Pascual v.

Secretary of Public Works Digest

G.R. No. L-10405 December 29, 1960
Ponente: Concepcion, J.

Legal Standing

Facts:
1. Petitioner was the governor of Rizal, filed a petition assailing the validity of R.A. 920
which contains an item providing for an appropriation of P85,000.00 for the
construction and repair of a feeder road in Pasig. The said law was passed in Congress
and approved by the President.

2. The property over which the feeder road will be constructed is however owned by
Sen. Zulueta. The property was to be donated to the local government, though the
donation was made a few months after the appropriation was included in RA 920. The
petition alleged that the said planned feeder road would relieve Zulueta the
responsibility of improving the road which is inside a private subdivision.

3. The lower court (RTC) ruled that the petitioner has standing to assail the validity of RA
920, due to the public interest involved in the appropriation. However, he does not have
a standing with respect to the donation since he does not have an interest that will be
injured by said donation, hence it dismissed the petition.

Issue: Whether or not the petitioner has the standing to file the petition

YES.

1. Petitioner has standing. He is not merely a taxpayer but the governor of the province
of Rizal which is considered one of the most populated biggest provinces during that
time, its taxpayers bear a substantial portion of the burden of taxation in the country.

2. Public funds can only be appropriated for a public purpose. The test of the
constitutionality of a statute requiring the use of public funds is whether it is used to
promote public interest. Moreover, the validity of a stature depends on the powers of
the Congress at the time of its passage or approval, not upon events occurring, or acts
performed subsequent thereto, unless it is an amendment of the organic law.

Pascual v. Secretary of Public Works Digest
G.R. No. L-10405 December 29, 1960
Ponente: Concepcion, J.

FACTS: In 1953, RA 920 was passed. This law appropriated P85,000.00 for the
construction, reconstruction, repair, extension and improvement of Pasig feeder road
terminals. Pascual, then governor of Rizal, assailed the validity of the law. He claimed
that the appropriation was actually going to be used for private use for the terminals
sought to be improved were part of the Antonio Subdivision. The said Subdivision is
owned by Senator Zulueta who was a member of the same Senate that passed and
approved the same RA. Pascual claimed that Zulueta misrepresented in Congress the
fact that he owns those terminals and that his property would be unlawfully enriched at
the expense of the taxpayers if the said RA would be upheld. Pascual then prayed that
the Sec of Public Works be restrained from releasing funds for such purpose. Zulueta, on
the other hand, perhaps as an afterthought, donated the said property to the City of
Pasig.

ISSUE: Whether or not the appropriation is valid.

HELD: The donation of the property to the government to make the property public
does not cure the constitutional defect. The fact that the law was passed when the said
property was still a private property cannot be ignored. In accordance with the rule
that the taxing power must be exercised for public purposes only, money raised by
taxation can be expanded only for public purposes and not for the advantage of private
individuals. Inasmuch as the land on which the projected feeder roads were to be
constructed belonged then to Zulueta, the result is that said appropriation sought a
private purpose, and, hence, was null and void

