Case Summaries on the Inherent Powers of the State
Andrino
POLICE POWER
NATURE OF POLICE POWER
(1) Jacobson v. Massachusetts
FACTS
Cities in Massachusetts could require that all residents
be vaccinated, as authorized by a state statute. This
type of regulation was adopted by the city of
Cambridge. It is alleged to be unconstitutional for
requiring vaccine.
RULING
In order to protect public health and safety, the scope
of the states police power includes the authority to
enact reasonable regulations to do so. The
Constitution secures liberty for every person within its
jurisdiction, but does not give an absolute right for
each person to be free from restraint at all times and
in all circumstances. Every person is required to be
subject to various restraints for the common good.
The efforts by Cambridge to stamp out smallpox are
substantially related to the protection of public health
and safety. There has been nothing to clearly justify
the Court holding the statute to be unconstitutional.
(2) Phil. Association of Service Exporters, Inc. v. Hon.
Drilon
FACTS
Constitutionality DOLE Order No. 1 alleged be
discriminatory against female domestic helpers
RULING
The petitioner has shown no satisfactory reason why
the contested measure should be nullified. There is no
question that Department Order No. 1 applies only to
Prepared by: Reah Crezz
"female contract workers," but it does not thereby
make an undue discrimination between the sexes. It is
well-settled that "equality before the law" under the
Constitution does not import a perfect Identity of
rights among all men and women. It admits of
classifications, provided that (1) such classifications
rest on substantial distinctions; (2) they are germane
to the purposes of the law; (3) they are not confined to
existing conditions; and (4) they apply equally to all
members of the same class.
(3) Miners Assoc. of the Philippines, Inc. v. Hon. Factoran
FACTS
Administrative Order Nos. 57 declares that all existing
mining leases or agreements which were granted after
the effectivity of the 1987 Constitutionshall be
converted into production-sharing agreements within
one (1) year from the effectivity of these guidelines.
and Administrative Order No. 82 provides that a failure
to submit Letter of Intent and Mineral Production-
Sharing Agreement within 2 years from the effectivity
of the Department Administrative Order No. 57 shall
cause the abandonment of the mining, quarry, and
sand and gravel claims, after their respective
effectivity dates
RULING
the State, in the exercise of its police power in this
regard, may not be precluded by the constitutional
restriction on non-impairment of contract from
altering, modifying and amending the mining leases or
agreements granted under Presidential Decree No.
463, as amended, pursuant to Executive Order No.
211. Police Power, being co-extensive with the
necessities of the case and the demands of public
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interest; extends to all the vital public needs. The
passage of Executive Order No. 279 which superseded
Executive Order No. 211 provided legal basis for the
DENR Secretary to carry into effect the mandate of
Article XII, Section 2 of the 1987 Constitution.
(4) Gancayco v. City Government of Quezon City
FACTS
MMDA demolished party wall, i.e., wing walls, of the
ground floor structure of the building owned by retired
Supreme Court Justice Emilio A. Gancayco along
Epifanio de los Santos Avenue (EDSA).
TESTS OF POLICE POWER
RULING
The MMDA was only to enforce Authoritative power on
development of Metro Manila, and was not supposed
to act with Police Power as they were not given the
authority to do such by the constitution, nor was it
expressed by the DPWH when the ordinance was
enacted. Therefore, MMDA acted on its own when it
illegally demolished Gancaycos property, and was
solely liable for the damage.
(5) MMDA v. Viron Transportation Co. Inc.
FACTS
MMDA recommended a plan to decongest traffic by
eliminating the bus terminals now located along major
Metro Manila thoroughfares and providing more and
convenient access to the mass transport system. The
MMC gave a go signal for the project.
RULING
Unconstitutional. The closure of their bus terminals
would mean, among other things, the loss of income
from the operation and/or rentals of stalls thereat.
