lot 1-B, Blk-1. Containing an area of
88,772 square meters, more or less, and registered in the name of
Maria Nieves Toledo Gozun under TCT No. 8708 of the Register of
Deeds of Pampanga, ....
In its complaint, the Republic alleged, among other things, that the fair
market value of the above-mentioned lands, according to the Committee
on Appraisal for the Province of Pampanga, was not more than P2,000 per
hectare, or a total market value of P259,669.10; and prayed, that the
provisional value of the lands be fixed at P259.669.10, that the court
authorizes plaintiff to take immediate possession of the lands upon
deposit of that amount with the Provincial Treasurer of Pampanga; that the
court appoints three commissioners to ascertain and report to the court
the just compensation for the property sought to be expropriated, and
that the court issues thereafter a final order of condemnation.
On June 29, 1959 the trial court issued an order fixing the provisional
value of the lands at P259,669.10.
In her "motion to dismiss" filed on July 14, 1959, Castellvi alleged, among
other things, that the land under her administration, being a residential
land, had a fair market value of P15.00 per square meter, so it had a total
market value of P11,389,485.00; that the Republic, through the Armed
Forces of the Philippines, particularly the Philippine Air Force, had been,
despite repeated demands, illegally occupying her property since July 1,
1956, thereby preventing her from using and disposing of it, thus causing
her damages by way of unrealized profits. This defendant prayed that the
complaint be dismissed, or that the Republic be ordered to pay her P15.00
per square meter, or a total of P11,389,485.00, plus interest thereon at
6% per annum from July 1, 1956; that the Republic be ordered to pay her
P5,000,000.00 as unrealized profits, and the costs of the suit.

By order of the trial court, dated August, 1959, Amparo C. Diaz, Dolores G.
viuda de Gil, Paloma Castellvi, Carmen Castellvi, Rafael Castellvi, Luis
Castellvi, Natividad Castellvi de Raquiza, Jose Castellvi and Consuelo
Castellvi were allowed to intervene as parties defendants. Subsequently,
Joaquin V. Gozun, Jr., husband of defendant Nieves Toledo Gozun, was also
allowed by the court to intervene as a party defendant.
After the Republic had deposited with the Provincial Treasurer of
Pampanga the amount of P259,669.10, the trial court ordered that the
Republic be placed in possession of the lands. The Republic was actually
placed in possession of the lands on August 10,
1959. 1
In her "motion to dismiss", dated October 22, 1959, Toledo-Gozun alleged,
among other things, that her two parcels of land were residential lands, in
fact a portion with an area of 343,303 square meters had already been
subdivided into different lots for sale to the general public, and the
remaining portion had already been set aside for expansion sites of the
already completed subdivisions; that the fair market value of said lands
was P15.00 per square meter, so they had a total market value of
P8,085,675.00; and she prayed that the complaint be dismissed, or that
she be paid the amount of P8,085,675.00, plus interest thereon at the rate
of 6% per annum from October 13, 1959, and attorney's fees in the
amount of P50,000.00.
Intervenors Jose Castellvi and Consuelo Castellvi in their answer, filed on
February 11, 1960, and also intervenor Joaquin Gozun, Jr., husband of
defendant Maria Nieves Toledo-Gozun, in his motion to dismiss, dated May
27, 1960, all alleged that the value of the lands sought to be expropriated
was at the rate of P15.00 per square meter.
On November 4, 1959, the trial court authorized the Provincial Treasurer of
Pampanga to pay defendant Toledo-Gozun the sum of P107,609.00 as
provisional value of her lands. 2 On May 16, 1960 the trial Court authorized
the Provincial Treasurer of Pampanga to pay defendant Castellvi the
amount of P151,859.80 as provisional value of the land under her
administration, and ordered said defendant to deposit the amount with
the Philippine National Bank under the supervision of the Deputy Clerk of
Court. In another order of May 16, 1960 the trial Court entered an order of
condemnation.3

The trial Court appointed three commissioners: Atty. Amadeo Yuzon, Clerk
of Court, as commissioner for the court; Atty. Felicisimo G. Pamandanan,
counsel of the Philippine National Bank Branch at Floridablanca, for the
plaintiff; and Atty. Leonardo F. Lansangan, Filipino legal counsel at Clark Air
Base, for the defendants. The Commissioners, after having qualified
themselves, proceeded to the performance of their duties.
On March 15,1961 the Commissioners submitted their report and
recommendation, wherein, after having determined that the lands sought
to be expropriated were residential lands, they recommended
unanimously that the lowest price that should be paid was P10.00 per
square meter, for both the lands of Castellvi and Toledo-Gozun; that an
additional P5,000.00 be paid to Toledo-Gozun for improvements found on
her land; that legal interest on the compensation, computed from August
10, 1959, be paid after deducting the amounts already paid to the owners,
and that no consequential damages be awarded. 4 The Commissioners'
report was objected to by all the parties in the case by defendants
Castellvi and Toledo-Gozun, who insisted that the fair market value of their
lands should be fixed at P15.00 per square meter; and by the Republic,
which insisted that the price to be paid for the lands should be fixed at
P0.20 per square meter. 5
After the parties-defendants and intervenors had filed their respective
memoranda, and the Republic, after several extensions of time, had
adopted as its memorandum its objections to the report of the
Commissioners, the trial court, on May 26, 1961, rendered its
decision 6 the dispositive portion of which reads as follows:
WHEREFORE, taking into account all the foregoing circumstances,
and that the lands are titled, ... the rising trend of land values ...,
and the lowered purchasing power of the Philippine peso, the court
finds that the unanimous recommendation of the commissioners of
ten (P10.00) pesos per square meter for the three lots of the
defendants subject of this action is fair and just.
xxx xxx xxx
The plaintiff will pay 6% interest per annum on the total value of the
lands of defendant Toledo-Gozun since (sic) the amount deposited
as provisional value from August 10, 1959 until full payment is made
to said defendant or deposit therefor is made in court.

