G.R. No.
L-29646 November 10, 1978 to engage or participate in any position or
MAYOR ANTONIO J. VILLEGAS, petitioner,
vs.
HIU CHIONG TSAI PAO HO and JUDGE
FRANCISCO ARCA, respondents.
Angel C. Cruz, Gregorio A. Ejercito, Felix C. Chaves
& Jose Laureta for petitioner.
Sotero H. Laurel for respondents.
FERNANDEZ, J.:
This is a petition for certiorari to review tile
decision dated September 17, 1968 of
respondent Judge Francisco Arca of the Court
of First Instance of Manila, Branch I, in Civil
Case No. 72797, the dispositive portion of
winch reads.
Wherefore, judgment is hereby rendered in
favor of the petitioner and against the
respondents, declaring Ordinance No. 6 37 of
the City of Manila null and void. The
preliminary injunction is made permanent. No
pronouncement as to cost.
SO ORDERED.
Manila, Philippines, September 17, 1968.
(SGD.) FRANCISCO ARCA
Judge 1
The controverted Ordinance No. 6537 was
passed by the Municipal Board of Manila on
February 22, 1968 and signed by the herein
petitioner Mayor Antonio J. Villegas of Manila
on March 27, 1968. 2
City Ordinance No. 6537 is entitled:
AN ORDINANCE MAKING IT UNLAWFUL
FOR ANY PERSON NOT A CITIZEN OF
THE PHILIPPINES TO BE EMPLOYED IN
ANY PLACE OF EMPLOYMENT OR TO BE
ENGAGED IN ANY KIND OF TRADE,
BUSINESS OR OCCUPATION WITHIN THE
CITY OF MANILA WITHOUT FIRST
SECURING AN EMPLOYMENT PERMIT
FROM THE MAYOR OF MANILA; AND FOR
OTHER PURPOSES. 3
Section 1 of said Ordinance No.
6537 4 prohibits aliens from being employed or
occupation or business enumerated therein,
whether permanent, temporary or casual,
without first securing an employment permit from
the Mayor of Manila and paying the permit fee of
P50.00 except persons employed in the
diplomatic or consular missions of foreign
countries, or in the technical assistance
programs of both the Philippine Government and
any foreign government, and those working in
their respective households, and members of
religious orders or congregations, sect or
denomination, who are not paid monetarily or in
kind.
Violations of this ordinance is punishable by
an imprisonment of not less than three (3)
months to six (6) months or fine of not less
than P100.00 but not more than P200.00 or
both such fine and imprisonment, upon
conviction. 5
On May 4, 1968, private respondent Hiu
Chiong Tsai Pao Ho who was employed in
Manila, filed a petition with the Court of First
Instance of Manila, Branch I, denominated as
Civil Case No. 72797, praying for the issuance
of the writ of preliminary injunction and
restraining order to stop the enforcement of
Ordinance No. 6537 as well as for a judgment
declaring said Ordinance No. 6537 null and
void. 6
In this petition, Hiu Chiong Tsai Pao Ho
assigned the following as his grounds for
wanting the ordinance declared null and void:
1) As a revenue measure imposed on aliens
employed in the City of Manila, Ordinance
No. 6537 is discriminatory and violative of the
rule of the uniformity in taxation;
2) As a police power measure, it makes no
distinction between useful and non-useful
occupations, imposing a fixed P50.00
employment permit, which is out of proportion
to the cost of registration and that it fails to
prescribe any standard to guide and/or limit
the action of the Mayor, thus, violating the
fundamental principle on illegal delegation of
legislative powers:
 3) It is arbitrary, oppressive
and unreasonable, being applied only to
aliens who are thus, deprived of their rights
to life, liberty and property and therefore,
violates the due process and equal protection
clauses of the Constitution. 7
On May 24, 1968, respondent Judge issued
the writ of preliminary injunction and on
September 17, 1968 rendered judgment
declaring Ordinance No. 6537 null and void
and making permanent the writ of preliminary
injunction. 8
Contesting the aforecited decision of
respondent Judge, then Mayor Antonio J.
Villegas filed the present petition on March 27,
1969. Petitioner assigned the following as
errors allegedly committed by respondent
Judge in the latter's decision of September
17,1968: 9
I cleared for employment. It is obvious that the
THE RESPONDENT JUDGE
COMMITTED A SERIOUS AND PATENT
ERROR OF LAW IN RULING THAT
ORDINANCE NO. 6537 VIOLATED THE
CARDINAL RULE OF UNIFORMITY OF
TAXATION.