Precisely, respondents claim a deprivation of their
Prepared by: Reah Crezz
constitutional right to property without due process of
law. MMDAs move didnt satisfy police power
requirements such as that (1) the interest of the public
generally, as distinguished from that of a particular
class, requires its exercise; and (2) the means
employed are reasonably necessary for the
accomplishment of the purpose and not unduly
oppressive upon individuals. Stated differently, the
police power legislation must be firmly grounded on
public interest and welfare and a reasonable relation
must exist between the purposes and the means.
(1) Hon. Fernando v. St. Scholasticas College
FACTS
City Government of Marikina sent a letter to St.
Scholasticas College to demolish tall concrete
perimeter fence in accordance with a city ordinance
which provides that walls and fences shall not be built
within a five-meter allowance between the front
monument line and the building line of an
establishment.
RULING
Invalid. Police power is the plenary power vested in the
legislature to make statutes and ordinances to
promote the health, morals, peace, education, good
order or safety and general welfare of the people.
Two tests:
(a) Rational Relationship Test
- Reqs: (1) interest of public generally require its
exercise;
(2) means employed are reasonably
necessary for the accomplishment of the
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purpose and not duly oppressive upon
individuals
(b) Strict Scrutiny Test
(3) Planters Products v. FERTIPHIL Corporation
FACTS
Marcos issued Letter of Instruction (LOI) 1465,
imposing a capital recovery component of Php10.00
per bag of fertilizer. The levy was to continue until
adequate capital was raised to make PPI financially
viable.
RULING
The main purpose of police power is the regulation of a
behavior or conduct, while taxation is revenue
generation. The "lawful subjects" and "lawful means"
tests are used to determine the validity of a law
enacted under the police power. The power of
taxation, on the other hand, is circumscribed
by inherent and constitutional limitations. While it is
true that the power to tax can be used as an
implement of police power, the primary purpose of the
levy was revenue generation. If the purpose is
primarily revenue, or if revenue is, at least, one of the
real and substantial purposes, then the exaction is
(5) Lucena Grand Central Terminal v. Jac Liner, Inc.
properly called a tax.
(4) City of Manila v. Hon. Laguio
FACTS
Enacted by the City Council and approved by
petitioner City Mayor, 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,
Prepared by: Reah Crezz
PRESCRIBING PENALTIES FOR VIOLATION THEREOF,
AND FOR OTHER PURPOSES. MTDC prayed that the
Ordinance, insofar as it includes motels and inns as
among its prohibited establishments, be declared
invalid and unconstitutional.
RULING
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. It 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.
FACTS
The City of Lucena enacted an ordinance which
provides, inter alia, that: all buses, mini-buses and out-
of-town passenger jeepneys shall be prohibited from
entering the city and are hereby directed to proceed to
the common terminal, for picking-up and/or dropping
of their passengers; and (b) all temporary terminals in
the City of Lucena are hereby declared inoperable
starting from the effectivity of this ordinance. It also
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provides that all jeepneys, mini-buses, and buses shall
use the grand central terminal of the city.
RULING
The questioned ordinances having been enacted with
the objective of relieving traffic congestion in the City
of Lucena, they involve public interest warranting the
interference of the State. The first requisite for the
proper exercise of police power is thus present. This
leaves for determination the issue of whether the
means employed by the Lucena Sangguniang
Panlungsod to attain its professed objective were
reasonably necessary and not unduly oppressive upon
individuals. The ordinances assailed herein are
characterized by overbreadth. They go beyond what is
reasonably necessary to solve the traffic problem.
(6) DECS v. San Diego
FACTS
San Diego, private respondent graduate of UE
(Zoology), took NMAT 3 times and flunked 3 times. The
fourth time he will take NMAT, he was rejected by
DECS and DCEM for the rule that:
A student shall be allowed only three (3) chances to
take the NMAT. After three (3) successive failures, a
student shall not be allowed to take the NMAT for the
fourth time.
RULING
The proper exercise of the police power requires the
concurrence of a lawful subject and a lawful method.
