Republic of the Philippines
She
SUPREME COURT
Manila
EN BANC
G.R. No. L-36409 October 26, 1973
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
LORETA GOZO, defendant-appellant.
Office of the Solicitor General Felix Q. Antonio, Assistant
Solicitor General Jaime M. Lantin and Solicitor Norberto P.
Eduardo for plaintiff-appellee.
Jose T. Nery for defendant-appellant.
FERNANDO, J.:
Appellant seeks to set aside a judgment of the Court of First Instance of
Zambales, convicting her of a violation of an ordinance of Olongapo,
Zambales, requiring a permit from the municipal mayor for the
construction or erection of a building, as well as any modification,
alteration, repair or demolition thereof. She questions its validity, or at the
very least, its applicability to her, by invoking due process, 1 a contention
she would premise on what for her is the teaching of People v. Fajardo. 2 If
such a ground were far from being impressed with solidity, she stands on
quicksand when she would deny the applicability of the ordinance to her,
on the pretext that her house was constructed within the naval base
leased to the American armed forces. While yielding to the well-settled
doctrine that it does not thereby cease to be Philippine territory, she
would, in effect, seek to emasculate our sovereign rights by the assertion
that we cannot exercise therein administrative jurisdiction. To state the
proposition is to make patent how much it is tinged with unorthodoxy.
Clearly then, the lower court decision must be affirmed with the sole
modification that she is given thirty days from the finality of a judgment to
obtain a permit, failing which, she is required to demolish the same.
The facts are undisputed. As set forth in the decision of the lower court:
"The accused bought a house and lot located inside the United States
Naval Reservation within the territorial jurisdiction of Olongapo City.
demolished the house and built another one in its place, without a
building permit from the City Mayor of Olongapo City, because she was
told by one Ernesto Evalle, an assistant in the City Mayor's office, as well
as by her neighbors in the area, that such building permit was not
necessary for the construction of the house. On December 29, 1966, Juan
Malones, a building and lot inspector of the City Engineer's Office,
Olongapo City, together with Patrolman Ramon Macahilas of the Olongapo
City police force apprehended four carpenters working on the house of the
accused and they brought the carpenters to the Olongapo City police
headquarters for interrogation. ... After due investigation, Loreta Gozo was
charged with violation of Municipal Ordinance No. 14, S. of 1964 with the
City Fiscal's Office." 3 The City Court of Olongapo City found her guilty of
violating Municipal Ordinance No. 14, Series of 1964 and sentenced her to
an imprisonment of one month as well as to pay the costs. The Court of
Instance of Zambales, on appeal, found her guilty on the above facts of
violating such municipal ordinance but would sentence her merely to pay
a fine of P200.00 and to demolish the house thus erected. She elevated
the case to the Court of Appeals but in her brief, she would put in issue
the validity of such an ordinance on constitutional ground or at the very
least its applicability to her in view of the location of her dwelling within
the naval base. Accordingly, the Court of Appeals, in a resolution of
January 29, 1973, noting the constitutional question raised, certified the
case to this Court.
There is, as mentioned in the opening paragraph of this petition, no
support in law for the stand taken by appellant.
1. It would be fruitless for her to assert that local government units are
devoid of authority to require building permits. This Court, from Switzer v.
Municipality of
Cebu, 4 decided in 1911, has sanctioned the validity of such measures. It
is much too late in the day to contend that such a requirement cannot be
validly imposed. Even appellant, justifiably concerned about the
unfavorable impression that could be created if she were to deny that
such competence is vested in municipal corporations and chartered cities,
had to concede in her brief: "If, at all; the questioned ordinance may be
predicated under the general welfare clause ... ." 5 Its scope is wide, well-
nigh all embracing, covering every aspect of public health, public morals,
public safety, and the well being and good order of the community. 6
It goes without saying that such a power is subject to limitations.
Certainly, if its exercise is violative of any constitutional right, then its
validity could be impugned, or at the very least, its applicability to the
person adversely affected could be questioned. So much is settled law.
Apparently, appellant has adopted the view that a due process question
may indeed be raised in view of what for her is its oppressive character.
She is led to such a conclusion, relying on People v. Fajardo. 7 A more
careful scrutiny of such a decision would not have led her astray, for that
case is easily distinguishable. The facts as set forth in the opinion follow:
"It appears that on August 15, 1950, during the incumbency of defendant-
appellant Juan F. Fajardo as mayor of the municipality of Baao, Camarines
Sur, the municipal council passed the ordinance in question providing as
follows: "... 1. Any person or persons who will construct or repair a building
should, before constructing or repairing, obtain a written permit from the
Municipal Mayor. ... 2. A fee of not less than P2.00 should be charged for
each building permit and P1.00 for each repair permit issued. ... 3.
[Penalty]-Any violation of the provisions of the above, this ordinance, shall
make the violator liable to pay a fine of not less than P25 nor more than
P50 or imprisonment of not less than 12 days nor more than 24 days or
both, at the discretion of the court. If said building destroys the view of
the Public Plaza or occupies any public property, it shall be removed at the
expense of the owner of the building or house. ... ." Four years later, after
the term of appellant Fajardo as mayor had expired, he and his son-in-law,
appellant Babilonia, filed a written request with the incumbent municipal
mayor for a permit to construct a building adjacent to their gasoline
station on a parcel of land registered in Fajardo's name, located along the
national highway and separated from the public plaza by a creek ... . On
January 16, 1954, the request was denied, for the reason among others
that the proposed building would destroy the view or beauty of the public
plaza ... . On January 18, 1954, defendants reiterated their request for a
building permit ..., but again the request was turned down by the mayor.
Whereupon, appellants proceeded with the construction of the building
without a permit, because they needed a place of residence very badly,
their former house having been destroyed by a typhoon and hitherto they
had been living on leased property." 8
Clearly then, the application of such an ordinance to Fajardo was
oppressive. A conviction therefore for a violation thereof both in the
justice of the peace court of Baao, Camarines Sur as well as in the Court
of First Instance could not be sustained. In this case, on the contrary,
appellant never bothered to comply with the ordinance. Perhaps aware of
such a crucial distinction, she would assert in her brief: "The evidence
showed that even if the accused were to secure a permit from the Mayor,
the same would not have been granted. To require the accused to obtain a
permit before constructing her house would be an exercise in futility. The
law will not require anyone to perform an impossibility, neither in law or in
fact: ... ." 9 It would be from her own version, at the very least then,
premature to anticipate such an adverse result, and thus to condemn an
ordinance which certainly lends itself to an interpretation that is neither
oppressive, unfair, or unreasonable. That kind of interpretation suffices to
remove any possible question of its validity, as was expressly announced
in Primicias v. Fugoso. 10 So it appears from this portion of the opinion of
Justice Feria, speaking for the Court: "Said provision is susceptible of two
constructions: one is that the Mayor of the City of Manila is vested with
unregulated discretion to grant or refuse to grant permit for the holding of
a lawful assembly or meeting, parade, or procession in the streets and
other public places of the City of Manila; and the other is that the
applicant has the right to a permit which shall be granted by the Mayor,
subject only to the latter's reasonable discretion to determine or specify
the streets or public places to be used for the purpose, with a view to
prevent confusion by overlapping, to secure convenient use of the streets
and public places by others, and to provide adequate and proper policing
to minimize the risk of disorder. After a mature deliberation, we have
arrived at the conclusion that we must adopt the second construction,
that is, construe the provisions of the said ordinance to mean that it does
not confer upon the Mayor the power to refuse to grant the permit, but
only the discretion, in issuing the permit, to determine or specify the
streets or public places where the parade or procession may pass or the
meeting may be held." 11 If, in a case affecting such a preferred freedom
as the right to assembly, this Court could construe an ordinance of the
City of Manila so as to avoid offending against a constitutional provision,
there is nothing to preclude it from a similar mode of approach in order to
show the lack of merit of an attack against an ordinance requiring a
permit. Appellant cannot therefore take comfort from any broad statement
in the Fajardo opinion, which incidentally is taken out of context,
considering the admitted oppressive application of the challenged
measure in that litigation. So much then for the contention that she could
not have been validly convicted for a violation of such ordinance. Nor
should it be forgotten that she did suffer the same fate twice, once from
the City Court and thereafter from the Court of First Instance. The reason
is obvious.Such ordinance applies to her.
2. Much less is a reversal indicated because of the alleged absence of the
rather novel concept of administrative jurisdiction on the part of Olongapo
City. Nor is novelty the only thing that may be said against it. Far worse is
the assumption at war with controlling and authoritative doctrines that the
mere existence of military or naval bases of a foreign country cuts deeply
into the power to govern. Two leading cases may be cited to show how
offensive is such thinking to the juristic concept of sovereignty, People v.
Acierto, 12 and Reagan v. Commissioner of Internal Revenue. 13 As was so
emphatically set forth by Justice Tuason in Acierto: "By the Agreement, it
should be noted, the Philippine Government merely consents that the
United States exercise jurisdiction in certain cases. The consent was given
purely as a matter of comity, courtesy, or expediency. The Philippine
Government has not abdicated its sovereignty over the bases as part of
the Philippine territory or divested itself completely of jurisdiction over
offenses committed therein. Under the terms of the treaty, the United
States Government has prior or preferential but not exclusive jurisdiction
of such offenses. The Philippine Government retains not only jurisdictional
rights not granted, but also all such ceded rights as the United States
Military authorities for reasons of their own decline to make use of. The
first proposition is implied from the fact of Philippine sovereignty over the
bases; the second from the express provisions of the treaty." 14 There was
a reiteration of such a view in Reagan. Thus: "Nothing is better settled
than that the Philippines being independent and sovereign, its authority
may be exercised over its entire domain. There is no portion thereof that
is beyond its power. Within its limits, its decrees are supreme, its
commands paramount. Its laws govern therein, and everyone to whom it
applies must submit to its terms. That is the extent of its jurisdiction, both
territorial and personal. Necessarily, likewise, it has to be exclusive. If it
were not thus, there is a diminution of sovereignty." 15 Then came this
paragraph dealing with the principle of auto-limitation: "It is to be
admitted any state may, by its consent, express or implied, submit to a
restriction of its sovereign rights. There may thus be a curtailment of what
otherwise is a power plenary in character. That is the concept of
sovereignty as auto-limitation, which, in the succinct language of Jellinek,
"is the property of a state-force due to which it has the exclusive capacity
of legal self-determination and self-restriction." A state then, if it chooses
to, may refrain from the exercise of what otherwise is illimitable
competence." 16 The opinion was at pains to point out though that even
then, there is at the most diminution of jurisdictional rights, not its
disappearance. The words employed follow: "Its laws may as to some
persons found within its territory no longer control. Nor does the matter
end there. It is not precluded from allowing another power to participate in
the exercise of jurisdictional right over certain portions of its territory. If it
does so, it by no means follows that such areas become impressed with an
alien character. They retain their status as native soil. They are still
subject to its authority. Its jurisdiction may be diminished, but it does not
disappear. So it is with the bases under lease to the American armed
forces by virtue of the military bases agreement of 1947. They are not and
cannot be foreign territory." 17
Can there be anything clearer, therefore, than that only a turnabout,
unwarranted and unjustified, from what is settled and orthodox law can
lend the slightest degree of plausibility to the contention of absence of
administrative jurisdiction. If it were otherwise, what was aptly referred to
by Justice Tuason "as a matter of comity, courtesy, or expediency"
becomes one of obeisance and submission. If on a concern purely
domestic in its implications, devoid of any connection with national
security, the Military-Bases Agreement could be thus interpreted, then
sovereignty indeed becomes a mockery and an illusion. Nor does
appellant's thesis rest on less shaky foundation by the mere fact that
Acierto and Reagan dealt with the competence of the national
government, while what is sought to be emasculated in this case is the so-
called administrative jurisdiction of a municipal corporation. Within the
limits of its territory, whatever statutory powers are vested upon it may be
validly exercised. Any residual authority and therein conferred, whether
expressly or impliedly, belongs to the national government, not to an alien
country. What is even more to be deplored in this stand of appellant is that
no such claim is made by the American naval authorities, not that it would
do them any good if it were so asserted. To quote from Acierto anew: "The
carrying out of the provisions of the Bases Agreement is the concern of
the contracting parties alone. Whether, therefore, a given case which by
the treaty comes within the United States jurisdiction should be
transferred to the Philippine authorities is a matter about which the
accused has nothing to do or say. In other words, the rights granted to the
United States by the treaty insure solely to that country and can not be
raised by the offender." 18 If an accused would suffer from such disability,
even if the American armed forces were the beneficiary of a treaty
privilege, what is there for appellant to take hold of when there is
absolutely no showing of any alleged grant of what is quaintly referred to
as administrative jurisdiction? That is all, and it is more than enough, to
make manifest the futility of seeking a reversal.
WHEREFORE, the appealed decision of November 11, 1969 is affirmed
insofar as it found the accused, Loreta Gozo, guilty beyond reasonable
doubt of a violation of Municipal Ordinance No. 14, series of 1964 and
sentencing her to pay a fine of P200.00 with subsidiary imprisonment in
case of insolvency, and modified insofar as she is required to demolish the
house that is the subject matter of the case, she being given a period of
thirty days from the finality of this decision within which to obtain the
required permit. Only upon her failure to do so will that portion of the
appealed decision requiringdemolition be enforced. Costs against the
accused.
Makalintal, C.J., Zaldivar, Castro, Teehankee, Makasiar, Antonio and
Esguerra, JJ., concur.
Barredo, J., took no part.
Facts: Appellant seeks to set aside a judgment of the Court of First
Instance of Zambales, convicting her of a violation of an ordinance of
Olongapo, Zambales, requiring a permit from the municipal mayor for the
construction or erection of a building, as well as any modification,
alteration, repair or demolition thereof. She questions its validity on the
pretext that her house was constructed within the naval base leased to
the American armed forces. While yielding to the well-settled doctrine that
it does not thereby cease to be Philippine territory, she in effect seek to
emasculate the State's sovereign rights by the assertion that the latter
cannot exercise therein administrative jurisdiction.
Issue/s: Whether or not the State can exercise administrative jurisdiction
within the naval base leased by the Philippines to the American armed
forces.
Held: The Philippine Government has not abdicated its sovereignty over
the bases as part of the Philippine territory or divested itself completely of
jurisdiction over offenses committed therein. Under the terms of the
treaty, the United States Government has prior or preferential but not
exclusive jurisdiction of such offenses. The Philippine Government retains
not only jurisdictional lights not granted, but also all such ceded rights as
the United States Military authorities for reasons of their own decline to
make use of. The first proposition is implied from the fact of Philippine
sovereignty over the bases; the second from the express provisions of the
treaty." There was a reiteration of such a view in Reagan. Thus: "Nothing is
better settled than that the Philippines being independent and sovereign,
its authority may be exercised over its entire domain. There is no portion
thereof that is beyond its power. Within its limits, its decrees are supreme,
its commands paramount. Its laws govern therein, and everyone to whom
it applies must submit to its terms. That is the extent of its jurisdiction,
both territorial and personal. Necessarily, likewise, it has to be exclusive. If
it were not thus, there is a diminution of it sovereignty." Then came this
paragraph dealing with the principle of auto-limitation: "It is to be
admitted that any state may, by its consent, express or implied, submit to
a restriction of its sovereign rights. There may thus be a curtailment of
what otherwise is a power plenary in character. That is the concept of
sovereignty as auto-limitation, which, in the succinct language of Jellinek,
'is the property of a state-force due to which it has the exclusive capacity
of legal self-determination and self-restriction.' A state then, if it chooses Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the
to, may refrain from the exercise of what otherwise is illimitable MIAA Charter.
competence." 16 The opinion was at pains to point out though that even As operator of the international airport, MIAA administers the land,
then, there is at the most diminution of jurisdictional rights, not it improvements and equipment within the NAIA Complex. The MIAA Charter
appearance. The words employed follow: "Its laws may as to some transferred to MIAA approximately 600 hectares of land,3 including the
persons found within its territory no longer control. Nor does the matter runways and buildings ("Airport Lands and Buildings") then under the
end there. It is not precluded from allowing another power to participate in Bureau of Air Transportation.4 The MIAA Charter further provides that no
the exercise of jurisdictional right over certain portions of its territory. If it portion of the land transferred to MIAA shall be disposed of through sale or
does so, it by no means follows that such areas become impressed with an any other mode unless specifically approved by the President of the
alien character. They retain their status as native soil. They are still Philippines.5
subject to its authority. Its jurisdiction may be diminished, but it does not On 21 March 1997, the Office of the Government Corporate Counsel
disappear. So it is with the bases under lease to the American armed (OGCC) issued Opinion No. 061. The OGCC opined that the Local
forces by virtue of the military bases agreement of 1947. They are not and Government Code of 1991 withdrew the exemption from real estate tax
cannot be foreign territory." granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Paraaque to pay the real estate tax
Republic of the Philippines imposed by the City. MIAA then paid some of the real estate tax already
SUPREME COURT due.
Manila On 28 June 2001, MIAA received Final Notices of Real Estate Tax
EN BANC Delinquency from the City of Paraaque for the taxable years 1992 to
2001. MIAA's real estate tax delinquency is broken down as follows:
G.R. No. 155650 July 20, 2006
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, TAX TAXABLE
vs. TAX DUE PENALTY TOTAL
DECLARATION YEAR
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF
PARAAQUE, SANGGUNIANG PANGLUNGSOD NG E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY
E-016-01374 1992-2001 111,689,424.9 68,149,479.59 179,838,904.49
TREASURER OF PARAAQUE, respondents. 0
DECISION
CARPIO, J.: E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00

