Pascual vs.

Secretary of Public Works

PASCUAL vs. SECRETARY OF PUBLIC WORKS
110 PHIL 331
GR No. L-10405, December 29, 1960

"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure, is merely
incidental in the promotion of a particular enterprise."

FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction, upon the ground that RA
No. 920, which apropriates funds for public works particularly for the construction and improvement of Pasig feeder road terminals
(Gen. Roxas Gen. Araneta Gen. Lucban Gen. Capinpin Gen. Segundo Gen. Delgado Gen. Malvar Gen. Lim). Some
of the feeder roads, however, as alleged and as contained in the tracings attached to the petition, were nothing but projected and
planned subdivision roads, not yet constructed within the Antonio Subdivision, belonging to private respondent Zulueta, situated at
Pasig, Rizal; and which projected feeder roads do not connect any government property or any important premises to the main
highway. The respondents' contention is that there is public purpose because people living in the subdivision will directly be
benefitted from the construction of the roads, and the government also gains from the donation of the land supposed to be
occupied by the streets, made by its owner to the government.

ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an expenditure of the
government?

HELD: No. 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.
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.

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.



Lutz vs. Araneta
G.R. No. L-7859, 22 December 1955
En Banc, Reyes J.B. L (J), 8 concur

FACTS: Due to the threat to industry by the imminent imposition of export taxes upon sugar as provided in the Tydings-McDuffe Act,
and the "eventual loss of its preferential position in the United States market"; the National Assembly promulgated Commonwealth
Act No. 567, otherwise known as the Sugar Adjustment Act "to obtain a readjustment of the benefits derived from the sugar
industry by the component elements thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of
its preferential position in the United States market and the imposition of the export taxes." Plaintiff, Walter Lutz, in his capacity as
Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma challenged the legality of the taxes imposed by the said Act.
In plaintiff's opinion such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively,
which is not a public purpose for which a tax may be constitutionally levied. The action having been dismissed by the Court of First
Instance, the plaintiff appealed the case directly to the Supreme Court.

HELD: The basic defect in the plaintiff's position is his assumption that the tax provided for in the said Act is a pure exercise of the
taxing power. However, the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the
threatened sugar industry. In other words, the act is primarily an exercise of the police power. The protection and promotion of the
sugar industry is a matter of public concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative discretion must be allowed fully play, subject only
to the test of reasonableness; and it is not contended that the means provided of the law bear no relation to the objective pursued
or are oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy
taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's police power. That the
tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint; indeed, it appears rational that
the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. The decision
appealed from is affirmed, with costs against appellant.

From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act, now in
question, should be exclusively spent in aid of the sugar industry, since it is that very enterprise that is being protected. It may be
that other industries are also in need of similar protection; that the legislature is not required by the Constitution to adhere to a
policy of "all or none." As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably
hits the evil where it is most felt, it is not to be overthrown because there are other instances to which it might have been applied;"
and that "the legislative authority, exerted within its proper field, need not embrace all the evils within its reach"
Lozada vs COMELEC

FACTS: Lozada together with Igot filed a petition for mandamus compelling the COMELEC to hold an election to fill the vacancies in
the Interim Batasang Pambansa (IBP). They anchor their contention on Sec 5 (2), Art 8 of the 1973 Constitution which provides: In
case a vacancy arises in the Batasang Pambansa eighteen months or more before a regular election, the Commission on Election
shall call a special election to be held within sixty (60) days after the vacancy occurs to elect the Member to serve the unexpired
term. COMELEC opposes the petition alleging, substantially, that 1) petitioners lack standing to file the instant petition for they are
not the proper parties to institute the action; 2) this Court has no jurisdiction to entertain this petition; and 3) Section 5(2), Article
VIII of the 1973 Constitution does not apply to the Interim Batasan Pambansa.

ISSUE: Whether or not the SC can compel COMELEC to hold a special election to fill vacancies in the legislature.