The subject of the challenged regulation is certainly
within the ambit of the police power. It is the right and
indeed the responsibility of the State to insure that the
medical profession is not infiltrated by incompetents to
Prepared by: Reah Crezz
whom patients may unwarily entrust their lives and
health. The method employed by the challenged
regulation is not irrelevant to the purpose of the law
nor is it arbitrary or oppressive. The three-flunk rule is
intended to insulate the medical schools and
ultimately the medical profession from the intrusion of
those not qualified to be doctors.
(7) Ynot v. IAC
FACTS
Petitioner violated EO 626-A by transporting six
carabaos in a ump boat from Masbate to Iloilo.
Carabaos seized and petitioner sought for their
recovery and assailed constitutionality of tha law.
RULING
The reasonable connection between the means
employed and the purpose sought to be achieved by
the questioned measure is missing the Supreme Court
do not see how the prohibition of the inter-provincial
transport of carabaos can prevent their indiscriminate
slaughter, considering that they can be killed
anywhere, with no less difficulty in one province than
in another. Obviously, retaining the carabaos in one
province will not prevent their slaughter there any
more than moving them to another province will make
it easier to kill them there.
COMPARISON WITH THE OTHER INHERENT POWERS
(1) Gerochi v. DOE
FACTS
Petitioners contest the constitutionality of the EPIRA,
stating that the imposition of the universal charge on
all end-users is oppressive and confiscatory and
amounts to taxation without representation for not
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giving the consumers a chance to be heard and
be represented.
RULING
Universal charge is not a tax but an exercise of police
power. Purpose of which is to ensure the viability of
countrys electric power industry. The taxing power
may be used as an implement of police power. The
theory behind the exercise of the power to tax
emanates from necessity; without taxes, government
cannot fulfill its mandate of promoting the general
welfare and well-being of the people
(2) Commonwealth v. Alger
FACTS
This in an indictment against the defendant for an
alleged breach of the statutes of this commonwealth
establishing the commissioners' lines, so called, in the
harbor of Boston, by erecting, building, and
maintaining a wharf over and beyond those lines into
said harbor.
RULING
The court explains that police power, "is very different
from the right of eminent doman, the right of a
government to take and appropriate private property
to public use, whenever the public exigency requires it;
which can be done only on condition of providing a
reasonable compensation therefore. The power we
allude to is rather the police power, the power vested
in the legislature by the constitution, to make, ordain,
and establish all manner of wholesome and reasonable
laws, statutes and ordinance, either with penalties or
Prepared by: Reah Crezz
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.
Justice Shaw reasoned the Massachusetts statute was,
"not an appropriation of the property to a public use,
but the restraint of an injurious private use by the
owner, and is therefore not within the principle of
property taken under the right of eminent domain.
(3) Manila Memorial Park, Inc. v. Secretary of Social
Welfare and Development
FACTS
Senior citizens discount of 20%
RULING
The 20% senior citizen discount and tax deduction
scheme are valid exercises of police power of the State
absent a clear showing that it is arbitrary, oppressive
or confiscatory. The discount is intended to improve
the welfare of the senior citizens who, at their age, are
less likely to be gainfully employed, more prone to
illnesses and other disabilities, and thus, in need of
subsidy in purchasing commodities. As to its nature
an effects, although the regulation affects the pricing,
and, hence, the profitability of a private establishment,
it does not purport to appropriate or burden specific
properties, used in the operation or conduct of the
business of private establishments, for the use or
benefit of the public, or senior citizens for that matter,
but merely regulates the pricing of goods and services
relative to, and the amount of profits or income/gross
sales that such private establishments may derive
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from, senior citizens. The State can employ police
power measures to regulate the pricing of goods and
services, and, hence, the profitability of business
establishments in order to pursue legitimate State
objectives for the common good, provided, the
regulation does not go too far as to amount to
taking.