The Antecedents E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) Complex in Paraaque City under E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
Executive Order No. 903, otherwise known as the Revised Charter of the
Manila International Airport Authority ("MIAA Charter"). Executive Order E-016-01378 1992-2001 111,107,950.4 67,794,681.59 178,902,631.99
No. 903 was issued on 21 July 1983 by then President Ferdinand E.
 0 also denied on 27 September 2002 MIAA's motion for reconsideration and
supplemental motion for reconsideration. Hence, MIAA filed on 5
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00December 2002 the present petition for review.7
Meanwhile, in January 2003, the City of Paraaque posted notices of
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00 auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and
Tambo, Paraaque City; in the public market of Barangay La Huerta; and in
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50the main lobby of the Paraaque City Hall. The City of Paraaque
published the notices in the 3 and 10 January 2003 issues of the Philippine
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
Daily Inquirer, a newspaper of general circulation in the Philippines. The
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00 notices announced the public auction sale of the Airport Lands and
Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the
GRAND TOTAL P392,435,861. P232,070,863. P 624,506,725. Legislative Session Hall Building of Paraaque City.
95 47 42 A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA
filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for Issuance of a Temporary Restraining Order. The motion sought to restrain
P4,207,028.75 respondents the City of Paraaque, City Mayor of
#9476101 for P28,676,480.00 Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of
#9476103 for P49,115.006 Paraaque, and the City Assessor of Paraaque ("respondents") from
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued auctioning the Airport Lands and Buildings.
notices of levy and warrants of levy on the Airport Lands and Buildings. On 7 February 2003, this Court issued a temporary restraining order (TRO)
The Mayor of the City of Paraaque threatened to sell at public auction the effective immediately. The Court ordered respondents to cease and desist
Airport Lands and Buildings should MIAA fail to pay the real estate tax from selling at public auction the Airport Lands and Buildings.
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. Respondents received the TRO on the same day that the Court issued it.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC However, respondents received the TRO only at 1:25 p.m. or three hours
Opinion No. 061. The OGCC pointed out that Section 206 of the Local after the conclusion of the public auction.
Government Code requires persons exempt from real estate tax to show On 10 February 2003, this Court issued a Resolution confirming nunc pro
proof of exemption. The OGCC opined that Section 21 of the MIAA Charter tunc the TRO.
is the proof that MIAA is exempt from real estate tax. On 29 March 2005, the Court heard the parties in oral arguments. In
On 1 October 2001, MIAA filed with the Court of Appeals an original compliance with the directive issued during the hearing, MIAA, respondent
petition for prohibition and injunction, with prayer for preliminary City of Paraaque, and the Solicitor General subsequently submitted their
injunction or temporary restraining order. The petition sought to restrain respective Memoranda.
the City of Paraaque from imposing real estate tax on, levying against, MIAA admits that the MIAA Charter has placed the title to the Airport
and auctioning for public sale the Airport Lands and Buildings. The petition Lands and Buildings in the name of MIAA. However, MIAA points out that it
was docketed as CA-G.R. SP No. 66878. cannot claim ownership over these properties since the real owner of the
On 5 October 2001, the Court of Appeals dismissed the petition because Airport Lands and Buildings is the Republic of the Philippines. The MIAA
MIAA filed it beyond the 60-day reglementary period. The Court of Appeals Charter mandates MIAA to devote the Airport Lands and Buildings for the
benefit of the general public. Since the Airport Lands and Buildings are
devoted to public use and public service, the ownership of these
properties remains with the State. The Airport Lands and Buildings are
thus inalienable and are not subject to real estate tax by local
governments.
MIAA also points out that Section 21 of the MIAA Charter specifically
exempts MIAA from the payment of real estate tax. MIAA insists that it is
also exempt from real estate tax under Section 234 of the Local
Government Code because the Airport Lands and Buildings are owned by
the Republic. To justify the exemption, MIAA invokes the principle that the
government cannot tax itself. MIAA points out that the reason for tax
exemption of public property is that its taxation would not inure to any
public advantage, since in such a case the tax debtor is also the tax
creditor.
Respondents invoke Section 193 of the Local Government Code,
which expressly withdrew the tax exemption privileges of "government-
owned and-controlled corporations" upon the effectivity of the Local
Government Code. Respondents also argue that a basic rule of statutory
construction is that the express mention of one person, thing, or act
excludes all others. An international airport is not among the exceptions
mentioned in Section 193 of the Local Government Code. Thus,
respondents assert that MIAA cannot claim that the Airport Lands and
Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International
Airport v. Marcos8 where we held that the Local Government Code has
withdrawn the exemption from real estate tax granted to international
airports. Respondents further argue that since MIAA has already paid
some of the real estate tax assessments, it is now estopped from claiming
that the Airport Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and
Buildings of MIAA are exempt from real estate tax under existing laws. If
so exempt, then the real estate tax assessments issued by the City of
Paraaque, and all proceedings taken pursuant to such assessments, are
void. In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real
estate tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but
an instrumentality of the National Government and thus exempt from local
taxation. Second, the real properties of MIAA are owned by the Republic of
the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled
corporation, is not exempt from real estate tax. Respondents claim that
the deletion of the phrase "any government-owned or controlled so
exempt by its charter" in Section 234(e) of the Local Government Code
withdrew the real estate tax exemption of government-owned or
controlled corporations. The deleted phrase appeared in Section 40(a) of
the 1974 Real Property Tax Code enumerating the entities exempt from
real estate tax.
There is no dispute that a government-owned or controlled corporation is
not exempt from real estate tax. However, MIAA is not a government-
owned or controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-
owned or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital
stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a
stock or non-stock corporation." MIAA is not organized as a stock or non-
stock corporation. MIAA is not a stock corporation because it has no
capital stock divided into shares. MIAA has no stockholders or voting
shares. Section 10 of the MIAA Charter9provides:
SECTION 10. Capital. The capital of the Authority to be contributed by
the National Government shall be increased from Two and One-half Billion
(P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to
consist of:
(a) The value of fixed assets including airport facilities, runways and
equipment and such other properties, movable and immovable[,] which
may be contributed by the National Government or transferred by it from
any of its agencies, the valuation of which shall be determined jointly with
the Department of Budget and Management and the Commission on Audit
on the date of such contribution or transfer after making due allowances
for depreciation and other deductions taking into account the loans and
other liabilities of the Authority at the time of the takeover of the assets
and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing
about seventy percentum (70%) of the unremitted share of the National
Government from 1983 to 1986 to be remitted to the National Treasury as
provided for in Section 11 of E. O. No. 903 as amended, shall be converted
into the equity of the National Government in the Authority. Thereafter,
the Government contribution to the capital of the Authority shall be
provided in the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided
into shares.
Section 3 of the Corporation Code10 defines a stock corporation as one
whose "capital stock is divided into shares and x x x authorized to
distribute to the holders of such shares dividends x x x." MIAA has capital
but it is not divided into shares of stock. MIAA has no stockholders or
voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members.
Section 87 of the Corporation Code defines a non-stock corporation as
"one where no part of its income is distributable as dividends to its
members, trustees or officers." A non-stock corporation must have
members. Even if we assume that the Government is considered as the
sole member of MIAA, this will not make MIAA a non-stock corporation.
Non-stock corporations cannot distribute any part of their income to their
members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of
its annual gross operating income to the National Treasury.11 This
prevents MIAA from qualifying as a non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations
are "organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers." MIAA is not
organized for any of these purposes. MIAA, a public utility, is organized to
operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not
qualify as a government-owned or controlled corporation. What then is the
legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested
with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy,
usually through a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers,
the instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain,12 police authority13 and the
levying of fees and charges.14 At the same time, MIAA exercises "all the
powers of a corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this Executive Order."15
Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government
machinery although not integrated with the department framework. The
MIAA Charter expressly states that transforming MIAA into a "separate and
autonomous body"16 will make its operation more "financially viable."17
Many government instrumentalities are vested with corporate powers but
they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a government-
owned or controlled corporation. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the
Philippines and Bangko Sentral ng Pilipinas. All these government
instrumentalities exercise corporate powers but they are not organized as
stock or non-stock corporations as required by Section 2(13) of the
Introductory Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate
entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative
Code, which is the governing law defining the legal relationship and status
of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the
Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend
to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units.(Emphasis and
underscoring supplied)
Section 133(o) recognizes the basic principle that local governments
cannot tax the national government, which historically merely delegated
to local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines
and limitations as the Congress may provide."18
When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local
governments. The rule is that a tax is never presumed and there must be
clear language in the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies
with greater force when local governments seek to tax national
government instrumentalities.
Another rule is that a tax exemption is strictly construed against the
taxpayer claiming the exemption. However, when Congress grants an
exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running
to the benefit of the government itself or its agencies. In such case the
practical effect of an exemption is merely to reduce the amount of money
that has to be handled by government in the course of its operations. For
these reasons, provisions granting exemptions to government agencies
may be construed liberally, in favor of non tax-liability of such agencies.19
There is, moreover, no point in national and local governments taxing
each other, unless a sound and compelling policy requires such transfer of
public funds from one government pocket to another.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of
local governments. The only exception is when the legislature clearly
intended to tax government instrumentalities for the delivery of essential
public services for sound and compelling policy considerations. There
must be express language in the law empowering local governments to
tax national government instrumentalities. Any doubt whether such power
exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax national
government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government
over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable
activities or enterprise using the power to tax as "a tool for regulation"
(U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to
destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power
to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of the Philippines. The
Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character
stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial property
of the State.
No one can dispute that properties of public dominion mentioned in Article
420 of the Civil Code, like "roads, canals, rivers, torrents, ports and
bridges constructed by the State," are owned by the State. The term
"ports" includes seaports and airports. The MIAA Airport Lands and
Buildings constitute a "port" constructed by the State. Under Article 420 of
the Civil Code, the MIAA Airport Lands and Buildings are properties of
public dominion and thus owned by the State or the Republic of the
Philippines.
The Airport Lands and Buildings are devoted to public use because they
are used by the public for international and domestic travel and
transportation. The fact that the MIAA collects terminal fees and other
charges from the public does not remove the character of the Airport
Lands and Buildings as properties for public use. The operation by the
government of a tollway does not change the character of the road as one
for public use. Someone must pay for the maintenance of the road, either
the public indirectly through the taxes they pay the government, or only
those among the public who actually use the road through the toll fees
they pay upon using the road. The tollway system is even a more efficient
and equitable manner of taxing the public for the maintenance of public
roads.
The charging of fees to the public does not determine the character of the
property whether it is of public dominion or not. Article 420 of the Civil
Code defines property of public dominion as one "intended for public use."
Even if the government collects toll fees, the road is still "intended for
public use" if anyone can use the road under the same terms and
conditions as the rest of the public. The charging of fees, the limitation on
the kind of vehicles that can use the road, the speed restrictions and other
conditions for the use of the road do not affect the public character of the
road.
The terminal fees MIAA charges to passengers, as well as the landing fees
MIAA charges to airlines, constitute the bulk of the income that maintains
the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed
user's tax. This means taxing those among the public who actually use a
public facility instead of taxing all the public including those who never
use the particular public facility. A user's tax is more equitable a
principle of taxation mandated in the 1987 Constitution.21
The Airport Lands and Buildings of MIAA, which its Charter calls the
"principal airport of the Philippines for both international and domestic air
traffic,"22 are properties of public dominion because they are intended for
public use. As properties of public dominion, they indisputably belong to
the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and
thus are properties of public dominion. As properties of public dominion,
the Airport Lands and Buildings are outside the commerce of man. The
Court has ruled repeatedly that properties of public dominion are outside
the commerce of man. As early as 1915, this Court already ruled
in Municipality of Cavite v. Rojas that properties devoted to public use are
outside the commerce of man, thus:
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public
works of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal
council of Cavite could not in 1907 withdraw or exclude from public use a
portion thereof in order to lease it for the sole benefit of the defendant
Hilaria Rojas. In leasing a portion of said plaza or public place to the
defendant for private use the plaintiff municipality exceeded its authority
in the exercise of its powers by executing a contract over a thing of which
it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not
outside the commerce of man may be the object of a contract, and plazas
and streets are outside of this commerce, as was decided by the supreme
court of Spain in its decision of February 12, 1895, which says: "Communal
things that cannot be sold because they are by their very nature outside
of commerce are those for public use, such as the plazas, streets,
common lands, rivers, fountains, etc." (Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the Court declared that properties of
public dominion are outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public
use and to be made available to the public in general. They are outside
the commerce of man and cannot be disposed of or even leased by the
municipality to private parties. While in case of war or during an
emergency, town plazas may be occupied temporarily by private
individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary occupation
or use must also cease, and the town officials should see to it that the
town plazas should ever be kept open to the public and free from
encumbrances or illegal private constructions.24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside
the commerce of man, cannot be the subject of an auction sale.25
Properties of public dominion, being for public use, are not subject to levy,
encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale. This will happen if the City
of Paraaque can foreclose and compel the auction sale of the 600-
hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the
President must first withdraw from public use the Airport Lands and
Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth
Act No. 141, which "remains to this day the existing general law governing
the classification and disposition of lands of the public domain other than
timber and mineral lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture
and Natural Resources, the President may designate by proclamation any
tract or tracts of land of the public domain as reservations for the use of
the Republic of the Philippines or of any of its branches, or of the
inhabitants thereof, in accordance with regulations prescribed for this
purposes, or for quasi-public uses or purposes when the public interest
requires it, including reservations for highways, rights of way for railroads,
hydraulic power sites, irrigation systems, communal pastures or lequas
communales, public parks, public quarries, public fishponds, working
men's village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of
Section eighty-three shall be non-alienable and shall not be subject to
occupation, entry, sale, lease, or other disposition until again declared
alienable under the provisions of this Act or by proclamation of the
President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport
Lands and Buildings from public use, these properties remain properties of
public dominion and are inalienable. Since the Airport Lands and Buildings
are inalienable in their present status as properties of public dominion,
they are not subject to levy on execution or foreclosure sale. As long as
the Airport Lands and Buildings are reserved for public use, their
ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for
public use, and to withdraw such public use, is reiterated in Section 14,
Chapter 4, Title I, Book III of the Administrative Code of 1987, which
states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the
Government. (1) The President shall have the power to reserve for
settlement or public use, and for specific public purposes, any of the lands
of the public domain, the use of which is not otherwise directed by law.
The reserved land shall thereafter remain subject to the specific public
purpose indicated until otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and
Buildings are withdrawn by law or presidential proclamation from public
use, they are properties of public dominion, owned by the Republic and
outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for
the Republic. Section 48, Chapter 12, Book I of the Administrative Code
allows instrumentalities like MIAA to hold title to real properties owned by
the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly
vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and
Buildings is clearer because even its executive head cannot sign the deed
of conveyance on behalf of the Republic. Only the President of the
Republic can sign such deed of conveyance.28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the
Airport Lands and Buildings from the Bureau of Air Transportation of the
Department of Transportation and Communications. The MIAA Charter
provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x
The land where the Airport is presently located as well as the surrounding
land area of approximately six hundred hectares, are hereby transferred,
conveyed and assigned to the ownership and administration of the
Authority, subject to existing rights, if any. The Bureau of Lands and other
appropriate government agencies shall undertake an actual survey of the
area transferred within one year from the promulgation of this Executive
Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through sale or
through any other mode unless specifically approved by the President of
the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. All
existing public airport facilities, runways, lands, buildings and other
property, movable or immovable, belonging to the Airport, and all assets,
powers, rights, interests and privileges belonging to the Bureau of Air
Transportation relating to airport works or air operations, including all
equipment which are necessary for the operation of crash fire and rescue
facilities, are hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in
the Bureau of Air Transportation and Transitory Provisions. The Manila
International Airport including the Manila Domestic Airport as a division
under the Bureau of Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA
without the Republic receiving cash, promissory notes or even stock since
MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the
transfer of the Airport Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the
Philippines for both international and domestic air traffic, is required to
provide standards of airport accommodation and service comparable with
the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other
facilities, have to be upgraded to meet the current and future air traffic
and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated that the
objectives of providing high standards of accommodation and service
within the context of a financially viable operation, will best be achieved
by a separate and autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by
Presidential Decree No. 1772, the President of the Philippines is given
continuing authority to reorganize the National Government, which
authority includes the creation of new entities, agencies and
instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air
Transportation to MIAA was not meant to transfer beneficial ownership of
these assets from the Republic to MIAA. The purpose was merely
to reorganize a division in the Bureau of Air Transportation into a separate
and autonomous body. The Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is owned solely by the Republic.
No party claims any ownership rights over MIAA's assets adverse to the
Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings
"shall not be disposed through sale or through any other mode unless
specifically approved by the President of the Philippines." This only means
that the Republic retained the beneficial ownership of the Airport Lands
and Buildings because under Article 428 of the Civil Code, only the "owner
has the right to x x x dispose of a thing." Since MIAA cannot dispose of the
Airport Lands and Buildings, MIAA does not own the Airport Lands and
Buildings.
At any time, the President can transfer back to the Republic title to the
Airport Lands and Buildings without the Republic paying MIAA any
consideration. Under Section 3 of the MIAA Charter, the President is the
only one who can authorize the sale or disposition of the Airport Lands
and Buildings. This only confirms that the Airport Lands and Buildings
belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate
tax any "[r]eal property owned by the Republic of the Philippines." Section
234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same
Code, which prohibits local governments from imposing "[t]axes, fees or
charges of any kind on the National Government, its agencies
andinstrumentalities x x x." The real properties owned by the Republic are
titled either in the name of the Republic itself or in the name of agencies
or instrumentalities of the National Government. The Administrative Code
allows real property owned by the Republic to be titled in the name of
agencies or instrumentalities of the national government. Such real
properties remain owned by the Republic and continue to be exempt from
real estate tax.
The Republic may grant the beneficial use of its real property to an agency
or instrumentality of the national government. This happens when title of
the real property is transferred to an agency or instrumentality even as
the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption. Section 234(a) of the
Local Government Code states that real property owned by the Republic
loses its tax exemption only if the "beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person." MIAA, as a
government instrumentality, is not a taxable person under Section 133(o)
of the Local Government Code. Thus, even if we assume that the Republic
has granted to MIAA the beneficial use of the Airport Lands and Buildings,
such fact does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax. For example, the land
area occupied by hangars that MIAA leases to private corporations is
subject to real estate tax. In such a case, MIAA has granted the beneficial
use of such land area for a consideration to ataxable person and therefore
such land area is subject to real estate tax. In Lung Center of the
Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities
as well as those parts of the hospital leased to private individuals are not
exempt from such taxes. On the other hand, the portions of the land
occupied by the hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real property taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax
because Section 193 of the Local Government Code of 1991 withdrew the
tax exemption of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise
provided in this Code, tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions are hereby withdrawn upon
effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The
minority argues that since the Local Government Code withdrew the tax
exemption of all juridical persons, then MIAA is not exempt from real
estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code
that the withdrawn exemptions from realty tax cover not just GOCCs, but
all persons. To repeat, the provisions lay down the explicit proposition that
the withdrawal of realty tax exemption applies to all persons. The
reference to or the inclusion of GOCCs is only clarificatory or illustrative of
the explicit provision.
The term "All persons" encompasses the two classes of persons
recognized under our laws, natural and juridical persons. Obviously, MIAA
is not a natural person. Thus, the determinative test is not just whether
MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis
and underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt
from local taxation is its status whether MIAA is a juridical person or
not. The minority also insists that "Sections 193 and 234 may be
examined in isolation from Section 133(o) to ascertain MIAA's claim of
exemption."
The argument of the minority is fatally flawed. Section 193 of the Local
Government Code expressly withdrew the tax exemption of all juridical
persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of
the Local Government Code expressly provides otherwise,
specifically prohibiting local governments from imposing any kind of tax
on national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend
to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its
agencies and instrumentalities, and local government units. (Emphasis
and underscoring supplied)
By express mandate of the Local Government Code, local governments
cannot impose any kind of tax on national government instrumentalities
like the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its agencies and
instrumentalities, "[u]nless otherwise provided in this Code" as stated in
the saving clause of Section 133. The saving clause refers to Section
234(a) on the exception to the exemption from real estate tax of real
property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193
itself, all juridical persons are subject to tax by local governments. The
minority insists that the juridical persons exempt from local taxation are
limited to the three classes of entities specifically enumerated as exempt
in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water
districts; (b) cooperatives duly registered under Republic Act No. 6938;
and (c) non-stock and non-profit hospitals and educational institutions. It
would be belaboring the obvious why the MIAA does not fall within any of
the exempt entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section
133(o) of the Local Government Code. This theory will result in gross
absurdities. It will make the national government, which itself is a juridical
person, subject to tax by local governments since the national
government is not included in the enumeration of exempt entities in
Section 193. Under this theory, local governments can impose any kind of
local tax, and not only real estate tax, on the national government.
Under the minority's theory, many national government instrumentalities
with juridical personalities will also be subject to any kind of local tax, and
not only real estate tax. Some of the national government
instrumentalities vested by law with juridical personalities are: Bangko
Sentral ng Pilipinas,30 Philippine Rice Research Institute,31Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases
Conversion Development Authority,34Philippine Ports
Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39
The minority's theory violates Section 133(o) of the Local Government
Code which expressly prohibits local governments from imposing any kind
of tax on national government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities with or without
juridical personalities. Where the law does not distinguish, courts should
not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative
test whether MIAA is exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government instrumentality
under Section 133(o) of the Local Government Code. Section 133(o) is the
specific provision of law prohibiting local governments from imposing any
kind of tax on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause
"[u]nless otherwise provided in this Code." This means that unless the
Local Government Code grants an express authorization, local
governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no
power to tax the national government, its agencies and instrumentalities.
As an exception to this rule, local governments may tax the national
government, its agencies and instrumentalities only if the Local
Government Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption
in Section 234(a) of the Code, which makes the national government
subject to real estate tax when it gives the beneficial use of its real
properties to a taxable entity. Section 234(a) of the Local Government
Code provides:
SEC. 234. Exemptions from Real Property Tax The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from
real estate tax. The exception to this exemption is when the government
gives the beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance
when the national government, its agencies and instrumentalities are
subject to any kind of tax by local governments. The exception to the
exemption applies only to real estate tax and not to any other tax. The
justification for the exception to the exemption is that the real property,
although owned by the Republic, is not devoted to public use or public
service but devoted to the private gain of a taxable person.
The minority also argues that since Section 133 precedes Section 193 and
234 of the Local Government Code, the later provisions prevail over
Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234.
Following an accepted rule of construction, in case of conflict the
subsequent provisions should prevail. Therefore, MIAA, as a juridical
person, is subject to real property taxes, the general exemptions attaching
to instrumentalities under Section 133(o) of the Local Government Code
being qualified by Sections 193 and 234 of the same law. (Emphasis
supplied)
The minority assumes that there is an irreconcilable conflict between
Section 133 on one hand, and Sections 193 and 234 on the other. No one
has urged that there is such a conflict, much less has any one presenteda
persuasive argument that there is such a conflict. The minority's
assumption of an irreconcilable conflict in the statutory provisions is an
egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193
because Section 193 expressly admits its subordination to other provisions
of the Code when Section 193 states "[u]nless otherwise provided in this
Code." By its own words, Section 193 admits the superiority of other
provisions of the Local Government Code that limit the exercise of the
taxing power in Section 193. When a provision of law grants a power but
withholds such power on certain matters, there is no conflict between the
grant of power and the withholding of power. The grantee of the power
simply cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers
of Local Government Units." Section 133 limits the grant to local
governments of the power to tax, and not merely the exercise of a
delegated power to tax. Section 133 states that the taxing powers of local
governments "shall not extend to the levy" of any kind of tax on the
national government, its agencies and instrumentalities. There is no
clearer limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing
powers of local governments, Section 133 logically prevails over Section
193 which grants local governments such taxing powers. By their very
meaning and purpose, the "common limitations" on the taxing power
prevail over the grant or exercise of the taxing power. If the taxing power
of local governments in Section 193 prevails over the limitations on such
taxing power in Section 133, then local governments can impose any kind
of tax on the national government, its agencies and instrumentalities a
gross absurdity.
Local governments have no power to tax the national government, its
agencies and instrumentalities, except as otherwise provided in the Local
Government Code pursuant to the saving clause in Section 133 stating
"[u]nless otherwise provided in this Code." This exception which is an
exception to the exemption of the Republic from real estate tax imposed
by local governments refers to Section 234(a) of the Code. The
exception to the exemption in Section 234(a) subjects real property owned
by the Republic, whether titled in the name of the national government,
its agencies or instrumentalities, to real estate tax if the beneficial use of
such property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of
the phrase "government-owned or controlled corporation" is not
controlling. The minority points out that Section 2 of the Introductory
Provisions of the Administrative Code admits that its definitions are not
controlling when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or
the context as a whole, or a particular statute, shall require a different
meaning:
xxxx
The minority then concludes that reliance on the Administrative Code
definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the
Administrative Code recognizes that a statute may require a different
meaning than that defined in the Administrative Code. However, this does
not automatically mean that the definition in the Administrative Code
does not apply to the Local Government Code. Section 2 of the
Administrative Code clearly states that "unless the specific words x x x of
a particular statute shall require a different meaning," the definition in
Section 2 of the Administrative Code shall apply. Thus, unless there is
specific language in the Local Government Code defining the phrase
"government-owned or controlled corporation" differently from the
definition in the Administrative Code, the definition in the Administrative
Code prevails.
The minority does not point to any provision in the Local Government
Code defining the phrase "government-owned or controlled corporation"
differently from the definition in the Administrative Code. Indeed, there is
none. The Local Government Code is silent on the definition of the phrase
"government-owned or controlled corporation." The Administrative Code,
however, expressly defines the phrase "government-owned or controlled
corporation." The inescapable conclusion is that the Administrative Code
definition of the phrase "government-owned or controlled corporation"
applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code
"incorporates in a unified document the major structural, functional and
procedural principles and rules of governance." Thus, the Administrative
Code is the governing law defining the status and relationship of
government departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly provides for a different status
and relationship for a specific government unit or entity, the provisions of
the Administrative Code prevail.
The minority also contends that the phrase "government-owned or
controlled corporation" should apply only to corporations organized under
the Corporation Code, the general incorporation law, and not to
corporations created by special charters. The minority sees no reason why
government corporations with special charters should have a capital
stock. Thus, the minority declares:
I submit that the definition of "government-owned or controlled
corporations" under the Administrative Code refer to those corporations
owned by the government or its instrumentalities which are created not
by legislative enactment, but formed and organized under the Corporation
Code through registration with the Securities and Exchange Commission.
In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a
capital structure for GOCCs whose full ownership is limited by its charter
to the State or Republic. Such GOCCs are not empowered to declare
dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with
the Constitution and existing legislations. It will also result in gross
absurdities.
First, the Administrative Code definition of the phrase "government-owned
or controlled corporation" does not distinguish between one incorporated
under the Corporation Code or under a special charter. Where the law
does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several
government-owned corporations organized as stock corporations. Prime
examples are the Land Bank of the Philippines and the Development Bank
of the Philippines. The special charter40 of the Land Bank of the
Philippines provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be
nine billion pesos, divided into seven hundred and eighty million common
shares with a par value of ten pesos each, which shall be fully subscribed
by the Government, and one hundred and twenty million preferred shares
with a par value of ten pesos each, which shall be issued in accordance
with the provisions of Sections seventy-seven and eighty-three of this
Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines
provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of
the Bank shall be Five Billion Pesos to be divided into Fifty Million common
shares with par value of P100 per share. These shares are available for
subscription by the National Government. Upon the effectivity of this
Charter, the National Government shall subscribe to Twenty-Five Million
common shares of stock worth Two Billion Five Hundred Million which shall
be deemed paid for by the Government with the net asset values of the
Bank remaining after the transfer of assets and liabilities as provided in
Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations
under their special charters are the Philippine Crop Insurance
Corporation,42 Philippine International Trading Corporation,43 and the
Philippine National Bank44 before it was reorganized as a stock
corporation under the Corporation Code. All these government-owned
corporations organized under special charters as stock corporations are
subject to real estate tax on real properties owned by them. To rule that
they are not government-owned or controlled corporations because they
are not registered with the Securities and Exchange Commission would
remove them from the reach of Section 234 of the Local Government
Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through
special charters are those that meet the two conditions prescribed in
Section 16, Article XII of the Constitution. The first condition is that the
government-owned or controlled corporation must be established for the
common good. The second condition is that the government-owned or
controlled corporation must meet the test of economic viability. Section
16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and
subject to the test of economic viability. (Emphasis and underscoring
supplied)
The Constitution expressly authorizes the legislature to create
"government-owned or controlled corporations" through special charters
only if these entities are required to meet the twin conditions of common
good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters
unless they are made to comply with the two conditions of common good
and economic viability. The test of economic viability applies only to
government-owned or controlled corporations that perform economic or
commercial activities and need to compete in the market place. Being
essentially economic vehicles of the State for the common good
meaning for economic development purposes these government-owned
or controlled corporations with special charters are usually organized as
stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers
and performing governmental or public functions need not meet the test
of economic viability. These instrumentalities perform essential public
services for the common good, services that every modern State must
provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations.
These instrumentalities are not the "government-owned or controlled
corporations" referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but
performing essential governmental or public functions. Congress has
plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential
government functions or public services. However, when the legislature
creates through special charters corporations that perform economic or
commercial activities, such entities known as "government-owned or
controlled corporations" must meet the test of economic viability
because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the
Development Bank of the Philippines and similar government-owned or
controlled corporations, which derive their income to meet operating
expenses solely from commercial transactions in competition with the
private sector. The intent of the Constitution is to prevent the creation of
government-owned or controlled corporations that cannot survive on their
own in the market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:
MR. OPLE: Madam President, the reason for this concern is really that
when the government creates a corporation, there is a sense in which this
corporation becomes exempt from the test of economic performance. We
know what happened in the past. If a government corporation loses, then
it makes its claim upon the taxpayers' money through new equity
infusions from the government and what is always invoked is the common
good. That is the reason why this year, out of a budget of P115 billion for
the entire government, about P28 billion of this will go into equity
infusions to support a few government financial institutions. And this is all
taxpayers' money which could have been relocated to agrarian reform, to
social services like health and education, to augment the salaries of
grossly underpaid public employees. And yet this is all going down the
drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together
with the "common good," this becomes a restraint on future enthusiasts
for state capitalism to excuse themselves from the responsibility of
meeting the market test so that they become viable. And so, Madam
President, I reiterate, for the committee's consideration and I am glad that
I am joined in this proposal by Commissioner Foz, the insertion of the
standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with
the common good.45
Father Joaquin G. Bernas, a leading member of the Constitutional
Commission, explains in his textbook The 1987 Constitution of the
Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission.
The significant addition, however, is the phrase "in the interest of the
common good and subject to the test of economic viability." The addition
includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private
sector can do better. Moreover, economic viability is more than financial
viability but also includes capability to make profit and generate benefits
not quantifiable in financial terms.46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government
entities vested with corporate powers and performing essential public
services. The State is obligated to render essential public services
regardless of the economic viability of providing such service. The non-
economic viability of rendering such essential public service does not
excuse the State from withholding such essential services from the public.
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives,
must meet the test of economic viability. These are the government-
owned or controlled corporations that are usually organized under their
special charters as stock corporations, like the Land Bank of the
Philippines and the Development Bank of the Philippines. These are the
government-owned or controlled corporations, along with government-
owned or controlled corporations organized under the Corporation Code,
that fall under the definition of "government-owned or controlled
corporations" in Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the
legislature did not create MIAA to compete in the market place. MIAA does
not compete in the market place because there is no competing
international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international airport
of the Philippines. The operation of an international airport requires the
presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival
and departure of passengers, screening out those without visas or travel
documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on
prohibited importations;
3. The quarantine office of the Department of Health, to enforce health
measures against the spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread
of plant and animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to
prevent the entry of terrorists and the escape of criminals, as well as to
secure the airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and
Communications, to authorize aircraft to enter or leave Philippine
airspace, as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway and
buildings for the government personnel, passengers, and airlines, and
to manage the airport operations.
All these agencies of government perform government functions essential
to the operation of an international airport.
MIAA performs an essential public service that every modern State must
provide its citizens. MIAA derives its revenues principally from the
mandatory fees and charges MIAA imposes on passengers and airlines.
The terminal fees that MIAA charges every passenger are regulatory or
administrative fees47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under
Section 2(10) of the Introductory Provisions of the Administrative Code,
which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy,
usually through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not
make MIAA a government-owned or controlled corporation. Without a
change in its capital structure, MIAA remains a government
instrumentality under Section 2(10) of the Introductory Provisions of the
Administrative Code. More importantly, as long as MIAA renders essential
public services, it need not comply with the test of economic viability.
Thus, MIAA is outside the scope of the phrase "government-owned or
controlled corporations" under Section 16, Article XII of the 1987
Constitution.
The minority belittles the use in the Local Government Code of the phrase
"government-owned or controlled corporation" as merely "clarificatory or
illustrative." This is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or controlled
corporations." The Administrative Code defines what constitutes a
"government-owned or controlled corporation." To belittle this phrase as
"clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation
under Section 2(13) of the Introductory Provisions of the Administrative
Code because it is not organized as a stock or non-stock corporation.
Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential
public services pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. As a government instrumentality, MIAA is not
subject to any kind of tax by local governments under Section 133(o) of
the Local Government Code. The exception to the exemption in Section
234(a) does not apply to MIAA because MIAA is not a taxable entity under
the Local Government Code. Such exception applies only if the beneficial
use of real property owned by the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to
public use and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads,
and others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and
seaports. The Airport Lands and Buildings of MIAA are intended for public
use, and at the very least intended for public service. Whether intended
for public use or public service, the Airport Lands and Buildings are
properties of public dominion. As properties of public dominion, the Airport
Lands and Buildings are owned by the Republic and thus exempt from real
estate tax under Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the
Administrative Code, which governs the legal relation and status of
government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a government-
owned or controlled corporation. Under Section 133(o) of the Local
Government Code, MIAA as a government instrumentality is not a taxable
person because it is not subject to "[t]axes, fees or charges of any kind"
by local governments. The only exception is when MIAA leases its real
property to a "taxable person" as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased
becomes subject to real estate tax. Thus, only portions of the Airport
Lands and Buildings leased to taxable persons like private parties are
subject to real estate tax by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of
MIAA, being devoted to public use, are properties of public dominion and
thus owned by the State or the Republic of the Philippines. Article 420
specifically mentions "ports x x x constructed by the State," which
includes public airports and seaports, as properties of public dominion and
owned by the Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport Lands and
Buildings are expressly exempt from real estate tax under Section 234(a)
of the Local Government Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to execution or foreclosure
sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed
Resolutions of the Court of Appeals of 5 October 2001 and 27 September
2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and
Buildings of the Manila International Airport Authority EXEMPT from the
real estate tax imposed by the City of Paraaque. We declare VOID all the
real estate tax assessments, including the final notices of real estate tax
delinquencies, issued by the City of Paraaque on the Airport Lands and
Buildings of the Manila International Airport Authority, except for the
portions that the Manila International Airport Authority has leased to
private parties. We also declare VOID the assailed auction sale, and all its
effects, of the Airport Lands and Buildings of the Manila International
Airport Authority.
No costs.
SO ORDERED.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,
Austria-Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga,
Chico-Nazario, Garcia, Velasco, Jr., J.J., concur.
x-------------------------------------------------------------------------------x
DISSENTING OPINION
TINGA, J. :
The legally correct resolution of this petition would have had the added
benefit of an utterly fair and equitable result a recognition of the
constitutional and statutory power of the City of Paraaque to impose real
property taxes on the Manila International Airport Authority (MIAA), but at
the same time, upholding a statutory limitation that prevents the City of
Paraaque from seizing and conducting an execution sale over the real
properties of MIAA. In the end, all that the City of Paraaque would hold
over the MIAA is a limited lien, unenforceable as it is through the sale or
disposition of MIAA properties. Not only is this the legal effect of all the
relevant constitutional and statutory provisions applied to this case, it also
leaves the room for negotiation for a mutually acceptable resolution
between the City of Paraaque and MIAA.
Instead, with blind but measured rage, the majority today veers wildly off-
course, shattering statutes and judicial precedents left and right in order
to protect the precious Ming vase that is the Manila International Airport
Authority (MIAA). While the MIAA is left unscathed, it is surrounded by the
wreckage that once was the constitutional policy, duly enacted into law,
that was local autonomy. Make no mistake, the majority has virtually
declared war on the seventy nine (79) provinces, one hundred seventeen
(117) cities, and one thousand five hundred (1,500) municipalities of the
Philippines.1
The icing on this inedible cake is the strained and purposely vague
rationale used to justify the majority opinion. Decisions of the Supreme
Court are expected to provide clarity to the parties and to students of
jurisprudence, as to what the law of the case is, especially when the
doctrines of long standing are modified or clarified. With all due respect,
the decision in this case is plainly so, so wrong on many levels. More
egregious, in the majority's resolve to spare the Manila International
Airport Authority (MIAA) from liability for real estate taxes, no clear-cut
rule emerges on the important question of the power of local government
units (LGUs) to tax government corporations, instrumentalities or
agencies.
The majority would overturn sub silencio, among others, at least one
dozen precedents enumerated below:
1) Mactan-Cebu International Airport Authority v. Hon. Marcos,2 the
leading case penned in 1997 by recently retired Chief Justice Davide,
which held that the express withdrawal by the Local Government Code of
previously granted exemptions from realty taxes applied to
instrumentalities and government-owned or controlled corporations
(GOCCs) such as the Mactan-Cebu International Airport Authority (MCIAA).
The majority invokes the ruling in Basco v. Pagcor,3 a precedent
discredited in Mactan, and a vanguard of a doctrine so noxious to the
concept of local government rule that the Local Government Code was
drafted precisely to counter such philosophy. The efficacy of several
rulings that expressly rely on Mactan, such as PHILRECA v. DILG
Secretary,4City Government of San Pablo v. Hon. Reyes5 is now put in
question.
2) The rulings in National Power Corporation v. City of
Cabanatuan,6 wherein the Court, through Justice Puno, declared that the
National Power Corporation, a GOCC, is liable for franchise taxes under the
Local Government Code, and succeeding cases that have relied on it such
as Batangas Power Corp. v. Batangas City7 The majority now states that
deems instrumentalities as defined under the Administrative Code of 1987
as purportedly beyond the reach of any form of taxation by LGUs, stating
"[l]ocal governments are devoid of power to tax the national government,
its agencies and instrumentalities."8 Unfortunately, using the definition
employed by the majority, as provided by Section 2(d) of the
Administrative Code, GOCCs are also considered as instrumentalities, thus
leading to the astounding conclusion that GOCCs may not be taxed by
LGUs under the Local Government Code.
3) Lung Center of the Philippines v. Quezon City,9 wherein a unanimous en
banc Court held that the Lung Center of the Philippines may be liable for
real property taxes. Using the majority's reasoning, the Lung Center would
be properly classified as an instrumentality which the majority now holds
as exempt from all forms of local taxation.10
4) City of Davao v. RTC,11 where the Court held that the Government
Service Insurance System (GSIS) was liable for real property taxes for the
years 1992 to 1994, its previous exemption having been withdrawn by the
enactment of the Local Government Code.12 This decision, which
expressly relied on Mactan, would be directly though silently overruled by
the majority.
5) The common essence of the Court's rulings in the two Philippine Ports
Authority v. City of Iloilo,13 cases penned by Justices Callejo and Azcuna
respectively, which relied in part on Mactan in holding the Philippine Ports
Authority (PPA) liable for realty taxes, notwithstanding the fact that it is a
GOCC. Based on the reasoning of the majority, the PPA cannot be
considered a GOCC. The reliance of these cases on Mactan, and its
rationale for holding governmental entities like the PPA liable for local
government taxation is mooted by the majority.
6) The 1963 precedent of Social Security System Employees Association v.
Soriano,14 which declared the Social Security Commission (SSC) as a
GOCC performing proprietary functions. Based on the rationale employed
by the majority, the Social Security System is not a GOCC. Or perhaps
more accurately, "no longer" a GOCC.
7) The decision penned by Justice (now Chief Justice) Panganiban, Light
Rail Transit Authority v. Central Board of Assessment.15 The
characterization therein of the Light Rail Transit Authority (LRTA) as a
"service-oriented commercial endeavor" whose patrimonial property is
subject to local taxation is now rendered inconsequential, owing to the
majority's thinking that an entity such as the LRTA is itself exempt from
local government taxation16, irrespective of the functions it performs.
Moreover, based on the majority's criteria, LRTA is not a GOCC.
8) The cases of Teodoro v. National Airports Corporation17 and Civil
Aeronautics Administration v. Court of Appeals.18 wherein the Court held
that the predecessor agency of the MIAA, which was similarly engaged in
the operation, administration and management of the Manila International
Agency, was engaged in the exercise of proprietary, as opposed to
sovereign functions. The majority would hold otherwise that the property
maintained by MIAA is actually patrimonial, thus implying that MIAA is
actually engaged in sovereign functions.
9) My own majority in Phividec Industrial Authority v. Capitol
Steel,19 wherein the Court held that the Phividec Industrial Authority, a
GOCC, was required to secure the services of the Office of the
Government Corporate Counsel for legal representation.20 Based on the
reasoning of the majority, Phividec would not be a GOCC, and the
mandate of the Office of the Government Corporate Counsel extends only
to GOCCs.
10) Two decisions promulgated by the Court just last month (June 2006),
National Power Corporation v. Province of Isabela21 and GSIS v. City
Assessor of Iloilo City.22 In the former, the Court pronounced that
"[a]lthough as a general rule, LGUs cannot impose taxes, fees, or charges
of any kind on the National Government, its agencies and
instrumentalities, this rule admits of an exception, i.e., when specific
provisions of the LGC authorize the LGUs to impose taxes, fees or charges
on the aforementioned entities." Yet the majority now rules that the
exceptions in the LGC no longer hold, since "local governments are devoid
of power to tax the national government, its agencies and
instrumentalities."23 The ruling in the latter case, which held the GSIS as
liable for real property taxes, is now put in jeopardy by the majority's
ruling.
There are certainly many other precedents affected, perhaps all previous
jurisprudence regarding local government taxation vis-a-vis government
entities, as well as any previous definitions of GOCCs, and previous
distinctions between the exercise of governmental and proprietary
functions (a distinction laid down by this Court as far back as 191624).
What is the reason offered by the majority for overturning or modifying all
these precedents and doctrines? None is given, for the majority takes
comfort instead in the pretense that these precedents never existed. Only
children should be permitted to subscribe to the theory that something
bad will go away if you pretend hard enough that it does not exist.
I.
Case Should Have Been Decided
Following Mactan Precedent
The core issue in this case, whether the MIAA is liable to the City of
Paraaque for real property taxes under the Local Government Code, has
already been decided by this Court in the Mactan case, and should have
been resolved by simply applying precedent.
Mactan Explained
A brief recall of the Mactan case is in order. The Mactan-Cebu International
Airport Authority (MCIAA) claimed that it was exempt from payment of real
property taxes to the City of Cebu, invoking the specific exemption
granted in Section 14 of its charter, Republic Act No. 6958, and its status
as an instrumentality of the government performing governmental
functions.25 Particularly, MCIAA invoked Section 133 of the Local
Government Code, precisely the same provision utilized by the majority as
the basis for MIAA's exemption. Section 133 reads:
Sec. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and barangays shall not extend
to the levy of the following:
xxx
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities and local government units. (emphasis and
underscoring supplied).
However, the Court in Mactan noted that Section 133 qualified the
exemption of the National Government, its agencies and instrumentalities
from local taxation with the phrase "unless otherwise provided herein." It
then considered the other relevant provisions of the Local Government
Code, particularly the following:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise
provided in this Code, tax exemption or incentives granted to, or enjoyed
by all persons, whether natural or juridical, including government-owned
and controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.26
SECTION 232. Power to Levy Real Property Tax. A province or city or a
municipality within the Metropolitan Manila area may levy an annual ad
valorem tax on real property such as land, building, machinery, and other
improvements not hereafter specifically exempted.27
SECTION 234. Exemptions from Real Property Tax. -- The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person:
(b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, non-profit or religious cemeteries and all lands,
buildings, and improvements actually, directly, and exclusively used for
religious charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned and
controlled corporations engaged in the distribution of water and/or
generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environmental
protection.
Except as provided herein, any exemption from payment of real property
tax previously granted to, or presently enjoyed by, all persons, whether
natural or juridical, including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity of this Code.28
Clearly, Section 133 was not intended to be so absolute a prohibition on
the power of LGUs to tax the National Government, its agencies and
instrumentalities, as evidenced by these cited provisions which "otherwise
provided." But what was the extent of the limitation under Section 133?
This is how the Court, correctly to my mind, defined the parameters in
Mactan:
The foregoing sections of the LGC speak of: (a) the limitations on the
taxing powers of local government units and the exceptions to such
limitations; and (b) the rule on tax exemptions and the exceptions thereto.
The use of exceptions or provisos in these sections, as shown by the
following clauses:
(1) "unless otherwise provided herein" in the opening paragraph of
Section 133;
(2) "Unless otherwise provided in this Code" in Section 193;
(3) "not hereafter specifically exempted" in Section 232; and
(4) "Except as provided herein" in the last paragraph of Section 234
initially hampers a ready understanding of the sections. Note, too, that the
aforementioned clause in Section 133 seems to be inaccurately worded.
Instead of the clause "unless otherwise provided herein," with the "herein"
to mean, of course, the section, it should have used the clause "unless
otherwise provided in this Code." The former results in absurdity since the
section itself enumerates what are beyond the taxing powers of local
government units and, where exceptions were intended, the exceptions
are explicitly indicated in the next. For instance, in item (a) which excepts
income taxes "when levied on banks and other financial institutions"; item
(d) which excepts "wharfage on wharves constructed and maintained by
the local government unit concerned"; and item (1) which excepts taxes,
fees and charges for the registration and issuance of licenses or permits
for the driving of "tricycles." It may also be observed that within the body
itself of the section, there are exceptions which can be found only in other
parts of the LGC, but the section interchangeably uses therein the clause,
"except as otherwise provided herein" as in items (c) and (i), or the clause
"except as provided in this Code" in item (j). These clauses would be
obviously unnecessary or mere surplusages if the opening clause of the
section were "Unless otherwise provided in this Code" instead of "Unless
otherwise provided herein." In any event, even if the latter is used, since
under Section 232 local government units have the power to levy real
property tax, except those exempted therefrom under Section 234, then
Section 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the LGC, we
conclude that as a general rule, as laid down in Section 133, the taxing
powers of local government units cannot extend to the levy of, inter alia,
"taxes, fees and charges of any kind on the National Government, its
agencies and instrumentalities, and local government units"; however,
pursuant to Section 232, provinces, cities, and municipalities in the
Metropolitan Manila Area may impose the real property tax except on,
inter alia, "real property owned by the Republic of the Philippines or any of
its political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person," as provided
in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or presently enjoyed by
natural or judicial persons, including government-owned and controlled
corporations, Section 193 of the LGC prescribes the general rule, viz., they
are withdrawn upon the effectivity of the LGC, except those granted to
local water districts, cooperatives duly registered under R.A. No. 6938,
non-stock and non-profit hospitals and educational institutions, and unless
otherwise provided in the LGC. The latter proviso could refer to Section
234 which enumerates the properties exempt from real property tax. But
the last paragraph of Section 234 further qualifies the retention of the
exemption insofar as real property taxes are concerned by limiting the
retention only to those enumerated therein; all others not included in the
enumeration lost the privilege upon the effectivity of the LGC. Moreover,
even as to real property owned by the Republic of the Philippines or any of
its political subdivisions covered by item (a) of the first paragraph of
Section 234, the exemption is withdrawn if the beneficial use of such
property has been granted to a taxable person for consideration or
otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the
effectivity of the LGC, exemptions from payment of real property taxes
granted to natural or juridical persons, including government-owned or
controlled corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation, it necessarily
follows that its exemption from such tax granted it in Section 14 of its
Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can
only be justified if the petitioner can seek refuge under any of the
exceptions provided in Section 234, but not under Section 133, as it now
asserts, since, as shown above, the said section is qualified by Sections
232 and 234.29
The Court in Mactan acknowledged that under Section 133,
instrumentalities were generally exempt from all forms of local
government taxation, unless otherwise provided in the Code. On the other
hand, Section 232 "otherwise provided" insofar as it allowed LGUs to levy
an ad valorem real property tax, irrespective of who owned the property.
At the same time, the imposition of real property taxes under Section 232
is in turn qualified by the phrase "not hereinafter specifically exempted."
The exemptions from real property taxes are enumerated in Section 234,
which specifically states that only real properties owned "by the Republic
of the Philippines or any of its political subdivisions" are exempted from
the payment of the tax. Clearly, instrumentalities or GOCCs do not fall
within the exceptions under Section 234.30
Mactan Overturned the
Precedents Now Relied
Upon by the Majority
But the petitioners in Mactan also raised the Court's ruling in Basco v.
PAGCOR,31 decided before the enactment of the Local Government Code.
The Court in Basco declared the PAGCOR as exempt from local taxes,
justifying the exemption in this wise:
Local governments have no power to tax instrumentalities of the National
Government. PAGCOR is a government owned or controlled corporation
with an original charter, PD 1869. All of its shares of stocks are owned by
the National Government. In addition to its corporate powers (Sec. 3, Title
II, PD 1869) it also exercises regulatory powers xxx
PAGCOR has a dual role, to operate and to regulate gambling casinos. The
latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the
Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to
control by a mere Local government.
"The states have no power by taxation or otherwise, to retard impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government." (McCulloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government
over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable
activates or enterprise using the power to tax as "a tool for regulation"
(U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to
destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power
to wield it.32
Basco is as strident a reiteration of the old guard view that frowned on the
principle of local autonomy, especially as it interfered with the
prerogatives and privileges of the national government. Also consider the
following citation from Maceda v. Macaraig,33 decided the same year as
Basco. Discussing the rule of construction of tax exemptions on
government instrumentalities, the sentiments are of a similar vein.
Moreover, it is a recognized principle that the rule on strict interpretation
does not apply in the case of exemptions in favor of a government political
subdivision or instrumentality.
The basis for applying the rule of strict construction to statutory provisions
granting tax exemptions or deductions, even more obvious than with
reference to the affirmative or levying provisions of tax statutes, is to
minimize differential treatment and foster impartiality, fairness, and
equality of treatment among tax payers.
The reason for the rule does not apply in the case of exemptions running
to the benefit of the government itself or its agencies. In such case the
practical effect of an exemption is merely to reduce the amount of money
that has to be handled by government in the course of its operations. For
these reasons, provisions granting exemptions to government agencies
may be construed liberally, in favor of non tax-liability of such agencies.
In the case of property owned by the state or a city or other public
corporations, the express exemption should not be construed with the
same degree of strictness that applies to exemptions contrary to the
policy of the state, since as to such property "exemption is the rule and
taxation the exception."34
Strikingly, the majority cites these two very cases and the stodgy
rationale provided therein. This evinces the perspective from which the
majority is coming from. It is admittedly a viewpoint once shared by this
Court, and en vogue prior to the enactment of the Local Government Code
of 1991.
However, the Local Government Code of 1991 ushered in a new ethos on
how the art of governance should be practiced in the Philippines,
conceding greater powers once held in the private reserve of the national
government to LGUs. The majority might have private qualms about the
wisdom of the policy of local autonomy, but the members of the Court are
not expected to substitute their personal biases for the legislative will,
especially when the 1987 Constitution itself promotes the principle of local
autonomy.
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms
of recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and
provide for the qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and all other
matters relating to the organization and operation of the local units.
xxx
Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments.
xxx
The Court in Mactan recognized that a new day had dawned with the
enactment of the 1987 Constitution and the Local Government Code of
1991. Thus, it expressly rejected the contention of the MCIAA that Basco
was applicable to them. In doing so, the language of the Court was
dramatic, if only to emphasize how monumental the shift in philosophy
was with the enactment of the Local Government Code:
Accordingly, the position taken by the [MCIAA] is untenable. Reliance on
Basco v. Philippine Amusement and Gaming Corporation is unavailing
since it was decided before the effectivity of the [Local Government Code].
Besides, nothing can prevent Congress from decreeing that even
instrumentalities or agencies of the Government performing governmental
functions may be subject to tax. Where it is done precisely to fulfill a
constitutional mandate and national policy, no one can doubt its
wisdom.35 (emphasis supplied)
The Court Has Repeatedly
Reaffirmed Mactan Over the
Precedents Now Relied Upon
By the Majority
Since then and until today, the Court has been emphatic in declaring the
Basco doctrine as dead. The notion that instrumentalities may be
subjected to local taxation by LGUs was again affirmed in National Power
Corporation v. City of Cabanatuan,36 which was penned by Justice Puno.
NPC or Napocor, invoking its continued exemption from payment of
franchise taxes to the City of Cabanatuan, alleged that it was an
instrumentality of the National Government which could not be taxed by a
city government. To that end, Basco was cited by NPC. The Court had this
to say about Basco.
xxx[T]he doctrine in Basco vs. Philippine Amusement and Gaming
Corporation relied upon by the petitioner to support its claim no longer
applies. To emphasize, the Basco case was decided prior to the effectivity
of the LGC, when no law empowering the local government units to tax
instrumentalities of the National Government was in effect. However, as
this Court ruled in the case of Mactan Cebu International Airport Authority
(MCIAA) vs. Marcos, nothing prevents Congress from decreeing that even
instrumentalities or agencies of the government performing governmental
functions may be subject to tax. In enacting the LGC, Congress exercised
its prerogative to tax instrumentalities and agencies of government as it
sees fit. Thus, after reviewing the specific provisions of the LGC, this Court
held that MCIAA, although an instrumentality of the national government,
was subject to real property tax.37
In the 2003 case of Philippine Ports Authority v. City of Iloilo,38 the Court,
in the able ponencia of Justice Azcuna, affirmed the levy of realty taxes on
the PPA. Although the taxes were assessed under the old Real Property Tax
Code and not the Local Government Code, the Court again cited Mactan to
refute PPA's invocation of Basco as the basis of its exemption.
[Basco] did not absolutely prohibit local governments from taxing
government instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is always
subject to "limitations" which Congress may provide by law. Since P.D.
1869 remains an "operative" law until "amended, repealed or revoked". . .
its "exemption clause" remains an exemption to the exercise of the power
of local governments to impose taxes and fees.
Furthermore, in the more recent case of Mactan Cebu International Airport
Authority v. Marcos, where the Basco case was similarly invoked for tax
exemption, we stated: "[N]othing can prevent Congress from decreeing
that even instrumentalities or agencies of the Government performing
governmental functions may be subject to tax. Where it is done precisely
to fulfill a constitutional mandate and national policy, no one can doubt its
wisdom." The fact that tax exemptions of government-owned or controlled
corporations have been expressly withdrawn by the present Local
Government Code clearly attests against petitioner's claim of absolute
exemption of government instrumentalities from local taxation.39
Just last month, the Court in National Power Corporation v. Province of
Isabela40 again rejected Basco in emphatic terms. Held the Court, through
Justice Callejo, Sr.:
Thus, the doctrine laid down in the Basco case is no longer true. In the
Cabanatuan case, the Court noted primarily that the Basco case was
decided prior to the effectivity of the LGC, when no law empowering the
local government units to tax instrumentalities of the National
Government was in effect. It further explained that in enacting the LGC,
Congress empowered the LGUs to impose certain taxes even on
instrumentalities of the National Government.41
The taxability of the PPA recently came to fore in Philippine Ports Authority
v. City of Iloilo42 case, a decision also penned by Justice Callejo, Sr.,
wherein the Court affirmed the sale of PPA's properties at public auction
for failure to pay realty taxes. The Court again reiterated that "it was the
intention of Congress to withdraw the tax exemptions granted to or
presently enjoyed by all persons, including government-owned or
controlled corporations, upon the effectivity" of the Code.43 The Court in
the second Public Ports Authority case likewise cited Mactan as providing
the "raison d'etre for the withdrawal of the exemption," namely, "the State
policy to ensure autonomy to local governments and the objective of the
[Local Government Code] that they enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as self-reliant
communities. . . . "44
Last year, the Court, in City of Davao v. RTC,45 affirmed that the legislated
exemption from real property taxes of the Government Service Insurance
System (GSIS) was removed under the Local Government Code. Again,
Mactan was relied upon as the governing precedent. The removal of the
tax exemption stood even though the then GSIS law46 prohibited the
removal of GSIS' tax exemptions unless the exemption was specifically
repealed, "and a provision is enacted to substitute the declared policy of
exemption from any and all taxes as an essential factor for the solvency of
the fund."47 The Court, citing established doctrines in statutory
construction and Duarte v. Dade48 ruled that such proscription on future
legislation was itself prohibited, as "the legislature cannot bind a future
legislature to a particular mode of repeal."49
And most recently, just less than one month ago, the Court, through
Justice Corona in Government Service Insurance System v. City Assessor
of Iloilo50 again affirmed that the Local Government Code removed the
previous exemption from real property taxes of the GSIS. Again Mactan
was cited as having "expressly withdrawn the [tax] exemption of the
[GOCC].51
Clearly then, Mactan is not a stray or unique precedent, but the basis of a
jurisprudential rule employed by the Court since its adoption, the doctrine
therein consistent with the Local Government Code. Corollarily, Basco, the
polar opposite of Mactan has been emphatically rejected and declared
inconsistent with the Local Government Code.
II.
Majority, in Effectively Overturning Mactan,
Refuses to Say Why Mactan Is Wrong
The majority cites Basco in support. It does not cite Mactan, other than an
incidental reference that it is relied upon by the respondents.52 However,