II
RESPONDENT JUDGE LIKEWISE
COMMITTED A GRAVE AND PATENT
ERROR OF LAW IN RULING THAT
ORDINANCE NO. 6537 VIOLATED THE
PRINCIPLE AGAINST UNDUE
DESIGNATION OF LEGISLATIVE POWER.
III
RESPONDENT JUDGE
FURTHER COMMITTED A SERIOUS AND
PATENT ERROR OF LAW IN RULING THAT
ORDINANCE NO. 6537 VIOLATED THE DUE
PROCESS AND EQUAL PROTECTION
CLAUSES OF THE CONSTITUTION.
Petitioner Mayor Villegas argues that
Ordinance No. 6537 cannot be declared null
and void on the ground that it violated the rule
on uniformity of taxation because the rule on
uniformity of taxation applies only to purely tax
or revenue measures and that Ordinance No.
6537 is not a tax or revenue measure but is
an exercise of the police power of the state, it
being principally a regulatory measure in
nature.
The contention that Ordinance No. 6537 is not
a purely tax or revenue measure because its
principal purpose is regulatory in nature has
no merit. While it is true that the first part
which requires that the alien shall secure an
employment permit from the Mayor involves
the exercise of discretion and judgment in the
processing and approval or disapproval of
applications for employment permits and
therefore is regulatory in character the second
part which requires the payment of P50.00 as
employee's fee is not regulatory but a revenue
measure. There is no logic or justification in
exacting P50.00 from aliens who have been
purpose of the ordinance is to raise money
under the guise of regulation.
The P50.00 fee is unreasonable not only
because it is excessive but because it fails to
consider valid substantial differences in
situation among individual aliens who are
required to pay it. Although the equal
protection clause of the Constitution does not
forbid classification, it is imperative that the
classification should be based on real and
substantial differences having a reasonable
relation to the subject of the particular
legislation. The same amount of P50.00 is
being collected from every employed alien
whether he is casual or permanent, part time
or full time or whether he is a lowly employee
or a highly paid executive
Ordinance No. 6537 does not lay down any
criterion or standard to guide the Mayor in the
exercise of his discretion. It has been held that
where an ordinance of a municipality fails to
state any policy or to set up any standard to
guide or limit the mayor's action, expresses no
purpose to be attained by requiring a permit,
enumerates no conditions for its grant or
refusal, and entirely lacks standard, thus
conferring upon the Mayor arbitrary and
unrestricted power to grant or deny the
issuance of building permits, such ordinance
is invalid, being an undefined and unlimited
delegation of power to allow or prevent an
activity per se lawful. 10
In Chinese Flour Importers Association vs.
Price Stabilization Board, 11 where a law
granted a government agency power to
determine the allocation of wheat flour among
importers, the Supreme Court ruled against the
interpretation of uncontrolled power as it vested
in the administrative officer an arbitrary
discretion to be exercised without a policy, rule,
or standard from which it can be measured or
controlled.
It was also held in Primicias vs. Fugoso 12 that
the authority and discretion to grant and refuse
permits of all classes conferred upon the Mayor
of Manila by the Revised Charter of Manila is not
uncontrolled discretion but legal discretion to be
exercised within the limits of the law.
Ordinance No. 6537 is void because it does
not contain or suggest any standard or
criterion to guide the mayor in the exercise of
the power which has been granted to him by
the ordinance.
The ordinance in question violates the due
process of law and equal protection rule of the
Constitution.
Requiring a person before he can be
employed to get a permit from the City Mayor
of Manila who may withhold or refuse it at will
is tantamount to denying him the basic right of
the people in the Philippines to engage in a
means of livelihood. While it is true that the
Philippines as a State is not obliged to admit
aliens within its territory, once an alien is
admitted, he cannot be deprived of life without
due process of law. This guarantee includes
the means of livelihood. The shelter of
protection under the due process and equal
protection clause is given to all persons, both
aliens and citizens. 13
The trial court did not commit the errors
assigned.
WHEREFORE, the decision appealed from is
hereby affirmed, without pronouncement as to
costs. SO ORDERED. Separate
OpinionsTEEHANKEE, J., concurring:
I concur in the decision penned by Mr. Justice
Fernandez which affirms the lower court's
judgment declaring Ordinance No. 6537 of the
City of Manila null and void for the reason that
the employment of aliens within the country is
a matter of national policy and regulation,
which properly pertain to the national
government officials and agencies concerned
and not to local governments, such as the City
of Manila, which after all are mere creations of
the national government.