G.R. No. L-10405 December 29, 1960
WENCESLAO PASCUAL, in his official capacity as Provincial Governor of
Rizal, petitioner-appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-
appellees.
Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.
Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for
appellee.
CONCEPCION, J.:
Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance
of Rizal, dismissing the above entitled case and dissolving the writ of preliminary
injunction therein issued, without costs.
On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal,
instituted this action for declaratory relief, with injunction, upon the ground that
Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", approved
on June 20, 1953, contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00
"for the construction, reconstruction, repair, extension and improvement" of Pasig
feeder road terminals (Gen. Roxas Gen. Araneta Gen. Lucban Gen. Capinpin
Gen. Segundo Gen. Delgado Gen. Malvar Gen. Lim)"; that, at the time of the
passage and approval of said Act, the aforementioned feeder roads were "nothing but
projected and planned subdivision roads, not yet constructed, . . . within the Antonio
Subdivision . . . situated at . . . Pasig, Rizal" (according to the tracings attached to the
petition as Annexes A and B, near Shaw Boulevard, not far away from the intersection
between the latter and Highway 54), which projected feeder roads "do not connect any
government property or any important premises to the main highway"; that the
aforementioned Antonio Subdivision (as well as the lands on which said feeder roads
were to be construed) were private properties of respondent Jose C. Zulueta, who, at
the time of the passage and approval of said Act, was a member of the Senate of the
Philippines; that on May, 1953, respondent Zulueta, addressed a letter to the Municipal
Council of Pasig, Rizal, offering to donate said projected feeder roads to the municipality
of Pasig, Rizal; that, on June 13, 1953, the offer was accepted by the council, subject to
the condition "that the donor would submit a plan of the said roads and agree to change
the names of two of them"; that no deed of donation in favor of the municipality of
Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote another
letter to said council, calling attention to the approval of Republic Act. No. 920, and the
sum of P85,000.00 appropriated therein for the construction of the projected feeder
roads in question; that the municipal council of Pasig endorsed said letter of respondent
Zulueta to the District Engineer of Rizal, who, up to the present "has not made any
endorsement thereon" that inasmuch as the projected feeder roads in question were
private property at the time of the passage and approval of Republic Act No. 920, the
appropriation of P85,000.00 therein made, for the construction, reconstruction, repair,
extension and improvement of said projected feeder roads, was illegal and, therefore,
void ab initio"; that said appropriation of P85,000.00 was made by Congress because its
members were made to believe that the projected feeder roads in question were
"public roads and not private streets of a private subdivision"'; that, "in order to give a
semblance of legality, when there is absolutely none, to the aforementioned
appropriation", respondents Zulueta executed on December 12, 1953, while he was a
member of the Senate of the Philippines, an alleged deed of donation copy of which
is annexed to the petition of the four (4) parcels of land constituting said projected
feeder roads, in favor of the Government of the Republic of the Philippines; that said
alleged deed of donation was, on the same date, accepted by the then Executive
Secretary; that being subject to an onerous condition, said donation partook of the
nature of a contract; that, such, said donation violated the provision of our fundamental
law prohibiting members of Congress from being directly or indirectly financially
interested in any contract with the Government, and, hence, is unconstitutional, as well
as null and voidab initio, for the construction of the projected feeder roads in question
with public funds would greatly enhance or increase the value of the aforementioned
subdivision of respondent Zulueta, "aside from relieving him from the burden of
constructing his subdivision streets or roads at his own expense"; that the construction
of said projected feeder roads was then being undertaken by the Bureau of Public
Highways; and that, unless restrained by the court, the respondents would continue to
execute, comply with, follow and implement the aforementioned illegal provision of
law, "to the irreparable damage, detriment and prejudice not only to the petitioner but
to the Filipino nation."
Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be
declared null and void; that the alleged deed of donation of the feeder roads in question
be "declared unconstitutional and, therefor, illegal"; that a writ of injunction be issued
enjoining the Secretary of Public Works and Communications, the Director of the Bureau
of Public Works and Highways and Jose C. Zulueta from ordering or allowing the
continuance of the above-mentioned feeder roads project, and from making and
securing any new and further releases on the aforementioned item of Republic Act No.
920, and the disbursing officers of the Department of Public Works and Highways from
making any further payments out of said funds provided for in Republic Act No. 920; and
that pending final hearing on the merits, a writ of preliminary injunction be issued
enjoining the aforementioned parties respondent from making and securing any new
and further releases on the aforesaid item of Republic Act No. 920 and from making any
further payments out of said illegally appropriated funds.
Respondents moved to dismiss the petition upon the ground that petitioner had "no
legal capacity to sue", and that the petition did "not state a cause of action". In support
to this motion, respondent Zulueta alleged that the Provincial Fiscal of Rizal, not its
provincial governor, should represent the Province of Rizal, pursuant to section 1683 of
the Revised Administrative Code; that said respondent is " not aware of any law which
makes illegal the appropriation of public funds for the improvements of . . . private
property"; and that, the constitutional provision invoked by petitioner is inapplicable to
the donation in question, the same being a pure act of liberality, not a contract. The
other respondents, in turn, maintained that petitioner could not assail the appropriation
in question because "there is no actual bona fide case . . . in which the validity of
Republic Act No. 920 is necessarily involved" and petitioner "has not shown that he has
a personal and substantial interest" in said Act "and that its enforcement has caused or
will cause him a direct injury."
Acting upon said motions to dismiss, the lower court rendered the aforementioned
decision, dated October 29, 1953, holding that, since public interest is involved in this
case, the Provincial Governor of Rizal and the provincial fiscal thereof who represents
him therein, "have the requisite personalities" to question the constitutionality of the
disputed item of Republic Act No. 920; that "the legislature is without power
appropriate public revenues for anything but a public purpose", that the instructions
and improvement of the feeder roads in question, if such roads where private property,
would not be a public purpose; that, being subject to the following condition:
The within donation is hereby made upon the condition that the Government
of the Republic of the Philippines will use the parcels of land hereby donated
for street purposes only and for no other purposes whatsoever; it being
expressly understood that should the Government of the Republic of the
Philippines violate the condition hereby imposed upon it, the title to the land
hereby donated shall, upon such violation, ipso facto revert to the DONOR,
JOSE C. ZULUETA. (Emphasis supplied.)
which is onerous, the donation in question is a contract; that said donation or contract is
"absolutely forbidden by the Constitution" and consequently "illegal", for Article 1409 of
the Civil Code of the Philippines, declares in existence and void from the very beginning
contracts "whose cause, objector purpose is contrary to law, morals . . . or public
policy"; that the legality of said donation may not be contested, however, by petitioner
herein, because his "interest are not directly affected" thereby; and that, accordingly,
the appropriation in question "should be upheld" and the case dismissed.
At the outset, it should be noted that we are concerned with a decision granting the
aforementioned motions to dismiss, which as much, are deemed to have admitted
hypothetically the allegations of fact made in the petition of appellant herein. According
to said petition, respondent Zulueta is the owner of several parcels of residential land
situated in Pasig, Rizal, and known as the Antonio Subdivision, certain portions of which
had been reserved for the projected feeder roads aforementioned, which, admittedly,
were private property of said respondent when Republic Act No. 920, appropriating
P85,000.00 for the "construction, reconstruction, repair, extension and improvement"
of said roads, was passed by Congress, as well as when it was approved by the President
on June 20, 1953. The petition further alleges that the construction of said roads, to be
undertaken with the aforementioned appropriation of P85,000.00, would have the
effect of relieving respondent Zulueta of the burden of constructing his subdivision
streets or roads at his own expenses,
1
and would "greatly enhance or increase the value
of the subdivision" of said respondent. The lower court held that under these
circumstances, the appropriation in question was "clearly for a private, not a public
purpose."
Respondents do not deny the accuracy of this conclusion, which is self-
evident.
2
However, respondent Zulueta contended, in his motion to dismiss that:
A law passed by Congress and approved by the President can never be illegal
because Congress is the source of all laws . . . Aside from the fact that movant
is not aware of any law which makes illegal the appropriation of public funds
for the improvement of what we, in the meantime, may assume as private
property . . . (Record on Appeal, p. 33.)
The first proposition must be rejected most emphatically, it being inconsistent with the
nature of the Government established under the Constitution of the Republic of the
Philippines and the system of checks and balances underlying our political structure.
Moreover, it is refuted by the decisions of this Court invalidating legislative enactments
deemed violative of the Constitution or organic laws.
3

