JEJOMAR C. BINAY v. EUFEMIO DOMINGO, GR No.

92389, 1991-09-11

Facts:
On September 27, 1988, petitioner Municipality... approved Resolution No. 60
"A RESOLUTION TO CONFIRM AND/OR RATIFY THE ONGOING BURIAL ASSISTANCE
PROGRAM INITIATED BY THE OFFICE OF THE MAYOR, OF EXTENDING FINANCIAL
ASSISTANCE OF FIVE HUNDRED PESOS (P500.00) TO A BEREAVED FAMILY, FUNDS TO
BE TAKEN OUT OF UNAPPROPRIATED AVAILABLE FUNDS EXISTING
IN THE MUNICIPAL TREASURY."
Burial Assistance Program... bereaved families of Makati whose gross family income
does not exceed two thousand pesos (P2,000.00) a month. The beneficiaries, upon
fulfillment of other requirements, would receive the amount of five... hundred pesos
(P500.00) cash relief from the Municipality of Makati.
municipal secretary certified a disbursement fund of four hundred thousand pesos
(P400,000.00) for the implementation of the Burial Assistance Program.
Resolution No. 60 was referred to
Commission on Audit (COA) for its expected allowance in audit.
respondent COA disapproved Resolution No. 60 and disallowed in audit the
disbursement of funds for the implementation... thereof.
Two letters for reconsideration... filed by petitioners Mayor Jejomar Binay, were denied
by respondent
Subject Resolution No. 60... and the intended disbursements fall within the twin
principles of 'police power' and 'parens patriae'
Issues:
whether or not Resolution No. 60,... of the Municipality of Makati is a valid exercise of
police power under the general welfare clause.
Ruling:
The first contention is believed untenable
The mere assertion by the legislature that a statute relates to... the public healthy,
safety, or welfare does not in itself bring the statute within the police power of a state
for there must always be an obvious and real connection between the actual provisions
of a police regulation and its avowed purpose, and the regulation adopted must be...
reasonably adapted to accomplish the end sought to be attained.
Here, we see no perceptible connection or relation between the objective sought to be
attained under Resolution No. 60... and the alleged public safety, general welfare, etc.
of the inhabitants of Makati.
Municipal governments exercise this power under the general welfare clause: pursuant
thereto they are clothed with authority to "enact such ordinances and issue such
regulations as may be necessary to carry out and discharge the responsibilities
conferred upon it by law,... and such as shall be necessary and proper to provide for
the health, safety, comfort and convenience, maintain peace and order, improve public
morals, promote the prosperity and general welfare of the municipality and the
inhabitants thereof, and insure the protection of... property therein.
In the case at bar, COA is of the position that there is "no perceptible connection or
relation between the objective sought to be attained under Resolution No. 60... and the
alleged public safety, general welfare etc. of the inhabitants of Makati."
Apparently, COA tries to redefine the scope of police power by circumscribing its
exercise to "public safety, general welfare, etc. of the inhabitants of Makati."
The police power of a municipal corporation is broad, and has been said to be
commensurate with, but not to exceed, the duty to provide for the real needs of the
people in their health, safety, comfort, and convenience as consistently as may be with
private rights. It... extends to all the great public needs, and, in a broad sense includes
all legislation and almost every function of the municipal government. It covers a wide
scope of subjects, and, while it is especially occupied with whatever affects the peace,
security, health, morals,... and general welfare of the community, it is not limited
thereto, but is broadened to deal with conditions which exist so as to bring out of them
the greatest welfare of the people by promoting public convenience or general
prosperity, and to everything worthwhile for the... preservation of comfort of the
inhabitants of the corporation
Thus, it is deemed inadvisable to attempt to frame any definition which shall absolutely
indicate the limits of police power.
Public purpose is not unconstitutional merely because it incidentally benefits a limited
number of persons. As correctly pointed out by the Office of the Solicitor General, "the
drift is towards social welfare... legislation geared towards state policies to provide
adequate social services... as well as human dignity and respect for human rights
The care for the poor is generally recognized as a public duty. The support for the poor
has long been an accepted exercise of police power in the promotion of the common
good.
Resolution No. 60... of the Municipality of Makati is a paragon of the continuing
program of our government towards social justice.
The Burial Assistance Program is a relief of pauperism, though not complete.
The loss of a member of... a family is a painful experience, and it is more painful for the
poor to be financially burdened by such death.
Resolution No. 60 vivifies the very words of the late President Ramon Magsaysay "those
who have less in life, should have more in law."
Principles:
The police power is a governmental function, an inherent attribute of sovereignty,
which was born with civilized government. It is founded largely on the maxims, "Sic
utere tuo et alienum non laedas" and "Salus populi est suprema lex." Its fundamental
purpose... is securing the general welfare, comfort and convenience of the people.
LUCENA GRAND CENTRAL TERMINAL, INC. v. JAC LINER, INC. 452 SCRA 174
(2005)

Facts:

