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G.R. No.

L-42571-72 July 25, 1983

VICENTE DE LA CRUZ, RENATO ALIPIO, JOSE TORRES III, LEONCIO CORPUZ, TERESITA
CALOT, ROSALIA FERNANDEZ, ELIZABETH VELASCO, NANETTE VILLANUEVA, HONORATO
BUENAVENTURA, RUBEN DE CASTRO, VICENTE ROXAS, RICARDO DAMIAN, DOMDINO
ROMDINA, ANGELINA OBLIGACION, CONRADO GREGORIO, TEODORO REYES, LYDIA
ATRACTIVO, NAPOLEON MENDOZA, PERFECTO GUMATAY, ANDRES SABANGAN, ROSITA
DURAN, SOCORRO BERNARDEZ, and PEDRO GABRIEL, petitioners,
vs.
THE HONORABLE EDGARDO L. PARAS, MATIAS RAMIREZ as the Municipal Mayor, MARIO
MENDOZA as the Municipal Vice-Mayor, and THE MUNICIPAL COUNCIL OF BOCAUE,
BULACAN, respondents.

Federico N. Alday for petitioners.

Dakila F. Castro for respondents.

FERNANDO, C.J.:

The crucial question posed by this certiorari proceeding is whether or not a municipal corporation,
Bocaue, Bulacan, represented by respondents, 1 can, prohibit the exercise of a lawful trade, the
operation of night clubs, and the pursuit of a lawful occupation, such clubs employing hostesses. It is
contended that the ordinance assailed as invalid is tainted with nullity, the municipality being devoid
of power to prohibit a lawful business, occupation or calling, petitioners at the same time alleging
that their rights to due process and equal protection of the laws were violated as the licenses
previously given to them was in effect withdrawn without judicial hearing. 2

The assailed ordinance 3 is worded as follows: "Section 1. Title of Ordinance. This Ordinance
shall be known and may be cited as the [Prohibition and Closure Ordinance] of Bocaue, Bulacan.
Section 2. Definitions of Terms (a) 'Night Club' shall include any place or establishment selling
to the public food or drinks where customers are allowed to dance. (b) 'Cabaret' or 'Dance Hall' shall
include any place or establishment where dancing is permitted to the public and where professional
hostesses or hospitality girls and professional dancers are employed. (c) 'Professional hostesses' or
'hospitality girls' shall include any woman employed by any of the establishments herein defined to
entertain guests and customers at their table or to dance with them. (d) 'Professional dancer' shall
include any woman who dances at any of the establishments herein defined for a fee or
remuneration paid directly or indirectly by the operator or by the persons she dances with. (e)
'Operator' shall include the owner, manager, administrator or any person who operates and is
responsible for the operation of any night club, cabaret or dance hall. Section 3. Prohibition in the
Issuance and Renewal of Licenses, Permits. Being the principal cause in the decadence of
morality and because of their other adverse effects on this community as explained above, no
operator of night clubs, cabarets or dance halls shall henceforth be issued permits/licenses to
operate within the jurisdiction of the municipality and no license/permit shall be issued to any
professional hostess, hospitality girls and professional dancer for employment in any of the
aforementioned establishments. The prohibition in the issuance of licenses/permits to said persons
and operators of said establishments shall include prohibition in the renewal thereof. Section
4. Revocation of Permits and Licenses. The licenses and permits issued to operators of night
clubs, cabarets or dance halls which are now in operation including permits issued to professional
hostesses, hospitality girls and professional dancers are hereby revoked upon the expiration of the
thirty-day period given them as provided in Section 8 hereof and thenceforth, the operation of these
establishments within the jurisdiction of the municipality shall be illegal. Section 5. Penalty in case
of violation. Violation of any of the provisions of this Ordinance shall be punishable by
imprisonment not exceeding three (3) months or a fine not exceeding P200.00 or both at the
discretion of the Court. If the offense is committed by a juridical entity, the person charged with the
management and/or operation thereof shall be liable for the penalty provided herein. Section 6.
Separability Clause. If, for any reason, any section or provision of this Ordinance is held
unconstitutional or invalid, no other section or provision hereof shall be affected thereby. Section
7. Repealing Clause. All ordinance, resolutions, circulars, memoranda or parts thereof that are
inconsistent with the provisions of this Ordinance are hereby repealed. Section 8. Effectivity.
This Ordinance shall take effect immediately upon its approval; provided, however, that operators of
night clubs, cabarets and dance halls now in operation including professional hostesses, hospitality
girls and professional dancers are given a period of thirty days from the approval hereof within which
to wind up their businesses and comply with the provisions of this Ordinance." 4

On November 5, 1975, two cases for prohibition with preliminary injunction were filed with the Court
of First Instance of Bulacan. 5 The grounds alleged follow:

1. Ordinance No. 84 is null and void as a municipality has no authority to prohibit a lawful business,
occupation or calling.

2. Ordinance No. 84 is violative of the petitioners' right to due process and the equal protection of the
law, as the license previously given to petitioners was in effect withdrawn without judicial hearing. 3.
That under Presidential Decree No. 189, as amended, by Presidential Decree No. 259, the power to
license and regulate tourist-oriented businesses including night clubs, has been transferred to the
Department of Tourism." 6 The cases were assigned to respondent Judge, now Associate Justice
Paras of the Intermediate Appellate Court, who issued a restraining order on November 7, 1975. The
answers were thereafter filed. It was therein alleged: " 1. That the Municipal Council is authorized by
law not only to regulate but to prohibit the establishment, maintenance and operation of night clubs
invoking Section 2243 of the RAC, CA 601, Republic Acts Nos. 938, 978 and 1224. 2. The
Ordinance No. 84 is not violative of petitioners' right to due process and the equal protection of the
law, since property rights are subordinate to public interests. 3. That Presidential Decree No. 189, as
amended, did not deprive Municipal Councils of their jurisdiction to regulate or prohibit night
clubs." 7 There was the admission of the following facts as having been established: "l. That
petitioners Vicente de la Cruz, et al. in Civil Case No. 4755-M had been previously issued licenses
by the Municipal Mayor of Bocaue-petitioner Jose Torres III, since 1958; petitioner Vicente de la
Cruz, since 1960; petitioner Renato Alipio, since 1961 and petitioner Leoncio Corpuz, since 1972; 2.
That petitioners had invested large sums of money in their businesses; 3. That the night clubs are
well-lighted and have no partitions, the tables being near each other; 4. That the petitioners
owners/operators of these clubs do not allow the hospitality girls therein to engage in immoral acts
and to go out with customers; 5. That these hospitality girls are made to go through periodic medical
check-ups and not one of them is suffering from any venereal disease and that those who fail to
submit to a medical check-up or those who are found to be infected with venereal disease are not
allowed to work; 6. That the crime rate there is better than in other parts of Bocaue or in other towns
of Bulacan." 8 Then came on January 15, 1976 the decision upholding the constitutionality and
validity of Ordinance No. 84 and dismissing the cases. Hence this petition for certiorari by way of
appeal.

In an exhaustive as well as scholarly opinion, the lower court dismissed the petitions. Its rationale is
set forth in the opening paragraph thus: "Those who lust cannot last. This in essence is why the
Municipality of Bocaue, Province of Bulacan, stigmatized as it has been by innuendos of sexual
titillation and fearful of what the awesome future holds for it, had no alternative except to order thru
its legislative machinery, and even at the risk of partial economic dislocation, the closure of its night
clubs and/or cabarets. This in essence is also why this Court, obedient to the mandates of good
government, and cognizant of the categorical imperatives of the current legal and social revolution,
hereby [upholds] in the name of police power the validity and constitutionality of Ordinance No. 84,
Series of 1975, of the Municipal Council of Bocaue, Bulacan. The restraining orders heretofore
issued in these two cases are therefore hereby rifted, effective the first day of February, 1976, the
purpose of the grace period being to enable the petitioners herein to apply to the proper appellate
tribunals for any contemplated redress."9 This Court is, however, unable to agree with such a
conclusion and for reasons herein set forth, holds that reliance on the police power is insufficient to
justify the enactment of the assailed ordinance. It must be declared null and void.

1. Police power is granted to municipal corporations in general terms as follows: "General power of
council to enact ordinances and make regulations. - The municipal council shall enact such
ordinances and make such regulations, not repugnant to law, as may be necessary to carry into
effect and discharge the powers and duties conferred upon it by law and such as shall seem
necessary and proper to provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof,
and for the protection of property therein." 10 It is practically a reproduction of the former Section 39 of
Municipal Code.11 An ordinance enacted by virtue thereof, according to Justice Moreland, speaking
for the Court in the leading case of United States v. Abendan 12 "is valid, unless it contravenes the
fundamental law of the Philippine Islands, or an Act of the Philippine Legislature, or unless it is
against public policy, or is unreasonable, oppressive, partial, discriminating, or in derogation of
common right. Where the power to legislate upon a given subject, and the mode of its exercise and
the details of such legislation are not prescribed, the ordinance passed pursuant thereto must be a
reasonable exercise of the power, or it will be pronounced invalid." 13 In another leading case, United
States v. Salaveria, 14 the ponente this time being Justice Malcolm, where the present Administrative
Code provision was applied, it was stated by this Court: "The general welfare clause has two
branches: One branch attaches itself to the main trunk of municipal authority, and relates to such
ordinances and regulations as may be necessary to carry into effect and discharge the powers and
duties conferred upon the municipal council by law. With this class we are not here directly
concerned. The second branch of the clause is much more independent of the specific functions of
the council which are enumerated by law. It authorizes such ordinances as shall seem necessary
and proper to provide for the health and safety, promote the prosperity, improve the morals, peace,
good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the
protection of property therein.' It is a general rule that ordinances passed by virtue of the implied
power found in the general welfare clause must be reasonable, consonant with the general
powersand purposes of the corporation, and not inconsistent with the laws or policy of the State." 15 If
night clubs were merely then regulated and not prohibited, certainly the assailed ordinance would
pass the test of validity. In the two leading cases above set forth, this Court had stressed
reasonableness, consonant with the general powers and purposes of municipal corporations, as well
as consistency with the laws or policy of the State. It cannot be said that such a sweeping exercise
of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering
public morals, a worthy and desirable end can be attained by a measure that does not encompass
too wide a field. Certainly the ordinance on its face is characterized by overbreadth. The purpose
sought to be achieved could have been attained by reasonable restrictions rather than by an
absolute prohibition. The admonition in Salaveria should be heeded: "The Judiciary should not lightly
set aside legislative action when there is not a clear invasion of personal or property rights under the
guise of police regulation." 16 It is clear that in the guise of a police regulation, there was in this
instance a clear invasion of personal or property rights, personal in the case of those individuals
desirous of patronizing those night clubs and property in terms of the investments made and salaries
to be earned by those therein employed.

2. The decision now under review refers to Republic Act No. 938 as amended. 17 It was originally
enacted on June 20, 1953. It is entitled: "AN ACT GRANTING MUNICIPAL OR CITY BOARDS AND
COUNCILS THE POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND
OPERATION OF CERTAIN PLACES OF AMUSEMENT WITHIN THEIR RESPECTIVE
TERRITORIAL JURISDICTIONS.' 18 Its first section insofar as pertinent reads: "The municipal or city
board or council of each chartered city shall have the power to regulate by ordinance the
establishment, maintenance and operation of night clubs, cabarets, dancing schools, pavilions,
cockpits, bars, saloons, bowling alleys, billiard pools, and other similar places of amusement within
its territorial jurisdiction: ... " 19Then on May 21, 1954, the first section was amended to include not
merely "the power to regulate, but likewise "Prohibit ... " 20 The title, however, remained the same. It
is worded exactly as Republic Act No. 938. It is to be admitted that as thus amended, if only the
above portion of the Act were considered, a municipal council may go as far as to prohibit the
operation of night clubs. If that were all, then the appealed decision is not devoid of support in law.
That is not all, however. The title was not in any way altered. It was not changed one whit. The exact
wording was followed. The power granted remains that of regulation, not prohibition. There is thus
support for the view advanced by petitioners that to construe Republic Act No. 938 as allowing the
prohibition of the operation of night clubs would give rise to a constitutional question. The
Constitution mandates: "Every bill shall embrace only one subject which shall be expressed in the
title thereof. " 21 Since there is no dispute as the title limits the power to regulating, not prohibiting, it
would result in the statute being invalid if, as was done by the Municipality of Bocaue, the operation
of a night club was prohibited. There is a wide gap between the exercise of a regulatory power "to
provide for the health and safety, promote the prosperity, improve the morals, 22 in the language of
the Administrative Code, such competence extending to all "the great public needs, 23 to quote from
Holmes, and to interdict any calling, occupation, or enterprise. In accordance with the well-settled
principle of constitutional construction that between two possible interpretations by one of which it
will be free from constitutional infirmity and by the other tainted by such grave defect, the former is to
be preferred. A construction that would save rather than one that would affix the seal of doom
certainly commends itself. We have done so before We do so again. 24

3. There is reinforcement to the conclusion reached by virtue of a specific provision of the recently-
enacted Local Government Code. 25 The general welfare clause, a reiteration of the Administrative
Code provision, is set forth in the first paragraph of Section 149 defining the powers and duties of
the sangguniang bayan. It read as follows: "(a) Enact such ordinances and issue such regulations as
may be necessary to carry out and discharge the responsibilities conferred upon it by law, and such
as shall be necessary and proper to provide for the health, safety, comfort and convenience,
maintain peace and order, improve public morals, promote the prosperity and general welfare of the
municipality and the inhabitants thereof, and insure the protection of property therein; ..." 26 There are
in addition provisions that may have a bearing on the question now before this Court. Thus
the sangguniang bayanshall "(rr) Regulate cafes, restaurants, beer-houses, hotels, motels, inns,
pension houses and lodging houses, except travel agencies, tourist guides, tourist transports, hotels,
resorts, de luxe restaurants, and tourist inns of international standards which shall remain under the
licensing and regulatory power of the Ministry of Tourism which shall exercise such authority without
infringing on the taxing or regulatory powers of the municipality; (ss) Regulate public dancing
schools, public dance halls, and sauna baths or massage parlors; (tt) Regulate the establishment
and operation of billiard pools, theatrical performances, circuses and other forms of entertainment;
..." 27 It is clear that municipal corporations cannot prohibit the operation of night clubs. They may be
regulated, but not prevented from carrying on their business. It would be, therefore, an exercise in
futility if the decision under review were sustained. All that petitioners would have to do is to apply
once more for licenses to operate night clubs. A refusal to grant licenses, because no such
businesses could legally open, would be subject to judicial correction. That is to comply with the
legislative will to allow the operation and continued existence of night clubs subject to appropriate
regulations. In the meanwhile, to compel petitioners to close their establishments, the necessary
result of an affirmance, would amount to no more than a temporary termination of their business.
During such time, their employees would undergo a period of deprivation. Certainly, if such an
undesirable outcome can be avoided, it should be. The law should not be susceptible to the
reproach that it displays less than sympathetic concern for the plight of those who, under a mistaken
appreciation of a municipal power, were thus left without employment. Such a deplorable
consequence is to be avoided. If it were not thus, then the element of arbitrariness enters the
picture. That is to pay less, very much less, than full deference to the due process clause with its
mandate of fairness and reasonableness.

4. The conclusion reached by this Court is not to be interpreted as a retreat from its resolute stand
sustaining police power legislation to promote public morals. The commitment to such an Ideal
forbids such a backward step. Legislation of that character is deserving of the fullest sympathy from
the judiciary. Accordingly, the judiciary has not been hesitant to lend the weight of its support to
measures that can be characterized as falling within that aspect of the police power. Reference is
made by respondents to Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of
Manila. 28 There is a misapprehension as to what was decided by this Court. That was a regulatory
measure. Necessarily, there was no valid objection on due process or equal protection grounds. It
did not prohibit motels. It merely regulated the mode in which it may conduct business in order
precisely to put an end to practices which could encourage vice and immorality. This is an entirely
different case. What was involved is a measure not embraced within the regulatory power but an
exercise of an assumed power to prohibit. Moreover, while it was pointed out in the aforesaid Ermita-
Malate Hotel and Motel Operators Association, Inc. decision that there must be a factual foundation
of invalidity, it was likewise made clear that there is no need to satisfy such a requirement if a statute
were void on its face. That it certainly is if the power to enact such ordinance is at the most dubious
and under the present Local Government Code non-existent.

WHEREFORE, the writ of certiorari is granted and the decision of the lower court dated January 15,
1976 reversed, set aside, and nullied. Ordinance No. 84, Series of 1975 of the Municipality of
Bocaue is declared void and unconstitutional. The temporary restraining order issued by this Court is
hereby made permanent. No costs.

Facts:
1. Assailed was the validity of an ordinance which prohibit the operation of night clubs.
Petitioners contended that the ordinance is invalid, tainted with nullity, the municipality
being devoid of power to prohibit a lawful business, occupation or calling. Petitioners at
the same time alleging that their rights to due process and equal protection of the laws
were violated as the licenses previously given to them was in effect withdrawn without
judicial hearing.

2. RA 938, as amended, was originally enacted on June 20, 1953. It is entitled: "An Act
Granting Municipal or City Boards and Councils the Power to Regulate the Establishments,
Maintenance and Operation of Certain Places of Amusement within Their Respective
Territorial Jurisdictions.'

The first section reads, "The municipal or city board or council of each chartered city shall
have the power to regulate by ordinance the establishment, maintenance and operation
of night clubs, cabarets, dancing schools, pavilions, cockpits, bars, saloons, bowling alleys,
billiard pools, and other similar places of amusement within its territorial jurisdiction:
On May 21, 1954, the first section was amended to include not merely "the power to
regulate, but likewise "Prohibit ... " The title, however, remained the same. It is worded
exactly as RA 938.

3. As thus amended, if only the said portion of the Act was considered, a municipal council
may go as far as to prohibit the operation of night clubs. The title was not in any way
altered. It was not changed one bit. The exact wording was followed. The power granted
remains that of regulation, not prohibition.

4. Petitioners contended that RA 938 which prohibits the operation of night clubs would
give rise to a constitutional question. The lower court upheld the constitutionality and
validity of Ordinance No. 84 and dismissed the cases. Hence this petition for certiorari by
way of appeal.

ISSUE: Whether or not the ordinance is valid

NO. It is unconstitutional. It undoubtly involves a measure not embraced within the


regulatory power but an exercise of an assumed power to prohibit.

1. The Constitution mandates: "Every bill shall embrace only one subject which shall be
expressed in the title thereof. "Since there is no dispute as the title limits the power to
regulating, not prohibiting, it would result in the statute being invalid if, as was done by
the Municipality of Bocaue, the operation of a night club was prohibited. There is a wide
gap between the exercise of a regulatory power "to provide for the health and safety,
promote the prosperity, and improve the morals, in the language of the Administrative
Code, such competence extending to all "the great public needs.

2. In accordance with the well-settled principle of constitutional construction that between


two possible interpretations by one of which it will be free from constitutional infirmity
and by the other tainted by such grave defect, the former is to be preferred. A
construction that would save rather than one that would affix the seal of doom certainly
commends itself.

3. Under the Local Govt Code, it is clear that municipal corporations cannot prohibit the
operation of night clubs. They may be regulated, but not prevented from carrying on their
business. It would be, therefore, an exercise in futility if the decision under review were
sustained. All that petitioners would have to do is to apply once more for licenses to
operate night clubs. A refusal to grant licenses, because no such businesses could legally
open, would be subject to judicial correction. That is to comply with the legislative will to
allow the operation and continued existence of night clubs subject to appropriate
regulations. In the meanwhile, to compel petitioners to close their establishments, the
necessary result of an affirmance, would amount to no more than a temporary
termination of their business.

4. Herein what was involved is a measure not embraced within the regulatory power but an
exercise of an assumed power to prohibit.

G.R. No. 92389 September 11, 1991

HON. JEJOMAR C. BINAY and the MUNICIPALITY OF MAKATI, petitioners,


vs.
HON. EUFEMIO DOMINGO and the COMMISSION ON AUDIT, respondents.

Jejomar C. Binay for himself and for his co-petitioner.

Manuel D. Tamase and Rafael C. Marquez for respondents.

PARAS, J.:

The only pivotal issue before Us is whether or not Resolution No. 60, re-enacted under Resolution
No. 243, of the Municipality of Makati is a valid exercise of police power under the general welfare
clause.