HELD: The SCs jurisdiction over the COMELEC is only to review by certiorari the latters decision, orders or rulings. This is as clearly
provided in Article XII-C, Section 11 of the New Constitution which reads: Any decision, order, or ruling of the Commission may be
brought to the Supreme Court on certiorari by the aggrieved party within thirty days from his receipt of a copy thereof. There is in
this case no decision, order or ruling of the COMELEC which is sought to be reviewed by this Court under its certiorari jurisdiction as
provided for in the aforequoted provision, which is the only known provision conferring jurisdiction or authority on the Supreme
Court over the COMELEC.

It is obvious that the holding of special elections in several regional districts where vacancies exist, would entail huge expenditure of
money. Only the Batasang Pambansa (BP) can make the necessary appropriation for the purpose, and this power of the BP may
neither be subject to mandamus by the courts much less may COMELEC compel the BP to exercise its power of appropriation. From
the role BP has to play in the holding of special elections, which is to appropriate the funds for the expenses thereof, it would seem
that the initiative on the matter must come from the BP, not the COMELEC, even when the vacancies would occur in the regular not
IBP. The power to appropriate is the sole and exclusive prerogative of the legislative body, the exercise of which may not be
compelled through a petition for mandamus. What is more, the provision of Section 5(2), Article VIII of the Constitution was
intended to apply to vacancies in the regular National Assembly, now BP, not to the IBP.

What was in the mind of the Constitutional Convention in providing for special elections to fill up vacancies is the regular National
Assembly, because a province or representative district would have only one representative in the said National Assembly.

Also under the original provision of the Constitution (Section 1, Article XVII-Transitory Provisions), the Interim National Assembly had
only one single occasion on which to call for an election, and that is for the election of members of the regular National Assembly.





































National Development Co vs Cebu City and Augusto PacisG.R. No. 51593 November 5, 1992

Facts: National Development Company (NDC) is a GOCC authorized to engage in commercial, industrial, mining, agricultural and
other enterprises necessary or contributory to economic development or important to public interest. It also operates subsidiary
corporations one of which is National Warehousing Corporation (NWC).On August 10, 1939, the President issued Proclamation No.
430 reserving Block no. 4, Reclamation Area No. 4, of Cebu City for warehousing purposes under the administration of NWC.
Subsequently, in 1940, a warehouse with a floor area of 1,940 square meters more or less, was constructed there on.In 1947, EO 93
dissolved NWC with NDC taking over its assetsa nd functions. In 1948, Cebu City assessed and collected from NDC real estate taxes
on the land and the warehouse thereon. By the first quarter of 1970, a total of P100,316.31 was paid by NDC 11 of which only
P3,895.06 was under protest. NDC asked for a full refund contending that the land and the warehouse belonged to the Republic and
therefore exempt from taxation. The CFI ordered Cebu City to refund to NDC the real estate taxes paid by it.

Issue: 1. Whether or not the land is exempted from tax.
2.Whether or not the warehouse is exempted from tax.

Held: The SC finds that National Development Company (NDC) is exempt from real estate tax on the reserved land but liable for the
warehouse erected thereon. The land The Republic, like any individual, may form a corporation with personality and existence
distinct from its own. The separate personality allows a GOCC to hold and possess properties in its own name and, thus, permit
greater independence and flexibility in its operations. It may, therefore, be stated that tax exemption of property owned by the
Republic of the Philippines "refers to properties owned by the Government and by its agencies which do not have separate and
distinct personalities (unincorporated entities).To come within the ambit of the exemption provided in Art. 3, par. (a), of the
Assessment Law, it is important to establish that the property is owned by the government or its unincorporated agency, and once
government ownership is determined, the nature of the use of the property, whether for proprietary or sovereign purposes. The
land remains absolute property of the government." The government "does not part with its title by reserving them (lands), but
simply gives notice to all the world that it desires them for a certain purpose." As its title remains with the Republic, the reserved
land is clearly recovered by the tax exemption provision. The warehouse As regards the warehouse constructed on a public
reservation, a different rule should apply because "[t]he exemption of public property from taxation does not extend to
improvements on the public lands made by pre-emptioners, homesteaders and other claimants, or occupants, at their own expense,
and these are taxable by the state . . ." Consequently, the warehouse constructed on the reserved land by NWC (now under
administration by NDC), indeed, should properly be assessed real estate tax as such improvement does not appear to belong to the
Republic.