In respect to the defendant Castellvi, interest at 6% per annum will

also be paid by the plaintiff to defendant Castellvi from July 1, 1956
when plaintiff commenced its illegal possession of the Castellvi land
when the instant action had not yet been commenced to July 10,
1959 when the provisional value thereof was actually deposited in
court, on the total value of the said (Castellvi) land as herein
adjudged. The same rate of interest shall be paid from July 11, 1959
on the total value of the land herein adjudged minus the amount
deposited as provisional value, or P151,859.80, such interest to run
until full payment is made to said defendant or deposit therefor is
made in court. All the intervenors having failed to produce evidence
in support of their respective interventions, said interventions are
ordered dismissed.
The costs shall be charged to the plaintiff.
On June 21, 1961 the Republic filed a motion for a new trial and/or
reconsideration, upon the grounds of newly-discovered evidence, that the
decision was not supported by the evidence, and that the decision was
against the law, against which motion defendants Castellvi and ToledoGozun filed their respective oppositions. On July 8, 1961 when the motion
of the Republic for new trial and/or reconsideration was called for hearing,
the Republic filed a supplemental motion for new trial upon the ground of
additional newly-discovered evidence. This motion for new trial and/or
reconsideration was denied by the court on July 12, 1961.
On July 17, 1961 the Republic gave notice of its intention to appeal from
the decision of May 26, 1961 and the order of July 12, 1961. Defendant
Castellvi also filed, on July 17, 1961, her notice of appeal from the decision
of the trial court.
The Republic filed various ex-parte motions for extension of time within
which to file its record on appeal. The Republic's record on appeal was
finally submitted on December 6, 1961.
Defendants Castellvi and Toledo-Gozun filed not only a joint opposition to
the approval of the Republic's record on appeal, but also a joint
memorandum in support of their opposition. The Republic also filed a
memorandum in support of its prayer for the approval of its record on
appeal. On December 27, 1961 the trial court issued an order declaring
both the record on appeal filed by the Republic, and the record on appeal

filed by defendant Castellvi as having been filed out of time, thereby

dismissing both appeals.
On January 11, 1962 the Republic filed a "motion to strike out the order of
December 27, 1961 and for reconsideration", and subsequently an
amended record on appeal, against which motion the defendants Castellvi
and Toledo-Gozun filed their opposition. On July 26, 1962 the trial court
issued an order, stating that "in the interest of expediency, the questions
raised may be properly and finally determined by the Supreme Court,"
and at the same time it ordered the Solicitor General to submit a record
on appeal containing copies of orders and pleadings specified therein. In
an order dated November 19, 1962, the trial court approved the
Republic's record on appeal as amended.
Defendant Castellvi did not insist on her appeal. Defendant Toledo-Gozun
did not appeal.
The motion to dismiss the Republic's appeal was reiterated by appellees
Castellvi and Toledo-Gozun before this Court, but this Court denied the
motion.
In her motion of August 11, 1964, appellee Castellvi sought to increase
the provisional value of her land. The Republic, in its comment on
Castellvi's motion, opposed the same. This Court denied Castellvi's motion
in a resolution dated October 2,1964.
The motion of appellees, Castellvi and Toledo-Gozun, dated October 6,
1969, praying that they be authorized to mortgage the lands subject of
expropriation, was denied by this Court or October 14, 1969.
On February 14, 1972, Attys. Alberto Cacnio, and Associates, counsel for
the estate of the late Don Alfonso de Castellvi in the expropriation
proceedings, filed a notice of attorney's lien, stating that as per
agreement with the administrator of the estate of Don Alfonso de Castellvi
they shall receive by way of attorney's fees, "the sum equivalent to ten
per centum of whatever the court may finally decide as the expropriated
price of the property subject matter of the case."
--------Before this Court, the Republic contends that the lower court erred:

1. In finding the price of P10 per square meter of the lands subject
of the instant proceedings as just compensation;
2. In holding that the "taking" of the properties under expropriation
commenced with the filing of this action;
3. In ordering plaintiff-appellant to pay 6% interest on the adjudged
value of the Castellvi property to start from July of 1956;
4. In denying plaintiff-appellant's motion for new trial based on
newly discovered evidence.
In its brief, the Republic discusses the second error assigned as the first
issue to be considered. We shall follow the sequence of the Republic's
discussion.
1. In support of the assigned error that the lower court erred in holding
that the "taking" of the properties under expropriation commenced with
the filing of the complaint in this case, the Republic argues that the
"taking" should be reckoned from the year 1947 when by virtue of a
special lease agreement between the Republic and appellee Castellvi, the
former was granted the "right and privilege" to buy the property should
the lessor wish to terminate the lease, and that in the event of such sale,
it was stipulated that the fair market value should be as of the time of
occupancy; and that the permanent improvements amounting to more
that half a million pesos constructed during a period of twelve years on
the land, subject of expropriation, were indicative of an agreed pattern of
permanency and stability of occupancy by the Philippine Air Force in the
interest of national Security. 7
Appellee Castellvi, on the other hand, maintains that the "taking" of
property under the power of eminent domain requires two essential
elements, to wit: (1) entrance and occupation by condemn or upon the
private property for more than a momentary or limited period, and (2)
devoting it to a public use in such a way as to oust the owner and deprive
him of all beneficial enjoyment of the property. This appellee argues that
in the instant case the first element is wanting, for the contract of lease
relied upon provides for a lease from year to year; that the second
element is also wanting, because the Republic was paying the lessor
Castellvi a monthly rental of P445.58; and that the contract of lease does

not grant the Republic the "right and privilege" to buy the premises "at
the value at the time of occupancy." 8
Appellee Toledo-Gozun did not comment on the Republic's argument in
support of the second error assigned, because as far as she was
concerned the Republic had not taken possession of her lands prior to
August 10, 1959. 9
In order to better comprehend the issues raised in the appeal, in so far as
the Castellvi property is concerned, it should be noted that the Castellvi
property had been occupied by the Philippine Air Force since 1947 under a
contract of lease, typified by the contract marked Exh. 4-Castellvi, the
pertinent portions of which read:
CONTRACT OF LEASE
This AGREEMENT OF LEASE MADE AND ENTERED into by and
between INTESTATE ESTATE OF ALFONSO DE CASTELLVI, represented
by CARMEN M. DE CASTELLVI, Judicial Administratrix ... hereinafter
called the LESSOR and THE REPUBLIC OF THE PHILIPPINES
represented by MAJ. GEN. CALIXTO DUQUE, Chief of Staff of the
ARMED FORCES OF THE PHILIPPINES, hereinafter called the LESSEE,
WITNESSETH:
1. For and in consideration of the rentals hereinafter reserved and
the mutual terms, covenants and conditions of the parties, the
LESSOR has, and by these presents does, lease and let unto the
LESSEE the following described land together with the
improvements thereon and appurtenances thereof, viz:
Un Terreno, Lote No. 27 del Plano de subdivision Psu 34752, parte de
la hacienda de Campauit, situado en el Barrio de San Jose, Municipio
de Floridablanca Pampanga. ... midiendo una extension superficial
de cuatro milliones once mil cuatro cientos trienta y cinco
(4,001,435) [sic] metros cuadrados, mas o menos.
Out of the above described property, 75.93 hectares thereof are
actually occupied and covered by this contract. .