As regards the legal feasibility of appropriating public funds for a public purpose, the
principle according to Ruling Case Law, is this:
It is a general rule that the legislature is without power to appropriate public
revenue for anything but a public purpose. . . . It is the essential character of
the direct object of the expenditure which must determine its validity as
justifying a tax, and not the magnitude of the interest to be affected nor the
degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental to the
public or to the state, which results from the promotion of private interest
and the prosperity of private enterprises or business, does not justify their aid
by the use public money. (25 R.L.C. pp. 398-400; Emphasis supplied.)
The rule is set forth in Corpus Juris Secundum in the following language:
In accordance with the rule that the taxing power must be exercised for public
purposes only, discussedsupra sec. 14, money raised by taxation can be
expended only for public purposes and not for the advantage of private
individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)
Explaining the reason underlying said rule, Corpus Juris Secundum states:
Generally, under the express or implied provisions of the constitution, public
funds may be used only for public purpose. The right of the legislature to
appropriate funds is correlative with its right to tax, and, under constitutional
provisions against taxation except for public purposes and prohibiting the
collection of a tax for one purpose and the devotion thereof to another
purpose, no appropriation of state funds can be made for other than for a
public purpose.
x x x x x x x x x
The test of the constitutionality of a statute requiring the use of public funds
is whether the statute is designed to promote the public interest, as opposed
to the furtherance of the advantage of individuals, although each advantage
to individuals might incidentally serve the public. (81 C.J.S. pp. 1147;
emphasis supplied.)
Needless to say, this Court is fully in accord with the foregoing views which, apart from
being patently sound, are a necessary corollary to our democratic system of
government, which, as such, exists primarily for the promotion of the general welfare.
Besides, reflecting as they do, the established jurisprudence in the United States, after
whose constitutional system ours has been patterned, said views and jurisprudence are,
likewise, part and parcel of our own constitutional law.lawphil.net
This notwithstanding, the lower court felt constrained to uphold the appropriation in
question, upon the ground that petitioner may not contest the legality of the donation
above referred to because the same does not affect him directly. This conclusion is,
presumably, based upon the following premises, namely: (1) that, if valid, said donation
cured the constitutional infirmity of the aforementioned appropriation; (2) that the
latter may not be annulled without a previous declaration of unconstitutionality of the
said donation; and (3) that the rule set forth in Article 1421 of the Civil Code is absolute,
and admits of no exception. We do not agree with these premises.
The validity of a statute depends upon the powers of Congress at the time of its passage
or approval, not upon events occurring, or acts performed, subsequently thereto, unless
the latter consists of an amendment of the organic law, removing, with retrospective
operation, the constitutional limitation infringed by said statute. Referring to the
P85,000.00 appropriation for the projected feeder roads in question, the legality thereof
depended upon whether said roads were public or private property when the bill,
which, latter on, became Republic Act 920, was passed by Congress, or, when said bill
was approved by the President and the disbursement of said sum became effective, or
on June 20, 1953 (see section 13 of said Act). Inasmuch as the land on which the
projected feeder roads were to be constructed belonged then to respondent Zulueta,
the result is that said appropriation sought a private purpose, and hence, was null and
void. 4 The donation to the Government, over five (5) months after the approval and
effectivity of said Act, made, according to the petition, for the purpose of giving a
"semblance of legality", or legalizing, the appropriation in question, did not cure its
aforementioned basic defect. Consequently, a judicial nullification of said donation need
not precede the declaration of unconstitutionality of said appropriation.
Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to
exceptions. For instance, the creditors of a party to an illegal contract may, under the
conditions set forth in Article 1177 of said Code, exercise the rights and actions of the
latter, except only those which are inherent in his person, including therefore, his right
to the annulment of said contract, even though such creditors are not affected by the
same, except indirectly, in the manner indicated in said legal provision.
Again, it is well-stated that the validity of a statute may be contested only by one who
will sustain a direct injury in consequence of its enforcement. Yet, there are many
decisions nullifying, at the instance of taxpayers, laws providing for the disbursement of
public funds,
5
upon the theory that "the expenditure of public funds by an officer of the
State for the purpose of administering an unconstitutional act constitutes
a misapplication of such funds," which may be enjoined at the request of a
taxpayer.
6
Although there are some decisions to the contrary,
7
the prevailing view in the
United States is stated in the American Jurisprudence as follows:
In the determination of the degree of interest essential to give the requisite
standing to attack the constitutionality of a statute, the general rule is that
not only persons individually affected, but alsotaxpayers, have sufficient
interest in preventing the illegal expenditure of moneys raised by taxation and
may therefore question the constitutionality of statutes requiring expenditure
of public moneys. (11 Am. Jur. 761; emphasis supplied.)
However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs.
Mellon (262 U.S. 447), insofar as federal laws are concerned, upon the ground that the
relationship of a taxpayer of the U.S. to its Federal Government is different from that of
a taxpayer of a municipal corporation to its government. Indeed, under
the composite system of government existing in the U.S., the states of the Union are
integral part of the Federation from an international viewpoint, but, each state enjoys
internally a substantial measure of sovereignty, subject to the limitations imposed by
the Federal Constitution. In fact, the same was made by representatives ofeach state of
the Union, not of the people of the U.S., except insofar as the former represented the
people of the respective States, and the people of each State has, independently of that
of the others, ratified said Constitution. In other words, the Federal Constitution and the
Federal statutes have become binding upon the people of the U.S. in consequence of an
act of, and, in this sense, through the respective states of the Union of which they are
citizens. The peculiar nature of the relation between said people and the Federal
Government of the U.S. is reflected in the election of its President, who is chosen
directly, not by the people of the U.S., but by electors chosen by each State, in such
manner as the legislature thereof may direct (Article II, section 2, of the Federal
Constitution).lawphi1.net
The relation between the people of the Philippines and its taxpayers, on the other hand,
and the Republic of the Philippines, on the other, is not identical to that obtaining
between the people and taxpayers of the U.S. and its Federal Government. It is closer,
from a domestic viewpoint, to that existing between the people and taxpayers of each
state and the government thereof, except that the authority of the Republic of the
Philippines over the people of the Philippines is more fully direct than that of the states
of the Union, insofar as the simple and unitary type of our national government is not
subject to limitations analogous to those imposed by the Federal Constitution upon the
states of the Union, and those imposed upon the Federal Government in the interest of
the Union. For this reason, the rule recognizing the right of taxpayers to assail the
constitutionality of a legislation appropriating local or state public funds which has
been upheld by the Federal Supreme Court (Crampton vs. Zabriskie, 101 U.S. 601) has
greater application in the Philippines than that adopted with respect to acts of Congress
of the United States appropriating federal funds.
Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation
of a land by the Province of Tayabas, two (2) taxpayers thereof were allowed to
intervene for the purpose of contesting the price being paid to the owner thereof, as
unduly exorbitant. It is true that in Custodio vs. President of the Senate (42 Off. Gaz.,
1243), a taxpayer and employee of the Government was not permitted to question the
constitutionality of an appropriation for backpay of members of Congress. However, in
Rodriguez vs. Treasurer of the Philippines and Barredo vs. Commission on Elections (84
Phil., 368; 45 Off. Gaz., 4411), we entertained the action of taxpayers impugning the
validity of certain appropriations of public funds, and invalidated the same. Moreover,
the reason that impelled this Court to take such position in said two (2) cases the
importance of the issues therein raised is present in the case at bar. Again, like the
petitioners in the Rodriguez and Barredo cases, petitioner herein is not merely a
taxpayer. The Province of Rizal, which he represents officially as its Provincial Governor,
is our most populated political subdivision,
8
and, the taxpayers therein bear a
substantial portion of the burden of taxation, in the Philippines.
Hence, it is our considered opinion that the circumstances surrounding this case
sufficiently justify petitioners action in contesting the appropriation and donation in
question; that this action should not have been dismissed by the lower court; and that
the writ of preliminary injunction should have been maintained.
Wherefore, the decision appealed from is hereby reversed, and the records are
remanded to the lower court for further proceedings not inconsistent with this decision,
with the costs of this instance against respondent Jose C. Zulueta. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Gutierrez
David, Paredes, and Dizon, JJ., concur.
GR # L-26379, December 27, 1969 (Constitutional Law Power to Tax)
FACTS: Petitioner questioned the payment of an income tax assessed on him by public
respondent on an amount realized by him on a sale of his automobile to a member of
the US Marine Corps, the transaction having taken place at the Clark Field Air Base.
Petitioner contends that the base is outside Philippine territory and therefore beyond
the jurisdictional power to tax.
ISSUE: Whether or not a sale made on a foreign military base is excluded from tax.
HELD: No. The said foreign military bases is not a foreign soil or territory for purposes of
income tax legislation. Philippine jurisdictional rights including the power to tax are
preserved.
GR # L-26379, December 27, 1969 (Constitutional Law Power to Tax)
Facts: William Reagan imported a tax-free 1960 Cadillac car with accessories valued at
US $ 6,443.83, including freight, insurance and other charges. After acquiring a permit to
sell the car from the base commander of Clark Air Base, Reagan sold the car to a certain
Willie Johnson Jr. of the US Marine Corps stationed in Sangley Point, Cavite for US$
6,600. Johnson sold the same, on the same day to Fred Meneses, a Filipino. As a result
of the transaction, the Commissioner rendered Reagan liable for income tax in the sum
of P2,970. Reagan claimed that he was exempt as the transaction occurred in Clark Air
Base, which as he contends is a base outside the Philippines.
Issue: Whether or not petitioner Reagan was covered by the tax exemption.