EMINENT DOMAIN
IN GENERAL
(1) Republic v. de Castellvi
FACTS
Owner of parcel of land leased by government refused
to continue lease so government expropriated
property. Dispute lies in the computation of just
compensation
RULING
the property was deemed taken only when the
expropriation proceedings commenced in 1959.
The essential elements of the taking are:
(1) Expropriator must enter a private property,
(2) for more than a momentary period,
(3) and under warrant of legal authority,
(4) devoting it to public use, or otherwise informally
appropriating or injuriously affecting it in such a way
as
(5) substantially to oust the owner and deprive him of
all beneficial enjoyment thereof.
In the case at bar, these elements were not present
when the government entered and occupied the
property under a contract of lease.
NECESSITY OF TAKING
Prepared by: Reah Crezz
(1) City of Manila v. Chinese Community of Manila
FACTS
City of Manila sought to expropriate parcels of land,
including a cemetery, to effect public improvements
RULING
The very foundation of the right to exercise eminent
domain is a genuine necessity, and that necessity
must be of a public character. The ascertainment of
the necessity must precede or accompany, and not
follow, the taking of the land. The court ruled that the
cemetery is a public property and it found no great
necessity to allow the expropriation of the land by the
City of Manila thus thereby affirmed the decision of the
lower court.
TAKING/DISPOSSESSION OF PROPERTY
(1) Republic v. Andaya
FACTS
Petitioner negotiated with Andaya to enforce the 60-
meter easement of right-of-way. The easement was for
concrete levees and floodwalls.
RULING
TAKING in the exercise of the power of eminent domain
occurs not only when the government actually
deprives or dispossesses the property owner of his
property or of its ordinary use, but also when there is
practical destruction or material impairment of the
value of his property. Using this standard, there was
undoubtedly a taking of the remaining area of
Andaya's property.
True, no burden was imposed thereon and Andaya still
retained title and possession of the property. But the
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nature and the effect of the floodwalls would deprive
Andaya of the normal use of the remaining areas. It
would prevent ingress and egress to the property and
turn it into a catch basin for the floodwaters coming
form the Agusan River.
(2) NPC v. Hon. Aguirre-Paderanga
FACTS
NPC sought to expropriate parcels of land owned by
Dilao to implement its Leyte-Cebu Interconnection
Project
RULING
There are two stages in every act of expropriation. The
first is concerned with the determination of the
authority of the plaintiff to exercise the power of
eminent domain and the propriety of its exercise in the
context of the facts involved in the suit. The second
phase of the eminent domain action is concerned with
the determination by the court of the just
compensation for the property sought to be taken.
The order fixing the just compensation on the basis of
the evidence before the commissioners would be final.
In the case at bar, the easement of right-of-way is
PUBLIC USE
definitely a taking under the power of eminent domain.
Considering the nature and effect of the installation of
the transmission lines, the limitation imposed by NPC
against the use of the land for an indefinite period
deprives private respondents of its ordinary use. It
cannot be opposed that NPCs complaint merely
involves a simple case of mere passage of
transmission lines over Dilao et. Als sproperty. Aside
from the actual damage done to the property
transversed by the transmission lines, the agricultural
and economic activity normally undertaken on the
Prepared by: Reah Crezz
entire property is unquestionably restricted and
perpetually hampered as the environment is made
dangerous to the occupants life and limb.
(3) Republic v. Hon. Gingoyon
FACTS
NAIA 3, a project between the Government and the
Philippine International Air Terminals Co., Inc (PIATCO)
was nullified.
Planning to put NAIA 3 facilities into immediate
operation, the Government, through expropriation filed
a petition to be entitled of a writ of possession
contending that a mere deposit of the assessed value
of the property with an authorized government
depository is enough for the entitlement to said writ.
RULING
In expropriation proceedings, entitlement of writ of
possession is issued only after direct payment of just
compensation is given to property owner on the basis
of fairness. The same principle applied in the 2004
Jurisprudence Resolution and the latest expropriation
law
(1) MCIAA v. Lozada
FACTS
Land was expropriated for the expansion of the Lahug
airport which was not pursued. The plaintiff-
respondents initiated a complaint for the recovery of
possession and reconveyance of ownership the subject
lot.
