NATIONAL POWER CORPORATION, petitioner, dated October 5, 1987), NAPOCOR’s tax

vs. THE PROVINCE OF ALBAY, ALBAY exemption had been validly restored. What it
GOVERNOR ROMEO R. SALALIMA, and ALBAY questions is NAPOCOR’s liability in the
PROVINCIAL TREASURER ABUNDIO M. NUÑEZ, interregnum between June 11, 1984, the date its
respondents. tax privileges were withdrawn, and March 10,
1987, the date they were purportedly restored.
Real property tax; Exemptions; PD No. 776
To be sure, it objects to Executive. Order No. 93
empowered FIRB to recommend tax
as alledgedly a delegation of legislative power,
exemptions.—As we said, the FIRB, under its
but only insofar as its (NAPOCOR’s) June 11, 1984
charter, Presidential Decree No. 776, had been
to March 10, 1987 tax accumulation is
empowered merely to Recommend’’ tax
concerned. We therefore leave the issue of
exemptions. By itself, it could not have validly
“delegation” to the future and its
prescribed exemptions or restore taxability.
constitutionality when the proper case arises. For
Hence, as of June 11, 1984 (promulgation of
the nonce, we leave Executive Order No. 93
Presidential Decree No. 1931), NAPOCOR had
alone, and so also, its validity as far as it grants
ceased to enjoy tax exemption privileges.
tax exemptions (through the FIRB) beginning
December 17, 1986, the date of its promulgation.

Same; Same; Executive Order No. 93 validly Same; Same; Same; Taxes, purpose.—Taxes are
restored NAPOCOR’S tax exemption.—Does the lifeblood of the nation. Their primary purpose
Executive Order No. 93 constitute an unlawful is to generate funds for the State to finance the
delegation of legislative power? It is to be needs of the citizenry and to advance the
stressed that the provincial government of Albay common weal. National Power Corporation vs.
admits that as of March 10, 1987 (the date Province of Albay, 186 SCRA 198, G.R. No. 87479
Resolution No. 17-87 was affirmed by the June 4, 1990
Memorandum of the Office of the President,
. for, as we said, real property taxes. The back
taxes NAPOCOR has supposedly accumulated
SARMIENTO, J.:
were computed at P214,845,184.76.
The National Power Corporation (NAPOCOR)
NAPOCOR opposed the sale, interposing in
questions the power of the provincial
support of its non-liability Resolution No. 17-87,
government of Albay to collect real property
of the Fiscal Incentives Review Board (FIRB),
taxes on its properties located at Tiwi, Albay,
which provides as follows:
amassed between June 11, 1984 up to March 10,
1987. BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That
the tax and duty exemption privileges of the
It appears that on March 14 and 15, 1989, the
National Power Corporation, including those
respondents caused the publication of a notice
pertaining to its domestic purchases of
of auction sale involving the properties of
petroleum and petroleum products, granted
NAPOCOR and the Philippine Geothermal Inc.
under the terms and conditions of
consisting of buildings, machines, and similar
Commonwealth Act No. 120 (Creating the
improvements standing on their offices at Tiwi,
National Power Corporation, defining its powers,
Albay. The amounts to be realized from this
objectives and functions, and for other
advertised auction sale are supposed to be
purposes), as amended, are restored effective
applied to the tax delinquencies claimed, as and
March 10, 1987, subject to the following of taxes, duties, fees, imposts as well as costs and
conditions: 1 service fees including filing fees, appeal bonds,
supersedeas bonds, in any court or
as well as the Memorandum of Executive
administrative proceedings. 5
Secretary Catalino Macaraig, which also states
thus: (2) On August 24, 1975, Presidential Decree No.
776 was promulgated, creating the Fiscal
Pursuant to Sections 1 (f) and 2 (e) of Executive
Incentives Review Board (FIRB). Among other
Order No. 93, series of 1986, FIRB Resolution No.
things, the Board was tasked as follows:
17-87, series of 1987, restoring, subject to
certain conditions prescribed therein, the tax Section 2. A Fiscal Incentives Review Board is
and duty exemption privileges of NPC as hereby created for the purpose of determining
provided under Commonwealth Act No. 120, as what subsidies and tax exemptions should be
amended, effective March 10, 1987, is hereby modified, withdrawn, revoked or suspended,
confirmed and approved. 2 which shall be composed of the following
officials:
On March 10, 1989, the Court resolved to issue a
temporary restraining order directing the Albay Chairman - Secretary of Finance
provincial government "to CEASE AND DESIST Members - Secretary of Industry
from selling and disposing of the NAPOCOR - Director General of the National Economic and
properties subject matter of this petition. 3 It Development Authority
appears, however, that "the temporary - Commissioner of Internal Revenue
restraining order failed to reach respondents - Commissioner of Customs
before the scheduled bidding at 10:00 a.m. on
The Board may recommend to the President of
March 30, 1989 ... [h]ence, the respondents
the Philippines and for reasons of compatibility
proceeded with the bidding wherein the
with the declared economic policy, the
Province of Albay was the highest bidder. 4
withdrawal, modification, revocation or
The Court gathers from the records that: suspension of the enforceability of any of the
abovestated statutory subsidies or tax
(1) Under Section 13, of Republic Act No. 6395,
exemption grants, except those granted by the
amending Commonwealth Act No. 120 (charter
Constitution. To attain its objectives, the Board
of NAPOCOR):
may require the assistance of any appropriate
Section 13. Non-profit Character of the government agency or entity. The Board shall
Corporation; Exemption from All Taxes, Duties, meet once a month, or oftener at the call of the
Fees, Imposts and Other Charges by the Secretary of Finance. 6
Government and Government Instrumentalities.
(3) On June 11, 1984, Presidential Decree No.
The Corporation shall be non-profit and shall
1931 was promulgated, prescribing, among
devote all its returns from its capital investment
other things, that:
as well as excess revenues from its operation, for
expansion, To enable the Corporation to pay its Section 1. The provisions of special or general
indebtedness and obligations and in furtherance law to the contrary notwithstanding, all
and effective implementation of the policy exemptions from the payment of duties, taxes,
enunciated in Section One of this Act, the fees, impost and other charges heretofore
Corporation, including its subsidiaries, is hereby granted in favor of government-owned or
declared exempt from the payment of all forms
controlled corporations including their taxation, indicating the source of funding
subsidiaries are hereby withdrawn. 7 therefor, eligible beneficiaries and the terms and
conditions for the grant thereof taking into
(4) Meanwhile, FIRB Resolution No. 10-85 was
consideration the international commitments of
issued, "restoring" NAPOCOR's tax exemption
the Philippines and the necessary precautions
effective June 11, 1984 to June 30, 1985;
such that the grant of subsidies does not become
(5) Thereafter, FIRB Resolution No. 1-86 was the basis for countervailing action. 10
issued, granting tax exemption privileges to
(8) On October 5, 1987, the Office of the
NAPOCOR from July 1, 1985 and indefinitely
President issued the Memorandum, confirming
thereafter;
NAPOCOR's tax exemption aforesaid. 11
(6) Likewise, FIRB Resolution No. 17-87 was
The provincial government of Albay now defends
promulgated, giving NAPOCOR tax exemption
the auction sale in question on the theory that
privileges effective until March 10, 1987; 8
the various FIRB issuances constitute an undue
(7) On December 17, 1986, Executive Order No. delegation of the taxing Power and hence, null
93 was promulgated by President Corazon and void, under the Constitution. It is also
Aquino, providing, among other things, as contended that, insofar as Executive Order No.
follows: 93 authorizes the FIRB to grant tax exemptions,
the same is of no force and effect under the
SECTION 1. The provisions of any general or constitutional provision allowing the legislature
special law to the contrary notwithstanding, all alone to accord tax exemption privileges.
tax and duty incentives granted to government
and private entities are hereby withdrawn, It is to be pointed out that under Presidential
except. 9 Decree No. 776, the power of the FIRB was
merely to "recommend to the President of the
and Philippines and for reasons of compatibility with
SECTION 2. The Fiscal Incentives Review Board the declared economic policy, the withdrawal,
created under Presidential Decree No. 776, as modification, revocation or suspension of the
amended, is hereby authorized to: enforceability of any of the above-cited statutory
subsidies or tax exemption grants, except those
a) restore tax and/or duty exemptions granted by the Constitution." It has no authority
withdrawn hereunder in whole or in part; to impose taxes or revoke existing ones, which,
b) revise the scope and coverage of tax and/or after all, under the Constitution, only the
duty exemption that may be restored; legislature may accomplish. 12 The question
therefore is whether or not the various tax
c) impose conditions for the restoration of tax exemptions granted by virtue of FIRB
and/or duty exemption; Resolutions Nos. 10-85, 1-86, and 17-87 are valid
and constitutional.
d) prescribe the date or period of effectivity of
the restoration of tax and/or duty exemption; We shall deal with FIRB No. 17-87 later, but with
respect to FIRB Resolutions Nos. 10- 85 and 1-86,
e) formulate and submit to the President for
we sustain the provincial government of Albay.
approval, a complete system for the grant of
subsidies to deserving beneficiaries, in lieu of or As we said, the FIRB, under its charter,
in combination with the restoration of tax and Presidential Decree No. 776, had been
duty exemptions or preferential treatment in empowered merely to "recommend" tax
exemptions. By itself, it could not have validly delegation of legislative power, but only insofar
prescribed exemptions or restore taxability. as its (NAPOCOR's) June 11, 1984 to March 10,
Hence, as of June 11, 1984 (promulgation of 1987 tax accumulation is concerned. We
Presidential Decree No. 1931), NAPOCOR had therefore leave the issue of "delegation" to the
ceased to enjoy tax exemption privileges. future and its constitutionality when the proper
case arises. For the nonce, we leave Executive
The fact that under Executive Order No. 93, the
Order No. 93 alone, and so also, its validity as far
FIRB has been given the prerogative to "restore
as it grants tax exemptions (through the FIRB)
tax and/or duty exemptions withdrawn
beginning December 17, 1986, the date of its
hereunder in whole or in part," 13 and "impose
promulgation.
conditions for ... tax and/or duty exemption" 14is
of no moment. These provisions are prospective NAPOCOR must then be held liable for the
in character and can not affect the Board's past intervening years aforesaid. So it has been held:
acts.
xxx xxx xxx
The Court is aware that in its preamble,
The last issue to be resolved is whether or not
Executive Order No. 93 states:
the private-respondent is liable for the fixed and
WHEREAS, a number of affected entities, deficiency percentage taxes in the amount of
government and private were able to get back P3,025.96 (i.e. for the period from January 1,
their tax and duty exemption privileges through 1946 to February 29, 1948) before the approval
the review mechanism implemented by the of its municipal franchises. As aforestated, the
Fiscal Incentives Review Board (FIRB); 15but by franchises were approved by the President only
no means can we say that it has "ratified" the on February 24,1948. Therefore, before the said
acts of FIRB. It is to misinterpret the scope of date, the private respondent was liable for the
FIRB's powers under Presidential Decree No. 776 payment of percentage and fixed taxes as seller
to say that it has. Apart from that, Section 2 of of light, heat, and power which, as the petitioner
the Executive Order was clearly intended to claims, amounted to P3,025.96. The legislative
amend Presidential Decree No. 776, which franchise (R.A. No. 3843) exempted the grantee
means, mutatis mutandis, that FIRB did not have from all kinds of taxes other than the 2% tax from
the right, in the first place, to grant tax the date the original franchise was granted. The
exemptions or withdraw existing ones. exemption, therefore, did not cover the period
before the franchise was granted, i.e. before
Does Executive Order No. 93 constitute an
February 24, 1948. ... 16
unlawful delegation of legislative power? It is to
be stressed that the provincial government of Actually, the State has no reason to decry the
Albay admits that as of March 10, 1987 (the date taxation of NAPOCOR's properties, as and by way
Resolution No. 17-87 was affirmed by the of real property taxes. Real property taxes, after
Memorandum of the Office of the President, all, form part and parcel of the financing
dated October 5, 1987), NAPOCOR's exemption apparatus of the Government in development
had been validly restored. What it questions is and nation-building, particularly in the local
NAPOCOR's liability in the interregnum between government level, Thus:
June 11, 1984, the date its tax privileges were
SEC. 86. Distribution of proceeds. — (a) The
withdrawn, and March 10, 1987, the date they
proceeds of the real property tax, except as
were purportedly restored. To be sure, it objects
otherwise provided in this Code, shall accrue to
to Executive Order No. 93 as alledgedly a
the province, city or municipality where the
property subject to the tax is situated and shall per cent shall be remitted to the Treasurer of the
be applied by the respective local government Philippines to be expended exclusively for
unit for its own use and benefit. stabilizing the Special Education Fund in
municipalities, cities and provinces in
(b) Barrio shares in real property tax collections.
accordance with the provisions of Section seven
— The annual shares of the barrios in real
of R.A. No. 5447.
property tax collections shall be as follows:
(2) Collections in the cities: Sixty per cent shall be
(1) Five per cent of the real property tax
retained by the city; and forty per cent shall be
collections of the province and another five
remitted to the Treasurer of the Philippines to be
percent of the collections of the municipality
expended exclusively for stabilizing the special
shall accrue to the barrio where the property
education fund in municipalities, cities and
subject to the tax is situated.
provinces as provided under Section 7 of R.A. No.
(2) In the case of the city, ten per cent of the 5447.
collections of the tax shag likewise accrue to the
However, any increase in the shares of
barrio where the property is situated.
provinces, cities and municipalities from said
Thirty per cent of the barrio shares herein additional tax accruing to their respective local
referred to may be spent for salaries or per school boards commencing with fiscal year 1973-
diems of the barrio officials and other 74 over what has been actually realized during
administrative expenses, while the remaining the fiscal year 1971-72 which, for purposes of
seventy per cent shall be utilized for this Code, shall remain as the based year, shall
development projects approved by the Secretary be divided equally between the general fund and
of Local Government and Community the special education fund of the local
Development or by such committee created, or government units concerned. The Secretary of
representatives designated, by him. Finance may, however, at his discretion, increase
to not more than seventy-five per cent the
SEC. 87. Application of proceeds. — (a) The amount that shall accrue annually to the local
proceeds of the real property tax pertaining to general fund.
the city and to the municipality shall accrue
entirely to their respective general funds. In the (c) The proceeds of all delinquent taxes and
case of the province, one-fourth thereof shall penalties, as well as the income realized from the
accrue to its road and bridge fund and the use, lease or other disposition of real property
remaining three-fourths, to its general fund. acquired by the province or city at a public
auction in accordance with the provisions of this
(b) The entire proceeds of the additional one per Code, and the proceeds of the sale of the
cent real property tax levied for the Special delinquent real property or, of the redemption
Education Fund created under R.A. No. 5447 thereof shall accrue to the province, city or
collected in the province or city on real property municipality in the same manner and proportion
situated in their respective territorial as if the tax or taxes had been paid in regular
jurisdictions shall be distributed as follows: course.
(1) Collections in the provinces: Fifty per cent (d) The proceeds of the additional real property
shall accrue to the municipality where the tax on Idle private lands shall accrue to the
property subject to the tax is situated; twenty respective general funds of the province, city and
per cent shall accrue to the province; and thirty
municipality where the land subject to the tax is impose taxes or revoke existing ones, which,
situated. 17 after all, under the
constitution, only the legislature may
To all intents and purposes, real property taxes
accomplish.
are funds taken by the State with one hand and
given to the other. In no measure can the
Government be said to have lost anything.

As a rule finally, claims of tax exemption are

construed strongly against the claimant. 18 They
must also be shown to exist clearly and
categorically, and supported by clear legal
provisions. 19

Taxes are the lifeblood of the nation. 20 Their

primary purpose is to generate funds for the
State to finance the needs of the citizenry and to
advance the common weal.

WHEREFORE, the petition is DENIED. No costs.

The auction sale of the petitioner's properties to
answer for real estate taxes accumulated
between June 11, 1984 through March 10, 1987
is hereby declared valid.

SO ORDERED.

DIGEST:

NPC v Albay

FACTS:
The province of Albay sought to sell Napocor
properties in order for the proceeds to be
applied to the real property taxes Napocor
allegedly owned the Albay provincial
government. Napocor opposed alleging that it
was immune from taxes citing Resolution 17-87
of the Fiscal Incentives Review Board (FIRB).

ISSUE:
Whether the granting of exemption by the FIRB
constituted undue delegation of taxing power

RULING:
Yes, it is undue delegation. It has no authority to
CALTEX PHILIPPINES, INC., petitioner, vs. THE still fail. Tax exemptions as a general rule are
HONORABLE COMMISSION ON AUDIT, construed strictly against the grantee and
HONORABLE COMMISSIONER BARTOLOME C. liberally in favor of the taxing authority. The
FERNANDEZ and HONORABLE COMMISSIONER burden of proof rests upon the party claiming
ALBERTO P. CRUZ, respondents. exemption to prove that it is in fact covered by
the exemption so claimed. The party claiming
Administrative Law; Commission on Audit; The
exemption must therefore be expressly
audit power of the Auditor General under the
mentioned in the exempting law or at least be
1935 Constitution and the Commission on Audit
within its purview by clear legislative intent.
under the 1973 Constitution authorized them to
disallow illegal expenditures of funds or uses of Same; Same; Though LOI 1416 may suspend the
funds and property.—There can be no doubt, payment of taxes by copper mining companies it
however, that the audit power of the Auditor does not give petitioner the same privilege with
General under the 1935 Constitution and the respect to the payment of OPSF dues.—In the
Commission on Audit under the 1973 case at bar, petitioner failed to prove that it is
Constitution authorized them to disallow illegal entitled, as a consequence of its sales to ATLAS
expenditures of funds or uses of funds and and MARCOPPER, to claim reimbursement from
property. Our present Constitution retains that the OPSF under LOI 1416. Though LOI 1416 may
same power and authority, further strengthened suspend the payment of taxes by copper mining
by the definition of the COA’s general jurisdiction companies, it does not give petitioner the same
in Section 26 of the Government Auditing Code of privilege with respect to the payment of OPSF
the Philippines and Administrative Code of 1987. dues.
Pursuant to its power to promulgate accounting
Same; Same; It is settled that a taxpayer may not
and auditing rules and regulations for the
affect taxes due from the claims that he may
prevention of irregular, unnecessary, excessive or
have against the government.—It is settled that
extravagant expenditures or uses of funds, the
a taxpayer may not offset taxes due from the
COA promulgated on 29 March 1977 COA
claims that he may have against the
Circular No. 77-55. Since the COA is responsible
government. Taxes cannot be the subject of
for the enforcement of the rules and regulations,
compensation because the government and
it goes without saying that failure to comply with
taxpayer are not mutually creditors and debtors
them is a ground for disapproving the payment
of each other and a claim for taxes is not such a
of the proposed expenditure.
debt, demand, contract or judgment as is
Civil Law; Taxation; LOI 1416 has no binding force allowed to be set-off. Caltex Philippines, Inc. vs.
or effect as it was never published in the Official Commission on Audit, 208 SCRA 726, G.R. No.
Gazette after its issuance or at anytime after the 92585 May 8, 1992
decision in the above-mentioned cases.—LOI
DAVIDE, JR., J.:
1416 has, therefore, no binding force or effect as
it was never published in the Official Gazette This is a petition erroneously brought under Rule
after its issuance or at any time after the decision 44 of the Rules of Court 1 questioning the
authority of the Commission on Audit (COA) in
Same; Same; Tax exemptions as a general rule
disallowing petitioner's claims for
are construed strictly against the grantee and
reimbursement from the Oil Price Stabilization
liberally in favor of the taxing authority.—
Fund (OPSF) and seeking the reversal of said
Furthermore, even granting arguendo that LOI
Commission's decision denying its claims for
1416 has force and effect, petitioner’s claim must
recovery of financing charges from the Fund and Sec. 8 . There is hereby created a Trust Account
reimbursement of underrecovery arising from in the books of accounts of the Ministry of
sales to the National Power Corporation, Atlas Energy to be designated as Oil Price Stabilization
Consolidated Mining and Development Fund (OPSF) for the purpose of minimizing
Corporation (ATLAS) and Marcopper Mining frequent price changes brought about by
Corporation (MAR-COPPER), preventing it from exchange rate adjustments and/or changes in
exercising the right to offset its remittances world market prices of crude oil and imported
against its reimbursement vis-a-vis the OPSF and petroleum products. The Oil Price Stabilization
disallowing its claims which are still pending Fund may be sourced from any of the following:
resolution before the Office of Energy Affairs
a) Any increase in the tax collection from ad
(OEA) and the Department of Finance (DOF).
valorem tax or customs duty imposed on
Pursuant to the 1987 Constitution, 2 any petroleum products subject to tax under this
decision, order or ruling of the Constitutional Decree arising from exchange rate adjustment,
Commissions 3 may be brought to this Court as may be determined by the Minister of Finance
on certiorari by the aggrieved party within thirty in consultation with the Board of Energy;
(30) days from receipt of a copy thereof.
b) Any increase in the tax collection as a result of
The certiorari referred to is the special civil
the lifting of tax exemptions of government
action for certiorari under Rule 65 of the Rules of
corporations, as may be determined by the
Court. 4
Minister of Finance in consultation with the
Considering, however, that the allegations that Board of Energy;
the COA acted with:
c) Any additional amount to be imposed on
(a) total lack of jurisdiction in completely
petroleum products to augment the resources of
ignoring and showing absolutely no respect for
the Fund through an appropriate Order that may
the findings and rulings of the administrator of
be issued by the Board of Energy requiring
the fund itself and in disallowing a claim which is
payment by persons or companies engaged in
still pending resolution at the OEA level, and (b)
the business of importing, manufacturing and/or
"grave abuse of discretion and completely
marketing petroleum products;
without jurisdiction" 5 in declaring that
petitioner cannot avail of the right to offset any d) Any resulting peso cost differentials in case
amount that it may be required under the law to the actual peso costs paid by oil companies in the
remit to the OPSF against any amount that it may importation of crude oil and petroleum products
receive by way of reimbursement therefrom are is less than the peso costs computed using the
sufficient to bring this petition within Rule 65 of reference foreign exchange rate as fixed by the
the Rules of Court, and, considering further the Board of Energy.
importance of the issues raised, the error in the
designation of the remedy pursued will, in this The Fund herein created shall be used for the
instance, be excused. following:

The issues raised revolve around the OPSF 1) To reimburse the oil companies for cost
created under Section 8 of Presidential Decree increases in crude oil and imported petroleum
(P.D.) No. 1956, as amended by Executive Order products resulting from exchange rate
(E.O.) No. 137. As amended, said Section 8 reads adjustment and/or increase in world market
as follows: prices of crude oil;
2) To reimburse the oil companies for possible 1986 — P233,190,916.00
cost under-recovery incurred as a result of the 1987 — 335,065,650.00
reduction of domestic prices of petroleum 1988 — 719,412,254.00;
products. The magnitude of the underrecovery,
directing it to remit the same, with interest and
if any, shall be determined by the Ministry of
surcharges thereon, within sixty (60) days from
Finance. "Cost underrecovery" shall include the
receipt of the letter; advising it that the COA will
following:
hold in abeyance the audit of all its claims for
i. Reduction in oil company take as directed by reimbursement from the OPSF; and directing it
the Board of Energy without the corresponding to desist from further offsetting the taxes
reduction in the landed cost of oil inventories in collected against outstanding claims in 1989 and
the possession of the oil companies at the time subsequent periods. 7
of the price change;
In its letter of 3 May 1989, petitioner requested
ii. Reduction in internal ad valorem taxes as a the COA for an early release of its
result of foregoing government mandated price reimbursement certificates from the OPSF
reductions; covering claims with the Office of Energy Affairs
since June 1987 up to March 1989, invoking in
iii. Other factors as may be determined by the
support thereof COA Circular No. 89-299 on the
Ministry of Finance to result in cost
lifting of pre-audit of government transactions of
underrecovery.
national government agencies and government-
The Oil Price Stabilization Fund (OPSF) shall be owned or controlled corporations. 8
administered by the Ministry of Energy.
In its Answer dated 8 May 1989, the COA denied
The material operative facts of this case, as petitioner's request for the early release of the
gathered from the pleadings of the parties, are reimbursement certificates from the OPSF and
not disputed. repeated its earlier directive to petitioner to
forward payment of the latter's unremitted
On 2 February 1989, the COA sent a letter to collections to the OPSF to facilitate COA's audit
Caltex Philippines, Inc. (CPI), hereinafter referred action on the reimbursement claims. 9
to as Petitioner, directing the latter to remit to
the OPSF its collection, excluding that By way of a reply, petitioner, in a letter dated 31
unremitted for the years 1986 and 1988, of the May 1989, submitted to the COA a proposal for
additional tax on petroleum products authorized the payment of the collections and the recovery
under the aforesaid Section 8 of P.D. No. 1956 of claims, since the outright payment of the sum
which, as of 31 December 1987, amounted to of P1.287 billion to the OEA as a prerequisite for
P335,037,649.00 and informing it that, pending the processing of said claims against the OPSF
such remittance, all of its claims for will cause a very serious impairment of its cash
reimbursement from the OPSF shall be held in position. 10 The proposal reads:
abeyance. 6
We, therefore, very respectfully propose the
On 9 March 1989, the COA sent another letter to following:
petitioner informing it that partial verification
(1) Any procedural arrangement acceptable to
with the OEA showed that the grand total of its
COA to facilitate monitoring of payments and
unremitted collections of the above tax is
reimbursements will be administered by the
P1,287,668,820.00, broken down as follows:
ERB/Finance Dept./OEA, as agencies designated administering the OPSF. This Commission,
by law to administer/regulate OPSF. however, expressing serious doubts as to the
propriety of the offsetting of all types of
(2) For the retroactive period, Caltex will deliver
reimbursements from the OPSF against all
to OEA, P1.287 billion as payment to OPSF,
categories of remittances, advised these oil
similarly OEA will deliver to Caltex the same
companies that such offsetting was bereft of
amount in cash reimbursement from OPSF.
legal basis. Aggrieved thereby, these companies
(3) The COA audit will commence immediately now seek reconsideration and in support thereof
and will be conducted expeditiously. clearly manifest their intent to make
arrangements for the remittance to the Office of
(4) The review of current claims (1989) will be Energy Affairs of the amount of collections
conducted expeditiously to preclude further equivalent to what has been previously
accumulation of reimbursement from OPSF. offset, provided that this Commission authorizes
On 7 June 1989, the COA, with the Chairman the Office of Energy Affairs to prepare the
taking no part, handed down Decision No. 921 corresponding checks representing
accepting the above-stated proposal but reimbursement from the OPSF. It is alleged that
prohibiting petitioner from further offsetting the implementation of such an arrangement,
remittances and reimbursements for the current whereby the remittance of collections due to the
and ensuing years. 11 Decision No. 921 reads: OPSF and the reimbursement of claims from the
Fund shall be made within a period of not more
This pertains to the within separate requests of than one week from each other, will benefit the
Mr. Manuel A. Estrella, President, Petron Fund and not unduly jeopardize the continuing
Corporation, and Mr. Francis Ablan, President daily cash requirements of these firms.
and Managing Director, Caltex (Philippines) Inc.,
for reconsideration of this Commission's adverse Upon a circumspect evaluation of the
action embodied in its letters dated February 2, circumstances herein obtaining, this Commission
1989 and March 9, 1989, the former directing perceives no further objectionable feature in the
immediate remittance to the Oil Price proposed arrangement, provided that 15% of
Stabilization Fund of collections made by the whatever amount is due from the Fund is
firms pursuant to P.D. 1956, as amended by E.O. retained by the Office of Energy Affairs, the same
No. 137, S. 1987, and the latter reiterating the to be answerable for suspensions or
same directive but further advising the firms to disallowances, errors or discrepancies which
desist from offsetting collections against their may be noted in the course of audit and
claims with the notice that "this Commission will surcharges for late remittances without
hold in abeyance the audit of all . . . claims for prejudice to similar future retentions to answer
reimbursement from the OPSF." for any deficiency in such surcharges, and
provided further that no offsetting of
It appears that under letters of authority issued remittances and reimbursements for the current
by the Chairman, Energy Regulatory Board, the and ensuing years shall be allowed.
aforenamed oil companies were allowed to
offset the amounts due to the Oil Price Pursuant to this decision, the COA, on 18 August
Stabilization Fund against their outstanding 1989, sent the following letter to Executive
claims from the said Fund for the calendar years Director Wenceslao R. De la Paz of the Office of
1987 and 1988, pending with the then Ministry Energy Affairs: 12
of Energy, the government entity charged with Dear Atty. dela Paz:
Pursuant to the Commission on Audit Decision Review of the provisions of P.D. 1596 as
No. 921 dated June 7, 1989, and based on our amended by E.O. 137 seems to indicate that
initial verification of documents submitted to us recovery of financing charges by oil companies is
by your Office in support of Caltex (Philippines), not among the items for which the OPSF may be
Inc. offsets (sic) for the year 1986 to May 31, utilized. Therefore, it is our view that recovery of
1989, as well as its outstanding claims against financing charges has no legal basis. The
the Oil Price Stabilization Fund (OPSF) as of May mechanism for such claims is provided in DOF
31, 1989, we are pleased to inform your Office Circular 1-87.
that Caltex (Philippines), Inc. shall be required to
b. Product Sales –– Sales to International
remit to OPSF an amount of P1,505,668,906,
Vessels/Airlines
representing remittances to the OPSF which
were offset against its claims reimbursements BOE Resolution No. 87-01 dated February 7,
(net of unsubmitted claims). In addition, the 1987 as implemented by OEA Order No. 87-03-
Commission hereby authorize (sic) the Office of 095 indicating that (sic) February 7, 1987 as the
Energy Affairs (OEA) to cause payment of effectivity date that (sic) oil companies should
P1,959,182,612 to Caltex, representing claims pay OPSF impost on export sales of petroleum
initially allowed in audit, the details of which are products. Effective February 7, 1987 sales to
presented hereunder: . . . international vessels/airlines should not be
included as part of its domestic sales. Changing
As presented in the foregoing computation the
the effectivity date of the resolution from
disallowances totalled P387,683,535, which
February 7, 1987 to October 20, 1987 as covered
included P130,420,235 representing those
by subsequent ERB Resolution No. 88-12 dated
claims disallowed by OEA, details of which is (sic)
November 18, 1988 has allowed Caltex to
shown in Schedule 1 as summarized as follows:
include in their domestic sales volumes to
Disallowance of COA international vessels/airlines and claim the
Particulars Amount corresponding reimbursements from OPSF
during the period. It is our opinion that the
Recovery of financing charges P162,728,475 /a
effectivity of the said resolution should be
Product sales 48,402,398 /b
February 7, 1987.
Inventory losses
Borrow loan arrangement 14,034,786 /c c. Inventory losses –– Settlement of Ad Valorem
Sales to Atlas/Marcopper 32,097,083 /d
We reviewed the system of handling Borrow and
Sales to NPC 558
Loan (BLA) transactions including the related BLA
——————
agreement, as they affect the claims for
P257,263,300
reimbursements of ad valorem taxes. We
Disallowances of OEA 130,420,235 observed that oil companies immediately
————————— —————— settle ad valorem taxes for BLA transaction (sic).
Total P387,683,535 Loan balances therefore are not tax paid
inventories of Caltex subject to reimbursements
The reasons for the disallowances are discussed
but those of the borrower. Hence, we
hereunder:
recommend reduction of the claim for July,
a. Recovery of Financing Charges August, and November, 1987 amounting to
P14,034,786.

d. Sales to Atlas/Marcopper
LOI No. 1416 dated July 17, 1984 provides that "I xxx xxx xxx
hereby order and direct the suspension of
On 6 November 1989, petitioner filed with the
payment of all taxes, duties, fees, imposts and
COA a Supplemental Omnibus Request for
other charges whether direct or indirect due and
Reconsideration. 14
payable by the copper mining companies in
distress to the national and local governments." On 16 February 1990, the COA, with Chairman
It is our opinion that LOI 1416 which implements Domingo taking no part and with Commissioner
the exemption from payment of OPSF imposts as Fernandez dissenting in part, handed down
effected by OEA has no legal basis. Decision No. 1171 affirming the disallowance for
recovery of financing charges, inventory losses,
Furthermore, we wish to emphasize that
and sales to MARCOPPER and ATLAS, while
payment to Caltex (Phil.) Inc., of the amount as
allowing the recovery of product sales or those
herein authorized shall be subject to availability
arising from export sales. 15 Decision No. 1171
of funds of OPSF as of May 31, 1989 and
reads as follows:
applicable auditing rules and regulations. With
regard to the disallowances, it is further Anent the recovery of financing charges you
informed that the aggrieved party has 30 days contend that Caltex Phil. Inc. has the .authority
within which to appeal the decision of the to recover financing charges from the OPSF on
Commission in accordance with law. the basis of Department of Finance (DOF)
Circular 1-87, dated February 18, 1987, which
On 8 September 1989, petitioner filed an
allowed oil companies to "recover cost of
Omnibus Request for the Reconsideration of the
financing working capital associated with crude
decision based on the following grounds: 13
oil shipments," and provided a schedule of
A) COA-DISALLOWED CLAIMS ARE AUTHORIZED reimbursement in terms of peso per barrel. It
UNDER EXISTING RULES, ORDERS, appears that on November 6, 1989, the DOF
RESOLUTIONS, CIRCULARS ISSUED BY THE issued a memorandum to the President of the
DEPARTMENT OF FINANCE AND THE ENERGY Philippines explaining the nature of these
REGULATORY BOARD PURSUANT TO EXECUTIVE financing charges and justifying their
ORDER NO. 137. reimbursement as follows:

xxx xxx xxx As part of your program to promote economic

recovery, . . . oil companies (were authorized) to
B) ADMINISTRATIVE INTERPRETATIONS IN THE
refinance their imports of crude oil and
COURSE OF EXERCISE OF EXECUTIVE POWER BY
petroleum products from the normal trade
DEPARTMENT OF FINANCE AND ENERGY
credit of 30 days up to 360 days from date of
REGULATORY BOARD ARE LEGAL AND SHOULD
loading . . . Conformably . . ., the oil companies
BE RESPECTED AND APPLIED UNLESS DECLARED
deferred their foreign exchange remittances for
NULL AND VOID BY COURTS OR REPEALED BY
purchases by refinancing their import bills from
LEGISLATION.
the normal 30-day payment term up to the
xxx xxx xxx desired 360 days. This refinancing of
importations carried additional costs (financing
C) LEGAL BASIS FOR RETENTION OF OFFSET charges) which then became, due to government
ARRANGEMENT, AS AUTHORIZED BY THE mandate, an inherent part of the cost of the
EXECUTIVE BRANCH OF GOVERNMENT, purchases of our country's oil requirement.
REMAINS VALID.
We beg to disagree with such contention. The fees and other charges" was issued when OPSF
justification that financing charges increased oil was not yet in existence and could not have
costs and the schedule of reimbursement rate in contemplated OPSF imposts at the time of its
peso per barrel (Exhibit 1) used to support formulation. Moreover, it is evident that OPSF
alleged increase (sic) were not validated in our was not created to aid distressed mining
independent inquiry. As manifested in Exhibit 2, companies but rather to help the domestic oil
using the same formula which the DOF used in industry by stabilizing oil prices.
arriving at the reimbursement rate but using
Unsatisfied with the decision, petitioner filed on
comparable percentages instead of pesos, the
28 March 1990 the present petition wherein it
ineluctable conclusion is that the oil companies
imputes to the COA the commission of the
are actually gaining rather than losing from the
following errors: 16
extension of credit because such extension
enables them to invest the collections in I
marketable securities which have much higher
rates than those they incur due to the extension. RESPONDENT COMMISSION ERRED IN
The Data we used were obtained from CPI DISALLOWING RECOVERY OF FINANCING
(CALTEX) Management and can easily be verified CHARGES FROM THE OPSF.
from our records. II
With respect to product sales or those arising RESPONDENT COMMISSION ERRED IN
from sales to international vessels or airlines, . . DISALLOWING
., it is believed that export sales (product sales) CPI's 17 CLAIM FOR REIMBURSEMENT OF
are entitled to claim refund from the OPSF. UNDERRECOVERY ARISING FROM SALES TO NPC.
As regard your claim for underrecovery arising III
from inventory losses, . . . It is the considered
view of this Commission that the OPSF is not RESPONDENT COMMISSION ERRED IN DENYING
liable to refund such surtax on inventory losses CPI's CLAIMS FOR REIMBURSEMENT ON SALES
because these are paid to BIR and not OPSF, in TO ATLAS AND MARCOPPER.
view of which CPI (CALTEX) should seek refund IV
from BIR. . . .
RESPONDENT COMMISSION ERRED IN
Finally, as regards the sales to Atlas and PREVENTING CPI FROM EXERCISING ITS LEGAL
Marcopper, it is represented that you are RIGHT TO OFFSET ITS REMITTANCES AGAINST ITS
entitled to claim recovery from the OPSF REIMBURSEMENT VIS-A-VIS THE OPSF.
pursuant to LOI 1416 issued on July 17, 1984,
since these copper mining companies did not pay V
CPI (CALTEX) and OPSF imposts which were
RESPONDENT COMMISSION ERRED IN
added to the selling price.
DISALLOWING CPI's CLAIMS WHICH ARE STILL
Upon a circumspect evaluation, this Commission PENDING RESOLUTION BY (SIC) THE OEA AND
believes and so holds that the CPI (CALTEX) has THE DOF.
no authority to claim reimbursement for this
In the Resolution of 5 April 1990, this Court
uncollected OPSF impost because LOI 1416
required the respondents to comment on the
dated July 17, 1984, which exempts distressed
petition within ten (10) days from notice. 18
mining companies from "all taxes, duties, import
On 6 September 1990, respondents COA and Department) of Finance may include financing
Commissioners Fernandez and Cruz, assisted by charges for "in essence, financing charges
the Office of the Solicitor General, filed their constitute unrecovered cost of acquisition of
Comment. 19 crude oil incurred by the oil companies," as
explained in the 6 November 1989
This Court resolved to give due course to this
Memorandum to the President of the
petition on 30 May 1991 and required the parties
Department of Finance; they "directly translate
to file their respective Memoranda within
to cost underrecovery in cases where the money
twenty (20) days from notice. 20
market placement rates decline and at the same
In a Manifestation dated 18 July 1991, the Office time the tax on interest income increases. The
of the Solicitor General prays that the Comment relationship is such that the presence of
filed on 6 September 1990 be considered as the underrecovery or overrecovery is directly
Memorandum for respondents. 21 dependent on the amount and extent of
financing charges."
Upon the other hand, petitioner filed its
Memorandum on 14 August 1991. (2) The claim for recovery of financing charges
has clear legal and factual basis; it was filed on
I. Petitioner dwells lengthily on its first assigned the basis of Department of Finance Circular No.
error contending, in support thereof, that: 1-87, dated 18 February 1987, which provides:
(1) In view of the expanded role of the OPSF To allow oil companies to recover the costs of
pursuant to Executive Order No. 137, which financing working capital associated with crude
added a second purpose, to wit: oil shipments, the following guidelines on the
2) To reimburse the oil companies for possible utilization of the Oil Price Stabilization Fund
cost underrecovery incurred as a result of the pertaining to the payment of the foregoing (sic)
reduction of domestic prices of petroleum exchange risk premium and recovery of financing
products. The magnitude of the underrecovery, charges will be implemented:
if any, shall be determined by the Ministry of 1. The OPSF foreign exchange premium shall be
Finance. "Cost underrecovery" shall include the reduced to a flat rate of one (1) percent for the
following: first (6) months and 1/32 of one percent per
i. Reduction in oil company take as directed by month thereafter up to a maximum period of
the Board of Energy without the corresponding one year, to be applied on crude oil' shipments
reduction in the landed cost of oil inventories in from January 1, 1987. Shipments with
the possession of the oil companies at the time outstanding financing as of January 1, 1987 shall
of the price change; be charged on the basis of the fee applicable to
the remaining period of financing.
ii. Reduction in internal ad valorem taxes as a
result of foregoing government mandated price 2. In addition, for shipments loaded after January
reductions; 1987, oil companies shall be allowed to recover
financing charges directly from the OPSF per
iii. Other factors as may be determined by the barrel of crude oil based on the following
Ministry of Finance to result in cost schedule:
underrecovery.
Financing Period Reimbursement Rate
the "other factors" mentioned therein that may Pesos per Barrel
be determined by the Ministry (now
Less than 180 days None guidelines for the computation of the foreign
180 days to 239 days 1.90 exchange risk fee and the recovery of financing
241 (sic) days to 299 4.02 charges from the OPSF, to wit:
300 days to 369 (sic) days 6.16
B. FINANCE CHARGES
360 days or more 8.28
1. Oil companies shall be allowed to recover
The above rates shall be subject to review every
financing charges directly from the OPSF for both
sixty
crude and product shipments loaded after
days. 22
January 1, 1987 based on the following rates:
Pursuant to this circular, the Department of
Financing Period Reimbursement Rate
Finance, in its letter of 18 February 1987, advised
(PBbl.)
the Office of Energy Affairs as follows:
Less than 180 days None
HON. VICENTE T. PATERNO
180 days to 239 days 1.90
Deputy Executive Secretary
240 days to 229 (sic) days 4.02
For Energy Affairs
300 days to 359 days 6.16
Office of the President
360 days to more 8.28
Makati, Metro Manila
2. The above rates shall be subject to review
Dear Sir:
every sixty days. 24
This refers to the letters of the Oil Industry dated
Then on 22 November 1988, the Department of
December 4, 1986 and February 5, 1987 and
Finance issued Circular No. 4-88 imposing
subsequent discussions held by the Price Review
further guidelines on the recoverability of
committee on February 6, 1987.
financing charges, to wit:
On the basis of the representations made, the
Following are the supplemental rules to
Department of Finance recognizes the necessity
Department of Finance Circular No. 1-87 dated
to reduce the foreign exchange risk premium
February 18, 1987 which allowed the recovery of
accruing to the Oil Price Stabilization Fund
financing charges directly from the Oil Price
(OPSF). Such a reduction would allow the
Stabilization Fund. (OPSF):
industry to recover partly associated financing
charges on crude oil imports. Accordingly, the 1. The Claim for reimbursement shall be on a per
OPSF foreign exchange risk fee shall be reduced shipment basis.
to a flat charge of 1% for the first six (6) months
plus 1/32% of 1% per month thereafter up to a 2. The claim shall be filed with the Office of
maximum period of one year, effective January Energy Affairs together with the claim on peso
1, 1987. In addition, since the prevailing cost differential for a particular shipment and
company take would still leave unrecovered duly certified supporting documents providedfor
financing charges, reimbursement may be under Ministry of Finance No. 11-85.
secured from the OPSF in accordance with the 3. The reimbursement shall be on the form of
provisions of the attached Department of reimbursement certificate (Annex A) to be issued
Finance circular. 23 by the Office of Energy Affairs. The said
Acting on this letter, the OEA issued on 4 May certificate may be used to offset against
1987 Order No. 87-05-096 which contains the amounts payable to the OPSF. The oil companies
may also redeem said certificates in cash if not can only include "factors which are of the same
utilized, subject to availability of funds. 25 nature or analogous to those enumerated;"

The OEA disseminated this Circular to all oil 4. In allowing reimbursement of financing
companies in its Memorandum Circular No. 88- charges from OPSF, Circular No. 1-87 of the
12-017. 26 Department of Finance violates P.D. No. 1956
and E.O. No. 137; and
The COA can neither ignore these issuances nor
formulate its own interpretation of the laws in 5. Department of Finance rules and regulations
the light of the determination of executive implementing P.D. No. 1956 do not likewise
agencies. The determination by the Department allow reimbursement of financing
29
of Finance and the OEA that financing charges charges.
are recoverable from the OPSF is entitled to
We find no merit in the first assigned error.
great weight and consideration. 27 The function
of the COA, particularly in the matter of allowing As to the power of the COA, which must first be
or disallowing certain expenditures, is limited to resolved in view of its primacy, We find the
the promulgation of accounting and auditing theory of petitioner –– that such does not extend
rules for, among others, the disallowance of to the disallowance of irregular, unnecessary,
irregular, unnecessary, excessive, extravagant, excessive, extravagant, or unconscionable
or unconscionable expenditures, or uses of expenditures, or use of government funds and
government funds and properties. 28 properties, but only to the promulgation of
accounting and auditing rules for, among others,
(3) Denial of petitioner's claim for
such disallowance –– to be untenable in the light
reimbursement would be inequitable.
of the provisions of the 1987 Constitution and
Additionally, COA's claim that petitioner is
related laws.
gaining, instead of losing, from the extension of
credit, is belatedly raised and not supported by Section 2, Subdivision D, Article IX of the 1987
expert analysis. Constitution expressly provides:
In impeaching the validity of petitioner's Sec. 2(l). The Commission on Audit shall have the
assertions, the respondents argue that: power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue
1. The Constitution gives the COA discretionary
and receipts of, and expenditures or uses of
power to disapprove irregular or unnecessary
funds and property, owned or held in trust by, or
government expenditures and as the monetary
pertaining to, the Government, or any of its
claims of petitioner are not allowed by law, the
subdivisions, agencies, or instrumentalities,
COA acted within its jurisdiction in denying
including government-owned and controlled
them;
corporations with original charters, and on a
2. P.D. No. 1956 and E.O. No. 137 do not allow post-audit basis: (a) constitutional bodies,
reimbursement of financing charges from the commissions and offices that have been granted
OPSF; fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c)
3. Under the principle of ejusdem generis, the
other government-owned or controlled
"other factors" mentioned in the second
corporations and their subsidiaries; and (d) such
purpose of the OPSF pursuant to E.O. No. 137
non-governmental entities receiving subsidy or
equity, directly or indirectly, from or through the
government, which are required by law or the unnecessary, excessive, or extravagant
granting institution to submit to such audit as a expenditures or uses of funds and property. 31
condition of subsidy or equity. However, where
Upon the other hand, under the 1935
the internal control system of the audited
Constitution, the power and authority of the
agencies is inadequate, the Commission may
COA's precursor, the General Auditing Office,
adopt such measures, including temporary or
were, unfortunately, limited; its very role was
special pre-audit, as are necessary and
markedly passive. Section 2 of Article XI
appropriate to correct the deficiencies. It shall
thereofprovided:
keep the general accounts, of the Government
and, for such period as may be provided by law, Sec. 2. The Auditor General shall examine, audit,
preserve the vouchers and other supporting and settle all accounts pertaining to the
papers pertaining thereto. revenues and receipts from whatever source,
including trust funds derived from bond issues;
(2) The Commission shall have exclusive
and audit, in accordance with law and
authority, subject to the limitations in this
administrative regulations, all expenditures of
Article, to define the scope of its audit and
funds or property pertaining to or held in trust by
examination, establish the techniques and
the Government or the provinces or
methods required therefor, and promulgate
municipalities thereof. He shall keep the general
accounting and auditing rules and regulations,
accounts of the Government and the preserve
including those for the prevention and
the vouchers pertaining thereto. It shall be the
disallowance of irregular, unnecessary,
duty of the Auditor General to bring to the
excessive, extravagant, or, unconscionable
attention of the proper administrative officer
expenditures, or uses of government funds and
expenditures of funds or property which, in his
properties.
opinion, are irregular, unnecessary, excessive, or
These present powers, consistent with the extravagant. He shall also perform such other
declared independence of the functions as may be prescribed by law.
30
Commission, are broader and more extensive
As clearly shown above, in respect to irregular,
than that conferred by the 1973 Constitution.
unnecessary, excessive or extravagant
Under the latter, the Commission was
expenditures or uses of funds, the 1935
empowered to:
Constitution did not grant the Auditor General
Examine, audit, and settle, in accordance with the power to issue rules and regulations to
law and regulations, all accounts pertaining to prevent the same. His was merely to bring that
the revenues, and receipts of, and expenditures matter to the attention of the proper
or uses of funds and property, owned or held in administrative officer.
trust by, or pertaining to, the Government, or
The ruling on this particular point, quoted by
any of its subdivisions, agencies, or
petitioner from the cases of Guevarra
instrumentalities including government-owned
vs. Gimenez 32 and Ramos vs.Aquino, 33 are no
or controlled corporations, keep the general
longer controlling as the two (2) were decided in
accounts of the Government and, for such period
the light of the 1935 Constitution.
as may be provided by law, preserve the
vouchers pertaining thereto; and promulgate There can be no doubt, however, that the audit
accounting and auditing rules and regulations power of the Auditor General under the 1935
including those for the prevention of irregular, Constitution and the Commission on Audit under
the 1973 Constitution authorized them to
disallow illegal expenditures of funds or uses of more extensive powers, they did not intend
funds and property. Our present Constitution merely to make the COA a toothless tiger, but
retains that same power and authority, further rather envisioned a dynamic, effective, efficient
strengthened by the definition of the COA's and independent watchdog of the Government.
general jurisdiction in Section 26 of the
The issue of the financing charges boils down to
Government Auditing Code of the
34 the validity of Department of Finance Circular
Philippines and Administrative Code of
No. 1-87, Department of Finance Circular No. 4-
1987. 35 Pursuant to its power to promulgate
88 and the implementing circulars of the OEA,
accounting and auditing rules and regulations for
issued pursuant to Section 8, P.D. No. 1956, as
the prevention of irregular, unnecessary,
amended by E.O. No. 137, authorizing it to
excessive or extravagant expenditures or uses of
determine "other factors" which may result in
funds, 36 the COA promulgated on 29 March
cost underrecovery and a consequent
1977 COA Circular No. 77-55. Since the COA is
reimbursement from the OPSF.
responsible for the enforcement of the rules and
regulations, it goes without saying that failure to The Solicitor General maintains that, following
comply with them is a ground for disapproving the doctrine of ejusdem generis, financing
the payment of the proposed expenditure. As charges are not included in "cost underrecovery"
observed by one of the Commissioners of the and, therefore, cannot be considered as one of
1986 Constitutional Commission, Fr. Joaquin G. the "other factors." Section 8 of P.D. No. 1956, as
Bernas: 37 amended by E.O. No. 137, does not explicitly
define what "cost underrecovery" is. It merely
It should be noted, however, that whereas under
states what it includes. Thus:
Article XI, Section 2, of the 1935 Constitution the
Auditor General could not correct "irregular, . . . "Cost underrecovery" shall include the
unnecessary, excessive or extravagant" following:
expenditures of public funds but could only
"bring [the matter] to the attention of the proper i. Reduction in oil company takes as directed by
administrative officer," under the 1987 the Board of Energy without the corresponding
Constitution, as also under the 1973 reduction in the landed cost of oil inventories in
Constitution, the Commission on Audit can the possession of the oil companies at the time
"promulgate accounting and auditing rules and of the price change;
regulations including those for the prevention ii. Reduction in internal ad valorem taxes as a
and disallowance of irregular, unnecessary, result of foregoing government mandated price
excessive, extravagant, or unconscionable reductions;
expenditures or uses of government funds and
properties." Hence, since the Commission on iii. Other factors as may be determined by the
Audit must ultimately be responsible for the Ministry of Finance to result in cost
enforcement of these rules and regulations, the underrecovery.
failure to comply with these regulations can be a These "other factors" can include only those
ground for disapproving the payment of a which are of the same class or nature as the two
proposed expenditure. specifically enumerated in subparagraphs (i) and
Indeed, when the framers of the last two (2) (ii). A common characteristic of both is that they
Constitutions conferred upon the COA a more are in the nature of government mandated price
active role and invested it with broader and reductions. Hence, any other factor which seeks
to be a part of the enumeration, or which could Court can do nothing. The duty of this Court is
qualify as a cost underrecovery, must be of the not to legislate, but to apply or interpret the law.
same class or nature as those specifically Be that as it may, this Court wishes to emphasize
enumerated. that as the facts in this case have shown, it was
at the behest of the Government that petitioner
Petitioner, however, suggests that E.O. No. 137
refinanced its oil import payments from the
intended to grant the Department of Finance
normal 30-day trade credit to a maximum of 360
broad and unrestricted authority to determine
days. Petitioner could be correct in its assertion
or define "other factors."
that owing to the extended period for payment,
Both views are unacceptable to this Court. the financial institution which refinanced said
payments charged a higher interest, thereby
The rule of ejusdem generis states that "[w]here resulting in higher financing expenses for the
general words follow an enumeration of persons petitioner. It would appear then that equity
or things, by words of a particular and specific considerations dictate that petitioner should
meaning, such general words are not to be somehow be allowed to recover its financing
construed in their widest extent, but are held to losses, if any, which may have been sustained
be as applying only to persons or things of the because it accommodated the request of the
same kind or class as those specifically Government. Although under Section 29 of the
mentioned. 38 A reading of subparagraphs (i) and National Internal Revenue Code such losses may
(ii) easily discloses that they do not have a be deducted from gross income, the effect of
common characteristic. The first relates to price that loss would be merely to reduce its taxable
reduction as directed by the Board of Energy income, but not to actually wipe out such losses.
while the second refers to reduction in The Government then may consider some
internal ad valoremtaxes. Therefore, positive measures to help petitioner and others
subparagraph (iii) cannot be limited by the similarly situated to obtain substantial relief. An
enumeration in these subparagraphs. What amendment, as aforestated, may then be in
should be considered for purposes of order.
determining the "other factors" in subparagraph
(iii) is the first sentence of paragraph (2) of the Upon the other hand, to accept petitioner's
Section which explicitly allows cost theory of "unrestricted authority" on the part of
underrecovery only if such were incurred as a the Department of Finance to determine or
result of the reduction of domestic prices of define "other factors" is to uphold an undue
petroleum products. delegation of legislative power, it clearly
appearing that the subject provision does not
Although petitioner's financing losses, if indeed provide any standard for the exercise of the
incurred, may constitute cost underrecovery in authority. It is a fundamental rule that
the sense that such were incurred as a result of delegation of legislative power may be sustained
the inability to fully offset financing expenses only upon the ground that some standard for its
from yields in money market placements, they exercise is provided and that the legislature, in
do not, however, fall under the foregoing making the delegation, has prescribed the
provision of P.D. No. 1956, as amended, because manner of the exercise of the delegated
the same did not result from the reduction of the authority. 39
domestic price of petroleum products. Until
paragraph (2), Section 8 of the decree, as Finally, whether petitioner gained or lost by
amended, is further amended by Congress, this reason of the extensive credit is rendered
irrelevant by reason of the foregoing National Power Corporation (NPC); and (c) other
disquisitions. It may nevertheless be stated that cost underrecoveries incurred as may be finally
petitioner failed to disprove COA's claim that it decided by the Supreme
had in fact gained in the process. Otherwise Court; . . .
stated, petitioner failed to sufficiently show that
Hence, petitioner can recover its claim arising
it incurred a loss. Such being the case, how can
from sales of petroleum products to the National
petitioner claim for reimbursement? It cannot
Power Corporation.
have its cake and eat it too.
III. With respect to its claim for reimbursement
II. Anent the claims arising from sales to the
on sales to ATLAS and MARCOPPER, petitioner
National Power Corporation, We find for the
relies on Letter of Instruction (LOI) 1416, dated
petitioner. The respondents themselves admit in
17 July 1984, which ordered the suspension of
their Comment that underrecovery arising from
payments of all taxes, duties, fees and other
sales to NPC are reimbursable because NPC was
charges, whether direct or indirect, due and
granted full exemption from the payment of
payable by the copper mining companies in
taxes; to prove this, respondents trace the laws
distress to the national government. Pursuant to
providing for such exemption. 40 The last law
this LOI, then Minister of Energy, Hon. Geronimo
cited is the Fiscal Incentives Regulatory Board's
Velasco, issued Memorandum Circular No. 84-
Resolution No. 17-87 of 24 June 1987 which
11-22 advising the oil companies that Atlas
provides, in part, "that the tax and duty
Consolidated Mining Corporation and
exemption privileges of the National Power
Marcopper Mining Corporation are among those
Corporation, including those pertaining to its
declared to be in distress.
domestic purchases of petroleum and petroleum
products . . . are restored effective March 10, In denying the claims arising from sales to ATLAS
1987." In a Memorandum issued on 5 October and MARCOPPER, the COA, in its 18 August 1989
1987 by the Office of the President, NPC's tax letter to Executive Director Wenceslao R. de la
exemption was confirmed and approved. Paz, states that "it is our opinion that LOI 1416
which implements the exemption from payment
Furthermore, as pointed out by respondents, the
of OPSF imposts as effected by OEA has no legal
intention to exempt sales of petroleum products
basis;" 42 in its Decision No. 1171, it ruled that
to the NPC is evident in the recently passed
"the CPI (CALTEX) (Caltex) has no authority to
Republic Act No. 6952 establishing the
claim reimbursement for this uncollected impost
Petroleum Price Standby Fund to support the
because LOI 1416 dated July 17, 1984, . . . was
OPSF. 41 The pertinent part of Section 2, Republic
issued when OPSF was not yet in existence and
Act No. 6952 provides:
could not have contemplated OPSF imposts at
Sec. 2. Application of the Fund shall be subject to the time of its formulation." 43 It is further stated
the following conditions: that: "Moreover, it is evident that OPSF was not
created to aid distressed mining companies but
(1) That the Fund shall be used to reimburse the
rather to help the domestic oil industry by
oil companies for (a) cost increases of imported
stabilizing oil prices."
crude oil and finished petroleum products
resulting from foreign exchange rate In sustaining COA's stand, respondents
adjustments and/or increases in world market vigorously maintain that LOI 1416 could not have
prices of crude oil; (b) cost underrecovery intended to exempt said distressed mining
incurred as a result of fuel oil sales to the
companies from the payment of OPSF dues for In applying said provision, this Court ruled in the
the following reasons: case of Tañada vs. Tuvera: 46

a. LOI 1416 granting the alleged exemption was WHEREFORE, the Court hereby orders
issued on July 17, 1984. P.D. 1956 creating the respondents to publish in the Official Gazette all
OPSF was promulgated on October 10, 1984, unpublished presidential issuances which are of
while E.O. 137, amending P.D. 1956, was issued general application, and unless so published they
on February 25, 1987. shall have no binding force and effect.

b. LOI 1416 was issued in 1984 to assist Resolving the motion for reconsideration of said
distressed copper mining companies in line with decision, this Court, in its Resolution
the government's effort to prevent the collapse promulgated on 29 December 1986, 47 ruled:
of the copper industry. P.D No. 1956, as
We hold therefore that all statutes, including
amended, was issued for the purpose of
those of local application and private laws, shall
minimizing frequent price changes brought
be published as a condition for their effectivity,
about by exchange rate adjustments and/or
which shall begin fifteen days after publication
changes in world market prices of crude oil and
unless a different effectivity date is fixed by the
imported petroleum product's; and
legislature.
c. LOI 1416 caused the "suspension of all taxes,
Covered by this rule are presidential decrees and
duties, fees, imposts and other charges, whether
executive orders promulgated by the President
direct or indirect, due and payable by the copper
in the exercise of legislative powers whenever
mining companies in distress to the Notional and
the same are validly delegated by the legislature
Local Governments . . ." On the other hand, OPSF
or, at present, directly conferred by the
dues are not payable by (sic) distressed copper
Constitution. Administrative rules and
companies but by oil companies. It is to be noted
regulations must also be published if their
that the copper mining companies do not pay
purpose is to enforce or implement existing laws
OPSF dues. Rather, such imposts are built in or
pursuant also to a valid delegation.
already incorporated in the prices of oil
products. 44 xxx xxx xxx
Lastly, respondents allege that while LOI 1416 WHEREFORE, it is hereby declared that all laws
suspends the payment of taxes by distressed as above defined shall immediately upon their
mining companies, it does not accord petitioner approval, or as soon thereafter as possible, be
the same privilege with respect to its obligation published in full in the Official Gazette, to
to pay OPSF dues. become effective only after fifteen days from
their publication, or on another date specified by
We concur with the disquisitions of the
the legislature, in accordance with Article 2 of
respondents. Aside from such reasons, however,
the Civil Code.
it is apparent that LOI 1416 was never published
in the Official Gazette 45 as required by Article 2 LOI 1416 has, therefore, no binding force or
of the Civil Code, which reads: effect as it was never published in the Official
Gazette after its issuance or at any time after the
Laws shall take effect after fifteen days following
decision in the abovementioned cases.
the completion of their publication in the Official
Gazette, unless it is otherwise provided. . . . Article 2 of the Civil Code was, however, later
amended by Executive Order No. 200, issued on
18 June 1987. As amended, the said provision An examination of the records of this case shows
now reads: that petitioner failed to prove or substantiate its
contention that the amount of P130,420,235.00
Laws shall take effect after fifteen days following
is still pending before the OEA and the DOF.
the completion of their publication either in the
Additionally, We find no reason to doubt the
Official Gazette or in a newspaper of general
submission of respondents that said amount has
circulation in the Philippines, unless it is
already been passed upon by the OEA. Hence,
otherwise provided.
the ruling of respondent COA disapproving said
We are not aware of the publication of LOI 1416 claim must be upheld.
in any newspaper of general circulation pursuant
V. The last issue to be resolved in this case is
to Executive Order No. 200.
whether or not the amounts due to the OPSF
Furthermore, even granting arguendo that LOI from petitioner may be offset against
1416 has force and effect, petitioner's claim petitioner's outstanding claims from said fund.
must still fail. Tax exemptions as a general rule Petitioner contends that it should be allowed to
are construed strictly against the grantee and offset its claims from the OPSF against its
liberally in favor of the taxing authority. 48The contributions to the fund as this has been
burden of proof rests upon the party claiming allowed in the past, particularly in the years 1987
exemption to prove that it is in fact covered by and 1988. 51
the exemption so claimed. The party claiming
Furthermore, petitioner cites, as bases for
exemption must therefore be expressly
offsetting, the provisions of the New Civil Code
mentioned in the exempting law or at least be
on compensation and Section 21, Book V, Title I-
within its purview by clear legislative intent.
B of the Revised Administrative Code which
In the case at bar, petitioner failed to prove that provides for "Retention of Money for
it is entitled, as a consequence of its sales to Satisfaction of Indebtedness to
52
ATLAS and MARCOPPER, to claim Government." Petitioner also mentions
reimbursement from the OPSF under LOI 1416. communications from the Board of Energy and
Though LOI 1416 may suspend the payment of the Department of Finance that supposedly
taxes by copper mining companies, it does not authorize compensation.
give petitioner the same privilege with respect to
Respondents, on the other hand, citing Francia
the payment of OPSF dues.
vs. IAC and Fernandez, 53 contend that there can
IV. As to COA's disallowance of the amount of be no offsetting of taxes against the claims that
P130,420,235.00, petitioner maintains that the a taxpayer may have against the government, as
Department of Finance has still to issue a final taxes do not arise from contracts or depend
and definitive ruling thereon; accordingly, it was upon the will of the taxpayer, but are imposed by
premature for COA to disallow it. By doing so, the law. Respondents also allege that petitioner's
latter acted beyond its reliance on Section 21, Book V, Title I-B of the
49
jurisdiction. Respondents, on the other hand, Revised Administrative Code, is misplaced
contend that said amount was already because "while this provision empowers the COA
disallowed by the OEA for failure to substantiate to withhold payment of a government
it. 50 In fact, when OEA submitted the claims of indebtedness to a person who is also indebted to
petitioner for pre-audit, the abovementioned the government and apply the government
amount was already excluded. indebtedness to the satisfaction of the obligation
of the person to the government, like authority
or right to make compensation is not given to the the existence of the government; taxes may be
private person." 54 The reason for this, as stated levied with a regulatory purpose to provide
in Commissioner of Internal Revenue vs. Algue, means for the rehabilitation and stabilization of
Inc., 55 is that money due the government, either a threatened industry which is affected with
in the form of taxes or other dues, is its lifeblood public interest as to be within the police power
and should be collected without hindrance. of the state. 57 There can be no doubt that the oil
Thus, instead of giving petitioner a reason for industry is greatly imbued with public interest as
compensation or set-off, the Revised it vitally affects the general welfare. Any
Administrative Code makes it the respondents' unregulated increase in oil prices could hurt the
duty to collect petitioner's indebtedness to the lives of a majority of the people and cause
OPSF. economic crisis of untold proportions. It would
have a chain reaction in terms of, among others,
Refuting respondents' contention, petitioner
demands for wage increases and upward
claims that the amounts due from it do not arise
spiralling of the cost of basic commodities. The
as a result of taxation because "P.D. 1956,
stabilization then of oil prices is of prime concern
amended, did not create a source of taxation; it
which the state, via its police power, may
instead established a special fund . . .," 56 and
properly address.
that the OPSF contributions do not go to the
general fund of the state and are not used for Also, P.D. No. 1956, as amended by E.O. No. 137,
public purpose, i.e., not for the support of the explicitly provides that the source of OPSF is
government, the administration of law, or the taxation. No amount of semantical juggleries
payment of public expenses. This alleged lack of could dim this fact.
a public purpose behind OPSF exactions
It is settled that a taxpayer may not offset taxes
distinguishes such from a tax. Hence, the ruling
due from the claims that he may have against the
in the Francia case is inapplicable.
government. 58Taxes cannot be the subject of
Lastly, petitioner cites R.A. No. 6952 creating the compensation because the government and
Petroleum Price Standby Fund to support the taxpayer are not mutually creditors and debtors
OPSF; the said law provides in part that: of each other and a claim for taxes is not such a
debt, demand, contract or judgment as is
Sec. 2. Application of the fund shall be subject to
allowed to be set-off. 59
the following conditions:
We may even further state that technically, in
xxx xxx xxx
respect to the taxes for the OPSF, the oil
(3) That no amount of the Petroleum Price companies merely act as agents for the
Standby Fund shall be used to pay any oil Government in the latter's collection since the
company which has an outstanding obligation to taxes are, in reality, passed unto the end-users –
the Government without said obligation being – the consuming public. In that capacity, the
offset first, subject to the requirements of petitioner, as one of such companies, has the
compensation or offset under the Civil Code. primary obligation to account for and remit the
taxes collected to the administrator of the OPSF.
We find no merit in petitioner's contention that This duty stems from the fiduciary relationship
the OPSF contributions are not for a public between the two; petitioner certainly cannot be
purpose because they go to a special fund of the considered merely as a debtor. In respect,
government. Taxation is no longer envisioned as therefore, to its collection for the OPSF vis-a-
a measure merely to raise revenue to support vis its claims for reimbursement, no
compensation is likewise legally feasible. Firstly, SO ORDERED.
the Government and the petitioner cannot be
said to be mutually debtors and creditors of each
other. Secondly, there is no proof that DIGEST:
petitioner's claim is already due and liquidated.
Under Article 1279 of the Civil Code, in order that G.R. No. 92585 May 8, 1992CALTEX
compensation may be proper, it is necessary PHILIPPINES, INC., petitioner,vs.THE
that: HONORABLE COMMISSION ON AUDIT,
HONORABLECOMMISSIONER BARTOLOME C.
(1) each one of the obligors be bound principally, FERNANDEZ and HONORABLECOMMISSIONER
and that he be at the same time a principal ALBERTO P. CRUZ, respondents.
creditor of the other;
Topic: (1) tax vs. ordinary debt, (2)
(2) both debts consist in a sum of :money, or if purpose/objective of taxation: non-revenue /
the things due are consumable, they be of the special / regulatoryPonente: Davide, Jr. J.
same kind, and also of the same quality if the
latter has been stated; DOCTRINE:

(3) the two (2) debts be due; A taxpayer may not offset taxes due from the
claims that he may have againstthe government.
(4) they be liquidated and demandable;
QUICK FACTS
(5) over neither of them there be any retention
or controversy, commenced by third persons : Caltex Philippines questions the decisions of
and communicated in due time to the debtor. COA fordisallowing the offsetting of its claims for
reimbursement with its due OPSFremittance
That compensation had been the practice in the
past can set no valid precedent. Such a practice
has no legal basis. Lastly, R.A. No. 6952 does not FACTS:
authorize oil companies to offset their claims
against their OPSF contributions. Instead, it The Oil Price Stabilization Fund (OPSF) was
prohibits the government from paying any created under Sec. 8, PD 1956, asamended by
amount from the Petroleum Price Standby Fund EO 137 for the purpose of minimizing frequent
to oil companies which have outstanding price changesbrought about by exchange rate
obligations with the government, without said adjustments. It will be used to reimburse theoil
obligation being offset first subject to the rules companies for cost increase and possible cost
on compensation in the Civil Code. underrecovery incurred dueto reduction of
domestic prices.COA sent a letter to Caltex
WHEREFORE, in view of the directing the latter to remit to the OPSF
foregoing, judgment is hereby rendered itscollection. Caltex requested COA for an early
AFFIRMING the challenged decision of the release of its reimbursementcertificates which
Commission on Audit, except that portion the latter denied.COA disallowed recover of
thereof disallowing petitioner's claim for financing charges, inventory losses and sales
reimbursement of underrecovery arising from tomarcopper and atlas but allowed the recovery
sales to the National Power Corporation, which of product sale or those arisingfrom export
is hereby allowed. sales.Petitioner’s Contention:Department of
With costs against petitioner. Finance issued Circular No. 4-88 allowing
reimbursement.Denial of claim a special fund of thegovernment. Taxation is no
for reimbursement would be inequitable. NCC longer envisioned as a measure merely toraise
(compensation)and Sec. 21, Book V, Title I-B of revenue to support the existence of the
the Revised Administrative Code (Retention government; taxes may belevied with a
of Money for Satisfaction of Indebtedness to regulatory purpose to provide means for the
Government) allows offsetting.Amounts due do rehabilitationand stabilization of a threatened
not arise as a result of taxation since PD 1956 did industry which is affected with publicinterest as
not create asource of taxation, it instead to be within the police power of the State.
established a special fund. This lack of
publicpurpose behind OPSF exactions
distinguishes it from tax. The oil industry is greatly imbued with public
interest as it vitally affectsthe general welfare.
Respondent’s Contention:Based on Francia v.
IAC, there’s no offsetting of taxes against the the
claimsthat a taxpayer may have against the
government, as taxes do not arise fromcontracts PD 1956, as amended by EO No. 137 explicitly
or depend upon the will of the taxpayer, but are provides that the sourceof OPSF is taxation.
imposed by law.

ISSUE: WON Caltex is entitled to offsetting

DECISION: NO. COA AFFIRMEDHELD:

It is settled that a taxpayer may not offset taxes

due from the claimsthat he may have against the
government. Taxes cannot be subject
of compensation because the government and
taxpayer are not mutuallycreditors and debtors
of each other and a claim for taxes is not such
adebt, demand, contract or judgment as is
allowed to be set-off.

Technically, the oil companies merely act as

agents for the Governmentin the latter’s
collection since the taxes are, in reality, passed
unto theend-users – the consuming public. Their
primary obligation is to accountfor and remit the
taxes collection to the administrator of the OPSF.