Above lot is more particularly described in TCT No. 1016, province

of
Pampanga ...
of which premises, the LESSOR warrants that he/she/they/is/are the
registered owner(s) and with full authority to execute a contract of this
nature.
2. The term of this lease shall be for the period beginning July 1,
1952 the date the premises were occupied by the PHILIPPINE AIR
FORCE, AFP until June 30, 1953, subject to renewal for another year
at the option of the LESSEE or unless sooner terminated by the
LESSEE as hereinafter provided.
3. The LESSOR hereby warrants that the LESSEE shall have quiet,
peaceful and undisturbed possession of the demised premises
throughout the full term or period of this lease and the LESSOR
undertakes without cost to the LESSEE to eject all trespassers, but
should the LESSOR fail to do so, the LESSEE at its option may
proceed to do so at the expense of the LESSOR. The LESSOR further
agrees that should he/she/they sell or encumber all or any part of
the herein described premises during the period of this lease, any
conveyance will be conditioned on the right of the LESSEE
hereunder.
4. The LESSEE shall pay to the LESSOR as monthly rentals under this
lease the sum of FOUR HUNDRED FIFTY-FIVE PESOS & 58/100
(P455.58) ...
5. The LESSEE may, at any time prior to the termination of this
lease, use the property for any purpose or purposes and, at its own
costs and expense make alteration, install facilities and fixtures and
errect additions ... which facilities or fixtures ... so placed in, upon or
attached to the said premises shall be and remain property of the
LESSEE and may be removed therefrom by the LESSEE prior to the
termination of this lease. The LESSEE shall surrender possession of
the premises upon the expiration or termination of this lease and if
so required by the LESSOR, shall return the premises in substantially
the same condition as that existing at the time same were first
occupied by the AFP, reasonable and ordinary wear and tear and
damages by the elements or by circumstances over which the

LESSEE has no control excepted: PROVIDED, that if the LESSOR so

requires the return of the premises in such condition, the LESSOR
shall give written notice thereof to the LESSEE at least twenty (20)
days before the termination of the lease and provided, further, that
should the LESSOR give notice within the time specified above, the
LESSEE shall have the right and privilege to compensate the LESSOR
at the fair value or the equivalent, in lieu of performance of its
obligation, if any, to restore the premises. Fair value is to be
determined as the value at the time of occupancy less fair wear and
tear and depreciation during the period of this lease.
6. The LESSEE may terminate this lease at any time during the term
hereof by giving written notice to the LESSOR at least thirty (30)
days in advance ...
7. The LESSEE should not be responsible, except under special
legislation for any damages to the premises by reason of combat
operations, acts of GOD, the elements or other acts and deeds not
due to the negligence on the part of the LESSEE.
8. This LEASE AGREEMENT supersedes and voids any and all
agreements and undertakings, oral or written, previously entered
into between the parties covering the property herein leased, the
same having been merged herein. This AGREEMENT may not be
modified or altered except by instrument in writing only duly signed
by the parties. 10
It was stipulated by the parties, that "the foregoing contract of lease (Exh.
4, Castellvi) is 'similar in terms and conditions, including the date', with
the annual contracts entered into from year to year between defendant
Castellvi and the Republic of the Philippines (p. 17, t.s.n., Vol. III)". 11 It is
undisputed, therefore, that the Republic occupied Castellvi's land from July
1, 1947, by virtue of the above-mentioned contract, on a year to year
basis (from July 1 of each year to June 30 of the succeeding year) under
the terms and conditions therein stated.
Before the expiration of the contract of lease on June 30, 1956 the
Republic sought to renew the same but Castellvi refused. When the AFP
refused to vacate the leased premises after the termination of the
contract, on July 11, 1956, Castellvi wrote to the Chief of Staff, AFP,
informing the latter that the heirs of the property had decided not to

continue leasing the property in question because they had decided to

subdivide the land for sale to the general public, demanding that the
property be vacated within 30 days from receipt of the letter, and that the
premises be returned in substantially the same condition as before
occupancy (Exh. 5 Castellvi). A follow-up letter was sent on January 12,
1957, demanding the delivery and return of the property within one
month from said date (Exh. 6 Castellvi). On January 30, 1957, Lieutenant
General Alfonso Arellano, Chief of Staff, answered the letter of Castellvi,
saying that it was difficult for the army to vacate the premises in view of
the permanent installations and other facilities worth almost P500,000.00
that were erected and already established on the property, and that, there
being no other recourse, the acquisition of the property by means of
expropriation proceedings would be recommended to the President
(Exhibit "7" Castellvi).
Defendant Castellvi then brought suit in the Court of First Instance of
Pampanga, in Civil Case No. 1458, to eject the Philippine Air Force from
the land. While this ejectment case was pending, the Republic instituted
these expropriation proceedings, and, as stated earlier in this opinion, the
Republic was placed in possession of the lands on August 10, 1959, On
November 21, 1959, the Court of First Instance of Pampanga, dismissed
Civil Case No. 1458, upon petition of the parties, in an order which, in
part, reads as follows:
1. Plaintiff has agreed, as a matter of fact has already signed an
agreement with defendants, whereby she has agreed to receive the
rent of the lands, subject matter of the instant case from June 30,
1966 up to 1959 when the Philippine Air Force was placed in
possession by virtue of an order of the Court upon depositing the
provisional amount as fixed by the Provincial Appraisal Committee
with the Provincial Treasurer of Pampanga;
2. That because of the above-cited agreement wherein the
administratrix decided to get the rent corresponding to the rent from
1956 up to 1959 and considering that this action is one of illegal
detainer and/or to recover the possession of said land by virtue of
non-payment of rents, the instant case now has become moot and
academic and/or by virtue of the agreement signed by plaintiff, she
has waived her cause of action in the above-entitled case. 12

The Republic urges that the "taking " of Castellvi's property should be
deemed as of the year 1947 by virtue of afore-quoted lease agreement. In
American Jurisprudence, Vol. 26, 2nd edition, Section 157, on the subject
of "Eminent Domain, we read the definition of "taking" (in eminent
domain) as follows:
Taking' under the power of eminent domain may be defined
generally as entering upon private property for more than a
momentary period, and, under the warrant or color of legal
authority, devoting it to a public use, or otherwise informally
appropriating or injuriously affecting it in such a way as substantially
to oust the owner and deprive him of all beneficial enjoyment
thereof. 13
Pursuant to the aforecited authority, a number of circumstances must be
present in the "taking" of property for purposes of eminent domain.
First, the expropriator must enter a private property. This circumstance is
present in the instant case, when by virtue of the lease agreement the
Republic, through the AFP, took possession of the property of Castellvi.
Second, the entrance into private property must be for more than a
momentary period. "Momentary" means, "lasting but a moment; of but a
moment's duration" (The Oxford English Dictionary, Volume VI, page 596);
"lasting a very short time; transitory; having a very brief life; operative or
recurring at every moment" (Webster's Third International Dictionary,
1963 edition.) The word "momentary" when applied to possession or
occupancy of (real) property should be construed to mean "a limited
period" not indefinite or permanent. The aforecited lease contract was
for a period of one year, renewable from year to year. The entry on the
property, under the lease, is temporary, and considered transitory. The
fact that the Republic, through the AFP, constructed some installations of
a permanent nature does not alter the fact that the entry into the land
was transitory, or intended to last a year, although renewable from year to
year by consent of 'The owner of the land. By express provision of the
lease agreement the Republic, as lessee, undertook to return the
premises in substantially the same condition as at the time the property
was first occupied by the AFP. It is claimed that the intention of the lessee
was to occupy the land permanently, as may be inferred from the
construction of permanent improvements. But this "intention" cannot