the ineluctable conclusion is that the majority rejects the rationale and
ruling in Mactan. The majority provides for a wildly different interpretation
of Section 133, 193 and 234 of the Local Government Code than that
employed by the Court in Mactan. Moreover, the parties in Mactan and in
this case are similarly situated, as can be obviously deducted from the
fact that both petitioners are airport authorities operating under similarly
worded charters. And the fact that the majority cites doctrines
contrapuntal to the Local Government Code as in Basco and Maceda
evinces an intent to go against the Court's jurisprudential trend adopting
the philosophy of expanded local government rule under the Local
Government Code.
Before I dwell upon the numerous flaws of the majority, a brief comment is
necessitated on the majority's studied murkiness vis--vis the Mactan
precedent. The majority is obviously inconsistent with Mactan and there is
no way these two rulings can stand together. Following basic principles in
statutory construction, Mactan will be deemed as giving way to this new
ruling.
However, the majority does not bother to explain why Mactan is wrong.
The interpretation in Mactan of the relevant provisions of the Local
Government Code is elegant and rational, yet the majority refuses to
explain why this reasoning of the Court in Mactan is erroneous. In fact, the
majority does not even engage Mactan in any meaningful way. If the
majority believes that Mactan may still stand despite this ruling, it remains
silent as to the viable distinctions between these two cases.
The majority's silence on Mactan is baffling, considering how different this
new ruling is with the ostensible precedent. Perhaps the majority does not
simply know how to dispense with the ruling in Mactan. If Mactan truly
deserves to be discarded as precedent, it deserves a more honorable end
than death by amnesia or ignonominous disregard. The majority could
have devoted its discussion in explaining why it thinks Mactan is wrong,
instead of pretending that Mactan never existed at all. Such an approach
might not have won the votes of the minority, but at least it would provide
some degree of intellectual clarity for the parties, LGUs and the national
government, students of jurisprudence and practitioners. A more
meaningful debate on the matter would have been possible, enriching the
study of law and the intellectual dynamic of this Court.
There is no way the majority can be justified unless Mactan is overturned.
The MCIAA and the MIAA are similarly situated. They are both, as will be
demonstrated, GOCCs, commonly engaged in the business of operating an
airport. They are the owners of airport properties they respectively
maintain and hold title over these properties in their name.53 These
entities are both owned by the State, and denied by their respective
charters the absolute right to dispose of their properties without prior
approval elsewhere.54 Both of them are
not empowered to obtain loans or encumber their properties without prior
approval the prior approval of the President.55
III.
Instrumentalities, Agencies
And GOCCs Generally
Liable for Real Property Tax
I shall now proceed to demonstrate the errors in reasoning of the majority.
A bulwark of my position lies with Mactan, which will further demonstrate
why the majority has found it inconvenient to even grapple with the
precedent that is Mactan in the first place.
Mactan held that the prohibition on taxing the national government, its
agencies and instrumentalities under Section 133 is qualified by Section
232 and Section 234, and accordingly, the only relevant exemption now
applicable to these bodies is as provided under Section 234(o), or on "real
property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person."
It should be noted that the express withdrawal of previously granted
exemptions by the Local Government Code do not even make any
distinction as to whether the exempt person is a governmental entity or
not. As Sections 193 and 234 both state, the withdrawal applies to "all
persons, including [GOCCs]", thus encompassing the two classes of
persons recognized under our laws, natural persons56 and juridical
persons.57
The fact that the Local Government Code mandates the withdrawal of
previously granted exemptions evinces certain key points. If an entity was
previously granted an express exemption from real property taxes in the
first place, the obvious conclusion would be that such entity would
ordinarily be liable for such taxes without the exemption. If such entities
were already deemed exempt due to some overarching principle of law,
then it would be a redundancy or surplusage to grant an exemption to an
already exempt entity. This fact militates against the claim that MIAA is
preternaturally exempt from realty taxes, since it required the enactment
of an express exemption from such taxes in its charter.
Amazingly, the majority all but ignores the disquisition in Mactan and
asserts that government instrumentalities are not taxable persons unless
they lease their properties to a taxable person. The general rule laid down
in Section 232 is given short shrift. In arriving at this conclusion, several
leaps in reasoning are committed.
Majority's Flawed Definition
of GOCCs.
The majority takes pains to assert that the MIAA is not a GOCC, but rather
an instrumentality. However, and quite grievously, the supposed
foundation of this assertion is an adulteration.
The majority gives the impression that a government instrumentality is a
distinct concept from a government corporation.58 Most tellingly, the
majority selectively cites a portion of Section 2(10) of the Administrative
Code of 1987, as follows:
Instrumentality refers to any agency of the National Government not
integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy,
usually through a charter. xxx59 (emphasis omitted)
However, Section 2(10) of the Administrative Code, when read in full,
makes an important clarification which the majority does not show. The
portions omitted by the majority are highlighted below:
(10)Instrumentality refers to any agency of the National Government not
integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy,
usually through a charter. This term includes regulatory agencies,
chartered institutions and governmentowned or controlled
corporations.60
Since Section 2(10) makes reference to "agency of the National
Government," Section 2(4) is also worth citing in full:
(4) Agency of the Government refers to any of the various units of the
Government, including a department, bureau, office, instrumentality, or
government-owned or controlled corporation, or a local government or a
distinct unit therein. (emphasis supplied)61
Clearly then, based on the Administrative Code, a GOCC may be an
instrumentality or an agency of the National Government. Thus, there
actually is no point in the majority's assertion that MIAA is not a GOCC,
since based on the majority's premise of Section 133 as the key provision,
the material question is whether MIAA is either an instrumentality, an
agency, or the National Government itself. The very provisions of the
Administrative Code provide that a GOCC can be either an instrumentality
or an agency, so why even bother to extensively discuss whether or not
MIAA is a GOCC?
Indeed as far back as the 1927 case of Government of the Philippine
Islands v. Springer,62 the Supreme Court already noted that a corporation
of which the government is the majority stockholder "remains an agency
or instrumentality of government."63
Ordinarily, the inconsequential verbiage stewing in judicial opinions
deserve little rebuttal. However, the entire discussion of the majority on
the definition of a GOCC, obiter as it may ultimately be, deserves
emphatic refutation. The views of the majority on this matter are very
dangerous, and would lead to absurdities, perhaps unforeseen by the
majority. For in fact, the majority effectively declassifies many entities
created and recognized as GOCCs and would give primacy to the
Administrative Code of 1987 rather than their respective charters as to
the definition of these entities.
Majority Ignores the Power
Of Congress to Legislate and
Define Chartered Corporations
First, the majority declares that, citing Section 2(13) of the Administrative
Code, a GOCC must be "organized as a stock or non-stock corporation," as
defined under the Corporation Code. To insist on this as an absolute rule
fails on bare theory. Congress has the undeniable power to create a
corporation by legislative charter, and has been doing so throughout
legislative history. There is no constitutional prohibition on Congress as to
what structure these chartered corporations should take on. Clearly,
Congress has the prerogative to create a corporation in whatever form it
chooses, and it is not bound by any traditional format. Even if there is a
definition of what a corporation is under the Corporation Code or the
Administrative Code, these laws are by no means sacrosanct. It should be
remembered that these two statutes fall within the same level of
hierarchy as a congressional charter, since they all are legislative
enactments. Certainly, Congress can choose to disregard either the
Corporation Code or the Administrative Code in defining the corporate
structure of a GOCC, utilizing the same extent of legislative powers
similarly vesting it the putative ability to amend or abolish the Corporation
Code or the Administrative Code.
These principles are actually recognized by both the Administrative Code
and the Corporation Code. The definition of GOCCs, agencies and
instrumentalities under the Administrative Code are laid down in the
section entitled "General Terms Defined," which qualifies:
Sec. 2. General Terms Defined. Unless the specific words of the text, or
the context as a whole, or a particular statute, shall require a different
meaning: (emphasis supplied)
xxx
Similar in vein is Section 6 of the Corporation Code which provides:
SEC. 4. Corporations created by special laws or charters. Corporations
created by special laws or charters shall be governed primarily by the
provisions of the special law or charter creating them or applicable to
them, supplemented by the provisions of this Code, insofar as they are
applicable. (emphasis supplied)
Thus, the clear doctrine emerges the law that governs the definition of a
corporation or entity created by Congress is its legislative charter. If the
legislative enactment defines an entity as a corporation, then it is a
corporation, no matter if the Corporation Code or the Administrative Code
seemingly provides otherwise. In case of conflict between the legislative
charter of a government corporation, on one hand, and the Corporate
Code and the Administrative Code, on the other, the former always
prevails.
Majority, in Ignoring the
Legislative Charters, Effectively
Classifies Duly Established GOCCs,
With Disastrous and Far Reaching
Legal Consequences
Second, the majority claims that MIAA does not qualify either as a stock or
non-stock corporation, as defined under the Corporation Code. It explains
that the MIAA is not a stock corporation because it does not have any
capital stock divided into shares. Neither can it be considered as a non-
stock corporation because it has no members, and under Section 87, a
non-stock corporation is one where no part of its income is distributable as
dividends to its members, trustees or officers.
This formulation of course ignores Section 4 of the Corporation Code,
which again provides that corporations created by special laws or charters
shall be governed primarily by the provisions of the special law or charter,
and not the Corporation Code.
That the MIAA cannot be considered a stock corporation if only because it
does not have a stock structure is hardly a plausible proposition. Indeed,
there is no point in requiring a capital stock structure for GOCCs whose full
ownership is limited by its charter to the State or Republic. Such GOCCs
are not empowered to declare dividends or alienate their capital shares.
Admittedly, there are GOCCs established in such a manner, such as the
National Power Corporation (NPC), which is provided with authorized
capital stock wholly subscribed and paid for by the Government of the
Philippines, divided into shares but at the same time, is prohibited from
transferring, negotiating, pledging, mortgaging or otherwise giving these
shares as security for payment of any obligation.64 However, based on
the Corporation Code definition relied upon by the majority, even the NPC
cannot be considered as a stock corporation. Under Section 3 of the
Corporation Code, stock corporations are defined as being "authorized to
distribute to the holders of its shares dividends or allotments of the
surplus profits on the basis of the shares held."65 On the other hand,
Section 13 of the NPC's charter states that "the Corporation shall be non-
profit and shall devote all its returns from its capital investment, as well as
excess revenues from its operation, for expansion."66 Can the holder of
the shares of NPC, the National Government, receive its surplus profits on
the basis of its shares held? It cannot, according to the NPC charter, and
hence, following Section 3 of the Corporation Code, the NPC is not a stock
corporation, if the majority is to be believed.
The majority likewise claims that corporations without members cannot be
deemed non-stock corporations. This would seemingly exclude entities
such as the NPC, which like MIAA, has no ostensible members. Moreover,
non-stock corporations cannot distribute any part of its income as
dividends to its members, trustees or officers. The majority faults MIAA for
remitting 20% of its gross operating income to the national government.
How about the Philippine Health Insurance Corporation, created with the
"status of a tax-exempt government corporation attached to the
Department of Health" under Rep. Act No. 7875.67 It too cannot be
considered as a stock corporation because it has no capital stock
structure. But using the criteria of the majority, it is doubtful if it would
pass muster as a non-stock corporation, since the PHIC or Philhealth, as it
is commonly known, is expressly empowered "to collect, deposit, invest,
administer and disburse" the National Health Insurance Fund.68 Or how
about the Social Security System, which under its revised charter,
Republic Act No. 8282, is denominated as a "corporate body."69 The SSS
has no capital stock structure, but has capital comprised of contributions
by its members, which are eventually remitted back to its members. Does
this disqualify the SSS from classification as a GOCC, notwithstanding this
Court's previous pronouncement in Social Security System Employees
Association v. Soriano?70
In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs,
whether stock or non-stock,71 declare and remit at least fifty percent
(50%) of their annual net earnings as cash, stock or property dividends to
the National Government.72 But according to the majority, non-stock
corporations are prohibited from declaring any part of its income as
dividends. But if Republic Act No. 7656 requires even non-stock
corporations to declare dividends from income, should it not follow that
the prohibition against declaration of dividends by non-stock corporations
under the Corporation Code does not apply to government-owned or
controlled corporations? For if not, and the majority's illogic is pursued,
Republic Act No. 7656, passed in 1993, would be fatally flawed, as it would
contravene the Administrative Code of 1987 and the Corporation Code.
In fact, the ruinous effects of the majority's hypothesis on the nature of
GOCCs can be illustrated by Republic Act No. 7656. Following the
majority's definition of a GOCC and in accordance with Republic Act No.
7656, here are but a few entities which are not obliged to remit fifty (50%)
of its annual net earnings to the National Government as they are
excluded from the scope of Republic Act No. 7656:
1) Philippine Ports Authority73 has no capital stock74, no members, and
obliged to apply the balance of its income or revenue at the end of each
year in a general reserve.75
2) Bases Conversion Development Authority76 - has no capital
stock,77 no members.
3) Philippine Economic Zone Authority78 - no capital stock,79 no
members.
4) Light Rail Transit Authority80 - no capital stock,81 no members.
5) Bangko Sentral ng Pilipinas82 - no capital stock,83 no members,
required to remit fifty percent (50%) of its net profits to the National
Treasury.84
6) National Power Corporation85 - has capital stock but is prohibited from
"distributing to the holders of its shares dividends or allotments of the
surplus profits on the basis of the shares held;"86 no members.
7) Manila International Airport Authority no capital stock87, no
members88, mandated to remit twenty percent (20%) of its annual gross
operating income to the National Treasury.89
Thus, for the majority, the MIAA, among many others, cannot be
considered as within the coverage of Republic Act No. 7656. Apparently,
President Fidel V. Ramos disagreed. How else then could Executive Order
No. 483, signed in 1998 by President Ramos, be explained? The issuance
provides:
WHEREAS, Section 1 of Republic Act No. 7656 provides that:
"Section 1. Declaration of Policy. - It is hereby declared the policy of the
State that in order for the National Government to realize additional
revenues, government-owned and/or controlled corporations, without
impairing their viability and the purposes for which they have been
established, shall share a substantial amount of their net earnings to the
National Government."
WHEREAS, to support the viability and mandate of government-owned
and/or controlled corporations [GOCCs], the liquidity, retained earnings
position and medium-term plans and programs of these GOCCs were
considered in the determination of the reasonable dividend rates of such
corporations on their 1997 net earnings.
WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance
recommended the adjustment on the percentage of annual net earnings
that shall be declared by the Manila International Airport Authority [MIAA]
and Phividec Industrial Authority [PIA] in the interest of national economy
and general welfare.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines, by
virtue of the powers vested in me by law, do hereby order:
SECTION 1. The percentage of net earnings to be declared and remitted
by the MIAA and PIA as dividends to the National Government as provided
for under Section 3 of Republic Act No. 7656 is adjusted from at least fifty
percent [50%] to the rates specified hereunder:
1. Manila International Airport Authority - 35% [cash]
2. Phividec Industrial Authority - 25% [cash]
SECTION 2. The adjusted dividend rates provided for under Section 1 are
only applicable on 1997 net earnings of the concerned government-owned
and/or controlled corporations.
Obviously, it was the opinion of President Ramos and the Secretary of
Finance that MIAA is a GOCC, for how else could it have come under the
coverage of Republic Act No. 7656, a law applicable only to GOCCs? But,
the majority apparently disagrees, and resultantly holds that MIAA is not
obliged to remit even the reduced rate of thirty five percent (35%) of its
net earnings to the national government, since it cannot be covered by
Republic Act No. 7656.
All this mischief because the majority would declare the Administrative
Code of 1987 and the Corporation Code as the sole sources of law defining
what a government corporation is. As I stated earlier, I find it illogical that
chartered corporations are compelled to comply with the templates of the
Corporation Code, especially when the Corporation Code itself states that
these corporations are to be governed by their own charters. This is
especially true considering that the very provision cited by the majority,
Section 87 of the Corporation Code, expressly says that the definition
provided therein is laid down "for the purposes of this [Corporation] Code."
Read in conjunction with Section 4 of the Corporation Code which
mandates that corporations created by charter be governed by the law
creating them, it is clear that contrary to the majority, MIAA is not
disqualified from classification as a non-stock corporation by reason of
Section 87, the provision not being applicable to corporations created by
special laws or charters. In fact, I see no real impediment why the MIAA
and similarly situated corporations such as the PHIC, the SSS, the
Philippine Deposit Insurance Commission, or maybe even the NPC could at
the very least, be deemed as no stock corporations (as differentiated from
non-stock corporations).
The point, stripped to bare simplicity, is that entity created by legislative
enactment is a corporation if the legislature says so. After all, it is the
legislature that dictates what a corporation is in the first place. This is
better illustrated by another set of entities created before martial law.
These include the Mindanao Development Authority,90 the Northern
Samar Development Authority,91 the Ilocos Sur Development
Authority,92 the Southeastern Samar Development Authority93 and the
Mountain Province Development Authority.94 An examination of the first
section of the statutes creating these entities reveal that they were
established "to foster accelerated and balanced growth" of their
respective regions, and towards such end, the charters commonly provide
that "it is recognized that a government corporation should be created for
the purpose," and accordingly, these charters "hereby created a body
corporate."95 However, these corporations do not have capital stock nor
members, and are obliged to return the unexpended balances of their
appropriations and earnings to a revolving fund in the National Treasury.
The majority effectively declassifies these entities as GOCCs, never mind
the fact that their very charters declare them to be GOCCs.
I mention these entities not to bring an element of obscurantism into the
fray. I cite them as examples to emphasize my fundamental pointthat it
is the legislative charters of these entities, and not the Administrative
Code, which define the class of personality of these entities created by
Congress. To adopt the view of the majority would be, in effect, to sanction
an implied repeal of numerous congressional charters for the purpose of
declassifying GOCCs. Certainly, this could not have been the intent of the
crafters of the Administrative Code when they drafted the "Definition of
Terms" incorporated therein.
MIAA Is Without
Doubt, A GOCC
Following the charters of government corporations, there are two kinds of
GOCCs, namely: GOCCs which are stock corporations and GOCCs which
are no stock corporations (as distinguished from non-stock corporation).
Stock GOCCs are simply those which have capital stock while no stock
GOCCs are those which have no capital stock. Obviously these definitions
are different from the definitions of the terms in the Corporation Code.
Verily, GOCCs which are not incorporated with the Securities and
Exchange Commission are not governed by the Corporation Code but by
their respective charters.
For the MIAA's part, its charter is replete with provisions that indubitably
classify it as a GOCC. Observe the following provisions from MIAA's
charter:
SECTION 3. Creation of the Manila International Airport Authority.There is
hereby established a body corporate to be known as the Manila
International Airport Authority which shall be attached to the Ministry of
Transportation and Communications. The principal office of the Authority
shall be located at the New Manila International Airport. The Authority
may establish such offices, branches, agencies or subsidiaries as it may
deem proper and necessary; Provided, That any subsidiary that may be
organized shall have the prior approval of the President.
The land where the Airport is presently located as well as the surrounding
land area of approximately six hundred hectares, are hereby transferred,
conveyed and assigned to the ownership and administration of the
Authority, subject to existing rights, if any. The Bureau of Lands and other
appropriate government agencies shall undertake an actual survey of the
area transferred within one year from the promulgation of this Executive
Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through sale or
through any other mode unless specifically approved by the President of
the Philippines.
xxx
SECTION 5. Functions, Powers, and Duties. The Authority shall have the
following functions, powers and duties:
xxx
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same from time to
time;
(h) To execute or enter into contracts of any kind or nature;
(i) To acquire, purchase, own, administer, lease, mortgage, sell or
otherwise dispose of any land, building, airport facility, or property of
whatever kind and nature, whether movable or immovable, or any interest
therein;
(j) To exercise the power of eminent domain in the pursuit of its purposes
and objectives;
xxx
(o) To exercise all the powers of a corporation under the Corporation Law,
insofar as these powers are not inconsistent with the provisions of this
Executive Order.
xxx
SECTION 16. Borrowing Power. The Authority may, after consultation
with the Minister of Finance and with the approval of the President of the
Philippines, as recommended by the Minister of Transportation and
Communications, raise funds, either from local or international sources, by
way of loans, credits or securities, and other borrowing instruments, with
the power to create pledges, mortgages and other voluntary liens or
encumbrances on any of its assets or properties.
All loans contracted by the Authority under this Section, together with all
interests and other sums payable in respect thereof, shall constitute a
charge upon all the revenues and assets of the Authority and shall rank
equally with one another, but shall have priority over any other claim or
charge on the revenue and assets of the Authority: Provided, That this
provision shall not be construed as a prohibition or restriction on the
power of the Authority to create pledges, mortgages, and other voluntary
liens or encumbrances on any assets or property of the Authority.
Except as expressly authorized by the President of the Philippines the total
outstanding indebtedness of the Authority in the principal amount, in local
and foreign currency, shall not at any time exceed the net worth of the
Authority at any given time.
xxx
The President or his duly authorized representative after consultation with
the Minister of Finance may guarantee, in the name and on behalf of the
Republic of the Philippines, the payment of the loans or other
indebtedness of the Authority up to the amount herein authorized.
These cited provisions establish the fitness of MIAA to be the subject of
legal relations.96 MIAA under its charter may acquire and possess
property, incur obligations, and bring civil or criminal actions. It has the
power to contract in its own name, and to acquire title to real or personal
property. It likewise may exercise a panoply of corporate powers and
possesses all the trappings of corporate personality, such as a corporate
name, a corporate seal and by-laws. All these are contained in MIAA's
charter which, as conceded by the Corporation Code and even the
Administrative Code, is the primary law that governs the definition and
organization of the MIAA.
In fact, MIAA itself believes that it is a GOCC represents itself as such. It
said so itself in the very first paragraph of the present petition before this
Court.97 So does, apparently, the Department of Budget and
Management, which classifies MIAA as a "government owned & controlled
corporation" on its internet website.98 There is also the matter of
Executive Order No. 483, which evinces the belief of the then-president of
the Philippines that MIAA is a GOCC. And the Court before had similarly
characterized MIAA as a government-owned and controlled corporation in
the earlier MIAA case, Manila International Airport Authority v. Commission
on Audit.99
Why then the hesitance to declare MIAA a GOCC? As the majority
repeatedly asserts, it is because MIAA is actually an instrumentality. But
the very definition relied upon by the majority of an instrumentality under
the Administrative Code clearly states that a GOCC is likewise an
instrumentality or an agency. The question of whether MIAA is a GOCC
might not even be determinative of this Petition, but the effect of the
majority's disquisition on that matter may even be more destructive than
the ruling that MIAA is exempt from realty taxes. Is the majority ready to
live up to the momentous consequences of its flawed reasoning?
Novel Proviso in 1987 Constitution
Prescribing Standards in the
Creation of GOCCs Necessarily
Applies only to GOCCs Created
After 1987.
One last point on this matter on whether MIAA is a GOCC. The majority
triumphantly points to Section 16, Article XII of the 1987 Constitution,
which mandates that the creation of GOCCs through special charters be
"in the interest of the common good and subject to the test of economic
viability." For the majority, the test of economic viability does not apply to
government entities vested with corporate powers and performing
essential public services. But this test of "economic viability" is new to the
constitutional framework. No such test was imposed in previous
Constitutions, including the 1973 Constitution which was the fundamental
law in force when the MIAA was created. How then could the MIAA, or any
GOCC created before 1987 be expected to meet this new precondition to
the creation of a GOCC? Does the dissent seriously suggest that GOCCs
created before 1987 may be declassified on account of their failure to
meet this "economic viability test"?
Instrumentalities and Agencies
Also Generally Liable For
Real Property Taxes
Next, the majority, having bludgeoned its way into asserting that MIAA is
not a GOCC, then argues that MIAA is an instrumentality. It cites
incompletely, as earlier stated, the provision of Section 2(10) of the
Administrative Code. A more convincing view offered during deliberations,
but which was not adopted by the ponencia, argued that MIAA is not an
instrumentality but an agency, considering the fact that under the
Administrative Code, the MIAA is attached within the department
framework of the Department of Transportation and
Communications.100Interestingly, Executive Order No. 341, enacted by
President Arroyo in 2004, similarly calls MIAA an agency. Since
instrumentalities are expressly defined as "an agency not integrated
within the department framework," that view concluded that MIAA cannot
be deemed an instrumentality.
Still, that distinction is ultimately irrelevant. Of course, as stated earlier,
the Administrative Code considers GOCCs as agencies,101 so the fact that
MIAA is an agency does not exclude it from classification as a GOCC. On
the other hand, the majority justifies MIAA's purported exemption on
Section 133 of the Local Government Code, which similarly situates
"agencies and instrumentalities" as generally exempt from the taxation
powers of LGUs. And on this point, the majority again evades Mactan and
somehow concludes that Section 133 is the general rule, notwithstanding
Sections 232 and 234(a) of the Local Government Code. And the
majority's ultimate conclusion? "By express mandate of the Local
Government Code, local governments cannot impose any kind of tax on
national government instrumentalities like the MIAA. Local governments
are devoid of power to tax the national government, its agencies and
instrumentalities."102
The Court's interpretation of the Local Government Code in Mactan
renders the law integrally harmonious and gives due accord to the
respective prerogatives of the national government and LGUs. Sections
133 and 234(a) ensure that the Republic of the Philippines or its political
subdivisions shall not be subjected to any form of local government
taxation, except realty taxes if the beneficial use of the property owned
has been granted for consideration to a taxable entity or person. On the
other hand, Section 133 likewise assures that government
instrumentalities such as GOCCs may not be arbitrarily taxed by LGUs,
since they could be subjected to local taxation if there is a specific proviso
thereon in the Code. One such proviso is Section 137, which as the Court
found in National Power Corporation,103 permits the imposition of a
franchise tax on businesses enjoying a franchise, even if it be a GOCC
such as NPC. And, as the Court acknowledged in Mactan, Section 232
provides another exception on the taxability of instrumentalities.
The majority abjectly refuses to engage Section 232 of the Local
Government Code although it provides the indubitable general rule that
LGUs "may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvements not hereafter specifically
exempted." The specific exemptions are provided by Section 234. Section
232 comes sequentially after Section 133(o),104 and even if the
sequencing is irrelevant, Section 232 would fall under the qualifying
phrase of Section 133, "Unless otherwise provided herein." It is sad, but
not surprising that the majority is not willing to consider or even discuss
the general rule, but only the exemptions under Section 133 and Section
234. After all, if the majority is dead set in ruling for MIAA no matter what
the law says, why bother citing what the law does say.
Constitution, Laws and
Jurisprudence Have Long
Explained the Rationale
Behind the Local Taxation
Of GOCCs.
This blithe disregard of precedents, almost all of them unanimously
decided, is nowhere more evident than in the succeeding discussion of the
majority, which asserts that the power of local governments to tax
national government instrumentalities be construed strictly against local
governments. The Maceda case, decided before the Local Government
Code, is cited, as is Basco. This section of the majority employs deliberate
pretense that the Code never existed, or that the fundamentals of local
autonomy are of limited effect in our country. Why is it that the Local
Government Code is barely mentioned in this section of the majority?
Because Section 5 of the Code, purposely omitted by the majority
provides for a different rule of interpretation than that asserted:
Section 5. Rules of Interpretation. In the interpretation of the provisions
of this Code, the following rules shall apply:
(a) Any provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall
be resolved in favor of devolution of powers and of the lower local
government unit. Any fair and reasonable doubt as to the existence of the
power shall be interpreted in favor of the local government unit
concerned;
(b) In case of doubt, any tax ordinance or revenue measure shall be
construed strictly against the local government unit enacting it, and
liberally in favor of the taxpayer. Any tax exemption, incentive or relief
granted by any local government unit pursuant to the provisions of this
Code shall be construed strictly against the person claiming it; xxx
Yet the majority insists that "there is no point in national and local
governments taxing each other, unless a sound and compelling policy
requires such transfer of public funds from one government pocket to
another."105 I wonder whether the Constitution satisfies the majority's
desire for "a sound and compelling policy." To repeat:
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
xxx
Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees, and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments.
Or how about the Local Government Code, presumably an expression of
sound and compelling policy considering that it was enacted by the
legislature, that veritable source of all statutes:
SEC. 129. Power to Create Sources of Revenue. - Each local government
unit shall exercise its power to create its own sources of revenue and to
levy taxes, fees, and charges subject to the provisions herein, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local government units.
Justice Puno, in National Power Corporation v. City of
Cabanatuan,106 provides a more "sound and compelling policy
considerations" that would warrant sustaining the taxability of
government-owned entities by local government units under the Local
Government Code.
Doubtless, the power to tax is the most effective instrument to raise
needed revenues to finance and support myriad activities of the local
government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people. As this Court observed in the
Mactan case, "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." With the added burden of devolution, it is even more
imperative for government entities to share in the requirements of
development, fiscal or otherwise, by paying taxes or other charges due
from them.107
I dare not improve on Justice Puno's exhaustive disquisition on the
statutory and jurisprudential shift brought about the acceptance of the
principles of local autonomy:
In recent years, the increasing social challenges of the times expanded
the scope of state activity, and taxation has become a tool to realize
social justice and the equitable distribution of wealth, economic progress
and the protection of local industries as well as public welfare and similar
objectives. Taxation assumes even greater significance with the
ratification of the 1987 Constitution. Thenceforth, the power to tax is no
longer vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges pursuant to
Article X, section 5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create its
own sources of revenue, to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees and charges shall
accrue exclusively to the Local Governments."
This paradigm shift results from the realization that genuine development
can be achieved only by strengthening local autonomy and promoting
decentralization of governance. For a long time, the country's highly
centralized government structure has bred a culture of dependence
among local government leaders upon the national leadership. It has also
"dampened the spirit of initiative, innovation and imaginative resilience in
matters of local development on the part of local government leaders." 35
The only way to shatter this culture of dependence is to give the LGUs a
wider role in the delivery of basic services, and confer them sufficient
powers to generate their own sources for the purpose. To achieve this
goal, section 3 of Article X of the 1987 Constitution mandates Congress to
enact a local government code that will, consistent with the basic policy of
local autonomy, set the guidelines and limitations to this grant of taxing
powers, viz:
"Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms
of recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and
provide for the qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and all other
matters relating to the organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160, also known as
the Local Government Code of 1991 (LGC), various measures have been
enacted to promote local autonomy. These include the Barrio Charter of
1959, the Local Autonomy Act of 1959, the Decentralization Act of 1967
and the Local Government Code of 1983. Despite these initiatives,
however, the shackles of dependence on the national government
remained. Local government units were faced with the same problems
that hamper their capabilities to participate effectively in the national
development efforts, among which are: (a) inadequate tax base, (b) lack
of fiscal control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence on
external sources of income, and (e) limited supervisory control over
personnel of national line agencies.
Considered as the most revolutionary piece of legislation on local
autonomy, the LGC effectively deals with the fiscal constraints faced by
LGUs. It widens the tax base of LGUs to include taxes which were
prohibited by previous laws such as the imposition of taxes on forest
products, forest concessionaires, mineral products, mining operations, and
the like. The LGC likewise provides enough flexibility to impose tax rates in
accordance with their needs and capabilities. It does not prescribe
graduated fixed rates but merely specifies the minimum and maximum
tax rates and leaves the determination of the actual rates to the
respective sanggunian.108
And the Court's ruling through Justice Azcuna in Philippine Ports Authority
v. City of Iloilo109, provides especially clear and emphatic rationale:
In closing, we reiterate that in taxing government-owned or controlled
corporations, the State ultimately suffers no loss. In National Power Corp.
v. Presiding Judge, RTC, Br. XXV, 38 we elucidated:
Actually, the State has no reason to decry the taxation of NPC's properties,
as and by way of real property taxes. Real property taxes, after all, form
part and parcel of the financing apparatus of the Government in
development and nation-building, particularly in the local government
level.
xxxxxxxxx
To all intents and purposes, real property taxes are funds taken by the
State with one hand and given to the other. In no measure can the
government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the
withdrawal of tax exemption privileges granted to government-owned and
controlled corporations and all other units of government was that such
privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises, hence resulting in the need for
these entities to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due from them.110
How does the majority counter these seemingly valid rationales which
establish the soundness of a policy consideration subjecting national
instrumentalities to local taxation? Again, by simply ignoring that these
doctrines exist. It is unfortunate if the majority deems these cases or the
principles of devolution and local autonomy as simply too inconvenient,
and relies instead on discredited precedents. Of course, if the majority
faces the issues squarely, and expressly discusses why Basco was right
and Mactan was wrong, then this entire endeavor of the Court would be
more intellectually satisfying. But, this is not a game the majority wants to
play.
Mischaracterization of My
Views on the Tax Exemption
Enjoyed by the National Government
Instead, the majority engages in an extended attack pertaining to Section
193, mischaracterizing my views on that provision as if I had been
interpreting the provision as making "the national government, which
itself is a juridical person, subject to tax by local governments since the
national government is not included in the enumeration of exempt entities
in Section 193."111
Nothing is farther from the truth. I have never advanced any theory of the
sort imputed in the majority. My main thesis on the matter merely echoes
the explicit provision of Section 193 that unless otherwise provided in the
Local Government Code (LGC) all tax exemptions enjoyed by all persons,
whether natural or juridical, including GOCCs, were withdrawn upon the
effectivity of the Code. Since the provision speaks of withdrawal of tax
exemptions of persons, it follows that the exemptions theretofore enjoyed
by MIAA which is definitely a person are deemed withdrawn upon the
advent of the Code.
On the other hand, the provision does not address the question of who are
beyond the reach of the taxing power of LGUs. In fine, the grant of tax
exemption or the withdrawal thereof assumes that the person or entity
involved is subject to tax. Thus, Section 193 does not apply to entities
which were never given any tax exemption. This would include the
national government and its political subdivisions which, as a general rule,
are not subjected to tax in the first place.112 Corollarily, the national
government and its political subdivisions do not need tax exemptions. And
Section 193 which ordains the withdrawal of tax exemptions is obviously
irrelevant to them.
Section 193 is in point for the disposition of this case as it forecloses
dependence for the grant of tax exemption to MIAA on Section 21 of its
charter. Even the majority should concede that the charter section is now
ineffectual, as Section 193 withdraws the tax exemptions previously
enjoyed by all juridical persons.
With Section 193 mandating the withdrawal of tax exemptions granted to
all persons upon the effectivity of the LGC, for MIAA to continue enjoying
exemption from realty tax, it will have to rely on a basis other than Section
21 of its charter.
Lung Center of the Philippines v. Quezon City113 provides another
illustrative example of the jurisprudential havoc wrought about by the
majority. Pursuant to its charter, the Lung Center was organized as a trust
administered by an eponymous GOCC organized with the SEC.114 There is
no doubt it is a GOCC, even by the majority's reckoning. Applying the
Administrative Code, it is also considered as an agency, the term
encompassing even GOCCs. Yet since the Administrative Code definition of
"instrumentalities" encompasses agencies, especially those not attached
to a line department such as the Lung Center, it also follows that the Lung
Center is an instrumentality, which for the majority is exempt from all
local government taxes, especially real estate taxes. Yet just in 2004, the
Court unanimously held that the Lung Center was not exempt from real
property taxes. Can the majority and Lung Center be reconciled? I do not
see how, and no attempt is made to demonstrate otherwise.
Another key point. The last paragraph of Section 234 specifically asserts
that any previous exemptions from realty taxes granted to or enjoyed by
all persons, including all GOCCs, are thereby withdrawn. The majority's
interpretation of Sections 133 and 234(a) however necessarily implies that
all instrumentalities, including GOCCs, can never be subjected to real
property taxation under the Code. If that is so, what then is the sense of
the last paragraph specifically withdrawing previous tax exemptions to all
persons, including GOCCs when juridical persons such as MIAA are
anyway, to his view, already exempt from such taxes under Section 133?
The majority's interpretation would effectively render the express and
emphatic withdrawal of previous exemptions to GOCCs inutile. Ut magis
valeat quam pereat. Hence, where a statute is susceptible of more than
one interpretation, the court should adopt such reasonable and beneficial
construction which will render the provision thereof operative and
effective, as well as harmonious with each other.115
But, the majority seems content rendering as absurd the Local
Government Code, since it does not have much use anyway for the Code's
general philosophy of fiscal autonomy, as evidently seen by the continued
reliance on Basco or Maceda. Local government rule has never been a
grant of emancipation from the national government. This is the favorite
bugaboo of the opponents of local autonomythe fallacy that autonomy
equates to independence.
Thus, the conclusion of the majority is that under Section 133(o), MIAA as
a government instrumentality is beyond the reach of local taxation
because it is not subject to taxes, fees or charges of any kind. Moreover,
the taxation of national instrumentalities and agencies by LGUs should be
strictly construed against the LGUs, citing Maceda and Basco. No mention
is made of the subsequent rejection of these cases in jurisprudence
following the Local Government Code, including Mactan. The majority is
similarly silent on the general rule under Section 232 on real property
taxation or Section 5 on the rules of construction of the Local Government
Code.
V.
MIAA, and not the National Government
Is the Owner of the Subject Taxable Properties
Section 232 of the Local Government Code explicitly provides that there
are exceptions to the general rule on rule property taxation, as "hereafter
specifically exempted." Section 234, certainly "hereafter," provides
indubitable basis for exempting entities from real property taxation. It
provides the most viable legal support for any claim that an governmental
entity such as the MIAA is exempt from real property taxes. To repeat:
SECTION 234. Exemptions from Real Property Tax. -- The following are
exempted from payment of the real property tax:
xxx
(f) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person:
The majority asserts that the properties owned by MIAA are owned by the
Republic of the Philippines, thus placing them under the exemption under
Section 234. To arrive at this conclusion, the majority employs four main
arguments.
MIAA Property Is Patrimonial
And Not Part of Public Dominion
The majority claims that the Airport Lands and Buildings are property of
public dominion as defined by the Civil Code, and therefore owned by the
State or the Republic of the Philippines. But as pointed out by Justice
Azcuna in the first PPA case, if indeed a property is considered part of the
public dominion, such property is "owned by the general public and
cannot be declared to be owned by a public corporation, such as [the
PPA]."
Relevant on this point are the following provisions of the MIAA charter:
Section 3. Creation of the Manila International Airport Authority. xxx
The land where the Airport is presently located as well as the surrounding
land area of approximately six hundred hectares, are hereby transferred,
conveyed and assigned to the ownership and administration of the
Authority, subject to existing rights, if any. xxx Any portion thereof shall
not be disposed through sale or through any other mode unless
specifically approved by the President of the Philippines.
Section 22. Transfer of Existing Facilities and Intangible Assets. All
existing public airport facilities, runways, lands, buildings and other
property, movable or immovable, belonging to the Airport, and all assets,
powers rights, interests and privileges belonging to the Bureau of Air
Transportation relating to airport works or air operations, including all
equipment which are necessary for the operation of crash fire and rescue
facilities, are hereby transferred to the Authority.
Clearly, it is the MIAA, and not either the State, the Republic of the
Philippines or the national government that asserts legal title over the
Airport Lands and Buildings. There was an express transfer of ownership
between the MIAA and the national government. If the distinction is to be
blurred, as the majority does, between the State/Republic/Government
and a body corporate such as the MIAA, then the MIAA charter showcases
the remarkable absurdity of an entity transferring property to itself.
Nothing in the Civil Code or the Constitution prohibits the State from
transferring ownership over property of public dominion to an entity that it
similarly owns. It is just like a family transferring ownership over the
properties its members own into a family corporation. The family exercises
effective control over the administration and disposition of these
properties. Yet for several purposes under the law, such as taxation, it is
the corporation that is deemed to own those properties. A similar situation
obtains with MIAA, the State, and the Airport Lands and Buildings.
The second Public Ports Authority case, penned by Justice Callejo, likewise
lays down useful doctrines in this regard. The Court refuted the claim that
the properties of the PPA were owned by the Republic of the Philippines,
noting that PPA's charter expressly transferred ownership over these
properties to the PPA, a situation which similarly obtains with MIAA. The
Court even went as far as saying that the fact that the PPA "had not been
issued any torrens title over the port and port facilities and appurtenances
is of no legal consequence. A torrens title does not, by itself, vest
ownership; it is merely an evidence of title over properties. xxx It has
never been recognized as a mode of acquiring ownership over real
properties."116
The Court further added:
xxx The bare fact that the port and its facilities and appurtenances are
accessible to the general public does not exempt it from the payment of
real property taxes. It must be stressed that the said port facilities and
appurtenances are the petitioner's corporate patrimonial properties, not
for public use, and that the operation of the port and its facilities and the
administration of its buildings are in the nature of ordinary business. The
petitioner is clothed, under P.D. No. 857, with corporate status and
corporate powers in the furtherance of its proprietary interests xxx The
petitioner is even empowered to invest its funds in such government
securities approved by the Board of Directors, and derives its income from
rates, charges or fees for the use by vessels of the port premises,
appliances or equipment. xxx Clearly then, the petitioner is a profit-
earning corporation; hence, its patrimonial properties are subject to
tax.117
There is no doubt that the properties of the MIAA, as with the PPA, are in a
sense, for public use. A similar argument was propounded by the Light
Rail Transit Authority in Light Rail Transit Authority v. Central Board of
Assessment,118 which was cited in Philippine Ports Authority and
deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a
body corporate, "provides valuable transportation facilities to the paying
public."119 It claimed that its carriage-ways and terminal stations are
immovably attached to government-owned national roads, and to impose
real property taxes thereupon would be to impose taxes on public roads.
This view did not persuade the Court, whose decision was penned by
Justice (now Chief Justice) Panganiban. It was noted:
Though the creation of the LRTA was impelled by public service to
provide mass transportation to alleviate the traffic and transportation
situation in Metro Manila its operation undeniably partakes of ordinary
business. Petitioner is clothed with corporate status and corporate powers
in the furtherance of its proprietary objectives. Indeed, it operates much
like any private corporation engaged in the mass transport industry. Given
that it is engaged in a service-oriented commercial endeavor, its
carriageways and terminal stations are patrimonial property subject to
tax, notwithstanding its claim of being a government-owned or controlled
corporation.
xxx
Petitioner argues that it merely operates and maintains the LRT system,
and that the actual users of the carriageways and terminal stations are
the commuting public. It adds that the public use character of the LRT is
not negated by the fact that revenue is obtained from the latter's
operations.
We do not agree. Unlike public roads which are open for use by everyone,
the LRT is accessible only to those who pay the required fare. It is thus
apparent that petitioner does not exist solely for public service, and that
the LRT carriageways and terminal stations are not exclusively for public
use. Although petitioner is a public utility, it is nonetheless profit-earning.
It actually uses those carriageways and terminal stations in its public
utility business and earns money therefrom.120
xxx
Even granting that the national government indeed owns the
carriageways and terminal stations, the exemption would not apply
because their beneficial use has been granted to petitioner, a taxable
entity.121
There is no substantial distinction between the properties held by the PPA,
the LRTA, and the MIAA. These three entities are in the business of
operating facilities that promote public transportation.
The majority further asserts that MIAA's properties, being part of the
public dominion, are outside the commerce of man. But if this is so, then
why does Section 3 of MIAA's charter authorize the President of the
Philippines to approve the sale of any of these properties? In fact, why
does MIAA's charter in the first place authorize the transfer of these
airport properties, assuming that indeed these are beyond the commerce
of man?
No Trust Has Been Created
Over MIAA Properties For
The Benefit of the Republic
The majority posits that while MIAA might be holding title over the Airport
Lands and Buildings, it is holding it in trust for the Republic. A provision of
the Administrative Code is cited, but said provision does not expressly
provide that the property is held in trust. Trusts are either express or
implied, and only those situations enumerated under the Civil Code would
constitute an implied trust. MIAA does not fall within this enumeration,
and neither is there a provision in MIAA's charter expressly stating that
these properties are being held in trust. In fact, under its charter, MIAA is
obligated to retain up to eighty percent (80%) of its gross operating
income, not an inconsequential sum assuming that the beneficial owner of
MIAA's properties is actually the Republic, and not the MIAA.
Also, the claim that beneficial ownership over the MIAA remains with the
government and not MIAA is ultimately irrelevant. Section 234(a) of the
Local Government Code provides among those exempted from paying real
property taxes are "[r]eal property owned by the [Republic] except when
the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." In the context of Section 234(a), the
identity of the beneficial owner over the properties is not determinative as
to whether the exemption avails. It is the identity of the beneficial user of
the property owned by the Republic or its political subdivisions that is
crucial, for if said beneficial user is a taxable person, then the exemption
does not lie.
I fear the majority confuses the notion of what might be construed as
"beneficial ownership" of the Republic over the properties of MIAA as
nothing more than what arises as a consequence of the fact that the
capital of MIAA is contributed by the National Government.122 If so, then
there is no difference between the State's ownership rights over MIAA
properties than those of a majority stockholder over the properties of a
corporation. Even if such shareholder effectively owns the corporation and
controls the disposition of its assets, the personality of the stockholder
remains separately distinct from that of the corporation. A brief recall of
the entrenched rule in corporate law is in order:
The first consequence of the doctrine of legal entity regarding the
separate identity of the corporation and its stockholders insofar as their
obligations and liabilities are concerned, is spelled out in this general rule
deeply entrenched in American jurisprudence:
Unless the liability is expressly imposed by constitutional or statutory
provisions, or by the charter, or by special agreement of the stockholders,
stockholders are not personally liable for debts of the corporation either at
law or equity. The reason is that the corporation is a legal entity or
artificial person, distinct from the members who compose it, in their
individual capacity; and when it contracts a debt, it is the debt of the legal
entity or artificial person the corporation and not the debt of the
individual members. (13A Fletcher Cyc. Corp. Sec. 6213)
The entirely separate identity of the rights and remedies of a corporation
itself and its individual stockholders have been given definite recognition
for a long time. Applying said principle, the Supreme Court declared that a
corporation may not be made to answer for acts or liabilities of its
stockholders or those of legal entities to which it may be connected, or
vice versa. (Palay Inc. v. Clave et. al. 124 SCRA 638) It was likewise
declared in a similar case that a bonafide corporation should alone be
liable for corporate acts duly authorized by its officers and directors.
(Caram Jr. v. Court of Appeals et.al. 151 SCRA, p. 372)123
It bears repeating that MIAA under its charter, is expressly conferred the
right to exercise all the powers of a corporation under the Corporation
Law, including the right to corporate succession, and the right to sue and
be sued in its corporate name.124 The national government made a
particular choice to divest ownership and operation of the Manila
International Airport and transfer the same to such an empowered entity
due to perceived advantages. Yet such transfer cannot be deemed
consequence free merely because it was the State which contributed the
operating capital of this body corporate.
The majority claims that the transfer the assets of MIAA was meant
merely to effect a reorganization. The imputed rationale for such transfer
does not serve to militate against the legal consequences of such
assignment. Certainly, if it was intended that the transfer should be free of
consequence, then why was it effected to a body corporate, with a distinct
legal personality from that of the State or Republic? The stated aims of the
MIAA could have very well been accomplished by creating an agency
without independent juridical personality.
VI.
MIAA Performs Proprietary Functions
Nonetheless, Section 234(f) exempts properties owned by the Republic of
the Philippines or its political subdivisions from realty taxation. The
obvious question is what comprises "the Republic of the Philippines." I
think the key to understanding the scope of "the Republic" is the phrase
"political subdivisions." Under the Constitution, political subdivisions are
defined as "the provinces, cities, municipalities and barangays."125 In
correlation, the Administrative Code of 1987 defines "local government"
as referring to "the political subdivisions established by or in accordance
with the Constitution."
Clearly then, these political subdivisions are engaged in the exercise of
sovereign functions and are accordingly exempt. The same could be said
generally of the national government, which would be similarly exempt.
After all, even with the principle of local autonomy, it is inherently noxious
and self-defeatist for local taxation to interfere with the sovereign exercise
of functions. However, the exercise of proprietary functions is a different
matter altogether.
Sovereign and Proprietary
Functions Distinguished
Sovereign or constituent functions are those which constitute the very
bonds of society and are compulsory in nature, while ministrant or
proprietary functions are those undertaken by way of advancing the
general interests of society and are merely optional.126 An exhaustive
discussion on the matter was provided by the Court in Bacani v.
NACOCO:127
xxx This institution, when referring to the national government, has
reference to what our Constitution has established composed of three
great departments, the legislative, executive, and the judicial, through
which the powers and functions of government are exercised. These
functions are twofold: constituent and ministrant. The former are those
which constitute the very bonds of society and are compulsory in nature;
the latter are those that are undertaken only by way of advancing the
general interests of society, and are merely optional. President Wilson
enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons and
property from violence and robbery.
'(2) The fixing of the legal relations between man and wife and between
parents and children.
'(3) The regulation of the holding, transmission, and interchange of
property, and the determination of its liabilities for debt or for crime.
'(4) The determination of contract rights between individuals.
'(5) The definition and punishment of crime.
'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges, and relations of
citizens.
'(8) Dealings of the state with foreign powers: the preservation of the
state from external danger or encroachment and the advancement of its
international interests.'" (Malcolm, The Government of the Philippine
Islands, p. 19.)
The most important of the ministrant functions are: public works, public
education, public charity, health and safety regulations, and regulations of
trade and industry. The principles determining whether or not a
government shall exercise certain of these optional functions are: (1) that
a government should do for the public welfare those things which private
capital would not naturally undertake and (2) that a government should do
these things which by its very nature it is better equipped to administer
for the public welfare than is any private individual or group of individuals.
(Malcolm, The Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions
which our government is required to exercise to promote its objectives as
expressed in our Constitution and which are exercised by it as an attribute
of sovereignty, and those which it may exercise to promote merely the
welfare, progress and prosperity of the people. To this latter class belongs
the organization of those corporations owned or controlled by the
government to promote certain aspects of the economic life of our people
such as the National Coconut Corporation. These are what we call
government-owned or controlled corporations which may take on the form
of a private enterprise or one organized with powers and formal
characteristics of a private corporations under the Corporation Law.128
The Court in Bacani rejected the proposition that the National Coconut
Corporation exercised sovereign functions:
Does the fact that these corporations perform certain functions of
government make them a part of the Government of the Philippines?
The answer is simple: they do not acquire that status for the simple
reason that they do not come under the classification of municipal or
public corporation. Take for instance the National Coconut Corporation.
While it was organized with the purpose of "adjusting the coconut industry
to a position independent of trade preferences in the United States" and of
providing "Facilities for the better curing of copra products and the proper
utilization of coconut by-products," a function which our government has
chosen to exercise to promote the coconut industry, however, it was given
a corporate power separate and distinct from our government, for it was
made subject to the provisions of our Corporation Law in so far as its
corporate existence and the powers that it may exercise are concerned
(sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in
the same manner as any other private corporations, and in this sense it is
an entity different from our government. As this Court has aptly said, "The
mere fact that the Government happens to be a majority stockholder does
not make it a public corporation" (National Coal Co. vs. Collector of
Internal Revenue, 46 Phil., 586-587). "By becoming a stockholder in the
National Coal Company, the Government divested itself of its sovereign
character so far as respects the transactions of the corporation. . . . Unlike
the Government, the corporation may be sued without its consent, and is
subject to taxation. Yet the National Coal Company remains an agency or
instrumentality of government." (Government of the Philippine Islands vs.
Springer, 50 Phil., 288.)
The following restatement of the entrenched rule by former SEC
Chairperson Rosario Lopez bears noting:
The fact that government corporations are instrumentalities of the State
does not divest them with immunity from suit. (Malong v. PNR, 138 SCRA
p. 63) It is settled that when the government engages in a particular
business through the instrumentality of a corporation, it divests itself pro
hoc vice of its sovereign character so as to subject itself to the rules
governing private corporations, (PNB v. Pabolan 82 SCRA 595) and is to be
treated like any other corporation. (PNR v. Union de Maquinistas Fogonero
y Motormen, 84 SCRA 223)
In the same vein, when the government becomes a stockholder in a
corporation, it does not exercise sovereignty as such. It acts merely as a
corporator and exercises no other power in the management of the affairs
of the corporation than are expressly given by the incorporating act. Nor
does the fact that the government may own all or a majority of the capital
stock take from the corporation its character as such, or make the
government the real party in interest. (Amtorg Trading Corp. v. US 71 F2d
524, 528)129
MIAA Performs Proprietary
Functions No Matter How
Vital to the Public Interest
The simple truth is that, based on these accepted doctrinal tests, MIAA
performs proprietary functions. The operation of an airport facility by the
State may be imbued with public interest, but it is by no means
indispensable or obligatory on the national government. In fact, as
demonstrated in other countries, it makes a lot of economic sense to
leave the operation of airports to the private sector.
The majority tries to becloud this issue by pointing out that the MIAA does
not compete in the marketplace as there is no competing international
airport operated by the private sector; and that MIAA performs an
essential public service as the primary domestic and international airport
of the Philippines. This premise is false, for one. On a local scale, MIAA
competes with other international airports situated in the Philippines, such
as Davao International Airport and MCIAA. More pertinently, MIAA also
competes with other international airports in Asia, at least. International
airlines take into account the quality and conditions of various
international airports in determining the number of flights it would assign
to a particular airport, or even in choosing a hub through which
destinations necessitating connecting flights would pass through.
Even if it could be conceded that MIAA does not compete in the market
place, the example of the Philippine National Railways should be taken
into account. The PNR does not compete in the marketplace, and performs
an essential public service as the operator of the railway system in the
Philippines. Is the PNR engaged in sovereign functions? The Court, in
Malong v. Philippine National Railways,130 held that it was not.131
Even more relevant to this particular case is Teodoro v. National Airports
Corporation,132 concerning the proper appreciation of the functions
performed by the Civil Aeronautics Administration (CAA), which had
succeeded the defunction National Airports Corporation. The CAA claimed
that as an unincorporated agency of the Republic of the Philippines, it was
incapable of suing and being sued. The Court noted:
Among the general powers of the Civil Aeronautics Administration are,
under Section 3, to execute contracts of any kind, to purchase property,
and to grant concession rights, and under Section 4, to charge landing
fees, royalties on sales to aircraft of aviation gasoline, accessories and
supplies, and rentals for the use of any property under its management.
These provisions confer upon the Civil Aeronautics Administration, in our
opinion, the power to sue and be sued. The power to sue and be sued is
implied from the power to transact private business. And if it has the
power to sue and be sued on its behalf, the Civil Aeronautics
Administration with greater reason should have the power to prosecute
and defend suits for and against the National Airports Corporation, having
acquired all the properties, funds and choses in action and assumed all
the liabilities of the latter. To deny the National Airports Corporation's
creditors access to the courts of justice against the Civil Aeronautics
Administration is to say that the government could impair the obligation of
its corporations by the simple expedient of converting them into
unincorporated agencies. 133
xxx
Eventually, the charter of the CAA was revised, and it among its expanded
functions was "[t]o administer, operate, manage, control, maintain and
develop the Manila International Airport."134 Notwithstanding this
expansion, in the 1988 case of CAA v. Court of Appeals135 the Court
reaffirmed the ruling that the CAA was engaged in "private or non-
governmental functions."136 Thus, the Court had already ruled that the
predecessor agency of MIAA, the CAA was engaged in private or non-
governmental functions. These are more precedents ignored by the
majority. The following observation from the Teodoro case very well
applies to MIAA.
The Civil Aeronautics Administration comes under the category of a
private entity. Although not a body corporate it was created, like the
National Airports Corporation, not to maintain a necessary function of
government, but to run what is essentially a business, even if revenues be
not its prime objective but rather the promotion of travel and the
convenience of the traveling public. It is engaged in an enterprise which,
far from being the exclusive prerogative of state, may, more than the
construction of public roads, be undertaken by private concerns.137
If the determinative point in distinguishing between sovereign functions
and proprietary functions is the vitality of the public service being
performed, then it should be noted that there is no more important public
service performed than that engaged in by public utilities. But notably, the
Constitution itself authorizes private persons to exercise these functions
as it allows them to operate public utilities in this country138 If indeed
such functions are actually sovereign and belonging properly to the
government, shouldn't it follow that the exercise of these tasks remain
within the exclusive preserve of the State?
There really is no prohibition against the government taxing itself,139 and
nothing obscene with allowing government entities exercising proprietary
functions to be taxed for the purpose of raising the coffers of LGUs. On the
other hand, it would be an even more noxious proposition that the
government or the instrumentalities that it owns are above the law and
may refuse to pay a validly imposed tax. MIAA, or any similar entity
engaged in the exercise of proprietary, and not sovereign functions,
cannot avoid the adverse-effects of tax evasion simply on the claim that it
is imbued with some of the attributes of government.
VII.
MIAA Property Not Subject to
Execution Sale Without Consent
Of the President.
Despite the fact that the City of Paraaque ineluctably has the power to
impose real property taxes over the MIAA, there is an equally relevant
statutory limitation on this power that must be fully upheld. Section 3 of
the MIAA charter states that "[a]ny portion [of the [lands transferred,
conveyed and assigned to the ownership and administration of the MIAA]
shall not be disposed through sale or through any other mode unless
specifically approved by the President of the Philippines."140
Nothing in the Local Government Code, even with its wide grant of powers
to LGUs, can be deemed as repealing this prohibition under Section 3,
even if it effectively forecloses one possible remedy of the LGU in the
collection of delinquent real property taxes. While the Local Government
Code withdrew all previous local tax exemptions of the MIAA and other
natural and juridical persons, it did not similarly withdraw any previously
enacted prohibitions on properties owned by GOCCs, agencies or
instrumentalities. Moreover, the resulting legal effect, subjecting on one
hand the MIAA to local taxes but on the other hand shielding its properties
from any form of sale or disposition, is not contradictory or paradoxical,
onerous as its effect may be on the LGU. It simply means that the LGU has
to find another way to collect the taxes due from MIAA, thus paving the
way for a mutually acceptable negotiated solution.141
There are several other reasons this statutory limitation should be upheld
and applied to this case. It is at this juncture that the importance of the
Manila Airport to our national life and commerce may be accorded proper
consideration. The closure of the airport, even by reason of MIAA's legal
omission to pay its taxes, will have an injurious effect to our national
economy, which is ever reliant on air travel and traffic. The same effect
would obtain if ownership and administration of the airport were to be
transferred to an LGU or some other entity which were not specifically
chartered or tasked to perform such vital function. It is for this reason that
the MIAA charter specifically forbids the sale or disposition of MIAA
properties without the consent of the President. The prohibition prevents
the peremptory closure of the MIAA or the hampering of its operations on
account of the demands of its creditors. The airport is important enough
to be sheltered by legislation from ordinary legal processes.
Section 3 of the MIAA charter may also be appreciated as within the
proper exercise of executive control by the President over the MIAA, a
GOCC which despite its separate legal personality, is still subsumed within
the executive branch of government. The power of executive control by
the President should be upheld so long as such exercise does not
contravene the Constitution or the law, the President having the corollary
duty to faithfully execute the Constitution and the laws of the land.142 In
this case, the exercise of executive control is precisely recognized and
authorized by the legislature, and it should be upheld even if it comes at
the expense of limiting the power of local government units to collect real
property taxes.
Had this petition been denied instead with Mactan as basis, but with the
caveat that the MIAA properties could not be subject of execution sale
without the consent of the President, I suspect that the parties would feel
little distress. Through such action, both the Local Government Code and
the MIAA charter would have been upheld. The prerogatives of LGUs in
real property taxation, as guaranteed by the Local Government Code,
would have been preserved, yet the concerns about the ruinous effects of
having to close the Manila International Airport would have been averted.
The parties would then be compelled to try harder at working out a
compromise, a task, if I might add, they are all too willing to engage
in.143 Unfortunately, the majority will cause precisely the opposite result
of unremitting hostility, not only to the City of Paraaque, but to the
thousands of LGUs in the country.
VIII.
Summary of Points
My points may be summarized as follows:
1) Mactan and a long line of succeeding cases have already settled the
rule that under the Local Government Code, enacted pursuant to the
constitutional mandate of local autonomy, all natural and juridical
persons, even those GOCCs, instrumentalities and agencies, are no longer
exempt from local taxes even if previously granted an exemption. The
only exemptions from local taxes are those specifically provided under the
Local Government Code itself, or those enacted through subsequent
legislation.
2) Under the Local Government Code, particularly Section 232,
instrumentalities, agencies and GOCCs are generally liable for real
property taxes. The only exemptions therefrom under the same Code are
provided in Section 234, which include real property owned by the
Republic of the Philippines or any of its political subdivisions.
3) The subject properties are owned by MIAA, a GOCC, holding title in its
own name. MIAA, a separate legal entity from the Republic of the
Philippines, is the legal owner of the properties, and is thus liable for real
property taxes, as it does not fall within the exemptions under Section 234
of the Local Government Code.
4) The MIAA charter expressly bars the sale or disposition of MIAA
properties. As a result, the City of Paraaque is prohibited from seizing or
selling these properties by public auction in order to satisfy MIAA's tax
liability. In the end, MIAA is encumbered only by a limited lien possessed
by the City of Paraaque.
On the other hand, the majority's flaws are summarized as follows:
1) The majority deliberately ignores all precedents which run counter to its
hypothesis, including Mactan. Instead, it relies and directly cites those
doctrines and precedents which were overturned by Mactan. By imposing
a different result than that warranted by the precedents without
explaining why Mactan or the other precedents are wrong, the majority
attempts to overturn all these ruling sub silencio and without legal
justification, in a manner that is not sanctioned by the practices and
traditions of this Court.
2) The majority deliberately ignores the policy and philosophy of local
fiscal autonomy, as mandated by the Constitution, enacted under the
Local Government Code, and affirmed by precedents. Instead, the majority
asserts that there is no sound rationale for local governments to tax
national government instrumentalities, despite the blunt existence of such
rationales in the Constitution, the Local Government Code, and
precedents.
3) The majority, in a needless effort to justify itself, adopts an extremely
strained exaltation of the Administrative Code above and beyond the
Corporation Code and the various legislative charters, in order to impose a
wholly absurd definition of GOCCs that effectively declassifies
innumerable existing GOCCs, to catastrophic legal consequences.
4) The majority asserts that by virtue of Section 133(o) of the Local
Government Code, all national government agencies and instrumentalities
are exempt from any form of local taxation, in contravention of several
precedents to the contrary and the proviso under Section 133, "unless
otherwise provided herein [the Local Government Code]."
5) The majority erroneously argues that MIAA holds its properties in trust
for the Republic of the Philippines, and that such properties are
patrimonial in character. No express or implied trust has been created to
benefit the national government. The legal distinction between sovereign
and proprietary functions, as affirmed by jurisprudence, likewise preclude
the classification of MIAA properties as patrimonial.
IX.
Epilogue
If my previous discussion still fails to convince on how wrong the majority
is, then the following points are well-worth considering. The majority cites
the Bangko Sentral ng Pilipinas (Bangko Sentral) as a government
instrumentality that exercises corporate powers but not organized as a
stock or non-stock corporation. Correspondingly for the majority, the
Bangko ng Sentral is exempt from all forms of local taxation by LGUs by
virtue of the Local Government Code.
Section 125 of Rep. Act No. 7653, The New Central Bank Act, states:
SECTION 125. Tax Exemptions. The Bangko Sentral shall be exempt for
a period of five (5) years from the approval of this Act from all national,
provincial, municipal and city taxes, fees, charges and assessments.
The New Central Bank Act was promulgated after the Local Government
Code if the BSP is already preternaturally exempt from local taxation
owing to its personality as an "government instrumentality," why then the
need to make a new grant of exemption, which if the majority is to be
believed, is actually a redundancy. But even more tellingly, does not this
provision evince a clear intent that after the lapse of five (5) years, that
the Bangko Sentral will be liable for provincial, municipal and city taxes?
This is the clear congressional intent, and it is Congress, not this Court
which dictates which entities are subject to taxation and which are
exempt.
Perhaps this notion will offend the majority, because the Bangko Sentral is
not even a government owned corporation, but a government
instrumentality, or perhaps "loosely", a "government corporate entity."
How could such an entity like the Bangko Sentral , which is not even a
government owned corporation, be subjected to local taxation like any
mere mortal? But then, see Section 1 of the New Central Bank Act:
SECTION 1. Declaration of Policy. The State shall maintain a central
monetary authority that shall function and operate as an independent and
accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this
policy, and considering its unique functions and responsibilities, the
central monetary authority established under this Act, while being a
government-owned corporation, shall enjoy fiscal and administrative
autonomy.
Apparently, the clear legislative intent was to create a government
corporation known as the Bangko Sentral ng Pilipinas. But this legislative
intent, the sort that is evident from the text of the provision and not the
one that needs to be unearthed from the bowels of the archival offices of
the House and the Senate, is for naught to the majority, as it contravenes
the Administrative Code of 1987, which after all, is "the governing law
defining the status and relationship of government agencies and
instrumentalities" and thus superior to the legislative charter in
determining the personality of a chartered entity. Its like saying that the
architect who designed a school building is better equipped to teach than
the professor because at least the architect is familiar with the geometry
of the classroom.
Consider further the example of the Philippine Institute of Traditional and
Alternative Health Care (PITAHC), created by Republic Act No. 8243 in
1997. It has similar characteristics as MIAA in that it is established as a
body corporate,144 and empowered with the attributes of a
corporation,145 including the power to purchase or acquire real
properties.146 However the PITAHC has no capital stock and no members,
thus following the majority, it is not a GOCC.
The state policy that guides PITAHC is the development of traditional and
alternative health care,147 and its objectives include the promotion and
advocacy of alternative, preventive and curative health care modalities
that have been proven safe, effective and cost effective.148 "Alternative
health care modalities" include "other forms of non-allophatic,
occasionally non-indigenous or imported healing methods" which include,
among others "reflexology, acupuncture, massage, acupressure" and
chiropractics.149
Given these premises, there is no impediment for the PITAHC to purchase
land and construct thereupon a massage parlor that would provide a
cheaper alternative to the opulent spas that have proliferated around the
metropolis. Such activity is in line with the purpose of the PITAHC and with
state policy. Is such massage parlor exempt from realty taxes? For the
majority, it is, for PITAHC is an instrumentality or agency exempt from
local government taxation, which does not fall under the exceptions under
Section 234 of the Local Government Code. Hence, this massage parlor
would not just be a shelter for frazzled nerves, but for taxes as well.
Ridiculous? One might say, certainly a decision of the Supreme Court
cannot be construed to promote an absurdity. But precisely the majority,
and the faulty reasoning it utilizes, opens itself up to all sorts of mischief,
and certainly, a tax-exempt massage parlor is one of the lesser evils that
could arise from the majority ruling. This is indeed a very strange and very
wrong decision.
I dissent.
DANTE O. TINGA
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 74930 February 13, 1989
RICARDO VALMONTE, OSWALDO CARBONELL, DOY DEL
CASTILLO, ROLANDO BARTOLOME, LEO OBLIGAR, JUN
GUTIERREZ, REYNALDO BAGATSING, JUN "NINOY" ALBA,
PERCY LAPID, ROMMEL CORRO and ROLANDO
FADUL, petitioners,
vs.
FELICIANO BELMONTE, JR., respondent.
Ricardo C. Valmonte for and in his own behalf and his co-
petitioners.
The Solicitor General for respondent.
CORTES, J.:
Petitioners in this special civil action for mandamus with preliminary
injunction invoke their right to information and pray that respondent be
directed:
(a) to furnish petitioners the list of the names of the Batasang Pambansa
members belonging to the UNIDO and PDP-Laban who were able to secure
clean loans immediately before the February 7 election thru the
intercession/marginal note of the then First Lady Imelda Marcos; and/or
(b) to furnish petitioners with certified true copies of the documents
evidencing their respective loans; and/or
(c) to allow petitioners access to the public records for the subject
information. (Petition, pp. 4-5; paragraphing supplied.]
The controversy arose when petitioner Valmonte wrote respondent
Belmonte the following letter:
June 4, 1986
Hon. Feliciano Belmonte
GSIS General Manager
Arroceros, Manila
Sir:
As a lawyer, member of the media and plain citizen of our Republic, I am
requesting that I be furnished with the list of names of the opposition
members of (the) Batasang Pambansa who were able to secure a clean
loan of P2 million each on guarranty (sic) of Mrs. Imelda Marcos. We
understand that OIC Mel Lopez of Manila was one of those aforesaid MPs.
Likewise, may we be furnished with the certified true copies of the
documents evidencing their loan. Expenses in connection herewith shall
be borne by us.
If we could not secure the above documents could we have access to
them?
We are premising the above request on the following provision of the
Freedom Constitution of the present regime.
The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents and papers
pertaining to official acts, transactions or decisions, shall be afforded the
citizen subject to such limitation as may be provided by law. (Art. IV, Sec.
6).
We trust that within five (5) days from receipt hereof we will receive your
favorable response on the matter.
Very truly yours,
(Sgd.) RICARDO C. VALMONTE
[Rollo, p. 7.]
To the aforesaid letter, the Deputy General Counsel of the GSIS replied:
June 17, 1986
Atty. Ricardo C. Valmonte
108 E. Benin Street
Caloocan City
Dear Compaero:
Possibly because he must have thought that it contained serious legal
implications, President & General Manager Feliciano Belmonte, Jr. referred
to me for study and reply your letter to him of June 4, 1986 requesting a
list of the opposition members of Batasang Pambansa who were able to
secure a clean loan of P2 million each on guaranty of Mrs. Imelda Marcos.
My opinion in this regard is that a confidential relationship exists between
the GSIS and all those who borrow from it, whoever they may be; that the
GSIS has a duty to its customers to preserve this confidentiality; and that
it would not be proper for the GSIS to breach this confidentiality unless so
ordered by the courts.
As a violation of this confidentiality may mar the image of the GSIS as a
reputable financial institution, I regret very much that at this time we
cannot respond positively to your request.
Very truly yours,
(Sgd.) MEYNARDO A. TIRO
Deputy General Counsel
[Rollo, p. 40.]
On June 20, 1986, apparently not having yet received the reply of the
Government Service and Insurance System (GSIS) Deputy General
Counsel, petitioner Valmonte wrote respondent another letter, saying that
for failure to receive a reply, "(W)e are now considering ourselves free to
do whatever action necessary within the premises to pursue our desired
objective in pursuance of public interest." [Rollo, p. 8.]
On June 26, 1986, Valmonte, joined by the other petitioners, filed the
instant suit.
On July 19, 1986, the Daily Express carried a news item reporting that 137
former members of the defunct interim and regular Batasang Pambansa,
including ten (10) opposition members, were granted housing loans by the
GSIS [Rollo, p. 41.]
Separate comments were filed by respondent Belmonte and the Solicitor
General. After petitioners filed a consolidated reply, the petition was given
due course and the parties were required to file their memoranda. The
parties having complied, the case was deemed submitted for decision.
In his comment respondent raises procedural objections to the issuance of
a writ of mandamus, among which is that petitioners have failed to
exhaust administrative remedies.
Respondent claims that actions of the GSIS General Manager are
reviewable by the Board of Trustees of the GSIS. Petitioners, however, did
not seek relief from the GSIS Board of Trustees. It is therefore asserted
that since administrative remedies were not exhausted, then petitioners
have no cause of action.
To this objection, petitioners claim that they have raised a purely legal
issue, viz., whether or not they are entitled to the documents sought, by
virtue of their constitutional right to information. Hence, it is argued that
this case falls under one of the exceptions to the principle of exhaustion of
administrative remedies.
Among the settled principles in administrative law is that before a party
can be allowed to resort to the courts, he is expected to have exhausted
all means of administrative redress available under the law. The courts for
reasons of law, comity and convenience will not entertain a case unless
the available administrative remedies have been resorted to and the
appropriate authorities have been given opportunity to act and correct the
errors committed in the administrative forum. However, the principle of
exhaustion of administrative remedies is subject to settled exceptions,
among which is when only a question of law is involved [Pascual v.
Provincial Board, 106 Phil. 466 (1959); Aguilar v. Valencia, et al., G.R. No.
L-30396, July 30, 1971, 40 SCRA 210; Malabanan v. Ramento, G.R. No. L-
2270, May 21, 1984, 129 SCRA 359.] The issue raised by petitioners,
which requires the interpretation of the scope of the constitutional right to
information, is one which can be passed upon by the regular courts more
competently than the GSIS or its Board of Trustees, involving as it does a
purely legal question. Thus, the exception of this case from the application
of the general rule on exhaustion of administrative remedies is warranted.
Having disposed of this procedural issue, We now address ourselves to the
issue of whether or not mandamus hes to compel respondent to perform
the acts sought by petitioners to be done, in pursuance of their right to
information.
We shall deal first with the second and third alternative acts sought to be
done, both of which involve the issue of whether or not petitioners are
entitled to access to the documents evidencing loans granted by the GSIS.
This is not the first time that the Court is confronted with a controversy
directly involving the constitutional right to information. In Taada v.
Tuvera, G.R. No. 63915, April 24,1985, 136 SCRA 27 and in the recent case
of Legaspi v. Civil Service Commission, G.R. No. 72119, May 29, 1987,150
SCRA 530, the Court upheld the people's constitutional right to be
informed of matters of public interest and ordered the government
agencies concerned to act as prayed for by the petitioners.
The pertinent provision under the 1987 Constitution is Art. 111, Sec. 7
which states:
The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law.
The right of access to information was also recognized in the 1973
Constitution, Art. IV Sec. 6 of which provided:
The right of the people to information on 'matters of public concern shall
be recognized. Access to official records, and to documents and papers
pertaining to official acts, transactions, or decisions, shall be afforded the
citizen subject to such limitations as may be provided by law.
An informed citizenry with access to the diverse currents in political, moral
and artistic thought and data relative to them, and the free exchange of
ideas and discussion of issues thereon, is vital to the democratic
government envisioned under our Constitution. The cornerstone of this
republican system of government is delegation of power by the people to
the State. In this system, governmental agencies and institutions operate
within the limits of the authority conferred by the people. Denied access
to information on the inner workings of government, the citizenry can
become prey to the whims and caprices of those to whom the power had
been delegated. The postulate of public office as a public trust,
institutionalized in the Constitution (in Art. XI, Sec. 1) to protect the people
from abuse of governmental power, would certainly be were empty words
if access to such information of public concern is denied, except under
limitations prescribed by implementing legislation adopted pursuant to
the Constitution.
Petitioners are practitioners in media. As such, they have both the right to
gather and the obligation to check the accuracy of information the
disseminate. For them, the freedom of the press and of speech is not only
critical, but vital to the exercise of their professions. The right of access to
information ensures that these freedoms are not rendered nugatory by the
government's monopolizing pertinent information. For an essential
element of these freedoms is to keep open a continuing dialogue or
process of communication between the government and the people. It is
in the interest of the State that the channels for free political discussion be
maintained to the end that the government may perceive and be
responsive to the people's will. Yet, this open dialogue can be effective
only to the extent that the citizenry is informed and thus able to formulate
its will intelligently. Only when the participants in the discussion are aware
of the issues and have access to information relating thereto can such
bear fruit.
The right to information is an essential premise of a meaningful right to
speech and expression. But this is not to say that the right to information
is merely an adjunct of and therefore restricted in application by the
exercise of the freedoms of speech and of the press. Far from it. The right
to information goes hand-in-hand with the constitutional policies of full
public disclosure * and honesty in the public service. ** It is meant to
enhance the widening role of the citizenry in governmental decision-
making as well as in checking abuse in government.
Yet, like all the constitutional guarantees, the right to information is not
absolute. As stated in Legaspi, the people's right to information is limited
to "matters of public concern," and is further "subject to such limitations
as may be provided by law." Similarly, the State's policy of full disclosure
is limited to "transactions involving public interest," and is "subject to
reasonable conditions prescribed by law."
Hence, before mandamus may issue, it must be clear that the information
sought is of "public interest" or "public concern," and is not exempted by
law from the operation of the constitutional guarantee [Legazpi v. Civil
Service Commission, supra, at p. 542.]
The Court has always grappled with the meanings of the terms "public
interest" and "public concern". As observed in Legazpi:
In determining whether or not a particular information is of public concern
there is no rigid test which can be applied. "Public concern" like "public
interest" is a term that eludes exact definition. Both terms embrace a
broad spectrum of subjects which the public may want to know, either
because these directly affect their lives, or simply because such matters
naturally arouse the interest of an ordinary citezen. In the final analysis, it
is for the courts to determine on a case by case basis whether the matter
at issue is of interest or importance, as it relates to or affects the public.
[Ibid. at p. 541]
In the Taada case the public concern deemed covered by the
constitutional right to information was the need for adequate notice to the
public of the various laws which are to regulate the actions and conduct of
citezens. InLegaspi, it was the "legitimate concern of citezensof ensure
that government positions requiring civil service eligibility are occupied
only by persons who are eligibles" [Supra at p. 539.]
The information sought by petitioners in this case is the truth of reports
that certain Members of the Batasang Pambansa belonging to the
opposition were able to secure "clean" loans from the GSIS immediately
before the February 7, 1986 election through the intercession of th
eformer First Lady, Mrs. Imelda Marcos.
The GSIS is a trustee of contributions from the government and its
employees and the administrator of various insurance programs for the
benefit of the latter. Undeniably, its funds assume a public character. More
particularly, Secs. 5(b) and 46 of P.D. 1146, as amended (the Revised
Government Service Insurance Act of 1977), provide for annual
appropriations to pay the contributions, premiums, interest and other
amounts payable to GSIS by the government, as employer, as well as the
obligations which the Republic of the Philippines assumes or guarantees to
pay. Considering the nature of its funds, the GSIS is expected to manage
its resources with utmost prudence and in strict compliance with the
pertinent laws or rules and regulations. Thus, one of the reasons that
prompted the revision of the old GSIS law (C.A. No. 186, as amended) was
the necessity "to preserve at all times the actuarial solvency of the funds
administered by the System" [Second Whereas Clause, P.D. No. 1146.]
Consequently, as respondent himself admits, the GSIS "is not supposed to
grant 'clean loans.'" [Comment, p. 8.] It is therefore the legitimate concern
of the public to ensure that these funds are managed properly with the
end in view of maximizing the benefits that accrue to the insured
government employees. Moreover, the supposed borrowers were
Members of the defunct Batasang Pambansa who themselves
appropriated funds for the GSIS and were therefore expected to be the
first to see to it that the GSIS performed its tasks with the greatest degree
of fidelity and that an its transactions were above board.
In sum, the public nature of the loanable funds of the GSIS and the public
office held by the alleged borrowers make the information sought clearly a
matter of public interest and concern.
A second requisite must be met before the right to information may be
enforced through mandamus proceedings,viz., that the information sought
must not be among those excluded by law.
Respondent maintains that a confidential relationship exists between the
GSIS and its borrowers. It is argued that a policy of confidentiality restricts
the indiscriminate dissemination of information.
Yet, respondent has failed to cite any law granting the GSIS the privilege
of confidentiality as regards the documents subject of this petition. His
position is apparently based merely on considerations of policy. The
judiciary does not settle policy issues. The Court can only declare what the
law is, and not what the law should be. Under our system of government,
policy issues are within the domain of the political branches of the
government, and of the people themselves as the repository of all State
power.
Respondent however contends that in view of the right to privacy which is
equally protected by the Constitution and by existing laws, the documents
evidencing loan transactions of the GSIS must be deemed outside the
ambit of the right to information.
There can be no doubt that right to privacy is constitutionally protected. In
the landmark case of Morfe v. Mutuc[130 Phil. 415 (1968), 22 SCRA 424],
this Court, speaking through then Mr. Justice Fernando, stated:
... The right to privacy as such is accorded recognition independently of its
identification with liberty; in itself, it is fully deserving of constitutional
protection. The language of Prof. Emerson is particularly apt: "The concept
of limited government has always included the idea that governmental
powers stop short of certain intrusions into the personal life of the citizen.
This is indeed one of the basic distinctions between absolute and limited
government. UItimate and pervasive control of the individual, in all
aspects of his life, is the hallmark of the absolute. state, In contrast, a
system of limited government safeguards a private sector, which belongs
to the individual, firmly distinguishing it from the public sector, which the
state can control. Protection of this private sector protection, in other
words, of the dignity and integrity of the individual has become
increasingly important as modem society has developed. All the forces of
technological age industrialization, urbanization, and organization
operate to narrow the area of privacy and facilitate intrusion into it. In
modern terms, the capacity to maintain and support this enclave of
private life marks the difference between a democratic and a totalitarian
society." [at pp. 444-445.]
When the information requested from the government intrudes into the
privacy of a citizen, a potential conflict between the rights to information
and to privacy may arise. However, the competing interests of these
rights need not be resolved in this case. Apparent from the above-quoted
statement of the Court in Morfe is that the right to privacy belongs to the
individual in his private capacity, and not to public and governmental
agencies like the GSIS. Moreover, the right cannot be invoked by juridical
entities like the GSIS. As held in the case of Vassar College v. Loose Wills
Biscuit Co. [197 F. 982 (1912)], a corporation has no right of privacy in its
name since the entire basis of the right to privacy is an injury to the
feelings and sensibilities of the party and a corporation would have no
such ground for relief.
Neither can the GSIS through its General Manager, the respondent, invoke
the right to privacy of its borrowers. The right is purely personal in nature
[Cf. Atkinson v. John Doherty & Co., 121 Mich 372, 80 N.W. 285, 46 L.RA.
219 (1899); Schuyler v. Curtis, 147 N.Y. 434, 42 N.E. 22, 31 L.R.A. 286
(1895)), and hence may be invoked only by the person whose privacy is
claimed to be violated.
It may be observed, however, that in the instant case, the concerned
borrowers themselves may not succeed if they choose to invoke their right
to privacy, considering the public offices they were holding at the time the
loans were alleged to have been granted. It cannot be denied that
because of the interest they generate and their newsworthiness, public
figures, most especially those holding responsible positions in
government, enjoy a more limited right to privacy as compared to
ordinary individuals, their actions being subject to closer public scrutiny
[Cf.Ayer Productions Pty. Ltd. v. Capulong, G.R. Nos. 82380 and 82398,
April 29, 1988; See also Cohen v. Marx, 211 P. 2d 321 (1949).]
Respondent next asserts that the documents evidencing the loan
transactions of the GSIS are private in nature and hence, are not covered
by the Constitutional right to information on matters of public concern
which guarantees "(a)ccess to official records, and to documents, and
papers pertaining to official acts, transactions, or decisions" only.
It is argued that the records of the GSIS, a government corporation
performing proprietary functions, are outside the coverage of the people's
right of access to official records.
It is further contended that since the loan function of the GSIS is merely
incidental to its insurance function, then its loan transactions are not
covered by the constitutional policy of full public disclosure and the right
to information which is applicable only to "official" transactions.
First of all, the "constituent ministrant" dichotomy characterizing
government function has long been repudiated. In ACCFA v. Confederation
of Unions and Government Corporations and Offices (G.R. Nos. L-21484
and L-23605, November 29, 1969, 30 SCRA 6441, the Court said that the
government, whether carrying out its sovereign attributes or running
some business, discharges the same function of service to the people.
Consequently, that the GSIS, in granting the loans, was exercising a
proprietary function would not justify the exclusion of the transactions
from the coverage and scope of the right to information.
Moreover, the intent of the members of the Constitutional Commission of
1986, to include government-owned and controlled corporations and
transactions entered into by them within the coverage of the State policy
of fun public disclosure is manifest from the records of the proceedings:
xxx xxx xxx
THE PRESIDING OFFICER (Mr. Colayco).
Commissioner Suarez is recognized.
MR. SUAREZ. Thank you. May I ask the Gentleman a few question?
MR. OPLE. Very gladly.
MR. SUAREZ. Thank you.
When we declare a "policy of full public disclosure of all its transactions"
referring to the transactions of the State and when we say the
"State" which I suppose would include all of the various agencies,
departments, ministries and instrumentalities of the government....
MR. OPLE. Yes, and individual public officers, Mr. Presiding Officer.
MR. SUAREZ. Including government-owned and controlled corporations.
MR. OPLE. That is correct, Mr. Presiding Officer.
MR. SUAREZ. And when we say "transactions" which should be
distinguished from contracts, agreements, or treaties or whatever, does
the Gentleman refer to the steps leading to the consummation of the
contract, or does he refer to the contract itself?
MR. OPLE. The "transactions" used here I suppose is generic and,
therefore, it can cover both steps leading to a contract, and already a
consummated contract, Mr. Presiding Officer.
MR. SUAREZ. This contemplates inclusion of negotiations leading to the
consummation of the transaction.
MR. OPLE. Yes, subject only to reasonable safeguards on the national
interest.
MR. SUAREZ. Thank you. [V Record of the Constitutional Commission 24-
25.] (Emphasis supplied.)
Considering the intent of the framers of the Constitution which, though
not binding upon the Court, are nevertheless persuasive, and considering
further that government-owned and controlled corporations, whether
performing proprietary or governmental functions are accountable to the
people, the Court is convinced that transactions entered into by the GSIS,
a government-controlled corporation created by special legislation are
within the ambit of the people's right to be informed pursuant to the
constitutional policy of transparency in government dealings.
In fine, petitioners are entitled to access to the documents evidencing
loans granted by the GSIS, subject to reasonable regulations that the
latter may promulgate relating to the manner and hours of examination,
to the end that damage to or loss of the records may be avoided, that
undue interference with the duties of the custodian of the records may be
prevented and that the right of other persons entitled to inspect the
records may be insured [Legaspi v. Civil Service Commission, supra at p.
538, quoting Subido v. Ozaeta, 80 Phil. 383, 387.] The petition, as to the
second and third alternative acts sought to be done by petitioners, is
meritorious.
However, the same cannot be said with regard to the first act sought by
petitioners, i.e., "to furnish petitioners the list of the names of the
Batasang Pambansa members belonging to the UNIDO and PDP-Laban
who were able to secure clean loans immediately before the February 7
election thru the intercession/marginal note of the then First Lady Imelda
Marcos."
Although citizens are afforded the right to information and, pursuant
thereto, are entitled to "access to official records," the Constitution does
not accord them a right to compel custodians of official records to prepare
lists, abstracts, summaries and the like in their desire to acquire
information on matters of public concern.
It must be stressed that it is essential for a writ of mandamus to issue that
the applicant has a well-defined, clear and certain legal right to the thing
demanded and that it is the imperative duty of defendant to perform the
act required. The corresponding duty of the respondent to perform the
required act must be clear and specific [Lemi v. Valencia, G.R. No. L-
20768, November 29,1968,126 SCRA 203; Ocampo v. Subido, G.R. No. L-
28344, August 27, 1976, 72 SCRA 443.] The request of the petitioners fails
to meet this standard, there being no duty on the part of respondent to
prepare the list requested.
WHEREFORE, the instant petition is hereby granted and respondent
General Manager of the Government Service Insurance System is
ORDERED to allow petitioners access to documents and records
evidencing loans granted to Members of the former Batasang Pambansa,
as petitioners may specify, subject to reasonable regulations as to the
time and manner of inspection, not incompatible with this decision, as the
GSIS may deem necessary.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano,
Gancayco, Padilla, Bidin, Sarmiento, Grio-Aquino, Medialdea and
Regalado, JJ., concur.
Separate Opinions
CRUZ, J., concurring:
Instead of merely affixing my signature to signify my concurrence, I write
this separate opinion simply to say I have nothing to add to Justice Irene
R. Cortes' exceptionally eloquent celebration of the right to information on
matters of public concern.
Separate Opinions
CRUZ, J., concurring:
Instead of merely affixing my signature to signify my concurrence, I write
this separate opinion simply to say I have nothing to add to Justice Irene
R. Cortes' exceptionally eloquent celebration of the right to information on
matters of public concern.
Footnotes
* Art. II, Sec. 28. Subject to reasonable conditions prescribed by law, the
State adopts and implements a policy of full public disclosure of all its
transactions involving public interest.
** Art XI, Sec. 1. Public office is a public trust. Public officers and
employees must at all times be accountable to the people, serve them
with utmost responsibility, integrity, loyalty, and efficiency, act with
partriotism and justice, and lead modest lives.
The following provisions of the 1987 Constitution are further indicative of
the policy of transparency:
Art. VII, Sec. 12. In case of serious illness of the President, the public shall
be informed of the state of his health. The members of the cabinet in
charge of national security and foreign relations and the Chief of Staff of
the Armed Forces of the Philippines shall not be denied access to the
President during such illness.
Art. XI, Sec. 17. A public officer or employee shall, upon assumption of
office and as often thereafter as may be required by law, submit a
declaration under oath or his assets liabilities, and net worth. In the case
of the President, the Vice-President, the Members of the Cabinet, the
Congress, the Supreme Court, the Constitutional Commissions and other
constitutional offices, and officers of the armed forces with general or flag
rank, the declaration shall be disclosed to the public in the manner
provided by law.
Art. XII, Sec. 21. Foreign loans may only be incurred in accordance with
law and the regulation of the monetary authority. Information on foreign
loans obtained or guaranteed by the Government shall be made available
to the public.
https://www.scribd.com/doc/100131401/Velmonte-vs-Belmonte-Case-
Digest
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A.M. No. 133-J May 31, 1982
BERNARDITA R. MACARIOLA, complainant,
vs.
HONORABLE ELIAS B. ASUNCION, Judge of the Court of
First Instance of Leyte, respondent.
MAKASIAR, J:
In a verified complaint dated August 6, 1968 Bernardita R. Macariola
charged respondent Judge Elias B. Asuncion of the Court of First Instance
of Leyte, now Associate Justice of the Court of Appeals, with "acts
unbecoming a judge."
The factual setting of the case is stated in the report dated May 27, 1971
of then Associate Justice Cecilia Muoz Palma of the Court of Appeals now
retired Associate Justice of the Supreme Court, to whom this case was
referred on October 28, 1968 for investigation, thus:
Civil Case No. 3010 of the Court of First Instance of Leyte was a complaint
for partition filed by Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes,
Ruperto Reyes, Adela Reyes, and Priscilla Reyes, plaintiffs, against
Bernardita R. Macariola, defendant, concerning the properties left by the
deceased Francisco Reyes, the common father of the plaintiff and
defendant.
In her defenses to the complaint for partition, Mrs. Macariola alleged
among other things that; a) plaintiff Sinforosa R. Bales was not a daughter
of the deceased Francisco Reyes; b) the only legal heirs of the deceased
were defendant Macariola, she being the only offspring of the first
marriage of Francisco Reyes with Felisa Espiras, and the remaining
plaintiffs who were the children of the deceased by his second marriage
with Irene Ondez; c) the properties left by the deceased were all the
conjugal properties of the latter and his first wife, Felisa Espiras, and no
properties were acquired by the deceased during his second marriage; d)
if there was any partition to be made, those conjugal properties should
first be partitioned into two parts, and one part is to be adjudicated solely
to defendant it being the share of the latter's deceased mother, Felisa
Espiras, and the other half which is the share of the deceased Francisco
Reyes was to be divided equally among his children by his two marriages.
On June 8, 1963, a decision was rendered by respondent Judge Asuncion in
Civil Case 3010, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court, upon a
preponderance of evidence, finds and so holds, and hereby renders
judgment (1) Declaring the plaintiffs Luz R. Bakunawa, Anacorita Reyes,
Ruperto Reyes, Adela Reyes and Priscilla Reyes as the only children
legitimated by the subsequent marriage of Francisco Reyes Diaz to Irene
Ondez; (2) Declaring the plaintiff Sinforosa R. Bales to have been an
illegitimate child of Francisco Reyes Diaz; (3) Declaring Lots Nos. 4474,
4475, 4892, 5265, 4803, 4581, 4506 and 1/4 of Lot 1145 as belonging to
the conjugal partnership of the spouses Francisco Reyes Diaz and Felisa
Espiras; (4) Declaring Lot No. 2304 and 1/4 of Lot No. 3416 as belonging
to the spouses Francisco Reyes Diaz and Irene Ondez in common
partnership; (5) Declaring that 1/2 of Lot No. 1184 as belonging
exclusively to the deceased Francisco Reyes Diaz; (6) Declaring the
defendant Bernardita R. Macariola, being the only legal and forced heir of
her mother Felisa Espiras, as the exclusive owner of one-half of each of
Lots Nos. 4474, 4475, 4892, 5265, 4803, 4581, 4506; and the remaining
one-half (1/2) of each of said Lots Nos. 4474, 4475, 4892, 5265, 4803,
4581, 4506 and one-half (1/2) of one-fourth (1/4) of Lot No. 1154 as
belonging to the estate of Francisco Reyes Diaz; (7) Declaring Irene Ondez
to be the exclusive owner of one-half (1/2) of Lot No. 2304 and one-half
(1/2) of one-fourth (1/4) of Lot No. 3416; the remaining one-half (1/2) of
Lot 2304 and the remaining one-half (1/2) of one-fourth (1/4) of Lot No.
3416 as belonging to the estate of Francisco Reyes Diaz; (8) Directing the
division or partition of the estate of Francisco Reyes Diaz in such a manner
as to give or grant to Irene Ondez, as surviving widow of Francisco Reyes
Diaz, a hereditary share of. one-twelfth (1/12) of the whole estate of
Francisco Reyes Diaz (Art. 996 in relation to Art. 892, par 2, New Civil
Code), and the remaining portion of the estate to be divided among the
plaintiffs Sinforosa R. Bales, Luz R. Bakunawa, Anacorita Reyes, Ruperto
Reyes, Adela Reyes, Priscilla Reyes and defendant Bernardita R. Macariola,
in such a way that the extent of the total share of plaintiff Sinforosa R.
Bales in the hereditary estate shall not exceed the equivalent of two-fifth
(2/5) of the total share of any or each of the other plaintiffs and the
defendant (Art. 983, New Civil Code), each of the latter to receive equal
shares from the hereditary estate, (Ramirez vs. Bautista, 14 Phil. 528;
Diancin vs. Bishop of Jaro, O.G. [3rd Ed.] p. 33); (9) Directing the parties,
within thirty days after this judgment shall have become final to submit to
this court, for approval a project of partition of the hereditary estate in the
proportion above indicated, and in such manner as the parties may, by
agreement, deemed convenient and equitable to them taking into
consideration the location, kind, quality, nature and value of the
properties involved; (10) Directing the plaintiff Sinforosa R. Bales and
defendant Bernardita R. Macariola to pay the costs of this suit, in the
proportion of one-third (1/3) by the first named and two-thirds (2/3) by the
second named; and (I 1) Dismissing all other claims of the parties [pp 27-
29 of Exh. C].
The decision in civil case 3010 became final for lack of an appeal, and on
October 16, 1963, a project of partition was submitted to Judge Asuncion
which is marked Exh. A. Notwithstanding the fact that the project of
partition was not signed by the parties themselves but only by the
respective counsel of plaintiffs and defendant, Judge Asuncion approved it
in his Order dated October 23, 1963, which for convenience is quoted
hereunder in full:
The parties, through their respective counsels, presented to this Court for
approval the following project of partition:
COMES NOW, the plaintiffs and the defendant in the above-entitled case,
to this Honorable Court respectfully submit the following Project of
Partition:
l. The whole of Lots Nos. 1154, 2304 and 4506 shall belong exclusively to
Bernardita Reyes Macariola;
2. A portion of Lot No. 3416 consisting of 2,373.49 square meters along
the eastern part of the lot shall be awarded likewise to Bernardita R.
Macariola;
3. Lots Nos. 4803, 4892 and 5265 shall be awarded to Sinforosa Reyes
Bales;
4. A portion of Lot No. 3416 consisting of 1,834.55 square meters along
the western part of the lot shall likewise be awarded to Sinforosa Reyes-
Bales;
5. Lots Nos. 4474 and 4475 shall be divided equally among Luz Reyes
Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and Priscilla
Reyes in equal shares;
6. Lot No. 1184 and the remaining portion of Lot No. 3416 after taking the
portions awarded under item (2) and (4) above shall be awarded to Luz
Reyes Bakunawa, Anacorita Reyes, Ruperto Reyes, Adela Reyes and
Priscilla Reyes in equal shares, provided, however that the remaining
portion of Lot No. 3416 shall belong exclusively to Priscilla Reyes.
WHEREFORE, it is respectfully prayed that the Project of Partition indicated
above which is made in accordance with the decision of the Honorable
Court be approved.
Tacloban City, October 16, 1963.
(SGD) BONIFACIO RAMO Atty. for the Defendant Tacloban City
(SGD) ZOTICO A. TOLETE Atty. for the Plaintiff Tacloban City
While the Court thought it more desirable for all the parties to have signed
this Project of Partition, nevertheless, upon assurance of both counsels of
the respective parties to this Court that the Project of Partition, as above-
quoted, had been made after a conference and agreement of the plaintiffs
and the defendant approving the above Project of Partition, and that both
lawyers had represented to the Court that they are given full authority to
sign by themselves the Project of Partition, the Court, therefore, finding
the above-quoted Project of Partition to be in accordance with law, hereby
approves the same. The parties, therefore, are directed to execute such
papers, documents or instrument sufficient in form and substance for the
vesting of the rights, interests and participations which were adjudicated
to the respective parties, as outlined in the Project of Partition and the
delivery of the respective properties adjudicated to each one in view of
said Project of Partition, and to perform such other acts as are legal and
necessary to effectuate the said Project of Partition.
SO ORDERED.
Given in Tacloban City, this 23rd day of October, 1963.
(SGD) ELIAS B. ASUNCION Judge
EXH. B.
The above Order of October 23, 1963, was amended on November 11,
1963, only for the purpose of giving authority to the Register of Deeds of
the Province of Leyte to issue the corresponding transfer certificates of
title to the respective adjudicatees in conformity with the project of
partition (see Exh. U).
One of the properties mentioned in the project of partition was Lot 1184 or
rather one-half thereof with an area of 15,162.5 sq. meters. This lot, which
according to the decision was the exclusive property of the deceased
Francisco Reyes, was adjudicated in said project of partition to the
plaintiffs Luz, Anacorita Ruperto, Adela, and Priscilla all surnamed Reyes in
equal shares, and when the project of partition was approved by the trial
court the adjudicatees caused Lot 1184 to be subdivided into five lots
denominated as Lot 1184-A to 1184-E inclusive (Exh. V).
Lot 1184-D was conveyed to Enriqueta D. Anota, a stenographer in Judge
Asuncion's court (Exhs. F, F-1 and V-1), while Lot 1184-E which had an
area of 2,172.5556 sq. meters was sold on July 31, 1964 to Dr. Arcadio
Galapon (Exh. 2) who was issued transfer certificate of title No. 2338 of
the Register of Deeds of the city of Tacloban (Exh. 12).
On March 6, 1965, Dr. Arcadio Galapon and his wife Sold a portion of Lot
1184-E with an area of around 1,306 sq. meters to Judge Asuncion and his
wife, Victoria S. Asuncion (Exh. 11), which particular portion was declared
by the latter for taxation purposes (Exh. F).
On August 31, 1966, spouses Asuncion and spouses Galapon conveyed
their respective shares and interest in Lot 1184-E to "The Traders
Manufacturing and Fishing Industries Inc." (Exit 15 & 16). At the time of
said sale the stockholders of the corporation were Dominador Arigpa Tan,
Humilia Jalandoni Tan, Jaime Arigpa Tan, Judge Asuncion, and the latter's
wife, Victoria S. Asuncion, with Judge Asuncion as the President and Mrs.
Asuncion as the secretary (Exhs. E-4 to E-7). The Articles of Incorporation
of "The Traders Manufacturing and Fishing Industries, Inc." which we shall
henceforth refer to as "TRADERS" were registered with the Securities and
Exchange Commission only on January 9, 1967 (Exh. E) [pp. 378-385,
rec.].
Complainant Bernardita R. Macariola filed on August 9, 1968 the instant
complaint dated August 6, 1968 alleging four causes of action, to wit: [1]
that respondent Judge Asuncion violated Article 1491, paragraph 5, of the
New Civil Code in acquiring by purchase a portion of Lot No. 1184-E which
was one of those properties involved in Civil Case No. 3010 decided by
him; [2] that he likewise violated Article 14, paragraphs I and 5 of the
Code of Commerce, Section 3, paragraph H, of R.A. 3019, otherwise
known as the Anti-Graft and Corrupt Practices Act, Section 12, Rule XVIII of
the Civil Service Rules, and Canon 25 of the Canons of Judicial Ethics, by
associating himself with the Traders Manufacturing and Fishing Industries,
Inc., as a stockholder and a ranking officer while he was a judge of the
Court of First Instance of Leyte; [3] that respondent was guilty of coddling
an impostor and acted in disregard of judicial decorum by closely
fraternizing with a certain Dominador Arigpa Tan who openly and publicly
advertised himself as a practising attorney when in truth and in fact his
name does not appear in the Rolls of Attorneys and is not a member of the
Philippine Bar; and [4] that there was a culpable defiance of the law and
utter disregard for ethics by respondent Judge (pp. 1-7, rec.).
Respondent Judge Asuncion filed on September 24, 1968 his answer to
which a reply was filed on October 16, 1968 by herein complainant. In Our
resolution of October 28, 1968, We referred this case to then Justice
Cecilia Muoz Palma of the Court of Appeals, for investigation, report and
recommendation. After hearing, the said Investigating Justice submitted
her report dated May 27, 1971 recommending that respondent Judge
should be reprimanded or warned in connection with the first cause of
action alleged in the complaint, and for the second cause of action,
respondent should be warned in case of a finding that he is prohibited
under the law to engage in business. On the third and fourth causes of
action, Justice Palma recommended that respondent Judge be exonerated.
The records also reveal that on or about November 9 or 11, 1968 (pp. 481,
477, rec.), complainant herein instituted an action before the Court of First
Instance of Leyte, entitled "Bernardita R. Macariola, plaintiff, versus
Sinforosa R. Bales, et al., defendants," which was docketed as Civil Case
No. 4235, seeking the annulment of the project of partition made pursuant
to the decision in Civil Case No. 3010 and the two orders issued by
respondent Judge approving the same, as well as the partition of the
estate and the subsequent conveyances with damages. It appears,
however, that some defendants were dropped from the civil case. For one,
the case against Dr. Arcadio Galapon was dismissed because he was no
longer a real party in interest when Civil Case No. 4234 was filed, having
already conveyed on March 6, 1965 a portion of lot 1184-E to respondent
Judge and on August 31, 1966 the remainder was sold to the Traders
Manufacturing and Fishing Industries, Inc. Similarly, the case against
defendant Victoria Asuncion was dismissed on the ground that she was no
longer a real party in interest at the time the aforesaid Civil Case No. 4234
was filed as the portion of Lot 1184 acquired by her and respondent Judge
from Dr. Arcadio Galapon was already sold on August 31, 1966 to the
Traders Manufacturing and Fishing industries, Inc. Likewise, the cases
against defendants Serafin P. Ramento, Catalina Cabus, Ben Barraza Go,
Jesus Perez, Traders Manufacturing and Fishing Industries, Inc., Alfredo R.
Celestial and Pilar P. Celestial, Leopoldo Petilla and Remedios Petilla,
Salvador Anota and Enriqueta Anota and Atty. Zotico A. Tolete were
dismissed with the conformity of complainant herein, plaintiff therein, and
her counsel.
On November 2, 1970, Judge Jose D. Nepomuceno of the Court of First
Instance of Leyte, who was directed and authorized on June 2, 1969 by the
then Secretary (now Minister) of Justice and now Minister of National
Defense Juan Ponce Enrile to hear and decide Civil Case No. 4234,
rendered a decision, the dispositive portion of which reads as follows:
A. IN THE CASE AGAINST JUDGE ELIAS B. ASUNCION
(1) declaring that only Branch IV of the Court of First Instance of Leyte has
jurisdiction to take cognizance of the issue of the legality and validity of
the Project of Partition [Exhibit "B"] and the two Orders [Exhibits "C" and
"C- 3"] approving the partition;
(2) dismissing the complaint against Judge Elias B. Asuncion;
(3) adjudging the plaintiff, Mrs. Bernardita R. Macariola to pay defendant
Judge Elias B. Asuncion,
(a) the sum of FOUR HUNDRED THOUSAND PESOS [P400,000.00] for moral
damages;
(b) the sum of TWO HUNDRED THOUSAND PESOS [P200,000.001 for
exemplary damages;
(c) the sum of FIFTY THOUSAND PESOS [P50,000.00] for nominal
damages; and
(d) he sum of TEN THOUSAND PESOS [PI0,000.00] for Attorney's Fees.
B. IN THE CASE AGAINST THE DEFENDANT MARIQUITA VILLASIN, FOR
HERSELF AND FOR THE HEIRS OF THE DECEASED GERARDO VILLASIN
(1) Dismissing the complaint against the defendants Mariquita Villasin and
the heirs of the deceased Gerardo Villasin;
(2) Directing the plaintiff to pay the defendants Mariquita Villasin and the
heirs of Gerardo Villasin the cost of the suit.
C. IN THE CASE AGAINST THE DEFENDANT SINFOROSA R. BALES, ET AL.,
WHO WERE PLAINTIFFS IN CIVIL CASE NO. 3010
(1) Dismissing the complaint against defendants Sinforosa R. Bales, Adela
R. Herrer, Priscilla R. Solis, Luz R. Bakunawa, Anacorita R. Eng and Ruperto
O. Reyes.
D. IN THE CASE AGAINST DEFENDANT BONIFACIO RAMO
(1) Dismissing the complaint against Bonifacio Ramo;
(2) Directing the plaintiff to pay the defendant Bonifacio Ramo the cost of
the suit.
SO ORDERED [pp. 531-533, rec.]
It is further disclosed by the record that the aforesaid decision was
elevated to the Court of Appeals upon perfection of the appeal on
February 22, 1971.
I Galapon who earlier purchased on July 31, 1964 Lot 1184-E from three of
WE find that there is no merit in the contention of complainant Bernardita
R. Macariola, under her first cause of action, that respondent Judge Elias
B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in
acquiring by purchase a portion of Lot No. 1184-E which was one of those
properties involved in Civil Case No. 3010. 'That Article provides:
Article 1491. The following persons cannot acquire by purchase, even at a
public or judicial action, either in person or through the mediation of
another:
xxx xxx xxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior
courts, and other officers and employees connected with the
administration of justice, the property and rights in litigation or levied
upon an execution before the court within whose jurisdiction or territory
they exercise their respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation in which they
may take part by virtue of their profession [emphasis supplied].
The prohibition in the aforesaid Article applies only to the sale or
assignment of the property which is the subject of litigation to the persons
disqualified therein. WE have already ruled that "... for the prohibition to
operate, the sale or assignment of the property must take place during
the pendency of the litigation involving the property" (The Director of
Lands vs. Ababa et al., 88 SCRA 513, 519 [1979], Rosario vda. de Laig vs.
Court of Appeals, 86 SCRA 641, 646 [1978]).
In the case at bar, when the respondent Judge purchased on March 6,
1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he
rendered on June 8, 1963 was already final because none of the parties
therein filed an appeal within the reglementary period; hence, the lot in
question was no longer subject of the litigation. Moreover, at the time of
the sale on March 6, 1965, respondent's order dated October 23,
1963 and the amended order dated November 11, 1963 approving the
October 16, 1963 project of partition made pursuant to the June 8, 1963
decision, had long become final for there was no appeal from said orders.
Furthermore, respondent Judge did not buy the lot in question on March 6,
1965 directly from the plaintiffs in Civil Case No. 3010 but from Dr. Arcadio
the plaintiffs, namely, Priscilla Reyes, Adela Reyes, and Luz R. Bakunawa
after the finality of the decision in Civil Case No. 3010. It may be recalled
that Lot 1184 or more specifically one-half thereof was adjudicated in
equal shares to Priscilla Reyes, Adela Reyes, Luz Bakunawa, Ruperto Reyes
and Anacorita Reyes in the project of partition, and the same was
subdivided into five lots denominated as Lot 1184-A to 1184-E. As
aforestated, Lot 1184-E was sold on July 31, 1964 to Dr. Galapon for which
he was issued TCT No. 2338 by the Register of Deeds of Tacloban City, and
on March 6, 1965 he sold a portion of said lot to respondent Judge and his
wife who declared the same for taxation purposes only. The subsequent
sale on August 31, 1966 by spouses Asuncion and spouses Galapon of
their respective shares and interest in said Lot 1184-E to the Traders
Manufacturing and Fishing Industries, Inc., in which respondent was the
president and his wife was the secretary, took place long after the finality
of the decision in Civil Case No. 3010 and of the subsequent two aforesaid
orders therein approving the project of partition.
While it appears that complainant herein filed on or about November 9 or
11, 1968 an action before the Court of First Instance of Leyte docketed as
Civil Case No. 4234, seeking to annul the project of partition and the two
orders approving the same, as well as the partition of the estate and the
subsequent conveyances, the same, however, is of no moment.
The fact remains that respondent Judge purchased on March 6, 1965 a
portion of Lot 1184-E from Dr. Arcadio Galapon; hence, after the finality of
the decision which he rendered on June 8, 1963 in Civil Case No. 3010 and
his two questioned orders dated October 23, 1963 and November 11,
1963. Therefore, the property was no longer subject of litigation.
The subsequent filing on November 9, or 11, 1968 of Civil Case No. 4234
can no longer alter, change or affect the aforesaid facts that the
questioned sale to respondent Judge, now Court of Appeals Justice, was
effected and consummated long after the finality of the aforesaid decision
or orders.
Consequently, the sale of a portion of Lot 1184-E to respondent Judge
having taken place over one year after the finality of the decision in Civil
Case No. 3010 as well as the two orders approving the project of partition,
and not during the pendency of the litigation, there was no violation of
paragraph 5, Article 1491 of the New Civil Code.
It is also argued by complainant herein that the sale on July 31, 1964 of
Lot 1184-E to Dr. Arcadio Galapon by Priscilla Reyes, Adela Reyes and Luz
R. Bakunawa was only a mere scheme to conceal the illegal and unethical
transfer of said lot to respondent Judge as a consideration for the approval
of the project of partition. In this connection, We agree with the findings of
the Investigating Justice thus:
And so we are now confronted with this all-important question whether or
not the acquisition by respondent of a portion of Lot 1184-E and the
subsequent transfer of the whole lot to "TRADERS" of which respondent
was the President and his wife the Secretary, was intimately related to the
Order of respondent approving the project of partition, Exh. A.
Respondent vehemently denies any interest or participation in the
transactions between the Reyeses and the Galapons concerning Lot 1184-
E, and he insists that there is no evidence whatsoever to show that Dr.
Galapon had acted, in the purchase of Lot 1184-E, in mediation for him
and his wife. (See p. 14 of Respondent's Memorandum).
xxx xxx xxx
On this point, I agree with respondent that there is no evidence in the
record showing that Dr. Arcadio Galapon acted as a mere "dummy" of
respondent in acquiring Lot 1184-E from the Reyeses. Dr. Galapon
appeared to this investigator as a respectable citizen, credible and
sincere, and I believe him when he testified that he bought Lot 1184-E in
good faith and for valuable consideration from the Reyeses without any
intervention of, or previous understanding with Judge Asuncion (pp. 391-
394, rec.).
On the contention of complainant herein that respondent Judge acted
illegally in approving the project of partition although it was not signed by
the parties, We quote with approval the findings of the Investigating
Justice, as follows:
1. I agree with complainant that respondent should have required the
signature of the parties more particularly that of Mrs. Macariola on the
project of partition submitted to him for approval; however, whatever
error was committed by respondent in that respect was done in good faith
as according to Judge Asuncion he was assured by Atty. Bonifacio Ramo,
the counsel of record of Mrs. Macariola, That he was authorized by his
client to submit said project of partition, (See Exh. B and tsn p. 24, January
20, 1969). While it is true that such written authority if there was any, was
not presented by respondent in evidence, nor did Atty. Ramo appear to
corroborate the statement of respondent, his affidavit being the only one
that was presented as respondent's Exh. 10, certain actuations of Mrs.
Macariola lead this investigator to believe that she knew the contents of
the project of partition, Exh. A, and that she gave her conformity thereto. I
refer to the following documents:
1) Exh. 9 Certified true copy of OCT No. 19520 covering Lot 1154 of the
Tacloban Cadastral Survey in which the deceased Francisco Reyes holds a
"1/4 share" (Exh. 9-a). On tills certificate of title the Order dated
November 11, 1963, (Exh. U) approving the project of partition was duly
entered and registered on November 26, 1963 (Exh. 9-D);
2) Exh. 7 Certified copy of a deed of absolute sale executed by
Bernardita Reyes Macariola onOctober 22, 1963, conveying to Dr. Hector
Decena the one-fourth share of the late Francisco Reyes-Diaz in Lot 1154.
In this deed of sale the vendee stated that she was the absolute owner of
said one-fourth share, the same having been adjudicated to her as her
share in the estate of her father Francisco Reyes Diaz as per decision of
the Court of First Instance of Leyte under case No. 3010 (Exh. 7-A). The
deed of sale was duly registered and annotated at the back of OCT 19520
on December 3, 1963 (see Exh. 9-e).
In connection with the abovementioned documents it is to be noted that in
the project of partition dated October 16, 1963, which was approved by
respondent on October 23, 1963, followed by an amending Order on
November 11, 1963, Lot 1154 or rather 1/4 thereof was adjudicated to
Mrs. Macariola. It is this 1/4 share in Lot 1154 which complainant sold to
Dr. Decena on October 22, 1963, several days after the preparation of the
project of partition.
Counsel for complainant stresses the view, however, that the latter sold
her one-fourth share in Lot 1154 by virtue of the decision in Civil Case
3010 and not because of the project of partition, Exh. A. Such contention
is absurd because from the decision, Exh. C, it is clear that one-half of
one- fourth of Lot 1154 belonged to the estate of Francisco Reyes Diaz
while the other half of said one-fourth was the share of complainant's
mother, Felisa Espiras; in other words, the decision did not adjudicate the
whole of the one-fourth of Lot 1154 to the herein complainant (see Exhs.
C-3 & C-4). Complainant became the owner of the entire one-fourth of Lot
1154 only by means of the project of partition, Exh. A. Therefore, if Mrs.
Macariola sold Lot 1154 on October 22, 1963, it was for no other reason
than that she was wen aware of the distribution of the properties of her
deceased father as per Exhs. A and B. It is also significant at this point to
state that Mrs. Macariola admitted during the cross-examination that she
went to Tacloban City in connection with the sale of Lot 1154 to Dr.
Decena (tsn p. 92, November 28, 1968) from which we can deduce that
she could not have been kept ignorant of the proceedings in civil case
3010 relative to the project of partition.
Complainant also assails the project of partition because according to her
the properties adjudicated to her were insignificant lots and the least
valuable. Complainant, however, did not present any direct and positive
evidence to prove the alleged gross inequalities in the choice and
distribution of the real properties when she could have easily done so by
presenting evidence on the area, location, kind, the assessed and market
value of said properties. Without such evidence there is nothing in the
record to show that there were inequalities in the distribution of the
properties of complainant's father (pp. 386389, rec.).
Finally, while it is. true that respondent Judge did not violate paragraph 5,
Article 1491 of the New Civil Code in acquiring by purchase a portion of
Lot 1184-E which was in litigation in his court, it was, however, improper
for him to have acquired the same. He should be reminded of Canon 3 of
the Canons of Judicial Ethics which requires that: "A judge's official
conduct should be free from the appearance of impropriety, and his
personal behavior, not only upon the bench and in the performance of
judicial duties, but also in his everyday life, should be beyond reproach."
And as aptly observed by the Investigating Justice: "... it was unwise and
indiscreet on the part of respondent to have purchased or acquired a
portion of a piece of property that was or had been in litigation in his court
and caused it to be transferred to a corporation of which he and his wife
were ranking officers at the time of such transfer. One who occupies an
exalted position in the judiciary has the duty and responsibility of
maintaining the faith and trust of the citizenry in the courts of justice, so
that not only must he be truly honest and just, but his actuations must be
such as not give cause for doubt and mistrust in the uprightness of his
administration of justice. In this particular case of respondent, he cannot
deny that the transactions over Lot 1184-E are damaging and render his
actuations open to suspicion and distrust. Even if respondent honestly
believed that Lot 1184-E was no longer in litigation in his court and that he
was purchasing it from a third person and not from the parties to the
litigation, he should nonetheless have refrained from buying it for himself
and transferring it to a corporation in which he and his wife were
financially involved, to avoid possible suspicion that his acquisition was
related in one way or another to his official actuations in civil case 3010.
The conduct of respondent gave cause for the litigants in civil case 3010,
the lawyers practising in his court, and the public in general to doubt the
honesty and fairness of his actuations and the integrity of our courts of
justice" (pp. 395396, rec.).
II
With respect to the second cause of action, the complainant alleged that
respondent Judge violated paragraphs 1 and 5, Article 14 of the Code of
Commerce when he associated himself with the Traders Manufacturing
and Fishing Industries, Inc. as a stockholder and a ranking officer, said
corporation having been organized to engage in business. Said Article
provides that:
Article 14 The following cannot engage in commerce, either in person
or by proxy, nor can they hold any office or have any direct,
administrative, or financial intervention in commercial or industrial
companies within the limits of the districts, provinces, or towns in which
they discharge their duties:
1. Justices of the Supreme Court, judges and officials of the department of
public prosecution in active service. This provision shall not be applicable
to mayors, municipal judges, and municipal prosecuting attorneys nor to
those who by chance are temporarily discharging the functions of judge or
prosecuting attorney.
xxx xxx xxx
5. Those who by virtue of laws or special provisions may not engage in
commerce in a determinate territory.
It is Our considered view that although the aforestated provision is
incorporated in the Code of Commerce which is part of the commercial
laws of the Philippines, it, however, partakes of the nature of a political
law as it regulates the relationship between the government and certain
public officers and employees, like justices and judges.
Political Law has been defined as that branch of public law which deals
with the organization and operation of the governmental organs of the
State and define the relations of the state with the inhabitants of its
territory (People vs. Perfecto, 43 Phil. 887, 897 [1922]). It may be recalled
that political law embraces constitutional law, law of public corporations,
administrative law including the law on public officers and elections.
Specifically, Article 14 of the Code of Commerce partakes more of the
nature of an administrative law because it regulates the conduct of certain
public officers and employees with respect to engaging in business:
hence, political in essence.
It is significant to note that the present Code of Commerce is the Spanish
Code of Commerce of 1885, with some modifications made by the
"Commission de Codificacion de las Provincias de Ultramar," which was
extended to the Philippines by the Royal Decree of August 6, 1888, and
took effect as law in this jurisdiction on December 1, 1888.
Upon the transfer of sovereignty from Spain to the United States and later
on from the United States to the Republic of the Philippines, Article 14 of
this Code of Commerce must be deemed to have been abrogated because
where there is change of sovereignty, the political laws of the former
sovereign, whether compatible or not with those of the new sovereign, are
automatically abrogated, unless they are expressly re-enacted by
affirmative act of the new sovereign.
Thus, We held in Roa vs. Collector of Customs (23 Phil. 315, 330, 311
[1912]) that:
By well-settled public law, upon the cession of territory by one nation to
another, either following a conquest or otherwise, ... those laws which are
political in their nature and pertain to the prerogatives of the former
government immediately cease upon the transfer of sovereignty. (Opinion,
Atty. Gen., July 10, 1899).
While municipal laws of the newly acquired territory not in conflict with
the, laws of the new sovereign continue in force without the express
assent or affirmative act of the conqueror, the political laws do not.
(Halleck's Int. Law, chap. 34, par. 14). However, such political laws of the
prior sovereignty as are not in conflict with the constitution or institutions
of the new sovereign, may be continued in force if the conqueror shall so
declare by affirmative act of the commander-in-chief during the war, or by
Congress in time of peace. (Ely's Administrator vs. United States, 171 U.S.
220, 43 L. Ed. 142). In the case of American and Ocean Ins. Cos. vs. 356
Bales of Cotton (1 Pet. [26 U.S.] 511, 542, 7 L. Ed. 242), Chief Justice
Marshall said:
On such transfer (by cession) of territory, it has never been held that the
relations of the inhabitants with each other undergo any change. Their
relations with their former sovereign are dissolved, and new relations are
created between them and the government which has acquired their
territory. The same act which transfers their country, transfers the
allegiance of those who remain in it; and the law which may be
denominated political, is necessarily changed, although that which
regulates the intercourse and general conduct of individuals, remains in
force, until altered by the newly- created power of the State.
Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court
stated that: "It is a general principle of the public law that on acquisition
of territory the previous political relations of the ceded region are totally
abrogated. "
There appears no enabling or affirmative act that continued the effectivity
of the aforestated provision of the Code of Commerce after the change of
sovereignty from Spain to the United States and then to the Republic of
the Philippines. Consequently, Article 14 of the Code of Commerce has no
legal and binding effect and cannot apply to the respondent, then Judge of
the Court of First Instance, now Associate Justice of the Court of Appeals.
It is also argued by complainant herein that respondent Judge violated
paragraph H, Section 3 of Republic Act No. 3019, otherwise known as the
Anti-Graft and Corrupt Practices Act, which provides that:
Sec. 3. Corrupt practices of public officers. In addition to acts or
omissions of public officers already penalized by existing law, the
following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:
xxx xxx xxx
(h) Directly or indirectly having financial or pecuniary interest in any
business, contract or transaction in connection with which he intervenes
or takes part in his official capacity, or in which he is prohibited by the
Constitution or by any Iaw from having any interest.
Respondent Judge cannot be held liable under the aforestated paragraph
because there is no showing that respondent participated or intervened in
his official capacity in the business or transactions of the Traders
Manufacturing and Fishing Industries, Inc. In the case at bar, the business
of the corporation in which respondent participated has obviously no
relation or connection with his judicial office. The business of said
corporation is not that kind where respondent intervenes or takes part in
his capacity as Judge of the Court of First Instance. As was held in one
case involving the application of Article 216 of the Revised Penal Code
which has a similar prohibition on public officers against directly or
indirectly becoming interested in any contract or business in which it is his
official duty to intervene, "(I)t is not enough to be a public official to be
subject to this crime; it is necessary that by reason of his office, he has to
intervene in said contracts or transactions; and, hence, the official who
intervenes in contracts or transactions which have no relation to his office
cannot commit this crime.' (People vs. Meneses, C.A. 40 O.G. 11th Supp.
134, cited by Justice Ramon C. Aquino; Revised Penal Code, p. 1174, Vol.
11 [1976]).
It does not appear also from the records that the aforesaid corporation
gained any undue advantage in its business operations by reason of
respondent's financial involvement in it, or that the corporation benefited
in one way or another in any case filed by or against it in court. It is
undisputed that there was no case filed in the different branches of the
Court of First Instance of Leyte in which the corporation was either party
plaintiff or defendant except Civil Case No. 4234 entitled "Bernardita R.
Macariola, plaintiff, versus Sinforosa O. Bales, et al.," wherein the
complainant herein sought to recover Lot 1184-E from the aforesaid
corporation. It must be noted, however, that Civil Case No. 4234 was filed
only on November 9 or 11, 1968 and decided on November 2, 1970 by CFI
Judge Jose D. Nepomuceno when respondent Judge was no longer
connected with the corporation, having disposed of his interest therein on
January 31, 1967.
Furthermore, respondent is not liable under the same paragraph because
there is no provision in both the 1935 and 1973 Constitutions of the
Philippines, nor is there an existing law expressly prohibiting members of
the Judiciary from engaging or having interest in any lawful business.
It may be pointed out that Republic Act No. 296, as amended, also known
as the Judiciary Act of 1948, does not contain any prohibition to that
effect. As a matter of fact, under Section 77 of said law, municipal judges
may engage in teaching or other vocation not involving the practice of law
after office hours but with the permission of the district judge concerned.
Likewise, Article 14 of the Code of Commerce which prohibits judges from
engaging in commerce is, as heretofore stated, deemed abrogated
automatically upon the transfer of sovereignty from Spain to America,
because it is political in nature.
Moreover, the prohibition in paragraph 5, Article 1491 of the New Civil
Code against the purchase by judges of a property in litigation before the
court within whose jurisdiction they perform their duties, cannot apply to
respondent Judge because the sale of the lot in question to him took place
after the finality of his decision in Civil Case No. 3010 as well as his two
orders approving the project of partition; hence, the property was no
longer subject of litigation.
In addition, although Section 12, Rule XVIII of the Civil Service Rules made
pursuant to the Civil Service Act of 1959 prohibits an officer or employee
in the civil service from engaging in any private business, vocation, or
profession or be connected with any commercial, credit, agricultural or
industrial undertaking without a written permission from the head of
department, the same, however, may not fall within the purview of
paragraph h, Section 3 of the Anti-Graft and Corrupt Practices Act because
the last portion of said paragraph speaks of a prohibition by
the Constitution or law on any public officer from having any interest in
any business and not by a mere administrative rule or regulation. Thus, a
violation of the aforesaid rule by any officer or employee in the civil
service, that is, engaging in private business without a written permission
from the Department Head may not constitute graft and corrupt practice
as defined by law.
On the contention of complainant that respondent Judge violated Section
12, Rule XVIII of the Civil Service Rules, We hold that the Civil Service Act
of 1959 (R.A. No. 2260) and the Civil Service Rules promulgated
thereunder, particularly Section 12 of Rule XVIII, do not apply to the
members of the Judiciary. Under said Section 12: "No officer or employee
shall engage directly in any private business, vocation, or profession or be
connected with any commercial, credit, agricultural or industrial
undertaking without a written permission from the Head of Department ..."
It must be emphasized at the outset that respondent, being a member of
the Judiciary, is covered by Republic Act No. 296, as amended, otherwise
known as the Judiciary Act of 1948 and by Section 7, Article X, 1973
Constitution.
Under Section 67 of said law, the power to remove or dismiss judges was
then vested in the President of the Philippines, not in the Commissioner of
Civil Service, and only on two grounds, namely, serious misconduct and
inefficiency, and upon the recommendation of the Supreme Court, which
alone is authorized, upon its own motion, or upon information of the
Secretary (now Minister) of Justice to conduct the corresponding
investigation. Clearly, the aforesaid section defines the grounds and
prescribes the special procedure for the discipline of judges.
And under Sections 5, 6 and 7, Article X of the 1973 Constitution, only the
Supreme Court can discipline judges of inferior courts as well as other
personnel of the Judiciary.
It is true that under Section 33 of the Civil Service Act of 1959: "The
Commissioner may, for ... violation of the existing Civil Service Law and
rules or of reasonable office regulations, or in the interest of the service,
remove any subordinate officer or employee from the service, demote him
in rank, suspend him for not more than one year without pay or fine him in
an amount not exceeding six months' salary." Thus, a violation of Section
12 of Rule XVIII is a ground for disciplinary action against civil service
officers and employees.
However, judges cannot be considered as subordinate civil service officers
or employees subject to the disciplinary authority of the Commissioner of
Civil Service; for, certainly, the Commissioner is not the head of the
Judicial Department to which they belong. The Revised Administrative
Code (Section 89) and the Civil Service Law itself state that the Chief
Justice is the department head of the Supreme Court (Sec. 20, R.A. No.
2260) [1959]); and under the 1973 Constitution, the Judiciary is the only
other or second branch of the government (Sec. 1, Art. X, 1973
Constitution). Besides, a violation of Section 12, Rule XVIII cannot be
considered as a ground for disciplinary action against judges because to
recognize the same as applicable to them, would be adding another
ground for the discipline of judges and, as aforestated, Section 67 of the
Judiciary Act recognizes only two grounds for their removal, namely,
serious misconduct and inefficiency.
Moreover, under Section 16(i) of the Civil Service Act of 1959, it is the
Commissioner of Civil Service who has original and exclusive jurisdiction
"(T)o decide, within one hundred twenty days, after submission to it, all
administrative cases against permanent officers and employees in the
competitive service, and, except as provided by law, to have final
authority to pass upon their removal, separation, and suspension and
upon all matters relating to the conduct, discipline, and efficiency of such
officers and employees; and prescribe standards, guidelines and
regulations governing the administration of discipline" (emphasis
supplied). There is no question that a judge belong to the non-competitive
or unclassified service of the government as a Presidential appointee and
is therefore not covered by the aforesaid provision. WE have already ruled
that "... in interpreting Section 16(i) of Republic Act No. 2260, we
emphasized that only permanent officers and employees who belong to
the classified service come under the exclusive jurisdiction of the
Commissioner of Civil Service" (Villaluz vs. Zaldivar, 15 SCRA 710,713
[1965], Ang-Angco vs. Castillo, 9 SCRA 619 [1963]).
Although the actuation of respondent Judge in engaging in private
business by joining the Traders Manufacturing and Fishing Industries, Inc.
as a stockholder and a ranking officer, is not violative of the provissions of
Article 14 of the Code of Commerce and Section 3(h) of the Anti-Graft and
Corrupt Practices Act as well as Section 12, Rule XVIII of the Civil Service
Rules promulgated pursuant to the Civil Service Act of 1959, the
impropriety of the same is clearly unquestionable because Canon 25 of
the Canons of Judicial Ethics expressly declares that:
A judge should abstain from making personal investments in enterprises
which are apt to be involved in litigation in his court; and, after his
accession to the bench, he should not retain such investments previously
made, longer than a period sufficient to enable him to dispose of them
without serious loss. It is desirable that he should, so far as reasonably
possible, refrain from all relations which would normally tend to arouse the
suspicion that such relations warp or bias his judgment, or prevent his
impartial attitude of mind in the administration of his judicial duties. ...
WE are not, however, unmindful of the fact that respondent Judge and his
wife had withdrawn on January 31, 1967 from the aforesaid corporation
and sold their respective shares to third parties, and it appears also that
the aforesaid corporation did not in anyway benefit in any case filed by or
against it in court as there was no case filed in the different branches of
the Court of First Instance of Leyte from the time of the drafting of the
Articles of Incorporation of the corporation on March 12, 1966, up to its
incorporation on January 9, 1967, and the eventual withdrawal of
respondent on January 31, 1967 from said corporation. Such disposal or
sale by respondent and his wife of their shares in the corporation only 22
days after the incorporation of the corporation, indicates that respondent
realized that early that their interest in the corporation contravenes the
aforesaid Canon 25. Respondent Judge and his wife therefore deserve the
commendation for their immediate withdrawal from the firm after its
incorporation and before it became involved in any court litigation
III
With respect to the third and fourth causes of action, complainant alleged
that respondent was guilty of coddling an impostor and acted in disregard
of judicial decorum, and that there was culpable defiance of the law and
utter disregard for ethics. WE agree, however, with the recommendation
of the Investigating Justice that respondent Judge be exonerated because
the aforesaid causes of action are groundless, and WE quote the pertinent
portion of her report which reads as follows:
The basis for complainant's third cause of action is the claim that
respondent associated and closely fraternized with Dominador Arigpa Tan
who openly and publicly advertised himself as a practising attorney (see
Exhs. I, I-1 and J) when in truth and in fact said Dominador Arigpa Tan
does not appear in the Roll of Attorneys and is not a member of the
Philippine Bar as certified to in Exh. K.
The "respondent denies knowing that Dominador Arigpa Tan was an
"impostor" and claims that all the time he believed that the latter was
a bona fide member of the bar. I see no reason for disbelieving this
assertion of respondent. It has been shown by complainant that
Dominador Arigpa Tan represented himself publicly as an attorney-at-law
to the extent of putting up a signboard with his name and the words
"Attorney-at Law" (Exh. I and 1- 1) to indicate his office, and it was but
natural for respondent and any person for that matter to have accepted
that statement on its face value. "Now with respect to the allegation of
complainant that respondent is guilty of fraternizing with Dominador
Arigpa Tan to the extent of permitting his wife to be a godmother of Mr.
Tan's child at baptism (Exh. M & M-1), that fact even if true did not render
respondent guilty of violating any canon of judicial ethics as long as his
friendly relations with Dominador A. Tan and family did not influence his
official actuations as a judge where said persons were concerned. There is
no tangible convincing proof that herein respondent gave any undue
privileges in his court to Dominador Arigpa Tan or that the latter
benefitted in his practice of law from his personal relations with
respondent, or that he used his influence, if he had any, on the Judges of
the other branches of the Court to favor said Dominador Tan.
Of course it is highly desirable for a member of the judiciary to refrain as
much as possible from maintaining close friendly relations with practising
attorneys and litigants in his court so as to avoid suspicion 'that his social
or business relations or friendship constitute an element in determining
his judicial course" (par. 30, Canons of Judicial Ethics), but if a Judge does
have social relations, that in itself would not constitute a ground for
disciplinary action unless it be clearly shown that his social relations be
clouded his official actuations with bias and partiality in favor of his friends
(pp. 403-405, rec.).
In conclusion, while respondent Judge Asuncion, now Associate Justice of
the Court of Appeals, did not violate any law in acquiring by purchase a
parcel of land which was in litigation in his court and in engaging in
business by joining a private corporation during his incumbency as judge
of the Court of First Instance of Leyte, he should be reminded to be more
discreet in his private and business activities, because his conduct as a
member of the Judiciary must not only be characterized with propriety but
must always be above suspicion.
WHEREFORE, THE RESPONDENT ASSOCIATE JUSTICE OF THE COURT OF
APPEALS IS HEREBY REMINDED TO BE MORE DISCREET IN HIS PRIVATE
AND BUSINESS ACTIVITIES.
SO ORDERED.
Teehankee, Guerrero, De Castro, Melencio-Herrera, Plana, Vasquez, Relova
and Gutierrez, JJ., concur.
Concepcion Jr., J., is on leave.
Fernando, C.J., Abad Santos and Esolin JJ., took no part.
Separate Opinions
AQUINO, J., concurring and dissenting:
I vote for respondent's unqualified exoneration.
BARREDO, J., concurring and dissenting:
I vote with Justice Aquino.
Separate Opinions
AQUINO, J., concurring and dissenting:
I vote for respondent's unqualified exoneration.
BARREDO, J., concurring and dissenting:
I vote with Justice Aquino.
Macariola Vs. Asuncion 114 SCRA 77
Facts:
On June 8, 1963, respondent Judge Elias Asuncion rendered a decision in
Civil Case 3010 final for lack of an appeal.
On October 16, 1963, a project of partition was submitted to Judge
Asuncion. The project of partition of lots was not signed by the parties
themselves but only by the respective counsel of plaintiffs and petitioner
Bernardita R. Macariola. The Judge approved it in his order dated October
23, 1963.
One of the lots in the project of partition was Lot 1184, which was
subdivided into 5 lots denominated as Lot 1184 A E. Dr. Arcadio Galapon
bought Lot 1184-E on July 31, 1964, who was issued transfer of certificate
of Title No, 2338 of the Register of Deeds of Tacloban City. On March 6,
1965, Galapon sold a portion of the lot to Judge Asuncion and his wife.
On August 31, 1966, spouses Asuncion and Galapon conveyed their
respective shares and interest inn Lot 1184-E to the Traders Manufacturing
& Fishing Industries Inc. Judge Asuncion was the President and his wife
Victoria was the Secretary. The Asuncions and Galapons were also the
stockholder of the corporation.
Respondent Macariola charged Judge Asuncion with "Acts unbecoming a
Judge" for violating the following provisions: Article 1491, par. 5 of the
New Civil Code, Article 14, par. 1 & 5 of the Code of Commerce, Sec. 3 par
H of RA 3019 also known as the Anti-Graft & Corrupt Practice Act., Sec. 12,
Rule XVIII of the Civil Service Rules and Canon 25 of the Canons of Judicial
Ethics.
On November 2, 1970 a certain Judge Jose D. Nepomuceno dismissed the
complaints filed against Asuncion.
 1967. The Judge realized early that their interest in the corporation
Issue: contravenes against Canon 25.
Whether or Not the respondent Judge violated the mentioned provisions.
https://www.scribd.com/doc/42610820/Macariola-vs-Asuncion-Digested
Ruling:
No. Judge Asuncion did not violate the mentioned provisions constituting
of "Acts unbecoming a Judge" but was reminded to be more discreet in his
private and business activities.