RULING
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Expropriation of property always subject to
condition that it be used for specific public purpose for
which it was taken. Abandonment or fullfilment of
public purpose = must return property to
original owners.
(2) ATO v. Gopuco Jr.
FACTS
Government obtained lands for the purpose of the
expansion of the airport. Landowners were given the
option to repurchase land when not anymore in use by
the government
RULING
Eminent domain is generally described as the highest
and most exact idea of property remaining in the
government that may be acquired for some public
purpose through a method in the nature of a forced
purchase by the State. Also often referred to as
expropriation and, with less frequency, as
condemnation, it is, like police power and taxation, an
inherent power of sovereignty and need not be clothed
with any constitutional gear to exist; instead,
provisions in our Constitution on the subject are meant
more to regulate, rather than to grant, the exercise of
the power. It is a right to take or reassert dominion
over property within the state for public use or to meet
a public exigency and is said to be an essential part of
governance even in its most primitive form and thus
inseparable from sovereignty. In fact, all separate
interests of individuals in property are held of the
government under this tacit agreement or implied
reservation. Notwithstanding the grant to individuals,
the eminent domain, the highest and most exact idea
of property, remains in the government, or in the
aggregate body of people in their sovereign capacity;
Prepared by: Reah Crezz
and they have the right to resume the possession of
the property whenever the public interest so requires
it.
(3) Kelo v. City of New London
FACTS
In 2000, the city of New London approved a
development plan that, in the words of the Supreme
Court of Connecticut, was projected to create in
excess of 1,000 jobs, to increase tax and other
revenues, and to revitalize an economically distressed
city, including its downtown and waterfront areas.
The city purchased property and seeks to enforce
eminent domain to acquire the remaining parcels from
unwilling owners. The City did not plan to open the
condemned land to the general public, nor were the
private lessees of the land required to operate like
common carriers.
RULING
The citys proposed disposition of petitioners property
qualifies as a public use within the meaning of the
Takings Clause. Public use in this case was broadly
interpreted to mean public purpose. This
jurisprudence has long recognized the needs of society
vary greatly between different parts of the Nation.
Earlier cases embodied a strong theme of federalism,
emphasizing the great respect owed to state
legislatures and state courts in discerning local public
needs. Public needs used to be according to rigid
formulas and intrusive scrutiny in favor of affording
legislatures broad latitude in determining what public
needs justified the use of the takings power. The court
must look to the entire Plans importance and the
Citys overall interest in the economic benefits derived
from the development.
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(4) Brgy. Sindalan v. CA
FACTS
Petitioner barangay sought to expropriate
respondents land to be converted to a feeder road
RULING
Taking was not for public purpose. It will only benefit
the homeowners of the Davsan II Subdivision who will
now have a better access to the highway
JUST COMPENSATION
(1) NPC v. Spouses Zabala
FACTS
NPC needed easement of right of way in Batangas for
its 230 KV Limay-Hermosa Transmission Lines. In the
computation of just compensation, consequential
damages were not taken into consideration.
RULING
The just compensation of P150.00 per square meter as
fixed by the RTC is not supported by evidence. Just
compensation cannot be arrived at arbitrarily. Several
factors must be considered, such as, but not limited to,
acquisition cost, current market value of like
properties, tax value of the condemned property, its
size, shape, and location. But before these factors can
be considered and given weight, the same must be
supported by documentary evidence.
Lastly, it should be borne in mind that just
compensation should be computed based on the fair
value of the subject property at the time of its taking
or the filing of the complaint, whichever came first.
Prepared by: Reah Crezz
Since in this case the filing of the eminent domain
case came ahead of the taking, just compensation
should be based on the fair market value of spouses
Zabalas property at the time of the filing of Napocors
Complaint on October 27, 1994 or thereabouts.