prevail over the clear and express terms of the lease contract. Intent is to
be deduced from the language employed by the parties, and the terms 'of
the contract, when unambiguous, as in the instant case, are conclusive in
the absence of averment and proof of mistake or fraud the question
being not what the intention was, but what is expressed in the language
used. (City of Manila v. Rizal Park Co., Inc., 53 Phil. 515, 525); Magdalena
Estate, Inc. v. Myrick, 71 Phil. 344, 348). Moreover, in order to judge the
intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered (Art. 1371, Civil Code). If
the intention of the lessee (Republic) in 1947 was really to occupy
permanently Castellvi's property, why was the contract of lease entered
into on year to year basis? Why was the lease agreement renewed from
year to year? Why did not the Republic expropriate this land of Castellvi in
1949 when, according to the Republic itself, it expropriated the other
parcels of land that it occupied at the same time as the Castellvi land, for
the purpose of converting them into a jet air base? 14 It might really have
been the intention of the Republic to expropriate the lands in question at
some future time, but certainly mere notice - much less an implied notice
of such intention on the part of the Republic to expropriate the lands in
the future did not, and could not, bind the landowner, nor bind the land
itself. The expropriation must be actually commenced in court (Republic
vs. Baylosis, et al., 96 Phil. 461, 484).
Third, the entry into the property should be under warrant or color of legal
authority. This circumstance in the "taking" may be considered as present
in the instant case, because the Republic entered the Castellvi property as
lessee.
Fourth, the property must be devoted to a public use or otherwise
informally appropriated or injuriously affected. It may be conceded that
the circumstance of the property being devoted to public use is present
because the property was used by the air force of the AFP.
Fifth, the utilization of the property for public use must be in such a way
as to oust the owner and deprive him of all beneficial enjoyment of the
property. In the instant case, the entry of the Republic into the property
and its utilization of the same for public use did not oust Castellvi and
deprive her of all beneficial enjoyment of the property. Castellvi remained
as owner, and was continuously recognized as owner by the Republic, as
shown by the renewal of the lease contract from year to year, and by the

provision in the lease contract whereby the Republic undertook to return

the property to Castellvi when the lease was terminated. Neither was
Castellvi deprived of all the beneficial enjoyment of the property, because
the Republic was bound to pay, and had been paying, Castellvi the agreed
monthly rentals until the time when it filed the complaint for eminent
domain on June 26, 1959.
It is clear, therefore, that the "taking" of Catellvi's property for purposes of
eminent domain cannot be considered to have taken place in 1947 when
the Republic commenced to occupy the property as lessee thereof. We
find merit in the contention of Castellvi that two essential elements in the
"taking" of property under the power of eminent domain, namely: (1) that
the entrance and occupation by the condemnor must be for a permanent,
or indefinite period, and (2) that in devoting the property to public use the
owner was ousted from the property and deprived of its beneficial use,
were not present when the Republic entered and occupied the Castellvi
property in 1947.
Untenable also is the Republic's contention that although the contract
between the parties was one of lease on a year to year basis, it was "in
reality a more or less permanent right to occupy the premises under the
guise of lease with the 'right and privilege' to buy the property should the
lessor wish to terminate the lease," and "the right to buy the property is
merged as an integral part of the lease relationship ... so much so that the
fair market value has been agreed upon, not, as of the time of purchase,
but as of the time of occupancy" 15 We cannot accept the Republic's
contention that a lease on a year to year basis can give rise to a
permanent right to occupy, since by express legal provision a lease made
for a determinate time, as was the lease of Castellvi's land in the instant
case, ceases upon the day fixed, without need of a demand (Article 1669,
Civil Code). Neither can it be said that the right of eminent domain may
be exercised by simply leasing the premises to be expropriated (Rule 67,
Section 1, Rules of Court). Nor can it be accepted that the Republic would
enter into a contract of lease where its real intention was to buy, or why
the Republic should enter into a simulated contract of lease ("under the
guise of lease", as expressed by counsel for the Republic) when all the
time the Republic had the right of eminent domain, and could expropriate
Castellvi's land if it wanted to without resorting to any guise whatsoever.
Neither can we see how a right to buy could be merged in a contract of
lease in the absence of any agreement between the parties to that effect.

To sustain the contention of the Republic is to sanction a practice whereby

in order to secure a low price for a land which the government intends to
expropriate (or would eventually expropriate) it would first negotiate with
the owner of the land to lease the land (for say ten or twenty years) then
expropriate the same when the lease is about to terminate, then claim
that the "taking" of the property for the purposes of the expropriation be
reckoned as of the date when the Government started to occupy the
property under the lease, and then assert that the value of the property
being expropriated be reckoned as of the start of the lease, in spite of the
fact that the value of the property, for many good reasons, had in the
meantime increased during the period of the lease. This would be
sanctioning what obviously is a deceptive scheme, which would have the
effect of depriving the owner of the property of its true and fair market
value at the time when the expropriation proceedings were actually
instituted in court. The Republic's claim that it had the "right and
privilege" to buy the property at the value that it had at the time when it
first occupied the property as lessee nowhere appears in the lease
contract. What was agreed expressly in paragraph No. 5 of the lease
agreement was that, should the lessor require the lessee to return the
premises in the same condition as at the time the same was first occupied
by the AFP, the lessee would have the "right and privilege" (or option) of
paying the lessor what it would fairly cost to put the premises in the same
condition as it was at the commencement of the lease, in lieu of the
lessee's performance of the undertaking to put the land in said condition.
The "fair value" at the time of occupancy, mentioned in the lease
agreement, does not refer to the value of the property if bought by the
lessee, but refers to the cost of restoring the property in the same
condition as of the time when the lessee took possession of the property.
Such fair value cannot refer to the purchase price, for purchase was never
intended by the parties to the lease contract. It is a rule in the
interpretation of contracts that "However general the terms of a contract
may be, they shall not be understood to comprehend things that are
distinct and cases that are different from those upon which the parties
intended to agree" (Art. 1372, Civil Code).
We hold, therefore, that the "taking" of the Castellvi property should not
be reckoned as of the year 1947 when the Republic first occupied the
same pursuant to the contract of lease, and that the just compensation to
be paid for the Castellvi property should not be determined on the basis of
the value of the property as of that year. The lower court did not commit