Respondent Judge did not buy the lot 1184-E directly on the plaintiffs in
Civil Case No. 3010 but from Dr. Galapon who earlier purchased the lot
from 3 of the plaintiffs. When the Asuncion bought the lot on March 6,
1965 from Dr. Galapon after the finality of the decision which he rendered
on June 8, 1963 in Civil Case No 3010 and his two orders dated October
and November, 1963. The said property was no longer the subject of
litigation.
In the case at bar, Article 14 of Code of Commerce has no legal and
binding effect and cannot apply to the respondent. Upon the sovereignty
from the Spain to the US and to the Republic of the Philippines, Art. 14 of
this Code of Commerce, which sourced from the Spanish Code of
Commerce, appears to have been abrogated because whenever there is a
change in the sovereignty, political laws of the former sovereign are
automatically abrogated, unless they are reenacted by Affirmative Act of
the New Sovereign.
Asuncion cannot also be held liable under the par. H, Sec. 3 of RA 3019,
citing that the public officers cannot partake in any business in connection
with this office, or intervened or take part in his official capacity. The Judge
and his wife had withdrawn on January 31, 1967 from the corporation and
sold their respective shares to 3rd parties, and it appears that the
corporation did not benefit in any case filed by or against it in court as
there was no case filed in the different branches of the Court of First
Instance from the time of the drafting of the Articles of Incorporation of
the corporation on March 12, 1966 up to its incorporation on January 9,
FIRST DIVISION
[G.R. No. 153883. January 13, 2004]
REPUBLIC OF THE PHILIPPINES, petitioner, vs. CHULE Y.
LIM, respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court
stemmed from a petition for correction of entries under Rule 108 of the
Rules of Court filed by respondent Chule Y. Lim with the Regional Trial
Court of Lanao del Norte, Branch 4, docketed as Sp. Proc. No. 4933.
In her petition, respondent claimed that she was born on October 29, 1954
in Buru-an, Iligan City. Her birth was registered in Kauswagan, Lanao del
Norte but the Municipal Civil Registrar of Kauswagan transferred her
record of birth to Iligan City. She alleged that both her Kauswagan and
Iligan City records of birth have four erroneous entries, and prays that
they be corrected.
The trial court then issued an Order,[1] which reads:
WHEREFORE, finding the petition to be sufficient in form and substance,
let the hearing of this case be set on December 27, 1999 before this
Court, Hall of Justice, Rosario Heights, Tubod, Iligan City at 8:30 oclock in
the afternoon at which date, place and time any interested person may
appear and show cause why the petition should not be granted.
Let this order be published in a newspaper of general circulation in the
City of Iligan and the Province of Lanao del Norte once a week for three (3)
consecutive weeks at the expense of the petitioner.
Furnish copies of this order the Office of the Solicitor General at 134
Amorsolo St., Legaspi Vill., Makati City and the Office of the Local Civil
Registrar of Iligan City at Quezon Ave., Pala-o, Iligan City.
SO ORDERED.
During the hearing, respondent testified thus:
First, she claims that her surname Yu was misspelled as Yo. She has been
using Yu in all her school records and in her marriage certificate.[2] She
presented a clearance from the National Bureau of Investigation (NBI)[3]
to further show the consistency in her use of the surname Yu.
Second, she claims that her fathers name in her birth record was written
as Yo Diu To (Co Tian) when it should have been Yu Dio To (Co Tian).
Third, her nationality was entered as Chinese when it should have been
Filipino considering that her father and mother never got married. Only
her deceased father was Chinese, while her mother is Filipina. She claims
that her being a registered voter attests to the fact that she is a Filipino
citizen.
Finally, it was erroneously indicated in her birth certificate that she was a
legitimate child when she should have been described as illegitimate
considering that her parents were never married.
Placida Anto, respondents mother, testified that she is a Filipino citizen as
her parents were both Filipinos from Camiguin. She added that she and
her daughters father were never married because the latter had a prior
subsisting marriage contracted in China.
In this connection, respondent presented a certification attested by
officials of the local civil registries of Iligan City and Kauswagan, Lanao del
Norte that there is no record of marriage between Placida Anto and Yu Dio
To from 1948 to the present.
The Republic, through the City Prosecutor of Iligan City, did not present
any evidence although it actively participated in the proceedings by
attending hearings and cross-examining respondent and her witnesses.
On February 22, 2000, the trial court granted respondents petition and
rendered judgment as follows:
WHEREFORE, the foregoing premises considered, to set the records of the
petitioner straight and in their proper perspective, the petition is granted
and the Civil Registrar of Iligan City is directed to make the following
corrections in the birth records of the petitioner, to wit:
1. Her family name from YO to YU;
2. Her fathers name from YO DIU TO (CO TIAN) to YU DIOTO (CO TIAN);
3. Her status from legitimate to illegitimate by changing YES to NO in
answer to the question LEGITIMATE?; and,
4. Her citizenship from Chinese to Filipino.
SO ORDERED.[4]
The Republic of the Philippines appealed the decision to the Court of
Appeals which affirmed the trial courts decision.[5]
Hence, this petition on the following assigned errors:
I falls under Rule 108 of the Revised Rules of Court considering that the
THE COURT OF APPEALS ERRED IN ORDERING THE CORRECTION OF THE
CITIZENSHIP OF RESPONDENT CHULE Y. LIM FROM CHINESE TO FILIPINO
DESPITE THE FACT THAT RESPONDENT NEVER DEMONSTRATED ANY
COMPLIANCE WITH THE LEGAL REQUIREMENTS FOR ELECTION OF
CITIZENSHIP.
II
THE COURT OF APPEALS ERRED IN ALLOWING RESPONDENT TO CONTINUE
USING HER FATHERS SURNAME DESPITE ITS FINDING THAT RESPONDENT
IS AN ILLEGITIMATE CHILD.[6]
To digress, it is just as well that the Republic did not cite as error
respondents recourse to Rule 108 of the Rules of Court to effect what
indisputably are substantial corrections and changes in entries in the civil
register. To clarify, Rule 108 of the Revised Rules of Court provides the
procedure for cancellation or correction of entries in the civil registry. The
proceedings under said rule may either be summary or adversary in
nature. If the correction sought to be made in the civil register is clerical,
then the procedure to be adopted is summary. If the rectification affects
the civil status, citizenship or nationality of a party, it is deemed
substantial, and the procedure to be adopted is adversary. This is our
ruling in Republic v. Valencia[7] where we held that even substantial errors
in a civil registry may be corrected and the true facts established under
Rule 108 provided the parties aggrieved by the error avail themselves of
the appropriate adversary proceeding. An appropriate adversary suit or
proceeding is one where the trial court has conducted proceedings where
all relevant facts have been fully and properly developed, where opposing
counsel have been given opportunity to demolish the opposite partys
case, and where the evidence has been thoroughly weighed and
considered.[8]
As likewise observed by the Court of Appeals, we take it that the Republics
failure to cite this error amounts to a recognition that this case properly
proceeding can be appropriately classified as adversarial.
Instead, in its first assignment of error, the Republic avers that respondent
did not comply with the constitutional requirement of electing Filipino
citizenship when she reached the age of majority. It cites Article IV,
Section 1(3) of the 1935 Constitution, which provides that the citizenship
of a legitimate child born of a Filipino mother and an alien father followed
the citizenship of the father, unless, upon reaching the age of majority,
the child elected Philippine citizenship.[9] Likewise, the Republic invokes
the provision in Section 1 of Commonwealth Act No. 625, that legitimate
children born of Filipino mothers may elect Philippine citizenship by
expressing such intention in a statement to be signed and sworn to by the
party concerned before any officer authorized to administer oaths, and
shall be filed with the nearest civil registry. The said party shall
accompany the aforesaid statement with the oath of allegiance to the
Constitution and the Government of the Philippines.[10]
Plainly, the above constitutional and statutory requirements of electing
Filipino citizenship apply only to legitimate children. These do not apply in
the case of respondent who was concededly an illegitimate child,
considering that her Chinese father and Filipino mother were never
married. As such, she was not required to comply with said constitutional
and statutory requirements to become a Filipino citizen. By being an
illegitimate child of a Filipino mother, respondent automatically became a
Filipino upon birth. Stated differently, she is a Filipino since birth without
having to elect Filipino citizenship when she reached the age of majority.
In Ching, Re: Application for Admission to the Bar,[11] citing In re Florencio
Mallare,[12] we held:
Esteban Mallare, natural child of Ana Mallare, a Filipina, is therefore
himself a Filipino, and no other act would be necessary to confer on him
all the rights and privileges attached to Philippine citizenship (U.S. vs. Ong
Tianse, 29 Phil. 332; Santos Co vs. Government of the Philippine Islands,
42 Phil. 543; Serra vs. Republic, L-4223, May 12, 1952; Sy Quimsuan vs.
Republic, L-4693, Feb. 16, 1953; Pitallano vs. Republic, L-5111, June 28,
1954). Neither could any act be taken on the erroneous belief that he is a
non-Filipino divest him of the citizenship privileges to which he is rightfully
entitled.[13]
This notwithstanding, the records show that respondent elected Filipino
citizenship when she reached the age of majority. She registered as a
voter in Misamis Oriental when she was 18 years old.[14] The exercise of
the right of suffrage and the participation in election exercises constitute a
positive act of election of Philippine citizenship.[15]
In its second assignment of error, the Republic assails the Court of Appeals
decision in allowing respondent to use her fathers surname despite its
finding that she is illegitimate.
The Republics submission is misleading. The Court of Appeals did not
allow respondent to use her fathers surname. What it did allow was the
correction of her fathers misspelled surname which she has been using
ever since she can remember. In this regard, respondent does not need a
court pronouncement for her to use her fathers surname.
We agree with the Court of Appeals when it held:
Firstly, Petitioner-appellee is now 47 years old. To bar her at this time from
using her fathers surname which she has used for four decades without
any known objection from anybody, would only sow confusion.
Concededly, one of the reasons allowed for changing ones name or
surname is to avoid confusion.
Secondly, under Sec. 1 of Commonwealth Act No. 142, the law regulating
the use of aliases, a person is allowed to use a name by which he has
been known since childhood.
Thirdly, the Supreme Court has already addressed the same issue. In
Pabellar v. Rep. of the Phils.,[16] we held:
Section 1 of Commonwealth Act No. 142, which regulates the use of
aliases, allows a person to use a name by which he has been known since
childhood (Lim Hok Albano v. Republic, 104 Phil. 795; People v. Uy Jui Pio,
102 Phil. 679; Republic v. Taada, infra). Even legitimate children cannot
enjoin the illegitimate children of their father from using his surname (De
Valencia v. Rodriguez, 84 Phil. 222).[17]
While judicial authority is required for a change of name or surname,[18]
there is no such requirement for the continued use of a surname which a
person has already been using since childhood.[19]
The doctrine that disallows such change of name as would give the false
impression of family relationship remains valid but only to the extent that
the proposed change of name would in great probability cause prejudice
or future mischief to the family whose surname it is that is involved or to
the community in general.[20] In this case, the Republic has not shown
that the Yu family in China would probably be prejudiced or be the object
of future mischief. In respondents case, the change in the surname that
she has been using for 40 years would even avoid confusion to her
community in general.
WHEREFORE, in view of the foregoing, the instant petition for review is
DENIED. The decision of the Court of Appeals in CA-G.R. CV No. 68893
dated May 29, 2002, is AFFIRMED. Accordingly, the Civil Registrar of Iligan
City is DIRECTED to make the following corrections in the birth record of
respondent Chule Y. Lim, to wit:
1. Her family name from YO to YU;
2. Her fathers name from YO DIU TO (CO TIAN) to YU DIOTO (CO TIAN);
3. Her status from legitimate to illegitimate by changing YES to NO in
answer to the question LEGITIMATE?; and,