Held: The court ruled in the negative. The Philippines, as an independent and sovereign
country, exercises its authority over its entire domain. Any state may, however, by its
consent, express or implied, submit to a restriction of its sovereign rights. It may allow
another power to participate in the exercise of jurisdictional right over certain portions
of its territory. By doing so, it by no means follows that such areas become impressed
with an alien character. The areas retain their status as native soil. Clark Air Base is
within Philippine territorial jurisdiction to tax, and thus, Reagan was liable for the
income tax arising from the sale of his automobile in Clark. The law does not look with
favor on tax exemptions and that he who would seek to be thus privileged must justify it
by words too plain to be mistaken and too categorical to be misinterpreted. Reagan has
not done so, and cannot do so.
GR # L-26379, December 27, 1969 (Constitutional Law Power to Tax)
FACTS: Reagan is a US citizen assigned at Clark Air Base to help provide technical
assistance to the US Air Force. In April 1960 Reagan imported a 1960 Cadillac car
valued at $6443.83. Two months later, he got permission to sell the same car provided
that he would sell the car to a US citizen or a member of the USAF. He sold it to Willie
Johnson Jr for $6600.00 as shown by a Bill of Sale. The sale took place within Clark Air
Base. As a result of this transaction, the Commissioner of Internal Revenue calculated the
net taxable income of Reagan to be at P17912.34 and that his income tax would be
P2797.00. Reagan paid the assessed tax but at the same time he sought for a refund
because he claims that he is exempt. Reagan claims that the sale took place in foreign
soil since Clark Air Base, in legal contemplation is a base outside the Philippines.
Reagan also cited that under the Military Bases Agreement, he, by nature of his
employment, is exempt from Philippine taxation.
ISSUE: Is the sale considered done in a foreign soil not subject to Philippine income tax?
HELD: The Philippines is independent and sovereign, its authority may be exercised
over its entire domain. There is no portion thereof that is beyond its power. Within its
limits, its decrees are supreme, its commands paramount. Its laws govern therein, and
everyone to whom it applies must submit to its terms. That is the extent of its jurisdiction,
both territorial and personal. On the other hand, there is nothing in the Military Bases
Agreement that lends support to Reagans assertion. The Base has not become foreign
soil or territory. This countrys jurisdictional rights therein, certainly not excluding the
power to tax, have been preserved, the Philippines merely consents that the US exercise
jurisdiction in certain cases this is just a matter of comity, courtesy and expediency. It is
likewise noted that he indeed is employed by the USAF and his income is derived from
US source but the income derived from the sale is not of US source hence taxable.