an error when it held that the "taking" of the property under expropriation
commenced with the filing of the complaint in this case.
Under Section 4 of Rule 67 of the Rules of Court, 16 the "just
compensation" is to be determined as of the date of the filing of the
complaint. This Court has ruled that when the taking of the property
sought to be expropriated coincides with the commencement of the
expropriation proceedings, or takes place subsequent to the filing of the
complaint for eminent domain, the just compensation should be
determined as of the date of the filing of the complaint. (Republic vs.
Philippine National Bank, L-14158, April 12, 1961, 1 SCRA 957, 961-962).
In the instant case, it is undisputed that the Republic was placed in
possession of the Castellvi property, by authority of the court, on August
10, 1959. The "taking" of the Castellvi property for the purposes of
determining the just compensation to be paid must, therefore, be
reckoned as of June 26, 1959 when the complaint for eminent domain was
filed.
Regarding the two parcels of land of Toledo-Gozun, also sought to be
expropriated, which had never been under lease to the Republic, the
Republic was placed in possession of said lands, also by authority of the
court, on August 10, 1959, The taking of those lands, therefore, must also
be reckoned as of June 26, 1959, the date of the filing of the complaint for
eminent domain.
2. Regarding the first assigned error discussed as the second issue
the Republic maintains that, even assuming that the value of the
expropriated lands is to be determined as of June 26, 1959, the price of
P10.00 per square meter fixed by the lower court "is not only exhorbitant
but also unconscionable, and almost fantastic". On the other hand, both
Castellvi and Toledo-Gozun maintain that their lands are residential lands
with a fair market value of not less than P15.00 per square meter.
The lower court found, and declared, that the lands of Castellvi and
Toledo-Gozun are residential lands. The finding of the lower court is in
consonance with the unanimous opinion of the three commissioners who,
in their report to the court, declared that the lands are residential lands.
The Republic assails the finding that the lands are residential, contending
that the plans of the appellees to convert the lands into subdivision for
residential purposes were only on paper, there being no overt acts on the

part of the appellees which indicated that the subdivision project had
been commenced, so that any compensation to be awarded on the basis
of the plans would be speculative. The Republic's contention is not well
taken. We find evidence showing that the lands in question had ceased to
be devoted to the production of agricultural crops, that they had become
adaptable for residential purposes, and that the appellees had actually
taken steps to convert their lands into residential subdivisions even before
the Republic filed the complaint for eminent domain. In the case of City
of Manila vs. Corrales (32 Phil. 82, 98) this Court laid down basic
guidelines in determining the value of the property expropriated for public
purposes. This Court said:
In determining the value of land appropriated for public
purposes, the same consideration are to be regarded as in a sale of
property between private parties. The inquiry, in such cases, must
be what is the property worth in the market, viewed not merely with
reference to the uses to which it is at the time applied, but with
reference to the uses to which it is plainly adapted, that is to say,
What is it worth from its availability for valuable uses?
So many and varied are the circumstances to be taken into account
in determining the value of property condemned for public purposes,
that it is practically impossible to formulate a rule to govern its
appraisement in all cases. Exceptional circumstances will modify the
most carefully guarded rule, but, as a general thing, we should say
that the compensation of the owner is to be estimated by reference
to the use for which the property is suitable, having regard to the
existing business or wants of the community, or such as may be
reasonably expected in the immediate future. (Miss. and Rum River
Boom Co. vs. Patterson, 98 U.S., 403).
In expropriation proceedings, therefore, the owner of the land has the
right to its value for the use for which it would bring the most in the
market. 17 The owner may thus show every advantage that his property
possesses, present and prospective, in order that the price it could be sold
for in the market may be satisfactorily determined. 18 The owner may also
show that the property is suitable for division into village or town lots. 19
The trial court, therefore, correctly considered, among other
circumstances, the proposed subdivision plans of the lands sought to be

expropriated in finding that those lands are residential lots. This finding of
the lower court is supported not only by the unanimous opinion of the
commissioners, as embodied in their report, but also by the Provincial
Appraisal Committee of the province of Pampanga composed of the
Provincial Treasurer, the Provincial Auditor and the District Engineer. In the
minutes of the meeting of the Provincial Appraisal Committee, held on
May 14, 1959 (Exh. 13-Castellvi) We read in its Resolution No. 10 the
following:
3. Since 1957 the land has been classified as residential in view of
its proximity to the air base and due to the fact that it was not being
devoted to agriculture. In fact, there is a plan to convert it into a
subdivision for residential purposes. The taxes due on the property
have been paid based on its classification as residential land;
The evidence shows that Castellvi broached the idea of subdividing her
land into residential lots as early as July 11, 1956 in her letter to the Chief
of Staff of the Armed Forces of the Philippines. (Exh. 5-Castellvi) As a
matter of fact, the layout of the subdivision plan was tentatively approved
by the National Planning Commission on September 7, 1956. (Exh. 8Castellvi). The land of Castellvi had not been devoted to agriculture since
1947 when it was leased to the Philippine Army. In 1957 said land was
classified as residential, and taxes based on its classification as residential
had been paid since then (Exh. 13-Castellvi). The location of the Castellvi
land justifies its suitability for a residential subdivision. As found by the
trial court, "It is at the left side of the entrance of the Basa Air Base and
bounded on two sides by roads (Exh. 13-Castellvi), paragraphs 1 and 2,
Exh. 12-Castellvi), the poblacion, (of Floridablanca) the municipal building,
and the Pampanga Sugar Mills are closed by. The barrio schoolhouse and
chapel are also near (T.S.N. November 23,1960, p. 68)." 20
The lands of Toledo-Gozun (Lot 1-B and Lot 3) are practically of the same
condition as the land of Castellvi. The lands of Toledo-Gozun adjoin the
land of Castellvi. They are also contiguous to the Basa Air Base, and are
along the road. These lands are near the barrio schoolhouse, the barrio
chapel, the Pampanga Sugar Mills, and the poblacion of Floridablanca
(Exhs. 1, 3 and 4-Toledo-Gozun). As a matter of fact, regarding lot 1-B it
had already been surveyed and subdivided, and its conversion into a
residential subdivision was tentatively approved by the National Planning
Commission on July 8, 1959 (Exhs. 5 and 6 Toledo-Gozun). As early as