There is not merit in Caltex’s contention that the

OPSF contributions
arenot for a public purpose because they go to
VALENTIN TIO doing business under the name Disposition of Videograms. Notwithstanding any
and style of OMI ENTERPRISES, petitioner, vs. provision of law to the contrary, the province
VIDEOGRAM REGULATORY BOARD, MINISTER shall collect a tax of thirty percent (30%) of the
OF FINANCE, METRO MANILA COMMISSION, purchase price or rental rate, as the case may be,
CITY MAYOR and CITY TREASURER OF MANILA, for every sale, lease or disposition of a videogram
respondents. containing a reproduction of any motion picture
or audiovisual program. Fifty percent (50%) of
Constitutional Law; Constitutional requirement
the proceeds of the tax collected shall accrue to
that “every bill shall embrace only one subject
the province, and the other fifty percent (50%)
which shall be expressed in the title thereof’ is
shall accrue to the municipality where the tax is
sufficiently complied with if the title be
collected; PROVIDED, That in Metropolitan
comprehensive enough to include the general
Manila, the tax shall be shared equally by the
purpose it seeks to achieve and if all the parts of
City/Municipality and the Metropolitan Manila
the statute are related and germane to the
Commission. x x x x” The foregoing provision is
subject matter expressed in the title or as long as
allied and germane to, and is reasonably
they are not inconsistent with or foreign to the
necessary for the accomplishment of, the general
general subject and title.—The Constitutional
object of the DECREE, which is the regulation of
requirement that “every bill shall embrace only
the video industry through the Videogram
one subject which shall be expressed in the title
Regulatory Board as expressed in its title. The tax
thereof” is sufficiently complied with if the title
provision is not inconsistent with, nor foreign to
be comprehensive enough to include the general
that general subject and title. As a tool for
purpose which a statute seeks to achieve. It is not
regulation it is simply one of the regulatory and
necessary that the title express each and every
control mechanisms scattered throughout the
end that the statute wishes to accomplish. The
DECREE. The express purpose of the DECREE to
requirement is satisfied if all the parts of the
include taxation of the video industry in order to
statute are related, and are germane to the
regulate and rationalize the heretofore
subject matter expressed in the title, or as long
uncontrolled distribution of videograms is
as they are not inconsistent with or foreign to the
evident from Preambles 2 and 5, supra. Those
general subject and title. An act having a single
preambles explain the motives of the lawmaker
general subject, indicated in the title, may
in presenting the measure. The title of the
contain any number of provisions, no matter how
DECREE, which is the creation of the Videogram
diverse they may be, so long as they are not
Regulatory Board, is comprehensive enough to
inconsistent with or foreign to the general
include the purposes expressed in its Preamble
subject, and may be considered in furtherance of
and reasonably covers all its provisions. It is
such subject by providing for the method and
unnecessary to express all those objectives in the
means of carrying out the general object.” The
title or that the latter be an index to the body of
rule also is that the constitutional requirement as
the DECREE,
to the title of a bill should not be so narrowly
construed as to cripple or impede the power of Same; Same; Same; Tax imposed under the
legislation. It should be given a practical rather Decree is not harsh; oppressive, confiscatory and
than technical construction. in restraint of trade but regulatory and a revenue
measure; The levy is for a public purpose.—
Same; Same; Section 10 PD 1987 otherwise
Petitioner also submits that the thirty percent
known as Videogram Regulatory Board is not a
(30%) tax imposed is harsh and oppressive,
Rider.—Section 10. Tax on Sale, Lease or
confiscatory, and in restraint of trade. However,
it is beyond serious question that a tax does not or personnel of such agencies and units to
cease to be valid merely because it regulates, perform enforcement functions for the Board” is
discourages, or even definitely deters the not a delegation of the power to legislate but
activities taxed. The power to impose taxes is one merely a conferment of authority or discretion as
so unlimited in force and so searching in extent, to its execution, enforcement, and
that the courts scarcely venture to declare that it implementation. “The true distinction is between
is subject to any restrictions whatever, except the delegation of power to make the law, which
such as rest in the discretion of the authority necessarily involves a discretion as to what it
which exercises it. In imposing a tax, the shall be, and conferring authority or discretion as
legislature acts upon its constituents. This is, in to its execution to be exercised under and in
general, a sufficient security against erroneous pursuance of the law. The first cannot be done;
and oppressive taxation. The tax imposed by the to the latter, no valid objection can be made.”
DECREE is not only a regulatory but also a Besides, in the very language of the decree, the
revenue measure prompted by the realization authority of the BOARD to solicit such assistance
that earnings of videogram establishments of is for a “fixed and limited period” with the
around P600 million per annum have not been deputized agencies concerned being “subject to
subjected to tax, thereby depriving the the direction and control of the BOARD.” That the
Government of an additional source of revenue. grant of such authority might be the source of
It is an end-user tax, imposed on retailers for graft and corruption would not stigmatize the
every videogram they make available for public DECREE as unconstitutional. Should the
viewing, It is similar to the 30% amusement tax eventuality occur, the aggrieved parties will not
imposed or borne by the movie industry which be without adequate remedy in law. Tio vs.
the theater-owners pay to the government, but Videogram Regulatory Board, 151 SCRA 208, No.
which is passed on to the entire cost of the L-75697 June 18, 1987
admission ticket, thus shifting the tax burden on
MELENCIO-HERRERA, J.:
the buying or the viewing public. It is a tax that is
imposed uniformly on all videogram operators. This petition was filed on September 1, 1986 by
The levy of the 30% tax is for a public purpose. It petitioner on his own behalf and purportedly on
was imposed primarily to answer the need for behalf of other videogram operators adversely
regulating the video industry, particularly affected. It assails the constitutionality of
because of the rampant film piracy, the flagrant Presidential Decree No. 1987 entitled "An Act
violation of intellectual property rights, and the Creating the Videogram Regulatory Board" with
proliferation of pornographic video tapes. And broad powers to regulate and supervise the
while it was also an objective of the DECREE to videogram industry (hereinafter briefly referred
protect the movie industry, the tax remains a to as the BOARD). The Decree was promulgated
valid imposition. on October 5, 1985 and took effect on April 10,
1986, fifteen (15) days after completion of its
Same; Same; Same; Same; PD 1987 not an undue
publication in the Official Gazette.
delegation of legislative power.—Neither can it
be successfully argued that the DECREE contains On November 5, 1985, a month after the
an undue delegation of legislative power. The promulgation of the abovementioned decree,
grant in Section 11 of the DECREE of authority to Presidential Decree No. 1994 amended the
the BOARD to “solicit the direct assistance of National Internal Revenue Code providing, inter
other agencies and Units of the government and alia:
deputize, for a fixed and limited period, the heads
SEC. 134. Video Tapes. — There shall be Government of approximately P180 Million in
collected on each processed video-tape cassette, taxes each year;
ready for playback, regardless of length, an
3. WHEREAS, the unregulated activities of
annual tax of five pesos; Provided, That locally
videogram establishments have also affected the
manufactured or imported blank video tapes
viability of the movie industry, particularly the
shall be subject to sales tax.
more than 1,200 movie houses and theaters
On October 23, 1986, the Greater Manila throughout the country, and occasioned
Theaters Association, Integrated Movie industry-wide displacement and unemployment
Producers, Importers and Distributors due to the shutdown of numerous moviehouses
Association of the Philippines, and Philippine and theaters;
Motion Pictures Producers Association,
4. "WHEREAS, in order to ensure national
hereinafter collectively referred to as the
economic recovery, it is imperative for the
Intervenors, were permitted by the Court to
Government to create an environment
intervene in the case, over petitioner's
conducive to growth and development of all
opposition, upon the allegations that
business industries, including the movie industry
intervention was necessary for the complete
which has an accumulated investment of about
protection of their rights and that their "survival
P3 Billion;
and very existence is threatened by the
unregulated proliferation of film piracy." The 5. WHEREAS, proper taxation of the activities of
Intervenors were thereafter allowed to file their videogram establishments will not only alleviate
Comment in Intervention. the dire financial condition of the movie industry
upon which more than 75,000 families and
The rationale behind the enactment of the
500,000 workers depend for their livelihood, but
DECREE, is set out in its preambular clauses as
also provide an additional source of revenue for
follows:
the Government, and at the same time
1. WHEREAS, the proliferation and unregulated rationalize the heretofore uncontrolled
circulation of videograms including, among distribution of videograms;
others, videotapes, discs, cassettes or any
6. WHEREAS, the rampant and unregulated
technical improvement or variation thereof,
showing of obscene videogram features
have greatly prejudiced the operations of
constitutes a clear and present danger to the
moviehouses and theaters, and have caused a
moral and spiritual well-being of the youth, and
sharp decline in theatrical attendance by at least
impairs the mandate of the Constitution for the
forty percent (40%) and a tremendous drop in
State to support the rearing of the youth for civic
the collection of sales, contractor's specific,
efficiency and the development of moral
amusement and other taxes, thereby resulting in
character and promote their physical,
substantial losses estimated at P450 Million
intellectual, and social well-being;
annually in government revenues;
7. WHEREAS, civic-minded citizens and groups
2. WHEREAS, videogram(s) establishments
have called for remedial measures to curb these
collectively earn around P600 Million per annum
blatant malpractices which have flaunted our
from rentals, sales and disposition of
censorship and copyright laws;
videograms, and such earnings have not been
subjected to tax, thereby depriving the 8. WHEREAS, in the face of these grave
emergencies corroding the moral values of the
people and betraying the national economic they may be, so long as they are not inconsistent
recovery program, bold emergency measures with or foreign to the general subject, and may
must be adopted with dispatch; ... (Numbering of be considered in furtherance of such subject by
paragraphs supplied). providing for the method and means of carrying
out the general object." 3 The rule also is that the
Petitioner's attack on the constitutionality of the
constitutional requirement as to the title of a bill
DECREE rests on the following grounds:
should not be so narrowly construed as to cripple
1. Section 10 thereof, which imposes a tax of 30% or impede the power of legislation. 4 It should be
on the gross receipts payable to the local given practical rather than technical
government is a RIDER and the same is not construction. 5
germane to the subject matter thereof;
Tested by the foregoing criteria, petitioner's
2. The tax imposed is harsh, confiscatory, contention that the tax provision of the DECREE
oppressive and/or in unlawful restraint of trade is a rider is without merit. That section
in violation of the due process clause of the reads, inter alia:
Constitution;
Section 10. Tax on Sale, Lease or Disposition of
3. There is no factual nor legal basis for the Videograms. — Notwithstanding any provision
exercise by the President of the vast powers of law to the contrary, the province shall collect
conferred upon him by Amendment No. 6; a tax of thirty percent (30%) of the purchase
price or rental rate, as the case may be, for every
4. There is undue delegation of power and sale, lease or disposition of a videogram
authority; containing a reproduction of any motion picture
5. The Decree is an ex-post facto law; and or audiovisual program. Fifty percent (50%) of
the proceeds of the tax collected shall accrue to
6. There is over regulation of the video industry the province, and the other fifty percent (50%)
as if it were a nuisance, which it is not. shall acrrue to the municipality where the tax is
We shall consider the foregoing objections collected; PROVIDED, That in Metropolitan
in seriatim. Manila, the tax shall be shared equally by the
City/Municipality and the Metropolitan Manila
1. The Constitutional requirement that "every Commission.
bill shall embrace only one subject which shall be
expressed in the title thereof" 1 is sufficiently xxx xxx xxx
complied with if the title be comprehensive The foregoing provision is allied and germane to,
enough to include the general purpose which a and is reasonably necessary for the
statute seeks to achieve. It is not necessary that accomplishment of, the general object of the
the title express each and every end that the DECREE, which is the regulation of the video
statute wishes to accomplish. The requirement is industry through the Videogram Regulatory
satisfied if all the parts of the statute are related, Board as expressed in its title. The tax provision
and are germane to the subject matter is not inconsistent with, nor foreign to that
expressed in the title, or as long as they are not general subject and title. As a tool for
inconsistent with or foreign to the general regulation 6 it is simply one of the regulatory and
subject and title. 2An act having a single general control mechanisms scattered throughout the
subject, indicated in the title, may contain any DECREE. The express purpose of the DECREE to
number of provisions, no matter how diverse include taxation of the video industry in order to
regulate and rationalize the heretofore The levy of the 30% tax is for a public purpose. It
uncontrolled distribution of videograms is was imposed primarily to answer the need for
evident from Preambles 2 and 5, supra. Those regulating the video industry, particularly
preambles explain the motives of the lawmaker because of the rampant film piracy, the flagrant
in presenting the measure. The title of the violation of intellectual property rights, and the
DECREE, which is the creation of the Videogram proliferation of pornographic video tapes. And
Regulatory Board, is comprehensive enough to while it was also an objective of the DECREE to
include the purposes expressed in its Preamble protect the movie industry, the tax remains a
and reasonably covers all its provisions. It is valid imposition.
unnecessary to express all those objectives in the
The public purpose of a tax may legally exist even
title or that the latter be an index to the body of
if the motive which impelled the legislature to
the DECREE. 7
impose the tax was to favor one industry over
2. Petitioner also submits that the thirty percent another. 11
(30%) tax imposed is harsh and oppressive,
It is inherent in the power to tax that a state be
confiscatory, and in restraint of trade. However,
free to select the subjects of taxation, and it has
it is beyond serious question that a tax does not
been repeatedly held that "inequities which
cease to be valid merely because it regulates,
result from a singling out of one particular class
discourages, or even definitely deters the
for taxation or exemption infringe no
activities taxed. 8 The power to impose taxes is
constitutional limitation". 12 Taxation has been
one so unlimited in force and so searching in
made the implement of the state's police
extent, that the courts scarcely venture to
power.13
declare that it is subject to any restrictions
whatever, except such as rest in the discretion of At bottom, the rate of tax is a matter better
the authority which exercises it. 9 In imposing a addressed to the taxing legislature.
tax, the legislature acts upon its constituents.
This is, in general, a sufficient security against 3. Petitioner argues that there was no legal nor
erroneous and oppressive taxation. 10 factual basis for the promulgation of the DECREE
by the former President under Amendment No.
The tax imposed by the DECREE is not only a 6 of the 1973 Constitution providing that
regulatory but also a revenue measure "whenever in the judgment of the President ... ,
prompted by the realization that earnings of there exists a grave emergency or a threat or
videogram establishments of around P600 imminence thereof, or whenever the interim
million per annum have not been subjected to Batasang Pambansa or the regular National
tax, thereby depriving the Government of an Assembly fails or is unable to act adequately on
additional source of revenue. It is an end-user any matter for any reason that in his judgment
tax, imposed on retailers for every videogram requires immediate action, he may, in order to
they make available for public viewing. It is meet the exigency, issue the necessary decrees,
similar to the 30% amusement tax imposed or orders, or letters of instructions, which shall
borne by the movie industry which the theater- form part of the law of the land."
owners pay to the government, but which is
passed on to the entire cost of the admission In refutation, the Intervenors and the Solicitor
ticket, thus shifting the tax burden on the buying General's Office aver that the 8th "whereas"
or the viewing public. It is a tax that is imposed clause sufficiently summarizes the justification in
uniformly on all videogram operators. that grave emergencies corroding the moral
values of the people and betraying the national
economic recovery program necessitated bold required at the time of the commission of the
emergency measures to be adopted with offense." It is petitioner's position that Section
dispatch. Whatever the reasons "in the 15 of the DECREE in providing that:
judgment" of the then President, considering
All videogram establishments in the Philippines
that the issue of the validity of the exercise of
are hereby given a period of forty-five (45) days
legislative power under the said Amendment still
after the effectivity of this Decree within which
pends resolution in several other cases, we
to register with and secure a permit from the
reserve resolution of the question raised at the
BOARD to engage in the videogram business and
proper time.
to register with the BOARD all their inventories
4. Neither can it be successfully argued that the of videograms, including videotapes, discs,
DECREE contains an undue delegation of cassettes or other technical improvements or
legislative power. The grant in Section 11 of the variations thereof, before they could be sold,
DECREE of authority to the BOARD to "solicit the leased, or otherwise disposed of. Thereafter any
direct assistance of other agencies and units of videogram found in the possession of any person
the government and deputize, for a fixed and engaged in the videogram business without the
limited period, the heads or personnel of such required proof of registration by the BOARD,
agencies and units to perform enforcement shall be prima facie evidence of violation of the
functions for the Board" is not a delegation of Decree, whether the possession of such
the power to legislate but merely a conferment videogram be for private showing and/or public
of authority or discretion as to its execution, exhibition.
enforcement, and implementation. "The true
raises immediately a prima facie evidence of
distinction is between the delegation of power to
violation of the DECREE when the required proof
make the law, which necessarily involves a
of registration of any videogram cannot be
discretion as to what it shall be, and conferring
presented and thus partakes of the nature of
authority or discretion as to its execution to be
an ex post facto law.
exercised under and in pursuance of the law. The
first cannot be done; to the latter, no valid The argument is untenable. As this Court held in
objection can be made." 14 Besides, in the very the recent case of Vallarta vs. Court of Appeals,
language of the decree, the authority of the et al. 15
BOARD to solicit such assistance is for a "fixed
and limited period" with the deputized agencies ... it is now well settled that "there is no
concerned being "subject to the direction and constitutional objection to the passage of a law
control of the BOARD." That the grant of such providing that the presumption of innocence
authority might be the source of graft and may be overcome by a contrary presumption
corruption would not stigmatize the DECREE as founded upon the experience of human conduct,
unconstitutional. Should the eventuality occur, and enacting what evidence shall be sufficient to
the aggrieved parties will not be without overcome such presumption of innocence"
adequate remedy in law. (People vs. Mingoa 92 Phil. 856 [1953] at 858-59,
citing 1 COOLEY, A TREATISE ON THE
5. The DECREE is not violative of the ex post CONSTITUTIONAL LIMITATIONS, 639-641). And
facto principle. An ex post facto law is, among the "legislature may enact that when certain
other categories, one which "alters the legal facts have been proved that they shall be prima
rules of evidence, and authorizes conviction facie evidence of the existence of the guilt of the
upon less or different testimony than the law accused and shift the burden of proof provided
there be a rational connection between the facts expediency of the DECREE. These considerations,
proved and the ultimate facts presumed so that however, are primarily and exclusively a matter
the inference of the one from proof of the others of legislative concern.
is not unreasonable and arbitrary because of lack
Only congressional power or competence, not
of connection between the two in common
the wisdom of the action taken, may be the basis
experience". 16
for declaring a statute invalid. This is as it ought
Applied to the challenged provision, there is no to be. The principle of separation of powers has
question that there is a rational connection in the main wisely allocated the respective
between the fact proved, which is non- authority of each department and confined its
registration, and the ultimate fact presumed jurisdiction to such a sphere. There would then
which is violation of the DECREE, besides the fact be intrusion not allowable under the
that the prima facie presumption of violation of Constitution if on a matter left to the discretion
the DECREE attaches only after a forty-five-day of a coordinate branch, the judiciary would
period counted from its effectivity and is, substitute its own. If there be adherence to the
therefore, neither retrospective in character. rule of law, as there ought to be, the last
offender should be courts of justice, to which
6. We do not share petitioner's fears that the
rightly litigants submit their controversy
video industry is being over-regulated and being
precisely to maintain unimpaired the supremacy
eased out of existence as if it were a nuisance.
of legal norms and prescriptions. The attack on
Being a relatively new industry, the need for its
the validity of the challenged provision likewise
regulation was apparent. While the underlying
insofar as there may be objections, even if valid
objective of the DECREE is to protect the
and cogent on its wisdom cannot be sustained. 18
moribund movie industry, there is no question
that public welfare is at bottom of its enactment, In fine, petitioner has not overcome the
considering "the unfair competition posed by presumption of validity which attaches to a
rampant film piracy; the erosion of the moral challenged statute. We find no clear violation of
fiber of the viewing public brought about by the the Constitution which would justify us in
availability of unclassified and unreviewed video pronouncing Presidential Decree No. 1987 as
tapes containing pornographic films and films unconstitutional and void.
with brutally violent sequences; and losses in
WHEREFORE, the instant Petition is hereby
government revenues due to the drop in
dismissed.
theatrical attendance, not to mention the fact
that the activities of video establishments are No costs.
virtually untaxed since mere payment of Mayor's
permit and municipal license fees are required to SO ORDERED.
engage in business. 17

The enactment of the Decree since April 10, 1986 DIGEST:

has not brought about the "demise" of the video
industry. On the contrary, video establishments Facts:
are seen to have proliferated in many places On September 1, 1986, Valentino Tio (Tio for
notwithstanding the 30% tax imposed. brevity), on his own behalf andpurportedly on
In the last analysis, what petitioner basically behalf of other videogram operators adversely
questions is the necessity, wisdom and affected, filed a petition assailingthe
constitutionality of Presidential Decree (P.D.) Ruling:
No. 1987 entitled “An Act Creating the
As to the first issue, the SC held that Tio’s
Videogram Regulatory Board” with broad
contention that the tax provision of the
powers to regulate and supervise the videogram
industry. The rationale behind the enactment of Decreeis a rider is bereft and devoid of merit
the aforesaid Decree may be summarized in its because the title of the Decree, which is the
eighth (8th ) whereas clause stating that grave creation of theVideogram Regulatory Board
emergencies corroding the moral values of the (VRB) aimed at regulating and controlling the
People and betraying the national economic video industry, iscomprehensive enough to
recovery program necessitate the adoption of include the purposes expressed in its Preamble
bold measures with dispatch. On October 23, and reasonably coversall its provisions.
1986, the Greater Manila Theaters Moreover, it is unnecessary to express all those
Association,Integrated Movie Producers, objectives in the title or that thelatter be an
Importers and Distributors Association of the index to the body of the decree. As to the second
Philippines, andPhilippine Motion Pictures issue, the SC held that it isaxiomatic that a tax
Producers Association were permitted by the does not cease to be valid merely because it
Supreme Court (SC) to regulates, discourages, or evendefinitely deters
the activities taxed. The legislature acts upon its
intervene in the case over Tio’s opposition
constituents in imposing a tax;thus, in general, a
upon the allegations that intervention was sufficient security against erroneous and
necessaryfor the complete protection oppressive taxation is afforded thetaxpayer.
More importantly, the tax imposed by the
of their rights and that their “survival and very
Decree is also a revenue measure. The tax of 30%
existence is
is exacted for a public purpose, i.e. to answer the
threatened by the unregu need for regulating the video
industry,particularly because of the rampant film
lated proliferation of film piracy.” piracy, the flagrant violation of intellectual
Issues: propertyrights, and the proliferation of
pornographic video tapes. As to the third issue,
(1) the SC held thatthe grant in Section 11 of the
Decree of authority to the

Whether or not Section 10 of P.D. No. 1987, VRB to “

which imposes a tax of thirty percent (30%)on solicit the direct assistance of other agencies and
the gross receipts payable to the local units of the government and deputize, for a fixed
government is a rider and the same is and limited period, the heads or personnel of
notgermane to the subject thereof;(2) such agencies and units to perform enforcement
functions for the Board” is not a delegation of
the power to legislate but merely a conferment
Whether or not the tax imposed is harsh, of authority or discretion as to its execution,
confiscatory, oppressive and/or in unlawful enforcement, and implementation.
restraint of trade in violation of the due process
of the Constitution; and (3) Whether or not there
is undue delegation of power and authority;
PEPSI-COLA BOTTLING COMPANY OF THE tax; and (4) in the assessment and collection of
PHILIPPINES, INC., plaintiff-appellant, vs. certain kinds of taxes notice and opportunity for
MUNICIPALITY OF TANAUAN, LEYTE, THE hearing are provided.
MUNICIPAL MAYOR, ET AL., defendants-
Same; Same; Delegation of powers; Delegation
appellees.
of taxing power to local governments may not be
Taxation; Delegation of Powers; Power of assailed on the ground of double taxation.—
taxation may be delegated to local governments There is no validity to the assertion that the
on matters of local concern.—The power of delegated authority can be declared
taxation x x x may be delegated to local unconstitutional on the theory of double
governments in respect of matters of local taxation. It must be observed that the delegating
concern. This is sanctioned by immoral practice. authority specifies the limitations and
By necessary implication, the legislative power to enumerates the taxes over which local taxation
create political corporations for purposes of local may not be exercised. x x x Moreover, double
self-government carries with it the power to taxation, in general, is not forbidden by our
confer on such local governmental agencies the fundamental law, since We have not adopted as
power to tax. x x x The plenary nature of the part thereof the injunction against double
taxing power thus delegated, contrary to taxation found in the Constitution of the United
plaintiff-appellant’s pretense, would not suffice States and some states of the Union. Double
to invalidate the said law as confiscatory and taxation becomes obnoxious only where the
oppressive. In delegating the authority, the State taxpayer is taxed twice for the benefit of the
is not limited to the exact meassure of that which same governmental entity or by the same
is exercised by itself. When it is said that the jurisdiction for the same purpose, but not in a
taxing power may be delegated to municipalities case where one tax is imposed by the State and
and the like, it is meant taxes there may be the other by the city of municipality.
delegated such measure of power to impose and
Taxation; A municipal ordinance which imposes a
collect taxes as the legislature may deem
tax of P0.01 for every gallon of soft drinks
expedient. Thus, municipalities may be permitted
produced in the municipality does not partake of
to tax subjects which for reasons of public policy
a percentage tax.—The imposition of “a tax of
the State has not deemed wise to tax for more
one centavo (P0.01) on each gallon (128 flued
general purposes.
ounces, U.S.) of volume capacity” on all soft
Same; Due process; Taking of property without drinks produced or manufactured under
due process of law may not be passed over under Ordinance No. 27 does not partake of the nature
the guise of taxing power, except when the latter of a percentage tax on sales, or other taxes in any
is exercised lawfully.—This is not to say though form based thereon. The tax is levied on the
that the constitutional injunction against produce (whether sold or not) and not on the
deprivation of property without due process of sales. The volume capacity of the taxpayer’s
law may be passed over under the guise of the production of soft drinks is considered solely for
taxing power, except when the taking of the purposes of determining the tax rate on the
property is in the lawful exercise of the taxing products, but there is no set ratio between the
power, as when (1) the tax is for a public purpose; volume of sales and the amount of the tax.
(2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within
the jurisdiction of the government levying the
Same; A municipal tax on soft drinks is not a municipality. Pepsi-Cola Bottling Co. of the
specific tax.—Nor can the tax levied be treated as Philippines, Inc. vs. Municipality of Tanauan,
a specific tax. Specific taxes are those imposed on Leyte, 69 SCRA 460, No. L-31156 February 27,
specified articles, such as distilled spirits, wines, x 1976
x x cigars and cigarettes, matches, x x x bunker
MARTIN, J.:
fuel oil, diesel fuel oil, cinematographic films,
playing cards, saccharine, opium and other This is an appeal from the decision of the Court
habit-forming drugs. Soft drinks is not one of of First Instance of Leyte in its Civil Case No.
those specified. 3294, which was certified to Us by the Court of
Appeals on October 6, 1969, as involving only
Same; A municipal tax of P0.01 on each gallon of
pure questions of law, challenging the power of
soft drinks produced is not unfair or
taxation delegated to municipalities under the
oppressive.—The tax of one centavo (P0.01) on
Local Autonomy Act (Republic Act No. 2264, as
each gallon (128 fluid ounces, U.S.) of volume
amended, June 19, 1959).
capacity on all soft drinks, produced or
manufactured, or an equivalent of 1½ centavos On February 14, 1963, the plaintiff-appellant,
per case, cannot be considered unjust and unfair. Pepsi-Cola Bottling Company of the Philippines,
An increase in the tax alone would not support Inc., commenced a complaint with preliminary
the claim that the tax is oppressive, unjust and injunction before the Court of First Instance of
confiscatory. Municipal corporations are allowed Leyte for that court to declare Section 2 of
much discretion in determining the rates of Republic Act No. 2264.1 otherwise known as the
imposable taxes. This is in line with the Local Autonomy Act, unconstitutional as an
constitutional policy of according the widest undue delegation of taxing authority as well as
possible autonomy to local governments in to declare Ordinances Nos. 23 and 27, series of
matters of local taxation, an aspect that is given 1962, of the municipality of Tanauan, Leyte, null
expression in the Local Tax Code (PD No. 231, July and void.
1, 1973). Unless the amount is so excessive as to
be prohibitive, courts will go slow in writing off On July 23, 1963, the parties entered into a
an ordinance as unreasonable. Stipulation of Facts, the material portions of
which state that, first, both Ordinances Nos. 23
Same; Licenses; Municipalities are empowered to and 27 embrace or cover the same subject
impose not only municipal license but just and matter and the production tax rates imposed
uniform taxes for public purposes.—The therein are practically the same, and second,
municipal license tax of P1,000.00 per corking that on January 17, 1963, the acting Municipal
machine with five but not more than ten Treasurer of Tanauan, Leyte, as per his letter
crowners x x x imposed on manufacturers, addressed to the Manager of the Pepsi-Cola
producers, importers and dealers of soft drinks Bottling Plant in said municipality, sought to
and/or mineral waters x x x appears not to affect enforce compliance by the latter of the
the resolution of the validity of Ordinance No. 27. provisions of said Ordinance No. 27, series of
Municipalities are empowered to impose, not 1962.
only municipal license taxes upon persons
engaged in any business or occupation but also Municipal Ordinance No. 23, of Tanauan, Leyte,
to levy for public purposes, just and uniform which was approved on September 25, 1962,
taxes. The ordinance in question (Ordinance No. levies and collects "from soft drinks producers
27) comes within the second power of a and manufacturers a tai of one-sixteenth (1/16)
of a centavo for every bottle of soft drink
corked." 2 For the purpose of computing the 2. — Do Ordinances Nos. 23 and 27 constitute
taxes due, the person, firm, company or double taxation and impose percentage or
corporation producing soft drinks shall submit to specific taxes?
the Municipal Treasurer a monthly report, of the
3. — Are Ordinances Nos. 23 and 27 unjust and
total number of bottles produced and corked
unfair?
during the month. 3
1. The power of taxation is an essential and
On the other hand, Municipal Ordinance No. 27,
inherent attribute of sovereignty, belonging as a
which was approved on October 28, 1962, levies
matter of right to every independent
and collects "on soft drinks produced or
government, without being expressly conferred
manufactured within the territorial jurisdiction
by the people. 6 It is a power that is purely
of this municipality a tax of ONE CENTAVO
legislative and which the central legislative body
(P0.01) on each gallon (128 fluid ounces, U.S.) of
cannot delegate either to the executive or
volume capacity." 4 For the purpose of
judicial department of the government without
computing the taxes due, the person, fun
infringing upon the theory of separation of
company, partnership, corporation or plant
powers. The exception, however, lies in the case
producing soft drinks shall submit to the
of municipal corporations, to which, said theory
Municipal Treasurer a monthly report of the
does not apply. Legislative powers may be
total number of gallons produced or
delegated to local governments in respect of
manufactured during the month. 5
matters of local concern. 7 This is sanctioned by
The tax imposed in both Ordinances Nos. 23 and immemorial practice. 8 By necessary implication,
27 is denominated as "municipal production tax.' the legislative power to create political
corporations for purposes of local self-
On October 7, 1963, the Court of First Instance
government carries with it the power to confer
of Leyte rendered judgment "dismissing the
on such local governmental agencies the power
complaint and upholding the constitutionality of
to tax. 9 Under the New Constitution, local
[Section 2, Republic Act No. 2264] declaring
governments are granted the autonomous
Ordinance Nos. 23 and 27 legal and
authority to create their own sources of revenue
constitutional; ordering the plaintiff to pay the
and to levy taxes. Section 5, Article XI provides:
taxes due under the oft the said Ordinances; and
"Each local government unit shall have the
to pay the costs."
power to create its sources of revenue and to
From this judgment, the plaintiff Pepsi-Cola levy taxes, subject to such limitations as may be
Bottling Company appealed to the Court of provided by law." Withal, it cannot be said that
Appeals, which, in turn, elevated the case to Us Section 2 of Republic Act No. 2264 emanated
pursuant to Section 31 of the Judiciary Act of from beyond the sphere of the legislative power
1948, as amended. to enact and vest in local governments the
power of local taxation.
There are three capital questions raised in this
appeal: The plenary nature of the taxing power thus
delegated, contrary to plaintiff-appellant's
1. — Is Section 2, Republic Act No. 2264 an undue pretense, would not suffice to invalidate the said
delegation of power, confiscatory and law as confiscatory and oppressive. In delegating
oppressive? the authority, the State is not limited 6 the exact
measure of that which is exercised by itself.
When it is said that the taxing power may be
delegated to municipalities and the like, it is own prerogative. Moreover, double taxation, in
meant that there may be delegated such general, is not forbidden by our fundamental
measure of power to impose and collect taxes as law, since We have not adopted as part thereof
the legislature may deem expedient. Thus, the injunction against double taxation found in
municipalities may be permitted to tax subjects the Constitution of the United States and some
which for reasons of public policy the State has states of the Union.14 Double taxation becomes
not deemed wise to tax for more general obnoxious only where the taxpayer is taxed
purposes. 10 This is not to say though that the twice for the benefit of the same governmental
constitutional injunction against deprivation of entity 15 or by the same jurisdiction for the same
property without due process of law may be purpose, 16 but not in a case where one tax is
passed over under the guise of the taxing power, imposed by the State and the other by the city or
except when the taking of the property is in the municipality. 17
lawful exercise of the taxing power, as when (1)
2. The plaintiff-appellant submits that Ordinance
the tax is for a public purpose; (2) the rule on
No. 23 and 27 constitute double taxation,
uniformity of taxation is observed; (3) either the
because these two ordinances cover the same
person or property taxed is within the
subject matter and impose practically the same
jurisdiction of the government levying the tax;
tax rate. The thesis proceeds from its assumption
and (4) in the assessment and collection of
that both ordinances are valid and legally
certain kinds of taxes notice and opportunity for
enforceable. This is not so. As earlier quoted,
hearing are provided. 11 Due process is usually
Ordinance No. 23, which was approved on
violated where the tax imposed is for a private as
September 25, 1962, levies or collects from soft
distinguished from a public purpose; a tax is
drinks producers or manufacturers a tax of one-
imposed on property outside the State, i.e.,
sixteen (1/16) of a centavo for .every bottle
extraterritorial taxation; and arbitrary or
corked, irrespective of the volume contents of
oppressive methods are used in assessing and
the bottle used. When it was discovered that the
collecting taxes. But, a tax does not violate the
producer or manufacturer could increase the
due process clause, as applied to a particular
volume contents of the bottle and still pay the
taxpayer, although the purpose of the tax will
same tax rate, the Municipality of Tanauan
result in an injury rather than a benefit to such
enacted Ordinance No. 27, approved on October
taxpayer. Due process does not require that the
28, 1962, imposing a tax of one centavo (P0.01)
property subject to the tax or the amount of tax
on each gallon (128 fluid ounces, U.S.) of volume
to be raised should be determined by judicial
capacity. The difference between the two
inquiry, and a notice and hearing as to the
ordinances clearly lies in the tax rate of the soft
amount of the tax and the manner in which it
drinks produced: in Ordinance No. 23, it was
shall be apportioned are generally not necessary
1/16 of a centavo for every bottle corked; in
to due process of law. 12
Ordinance No. 27, it is one centavo (P0.01) on
There is no validity to the assertion that the each gallon (128 fluid ounces, U.S.) of volume
delegated authority can be declared capacity. The intention of the Municipal Council
unconstitutional on the theory of double of Tanauan in enacting Ordinance No. 27 is thus
taxation. It must be observed that the delegating clear: it was intended as a plain substitute for the
authority specifies the limitations and prior Ordinance No. 23, and operates as a repeal
enumerates the taxes over which local taxation of the latter, even without words to that
may not be exercised. 13 The reason is that the effect. 18 Plaintiff-appellant in its brief admitted
State has exclusively reserved the same for its that defendants-appellees are only seeking to
enforce Ordinance No. 27, series of 1962. Even of a percentage tax on sales, or other taxes in any
the stipulation of facts confirms the fact that the form based thereon. The tax is levied on the
Acting Municipal Treasurer of Tanauan, Leyte produce (whether sold or not) and not on the
sought t6 compel compliance by the plaintiff- sales. The volume capacity of the taxpayer's
appellant of the provisions of said Ordinance No. production of soft drinks is considered solely for
27, series of 1962. The aforementioned purposes of determining the tax rate on the
admission shows that only Ordinance No. 27, products, but there is not set ratio between the
series of 1962 is being enforced by defendants- volume of sales and the amount of the tax.21
appellees. Even the Provincial Fiscal, counsel for
Nor can the tax levied be treated as a specific tax.
defendants-appellees admits in his brief "that
Specific taxes are those imposed on specified
Section 7 of Ordinance No. 27, series of 1962
articles, such as distilled spirits, wines,
clearly repeals Ordinance No. 23 as the
fermented liquors, products of tobacco other
provisions of the latter are inconsistent with the
than cigars and cigarettes, matches firecrackers,
provisions of the former."
manufactured oils and other fuels, coal, bunker
That brings Us to the question of whether the fuel oil, diesel fuel oil, cinematographic films,
remaining Ordinance No. 27 imposes a playing cards, saccharine, opium and other
percentage or a specific tax. Undoubtedly, the habit-forming drugs. 22 Soft drink is not one of
taxing authority conferred on local governments those specified.
under Section 2, Republic Act No. 2264, is broad
3. The tax of one (P0.01) on each gallon (128 fluid
enough as to extend to almost "everything,
ounces, U.S.) of volume capacity on all
accepting those which are mentioned therein."
softdrinks, produced or manufactured, or an
As long as the text levied under the authority of
equivalent of 1-½ centavos per case, 23 cannot be
a city or municipal ordinance is not within the
considered unjust and unfair. 24 an increase in
exceptions and limitations in the law, the same
the tax alone would not support the claim that
comes within the ambit of the general rule,
the tax is oppressive, unjust and confiscatory.
pursuant to the rules of exclucion
Municipal corporations are allowed much
attehus and exceptio firmat regulum in cabisus
discretion in determining the reates of
non excepti 19 The limitation applies, particularly,
imposable taxes. 25 This is in line with the
to the prohibition against municipalities and
constutional policy of according the widest
municipal districts to impose "any percentage
possible autonomy to local governments in
tax or other taxes in any form based thereon nor
matters of local taxation, an aspect that is given
impose taxes on articles subject to specific
expression in the Local Tax Code (PD No. 231,
tax except gasoline, under the provisions of the
July 1, 1973). 26 Unless the amount is so
National Internal Revenue Code." For purposes
excessive as to be prohibitive, courts will go slow
of this particular limitation, a municipal
in writing off an ordinance as unreasonable. 27
ordinance which prescribes a set ratio between
Reluctance should not deter compliance with an
the amount of the tax and the volume of sale of
ordinance such as Ordinance No. 27 if the
the taxpayer imposes a sales tax and is null and
purpose of the law to further strengthen local
void for being outside the power of the
autonomy were to be realized. 28
municipality to enact. 20 But, the imposition of "a
tax of one centavo (P0.01) on each gallon (128 Finally, the municipal license tax of P1,000.00
fluid ounces, U.S.) of volume capacity" on all soft per corking machine with five but not more than
drinks produced or manufactured under ten crowners or P2,000.00 with ten but not more
Ordinance No. 27 does not partake of the nature than twenty crowners imposed on
manufacturers, producers, importers and
dealers of soft drinks and/or mineral waters
Ordinances No. 23 and 27 cover the same subject
under Ordinance No. 54, series of 1964, as
matterand the imposed production tax are the
amended by Ordinance No. 41, series of 1968, of
same. b.
defendant Municipality, 29 appears not to affect
the resolution of the validity of Ordinance No.
27. Municipalities are empowered to impose,
not only municipal license taxes upon persons The Municipal Treasurer is seeking to
engaged in any business or occupation but also enforcecompliance by Pepsi of Ordinance No. 27
to levy for public purposes, just and uniform alone3.
taxes. The ordinance in question (Ordinance No.
27) comes within the second power of a
municipality. Ordinance No. 23 -

ACCORDINGLY, the constitutionality of Section 2 levies and collects from soft drinks producers
of Republic Act No. 2264, otherwise known as and manufacturers at tax of 1/16 of a
the Local Autonomy Act, as amended, is hereby centavo forevery bottle of soft drink corked.
upheld and Municipal Ordinance No. 27 of the
Municipality of Tanauan, Leyte, series of 1962,
re-pealing Municipal Ordinance No. 23, same 4.
series, is hereby declared of valid and legal
effect. Costs against petitioner-appellant.
Ordinance No. 27

–
DIGEST:

Pepsi-Cola Bottling Co. of the Philippines Inc. vs.

Municipality ofTanauan, Leyte levies and collects “on soft drinks

Martin, J.: produced or manufactured within the territorial

jurisdiction ofthe municipality a tax of 1 centavo
Facts:
on each gallon of volumecapacity.
1.