G.R. No. L-26379 December 27, 1969
WILLIAM C. REAGAN, ETC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Quasha, Asperilla, Blanco, Zafra and Tayag for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo
R. Rosete, Solicitor Lolita O. Gal-lang and Special Attorney Gamaliel H. Mantolino for
respondent.
FERNANDO, J.:
A question novel in character, the answer to which has far-reaching implications, is
raised by petitioner William C. Reagan, at one time a civilian employee of an American
corporation providing technical assistance to the United States Air Force in the
Philippines. He would dispute the payment of the income tax assessed on him by
respondent Commissioner of Internal Revenue on an amount realized by him on a sale
of his automobile to a member of the United States Marine Corps, the transaction
having taken place at the Clark Field Air Base at Pampanga. It is his contention, seriously
and earnestly expressed, that in legal contemplation the sale was made outside
Philippine territory and therefore beyond our jurisdictional power to tax.
Such a plea, far-fetched and implausible, on its face betraying no kinship with reality, he
would justify by invoking, mistakenly as will hereafter be more fully shown an
observation to that effect in a 1951 opinion,
1
petitioner ignoring that such utterance
was made purely as a flourish of rhetoric and by way of emphasizing the decision
reached, that the trading firm as purchaser of army goods must respond for the sales
taxes due from an importer, as the American armed forces being exempt could not be
taxed as such under the National Internal Revenue Code.
2
Such an assumption, inspired
by the commendable aim to render unavailing any attempt at tax evasion on the part of
such vendee, found expression anew in a 1962 decision,
3
coupled with the reminder
however, to render the truth unmistakable, that "the areas covered by the United States
Military Bases are not foreign territories both in the political and geographical sense."
As thus clarified, it is manifest that such a view amounts at most to a legal fiction and is
moreover obiter. It certainly cannot control the resolution of the specific question that
confronts us. We declare our stand in an unequivocal manner. The sale having taken
place on what indisputably is Philippine territory, petitioner's liability for the income tax
due as a result thereof was unavoidable. As the Court of Tax Appeals reached a similar
conclusion, we sustain its decision now before us on appeal.
In the decision appealed from, the Court of Tax Appeals, after stating the nature of the
case, started the recital of facts thus: "It appears that petitioner, a citizen of the United
States and an employee of Bendix Radio, Division of Bendix Aviation Corporation, which
provides technical assistance to the United States Air Force, was assigned at Clark Air
Base, Philippines, on or about July 7, 1959 ... . Nine (9) months thereafter and before his
tour of duty expired, petitioner imported on April 22, 1960 a tax-free 1960 Cadillac car
with accessories valued at $6,443.83, including freight, insurance and other
charges."
4
Then came the following: "On July 11, 1960, more than two (2) months after
the 1960 Cadillac car was imported into the Philippines, petitioner requested the Base
Commander, Clark Air Base, for a permit to sell the car, which was granted provided that
the sale was made to a member of the United States Armed Forces or a citizen of the
United States employed in the U.S. military bases in the Philippines. On the same date,
July 11, 1960, petitioner sold his car for $6,600.00 to a certain Willie Johnson, Jr. (Private
first class), United States Marine Corps, Sangley Point, Cavite, Philippines, as shown by a
Bill of Sale . . . executed at Clark Air Base. On the same date, Pfc. Willie (William)
Johnson, Jr. sold the car to Fred Meneses for P32,000.00 as evidenced by a deed of sale
executed in Manila."
5