Two ordinances were enacted by the Sangguniang Panlungsod of Lucena with the
objective of alleviating the traffic congestion said to have been caused by the existence
of various bus and jeepney terminals within the city. City Ordinance 1631 grants franchise
to the Lucena Grand Central Terminal, Inc. to construct, finance, establish, operate and
maintain common bus- jeepney terminal facility in the City of Lucena. City Ordinance
1778, on the other hand, strips out all the temporary terminals in the City of Lucena the
right to operate which as a result favors only the Lucena Grand Central Terminal, Inc.
The Regional Trial Court of Lucena declared City Ordinance 1631 as a valid excercise of
police power while declaring City Ordinance 1778 as null and void for being invalid.
Petitioner Lucena Grand Central Terminal, Inc. filed its Motion for Reconsideration which
was denied. Lucena then elevated it via petition for review under Rule 45 before the
Court. The Court referred the petition to the Court of Appeals (CA) with which it has
concurrent jurisdiction. The CA dismissed the petition and affirmed the challenged orders
of the trial court. Its motion for reconsideration having been denied by the CA, Lucena
now comes to the Court via petition for review to assail the Decision and Resolution of
the CA.

ISSUE:

Whether or not the means employed by the Lucena Sannguniang Panlungsod to attain
its professed objective were reasonably necessary and not duly oppressive upon
individuals.

HELD:

With the aim of localizing the source of traffic congestion in the city to a single location,
the subject ordinances prohibit the operation of all bus and jeepney terminals within
Lucena, including those already existing, and allow the operation of only one common
terminal located outside the city proper, the franchise for which was granted to Lucena.
The common carriers plying routes to and from Lucena City are thus compelled to close
down their existing terminals and use the facilities of Lucena. The true role of
Constitutional Law is to effect an equilibrium between authority and liberty so that rights
are exercised within the framework of the law and the laws are enacted with due
deference to rights. A due deference to the rights of the individual thus requires a more
careful formulation of solutions to societal problems. From the memorandum filed before
the Court by Lucena, it is gathered that the Sangguniang Panlungsod had identified the
cause of traffic congestion to be the indiscriminate loading and unloading of passengers
by buses on the streets of the city proper, hence, the conclusion that the terminals
contributed to the proliferation of buses obstructing traffic on the city streets. Bus
terminals per se do not, however, impede or help impede the flow of traffic. How the
outright proscription against the existence of all terminals, apart from that franchised to
Lucena, can be considered as reasonably necessary to solve the traffic problem, the Court
has not been enlightened. If terminals lack adequate space such that bus drivers are
compelled to load and unload passengers on the streets instead of inside the terminals,
then reasonable specifications for the size of terminals could be instituted, with permits
to operate the same denied those which are unable to meet the specifications. In the
subject ordinances, however, the scope of the proscription against the maintenance of
terminals is so broad that even entities which might be able to provide facilities better
than the franchised terminal are barred from operating at all. The Court is not unaware
of the resolutions of various barangays in Lucena City supporting the establishment of a
common terminal, and similar expressions of support from the private sector, copies of
which were submitted to this Court by Lucena Grand Central Terminal, Inc. The weight
of popular opinion, however, must be balanced with that of an individual ‘s rights.
 CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila,
HON. JOSELITO L. ATIENZA, in his capacity as Vice-Mayor of the City of
Manila and Presiding Officer of the City Council of Manila, et.al vs. HON.
PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE
TOURIST DEVELOPMENT CORPORATION
G.R. No. 118127, April 12, 2005

FACTS:

Private respondent Malate Tourist Development Corporation (MTDC) is a corporation

engaged in the business of operating hotels, motels, hostels and lodging houses. It built
and opened Victoria Court in Malate which was licensed as a motel although duly
accredited with the DOT as a hotel. On 28 June 1993, MTDC filed a Petition for Declaratory
Relief with Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining
Order7 with the lower court impleading as defendants, herein petitioners City of Manila,
Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza, and the members of the City Council
of Manila (City Council). MTDC prayed that the Ordinance, insofar as it includes motels
and inns as among its prohibited establishments, be declared invalid and unconstitutional.

Enacted by the City Council and approved by petitioner City Mayor, the said Ordinance
is entitled–

AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES

PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, SERVICES AND
FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION
THEREOF, AND FOR OTHER PURPOSES.
Judge Laguio rendered the assailed Decision (in favour of respondent).

On 11 January 1995, petitioners filed the present Petition, alleging that the following
errors were committed by the lower court in its ruling:

(1) It erred in concluding that the subject ordinance is ultra vires, or otherwise, unfair,
unreasonable and oppressive exercise of police power;
(2) It erred in holding that the questioned Ordinance contravenes P.D. 499 which allows
operators of all kinds of commercial establishments, except those specified therein; and
(3) It erred in declaring the Ordinance void and unconstitutional.

ISSUE:

WON the ordinance is unconstitutional.

HELD:

The Court is of the opinion, and so holds, that the lower court did not err in declaring
the Ordinance, as it did, ultra vires and therefore null and void.
The tests of a valid ordinance are well established. A long line of decisions has held that
for an ordinance to be valid, it must not only be within the corporate powers of the
local government unit to enact and must be passed according to the procedure
prescribed by law, it must also conform to the following substantive requirements:
(1) must not contravene the Constitution or any statute;
(2) must not be unfair or oppressive;
(3) must not be partial or discriminatory;
(4) must not prohibit but may regulate trade;
(5) must be general and consistent with public policy; and
(6) must not be unreasonable.
The Ordinance was passed by the City Council in the exercise of its police power, an
enactment of the City Council acting as agent of Congress. This delegated police power
is found in Section 16 of the LGC, known as the general welfare clause.
The inquiry in this Petition is concerned with the validity of the exercise of such
delegated power.