4. Her citizenship from Chinese to Filipino.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.
G.R. No. 153883 January 13, 2004
Republic of the Philippines v Chule Y Lim
Facts:
The respondent, Chule Y. Lim, is an illegitimate daughter of a Chinese
father and a Filipina mother, who never got married due to a prior
subsisting marriage of her father. The respondent petitioned that there
were few mistakes as to her citizenship and identity, to wit:
1. That her surname Yu was misspelled as Yo. She has been using Yu an illegitimate child of a Filipino mother, respondent automatically
in all of her school records and in her marriage certificate.
2. That her fathers name in her birth record was written as Yo Diu To (Co
Tian) when it should have been Yu Dio To (Co Tian).
3. That her nationality was entered as Chinese when it should have been
Filipino considering that her father and mother got married.
4. That she was entered as a legitimate child on her birth certificate when
in fact, it should have been illegitimate. Both the trial court and Court of
Appeals granted the respondents petition.
Issue:
The Republic of the Philippines appealed the decision to the Supreme
Court on the following grounds:
1. Whether the Court of Appeals erred in ordering the correction of the
citizenship of respondent Chule Y. Lim from Chinese to Filipino despite
the fact that respondent never demonstrated any compliance with the
legal requirements for election of citizenship.
2. Whether the Court of Appeals erred in allowing respondent to continue
using her fathers surname despite its finding that respondent is an
illegitimate child.
Held:
1. No. The Republic avers that respondent did not comply with the
constitutional requirement of electing Filipino citizenship when she
reached the age of majority as mandated in Article IV, Section 1(3) of the
1935 Constitution and Section 1 of the Commonwealth Act No. 625. The
Supreme Court held that the two above provisions only apply to legitimate
children. These do not apply in the case of the respondent who was an
illegitimate child considering that her parents never got married. By being
became a Filipino upon birth, and as such, there was no more need for her
to validly elect Filipino citizenship upon reaching the age of majority. Also,
she registered as a voter inside the country when she reached 18 years
old. The exercise of the right of suffrage and the participation in election
exercises constitute a positive act of election of Philippine citizenship.
2. No. The Republics submission was misleading. The Court of Appeals did
not allow respondent to use her fathers surname. What it did allow was
the correction of her fathers misspelled surname which she has been
using ever since she can remember. The court held that prohibiting the
respondent to use her fathers surname would only sow confusion. Also,
Sec. 1 of Commonwealth Act No. 142 which regulates the use of aliases as
well as the jurisprudence state that it is allowed for a person to use a
name by which he has been known since childhood. Even legitimate
children cannot enjoin the illegitimate children of their father from using
his surname. While judicial authority is required for a chance of name or
surname, there is no such requirement for the continued use of a surname
which a person has already been using since childhood.
The doctrine that disallows such change of name as would give the false AASJS (ADVOCATES AND ADHERENTS OF SOCIAL
impression of family relationship remains valid but only to the extent that JUSTICE FOR SCHOOL TEACHERS AND ALLIED WORKERS)
the proposed change of name would in great probability cause prejudice
or future mischief to the family whose surname it is that is involved or to
MEMBER - HECTOR GUMANGAN CALILUNG, Petitioner,
vs.
the community in general. In this case, the Republic has not shown that
THE HONORABLE SIMEON DATUMANONG, in his official capacity as the
the Yu family in China would probably be prejudiced or be the object of
Secretary of Justice, Respondent.
future mischief.
DECISION
WHEREFORE, in view of the foregoing, the instant petition brought by the
Republic is DENIED. The decision of the Court of Appeals is AFFIRMED.
QUISUMBING, J.:
https://www.scribd.com/doc/59765753/Consti-Law-Citizenship-Republic-vs-
This is an original action for prohibition under Rule 65 of the 1997 Revised
Lim-case-digest
Rules of Civil Procedure.