(2) APO Fruits Corporation v. Land Bank of the Philippines
FACTS
Petitioners voluntarily offered to sell properties to DAR.
Government, through the Land Bank of the Philippines,
deposited P26M into AFCs account and P45M into
HPIs account as down payment in 1996.
RULING
The concept of just compensation embraces not only
the correct determination of the amount to be paid to
the owners of the land, but also the payment of the
land within a reasonable time from its taking. Without
prompt payment, compensation cannot be considered
just inasmuch as the property owner is being made
to suffer the consequences of being immediately
deprived of his land while being made to wait for a
decade or more before actually receiving the amount
necessary to cope with his loss.
(3) Republic v. Lim
FACTS
Government expropriated land. The Republic deposited
P9,500 in the PNB then took possession of the lots.
Thereafter, on May 1940, the CFI rendered its Decision
ordering the Republic to pay the Denzons the sum of
P4,062.10 as just compensation. The Denzons
appealed to the CA but it was dismissed onMarch11,
1948. An entry of judgment was made on April5,
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1948.In 1950, one of the heirs of the Denzons, filed
with the National Airports Corporation a claim for
rentals for the two lots, but it "denied knowledge of the
matter. On September 6, 1961, Lt. Cabal rejected the
claim but expressed willingness to pay the appraised
value of the lots within a reasonable time
RULING
The points in dispute are whether such payment can
still be made and, if so, in what amount. Said lots have
been the subject of expropriation proceedings. By final
and executory judgment in said proceedings, they
were condemned for public use, as part of an airport,
and ordered sold to the Government. In fact, the
abovementioned title certificates secured by plaintiffs
over said lots contained annotations of the right of the
(1) Heirs of Alberto Suguitan v. City of Mandaluyong
National Airports Corporation (now CAA) to pay for and
acquire them. It follows that both by virtue of the
judgment, long final, in the expropriation suit, as well
as the annotations upon their title certificates,
plaintiffs are not entitled to recover possession of their
expropriated lots which are still devoted to the public
use for which they were expropriated but only to
demand the fair market value of the same.
(4) Secretary of Public Works and Highways v. Spouses
Tecson
FACTS
Property expropriated but government failed to pay
just compensation. Petitioners sought to pay for just
compensation 54 years after. Petitioners claim that the
just compensation should be based on the value of the
property at the time of taking in 1940 and not at the
time of payment.
Prepared by: Reah Crezz
RULING
There is taking when the expropriator enters private
property not only for a momentary period but for a
permanent duration, or for the purpose of devoting the
property to public use in such a manner as to oust the
owner and deprive him of all beneficial enjoyment
thereof.
The Court has uniformly ruled that just compensation
is the value of the property at the time of taking that is
controlling for purposes of compensation. The rule is
that just compensation is based on the valuation of the
property at the time of taking or institution of
expropriation proceedings, whichever comes first.
POWER OF EMINENT DOMAIN OF LGUs
FACTS
SP of Mandaluyong authorized Mayor to institute
expropriation proceedings through a resolution.
RULING
The power of eminent domain is lodged in the
legislative branch of government, which may delegate
the exercise thereof to LGUs, other public entities and
public utilities. An LGU may therefore exercise the
power to expropriate private property only when
authorized by Congress and subject to the latter's
control and restraints imposed "through the law
conferring the power or in other legislations." In this
case, Section 19 of RA 7160, which delegates to LGUs
the power of eminent domain, also lays down the
parameters for its exercise.
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Requisites for valid exercise of eminent domain in
LGUs
1. An ordinance is enacted by the local legislative
council authorizing the local chief executive, in
behalf of the local government unit, to exercise the
power of eminent domain or pursue expropriation
proceedings over a particular private property.
(Note: This is not complied in this case since
authority of mayor only given in a resolution)
2. The power of eminent domain is exercised for
public use, purpose or welfare, or for the benefit of
the poor and the landless.