The national policy on the matter has been
determined in the statutes enacted by the
legislature, viz, the various Philippine
nationalization laws which on the whole
recognize the right of aliens to obtain gainful
employment in the country with the exception
of certain specific fields and areas. Such
national policies may not be interfered with,
thwarted or in any manner negated by any
local government or its officials since they are
not separate from and independent of the
national government.
As stated by the Court in the early case
of Phil. Coop. Livestock Ass'n. vs. Earnshaw,
59 Phil. 129: "The City of Manila is a
subordinate body to the Insular (National
Government ...). When the Insular (National)
Government adopts a policy, a municipality is
without legal authority to nullify and set at
naught the action of the superior authority."
Indeed, "not only must all municipal powers
be exercised within the limits of the organic
laws, but they must be consistent with the
general law and public policy of the particular
state ..." (I McQuillin, Municipal Corporations,
2nd sec. 367, P. 1011).
With more reason are such national policies
binding on local governments when they
involve our foreign relations with other
countries and their nationals who have been
lawfully admitted here, since in such matters
the views and decisions of the Chief of State
and of the legislature must prevail over those
of subordinate and local governments and
officials who have no authority whatever to
take official acts to the contrary.
SeparateOpinionsTEEHANKEE, J., concurri
ng:
I concur in the decision penned by Mr. Justice
Fernandez which affirms the lower court's
judgment declaring Ordinance No. 6537 of the
City of Manila null and void for the reason that
the employment of aliens within the country is
a matter of national policy and regulation,
which properly pertain to the national
government officials and agencies concerned
and not to local governments, such as the City
of Manila, which after all are mere creations of
the national government.
The national policy on the matter has been
determined in the statutes enacted by the
legislature, viz, the various Philippine
nationalization laws which on the whole
recognize the right of aliens to obtain gainful
employment in the country with the exception
of certain specific fields and areas. Such
national policies may not be interfered with,
thwarted or in any manner negated by any
local government or its officials since they are
not separate from and independent of the
national government.
As stated by the Court in the early case
of Phil. Coop. Livestock Ass'n. vs. Earnshaw,
59 Phil. 129: "The City of Manila is a
subordinate body to the Insular (National
Government ...). When the Insular (National)
Government adopts a policy, a municipality is
without legal authority to nullify and set at
naught the action of the superior authority."
Indeed, "not only must all municipal powers
be exercised within the limits of the organic
laws, but they must be consistent with the
general law and public policy of the particular
state ..." (I McQuillin, Municipal Corporations,
2nd sec. 367, P. 1011).
With more reason are such national policies
binding on local governments when they
involve our foreign relations with other
countries and their nationals who have been
lawfully admitted here, since in such matters
the views and decisions of the Chief of State
and of the legislature must prevail over those
of subordinate and local governments and
officials who have no authority whatever to
take official acts to the contrary.
Footnotes1 Annex "F", Petition, Rollo, p. 64.2
Petition, Rollo, p. 28.3 Annex "A", of Petition,
Rollo, p. 37-38.
4 Section 1. It shall he unlawful for any
person not a citizen of the Philippines to be
employed in any kind of position or
occupation or allowed directly or indirectly to
participate in the functions, administration or
management in any office, corporation, store,
restaurant, factory, business firm, or any
other place of employment either as
consultant, adviser, clerk, employee,
technician, teacher, actor, actress, acrobat,
singer or other theatrical performer, laborer,
cook, etc., whether temporary, casual,
permanent or otherwise and irrespective of
the source or origin of his compensation or
number of hours spent in said office, store,
restaurant, factory, corporation or any other
place of employment, or to engage in any
kind of business and trade within the City of
Manila, without first securing an employment
permit from the Mayor of Manila, and paying
the necessary fee therefor to the City the City
Treasurer: PROVIDED, HOWEVER, That
persons employed in diplomatic and consular
missions of foreign countries and in technical
assistance programs agreed upon by the
Philippine Government and any foreign
government, and those working in their
respective households, and members of
different congregations or religious orders of
any religion, sect or denomination, who are
not paid either monetarily or in kind shag be
exempted from the provisions of this
Ordinance.