The pertinent facts are:

On September 27, 1988, petitioner Municipality, through its Council, approved Resolution No. 60
which reads:

A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL ASSISTANCE


PROGRAM INITIATED BY THE OFFICE OF THE MAYOR, OF EXTENDING FINANCIAL
ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO A BEREAVED FAMILY, FUNDS
TO BE TAKEN OUT OF UNAPPROPRIATED AVAILABLE FUNDS EXISTING IN THE
MUNICIPAL TREASURY. (Rollo, Annnex "A" p. 39)

Qualified beneficiaries, under the Burial Assistance Program, are bereaved families of Makati whose
gross family income does not exceed two thousand pesos (P2,000.00) a month. The beneficiaries,
upon fulfillment of other requirements, would receive the amount of five hundred pesos (P500.00)
cash relief from the Municipality of Makati. (Reno, Annex "13", p. 41)

Metro Manila Commission approved Resolution No. 60. Thereafter, the municipal secretary certified
a disbursement fired of four hundred thousand pesos (P400,000.00) for the implementation of the
Burial Assistance Program. (Rollo, Annex "C", p. 43).

Resolution No. 60 was referred to respondent Commission on Audit (COA) for its expected
allowance in audit. Based on its preliminary findings, respondent COA disapproved Resolution No.
60 and disallowed in audit the disbursement of finds for the implementation thereof. (Rollo, Annex
"D", P. 44)

Two letters for reconsideration (Annexes "E" and "F", Rollo, pp. 45 and 48, respectively) filed by
petitioners Mayor Jejomar Binay, were denied by respondent in its Decision No. 1159, in the
following manner:

Your request for reconsideration is predicated on the following grounds, to wit:

1. Subject Resolution No. 60, s. 1988, of the Municipal Council of Makati and the intended
disbursements fall within the twin principles of 'police power and parens patriae and

2. The Metropolitan Manila Commission (MMC), under a Certification, dated June 5, 1989,
has already appropriated the amount of P400,000.00 to implement the Id resolution, and the
only function of COA on the matter is to allow the financial assistance in question.

The first contention is believed untenable. Suffice it to state that:

a statute or ordinance must have a real substantial, or rational relation to the public
safety, health, morals, or general welfare to be sustained as a legitimate exercise of
the police power. The mere assertion by the legislature that a statute relates to the
public health, safety, or welfare does not in itself bring the statute within the police
power of a state for there must always be an obvious and real connection between
the actual provisions of a police regulations and its avowed purpose, and the
regulation adopted must be reasonably adapted to accomplish the end sought to be
attained. 16 Am. Jur 2d, pp. 542-543; emphasis supplied).

Here, we see no perceptible connection or relation between the objective sought to be


attained under Resolution No. 60, s. 1988, supra, and the alleged public safety, general
welfare, etc. of the inhabitants of Makati.

Anent the second contention, let it be stressed that Resolution No. 60 is still subject to the
limitation that the expenditure covered thereby should be for a public purpose, i.e., that the
disbursement of the amount of P500.00 as burial assistance to a bereaved family of the
Municipality of Makati, or a total of P400,000.00 appropriated under the Resolution, should
be for the benefit of the whole, if not the majority, of the inhabitants of the Municipality and
not for the benefit of only a few individuals as in the present case. On this point government
funds or property shall be spent or used solely for public purposes. (Cf. Section 4[2], P.D.
1445). (pp. 50-51, Rollo)

Bent on pursuing the Burial Assistance Program the Municipality of Makati, through its Council,
passed Resolution No. 243, re-affirming Resolution No. 60 (Rollo, Annex "H", p. 52).

However, the Burial Assistance Program has been stayed by COA Decision No. 1159. Petitioner,
through its Mayor, was constrained to file this special civil action of certiorari praying that COA
Decision No. 1159 be set aside as null and void.

The police power is a governmental function, an inherent attribute of sovereignty, which was born
with civilized government. It is founded largely on the maxims, "Sic utere tuo et ahenum non laedas
and "Salus populi est suprema lex Its fundamental purpose is securing the general welfare, comfort
and convenience of the people.
Police power is inherent in the state but not in municipal corporations (Balacuit v. CFI of Agusan del
Norte, 163 SCRA 182). Before a municipal corporation may exercise such power, there must be a
valid delegation of such power by the legislature which is the repository of the inherent powers of the
State. A valid delegation of police power may arise from express delegation, or be inferred from the
mere fact of the creation of the municipal corporation; and as a general rule, municipal corporations
may exercise police powers within the fair intent and purpose of their creation which are reasonably
proper to give effect to the powers expressly granted, and statutes conferring powers on public
corporations have been construed as empowering them to do the things essential to the enjoyment
of life and desirable for the safety of the people. (62 C.J.S., p. 277). The so-called inferred police
powers of such corporations are as much delegated powers as are those conferred in express
terms, the inference of their delegation growing out of the fact of the creation of the municipal
corporation and the additional fact that the corporation can only fully accomplish the objects of its
creation by exercising such powers. (Crawfordsville vs. Braden, 28 N.E. 849). Furthermore,
municipal corporations, as governmental agencies, must have such measures of the power as are
necessary to enable them to perform their governmental functions. The power is a continuing one,
founded on public necessity. (62 C.J.S. p. 273) Thus, not only does the State effectuate its purposes
through the exercise of the police power but the municipality does also. (U.S. v. Salaveria, 39 Phil.
102).

Municipal governments exercise this power under the general welfare clause: pursuant thereto they
are clothed with authority to "enact such ordinances and issue such regulations as may be
necessary to carry out and discharge the responsibilities conferred upon it by law, and such as shall
be necessary and proper to provide for the health, safety, comfort and convenience, maintain peace
and order, improve public morals, promote the prosperity and general welfare of the municipality and
the inhabitants thereof, and insure the protection of property therein." (Sections 91, 149, 177 and
208, BP 337). And under Section 7 of BP 337, "every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as powers necessary and
proper for governance such as to promote health and safety, enhance prosperity, improve morals,
and maintain peace and order in the local government unit, and preserve the comfort and
convenience of the inhabitants therein."

Police power is the power to prescribe regulations to promote the health, morals, peace, education,
good order or safety and general welfare of the people. It is the most essential, insistent, and
illimitable of powers. In a sense it is the greatest and most powerful attribute of the government. It is
elastic and must be responsive to various social conditions. (Sangalang, et al. vs. IAC, 176 SCRA
719). On it depends the security of social order, the life and health of the citizen, the comfort of an
existence in a thickly populated community, the enjoyment of private and social life, and the
beneficial use of property, and it has been said to be the very foundation on which our social system
rests. (16 C.J.S., P. 896) However, it is not confined within narrow circumstances of precedents
resting on past conditions; it must follow the legal progress of a democratic way of life. (Sangalang,
et al. vs. IAC, supra).

In the case at bar, COA is of the position that there is "no perceptible connection or relation between
the objective sought to be attained under Resolution No. 60, s. 1988, supra, and the alleged public
safety, general welfare. etc. of the inhabitants of Makati." (Rollo, Annex "G", p. 51).

Apparently, COA tries to re-define the scope of police power by circumscribing its exercise to "public
safety, general welfare, etc. of the inhabitants of Makati."

In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of an exact
definition but has been, purposely, veiled in general terms to underscore its all comprehensiveness.
Its scope, over-expanding to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuring the greatest benefits.

The police power of a municipal corporation is broad, and has been said to be commensurate with,
but not to exceed, the duty to provide for the real needs of the people in their health, safety, comfort,
and convenience as consistently as may be with private rights. It extends to all the great public
needs, and, in a broad sense includes all legislation and almost every function of the municipal
government. It covers a wide scope of subjects, and, while it is especially occupied with whatever
affects the peace, security, health, morals, and general welfare of the community, it is not limited
thereto, but is broadened to deal with conditions which exists so as to bring out of them the greatest
welfare of the people by promoting public convenience or general prosperity, and to everything
worthwhile for the preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec. 128).
Thus, it is deemed inadvisable to attempt to frame any definition which shall absolutely indicate the
limits of police power.

COA's additional objection is based on its contention that "Resolution No. 60 is still subject to the
limitation that the expenditure covered thereby should be for a public purpose, ... should be for the
benefit of the whole, if not the majority, of the inhabitants of the Municipality and not for the benefit of
only a few individuals as in the present case." (Rollo, Annex "G", p. 51).

COA is not attuned to the changing of the times. Public purpose is not unconstitutional merely
because it incidentally benefits a limited number of persons. As correctly pointed out by the Office of
the Solicitor General, "the drift is towards social welfare legislation geared towards state policies to
provide adequate social services (Section 9, Art. II, Constitution), the promotion of the general
welfare (Section 5, Ibid) social justice (Section 10, Ibid) as well as human dignity and respect for
human rights. (Section 11, Ibid." (Comment, p. 12)

The care for the poor is generally recognized as a public duty. The support for the poor has long
been an accepted exercise of police power in the promotion of the common good.

There is no violation of the equal protection clause in classifying paupers as subject of legislation.
Paupers may be reasonably classified. Different groups may receive varying treatment. Precious to
the hearts of our legislators, down to our local councilors, is the welfare of the paupers. Thus,
statutes have been passed giving rights and benefits to the disabled, emancipating the tenant-farmer
from the bondage of the soil, housing the urban poor, etc.

Resolution No. 60, re-enacted under Resolution No. 243, of the Municipality of Makati is a paragon
of the continuing program of our government towards social justice. The Burial Assistance Program
is a relief of pauperism, though not complete. The loss of a member of a family is a painful
experience, and it is more painful for the poor to be financially burdened by such death. Resolution
No. 60 vivifies the very words of the late President Ramon Magsaysay 'those who have less in life,
should have more in law." This decision, however must not be taken as a precedent, or as an official
go-signal for municipal governments to embark on a philanthropic orgy of inordinate dole-outs for
motives political or otherwise.

PREMISES CONSIDERED, and with the afore-mentioned caveat, this petition is hereby GRANTED
and the Commission on Audit's Decision No. 1159 is hereby SET ASIDE. SO ORDERED.

Facts:

Petitioner Municipality of Makati, through its Council, approved Resolution No. 60 which
extends P500 burial assistance to bereaved families whose gross family income does
not exceed P2,000.00 a month. The funds are to be taken out of the unappropriated
available funds in the municipal treasury. The Metro Manila Commission approved the
resolution. Thereafter, the municipal secretary certified a disbursement of P400,000.00
for the implementation of the program. However, the Commission on Audit disapproved
said resolution and the disbursement of funds for the implementation thereof for the
following reasons: (1) the resolution has no connection to alleged public safety, general
welfare, safety, etc. of the inhabitants of Makati; (2) government funds must be
disbursed for public purposes only; and, (3) it violates the equal protection clause since
it will only benefit a few individuals.

Issues:

1. Whether Resolution No. 60 is a valid exercise of the police power under the general
welfare clause
2. Whether the questioned resolution is for a public purpose
3. Whether the resolution violates the equal protection clause

Held:

1. The police power is a governmental function, an inherent attribute of sovereignty,


which was born with civilized government. It is founded largely on the maxims, "Sic
utere tuo et ahenum non laedas and "Salus populi est suprema lex. Its fundamental
purpose is securing the general welfare, comfort and convenience of the people.

Police power is inherent in the state but not in municipal corporations. Before a municipal corporation
may exercise such power, there must be a valid delegation of such power by the
legislature which is the repository of the inherent powers of the State.

Municipal governments exercise this power under the general welfare clause. Pursuant
thereto they are clothed with authority to "enact such ordinances and issue such
regulations as may be necessary to carry out and discharge the responsibilities
conferred upon it by law, and such as shall be necessary and proper to provide for the
health, safety, comfort and convenience, maintain peace and order, improve public
morals, promote the prosperity and general welfare of the municipality and the
inhabitants thereof, and insure the protection of property therein.

2. Police power is not capable of an exact definition but has been, purposely, veiled in
general terms to underscore its all comprehensiveness. Its scope, over-expanding to
meet the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and
circumstances thus assuring the greatest benefits.

The police power of a municipal corporation is broad, and has been said to be
commensurate with, but not to exceed, the duty to provide for the real needs of the
people in their health, safety, comfort, and convenience as consistently as may be with
private rights. It extends to all the great public needs, and, in a broad sense includes all
legislation and almost every function of the municipal government. It covers a wide
scope of subjects, and, while it is especially occupied with whatever affects the peace,
security, health, morals, and general welfare of the community, it is not limited thereto,
but is broadened to deal with conditions which exists so as to bring out of them the
greatest welfare of the people by promoting public convenience or general prosperity,
and to everything worthwhile for the preservation of comfort of the inhabitants of the
corporation. Thus, it is deemed inadvisable to attempt to frame any definition which
shall absolutely indicate the limits of police power.

Public purpose is not unconstitutional merely because it incidentally benefits a limited number of persons. As
correctly pointed out by the Office of the Solicitor General, "the drift is towards social
welfare legislation geared towards state policies to provide adequate social services, the
promotion of the general welfare, social justice as well as human dignity and respect for
human rights." The care for the poor is generally recognized as a public duty. The
support for the poor has long been an accepted exercise of police power in the
promotion of the common good.

3. There is no violation of the equal protection clause. Paupers may be reasonably classified.
Different groups may receive varying treatment. Precious to the hearts of our
legislators, down to our local councilors, is the welfare of the paupers. Thus, statutes
have been passed giving rights and benefits to the disabled, emancipating the tenant-
farmer from the bondage of the soil, housing the urban poor, etc. Resolution No. 60,
re-enacted under Resolution No. 243, of the Municipality of Makati is a paragon of the
continuing program of our government towards social justice. The Burial Assistance
Program is a relief of pauperism, though not complete. The loss of a member of a
family is a painful experience, and it is more painful for the poor to be financially
burdened by such death. Resolution No. 60 vivifies the very words of the late President
Ramon Magsaysay 'those who have less in life, should have more in law." This decision,
however must not be taken as a precedent, or as an official go-signal for municipal
governments to embark on a philanthropic orgy of inordinate dole-outs for motives
political or otherwise.

03 G.R. No. 104786 January 27, 1994 AUTHOR: Enriquez


NOTES:
ALFREDO PATALINGHUG, petitioner,
vs.
HON. COURT OF APPEALS, RICARDO CRIBILLO,
MARTIN ARAPOL, CORAZON ALCASID,
PRIMITIVA SEDO, respondents.

TOPIC: Police Power PONENTE: Romero


CASE LAW/ DOCTRINE: The declaration of the said area as a commercial zone thru a municipal
ordinance is an exercise of police power to promote the good order and general welfare of the
people in the locality. Corollary thereto, the state, in order to promote the general welfare, may
interfere with personal liberty, with property, and with business and occupations. Thus, persons
may be subjected to certain kinds of restraints and burdens in order to secure the general
welfare of the state and to this fundamental aim of government, the rights of the individual may
be subordinated. The ordinance which regulates the location of funeral homes has been
adopted as part of comprehensive zoning plans for the orderly development of the area covered
thereunder.
FACTS: The Sangguniang Panlungsod (SP) of Davao City enacted an Ordinance known as the
"Expanded Zoning Ordinance of Davao City," Section 8 of which states:

Sec. 8. USE REGULATIONS IN C-2 (commercial) DISTRICTS AC-2


District shall be dominantly for commercial and compatible industrial
uses as provided hereunder:

xxx xxx xxx

xxx xxx xxx

3.1 Funeral Parlors/Memorial Homes xxx xxx xxx shall be established not
less than 50 meters from any residential structures, churches and other
institutional buildings.

Zoning Administrator issued a Building Permit in favor of Petitioner for the construction of a
funeral parlor. Thereafter, Petitioner commenced the construction of his funeral parlor.

Acting on the complaint of several residents of Barangay Agdao (that the construction of
petitioner's funeral parlor violated the above-mentioned ordinance) since it was allegedly
situated within a 50-meter radius from the Iglesia ni Kristo Chapel and several residential
structures, the SP conducted an investigation and found that "the nearest residential structure,
owned by Tepoot is only 8 inches (voluminous? Respectable!) to the south"

Notwithstanding the findings of the SP, Petitioner continued to construct his funeral parlor
which was eventually finished. Thus, prompting Private Respondents to file a case for the
declaration of nullity of a building permit with preliminary prohibitory and mandatory injunction
and/or restraining order with the trial court.

Trial Court dismissed the complaint. It stated:


That the residential building owned by Cribillo (one of the Private Respondents) and
Iglesia ni Kristo chapel are 63.25 meters and 55.95 meters away, respectively from the
funeral parlor.
Although the residential building owned by Mr. Teepot is adjacent to the funeral parlor,
and is only separated by a concrete fence, it is being rented by another person who
devotes it to his laundry business. Thus, considered as commercial
Private respondent's suit is premature as they failed to exhaust the administrative
remedies provided by Ordinance No. 363.

Hence, the Private Respondents appealed to the CA. The CA then reversed the Trial Court and
annulled the building permit. It stated:
That although the buildings owned by Cribillo and Iglesia ni Kristo were beyond the 50-
meter residential radius prohibited by Ordinance 363, the construction of the funeral
parlor was within the 50-meter radius measured from the Tepoot's building.
That although it was used by Mr. Tepoot's lessee for laundry business, it was a residential
lot as reflected in the tax declaration, thus paving the way for the application of the
above-mentioned ordinance.
Hence, this appeal by Petitioner to the SC. He argued that:
The CA erred in concluding that the Tepoot building adjacent to petitioner's funeral
parlor is residential simply because it was allegedly declared as such for taxation
purposes, in complete disregard of the above-mentioned ordinance declaring the
subject area as dominantly for commercial and compatible industrial uses.
ISSUE(S): Whether the CA erred in declaring the land as residential

HELD: Yes.
RATIO: In this case, the CAs reversal of the trial court's decision was based on Tepoot's building
being declared for taxation purposes as residential. However, the SC said that a tax declaration
is not conclusive of the nature of the property for zoning purposes. A property may have been
declared by its owner as residential for real estate taxation purposes but it may well be within a
commercial zone. A discrepancy may thus exist in the determination of the nature of property
for real estate taxation purposes vis-a-vis the determination of a property for zoning purposes.

A tax declaration only enables the assessor to identify the same for assessment levels. It does
not bind a provincial/city assessor, for under Sec. 22 of the Real Estate Tax Code, appraisal and
assessment are based on the actual use irrespective of "any previous assessment or taxpayer's
valuation thereon," which is based on a taxpayer's declaration. In fact, a piece of land declared
by a taxpayer as residential may be assessed by the provincial or city assessor as commercial
because its actual use is commercial.

The RTCs determination that Mr. Tepoot's building is commercial and, therefore, Sec. 8 is
inapplicable, is strengthened by the fact that the SP has declared the questioned area as
commercial or C-2. Consequently, even if Tepoot's building was declared for taxation purposes
as residential, once a local government has reclassified an area as commercial, that
determination for zoning purposes must prevail. While the commercial character of the
questioned vicinity has been declared thru the ordinance, private respondents have failed to
present convincing arguments to substantiate their claim that Cabaguio Avenue, where the
funeral parlor was constructed, was still a residential zone. Unquestionably, the operation of a
funeral parlor constitutes a "commercial purpose," as gleaned from the ordinance issued.

The declaration of the said area as a commercial zone thru a municipal ordinance is an exercise
of police power to promote the good order and general welfare of the people in the locality.
Corollary thereto, the state, in order to promote the general welfare, may interfere with
personal liberty, with property, and with business and occupations. Thus, persons may be
subjected to certain kinds of restraints and burdens in order to secure the general welfare of
the state and to this fundamental aim of government, the rights of the individual may be
subordinated. The ordinance which regulates the location of funeral homes has been adopted
as part of comprehensive zoning plans for the orderly development of the area covered
thereunder.