As regards the claim for refund of tax payments spanning more than twenty (20) years, We also said in Ramie Textiles that

Solutio indebiti is a quasi-contract, and the instant case being in the nature of solutio indebiti, the claim for refund must be
commenced within six (6) years from date of payment pursuant to Article 1145 (2) of the New Civil Code

































Tolentino vs Secretary of Finance

FACTS

RA 7716, otherwise known as the Expanded Value-Added Tax Law, is an act that seeks to widen the tax base of the existing VAT
system and enhance its administration by amending the National Internal Revenue Code. There are various suits questioning and
challenging the constitutionality of RA 7716 on various grounds.

Tolentino contends that RA 7716 did not originate exclusively from the House of Representatives but is a mere consolidation of HB.
No. 11197 and SB. No. 1630 and it did not pass three readings on separate days on the Senate thus violating Article VI, Sections 24
and 26(2) of the Constitution, respectively.

Art. VI, Section 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and
private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Art. VI, Section 26(2): No bill passed by either House shall become a law unless it has passed three readings on separate days, and
printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the
President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a
bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays
entered in the Journal.

ISSUE: Whether or not EVAT originated in the HoR.

HELD: By a 9-6 vote, the SC rejected the challenge, holding that such consolidation was consistent with the power of the Senate to
propose or concur with amendments to the version originated in the HoR. What the Constitution simply means, according to the 9
justices, is that the initiative must come from the HoR. Note also that there were several instances before where Senate passed its
own version rather than having the HoR version as far as revenue and other such bills are concerned. This practice of amendment by
substitution has always been accepted. The proposition of Tolentino concerns a mere matter of form. There is no showing that it
would make a significant difference if Senate were to adopt his over what has been done.









































Herrera vs. Quezon City Board of Assessment Appeals
GR L-15270, 30 September 1961
First Division, Concepcion (J): 6 concur

Facts: In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester Ochangco Herrera to establish and
operate the St. Catherines Hospital (mostly obstetrics cases). In 1953, the Herreras sent a letter to the Quezon City Assessor
requesting exemption from payment of real estate tax on the hospital, stating that the same was established for charitable and
humanitarian purposes and not for commercial gain. The exemption was granted effective years 1953 to 1955. In 1955, however,
the Assessor reclassified the properties from exempt to taxable effective 1956, as it was ascertained that out 32 beds in the
hospital, 12 of which are for pay-patients. A school of midwifery is also operated within the premises of the hospital.

The building involved in this case is principally used as a hospital. It is mainly a surgical and orthopedic hospital with emphasis on obstetrical cases,
the latter constituting 90% of the total number of cases registered therein. The hospital has thirty-two (32) beds, of which twenty (20) are for
charity-patients and twelve (12) for pay-patients. From the evidence presented by petitioners, it is made to appear that there are two kinds of
charity patients (a) those who come for consultation only ("out-charity patients"); and (b) those who remain in the hospital for treatment
("lying-in-patients"). The out-charity patients are given free consultation and prescription, although sometimes they are furnished with free
medicines which are not costly like aspirin, sulfatiazole, etc. The charity lying-in-patients are given free medical service and medicine although the
food served to the pay-patients is very much better than that given to the former. Although no condition is imposed by the hospital on the
admission of charity lying-in-patients, they however, usually give donations to the hospital. On the other hand, the pay-patients are required to pay
for hospital services ranging from the minimum charge of P5.00 to the maximum of P40.00 for each day of stay in the hospital. The income realized
from pay-patients is spent for the improvement of the charity wards . The hospital personnel is composed of three nurses, two graduate midwives,
a resident physician receiving a salary of P170.00 a month and the petitioner, Dr. Ester Ochangco Herrera, as directress. As such directress, the
latter does not receive any salary.
Petitioners also operate within the premises of the hospital the "St. Catherine's School of Midwifery" which was granted government recognition
by the Secretary of Education on February 1, 1955 (Exhibit "F-3", p. 10, BIR rec.) This school has an enrollment of about two hundred students. The
students are charged a matriculation fee of P300.00 for 1- years, plus P50.00 a month for board and lodging, which includes transportation to the
St. Mary's Hospital. The students practice in the St. Catherine's Hospital, as well as in the St. Mary's Hospital, which is also owned by the
petitioners. A separate set of accounting books is maintained by the school for midwifery distinct from that kept by the hospital.
(St. Catherine has other properties, land in quezon and apartment for rent in Manila)
Issue: Whether St. Catherines Hospital is exempt from realty tax.