5.
Pepsi filed a complaint before the CFI to declare
SEC 2 of RA No. 2264 (Local Autonomy Act)
as unconstitutional and as anundue delegation Tax imposed on both Ordinances No. 23 and 27
of taxing authority. Pepsi also sought tohave is
Ordinances 23 and 27 by the Municipality of
denominated as “municipal production tax”
Tanauan be declared as null and void2.

6.
In a Stipulation of Facts entered into by the
parties:a.
CFI dismissed the complaint and upheld the gov’t carries with it the power to confer on such
constitutionalityof the 2 ordinances. local

Issue/s: governmental agencies the power to tax.The

plenary (unlimited) nature of the taxing power
a.
thusdelegated would not suffice to invalidate the
said law asconfiscatory and oppressive. In
delegating the authority, the Stateis not limited
Is Sec 2, RA 2264 an undue delegation of power, to the exact measure of that which is exercised
confiscatoryand oppressive? b. byitself. When it is said that the taxing power
may be delegated tomunicipalities and the like,
it is meant that there may bedelegated such
Do ordinances nos. 23 and 27 constitute double measure of power to impose and collect taxes
taxation andimpose percentage or specific asthe legislature may deem expedient. Thus
taxes?c. municipalities may be permitted to tax subjects
which for reasons of public policy thestate has
not deemed wise to tax for more general
Are ordinances nos. 23 unjust and unfair? purposes.
Ruling: There is no validity to the assertion that the
delegated authoritycan be declared
1.
unconstitutional on the theory of doubletaxation.

It must be observed that the delegating

The power of taxation is an essential and authorityspecifies the limitations and
inherent attribute of enumerates the taxes over whichlocal taxation
may not be exercised. Moreover,
sovereignty, belonging as a matter of right to
every gov’t without double taxation,in general, is not forbidden by
our fundamental law
being expressly conferred by the people. It
is purely legislativeand which the central , since wehave not adopted as part of our
legislative body cannot delegate wither tothe fundamental law the injunction….
executiv

e of judicial department of the gov’t without

DIGEST 2:
infringing upon the theory of separation
"Legislative power to create political
of powers.
corporations for purposes of local self-
Legislative government carries with it the power to confer
powers may be delegated to local governments i on such local governmental agencies the power
nrespect of matters of local concern to tax.
. This is sanctioned byimmemorial practice. By
necessary implication, the legislative power to
FACTS: Plaintiff-appellant Pepsi-Cola
create political corporations for purposes of local
commenced a complaint with preliminary
self-
injunction to declare Section 2 of Republic Act
No. 2264, otherwise known as the Local Also, there is no validity to the assertion that
Autonomy Act, unconstitutional as an undue the delegated authority can be declared
delegation of taxing authority as well as to unconstitutional on the theory of double
declare Ordinances Nos. 23 and 27 denominated taxation. It must be observed that the delegating
as "municipal production tax" of the Municipality authority specifies the limitations and
of Tanauan, Leyte, null and void. Ordinance 23 enumerates the taxes over which local taxation
levies and collects from soft drinks producers may not be exercised. The reason is that the
and manufacturers a tax of one-sixteenth (1/16) State has exclusively reserved the same for its
of a centavo for every bottle of soft drink corked, own prerogative. Moreover, double taxation, in
and Ordinance 27 levies and collects on soft general, is not forbidden by our fundamental
drinks produced or manufactured within the law, so that double taxation becomes obnoxious
territorial jurisdiction of this municipality a tax of only where the taxpayer is taxed twice for the
ONE CENTAVO (P0.01) on each gallon (128 fluid benefit of the same governmental entity or by
ounces, U.S.) of volume capacity. Aside from the the same jurisdiction for the same purpose, but
undue delegation of authority, appellant not in a case where one tax is imposed by the
contends that it allows double taxation, and that State and the other by the city or municipality.
the subject ordinances are void for they impose On the last issue raised, the ordinances do not
percentage or specific tax. partake of the nature of a percentage tax on
sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or
ISSUE: Are the contentions of the appellant not) and not on the sales. The volume capacity of
tenable? the taxpayer's production of soft drinks is
considered solely for purposes of determining
the tax rate on the products, but there is not set
HELD: No. On the issue of undue delegation of ratio between the volume of sales and the
taxing power, it is settled that the power of amount of the tax.
taxation is an essential and inherent attribute of
sovereignty, belonging as a matter of right to
every independent government, without being
expressly conferred by the people. It is a power
that is purely legislative and which the central
legislative body cannot delegate either to the
executive or judicial department of the
government without infringing upon the theory
of separation of powers. The exception,
however, lies in the case of municipal
corporations, to which, said theory does not
apply. Legislative powers may be delegated to
local governments in respect of matters of local
concern. By necessary implication, the legislative
power to create political corporations for
purposes of local self-government carries with it
the power to confer on such local governmental
agencies the power to tax.
ASSOCIATION OF SMALL LANDOWNERS IN THE unavoidably necessary to the decision of the case
PHILIP-PINES, INC., JUANITO D. GOMEZ, itself.
GERARDO B. ALARCIO, FELIPE A. GUICO, JR.,
Same; Agrarian Law; Powers of the President;
BERNARDO M. ALMONTE, CANUTO RAMIR B.
Power of President Aquino to promulgate
CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO,
Proclamation No. 131 and E.O. Nos. 228 and 229,
FAUSTO J. SALVA, REYNALDO G. ESTRADA,
the same authorized under Section 6 of the
FELISA C. BAUTISTA, ESMENIA J. CABE,
Transitory Provisions of the 1987 Constitution.—
TEODORO B. MADRIAGA, AUREA J. PRESTOSA,
The promulgation of P.D. No. 27 by President
EMERENCIANA J. ISLA, FELICISIMA C. APRESTO,
Marcos in the exercise of his powers under
CONSUELO M. MORALES, BENJAMIN R.
martial law has already been sustained in
SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
Gonzales v. Estrella and we find no reason to
FERRER, petitioners, vs. HONORABLE
modify or reverse it on that issue. As for the
SECRETARY OF AGRARIAN REFORM,
power of President Aquino to promulgate Proc.
respondent.
No. 131 and E.O Nos. 228 and 229, the same was
G.R. No. 79310. July 14, 1989.* authorized under Section 6 of the Transitory
Provisions of the 1987 Constitution, quoted
above.
ARSENIO AL. ACUÑA, NEWTON JISON,
Same; Same; Pres. Aquino’s loss of legislative
VICTORINO FER-RARIS, DENNIS JEREZA,
powers did not have the effect of invalidating all
HERMINIGILDO GUSTILO, PAULINO D.
the measures enacted by her when she possessed
TOLENTINO and PLANTERS’ COMMITTEE, INC.,
it; Reasons.—The said measures were issued by
Victorias Mill District, Victorias, Negros
President Aquino before July 27, 1987, when the
Occidental, petitioners, vs. JOKER ARROYO,
Congress of the Philippines was formally
PHILIP E. JUICO and PRESIDENTIAL AGRARIAN
convened and took over legislative power from
REFORM COUNCIL, respondents.
her. They are not “midnight” enactments
Constitutional Law; Elements of judicial intended to pre-empt the legislature because
inquiry.—In addition, the Constitution itself lays E.O. No. 228 was issued on July 17, 1987, and the
down stringent conditions for a declaration of other measures, i.e., Proc. No. 131 and E.O. No.
unconstitutionality, requiring therefor the 229, were both issued on July 22, 1987. Neither is
concurrence of a majority of the members of the it correct to say that these measures ceased to be
Supreme Court who took part in the deliberations valid when she lost her legislative power for, like
and voted on the issue during their session en any statute, they continue to be in force unless
banc. And as established by judge-made modified or repealed by subsequent law or
doctrine, the Court will assume jurisdiction over declared invalid by the courts. A statute does not
a constitutional question only if it is shown that ipso facto become inoperative simply because of
the essential requisites of a judicial inquiry into the dissolution of the legislature that enacted it.
such a question are first satisfied. Thus, there By the same token, President Aquino’s loss of
must be an actual case or controversy involving a legislative power did not have the effect of
conflict of legal rights susceptible of judicial invalidating all the measures enacted by her
determination, the constitutional question must when and as long as she possessed it.
have been opportunely raised by the proper
Same; Same; Same; Appropriation Law, defined;
party, and the resolution of the question is
Proc. No. 131 is not an appropriation measure;
Reasons.—That fund, as earlier noted, is itself
being questioned on the ground that it does not approval of this Act shall retain the same areas
conform to the requirements of a valid as long as they continue to cultivate said
appropriation as specified in the Constitution. homestead.
Clearly, however, Proc. No. 131 is not an
Same; Same; Same; Rule that the title of the bill
appropriation measure even if it does provide for
does not have to be a catalogue of its contents.—
the creation of said fund, for that is not its
The argument that E.O. No. 229 violates the
principal purpose. An appropriation law is one
constitutional requirement that a bill shall have
the primary and specific purpose of which is to
only one subject, to be expressed in its title,
authorize the release of public funds from the
deserves only short attention. It is settled that
treasury. The creation of the fund is only
the title of the bill does not have to be a
incidental to the main objective of the
catalogue of its contents and will suffice if the
proclamation, which is agrarian reform.
matters embodied in the text are relevant to
Same; Same; Same; Section 6 of Comprehensive each other and may be inferred from the title.
Agrarian Reform Program of 1988 (R.A. No.
Same; Same; Same; Mandamus; Rule that
6657) provides for retention limits.—The
mandamus can issue to require action only but
argument of some of the petitioners that Proc.
not specific action.—Finally, there is the
No. 131 and E.O. No. 229 should be invalidated
contention of the public respondent in G.R. No.
because they do not provide for retention limits
78742 that the writ of mandamus cannot issue to
as required by Article XIII, Section 4, of the
compel the performance of a discretionary act,
Constitution is no longer tenable. R.A. No. 6657
especially by a specific department of the
does provide for such limits now in Section 6 of
government. That is true as a general proposition
the law, which in fact is one of its most
but is subject to one important qualification.
controversial provisions. This section declares:
Correctly and categorically stated, the rule is that
Retention Limits.—Except as otherwise provided
mandamus will lie to compel the dischrage of the
in this Act, no person may own or retain, directly
discretionary duty itself but not to control the
or indirectly, any public or private agricultural
discretion to be exercised. In other words,
land, the size of which shall vary according to
mandamus can issue to require action only but
factors governing a viable family-sized farm,
not specific action. Whenever a duty is imposed
such as commodity produced, terrain,
upon a public official and an unnecessary and
infrastructure, and soil fertility as determined by
unreasonable delay in the exercise of such duty
the Presidential Agrarian Reform Council (PARC)
occurs, if it is a clear duty imposed by law, the
created hereunder, but in no case shall retention
courts will intervene by the extraordinary legal
by the landowner exceed five (5) hectares. Three
remedy of mandamus to compel action. If the
(3) hectares may be awarded to each child of the
duty is purely ministerial, the courts will require
landowner, subject to the following
specific action. If the duty is purely discretionary,
qualifications: (1) that he is at least fifteen (15)
the courts by mandamus will require action only.
years of age; and (2) that he is actually tilling the
For example, if an inferior court, public official, or
land or directly managing the farm; Provided,
board should, for an unreasonable length of
That landowners whose lands have been covered
time, fail to decide a particular question to the
by Presidential Decree No. 27 shall be allowed to
great detriment of all parties concerned, or a
keep the area originally retained by them
court should refuse to take jurisdiction of a cause
thereunder, further, That original homestead
when the law clearly gave it jurisdiction,
grantees or direct compulsory heirs who still own
mandamus will issue, in the first case to require
the original homestead at the time of the
a decision, and in the second to require that mere limitation of the use of the land. What is
jurisdiction be taken of the cause. required is the surrender of the title to and the
physical possession of the said excess and all
Same; Same; Same; Eminent Domain; Police
beneficial rights accruing to the owner in favor of
Power; Property condemned under Police Power
the farmer-beneficiary. This is definitely an
is noxious or intended for a noxious purpose is
exercise not of the police power but of the power
not compensable.—There are traditional
of eminent domain.
distinctions between the police power and the
power of eminent domain that logically preclude
the application of both powers at the same time
Same; Same; Same; Equal Protection of the Law;
on the same subject. In the case of City of Baguio
Classification defined; Requisites of a valid
v. NAWASA, for example, where a law required
classification.—Classification has been defined
the transfer of all municipal waterworks systems
as the grouping of persons or things similar to
to the NAWASA in exchange for its assets of
each other in certain particulars and different
equivalent value, the Court held that the power
from each other in these same particulars. To be
being exercised was eminent domain because
valid, it must conform to the following
the property involved was wholesome and
requirements: (1) it must be based on substantial
intended for a public use. Property condemned
distinctions; (2) it must be germane to the
under the police power is noxious or intended for
purposes of the law; (3) it must not be limited to
a noxious purpose, such as a building on the
existing conditions only; and (4) it must apply
verge of collapse, which should be demolished for
equally to all the members of the class. The Court
the public safety, or obscene materials, which
finds that all these requisites have been met by
should be destroyed in the interest of public
the measures here challenged as arbitrary and
morals. The confiscation of such property is not
discriminatory.
compensable, unlike the taking of property under
the power of expropriation, which requires the Same; Same; Same; Same; Definition of Equal
payment of just compensation to the owner. Protection.—Equal protection simply means that
all persons or things similarly situated must be
Same; Same; Same; Same; Cases at bar: The
treated alike both as to the rights conferred and
extent, retention limits, police power,
the liabilities imposed. The petitioners have not
deprivation, excess of the maximum area under
shown that they belong to a different class and
power of eminent domain.—The cases before us
entitled to a different treatment. The argument
present no knotty complication insofar as the
that not only landowners but also owners of
question of compensable taking is concerned. To
other properties must be made to share the
the extent that the measures under challenge
burden of implementing land reform must be
merely prescribe retention limits for landowners,
rejected. There is a substantial distinction
there is an exercise of the police power for the
between these two classes of owners that is
regulation of private property in accordance with
clearly visible except to those who will not see.
the Constitution. But where, to carry out such
There is no need to elaborate on this matter. In
regulation, it becomes necessary to deprive such
any event, the Congress is allowed a wide leeway
owners of whatever lands they may own in
in providing for a valid classification. Its decision
excess of the maximum area allowed, there is
is accorded recognition and respect by the courts
definitely a taking under the power of eminent
of justice except only where its discretion is
domain for which payment of just compensation
abused to the detriment of the Bill of Rights.
is imperative. The taking contemplated is not a
Same; Same; Same; Same; Statutes; A statute no power is absolute). The limitation is found in
may be sustained under the police power only if the constitutional injunction that “private
there is a concurrence of the lawful subject and property shall not be taken for public use without
method.—It is worth remarking at this juncture just compensation” and in the abundant
that a statute may be sustained under the police jurisprudence that has evolved from the
power only if there is a concurrence of the lawful interpretation of this principle. Basically, the
subject and the lawful method. Put otherwise, requirements for a proper exercise of the power
the interests of the public generally as are: (1) public use and (2) just compensation.
distinguished from those of a particular class
Same; Same; Same; Same; Concept of political
require the interference of the State and, no less
question.—A becoming courtesy admonishes us
important, the means employed are reasonably
to respect the decisions of the political
necessary for the attainment of the purpose
departments when they decide what is known as
sought to be achieved and not unduly oppressive
the political question. As explained by Chief
upon individuals. As the subject and purpose of
Justice Concepcion in the case of Tañada v.
agrarian reform have been laid down by the
Cuenco: The term “political question” connotes
Constitution itself, we may say that the first
what it means in ordinary parlance, namely, a
requirement has been satisfied. What remains to
question of policy. It refers to “those questions
be examined is the validity of the method
which, under the Constitution, are to be decided
employed to achieve the Constitutional goal.
by the people in their sovereign capacity; or in
regard to which full discretionary authority has
been delegated to the legislative or executive
Same; Same; Same; Same; Eminent Domain,
branch of the government.” It is concerned with
defined.—Eminent domain is an inherent power
issues dependent upon the wisdom, not legality,
of the State that enables it to forcibly acquire
of a particular measure.
private lands intended for public use upon
payment of just compensation to the owner. Same; Same; Same; Same; Just Compensation,
Obviously, there is no need to expropriate where defined.—Just compensation is defined as the full
the owner is willing to sell under terms also and fair equivalent of the property taken from its
acceptable to the purchaser, in which case an owner by the expropriator. It has been
ordinary deed of sale may be agreed upon by the repeatedly stressed by this Court that the
parties. It is only where the owner is unwilling to measure is not the taker’s gain but the owner’s
sell, or cannot accept the price or other loss. The word “just” is used to intensify the
conditions offered by the vendee, that the power meaning of the word “compensation” to convey
of eminent domain will come into play to assert the idea that the equivalent to be rendered for
the paramount authority of the State over the the property to be taken shall be real,
interests of the property owner. Private rights substantial, full, ample.
must then yield to the irresistible demands of the
public interest on the time-honored justification,
as in the case of the police power, that the Same; Same; Same; Same; Requirements of
welfare of the people is the supreme law. compensable taking.—As held in Republic of the
Philippines v. Castellvi, there is compensable
Same; Same; Same; Same; Requirements for a
taking when the following conditions concur: (1)
proper exercise of power of eminent domain.—
the expropriator must enter a private property;
But for all its primacy and urgency, the power of
(2) the entry must be for more than a momentary
expropriation is by no means absolute (as indeed
period; (3) the entry must be under warrant or farmer’s hopes even as they approach realization
color of legal authority; (4) the property must be and resurrecting the spectre of discontent and
devoted to public use or otherwise informally dissent in the restless countryside. That is not in
appropriated or injuriously affected; and (5) the our view the intention of the Constitution, and
utilization of the property for public use must be that is not what we shall decree today.
in such a way as to oust the owner and deprive
Same; Same; Same; Same; Theory that payment
him of beneficial enjoyment of the property. All
of the just compensation is not always required
these requisites are envisioned in the measures
to be made fully in money; Other modes of
before us.
payment.—Accepting the theory that payment of
Same; Same; Same; Same; Determination of Just the just compensation is not always required to
Compensation, addressed to the courts of justice be made fully in money, we find further that the
and may not be usurped by any other branch.— proportion of cash payment to the other things
To be sure, the determination of just of value constituting the total payment, as
compensation is a function addressed to the determined on the basis of the areas of the lands
courts of justice and may not be usurped by any expropriated, is not unduly oppressive upon the
other branch or official of the government. EPZA landowner. It is noted that the smaller the land,
v. Dulay resolved a challenge to several decrees the bigger the payment in money, primarily
promulgated by President Marcos providing that because the small landwoner will be needing it
the just compensation for property under more than the big landowners, who can afford a
expropriation should be either the assessment of bigger balance in bonds and other things of
the property by the government or the sworn value. No less importantly, the government
valuation thereof by the owner, whichever was financial instruments making up the balance of
lower. the payment are “negotiable at any time.” The
other modes, which are likewise available to the
Same; Same; Same; Same; The Court declares
landowner at his option, are also not
that the content and manner of the just
unreasonable because payment is made in
compensation provided for in the CARP Law is not
shares of stock, LBP bonds, other properties or
violative of the Constitution.—With these
assets, tax credits, and other things of value
assumptions, the Court hereby declares that the
equivalent to the amount of just compensation.
content and manner of the just compensation
provided for in the afore-quoted Section 18 of the Same; Same; Same; Same; CARP Law repeats the
CARP Law is not violative of the Constitution. We requisites of registration but does not provide
do not mind admitting that a certain degree of that in case of failure or refusal to register the
pragmatism has influenced our decision on this land, the valuation thereof shall be that given by
issue, but after all this Court is not a cloistered the provincial or city assessor for tax purposes.—
institution removed from the realities and The complaint against the effects of non-
demands of society or oblivious to the need for its registration of the land under E.O. No. 229 does
enhancement. The Court is as acutely anxious as not seem to be viable any more as it appears that
the rest of our people to see the goal of agrarian Setion 4 of the Order has been superseded by
reform achieved at last after the frustrations and Section 14 of the CARP Law. This repeats the
deprivations of our peasant masses during all requisites of registration as embodied in the
these disappointing decades. We are aware that earlier measure but does not provide, as the
invalidation of the said section will result in the latter did, that in case of failure or refusal to
nullification of the entire program, killing the register the land, the valuation thereof shall be
that given by the provincial or city assessor for ASSOCIATION OF SMALL LANDOWNERS IN THE
tax purposes. On the contrary, the CARP Law says PHILIPPINES, INC., JUANITO D. GOMEZ,
that the just compensation shall be ascertained GERARDO B. ALARCIO, FELIPE A. GUICO, JR.,
on the basis of the factors mentioned in its BERNARDO M. ALMONTE, CANUTO RAMIR B.
Section 17 and in the manner provided for in CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO,
Section 16. FAUSTO J. SALVA, REYNALDO G. ESTRADA,
FELISA C. BAUTISTA, ESMENIA J. CABE,
Same; Same; Same; Same; Recognized rule that
TEODORO B. MADRIAGA, AUREA J. PRESTOSA,
title to the property expropriated shall pass from
EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO,
the owner to the expropriator only upon full
CONSUELO M. MORALES, BENJAMIN R.
payment of the just compensation.—The
SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
recognized rule, indeed, is that title to the
FERRER, petitioners,
property expropriated shall pass from the owner
vs.
to the expropriator only upon full payment of the
HONORABLE SECRETARY OF AGRARIAN
just compensation. Jurisprudence on this settled
REFORM, respondent.
principle is consistent both here and in other
democratic jurisdictions. G.R. No. 79310 July 14, 1989