Tano v. Socrates AUTHOR: Garcia


[G.R. No. 110249 August 21, 1997] NOTES:
TOPIC: Police Power Di ko na sinama yung procedural. Basta ang unusual
PONENTE: Davide, JR., J. lang is hierarchy of courts was not followed. Pero since
malapit na magend yung life ng ordinance (5 years) nag
decide na din yung court
CASE LAW/ DOCTRINE:
Laws enjoy the presumption of constitutionality.
The conflict with the Constitution must be shown beyond reasonable doubt.
FACTS:
December 14, 1992 Sangguniang Panlungsod ng Puerto Princesa City enacted Ordinance No. 15-92 which
took effect on January 1, 1993 entitled: AN ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH AND
LOBSTER OUTSIDE PURERTO PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1, 1998 AND PROVIDING
EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES THEREOF.
To implement the said city ordinance, then Acting City Mayor Lucero issued Office Order No. 23 (basically
an authorization to inspect.
February 19,1993 the Sangguniang Panlalawiagan, Provincial Government of Palawan enacted Resolution
No. 33 A RESOLUTION PROHIBITING THE CATCHING, GATHERING, POSSESSING, BUYING, SELLING AND
SHIPMENT OF LIVE MARINE CORAL DWELLING AQUATIC ORGANISMS
Ordinance no. 2 Ordinance prohibiting the catching, gathering, possessing, buying, selling and shipment
of live marine coral dwelling aquatic organisms
Tano et al. were charged criminally. Lim et al., were charged by the PNP.
Without seeking redress from concerned local government units, prosecutors office and courts,
petitioners directly invoke the original jurisdiction of the SC by filing a petition with the SC.
Ordinances deprived them of due process of law. Their livelihood, and unduly restricted them
from the practice of their trade
Office Order No. 23 contained no regulation nor condition under which the Mayors permit could
be granted or denied; in other words, the Mayor had the absolute authority to determine
whether or not to issue the permit.
Ordinance No. 2 took away the right of petiitoners-fishermen to earn their livelihood in lawful
ways.
As Ordinance No. 2 is void, the criminal cases based theoreon have to be dismissed.
Respondents:
Valid exercise of power under the general welfare clause
Valid exercise of power to protect the environment
The province had such right and responsibility.
Not unconstitiutional No violation of the due process and equal protection clauses of the
Constitution. Public hearings were conducted before the enactment of the Ordinance which,
undoubtedly, had a lawful purpose and employed and employed reasonable means. Substantial
distinction existed between a fisherman who catches live fish with no intention at all of selling it
live. The ordinance applied equally to all those belonging to one class.

ISSUE(S):
Whether or not the ordinances were unconstitutional
HELD:
No.
RATIO:
The court finds petitioners contentions baseless and so hold that the former do not suffer from any
infirmity, both under the Constitution and applicable laws. Petitioners specifically point to Section 2,
Article XII and Sections 2 and 7, Article XIII of the Constitution as having been transgressed by the
Ordinances. There is no showing that any of the petitioners qualifies as a substance or marginal
fisherman.
Section 2 of Article XII aims primarily not to bestow any right to subsistence fishermen, but to lay stress
on the duty of the State to protect the nations marine wealth.
The ordinances in question are meant precisely to protect and conserve our marine resources to the end
that their enjoyment may be guaranteed not only for the present generation, but also for the generations
to come.
The so-called preferential right of subsistence or marginal fishermen to the use of marine resources
is not at all absolute.
Regalian Doctrine, marine resources belong to the State, and, pursuant to the first paragraph of Section
2, Article XII of the Constitution, their exploration, development and utilization shall be under the full
control and supervision of the State.
The LGC provisions invoked by private respondents merely seek to give flesh and blood to the right of
the people to a balanced and healthful ecology. In fact, the General Welfare Clause.
Section 5 of the LGC explicitly mandates that the general welfare provisions of the LGC shall be
liberally interpreted to give more powers to the local government units in accelerating economic
development and upgrading the quality of life for the people of the community.
The LGC vests municipalities with the power to grant fishery privileges in municipal waters and impose
rentals, fees or charges therefor; to penalize, by appropriate ordinances, the use of explosives, noxious
or poisonous substances, electricity, muro-ami, and other deleterious methods of fishing; and to
prosecute any violation of the provisions of applicable fishery laws. Further, the sangguniang bayan, the
sangguniang panglungsongsod and the sangguniang panlalawigan are directed to enact ordinances for
the general welfare of the municipality and its inhabitants, which hall include, inter alia, ordinances that
protect the environment such as dynamite fishing and other forms of destructive fishing and such
other activities which result in pollution, acceleration of eutrophication of rivers and lakes, or of
ecological imbalance.
One of the devolved powers enumerated in the section of the LGC on devolution is the enforcement of
fishery laws in municipal waters including the conservation of mangroves. This necessarily includes the
enactment of ordinance to effectively carry out such fishery laws within the municipal waters.
In light then of the principles of decentralization and devolution enshrined in the LGC and the powers
granted therein to local government units, the validity of the questioned Ordinances cannot be doubted.

White Light Corp., Titanium Corp., Sta. Mesa Tourist AUTHOR: Tristan
and Devt. Corp. vs. City of Manila represented by NOTES: Motel Case tackled in Consti2 as well
Mayor Alfredo Lim
[G.R. No. 122846, January 20, 2009]
TOPIC: Police Power PONENTE: Tinga
CASE LAW/ DOCTRINE:
In the exercise of police power, it must appear that the interests of the public generally, as distinguished
from those of a particular class, require an interference with private rights and the means must be
reasonably necessary for the accomplishment of the purpose and not unduly oppressive of private rights.
It must also be evident that no other alternative for the accomplishment of the purpose less intrusive of
private rights can work. More importantly, a reasonable relation must exist between the purposes of the
measure and the means employed for its accomplishment, for even under the guise of protecting the
public interest, personal rights and those pertaining to private property will not be permitted to be
arbitrarily invaded. Lacking a concurrence of these requisites, the police measure shall be struck down
as an arbitrary intrusion into private rights.

FACTS:
City Mayor Alfredo S. Lim (Mayor Lim) signed into law an Ordinance" prohibiting short time admission in
hotels, motels, lodging houses, pension houses and similar establishments in the City of Manila.

Short-time admission shall mean admittance and charging of room rate for less than twelve (12) hours
at any given time or the renting out of rooms more than twice a day

Petitioners filed a complaint alleging that the Ordinance, insofar as it includes motels and inns as among
its prohibited establishments, be declared invalid and unconstitutional.

Petitioners contentions: Ordinance is unconstitutional and void since it violates the right to privacy and
the freedom of movement; it is an invalid exercise of police power; and it is an unreasonable and
oppressive interference in their business.

City of Manila defense: Ordinance is a valid exercise of police power pursuant to Section 458 (4)(iv) of
the Local Government Code which confers on cities, among other local government units, the power:
To regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels,
motels, inns, pension houses, lodging houses and other similar establishments, including tourist guides
and transports.

RTC: declared ordinance null and void since it strikes at the personal liberty of the individual guaranteed
and jealously guarded by the Constitution.

CA: reversed RTC

ISSUE(S):
WoN the Ordinance is a valid exercise of police power and thus constitutional.

HELD: No, petition is Granted. Ordinance is rendered null and void.


RATIO:
This is another case about the extent to which the State can intrude into and regulate the lives of its
citizens.

The test of a valid ordinance is well established. A long line of decisions including City of Manila has held
that for an ordinance to be valid, it must not only be within the corporate powers of the local government
unit to enact and pass according to the procedure prescribed by law, it must also conform to the
following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must
not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may
regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable.

The Ordinance prohibits two specific and distinct business practices, namely wash rate admissions and
renting out a room more than twice a day. The ban is evidently sought to be rooted in the police power
as conferred on local government units by the Local Government Code through such implements as the
general welfare clause.

Police power, while incapable of an exact definition, has been purposely veiled in general terms to
underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response as the conditions warrant. Police power is based upon the concept of necessity of the
State and its corresponding right to protect itself and its people. Police power has been used as
justification for numerous and varied actions by the State. These range from the regulation of dance
halls, movie theaters, gas stations and cockpits. The awesome scope of police power is best
demonstrated by the fact that in its hundred or so years of presence in our nations legal system, its use
has rarely been denied.

The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered establishments
for illicit sex, prostitution, drug use and alike. These goals, by themselves, are unimpeachable and
certainly fall within the ambit of the police power of the State. Yet the desirability of these ends do not
sanctify any and all means for their achievement. Those means must align with the Constitution, and our
emerging sophisticated analysis of its guarantees to the people.

Strict Scrutiny TEST APPLIED: Strict scrutiny refers to the standard for determining the quality and the
amount of governmental interest brought to justify the regulation of fundamental freedoms. Strict
scrutiny is used today to test the validity of laws dealing with the regulation of speech, gender, or race
as well as other fundamental rights as expansion from its earlier applications to equal protection.

It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual behavior.
The City asserts before this Court that the subject establishments "have gained notoriety as venue of
prostitution, adultery and fornications in Manila since they provide the necessary atmosphere for
clandestine entry, presence and exit and thus became the ideal haven for prostitutes and thrill-
seekers." Whether or not this depiction is accurate, it cannot be denied that legitimate sexual behavior
among willing married or consenting single adults which is constitutionally protected will be curtailed as
well.

The right to privacy is a constitutional right, the invasion of which should be justified by a compelling
state interest. The case of Morfe accorded recognition to the right to privacy independently of its
identification with liberty; in itself it is fully deserving of constitutional protection. Governmental powers
should stop short of certain intrusions into the personal life of the citizen.

There are also other legitimate activities which the Ordinance would proscribe or impair. There are very
legitimate uses for a wash rate or renting the room out for more than twice a day. (Families who choose
to stay when power is out, in transit passengers who want to rest etc.)

That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the
petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of the
Ordinance as a police power measure. It must appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with private rights and the means
must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive of
private rights. It must also be evident that no other alternative for the accomplishment of the purpose
less intrusive of private rights can work. More importantly, a reasonable relation must exist between the
purposes of the measure and the means employed for its accomplishment, for even under the guise of
protecting the public interest, personal rights and those pertaining to private property will not be
permitted to be arbitrarily invaded.

Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights. The exercise of police power is subject to judicial review when life, liberty
or property is affected. However, this is not in any way meant to take it away from the vastness of State
police power whose exercise enjoys the presumption of validity.

The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact be
diminished simply by applying existing laws. Less intrusive measures such as curbing the proliferation of
prostitutes and drug dealers through active police work would be more effective in easing the situation.
So would the strict enforcement of existing laws and regulations penalizing prostitution and drug use.
These measures would have minimal intrusion on the businesses of the petitioners and other legitimate
merchants. Further, it is apparent that the Ordinance can easily be circumvented by merely paying the
whole day rate without any hindrance to those engaged in illicit activities. Moreover, drug dealers and
prostitutes can in fact collect "wash rates" from their clientele by charging their customers a portion of
the rent for motel rooms and even apartments.

The promotion of public welfare and a sense of morality among citizens deserves the full endorsement
of the judiciary provided that such measures do not trample rights this Court is sworn to protect.

06 CASE TITLE THE CITY OF MANILA, plaintiff-appellant, vs. AUTHOR: Richard Coeur De Leon edited by Laureta for Loc
CHINESE COMMUNITY OF MANILA, ET AL., defendants- Gov
appellees. NOTES: 1920 case according to syllabus, but I couldnt find it
[G.R. No. Date] G.R. No. L-14355 October 31, 1919
TOPIC: Expropriation
PONENTE: JOHNSON, J.
CASE LAW/ DOCTRINE: The moment the municipal corporation or entity attempts to exercise the authority conferred, it
must comply with the conditions accompanying the authority. The right of expropriation is not an inherent power in a
municipal corporation, and before it can exercise the right some law must exist conferring the power upon it.
FACTS:
FACTS
The City of Manila presented a petition in the Court of First Instance of said city, praying that certain lands, therein
particularly described, be expropriated for the purpose of constructing a public improvement.

The petitioner alleged that for the purpose of constructing an extension of Rizal Avenue, Manila, it is necessary for
the plaintiff to acquire ownership of certain parcels of land situated in the district of Binondo.

The defendants the Chinese Community of Manila, Ildefonso Tambunting, and Feliza Concepcion de Delgado
alleged in their Answer (a) that no necessity existed for said expropriation and (b) that the land in question was a
cemetery, which had been used as such for many years, and was covered with sepulchres and monuments, and
that the same should not be converted into a street for public purposes.

One of the defendants, Ildefonso Tampbunting, offered to grant a right of way for the said extension over other
land, without cost to the plaintiff, in order that the sepulchers, chapels and graves of his ancestors may not be
disturbed.

The Honorable Simplicio del Rosario, decided that there was no necessity for the expropriation of the particular
strip of land in question, and absolved each and all of the defendants from all liability under the complaint,
without any finding as to costs.

On appeal, the plaintiff contended that the city of Manila has authority to expropriate private lands for public
purposes. Section 2429 of Act No. 2711 (Charter of the city of Manila) provides that "the city (Manila) . . . may
condemn private property for public use."
The theory of the plaintiff is, that once it has established the fact, under the law, that it has authority to
expropriate land, it may expropriate any land it may desire; that the only function of the court in such proceedings
is to ascertain the value of the land in question; that neither the court nor the owners of the land can inquire into
the advisible purpose of purpose of the expropriation or ask any questions concerning the necessities therefor;
that the courts are mere appraisers of the land involved in expropriation proceedings, and, when the value of the
land is fixed by the method adopted by the law, to render a judgment in favor of the defendant for its value.

Some Manila charter provisions :

Section 243 provides that if the court shall find upon trial that the right to expropriate the land in question exists, it
shall then appoint commissioners.

Sections 244, 245 and 246 provide the method of procedure and duty of the commissioners. Section 248 provides
for an appeal from the judgment of the Court of First Instance to the Supreme Court. Said section 248 gives the
Supreme Court authority to inquire into the right of expropriation on the part of the plaintiff. If the Supreme Court
on appeal shall determine that no right of expropriation existed, it shall remand the cause to the Court of First
Instance with a mandate that the defendant be replaced in the possession of the property and that he recover
whatever damages he may have sustained by reason of the possession of the plaintiff.

It is contended on the part of the plaintiff that the phrase in said section, "and if the court shall find the right to expropriate
exists," means simply that, if the court finds that there is some law authorizing the plaintiff to expropriate, then the courts
have no other function than to authorize the expropriation and to proceed to ascertain the value of the land involved; that
the necessity for the expropriation is a legislative and not a judicial question.

ISSUE(S): W/N the City of Manila can condemn private property for public use without the interference of the court.

HELD: No

RATIO:
No. It is true that Section 2429 of Act No. 2711, or the Charter of the City of Manila states that "the city (Manila) . . . may
condemn private property for public use." But when the statute does not designate the property to be taken nor how it may
be taken, the necessity of taking particular property is a question for the courts. When the application to condemn or
appropriate property is made directly to the court, the question of necessity should be raised

The necessity for conferring the authority upon a municipal corporation to exercise the right of eminent domain is
admittedly within the power of the legislature. But whether or not the municipal corporation or entity is exercising the right
in a particular case under the conditions imposed by the general authority, is a question which the courts have the right to
inquire into.

The impossibility of measuring the damage and inadequacy of a remedy at law is too apparent to admit of argument. To
disturb the mortal remains of those endeared to us in life sometimes becomes the sad duty of the living; but, except in cases
of necessity, or for laudable purposes, the sanctity of the grave, the last resting place of our friends, should be maintained,
and the preventative aid of the courts should be invoked for that object.

Whether or not the cemetery is public or private property, its appropriation for the uses of a public street, especially during
the lifetime of those specially interested in its maintenance as a cemetery, should be a question of great concern, and its
appropriation should not be made for such purposes until it is fully established that the greatest necessity exists therefor.

In the present case, even granting that a necessity exists for the opening of the street in question, the record contains no
proof of the necessity of opening the same through the cemetery. The record shows that adjoining and adjacent lands have
been offered by Tambunting to the city free of charge, which will answer every purpose of the plaintiff. The judgment of the
lower court was affirmed.

The taking of private property for any use, which is not required by the necessities or convenience of the inhabitants of the
state, is an unreasonable exercise of the right of eminent domain, and beyond the power of the legislature to delegate.
To justify the exercise of this extreme power (eminent domain) where the legislature has left it to depend upon the
necessity that may be found to exist, in order to accomplish the purpose of the incorporation, the party claiming the right
to the exercise of the power should be required to show at least a reasonable degree of necessity for its exercise

The general power to exercise the right of eminent domain must not be confused with the right to exercise it in a particular
case. The power of the legislature to confer, upon municipal corporations and other entities within the State, general
authority to exercise the right of eminent domain cannot be questioned by the courts, but that general authority of
municipalities or entities must not be confused with the right to exercise it in particular instances.

The moment the municipal corporation or entity attempts to exercise the authority conferred, it must comply with the
conditions accompanying the authority. The right of expropriation is not an inherent power in a municipal corporation,
and before it can exercise the right some law must exist conferring the power upon it. When the courts come to
determine the question, they must only find (a) that a law or authority exists for the exercise of the right of eminent
domain, but (b) also that the right or authority is being exercised in accordance with the law.

In the present case there are two conditions imposed upon the authority conceded to the City of Manila: First, the land
must be private; and, second, the purpose must be public. If the court, upon trial, finds that neither of these conditions
exists or that either one of them fails, certainly it cannot be contended that the right is being exercised in accordance with
law. The exercise of the right of eminent domain, whether directly by the State, or by its authorized agents, is necessarily
in derogation of private rights, and the rule in that case is that the authority must be strictly construed.

No species of property is held by individuals with greater tenacity, and none is guarded by the constitution and laws more
sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right, and, for greater
public purposes, appropriates the land of an individual without his consent, the plain meaning of the law should not be
enlarged by doubtly interpretation.

Additional (nabanggit ng court)


Upon the question whether expropriation is a legislative function exclusively, and that the courts cannot intervene except
for the purpose of determining the value of the land in question, there is much legal legislature. Much has been written
upon both sides of that question. A careful examination of the discussions pro and con will disclose the fact that the
decisions depend largely upon particular constitutional or statutory provisions. It cannot be denied, if the legislature under
proper authority should grant the expropriation of a certain or particular parcel of land for some specified public purpose,
that the courts would be without jurisdiction to inquire into the purpose of that legislation.

If, upon the other hand, however, the Legislature should grant general authority to a municipal corporation to expropriate
private land for public purposes, we think the courts have ample authority in this jurisdiction, under the provisions above
quoted, to make inquiry and to hear proof, upon an issue properly presented, concerning whether or not the lands were
private and whether the purpose was, in fact, public.

CASE TITLE City of Manila v. Arellano Law AUTHOR: Mendoza


Colleges NOTES: Wala talaga masyadong facts..
[G.R. No. Date] L-2929 February 29, 1950 Section 1 of Republic Act No. 267:
TOPIC: Expropriation
Cities and municipalities are authorized to contract loans from
PONENTE: Tuason
the Reconstruction Finance Corporation, the Philippine
National Bank, and/or any other entity or person at a rate of
interest not exceeding eight per cent per annum for the purpose
of purchasing or expropriating homesites within their
respective territorial jurisdiction and reselling them at cost to
residents of the said cities and municipalities."

CASE LAW/ DOCTRINE:


1. Republic Act No. 267 empowers cities to expropriate as well as to purchase lands for homesites. The word
"expropriating," taken singly or with the text, is susceptible of only one meaning. But this power to expropriate is
necessarily subject to the limitations and conditions. The National Government may not confer upon its
instrumentalities authority which it itself may not exercise. A stream can not run higher than its source.

2. A necessity must exist for the taking thereof for the proposed uses and purposes. Necessity within the rule that
the particular property to be expropriated must be necessary, does not mean an absolute but only a reasonable or
practical necessity, such as would combine the greatest benefit to the public with the least inconvenience and
expense to the condemning party and property owner consistent with such benefit.

FACTS:
The Appellant-City of Manila wanted to purchase and expropriate several lands of the Defendant-Arellano Law
College in Legarda Street, Manila.

The CFI ruled that Section 1 of R.A. No. 257 empowers cities to purchase but not to expropriate lands for the
purpose of subdivision and resale, and dismissed the present action of the Appellant, which seeks to condemn,
for the purpose just stated, several parcels of land having a combined area of 7,270 square meters and situated on
Legarda Street, City of Manila.

The Court cited Guido v. Rural Progress Administration and Commonwealth of the Philippines v. De Borja on
the extent of the Philippine Government's power to condemn private property for resale.

In a broad sense, expropriation of large estates, trusts in perpetuity, and land that
embraces a whole town, or a large section of a town or city, bears direct relation to the
public welfare. But it will be noted that in all these cases and others of similar nature
extensive areas were involved and numerous people and the general public benefited
by the action taken.

On the other hand, the condemnation of a small property in behalf of 10, 20 or 50


persons and their families does not insure to the benefit of the public to a degree
sufficient to give the use public character. What is proposed to be done is to take
plaintiff's property, which for all we know she acquired by sweat and sacrifices for her
and her family's security, and sell it at cost to a few lessees who refuse to pay the
stipulated rent or leave the premises.

"No fixed line of demarcation between what taking is for public use and what is not
can be made; each case has to be judged according to its peculiar circumstances. It
suffices to say for the purpose of this decision that the case under consideration is far
wanting in those elements which make for public convenience or public use. To make
the analogy closer, we find no reason why the Rural Progress Administration could
not take by condemnation an urban lot containing and area of 1,000 or 2,000 square
meters for subdivision into tiny lots for resale to its occupants or those who want to
build thereon."