Held: The admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted
exclusively to the maintenance of the institution as a public charity. The exemption in favor of property used exclusively for
charitable or educational purpose is not limited to property actually indispensable therefore, but extends to facilities which are
incidental to and reasonably necessary for the accomplishment of said purpose, such as in the case of hospitals a school for
training nurses; a nurses home; property used to provide housing facilities for interns, resident doctors, superintendents and other
members of the hospital staff; and recreational facilities for student nurses, interns and residents. Within the purview of the
Constitution, St. Catherines Hospital is a charitable institution exempt from taxation.

UST and St. Paul Hospitals were also declared non-profit hospitals. (higher bed capacity)

Within the purview of the Constitutional exemption from taxation, the St. Catherine's Hospital is, therefore, a charitable institution,
and the fact that it admits pay-patients does not bar it from claiming that it is devoted exclusively to benevolent purposes, it being
admitted that the income derived from pay-patients is devoted to the improvement of the charity wards, which represent almost
two-thirds (2/3) of the bed capacity of the hospital, aside from "out-charity patients" who come only for consultation.

Again, the existence of "St. Catherine's School of Midwifery", with an enrollment of about 200 students, who practice partly in St.
Catherine's Hospital and partly in St. Mary's Hospital, which, likewise, belongs to petitioners herein, does not, and cannot, affect the
exemption to which St. Catherine's Hospital is entitled under our fundamental law. On the contrary, it furnishes another ground for
exemption. Seemingly, the Court of Tax Appeals was impressed by the fact that the size of said enrollment and the matriculation fee
charged from the students of midwifery, aside from the amount they paid for board and lodging, including transportation to St.
Mary's Hospital, warrants the belief that petitioners derive a substantial profit from the operation of the school aforementi oned.
Such factor is, however, immaterial to the issue in the case at bar, for "all lands, building and improvements used exclusively for
religious, charitable or educational purposes shall be exempt from taxation," pursuant to the Constitution, regardless of whether or
not material profits are derived from the operation of the institutions in question. In other words, Congress may, if it deems fit to do
so, impose taxes upon such "profits", but said "lands, buildings and improvements" are beyond its taxing power.

Similarly, the garage in the building above referred to which was obviously essential to the operation of the school of midwifery,
for the students therein enrolled practiced, not only in St. Catherine's Hospital, but, also, in St. Mary's Hospital, and were entitled to
transportation thereto for Mrs. Herrera received no compensation as directress of St. Catherine's Hospital were incidental to
the operation of the latter and of said school, and, accordingly, did not affect the charitable character of said hospital and the
educational nature of said school.










PH Lung Center vs Quezon City

Facts: Lung Center of the Philippines is a non-stock and non-profit entity established by virtue of PD No. 1823. It is the registered
owner of the land on which the Lung Center of the Philippines Hospital is erected. A big space in the ground floor of the hospital is
being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as
their private clinics. Also, a big portion on the right side of the hospital is being leased for commercial purposes to a private
enterprise known as the Elliptical Orchids and Garden Center. Left side vacant and idle.

The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying.
Aside from its income from paying patients, the petitioner receives annual subsidies from the government.