A. The Ordinance contravenes

the Constitution

The enactment of the Ordinance was an invalid exercise of delegated power as it is

unconstitutional and repugnant to general laws.
The police power granted to LGUs must always be exercised with utmost observance of
the rights of the people to due process and equal protection of the law. Due process
requires the intrinsic validity of the law in interfering with the rights of the person to his
life, liberty and property.

Requisites for the valid exercise

of Police Power are not met

To successfully invoke the exercise of police power as the rationale for the enactment
of the Ordinance, and to free it from the imputation of constitutional infirmity, not only
must it appear that the interests of the public generally, as distinguished from those of
a particular class, require an interference with private rights, but the means adopted
must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals.60 It must be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. A reasonable
relation must exist between the purposes of the police measure and the means
employed for its accomplishment, for even under the guise of protecting the public
interest, personal rights and those pertaining to private property will not be permitted
to be arbitrarily invaded.

Lacking a concurrence of these two requisites, the police measure shall be struck down
as an arbitrary intrusion into private rights a violation of the due process clause.

The object of the Ordinance was, accordingly, the promotion and protection of the
social and moral values of the community. Granting for the sake of argument that the
objectives of the Ordinance are within the scope of the City Council’s police powers, the
means employed for the accomplishment thereof were unreasonable and unduly
oppressive.

The worthy aim of fostering public morals and the eradication of the community’s social
ills can be achieved through means less restrictive of private rights; it can be attained
by reasonable restrictions rather than by an absolute prohibition. The closing down and
transfer of businesses or their conversion into businesses “allowed” under the
Ordinance have no reasonable relation to the accomplishment of its purposes.
Otherwise stated, the prohibition of the enumerated establishments will not per se
protect and promote the social and moral welfare of the community; it will not in itself
eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the
spread of sexual disease in Manila.

The enumerated establishments are lawful pursuits which are not per se offensive to
the moral welfare of the community. While a motel may be used as a venue for immoral
sexual activity, it cannot for that reason alone be punished. It cannot be classified as a
house of ill-repute or as a nuisance per se on a mere likelihood or a naked assumption.

If the City of Manila so desires to put an end to prostitution, fornication and other social
ills, it can instead impose reasonable regulations such as daily inspections of the
establishments for any violation of the conditions of their licenses or permits; it may
exercise its authority to suspend or revoke their licenses for these violations; and it may
even impose increased license fees. In other words, there are other means to
reasonably accomplish the desired end.

It is readily apparent that the means employed by the Ordinance for the achievement of
its purposes, the governmental interference itself, infringes on the constitutional
guarantees of a person’s fundamental right to liberty and property.

Modality employed is
unlawful taking

It is an ordinance which permanently restricts the use of property that it can not be
used for any reasonable purpose goes beyond regulation and must be recognized as a
taking of the property without just compensation.78 It is intrusive and violative of the
private property rights of individuals.

There are two different types of taking that can be identified. A “possessory” taking
occurs when the government confiscates or physically occupies property. A “regulatory”
taking occurs when the government’s regulation leaves no reasonable economically
viable use of the property.

What is crucial in judicial consideration of regulatory takings is that government

regulation is a taking if it leaves no reasonable economically viable use of property in a
manner that interferes with reasonable expectations for use. When the owner of real
property has been called upon to sacrifice all economically beneficial uses in the name
of the common good, that is, to leave his property economically idle, he has suffered a
taking.

The Ordinance gives the owners and operators of the “prohibited” establishments three
(3) months from its approval within which to “wind up business operations or to
transfer to any place outside of the Ermita-Malate area or convert said businesses to
other kinds of business allowable within the area.” The directive to “wind up business
operations” amounts to a closure of the establishment, a permanent deprivation of
property, and is practically confiscatory. Unless the owner converts his establishment to
accommodate an “allowed” business, the structure which housed the previous business
will be left empty and gathering dust. It is apparent that the Ordinance leaves no
reasonable economically viable use of property in a manner that interferes with
reasonable expectations for use.
The second and third options to transfer to any place outside of the Ermita-Malate
area or to convert into allowed businessesare confiscatory as well. The penalty of
permanent closure in cases of subsequent violations found in Section 4 of the
Ordinance is also equivalent to a “taking” of private property.

Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A

zoning ordinance, although a valid exercise of police power, which limits a “wholesome”
property to a use which can not reasonably be made of it constitutes the taking of such
property without just compensation. Private property which is not noxious nor intended
for noxious purposes may not, by zoning, be destroyed without compensation. Such
principle finds no support in the principles of justice as we know them. The police
powers of local government units which have always received broad and liberal
interpretation cannot be stretched to cover this particular taking.

Further, The Ordinance confers upon the mayor arbitrary and unrestricted power to
close down establishments. Ordinances such as this, which make possible abuses in its
execution, depending upon no conditions or qualifications whatsoever other than the
unregulated arbitrary will of the city authorities as the touchstone by which its validity is
to be tested, are unreasonable and invalid. The Ordinance should have established a
rule by which its impartial enforcement could be secured. Similarly, the Ordinance does
not specify the standards to ascertain which establishments “tend to disturb the
community,” “annoy the inhabitants,” and “adversely affect the social and moral welfare
of the community.”