ISSUE(S):
Whether or not Arellanos several lands should be expropriated or condemned.

HELD:
No. Decision of the CFI is affirmed. Act No. 267 empowers cities to expropriate as well as to purchase lands for
homesites. The word "expropriating," taken singly or with the text, is susceptible of only one meaning. But this
power to expropriate is necessarily subject to the limitations and conditions noted in the decisions Guido and De
Borja. The National Government may not confer upon its instrumentalities authority which it itself may not
exercise. A stream can not run higher than its source.

RATIO:
1. The case at bar is weaker for the condemnor- Rural Progress Administration. In the first place, the land that is
the subject of the present expropriation is only one-third of the land sought to be taken in the Guido case, and about
two-thirds of that involved in the Borja condemnation proceeding. In the second place, the Arellano Colleges' land
is situated in a highly commercial section of the city and is occupied by persons who are not bona fide tenants.
Lastly, this land was bought by the defendant for a university site to take the place of rented buildings that are
unsuitable for schools of higher learning.

To authorize the condemnation of any particular land by a grantee of the power of eminent domain, a necessity
must exist for the taking thereof for the proposed uses and purposes.

2. The private character of the intended use, necessity for the condemnation has not been shown. The land in
question has cost the owner P140,000 . The people for whose benefit the condemnation is being undertaken are so
poor they could ill afford to meet this high price, unless they intend to borrow the money with a view to disposing
of the property later for a profit. Cheaper lands not dedicated to a purpose so worthy as a school and more suited to
the occupants' needs and means, if really they only want to own their own homes, are aplenty elsewhere.

The defendant not only has invested a considerable amount for its property but had the plans for construction ready
and would have completed the project a long time ago had it not been stopped by the city authorities. And again,
while a handful of people stand to profit by the expropriation, the development of a university that has a present
enrolment of 9,000 students would be sacrificed.

As the Rural Progress Administration, the national agency created by the Government to purchase or expropriate
lands for resale as homesites, and to which the petition to purchase the land in question on behalf of the
occupants was referred by the President, turning down the occupants' request after proper investigation,
commented that "the necessity of the Arellano Law College to acquire a permanent site of its own is
imperative not only because denial of the same would hamper the objectives of that educational institution,
but it would likewise be taking a property intended already for public benefit." The Mayor of the City of
Manila himself confessed that he believes the plaintiff is entitled to keep this land.

08 MUNICIPALITY OF MEYCAUAYAN, BULACAN V AUTHOR: PAGCALIWAGAN


INTERMEDIATE APPELLATE COURT NOTES:
G.R. No. 72126 January 29, 1988
TOPIC: Eminent Domain
PONENTE: Gutierrez, Jr., J.
CASE LAW/ DOCTRINE:

FACTS:
1975 respondent Philippine Pipes and Merchandising Corporation (PPMC) filed with Office of
the Municipal Mayor of Meycauayan, Bulacan, an application for a permit to fence a parcel of land
covered by 2 TCTs (1st TCT & 2nd TCT)
Fencing of property was allegedly to enable the storage of PPMCs heavy equipment and
various finished products (large diameter steel pipes, pontoon pipes for ports, wharves,
harbors bridge components, pre-stressed girders and piles, large diameter concrete pipes,
and parts of low cost housing)
1975 Municipal Council of Meycauayan (headed by Mayor Legaspi) passed Resolution 258
manifesting the intention to expropriate PPMC parcel of land covered by 2nd TCT
Opposition was filed by PPMC with Office of the Provincial Governor (OPG)
OPG created a special committee of 4 members to investigate the matter
March 10, 1976 Special Committee recommended that the Provincial Board of Bulacan
disapprove or annul the resolution
Because there was no genuine necessity for the Municipality of Meycauayan to
expropriate PMMCs property to use as a public road
On the basis of this report, Provincial Board passed Resolution No. 238 disapproving and
annulling Resolution No. 258
PPMC reiterated to Office of the Mayor its petition for the approval of the permit to fence
its parcels of land
October 21, 1983 Municipal Council (headed by Mayor Daez) passed Resolution No. 21 to
expropriate PMMCs land
Provincial Board approved the resolution
Petitioner filed with RTC a special civil action for expropriation
Upon deposit of P24,025 (market value) with PNB, RTC issued a writ of possession in favor
of petitioner
RTC issued order declaring taking of the property as lawful and appointing Provincial Assessor of
Bulacan as court commissioner to hold hearing to ascertain the just compensation of property
PPMC filed petition for review with IAC

IAC: Affirmed RTCs decision. Upon MR, decision was re-examined and reversed. Held that there was
no genuine necessity to expropriate the land for use as a public road as there were several roads for
the same purpose and another more appropriate lot for the proposed public road. Taking into
consideration the location and size of land (26.8m x 184.37m), opined that it is more ideal as storage
are for PPMCs heavy equipment and finished products.

Petitioners Arguments: IAC has decided a question of substance not in accord with law or with
applicable decisions of SC; and judgment is based on a misapprehension of facts and the conclusion is a
finding grounded entirely on speculation, surmises, and conjectures.
ISSUE(S): WON the expropriation should be granted.

HELD: NO.

RATIO:

The petitioner's purpose in expropriating the respondent's property is to convert the same into a
public road which would provide a connecting link between Malhacan Road and Bulac Road in
Valenzuela, Bulacan and thereby ease the traffic in the area of vehicles coming from MacArthur
Highway.

The records, however, reveals that there are other connecting links between the aforementioned
roads. The petitioner itself admits that there are four such cross roads in existence. The respondent
court stated that with the proposed road, there would be seven.

Facts established on Ocular Inspection:


1. Property is a private road of the company used in the conduct and operation of its business, with
the inhabitation in nearby premises tolerated to pass the same
2. Adjoining this private road on the eastern side, is a vacant property also belonging to PPMC with
a high wall along the property line on the east side serving as a fence
3. Opposite of the private road is the gate of the factory of the PPMC
4. From the private road on the eastern direction about 30-40m are subdivision roads of an existing
subdivision
5. On the western side of the private road is a vacant lot offered for sale by its owner
6. Bulac road, a municipal road and all nearby subdivision roads are obviously very poorly
developed and maintained, and are in dire need of repair.

There is no showing that some of the six other available cross roads have been closed or that the private
roads in the subdivision may not be used for municipal purposes. What is more likely is that these roads
have already been turned over to the government. The petitioner alleges that surely the environmental
progress during the span of seven years between the first and second attempts to expropriate has
brought about a change in the facts of the case. This allegation does not merit consideration absent a
showing of concrete evidence attesting to it.

As early as City of Manila v. Chinese Community of Manila (40 Phil. 349) this Court held that the
foundation of the right to exercise the power of eminent domain is genuine necessity and that necessity
must be of a public character. Condemnation of private property is justified only if it is for the public
good and there is a genuine necessity of a public character. Consequently, the courts have the power to
inquire into the legality of the exercise of the right of eminent domain and to determine whether there
is a genuine necessity therefor.

In the recent case of De Knecht v. Bautista, (100 SCRA 660) this court further ruled that the government
may not capriciously choose what private property should be taken.

There is absolutely no showing in the petition why the more appropriate lot for the proposed road which
was offered for sale has not been the subject of the petitioner's attempt to expropriate assuming there
is a real need for another connecting road.

MUNICIPALITY OF PARANAQUE v. V.M. AUTHOR: RAMOS


REALTY CORP. [G.R. 127820. July 20, 1998] NOTES:
TOPIC: Eminent Domain PONENTE:
Panganiban, J.
CASE LAW/ DOCTRINE: LGUs CANNOT authorize expropriation of private property by mere
resolution of its lawmaking body. The LGC requires an ordinance. A resolution which merely expresses
the sentiment of opinion of the Municipal Council will not suffice.
FACTS:
Sept 20, 1993: By virtue of Sangguniang Bayan Resolution 93-95, series of 1993, Paranaque filed
a Complaint for expropriation vs. respondent over 2 parcels of land (Lots 2-A-2 and 2-B-1 of
Subd. Plan Psd-17917; Torrens Title 48700; 10K sq m area) in Wakas, San Dionisio.
o Purpose: alleviating the living conditions of the underprivileged by providing a socialized
housing project.
o petitioner, pursuant to Sangguniang Bayan Res. 577 (1991), previously made an offer to
buy the property, which respondent did not accept
RTC: gave the complaint due course after finding it sufficient in form and substance
o Feb 4, 1994: authorized Paranaque to take possession of the property upon deposit with its
clerk of court of an amount equivalent to 15 percent of its fair market value based on its
current tax declaration
Feb 21, 1994, respondent filed its Answer (treated as a motion to dismiss) alleging that
o complaint failed to state a cause of action because it was filed pursuant to a resolution
and not to an ordinance as required by the LGC; and
o cause of action, if any, was barred by a prior judgment or res judicata.
Mar 24, 1994: Paranaque filed its opposition
o Resolution is substantial compliance! Ordinance and resolution are synonymous for the
purpose of bestowing authority on the LGU through its chief executive to initiate the
expropriation proceedings in court in the exercise of the power of eminent domain
o trial courts Order was in accord with Sec 19 of LGC
o res judicata was not applicable
RTC: nullified its Feb 4, 1994 order and dismissed the case (MR & transfer of venue denied)
CA: Affirmed RTC
ISSUE(S):
1. WON eminent domain may be exercised by an LGU through a resolution [NO, it requires an
ordinance]
2. WON res judicata bars subsequent proceedings for expropriation of the same property [NO, res
judicata does not apply]
HELD: Petition DENIED without prejudice to Paranaques proper exercise of its power of eminent
domain over subject property
1. An ordinance is required for LGUs to exercise their power of eminent domain. Paranaque failed to
state its cause of action, being based on a mere resolution.
Right of the LGU to exercise the power of eminent domain is not disputed
o BUT such right must be exercised through an ordinance
o Here, no such ordinance exists; hence, the petitioner states no cause of action
POWER OF EMINENT DOMAIN is lodged in the legislative branch of government, which
may delegate the exercise thereof to LGUs, other public entities and public utilities. An LGU
may exercise the power only when authorized by Congress and subject the control and restraints
under the law.
LGC Sec 19 delegates to LGUs the power of eminent domain and provides for the following
essential requisites:
1. An ordinance is enacted by the local legislative council authorizing the local chief
executive, in behalf of the LGU, to exercise the power of eminent domain or pursue
expropriation proceedings over a particular private property.
2. The power of eminent domain is exercised for public use, purpose or welfare, or for the
benefit of the poor and the landless.
3. There is payment of just compensation, as required under Section 9, Article III of the
Constitution, and other pertinent laws.
4. A valid and definite offer has been previously made to the owner of the property sought
to be expropriated, but said offer was not accepted.
Here, the mayor sought to exercise the power pursuant to a resolution of the municipal council.
Thus, there was NO compliance with the first requisite that the mayor be authorized through an
ordinance.
o Petitioner cites Camarines Sur vs. CA which allows the exercise through a resolution.
However, this case is no longer applicable since the law at that time was BP 337 (old
LGC), which provided that a mere resolution would enable an LGU to exercise eminent
domain.
o In contrast, RA 7160 (LGC) which was already in force when the Complaint for
expropriation was filed, explicitly required an ordinance
ordinance is a law, but a resolution is merely a declaration of the sentiment or opinion of a
lawmaking body on a specific matter
o the two are enacted differently -- a third reading is necessary for an ordinance, but not
for a resolution (unless decided so the majority)
o clear divergence from the old LGCs language bolster the stand that these two are
different
o Petitioner relies on the Implementing Rules, which requires only a resolution. This is
misplaced, because the law itself prevails over the IRR.
This ruling does NOT diminish the policy on local autonomy. It merely upholds the law as
worded in the LGC.
o LGU is created by law and all its powers and rights are sourced therefrom. It has no
power to amend or act beyond the authority given by law.
o Eminent domain delegated to an LGU is in reality not eminent but inferior domain, since
it must conform to the limits imposed by the delegation, and thus partakes only of a
share in eminent domain. The national legislature is still the principal of LGUs, which
cannot defy or modify its will
petitioner alleged the existence of an ordinance, but it did not present any certified true copy
thereof. Also, it did not raise this point before this Court.
in a motion to dismiss based on the ground that the complaint fails to state a cause of action,
the question submitted before the court for determination is the sufficiency of the allegations in
the complaint itself. Whether those allegations are true or not is beside the point, for their truth
is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the
court render a valid judgment in accordance with the prayer of the complaint
o the fact that there is no cause of action is evident from the face of the Complaint for
expropriation which was based on a mere resolution

2. Eminent domain is NOT BARRED by res judicata


All the requisites for the application of res judicata are present in this case.
o There is a previous final judgment on the merits in a prior expropriation case involving
identical interests, subject matter and cause of action, which has been rendered by a court
having jurisdiction over it.
NEVERTHELESS, res judicata CANNOT bar the right of the State or its agent to
expropriate private property.
o Nature of eminent domain, as an inherent power of the State, dictates that the right to
exercise the power be absolute and unfettered
o The scope of eminent domain is plenary and, like police power, can reach every form of
property which the State might need for public use.
o All separate interests of individuals in property are held of the government under this
tacit agreement or implied reservation. Notwithstanding the grant to individuals, the
eminent domain, the highest and most exact idea of property, remains in the government,
or in the aggregate body of the people in their sovereign capacity; and they have the right
to resume the possession of the property whenever the public interest requires it.
o State cannot be forever barred from exercising said right by reason alone of previous
non-compliance with any legal requirement
While res judicata does not denigrate the right of the State to exercise eminent domain, it does
apply to specific issues decided in a previous case.
o For example, a final judgment dismissing an expropriation suit on the ground that there
was no prior offer precludes another suit raising the same issue; however, it CANNOT
bar the State from thereafter complying with this requirement, as prescribed by law,
and subsequently exercising its power of eminent domain over the same property.
o To rule otherwise will not only improperly diminish the power of eminent domain, but
also clearly defeat social justice.
Our ruling that petitioner cannot exercise its delegated power of eminent domain through a mere
resolution will not bar it from reinstituting similar proceedings, once the said legal requirement
and, for that matter, all others are properly complied with.

[G.R. No. 142971. May 7, 2002]

THE CITY OF CEBU, petitioner, vs. SPOUSES APOLONIO and BLASA


DEDAMO, respondents.

DECISION
DAVIDE, JR., C.J.:

In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, petitioner City of Cebu assails the decision of 11 October 1999 of the Court
of Appeals in CA-G.R. CV No. 59204[1] affirming the judgment of 7 May 1996 of the
Regional Trial Court, Branch 13, Cebu City, in Civil Case No. CEB-14632, a case for
eminent domain, which fixed the valuation of the land subject thereof on the basis of
the recommendation of the commissioners appointed by it.
The material operative facts are not disputed.
On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632
a complaint for eminent domain against respondents spouses Apolonio and Blasa
Dedamo. The petitioner alleged therein that it needed the following parcels of land
of respondents, to wit:

Lot No. 1527

Area----------------------------1,146 square meters


Tax Declaration---------------03472
Title No.-----------------------31833
Market value------------------P240,660.00
Assessed Value---------------P72,200.00

Lot No. 1528


Area--------------------------------------------------------793 square meters
Area sought to be-----------------------------------------478 square meters
expropriated
Tax Declaration-------------------------------------------03450
Title No. ---------------------------------------------------31832
Market value for the whole lot--------------------------P1,666,530.00
Market value of the Area to be expropriated----------P100,380.00
Assessed Value--------------------------------------------P49,960.00

for a public purpose, i.e., for the construction of a public road which shall serve as an
access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and
the back of Magellan International Hotel Roads in Cebu City. The lots are the most
suitable site for the purpose. The total area sought to be expropriated is 1,624 square
meters with an assessed value of P1,786,400. Petitioner deposited with the Philippine
National Bank the amount of P51,156 representing 15% of the fair market value of the
property to enable the petitioner to take immediate possession of the property pursuant
to Section 19 of R.A. No. 7160.[2]
Respondents, filed a motion to dismiss the complaint because the purpose for which
their property was to be expropriated was not for a public purpose but for benefit of a
single private entity, the Cebu Holdings, Inc. Petitioner could simply buy directly from
them the property at its fair market value if it wanted to, just like what it did with the
neighboring lots. Besides, the price offered was very low in light of the consideration
of P20,000 per square meter, more or less, which petitioner paid to the neighboring
lots. Finally, respondents alleged that they have no other land in Cebu City.
A pre-trial was thereafter had.
On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession
pursuant to Section 19 of R.A. No. 7160. The motion was granted by the trial court on
21 September 1994.[3]
On 14 December 1994, the parties executed and submitted to the trial court an
Agreement[4] wherein they declared that they have partially settled the case and in
consideration thereof they agreed:
1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in
expropriating their parcels of land in the above-cited case as for public purpose and for the
benefit of the general public;
2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land in
favor of the FIRST PARTY provided the latter will pay just compensation for the same in the
amount determined by the court after due notice and hearing;
3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE MILLION
SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS (1,786,400.00)
as provisional payment for the subject parcels of land, without prejudice to the final valuation
as maybe determined by the court;
4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated
September 21, 1994 issued by the Honorable Court, agreed to take possession over that portion
of the lot sought to be expropriated where the house of the SECOND PARTY was located
only after fifteen (15) days upon the receipt of the SECOND PARTY of the amount
of P1,786,400.00;
5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn over
to the FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days grace
period will voluntarily demolish their house and the other structure that may be located thereon
at their own expense;
6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to
render judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT;
7. That the judgment sought to be rendered under this agreement shall be followed by a
supplemental judgment fixing the just compensation for the property of the SECOND PARTY
after the Commissioners appointed by this Honorable Court to determine the same shall have
rendered their report and approved by the court.
Pursuant to said agreement, the trial court appointed three commissioners to
determine the just compensation of the lots sought to be expropriated. The
commissioners were Palermo M. Lugo, who was nominated by petitioner and who was
designated as Chairman; Alfredo Cisneros, who was nominated by respondents; and
Herbert E. Buot, who was designated by the trial court. The parties agreed to their
appointment.
Thereafter, the commissioners submitted their report, which contained their
respective assessments of and recommendation as to the valuation of the property.
On the basis of the commissioners report and after due deliberation thereon, the trial
court rendered its decision on 7 May 1996,[5] the decretal portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance


with the report of the commissioners.

Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum
of pesos: TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE
THOUSAND AND NINE HUNDRED THIRTY (P24,865.930.00) representing the
compensation mentioned in the Complaint.

Plaintiff and defendants are directed to pay the following commissioners fee;

1. To Palermo Lugo - P21,000.00


2. To Herbert Buot - P19,000.00
3. To Alfredo Cisneros - P19,000.00
Without pronouncement as to cost.

SO ORDERED.

Petitioner filed a motion for reconsideration on the ground that the commissioners
report was inaccurate since it included an area which was not subject to
expropriation. More specifically, it contended that Lot No. 1528 contains 793 square
meters but the actual area to be expropriated is only 478 square meters. The remaining
315 square meters is the subject of a separate expropriation proceeding in Civil Case
No. CEB-8348, then pending before Branch 9 of the Regional Trial Court of Cebu City.
On 16 August 1996, the commissioners submitted an amended assessment for the
478 square meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in
the amount of P20,826,339.50.The assessment was approved as the just compensation
thereof by the trial court in its Order of 27 December 1996.[6] Accordingly, the
dispositive portion of the decision was amended to reflect the new valuation.
Petitioner elevated the case to the Court of Appeals, which docketed the case as
CA-G.R. CV No. 59204. Petitioner alleged that the lower court erred in fixing the
amount of just compensation at P20,826,339.50. The just compensation should be
based on the prevailing market price of the property at the commencement of the
expropriation proceedings.
The petitioner did not convince the Court of Appeals. In its decision of 11 October
1999,[7] the Court of Appeals affirmed in toto the decision of the trial court.
Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It
raises the sole issue of whether just compensation should be determined as of the date
of the filing of the complaint.It asserts that it should be, which in this case should be 17
September 1993 and not at the time the property was actually taken in 1994, pursuant
to the decision in National Power Corporation vs. Court of Appeals.[8]
In their Comment, respondents maintain that the Court of Appeals did not err in
affirming the decision of the trial court because (1) the trial court decided the case on
the basis of the agreement of the parties that just compensation shall be fixed by
commissioners appointed by the court; (2) petitioner did not interpose any serious
objection to the commissioners report of 12 August 1996 fixing the just compensation
of the 1,624-square meter lot at P20,826,339.50; hence, it was estopped from attacking
the report on which the decision was based; and (3) the determined just compensation
fixed is even lower than the actual value of the property at the time of the actual taking
in 1994.
Eminent domain is a fundamental State power that is inseparable from
sovereignty. It is the Governments right to appropriate, in the nature of a compulsory
sale to the State, private property for public use or purpose. [9] However, the Government
must pay the owner thereof just compensation as consideration therefor.
In the case at bar, the applicable law as to the point of reckoning for the
determination of just compensation is Section 19 of R.A. No. 7160, which expressly
provides that just compensation shall be determined as of the time of actual taking. The
Section reads as follows:

SECTION 19. Eminent Domain. -- A local government unit may, through its chief
executive and acting pursuant to an ordinance, exercise the power of eminent domain
for public use, or purpose or welfare for the benefit of the poor and the landless, upon
payment of just compensation, pursuant to the provisions of the Constitution and
pertinent laws: Provided, however, That the power of eminent domain may not be
exercised unless a valid and definite offer has been previously made to the owner, and
such offer was not accepted: Provided, further, That the local government unit may
immediately take possession of the property upon the filing of the expropriation
proceedings and upon making a deposit with the proper court of at least fifteen
percent (15%) of the fair market value of the property based on the current tax
declaration of the property to be expropriated: Provided finally, That, the amount to
be paid for the expropriated property shall be determined by the proper court, based
on the fair market value at the time of the taking of the property.