As a result of the transaction thus made, respondent Commissioner of Internal Revenue,
after deducting the landed cost of the car as well as the personal exemption to which
petitioner was entitled, fixed as his net taxable income arising from such transaction the
amount of P17,912.34, rendering him liable for income tax in the sum of P2,979.00.
After paying the sum, he sought a refund from respondent claiming that he was exempt,
but pending action on his request for refund, he filed the case with the Court of Tax
Appeals seeking recovery of the sum of P2,979.00 plus the legal rate of interest.
As noted in the appealed decision: "The only issue submitted for our resolution is
whether or not the said income tax of P2,979.00 was legally collected by respondent for
petitioner."
6
After discussing the legal issues raised, primarily the contention that the
Clark Air Base "in legal contemplation, is a base outside the Philippines" the sale
therefore having taken place on "foreign soil", the Court of Tax Appeals found nothing
objectionable in the assessment and thereafter the payment of P2,979.00 as income tax
and denied the refund on the same. Hence, this appeal predicated on a legal theory we
cannot accept. Petitioner cannot make out a case for reversal.
1. Resort to fundamentals is unavoidable to place things in their proper perspective,
petitioner apparently feeling justified in his refusal to defer to basic postulates of
constitutional and international law, induced no doubt by the weight he would accord
to the observation made by this Court in the two opinions earlier referred to. To repeat,
scant comfort, if at all is to be derived from such an obiter dictum, one which is likewise
far from reflecting the fact as it is.
Nothing is better settled than that the Philippines being independent and sovereign, its
authority may be exercised over its entire domain. There is no portion thereof that is
beyond its power. Within its limits, its decrees are supreme, its commands paramount.
Its laws govern therein, and everyone to whom it applies must submit to its terms. That
is the extent of its jurisdiction, both territorial and personal. Necessarily, likewise, it has
to be exclusive. If it were not thus, there is a diminution of its sovereignty.
It is to be admitted that any state may, by its consent, express or implied, submit to a
restriction of its sovereign rights. There may thus be a curtailment of what otherwise is
a power plenary in character. That is the concept of sovereignty as auto-limitation,
which, in the succinct language of Jellinek, "is the property of a state-force due to which
it has the exclusive capacity of legal self-determination and self-restriction."
7
A state
then, if it chooses to, may refrain from the exercise of what otherwise is illimitable
competence.
Its laws may as to some persons found within its territory no longer control. Nor does
the matter end there. It is not precluded from allowing another power to participate in
the exercise of jurisdictional right over certain portions of its territory. If it does so, it by
no means follows that such areas become impressed with an alien character. They
retain their status as native soil. They are still subject to its authority. Its jurisdiction may
be diminished, but it does not disappear. So it is with the bases under lease to the
American armed forces by virtue of the military bases agreement of 1947. They are not
and cannot be foreign territory.
Decisions coming from petitioner's native land, penned by jurists of repute, speak to
that effect with impressive unanimity. We start with the citation from Chief Justice
Marshall, announced in the leading case of Schooner Exchange v. M'Faddon,
8
an 1812
decision: "The jurisdiction of the nation within its own territory is necessarily exclusive
and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon
it, deriving validity from an external source, would imply a diminution of its sovereignty
to the extent of the restriction, and an investment of that sovereignty to the same
extent in that power which could impose such restriction." After which came this
paragraph: "All exceptions, therefore, to the full and complete power of a nation within
its own territories, must be traced up to the consent of the nation itself. They can flow
from no other legitimate source."
Chief Justice Taney, in an 1857 decision,
9
affirmed the fundamental principle of
everyone within the territorial domain of a state being subject to its commands: "For
undoubtedly every person who is found within the limits of a government, whether the
temporary purposes or as a resident, is bound by its laws." It is no exaggeration then for
Justice Brewer to stress that the United States government "is one having jurisdiction
over every foot of soil within its territory, and acting directly upon each [individual
found therein]; . . ."
10