3. There is payment of just compensation, as required
under Section 9, Article III of the Constitution, and
other pertinent laws.
4. A valid and definite offer has been previously made
to the owner of the property sought to be
expropriated, but said offer was not accepted
(2) Beluso v. Municipality of Panay
FACTS
Similar to Suguitan case. Authority granted in a
resolution
RULING
Not valid. Must be in an ordinance. (NOTE: You know
the difference between an ordinance and a reso right?)
(3) Francia v. Municipality of Meycauayan
FACTS
A Complaint for expropriation was filed by respondent
Municipality of Meycauayan, Bulacan against the
property of petitioners Amos Francia, Cecilia Francia
Prepared by: Reah Crezz
and Benjamin Francia. The Municipality of Meycauayan
seeks to use the said property in order to establish a
common public terminal for all public utility vehicles.
The Regional Trial Court (RTC) ruled that the
expropriation was for public purpose and issued an
Order of Expropriation.
RULING
Before a local government unit may enter into the
possession of the property sought to be expropriated,
it must (1) file a complaint for expropriation sufficient
in form and substance in the proper court and (2)
deposit with the said court at least 15% of the
property's fair market value based on its current tax
declaration. The law does not make the determination
of a public purpose a condition precedent to the
issuance of a writ of possession.
POWER OF TAXATION
DEFINITION AND CONCEPT OF TAXATION
(1) Commissioner of Internal Revenue v. Algue
FACTS
Algue Inc domestic corp engaged in engineering,
construction and other allied activities. CIR
disputed its claim for deduction as it was not an
ordinary reasonable or necessary business
expense.
RULING
Taxes are what we pay for civilization society.
Without taxes, the government would be paralyzed
for lack of the motive power to activate and
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operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the
taxing authorities, every person who is able to must
contribute his share in the running of the
government. The government for its part, is
expected to respond in the form of tangible and
intangible benefits intended to improve the lives of
the people and enhance their moral and material
values.
Taxation must be exercised reasonably and in
accordance with the prescribed procedure. If it is
not, then the taxpayer has a right to complain and
the courts will then come to his succor.
Sec. 30 of the Tax Code: allowed deductions in the
net income Expenses - All the ordinary and
necessary expenses paid or incurred during the
taxable year in carrying on any trade or business,
including a reasonable allowance for salaries or
other compensation for personal services actually
rendered xxx
The burden is on the taxpayer to prove the validity
of the claimed deduction. In this case, Algue
Inc. has proved that the payment of the fees was
necessary and reasonable in the light of the efforts
exerted by the payees in inducing investors and
prominent businessmen to venture in an
experimental enterprise and involve themselves in
a new business requiring millions of pesos.
(2) NPC v. City of Cabanatuan
FACTS
Petitioner is a GOCC. It refused to pay tax
assessment alleging that respondent has no
Prepared by: Reah Crezz
authority to impose tax on government entities.
Petitioner also contended that as a non-profit
organization, it is exempted from the payment of all
forms of taxes, charges, duties or fees in
accordance with sec. 13 of Rep. Act No. 6395, as
amended.
RULING
Taxes are the lifeblood of the government, for
without taxes, the government can neither exist nor
endure. Section 137 of the LGC clearly states that
the LGUs can impose franchise tax
notwithstanding any exemption granted by any
law or other special law. This particular provision
of the LGC does not admit any exception. The
franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special
laws. the original reasons for the withdrawal of tax
exemption privileges granted to government-owned
or controlled corporations and all other units of
government were that such privilege resulted in
serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises.
THEORY AND BASIS OF TAXATION
(1) North Camarines Lumber v. CIR
FACTS
The petitioner sold more than 2M boardfeet of logs
to General Lumber Co. with the agreement that the
latter would pay the sales taxes. Failed to pay the
same. The petitioner had consumed thirty-three
days from the receipt of the demand, before filing
the appeal. Petitioner argued that in computing the
30-day period in perfecting the appeal the letter of
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the respondent Collector dated January 30, 1956,
denying the second request for reconsideration,
should be considered as the final decision
contemplated in Section 7, and not the letter of
demand dated August 30, 1955.