The petitioner has misread our ruling in The National Power Corp. vs. Court of
Appeals.[10] We did not categorically rule in that case that just compensation should be
determined as of the filing of the complaint. We explicitly stated therein that although
the general rule in determining just compensation in eminent domain is the value of the
property as of the date of the filing of the complaint, the rule admits of an exception:
where this Court fixed the value of the property as of the date it was taken and not at
the date of the commencement of the expropriation proceedings.
Also, the trial court followed the then governing procedural law on the matter,
which was Section 5 of Rule 67 of the Rules of Court, which provided as follows:

SEC. 5. Ascertainment of compensation. -- Upon the entry of the order of


condemnation, the court shall appoint not more than three (3) competent and
disinterested persons as commissioners to ascertain and report to the court the just
compensation for the property sought to be taken. The order of appointment shall
designate the time and place of the first session of the hearing to be held by the
commissioners and specify the time within which their report is to be filed with the
court.

More than anything else, the parties, by a solemn document freely and voluntarily
agreed upon by them, agreed to be bound by the report of the commission and approved
by the trial court. The agreement is a contract between the parties. It has the force of
law between them and should be complied with in good faith. Article 1159 and 1315 of
the Civil Code explicitly provides:

Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties
are bound not only to the fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may be in keeping with good
faith, usage and law.

Furthermore, during the hearing on 22 November 1996, petitioner did not interpose
a serious objection.[11] It is therefore too late for petitioner to question the valuation now
without violating the principle of equitable estoppel. Estoppel in pais arises when one,
by his acts, representations or admissions, or by his own silence when he ought to speak
out, intentionally or through culpable negligence, induces another to believe certain
facts to exist and such other rightfully relies and acts on such belief, so that he will be
prejudiced if the former is permitted to deny the existence of such facts.[12]Records show
that petitioner consented to conform with the valuation recommended by the
commissioners. It cannot detract from its agreement now and assail correctness of the
commissioners assessment.
Finally, while Section 4, Rule 67 of the Rules of Court provides that just
compensation shall be determined at the time of the filing of the complaint for
expropriation,[13]such law cannot prevail over R.A. 7160, which is a substantive law.[14]
WHEREFORE, finding no reversible error in the assailed judgment of the Court
of Appeals in CA-G.R. CV No. 59204, the petition in this case is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.

Estanislao v. Costales AUTHOR: S A Y O


[G.R. No. Date] NOTES:
TOPIC: Taxation and Fiscal Administration
PONENTE: Gancayco
CASE LAW/ DOCTRINE:

Local government units have the power to create its own sources of revenue, levy taxes, etc., but
subject to such guidelines and limitations set by Congress; Ordinance No. 44 Traverses the limitations
set by the Local Tax Code, hence, it is ultra vires
FACTS:
The validity of Ordinance No. 44 of Zamboanga City imposing a P0.01 tax per liter of softdrinks
produced, manufactured, and/or bottled within the territorial jurisdiction of the City of
Zamboanga is the issue addressed by this petition.

Ordinance No. 44 was passed by the Sangguniang Panglungsod of Zamboanga City.

On February 16, 1982, the Sanggunian sent a copy of the Ordinance to the then Minister of
Finance by registered mail for his review. (requirement of the local tax code)

On December 3, 1982, the Minister of Finance through Deputy Minister Antonino


P. Roman, Jr., sent the letter addressed to the Sanggunian, suspending the effectivity of
Ordinance No. 44 on the ground that it contravenes Section 19(a) of the Local Tax Code.

On January 31, 1983, the City of Zamboanga, represented by its City Mayor, appealed said
decision of the Minister of Finance to the RTC of Zamboanga City.

RTC: rendered a decision finding that the tax levied under said Ordinance is not among those
that the Sanggunian may impose under the Local Tax Code, but nonetheless, it upheld its validity
on the ground that the Minister of Finance did not take appropriate action on the matter within
the prescribed period of 120 days after receipt of a copy thereof. (requirement of the local tax
code)

Hence, this petition for review on certiorari filed by the incumbent Secretary of Finance,
represented by the Solicitor General, alleging that the trial court erred when it held that the
failure of the Minister of Finance to suspend the effectivity of Ordinance No. 44 within 120 days
from receipt of a copy thereof rendered said Ordinance valid.

ISSUE(S): WON Ordinance 44 is valid

HELD: NO

RATIO:
No doubt this Ordinance is ultra vires as it is not within the authority of the City to impose said
tax. The authority of the City is limited to the imposition of a percentage tax on the gross sales
or receipts of said product which, being non-essential, shall be at the rate of not exceeding 2%
of the gross sales or receipts of the softdrinks for the preceding calendar year. The tax being
imposed under said Ordinance is based on the output or production and not on the gross
sales or receipts as authorized under the Local Tax Code

The Local Autonomy Act has been superseded by the Local Tax Code insofar as the taxing
authority in the provinces, cities or municipalities is concerned. By express language of
Section 64(a) of the Local Tax Code, all existing tax ordinances of provinces, cities,
municipalities and barrios shall be deemed ipso facto nullified on June 30, 1974. The
applicable law, therefore, to the present case is the Local Tax Code and not the Local
Autonomy Act. Section 5, Article X of the 1987 Constitution provides 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. Ordinance No. 44 of public respondent Zamboanga
City traverses the limitations set by the Local Tax Code.

With regard to the 120-day period:


The 120-day prescribed period for review of tax ordinances is merely directory and the Sec. of Finance
may still review the ordinance and act accordingly even after the lapse of the said period provided he
acts within a reasonable time

Philippine Petroleum Corporation vs. AUTHOR: SOLIS


Municipality of Pililia, Rizal, Represented by NOTES:
Mayor Nicomendes F. Patenia Ate Jane puro laws T_T. Sinama ko lahat. Parang
[G.R. No. 90776 |June 3, 1991] full text na din kasi kailangan lahat
TOPIC: Local Taxation
PONENTE: Paras, J.
CASE LAW/ DOCTRINE:

EMERGENCY RECIT:

Petitioner PPC owns and maintains an oil refinery conducting business within the Municipality of Pililia,
Rizal. P.D. 231 or the Local Tax Code of 1973 provide for the Municipality of impose taxes on business
any article of commerce. Thereafter, Provincial Circular 26-73 was issued directing all provincial, city
and municipal treasurers to refrain from collecting any local imposed in petroleum products. In 1974,
P.D. 426 amended certain provisions of P.D. 231. The municipality of Pililia, through Municipal Tax
ordinance 1, S-1974, imposed tax on business. In RTC, respondent received a favorable decision,
directing herein petitioner to pay the tax and fees imposed unto it. Petitioner contended that Provincial
Circular 26-73 suspended the effectively of local tax ordinances of the local tax code.

FACTS:
Petitioner Philippine Petroleum Corporation (PPC) is engaged in the manufacture of lubricated oil
basestock which is a petroleum product, with its refinery plant situated at Malaya, Pililia, Rizal

Under Section 142 of the NIRC of 1939, manufactured oils and other fuels are subject to specific
tax

P.D. 231 otherwise known as the Local Tax Code was issued by former President Ferdinand E.
Marcos governing the exercise by provinces, cities, municipalities and barrios of their taxing and
other revenue-raising powers. Section 19 and 19 (a) provides, that the municipality may impose
taxes on business, except on those for which taxes are provided on manufacturers, importers or
producers of any article of commerce of whatever kind or nature, including brewers, distillers,
rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines in accordance
with the schedule listed therein.

The Secretary of Finance issued Provincial Circular No. 26-73 directed to all provincial, city and
municipal treasurers to refrain from collecting any local tax imposed in old or new tax ordinances
in the business of manufacturing, wholesaling, retailing, or dealing in petroleum products subject
to the specific tax under the NIRC.

Provincial Circular No. 26 A-73 was also issued, instructing all City Treasurers to refrain from
collecting any local tax imposed in tax ordinances enacted before or after the effectivity of the
Local Tax Code on 1 July 1973, on the businesses of manufacturing, wholesaling, retailing, or
dealing in, petroleum products subject to the specific tax under the NIRC

Respondent Municipality of Pililia, Rizal, through Municipal Council Resolution No. 25, S-1974
enacted Municipal Tax Ordinance No. 1, S-1974 otherwise known as The Pililia Tax Code of
1974. Sections 9 and 10 of the said ordinance imposed a tax on business, except for those for
which fixed taxes are provided in the Local Tax Code on manufacturers, importers, or producers
of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers,
repackers, and compounders of liquors, distilled spirits and/or wines in accordance with the
schedule found in the Local Tax Code, as well as mayors permit, sanitary inspection fee and
storage permit fee for flammable, combustible or explosive substances, while Section 139 of the
disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges.

P.D. 426 was issued amending certain provisions of P.D. 231 but retaining Sections 19 and 19 (a)
with adjusted rates and 22 (b)

P.D. 436 was promulgated increasing the specific tax on lubricating oils, gasoline, bunker fuel oil,
diesel fuel oil and other similar petroleum products levied under Sections 142, 144 and 145 of
the NIRC, as amended, and granting provinces, cities and municipalities certain shares in the
specific tax on such products in lieu of local taxes imposed on petroleum products

The questioned Municipal Tax Ordinance No. 1 was reviewed and approved by the Provincial
Treasurer of Rizal, but was not implemented and/or enforced by the Municipality of Pililia
because of its having been suspended up to now in view of Provincial Circular Nos. 26-73 and 26
A-73

Provincial Circular No. 6-77 was also issued directing all city and municipality treasurers to refrain
from collecting the so-called storage fee on flammable or combustible materials imposed under
the local tax ordinance of their respective locality, said fee partaking of the nature of a strictly
revenue measure or service charge

P.D. 1158 otherwise known as the NIRC of 1977 was enacted, Section 153 of which specifically
imposes specific tax on refined and manufactured mineral oils and motor fuels

Enforcing the provisions of the above-mentioned ordinance, the respondent filed a complaint on
4 April 1986 against PPC for the collection of the business tax from 1979 to 1986; storage permit
fees from 1975 to 1986; mayors permit and sanitary inspection fees from 1975 to 1984. PPC,
however, have already paid the last-named fees starting 1985.

Trial Court rendered a decision against PPC. PPC moved for reconsideration of the decision, but
this was denied by the lower court
PPC contends that: (a) Provincial Circular No. 2673 declared as contrary to national economic
policy the imposition of local taxes on the manufacture of petroleum products as they are
already subject to specific tax under the NIRC; (b) the above declaration covers not only old tax
ordinances but new ones, as well as those which may be enacted in the future; (c) both
Provincial Circulars (PC) 26-73 and 26 A-73 are still effective, hence, unless and until revoked, any
effort on the part of the respondent to collect the suspended tax on business from the petitioner
would be illegal and unauthorized; and (d) Section 2 of P.D. 436 prohibits the imposition of local
taxes on petroleum products
ISSUE(S): Whether or not PPC whose oil products are subject to specific tax under the NIRC, is still
liable to pay (a)tax on business and (b)storage fees, considering Provincial Circular No. 6-77; and
mayors permit and sanitary inspection fee unto the respondent Municipality of Pililia, Rizal, based on
Municipal Ordinance No. 1

HELD:
Provincial Circular No. 6-77 imposed in the local tax ordinance of their respective locality frees PPC
from the payment of storage permit fee.

Section 10 (z) (13) of Pililias Municipal Tax Ordinance No. 1 prescribing a permit fee is a permit fee
allowed under Section 36 of the amended Code.

RATIO:
There is no question that Pililias Municipal Tax Ordinance No. 1 imposing the assailed taxes,
fees and charges is valid especially Section 9 (a) which according to the trial court was lifted in
toto and/or is a literal production of Section 19 (a) of the Local Tax Code as amended by P.D.
426. It conforms with the mandate of said law.

But P.D. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos.
26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were carried
over into P.D. 426 and no exemptions were given to manufacturers, wholesalers, retailers, or
dealers in petroleum products.

Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum
products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D.
426,wherein the municipality is granted the right to levy taxes on business of manufacturers,
importers, producers of any article of commerce of whatever kind or nature. A tax on business
is distinct from a tax on the article itself. This, if the imposition of tax on business of
manufacturers, etc. in petroleum products contravenes a declared national policy, it should
have been expressly stated in P.D. 436

Constitution: Each local government unit shall have the power to created its own sources of
revenues and to levy taxes, fees, and charges subject to such guidelines and limitation as the
Congress may provide, consistent with the basic policy of local autonomy

Provincial Circular No. 6-77 imposed in the local tax ordinance of their respective locality frees
PPC from the payment of storage permit fee.
The storage permit fee being imposed by Pililias tax ordinance is a fee for the installation and
keeping in storage of any flammable, combustible or explosive substances. Inasmuch as said
storage makes used of tanks owned not by the municipality of Pililia, but by PPC, same is
obviously not a charge fo any service rendered by the municipality as what is envisioned in
Section 37 of the same Code.

The mayor has the authority to waive payment of the mayors permit and sanitary inspection
fees, the trial court held that since the power to tax includes the power to exempt thereof
which is essentially a legislative prerogative, it follows that a municipal mayor who is an
executive officer may not unilaterally withdraw such an expression of a policy thru the
enactment of a tax.

13. Domingo A. Tuzon and Lope C. Mapagu vs Saturnino T. AUTHOR: The Talio
Jurado NOTES:
[G.R. No. 90107; August 21, 1992] R9 Resolution No. 9
TOPIC: Taxation and Fiscal Administration | PONENTE: Cruz, SB Sangguniang Bayan
J.
CASE LAW/ DOCTRINE:
While it would appear from the wording of the resolution that the municipal government merely intends to "solicit" the
1% contribution from the threshers, the implementing agreement seems to make the donation obligatory and a condition
precedent to the issuance of the mayors permit. This goes against the nature of a donation, which is an act of liberality
and is never obligatory. If, on the other hand, it is to be considered a tax ordinance, then it must be shown in view of the
challenge raised by Jurado to have been enacted in accordance with the requirements of the Local Tax Code. These would
include the holding of a public hearing on the measure and its subsequent approval by the Secretary of Finance, in
addition to the usual requisites for publication of ordinances in general.
The Court is convinced that the petitioners acted within the scope of their authority and in consonance with their
honest interpretation of the resolution in question. We agree that it was not for them to rule on its validity. In the
absence of a judicial decision declaring it invalid, its legality would have to be presumed (in fact, both the trial court and
the appellate court said there was nothing wrong with it). As executive officials of the municipality, they had the duty to
enforce it as long as it had not been repealed by the SB or annulled by the courts.
FACTS:
The petitioners are questioning the decision of the respondent court holding them liable in damages to the respondent
for refusing to issue to him a mayors permit and license to operate his palay-threshing business.

March 14, 1977 - the SB of Camalaniugan, Cagayan, unanimously adopted Resolution No. 9, reading pertinently as
follows:
o the municipality of Camalaniugan, Cagayan has embarked in the construction of Sports and Nutrition Center,
to provide the proper center wherein the government program of Nutrition and physical development of the
people, especially the youth could be well administered
o the available funds for the construction of the said project is far being adequate to finance its completion;
o the SB have thought of fund-raising scheme, to help finance the construction of the project, by soliciting 1%
donation from the thresher operators who will apply for a permit to thresh within the jurisdiction of this
municipality, of all the palay threshed by them to help finance the continuation of the construction of the Sports
and Nutrition Center Building.
o the municipal treasurer is hereby authorized to enter into an agreement to all thresher operators, that will
come to apply for a permit to thresh palay within the jurisdiction of this municipality to donate 1% of all the
palay threshed by them.

To implement the resolution, Mapagu, then incumbent municipal treasurer, prepared a document for signature of all
thresher/owner/operators applying for a mayors permit.

Soon, Jurado sent his agent to the municipal treasurers office to pay the license fee of Php 285 for thresher operators.
Mapagu refused to accept the payment and required him to first secure a mayors permit. For his part, Mayor Domingo
Tuzon said that Jurado should first comply with R9 and sign the agreement before the permit could be issued.
Jurado ignored the requirement. Instead, he sent the PHP 285 license fee by postal money order to the office of the
municipal treasurer who, however, returned the said amount. The reason given was the failure of Jurado to comply with
R9.

April 4, 1977 - Jurado filed with the CFI of Cagayan a special civil action for mandamus with actual and moral damages to
compel the issuance of the mayors permit and license.

May 31, 1977 - Jurado filed for declaratory judgment against the R9 (and the implementing agreement) for being illegal
either as a donation or as a tax measure.

CFI: upheld the challenged measure. However, it dismissed the claims for damages of both parties for lack of evidence.

CA: affirmed the validity of R9 and the implementing agreement. Nevertheless, it found Tuzon and Mapagu to have acted
maliciously and in bad faith when they denied Jurados application for the mayors permit and license. Consequently,
they were held liable.

The petitioners stress that they were acting in their official capacity when they enforced the resolution, which was duly
adopted by the SB and later declared to be valid by both the CFI and CA. For so acting, they cannot be held personally
liable in damages, more so because their act was not tainted with bad faith or malice.

Jurado avers that the signing of the implementing agreement was not a condition sine qua non to the issuance of a permit
and license. Hence the petitioners unwarranted refusal to issue the permit and license despite his offer to pay the
required fee constituted bad faith on their part.

Jurado further assails R9 and the implementing agreement for compelling the thresher to donate something which he
does not yet own. He also claims that the measure contravenes the limitations on the taxing powers of local government
units under Sec. 5, of the Local Tax Code.
ISSUE: WON petitioners are liable in damages to the respondent for having withheld from him the mayors permit and license
because of his refusal to comply with Resolution No. 9.

HELD:
RATIO:
We may merely observe at this time that in sustaining Resolution No. 9, the CA said no more than that:

It was passed by the Sangguniang Bayan of Camalaniugan in the lawful exercise of its legislative powers in pursuance to
Article XI, Section 5 of the 1973 Constitution which provided that: Each local government unit shall have the power to
create (sic) its own source of revenue and to levy taxes, subject to such limitation as may be provided by law. And under
Article 4, Section 29 of Presidential Decree No. 231 (Enacting a Local Tax Code for Provinces, Cities, Municipalities and
Barrios), it is provided that

"Section 29. Contributions. In addition to the above specified taxing and other revenue-raising powers, the barrio
council may solicit monies, materials, and other contributions from the following sources:

"(c) Monies from private agencies and individuals."

That is an over simplification. The CA has not offered any explanation for its conclusion that the challenged measures are
valid nor does it discuss its own concept of the nature of the resolution.

While it would appear from the wording of the resolution that the municipal government merely intends to "solicit" the
1% contribution from the threshers, the implementing agreement seems to make the donation obligatory and a condition
precedent to the issuance of the mayors permit. This goes against the nature of a donation, which is an act of liberality
and is never obligatory. If, on the other hand, it is to be considered a tax ordinance, then it must be shown in view of the
challenge raised by Jurado to have been enacted in accordance with the requirements of the Local Tax Code. These would
include the holding of a public hearing on the measure and its subsequent approval by the Secretary of Finance, in
addition to the usual requisites for publication of ordinances in general.