Not too long ago, there was a reiteration of such a view, this time from the pen of
Justice Van Devanter. Thus: "It now is settled in the United States and recognized
elsewhere that the territory subject to its jurisdiction includes the land areas under its
dominion and control the ports, harbors, bays, and other in closed arms of the sea along
its coast, and a marginal belt of the sea extending from the coast line outward a marine
league, or 3 geographic miles."
11
He could cite moreover, in addition to many American
decisions, such eminent treatise-writers as Kent, Moore, Hyde, Wilson, Westlake,
Wheaton and Oppenheim.
As a matter of fact, the eminent commentator Hyde in his three-volume work on
International Law, as interpreted and applied by the United States, made clear that not
even the embassy premises of a foreign power are to be considered outside the
territorial domain of the host state. Thus: "The ground occupied by an embassy is not in
fact the territory of the foreign State to which the premises belong through possession
or ownership. The lawfulness or unlawfulness of acts there committed is determined by
the territorial sovereign. If an attache commits an offense within the precincts of an
embassy, his immunity from prosecution is not because he has not violated the local
law, but rather for the reason that the individual is exempt from prosecution. If a person
not so exempt, or whose immunity is waived, similarly commits a crime therein, the
territorial sovereign, if it secures custody of the offender, may subject him to
prosecution, even though its criminal code normally does not contemplate the
punishment of one who commits an offense outside of the national domain. It is not
believed, therefore, that an ambassador himself possesses the right to exercise
jurisdiction, contrary to the will of the State of his sojourn, even within his embassy with
respect to acts there committed. Nor is there apparent at the present time any
tendency on the part of States to acquiesce in his exercise of it."
12

2. In the light of the above, the first and crucial error imputed to the Court of Tax
Appeals to the effect that it should have held that the Clark Air Force is foreign soil or
territory for purposes of income tax legislation is clearly without support in law. As thus
correctly viewed, petitioner's hope for the reversal of the decision completely fades
away. There is nothing in the Military Bases Agreement that lends support to such an
assertion. It has not become foreign soil or territory. This country's jurisdictional rights
therein, certainly not excluding the power to tax, have been preserved. As to certain tax
matters, an appropriate exemption was provided for.
Petitioner could not have been unaware that to maintain the contrary would be to defy
reality and would be an affront to the law. While his first assigned error is thus worded,
he would seek to impart plausibility to his claim by the ostensible invocation of the
exemption clause in the Agreement by virtue of which a "national of the United States
serving in or employed in the Philippines in connection with the construction,
maintenance, operation or defense of the bases and residing in the Philippines only by
reason of such employment" is not to be taxed on his income unless "derived from
Philippine source or sources other than the United States sources."
13
The reliance, to
repeat, is more apparent than real for as noted at the outset of this opinion, petitioner
places more faith not on the language of the provision on exemption but on a sentiment
given expression in a 1951 opinion of this Court, which would be made to yield such an
unwarranted interpretation at war with the controlling constitutional and international
law principles. At any rate, even if such a contention were more adequately pressed and
insisted upon, it is on its face devoid of merit as the source clearly was Philippine.
In Saura Import and Export Co. v. Meer,
14
the case above referred to, this Court affirmed
a decision rendered about seven months previously,
15
holding liable as an importer,
within the contemplation of the National Internal Revenue Code provision, the trading
firm that purchased army goods from a United States government agency in the
Philippines. It is easily understandable why. If it were not thus, tax evasion would have
been facilitated. The United States forces that brought in such equipment later disposed
of as surplus, when no longer needed for military purposes, was beyond the reach of
our tax statutes.
Justice Tuason, who spoke for the Court, adhered to such a rationale, quoting
extensively from the earlier opinion. He could have stopped there. He chose not to do
so. The transaction having occurred in 1946, not so long after the liberation of the
Philippines, he proceeded to discuss the role of the American military contingent in the
Philippines as a belligerent occupant. In the course of such a dissertion, drawing on his
well-known gift for rhetoric and cognizant that he was making an as if statement, he did
say: "While in army bases or installations within the Philippines those goods were in
contemplation of law on foreign soil."
It is thus evident that the first, and thereafter the controlling, decision as to the liability
for sales taxes as an importer by the purchaser, could have been reached without any
need for such expression as that given utterance by Justice Tuason. Its value then as an
authoritative doctrine cannot be as much as petitioner would mistakenly attach to it. It
was clearly obiter not being necessary for the resolution of the issue before this
Court.
16
It was an opinion "uttered by the way."
17
It could not then be controlling on the
question before us now, the liability of the petitioner for income tax which, as
announced at the opening of this opinion, is squarely raised for the first time.
18

On this point, Chief Justice Marshall could again be listened to with profit. Thus: "It is a
maxim, not to be disregarded, that general expressions, in every opinion, are to be
taken in connection with the case in which those expressions are used. If they go
beyond the case, they may be respected, but ought not to control the judgment in a
subsequent suit when the very point is presented for decision."
19