Same; Same; Same; Same; CARP Law (R.A. 6657) ARSENIO AL. ACUNA, NEWTON JISON,
is more liberal than those granted by P.D. No. 27 VICTORINO FERRARIS, DENNIS JEREZA,
as to retention limits; Case at bar.—In connection HERMINIGILDO GUSTILO, PAULINO D.
with these retained rights, it does not appear in TOLENTINO and PLANTERS' COMMITTEE, INC.,
G.R. No. 78742 that the appeal filed by the Victorias Mill District, Victorias, Negros
petitioners with the Office of the President has Occidental, petitioners,
already been resolved. Although we have said vs.
that the doctrine of exhaustion of administrative JOKER ARROYO, PHILIP E. JUICO and
remedies need not preclude immediate resort to PRESIDENTIAL AGRARIAN REFORM
judicial action, there are factual issues that have COUNCIL, respondents.
yet to be examined on the administrative level,
G.R. No. 79744 July 14, 1989
especially the claim that the petitioners are not
covered by LOI 474 because they do not own INOCENTES PABICO, petitioner,
other agricultural lands than the subjects of their vs.
petition. Obviously, the Court cannot resolve HON. PHILIP E. JUICO, SECRETARY OF THE
these issues. In any event, assuming that the DEPARTMENT OF AGRARIAN REFORM, HON.
petitioners have not yet exercised their retention JOKER ARROYO, EXECUTIVE SECRETARY OF THE
rights, if any, under P.D. No. 27, the Court holds OFFICE OF THE PRESIDENT, and Messrs.
that they are entitled to the new retention rights SALVADOR TALENTO, JAIME ABOGADO,
provided for by R.A. No. 6657, which in fact are CONRADO AVANCENA and ROBERTO
on the whole more liberal than those granted by TAAY, respondents.
the decree. Association of Small Landowners in
the Philippines, Inc. vs. Secretary of Agrarian G.R. No. 79777 July 14, 1989
Reform, 175 SCRA 343, G.R. No. 78742, G.R. No. NICOLAS S. MANAAY and AGUSTIN HERMANO,
79310, G.R. No. 79744, G.R. No. 79777 July 14, JR., petitioners,
1989 vs.
G.R. No. 78742 July 14, 1989 HON. PHILIP ELLA JUICO, as Secretary of
Agrarian Reform, and LAND BANK OF THE specifically that "the State shall regulate the
PHILIPPINES, respondents. acquisition, ownership, use, enjoyment and
disposition of private property and equitably
diffuse property ownership and
2
CRUZ, J.: profits." Significantly, there was also the
specific injunction to "formulate and implement
In ancient mythology, Antaeus was a terrible an agrarian reform program aimed at
giant who blocked and challenged Hercules for emancipating the tenant from the bondage of
his life on his way to Mycenae after performing the soil." 3
his eleventh labor. The two wrestled mightily
and Hercules flung his adversary to the ground The Constitution of 1987 was not to be outdone.
thinking him dead, but Antaeus rose even Besides echoing these sentiments, it also
stronger to resume their struggle. This happened adopted one whole and separate Article XIII on
several times to Hercules' increasing Social Justice and Human Rights, containing
amazement. Finally, as they continued grappling, grandiose but undoubtedly sincere provisions for
it dawned on Hercules that Antaeus was the son the uplift of the common people. These include
of Gaea and could never die as long as any part a call in the following words for the adoption by
of his body was touching his Mother Earth. Thus the State of an agrarian reform program:
forewarned, Hercules then held Antaeus up in
SEC. 4. The State shall, by law, undertake an
the air, beyond the reach of the sustaining soil,
agrarian reform program founded on the right of
and crushed him to death.
farmers and regular farmworkers, who are
Mother Earth. The sustaining soil. The giver of landless, to own directly or collectively the lands
life, without whose invigorating touch even the they till or, in the case of other farmworkers, to
powerful Antaeus weakened and died. receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake
The cases before us are not as fanciful as the the just distribution of all agricultural lands,
foregoing tale. But they also tell of the elemental subject to such priorities and reasonable
forces of life and death, of men and women who, retention limits as the Congress may prescribe,
like Antaeus need the sustaining strength of the taking into account ecological, developmental,
precious earth to stay alive. or equity considerations and subject to the
"Land for the Landless" is a slogan that payment of just compensation. In determining
underscores the acute imbalance in the retention limits, the State shall respect the right
distribution of this precious resource among our of small landowners. The State shall further
people. But it is more than a slogan. Through the provide incentives for voluntary land-sharing.
brooding centuries, it has become a battle-cry Earlier, in fact, R.A. No. 3844, otherwise known
dramatizing the increasingly urgent demand of as the Agricultural Land Reform Code, had
the dispossessed among us for a plot of earth as already been enacted by the Congress of the
their place in the sun. Philippines on August 8, 1963, in line with the
Recognizing this need, the Constitution in 1935 above-stated principles. This was substantially
mandated the policy of social justice to "insure superseded almost a decade later by P.D. No. 27,
the well-being and economic security of all the which was promulgated on October 21, 1972,
people," 1 especially the less privileged. In 1973, along with martial law, to provide for the
the new Constitution affirmed this goal adding compulsory acquisition of private lands for
distribution among tenant-farmers and to
specify maximum retention limits for The subjects of this petition are a 9-hectare
landowners. riceland worked by four tenants and owned by
petitioner Nicolas Manaay and his wife and a 5-
The people power revolution of 1986 did not
hectare riceland worked by four tenants and
change and indeed even energized the thrust for
owned by petitioner Augustin Hermano, Jr. The
agrarian reform. Thus, on July 17, 1987,
tenants were declared full owners of these lands
President Corazon C. Aquino issued E.O. No. 228,
by E.O. No. 228 as qualified farmers under P.D.
declaring full land ownership in favor of the
No. 27.
beneficiaries of P.D. No. 27 and providing for the
valuation of still unvalued lands covered by the The petitioners are questioning P.D. No. 27 and
decree as well as the manner of their payment. E.O. Nos. 228 and 229 on grounds inter alia of
This was followed on July 22, 1987 by separation of powers, due process, equal
Presidential Proclamation No. 131, instituting a protection and the constitutional limitation that
comprehensive agrarian reform program (CARP), no private property shall be taken for public use
and E.O. No. 229, providing the mechanics for its without just compensation.
implementation.
They contend that President Aquino usurped
Subsequently, with its formal organization, the legislative power when she promulgated E.O.
revived Congress of the Philippines took over No. 228. The said measure is invalid also for
legislative power from the President and started violation of Article XIII, Section 4, of the
its own deliberations, including extensive public Constitution, for failure to provide for retention
hearings, on the improvement of the interests of limits for small landowners. Moreover, it does
farmers. The result, after almost a year of not conform to Article VI, Section 25(4) and the
spirited debate, was the enactment of R.A. No. other requisites of a valid appropriation.
6657, otherwise known as the Comprehensive
In connection with the determination of just
Agrarian Reform Law of 1988, which President
compensation, the petitioners argue that the
Aquino signed on June 10, 1988. This law, while
same may be made only by a court of justice and
considerably changing the earlier mentioned
not by the President of the Philippines. They
enactments, nevertheless gives them suppletory
invoke the recent cases of EPZA v.
effect insofar as they are not inconsistent with its
Dulay 5 andManotok v. National Food
provisions. 4 6
Authority. Moreover, the just compensation
The above-captioned cases have been contemplated by the Bill of Rights is payable in
consolidated because they involve common legal money or in cash and not in the form of bonds or
questions, including serious challenges to the other things of value.
constitutionality of the several measures
In considering the rentals as advance payment
mentioned above. They will be the subject of one
on the land, the executive order also deprives
common discussion and resolution, The different
the petitioners of their property rights as
antecedents of each case will require separate
protected by due process. The equal protection
treatment, however, and will first be explained
clause is also violated because the order places
hereunder.
the burden of solving the agrarian problems on
G.R. No. 79777 the owners only of agricultural lands. No similar
obligation is imposed on the owners of other
Squarely raised in this petition is the
properties.
constitutionality of P.D. No. 27, E.O. Nos. 228
and 229, and R.A. No. 6657.
The petitioners also maintain that in declaring Nevertheless, this statute should itself also be
the beneficiaries under P.D. No. 27 to be the declared unconstitutional because it suffers
owners of the lands occupied by them, E.O. No. from substantially the same infirmities as the
228 ignored judicial prerogatives and so violated earlier measures.
due process. Worse, the measure would not
A petition for intervention was filed with leave of
solve the agrarian problem because even the
court on June 1, 1988 by Vicente Cruz, owner of
small farmers are deprived of their lands and the
a 1. 83- hectare land, who complained that the
retention rights guaranteed by the Constitution.
DAR was insisting on the implementation of P.D.
In his Comment, the Solicitor General stresses No. 27 and E.O. No. 228 despite a compromise
that P.D. No. 27 has already been upheld in the agreement he had reached with his tenant on
earlier cases ofChavez v. Zobel, 7 Gonzales v. the payment of rentals. In a subsequent motion
Estrella, 8 and Association of Rice and Corn dated April 10, 1989, he adopted the allegations
Producers of the Philippines, Inc. v. The National in the basic amended petition that the above-
Land Reform Council. 9 The determination of just mentioned enactments have been impliedly
compensation by the executive authorities repealed by R.A. No. 6657.
conformably to the formula prescribed under
G.R. No. 79310
the questioned order is at best initial or
preliminary only. It does not foreclose judicial The petitioners herein are landowners and sugar
intervention whenever sought or warranted. At planters in the Victorias Mill District, Victorias,
any rate, the challenge to the order is premature Negros Occidental. Co-petitioner Planters'
because no valuation of their property has as yet Committee, Inc. is an organization composed of
been made by the Department of Agrarian 1,400 planter-members. This petition seeks to
Reform. The petitioners are also not proper prohibit the implementation of Proc. No. 131
parties because the lands owned by them do not and E.O. No. 229.
exceed the maximum retention limit of 7
hectares. The petitioners claim that the power to provide
for a Comprehensive Agrarian Reform Program
Replying, the petitioners insist they are proper as decreed by the Constitution belongs to
parties because P.D. No. 27 does not provide for Congress and not the President. Although they
retention limits on tenanted lands and that in agree that the President could exercise
any event their petition is a class suit brought in legislative power until the Congress was
behalf of landowners with landholdings below convened, she could do so only to enact
24 hectares. They maintain that the emergency measures during the transition
determination of just compensation by the period. At that, even assuming that the interim
administrative authorities is a final legislative power of the President was properly
ascertainment. As for the cases invoked by the exercised, Proc. No. 131 and E.O. No. 229 would
public respondent, the constitutionality of P.D. still have to be annulled for violating the
No. 27 was merely assumed in Chavez, while constitutional provisions on just compensation,
what was decided in Gonzales was the validity of due process, and equal protection.
the imposition of martial law.
They also argue that under Section 2 of Proc. No.
In the amended petition dated November 22, 131 which provides:
1588, it is contended that P.D. No. 27, E.O. Nos.
228 and 229 (except Sections 20 and 21) have Agrarian Reform Fund.-There is hereby created a
been impliedly repealed by R.A. No. 6657. special fund, to be known as the Agrarian Reform
Fund, an initial amount of FIFTY BILLION PESOS that can justify the application of the CARP to
(P50,000,000,000.00) to cover the estimated them. To the extent that the sugar planters have
cost of the Comprehensive Agrarian Reform been lumped in the same legislation with other
Program from 1987 to 1992 which shall be farmers, although they are a separate group with
sourced from the receipts of the sale of the problems exclusively their own, their right to
assets of the Asset Privatization Trust and equal protection has been violated.
Receipts of sale of ill-gotten wealth received
A motion for intervention was filed on August
through the Presidential Commission on Good
27,1987 by the National Federation of Sugarcane
Government and such other sources as
Planters (NASP) which claims a membership of at
government may deem appropriate. The
least 20,000 individual sugar planters all over the
amounts collected and accruing to this special
country. On September 10, 1987, another
fund shall be considered automatically
motion for intervention was filed, this time by
appropriated for the purpose authorized in this
Manuel Barcelona, et al., representing coconut
Proclamation the amount appropriated is in
and riceland owners. Both motions were granted
futuro, not in esse. The money needed to cover
by the Court.
the cost of the contemplated expropriation has
yet to be raised and cannot be appropriated at NASP alleges that President Aquino had no
this time. authority to fund the Agrarian Reform Program
and that, in any event, the appropriation is
Furthermore, they contend that taking must be
invalid because of uncertainty in the amount
simultaneous with payment of just
appropriated. Section 2 of Proc. No. 131 and
compensation as it is traditionally understood,
Sections 20 and 21 of E.O. No. 229 provide for an
i.e., with money and in full, but no such payment
initial appropriation of fifty billion pesos and thus
is contemplated in Section 5 of the E.O. No. 229.
specifies the minimum rather than the maximum
On the contrary, Section 6, thereof provides that
authorized amount. This is not allowed.
the Land Bank of the Philippines "shall
Furthermore, the stated initial amount has not
compensate the landowner in an amount to be
been certified to by the National Treasurer as
established by the government, which shall be
actually available.
based on the owner's declaration of current fair
market value as provided in Section 4 hereof, but Two additional arguments are made by
subject to certain controls to be defined and Barcelona, to wit, the failure to establish by clear
promulgated by the Presidential Agrarian and convincing evidence the necessity for the
Reform Council." This compensation may not be exercise of the powers of eminent domain, and
paid fully in money but in any of several modes the violation of the fundamental right to own
that may consist of part cash and part bond, with property.
interest, maturing periodically, or direct
payment in cash or bond as may be mutually The petitioners also decry the penalty for non-
agreed upon by the beneficiary and the registration of the lands, which is the
landowner or as may be prescribed or approved expropriation of the said land for an amount
by the PARC. equal to the government assessor's valuation of
the land for tax purposes. On the other hand, if
The petitioners also argue that in the issuance of the landowner declares his own valuation he is
the two measures, no effort was made to make unjustly required to immediately pay the
a careful study of the sugar planters' situation. corresponding taxes on the land, in violation of
There is no tenancy problem in the sugar areas the uniformity rule.
In his consolidated Comment, the Solicitor (3) The power of the President to legislate was
General first invokes the presumption of terminated on July 2, 1987; and
constitutionality in favor of Proc. No. 131 and
(4) The appropriation of a P50 billion special fund
E.O. No. 229. He also justifies the necessity for
from the National Treasury did not originate
the expropriation as explained in the "whereas"
from the House of Representatives.
clauses of the Proclamation and submits that,
contrary to the petitioner's contention, a pilot G.R. No. 79744
project to determine the feasibility of CARP and
a general survey on the people's opinion thereon The petitioner alleges that the then Secretary of
are not indispensable prerequisites to its Department of Agrarian Reform, in violation of
promulgation. due process and the requirement for just
compensation, placed his landholding under the
On the alleged violation of the equal protection coverage of Operation Land Transfer.
clause, the sugar planters have failed to show Certificates of Land Transfer were subsequently
that they belong to a different class and should issued to the private respondents, who then
be differently treated. The Comment also refused payment of lease rentals to him.
suggests the possibility of Congress first
distributing public agricultural lands and On September 3, 1986, the petitioner protested
scheduling the expropriation of private the erroneous inclusion of his small landholding
agricultural lands later. From this viewpoint, the under Operation Land transfer and asked for the
petition for prohibition would be premature. recall and cancellation of the Certificates of Land
Transfer in the name of the private respondents.
The public respondent also points out that the He claims that on December 24, 1986, his
constitutional prohibition is against the payment petition was denied without hearing. On
of public money without the corresponding February 17, 1987, he filed a motion for
appropriation. There is no rule that only money reconsideration, which had not been acted upon
already in existence can be the subject of an when E.O. Nos. 228 and 229 were issued. These
appropriation law. Finally, the earmarking of fifty orders rendered his motion moot and academic
billion pesos as Agrarian Reform Fund, although because they directly effected the transfer of his
denominated as an initial amount, is actually the land to the private respondents.
maximum sum appropriated. The word "initial"
simply means that additional amounts may be The petitioner now argues that:
appropriated later when necessary. (1) E.O. Nos. 228 and 229 were invalidly issued
On April 11, 1988, Prudencio Serrano, a coconut by the President of the Philippines.
planter, filed a petition on his own behalf, (2) The said executive orders are violative of the
assailing the constitutionality of E.O. No. 229. In constitutional provision that no private property
addition to the arguments already raised, shall be taken without due process or just
Serrano contends that the measure is compensation.
unconstitutional because:
(3) The petitioner is denied the right of maximum
(1) Only public lands should be included in the retention provided for under the 1987
CARP; Constitution.
(2) E.O. No. 229 embraces more than one subject The petitioner contends that the issuance of E.0.
which is not expressed in the title; Nos. 228 and 229 shortly before Congress
convened is anomalous and arbitrary, besides In his Reply to the public respondents, the
violating the doctrine of separation of powers. petitioner maintains that the motion he filed was
The legislative power granted to the President resolved on December 14, 1987. An appeal to
under the Transitory Provisions refers only to the Office of the President would be useless with
emergency measures that may be promulgated the promulgation of E.O. Nos. 228 and 229,
in the proper exercise of the police power. which in effect sanctioned the validity of the
public respondent's acts.
The petitioner also invokes his rights not to be
deprived of his property without due process of G.R. No. 78742
law and to the retention of his small parcels of
The petitioners in this case invoke the right of
riceholding as guaranteed under Article XIII,
retention granted by P.D. No. 27 to owners of
Section 4 of the Constitution. He likewise argues
rice and corn lands not exceeding seven hectares
that, besides denying him just compensation for
as long as they are cultivating or intend to
his land, the provisions of E.O. No. 228 declaring
cultivate the same. Their respective lands do not
that:
exceed the statutory limit but are occupied by
Lease rentals paid to the landowner by the tenants who are actually cultivating such lands.
farmer-beneficiary after October 21, 1972 shall
According to P.D. No. 316, which was
be considered as advance payment for the land.
promulgated in implementation of P.D. No. 27:
is an unconstitutional taking of a vested property
No tenant-farmer in agricultural lands primarily
right. It is also his contention that the inclusion
devoted to rice and corn shall be ejected or
of even small landowners in the program along
removed from his farmholding until such time as
with other landowners with lands consisting of
the respective rights of the tenant- farmers and
seven hectares or more is undemocratic.
the landowner shall have been determined in
In his Comment, the Solicitor General submits accordance with the rules and regulations
that the petition is premature because the implementing P.D. No. 27.
motion for reconsideration filed with the
The petitioners claim they cannot eject their
Minister of Agrarian Reform is still unresolved.
tenants and so are unable to enjoy their right of
As for the validity of the issuance of E.O. Nos. 228
retention because the Department of Agrarian
and 229, he argues that they were enacted
Reform has so far not issued the implementing
pursuant to Section 6, Article XVIII of the
rules required under the above-quoted decree.
Transitory Provisions of the 1987 Constitution
They therefore ask the Court for a writ of
which reads:
mandamus to compel the respondent to issue
The incumbent president shall continue to the said rules.
exercise legislative powers until the first
In his Comment, the public respondent argues
Congress is convened.
that P.D. No. 27 has been amended by LOI 474
On the issue of just compensation, his position is removing any right of retention from persons
that when P.D. No. 27 was promulgated on who own other agricultural lands of more than 7
October 21. 1972, the tenant-farmer of hectares in aggregate area or lands used for
agricultural land was deemed the owner of the residential, commercial, industrial or other
land he was tilling. The leasehold rentals paid purposes from which they derive adequate
after that date should therefore be considered income for their family. And even assuming that
amortization payments. the petitioners do not fall under its terms, the
regulations implementing P.D. No. 27 have Although holding neither purse nor sword and so
already been issued, to wit, the Memorandum regarded as the weakest of the three
dated July 10, 1975 (Interim Guidelines on departments of the government, the judiciary is
Retention by Small Landowners, with an nonetheless vested with the power to annul the
accompanying Retention Guide Table), acts of either the legislative or the executive or
Memorandum Circular No. 11 dated April 21, of both when not conformable to the
1978, (Implementation Guidelines of LOI No. fundamental law. This is the reason for what
474), Memorandum Circular No. 18-81 dated some quarters call the doctrine of judicial
December 29,1981 (Clarificatory Guidelines on supremacy. Even so, this power is not lightly
Coverage of P.D. No. 27 and Retention by Small assumed or readily exercised. The doctrine of
Landowners), and DAR Administrative Order No. separation of powers imposes upon the courts a
1, series of 1985 (Providing for a Cut-off Date for proper restraint, born of the nature of their
Landowners to Apply for Retention and/or to functions and of their respect for the other
Protest the Coverage of their Landholdings departments, in striking down the acts of the
under Operation Land Transfer pursuant to P.D. legislative and the executive as unconstitutional.
No. 27). For failure to file the corresponding The policy, indeed, is a blend of courtesy and
applications for retention under these measures, caution. To doubt is to sustain. The theory is that
the petitioners are now barred from invoking before the act was done or the law was enacted,
this right. earnest studies were made by Congress or the
President, or both, to insure that the
The public respondent also stresses that the
Constitution would not be breached.
petitioners have prematurely initiated this case
notwithstanding the pendency of their appeal to In addition, the Constitution itself lays down
the President of the Philippines. Moreover, the stringent conditions for a declaration of
issuance of the implementing rules, assuming unconstitutionality, requiring therefor the
this has not yet been done, involves the exercise concurrence of a majority of the members of the
of discretion which cannot be controlled through Supreme Court who took part in the
the writ of mandamus. This is especially true if deliberations and voted on the issue during their
this function is entrusted, as in this case, to a session en banc.11 And as established by judge
separate department of the government. made doctrine, the Court will assume jurisdiction
over a constitutional question only if it is shown
In their Reply, the petitioners insist that the
that the essential requisites of a judicial inquiry
above-cited measures are not applicable to them
into such a question are first satisfied. Thus,
because they do not own more than seven
there must be an actual case or controversy
hectares of agricultural land. Moreover,
involving a conflict of legal rights susceptible of
assuming arguendo that the rules were intended
judicial determination, the constitutional
to cover them also, the said measures are
question must have been opportunely raised by
nevertheless not in force because they have not
the proper party, and the resolution of the
been published as required by law and the ruling
question is unavoidably necessary to the
of this Court in Tanada v. Tuvera.10 As for LOI
decision of the case itself. 12
474, the same is ineffective for the additional
reason that a mere letter of instruction could not With particular regard to the requirement of
have repealed the presidential decree. proper party as applied in the cases before us,
we hold that the same is satisfied by the
I
petitioners and intervenors because each of
them has sustained or is in danger of sustaining It need only be added, to borrow again the words
an immediate injury as a result of the acts or of Justice Laurel, that —
measures complained of. 13 And even if, strictly
... when the judiciary mediates to allocate
speaking, they are not covered by the definition,
constitutional boundaries, it does not assert any
it is still within the wide discretion of the Court
superiority over the other departments; it does
to waive the requirement and so remove the
not in reality nullify or invalidate an act of the
impediment to its addressing and resolving the
Legislature, but only asserts the solemn and
serious constitutional questions raised.
sacred obligation assigned to it by the
In the first Emergency Powers Cases, 14 ordinary Constitution to determine conflicting claims of
citizens and taxpayers were allowed to question authority under the Constitution and to establish
the constitutionality of several executive orders for the parties in an actual controversy the rights
issued by President Quirino although they were which that instrument secures and guarantees to
invoking only an indirect and general interest them. This is in truth all that is involved in what
shared in common with the public. The Court is termed "judicial supremacy" which properly is
dismissed the objection that they were not the power of judicial review under the
proper parties and ruled that "the Constitution. 16
transcendental importance to the public of these
The cases before us categorically raise
cases demands that they be settled promptly
constitutional questions that this Court must
and definitely, brushing aside, if we must,
categorically resolve. And so we shall.
technicalities of procedure." We have since then
applied this exception in many other cases. 15 II
The other above-mentioned requisites have also We proceed first to the examination of the
been met in the present petitions. preliminary issues before resolving the more
serious challenges to the constitutionality of the
In must be stressed that despite the inhibitions
several measures involved in these petitions.
pressing upon the Court when confronted with
constitutional issues like the ones now before it, The promulgation of P.D. No. 27 by President
it will not hesitate to declare a law or act invalid Marcos in the exercise of his powers under
when it is convinced that this must be done. In martial law has already been sustained
arriving at this conclusion, its only criterion will in Gonzales v. Estrella and we find no reason to
be the Constitution as God and its conscience modify or reverse it on that issue. As for the
give it the light to probe its meaning and discover power of President Aquino to promulgate Proc.
its purpose. Personal motives and political No. 131 and E.O. Nos. 228 and 229, the same was
considerations are irrelevancies that cannot authorized under Section 6 of the Transitory
influence its decision. Blandishment is as Provisions of the 1987 Constitution, quoted
ineffectual as intimidation. above.
For all the awesome power of the Congress and The said measures were issued by President
the Executive, the Court will not hesitate to Aquino before July 27, 1987, when the Congress
"make the hammer fall, and heavily," to use of the Philippines was formally convened and
Justice Laurel's pithy language, where the acts of took over legislative power from her. They are
these departments, or of any public official, not "midnight" enactments intended to pre-
betray the people's will as expressed in the empt the legislature because E.O. No. 228 was
Constitution. issued on July 17, 1987, and the other measures,
i.e., Proc. No. 131 and E.O. No. 229, were both the simple reason that the House of
issued on July 22, 1987. Neither is it correct to Representatives, which now has the exclusive
say that these measures ceased to be valid when power to initiate appropriation measures, had
she lost her legislative power for, like any not yet been convened when the proclamation
statute, they continue to be in force unless was issued. The legislative power was then solely
modified or repealed by subsequent law or vested in the President of the Philippines, who
declared invalid by the courts. A statute does embodied, as it were, both houses of Congress.
not ipso facto become inoperative simply
The argument of some of the petitioners that
because of the dissolution of the legislature that
Proc. No. 131 and E.O. No. 229 should be
enacted it. By the same token, President
invalidated because they do not provide for
Aquino's loss of legislative power did not have
retention limits as required by Article XIII,
the effect of invalidating all the measures
Section 4 of the Constitution is no longer
enacted by her when and as long as she
tenable. R.A. No. 6657 does provide for such
possessed it.
limits now in Section 6 of the law, which in fact is
Significantly, the Congress she is alleged to have one of its most controversial provisions. This
undercut has not rejected but in fact section declares:
substantially affirmed the challenged measures
Retention Limits. — Except as otherwise
and has specifically provided that they shall be
provided in this Act, no person may own or
suppletory to R.A. No. 6657 whenever not
retain, directly or indirectly, any public or private
inconsistent with its provisions. 17 Indeed, some
agricultural land, the size of which shall vary
portions of the said measures, like the creation
according to factors governing a viable family-
of the P50 billion fund in Section 2 of Proc. No.
sized farm, such as commodity produced,
131, and Sections 20 and 21 of E.O. No. 229, have
terrain, infrastructure, and soil fertility as
been incorporated by reference in the CARP
determined by the Presidential Agrarian Reform
Law. 18
Council (PARC) created hereunder, but in no case
That fund, as earlier noted, is itself being shall retention by the landowner exceed five (5)
questioned on the ground that it does not hectares. Three (3) hectares may be awarded to
conform to the requirements of a valid each child of the landowner, subject to the
appropriation as specified in the Constitution. following qualifications: (1) that he is at least
Clearly, however, Proc. No. 131 is not an fifteen (15) years of age; and (2) that he is
appropriation measure even if it does provide for actually tilling the land or directly managing the
the creation of said fund, for that is not its farm; Provided, That landowners whose lands
principal purpose. An appropriation law is one have been covered by Presidential Decree No. 27
the primary and specific purpose of which is to shall be allowed to keep the area originally
authorize the release of public funds from the retained by them thereunder, further, That
treasury. 19 The creation of the fund is only original homestead grantees or direct
incidental to the main objective of the compulsory heirs who still own the original
proclamation, which is agrarian reform. homestead at the time of the approval of this Act
shall retain the same areas as long as they
It should follow that the specific constitutional
continue to cultivate said homestead.
provisions invoked, to wit, Section 24 and
Section 25(4) of Article VI, are not applicable. The argument that E.O. No. 229 violates the
With particular reference to Section 24, this constitutional requirement that a bill shall have
obviously could not have been complied with for only one subject, to be expressed in its title,
deserves only short attention. It is settled that clear duty imposed by law, the courts will
the title of the bill does not have to be a intervene by the extraordinary legal remedy of
catalogue of its contents and will suffice if the mandamus to compel action. If the duty is purely
matters embodied in the text are relevant to ministerial, the courts will require specific action.
each other and may be inferred from the title. 20 If the duty is purely discretionary, the courts
by mandamus will require action only. For
The Court wryly observes that during the past
example, if an inferior court, public official, or
dictatorship, every presidential issuance, by
board should, for an unreasonable length of
whatever name it was called, had the force and
time, fail to decide a particular question to the
effect of law because it came from President
great detriment of all parties concerned, or a
Marcos. Such are the ways of despots. Hence, it
court should refuse to take jurisdiction of a cause
is futile to argue, as the petitioners do in G.R. No.
when the law clearly gave it jurisdiction
79744, that LOI 474 could not have repealed P.D.
mandamus will issue, in the first case to require
No. 27 because the former was only a letter of
a decision, and in the second to require that
instruction. The important thing is that it was
jurisdiction be taken of the cause. 22
issued by President Marcos, whose word was law
during that time. And while it is true that as a rule the writ will not
be proper as long as there is still a plain, speedy
But for all their peremptoriness, these issuances
and adequate remedy available from the
from the President Marcos still had to comply
administrative authorities, resort to the courts
with the requirement for publication as this
may still be permitted if the issue raised is a
Court held in Tanada v. Tuvera. 21 Hence, unless
question of law. 23
published in the Official Gazette in accordance
with Article 2 of the Civil Code, they could not III
have any force and effect if they were among
There are traditional distinctions between the
those enactments successfully challenged in that
police power and the power of eminent domain
case. LOI 474 was published, though, in the
that logically preclude the application of both
Official Gazette dated November 29,1976.)
powers at the same time on the same subject. In
Finally, there is the contention of the public the case of City of Baguio v. NAWASA, 24for
respondent in G.R. No. 78742 that the writ of example, where a law required the transfer of all
mandamus cannot issue to compel the municipal waterworks systems to the NAWASA
performance of a discretionary act, especially by in exchange for its assets of equivalent value, the
a specific department of the government. That is Court held that the power being exercised was
true as a general proposition but is subject to eminent domain because the property involved
one important qualification. Correctly and was wholesome and intended for a public use.
categorically stated, the rule is that mandamus Property condemned under the police power is
will lie to compel the discharge of the noxious or intended for a noxious purpose, such
discretionary duty itself but not to control the as a building on the verge of collapse, which
discretion to be exercised. In other words, should be demolished for the public safety, or
mandamus can issue to require action only but obscene materials, which should be destroyed in
not specific action. the interest of public morals. The confiscation of
such property is not compensable, unlike the
Whenever a duty is imposed upon a public
taking of property under the power of
official and an unnecessary and unreasonable
expropriation, which requires the payment of
delay in the exercise of such duty occurs, if it is a
just compensation to the owner.
In the case of Pennsylvania Coal Co. v. like the power of taxation. The employment of
Mahon, 25 Justice Holmes laid down the limits of the taxing power to achieve a police purpose has
the police power in a famous aphorism: "The long been accepted. 26 As for the power of
general rule at least is that while property may expropriation, Prof. John J. Costonis of the
be regulated to a certain extent, if regulation University of Illinois College of Law (referring to
goes too far it will be recognized as a taking." The the earlier case of Euclid v. Ambler Realty Co.,
regulation that went "too far" was a law 272 US 365, which sustained a zoning law under
prohibiting mining which might cause the the police power) makes the following significant
subsidence of structures for human habitation remarks:
constructed on the land surface. This was
Euclid, moreover, was decided in an era when
resisted by a coal company which had earlier
judges located the Police and eminent domain
granted a deed to the land over its mine but
powers on different planets. Generally speaking,
reserved all mining rights thereunder, with the
they viewed eminent domain as encompassing
grantee assuming all risks and waiving any
public acquisition of private property for
damage claim. The Court held the law could not
improvements that would be available for public
be sustained without compensating the grantor.
use," literally construed. To the police power, on
Justice Brandeis filed a lone dissent in which he
the other hand, they assigned the less intrusive
argued that there was a valid exercise of the
task of preventing harmful externalities a point
police power. He said:
reflected in the Euclid opinion's reliance on an
Every restriction upon the use of property analogy to nuisance law to bolster its support of
imposed in the exercise of the police power zoning. So long as suppression of a privately
deprives the owner of some right theretofore authored harm bore a plausible relation to some
enjoyed, and is, in that sense, an abridgment by legitimate "public purpose," the pertinent
the State of rights in property without making measure need have afforded no compensation
compensation. But restriction imposed to whatever. With the progressive growth of
protect the public health, safety or morals from government's involvement in land use, the
dangers threatened is not a taking. The distance between the two powers has
restriction here in question is merely the contracted considerably. Today government
prohibition of a noxious use. The property so often employs eminent domain interchangeably
restricted remains in the possession of its owner. with or as a useful complement to the police
The state does not appropriate it or make any power-- a trend expressly approved in the
use of it. The state merely prevents the owner Supreme Court's 1954 decision in Berman v.
from making a use which interferes with Parker, which broadened the reach of eminent
paramount rights of the public. Whenever the domain's "public use" test to match that of the
use prohibited ceases to be noxious — as it may police power's standard of "public purpose." 27
because of further changes in local or social
The Berman case sustained a redevelopment
conditions — the restriction will have to be
project and the improvement of blighted areas in
removed and the owner will again be free to
the District of Columbia as a proper exercise of
enjoy his property as heretofore.
the police power. On the role of eminent domain
Recent trends, however, would indicate not a in the attainment of this purpose, Justice
polarization but a mingling of the police power Douglas declared:
and the power of eminent domain, with the
If those who govern the District of Columbia
latter being used as an implement of the former
decide that the Nation's Capital should be
beautiful as well as sanitary, there is nothing in The cases before us present no knotty
the Fifth Amendment that stands in the way. complication insofar as the question of
compensable taking is concerned. To the extent
Once the object is within the authority of
that the measures under challenge merely
Congress, the right to realize it through the
prescribe retention limits for landowners, there
exercise of eminent domain is clear.
is an exercise of the police power for the
For the power of eminent domain is merely the regulation of private property in accordance with
means to the end. 28 the Constitution. But where, to carry out such
regulation, it becomes necessary to deprive such
In Penn Central Transportation Co. v. New York owners of whatever lands they may own in
City, 29 decided by a 6-3 vote in 1978, the U.S excess of the maximum area allowed, there is
Supreme Court sustained the respondent's definitely a taking under the power of eminent
Landmarks Preservation Law under which the domain for which payment of just compensation
owners of the Grand Central Terminal had not is imperative. The taking contemplated is not a
been allowed to construct a multi-story office mere limitation of the use of the land. What is
building over the Terminal, which had been required is the surrender of the title to and the
designated a historic landmark. Preservation of physical possession of the said excess and all
the landmark was held to be a valid objective of beneficial rights accruing to the owner in favor of
the police power. The problem, however, was the farmer-beneficiary. This is definitely an
that the owners of the Terminal would be exercise not of the police power but of the power
deprived of the right to use the airspace above it of eminent domain.
although other landowners in the area could do
so over their respective properties. While Whether as an exercise of the police power or of
insisting that there was here no taking, the Court the power of eminent domain, the several
nonetheless recognized certain compensatory measures before us are challenged as violative of
rights accruing to Grand Central Terminal which the due process and equal protection clauses.
it said would "undoubtedly mitigate" the loss
The challenge to Proc. No. 131 and E.O. Nos. 228
caused by the regulation. This "fair
and 299 on the ground that no retention limits
compensation," as he called it, was explained by
are prescribed has already been discussed and
Prof. Costonis in this wise:
dismissed. It is noted that although they excited
In return for retaining the Terminal site in its many bitter exchanges during the deliberation of
pristine landmark status, Penn Central was the CARP Law in Congress, the retention limits
authorized to transfer to neighboring properties finally agreed upon are, curiously enough, not
the authorized but unused rights accruing to the being questioned in these petitions. We
site prior to the Terminal's designation as a therefore do not discuss them here. The Court
landmark — the rights which would have been will come to the other claimed violations of due
exhausted by the 59-story building that the city process in connection with our examination of
refused to countenance atop the Terminal. the adequacy of just compensation as required
Prevailing bulk restrictions on neighboring sites under the power of expropriation.
were proportionately relaxed, theoretically
The argument of the small farmers that they
enabling Penn Central to recoup its losses at the
have been denied equal protection because of
Terminal site by constructing or selling to others
the absence of retention limits has also become
the right to construct larger, hence more
academic under Section 6 of R.A. No. 6657.
profitable buildings on the transferee sites. 30
Significantly, they too have not questioned the
area of such limits. There is also the complaint distinguished from those of a particular class
that they should not be made to share the require the interference of the State and, no less
burden of agrarian reform, an objection also important, the means employed are reasonably
made by the sugar planters on the ground that necessary for the attainment of the purpose
they belong to a particular class with particular sought to be achieved and not unduly oppressive
interests of their own. However, no evidence has upon individuals. 34 As the subject and purpose
been submitted to the Court that the requisites of agrarian reform have been laid down by the
of a valid classification have been violated. Constitution itself, we may say that the first
requirement has been satisfied. What remains to
Classification has been defined as the grouping
be examined is the validity of the method
of persons or things similar to each other in
employed to achieve the constitutional goal.
certain particulars and different from each other
in these same particulars. 31 To be valid, it must One of the basic principles of the democratic
conform to the following requirements: (1) it system is that where the rights of the individual
must be based on substantial distinctions; (2) it are concerned, the end does not justify the
must be germane to the purposes of the law; (3) means. It is not enough that there be a valid
it must not be limited to existing conditions only; objective; it is also necessary that the means
and (4) it must apply equally to all the members employed to pursue it be in keeping with the
of the class. 32 The Court finds that all these Constitution. Mere expediency will not excuse
requisites have been met by the measures here constitutional shortcuts. There is no question
challenged as arbitrary and discriminatory. that not even the strongest moral conviction or
the most urgent public need, subject only to a
Equal protection simply means that all persons
few notable exceptions, will excuse the
or things similarly situated must be treated alike
bypassing of an individual's rights. It is no
both as to the rights conferred and the liabilities
exaggeration to say that a, person invoking a
imposed. 33 The petitioners have not shown that
right guaranteed under Article III of the
they belong to a different class and entitled to a
Constitution is a majority of one even as against
different treatment. The argument that not only
the rest of the nation who would deny him that
landowners but also owners of other properties
right.
must be made to share the burden of
implementing land reform must be rejected. That right covers the person's life, his liberty and
There is a substantial distinction between these his property under Section 1 of Article III of the
two classes of owners that is clearly visible Constitution. With regard to his property, the
except to those who will not see. There is no owner enjoys the added protection of Section 9,
need to elaborate on this matter. In any event, which reaffirms the familiar rule that private
the Congress is allowed a wide leeway in property shall not be taken for public use
providing for a valid classification. Its decision is without just compensation.
accorded recognition and respect by the courts
This brings us now to the power of eminent
of justice except only where its discretion is
domain.
abused to the detriment of the Bill of Rights.
IV
It is worth remarking at this juncture that a
statute may be sustained under the police power Eminent domain is an inherent power of the
only if there is a concurrence of the lawful State that enables it to forcibly acquire private
subject and the lawful method. Put otherwise, lands intended for public use upon payment of
the interests of the public generally as just compensation to the owner. Obviously,
there is no need to expropriate where the owner they decide what is known as the political
is willing to sell under terms also acceptable to question. As explained by Chief Justice
the purchaser, in which case an ordinary deed of Concepcion in the case of Tañada v. Cuenco: 36
sale may be agreed upon by the parties. 35 It is
The term "political question" connotes what it
only where the owner is unwilling to sell, or
means in ordinary parlance, namely, a question
cannot accept the price or other conditions
of policy. It refers to "those questions which,
offered by the vendee, that the power of
under the Constitution, are to be decided by the
eminent domain will come into play to assert the
people in their sovereign capacity; or in regard to
paramount authority of the State over the
which full discretionary authority has been
interests of the property owner. Private rights
delegated to the legislative or executive branch
must then yield to the irresistible demands of the
of the government." It is concerned with issues
public interest on the time-honored justification,
dependent upon the wisdom, not legality, of a
as in the case of the police power, that the
particular measure.
welfare of the people is the supreme law.
It is true that the concept of the political
But for all its primacy and urgency, the power of
question has been constricted with the
expropriation is by no means absolute (as indeed
enlargement of judicial power, which now
no power is absolute). The limitation is found in
includes the authority of the courts "to
the constitutional injunction that "private
determine whether or not there has been a
property shall not be taken for public use
grave abuse of discretion amounting to lack or
without just compensation" and in the abundant
excess of jurisdiction on the part of any branch
jurisprudence that has evolved from the
or instrumentality of the Government." 37 Even
interpretation of this principle. Basically, the
so, this should not be construed as a license for
requirements for a proper exercise of the power
us to reverse the other departments simply
are: (1) public use and (2) just compensation.
because their views may not coincide with ours.
Let us dispose first of the argument raised by the
The legislature and the executive have been seen
petitioners in G.R. No. 79310 that the State
fit, in their wisdom, to include in the CARP the
should first distribute public agricultural lands in
redistribution of private landholdings (even as
the pursuit of agrarian reform instead of
the distribution of public agricultural lands is first
immediately disturbing property rights by
provided for, while also continuing apace under
forcibly acquiring private agricultural lands.
the Public Land Act and other cognate laws). The
Parenthetically, it is not correct to say that only
Court sees no justification to interpose its
public agricultural lands may be covered by the
authority, which we may assert only if we believe
CARP as the Constitution calls for "the just
that the political decision is not unwise, but
distribution of all agricultural lands." In any
illegal. We do not find it to be so.
event, the decision to redistribute private
agricultural lands in the manner prescribed by In U.S. v. Chandler-Dunbar Water Power
the CARP was made by the legislative and Company,38 it was held:
executive departments in the exercise of their
discretion. We are not justified in reviewing that Congress having determined, as it did by the Act
discretion in the absence of a clear showing that of March 3,1909 that the entire St. Mary's river
it has been abused. between the American bank and the
international line, as well as all of the upland
A becoming courtesy admonishes us to respect north of the present ship canal, throughout its
the decisions of the political departments when entire length, was "necessary for the purpose of
navigation of said waters, and the waters enjoyment, to entitle them to the just
connected therewith," that determination is compensation mandated by the Constitution.
conclusive in condemnation proceedings
As held in Republic of the Philippines v.
instituted by the United States under that Act,
Castellvi, 42 there is compensable taking when
and there is no room for judicial review of the
the following conditions concur: (1) the
judgment of Congress ... .
expropriator must enter a private property; (2)
As earlier observed, the requirement for public the entry must be for more than a momentary
use has already been settled for us by the period; (3) the entry must be under warrant or
Constitution itself No less than the 1987 Charter color of legal authority; (4) the property must be
calls for agrarian reform, which is the reason why devoted to public use or otherwise informally
private agricultural lands are to be taken from appropriated or injuriously affected; and (5) the
their owners, subject to the prescribed utilization of the property for public use must be
maximum retention limits. The purposes in such a way as to oust the owner and deprive
specified in P.D. No. 27, Proc. No. 131 and R.A. him of beneficial enjoyment of the property. All
No. 6657 are only an elaboration of the these requisites are envisioned in the measures
constitutional injunction that the State adopt the before us.
necessary measures "to encourage and
Where the State itself is the expropriator, it is not
undertake the just distribution of all agricultural
necessary for it to make a deposit upon its taking
lands to enable farmers who are landless to own
possession of the condemned property, as "the
directly or collectively the lands they till." That
compensation is a public charge, the good faith
public use, as pronounced by the fundamental
of the public is pledged for its payment, and all
law itself, must be binding on us.
the resources of taxation may be employed in
The second requirement, i.e., the payment of raising the amount." 43 Nevertheless, Section
just compensation, needs a longer and more 16(e) of the CARP Law provides that:
thoughtful examination.
Upon receipt by the landowner of the
Just compensation is defined as the full and fair corresponding payment or, in case of rejection
equivalent of the property taken from its owner or no response from the landowner, upon the
by the expropriator. 39 It has been repeatedly deposit with an accessible bank designated by
stressed by this Court that the measure is not the the DAR of the compensation in cash or in LBP
taker's gain but the owner's loss. 40 The word bonds in accordance with this Act, the DAR shall
"just" is used to intensify the meaning of the take immediate possession of the land and shall
word "compensation" to convey the idea that request the proper Register of Deeds to issue a
the equivalent to be rendered for the property Transfer Certificate of Title (TCT) in the name of
to be taken shall be real, substantial, full, the Republic of the Philippines. The DAR shall
ample. 41 thereafter proceed with the redistribution of the
land to the qualified beneficiaries.
It bears repeating that the measures challenged
in these petitions contemplate more than a mere Objection is raised, however, to the manner of
regulation of the use of private lands under the fixing the just compensation, which it is claimed
police power. We deal here with an actual taking is entrusted to the administrative authorities in
of private agricultural lands that has violation of judicial prerogatives. Specific
dispossessed the owners of their property and reference is made to Section 16(d), which
deprived them of all its beneficial use and provides that in case of the rejection or disregard
by the owner of the offer of the government to property is seemingly fulfilled since it cannot be
buy his land- said that a judicial proceeding was not had
before the actual taking. However, the strict
... the DAR shall conduct summary administrative
application of the decrees during the
proceedings to determine the compensation for
proceedings would be nothing short of a mere
the land by requiring the landowner, the LBP and
formality or charade as the court has only to
other interested parties to submit evidence as to
choose between the valuation of the owner and
the just compensation for the land, within fifteen
that of the assessor, and its choice is always
(15) days from the receipt of the notice. After the
limited to the lower of the two. The court cannot
expiration of the above period, the matter is
exercise its discretion or independence in
deemed submitted for decision. The DAR shall
determining what is just or fair. Even a grade
decide the case within thirty (30) days after it is
school pupil could substitute for the judge
submitted for decision.
insofar as the determination of constitutional
To be sure, the determination of just just compensation is concerned.
compensation is a function addressed to the
xxx
courts of justice and may not be usurped by any
other branch or official of the government. EPZA In the present petition, we are once again
v. Dulay 44 resolved a challenge to several confronted with the same question of whether
decrees promulgated by President Marcos the courts under P.D. No. 1533, which contains
providing that the just compensation for the same provision on just compensation as its
property under expropriation should be either predecessor decrees, still have the power and
the assessment of the property by the authority to determine just compensation,
government or the sworn valuation thereof by independent of what is stated by the decree and
the owner, whichever was lower. In declaring to this effect, to appoint commissioners for such
these decrees unconstitutional, the Court held purpose.
through Mr. Justice Hugo E. Gutierrez, Jr.:
This time, we answer in the affirmative.
The method of ascertaining just compensation
xxx
under the aforecited decrees constitutes
impermissible encroachment on judicial It is violative of due process to deny the owner
prerogatives. It tends to render this Court inutile the opportunity to prove that the valuation in
in a matter which under this Constitution is the tax documents is unfair or wrong. And it is
reserved to it for final determination. repulsive to the basic concepts of justice and
fairness to allow the haphazard work of a minor
Thus, although in an expropriation proceeding
bureaucrat or clerk to absolutely prevail over the
the court technically would still have the power
judgment of a court promulgated only after
to determine the just compensation for the
expert commissioners have actually viewed the
property, following the applicable decrees, its
property, after evidence and arguments pro and
task would be relegated to simply stating the
con have been presented, and after all factors
lower value of the property as declared either by
and considerations essential to a fair and just
the owner or the assessor. As a necessary
determination have been judiciously evaluated.
consequence, it would be useless for the court to
appoint commissioners under Rule 67 of the A reading of the aforecited Section 16(d) will
Rules of Court. Moreover, the need to satisfy the readily show that it does not suffer from the
due process clause in the taking of private arbitrariness that rendered the challenged
decrees constitutionally objectionable. Although five percent (25%) cash, the balance to be paid in
the proceedings are described as summary, the government financial instruments negotiable at
landowner and other interested parties are any time.
nevertheless allowed an opportunity to submit
(b) For lands above twenty-four (24) hectares
evidence on the real value of the property. But
and up to fifty (50) hectares — Thirty percent
more importantly, the determination of the just
(30%) cash, the balance to be paid in government
compensation by the DAR is not by any means
financial instruments negotiable at any time.
final and conclusive upon the landowner or any
other interested party, for Section 16(f) clearly (c) For lands twenty-four (24) hectares and
provides: below — Thirty-five percent (35%) cash, the
balance to be paid in government financial
Any party who disagrees with the decision may
instruments negotiable at any time.
bring the matter to the court of proper
jurisdiction for final determination of just (2) Shares of stock in government-owned or
compensation. controlled corporations, LBP preferred shares,
physical assets or other qualified investments in
The determination made by the DAR is only
accordance with guidelines set by the PARC;
preliminary unless accepted by all parties
concerned. Otherwise, the courts of justice will (3) Tax credits which can be used against any tax
still have the right to review with finality the said liability;
determination in the exercise of what is
admittedly a judicial function. (4) LBP bonds, which shall have the following
features:
The second and more serious objection to the
provisions on just compensation is not as easily (a) Market interest rates aligned with 91-day
resolved. treasury bill rates. Ten percent (10%) of the face
value of the bonds shall mature every year from
This refers to Section 18 of the CARP Law the date of issuance until the tenth (10th) year:
providing in full as follows: Provided, That should the landowner choose to
forego the cash portion, whether in full or in
SEC. 18. Valuation and Mode of Compensation.
part, he shall be paid correspondingly in LBP
— The LBP shall compensate the landowner in
bonds;
such amount as may be agreed upon by the
landowner and the DAR and the LBP, in (b) Transferability and negotiability. Such LBP
accordance with the criteria provided for in bonds may be used by the landowner, his
Sections 16 and 17, and other pertinent successors-in- interest or his assigns, up to the
provisions hereof, or as may be finally amount of their face value, for any of the
determined by the court, as the just following:
compensation for the land.
(i) Acquisition of land or other real properties of
The compensation shall be paid in one of the the government, including assets under the
following modes, at the option of the landowner: Asset Privatization Program and other assets
foreclosed by government financial institutions
(1) Cash payment, under the following terms and
in the same province or region where the lands
conditions:
for which the bonds were paid are situated;
(a) For lands above fifty (50) hectares, insofar as
the excess hectarage is concerned — Twenty-
(ii) Acquisition of shares of stock of government- neither more nor less, whenever it is possible to
owned or controlled corporations or shares of make the assessment, than the money
stock owned by the government in private equivalent of said property. Just compensation
corporations; has always been understood to be the just and
complete equivalent of the loss which the owner
(iii) Substitution for surety or bail bonds for the
of the thing expropriated has to suffer by reason
provisional release of accused persons, or for
of the expropriation . 45 (Emphasis supplied.)
performance bonds;
In J.M. Tuazon Co. v. Land Tenure
(iv) Security for loans with any government
Administration, 46 this Court held:
financial institution, provided the proceeds of
the loans shall be invested in an economic It is well-settled that just compensation means
enterprise, preferably in a small and medium- the equivalent for the value of the property at
scale industry, in the same province or region as the time of its taking. Anything beyond that is
the land for which the bonds are paid; more, and anything short of that is less, than just
compensation. It means a fair and full equivalent
(v) Payment for various taxes and fees to
for the loss sustained, which is the measure of
government: Provided, That the use of these
the indemnity, not whatever gain would accrue
bonds for these purposes will be limited to a
to the expropriating entity. The market value of
certain percentage of the outstanding balance of
the land taken is the just compensation to which
the financial instruments; Provided, further, That
the owner of condemned property is entitled,
the PARC shall determine the percentages
the market value being that sum of money which
mentioned above;
a person desirous, but not compelled to buy, and
(vi) Payment for tuition fees of the immediate an owner, willing, but not compelled to sell,
family of the original bondholder in government would agree on as a price to be given and
universities, colleges, trade schools, and other received for such property. (Emphasis supplied.)
institutions;
In the United States, where much of our
(vii) Payment for fees of the immediate family of jurisprudence on the subject has been derived,
the original bondholder in government hospitals; the weight of authority is also to the effect that
and just compensation for property expropriated is
payable only in money and not otherwise. Thus
(viii) Such other uses as the PARC may from time —
to time allow.
The medium of payment of compensation is
The contention of the petitioners in G.R. No. ready money or cash. The condemnor cannot
79777 is that the above provision is compel the owner to accept anything but
unconstitutional insofar as it requires the owners money, nor can the owner compel or require the
of the expropriated properties to accept just condemnor to pay him on any other basis than
compensation therefor in less than money, the value of the property in money at the time
which is the only medium of payment allowed. In and in the manner prescribed by the
support of this contention, they cite Constitution and the statutes. When the power
jurisprudence holding that: of eminent domain is resorted to, there must be
The fundamental rule in expropriation matters is a standard medium of payment, binding upon
that the owner of the property expropriated is both parties, and the law has fixed that standard
entitled to a just compensation, which should be as money in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and to them tomorrow through our thoughtfulness
cannot, in the nature of things, be regarded as a today. And, finally, let it not be forgotten that it
reliable and constant standard of is no less than the Constitution itself that has
48
compensation. ordained this revolution in the farms, calling for
"a just distribution" among the farmers of lands
"Just compensation" for property taken by
that have heretofore been the prison of their
condemnation means a fair equivalent in money,
dreams but can now become the key at least to
which must be paid at least within a reasonable
their deliverance.
time after the taking, and it is not within the
power of the Legislature to substitute for such Such a program will involve not mere millions of
payment future obligations, bonds, or other pesos. The cost will be tremendous. Considering
valuable advantage. 49(Emphasis supplied.) the vast areas of land subject to expropriation
under the laws before us, we estimate that
It cannot be denied from these cases that the
hundreds of billions of pesos will be needed, far
traditional medium for the payment of just
more indeed than the amount of P50 billion
compensation is money and no other. And so,
initially appropriated, which is already staggering
conformably, has just compensation been paid in
as it is by our present standards. Such amount is
the past solely in that medium. However, we do
in fact not even fully available at this time.
not deal here with the traditional excercise of
the power of eminent domain. This is not an We assume that the framers of the Constitution
ordinary expropriation where only a specific were aware of this difficulty when they called for
property of relatively limited area is sought to be agrarian reform as a top priority project of the
taken by the State from its owner for a specific government. It is a part of this assumption that
and perhaps local purpose. when they envisioned the expropriation that
would be needed, they also intended that the
What we deal with here is a revolutionary kind of
just compensation would have to be paid not in
expropriation.
the orthodox way but a less conventional if more
The expropriation before us affects all private practical method. There can be no doubt that
agricultural lands whenever found and of they were aware of the financial limitations of
whatever kind as long as they are in excess of the the government and had no illusions that there
maximum retention limits allowed their owners. would be enough money to pay in cash and in full
This kind of expropriation is intended for the for the lands they wanted to be distributed
benefit not only of a particular community or of among the farmers. We may therefore assume
a small segment of the population but of the that their intention was to allow such manner of
entire Filipino nation, from all levels of our payment as is now provided for by the CARP Law,
society, from the impoverished farmer to the particularly the payment of the balance (if the
land-glutted owner. Its purpose does not cover owner cannot be paid fully with money), or
only the whole territory of this country but goes indeed of the entire amount of the just
beyond in time to the foreseeable future, which compensation, with other things of value. We
it hopes to secure and edify with the vision and may also suppose that what they had in mind
the sacrifice of the present generation of was a similar scheme of payment as that
Filipinos. Generations yet to come are as prescribed in P.D. No. 27, which was the law in
involved in this program as we are today, force at the time they deliberated on the new
although hopefully only as beneficiaries of a Charter and with which they presumably agreed
richer and more fulfilling life we will guarantee in principle.
The Court has not found in the records of the approach realization and resurrecting the
Constitutional Commission any categorical spectre of discontent and dissent in the restless
agreement among the members regarding the countryside. That is not in our view the intention
meaning to be given the concept of just of the Constitution, and that is not what we shall
compensation as applied to the comprehensive decree today.
agrarian reform program being contemplated.
Accepting the theory that payment of the just
There was the suggestion to "fine tune" the
compensation is not always required to be made
requirement to suit the demands of the project
fully in money, we find further that the
even as it was also felt that they should "leave it
proportion of cash payment to the other things
to Congress" to determine how payment should
of value constituting the total payment, as
be made to the landowner and reimbursement
determined on the basis of the areas of the lands
required from the farmer-beneficiaries. Such
expropriated, is not unduly oppressive upon the
innovations as "progressive compensation" and
landowner. It is noted that the smaller the land,
"State-subsidized compensation" were also
the bigger the payment in money, primarily
proposed. In the end, however, no special
because the small landowner will be needing it
definition of the just compensation for the lands
more than the big landowners, who can afford a
to be expropriated was reached by the
bigger balance in bonds and other things of
Commission. 50
value. No less importantly, the government
On the other hand, there is nothing in the financial instruments making up the balance of
records either that militates against the the payment are "negotiable at any time." The
assumptions we are making of the general other modes, which are likewise available to the
sentiments and intention of the members on the landowner at his option, are also not
content and manner of the payment to be made unreasonable because payment is made in
to the landowner in the light of the magnitude of shares of stock, LBP bonds, other properties or
the expenditure and the limitations of the assets, tax credits, and other things of value
expropriator. equivalent to the amount of just compensation.