Jurado anchors his claim for damages on Art. 27 of the New Civil Code, which reads:
Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without
just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice
to any disciplinary administrative action that may be taken.

It has been remarked that one purpose of this article is to end the "bribery system, where the public official, for some
flimsy excuse, delays or refuses the performance of his duty until he gets some kind of pabagsak." Official inaction may
also be due to plain indolence or a cynical indifference to the responsibilities of public service. According to Phil. Match
Co. Ltd. v. City of Cebu, the provision presupposes that the refusal or omission of a public official to perform his official
duty is attributable to malice or inexcusable negligence. In any event, the erring public functionary is justly punishable
under this article for whatever loss or damage the complainant has sustained.

In the present case, it has not even been alleged that the Mayor Tuzons refusal to act on Jurados application was an
attempt to compel him to resort to bribery to obtain approval of his application. It cannot be said either that the mayor
and the municipal treasurer were motivated by personal spite or were grossly negligent in refusing to issue the permit
and license to Jurado.

It is no less significant that no evidence has been offered to show that the petitioners singled out the respondent for
persecution. Neither does it appear that the petitioners stood to gain personally from refusing to issue to Jurado the
mayors permit and license he needed. The petitioners were not Jurados business competitors nor has it been
established that they intended to favor his competitors. On the contrary, the record discloses that the resolution was
uniformly applied to all the threshers in the municipality without discrimination or preference.

The Court is convinced that the petitioners acted within the scope of their authority and in consonance with their honest
interpretation of the resolution in question. We agree that it was not for them to rule on its validity. In the absence of a
judicial decision declaring it invalid, its legality would have to be presumed (in fact, both the trial court and the appellate
court said there was nothing wrong with it). As executive officials of the municipality, they had the duty to enforce it as
long as it had not been repealed by the SB or annulled by the courts.

. . . As a rule, a public officer, whether judicial, quasi-judicial or executive, is not personally liable to one injured in
consequence of an act performed within the scope of his official authority, and in line of his official duty.

. . . It has been held that an erroneous interpretation of an ordinance does not constitute nor does it amount to bad
faith that would entitle an aggrieved party to an award for damages. (Philippine Match Co. Ltd. v. City of Cebu, 81 SCRA
99).

G.R. No. 112497 August 4, 1994

HON. FRANKLIN M. DRILON, in his capacity as SECRETARY OF JUSTICE, petitioner,


vs.
MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA, CITY TREASURER ANTHONY
ACEVEDO, SANGGUNIANG PANGLUNSOD AND THE CITY OF MANILA, respondents.

The City Legal Officer for petitioner.

Angara, Abello, Concepcion, Regala & Cruz for Caltex (Phils.).

Joseph Lopez for Sangguniang Panglunsod of Manila.

L.A. Maglaya for Petron Corporation.

CRUZ, J.:
The principal issue in this case is the constitutionality of Section 187 of the Local Government Code
reading as follows:

Procedure For Approval And Effectivity Of Tax Ordinances And Revenue Measures;
Mandatory Public Hearings. The procedure for approval of local tax ordinances
and revenue measures shall be in accordance with the provisions of this Code:
Provided, That public hearings shall be conducted for the purpose prior to the
enactment thereof; Provided, further, That any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on appeal within thirty
(30) days from the effectivity thereof to the Secretary of Justice who shall render a
decision within sixty (60) days from the date of receipt of the appeal: Provided,
however, That such appeal shall not have the effect of suspending the effectivity of
the ordinance and the accrual and payment of the tax, fee, or charge levied therein:
Provided, finally, That within thirty (30) days after receipt of the decision or the lapse
of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of competent
jurisdiction.

Pursuant thereto, the Secretary of Justice had, on appeal to him of four oil companies and a
taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and
void for non-compliance with the prescribed procedure in the enactment of tax ordinances and for
containing certain provisions contrary to law and public policy.1

In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the
Secretary's resolution and sustained the ordinance, holding inter alia that the procedural
requirements had been observed. More importantly, it declared Section 187 of the Local
Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power
of control over local governments in violation of the policy of local autonomy mandated in the
Constitution and of the specific provision therein conferring on the President of the Philippines only
the power of supervision over local governments.2

The present petition would have us reverse that decision. The Secretary argues that the annulled
Section 187 is constitutional and that the procedural requirements for the enactment of tax
ordinances as specified in the Local Government Code had indeed not been observed.

Parenthetically, this petition was originally dismissed by the Court for non-compliance with Circular
1-88, the Solicitor General having failed to submit a certified true copy of the challenged
decision.3 However, on motion for reconsideration with the required certified true copy of the decision
attached, the petition was reinstated in view of the importance of the issues raised therein.

We stress at the outset that the lower court had jurisdiction to consider the constitutionality of
Section 187, this authority being embraced in the general definition of the judicial power to determine
what are the valid and binding laws by the criterion of their conformity to the fundamental law.
Specifically, BP 129 vests in the regional trial courts jurisdiction over all civil cases in which the
subject of the litigation is incapable of pecuniary estimation,4 even as the accused in a criminal action
has the right to question in his defense the constitutionality of a law he is charged with violating and
of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover,
Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final
judgments and orders of lower courts in all cases in which the constitutionality or validity of any
treaty, international or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.
In the exercise of this jurisdiction, lower courts are advised to act with the utmost circumspection,
bearing in mind the consequences of a declaration of unconstitutionality upon the stability of laws, no
less than on the doctrine of separation of powers. As the questioned act is usually the handiwork of
the legislative or the executive departments, or both, it will be prudent for such courts, if only out of a
becoming modesty, to defer to the higher judgment of this Court in the consideration of its validity,
which is better determined after a thorough deliberation by a collegiate body and with the
concurrence of the majority of those who participated in its discussion.5

It is also emphasized that every court, including this Court, is charged with the duty of a purposeful
hesitation before declaring a law unconstitutional, on the theory that the measure was first carefully
studied by the executive and the legislative departments and determined by them to be in
accordance with the fundamental law before it was finally approved. To doubt is to sustain. The
presumption of constitutionality can be overcome only by the clearest showing that there was indeed
an infraction of the Constitution, and only when such a conclusion is reached by the required
majority may the Court pronounce, in the discharge of the duty it cannot escape, that the challenged
act must be struck down.

In the case before us, Judge Rodolfo C. Palattao declared Section 187 of the Local Government
Code unconstitutional insofar as it empowered the Secretary of Justice to review tax ordinances and,
inferentially, to annul them. He cited the familiar distinction between control and supervision, the first
being "the power of an officer to alter or modify or set aside what a subordinate officer had done in
the performance of his duties and to substitute the judgment of the former for the latter," while the
second is "the power of a superior officer to see to it that lower officers perform their functions in
accordance with law."6 His conclusion was that the challenged section gave to the Secretary the
power of control and not of supervision only as vested by the Constitution in the President of the
Philippines. This was, in his view, a violation not only of Article X, specifically Section 4 thereof, 7 and
of Section 5 on the taxing powers of local governments,8 and the policy of local autonomy in general.

We do not share that view. The lower court was rather hasty in invalidating the provision.

Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the
tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or
modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the
judgment of the local government that enacted the measure. Secretary Drilon did set aside the
Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He
did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not
say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in
reviewing the said measure was determine if the petitioners were performing their functions in
accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and
the grant of powers to the city government under the Local Government Code. As we see it, that was
an act not of control but of mere supervision.

An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his
discretion, order the act undone or re-done by his subordinate or he may even decide to do it
himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to
it that the rules are followed, but he himself does not lay down such rules, nor does he have the
discretion to modify or replace them. If the rules are not observed, he may order the work done or re-
done but only to conform to the prescribed rules. He may not prescribe his own manner for the doing
of the act. He has no judgment on this matter except to see to it that the rules are followed. In the
opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so
performed an act not of control but of mere supervision.
The case of Taule v. Santos 9 cited in the decision has no application here because the jurisdiction
claimed by the Secretary of Local Governments over election contests in the Katipunan ng Mga
Barangay was held to belong to the Commission on Elections by constitutional provision. The
conflict was over jurisdiction, not supervision or control.

Significantly, a rule similar to Section 187 appeared in the Local Autonomy Act, which provided in its
Section 2 as follows:

A tax ordinance shall go into effect on the fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided, however, That the Secretary of Finance
shall have authority to suspend the effectivity of any ordinance within one hundred
and twenty days after receipt by him of a copy thereof, if, in his opinion, the tax or fee
therein levied or imposed is unjust, excessive, oppressive, or confiscatory, or when it
is contrary to declared national economy policy, and when the said Secretary
exercises this authority the effectivity of such ordinance shall be suspended, either in
part or as a whole, for a period of thirty days within which period the local legislative
body may either modify the tax ordinance to meet the objections thereto, or file an
appeal with a court of competent jurisdiction; otherwise, the tax ordinance or the part
or parts thereof declared suspended, shall be considered as revoked. Thereafter, the
local legislative body may not reimpose the same tax or fee until such time as the
grounds for the suspension thereof shall have ceased to exist.

That section allowed the Secretary of Finance to suspend the effectivity of a tax ordinance if, in his
opinion, the tax or fee levied was unjust, excessive, oppressive or confiscatory. Determination of
these flaws would involve the exercise of judgment or discretion and not merely an examination of
whether or not the requirements or limitations of the law had been observed; hence, it would smack
of control rather than mere supervision. That power was never questioned before this Court but, at
any rate, the Secretary of Justice is not given the same latitude under Section 187. All he is
permitted to do is ascertain the constitutionality or legality of the tax measure, without the right to
declare that, in his opinion, it is unjust, excessive, oppressive or confiscatory. He has no discretion
on this matter. In fact, Secretary Drilon set aside the Manila Revenue Code only on two grounds, to
with, the inclusion therein of certain ultra vires provisions and non-compliance with the prescribed
procedure in its enactment. These grounds affected the legality, not the wisdom or reasonableness,
of the tax measure.

The issue of non-compliance with the prescribed procedure in the enactment of the Manila Revenue
Code is another matter.

In his resolution, Secretary Drilon declared that there were no written notices of public hearings on
the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of
the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance
published in three successive issues of a newspaper of general circulation pursuant to Art. 276(a).
No minutes were submitted to show that the obligatory public hearings had been held. Neither were
copies of the measure as approved posted in prominent places in the city in accordance with Sec.
511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into
Pilipino or Tagalog and disseminated among the people for their information and guidance,
conformably to Sec. 59(b) of the Code.

Judge Palattao found otherwise. He declared that all the procedural requirements had been
observed in the enactment of the Manila Revenue Code and that the City of Manila had not been
able to prove such compliance before the Secretary only because he had given it only five days
within which to gather and present to him all the evidence (consisting of 25 exhibits) later submitted
to the trial court.

To get to the bottom of this question, the Court acceded to the motion of the respondents and called
for the elevation to it of the said exhibits. We have carefully examined every one of these exhibits
and agree with the trial court that the procedural requirements have indeed been observed. Notices
of the public hearings were sent to interested parties as evidenced by Exhibits G-1 to 17. The
minutes of the hearings are found in Exhibits M, M-1, M-2, and M-3. Exhibits B and C show that the
proposed ordinances were published in the Balita and the Manila Standard on April 21 and 25, 1993,
respectively, and the approved ordinance was published in the July 3, 4, 5, 1993 issues of the
Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-2, and Q-3.

The only exceptions are the posting of the ordinance as approved but this omission does not affect
its validity, considering that its publication in three successive issues of a newspaper of general
circulation will satisfy due process. It has also not been shown that the text of the ordinance has
been translated and disseminated, but this requirement applies to the approval of local development
plans and public investment programs of the local government unit and not to tax ordinances.

We make no ruling on the substantive provisions of the Manila Revenue Code as their validity has
not been raised in issue in the present petition.

WHEREFORE, the judgment is hereby rendered REVERSING the challenged decision of the
Regional Trial Court insofar as it declared Section 187 of the Local Government Code
unconstitutional but AFFIRMING its finding that the procedural requirements in the enactment of the
Manila Revenue Code have been observed. No pronouncement as to costs. SO ORDERED.

The principal issue in this case is the constitutionality of Section 187 of the Local
Government Code. The Secretary of Justice (on appeal to him of four oil companies and
a taxpayer) declared Ordinance No. 7794 (Manila Revenue Code) null and void for non-
compliance with the procedure in the enactment of tax ordinances and for containing
certain provisions contrary to law and public policy.

RTCs Ruling:

1. The RTC revoked the Secretarys resolution and sustained the ordinance. It declared
Sec 187 of the LGC as unconstitutional because it vests on the Secretary the power of
control over LGUs in violation of the policy of local autonomy mandated in the
Constitution.

Petitioners Argument:

1. The annulled Section 187 is constitutional and that the procedural requirements for the
enactment of tax ordinances as specified in the Local Government Code had indeed
not been observed. (Petition originally dismissed by the Court due to failure to submit
certified true copy of the decision, but reinstated it anyway.)
2. Grounds of non-compliance of procedure
a. No written notices as required by Art 276 of Rules of Local Government Code
b. Not published
c. Not translated to tagalog
Supreme Courts Argument:
1. Section 187 authorizes the petitioner to review only the constitutionality or legality of tax
ordinance. What he found only was that it was illegal. That act is not control but
supervision.
2. Control lays down the rules in the doing of act and if not followed order the act undone
or re-done. Supervision sees to it that the rules are followed.
3. Two grounds of declaring Manila Revenue Code null and void (1) inclusion of certain
ultra vires provisions (2) non-compliance with prescribed procedure in its enactment but
were followed.
The requirements are upon approval of local development plans and public investment
programs of LGU not to tax ordinances.

BENGUET CORP. v. CENTRAL BOARD OF ASSESSMENT AUTHOR: ACIDO


APPEALS, LOCAL BOARD OF ASSESSMENT APPEALS OF NOTES: Petition for certiorari
THE PROVINCE OF BENGUET, and MUNCIPAL ASSESSOR
OF ITOGON, BENGUET
G.R. No. 100959, June 29, 1992
TOPIC: Real Property Taxation PONENTE: Bellosillo, J.
CASE LAW/ DOCTRINE:
It is the national government, expressing itself through the legislative branch, that levies the real property tax.
Consequently, when local governments are required to fix the rates, they are merely constituted as agents of the
national government in the enforcement of the Real Property Tax Code.
FACTS:
The Provincial Assessor of Benguet, through the Municipal Assessor of Itogon, assessed real property tax on
the bunkhouses of petitioner Benguet Corporation occupied for residential purposes by its rank and file
employees under Tax Declarations Nos. 8471 and 10454. According to the Provincial Assessor, the tax
exemption of bunkhouses under P.D. 745 was withdrawn by P.D. 1955.
Petitioner appealed the assessment to the Local Board of Assessment Appeals of the Province of Benguet,
docketed as LBAA Cases Nos. 42 and 43, respectively. Meanwhile, the parties agreed to suspend hearings in
LBAA Cases Nos. 42 and 43 to await the outcome of another case, LBAA Case No. 41, covering Tax
Declaration No. 9534, which involved the same parties and issue until the appeal was decided by the Central
Board of Assessment Appeals.
July 15, 1986: CBAA handed down its decision in LBAA Case No. 41 holding that the buildings of petitioner
used as dwellings by its rank and file employees were exempt from real property tax pursuant to P.D. 745.
The proceedings in LBAA Cases Nos. 42 and 43 proceeded after which a decision was rendered: petitioners
property was taxable. On appeal, CBAA sustained the decision, explaining that the realty tax exemption
under P.D. 745 was withdrawn by P.D. 1955 and E.O. 93, so that petitioner should have applied for
restoration of the exemption with the Fiscal Incentives Review Board. CBAA clarified that Case No. 41 was
different because it was effective prior to 1985, hence, was not covered by P.D. 1955 nor by E.O. 93.
CBAA denied petitioners MR, holding that petitioner's "classification" of P.D. 745 is unavailing because P.D.
1955 and E.O. 93 do not discriminate against the so-called "social statutes.
ISSUES:
Whether respondent Assessors may validly assess real property tax on the properties of petitioner considering
the proscription in The Local Tax Code (P.D. 231) and the Mineral Resources Development Degree of 1974 (P.D.
463) against imposition of taxes on mines by local governments.
HELD:
Yes. Petition dismissed.
RATIO:
Petitioner contends that local government units are without any authority to levy realty taxes on mines
pursuant to Sec. 52 of P.D. 463 and Sec. 5 (m) of The Local Tax Code, as amended by P.D. 426:
Sec. 52. Power to Levy Taxes on Mines, Mining Operations and Mineral Products. Any law to the
contrary notwithstanding, no province, city, municipality, barrio or municipal district shall levy and
collect taxes, fees, rentals, royalties or charges of any kind whatsoever on mines, mining claims, mineral
products, or any operation, process or activity connected therewith
Sec. 5. Common limitations on the taxing powers of local governments. The exercise of the taxing
powers of provinces, cities, municipalities and barrios shall not extend to the imposition of the following:
. . . (m) Taxes on mines; mining operations; and minerals, mineral products, and their by-products when
sold domestically by the operator
Petitioner is estopped from raising the question of lack of authority to issue the challenged assessments
inasmuch as it was never raised before, hence, not passed upon by, the municipal and provincial
assessors, LBAA and CBAA.
Petitioner argues that realty taxes are local taxes because they are levied by local government units,
citing Sec. 39 of P.D. 464, which provides:
Sec. 39. Rates of Levy. The provincial, city or municipal board or council shall fix a uniform rate of real
property tax applicable to their respective localities . . .
While local government units are charged with fixing the rate of real property taxes, it does not necessarily
follow from that authority the determination of whether or not to impose the tax. In fact, local
governments have no alternative but to collect taxes as mandated in Sec. 38 of the Real Property Tax
Code, which states:
Sec. 38 Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces,
cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery
and other improvements affixed or attached to real property not hereinafter specifically exempted.
It is the national government, expressing itself through the legislative branch, that levies the real property
tax. Consequently, when local governments are required to fix the rates, they are merely constituted as
agents of the national government in the enforcement of the Real Property Tax Code. The delegation of
taxing power is not even involved here because the national government has already imposed realty tax in
Sec. 38 above-quoted, leaving only the enforcement to be done by local governments.
Consequently, the provisions of Sec. 52 of the Mineral Resources Development Decree of 1974 (P.D.
463), and Secs. 5 (m), 17 (d) and 22 (c) of The Local Tax Code (P.D. 231) cited by petitioner are mere
limitations on the taxing power of local government units; they are not pertinent to the issue and,
therefore, cannot and should not affect the imposition of real property tax by the national government.