June, 1958, no less than 32 man connected with the Philippine Air Force
among them commissioned officers, non-commission officers, and enlisted
men had requested Mr. and Mrs. Joaquin D. Gozun to open a subdivision
on their lands in question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21
We agree with the findings, and the conclusions, of the lower court that
the lands that are the subject of expropriation in the present case, as of
August 10, 1959 when the same were taken possession of by the
Republic, were residential lands and were adaptable for use as residential
subdivisions. Indeed, the owners of these lands have the right to their
value for the use for which they would bring the most in the market at the
time the same were taken from them. The most important issue to be
resolved in the present case relates to the question of what is the just
compensation that should be paid to the appellees.
The Republic asserts that the fair market value of the lands of the
appellees is P.20 per square meter. The Republic cites the case of Republic
vs. Narciso, et al., L-6594, which this Court decided on May 18, 1956. The
Narciso case involved lands that belonged to Castellvi and Toledo-Gozun,
and to one Donata Montemayor, which were expropriated by the Republic
in 1949 and which are now the site of the Basa Air Base. In the Narciso
case this Court fixed the fair market value at P.20 per square meter. The
lands that are sought to be expropriated in the present case being
contiguous to the lands involved in the Narciso case, it is the stand of the
Republic that the price that should be fixed for the lands now in question
should also be at P.20 per square meter.
We can not sustain the stand of the Republic. We find that the price of P.20
per square meter, as fixed by this Court in the Narciso case, was based on
the allegation of the defendants (owners) in their answer to the complaint
for eminent domain in that case that the price of their lands was
P2,000.00 per hectare and that was the price that they asked the court to
pay them. This Court said, then, that the owners of the land could not be
given more than what they had asked, notwithstanding the
recommendation of the majority of the Commission on Appraisal which
was adopted by the trial court that the fair market value of the lands
was P3,000.00 per hectare. We also find that the price of P.20 per square
meter in the Narciso case was considered the fair market value of the
lands as of the year 1949 when the expropriation proceedings were
instituted, and at that time the lands were classified as sugar lands, and

assessed for taxation purposes at around P400.00 per hectare, or P.04 per
square meter. 22 While the lands involved in the present case, like the
lands involved in the Narciso case, might have a fair market value of P.20
per square meter in 1949, it can not be denied that ten years later, in
1959, when the present proceedings were instituted, the value of those
lands had increased considerably. The evidence shows that since 1949
those lands were no longer cultivated as sugar lands, and in 1959 those
lands were already classified, and assessed for taxation purposes, as
residential lands. In 1959 the land of Castellvi was assessed at P1.00 per
square meter. 23
The Republic also points out that the Provincial Appraisal Committee of
Pampanga, in its resolution No. 5 of February 15, 1957 (Exhibit D),
recommended the sum of P.20 per square meter as the fair valuation of
the Castellvi property. We find that this resolution was made by the
Republic the basis in asking the court to fix the provisional value of the
lands sought to be expropriated at P259,669.10, which was approved by
the court. 24 It must be considered, however, that the amount fixed as the
provisional value of the lands that are being expropriated does not
necessarily represent the true and correct value of the land. The value is
only "provisional" or "tentative", to serve as the basis for the immediate
occupancy of the property being expropriated by the condemnor. The
records show that this resolution No. 5 was repealed by the same
Provincial Committee on Appraisal in its resolution No. 10 of May 14, 1959
(Exhibit 13-Castellvi). In that resolution No. 10, the appraisal committee
stated that "The Committee has observed that the value of the land in this
locality has increased since 1957 ...", and recommended the price of
P1.50 per square meter. It follows, therefore, that, contrary to the stand of
the Republic, that resolution No. 5 of the Provincial Appraisal Committee
can not be made the basis for fixing the fair market value of the lands of
Castellvi and Toledo-Gozun.
The Republic further relied on the certification of the Acting Assistant
Provincial Assessor of Pampanga, dated February 8, 1961 (Exhibit K), to
the effect that in 1950 the lands of Toledo-Gozun were classified partly as
sugar land and partly as urban land, and that the sugar land was assessed
at P.40 per square meter, while part of the urban land was assessed at
P.40 per square meter and part at P.20 per square meter; and that in 1956
the Castellvi land was classified as sugar land and was assessed at
P450.00 per hectare, or P.045 per square meter. We can not also consider

this certification of the Acting Assistant Provincial Assessor as a basis for

fixing the fair market value of the lands of Castellvi and Toledo-Gozun
because, as the evidence shows, the lands in question, in 1957, were
already classified and assessed for taxation purposes as residential lands.
The certification of the assessor refers to the year 1950 as far as the lands
of Toledo-Gozun are concerned, and to the year 1956 as far as the land of
Castellvi is concerned. Moreover, this Court has held that the valuation
fixed for the purposes of the assessment of the land for taxation purposes
can not bind the landowner where the latter did not intervene in fixing
it. 25
On the other hand, the Commissioners, appointed by the court to appraise
the lands that were being expropriated, recommended to the court that
the price of P10.00 per square meter would be the fair market value of the
lands. The commissioners made their recommendation on the basis of
their observation after several ocular inspections of the lands, of their own
personal knowledge of land values in the province of Pampanga, of the
testimonies of the owners of the land, and other witnesses, and of
documentary evidence presented by the appellees. Both Castellvi and
Toledo-Gozun testified that the fair market value of their respective land
was at P15.00 per square meter. The documentary evidence considered
by the commissioners consisted of deeds of sale of residential lands in the
town of San Fernando and in Angeles City, in the province of Pampanga,
which were sold at prices ranging from P8.00 to P20.00 per square meter
(Exhibits 15, 16, 17, 18, 19, 20, 21, 22, 23-Castellvi). The commissioners
also considered the decision in Civil Case No. 1531 of the Court of First
Instance of Pampanga, entitled Republic vs. Sabina Tablante, which was
expropriation case filed on January 13, 1959, involving a parcel of land
adjacent to the Clark Air Base in Angeles City, where the court fixed the
price at P18.00 per square meter (Exhibit 14-Castellvi). In their report, the
commissioners, among other things, said:
... This expropriation case is specially pointed out, because the
circumstances and factors involved therein are similar in many
respects to the defendants' lands in this case. The land in Civil Case
No. 1531 of this Court and the lands in the present case (Civil Case
No. 1623) are both near the air bases, the Clark Air Base and the
Basa Air Base respectively. There is a national road fronting them
and are situated in a first-class municipality. As added advantage it
may be said that the Basa Air Base land is very near the sugar mill

at Del Carmen, Floridablanca, Pampanga, owned by the Pampanga

Sugar Mills. Also just stone's throw away from the same lands is a
beautiful vacation spot at Palacol, a sitio of the town of
Floridablanca, which counts with a natural swimming pool for
vacationists on weekends. These advantages are not found in the
case of the Clark Air Base. The defendants' lands are nearer to the
poblacion of Floridablanca then Clark Air Base is nearer (sic) to the
poblacion of Angeles, Pampanga.
The deeds of absolute sale, according to the undersigned
commissioners, as well as the land in Civil Case No. 1531 are
competent evidence, because they were executed during the year
1959 and before August 10 of the same year. More specifically so
the land at Clark Air Base which coincidentally is the subject matter
in the complaint in said Civil Case No. 1531, it having been filed on
January 13, 1959 and the taking of the land involved therein was
ordered by the Court of First Instance of Pampanga on January 15,
1959, several months before the lands in this case were taken by
the plaintiffs ....
From the above and considering further that the lowest as well as
the highest price per square meter obtainable in the market of
Pampanga relative to subdivision lots within its jurisdiction in the
year 1959 is very well known by the Commissioners, the
Commission finds that the lowest price that can be awarded to the
lands in question is P10.00 per square meter. 26
The lower court did not altogether accept the findings of the
Commissioners based on the documentary evidence, but it considered the
documentary evidence as basis for comparison in determining land
values. The lower court arrived at the conclusion that "the unanimous
recommendation of the commissioners of ten (P10.00) pesos per square
meter for the three lots of the defendants subject of this action is fair and
just". 27 In arriving at its conclusion, the lower court took into
consideration, among other circumstances, that the lands are titled, that
there is a rising trend of land values, and the lowered purchasing power of
the Philippine peso.
In the case of Manila Railroad Co. vs. Caligsihan, 40 Phil. 326, 328, this
Court said:

A court of first instance or, on appeal, the Supreme Court, may

change or modify the report of the commissioners by increasing or
reducing the amount of the award if the facts of the case so justify.
While great weight is attached to the report of the commissioners,
yet a court may substitute therefor its estimate of the value of the
property as gathered from the record in certain cases, as, where the
commissioners have applied illegal principles to the evidence
submitted to them, or where they have disregarded a clear
preponderance of evidence, or where the amount allowed is either
palpably inadequate or excessive. 28
The report of the commissioners of appraisal in condemnation
proceedings are not binding, but merely advisory in character, as far as
the court is concerned. 29 In our analysis of the report of the
commissioners, We find points that merit serious consideration in the
determination of the just compensation that should be paid to Castellvi
and Toledo-Gozun for their lands. It should be noted that the
commissioners had made ocular inspections of the lands and had
considered the nature and similarities of said lands in relation to the lands
in other places in the province of Pampanga, like San Fernando and
Angeles City. We cannot disregard the observations of the commissioners
regarding the circumstances that make the lands in question suited for
residential purposes their location near the Basa Air Base, just like the
lands in Angeles City that are near the Clark Air Base, and the facilities
that obtain because of their nearness to the big sugar central of the
Pampanga Sugar mills, and to the flourishing first class town of
Floridablanca. It is true that the lands in question are not in the territory of
San Fernando and Angeles City, but, considering the facilities of modern
communications, the town of Floridablanca may be considered practically
adjacent to San Fernando and Angeles City. It is not out of place,
therefore, to compare the land values in Floridablanca to the land values
in San Fernando and Angeles City, and form an idea of the value of the
lands in Floridablanca with reference to the land values in those two other
communities.
The important factor in expropriation proceeding is that the owner is
awarded the just compensation for his property. We have carefully studied
the record, and the evidence, in this case, and after considering the
circumstances attending the lands in question We have arrived at the
conclusion that the price of P10.00 per square meter, as recommended by

the commissioners and adopted by the lower court, is quite high. It is Our
considered view that the price of P5.00 per square meter would be a fair
valuation of the lands in question and would constitute a just
compensation to the owners thereof. In arriving at this conclusion We have
particularly taken into consideration the resolution of the Provincial
Committee on Appraisal of the province of Pampanga informing, among
others, that in the year 1959 the land of Castellvi could be sold for from
P3.00 to P4.00 per square meter, while the land of Toledo-Gozun could be
sold for from P2.50 to P3.00 per square meter. The Court has weighed all
the circumstances relating to this expropriations proceedings, and in fixing
the price of the lands that are being expropriated the Court arrived at a
happy medium between the price as recommended by the commissioners
and approved by the court, and the price advocated by the Republic. This
Court has also taken judicial notice of the fact that the value of the
Philippine peso has considerably gone down since the year
1959. 30Considering that the lands of Castellvi and Toledo-Gozun are
adjoining each other, and are of the same nature, the Court has deemed it
proper to fix the same price for all these lands.
3. The third issue raised by the Republic relates to the payment of
interest. The Republic maintains that the lower court erred when it
ordered the Republic to pay Castellvi interest at the rate of 6% per
annum on the total amount adjudged as the value of the land of
Castellvi, from July 1, 1956 to July 10, 1959. We find merit in this
assignment of error.
In ordering the Republic to pay 6% interest on the total value of the land
of Castellvi from July 1, 1956 to July 10, 1959, the lower court held that
the Republic had illegally possessed the land of Castellvi from July 1,
1956, after its lease of the land had expired on June 30, 1956, until August
10, 1959 when the Republic was placed in possession of the land pursuant
to the writ of possession issued by the court. What really happened was
that the Republic continued to occupy the land of Castellvi after the
expiration of its lease on June 30, 1956, so much so that Castellvi filed an
ejectment case against the Republic in the Court of First Instance of
Pampanga. 31 However, while that ejectment case was pending, the
Republic filed the complaint for eminent domain in the present case and
was placed in possession of the land on August 10, 1959, and because of
the institution of the expropriation proceedings the ejectment case was

later dismissed. In the order dismissing the ejectment case, the Court of
First Instance of Pampanga said:
Plaintiff has agreed, as a matter of fact has already signed an
agreement with defendants, whereby she had agreed to receive the
rent of the lands, subject matter of the instant case from June 30,
1956 up to 1959 when the Philippine Air Force was placed in
possession by virtue of an order of the Court upon depositing the
provisional amount as fixed by the Provincial Appraisal Committee
with the Provincial Treasurer of
Pampanga; ...
If Castellvi had agreed to receive the rentals from June 30, 1956 to August
10, 1959, she should be considered as having allowed her land to be
leased to the Republic until August 10, 1959, and she could not at the
same time be entitled to the payment of interest during the same period
on the amount awarded her as the just compensation of her land. The
Republic, therefore, should pay Castellvi interest at the rate of 6% per
annum on the value of her land, minus the provisional value that was
deposited, only from July 10, 1959 when it deposited in court the
provisional value of the land.
4. The fourth error assigned by the Republic relates to the denial by the
lower court of its motion for a new trial based on nearly discovered
evidence. We do not find merit in this assignment of error.
After the lower court had decided this case on May 26, 1961, the Republic
filed a motion for a new trial, supplemented by another motion, both
based upon the ground of newly discovered evidence. The alleged newly
discovered evidence in the motion filed on June 21, 1961 was a deed of
absolute sale-executed on January 25, 1961, showing that a certain
Serafin Francisco had sold to Pablo L. Narciso a parcel of sugar land having
an area of 100,000 square meters with a sugar quota of 100 piculs,
covered by P.A. No. 1701, situated in Barrio Fortuna, Floridablanca, for
P14,000, or P.14 per square meter.
In the supplemental motion, the alleged newly discovered evidence were:
(1) a deed of sale of some 35,000 square meters of land situated at
Floridablanca for P7,500.00 (or about P.21 per square meter) executed in
July, 1959, by the spouses Evelyn D. Laird and Cornelio G. Laird in favor of
spouses Bienvenido S. Aguas and Josefina Q. Aguas; and (2) a deed of