With these assumptions, the Court hereby Admittedly, the compensation contemplated in
declares that the content and manner of the just the law will cause the landowners, big and small,
compensation provided for in the afore- quoted not a little inconvenience. As already remarked,
Section 18 of the CARP Law is not violative of the this cannot be avoided. Nevertheless, it is
Constitution. We do not mind admitting that a devoutly hoped that these countrymen of ours,
certain degree of pragmatism has influenced our conscious as we know they are of the need for
decision on this issue, but after all this Court is their forebearance and even sacrifice, will not
not a cloistered institution removed from the begrudge us their indispensable share in the
realities and demands of society or oblivious to attainment of the ideal of agrarian reform.
the need for its enhancement. The Court is as Otherwise, our pursuit of this elusive goal will be
acutely anxious as the rest of our people to see like the quest for the Holy Grail.
the goal of agrarian reform achieved at last after
The complaint against the effects of non-
the frustrations and deprivations of our peasant
registration of the land under E.O. No. 229 does
masses during all these disappointing decades.
not seem to be viable any more as it appears that
We are aware that invalidation of the said
Section 4 of the said Order has been superseded
section will result in the nullification of the entire
by Section 14 of the CARP Law. This repeats the
program, killing the farmer's hopes even as they
requisites of registration as embodied in the
earlier measure but does not provide, as the title to the property in the State" albeit "not to
latter did, that in case of failure or refusal to the appropriation of it to public use." In Rexford
register the land, the valuation thereof shall be v. Knight, 55 the Court of Appeals of New York
that given by the provincial or city assessor for said that the construction upon the statutes was
tax purposes. On the contrary, the CARP Law that the fee did not vest in the State until the
says that the just compensation shall be payment of the compensation although the
ascertained on the basis of the factors authority to enter upon and appropriate the land
mentioned in its Section 17 and in the manner was complete prior to the payment. Kennedy
provided for in Section 16. further said that "both on principle and authority
the rule is ... that the right to enter on and use
The last major challenge to CARP is that the
the property is complete, as soon as the property
landowner is divested of his property even
is actually appropriated under the authority of
before actual payment to him in full of just
law for a public use, but that the title does not
compensation, in contravention of a well-
pass from the owner without his consent, until
accepted principle of eminent domain.
just compensation has been made to him."
The recognized rule, indeed, is that title to the
Our own Supreme Court has held
property expropriated shall pass from the owner
in Visayan Refining Co. v. Camus and
to the expropriator only upon full payment of the
Paredes, 56 that:
just compensation. Jurisprudence on this settled
principle is consistent both here and in other If the laws which we have exhibited or cited in
democratic jurisdictions. Thus: the preceding discussion are attentively
examined it will be apparent that the method of
Title to property which is the subject of
expropriation adopted in this jurisdiction is such
condemnation proceedings does not vest the
as to afford absolute reassurance that no piece
condemnor until the judgment fixing just
of land can be finally and irrevocably taken from
compensation is entered and paid, but the
an unwilling owner until compensation is paid ...
condemnor's title relates back to the date on
. (Emphasis supplied.)
which the petition under the Eminent Domain
Act, or the commissioner's report under the It is true that P.D. No. 27 expressly ordered the
Local Improvement Act, is filed. 51 emancipation of tenant-farmer as October 21,
1972 and declared that he shall "be deemed the
... although the right to appropriate and use land
owner" of a portion of land consisting of a family-
taken for a canal is complete at the time of entry,
sized farm except that "no title to the land
title to the property taken remains in the owner
owned by him was to be actually issued to him
until payment is actually made. 52 (Emphasis
unless and until he had become a full-fledged
supplied.)
member of a duly recognized farmers'
In Kennedy v. Indianapolis, 53 the US Supreme cooperative." It was understood, however, that
Court cited several cases holding that title to full payment of the just compensation also had
property does not pass to the condemnor until to be made first, conformably to the
just compensation had actually been made. In constitutional requirement.
fact, the decisions appear to be uniformly to this
When E.O. No. 228, categorically stated in its
effect. As early as 1838, in Rubottom v.
Section 1 that:
McLure, 54 it was held that "actual payment to
the owner of the condemned property was a All qualified farmer-beneficiaries are now
condition precedent to the investment of the deemed full owners as of October 21, 1972 of
the land they acquired by virtue of Presidential President has already been resolved. Although
Decree No. 27. (Emphasis supplied.) we have said that the doctrine of exhaustion of
administrative remedies need not preclude
it was obviously referring to lands already validly
immediate resort to judicial action, there are
acquired under the said decree, after proof of
factual issues that have yet to be examined on
full-fledged membership in the farmers'
the administrative level, especially the claim that
cooperatives and full payment of just
the petitioners are not covered by LOI 474
compensation. Hence, it was also perfectly
because they do not own other agricultural lands
proper for the Order to also provide in its Section
than the subjects of their petition.
2 that the "lease rentals paid to the landowner
by the farmer- beneficiary after October 21, Obviously, the Court cannot resolve these issues.
1972 (pending transfer of ownership after full In any event, assuming that the petitioners have
payment of just compensation), shall be not yet exercised their retention rights, if any,
considered as advance payment for the land." under P.D. No. 27, the Court holds that they are
entitled to the new retention rights provided for
The CARP Law, for its part, conditions the
by R.A. No. 6657, which in fact are on the whole
transfer of possession and ownership of the land
more liberal than those granted by the decree.
to the government on receipt by the landowner
of the corresponding payment or the deposit by V
the DAR of the compensation in cash or LBP
The CARP Law and the other enactments also
bonds with an accessible bank. Until then, title
involved in these cases have been the subject of
also remains with the landowner. 57 No outright
bitter attack from those who point to the
change of ownership is contemplated either.
shortcomings of these measures and ask that
Hence, the argument that the assailed measures they be scrapped entirely. To be sure, these
violate due process by arbitrarily transferring enactments are less than perfect; indeed, they
title before the land is fully paid for must also be should be continuously re-examined and
rejected. rehoned, that they may be sharper instruments
for the better protection of the farmer's rights.
It is worth stressing at this point that all rights
But we have to start somewhere. In the pursuit
acquired by the tenant-farmer under P.D. No. 27,
of agrarian reform, we do not tread on familiar
as recognized under E.O. No. 228, are retained
ground but grope on terrain fraught with pitfalls
by him even now under R.A. No. 6657. This
and expected difficulties. This is inevitable. The
should counter-balance the express provision in
CARP Law is not a tried and tested project. On
Section 6 of the said law that "the landowners
the contrary, to use Justice Holmes's words, "it is
whose lands have been covered by Presidential
an experiment, as all life is an experiment," and
Decree No. 27 shall be allowed to keep the area
so we learn as we venture forward, and, if
originally retained by them thereunder, further,
necessary, by our own mistakes. We cannot
That original homestead grantees or direct
expect perfection although we should strive for
compulsory heirs who still own the original
it by all means. Meantime, we struggle as best
homestead at the time of the approval of this Act
we can in freeing the farmer from the iron
shall retain the same areas as long as they
shackles that have unconscionably, and for so
continue to cultivate said homestead."
long, fettered his soul to the soil.
In connection with these retained rights, it does
By the decision we reach today, all major legal
not appear in G.R. No. 78742 that the appeal
obstacles to the comprehensive agrarian reform
filed by the petitioners with the Office of the
program are removed, to clear the way for the Association of Small Landowners in the
true freedom of the farmer. We may now Philippines v. Honorable Secretary of Agrarian
glimpse the day he will be released not only from Reform
want but also from the exploitation and disdain
G.R. No. 78742
of the past and from his own feelings of
inadequacy and helplessness. At last his July 14, 1989
servitude will be ended forever. At last the farm
on which he toils will be his farm. It will be his Ponente: CRUZ, J.
portion of the Mother Earth that will give him
not only the staff of life but also the joy of living.
And where once it bred for him only deep FACTS
despair, now can he see in it the fruition of his  Cases have been consolidated because
hopes for a more fulfilling future. Now at last can they involve common legal questions.
he banish from his small plot of earth his They will be subject to one common
insecurities and dark resentments and "rebuild discussion and resolution.
in it the music and the dream."
G.R. No. 79777:
WHEREFORE, the Court holds as follows:
 The petitioners are Nicolas Manaay and
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and
his wife who own a 9-hectare riceland
E.O. Nos. 228 and 229 are SUSTAINED against all
worked by four tenants and Augustin
the constitutional objections raised in the herein
Hermano, Jr. who owns a 5-hectare
petitions.
riceland worked by four tenants. They
2. Title to all expropriated properties shall be question the constitutionality of P.D. No.
transferred to the State only upon full payment 27, E.O. Nos. 228 & 229, and R.A. No.
of compensation to their respective owners. 6657 since their tenants were declared
full owners of the mentioned lands.
3. All rights previously acquired by the tenant-
farmers under P.D. No. 27 are retained and G.R. No. 79310
recognized.
 Landowners and sugar planters in the
4. Landowners who were unable to exercise their Victorias Mill District, Victorias, Negros
rights of retention under P.D. No. 27 shall enjoy Occidental and Planters’ Committee Inc.,
the retention rights granted by R.A. No. 6657 with 1400 planter-members, submitted
under the conditions therein prescribed. a petition seeking to prohibit the
implementation of Proc. No. 131 and
5. Subject to the above-mentioned rulings all the E.O. No. 229.
petitions are DISMISSED, without
pronouncement as to costs.  Aug. 27, 1987 – A motion for
intervention was filed by the National
SO ORDERED. Federation of Sugarcane Planters, which
claim 20 000 members). It was granted
by the court.
DIGEST:
 Sept. 10, 1987 – A motion for
intervention was filed by Manuel
 Barcelona, et al., representing coconut 5. Whether or not E.O. No. 229 violates
and riceland owners. It was granted by constitutional requirement that a bill
the court. should only have one subject, to be
expressed in its title
G.R. No. 79744
6. Whether or not the writ of mandamus
 Sept. 3 1986 – The petitioner protested
can issue to compel the performance of
the erroneous inclusion of his small
a discretionary act, especially by a
landholding under Operation Land
specific department of the government.
Transfer accusing the then Secretary of
DAR of violation of due process and the 7. Whether this statute is an exercise of
requirement for just compensation. police power or the power of eminent
Certificates of Land Transfer were issued domain
to the private respondents who then
8. Whether or not the statutes are valid
refused to pay lease rentals. The
exercises of police power
petitioner is asking for the recall and
cancellation of these certificates. 9. Whether or not the equal protection
clause was violated
 Dec. 24, 1986 – Petitioner claims his
petition was denied without hearing. 10. Whether or not the content and manner
of the just compensation provided for in
 Feb. 17, 1987 – A motion for
the CARP Law is not violative of the
reconsideration was filed which had not
Constitution
been acted upon when E.O. Nos. 228 &
229 were issued which rendered his 11. Whether or not there is contravention of
motion moot. a well- accepted principle of eminent
domain by divesting the landowner of
his property even before actual payment
ISSUES to him in full of just compensation

1. Whether or not the President had the

power to promulgate Proc. No. 131 and
RULING
E.O. Nos. 228 & 229
1. YES. P.D. No. 27 by President Marcos
2. Whether or not the President had the
during Martial Law has been sustained in
legislative power for issuing the
Gonzales v. Estrella. President Aquino is
measures
authorized under Section 6 of the
3. Whether or not Proc. No. 131 conforms Transitory Provisions of the 1987
to the requirements of a valid Constitution to promulgate Proc. No.
appropriation as specified in the 131 and E.O. Nos. 228 & 229.
Constitution
2. YES. The said measures were issued
4. Whether or not Proc. No. 131 and E.O. before July 27, 1987, when the Congress
No. 229 should be invalidated because was formally convened and took over
they do not provide for retention limits legislative power.
required by Article 13, Section 4 of the
Constitution
3. NO. Proc. No. 131 is not an appropriation implementing land reform must be
measure for that is not its principal rejected. There is a substantial
purpose and therefore is not required to distinction between these two classes of
conform to the requirements. owners that is clearly visible except to
those who will not see.
4. NO. R.A. No. 6657 does provide for such
limits now in Section 6 of the law. 10. NO. It is declared that although money is
the traditional mode of payment, other
5. NO. It is settled that the title of the bill
modes of payment shall be permitted as
does not have to be a catalogue of its
compensation. The court accepts the
contents and will suffice if the matters
theory that payment of the just
embodied in the text are relevant to
compensation is not always required to
each other and may be inferred from the
be made fully in money, they find further
title.
that the proportion of cash payment to
6. NO. The rule is that mandamus will lie to the other things of value constituting the
compel the discharge of the total payment, as determined on the
discretionary duty itself but not to basis of the areas of the lands
control the discretion to be exercised. In expropriated, is not unduly oppressive
other words, mandamus can issue to upon the landowner. The other modes,
require action only but not specific which are likewise available to the
action. landowner at his option, are also not
unreasonable because payment is made
7. It is an exercise of the power of eminent in shares of stock, LBP bonds, other
domain because there is payment of just properties or assets, tax credits, and
compensation unlike in the exercise of other things of value equivalent to the
police power wherein confiscation of amount of just compensation.
property is not compensable.
(Court: We do not mind admitting that a certain
8. YES. A statute may be sustained under degree of pragmatism has influenced our
the police power only if there is a decision on this issue. The Court is as acutely
concurrence of the lawful subject and anxious as the rest of our people to see the goal
the lawful method. As the subject and of agrarian reform achieved at last after the
purpose of agrarian reform have been frustrations and deprivations of our peasant
laid down by the Constitution itself, we masses during all these disappointing decades.
may say that the first requirement has We are aware that invalidation of the said
been satisfied. What remains to be section will result in the nullification of the entire
examined is the validity of the method program, killing the farmer's hopes even as they
employed to achieve the constitutional approach realization and resurrecting the
goal. spectre of discontent and dissent in the restless
9. NO. The petitioners have not shown that countryside. That is not in our view the intention
they belong to a different class and of the Constitution, and that is not what we shall
entitled to a different treatment. The decree today.)
argument that not only landowners but 11. NO. The CARP Law conditions the
also owners of other properties must be transfer of possession and ownership of
made to share the burden of the land to the government on receipt by
 the landowner of the corresponding
payment or the deposit by the DAR of
the compensation in cash or LBP bonds
with an accessible bank. Until then, title
also remains with the landowner.

DISPOSITIVE

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and
E.O. Nos. 228 and 229 are SUSTAINED against all
the constitutional objections raised in the herein
petitions.

2. Title to all expropriated properties shall be

transferred to the State only upon full payment
of compensation to their respective owners.

3. All rights previously acquired by the tenant-

farmers under P.D. No. 27 are retained and
recognized.

4. Landowners who were unable to exercise their

rights of retention under P.D. No. 27 shall enjoy
the retention rights granted by R.A. No. 6657
under the conditions therein prescribed.

5. Subject to the above-mentioned rulings all the

petitions are DISMISSED, without
pronouncement as to costs.
COMMISSIONER OF INTERNAL REVENUE, deduction is any of the allowable deductions
petitioner, vs. CENTRAL LUZON DRUG enumerated in Section 34 of the Tax Code.
CORPORATION, respondent.
Same; Same; Same; Same; A tax credit differs
Taxation; Tax Credits and Tax Deductions; Senior from a tax deduction; A tax credit reduces the tax
Citizens’ Law (R.A. No. 7432); The tax credit due, including—whenever applicable—the
allowed under R.A. 7432 to establishments as a income tax that is determined after applying the
result of granting senior citizens 20% discount on corresponding tax rates to taxable income; A tax
their purchase of medicines from private deduction reduces the income that is subject to
establishments may be claimed by such tax in order to arrive at taxable income.—A tax
establishments even though they are operating credit differs from a tax deduction. On the one
at a loss.— Section 4(a) of RA 7432 grants to hand, a tax credit reduces the tax due,
senior citizens the privilege of obtaining a 20 including—whenever applicable—the income tax
percent discount on their purchase of medicine that is determined after applying the
from any private establishment in the country. corresponding tax rates to taxable income. A tax
The latter may then claim the cost of the discount deduction, on the other, reduces the income that
as a tax credit. But can such credit be claimed, is subject to tax in order to arrive at taxable
even though an establishment operates at a loss? income. To think of the former as the latter is to
We answer in the affirmative. avoid, if not entirely confuse, the issue. A tax
credit is used only after the tax has been
Same; Same; Same; Words and Phrases; Tax
computed; a tax deduction, before.
credit generally refers to an amount that is
subtracted directly from one’s total tax liability, Same; Same; Same; Under R.A. 7432, Congress
an allowance against the tax itself, or a has granted without conditions a tax credit
deduction from what is owed; Tax deduction is benefit to all covered establishments; Although
defined as a subtraction from income for tax this tax credit benefit is available, it need not be
purposes, or an amount that is allowed by law to used by losing ventures, since there is no tax
reduce income prior to the application of the tax liability that calls for its application—by its
rate to compute the amount of tax which is nature, the tax credit may still be deducted from
due.—Although the term is not specifically a future, not a present, tax liability, without
defined in our Tax Code, tax credit generally which it does not have any use.—If a net loss is
refers to an amount that is “subtracted directly reported by, and no other taxes are currently due
from one’s total tax liability.” It is an “allowance from, a business establishment, there will
against the tax itself” or “a deduction from what obviously be no tax liability against which any tax
is owed” by a taxpayer to the government. credit can be applied. For the establishment to
Examples of tax credits are withheld taxes, choose the immediate availment of a tax credit
payments of estimated tax, and investment tax will be premature and impracticable.
credits. Tax credit should be understood in Nevertheless, the irrefutable fact remains that,
relation to other tax concepts. One of these is tax under RA 7432, Congress has granted without
deduction—defined as a subtraction “from conditions a tax credit benefit to all covered
income for tax purposes,” or an amount that is establishments. Although this tax credit benefit is
“allowed by law to reduce income prior to [the] available, it need not be used by losing ventures,
application of the tax rate to compute the since there is no tax liability that calls for its
amount of tax which is due.” An example of a tax application. Neither can it be reduced to nil by
the quick yet callow stroke of an administrative
pen, simply because no reduction of taxes can be credited against taxes has not been clarified
instantly be effected. By its nature, the tax credit by the revenue regulations. By ordinary
may still be deducted from a future, not a acceptation, a discount is an “abatement or
present, tax liability, without which it does not reduction made from the gross amount or value
have any use. In the meantime, it need not move. of anything.” To be more precise, it is in business
But it breathes. parlance “a deduction or lowering of an amount
of money”; or “a reduction from the full amount
Same; Same; Same; While a tax liability is
or value of something, especially a price.” In
essential to the availment or use of any tax
business there are many kinds of discount, the
credit, prior tax payments are not—for the
most common of which is that affecting the
existence or grant solely of such credit, neither a
income statement or financial report upon which
tax liability nor a prior tax payment is needed.—
the income tax is based.
While a tax liability is essential to the availment
or use of any tax credit, prior tax payments are Same; Same; Same; Same; “Cash Discount,”
not. On the contrary, for the existence or grant “Sales Discount,” “Quantity, Volume or Bulk
solely of such credit, neither a tax liability nor a Discount,” “Trade Discount,” “Chain Discount,”
prior tax payment is needed. The Tax Code is in and “Functional Discount,” Explained.—A cash
fact replete with provisions granting or allowing discount, for example, is one granted by business
tax credits, even though no taxes have been establishments to credit customers for their
previously paid. prompt payment. It is a “reduction in price
offered to the purchaser if payment is made
Same; Same; Same; To deny the tax credit,
within a shorter period of time than the
despite the plain mandate of the law and the
maximum time specified.” Also referred to as a
regulations carrying out that mandate, is
sales discount on the part of the seller and a
indefensible.—RA 7432 specifically allows
purchase discount on the part of the buyer, it
private establishments to claim as tax credit the
may be expressed in such terms as “5/10, n/30.”
amount of discounts they grant. In turn, the
A quantity discount, however, is a “reduction in
Implementing Rules and Regulations, issued
price allowed for purchases made in large
pursuant thereto, provide the procedures for its
quantities, justified by savings in packaging,
availment. To deny such credit, despite the plain
shipping, and handling.” It is also called a volume
mandate of the law and the regulations carrying
or bulk discount. A “percentage reduction from
out that mandate, is indefensible.
the list price x x x allowed by manufacturers to
Same; Same; Same; Words and Phrases; By wholesalers and by wholesalers to retailers” is
ordinary acceptation, a discount is an known as a trade discount. No entry for it need
“abatement or reduction made from the gross be made in the manual or computerized books of
amount or value of anything.”—The definition accounts, since the purchase or sale is already
given by petitioner is erroneous. It refers to tax valued at the net price actually charged the
credit as the amount representing the 20 percent buyer. The purpose for the discount is to
discount that “shall be deducted by the said encourage trading or increase sales, and the
establishments from their gross income for prices at which the purchased goods may be
income tax purposes and from their gross sales resold are also suggested. Even a chain
for value-added tax or other percentage tax discount—a series of discounts from one list
purposes.” In ordinary business language, the tax price—is recorded at net. Finally, akin to a trade
credit represents the amount of such discount. discount is a functional discount. It is “a
However, the manner by which the discount shall supplier’s price discount given to a purchaser
based on the [latter’s] role in the [former’s] The 20 percent discount required by the law to
distribution system.” This role usually involves be given to senior citizens is a tax credit, not
warehousing or advertising. merely a tax deductionfrom the gross income or
gross sale of the establishment concerned. A tax
Same; Same; Same; Same; The term sales
credit is used by a private establishment only
discounts is not expressly defined in the Tax
after the tax has been computed; a tax
Code, but one provision adverts to amounts
deduction, before the tax is computed. RA 7432
whose sum—along with sales returns,
unconditionally grants a tax credit to all covered
allowances and cost of goods sold—is deducted
entities. Thus, the provisions of the revenue
from gross sales to come up with the gross
regulation that withdraw or modify such grant
income, profit or margin derived from
are void. Basic is the rule that administrative
business.—The term sales discounts is not
regulations cannot amend or revoke the law.
expressly defined in the Tax Code, but one
provision adverts to amounts whose sum—along The Case
with sales returns, allowances and cost of goods
Before us is a Petition for Review1 under Rule 45
sold—is deducted from gross sales to come up
of the Rules of Court, seeking to set aside the
with the gross income, profit or margin derived
August 29, 2002 Decision2 and the August 11,
from business. In another provision therein, sales
2003 Resolution3 of the Court of Appeals (CA) in
discounts that are granted and indicated in the
CA-GR SP No. 67439. The assailed Decision reads
invoices at the time of sale—and that do not
as follows:
depend upon the happening of any future
event—may be excluded from the gross sales "WHEREFORE, premises considered, the
within the same quarter they were given. While Resolution appealed from is AFFIRMED in
determinative only of the VAT, the latter toto. No costs."4
provision also appears as a suitable reference
point for income tax purposes already embraced The assailed Resolution denied petitioner’s
in the former. After all, these two provisions Motion for Reconsideration.
affirm that sales discounts are amounts that are The Facts
always deductible from gross sales.
The CA narrated the antecedent facts as follows:
Same; Same; Same; To be sure, the privilege
enjoyed by the senior citizen must be equivalent "Respondent is a domestic corporation primarily
to the tax credit benefit enjoyed by the private engaged in retailing of medicines and other
establishment granting the discount.—A pharmaceutical products. In 1996, it operated six
distinguishing feature of the implementing rules (6) drugstores under the business name and style
of RA 7432 is the private establishment’s outright ‘Mercury Drug.’
deduction of the discount from the invoice price "From January to December 1996, respondent
of the medicine sold to the senior citizen. It is, granted twenty (20%) percent sales discount to
therefore, expected that for each retail sale qualified senior citizens on their purchases of
made under this law, the discount period lasts no medicines pursuant to Republic Act No. [R.A.]
more than a day, because such discount is 7432 and its Implementing Rules and
given—and the net amount thereof collected— Regulations. For the said period, the amount
immediately upon perfection of the sale. allegedly representing the 20% sales discount
PANGANIBAN, J.: granted by respondent to qualified senior
citizens totaled ₱904,769.00.
"On April 15, 1997, respondent filed its Annual Corporation vs. Commissioner of Internal
Income Tax Return for taxable year 1996 Revenue’ promulgated on May 31, 2001, to wit:
declaring therein that it incurred net losses from
‘However, Sec. 229 clearly does not apply in the
its operations.
instant case because the tax sought to be
"On January 16, 1998, respondent filed with refunded or credited by petitioner was not
petitioner a claim for tax refund/credit in the erroneously paid or illegally collected. We take
amount of ₱904,769.00 allegedly arising from exception to the CTA’s sweeping but unfounded
the 20% sales discount granted by respondent to statement that ‘both tax refund and tax credit
qualified senior citizens in compliance with [R.A.] are modes of recovering taxes which are either
7432. Unable to obtain affirmative response erroneously or illegally paid to the government.’
from petitioner, respondent elevated its claim to Tax refunds or credits do not exclusively pertain
the Court of Tax Appeals [(CTA or Tax to illegally collected or erroneously paid taxes as
Court)] via a Petition for Review. they may be other circumstances where a refund
is warranted. The tax refund provided under
"On February 12, 2001, the Tax Court rendered
Section 229 deals exclusively with illegally
a Decision5 dismissing respondent’s Petition for
collected or erroneously paid taxes but there are
lack of merit. In said decision, the [CTA] justified
other possible situations, such as the refund of
its ruling with the following ratiocination:
excess estimated corporate quarterly income tax
‘x x x, if no tax has been paid to the government, paid, or that of excess input tax paid by a VAT-
erroneously or illegally, or if no amount is due registered person, or that of excise tax paid on
and collectible from the taxpayer, tax refund or goods locally produced or manufactured but
tax credit is unavailing. Moreover, whether the actually exported. The standards and mechanics
recovery of the tax is made by means of a claim for the grant of a refund or credit under these
for refund or tax credit, before recovery is situations are different from that under Sec. 229.
allowed[,] it must be first established that there Sec. 4[.a)] of R.A. 7432, is yet another instance of
was an actual collection and receipt by the a tax credit and it does not in any way refer to
government of the tax sought to be recovered. x illegally collected or erroneously paid taxes, x x
x x. x.’"7