The cited case supports the nullification of the Ordinance for lack of comprehensible
standards to guide the law enforcers in carrying out its provisions.

Petitioners cannot therefore order the closure of the enumerated establishments

without infringing the due process clause. These lawful establishments may be
regulated, but not prevented from carrying on their business.

B. The Ordinance violates Equal

Protection Clause

In the Court’s view, there are no substantial distinctions between motels, inns, pension
houses, hotels, lodging houses or other similar establishments. By definition, all are
commercial establishments providing lodging and usually meals and other services for
the public. No reason exists for prohibiting motels and inns but not pension houses,
hotels, lodging houses or other similar establishments. The classification in the instant
case is invalid as similar subjects are not similarly treated, both as to rights conferred
and obligations imposed. It is arbitrary as it does not rest on substantial distinctions
bearing a just and fair relation to the purpose of the Ordinance.

The Court likewise cannot see the logic for prohibiting the business and operation of
motels in the Ermita-Malate area but not outside of this area. A noxious establishment
does not become any less noxious if located outside the area.

The standard “where women are used as tools for entertainment” is also discriminatory
as prostitutionone of the hinted ills the Ordinance aims to banishis not a profession
exclusive to women. Both men and women have an equal propensity to engage in
prostitution. Thus, the discrimination is invalid.
C. The Ordinance is repugnant
to general laws; it is ultra vires

The Ordinance is in contravention of the Code (Sec 458) as the latter merely empowers
local government units to regulate, and not prohibit, the establishments enumerated in
Section 1 thereof.

With respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses,
lodging houses, and other similar establishments, the only power of the City Council to
legislate relative thereto is to regulate them to promote the general welfare. The Code
still withholds from cities the power to suppress and prohibit altogether the
establishment, operation and maintenance of such establishments.

It is well to point out that petitioners also cannot seek cover under the general welfare
clause authorizing the abatement of nuisances without judicial proceedings. That tenet
applies to a nuisance per se, or one which affects the immediate safety of persons and
property and may be summarily abated under the undefined law of necessity. It can not
be said that motels are injurious to the rights of property, health or comfort of the
community. It is a legitimate business. If it be a nuisance per accidens it may be so
proven in a hearing conducted for that purpose. A motel is not per se a nuisance
warranting its summary abatement without judicial intervention.

Not only does the Ordinance contravene the Code, it likewise runs counter to the
provisions of P.D. 499. As correctly argued by MTDC, the statute had already converted
the residential Ermita-Malate area into a commercial area. The decree allowed the
establishment and operation of all kinds of commercial establishments except
warehouse or open storage depot, dump or yard, motor repair shop, gasoline service
station, light industry with any machinery or funeral establishment. The rule is that for
an ordinance to be valid and to have force and effect, it must not only be within the
powers of the council to enact but the same must not be in conflict with or repugnant
to the general law.

Conclusion
All considered, the Ordinance invades fundamental personal and property rights and
impairs personal privileges. It is constitutionally infirm. The Ordinance contravenes
statutes; it is discriminatory and unreasonable in its operation; it is not sufficiently
detailed and explicit that abuses may attend the enforcement of its sanctions. And not
to be forgotten, the City Council under the Code had no power to enact the Ordinance
and is therefore ultra vires, null and void.

Petition Denied.
DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) and DIRECTOR
OF CENTER FOR EDUCATIONAL MEASUREMENT, petitioners,

vs.

ROBERTO REY C. SAN DIEGO and JUDGE TERESITA DIZON-CAPULONG, in her

capacity as Presiding Judge of the Regional Trial Court of Valenzuela, Metro
Manila, Branch 172, respondents.

FACTS:

Private respondent, San Diego, is a graduate of the University of the East with a degree
of B.S. in Zoology. The petitioner claims that he took the National Medical Admission
Test (NMAT) three times and flunked it as many times. When he applied to take it
again, the petitioner rejected his application on the basis of the NMAT rule:

H) A STUDENT SHALL BE ALLOWED ONLY THREE (3) CHANCES TO

TAKE THE NMAT. AFTER THREE (3) SUCCESSIVE FAILURES, A
STUDENT SHALL NOT BE ALLOWED TO TAKE THE NMAT FOR THE
FOURTH TIME.

He then went to RTC Valenzuela to compel his admission to the test. In his petition, he
squarely challenged the constitutionality of MECS Order No. 12, Series of 1972,
containing the above-cited rule. The additional grounds raised were due process and
equal protection.

ISSUE:

Whether respondent was deprived of his right to a medical education through an

arbitrary exercise of the police power.

HELD:

The regulation of the practice of medicine in all its branches has long been recognized
as a reasonable method of protecting the health and safety of the public. Thus,
legislation and administrative regulations requiring those who wish to practice medicine
first to take and pass medical board examinations is a valid exercises of governmental
power.

The Court agreed that the government is entitled to prescribe an admission test like the
NMAT as a means of achieving its stated objective of “upgrading the selection of
applicants into medical schools” and of “improving the quality of medical education in
the country.”