5 Section 4. Any violation of this Ordinance
shall upon conviction, be punished by
imprisonment of not less than three (3)
months but not more than six (6) months or
by a fine of not less than one hundred pesos
(P100.00) but not more than two hundred
pesos (P200.00), or by both such fine and
imprisonment, in the discretion of the Court:
PROVIDED, HOWEVER, That in case of
juridical persons, the President, the Vice-
 President or the person in charge shall be Before us is a petition for review under
liable. Rule 45 of the Rules of Court, seeking the
reversal of the Court of Appeals
[1]
6 Annex "B", Petition, Rollo, p. Decision promulgated on August 29, 1996, and
39. Resolution[2] dated November 13, 1996, in CA-
GR SP No. 37788.[3] The challenged Decision
upheld the constitutionality and validity of
Executive Order No. 97-A (EO 97-A), according
[G.R. No. 127410. January 20, 1999] to which the grant and enjoyment of the tax and
duty incentives authorized under Republic Act
No. 7227 (RA 7227) were limited to the
business enterprises and residents within the
CONRADO L. TIU, JUAN T. fenced-in area of the Subic Special Economic
MONTELIBANO JR. and ISAGANI Zone (SSEZ).
M. JUNGCO, petitioners, vs. COURT
OF APPEALS, HON. TEOFISTO T. The assailed Resolution denied the
GUINGONA JR., BASES petitioners motion for reconsideration.
CONVERSION AND
DEVELOPMENT AUTHORITY,
SUBIC BAY METROPOLITAN The Facts

AUTHORITY, BUREAU OF
INTERNAL REVENUE, CITY
TREASURER OF OLONGAPO and
MUNICIPAL TREASURER OF
SUBIC, ZAMBALES, respondents.
DECISION
PANGANIBAN, J.:
The constitutional right to equal protection
of the law is not violated by an executive order,
issued pursuant to law, granting tax and duty
incentives only to businesses and residents
within the secured area of the Subic Special
Economic Zone and denying them to those who
live within the Zone but outside such fenced-in
territory. The Constitution does not require
absolute equality among residents. It is enough
that all persons under like circumstances or
conditions are given the same privileges and
required to follow the same obligations. In short,
a classification based on valid and reasonable
standards does not violate the equal protection
clause.
The Case
On March 13, 1992, Congress, with the
approval of the President, passed into law RA
7227 entitled An Act Accelerating the
Conversion of Military Reservations Into Other
Productive Uses, Creating the Bases Conversion
and Development Authority for this Purpose,
Providing Funds Therefor and for Other
Purposes. Section 12 thereof created the Subic
Special Economic Zone and granted thereto
special privileges, as follows:
SEC. 12. Subic Special Economic Zone. --
Subject to the concurrence by resolution of
the sangguniang panlungsod of the City of
Olongapo and the sangguniang bayan of the
Municipalities of Subic, Morong and Hermosa,
there is hereby created a Special Economic and
Free-port Zone consisting of the City of
Olongapo and the Municipality of Subic,
Province of Zambales, the lands occupied by the
Subic Naval Base and its contiguous extensions
as embraced, covered, and defined by the 1947
Military Bases Agreement between the
Philippines and the United States of America as
amended, and within the territorial jurisdiction
of the Municipalities of Morong and Hermosa,
Province of Bataan, hereinafter referred to as the
Subic Special Economic Zone whose metes and
bounds shall be delineated in a proclamation to
be issued by the President of the
Philippines. Within thirty (30) days after the
approval of this Act, each local government unit
shall submit its resolution of concurrence to join
the Subic Special Economic Zone to the Office
of the President. Thereafter, the President of the
Philippines shall issue a proclamation defining
the metes and bounds of the zone as provided
herein.
The abovementioned zone shall be subject to the
following policies:
(a) Within the framework and subject to the
mandate and limitations of the Constitution and
the pertinent provisions of the Local
Government Code, the Subic Special Economic
Zone shall be developed into a self-sustaining,
industrial, commercial, financial and investment
center to generate employment opportunities in
and around the zone and to attract and promote
productive foreign investments;
(b) The Subic Special Economic Zone shall be
operated and managed as a separate customs
territory ensuring free flow or movement of
goods and capital within, into and exported out
of the Subic Special Economic Zone, as well as
provide incentives such as tax and duty-free
importations of raw materials, capital and
equipment. However, exportation or removal of
goods from the territory of the Subic Special
Economic Zone to the other parts of the
Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff
Code and other relevant tax laws of the
Philippines;
(c) The provision of existing laws, rules and
regulations to the contrary notwithstanding, no
taxes, local and national, shall be imposed
within the Subic Special Economic Zone. In lieu
of paying taxes, three percent (3%) of the gross
income earned by all businesses and enterprises
within the Subic Special Economic Zone shall
be remitted to the National Government, one
percent (1%) each to the local government units
affected by the declaration of the zone in
proportion to their population area, and other
factors. In addition, there is hereby established a
development fund of one percent (1%) of the
gross income earned by all businesses and
enterprises within the Subic Special Economic
Zone to be utilized for the development of
municipalities outside the City of Olongapo and
the Municipality of Subic, and other
municipalities contiguous to the base areas.