‘x x x x x x x x x Ruling of the Court of Appeals

‘Prescinding from the above, it could logically be The CA affirmed in toto the Resolution of the
deduced that tax credit is premised on the Court of Tax Appeals (CTA) ordering petitioner to
existence of tax liability on the part of taxpayer. issue a tax credit certificate in favor of
In other words, if there is no tax liability, tax respondent in the reduced amount of
credit is not available.’ ₱903,038.39. It reasoned that Republic Act No.
(RA) 7432 required neither a tax liability nor a
"Respondent lodged a Motion for payment of taxes by private establishments prior
Reconsideration. The [CTA], in its assailed to the availment of a tax credit. Moreover, such
resolution,6 granted respondent’s motion for credit is not tantamount to an unintended
reconsideration and ordered herein petitioner to benefit from the law, but rather a just
issue a Tax Credit Certificate in favor of compensation for the taking of private property
respondent citing the decision of the then for public use.
Special Fourth Division of [the CA] in CA G.R. SP
No. 60057 entitled ‘Central [Luzon] Drug Hence this Petition.8
The Issues Tax credit should be understood in relation to
other tax concepts. One of these is tax
Petitioner raises the following issues for our
deduction -- defined as a subtraction "from
consideration:
income for tax purposes,"18 or an amount that is
"Whether the Court of Appeals erred in holding "allowed by law to reduce income prior to [the]
that respondent may claim the 20% sales application of the tax rate to compute the
discount as a tax credit instead of as a deduction amount of tax which is due."19 An example of
from gross income or gross sales. a tax deduction is any of the allowable
deductions enumerated in Section 3420 of the
"Whether the Court of Appeals erred in holding Tax Code.
that respondent is entitled to a refund."9
A tax credit differs from a tax deduction. On the
These two issues may be summed up in only one: one hand, a tax credit reduces the tax due,
whether respondent, despite incurring a net loss, including -- whenever applicable -- the income
may still claim the 20 percent sales discount as a tax that is determined after applying the
tax credit. corresponding tax rates to taxable
The Court’s Ruling income.21 A tax deduction, on the other, reduces
the income that is subject to tax22 in order to
The Petition is not meritorious. arrive at taxable income.23 To think of the former
Sole Issue: as the latter is to avoid, if not entirely confuse,
the issue. A tax credit is used only after the tax
Claim of 20 Percent Sales Discount has been computed; a tax deduction, before.
as Tax Credit Despite Net Loss Tax Liability Required
Section 4a) of RA 743210 grants to senior citizens for Tax Credit
the privilege of obtaining a 20 percent discount
on their purchase of medicine from any private Since a tax credit is used to reduce directly the
establishment in the country.11 The latter may tax that is due, there ought to be a tax
then claim the cost of the discount as a tax liability before the tax creditcan be applied.
credit.12 But can such credit be claimed, even Without that liability, any tax credit application
though an establishment operates at a loss? will be useless. There will be no reason for
deducting the latter when there is, to begin with,
We answer in the affirmative. no existing obligation to the government.
However, as will be presented shortly,
Tax Credit versus
the existence of a tax credit or its grant by law is
Tax Deduction not the same as the availment or use of such
credit. While the grant is mandatory, the
Although the term is not specifically defined in
availment or use is not.
our Tax Code,13 tax credit generally refers to an
amount that is "subtracted directly from one’s If a net loss is reported by, and no other taxes are
total tax liability."14 It is an "allowance against currently due from, a business establishment,
the tax itself"15 or "a deduction from what is there will obviously be no tax liability against
owed"16 by a taxpayer to the government. which any tax credit can be applied.24 For the
Examples of tax credits are withheld taxes, establishment to choose the immediate
payments of estimated tax, and investment tax availment of a tax credit will be premature and
credits.17 impracticable. Nevertheless, the irrefutable fact
remains that, under RA 7432, Congress has necessarily paid by -- such VAT-registered person
granted without conditions a tax credit benefit in the course of trade or business; or the
to all covered establishments. transitional input tax determined in accordance
with Section 111(A). The latter type may in fact
Although this tax credit benefit is available, it
be an amount equivalent to only eight percent of
need not be used by losing ventures, since there
the value of a VAT-registered person’s beginning
is no tax liability that calls for its application.
inventory of goods, materials and supplies, when
Neither can it be reduced to nil by the quick yet
such amount -- as computed -- is higher than the
callow stroke of an administrative pen, simply
actual VAT paid on the said items.25 Clearly from
because no reduction of taxes can instantly be
this provision, the tax credit refers to an input
effected. By its nature, the tax credit may still be
tax that is either due only or given a value by
deducted from a future, not a present, tax
mere comparison with the VAT actually paid --
liability, without which it does not have any use.
then later prorated. No tax is actually paid prior
In the meantime, it need not move. But it
to the availment of such credit.
breathes.
In Section 111(B), a one and a half percent
Prior Tax Payments Not
input tax credit that is merely presumptive is
Required for Tax Credit allowed. For the purchase of primary agricultural
products used as inputs -- either in the
While a tax liability is essential to the availment processing of sardines, mackerel and milk, or in
or use of any tax credit, prior tax payments are the manufacture of refined sugar and cooking oil
not. On the contrary, for the existence or -- and for the contract price of public work
grant solely of such credit, neither a tax liability contracts entered into with the government,
nor a prior tax payment is needed. The Tax Code again, no prior tax payments are needed for the
is in fact replete with provisions granting or use of the tax credit.
allowing tax credits, even though no taxes have
been previously paid. More important, a VAT-registered person whose
sales are zero-rated or effectively zero-rated
For example, in computing the estate tax due, may, under Section 112(A), apply for the
Section 86(E) allows a tax credit -- subject to issuance of a tax credit certificate for the
certain limitations -- for estate taxes paid to a amount of creditable input taxes merely due --
foreign country. Also found in Section 101(C) is a again not necessarily paid to -- the government
similar provision for donor’s taxes -- again when and attributable to such sales, to the extent that
paid to a foreign country -- in computing for the input taxes have not been applied against
the donor’s tax due. The tax credits in both output taxes.26 Where a taxpayer
instances allude to the prior payment of taxes, is engaged in zero-rated or effectively zero-rated
even if not made to our government. sales and also in taxable or exempt sales, the
Under Section 110, a VAT (Value-Added Tax)- amount of creditable input taxes due that are
registered person engaging in transactions -- not directly and entirely attributable to any one
whether or not subject to the VAT -- is also of these transactions shall be proportionately
allowed a tax credit that includes a ratable allocated on the basis of the volume of sales.
portion of any input tax not directly attributable Indeed, in availing of such tax credit for VAT
to either activity. This input tax may either be the purposes, this provision -- as well as the one
VAT on the purchase or importation of goods or earlier mentioned -- shows that the prior
services that is merely due from -- not payment of taxes is not a requisite.
It may be argued that Section 28(B)(5)(b) of the as a credit against the tax levied in the
Tax Code is another illustration of a tax latter.29 Apparently, payment is made to
credit allowed, even though no prior tax the state of source, not the state of residence. No
payments are not required. Specifically, in this tax, therefore, has been previously paid to the
provision, the imposition of a final withholding latter.
tax rate on cash and/or property dividends
Under special laws that particularly affect
received by a nonresident foreign corporation
businesses, there can also be tax
from a domestic corporation is subjected to the
credit incentives. To illustrate, the incentives
condition that a foreign tax credit will be given
provided for in Article 48 of Presidential Decree
by the domiciliary country in an amount
No. (PD) 1789, as amended by Batas Pambansa
equivalent to taxes that are merely deemed
Blg. (BP) 391, include tax credits equivalent to
paid.27 Although true, this provision actually
either five percent of the net value earned, or
refers to the tax credit as a condition only for the
five or ten percent of the net local content of
imposition of a lower tax rate, not as
exports.30 In order to avail of such credits under
a deduction from the corresponding tax liability.
the said law and still achieve its objectives, no
Besides, it is not our government but the
prior tax payments are necessary.
domiciliary country that credits against the
income tax payable to the latter by the foreign From all the foregoing instances, it is evident that
corporation, the tax to be foregone or spared.28 prior tax payments are not indispensable to the
availment of a tax credit. Thus, the CA correctly
In contrast, Section 34(C)(3), in relation to
held that the availment under RA 7432 did not
Section 34(C)(7)(b), categorically allows as
require prior tax payments by private
credits, against the income tax imposable under
establishments concerned.31 However, we do
Title II, the amount of income taxes merely
not agree with its finding32 that the carry-over
incurred -- not necessarily paid -- by a domestic
of tax credits under the said special law to
corporation during a taxable year in any foreign
succeeding taxable periods, and even their
country. Moreover, Section 34(C)(5) provides
application against internal revenue taxes, did
that for such taxes incurred but not paid, a tax
not necessitate the existence of a tax liability.
credit may be allowed, subject to the condition
precedent that the taxpayer shall simply give a The examples above show that a tax liability is
bond with sureties satisfactory to and approved certainly important in the availment or use, not
by petitioner, in such sum as may be required; the existence or grant, of a tax credit. Regarding
and further conditioned upon payment by the this matter, a private establishment reporting
taxpayer of any tax found due, upon petitioner’s a net loss in its financial statements is no
redetermination of it. different from another that presents a net
income. Both are entitled to the tax
In addition to the above-cited provisions in the
credit provided for under RA 7432, since the law
Tax Code, there are also tax treaties and special
itself accords that unconditional benefit.
laws that grant or allow tax credits, even though
However, for the losing establishment to
no prior tax payments have been made.
immediately apply such credit, where no tax is
Under the treaties in which the tax due, will be an improvident usance.
credit method is used as a relief to avoid double
Sections 2.i and 4 of Revenue
taxation, income that is taxed in the state of
source is also taxable in the state of residence, Regulations No. 2-94 Erroneous
but the tax paid in the former is merely allowed
RA 7432 specifically allows private may be expressed in such
establishments to claim as tax credit the amount terms as "5/10, n/30."42
of discounts they grant.33 In turn, the
A quantity discount, however, is a "reduction in
Implementing Rules and Regulations, issued
price allowed for purchases made in large
pursuant thereto, provide the procedures for its
quantities, justified by savings in packaging,
availment.34To deny such credit, despite the
shipping, and handling."43 It is also called
plain mandate of the law and the regulations
a volume or bulk discount.44
carrying out that mandate, is indefensible.
A "percentage reduction from the list price x x x
First, the definition given by petitioner is
allowed by manufacturers to wholesalers and by
erroneous. It refers to tax credit as the amount
wholesalers to retailers"45 is known as a trade
representing the 20 percent discount that "shall
discount. No entry for it need be made in the
be deducted by the said establishments from
manual or computerized books of accounts,
their gross income for income tax purposes and
since the purchase or sale is already valued at the
from their gross sales for value-added tax or
net price actually charged the buyer.46 The
other percentage tax purposes."35 In ordinary
purpose for the discount is to encourage trading
business language, the tax credit represents the
or increase sales, and the prices at which the
amount of such discount. However, the manner
purchased goods may be resold are also
by which the discount shall be credited against
suggested.47 Even a chain discount -- a series of
taxes has not been clarified by the revenue
discounts from one list price -- is recorded at
regulations.
net.48
By ordinary acceptation, a discount is an
Finally, akin to a trade discount is a functional
"abatement or reduction made from the gross
discount. It is "a supplier’s price discount given to
amount or value of anything."36 To be more
a purchaser based on the [latter’s] role in the
precise, it is in business parlance "a deduction or
[former’s] distribution system."49 This role
lowering of an amount of money;"37 or "a
usually involves warehousing or advertising.
reduction from the full amount or value of
something, especially a price."38 In business Based on this discussion, we find that the nature
there are many kinds of discount, the most of a sales discount is peculiar. Applying generally
common of which is that affecting the income accepted accounting principles (GAAP) in the
statement39 or financial report upon which country, this type of discount is reflected in
the income tax is based. the income statement50 as a line item deducted -
- along with returns, allowances, rebates and
Business Discounts
other similar expenses -- from gross sales to
Deducted from Gross Sales arrive at net sales.51 This type of presentation is
resorted to, because the accounts
A cash discount, for example, is one granted by
receivable and sales figures that arise from sales
business establishments to credit customers for
discounts, -- as well as from quantity,
their prompt payment.40 It is a "reduction in price
volume or bulk discounts -- are recorded in the
offered to the purchaser if payment is made
manual and computerized books of
within a shorter period of time than the
accounts and reflected in the financial
maximum time specified."41 Also referred to as
statements at the gross amounts of the
a sales discount on the part of the seller and
invoices.52This manner of recording credit sales -
a purchase discounton the part of the buyer, it
- known as the gross method -- is most widely
used, because it is simple, more convenient to collected -- immediately upon perfection of the
apply than the net method, and produces no sale.61 Although prompt payment is made for an
material errors over time.53 arm’s-length transaction by the senior citizen,
the real and compelling reason for the private
However, under the net method used in
establishment giving the discount is that the law
recording trade, chain or functional discounts,
itself makes it mandatory.
only the net amounts of the invoices -- after the
discounts have been deducted -- are recorded in What RA 7432 grants the senior citizen is a mere
the books of accounts54 and reflected in the discount privilege, not a sales discount or any of
financial statements. A separate line item cannot the above discounts in particular. Prompt
be shown,55 because the transactions payment is not the reason for (although a
themselves involving both accounts necessary consequence of) such grant. To be
receivable and sales have already been entered sure, the privilege enjoyed by the senior citizen
into, net of the said discounts. must be equivalent to the tax credit benefit
enjoyed by the private establishment granting
The term sales discounts is not expressly defined
the discount. Yet, under the revenue regulations
in the Tax Code, but one provision adverts to
promulgated by our tax authorities, this benefit
amounts whose sum -- along with sales
has been erroneously likened and confined to
returns, allowances and cost of goods sold56 -- is
a sales discount.
deducted from gross sales to come up with
the gross income, profit or margin57 derived To a senior citizen, the monetary effect of the
from business.58 In another provision privilege may be the same as that resulting from
therein, sales discounts that are granted and a sales discount. However, to a private
indicated in the invoices at the time of sale -- and establishment, the effect is different from a
that do not depend upon the happening of any simple reduction in price that results from such
future event -- may be excluded from the gross discount. In other words, the tax credit benefit is
sales within the same quarter they were not the same as a sales discount. To repeat from
given.59 While determinative only of the VAT, the our earlier discourse, this benefit cannot and
latter provision also appears as a suitable should not be treated as a tax deduction.
reference point for income tax purposes already
To stress, the effect of a sales discount on
embraced in the former. After all, these two
the income statement and income tax return of
provisions affirm that sales discounts are
an establishment covered by RA 7432 is different
amounts that are always deductible from gross
from that resulting from the availment or use of
sales.
its tax credit benefit. While the former is a
Reason for the Senior Citizen Discount: deduction before, the latter is a deduction after,
the income tax is computed. As mentioned
The Law, Not Prompt Payment
earlier, a discount is not necessarily a sales
A distinguishing feature of the implementing discount, and a tax credit for a simple discount
rules of RA 7432 is the private establishment’s privilege should not be automatically treated like
outright deduction of the discount from the a sales discount. Ubi lex non distinguit, nec nos
invoice price of the medicine sold to the senior distinguere debemus. Where the law does not
citizen.60 It is, therefore, expected that for each distinguish, we ought not to distinguish.
retail sale made under this law, the discount
Sections 2.i and 4 of Revenue Regulations No.
period lasts no more than a day, because such
(RR) 2-94 define tax credit as the 20 percent
discount is given -- and the net amount thereof
discount deductible from gross In the present case, the tax authorities have
income for income tax purposes, or from gross given the term tax credit in Sections 2.i and 4 of
sales for VAT or other percentage tax purposes. RR 2-94 a meaning utterly in contrast to what RA
In effect, the tax credit benefit under RA 7432 is 7432 provides. Their interpretation has muddled
related to a sales discount. This contrived up the intent of Congress in granting a mere
definition is improper, considering that the latter discount privilege, not a sales discount. The
has to be deducted from gross sales in order to administrative agency issuing these regulations
compute the gross income in the income may not enlarge, alter or restrict the provisions
statementand cannot be deducted again, even of the law it administers; it cannot engraft
for purposes of computing the income tax. additional requirements not contemplated by
the legislature.67
When the law says that the cost of the discount
may be claimed as a tax credit, it means that the In case of conflict, the law must prevail.68 A
amount -- when claimed -- shall be treated as a "regulation adopted pursuant to law is
reduction from any tax liability, plain and simple. law."69 Conversely, a regulation or any portion
The option to avail of the tax creditbenefit thereof not adopted pursuant to law is no law
depends upon the existence of a tax liability, but and has neither the force nor the effect of law.70
to limit the benefit to a sales discount -- which is
Availment of Tax
not even identical to the discount privilege that
is granted by law -- does not define it at all and Credit Voluntary
serves no useful purpose. The definition must,
therefore, be stricken down.
Third, the word may in the text of the
Laws Not Amended statute71 implies that the
availability of the tax credit benefit is neither
by Regulations
unrestricted nor mandatory.72 There is no
Second, the law cannot be amended by a mere absolute right conferred upon respondent, or
regulation. In fact, a regulation that "operates to any similar taxpayer, to avail itself of the tax
create a rule out of harmony with credit remedy whenever it chooses; "neither
the statute is a mere nullity";62 it cannot prevail. does it impose a duty on the part of the
government to sit back and allow an important
It is a cardinal rule that courts "will and should
facet of tax collection to be at the sole control
respect the contemporaneous construction
and discretion of the taxpayer."73 For the tax
placed upon a statute by the executive officers
authorities to compel respondent to deduct the
whose duty it is to enforce it x x x."63 In the
20 percent discount from either its gross
scheme of judicial tax administration, the need
income or its gross sales74 is, therefore, not only
for certainty and predictability in the
to make an imposition without basis in law, but
implementation of tax laws is crucial.64 Our tax
also to blatantly contravene the law itself.
authorities fill in the details that "Congress may
not have the opportunity or competence to What Section 4.a of RA 7432 means is that
provide."65 The regulations these authorities the tax credit benefit is merely permissive, not
issue are relied upon by taxpayers, who are imperative. Respondent is given two options --
certain that these will be followed by the either to claim or not to claim the cost of the
courts.66 Courts, however, will not uphold these discounts as a tax credit. In fact, it may even
authorities’ interpretations when clearly absurd, ignore the credit and simply consider the gesture
erroneous or improper.
as an act of beneficence, an expression of its convenience.78 The discount privilege to which
social conscience. our senior citizens are entitled is actually a
benefit enjoyed by the general public to which
Granting that there is a tax liability and
these citizens belong. The discounts given would
respondent claims such cost as a tax credit, then
have entered the coffers and formed part of
the tax credit can easily be applied. If there is
the gross sales of the private establishments
none, the credit cannot be used and will just
concerned, were it not for RA 7432. The
have to be carried over and
permanent reduction in their total revenues is a
revalidated75 accordingly. If, however, the
forced subsidy corresponding to the taking of
business continues to operate at a loss and no
private property for public use or benefit.
other taxes are due, thus compelling it to close
shop, the credit can never be applied and will be As a result of the 20 percent discount imposed
lost altogether. by RA 7432, respondent becomes entitled to
a just compensation. This term refers not only to
In other words, it is the existence or the lack of a
the issuance of a tax credit certificate indicating
tax liability that determines whether the cost of
the correct amount of the discounts given, but
the discounts can be used as a tax credit. RA
also to the promptness in its release. Equivalent
7432 does not give respondent the unfettered
to the payment of property taken by the State,
right to avail itself of the credit whenever it
such issuance -- when not done within
pleases. Neither does it allow our tax
a reasonable time from the grant of the
administrators to expand or contract the
discounts -- cannot be considered as just
legislative mandate. "The ‘plain meaning rule’
compensation. In effect, respondent is made to
or verba legis in statutory construction is thus
suffer the consequences of being immediately
applicable x x x. Where the words of a statute are
deprived of its revenues while awaiting actual
clear, plain and free from ambiguity, it must be
receipt, through the certificate, of the equivalent
given its literal meaning and applied without
amount it needs to cope with the reduction in its
attempted interpretation."76
revenues.79
Tax Credit Benefit
Besides, the taxation power can also be used as
Deemed Just Compensation an implement for the exercise of the power of
eminent domain.80Tax measures are but
Fourth, Sections 2.i and 4 of RR 2-94 deny the "enforced contributions exacted on pain of penal
exercise by the State of its power of eminent sanctions"81 and "clearly imposed for a public
domain. Be it stressed that the privilege enjoyed purpose."82 In recent years, the power to tax has
by senior citizens does not come directly from indeed become a most effective tool to realize
the State, but rather from the private social justice, public welfare, and the equitable
establishments concerned. Accordingly, the tax distribution of wealth.83
credit benefit granted to these establishments
can be deemed as their just compensation for While it is a declared commitment under Section
private property taken by the State for public 1 of RA 7432, social justice "cannot be invoked to
use.77 trample on the rights of property owners who
under our Constitution and laws are also entitled
The concept of public use is no longer confined to protection. The social justice consecrated in
to the traditional notion of use by the public, but our [C]onstitution [is] not intended to take away
held synonymous with public interest, public rights from a person and give them to another
benefit, public welfare, and public who is not entitled thereto."84 For this reason, a
just compensation for income that is taken away Meeting on Social Justice, which finalized RA
from respondent becomes necessary. It is in 7432, disclose the true intent of our legislators to
the tax credit that our legislators find support to treat the sales discounts as a tax credit, rather
realize social justice, and no administrative body than as a deduction from gross income. We
can alter that fact. quote from those deliberations as follows:

To put it differently, a private establishment that "THE CHAIRMAN (Rep. Unico). By the way,
merely breaks even85 -- without the discounts yet before that ano, about deductions from taxable
-- will surely start to incur losses because of such income. I think we incorporated there a
discounts. The same effect is expected if its provision na - on the responsibility of the private
mark-up is less than 20 percent, and if all its sales hospitals and drugstores, hindi ba?
come from retail purchases by senior citizens.
SEN. ANGARA. Oo.
Aside from the observation we have already
raised earlier, it will also be grossly unfair to an THE CHAIRMAN. (Rep. Unico), So, I think we have
establishment if the discounts will be treated to put in also a provision here about the
merely as deductions from either its gross deductions from taxable income of that private
income or its gross sales. Operating at a loss hospitals, di ba ganon 'yan?
through no fault of its own, it will realize that
the tax credit limitation under RR 2-94 is inutile, MS. ADVENTO. Kaya lang po sir, and mga
if not improper. Worse, profit-generating discounts po nila affecting government and
businesses will be put in a better position if they public institutions, so, puwede na po nating hindi
avail themselves of tax credits denied those that isama yung mga less deductions ng taxable
are losing, because no taxes are due from the income.
latter. THE CHAIRMAN. (Rep. Unico). Puwede na. Yung
Grant of Tax Credit about the private hospitals. Yung isiningit natin?

Intended by the Legislature MS. ADVENTO. Singit na po ba yung 15% on

credit. (inaudible/did not use the microphone).
Fifth, RA 7432 itself seeks to adopt measures
whereby senior citizens are assisted by the SEN. ANGARA. Hindi pa, hindi pa.
community as a whole and to establish a THE CHAIRMAN. (Rep. Unico) Ah, 'di pa ba
program beneficial to them.86 These objectives naisama natin?
are consonant with the constitutional policy of
making "health x x x services available to all the SEN. ANGARA. Oo. You want to insert that?
people at affordable cost"87 and of giving THE CHAIRMAN (Rep. Unico). Yung ang proposal
"priority for the needs of the x x x ni Senator Shahani, e.
elderly."88 Sections 2.i and 4 of RR 2-94, however,
contradict these constitutional policies and SEN. ANGARA. In the case of private hospitals
statutory objectives. they got the grant of 15% discount, provided
that, the private hospitals can claim the expense
Furthermore, Congress has allowed all private as a tax credit.
establishments a simple tax credit, not a
deduction. In fact, no cash outlay is required REP. AQUINO. Yah could be allowed as
from the government for the availment or use of deductions in the perpetrations of (inaudible)
such credit. The deliberations on February 5, income.
1992 of the Bicameral Conference Committee
SEN. ANGARA. I-tax credit na lang natin para Sixth and last, RA 7432 is a special law that
walang cash-out ano? should prevail over the Tax Code -- a general law.
"x x x [T]he rule is that on a specific matter the
REP. AQUINO. Oo, tax credit. Tama, Okay.
special law shall prevail over the general law,
Hospitals ba o lahat ng establishments na
which shall
covered.
be resorted to only to supply deficiencies in the
THE CHAIRMAN. (Rep. Unico). Sa kuwan lang former."90 In addition, "[w]here there are two
yon, as private hospitals lang. statutes, the earlier special and the later general
-- the terms of the general broad enough to
REP. AQUINO. Ano ba yung establishments na include the matter provided for in the special --
covered? the fact that one is special and the other is
SEN. ANGARA. Restaurant lodging houses, general creates a presumption that the special is
recreation centers. to be considered as remaining an exception to
the general,91 one as a general law of the land,
REP. AQUINO. All establishments covered the other as the law of a particular case."92 "It is
siguro? a canon of statutory construction that a
SEN. ANGARA. From all establishments. Alisin na later statute, general in its terms and not
natin 'Yung kuwan kung ganon. Can we go back expressly repealing a prior special statute, will
to Section 4 ha? ordinarily not affect the special provisions of
such earlier statute."93
REP. AQUINO. Oho.
RA 7432 is an earlier law not expressly repealed
SEN. ANGARA. Letter A. To capture that thought, by, and therefore remains an exception to, the
we'll say the grant of 20% discount from all Tax Code -- a later law. When the former states
establishments et cetera, et cetera, provided that a tax credit may be claimed, then the
that said establishments - provided that private requirement of prior tax payments under certain
establishments may claim the cost as a tax credit. provisions of the latter, as discussed above,
Ganon ba 'yon? cannot be made to apply. Neither can the
instances of or references to a tax
REP. AQUINO. Yah.
deduction under the Tax Code94 be made to
SEN. ANGARA. Dahil kung government, they restrict RA 7432. No provision of any revenue
don't need to claim it. regulation can supplant or modify the acts of
Congress.
THE CHAIRMAN. (Rep. Unico). Tax credit.
WHEREFORE, the Petition is hereby DENIED. The
SEN. ANGARA. As a tax credit [rather] than a
assailed Decision and Resolution of the Court of
kuwan - deduction, Okay.
Appeals AFFIRMED. No pronouncement as to
REP. AQUINO Okay. costs.

SEN. ANGARA. Sige Okay. Di subject to style na SO ORDERED.

lang sa Letter A".89

Special Law
DIGEST:
Over General Law
Facts:
Respondents operated six drugstores under the
business name Mercury Drug. From January to may then claim the cost of the discount as a tax
December 1996 respondent granted 20% sales credit. Such credit can be claimed even if the
discount to qualified senior citizens on their establishment operates at a loss.
purchases of medicines pursuant to RA 7432 for
a total of ₱ 904,769. A tax credit generally refers to an amount that is
“subtracted directly from one’s total tax
On April 15, 1997, respondent filed its annual liability.” It is an “allowance against the tax itself”
Income Tax Return for taxable year 1996 or “a deduction from what is owed” by a
declaring therein net losses. On Jan. 16, 1998 taxpayer to the government.
respondent filed with petitioner a claim for tax A tax credit should be understood in relation to
refund/credit of ₱ 904,769.00 allegedly arising other tax concepts. One of these is tax deduction
from the 20% sales discount. Unable to obtain – which is subtraction “from income for tax
affirmative response from petitioner, purposes,” or an amount that is “allowed by law
respondent elevated its claim to the Court of Tax to reduce income prior to the application of the
Appeals. The court dismissed the same but upon tax rate to compute the amount of tax which is
reconsideration, the latter reversed its earlier due.” In other words, whereas a tax credit
ruling and ordered petitioner to issue a Tax reduces the tax due, tax deduction reduces the
Credit Certificate in favor of respondent citing CA income subject to tax in order to arrive at the
GR SP No. 60057 (May 31, 2001, Central Luzon taxable income.
Drug Corp. vs. CIR) citing that Sec. 229 of RA 7432
deals exclusively with illegally collected or A tax credit is used to reduce directly the tax that
erroneously paid taxes but that there are other is due, there ought to be a tax liability before the
situations which may warrant a tax tax credit can be applied. Without that liability,
credit/refund. any tax credit application will be useless. There
will be no reason for deducting the latter when
CA affirmed Court of Tax Appeal's decision there is, to begin with, no existing obligation to
reasoning that RA 7432 required neither a tax the government. However, as will be presented
liability nor a payment of taxes by private shortly, the existence of a tax credit or its grant
establishments prior to the availment of a tax by law is not the same as the availment or use of
credit. Moreover, such credit is not tantamount such credit. While the grant is mandatory, the
to an unintended benefit from the law, but availment or use is not. If a net loss is reported
rather a just compensation for the taking of by, and no other taxes are currently due from, a
private property for public use. business establishment, there will obviously be
no tax liability against which any tax credit can
Issue: be applied. For the establishment to choose the
Whether or not respondent, despite incurring a immediate availment of a tax credit will be
net loss, may still claim the 20% sales discount as premature and impracticable.
a tax credit.

Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to
senior citizens the privilege of obtaining a 20%
discount on their purchase of medicine from any
private establishment in the country. The latter
NURSERY CARE CORPORATION; SHOEMART, invites a review of the evidence presented, the
INC.; STAR APPLIANCE CENTER, INC.; H&B, INC.; question posed is one of fact. Thus, the test of
SUPPLIES STATION, INC.; and HARDWARE whether a question is one of law or of fact is not
WORKSHOP, INC., petitioners, vs. ANTHONY the appellation given to such question by the
ACEVEDO, in his capacity as THE TREASURER OF party raising the same; rather, it is whether the
MANILA; and THE CITY OF MANILA, appellate court can determine the issue raised
respondents. without reviewing or evaluating the evidence, in
which case, it is a question of law; otherwise it is
a question of fact.
Remedial Law; Civil Procedure; Appeals; Modes
Taxation; Double Taxation; On the basis of the
of Appeal from the Decisions and Final Orders of
rulings in City of Manila v. Coca-Cola Bottlers
the Regional Trial Court (RTC).—The Rules of
Philippines, Inc., 595 SCRA 299 (2009) and
Court provides three modes of appeal from the
Swedish Match Philippines, Inc. v. The Treasurer
decisions and final orders of the RTC, namely: (1)
of the City of Manila, 700 SCRA 428 (2013), the
ordinary appeal or appeal by writ of error under
Court now holds that all the elements of double
Rule 41, where the decisions and final orders
taxation concurred upon the City of Manila’s
were rendered in civil or criminal actions by the
assessment on and collection from the
RTC in the exercise of original jurisdiction; (2)
petitioners of taxes for the first quarter of 1999
petition for review under Rule 42, where the
pursuant to Section 21 of the Revenue Code of
decisions and final orders were rendered by the
Manila.—On the basis of the rulings in City of
RTC in the exercise of appellate jurisdiction; and
Manila v. Coca-Cola Bottlers Philippines, Inc., 595
(3) petition for review on certiorari to the
SCRA 299 (2009) and Swedish Match Philippines,
Supreme Court under Rule 45. The first mode of
Inc. v. The Treasurer of the City of Manila, 700
appeal is taken to the CA on questions of fact, or
SCRA 428 (2013), the Court now holds that all the
mixed questions of fact and law. The second
elements of double taxation concurred upon the
mode of appeal is brought to the CA on questions
City of Manila’s assessment on and collection
of fact, of law, or mixed questions of fact and
from the petitioners of taxes for the first quarter
law. The third mode of appeal is elevated to the
of 1999 pursuant to Section 21 of the Revenue
Supreme Court only on questions of law.
Code of Manila. Firstly, because Section 21 of the
Same; “Questions of Law” and “Questions of Revenue Code of Manila imposed the tax on a
Fact,” Distinguished.—The distinction between a person who sold goods and services in the course
question of law and a question of fact is well- of trade or business based on a certain
established. On the one hand, a question of law percentage of his gross sales or receipts in the
arises when there is doubt as to what the law is preceding calendar year, while Section 15 and
on a certain state of facts; on the other, there is Section 17 likewise imposed the tax on a person
a question of fact when the doubt arises as to the who sold goods and services in the course of
truth or falsity of the alleged facts. According to trade or business but only identified such person
Leoncio v. De Vera, 546 SCRA 180 (2008): x x x For with particularity, namely, the wholesaler,
a question to be one of law, the same must not distributor or dealer (Section 15), and the retailer
involve an examination of the probative value of (Section 17), all the taxes — being imposed on
the evidence presented by the litigants or any of the privilege of doing business in the City of
them. The resolution of the issue must rest solely Manila in order to make the taxpayers contribute
on what the law provides on the given set of to the city’s revenues — were imposed on the
circumstances. Once it is clear that the issue same subject matter and for the same purpose.
Secondly, the taxes were imposed by the same added or percentage taxes under the National
taxing authority (the City of Manila) and within Internal Revenue Code, hereinafter referred to
the same jurisdiction in the same taxing period as NIRC, as amended, a tax of FIFTY PERCENT
(i.e., per calendar year). Thirdly, the taxes were (50%) OF ONE PERCENT (1%) per annum on the
all in the nature of local business taxes. Nursery gross sales or receipts of the preceding calendar
Care Corporation vs. Acevedo, 731 SCRA 280, year is hereby imposed:
G.R. No. 180651 July 30, 2014
A) On person who sells goods and services in the
BERSAMIN, J.: course of trade or businesses; x x x PROVIDED,
that all registered businesses in the City of
The issue here concerns double taxation. There
Manila already paying the aforementioned tax
is double taxation when the same taxpayer is
shall be exempted from payment thereof.
taxed twice when he should be taxed only once
for the same purpose by the same taxing To comply with the City of Manila’s
authority within the same jurisdiction during the assessmentof taxes under Section 21, supra, the
same taxing period, and the taxes are of the petitioners paid under protest the following
same kind or character. Double taxation is amounts corresponding to the first quarter of
obnoxious. 1999,5 to wit:

The Case (a) Nursery Care Corporation ₱595,190.25

Under review are the resolution promulgated in (b) Shoemart Incorporated ₱3,283,520.14
CA-G.R. SP No. 72191 on June 18,
(c) Star Appliance Center ₱236,084.03
2007,1 whereby the Court of Appeals (CA) denied
petitioners' appeal for lack of jurisdiction; and (d) H & B, Inc. ₱1,271,118.74
the resolution promulgated on November 14,
2007,2 whereby the CA denied their motion for (e) Supplies Station, Inc. ₱239,501.25
reconsideration for its lack of merit. (f) Hardware Work Shop, Inc. ₱609,953.24
Antecedents By letter dated March 1, 1999, the petitioners
The City of Manila assessed and collected taxes formally requested the Office of the City
from the individual petitioners pursuant to Treasurer for the tax credit or refund of the local
Section 15 (Tax on Wholesalers, Distributors, or business taxes paid under protest.6 However,
Dealers) and Section 17 (Tax on Retailers) of the then City Treasurer Anthony Acevedo (Acevedo)
Revenue Code of Manila.3 At the same time, the denied the request through his letter of March
City of Manila imposed additional taxes upon the 10, 1999.7
petitioners pursuant to Section 21 ofthe On April 8, 1999, the petitioners, through their
Revenue Code of Manila,4 as amended, as a representative, Cecilia R. Patricio, sought the
condition for the renewal of their respective reconsideration of the denial of their
business licenses for the year 1999. Section 21 of request.8 Still, the City Treasurer did not
the Revenue Code of Manila stated: reconsider.9 In the meanwhile, Liberty Toledo
Section 21. Tax on Business Subject to the Excise, succeeded Acevedo as the City Treasurer of
Value-Added or Percentage Taxes under the Manila.10
NIRC - On any of the following businesses and On April 29, 1999, the petitioners filed their
articles of commerce subject to the excise, value- respective petitions for certiorariin the Regional
Trial Court (RTC) in Manila. The petitions, imposed upon herein petitioners under Section
docketed as Civil Cases Nos. 99-93668 to 99- 21 is not a tax against the business of the
93673,11 were initially raffled to different petitioners (as wholesalers, distributors, dealers
branches, but were soon consolidated in Branch or retailers)but is rather a tax against consumers
34.12 After the presiding judge of Branch 34 or end-users of the articles sold by petitioners.
voluntarily inhibited himself, the consolidated This is plain from a reading of the modifying
cases were transferred to Branch 23,13 but were paragraph of Section 21 which says:
again re-raffled to Branch 19 upon the
"The tax shall be payable by the person paying
designation of Branch 23 as a special drugs
for the services rendered and shall be paid to the
court.14
person rendering the services who is required to
The parties agreed on and jointly submitted the collect and pay the tax within twenty (20) days
following issues for the consideration and after the end of each quarter." (Underscoring
resolution of the RTC, namely: supplied)

(a) Whether or not the collection of taxes under In effect, the petitioners only act as the
Section 21 of Ordinance No. 7794, as amended, collection or withholding agent of the City while
constitutes double taxation. the ones actually paying the tax are the
consumers or end-users of the articles being sold
(b) Whether or not the failure of the petitioners
by petitioners. The taxes imposed under Sec. 21
to avail of the statutorily provided remedy for
represent additional amounts added by the
their tax protest on the ground of
business establishment to the basic prices of its
unconstitutionality, illegality and oppressiveness
goods and services which are paid by the end-
under Section 187 of the Local Government Code
users to the businesses. It is actually not taxes on
renders the present action dismissible for non-
the business of petitioners but on the
exhaustion of administrative remedy.15
consumers. Hence, there is no double taxation in
Decision of the RTC the narrow, strict or obnoxious sense,involved in
the imposition of taxes by the City of Manila
On April 26, 2002, the RTC rendered its decision, under Sections 15, 17 and 21 of the questioned
holding thusly: Ordinance. This in effect resolves infavor of the
The Court perceives of no instance of the constitutionality of the assailed sections of
constitutionally proscribed double taxation, in Ordinance No. 7807 of the City of Manila.
the strict, narrow or obnoxious sense, imposed Petitioners, likewise, pray the Court to direct
upon the petitioners under Section 15 and 17, on respondents to cease and desist from
the one hand, and under Section 21, on the implementing Section 21 of the questioned
other, of the questioned Ordinance. The tax Ordinance. That the Court cannot do, without
imposed under Section 15 and 17, as against that doing away with the mandatory provisions of
imposed under Section 21, are levied against Section 187 of the Local Government Code which
different tax objects or subject matter. The tax distinctly commands that an appeal questioning
under Section 15 is imposed upon wholesalers, the constitutionality or legality of a tax ordinance
distributors or dealers, while that under Section shall not have the effectof suspending the
17 is imposedupon retailers. In short, taxes effectivity of the ordinance and the accrual and
imposed under Section 15 and 17 is a tax on the payment of the tax, fee or charge levied therein.
business of wholesalers, distributors, dealers This is so because an ordinance carries with it the
and retailers. On the other hand, the tax presumption of validity.
xxx notice of appeal instead of by petition for review
from the appellate judgment of a Regional Trial
With the foregoing findings, petitioners’ prayer
Court shall be dismissed.
for the refund of the amounts paid by them
under protest must, likewise, fail. An appeal erroneously taken tothe Court of
Appeals shall not be transferred to the
Wherefore, the petitions are dismissed. Without
appropriate court but shall be dismissed
pronouncement as to costs.
outright.
SO ORDERED.16
WHEREFORE, the foregoing considered, the
The petitioners appealed to the CA. 17 appeal is DISMISSED.