The subject of the challenged regulation is certainly within the ambit of the police
power. It is the right and indeed the responsibility of the State to insure that the
medical profession is not infiltrated by incompetents to whom patients may unwarily
entrust their lives and health. The three-flunk rule is intended to insulate the medical
schools and ultimately the medical profession from the intrusion of those not qualified
to be doctors.
 LOZANO VS. MARTINEZ

FACTS:

Petitioners were charged with violation of Batas Pambansa Bilang 22 (Bouncing Check
Law). They moved seasonably to quash the informations on the ground that the acts
charged did not constitute an offense, the statute being unconstitutional. The motions
were denied by the respondent trial courts, except in one case, wherein the trial court
declared the law unconstitutional and dismissed the case. The parties adversely affected
thus appealed.

ISSUES:

1. Does BP 22 is violate the constitutional provision on non-imprisonment due to debt?

2. Does it impair freedom of contract?
3. Does it contravene the equal protection clause?

HELD:

1. The enactment of BP 22 is a valid exercise of the police power and is not repugnant
to the constitutional inhibition against imprisonment for debt. The gravamen of the
offense punished by BP 22 is the act of making and issuing a worthless check or a
check that is dishonored upon its presentation for payment. It is not the non-payment
of an obligation which the law punishes. The law is not intended or designed to coerce
a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and putting them in circulation. Because of
its deleterious effects on the public interest, the practice is proscribed by the law. The
law punishes the act not as an offense against property, but an offense against public
order.

Unlike a promissory note, a check is not a mere undertaking to pay an amount of

money. It is an order addressed to a bank and partakes of a representation that the
drawer has funds on deposit against which the check is drawn, sufficient to ensure
payment upon its presentation to the bank. There is therefore an element of certainty
or assurance that the instrument will be paid upon presentation. For this reason, checks
have become widely accepted as a medium of payment in trade and commerce.
Although not legal tender, checks have come to be perceived as convenient substitutes
for currency in commercial and financial transactions. The basis or foundation of such
perception is confidence. If such confidence is shaken, the usefulness of checks as
currency substitutes would be greatly diminished or may become nil. Any practice
therefore tending to destroy that confidence should be deterred for the proliferation of
worthless checks can only create havoc in trade circles and the banking community.
The effects of the issuance of a worthless check transcends the private interests of the
parties directly involved in the transaction and touches the interests of the community
at large. The mischief it creates is not only a wrong to the payee or holder, but also an
injury to the public. The harmful practice of putting valueless commercial papers in
circulation, multiplied a thousand fold, can very wen pollute the channels of trade and
commerce, injure the banking system and eventually hurt the welfare of society and
the public interest.

2. The freedom of contract which is constitutionally protected is freedom to enter into

“lawful” contracts. Contracts which contravene public policy are not lawful. Besides, we
must bear in mind that checks can not be categorized as mere contracts. It is
a commercial instrument which, in this modem day and age, has become a convenient
substitute for money; it forms part of the banking system and therefore not entirely
free from the regulatory power of the state.

3. There is no substance in the claim that the statute in question denies equal
protection of the laws or is discriminatory, since it penalizes the drawer of the check,
but not the payee. It is contended that the payee is just as responsible for the crime as
the drawer of the check, since without the indispensable participation of the payee by
his acceptance of the check there would be no crime. This argument is tantamount to
saying that, to give equal protection, the law should punish both the swindler and the
swindled. The petitioners’ posture ignores the well-accepted meaning of the clause
“equal protection of the laws.” The clause does not preclude classification of individuals,
who may be accorded different treatment under the law as long as the classification
is not unreasonable or arbitrary. (Lozano vs Martinez, G.R. No. L-63419, December 18,
1986)
 Masikip v. City of Pasig
G.R. No. 136349, January 23, 2006

- the power of eminent domain is not inherent in LGU and must be expressly provided
for by statute

FACTS:

Lourdes Dela Paz Masikip is the registered owner of a parcel of land, which the City of
Pasig sought to expropriate a portion thereof for the “sports development and
recreational activities” of the residents of Barangay Caniogan. This was in January
1994. Masikip refused.

On March 23, 1994, City of Pasig sought again to expropriate said portion of land for
the alleged purpose that it was “in line with the program of the Municipal Government
to provide land opportunities to deserving poor sectors of our community.”

Petitioner protested, so City of Pasig filed with the trial court a complaint for
expropriation. The Motion to Dismiss filed by Masikip was dismissed by the rial court on
the ground that there was genuine necessity to expropriate the property. Case was
elevated to the Court of Appeals, which dismissed petition for lack of merit.

Hence, this petition.

ISSUE:

W/N there was genuine necessity to expropriate the property

HELD:

Eminent domain is “the right of a government to take and appropriate private property
to the public use, whenever the public exigency requires it, which can be done only on
condition of providing a reasonably compensation therefor.” It is the power of the State
or its instrumentalities to take private property for public use and is inseparable from
sovereignty and inherent in government.

This power is lodged in the legislative branch of government. It delegates the power
thereof to the LGUs, other public entities and public utility corporations, subject only to
constitutional limitations. LGUs have no inherent power of eminent domain and may
exercise it only when expressly authorized by statute.