When the City Assessor of Quezon City assessed both its land and hospital building for real property taxes, the Lung Center of the
Philippines filed a claim for exemption on its averment that it is a charitable institution with a minimum of 60% of its hospital beds
exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The claim for
exemption was denied, prompting a petition for the reversal of the resolution of the City Assessor with the Local Board of
Assessment Appeals of Quezon City, which denied the same. On appeal, the Central Board of Assessment Appeals of Quezon City
affirmed the local boards decision, finding that Lung Center of the Philippines is not a charitable institution and that its properties
were not actually, directly and exclusively used for charitable purposes. Hence, the present petition for review with averments that
the Lung Center of the Philippines is a charitable institution under Section 28(3), Article VI of the Constitution, notwithstanding that
it accepts paying patients and rents out portions of the hospital building to private individuals and enterprises.

Issue: Is the Lung Center of the Philippines a charitable institution within the context of the Constitution, and therefore, exempt
from real property tax?

Held: The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in law as charitable
or whether it is maintained for gain, profit, or private advantage.

The Lung Center of the Philippines is a charitable institution. To determine whether an enterprise is a charitable institution or not,
the elements which should be considered include the statute creating the enterprise, its corporate purposes, its constitution and by-
laws, the methods of administration, the nature of the actual work performed, that character of the services rendered, the
indefiniteness of the beneficiaries and the use and occupation of the properties.

As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it
derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so
long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money
inures to the private benefit of the persons managing or operating the institution.

Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character as a charitable
institution simply because the gift or donation is in the form of subsidies granted by the government.

Operational loss in 1991 and 1992. All income were used to defray operational expenses.

PD 1823 did not exempt lung center from real property tax but exe,ption is by virtue of the Consitution and RA 7160

However, under the Constitution, in order to be entitled to exemption from real property tax, there must be clear and unequivocal
proof that (1) it is a charitable institution and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable
purposes. While portions of the hospital are used for treatment of patients and the dispensation of medical services to them,
whether paying or non-paying, other portions thereof are being leased to private individuals and enterprises. 1935 Constitution
exclusively. 1973 and 1987 Consti - ADE

Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from participation or enjoyment. If real property
is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.


















ABRA VALLEY COLLEGE INC. VS AQUINO

[GR L-39086, 15 June 1988]
Facts: Petitioner Abra Valley College is an educational corporation and institution of higher learning duly incorporated with the SEC
in 1948. On 6 July 1972, the Municipal and Provincial treasurers (Gaspar Bosque and Armin Cariaga, respectively) and issued a Notice
of Seizure upon the petitioner for the college lot and building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers
served upon the petitioner a Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno Millare, then municipal
mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving the sale of the college lot and buildi ng. The
certificate of sale was correspondingly issued to him.

The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and declare void the Notice of Seizure and the Notice
of Sale of its lot and building located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to P5,140.31.
On 12 April 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision.
The trial court ruled for the government, holding that the second floor of the building is being used by the director for residential
purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the
property is not being used exclusively for educational purposes. Instead of perfecting an appeal, petitioner availed of the instant
petition for review on certiorari with prayer for preliminary injunction before the Supreme Court, by filing said petition on 17 August
1974.

The Supreme Court affirmed the decision of the CFI Abra (Branch I) subject to the modification that half of the assessed tax be
returned to the petitioner. The modification is derived from the fact that the ground floor is being used for commercial purposes
(leased) and the second floor being used as incidental to education (residence of the director).

Issue: Should there be tax exemption?

Interpretation of the phrase used exclusively for educational purposes
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, expressly grants exemption from realty taxes for
Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable or educational purposes. This constitution is relative to Section 54, paragraph c, Commonwealth
Act 470 as amended by RA 409 (Assessment Law). An institution used exclusively for religious, charitable and educational purposes,
and as such, it is entitled to be exempted from taxation; notwithstanding that it keeps a lodging and a boarding house and maintains
a restaurant for its members (YMCA case). A lot which is not used for commercial purposes but serves solely as a sort of lodging
place, also qualifies for exemption because this constitutes incidental use in religious functions (Bishop of Nueva Segovia case).

Exemption in favour of property used exclusively for charitable or educational purposes is not limited to property actually
indispensable therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said
purposes (Herrera v. Quezon City Board of Assessment Appeals). While the Court allows a more liberal and non-restrictive
interpretation of the phrase exclusively used for educational purposes, reasonable emphasis has always been made that
exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. The
use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. In the case at bar,
the lease of the first floor of the building to the Northern Marketing Corporation cannot by any stretch of the imagination be
considered incidental to the purpose of education.