In case of conflict between national and local
laws with respect to tax exemption privileges in
the Subic Special Economic Zone, the same
shall be resolved in favor of the latter;
(d) No exchange control policy shall be applied
and free markets for foreign exchange, gold,
securities and future shall be allowed and
maintained in the Subic Special Economic Zone;
(e) The Central Bank, through the Monetary
Board, shall supervise and regulate the
operations of banks and other financial
institutions within the Subic Special Economic
Zone;
(f) Banking and finance shall be liberalized with
the establishment of foreign currency depository
units of local commercial banks and offshore
banking units of foreign banks with minimum
Central Bank regulation;
(g) Any investor within the Subic Special
Economic Zone whose continuing investment
shall not be less than two hundred fifty thousand
dollars ($250,000), his/her spouse and
dependent children under twenty-one (21) years
of age, shall be granted permanent resident
status within the Subic Special Economic
Zone. They shall have the freedom of ingress
and egress to and from the Subic Special
Economic Zone without any need of special
authorization from the Bureau of Immigration
and Deportation. The Subic Bay Metropolitan
Authority referred to in Section 13 of this Act
may also issue working visas renewable every
two (2) years to foreign executives and other
aliens possessing highly technical skills which
no Filipino within the Subic Special Economic
Zone possesses, as certified by the Department
of Labor and Employment. The names of aliens
granted permanent residence status and working
visas by the Subic Bay Metropolitan Authority
shall be reported to the Bureau of Immigration
and Deportation within thirty (30) days after
issuance thereof;
(h) The defense of the zone and the security of
its perimeters shall be the responsibility of the
National Government in coordination with the
Subic Bay Metropolitan Authority. The Subic
Bay Metropolitan Authority shall provide and
establish its own security and fire-fighting
forces; and
(i) Except as herein provided, the local
government units comprising the Subic Special
Economic Zone shall retain their basic
autonomy and identity. The cities shall be
governed by their respective charters and the
municipalities shall operate and function in
accordance with Republic Act No. 7160,
otherwise known as the Local Government Code
of 1991.
On June 10, 1993, then President Fidel V.
Ramos issued Executive Order No. 97 (EO 97),
clarifying the application of the tax and duty
incentives thus:
Section 1. On Import Taxes and Duties -- Tax
and duty-free importations shall apply only to
raw materials, capital goods and equipment
brought in by business enterprises into the
SSEZ. Except for these items, importations of
other goods into the SSEZ, whether by business
enterprises or resident individuals, are subject to
taxes and duties under relevant Philippine laws.
The exportation or removal of tax and duty-free
goods from the territory of the SSEZ to other
parts of the Philippine territory shall be subject
to duties and taxes under relevant Philippine
laws.
Section 2. On All Other Taxes. -- In lieu of all
local and national taxes (except import taxes and
duties), all business enterprises in the SSEZ
shall be required to pay the tax specified in
Section 12(c) of R.A. No. 7227.
Nine days after, on June 19, 1993, the
President issued Executive Order No. 97-A (EO
97-A), specifying the area within which the tax-
and-duty-free privilege was operative, viz.:
Section 1.1. The Secured Area consisting of the
presently fenced-in former Subic Naval Base
shall be the only completely tax and duty-free
area in the SSEFPZ [Subic Special Economic
and Free Port Zone]. Business enterprises and
individuals (Filipinos and foreigners) residing
within the Secured Area are free to import raw
materials, capital goods, equipment, and
consumer items tax and duty-free. Consumption
items, however, must be consumed within
the Secured Area. Removal of raw materials,
capital goods, equipment and consumer items
out of the Secured Area for sale to non-SSEFPZ
registered enterprises shall be subject to the
usual taxes and duties, except as may be
provided herein
On October 26, 1994, the petitioners
challenged before this Court the constitutionality
of EO 97-A for allegedly being violative of their
right to equal protection of the laws. In a
Resolution dated June 27, 1995, this Court
referred the matter to the Court of Appeals,
pursuant to Revised Administrative Circular No.
1-95.
Incidentally, on February 1, 1995,
Proclamation No. 532 was issued by President
Ramos. It delineated the exact metes and bounds
of the Subic Special Economic and Free Port
Zone, pursuant to Section 12 of RA 7227.