Sec. 19, LGC: LGU may, through its chief executive and acting pursuant to an
ordinance, exercise the power of eminent domain for public use, purpose or welfare for
the benefit of the poor and landless, upon payment of just compensation, pursuant to
the provisions of the Constitution and pertinent laws.

Provided:

(1) power of eminent domain may not be exercised unless a valid and definite offer has
been previously made to the owner and such offer was not accepted;
(2) LGU may immediately take possession of the property upon the filing of
expropriation proceedings and upon making a deposit with the proper court of at least
15% fair market value of the property based on the current tax declaration; and
(3) amount to be paid for expropriated property shall be determined by the proper
court, based on the fair market value at the time of the taking of the property

There is already an established sports development and recreational activity center at

Rainforest Park in Pasig City. Evidently, there is no “genuine necessity” to justify the
expropriation. The records show that the Certification issued by the Caniogan Barangay
Council which became the basis for the passage of Ordinance No. 4, authorizing the
expropriation, indicates that the intended beneficiary is the Melendres Compound
Homeowner’s Association, a private, non-profit organization, not the residents of
Caniogan.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 72126 January 29, 1988

MUNICIPALITY OF MEYCAUAYAN, BULACAN, HON. ADRIANO D. DAEZ, MUNICIPAL MAYOR, MEYCAUAYAN,

BULACAN, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and PHILIPPINE PIPES & MERCHANDIZING CORPORATION, respondents.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari of the resolution dated April 24,1985 by the former Intermediate
Appellate Court, now Court of Appeals, setting aside its earlier decision dated January 10, 1985 and dismissing
the special civil action for expropriation filed by the petitioner.

In 1975, respondent Philippine Pipes and Merchandising Corporation filed with the Office of the Municipal Mayor
of Meycauayan, Bulacan, an application for a permit to fence a parcel of land with a width of 26.8 meters and a
length of 184.37 meters covered by Transfer Certificates of Title Nos. 215165 and 37879. The fencing of said
property was allegedly to enable the storage of the respondent's heavy equipment and various finished products
such as large diameter steel pipes, pontoon pipes for ports, wharves, and harbors, bridge components, pre-
stressed girders and piles, large diameter concrete pipes, and parts for low cost housing.

In the same year, the Municipal Council of Meycauayan, headed by then Mayor Celso R. Legaspi, passed
Resolution No. 258, Series of 1975, manifesting the intention to expropriate the respondent's parcel of land
covered by Transfer Certificate of Title No. 37879.

An opposition to the resolution was filed by the respondent with the Office of the Provincial Governor, which, in
turn, created a special committee of four members to investigate the matter.

On March 10, 1976, the Special Committee recommended that the Provincial Board of Bulacan disapprove or
annul the resolution in question because there was no genuine necessity for the Municipality of Meycauayan to
expropriate the respondent's property for use as a public road.

On the basis of this report, the Provincial Board of Bulacan passed Resolution No. 238, Series of 1976,
disapproving and annulling Resolution No. 258, Series of 1975, of the Municipal Council of Meycauayan. The
respondent, then, reiterated to the Office of the Mayor its petition for the approval of the permit to fence the
aforesaid parcels of land.

On October 21, 1983, however, the Municipal Council of Meycauayan, now headed by Mayor Adriano D. Daez,
passed Resolution No. 21, Series of 1983, for the purpose of expropriating anew the respondent's land. The
Provincial Board of Bulacan approved the aforesaid resolution on January 25, 1984.

Thereafter, the petitioner, on February 14, 1984, filed with the Regional Trial Court of Malolos, Bulacan, Branch
VI, a special civil action for expropriation.

Upon deposit of the amount of P24,025.00, which is the market value of the land, with the Philippine National
Bank, the trial court on March 1, 1984 issued a writ of possession in favor of the petitioner.
On August 27, 1984, the trial court issued an order declaring the taking of the property as lawful and appointing
the Provincial Assessor of Bulacan as court commissioner who shall hold the hearing to ascertain the just
compensation for the property.

The respondent went to the Intermediate Appellate Court on petition for review. On January 10, 1985, the
appellate court affirmed the trial court's decision. However, upon motion for reconsideration by the respondent,
the decision was re-examined and reversed. The appellate court held that there is no genuine necessity to
expropriate the land for use as a public road as there were several other roads for the same purpose and
another more appropriate lot for the proposed public road. The court, taking into consideration the location and
size of the land, also opined that the land is more Ideal for use as storage area for respondent's heavy
equipment and finished products.

After its motion for reconsideration was denied, the petitioner went to this Court on petition for review on
certiorari on October 25, 1985, with the following arguments:

Petitioners most respectfully submit that respondent Court has decided a question of
substance not in accord with law or with applicable decisions of this Honorable Supreme
Court; that the judgment is based on a misapprehension of facts and the conclusion is a
finding grounded entirely on speculation, surmises, and conjectures, because:

a. It concluded, that by dismissing the complaint for expropriation the existence of legal and
factual circumstance of grave abuse of discretion amounting to lack of jurisdiction
committed by the respondent Judge without any shred of evidence at all contrary to the law
on evidence;

b. It concluded, in its decision that respondent Philippine Pipes and Merchandising

Corporation has no need of the property sought to be condemned on the use to which it is
devoted as a private road but allegedly for storage contrary to the allegations of respondent
Philippine Pipes and Merchandising Corporation itself;

c. It anchored its decision on factual situations obtaining a long, long time ago without
regard to the relatively present situation now obtaining. (Rollo, pp. 8-9)

In refuting the petitioner's arguments, the private respondent contends that this Court may only resolve
questions of law and not questions of fact such as those which the petitioner puts in issue in this case. The
respondent further argues that this Court may not also interfere with an action of the Court of Appeals which
involves the exercise of discretion.