HELD:NO. It must be stressed that while the court allows a more liberal and non-restrictive interpretation of the phrase exclusively
used for educational purposes as provided for in the Article VI, Section 22, Paragraph 3 of the 1935Philippine Constitution,
reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary
for the accomplishment of the main purpose. Otherwise stated, the use of the school building or lot for commercial purposes i s
neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar for
residential purposes of the Director and his family, may find justification under the concept of incidental use, which is
complimentary to the main or primary purpose educational, the lease of the first floor thereof to the Northern Marketing
Corporation cannot by any stretch of the imagination be considered incidental to the purposes of education.

Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school building as well as the lot where it is
built, should be taxed, not because the second floor of the same is being used by the director and his family for residential purposes,
but because the first floor thereof is being used for commercial purposes. However, since only a portion is used for purposes of
commerce, it is only fair that half of the assessed tax be return to the schooli nvolved.














ORMOC SUGAR COMPANY, INC., plaintiff-appellant,
vs.
THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C. CONEJOS as Mayor of Ormoc City and ORMOC CITY,
defendants-appellees.

Ponce Enrile, Siguion Reyna, Montecillo & Belo and Teehankee, Carreon & Taada for plaintiff-appellant.
Ramon O. de Veyra for defendants-appellees.

BENGZON, J.P., J.:

On January 29, 1964, the Municipal Board of Ormoc City passed 1 Ordinance No. 4, Series of 1964, imposing "on any and all productions of
centrifugal sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal tax equivalent to one per centum (1%) per export sale to the
United States of America and other foreign countries." 2

Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. on March 20, 1964 for P7,087.50 and on April 20, 1964 for
P5,000, or a total of P12,087.50.

On June 1, 1964, Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte, with service of a copy upon the Solicitor
General, a complaint 3 against the City of Ormoc as well as its Treasurer, Municipal Board and Mayor, alleging that the afore-stated ordinance is
unconstitutional for being violative of the equal protection clause (Sec. 1[1], Art. III, Constitution) and the rule of uniformity of taxation (Sec. 22[1]),
Art. VI, Constitution), aside from being an export tax forbidden under Section 2287 of the Revised Administrative Code. It further alleged that the
tax is neither a production nor a license tax which Ormoc City under Section 15-kk of its charter and under Section 2 of Republic Act 2264,
otherwise known as the Local Autonomy Act, is authorized to impose; and that the tax amounts to a customs duty, fee or charge in violation of
paragraph 1 of Section 2 of Republic Act 2264 because the tax is on both the sale and export of sugar.

Answering, the defendants asserted that the tax ordinance was within defendant city's power to enact under the Local Autonomy Act and
that the same did not violate the afore-cited constitutional limitations. After pre-trial and submission of the case on memoranda, the Court of First
Instance, on August 6, 1964, rendered a decision that upheld the constitutionality of the ordinance and declared the taxing power of defendant
chartered city broadened by the Local Autonomy Act to include all other forms of taxes, licenses or fees not excluded in its charter.

Appeal therefrom was directly taken to Us by plaintiff Ormoc Sugar Company, Inc. Appellant alleges the same statutory and constitutional
violations in the aforesaid taxing ordinance mentioned earlier.

Section 1 of the ordinance states: "There shall be paid to the City Treasurer on any and all productions of centrifugal sugar milled at the
Ormoc Sugar Company, Incorporated, in Ormoc City, a municipal tax equivalent to one per centum (1%) per export sale to the United States of
America and other foreign countries." Though referred to as a tax on the export of centrifugal sugar produced at Ormoc Sugar Company, Inc. For
production of sugar alone is not taxable; the only time the tax applies is when the sugar produced is exported.

Appellant questions the authority of the defendant Municipal Board to levy such an export tax, in view of Section 2287 of the Revised
Administrative Code which denies from municipal councils the power to impose an export tax. Section 2287 in part states: "It shall not be in the
power of the municipal council to impose a tax in any form whatever, upon goods and merchandise carried into the municipality, or out of the
same, and any attempt to impose an import or export tax upon such goods in the guise of an unreasonable charge for wharfage use of bridges or
otherwise, shall be void."