Ruling of the Court of Appeals
Respondent Court held that there is no
substantial difference between the provisions of
EO 97-A and Section 12 of RA 7227. In both,
the Secured Area is precise and well-defined as
xxx the lands occupied by the Subic Naval Base
and its contiguous extensions as embraced,
covered and defined by the 1947 Military Bases
Agreement between the Philippines and the
United States of America, as amended, xxx. The
appellate court concluded that such being the
case, petitioners could not claim that EO 97-A is
unconstitutional, while at the same time
maintaining the validity of RA 7227.
The court a quo also explained that the
intention of Congress was to confine the
coverage of the SSEZ to the secured area and
not to include the entire Olongapo City and
other areas mentioned in Section 12 of the
law. It relied on the following deliberations in
the Senate:
Senator Paterno. Thank you, Mr.
President. My first question is the extent of the
economic zone. Since this will be a free port, in
effect, I believe that it is important to delineate
or make sure that the delineation will be quite
precise[. M]y question is: Is it the intention that
the entire of Olongapo City, the Municipality of
Subic and the Municipality of Dinalupihan will
be covered by the special economic zone or only
portions thereof?
Senator Shahani. Only portions, Mr.
President. In other words, where the actual
operations of the free port will take place.
Senator Paterno. I see. So, we should say,
COVERING THE DESIGNATED PORTIONS
OR CERTAIN PORTIONS OF OLONGAPO
CITY, SUBIC AND DINALUPIHAN to make it
clear that it is not supposed to cover the entire
area of all of these territories.
Senator Shahani. So, the Gentleman is
proposing that the words CERTAIN AREAS ...
The President. The Chair would want to
invite the attention of the Sponsor and Senator
Paterno to letter C, which says: THE
PRESIDENT OF THE PHILIPPINES IS
HEREBY AUTHORIZED TO PROCLAIM,
DELINEATE AND SPECIFY THE METES
AND BOUNDS OF OTHER SPECIAL
ECONOMIC ZONES WHICH MAY BE
CREATED IN THE CLARK MILITARY
RESERVATIONS AND ITS EXTENSIONS.
Probably, this provision can be expanded
since, apparently, the intention is that what is
referred to in Olongapo as Metro Olongapo is
not by itself ipso jure already a special economic
zone.
Senator Paterno. That is correct.
The President. Someone, some authority
must declare which portions of the same shall be
the economic zone. Is it the intention of the
author that it is the President of the Philippines
who will make such delineation?
Senator Shahani. Yes, Mr. President.
The Court of Appeals further justified the
limited application of the tax incentives as being
within the prerogative of the legislature,
pursuant to its avowed purpose [of serving]
some public benefit or interest. It ruled that EO
97-A merely implements the legislative purpose
of [RA 7227].
Disagreeing, petitioners now seek before us
a review of the aforecited Court of Appeals
Decision and Resolution.
The Issue
Petitioners submit the following issue for
the resolution of the Court:
[W]hether or not Executive Order No. 97-A
violates the equal protection clause of the
Constitution. Specifically the issue is whether
the provisions of Executive Order No. 97-A
confining the application of R.A. 7227 within
the secured area and excluding the residents of
the zone outside of the secured area is
discriminatory or not.[4]
The Courts Ruling
The petition[5] is bereft of merit.
Main Issue: The Constitutionality of EO 97-A
Citing Section 12 of RA 7227, petitioners
contend that the SSEZ encompasses (1) the City
of Olongapo, (2) the Municipality of Subic in
Zambales, and (3) the area formerly occupied by
the Subic Naval Base. However, EO 97-A,
according to them, narrowed down the area
within which the special privileges granted to
the entire zone would apply to the present
fenced-in former Subic Naval Base only. It has
thereby 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.
On the other hand, the solicitor general
defends, on behalf of respondents, the validity of
EO 97-A, arguing that Section 12 of RA 7227
clearly vests in the President the authority to
delineate the metes and bounds of the SSEZ. He
adds that the issuance fully complies with the
requirements of a valid classification.
We rule in favor of the constitutionality and
validity of the assailed EO. Said Order is not
violative of the equal protection clause; neither
is it discriminatory. Rather, we find 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. [6] The
classification must also be germane to the
purpose of the law and must apply to all those
belonging to the same class. [7] Explaining the
nature of the equal protection guarantee, the
Court in Ichong v. Hernandez[8] said:
The equal protection of the law clause is against
undue favor and individual or class privilege, as
well as hostile discrimination or the oppression
of inequality. It is not intended to prohibit
legislation which is limited either [by] the object
to which it is directed or by [the] territory within
which it is to operate. It does not demand
absolute equality among residents; it merely
requires that all persons shall be treated
alike, under like circumstances and
conditions both as to privileges conferred and
liabilities enforced. The equal protection clause
is not infringed by legislation which applies only
to those persons falling within a specified class,
if it applies alike to all persons within such class,
and reasonable grounds exist for making a
distinction between those who fall within such
class and those who do not.