RULING
We cannot countenance that theory that would
make the commencement of the statutory 30-day
period solely dependent on the will of the taxpayer
and place the latter in a position to put off
indefinitely and at his convenience the finality of a
tax assessment. Such an absurd procedure would
be detrimental to the interest of the Government,
for "taxes are the lifeblood of the government, and
their prompt and certain availability is an imperious
need."
(2) Phil. Guaranty Co. v. CIR
FACTS
Petitioner entered into reinsurance contracts with
foreign insurance companies not doing business in
the country, thereby ceding to foreign reinsurers a
portion of the premiums on insurance it has
originally underwritten in the Philippines. Premiums
paid such foreign entities were not subject to
withholding tax
RULING
The power to tax is an attribute of sovereignty. It is
a power emanating from necessity. It is a necessary
burden to preserve the State's sovereignty and a
means to give the citizenry an army to resist an
aggression, a navy to defend its shores from
Prepared by: Reah Crezz
invasion, a corps of civil servants to serve, public
improvement designed for the enjoyment of the
citizenry and those which come within the State's
territory, and facilities and protection which a
government is supposed to provide. Considering
that the reinsurance premiums in question were
afforded protection by the government and the
recipient foreign reinsurers exercised rights and
privileges guaranteed by our laws, such
reinsurance premiums and reinsurers should share
the burden of maintaining the state.
DOUBLE TAXATION
(1) City of Manila v. Coca-cola Bottlers
FACTS
Respondent paid the local business tax only as a
manufacturers as it was expressly exempted from
the business tax under a different section and
which applied to businesses subject to excise, VAT
or percentage tax under the Tax Code. The City of
Manila subsequently amended the ordinance by
deleting the provision exempting businesses under
the latter section if they have already paid taxes
under a different section in the ordinance.
RULING
There is indeed double taxation if respondent is
subjected to the taxes under both Sections 14 and
21 of the tax ordinance since these are being
imposed: (1) on the same subject matter the
privilege of doing business in the City of Manila; (2)
for the same purpose to make persons
conducting business within the City of Manila
contribute to city revenues; (3) by the same taxing
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authority petitioner City of Manila; (4) within the
same taxing jurisdiction within the territorial
jurisdiction of the City of Manila; (5) for the same
taxing periods per calendar year; and (6) of the
same kind or character a local business tax
imposed on gross sales or receipts of the business.
LICENSE v. TAX; LGUs POWER TO TAX
(1) Saldana v. City of Iloilo
FACTS
In 1946, the City of Iloilo promulgated Ordinance
28, which strictly prohibits the transport of food
supply and labor animals outside Iloilo without first
obtaining the necessary license permit from the
mayor. Under the ordinance, Serafin Saldana had
been paying, under protest, so-called fees on fish
bought in Iloilo and sent to Manila from 16
September to 6 December 1946.
RULING
Prepared by: Reah Crezz
A license fee represents the permission conceded
to do an act is in the main purpose of police power,
and is not supposed to be imposed for revenue. A
property tax, on the other hand, is a tax in the
ordinary sense, assessing according to the value of
property. Judging from the amount of fees fixed in
the ordinance, the so-called fees were in reality
taxes for city revenue. As such, they are
unauthorized by the law or the City Charter, and
are also in contravention of Sections 2287 and
2629 of the Revised Administrative Code. The
prohibition against taking animals and articles
outside Iloilo without mayors permit is in restraint
of trade and a curtailment of the rights of the
owners of said animals and articles to freely sell
and of prospective purchasers to buy and dispose
of them without the city limits in the ordinary
course of commerce and trade. The ordinance is
ultra vires and, thus, is null and void.
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