Subsequently, however, Section 2 of Republic Act 2264 effective June 19, 1959, gave chartered cities, municipalities and municipal districts
authority to levy for public purposes just and uniform taxes, licenses or fees. Anent the inconsistency between Section 2287 of the Revised
Administrative Code and Section 2 of Republic Act 2264, this Court, in Nin Bay Mining Co. v. Municipality of Roxas 4 held the former to have been
repealed by the latter. And expressing Our awareness of the transcendental effects that municipal export or import taxes or licenses will have on
the national economy, due to Section 2 of Republic Act 2264, We stated that there was no other alternative until Congress acts to provide remedial
measures to forestall any unfavorable results.

The point remains to be determined, however, whether constitutional limits on the power of taxation, specifically the equal protection clause
and rule of uniformity of taxation, were infringed.

The Constitution in the bill of rights provides: ". . . nor shall any person be denied the equal protection of the laws." (Sec. 1 [1], Art. III) In
Felwa vs. Salas, 5 We ruled that the equal protection clause applies only to persons or things identically situated and does not bar a reasonable
classification of the subject of legislation, and a classification is reasonable where (1) it is based on substantial distinctions which make real
differences; (2) these are germane to the purpose of the law; (3) the classification applies not only to present conditions but also to future
conditions which are substantially identical to those of the present; (4) the classification applies only to those who belong to the same class.

A perusal of the requisites instantly shows that the questioned ordinance does not meet them, for it taxes only centrifugal sugar produced
and exported by the Ormoc Sugar Company, Inc. and none other. At the time of the taxing ordinance's enactment, Ormoc Sugar Company, Inc., it is
true, was the only sugar central in the city of Ormoc. Still, the classification, to be reasonable, should be in terms applicable to future conditions as
well. The taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as
plaintiff, for the coverage of the tax. As it is now, even if later a similar company is set up, it cannot be subject to the tax because the ordinance
expressly points only to Ormoc City Sugar Company, Inc. as the entity to be levied upon.

Appellant, however, is not entitled to interest; on the refund because the taxes were not arbitrarily collected (Collector of Internal Revenue v.
Binalbagan). 6 At the time of collection, the ordinance provided a sufficient basis to preclude arbitrariness, the same being then presumed
constitutional until declared otherwise.

WHEREFORE, the decision appealed from is hereby reversed, the challenged ordinance is declared unconstitutional and the defendants-
appellees are hereby ordered to refund the P12,087.50 plaintiff-appellant paid under protest. No costs. So ordered.





TIU va CA
F: The passage of RA 7227 (An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the
Bases Conversion andDevelopment Authority for this Purpose, Providing Funds Therefore and for Other Purposes) paved the
creation of Subic Special Economic Zone (SSEZ). It includedCity of Olongapo and the Municipality of Subic Province of Zambales, the
lands occupied by the Subic Naval bases Agreement and within the territorial jurisdiction ofthe Municipalities of Morong and
Hermosa, Province of Bataan as secured areas of SSEZ and should, therefore, enjoy the same privileges. Pres. Ramos issued EO 97-A,
specifying the areas within which the tax-and-duty-free privilege was operative (only in secured areas consisting of the presently
fenced-in former Subic Naval Base shall be the completely tax and duty-free area in SSEZ some of the citizens from areas no longer
included in the new delineated areas challenged the constitutionality of EO 97-A. According to the citizens, EO 97-A excluded the
residents of the first two components of the zone from enjoying the benefits granted by the law. It has effectively discriminated
against them without reasonable or valid standards, in contravention of the equal protection guarantee.

I: WON the issuance of EO 97-A violates the equal protection clause guaranteed by the Constitution. And WON the exclusion of
some locations from the zone is discriminatory.