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.[9]
We first determine the purpose of the
law. From the very title itself, it is clear that RA
7227 aims primarily to accelerate the
conversion of military reservations into
productive uses. Obviously, the lands covered
under the 1947 Military Bases Agreement are its
object. Thus, the law avows this policy:
SEC. 2. Declaration of Policies. -- It is hereby
declared the policy of the Government to
accelerate the sound and balanced conversion
into alternative productive uses of the Clark and
Subic military reservations and their extensions
(John Hay Station, Wallace Air Station,
ODonnell Transmitter Station, San Miguel
Naval Communications Station and Capas Relay
Station), to raise funds by the sale of portions of
Metro Manila military camps, and to apply said
funds as provided herein for the development
and conversion to productive civilian use of the
lands covered under the 1947 Military Bases
Agreement between the Philippines and the
United States of America, as amended.
To undertake the above objectives, the
same law created the Bases Conversion and
Development Authority, some of whose relevant
defined purposes are:
(b) To adopt, prepare and implement a
comprehensive and detailed development plan
embodying a list of projects including but not
limited to those provided in the Legislative-
Executive Bases Council (LEBC) framework
plan for the sound and balanced conversion of
the Clark and Subic military reservations and
their extensions consistent with ecological and
environmental standards, into other productive
uses to promote the economic and social
development of Central Luzon in particular and
the country in general;
(c) To encourage the active participation of the
private sector in transforming the Clark and
Subic military reservations and their extensions
into other productive uses;
Further, in creating the SSEZ, the law declared it
a policy to develop the zone into a self-
sustaining, industrial, commercial, financial and
investment center.[10]
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.
WHEREFORE, the petition
is DENIED for lack of merit. The assailed
Decision and Resolution are
hereby AFFIRMED. Costs against
petitioners.
SO ORDERED.
Davide, Jr., C.J., Romero, Bellosillo,
Melo, Puno, Vitug, Kapunan, Mendoza,
Martinez, Quisumbing, Purisima, Pardo,
Buena, and Gonzaga-Reyes, JJ., concur.
Tiu v. Court of Appeals, 301
SCRA 278 (1999)
posted in CONLAW2 cases by katcobing
The constitutionality and validity of EO 97-
A, that provides that the grant and
enjoyment of the tax and duty incentives
authorized under RA 7227 were limited to
the business enterprises and residents
within the fenced-in area of the Subic
Special Economic Zone (SSEZ), was
questioned.
Nature of the case: A petition for review
to reverse the decision of the Court of
Appeals which upheld the constitutionality
and validity of the E.O. 97-A.
Facts of the case: The petitioners assail
the constitutionality of the said Order
claiming that they are excluded from the
benefits provided by RA 7227 without any
reasonable standards and thus violated
the equal protection clause of the
Constitution. The Court of Appeals upheld
the validity and constitutionality and
denied the motion for reconsideration.
Hence, this petition was filed.
Issue: WON E.O. 97-A violates the equal
protection clause of the Constitution
Arguments: Petitioners contend that the
SSEZ encompasses (1) the City of
Olongapo, (2) the Municipality of Subic in
Zambales, and (3) the area formerly
occupied by the Subic Naval Base.
However, EO 97-A, according to them,
narrowed down the area within which the
special privileges granted to the entire
zone would apply to the present fenced-
in former Subic Naval Base only. It has
thereby 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.
The solicitor general defends the validity
of EO 97-A, arguing that Section 12 of RA
7227 clearly vests in the President the
authority to delineate the metes and
bounds of the SSEZ. He adds that the
issuance fully complies with the
requirements of a valid classification.
Decision: Panganiban J., The Court held
that the classification was based on valid
and reasonable standards and does not
violate the equal protection clause.
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.
Ruling: Petition denied. The challenge
decision and resolution were affirmed.

a.
b.