Nor did the fact that such utterance of Justice Tuason was cited in Co Po v. Collector of
Internal Revenue,
20
a 1962 decision relied upon by petitioner, put a different complexion
on the matter. Again, it was by way of pure embellishment, there being no need to
repeat it, to reach the conclusion that it was the purchaser of army goods, this time
from military bases, that must respond for the advance sales taxes as importer. Again,
the purpose that animated the reiteration of such a view was clearly to emphasize that
through the employment of such a fiction, tax evasion is precluded. What is more, how
far divorced from the truth was such statement was emphasized by Justice Barrera, who
penned the Co Po opinion, thus: "It is true that the areas covered by the United States
Military Bases are not foreign territories both in the political and geographical sense."
21

Justice Tuason moreover made explicit that rather than corresponding with reality, what
was said by him was in the way of a legal fiction. Note his stress on "in contemplation of
law." To lend further support to a conclusion already announced, being at that a
confirmation of what had been arrived at in the earlier case, distinguished by its sound
appreciation of the issue then before this Court and to preclude any tax evasion, an
observation certainly not to be taken literally was thus given utterance.
This is not to say that it should have been ignored altogether afterwards. It could be
utilized again, as it undoubtedly was, especially so for the purpose intended, namely to
stigmatize as without support in law any attempt on the part of a taxpayer to escape an
obligation incumbent upon him. So it was quoted with that end in view in the Co Po
case. It certainly does not justify any effort to render futile the collection of a tax legally
due, as here. That was farthest from the thought of Justice Tuason.
What is more, the statement on its face is, to repeat, a legal fiction. This is not to
discount the uses of a fictio jurisin the science of the law. It was Cardozo who pointed
out its value as a device "to advance the ends of justice" although at times it could be
"clumsy" and even "offensive".
22
Certainly, then, while far from objectionable as thus
enunciated, this observation of Justice Tuason could be misused or misconstrued in a
clumsy manner to reach an offensive result. To repeat, properly used, a legal fiction
could be relied upon by the law, as Frankfurter noted, in the pursuit of legitimate
ends.
23
Petitioner then would be well-advised to take to heart such counsel of care and
circumspection before invoking not a legal fiction that would avoid a mockery of the law
by avoiding tax evasion but what clearly is a misinterpretation thereof, leading to results
that would have shocked its originator.
The conclusion is thus irresistible that the crucial error assigned, the only one that calls
for discussion to the effect that for income tax purposes the Clark Air Force Base is
outside Philippine territory, is utterly without merit. So we have said earlier.
3. To impute then to the statement of Justice Tuason the meaning that petitioner would
fasten on it is, to paraphrase Frankfurter, to be guilty of succumbing to the vice of
literalness. To so conclude is, whether by design or inadvertence, to misread it. It
certainly is not susceptible of the mischievous consequences now sought to be fastened
on it by petitioner.
That it would be fraught with such peril to the enforcement of our tax statutes on the
military bases under lease to the American armed forces could not have been within the
contemplation of Justice Tuason. To so attribute such a bizarre consequence is to be
guilty of a grave disservice to the memory of a great jurist. For his real and genuine
sentiment on the matter in consonance with the imperative mandate of controlling
constitutional and international law concepts was categorically set forth by him, not as
an obiter but as the rationale of the decision, in People v. Acierto
24
thus: "By the
[Military Bases] Agreement, it should be noted, the Philippine Government merely
consents that the United States exercise jurisdiction in certain cases. The consent was
given purely as a matter of comity, courtesy, or expediency over the bases as part of the
Philippine territory or divested itself completely of jurisdiction over offenses committed
therein."
Nor did he stop there. He did stress further the full extent of our territorial jurisdiction
in words that do not admit of doubt. Thus: "This provision is not and can not on
principle or authority be construed as a limitation upon the rights of the Philippine
Government. If anything, it is an emphatic recognition and reaffirmation of Philippine
sovereignty over the bases and of the truth that all jurisdictional rights granted to the
United States and not exercised by the latter are reserved by the Philippines for itself."
25

It is in the same spirit that we approach the specific question confronting us in this
litigation. We hold, as announced at the outset, that petitioner was liable for the income
tax arising from a sale of his automobile in the Clark Field Air Base, which clearly is and
cannot otherwise be other than, within our territorial jurisdiction to tax.
4. With the mist thus lifted from the situation as it truly presents itself, there is nothing
that stands in the way of an affirmance of the Court of Tax Appeals decision. No useful
purpose would be served by discussing the other assigned errors, petitioner himself
being fully aware that if the Clark Air Force Base is to be considered, as it ought to be
and as it is, Philippine soil or territory, his claim for exemption from the income tax due
was distinguished only by its futility.
There is further satisfaction in finding ourselves unable to indulge petitioner in his plea
for reversal. We thus manifest fealty to a pronouncement made time and time again
that the law does not look with favor on tax exemptions and that he who would seek to
be thus privileged must justify it by words too plain to be mistaken and too categorical
to be misinterpreted.
26
Petitioner had not done so. Petitioner cannot do so.
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the
refund of P2,979.00 as the income tax paid by petitioner is affirmed. With costs against
petitioner.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ., concur.
Reyes, J.B.L., J., concurs in the result.
Barredo, J., took no part.