R: The equal-protection guarantee does not require territorial uniformity of laws. The fundamental right of equal protection of the
law is not absolute, but is subject to reasonable classification. Classification, to be valid, must (1) rest on substantial distinctions, (2)
be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the
same class.Furthermore, RA 7227 clearly vests in the President the authority to delineate the metes and bounds of the SSEZ.People v
Cayat 68 PHIL 12F: Cayat is a member of non-Christian tribe convicted under Act. No. 1639 for possession of an intoxicating liquor
and sentenced him to pay P50.00 or subsidiary imprisonment. Cayat assails the decision on the ff. grounds: It is discriminatory,
denial of equal protection of the law, violative of due process provided by the constitution, that it is an improper exercise of police
power.I: Does Act No. 1639 unconstitutionalR: It is an established principle of constitutional law that the guaranty for equal
protection of the law is not violated by a legislation based on reasonable classification.

Held: No. The Court found real and substantive distinctions between the circumstances obtaining inside and those outside the Subic
Naval Base, thereby justifying a valid and reasonable classification. The fundamental right of equal protection of the laws is not
absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real
differences, one class may be treated and regulated differently from another. The classification must also be germane to the
purpose of the law and must apply to all those belonging to the same class. Classification, to be valid, must (1) rest on substantial
distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all
members of the same class. The Supreme Court believed it was reasonable for the President to have delimited the application of
some incentives to the confines of the former Subic military base. It is this specific area which the government intends to transform
and develop from its status quo ante as an abandoned naval facility into a self-sustaining industrial and commercial zone,
particularly for big foreign and local investors to use as operational bases for their businesses and industries.

From the above provisions of the law, it can easily be deduced that the real concern of RA 7227 is to convert the lands formerly occupied by the US
military bases into economic or industrial areas. In furtherance of such objective, Congress deemed it necessary to extend economic incentives to
attract and encourage investors, both local and foreign. Among such enticements are:[11] (1) a separate customs territory within the zone, (2) tax-
and-duty-free importations, (3) restructured income tax rates on business enterprises within the zone, (4) no foreign exchange control, (5)
liberalized regulations on banking and finance, and (6) the grant of resident status to certain investors and of working visas to certain foreign
executives and workers.

We believe it was reasonable for the President to have delimited the application of some incentives to the confines of the former Subic military
base. It is this specific area which the government intends to transform and develop from its status quo ante as an abandoned naval facility into a
self-sustaining industrial and commercial zone, particularly for big foreign and local investors to use as operational bases for their businesses and
industries. Why the seeming bias for big investors? Undeniably, they are the ones who can pour huge investments to spur economic growth in the
country and to generate employment opportunities for the Filipinos, the ultimate goals of the government for such conversion. The classification
is, therefore, germane to the purposes of the law. And as the legal maxim goes, The intent of a statute is the law.*12+

Certainly, there are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called
secured area and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands of
new jobs. On the other hand, definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local. Even
more important, at this time the business activities outside the secured area are not likely to have any impact in achieving the purpose of the
law, which is to turn the former military base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable
basis to extend to them the benefits and incentives accorded in RA 7227. Additionally, as the Court of Appeals pointed out, it will be easier to
manage and monitor the activities within the secured area, which is already fenced off, to prevent fraudulent importation of merchandise or
smuggling.

It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws.[13] As long as there are actual and material
differences between territories, there is no violation of the constitutional clause. And of course, anyone, including the petitioners, possessing the
requisite investment capital can always avail of the same benefits by channeling his or her resources or business operations into the fenced-off free
port zone.

We believe that the classification set forth by the executive issuance does not apply merely to existing conditions. As laid down in RA 7227, the
objective is to establish a self-sustaining, industrial, commercial, financial and investment center in the area. There will, therefore, be a long-
term difference between such investment center and the areas outside it.

Lastly, the classification applies equally to all the resident individuals and businesses within the secured area. The residents, being in like
circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. Instead, they are all similarly
treated, both in privileges granted and in obligations required.

All told, the Court holds that no undue favor or privilege was extended. The classification occasioned by EO 97-A was not unreasonable, capricious
or unfounded. To repeat, it was based, rather, on fair and substantive considerations that were germane to the legislative purpose.