American Bible Society vs. City of Manila
GR No. L-9637 | April 30, 1957
Facts:
American Bible Society is a foreign, non-stock,
non-profit, religious, missionary corporation
duly registered and doing business in the
Philippines through its Philippine agency
established in Manila in November, 1898
City of Manila is a municipal corporation with
powers that are to be exercised in conformity
with the provisions of Republic Act No. 409,
known as the Revised Charter of the City of
Manila
American Bible Society has been distributing
and selling bibles and/or gospel portions
throughout the Philippines and translating the
same into several Philippine dialect
City Treasurer of Manila informed American
Bible Society that it was violating several
Ordinances for operating without the necessary
permit and license, thereby requiring the
corporation to secure the permit and license
fees covering the period from 4Q 1945-2Q 1953
To avoid closing of its business, American Bible
Society paid the City of Manila its permit and
license fees under protest
American Bible filed a complaint, questioning
the constitutionality and legality of the
Ordinances 2529 and 3000, and prayed for a
refund of the payment made to the City of
Manila. They contended:
They had been in the Philippines since 1899
and were not required to pay any license fee or
sales tax
it never made any profit from the sale of its
bibles
City of Manila prayed that the complaint be
dismissed, reiterating the constitutionality of
the Ordinances in question
Trial Court dismissed the complaint
American Bible Society appealed to the Court
of Appeals
Issue: WON American Bible Society liable to
pay sales tax for the distribution and sale of
bibles
Ruling: NO
Under Sec. 1 of Ordinance 3000, one of the
ordinance in question, person or entity engaged
in any of the business, trades or occupation
enumerated under Sec. 3 must obtain a Mayors
permit and license from the City Treasurer.
American Bible Societys business is not among
those enumerated
 However, item 79 of Sec. 3 of the Ordinance
provides that all other businesses, trade or
occupation not mentioned, except those upon
which the City is not empowered to license or
to tax P5.00
Therefore, the necessity of the permit is made
to depend upon the power of the City to
license or tax said business, trade or
occupation.
2 provisions of law that may have bearing on
this case:
a. Chapter 60 of the Revised Administrative
Code, the Municipal Board of the City of Manila
is empowered to tax and fix the license fees on
retail dealers engaged in the sale of books
b. Sec. 18(o) of RA 409: to tax and fix the
license fee on dealers in general merchandise,
including importers and indentors, except those
dealers who may be expressly subject to the
payment of some other municipal tax. Further,
Dealers in general merchandise shall be
classified as (a) wholesale dealers and (b) retail
dealers. For purposes of the tax on retail
dealers, general merchandise shall be classified
into four main classes: namely (1) luxury
articles, (2) semi-luxury articles, (3) essential
commodities, and (4) miscellaneous articles. A
separate license shall be prescribed for each
class but where commodities of different
classes are sold in the same establishment, it
shall not be compulsory for the owner to secure
more than one license if he pays the higher or
highest rate of tax prescribed by ordinance.
Wholesale dealers shall pay the license tax as
such, as may be provided by ordinance
The only difference between the 2 provisions is
the limitation as to the amount of tax or
license fee that a retail dealer has to pay per
annum
As held in Murdock vs. Pennsylvania, The
power to impose a license tax on the exercise
of these freedoms provided for in the Bill of
Rights, is indeed as potent as the power of
censorship which this Court has repeatedly
struck down. It is not a nominal fee imposed as
a regulatory measure to defray the expenses of
policing the activities in question. It is in no
way apportioned. It is flat license tax levied
and collected as a condition to the pursuit of
activities whose enjoyment is guaranteed by
the constitutional liberties of press and religion
and inevitably tends to suppress their exercise.
That is almost uniformly recognized as the
inherent vice and evil of this flat license tax.
Further, the case also mentioned that the
power to tax the exercise of a privilege is the
power to control or suppress its enjoyment.
Those who can tax the exercise of this religious
practice can make its exercise so costly as to
deprive it of the resources necessary for its
maintenance. Those who can tax the privilege
of engaging in this form of missionary
evangelism can close all its doors to all those
who do not have a full purse
Under Sec. 27(e) of Commonwealth Act No.
466 or the National Internal Revenue
Code,Corporations or associations organized
and operated exclusively for religious,
charitable, . . . or educational purposes, . . .:
Provided, however, That the income of
whatever kind and character from any of its
properties, real or personal, or from any
activity conducted for profit, regardless of the
disposition made of such income, shall be
liable to the tax imposed under this Code shall
not be taxed
The price asked for the bibles and other
religious pamphlets was in some instances a
little bit higher than the actual cost of the
same but this cannot mean that American Bible
Society was engaged in the business or
occupation of selling said "merchandise" for
profit
Therefore, the Ordinance cannot be applied for
in doing so it would impair American Bible
Societys free exercise and enjoyment of its
religious profession and worship as well as its
rights of dissemination of religious beliefs.
Wherefore, and on the strength of the
foregoing considerations, We hereby reverse
the decision appealed from, sentencing
defendant return to plaintiff the sum of
P5,891.45 unduly collected from it