We agree with the respondent.

The jurisdiction of this Court in cases brought to us from the Court of Appeals is limited to the review of errors of
law (Rizal Cement Co., Inc. v. Villareal, 135 SCRA 15, 24), factual issues not being proper in certiorari
proceedings (See Ygay et al. v. Hon. Escareal et al., 135 SCRA 78, 82).

This Court reviews and rectifies the findings of fact of the Court of Appeals only under certain established
exceptions such as: (1) when the conclusion is a finding grounded entirely on speculations, surmises and
conjectures; (2) when the inference made is manifestly mistaken, absurd and impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; and (5) when the
court, in making its finding, went beyond the issues of the case and the same is contrary to the admissions of
both the appellant and the appellee (Moran, Jr. v. Court of Appeals, 133 SCRA 88).

None of the exceptions warranting non-application of the rule is present in this case. On the contrary, we find
that the appellate court's decision is supported by substantial evidence.
The petitioner's purpose in expropriating the respondent's property is to convert the same into a public road
which would provide a connecting link between Malhacan Road and Bulac Road in Valenzuela, Bulacan and
thereby ease the traffic in the area of vehicles coming from MacArthur Highway.

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

Appreciating the evidence presented before it, with particular emphasis on the Special Committee's report dated
March 10, 1976, the Court of Appeals declared:

xxx xxx xxx

FACTS ESTABLISHED ON OCULAR INSPECTION

In the ocular inspection, the following facts came into the limelight:

(1) The property in question of the Philippine Pipes and Merchandazing Corporation
intended to be expropriated by the Municipality of Meycauayan is embraced under Transfer
Certificate of Title No. 37879 and is a private road of the company used in the conduct and
operation of its business, with the inhabitation in nearby premises tolerated to pass the
same. It extends from Bulac Road to the south, to Malhacan Road on the north, with a
width of about 6 to 7 meters, more or less.

(2) Adjoining this private road on the eastern side, is a vacant property also belonging to
the Philippine Pipes and Merchandising Corporation and extending also from Bulac Road
to Malhacan Road, with a high wall along the property line on the east side thereof serving
as a fence.

(3) Opposite the private road, after crossing Bulac Road, is the gate of the factory of the
Philippine Pipes and Merchandising Corporation.

(4) From the private road of the firm on the eastern direction about 30 to 40 meters
distance are subdivision roads of an existing subdivision with a width of 6 to 7 meters, more
or less, running parallel to the said private road of the firm and likewise extending from
Bulac Road to Malhacan Road. Whether said subdivision roads had already been donated to
the municipality is not known.

(5) On the western side of the private road is a vacant lot with an area of l6,071 square
meters offered for sale by its owner extending also from Bulac Road to Malhacan Road.

(6) Bulac road, a municipal road with a width of about 6 to 7 meters and all the nearby
subdivision roads are obviously very poorly developed and maintained, and are in dire need
of repair. Like the Malhacan Road, Bulac road extends from the McArthur Highway with exit
to North Diversion Road.

xxx xxx xxx

The Sketch Plan (Rollo, p. 26 or p. 97) clearly and conclusively shows that petitioner does
not need this strip of land as a private road. The Sketch Plan clearly shows that petitioner's
factory site is adjacent to Bulac Road which has a width of about seven meters, more or
less. Petitioner can use Bulac Road in reaching McArthur Highway on the west or in reaching
the Manila North Expressway on the east for the purpose of transporting its products.
Petitioner does not need to go to Malhacan Road via this so-called private road before going
to McArthur Highway or to the Manila North Expressway. Why should petitioner go first to
Malhacan Road via this so called "private road" before going to McArthur Highway or to the
Manila North Expressway when taking the Bulac Road in going to McArthur Highway or to
the Manila North Expressway is more direct, nearer and more advantageous. Hence, it is
beyond doubt that petitioner acquired this strip of land for the storage of its heavy
equipments and various finished products and for growth and expansion and never to use it
as a private road. This is the very reason why petitioner filed an application with the Office
of the Municipal Mayor of Meycauayan, Bulacan to fence with hollow blocks this strip of
land.

Third, We will determine whether there is a genuine necessity to expropriate this strip of
land for use as a public road.