Petitioner filed the instant petition against respondent, then Secretary of

Justice Simeon Datumanong, the official tasked to implement laws
governing citizenship.1 Petitioner prays that a writ of prohibition be issued
to stop respondent from implementing Republic Act No. 9225, entitled "An
Act Making the Citizenship of Philippine Citizens Who Acquire Foreign
Citizenship Permanent, Amending for the Purpose Commonwealth Act No.
63, As Amended, and for Other Purposes." Petitioner avers that Rep. Act
No. 9225 is unconstitutional as it violates Section 5, Article IV of the 1987
Constitution that states, "Dual allegiance of citizens is inimical to the
national interest and shall be dealt with by law."

Rep. Act No. 9225, signed into law by President Gloria M. Arroyo on August
29, 2003, reads:
Republic of the Philippines
SUPREME COURT
SECTION 1. Short Title.-This Act shall be known as the "Citizenship
Manila
Retention and Reacquisition Act of 2003."
EN BANC
G.R. No. 160869 May 11, 2007 SEC. 2. Declaration of Policy.-It is hereby declared the policy of the State
that all Philippine citizens who become citizens of another country shall be
deemed not to have lost their Philippine citizenship under the conditions
of this Act.
SEC. 3. Retention of Philippine Citizenship.-Any provision of law to the
contrary notwithstanding, natural-born citizens of the Philippines who
have lost their Philippine citizenship by reason of their naturalization as
citizens of a foreign country are hereby deemed to have reacquired
Philippine citizenship upon taking the following oath of allegiance to the
Republic:
"I ___________________________, solemnly swear (or affirm) that I will support
and defend the Constitution of the Republic of the Philippines and obey
the laws and legal orders promulgated by the duly constituted authorities
of the Philippines; and I hereby declare that I recognize and accept the
supreme authority of the Philippines and will maintain true faith and
allegiance thereto; and that I impose this obligation upon myself
voluntarily without mental reservation or purpose of evasion."
Natural-born citizens of the Philippines who, after the effectivity of this
Act, become citizens of a foreign country shall retain their Philippine
citizenship upon taking the aforesaid oath.
SEC. 4. Derivative Citizenship. - The unmarried child, whether legitimate,
illegitimate or adopted, below eighteen (18) years of age, of those who
reacquire Philippine citizenship upon effectivity of this Act shall be
deemed citizens of the Philippines.
SEC. 5. Civil and Political Rights and Liabilities. - Those who retain or
reacquire Philippine citizenship under this Act shall enjoy full civil and
political rights and be subject to all attendant liabilities and responsibilities
under existing laws of the Philippines and the following conditions:
(1) Those intending to exercise their right of suffrage must meet the
requirements under Section 1, Article V of the Constitution, Republic Act
No. 9189, otherwise known as "The Overseas Absentee Voting Act of
2003" and other existing laws;
(2) Those seeking elective public office in the Philippines shall meet the
qualifications for holding such public office as required by the Constitution
and existing laws and, at the time of the filing of the certificate of
candidacy, make a personal and sworn renunciation of any and all foreign
citizenship before any public officer authorized to administer an oath;
(3) Those appointed to any public office shall subscribe and swear to an
oath of allegiance to the Republic of the Philippines and its duly
constituted authorities prior to their assumption of office: Provided, That
they renounce their oath of allegiance to the country where they took that
oath;
(4) Those intending to practice their profession in the Philippines shall
apply with the proper authority for a license or permit to engage in such
practice; and
(5) That right to vote or be elected or appointed to any public office in the
Philippines cannot be exercised by, or extended to, those who:
(a) are candidates for or are occupying any public office in the country of
which they are naturalized citizens; and/or
(b) are in the active service as commissioned or noncommissioned officers
in the armed forces of the country which they are naturalized citizens.
SEC. 6. Separability Clause. - If any section or provision of this Act is held
unconstitutional or invalid, any other section or provision not affected
thereby shall remain valid and effective.
SEC. 7. Repealing Clause. - All laws, decrees, orders, rules and regulations
inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.
SEC. 8. Effectivity Clause. - This Act shall take effect after fifteen (15) days
following its publication in the Official Gazette or two (2) newspapers of
general circulation.
In this petition for prohibition, the following issues have been raised: (1) Is
Rep. Act No. 9225 unconstitutional? (2) Does this Court have jurisdiction to
pass upon the issue of dual allegiance?
We shall discuss these issues jointly.
Petitioner contends that Rep. Act No. 9225 cheapens Philippine
citizenship. He avers that Sections 2 and 3 of Rep. Act No. 9225, together,
allow dual allegiance and not dual citizenship. Petitioner maintains that
Section 2 allows all Filipinos, either natural-born or naturalized, who
become foreign citizens, to retain their Philippine citizenship without
losing their foreign citizenship. Section 3 permits dual allegiance because
said law allows natural-born citizens of the Philippines to regain their
Philippine citizenship by simply taking an oath of allegiance without
forfeiting their foreign allegiance.2 The Constitution, however, is
categorical that dual allegiance is inimical to the national interest.
The Office of the Solicitor General (OSG) claims that Section 2 merely
declares as a state policy that "Philippine citizens who become citizens of
another country shall be deemed not to have lost their Philippine
citizenship." The OSG further claims that the oath in Section 3 does not
allow dual allegiance since the oath taken by the former Filipino citizen is
an effective renunciation and repudiation of his foreign citizenship. The
fact that the applicant taking the oath recognizes and accepts the
supreme authority of the Philippines is an unmistakable and categorical
affirmation of his undivided loyalty to the Republic.3
In resolving the aforecited issues in this case, resort to the deliberations of
Congress is necessary to determine the intent of the legislative branch in
drafting the assailed law. During the deliberations, the issue of whether
Rep. Act No. 9225 would allow dual allegiance had in fact been the subject
of debate. The record of the legislative deliberations reveals the following:
xxxx
Pursuing his point, Rep. Dilangalen noted that under the measure, two
situations exist - - the retention of foreign citizenship, and the
reacquisition of Philippine citizenship. In this case, he observed that there
are two citizenships and therefore, two allegiances. He pointed out that
under the Constitution, dual allegiance is inimical to public interest. He
thereafter asked whether with the creation of dual allegiance by reason of
retention of foreign citizenship and the reacquisition of Philippine
citizenship, there will now be a violation of the Constitution
Rep. Locsin underscored that the measure does not seek to address the
constitutional injunction on dual allegiance as inimical to public interest.
He said that the proposed law aims to facilitate the reacquisition of
Philippine citizenship by speedy means. However, he said that in one
sense, it addresses the problem of dual citizenship by requiring the taking
of an oath. He explained that the problem of dual citizenship is transferred
from the Philippines to the foreign country because the latest oath that
will be taken by the former Filipino is one of allegiance to the Philippines
and not to the United States, as the case may be. He added that this is a
matter which the Philippine government will have no concern and
competence over.
Rep. Dilangalen asked why this will no longer be the country's concern,
when dual allegiance is involved.
Rep. Locsin clarified that this was precisely his objection to the original
version of the bill, which did not require an oath of allegiance. Since the
measure now requires this oath, the problem of dual allegiance is
transferred from the Philippines to the foreign country concerned, he
explained.
xxxx
Rep. Dilangalen asked whether in the particular case, the person did not
denounce his foreign citizenship and therefore still owes allegiance to the
foreign government, and at the same time, owes his allegiance to the
Philippine government, such that there is now a case of dual citizenship
and dual allegiance.
Rep. Locsin clarified that by swearing to the supreme authority of the
Republic, the person implicitly renounces his foreign citizenship. However,
he said that this is not a matter that he wishes to address in Congress
because he is not a member of a foreign parliament but a Member of the
House.
xxxx
Rep. Locsin replied that it is imperative that those who have dual
allegiance contrary to national interest should be dealt with by law.
However, he said that the dual allegiance problem is not addressed in the
bill. He then cited the Declaration of Policy in the bill which states that "It
is hereby declared the policy of the State that all citizens who become
citizens of another country shall be deemed not to have lost their
Philippine citizenship under the conditions of this Act." He stressed that
what the bill does is recognize Philippine citizenship but says nothing
about the other citizenship.
Rep. Locsin further pointed out that the problem of dual allegiance is
created wherein a natural-born citizen of the Philippines takes an oath of
allegiance to another country and in that oath says that he abjures and
absolutely renounces all allegiance to his country of origin and swears
allegiance to that foreign country. The original Bill had left it at this stage,
he explained. In the present measure, he clarified, a person is required to
take an oath and the last he utters is one of allegiance to the country. He
then said that the problem of dual allegiance is no longer the problem of
the Philippines but of the other foreign country.4 (Emphasis supplied.)
From the above excerpts of the legislative record, it is clear that the intent
of the legislature in drafting Rep. Act No. 9225 is to do away with the
provision in Commonwealth Act No. 635 which takes away Philippine
citizenship from natural-born Filipinos who become naturalized citizens of
other countries. What Rep. Act No. 9225 does is allow dual citizenship to
natural-born Filipino citizens who have lost Philippine citizenship by reason
of their naturalization as citizens of a foreign country. On its face, it does
not recognize dual allegiance. By swearing to the supreme authority of the
Republic, the person implicitly renounces his foreign citizenship. Plainly,
from Section 3, Rep. Act No. 9225 stayed clear out of the problem of dual
allegiance and shifted the burden of confronting the issue of whether or
not there is dual allegiance to the concerned foreign country. What
happens to the other citizenship was not made a concern of Rep. Act No.
9225.
Petitioner likewise advances the proposition that although Congress has
not yet passed any law on the matter of dual allegiance, such absence of
a law should not be justification why this Court could not rule on the issue.
He further contends that while it is true that there is no enabling law yet
on dual allegiance, the Supreme Court, through Mercado v. Manzano,6
already had drawn up the guidelines on how to distinguish dual allegiance
from dual citizenship.7
For its part, the OSG counters that pursuant to Section 5, Article IV of the
1987 Constitution, dual allegiance shall be dealt with by law. Thus, until a
law on dual allegiance is enacted by Congress, the Supreme Court is
without any jurisdiction to entertain issues regarding dual allegiance.8
To begin with, Section 5, Article IV of the Constitution is a declaration of a
policy and it is not a self-executing provision. The legislature still has to
enact the law on dual allegiance. In Sections 2 and 3 of Rep. Act No. 9225,
the framers were not concerned with dual citizenship per se, but with the
status of naturalized citizens who maintain their allegiance to their
countries of origin even after their naturalization.9 Congress was given a
mandate to draft a law that would set specific parameters of what really
constitutes dual allegiance.10 Until this is done, it would be premature for
the judicial department, including this Court, to rule on issues pertaining
to dual allegiance.
Neither can we subscribe to the proposition of petitioner that a law is not
needed since the case of Mercado had already set the guidelines for
determining dual allegiance. Petitioner misreads Mercado. That case did (On leave)
not set the parameters of what constitutes dual allegiance but merely RENATO C. CORONA
made a distinction between dual allegiance and dual citizenship. Associate Justice
CONCHITA CARPIO MORALES
Moreover, in Estrada v. Sandiganbayan,11 we said that the courts must Asscociate Justice
assume that the legislature is ever conscious of the borders and edges of ADOLFO S. AZCUNA
its plenary powers, and passed laws with full knowledge of the facts and Associate Justice DANTE O. TINGA
for the purpose of promoting what is right and advancing the welfare of Asscociate Justice
the majority. Hence, in determining whether the acts of the legislature are MINITA V. CHICO-NAZARIO
in tune with the fundamental law, we must proceed with judicial restraint Associate Justice CANCIO C. GARCIA
and act with caution and forbearance.12 The doctrine of separation of Asscociate Justice
powers demands no less. We cannot arrogate the duty of setting the PRESBITERO J. VELASCO, JR.
parameters of what constitutes dual allegiance when the Constitution Associate Justice ANTONIO EDUARDO B. NACHURA
itself has clearly delegated the duty of determining what acts constitute Asscociate Justice
dual allegiance for study and legislation by Congress. CERTIFICATION

WHEREFORE, the petition is hereby DISMISSED for lack of merit. Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before
SO ORDERED. the case was assigned to the writer of the opinion of the Court.

LEONARDO A. QUISUMBING REYNATO S. PUNO

Associate Justice Chief Justice

WE CONCUR: FACTS:
Petitioner prays for a writ of prohibition be issued to stop respondent from
REYNATO S. PUNO implementing RA 9225, or Act Making the Citizenship of the Philippine
Chief Justice Citizens Who Acquire Foreign Citizenship Permanent, Amending for the
Purpose Commonwealth Act No. 63, as Amended, and for Other Purposes.
CONSUELO YNARES-SANTIAGO Petitioner avers that said Act is unconstitutional as it violates Section 5,
Associate Justice ANGELINA SANDOVAL-GUTIERREZ Article IV of the 1987 Constitution: "Dual allegiance of citizens is inimical
Asscociate Justice to the national interest and shall be dealt with by law."