08 National Development Co. v. Cebu City, et al., AUTHOR: Adre


G.R. No. 51593, November 5, 1992 NOTES:
TOPIC: Real Property Tax
PONENTE: BELLOSILLO, J
CASE LAW/ DOCTRINE: Tax exemption of property owned by the Republic of the Philippines refers to
properties owned by the Government and by its agencies which do not have separate and distinct
personalities
FACTS:
National Development Company (NDC), a government-owned or controlled corporation (GOCC)
existing by virtue of C.A. 182 (An Act to create Public Corporation to be known as the 'National
Development Company', took effect 1 January 1937) and E.O. 399 (Uniform Charter for
Government Corporations) is authorized to engage in commercial, industrial, mining, agricultural
and other enterprises necessary or contributory to economic development or important to public
interest.
It also operates, in furtherance of its objectives, subsidiary corporations one of which is the now
defunct National Warehousing Corporation (NWC)
August 10, 1939, the President issued Proclamation No. 430 reserving Block no. 4, Reclamation
Area No. 4, of Cebu City for warehousing purposes under the administration of NWC.
1940, a warehouse with a floor area of 1,940 square meters more or less, was constructed.
In 1947, EO 93 dissolved NWC with NDC taking over its assets and functions.
1948: Cebu City assessed and collected from NDC real estate taxes on the land and the warehouse.
By the first quarter of 1970, a total of P100,316.31 was paid by NDC, of which only P3,895.06 was
under protest.
NDC wrote to the City Assessor and asked for a full refund contending that the land and the
warehouse belonged to the Republic and therefore exempt from taxation.
CEBU did not acquiesce in the demand, hence, the present suit filed 25 October 1972 in the Court
of First Instance of Manila.
The CFI ordered Cebu City to refund to NDC the real estate taxes paid by it.
The defendants appealed to the Court of Appeals which however certified the case to the Court as
one involving pure questions of law, pursuant to Sec. 17, R.A. 296
CA Appeal: Cebu raises the issue whether NDC is exempted from payment of the real estate taxes
on the land reserved by the President for warehousing purposes as well as the warehouse
constructed thereon, and in the affirmative, whether NDC may recover in refund unprotested real
estate taxes it paid from 1948 to 1970.
o On the first question, CEBU insists on taxability of the subject properties, claiming
that no law grants NDC exemption from real estate taxes, and that NDC, as
recipient of the land reserved by the President pursuant to Sec. 83 of the Public
Land Act, is liable for payment or ordinary (real estate) taxes under Sec. 115.
o CEBU contends that the properties have ceased to be tax exempt under the
Assessment Law when the government disposed of them in favor of NDC, and even
assuming that title to the land remains with the government (ownership being the
basis for real estate taxability under the Assessment Law), the Supreme Court
rulings establish increasing rather than "ownership" as basis for real estate tax
liability.
o NDC maintains the Sec. 3 of the Assessment Law, which exempts properties
owned by the Republic from real estate tax, includes subject properties in the
exemption. It invokes the ruling in Board of Assessment Appeals vs. CTA & NWSA
which held that properties of NWSA, a GOCC, were exempt from real estate tax
because Sec. 3 of the Assessment Law applied to all government properties
whether held in governmental or proprietary capacity. NDC rejects the applicability
of Sec. 115 of the Public Land Act to the subject land, claiming that provision
contemplates dispositions of public land with eventual transfer of title. In addition,
NDC believes that it is neither a grantee of a public land nor an applicant within the
purview of the same provision.
o NDC cites Board of Assessment Appeals, Province of Laguna v. Court of Tax
Appeal and National Waterworks and Sewerage Authority (NWSA). In that case, it
was held that properties of NWSA, a GOCC, were exempt from real estate tax
because Sec. 3, par (c), of R.A. 470 did not distinguish between those possessed
by the government in sovereign/governmental/political capacity and those in
private/proprietary/patrimonial character.
ISSUE(S): WON NDC IS EXEMPT FROM REAL ESTATE TAX

HELD: Yes.

RATIO:
The SC finds that National Development Company (NDC) is exempt from real estate tax on the
reserved land but liable for the warehouse erected thereon.

The land:

NDC cites Board of Assessment Appeals, Province of Laguna v. CTA and National Waterworks and
Sewerage Authority (NWSA). In that case, the properties of NWSA, a GOCC, were exempt from real
estate tax because Sec. 3, par (c), of R.A. 470 did not distinguish between those possessed by the
government in sovereign/governmental/political capacity and those in private proprietary patrimonial
character. The conflict between NDC v. Nueva Ecija, supra, and BAA v. CTA and NWSA, is more
superficial than real. The NDC decision speaks of properties owned by NDC, while the BAA ruling
concerns properties belonging to the Republic In the case at bar, no similar statement appears in the
stipulation of facts, hence, ownership of subject properties should first be established. For, while it may
be stated that the Republic owns NDC, it does not necessary follow that properties owned by NDC, are
also owned by Republic in the same way that stockholders are not ipso facto owners of the properties of
their corporation.

The Republic, like any individual, may form a corporation with personality and existence distinct from its
own. The separate personality allows a GOCC to hold and possess properties in its own name and, thus,
permit greater independence and flexibility in its operations. It may, therefore, be stated that tax
exemption of property owned by the Republic of the Philippines "refers to properties owned by the
Government and by its agencies which do not have separate and distinct personalities (unincorporated
entities).

To come within the ambit of the exemption provided in Art. 3, par. (a), of the Assessment Law, it is
important to establish that the property is owned by the government or its unincorporated agency, and
once government ownership is determined, the nature of the use of the property, whether for proprietary
or sovereign purposes. The land remains absolute property of the government." The government "does
not part with its title by reserving them (lands), but simply gives notice to all the world that it desires them
for a certain purpose." As its title remains with the Republic, the reserved land is clearly recovered by
the tax exemption provision.

The warehouse :

The exemption of public property from taxation does not extend to improvements on the public lands
made by preemptioners, homesteaders and other claimants or occupants at their own expenses and
these are taxable by the state.However, as regards the warehouse constructed on a public reservation,
a different rule should apply because [t]he exemption of public property from taxation does not extend
to improvements on the public lands made by preemptioners, homesteaders and other claimants, or
occupants, at their own expense, and these are taxable by the state x x x x Consequently, the warehouse
constructed on the reserved land by NWC (now under administration by NDC), indeed, should properly
be assessed real estate tax as such improvement does not appear to belong to the Republic.

Province of Tarlac v. Hon. Fernando Alcantara and Tarlac AUTHOR: Castro


Enterprises, Inc. NOTES:
[G.R. No. 65230. December 23, 1992] Tarlac Enterprises, Inc. Tarlac
TOPIC: Real Property Taxation Province of Tarlac - Province
PONENTE: Romero, J.
FACTS:
Tarlac Enterprises, Inc., a corporation duly organized and existing under and by virtue of the laws of the
Philippines, is the owner of several properties at Mabini, Tarlac.
o Parcel of land
o Ice drop factory
o Machinery shed
o A machinery of Diesel Electric Sets
The real estate taxes of the properties from 1974 to 1982, in the total amount of P532,435.55, including
principals and penalties, had not been paid by Tarlac.
Province of Tarlac (Provincial Treasurer Jose Meru) filed a complaint praying that the tax and the damages be
paid.
Tarlac filed a Motion to Dismiss the complaint DENIED. MR was likewise denied.
Thereafter, Province set the auction sale of Tarlacs properties to satisfy the real estate taxes due.
Tarlac filed a motion praying that the Province be directed to desist from proceeding with the public auction
sale GRANTED to prevent the mootness of the case since the properties involved were the subjects of the
complaint.
Then, Tarlac filed its answer alleging the following:
o it refused to pay the real estate taxes because under Sec. 40, paragraph (g) of Presidential Decree No.
464 in relation to P.D. No. 551, as amended, it was exempt from paying said tax.
o the complaint stated no cause of action and that the claims had been waived, abandoned or
otherwise extinguished or barred by the statute of limitations.
o
Lower Court: DISMISSED the complaint filed by the Province.
o It ruled that P.D. No. 551 expressly exempts Tarlac from paying the real property taxes demanded, it being
a grantee of a franchise to generate, distribute and sell electric current for light.
o It held that in lieu of said taxes, Tarlac had been required to pay two percent (2%) franchise tax in line with
the intent of the law to give assistance to operators to enable the consumers to enjoy cheaper rates.
o Citing the case of Butuan Sawmill, Inc. v. City of Butuan, it ruled that local governments are without power
to tax the electric companies already subject to franchise tax unless their franchise allows the imposition
of additional tax.
The Motion for Reconsideration filed by the Province was denied. Hence, this Petition for Review.

Province of Tarlacs contention: respondent judge erred in: (a) holding that private respondent is exempt from the
payment of realty tax under P.D. No. 551, as amended; (b) ruling, under the authority of Butuan Sawmill, Inc. v.
Butuan City, that it is without power to impose said realty tax on private respondent, and (c) dismissing the
complaint and denying its motion for the reconsideration of its decision.
ISSUE:
Whether Tarlac Enterprises, Inc. is exempt from the payment of real property tax under Sec. 40 (g) of P.D. No.464
in relation to P.D. No. 551, as amended.
HELD:
No.
RATIO:
SEC.40.Exemptions from Real Property Tax. The exemption shall be as follows:
xxx xxx xxx (g) Real property exempt under other laws.
Tarlac contends that the other laws referred to in this Section is P.D. No. 551 (Lowering the Cost to
Consumers of Electricity by Reducing the Franchise Tax Payable by Electric Franchise Holders and the Tariff on
Fuel Oils for the Generation of Electric Power by Public Utilities). Its pertinent provisions state:
SECTION 1. Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax payable by all grantees
of franchises to generate, distribute and sell electric current for light, heat and power shall be two (2%) of their gross receipts
received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric
current. Such franchise tax shall be payable to the Commissioner of Internal Revenue or his duly authorized representative on or
before the twentieth day of the month following the end of each calendar quarter or month as may be provided in the respective
franchise or pertinent municipal regulation and shall, any provision of the Local Tax Code or any other law to the contrary
notwithstanding, be in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on
earnings, receipts, income and privilege of generation, distribution and sale of electric current.
P.D. No. 551 was amended on December 19, 1975 by P.D. No. 852 with the insertion of the phrase and for
the manufacture, distribution and sale of city gas between the phrases x x x light, heat and power and shall
be two (2%) x x x.
Supreme Court does not agree with the lower court that the phrase in lieu of all taxes and assessments of
whatever nature in the second paragraph of Sec. 1 of P.D. No. 551 expressly exempts private respondent
from paying real property taxes. As correctly observed by the petitioner, said proviso is modified and delimited
by the phrase on earnings, receipts, income and privilege of generation, distribution and sale which specifies
the kinds of taxes and assessments which shall not be collected in view of the imposition of the franchise tax.
Said enumerated items upon which taxes shall not be imposed, have no relation at all to, and are entirely
different from, real properties subject to tax.
If the intention of the law is to exempt electric franchise grantees from paying real property tax and to make
the two (2%) percent franchise tax the only imposable tax, then said enumerated items would not have been
added when P.D. No. 852 was enacted to amend P.D. No. 551. The legislative authority would have simply
stopped after the phrase national or local authority by putting therein a period. On the contrary, it went on
to enumerate what should not be subject to tax thereby delimiting the extent of the exemption.
The SC likewise does not find merit in private respondents contention that the real properties being taxed,
viz., the machinery for the generation and distribution of electric power, the building housing said machinery,
and the land on which said building is constructed, are necessary for the operation of its business of
generation, distribution and sale of electric current and, therefore, they should be exempted from taxation.
Private respondent apparently does not quite comprehend the distinction among the subject matters or
objects of the taxes involved. It bears emphasis that P.D. No. 551 as amended by P.D. No. 852 deals with
franchise tax and tariff on fuel oils and the earnings, receipts, income and privilege of generation, distribution
and sale of electric current are the items exempted from taxation by the imposition of said tax or tariff duty.
On the other hand, the collection complaint filed by petitioner specified only taxes due on real properties.
While P.D. No. 551 was intended to give assistance to the franchise holders by reducing some of their tax and
tariff obligations, to construe said decree as having granted such franchise holders exemption from payment
of real property tax would unduly extend the ambit of exemptions beyond the purview of the law.
The annexes attached to private respondents comment on the petition to prove by contemporaneous
interpretation its claimed tax exemption are not of much help to it. Department Order No. 35-74 dated
September 16, 1974 regulating the implementation of P.D. No. 551 merely reiterates the in lieu of all taxes
proviso. Local Tax Regulations No. 3-75 issued by then Secretary of Finance Cesar Virata and addressed to all
Provincial and City Treasurers enjoins strict compliance with the directive that the franchise tax imposed
under Local Tax Ordinances pursuant to Section 19 of the Local Tax Code, as amended, shall be collected from
business holding franchises but not from establishments whose franchise contains the in lieu of all taxes
proviso, thereby clearly indicating that said proviso exempts taxpayers like private respondent from paying
the franchise tax collected by the provinces under the Local Tax Code. Lastly, the letter of the then Bureau of
Internal Revenue Acting Commissioner addressed to the Matic Law Office granting exemption to the latters
client from paying the privilege (fixed) tax which is an excise tax on the privilege of engaging in business
clearly excludes realty tax from such exemption.
SC also finds misplaced the lower courts and the private respondents reliance on Butuan Sawmill, Inc. v. City
of Butuan. In that case, the questioned tax is a tax on the gross sales or receipts of said sawmill while the tax
involved herein is a real property tax. The City of Butuan is categorically prohibited therein by Sec. 2(j) of the
Local Autonomy Act from imposing taxes of any kind x x x on person paying franchise tax. On the other
hand, P.D. No. 551 is not as all-encompassing as said provision of the Local Autonomy Act for it enumerates
the items which are not taxable by virtue of the payment of franchise tax.
SC finds the lower court to have erred in exempting private respondent from paying real property tax on its
properties which are enumerated in the complaint. However, in its decision, the lower court found that private
respondent owns only three real properties consisting of the parcel of land, machinery shed and machinery,
noticeably omitting the ice drop factory mentioned in its complaint by the petitioner. In view, however, of the
petitioners failure to assign such omission as an error, the same should be considered waived.

G.R. No. 120082 September 11, 1996

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner,


vs.
HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial
Court, Branch 20, Cebu City, THE CITY OF CEBU, represented by its Mayor HON. TOMAS R.
OSMEA, and EUSTAQUIO B. CESA, respondents.

DAVIDE, JR., J.:


For review under Rule 45 of the Rules of Court on a pure question of law are the decision of
22 March 19951of the Regional Trial Court (RTC) of Cebu City, Branch 20, dismissing the
petition for declaratory relief in Civil Case No. CEB-16900 entitled "Mactan Cebu
International Airport Authority vs. City of Cebu", and its order of 4, May 19952 denying the
motion to reconsider the decision.

We resolved to give due course to this petition for its raises issues dwelling on the scope of
the taxing power of local government-owned and controlled corporations.

The uncontradicted factual antecedents are summarized in the instant petition as follows:

Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue
of Republic Act No. 6958, mandated to "principally undertake the economical,
efficient and effective control, management and supervision of the Mactan
International Airport in the Province of Cebu and the Lahug Airport in Cebu City, . . .
and such other Airports as may be established in the Province of Cebu . . . (Sec. 3,
RA 6958). It is also mandated to:

a) encourage, promote and develop international and


domestic air traffic in the Central Visayas and
Mindanao regions as a means of making the regions
centers of international trade and tourism, and
accelerating the development of the means of
transportation and communication in the country; and

b) upgrade the services and facilities of the airports


and to formulate internationally acceptable standards
of airport accommodation and service.

Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption
from payment of realty taxes in accordance with Section 14 of its Charter.

Sec. 14. Tax Exemptions. The authority shall be exempt from


realty taxes imposed by the National Government or any of its
political subdivisions, agencies and instrumentalities . . .

On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of


the Treasurer of the City of Cebu, demanded payment for realty taxes on several
parcels of land belonging to the petitioner (Lot Nos. 913-G, 743, 88 SWO, 948-A,
989-A, 474, 109(931), I-M, 918, 919, 913-F, 941, 942, 947, 77 Psd., 746 and 991-A),
located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu City, in the total
amount of P2,229,078.79.

Petitioner objected to such demand for payment as baseless and unjustified,


claiming in its favor the aforecited Section 14 of RA 6958 which exempt it from
payment of realty taxes. It was also asserted that it is an instrumentality of the
government performing governmental functions, citing section 133 of the Local
Government Code of 1991 which puts limitations on the taxing powers of local
government units:

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 barangay
shall not extend to the levy of the following:

a) . . .

xxx xxx xxx

o) Taxes, fees or charges of any kind on the National


Government, its agencies and instrumentalities, and
local government units. (Emphasis supplied)

Respondent City refused to cancel and set aside petitioner's realty tax account,
insisting that the MCIAA is a government-controlled corporation whose tax exemption
privilege has been withdrawn by virtue of Sections 193 and 234 of the Local
Governmental Code that took effect on January 1, 1992:

Sec. 193. Withdrawal of Tax Exemption Privilege. Unless otherwise provided in


this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons whether natural or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under RA No.
6938, non-stock, and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code. (Emphasis supplied)

xxx xxx xxx

Sec. 234. Exemptions from Real Property taxes. . . .

(a) . . .

xxx xxx xxx

(c) . . .

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 government-owned or
controlled corporations are hereby withdrawn upon the effectivity of
this Code.

As the City of Cebu was about to issue a warrant of levy against the properties of
petitioner, the latter was compelled to pay its tax account "under protest" and
thereafter filed a Petition for Declaratory Relief with the Regional Trial Court of Cebu,
Branch 20, on December 29, 1994. MCIAA basically contended that the taxing
powers of local government units do not extend to the levy of taxes or fees of any
kind on an instrumentality of the national government. Petitioner insisted that while it
is indeed a government-owned corporation, it nonetheless stands on the same
footing as an agency or instrumentality of the national government. Petitioner insisted
that while it is indeed a government-owned corporation, it nonetheless stands on the
same footing as an agency or instrumentality of the national government by the very
nature of its powers and functions.
Respondent City, however, asserted that MACIAA is not an instrumentality of the
government but merely a government-owned corporation performing proprietary
functions As such, all exemptions previously granted to it were deemed withdrawn by
operation of law, as provided under Sections 193 and 234 of the Local Government
Code when it took effect on January 1, 1992.3

The petition for declaratory relief was docketed as Civil Case No. CEB-16900.

In its decision of 22 March 1995,4 the trial court dismissed the petition in light of its findings,
to wit:

A close reading of the New Local Government Code of 1991 or RA 7160 provides
the express cancellation and withdrawal of exemption of taxes by government owned
and controlled corporation per Sections after the effectivity of said Code on January
1, 1992, to wit: [proceeds to quote Sections 193 and 234]

Petitioners claimed that its real properties assessed by respondent City Government
of Cebu are exempted from paying realty taxes in view of the exemption granted
under RA 6958 to pay the same (citing Section 14 of RA 6958).

However, RA 7160 expressly provides that "All general and special laws, acts, city
charters, decress [sic], executive orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent with any of the provisions
of this Code are hereby repealed or modified accordingly." ([f], Section 534, RA
7160).

With that repealing clause in RA 7160, it is safe to infer and state that the tax
exemption provided for in RA 6958 creating petitioner had been expressly repealed
by the provisions of the New Local Government Code of 1991.

So that petitioner in this case has to pay the assessed realty tax of its properties
effective after January 1, 1992 until the present.

This Court's ruling finds expression to give impetus and meaning to the overall
objectives of the New Local Government Code of 1991, RA 7160. "It is hereby
declared the policy of the State that the territorial and political subdivisions of the
State shall enjoy genuine and meaningful local autonomy to enable them to attain
their fullest development as self-reliant communities and make them more effective
partners in the attainment of national goals. Towards this end, the State shall provide
for a more responsive and accountable local government structure instituted through
a system of decentralization whereby local government units shall be given more
powers, authority, responsibilities, and resources. The process of decentralization
shall proceed from the national government to the local government units. . . .5

Its motion for reconsideration having been denied by the trial court in its 4 May 1995 order,
the petitioner filed the instant petition based on the following assignment of errors:

I RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT THE


PETITIONER IS VESTED WITH GOVERNMENT POWERS AND
FUNCTIONS WHICH PLACE IT IN THE SAME CATEGORY AS AN
INSTRUMENTALITY OR AGENCY OF THE GOVERNMENT.
II RESPONDENT JUDGE ERRED IN RULING THAT PETITIONER
IS LIABLE TO PAY REAL PROPERTY TAXES TO THE CITY OF
CEBU.

Anent the first assigned error, the petitioner asserts that although it is a government-owned
or controlled corporation it is mandated to perform functions in the same category as an
instrumentality of Government. An instrumentality of Government is one created to perform
governmental functions primarily to promote certain aspects of the economic life of the
people.6 Considering its task "not merely to efficiently operate and manage the Mactan-Cebu
International Airport, but more importantly, to carry out the Government policies of promoting
and developing the Central Visayas and Mindanao regions as centers of international trade
and tourism, and accelerating the development of the means of transportation and
communication in the country,"7and that it is an attached agency of the Department of
Transportation and Communication (DOTC),8 the petitioner "may stand in [sic] the same
footing as an agency or instrumentality of the national government." Hence, its tax exemption
privilege under Section 14 of its Charter "cannot be considered withdrawn with the passage
of the Local Government Code of 1991 (hereinafter LGC) because Section 133 thereof
specifically states that the taxing powers of local government units shall not extend to the
levy of taxes of fees or charges of any kind on the national government its agencies and
instrumentalities."

As to the second assigned error, the petitioner contends that being an instrumentality of the
National Government, respondent City of Cebu has no power nor authority to impose realty
taxes upon it in accordance with the aforesaid Section 133 of the LGC, as explained
in Basco vs. Philippine Amusement and Gaming Corporation;9

Local governments have no power to tax instrumentalities of the National


Government. PAGCOR is a government owned or controlled corporation with an
original character, PD 1869. All its shares of stock are owned by the National
Government. . . .

PAGCOR has a dual role, to operate and regulate gambling casinos. The latter joke
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. Maryland,
4 Wheat 316, 4 L Ed. 579).

This doctrine emanates from the "supremacy" of the National Government over local
government.