absolute sale of a parcel of land having an area of 4,120,101 square

meters, including the sugar quota covered by Plantation Audit No. 161
1345, situated at Floridablanca, Pampanga, for P860.00 per hectare (a
little less than P.09 per square meter) executed on October 22, 1957 by
Jesus Toledo y Mendoza in favor of the Land Tenure Administration.
We find that the lower court acted correctly when it denied the motions for
a new trial.
To warrant the granting of a new trial based on the ground of newly
discovered evidence, it must appear that the evidence was discovered
after the trial; that even with the exercise of due diligence, the evidence
could not have been discovered and produced at the trial; and that the
evidence is of such a nature as to alter the result of the case if
admitted. 32 The lower court correctly ruled that these requisites were not
complied with.
The lower court, in a well-reasoned order, found that the sales made by
Serafin Francisco to Pablo Narciso and that made by Jesus Toledo to the
Land Tenure Administration were immaterial and irrelevant, because those
sales covered sugarlands with sugar quotas, while the lands sought to be
expropriated in the instant case are residential lands. The lower court also
concluded that the land sold by the spouses Laird to the spouses Aguas
was a sugar land.
We agree with the trial court. In eminent domain proceedings, in order
that evidence as to the sale price of other lands may be admitted in
evidence to prove the fair market value of the land sought to be
expropriated, the lands must, among other things, be shown to be similar.
But even assuming, gratia argumenti, that the lands mentioned in those
deeds of sale were residential, the evidence would still not warrant the
grant of a new trial, for said evidence could have been discovered and
produced at the trial, and they cannot be considered newly discovered
evidence as contemplated in Section 1(b) of Rule 37 of the Rules of Court.
Regarding this point, the trial court said:
The Court will now show that there was no reasonable diligence
employed.

The land described in the deed of sale executed by Serafin

Francisco, copy of which is attached to the original motion, is
covered by a Certificate of Title issued by the Office of the Register
of Deeds of Pampanga. There is no question in the mind of the court
but this document passed through the Office of the Register of
Deeds for the purpose of transferring the title or annotating the sale
on the certificate of title. It is true that Fiscal Lagman went to the
Office of the Register of Deeds to check conveyances which may be
presented in the evidence in this case as it is now sought to be done
by virtue of the motions at bar, Fiscal Lagman, one of the lawyers of
the plaintiff, did not exercise reasonable diligence as required by the
rules. The assertion that he only went to the office of the Register of
Deeds 'now and then' to check the records in that office only shows
the half-hazard [sic] manner by which the plaintiff looked for
evidence to be presented during the hearing before the
Commissioners, if it is at all true that Fiscal Lagman did what he is
supposed to have done according to Solicitor Padua. It would have
been the easiest matter for plaintiff to move for the issuance of a
subpoena duces tecum directing the Register of Deeds of Pampanga
to come to testify and to bring with him all documents found in his
office pertaining to sales of land in Floridablanca adjacent to or near
the lands in question executed or recorded from 1958 to the
present. Even this elementary precaution was not done by plaintiff's
numerous attorneys.
The same can be said of the deeds of sale attached to the
supplementary motion. They refer to lands covered by certificate of
title issued by the Register of Deeds of Pampanga. For the same
reason they could have been easily discovered if reasonable
diligence has been exerted by the numerous lawyers of the plaintiff
in this case. It is noteworthy that all these deeds of sale could be
found in several government offices, namely, in the Office of the
Register of Deeds of Pampanga, the Office of the Provincial Assessor
of Pampanga, the Office of the Clerk of Court as a part of notarial
reports of notaries public that acknowledged these documents, or in
the archives of the National Library. In respect to Annex 'B' of the
supplementary motion copy of the document could also be found in
the Office of the Land Tenure Administration, another government
entity. Any lawyer with a modicum of ability handling this
expropriation case would have right away though [sic] of digging up

documents diligently showing conveyances of lands near or around

the parcels of land sought to be expropriated in this case in the
offices that would have naturally come to his mind such as the
offices mentioned above, and had counsel for the movant really
exercised the reasonable diligence required by the Rule'
undoubtedly they would have been able to find these documents
and/or caused the issuance of subpoena duces tecum. ...
It is also recalled that during the hearing before the Court of the
Report and Recommendation of the Commissioners and objection
thereto, Solicitor Padua made the observation:
I understand, Your Honor, that there was a sale that took place in
this place of land recently where the land was sold for P0.20 which is
contiguous to this land.
The Court gave him permission to submit said document subject to
the approval of the Court. ... This was before the decision was
rendered, and later promulgated on May 26, 1961 or more than one
month after Solicitor Padua made the above observation. He could
have, therefore, checked up the alleged sale and moved for a
reopening to adduce further evidence. He did not do so. He forgot to
present the evidence at a more propitious time. Now, he seeks to
introduce said evidence under the guise of newly-discovered
evidence. Unfortunately the Court cannot classify it as newlydiscovered evidence, because tinder the circumstances, the correct
qualification that can be given is 'forgotten evidence'. Forgotten
however, is not newly-discovered
evidence. 33
The granting or denial of a motion for new trial is, as a general rule,
discretionary with the trial court, whose judgment should not be disturbed
unless there is a clear showing of abuse of discretion. 34 We do not see
any abuse of discretion on the part of the lower court when it denied the
motions for a new trial.
WHEREFORE, the decision appealed from is modified, as follows:
(a) the lands of appellees Carmen Vda. de Castellvi and Maria
Nieves Toledo-Gozun, as described in the complaint, are declared
expropriated for public use;

(b) the fair market value of the lands of the appellees is fixed at
P5.00 per square meter;
(c) the Republic must pay appellee Castellvi the sum of
P3,796,495.00 as just compensation for her one parcel of land that
has an area of 759,299 square meters, minus the sum of
P151,859.80 that she withdrew out of the amount that was
deposited in court as the provisional value of the land, with interest
at the rate of 6% per annum from July 10, 1959 until the day full
payment is made or deposited in court;
(d) the Republic must pay appellee Toledo-Gozun the sum of
P2,695,225.00 as the just compensation for her two parcels of land
that have a total area of 539,045 square meters, minus the sum of
P107,809.00 that she withdrew out of the amount that was
deposited in court as the provisional value of her lands, with interest
at the rate of 6%, per annum from July 10, 1959 until the day full
payment is made or deposited in court; (e) the attorney's lien of
Atty. Alberto Cacnio is enforced; and
(f) the costs should be paid by appellant Republic of the Philippines,
as provided in Section 12, Rule 67, and in Section 13, Rule 141, of
the Rules of Court.
IT IS SO ORDERED.
Makalintal, C.J., Barredo, Antonio, Esguerra, Fernandez, Muoz Palma and
Aquino, JJ., concur.
Castro, Fernando, Teehankee and Makasiar, JJ., took no part.