ANTONIO T. CARPIO ISSUE:

Associate Justice (On leave) Whether or not RA 9225 is unconstitutional by recognizing and allowing
MA. ALICIA AUSTRIA-MARTINEZ dual allegiance.
Asscociate Justice
RULING:
No. Section 5, Article IV of the Constitution is a declaration of policy and is Vicente D. Ching, the legitimate son of the spouses Tat Ching, a Chinese
not self-executing provision. citizen, and Prescila A. Dulay, a Filipino, was born in Francia West, Tubao,
La Union on 11 April 1964. Since his birth, Ching has resided in the
What RA 9225 does is to allow dual citizenship to natural-born Filipino Philippines.
citizens who have lost their Philippine citizenship, by reason of
naturalization as citizens of a foreign country. In its face, it does not On 17 July 1998, Ching, after having completed a Bachelor of Laws course
recognize dual allegiance. at the St. Louis University in Baguio City, filed an application to take the
1998 Bar Examinations. In a Resolution of this Court, dated 1 September
epublic of the Philippines 1998, he was allowed to take the Bar Examinations, subject to the
SUPREME COURT condition that he must submit to the Court proof of his Philippine
Manila citizenship.
EN BANC
In compliance with the above resolution, Ching submitted on 18
November 1998, the following documents:

1. Certification, dated 9 June 1986, issued by the Board of

BAR MATTER No. 914 October 1, 1999 Accountancy of the Professional Regulations Commission showing that
Ching is a certified public accountant;
RE: APPLICATION FOR ADMISSION TO THE PHILIPPINE 2. Voter Certification, dated 14 June 1997, issued by Elizabeth B.
BAR, Cerezo, Election Officer of the Commission on Elections (COMELEC) in
vs. Tubao La Union showing that Ching is a registered voter of the said place;
VICENTE D. CHING, applicant. and

3. Certification, dated 12 October 1998, also issued by Elizabeth B.

RESOLUTION
Cerezo, showing that Ching was elected as a member of the Sangguniang
Bayan of Tubao, La Union during the 12 May 1992 synchronized elections.
KAPUNAN, J.:
On 5 April 1999, the results of the 1998 Bar Examinations were released
Can a legitimate child born under the 1935 Constitution of a Filipino
and Ching was one of the successful Bar examinees. The oath-taking of
mother and an alien father validly elect Philippine citizenship fourteen (14)
the successful Bar examinees was scheduled on 5 May 1999. However,
years after he has reached the age of majority? This is the question
because of the questionable status of Ching's citizenship, he was not
sought to be resolved in the present case involving the application for
allowed to take his oath. Pursuant to the resolution of this Court, dated 20
admission to the Philippine Bar of Vicente D. Ching.
April 1999, he was required to submit further proof of his citizenship. In
the same resolution, the Office of the Solicitor General (OSG) was required
The facts of this case are as follows:
to file a comment on Ching's petition for admission to the bar and on the
documents evidencing his Philippine citizenship.
The OSG filed its comment on 8 July 1999, stating that Ching, being the
"legitimate child of a Chinese father and a Filipino mother born under the
1935 Constitution was a Chinese citizen and continued to be so, unless
upon reaching the age of majority he elected Philippine citizenship" 1 in
strict compliance with the provisions of Commonwealth Act No. 625
entitled "An Act Providing for the Manner in which the Option to Elect
Philippine Citizenship shall be Declared by a Person Whose Mother is a
Filipino Citizen." The OSG adds that "(w)hat he acquired at best was only
an inchoate Philippine citizenship which he could perfect by election upon
reaching the age of majority." 2 In this regard, the OSG clarifies that "two
(2) conditions must concur in order that the election of Philippine
citizenship may be effective, namely: (a) the mother of the person making
the election must be a citizen of the Philippines; and (b) said election must
be made upon reaching the age of majority." 3 The OSG then explains the
meaning of the phrase "upon reaching the age of majority:"
The clause "upon reaching the age of majority" has been construed to
mean a reasonable time after reaching the age of majority which had
been interpreted by the Secretary of Justice to be three (3) years (VELAYO,
supra at p. 51 citing Op., Sec. of Justice No. 70, s. 1940, Feb. 27, 1940).
Said period may be extended under certain circumstances, as when a (sic)
person concerned has always considered himself a Filipino (ibid., citing
Op. Nos. 355 and 422, s. 1955; 3, 12, 46, 86 and 97, s. 1953). But in
Cuenco, it was held that an election done after over seven (7) years was
not made within a reasonable time.
In conclusion, the OSG points out that Ching has not formally elected
Philippine citizenship and, if ever he does, it would already be beyond the
"reasonable time" allowed by present jurisprudence. However, due to the
peculiar circumstances surrounding Ching's case, the OSG recommends
the relaxation of the standing rule on the construction of the phrase
"reasonable period" and the allowance of Ching to elect Philippine
citizenship in accordance with C.A. No. 625 prior to taking his oath as a
member of the Philippine Bar.
On 27 July 1999, Ching filed a Manifestation, attaching therewith his
Affidavit of Election of Philippine Citizenship and his Oath of Allegiance,
both dated 15 July 1999. In his Manifestation, Ching states:
1. I have always considered myself as a Filipino;
2. I was registered as a Filipino and consistently declared myself as
one in my school records and other official documents;
3. I am practicing a profession (Certified Public Accountant) reserved
for Filipino citizens;
4. I participated in electoral process[es] since the time I was eligible to
vote;
5. I had served the people of Tubao, La Union as a member of the
Sangguniang Bayan from 1992 to 1995;
6. I elected Philippine citizenship on July 15, 1999 in accordance with
Commonwealth Act No. 625;
7. My election was expressed in a statement signed and sworn to by
me before a notary public;
8. I accompanied my election of Philippine citizenship with the oath of
allegiance to the Constitution and the Government of the Philippines;
9. I filed my election of Philippine citizenship and my oath of
allegiance to (sic) the Civil Registrar of Tubao La Union, and
10. I paid the amount of TEN PESOS (Ps. 10.00) as filing fees.
Since Ching has already elected Philippine citizenship on 15 July 1999, the
question raised is whether he has elected Philippine citizenship within a
"reasonable time." In the affirmative, whether his citizenship by election
retroacted to the time he took the bar examination.
When Ching was born in 1964, the governing charter was the 1935
Constitution. Under Article IV, Section 1(3) of the 1935 Constitution, the
citizenship of a legitimate child born of a Filipino mother and an alien
father followed the citizenship of the father, unless, upon reaching the age
of majority, the child elected Philippine citizenship. 4 This right to elect
Philippine citizenship was recognized in the 1973 Constitution when it
provided that "(t)hose who elect Philippine citizenship pursuant to the
provisions of the Constitution of nineteen hundred and thirty-five" are
citizens of the Philippines. 5 Likewise, this recognition by the 1973
Constitution was carried over to the 1987 Constitution which states that
"(t)hose born before January 17, 1973 of Filipino mothers, who elect
Philippine citizenship upon reaching the age of majority" are Philippine
citizens. 6 It should be noted, however, that the 1973 and 1987
Constitutional provisions on the election of Philippine citizenship should
not be understood as having a curative effect on any irregularity in the
acquisition of citizenship for those covered by the 1935 Constitution. 7 If
the citizenship of a person was subject to challenge under the old charter,
it remains subject to challenge under the new charter even if the judicial
challenge had not been commenced before the effectivity of the new
Constitution. 8
C.A. No. 625 which was enacted pursuant to Section 1(3), Article IV of the
1935 Constitution, prescribes the procedure that should be followed in
order to make a valid election of Philippine citizenship. Under Section 1
thereof, legitimate children born of Filipino mothers may elect Philippine
citizenship by expressing such intention "in a statement to be signed and
sworn to by the party concerned before any officer authorized to
administer oaths, and shall be filed with the nearest civil registry. The said
party shall accompany the aforesaid statement with the oath of allegiance
to the Constitution and the Government of the Philippines."
However, the 1935 Constitution and C.A. No. 625 did not prescribe a time
period within which the election of Philippine citizenship should be made.
The 1935 Charter only provides that the election should be made "upon
reaching the age of majority." The age of majority then commenced upon
reaching twenty-one (21) years. 9 In the opinions of the Secretary of
Justice on cases involving the validity of election of Philippine citizenship,
this dilemma was resolved by basing the time period on the decisions of
this Court prior to the effectivity of the 1935 Constitution. In these
decisions, the proper period for electing Philippine citizenship was, in turn,
based on the pronouncements of the Department of State of the United
States Government to the effect that the election should be made within a
"reasonable time" after attaining the age of majority. 10 The phrase
"reasonable time" has been interpreted to mean that the election should
be made within three (3) years from reaching the age of
majority. 11 However, we held in Cuenco vs. Secretary of Justice, 12 that
the three (3) year period is not an inflexible rule. We said:
It is true that this clause has been construed to mean a reasonable period
after reaching the age of majority, and that the Secretary of Justice has
ruled that three (3) years is the reasonable time to elect Philippine
citizenship under the constitutional provision adverted to above, which
period may be extended under certain circumstances, as when the person
concerned has always considered himself a Filipino. 13
However, we cautioned in Cuenco that the extension of the option to elect
Philippine citizenship is not indefinite:
Regardless of the foregoing, petitioner was born on February 16, 1923. He
became of age on February 16, 1944. His election of citizenship was made
on May 15, 1951, when he was over twenty-eight (28) years of age, or
over seven (7) years after he had reached the age of majority. It is clear
that said election has not been made "upon reaching the age of majority."
14
In the present case, Ching, having been born on 11 April 1964, was
already thirty-five (35) years old when he complied with the requirements
of C.A. No. 625 on 15 June 1999, or over fourteen (14) years after he had
reached the age of majority. Based on the interpretation of the phrase
"upon reaching the age of majority," Ching's election was clearly beyond,
by any reasonable yardstick, the allowable period within which to exercise
the privilege. It should be stated, in this connection, that the special
circumstances invoked by Ching, i.e., his continuous and uninterrupted
stay in the Philippines and his being a certified public accountant, a
registered voter and a former elected public official, cannot vest in him
Philippine citizenship as the law specifically lays down the requirements
for acquisition of Philippine citizenship by election.
Definitely, the so-called special circumstances cannot constitute what
Ching erroneously labels as informal election of citizenship. Ching cannot
find a refuge in the case of In re: Florencio Mallare, 15 the pertinent
portion of which reads:
And even assuming arguendo that Ana Mallare were (sic) legally married
to an alien, Esteban's exercise of the right of suffrage when he came of
age, constitutes a positive act of election of Philippine citizenship. It has
been established that Esteban Mallare was a registered voter as of April
14, 1928, and that as early as 1925 (when he was about 22 years old),
Esteban was already participating in the elections and campaigning for
certain candidate[s]. These acts are sufficient to show his preference for
Philippine citizenship. 16
Ching's reliance on Mallare is misplaced. The facts and circumstances
obtaining therein are very different from those in the present case, thus,
negating its applicability. First, Esteban Mallare was born before the
effectivity of the 1935 Constitution and the enactment of C.A. No. 625.
Hence, the requirements and procedures prescribed under the 1935
Constitution and C.A. No. 625 for electing Philippine citizenship would not
be applicable to him. Second, the ruling in Mallare was an obiter since, as
correctly pointed out by the OSG, it was not necessary for Esteban Mallare
to elect Philippine citizenship because he was already a Filipino, he being
a natural child of a Filipino mother. In this regard, the Court stated:
Esteban Mallare, natural child of Ana Mallare, a Filipina, is therefore
himself a Filipino, and no other act would be necessary to confer on him
all the rights and privileges attached to Philippine citizenship (U.S. vs. Ong
Tianse, 29 Phil. 332; Santos Co vs. Government of the Philippine Islands,
42 Phil. 543, Serra vs. Republic, L-4223, May 12, 1952, Sy Quimsuan vs.
Republic, L-4693, Feb. 16, 1953; Pitallano vs. Republic, L-5111, June 28,
1954). Neither could any act be taken on the erroneous belief that he is a
non-filipino divest him of the citizenship privileges to which he is rightfully
entitled. 17
The ruling in Mallare was reiterated and further elaborated in Co vs.
Electoral Tribunal of the House of Representatives, 18 where we held:
We have jurisprudence that defines "election" as both a formal and an
informal process.
In the case of In re: Florencio Mallare (59 SCRA 45 [1974]), the Court held
that the exercise of the right of suffrage and the participation in election
exercises constitute a positive act of election of Philippine citizenship. In
the exact pronouncement of the Court, we held:
Esteban's exercise of the right of suffrage when he came of age
constitutes a positive act of Philippine citizenship. (p. 52: emphasis
supplied)
The private respondent did more than merely exercise his right of
suffrage. He has established his life here in the Philippines.
For those in the peculiar situation of the respondent who cannot be
excepted to have elected Philippine citizenship as they were already
citizens, we apply the In Re Mallare rule.
xxx xxx xxx
The filing of sworn statement or formal declaration is a requirement for
those who still have to elect citizenship. For those already Filipinos when
the time to elect came up, there are acts of deliberate choice which
cannot be less binding. Entering a profession open only to Filipinos,
serving in public office where citizenship is a qualification, voting during
election time, running for public office, and other categorical acts of
similar nature are themselves formal manifestations for these persons.
An election of Philippine citizenship presupposes that the person electing
is an alien. Or his status is doubtful because he is a national of two
countries. There is no doubt in this case about Mr. Ong's being a Filipino
when he turned twenty-one (21).
We repeat that any election of Philippine citizenship on the part of the
private respondent would not only have been superfluous but it would also
have resulted in an absurdity. How can a Filipino citizen elect Philippine
citizenship? 19
The Court, like the OSG, is sympathetic with the plight of Ching. However,
even if we consider the special circumstances in the life of Ching like his
having lived in the Philippines all his life and his consistent belief that he is
a Filipino, controlling statutes and jurisprudence constrain us to disagree
with the recommendation of the OSG. Consequently, we hold that Ching
failed to validly elect Philippine citizenship. The span of fourteen (14)
years that lapsed from the time he reached the age of majority until he
finally expressed his intention to elect Philippine citizenship is clearly way
beyond the contemplation of the requirement of electing "upon reaching
the age of majority." Moreover, Ching has offered no reason why he
delayed his election of Philippine citizenship. The prescribed procedure in
electing Philippine citizenship is certainly not a tedious and painstaking
process. All that is required of the elector is to execute an affidavit of
election of Philippine citizenship and, thereafter, file the same with the
nearest civil registry. Ching's unreasonable and unexplained delay in
making his election cannot be simply glossed over.
Philippine citizenship can never be treated like a commodity that can be
claimed when needed and suppressed when convenient. 20 One who is
privileged to elect Philippine citizenship has only an inchoate right to such
citizenship. As such, he should avail of the right with fervor, enthusiasm
and promptitude. Sadly, in this case, Ching slept on his opportunity to
elect Philippine citizenship and, as a result. this golden privilege slipped
away from his grasp.
IN VIEW OF THE FOREGOING, the Court Resolves to DENY Vicente D.
Ching's application for admission to the Philippine Bar.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Mendoza, Panganiban,
Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes and Ynares-Santiago,
JJ., concur.
Bar Matter No. 914, October 1, 1999
Re: Application for Admission to the Philippine Bar
vs.
Vicente D. Ching, petitioner
Facts:
Vicente D. Ching, a legitimate child of a Filipino mother and an alien
Chinese father, was born on April 11, 1964 in Tubao La Union, under the
1935 Constitution. He has resided in the Philippines
He completed his Bachelor of Laws at SLU in Baguio on July 1998, filed an
application to take the 1998 Bar Examination.
The Resolution in this Court, he was allowed to take the bar if he submit to
the Court the following documents as proof of his Philippine Citizenship:
1. Certification issued by the PRC Board of Accountancy that Ching is a
certified accountant;
2. Voter Certification issued COMELEC in Tubao La Union showing that
Ching is a registered voter of his place; and
3. Certification showing that Ching was elected as member of the
Sangguniang Bayan of Tubao, La Union
On April 5, 1999, Ching was one of the bar passers. The oath taking
ceremony was scheduled on May 5, 1999.
Because of his questionable status of Ching's citizenship, he was not
allowed to take oath.
He was required to submit further proof of his citizenship.
The Office of the Solicitor General was required to file a comment on
Ching's petition for admission to the Philippine Bar.
In his report:
Ching, under the 1935 Constitution, was a Chinese citizen and continue to
be so, unless upon reaching the age of majority he elected Philippine
citizenship, under the compliance with the provisions of Commonwealth
Act No. 265 "an act providing for the manner in which the option to elect
Philippine citizenship shall be declared by a person whose mother is a
Filipino citizen"
He pointed out the Ching has not formally elected Philippine citizenship,
and if ever he does, it would already be beyond the "reasonable time"
allowed by the present jurisprudence.
Issue:
Whether or not he has elected Philippine citizenship within "a reasonable
time".
Rulings:
No. Ching, despite the special circumstances, failed to elect Philippine
citizenship within a reasonable time. The reasonable time means that the
election should be made within 3 years from "upon reaching the age of
majority", which is 21 years old. Instead, he elected Philippine citizenship
14 years after reaching the age of majority which the court considered not
within the reasonable time. Ching offered no reason why he delayed his
election of Philippine citizenship, as procedure in electing Philippine
citizenship is not a tedious and painstaking process. All that is required is
an affidavit of election of Philippine citizenship and file the same with the
nearest civil registry.
In 1998, Vicente Ching finished his law degree at the Saint Louis
University in Baguio City. He eventually passed the bar but he was advised
that he needs to show proof that he is a Filipino citizen before he be
allowed to take his oath. Apparently, Chings father was a Chinese citizen
but his mother was a Filipino citizen. His parents were married before he
was born in 1963. Under the 1935 Constitution, a legitimate child, whose
one parent is a foreigner, acquires the foreign citizenship of the foreign
parent. Ching maintained that he has always considered himself as a
Filipino; that he is a certified public accountant a profession reserved for
Filipinos; that he even served as a councilor in a municipality in La Union.
The Solicitor-General commented on the case by saying that as a
legitimate child of a Chinese and a Filipino, Ching should have elected
Filipino citizenship upon reaching the age of majority; that under
prevailing jurisprudence, upon reaching the age of majority is construed
as within 7 years after reaching the age of majority (in his case 21 years
old because he was born in 1964 while the 1935 Constitution was in
place).
Ching did elect Filipino citizenship but he only did so when he was
preparing for the bar in 1998 or 14 years after reaching the age of
majority. Nevertheless, the Solicitor-General recommended that the rule
be relaxed due to the special circumstance of Ching.
ISSUE: Whether or not Ching should be allowed to take the lawyers oath.
HELD: No. Unfortunately, he belatedly elected Filipino citizenship. The
Supreme Court cannot agree with the recommendation of the Solicitor-
General. Fourteen years had lapsed and its way beyond the allowable 7
year period. The Supreme Court even noted that the period is originally 3
years but it was extended to 7 years. (It seems it cant be extended any
further). Chings special circumstances cant be considered. It is not
enough that he considered all his life that he is a Filipino; that he is a
professional and a public officer (was) serving this country. The rules for
citizenship are in place. Further, Ching didnt give any explanation why he
belatedly chose to elect Filipino citizenship (but I guess its simply because
he never thought hes Chinese not until he applied to take the bar). The
prescribed procedure in electing Philippine citizenship is certainly not a
tedious and painstaking process. All that is required of the elector is to
execute an affidavit of election of Philippine citizenship and, thereafter,
file the same with the nearest civil registry. Chings unreasonable and
unexplained delay in making his election cannot be simply glossed over.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 87193 June 23, 1989
JUAN GALLANOSA FRIVALDO, petitioner,
vs.
COMMISSION ON ELECTIONS AND THE LEAGUE OF
MUNICIPALITIES, SORSOGON CHAPTER, HEREIN
REPRESENTED BY ITS PRESIDENT, SALVADOR NEE ESTUYE,
respondents.
J.L. Misa & Associates for petitioner.
Lladoc, Huab & Associates for private respondent.
CRUZ, J.:
Petitioner Juan G. Frivaldo was proclaimed governor-elect of the province
of Sorsogon on January 22, 1988, and assumed office in due time. On
October 27, 1988, the League of Municipalities, Sorsogon Chapter
(hereafter, League), represented by its President, Salvador Estuye, who
was also suing in his personal capacity, filed with the Commission on
Elections a petition for the annulment of Frivaldo; election and
proclamation on the ground that he was not a Filipino citizen, having been
naturalized in the United States on January 20, 1983. In his answer dated
May 22, 1988, Frivaldo admitted that he was naturalized in the United
States as alleged but pleaded the special and affirmative defenses that he
had sought American citizenship only to protect himself against President
Marcos. His naturalization, he said, was "merely forced upon himself as a
means of survival against the unrelenting persecution by the Martial Law
Dictator's agents abroad." He added that he had returned to the
Philippines after the EDSA revolution to help in the restoration of
democracy. He also argued that the challenge to his title should be
dismissed, being in reality a quo warranto petition that should have been
filed within ten days from his proclamation, in accordance with Section
253 of the Omnibus Election Code. The League, moreover, was not a
proper party because it was not a voter and so could not sue under the
said section.
Frivaldo moved for a preliminary hearing on his affirmative defenses but
the respondent Commission on Elections decided instead by its Order of
January 20, 1988, to set the case for hearing on the merits. His motion for
reconsideration was denied in another Order dated February 21, 1988. He
then came to this Court in a petition for certiorari and prohibition to ask
that the said orders be set aside on the ground that they had been
rendered with grave abuse of discretion. Pending resolution of the petition,
we issued a temporary order against the hearing on the merits scheduled
by the COMELEC and at the same time required comments from the
respondents.
In their Comment, the private respondents reiterated their assertion that
Frivaldo was a naturalized American citizen and had not reacquired
Philippine citizenship on the day of the election on January 18, 1988. He
was therefore not qualified to run for and be elected governor. They also
argued that their petition in the Commission on Elections was not really
for quo warranto under Section 253 of the Omnibus Election Code. The
ultimate purpose was to prevent Frivaldo from continuing as governor, his
candidacy and election being null and void ab initio because of his
alienage. Even if their petition were to be considered as one for quo
warranto, it could not have been filed within ten days from Frivaldo's
proclamation because it was only in September 1988 that they received
proof of his naturalization. And assuming that the League itself was not a
proper party, Estuye himself, who was suing not only for the League but
also in his personal capacity, could nevertheless institute the suit by
himself alone.
Speaking for the public respondent, the Solicitor General supported the
contention that Frivaldo was not a citizen of the Philippines and had not
repatriated himself after his naturalization as an American citizen. As an
alien, he was disqualified from public office in the Philippines. His election
did not cure this defect because the electorate of Sorsogon could not
amend the Constitution, the Local Government Code, and the Omnibus
Election Code. He also joined in the private respondent's argument that
Section 253 of the Omnibus Election Code was not applicable because
what the League and Estuye were seeking was not only the annulment of
the proclamation and election of Frivaldo. He agreed that they were also
asking for the termination of Frivaldo's incumbency as governor of
Sorsogon on the ground that he was not a Filipino.
In his Reply, Frivaldo insisted that he was a citizen of the Philippines
because his naturalization as an American citizen was not "impressed with
voluntariness." In support he cited the Nottebohm Case, [(1955 I.C.J. 4; 49
A.J.I.L. 396 (1955)] where a German national's naturalization in
Liechtenstein was not recognized because it had been obtained for
reasons of convenience only. He said he could not have repatriated
himself before the 1988 elections because the Special Committee on
Naturalization created for the purpose by LOI No. 27C had not yet been
organized then. His oath in his certificate of candidacy that he was a
natural-born citizen should be a sufficient act of repatriation. Additionally,
his active participation in the 1987 congressional elections had divested
him of American citizenship under the laws of the United States, thus
restoring his Philippine citizenship. He ended by reiterating his prayer for
the rejection of the move to disqualify him for being time-barred under
Section 253 of the Omnibus Election Code.
Considering the importance and urgency of the question herein raised, the
Court has decided to resolve it directly instead of allowing the normal
circuitous route that will after all eventually end with this Court, albeit only
after a, long delay. We cannot permit this delay. Such delay will be inimical
to the public interest and the vital principles of public office to be here
applied.
It is true that the Commission on Elections has the primary jurisdiction
over this question as the sole judge of all contests relating to the election,
returns and qualifications of the members of the Congress and elective
provincial and city officials. However, the decision on Frivaldo's citizenship
has already been made by the COMELEC through its counsel, the Solicitor
General, who categorically claims that Frivaldo is a foreigner. We assume
this stance was taken by him after consultation with the public respondent
and with its approval. It therefore represents the decision of the COMELEC
itself that we may now review. Exercising our discretion to interpret the
Rules of Court and the Constitution, we shall consider the present petition Our records show that JUAN GALLANOSA FRIVALDO, born on October 20,
as having been filed in accordance with Article IX-A Section 7, of the 1915, was naturalized in this Court on January 20, 1983, and issued
Constitution, to challenge the aforementioned Orders of the COMELEC. Certificate of Naturalization No. 11690178.

The basic question we must resolve is whether or not Juan G. Frivaldo was Petition No. 280225.
a citizen of the Philippines at the time of his election on January 18, 1988,
as provincial governor of Sorsogon. All the other issues raised in this Alien Registration No. A23 079 270.
petition are merely secondary to this basic question.
Very truly yours,
The reason for this inquiry is the provision in Article XI, Section 9, of the
Constitution that all public officials and employees owe the State and the
Constitution "allegiance at all times" and the specific requirement in
Section 42 of the Local Government Code that a candidate for local WILLIAM L. WHITTAKER
elective office must be inter alia a citizen of the Philippines and a qualified
voter of the constituency where he is running. Section 117 of the Omnibus Clerk
Election Code provides that a qualified voter must be, among other
qualifications, a citizen of the Philippines, this being an indispensable by:
requirement for suffrage under Article V, Section 1, of the Constitution.
(Sgd.)
In the certificate of candidacy he filed on November 19, 1987, Frivaldo
described himself as a "natural-born" citizen of the Philippines, omitting
mention of any subsequent loss of such status. The evidence shows,
however, that he was naturalized as a citizen of the United States in 1983 ARACELI V. BAREN
per the following certification from the United States District Court,
Northern District of California, as duly authenticated by Vice Consul Deputy Clerk
Amado P. Cortez of the Philippine Consulate General in San Francisco,
California, U.S.A. This evidence is not denied by the petitioner. In fact, he expressly
admitted it in his answer. Nevertheless, as earlier noted, he claims it was
OFFICE OF THE CLERK "forced" on him as a measure of protection from the persecution of the
UNITED STATES DISTRICT COURT Marcos government through his agents in the United States.
NORTHERN DISTRICT OF CALIFORNIA
The Court sees no reason not to believe that the petitioner was one of the
September 23, 1988 enemies of the Marcos dictatorship. Even so, it cannot agree that as a
consequence thereof he was coerced into embracing American citizenship.
TO WHOM IT MAY CONCERN: His feeble suggestion that his naturalization was not the result of his own
free and voluntary choice is totally unacceptable and must be rejected
outright.
There were many other Filipinos in the United States similarly situated as
Frivaldo, and some of them subject to greater risk than he, who did not
find it necessary nor do they claim to have been coerced to abandon
their cherished status as Filipinos. They did not take the oath of allegiance
to the United States, unlike the petitioner who solemnly declared "on oath,
that I absolutely and entirely renounce and abjure all allegiance and
fidelity to any foreign prince, potentate, state or sovereignty of whom or
which I have heretofore been a subject or citizen," meaning in his case the
Republic of the Philippines. The martyred Ninoy Aquino heads the
impressive list of those Filipinos in exile who, unlike the petitioner, held
fast to their Philippine citizenship despite the perils of their resistance to
the Marcos regime.
The Nottebohm case cited by the petitioner invoked the international law
principle of effective nationality which is clearly not applicable to the case
at bar. This principle is expressed in Article 5 of the Hague Convention of
1930 on the Conflict of Nationality Laws as follows:
Art. 5. Within a third State a person having more than one nationality shall
be treated as if he had only one. Without prejudice to the application of its
law in matters of personal status and of any convention in force, a third
State shall, of the nationalities which any such person possesses,
recognize exclusively in its territory either the nationality of the country in
which he is habitually and principally resident or the nationality of the
country with which in the circumstances he appears to be in fact most
closely connected.
Nottebohm was a German by birth but a resident of Guatemala for 34
years when he applied for and acquired naturalization in Liechtenstein one
month before the outbreak of World War II. Many members of his family
and his business interests were in Germany. In 1943, Guatemala, which
had declared war on Germany, arrested Nottebohm and confiscated all his
properties on the ground that he was a German national. Liechtenstein
thereupon filed suit on his behalf, as its citizen, against Guatemala. The
International Court of Justice held Nottebohm to be still a national of
Germany, with which he was more closely connected than with
Liechtenstein.
That case is not relevant to the petition before us because it dealt with a
conflict between the nationality laws of two states as decided by a third
state. No third state is involved in the case at bar; in fact, even the United
States is not actively claiming Frivaldo as its national. The sole question
presented to us is whether or not Frivaldo is a citizen of the Philippines
under our own laws, regardless of other nationality laws. We can decide
this question alone as sovereign of our own territory, conformably to
Section 1 of the said Convention providing that "it is for each State to
determine under its law who are its nationals."
It is also worth noting that Nottebohm was invoking his naturalization in
Liechtenstein whereas in the present case Frivaldo is rejecting his
naturalization in the United States.
If he really wanted to disavow his American citizenship and reacquire
Philippine citizenship, the petitioner should have done so in accordance
with the laws of our country. Under CA No. 63 as amended by CA No. 473
and PD No. 725, Philippine citizenship may be reacquired by direct act of
Congress, by naturalization, or by repatriation.
While Frivaldo does not invoke either of the first two methods, he
nevertheless claims he has reacquired Philippine citizenship by virtue of a
valid repatriation. He claims that by actively participating in the elections
in this country, he automatically forfeited American citizenship under the
laws of the United States. Such laws do not concern us here. The alleged
forfeiture is between him and the United States as his adopted country. It
should be obvious that even if he did lose his naturalized American
citizenship, such forfeiture did not and could not have the effect of
automatically restoring his citizenship in the Philippines that he had earlier
renounced. At best, what might have happened as a result of the loss of
his naturalized citizenship was that he became a stateless individual.

Frivaldo's contention that he could not have repatriated himself under LOI
270 because the Special Committee provided for therein had not yet been
constituted seems to suggest that the lack of that body rendered his
repatriation unnecessary. That is far-fetched if not specious Such a
conclusion would open the floodgates, as it were. It would allow all
Filipinos who have renounced this country to claim back their abandoned
citizenship without formally rejecting their adoptedstate and reaffirming
their allegiance to the Philippines.
It does not appear that Frivaldo has taken these categorical acts. He
contends that by simply filing his certificate of candidacy he had, without
more, already effectively recovered Philippine citizenship. But that is
hardly the formal declaration the law envisions surely, Philippine
citizenship previously disowned is not that cheaply recovered. If the
Special Committee had not yet been convened, what that meant simply
was that the petitioner had to wait until this was done, or seek
naturalization by legislative or judicial proceedings.
The argument that the petition filed with the Commission on Elections
should be dismissed for tardiness is not well-taken. The herein private
respondents are seeking to prevent Frivaldo from continuing to discharge
his office of governor because he is disqualified from doing so as a
foreigner. Qualifications for public office are continuing requirements and
must be possessed not only at the time of appointment or election or
assumption of office but during the officer's entire tenure. Once any of the
required qualifications is lost, his title may be seasonably challenged. If,
say, a female legislator were to marry a foreigner during her term and by
her act or omission acquires his nationality, would she have a right to
remain in office simply because the challenge to her title may no longer
be made within ten days from her proclamation? It has been established,
and not even denied, that the evidence of Frivaldo's naturalization was
discovered only eight months after his proclamation and his title was
challenged shortly thereafter.
This Court will not permit the anomaly of a person sitting as provincial
governor in this country while owing exclusive allegiance to another
country. The fact that he was elected by the people of Sorsogon does not
excuse this patent violation of the salutary rule limiting public office and
employment only to the citizens of this country. The qualifications
prescribed for elective office cannot be erased by the electorate alone.
The will of the people as expressed through the ballot cannot cure the vice
of ineligibility, especially if they mistakenly believed, as in this case, that
the candidate was qualified. Obviously, this rule requires strict application
when the deficiency is lack of citizenship. If a person seeks to serve in the
Republic of the Philippines, he must owe his total loyalty to this country
only, abjuring and renouncing all fealty and fidelity to any other state.
It is true as the petitioner points out that the status of the natural-born
citizen is favored by the Constitution and our laws, which is all the more
reason why it should be treasured like a pearl of great price. But once it is
surrendered and renounced, the gift is gone and cannot be lightly
restored. This country of ours, for all its difficulties and limitations, is like a
jealous and possessive mother. Once rejected, it is not quick to welcome
back with eager arms its prodigal if repentant children. The returning
renegade must show, by an express and unequivocal act, the renewal of
his loyalty and love.
WHEREFORE, the petition is DISMISSED and petitioner JUAN G. FRIVALDO
is hereby declared not a citizen of the Philippines and therefore
DISQUALIFIED from serving as Governor of the Province of Sorsogon.
Accordingly, he is ordered to vacate his office and surrender the same to
the duly elected Vice-Governor of the said province once this decision
becomes final and executory. The temporary restraining order dated
March 9, 1989, is LIFTED.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Paras, Feliciano, Gancayco,
Padilla, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Sarmiento, J., took no part.
Cortes J., concurs in the result.
Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur in the pragmatic approach taken by the Court. I agree that when
the higher interests of the State are involved, the public good should
supersede any procedural infinities which may affect a petition filed with
the Commission on Elections. I fail to see how the Court could allow a
person who by his own admissions is indubitably an alien to continue
holding the office of Governor of any province.
It is an established rule of long standing that the period fixed by law for
the filing of a protest whether quo warranto or election contest is
mandatory and jurisdictional. 1
As a rule, the quo warranto petition seeking to annul the petitioner's
election and proclamation should have been filed with ten days after the
proclamation of election results. 2 The purpose of the law in not allowing
the filing of protests beyond the period fixed by law is to have a certain
and definite time within which petitions against the results of an election
should be filed and to provide summary proceedings for the settlement of
such disputes. 3 The Rules of Court allow the Republic of the Philippines to
file quo warranto proceedings against any public officer who performs an
act which works a forfeiture of his office. 4 However, where the Solicitor
General or the President feel that there are no good reasons to commence
quo warranto proceedings, 5 the Court should allow a person like
respondent Estuye or his league to bring the action.
I must emphasize, however, that my concurrence is limited to a clear case
of an alien holding an elective public office. And perhaps in a clear case of
disloyalty to the Republic of the Philippines. 6 Where the disqualification is
based on age, residence, or any of the many grounds for ineligibility, 7 I
believe that the ten-day period should be applied strictly.
The pragmatic approach is also shown by the fact that the Court found it
inexpedient to wait for the final decision of COMELEC. This step is most
unusual but considering the total lack of any serious grounds for the
petitioner's claim of having regained his Philippine citizenship, I am
constrained to concur in the procedure pro hac vice.
Separate Opinions
GUTIERREZ, JR., J., concurring:
I concur in the pragmatic approach taken by the Court. I agree that when
the higher interests of the State are involved, the public good should
supersede any procedural infinities which may affect a petition filed with
the Commission on Elections. I fail to see how the Court could allow a
person who by his own admissions is indubitably an alien to continue
holding the office of Governor of any province.
It is an established rule of long standing that the period fixed by law for
the filing of a protest whether quo warranto or election contest is
mandatory and jurisdictional. 1
As a rule, the quo warranto petition seeking to annul the petitioner's
election and proclamation should have been filed with ten days after the
proclamation of election results. 2 The purpose of the law in not allowing
the filing of protests beyond the period fixed by law is to have a certain
and definite time within which petitions against the results of an election
should be filed and to provide summary proceedings for the settlement of
such disputes. 3 The Rules of Court allow the Republic of the Philippines to
file quo warranto proceedings against any public officer who performs an
act which works a forfeiture of his office. 4 However, where the Solicitor
General or the President feel that there are no good reasons to commence
quo warranto proceedings, 5 the Court should allow a person like
respondent Estuye or his league to bring the action.
I must emphasize, however, that my concurrence is limited to a clear case
of an alien holding an elective public office. And perhaps in a clear case of
disloyalty to the Republic of the Philippines. 6 Where the disqualification is
based on age, residence, or any of the many grounds for ineligibility, 7 I
believe that the ten-day period should be applied strictly.
The pragmatic approach is also shown by the fact that the Court found it
inexpedient to wait for the final decision of COMELEC. This step is most
unusual but considering the total lack of any serious grounds for the
petitioner's claim of having regained his Philippine citizenship, I am
constrained to concur in the procedure pro hac vice.
G.R. No. 87193, 23 June 1989 [Naturalization; Reacquisition]
FACTS:
Juan G. Frivaldo was proclaimed governor of the province of Sorsogon and
assumed office in due time. The League of Municipalities filed with the
COMELEC a petition for the annulment of Frivaldo on the ground that he
was not a Filipino citizen, having been naturalized in the United States.
Frivaldo admitted the allegations but pleaded the special and affirmative
defenses that he was naturalized as American citizen only to protect
himself against President Marcos during the Martial Law era.
ISSUE:
Whether or not Frivaldo is a Filipino citizen.
RULING:
No. Section 117 of the Omnibus Election Code provides that a qualified
voter must be, among other qualifications, a citizen of the Philippines, this
being an indispensable requirement for suffrage under Article V, Section 1,
of the Constitution.
He claims that he has reacquired Philippine citizenship by virtue of valid
repatriation. He claims that by actively participating in the local elections,
he automatically forfeited American citizenship under the laws of the
United States of America. The Court stated that that the alleged forfeiture
was between him and the US. If he really wanted to drop his American
citizenship, he could do so in accordance with CA No. 63 as amended by
CA No. 473 and PD 725. Philippine citizenship may be reacquired by direct
act of Congress, by naturalization, or by repatriation.