Justice Holmes, speaking for the Supreme Court, make references 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)
Otherwise mere creature 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 toll 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. (Emphasis supplied)

It then concludes that the respondent Judge "cannot therefore correctly say that the
questioned provisions of the Code do not contain any distinction between a governmental
function as against one performing merely proprietary ones such that the exemption privilege
withdrawn under the said Code would apply to allgovernment corporations." For it is clear
from Section 133, in relation to Section 234, of the LGC that the legislature meant to
exclude instrumentalities of the national government from the taxing power of the local
government units.

In its comment respondent City of Cebu alleges that as local a government unit and a
political subdivision, it has the power to impose, levy, assess, and collect taxes within its
jurisdiction. Such power is guaranteed by the Constitution10 and enhanced further by the
LGC. While it may be true that under its Charter the petitioner was exempt from the payment
of realty taxes,11 this exemption was withdrawn by Section 234 of the LGC. In response to the
petitioner's claim that such exemption was not repealed because being an instrumentality of
the National Government, Section 133 of the LGC prohibits local government units from
imposing taxes, fees, or charges of any kind on it, respondent City of Cebu points out that
the petitioner is likewise a government-owned corporation, and Section 234 thereof does not
distinguish between government-owned corporation, and Section 234 thereof does not
distinguish between government-owned corporation, and Section 234 thereof does not
distinguish between government-owned or controlled corporations performing governmental
and purely proprietary functions. Respondent city of Cebu urges this the Manila International
Airport Authority is a governmental-owned corporation, 12 and to reject the application of
Basco because it was "promulgated . . . before the enactment and the singing into law of
R.A. No. 7160," and was not, therefore, decided "in the light of the spirit and intention of the
framers of the said law.

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is to be found
only in the responsibility of the legislature which imposes the tax on the constituency who are
to pay it. Nevertheless, effective limitations thereon may be imposed by the people through
their Constitutions.13 Our Constitution, for instance, provides that the rule of taxation shall be
uniform and equitable and Congress shall evolve a progressive system of taxation.14 So
potent indeed is the power that it was once opined that "the power to tax involves the power
to destroy."15 Verily, taxation is a destructive power which interferes with the personal and
property for the support of the government. Accordingly, tax statutes must be construed
strictly against the government and liberally in favor of the taxpayer.16 But since taxes are
what we pay for civilized society,17 or are the lifeblood of the nation, the law frowns against
exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayers and liberally in favor of the taxing
authority.18 A claim of exemption from tax payment must be clearly shown and based on
language in the law too plain to be mistaken.19 Elsewise stated, taxation is the rule,
exemption therefrom is the exception.20 However, if the grantee of the exemption is a political
subdivision or instrumentality, the rigid rule of construction does not apply because the
practical effect of the exemption is merely to reduce the amount of money that has to be
handled by the government in the course of its operations.21
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as
before, but pursuant to direct authority conferred by Section 5, Article X of the
Constitution.22 Under the latter, the exercise of the power may be subject to such guidelines
and limitations as the Congress may provide which, however, must be consistent with the
basic policy of local autonomy.

There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt
from the payment of realty taxes imposed by the National Government or any of its political
subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and
exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of
the taxing authority. The only exception to this rule is where the exemption was granted to
private parties based on material consideration of a mutual nature, which then becomes
contractual and is thus covered by the non-impairment clause of the Constitution.23

The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the
exercise by local government units of their power to tax, the scope thereof or its limitations,
and the exemption from taxation.

Section 133 of the LGC prescribes the common limitations on the taxing powers of local
government units as follows:

Sec. 133. Common Limitations on the Taxing Power of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial
institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, "inheritance, gifts, legacies and other


acquisitions mortis causa, except as otherwise provided herein

(d) Customs duties, registration fees of vessels and wharfage on


wharves, tonnage dues, and all other kinds of customs fees charges
and dues except wharfage on wharves constructed and maintained
by the local government unit concerned:

(e) Taxes, fees and charges and other imposition upon goods carried
into or out of, or passing through, the territorial jurisdictions of local
government units in the guise or charges for wharfages, tolls for
bridges or otherwise, or other taxes, fees or charges in any form
whatsoever upon such goods or merchandise;

(f) Taxes fees or charges on agricultural and aquatic products when


sold by marginal farmers or fishermen;

(g) Taxes on business enterprise certified to be the Board of


Investment as pioneer or non-pioneer for a period of six (6) and four
(4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or charges on
petroleum products;

(i) Percentage or value added tax (VAT) on sales, barters or


exchanges or similar transactions on goods or services except as
otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractor and


person engage in the transportation of passengers of freight by hire
and common carriers by air, land, or water, except as provided in this
code;

(k) Taxes on premiums paid by ways reinsurance or retrocession;

(l) Taxes, fees, or charges for the registration of motor vehicles and
for the issuance of all kinds of licenses or permits for the driving of
thereof, except, tricycles;

(m) Taxes, fees, or other charges on Philippine product actually


exported, except as otherwise provided herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business


Enterprise and Cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty nine hundred thirty-eight (R.A. No.
6938) otherwise known as the "Cooperative Code of the Philippines;
and

(o) TAXES, FEES, OR CHARGES OF ANY KIND ON THE


NATIONAL GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES, AND LOCAL GOVERNMENT UNITS.
(emphasis supplied)

Needless to say the last item (item o) is pertinent in this case. The "taxes, fees or charges"
referred to are "of any kind", hence they include all of these, unless otherwise provided by
the LGC. The term "taxes" is well understood so as to need no further elaboration, especially
in the light of the above enumeration. The term "fees" means charges fixed by law or
Ordinance for the regulation or inspection of business activity,24 while "charges" are
pecuniary liabilities such as rents or fees against person or property.25

Among the "taxes" enumerated in the LGC is real property tax, which is governed by Section
232. It reads as follows:

Sec. 232. Power to Levy Real Property Tax. A province or city or a municipality
within the Metropolitan Manila Area may levy on an annual ad valorem tax on real
property such as land, building, machinery and other improvements not hereafter
specifically exempted.

Section 234 of LGC provides for the exemptions from payment of real property taxes and
withdraws previous exemptions therefrom granted to natural and juridical persons, including
government owned and controlled corporations, except as provided therein. It provides:
Sec. 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of


its political subdivisions except when the beneficial use thereof had
been granted, for reconsideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents


appurtenants thereto, mosques nonprofits or religious cemeteries and
all lands, building and improvements actually, directly, and
exclusively used for religious charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or
controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as


provided for under R.A. No. 6938; and;

(e) Machinery and equipment used for pollution control and


environmental protection.

Except as provided herein, any exemptions 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
his Code.

These exemptions are based on the ownership, character, and use of the property. Thus;

(a) Ownership Exemptions. Exemptions from real property taxes on


the basis of ownership are real properties owned by: (i) the Republic,
(ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi)
registered cooperatives.

(b) Character Exemptions. Exempted from real property taxes on the


basis of their character are: (i) charitable institutions, (ii) houses and
temples of prayer like churches, parsonages or convents appurtenant
thereto, mosques, and (iii) non profit or religious cemeteries.

(c) Usage exemptions. Exempted from real property taxes on the


basis of the actual, direct and exclusive use to which they are
devoted are: (i) all lands buildings and improvements which are
actually, directed and exclusively used for religious, charitable or
educational purpose; (ii) all machineries and equipment actually,
directly and exclusively used or by local water districts or by
government-owned or controlled corporations engaged in the supply
and distribution of water and/or generation and transmission of
electric power; and (iii) all machinery and equipment used for
pollution control and environmental protection.
To help provide a healthy environment in the midst of the modernization of the
country, all machinery and equipment for pollution control and environmental
protection may not be taxed by local governments.

2. Other Exemptions Withdrawn. All other exemptions previously


granted to natural or juridical persons including government-owned or
controlled corporations are withdrawn upon the effectivity of the
Code.26

Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. It
provides:

Sec. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in


this code, tax exemptions or incentives granted to or presently enjoyed by all
persons, whether natural or juridical, including government-owned, or controlled
corporations, except local water districts, cooperatives duly registered under R.A.
6938, non stock and non profit hospitals and educational constitutions, are hereby
withdrawn upon the effectivity of this Code.

On the other hand, the LGC authorizes local government units to grant tax exemption
privileges. Thus, Section 192 thereof provides:

Sec. 192. Authority to Grant Tax Exemption Privileges. Local government units
may, through ordinances duly approved, grant tax exemptions, incentives or reliefs
under such terms and conditions as they may deem necessary.

The foregoing sections of the LGC speaks 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 of provisos in these section, 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 were explicitly indicated in the
text. For instance, in item (a) which excepts the income taxes "when livied on banks and
other financial institutions", item (d) which excepts "wharfage on wharves constructed and
maintained by the local government until concerned"; and item (1) which excepts taxes, fees,
and charges for the registration and issuance of license 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 otherwise provided herein" as in items (c) and (i), or the
clause "excepts as provided in this Code" in item (j). These clauses would be obviously
unnecessary or mere surplus-ages 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 Section 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 of the National Government, its
agencies and instrumentalties, and local government units"; however, pursuant to Section
232, provinces, cities, 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 used thereof has been granted, for
consideration or otherwise, to a taxable person", as provided in item (a) of the first paragraph
of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical


persons, including government-owned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except
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 in so far as the real
property taxes are concerned by limiting the retention only to those enumerated there-in; all
others not included in the enumeration lost the privilege upon the effectivity of the LGC.
Moreover, even as the real property is 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 taxable person for
consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the
LGC, exemptions from 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 Section 232 and 234.

In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing
powers of the local government units cannot extend to the levy of:

(o) taxes, fees, or charges of any kind on the National Government,


its agencies, or instrumentalities, and local government units.

I must show that the parcels of land in question, which are real property, are any one of
those enumerated in Section 234, either by virtue of ownership, character, or use of the
property. Most likely, it could only be the first, but not under any explicit provision of the said
section, for one exists. In light of the petitioner's theory that it is an "instrumentality of the
Government", it could only be within be first item of the first paragraph of the section by
expanding the scope of the terms Republic of the Philippines" to embrace . . . . .
. "instrumentalities" and "agencies" or expediency we quote:

(a) real property owned by the Republic of the Philippines, or any of


the Philippines, or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person.

This view does not persuade us. In the first place, the petitioner's claim that it is an
instrumentality of the Government is based on Section 133(o), which expressly mentions the
word "instrumentalities"; and in the second place it fails to consider the fact that the
legislature used the phrase "National Government, its agencies and instrumentalities" "in
Section 133(o),but only the phrase "Republic of the Philippines or any of its political
subdivision "in Section 234(a).

The terms "Republic of the Philippines" and "National Government" are not interchangeable.
The former is boarder and synonymous with "Government of the Republic of the Philippines"
which the Administrative Code of the 1987 defines as the "corporate governmental entity
though which the functions of the government are exercised through at the Philippines,
including, saves as the contrary appears from the context, the various arms through which
political authority is made effective in the Philippines, whether pertaining to the autonomous
reason, the provincial, city, municipal or barangay subdivision or other forms of local
government."27 These autonomous regions, provincial, city, municipal or barangay
subdivisions" are the political subdivision.28

On the other hand, "National Government" refers "to the entire machinery of the central
government, as distinguished from the different forms of local Governments."29 The National
Government then is composed of the three great departments the executive, the legislative
and the judicial.30

An "agency" of the Government refers to "any of the various units of the Government,
including a department, bureau, office instrumentality, or government-owned or controlled
corporation, or a local government or a distinct unit therein;"31 while an "instrumentality" refers
to "any agency of the National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy; usually through a
charter. This term includes regulatory agencies, chartered institutions and government-
owned and controlled corporations".32

If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption
from payment of real property taxes under the last sentence of the said section to the
agencies and instrumentalities of the National Government mentioned in Section 133(o),
then it should have restated the wording of the latter. Yet, it did not Moreover, that Congress
did not wish to expand the scope of the exemption in Section 234(a) to include real property
owned by other instrumentalities or agencies of the government including government-
owned and controlled corporations is further borne out by the fact that the source of this
exemption is Section 40(a) of P.D. No. 646, otherwise known as the Real Property Tax
Code, which reads:
Sec 40. Exemption from Real Property Tax. The exemption shall be as follows:

(a) Real property owned by the Republic of the


Philippines or any of its political subdivisions and any
government-owned or controlled corporations so
exempt by is charter: Provided, however, that this
exemption shall not apply to real property of the
above mentioned entities the beneficial use of which
has been granted, for consideration or otherwise, to a
taxable person.

Note that as a reproduced in Section 234(a), the phrase "and any government-owned or
controlled corporation so exempt by its charter" was excluded. The justification for this
restricted exemption in Section 234(a) seems obvious: to limit further tax exemption
privileges, specially in light of the general provision on withdrawal of exemption from
payment of real property taxes in the last paragraph of property taxes in the last paragraph of
Section 234. These policy considerations are consistent with the State policy to ensure
autonomy to local governments33 and the objective of the LGC that they enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals.34 The
power to tax is the most effective instrument to raise needed revenues to finance and
support myriad activities of local government units for the delivery of basic services essential
to the promotion of the general welfare and the enhancement of peace, progress, and
prosperity of the people. It may also be relevant to recall that the original reasons for the
withdrawal of tax exemption privileges granted to government-owned and controlled
corporations and all other units of government were that such privilege resulted in serious tax
base erosion and distortions in the tax treatment of similarly situated enterprises, and there
was a need for this entities to share in the requirements of the development, fiscal or
otherwise, by paying the taxes and other charges due from them.35

The crucial issues then to be addressed are: (a) whether the parcels of land in question
belong to the Republic of the Philippines whose beneficial use has been granted to the
petitioner, and (b) whether the petitioner is a "taxable person".

Section 15 of the petitioner's Charter provides:

Sec. 15. Transfer of Existing Facilities and Intangible Assets. All existing public
airport facilities, runways, lands, buildings and other properties, movable or
immovable, belonging to or presently administered by the airports, and all assets,
powers, rights, interests and privileges relating on airport works, or air operations,
including all equipment which are necessary for the operations of air navigation,
acrodrome control towers, crash, fire, and rescue facilities are hereby transferred to
the Authority: Provided however, that the operations control of all equipment
necessary for the operation of radio aids to air navigation, airways communication,
the approach control office, and the area control center shall be retained by the Air
Transportation Office. No equipment, however, shall be removed by the Air
Transportation Office from Mactan without the concurrence of the authority. The
authority may assist in the maintenance of the Air Transportation Office equipment.

The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International
AirPort in the Province of Cebu",36 which belonged to the Republic of the Philippines, then
under the Air Transportation Office (ATO).37
It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then
administered by the Lahug Air Port and includes the parcels of land the respondent City of
Cebu seeks to levy on for real property taxes. This section involves a "transfer" of the "lands"
among other things, to the petitioner and not just the transfer of the beneficial use thereof,
with the ownership being retained by the Republic of the Philippines.

This "transfer" is actually an absolute conveyance of the ownership thereof because the
petitioner's authorized capital stock consists of, inter alia "the value of such real estate
owned and/or administered by the airports."38 Hence, the petitioner is now the owner of the
land in question and the exception in Section 234(c) of the LGC is inapplicable.

Moreover, the petitioner cannot claim that it was never a "taxable person" under its Charter.
It was only exempted from the payment of real property taxes. The grant of the privilege only
in respect of this tax is conclusive proof of the legislative intent to make it a taxable person
subject to all taxes, except real property tax.

Finally, even if the petitioner was originally not a taxable person for purposes of real property
tax, in light of the forgoing disquisitions, it had already become even if it be conceded to be
an "agency" or "instrumentality" of the Government, a taxable person for such purpose in
view of the withdrawal in the last paragraph of Section 234 of exemptions from the payment
of real property taxes, which, as earlier adverted to, applies to the petitioner.

Accordingly, the position taken by the petitioner is untenable. Reliance on Basco


vs. Philippine Amusement and Gaming Corporation39 is unavailing since it was decided
before the effectivity of the LGC. Besides, nothing can prevent Congress from decreeing that
even instrumentalities or agencies of the government performing governmental functions
may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and
national policy, no one can doubt its wisdom.

WHEREFORE, the instant petition is DENIED. The challenged decision and order of the
Regional Trial Court of Cebu, Branch 20, in Civil Case No. CEB-16900 are AFFIRMED.

No pronouncement as to costs. SO ORDERED.

FACTS:
Petitioner was created by virtue of RA 6958. Section 1 thereof states that the authority shall be exempt from realty
taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities.
However, the Treasurer of Cebu City demanded payment for realty taxes from petitioner. Petitioner filed a declaratory
relief before the Regional Trial Court. The trial court dismissed the petitioner ruling that the Local Government Code
withdrew the tax exemption granted to Government owned and controlled corporation.

ISSUE:
Whether the city of Cebu has the power to impose taxes on petitioner

RULING:
Yes. Taxation is the rule and exemption is the exception, the exemption may thus be withdrawn at the pleasure of the
taxing authority. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons,
including government- owned and controlled corporations, section 193 of the LGC prescribes the general rule, viz,
they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives, duly
registered under RA 6938, non stock and nonprofit hospitals and educational institutions and unless otherwise
provided in the LGC.
10 Pimentel v. Aguirre AUTHOR: Miguel M. Consing
[G.R. No. 132988; July 19, 2000] NOTES:
TOPIC: Taxation and Fiscal Administration AO 372 was amended in 1998 by AO 43 which reduced the IRAs t
PONENTE: Panganiban, J. be withheld to only 5%
Supra Case
FACTS:
In 1997, President Ramos issued AO 372, the contested provisions of which provide that:
o (1) LGUS are required to reduce their expenditures by 25 percent of their authorized regular appropriations for non
personal services [Sec. 1]; and
o (2) 10% of the Internal Revenue Allotments of each LGU shall be withheld, pending evaluation by the Development
Budget Coordinating Committee [Sec 4].
o This order was issued in response to the economic difficulties brought about by the depreciation of the peso.

The petitioners challenged the above AO. They argued that the AO violated the fiscal autonomy of LGUs when the president
unilaterally ordered all LGUS to adopt a 25% cost reduction program, and when he ordered that 10% of their IRAs were to be
withheld.
ISSUE(S):
Was it within the Presidents power to unilaterally: (1) order all LGUS to adopt a 25% cost reduction program, and (2) order that 10% o
their IRAs be withheld?

HELD/RATIO:
No. Under the law, LGUs enjoy fiscal autonomy. This means that local governments have the power to create their own sources of
revenue in addition to their equitable share in the national taxes released by the national government, as well as the power to allocat
their resources in accordance with their own priorities. It extends to the preparation of their budgets, and local officials in turn have to
work within the constraints thereof.

Local fiscal autonomy does not however rule out any manner of national government intervention by way of supervision, in order to
ensure that local programs, fiscal and otherwise, are consistent with national goals. However, under the Constitution, the formulation
and the implementation of such policies and programs are subject to "consultations with the appropriate public agencies, various
private sectors, and local government units." The President cannot do so unilaterally.

Furthermore, the Local Government Code provides 3 requisites for when the President may interfere with local fiscal matters: (1) an
unmanaged public sector deficit of the national government; (2) consultations with the presiding officers of the Senate and the House
of Representatives and the presidents of the various local leagues; and (3) the corresponding recommendation of the secretaries of th
Department of Finance, Interior and Local Government, and Budget and Management.

With regard to the order to withhold IRAs for the LGUs, the Court held that the Constitution itself provides for the automatic release o
the shares of LGUs in the national internal revenue. These IRAs "shall not be subject to any lien or holdback that may be imposed by
the national government for whatever purpose." It does not matter if the retention is temporary, any retention is prohibited. Thus the
Presidents order that the IRA of the LGUS be temporarily withheld, is void.
CASE LAW/ DOCTRINE:
On the Presidents Power of Supervision:
The Constitution vests the President with the power of supervision, not control, over LGUs. Such power enables him to see to it that
LGUs and their officials execute their tasks in accordance with law. While he may issue advisories and seek their cooperation in solving
economic difficulties, he cannot prevent them from performing their tasks and using available resources to achieve their goals. He ma
not withhold or alter any authority or power given them by the law.

On Autonomy:
Under the Philippine concept of local autonomy, the national government has not completely relinquished all its powers over local
governments, including autonomous regions. Only administrative powers over local affairs are delegated to political subdivisions. The
purpose of the delegation is to make governance more directly responsive and effective at the local levels.
On Taxes and Fiscal Administration:
The Constitution itself provides for the automatic release of the shares of LGUs in the national internal revenue. These IRAs "shall not b
subject to any lien or holdback that may be imposed by the national government for whatever purpose."