Ruling of the CA SO ORDERED.18

On June 18, 2007, the CA deniedthe petitioners’ The petitioners moved for reconsideration, but
appeal, ruling as follows: the CA denied their motion through the
resolution promulgated on November 14,
The six (6) cases were consolidated on a common 2007.19
question of fact and law, that is, whether the act
ofthe City Treasurer of Manila of assessing and Issues
collecting business taxes under Section 21of
The petitioners now appeal, raising the following
Ordinance 7807, on top of other business taxes
grounds, to wit:
alsoassessed and collected under the previous
sections of the same ordinance is a violation of A.
the provisions of Section 143 of the Local
THE COURT OF APPEALS, IN DISMISSING THE
Government Code.
APPEAL OF THE PETITIONERS AND DENYING
Clearly, the disposition of the present appeal in THEIR MOTION FOR RECONSIDERATION, ERRED
these consolidated cases does not necessitate INRULING THAT THE ISSUE INVOLVED IS A
the calibration of the whole evidence as there is PURELY LEGAL QUESTION.
no question or doubt as to the truth or the
B.
falsehood of the facts obtaining herein, as both
parties agree thereon. The present case involves THE COURT OF APPEALS ERRED IN NOT
a question of law that would not lend itself to an REVERSING THE DECISION OF BRANCH 19 OF THE
examination or evaluation by this Court of the REGIONAL TRIAL COURT OF MANILA DATED 26
probative value of the evidence presented. APRIL 2002 DENYING PETITIONERS’ PRAYER FOR
REFUND OF THE AMOUNTS PAID BY THEM
Thus the Court is constrained todismiss the
UNDER PROTEST AND DISMISSING THE PETITION
instant petition for lack of jurisdiction under
FOR CERTIORARI FILED BY THE PETITIONERS.
Section 2,Rule 50 of the 1997 Rules on Civil
Procedure which states: C.
"Sec. 2. Dismissal of improper appeal to the THE COURT OF APPEALS ERRED IN NOT RULING
Court of Appeals. – An appeal under Rule 41 THAT THE ACT OF THE CITY TREASURER OF
taken from the Regional Trial Court to the Court MANILA IN IMPOSING, ASSESSING AND
of Appeals raising only questions of law shall be COLLECTING THE ADDITIONAL BUSINESS TAX
dismissed, issues purely of law not being UNDER SECTION 21 OFORDINANCE NO. 7794, AS
reviewable by said court. similarly, an appeal by AMENDED BY ORDINANCE NO. 7807, ALSO
KNOWN AS THE REVENUE CODE OF THE CITY the alleged facts.24 According to Leoncio v. De
OFMANILA, IS CONSTITUTIVE OF DOUBLE Vera:25
TAXATION AND VIOLATIVE OF THE LOCAL
x x x For a question to beone of law, the same
GOVERNMENT CODE OF 1991.20
must not involve an examination of the
The main issues for resolution are, therefore, (1) probative value ofthe evidence presented by the
whether or not the CA properly denied due litigants or any of them. The resolution of the
course to the appeal for raising pure questions of issue must restsolely on what the law provides
law; and (2) whether or not the petitioners were on the given set of circumstances. Once it is clear
entitled to the tax credit or tax refund for the that the issue invites a review of the evidence
taxes paid under Section 21, supra. presented, the question posed is one of fact.
Thus, the test of whether a question isone of law
Ruling
or offact is not the appellation given to such
The appeal is meritorious. question by the party raising the same; rather, it
is whether the appellate court can determine the
1. issue raised without reviewing or evaluating the
The CA did not err in dismissing the appeal; evidence, in which case, it is a question oflaw;
but the rules should be liberally applied otherwise it is a question of fact.26
for the sake of justice and equity The nature of the issues to be raised on appeal
The Rules of Courtprovides three modes of can be gleaned from the appellant’s notice of
appeal from the decisions and final orders of the appeal filed in the trial court, and from the
RTC, namely: (1) ordinary appeal or appeal by appellant’s brief submitted to the appellate
writ of error under Rule 41, where the court.27 In this case, the petitioners filed a notice
decisionsand final orders were rendered in civil of appeal in which they contended that the April
or criminal actions by the RTC in the exercise of 26, 2002 decision and the order of July 17, 2002
original jurisdiction; (2) petition for review under issued by the RTC denying their consolidated
Rule 42, where the decisions and final orders motion for reconsideration were contrary to the
were rendered by the RTC in the exerciseof facts and law obtaining in the consolidated
appellate jurisdiction; and (3) petition for review cases.28 In their consolidated memorandum filed
on certiorarito the Supreme Court under Rule in the CA, they essentially assailed the RTC’s
45.21 The first mode of appeal is taken to the CA ruling that the taxes imposed on and collected
on questions of fact, or mixed questions of fact from the petitioners under Section 21 of the
and law. The second mode of appeal is brought Revenue Code of Manila constituted double
to the CA on questions of fact, of law, or mixed taxation in the strict, narrow or obnoxious sense.
questions of fact and law.22 The third mode of Considered together, therefore, the notice of
appeal is elevated to the Supreme Court only on appeal and consolidated memorandum
questions of law.23 evidently did notraise issues that required the
reevaluation of evidence or the relevance of
The distinction between a question oflaw and a surrounding circumstances.
question of fact is well established. On the one
hand, a question of law ariseswhen there is The CA rightly concluded that the petitioners
doubt as to what the law is on a certain state of thereby raised only a question of law. The
facts; on the other, there is a question of fact dismissal of their appeal was proper, strictly
when the doubt arises asto the truth or falsity of speaking, because Section 2, Rule 50 of the Rules
of Court provides that an appeal from the RTC to
the CA raising only questions of law shall be against the petitioners constituted double
dismissed; taxation because the local business taxes under
Section 15 and Section 17 of the Revenue Code
and that an appeal erroneously taken to the CA
of Manila were already being paid by
shall be outrightly dismissed.29
them.31 They contend that the proviso in Section
2. 21 exempted all registered businesses in the City
of Manila from paying the tax imposed under
Collection of taxes pursuant to Section 21 of the Section 21;32 and that the exemption was more
Revenue Code of Manila constituted double in accord with Section 143 of the Local
taxation Government Code,33 the law that vested in the
The foregoing notwithstanding, the Court, given municipal and city governments the power to
the circumstances obtaining herein and in light impose business taxes.
of jurisprudence promulgated subsequent to the The respondents counter, however, that double
filing of the petition, deems it fitting and proper taxation did not occur from the imposition and
to adopt a liberal approach in order to render a collection of the tax pursuant to Section 21 of the
justand speedy disposition of the substantive Revenue Code of Manila;34 that the taxes
issue at hand. Hence, we resolve, bearing inmind imposed pursuant to Section 21 were in the
the following pronouncement in Go v. Chaves:30 concept of indirect taxes upon the consumers of
Our rules of procedure are designed to facilitate the goods and services sold by a business
the orderly disposition of cases and permit the establishment;35 and that the petitioners did not
prompt disposition of unmeritorious cases which exhaust their administrative remedies by first
clog the court dockets and do little more than appealing to the Secretary of Justice to challenge
waste the courts’ time. These technical and the constitutionalityor legality of the tax
procedural rules, however, are intended to ordinance.36
ensure, rather than suppress, substantial justice. In resolving the issue of double taxation
A deviation from their rigid enforcement may involving Section 21 of the Revenue Code of
thus be allowed, as petitioners should be given Manila, the Court is mindful of the ruling in City
the fullest opportunity to establish the merits of of Manila v. Coca-Cola Bottlers Philippines,
their case, rather than lose their property on Inc.,37 which has been reiterated in Swedish
mere technicalities. We held in Ong Lim Sing, Jr. Match Philippines, Inc. v. The Treasurer of the
v. FEB Leasing and Finance Corporation that: City of Manila.38 In the latter, the Court has held:
Courts have the prerogative to relax procedural x x x [T]he issue of double taxation is not novel,
rules of even the most mandatory character, as it has already been settled by this Court in The
mindful of the duty to reconcile both the need to City of Manila v. Coca-Cola Bottlers Philippines,
speedily put an end to litigation and the parties' Inc.,in this wise:
right to due process.In numerous cases, this
Court has allowed liberal construction of the Petitioners obstinately ignore the exempting
rules when to do so would serve the demands of proviso in Section 21 of Tax Ordinance No. 7794,
substantial justice and equity. to their own detriment.1âwphi1 Said exempting
proviso was precisely included in said section so
The petitioners point out that although Section as to avoid double taxation.
21 of the Revenue Code of Manila was not itself
unconstitutional or invalid, its enforcement Double taxation means taxingthe same property
twice when it should be taxed only once; that is,
"taxing the same person twice by the same subject to excise tax, VAT, or percentagetax
jurisdictionfor the same thing." It is obnoxious under the NIRC, and that are "not otherwise
when the taxpayer is taxed twice, when it should specified in preceding paragraphs." In the same
be but once. Otherwise described as "direct way, businesses such as respondent’s, already
duplicate taxation," the two taxes must be subject to a local business tax under Section 14
imposed on the same subject matter, for the of Tax Ordinance No. 7794 [which is based on
same purpose, by the same taxing authority, Section 143(a) of the LGC], can no longer be
within the same jurisdiction, during the same made liable for local business tax under Section
taxing period; and the taxes must be of the same 21 of the same Tax Ordinance [which is based on
kind or character. Section 143(h) of the LGC].

Using the aforementioned test, the Court finds Based on the foregoing reasons, petitioner
that there is indeed double taxation if should not have been subjected to taxes under
respondent is subjected to the taxes under both Section 21 of the ManilaRevenue Code for the
Sections 14 and 21 of Tax Ordinance No. 7794, fourth quarter of 2001, considering thatit had
since these are being imposed: (1) on the same already been paying local business tax under
subject matter – the privilege of doing business Section 14 of the same ordinance.
in the City of Manila; (2) for the same purpose –
xxxx
to make persons conducting business within the
City of Manila contribute tocity revenues; (3) by Accordingly, respondent’s assessment under
the same taxing authority – petitioner Cityof both Sections 14 and 21 had no basis. Petitioner
Manila; (4) within the same taxing jurisdiction – is indeed liable to pay business taxes to the City
within the territorial jurisdiction of the City of of Manila; nevertheless, considering that the
Manila; (5) for the same taxing periods – per former has already paid these taxes under
calendar year; and (6) of the same kind or Section 14 of the Manila Revenue Code, it is
character – a local business tax imposed on gross exempt from the same payments under Section
sales or receipts of the business. 21 of the same code. Hence, payments made
under Section 21 must be refunded in favor of
The distinction petitioners attempt to make
petitioner.
between the taxes under Sections 14 and 21 of
Tax Ordinance No. 7794 is specious. The Court It is undisputed thatpetitioner paid business
revisits Section 143 of the LGC, the very source taxes based on Sections 14 and 21 for the fourth
of the power of municipalities and cities to quarter of 2001 in the total amount of
impose a local business tax, and to which any ₱470,932.21. Therefore, it is entitled to a refund
local business tax imposed by petitioner City of of ₱164,552.04 corresponding to the payment
Manila must conform. It is apparent from a under Section 21 of the Manila Revenue Code.
perusal thereof that when a municipality or city
has already imposed a business tax on On the basis of the rulings in Coca-Cola Bottlers
manufacturers, etc.of liquors, distilled spirits, Philippines, Inc. and Swedish Match Philippines,
wines, and any other article of commerce, Inc., the Court now holds that all the elements of
pursuant to Section 143(a) of the LGC, said double taxation concurred upon the Cityof
municipality or city may no longer subject the Manila’s assessment on and collection from the
same manufacturers, etc.to a business tax under petitioners of taxes for the first quarter of 1999
Section 143(h) of the same Code. Section 143(h) pursuant to Section 21 of the Revenue Code of
may be imposed only on businesses that are Manila.
Firstly, because Section 21 of the Revenue Code and November 14, 2007 in CA-G.R. SP No. 72191;
of Manila imposed the tax on a person who sold and DIRECTS the City of Manila to refund the
goods and services in the course of trade or payments made by the petitioners of the taxes
business based on a certain percentage ofhis assessed and collected for the first quarter of
gross sales or receipts in the preceding calendar 1999 pursuant to Section 21 of the Revenue
year, while Section 15 and Section 17 likewise Code of Manila.
imposed the tax on a person who sold goods and
No pronouncement on costs of suit.
services in the course of trade or business but
only identified such person with particularity, SO ORDERED.
namely, the wholesaler, distributor or dealer
(Section 15), and the retailer (Section 17), all the
taxes – being imposed on the privilege of doing DIGEST:
business in the City of Manila in order to make
the taxpayers contributeto the city’s revenues – FACTS OF THE CASE:
were imposed on the same subject matter and  The CITY OF MANILA assessed and collected
for the same purpose. taxes from the individual petitioners pursuant to
Secondly, the taxes were imposed by the same Section 15 (Tax on Wholesalers, Distributors, or
taxing authority (the City of Manila) and within Dealers) and Section 17 (Tax on Retailers) of the
the same jurisdiction in the same taxing period Revenue Code of Manila. At the same time, the
(i.e., per calendar year). CITY OF MANILA imposed additional taxes upon
the petitioners pursuant to Section 21 of the
Thirdly, the taxes were all in the nature of local Revenue Code of Manila, as amended, as a
business taxes. condition for the renewal of their respective
We note that although Coca-Cola Bottlers business licenses for the year 1999. SECTION 21
Philippines, Inc. and Swedish Match Philippines, OF THE REVENUE CODE OF MANILA stated:
Inc. involved Section 21 vis-à-vis Section 14 (Tax Section 21. Tax on Business Subject to the Excise,
on Manufacturers, Assemblers and Other Value-Added or Percentage Taxes under the
Processors)39 of the Revenue Code of Manila, the NIRC - On any of the following businesses and
legal principlesenunciated therein should articles of commerce subject to the excise,
similarly apply because Section 15 (Tax on VALUE-ADDED OR PERCENTAGE TAXES under
Wholesalers, Distributors, or Dealers)and the National Internal Revenue Code, hereinafter
Section 17 (Tax on Retailers) of the Revenue referred to as NIRC, as amended, a tax of FIFTY
Code of Manila imposed the same nature of tax PERCENT (50%) OF ONE PERCENT (1%) per
as that imposed under Section 14, i.e., local annum on the gross sales or receipts of the
business tax, albeit on a different subject matter preceding calendar year is hereby imposed: A)
or group of taxpayers. On person who sells goods and services in the
course of trade or businesses; x x x PROVIDED,
In fine, the imposition of the tax under Section that all registered businesses in the City of
21 of the Revenue Code of Manila constituted Manila already paying the aforementioned tax
double taxation, and the taxes collected shall be exempted from payment thereof.
pursuant thereto must be refunded.
 To comply with the City of Manila’s assessment
WHEREFORE, the Court GRANTS the petition for of taxes under Section 21, the PETITIONERS paid
review on certiorari; REVERSES and SETS ASIDE under protest the following amounts
the resolutions promulgated on June 18, 2007
 corresponding to the first quarter of 1999, to wit: ISSUE: Whether or not the collection of taxes
(a) Nursery Care Corporation ₱595,190.25; (b) under Section 21 of Ordinance No. 7794, as
Shoemart Incorporated ₱3,283,520.14; (c) Star amended, constitutes double taxation. YES
Appliance Center ₱236,084.03; (d) H & B, Inc.
₱1,271,118.74; (e) Supplies Station, Inc.
₱239,501.25; (f) Hardware Work Shop, Inc. RULING:
₱609,953.24. By letter dated March 1, 1999, the
PETITIONERS formally requested the Office of  There is DOUBLE TAXATION when the same
the City Treasurer for the tax credit or refund of taxpayer is taxed twice when he should be taxed
the local business taxes paid under protest. only once for the same purpose by the same
However, then City Treasurer Anthony Acevedo taxing authority within the same jurisdiction
(Acevedo) denied the request. during the same taxing period, and the taxes are
of the same kind or character. DOUBLE
 On April 8, 1999, the PETITIONERS, sought the TAXATION is obnoxious.
reconsideration of the denial of their request.
Still, the CITY TREASURER did not reconsider. In  DOUBLE TAXATION means taxing the same
the meanwhile, Liberty Toledo succeeded property twice when it should be taxed only
Acevedo as the City Treasurer of Manila. once; that is, "taxing the same person twice by
PETITIONERS filed their respective petitions for the same jurisdiction for the same thing." It is
certiorari in the Regional Trial Court (RTC) in obnoxious when the taxpayer is taxed twice,
Manila. when it should be but once. Otherwise described
as "DIRECT DUPLICATE TAXATION," the two
 RTC held that it perceives NO INSTANCE OF THE taxes must be imposed on the same subject
CONSTITUTIONALLY PROSCRIBED DOUBLE matter, for the same purpose, by the same taxing
TAXATION, in the strict, narrow or obnoxious authority, within the same jurisdiction, during
sense, imposed upon the petitioners under the same taxing period; and the taxes must be of
Section 15 and 17, on the one hand, and under the same kind or character.
Section 21, on the other, of the questioned
Ordinance. The tax imposed under Section 15  Using the aforementioned test, the COURT finds
and 17, as against that imposed under Section that there is INDEED DOUBLE TAXATION IF
21, are levied against different tax objects or RESPONDENT IS SUBJECTED TO THE TAXES
subject matter. The tax under Section 15 is UNDER BOTH SECTIONS 14 AND 21 OF TAX
imposed upon wholesalers, distributors or ORDINANCE NO. 7794, since these are being
dealers, while that under Section 17 is imposed imposed: (1) on the same subject matter – the
upon retailers. In short, taxes imposed under privilege of doing business in the City of Manila;
Section 15 and 17 is a tax on the business of (2) for the same purpose – to make persons
wholesalers, distributors, dealers and retailers. conducting business within the City of Manila
On the other hand, the tax imposed upon herein contribute to city revenues; (3) by the same
petitioners under Section 21 is not a tax against taxing authority – petitioner City of Manila; (4)
the business of the petitioners (as wholesalers, within the same taxing jurisdiction – within the
distributors, dealers or retailers) but is rather a territorial jurisdiction of the City of Manila; (5)
tax against consumers or end-users of the for the same taxing periods – per calendar year;
articles sold by petitioners. CA affirmed the and (6) of the same kind or character – a local
decision of the RTC. business tax imposed on gross sales or receipts
of the business.
 Based on the foregoing reasons, PETITIONER  DOUBLE TAXATION means taxing the same
should not have been subjected to taxes under property twice when it should be taxed only
Section 21 of the Manila Revenue Code for the once; that is, "taxing the same person twice by
fourth quarter of 2001, considering that it had the same jurisdiction for the same thing." It is
already been paying local business tax under obnoxious when the taxpayer is taxed twice,
Section 14 of the same ordinance. when it should be but once. Otherwise described
as "DIRECT DUPLICATE TAXATION," the two
 Accordingly, respondent’s assessment under
taxes must be imposed on the same subject
both Sections 14 and 21 had no basis.
matter, for the same purpose, by the same taxing
PETITIONER is indeed liable to pay business
authority, within the same jurisdiction, during
taxes to the City of Manila; nevertheless,
the same taxing period; and the taxes must be of
considering that the FORMER has already paid
the same kind or character.
these taxes under Section 14 of the Manila
Revenue Code, it is exempt from the same
payments under Section 21 of the same code.
REQUISITES OF DOUBLE TAXATION:
Hence, payments made under Section 21 must
be refunded in favor of petitioner. It is
undisputed that PETITIONER paid business taxes
based on Sections 14 and 21 for the fourth Using the aforementioned test, the COURT finds
that there is INDEED DOUBLE TAXATION IF
quarter of 2001 in the total amount of
RESPONDENT IS SUBJECTED TO THE TAXES
₱470,932.21. Therefore, it is ENTITLED TO A
UNDER BOTH SECTIONS 14 AND 21 OF TAX
REFUND OF ₱164,552.04 corresponding to the
payment under Section 21 of the Manila ORDINANCE NO. 7794, since these are being
Revenue Code. imposed:

(1) On the same subject matter – the privilege of

 In fine, the IMPOSITION OF THE TAX UNDER
doing business in the City of Manila;
SECTION 21 OF THE REVENUE CODE OF MANILA
constituted double taxation, and the taxes (2) For the same purpose – to make persons
collected pursuant thereto must be refunded. conducting business within the City of Manila
contribute to city revenues;

(3) By the same taxing authority – petitioner City

IMPORTANT PRINCIPLE: WHEN IS THERE
of Manila;
DOUBLE TAXATION; REQUISITES OF DOUBLE
TAXATION (4) Within the same taxing jurisdiction – within
the territorial jurisdiction of the City of Manila;
WHEN IS THERE DOUBLE TAXATION?
(5) For the same taxing periods – per calendar
 There is DOUBLE TAXATION when the same
year; and
taxpayer is taxed twice when he should be taxed
only once for the same purpose by the same (6) Of the same kind or character – a local
taxing authority within the same jurisdiction business tax imposed on gross sales or receipts
during the same taxing period, and the taxes are of the business.
of the same kind or character. DOUBLE
TAXATION is obnoxious.
G.R. No. 168056 October 18, 2005 Court into dis-honor, disrespect, and public
contempt, diminished public confidence,
Agenda for Item No. 45
promoted distrust in the Court, and assailed the
G.R. No. 168056 (ABAKADA Guro Party List integrity of its Members. The Court already took
Officer Samson S. Alcantara, et al. vs. The Hon. a beating before Purisima made any disclaimer.
Executive Secretary Eduardo R. Ermita); G.R. The damage has been done, so to speak.
No. 168207 (Aquilino Q. Pimentel, Jr., et Abakada Guro Party List vs. Ermita, 469 SCRA 1,
al. vs. Executive Secretary Eduardo R. Ermita, et G.R. No. 168056, G.R. No. 168207, G.R. No.
al.); G.R. No. 168461 (Association of Pilipinas 168461, G.R. No. 168463, G.R. No. 168730
Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et September 1, 2005
al.); G.R. No. 168463 (Francis Joseph G.
RESOLUTION
Escudero vs. Cesar V. Purisima, et al); and G.R.
No. 168730 (Bataan Governor Enrique T. Garcia, For resolution are the following motions for
Jr. vs. Hon. Eduardo R. Ermita, et al.) reconsideration of the Court’s Decision dated
September 1, 2005 upholding the
constitutionality of Republic Act No. 9337 or the
Courts; Contempt; Separation of Powers; If it VAT Reform Act1:
were true that former Finance Secretary Purisima
1) Motion for Reconsideration filed by
felt that the media misconstrued his actions, then
petitioners in G.R. No. 168463, Escudero, et al.,
he should have immediately rectified it and not
on the following grounds:
waited until the Supreme Court required him to
explain before he denied having made such A. THE DELETION OF THE "NO PASS ON
statements which impressed upon the public’s PROVISIONS" FOR THE SALE OF PETROLEUM
mind that the issuance of the TRO was the PRODUCTS AND POWER GENERATION SERVICES
product of the machinations on the Court by the CONSTITUTED GRAVE ABUSE OF DISCRETION
executive branch.—At the time the reports came AMOUNTING TO LACK OR EXCESS OF
out, Purisima did not controvert the truth or JURISDICTION ON THE PART OF THE BICAMERAL
falsity of the statements attributed to him. It was CONFERENCE COMMITTEE.
only after the Court issued the show-cause order
B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES
that Purisima saw it fit to deny having uttered
THE CONSTITUTIONAL IMPERATIVE ON
these statements. By then, it was already
EXCLUSIVE ORIGINATION OF REVENUE BILLS
impressed upon the public’s mind that the
UNDER §24, ARTICLE VI, 1987 PHILIPPINE
issuance of the TRO was the product of
CONSTITUTION.
machinations on the Court by the executive
branch. If it were true that Purisima felt that the C. REPUBLIC ACT NO. 9337’S STAND-BY
media misconstrued his actions, then he should AUTHORITY TO THE EXECUTIVE TO INCREASE
have immediately rectified it. He should not have THE VAT RATE, ESPECIALLY ON ACCOUNT OF THE
waited until the Court required him to explain EFFECTIVE RECOMMENDATORY POWER
before he denied having made such statements. GRANTED TO THE SECRETARY OF FINANCE,
And even then, his denials were made as a result CONSTITUTES UNDUE DELEGATION OF
of the Court’s show-cause order and not by any LEGISLATIVE AUTHORITY.
voluntary act on his part that will show utter
regret for having been “misquoted.” Purisima 2) Motion for Reconsideration of petitioner in
should know that these press releases placed the G.R. No. 168730, Bataan Governor Enrique T.
Garcia, Jr., with the argument that burdening the Respondents filed their Consolidated Comment.
consumers with significantly higher prices under Petitioner Garcia filed his Reply.
a VAT regime vis-à-vis a 3% gross tax renders the
Petitioners Escudero, et al., insist that the
law unconstitutional for being arbitrary,
bicameral conference committee should not
oppressive and inequitable.
even have acted on the no pass-on provisions
and since there is no disagreement between House
Bill Nos. 3705 and 3555 on the one hand, and
3) Motion for Reconsideration by petitioners
Senate Bill No. 1950 on the other, with regard to
Association of Pilipinas Shell Dealers, Inc. in G.R.
the no pass-on provision for the sale of service
No. 168461, on the grounds that:
for power generation because both the Senate
I. This Honorable Court erred in upholding the and the House were in agreement that the VAT
constitutionality of Section 110(A)(2) and Section burden for the sale of such service shall not be
110(B) of the NIRC, as amended by the EVAT Law, passed on to the end-consumer. As to the no
imposing limitations on the amount of input VAT pass-on provision for sale of petroleum
that may be claimed as a credit against output products, petitioners argue that the fact that the
VAT, as well as Section 114(C) of the NIRC, as presence of such a no pass-on provision in the
amended by the EVAT Law, requiring the House version and the absence thereof in the
government or any of its instrumentalities to Senate Bill means there is no conflict because "a
withhold a 5% final withholding VAT on their House provision cannot be in conflict with
gross payments on purchases of goods and something that does not exist."
services, and finding that the questioned
Such argument is flawed. Note that the rules of
provisions:
both houses of Congress provide that a
A. are not arbitrary, oppressive and consfiscatory conference committee shall settle the
as to amount to a deprivation of property "differences" in the respective bills of each
without due process of law in violation of Article house. Verily, the fact that a no pass-
III, Section 1 of the 1987 Philippine Constitution; on provision is present in one version but absent
in the other, and one version intends two
B. do not violate the equal protection clause industries, i.e., power generation companies and
prescribed under Article III, Section 1 of the 1987 petroleum sellers, to bear the burden of the tax,
Philippine Constitution; and while the other version intended only the
C. apply uniformly to all those belonging to the industry of power generation, transmission and
same class and do not violate Article VI, Section distribution to be saddled with such burden,
28(1) of the 1987 Philippine Constitution. clearly shows that there are indeed differences
between the bills coming from each house,
II. This Honorable Court erred in upholding the which differences should be acted upon by the
constitutionality of Section 110(B) of the NIRC, as bicameral conference committee. It is incorrect
amended by the EVAT Law, imposing a limitation to conclude that there is no clash between two
on the amount of input VAT that may be claimed opposing forces with regard to the no pass-
as a credit against output VAT notwithstanding on provision for VAT on the sale of petroleum
the finding that the tax is not progressive as products merely because such provision exists in
exhorted by Article VI, Section 28(1) of the 1987 the House version while it is absent in the Senate
Philippine Constitution. version. It is precisely the absence of such
provision in the Senate bill and the presence
thereof in the House bills that causes the requisite number of members have agreed to a
conflict. The absence of the provision in the particular measure."3
Senate bill shows the Senate’s disagreement to
Escudero, et. al., also contend that Republic Act
the intention of the House of Representatives
No. 9337 grossly violates the constitutional
make the sellers of petroleum bear the burden
imperative on exclusive origination of revenue
of the VAT. Thus, there are indeed two opposing
bills under Section 24 of Article VI of the
forces: on one side, the House of
Constitution when the Senate introduced
Representatives which wants petroleum dealers
amendments not connected with VAT.
to be saddled with the burden of paying VAT and
on the other, the Senate which does not see it The Court is not persuaded.
proper to make that particular industry bear said
burden. Clearly, such conflicts and differences Article VI, Section 24 of the Constitution
between the no pass-on provisions in the Senate provides:
and House bills had to be acted upon by the Sec. 24 All appropriation, revenue or tariff bills,
bicameral conference committee as mandated bills authorizing increase of the public debt, bills
by the rules of both houses of Congress. of local application, and private bills shall
Moreover, the deletion of the no pass- originate exclusively in the House of
on provision made the present VAT law more in Representatives, but the Senate may propose or
consonance with the very nature of VAT which, concur with amendments.
as stated in the Decision promulgated on Section 24 speaks of origination of certain bills
September 1, 2005, is a tax on spending or from the House of Representatives which has
consumption, thus, the burden thereof is been interpreted in the Tolentino case as
ultimately borne by the end-consumer. follows:
Escudero, et al., then claim that there had been … To begin with, it is not the law — but the
changes introduced in the Rules of the House of revenue bill — which is required by the
Representatives regarding the conduct of the Constitution to "originate exclusively" in the
House panel in a bicameral conference House of Representatives. It is important to
committee, since the time of Tolentino vs. emphasize this, because a bill originating in the
Secretary of Finance2 to act as safeguards against House may undergo such extensive changes in
possible abuse of authority by the House the Senate that the result may be a rewriting of
members of the bicameral conference the whole … At this point, what is important to
committee. Even assuming that the rule note is that, as a result of the Senate action, a
requiring the House panel to report back to the distinct bill may be produced. To insist that a
House if there are substantial differences in the revenue statute — and not only the bill which
House and Senate bills had indeed been initiated the legislative process culminating in
introduced after Tolentino, the Court stands by the enactment of the law — must substantially
its ruling that the issue of whether or not the be the same as the House bill would be to deny
House panel in the bicameral conference the Senate's power not only to "concur with
committee complied with said internal rule amendments" but also to " propose
cannot be inquired into by the Court. To amendments." It would be to violate the
reiterate, "mere failure to conform to coequality of legislative power of the two houses
parliamentary usage will not invalidate the of Congress and in fact make the House superior
action (taken by a deliberative body) when the to the Senate.
… Given, then, the power of the Senate to filed, i.e., to raise revenues for the government,
propose amendments, the Senate can propose the Senate introduced amendments on income
its own version even with respect to bills which taxes, which as admitted by Senator Ralph Recto,
are required by the Constitution to originate in would yield about ₱10.5 billion a year.
the House.
Moreover, since the objective of these house
... bills is to raise revenues, the increase in
corporate income taxes would be a great help
Indeed, what the Constitution simply means is
and would also soften the impact of VAT
that the initiative for filing revenue, tariff, or tax
measure on the consumers by distributing the
bills, bills authorizing an increase of the public
burden across all sectors instead of putting it
debt, private bills and bills of local application
entirely on the shoulders of the consumers.
must come from the House of Representatives
on the theory that, elected as they are from the As to the other National Internal Revenue Code
districts, the members of the House can be (NIRC) provisions found in Senate Bill No.
expected to be more sensitive to the local needs 1950, i.e., percentage taxes, franchise taxes,
and problems. On the other hand, the senators, amusement and excise taxes, these provisions
who are elected at large, are expected to are needed so as to cushion the effects of VAT on
approach the same problems from the national consumers. As we said in our decision, certain
perspective. Both views are thereby made to goods and services which were subject to
bear on the enactment of such laws.4 percentage tax and excise tax would no longer be
VAT exempt, thus, the consumer would be
Clearly, after the House bills as approved on third
burdened more as they would be paying the VAT
reading are duly transmitted to the Senate, the
in addition to these taxes. Thus, there is a need
Constitution states that the latter can propose or
to amend these sections to soften the impact of
concur with amendments. The Court finds that
VAT. The Court finds no reason to reverse the
the subject provisions found in the Senate bill are
earlier ruling that the Senate introduced
within the purview of such constitutional
amendments that are germane to the subject
provision as declared in the Tolentino case.
matter and purposes of the house bills.
The intent of the House of Representatives in
Petitioners Escudero, et al., also reiterate that
initiating House Bill Nos. 3555 and 3705 was to
R.A. No. 9337’s stand- by authority to the
solve the country’s serious financial problems. It
Executive to increase the VAT rate, especially on
was stated in the respective explanatory notes
account of the recommendatory power granted
that there is a need for the government to make
to the Secretary of Finance, constitutes undue
significant expenditure savings and a credible
delegation of legislative power. They submit that
package of revenue measures. These measures
the recommendatory power given to the
include improvement of tax administration and
Secretary of Finance in regard to the occurrence
control and leakages in revenues from income
of either of two events using the Gross Domestic
taxes and value added tax. It is also stated that
Product (GDP) as a benchmark necessarily and
one opportunity that could be beneficial to the
inherently required extended analysis and
overall status of our economy is to review
evaluation, as well as policy making.
existing tax rates, evaluating the relevance given
our present conditions. Thus, with these There is no merit in this contention. The Court
purposes in mind and to accomplish these reiterates that in making his recommendation to
purposes for which the house bills were the President on the existence of either of the
two conditions, the Secretary of Finance is not province of the Court to inquire into, its task
acting as the alter ego of the President or even being to interpret the law.
her subordinate. He is acting as the agent of the
With regard to petitioner Garcia’s arguments,
legislative department, to determine and declare
the Court also finds the same to be without
the event upon which its expressed will is to take
merit. As stated in the assailed Decision, the
effect. The Secretary of Finance becomes the
Court recognizes the burden that the consumers
means or tool by which legislative policy is
will be bearing with the passage of R.A. No. 9337.
determined and implemented, considering that
But as was also stated by the Court, it cannot
he possesses all the facilities to gather data and
strike down the law as unconstitutional simply
information and has a much broader perspective
because of its yokes. The legislature has spoken
to properly evaluate them. His function is to
and the only role that the Court plays in the
gather and collate statistical data and other
picture is to determine whether the law was
pertinent information and verify if any of the two
passed with due regard to the mandates of the
conditions laid out by Congress is present.
Constitution. Inasmuch as the Court finds that
Congress granted the Secretary of Finance the
there are no constitutional infirmities with its
authority to ascertain the existence of a fact,
passage, the validity of the law must therefore
namely, whether by December 31, 2005, the
be upheld.
value-added tax collection as a percentage of
GDP of the previous year exceeds two and four- Finally, petitioners Association of Pilipinas Shell
fifth percent (24/5%) or the national government Dealers, Inc. reiterated their arguments in the
deficit as a percentage of GDP of the previous petition, citing this time, the dissertation of
year exceeds one and one-half percent (1½%). If Associate Justice Dante O. Tinga in his Dissenting
either of these two instances has occurred, the Opinion.
Secretary of Finance, by legislative mandate,
must submit such information to the President. The glitch in petitioners’ arguments is that it
Then the 12% VAT rate must be imposed by the presents figures based on an event that is yet to
President effective January 1, 2006. Congress happen. Their illustration of the possible effects
does not abdicate its functions or unduly of the 70% limitation, while seemingly concrete,
delegate power when it describes what job must still remains theoretical. Theories have no place
be done, who must do it, and what is the scope in this case as the Court must only deal with an
of his authority; in our complex economy that is existing case or controversy that is appropriate
frequently the only way in which the legislative or ripe for judicial determination, not one that
process can go forward. There is no undue is conjectural or merely anticipatory.5 The Court
delegation of legislative power but only of the will not intervene absent an actual and
discretion as to the execution of a law. This is substantial controversy admitting of specific
constitutionally permissible. Congress did not relief through a decree conclusive in nature, as
delegate the power to tax but the mere distinguished from an opinion advising what the
implementation of the law. The intent and will to law would be upon a hypothetical state of facts.6
increase the VAT rate to 12% came from The impact of the 70% limitation on the
Congress and the task of the President is to creditable input tax will ultimately depend on
simply execute the legislative policy. That how one manages and operates its business.
Congress chose to use the GDP as a benchmark Market forces, strategy and acumen will dictate
to determine economic growth is not within the their moves. With or without these VAT
provisions, an entrepreneur who does not have
the ken to adapt to economic variables will absolute, unconditional, and perfect or fixed and
surely perish in the competition. The arguments irrefutable.8 As adeptly stated by Associate
posed are within the realm of business, and the Justice Minita V. Chico-Nazario in her Concurring
solution lies also in business. Opinion, which the Court adopts, petitioners’
right to the input VAT credits has not yet vested,
Petitioners also reiterate their argument that the
thus –
input tax is a property or a property right. In the
same breath, the Court reiterates its finding that It should be remembered that prior to Rep. Act
it is not a property or a property right, and a VAT- No. 9337, the petroleum dealers’ input VAT
registered person’s entitlement to the creditable credits were inexistent – they were
input tax is a mere statutory privilege. unrecognized and disallowed by law. The
petroleum dealers had no such property called
Petitioners also contend that even if the right to
input VAT credits. It is only rational, therefore,
credit the input VAT is merely a statutory
that they cannot acquire vested rights to the use
privilege, it has already evolved into a vested
of such input VAT credits when they were never
right that the State cannot remove.
entitled to such credits in the first place, at least,
As the Court stated in its Decision, the right to not until Rep. Act No. 9337.
credit the input tax is a mere creation of law.
My view, at this point, when Rep. Act No. 9337
Prior to the enactment of multi-stage sales
has not yet even been implemented, is that
taxation, the sales taxes paid at every level of
petroleum dealers’ right to use their input VAT
distribution are not recoverable from the taxes
as credit against their output VAT unlimitedly has
payable. With the advent of Executive Order No.
not vested, being a mere expectancy of a future
273 imposing a 10% multi-stage tax on all sales,
benefit and being contingent on the continuance
it was only then that the crediting of the input
of Section 110 of the National Internal Revenue
tax paid on purchase or importation of goods
Code of 1997, prior to its amendment by Rep. Act
and services by VAT-registered persons against
No. 9337.
the output tax was established. This continued
with the Expanded VAT Law (R.A. No. 7716), and The elucidation of Associate Justice Artemio V.
The Tax Reform Act of 1997 (R.A. No. 8424). The Panganiban is likewise worthy of note, to wit:
right to credit input tax as against the output tax
Moreover, there is no vested right in generally
is clearly a privilege created by law, a privilege
accepted accounting principles. These refer to
that also the law can limit. It should be stressed
accounting concepts, measurement techniques,
that a person has no vested right in statutory
and standards of presentation in a company’s
privileges.7
financial statements, and are not rooted in laws
The concept of "vested right" is a consequence of nature, as are the laws of physical science, for
of the constitutional guaranty of due process these are merely developed and continually
that expresses a present fixed interest which in modified by local and international regulatory
right reason and natural justice is protected accounting bodies. To state otherwise and
against arbitrary state action; it includes not only recognize such asset account as a vested right is
legal or equitable title to the enforcement of a to limit the taxing power of the State. Unlimited,
demand but also exemptions from new plenary, comprehensive and supreme, this
obligations created after the right has become power cannot be unduly restricted by mere
vested. Rights are considered vested when the creations of the State.
right to enjoyment is a present interest,
More importantly, the assailed provisions of R.A. These provisions contain a provision which
No. 9337 already involve legislative policy and authorizing the President, upon
wisdom. So long as there is a public end for which recommendation of the Secretary of Finance, to
R.A. No. 9337 was passed, the means through raise the VAT rate to 12%, effective January 1,
which such end shall be accomplished is for the 2006, after specified conditions have been
legislature to choose so long as it is within satisfied.
constitutional bounds. As stated in Carmichael
vs. Southern Coal & Coke Co.:
Issues:
If the question were ours to decide, we could not
say that the legislature, in adopting the present Whether or not there is a violation of Article VI,
scheme rather than another, had no basis for its Section 24 of the Constitution.
choice, or was arbitrary or unreasonable in its
action. But, as the state is free to distribute the
burden of a tax without regard to the particular Whether or not there is undue delegation of
purpose for which it is to be used, there is no legislative power in violation of Article VI Sec
warrant in the Constitution for setting the tax 28(2) of the Constitution.
aside because a court thinks that it could have
distributed the burden more wisely. Those are
functions reserved for the legislature.9 Whether or not there is a violation of the due
WHEREFORE, the Motions for Reconsideration process and equal protection of the Constitution.
are hereby DENIED WITH FINALITY. The
temporary restraining order issued by the Court
is LIFTED. Ruling:

SO ORDERED. No, the revenue bill exclusively originated in the

House of Representatives, the Senate was acting
Facts: within its constitutional power to introduce
ABAKADA GURO Party List, et al., filed a petition amendments to the House bill when it included
for prohibition o questioning the provisions in Senate Bill No. 1950 amending
constitutionality of Sections 4, 5 and 6 of R.A. No. corporate income taxes, percentage, and excise
9337, amending Sections 106, 107 and 108, and franchise taxes.
respectively, of the National Internal Revenue
Code (NIRC).
No, there is no undue delegation of legislative
Section 4 imposes a 10% VAT on sale of goods power but only of the discretion as to the
and properties; execution of a law. This is constitutionally
Section 5 imposes a 10% VAT on importation of permissible. Congress does not abdicate its
goods; and functions or unduly delegate power when it
describes what job must be done, who must do
Section 6 imposes a 10% VAT on sale of services it, and what is the scope of his authority; in our
and use or lease of properties; complex economy that is frequently the only way
in which the legislative process can go forward.
In this case, it is not a delegation of legislative
power but a delegation of ascertainment of facts
upon which enforcement and administration of
the increased rate under the law is contingent.

No, the power of the State to make reasonable

and natural classifications for the purposes of
taxation has long been established. Whether it
relates to the subject of taxation, the kind of
property, the rates to be levied, or the amounts
to be raised, the methods of assessment,
valuation and collection, the State’s power is
entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power
absent a clear showing of unreasonableness,
discrimination, or arbitrariness.