We hereby quote a relevant part of the Special Committee's Report dated March 10, 1976,
which is as follows:

OBSERVATION OF COMMITTEE

From the foregoing facts, it appears obvious to this Special Committee that there is no
genuine necessity for the Municipality of' Meycauayan to expropriate the aforesaid property
of the Philippine Pipes and Merchandising Corporation for use as a public road. Considering
that in the vicinity there are other available road and vacant lot offered for sale situated
similarly as the lot in question and lying Idle, unlike the lot sought to be expropriated which
was found by the Committee to be badly needed by the company as a site for its heavy
equipment after it is fenced together with the adjoining vacant lot, the justification to
condemn the same does not appear to be very imperative and necessary and would only
cause unjustified damage to the firm. The desire of the Municipality of Meycauayan to build
a public road to decongest the volume of traffic can be fully and better attained by acquiring
the other available roads in the vicinity maybe at lesser costs without causing harm to an
establishment doing legitimate business therein. Or, the municipality may seek to
expropriate a portion of the vacant lot also in the vicinity offered for sale for a wider public
road to attain decongest (sic) of traffic because as observed by the Committee, the lot of
the Corporation sought to be taken will only accommodate a one-way traffic lane and
therefore, will not suffice to improve and decongest the flow of traffic and pedestrians in the
Malhacan area. ...

xxx xxx xxx

It must be noted that this strip of land covered by Transfer Certificates of Titles Nos. 215165
and 37879 were acquired by petitioner from Dr. Villacorta. The lot for sale and lying Idle
with an area of 16,071 square meter which is adjacent and on the western side of the
aforesaid strip of land and extends likewise from Bulac Road to Malhacan Road belongs also
to Dr. Villacorta. This lot for sale and lying Idle is most Ideal for use as a public road
because it is more than three (3) times wider that the said strip of land.

xxx xxx xxx

xxx xxx xxx

Since there is another lot ready for sale and lying Idle, adjacent and on the western side of
the strip of land, and extending also from Malhacan Road to Bulac Road and most Ideal for
a public road because it is very much wider than the lot sought to be expropriated, it seems
that it is more just, fair, and reasonable if this lot is the one to be expropriated. (Rollo, pp.
22-26)
The petitioner objects to the appellate court's findings contending that they were based on facts obtaining long
before the present action to expropriate took place. We note, however, that there is no evidence on record
which shows a change in the factual circumstances of the case. There is no showing that some of the six other
available cross roads have been closed or that the private roads in the subdivision may not be used for municipal
purposes. What is more likely is that these roads have already been turned over to the government. The
petitioner alleges that surely the environmental progress during the span of seven years between the first and
second attempts to expropriate has brought about a change in the facts of the case. This allegation does not
merit consideration absent a showing of concrete evidence attesting to it.

There is no question here as to the right of the State to take private property for public use upon payment of
just compensation. What is questioned is the existence of a genuine necessity therefor.

As early as City of Manila v. Chinese Community of Manila (40 Phil. 349) this Court held that the foundation of
the right to exercise the power of eminent domain is genuine necessity and that necessity must be of a public
character. Condemnation of private property is justified only if it is for the public good and there is a genuine
necessity of a public character. Consequently, the courts have the power to inquire into the legality of the
exercise of the right of eminent domain and to determine whether there is a genuine necessity therefor
(Republic v. La Orden de PP. Benedictos de Filipinas, 1 SCRA 646; J.M. Tuason & Co., Inc. v. Land Tenure
Administration, 31 SCRA 413).

In the recent case of De Knecht v. Bautista, (100 SCRA 660) this court further ruled that the government may
not capriciously choose what private property should be taken. Citing the case of J.M. Tuason & Co., Inc. v. Land
Tenure Administration (supra), the Court held:

... With due recognition then of the power of Congress to designate the particular property
to be taken and how much thereof may be condemned in the exercise of the power of
expropriation, it is still a judicial question whether in the exercise of such competence, the
party adversely affected is the victim of partiality and prejudice. That the equal protection
clause will not allow. (At p. 436)

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

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The questioned resolution of the respondent
court is AFFIRMED.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

The Lawphil Project - Arellano Law Foundation

 MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY v. BERNARDO L.
LOZADA, GR No. 176625, 2010-02-25

Facts:
Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017
square meters, more or less, located in Lahug, Cebu City.
Its original owner was Anastacio Deiparine when the same was subject to expropriation
proceedings, initiated by the Republic of the
Philippines (Republic), represented by the then Civil Aeronautics Administration (CAA),
for the expansion and improvement of the Lahug Airport. The case was filed with the
then Court of First Instance of Cebu, Third Branch, and docketed as Civil Case No. R-
1881.
During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada,
Sr. acquired Lot No. 88 from Deiparine.
On December 29, 1961, the trial court rendered judgment in favor of the Republic and
ordered the latter to pay Lozada the fair market value of Lot No. 88, adjudged at P3.00
per square meter, with consequential damages by way of legal interest computed from
November 16, 1947--the... time when the lot was first occupied by the airport.
Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr.,
requesting to repurchase the lots, as per previous agreement.
On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the
Department of Transportation, directing the transfer of general aviation operations of
the Lahug Airport to the Mactan International Airport before the end of 1990 and, upon
such transfer, the... closure of the Lahug Airport.
From the date of the institution of the expropriation proceedings up to the present, the
public purpose of the said expropriation (expansion of the airport) was never actually
initiated, realized, or implemented.
Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession
and reconveyance of ownership of Lot No. 88.
On October 22, 1999, the RTC rendered its Decision, disposing as follows... he Court
hereby renders judgment in favor of the plaintiffs, Bernardo L. Lozada, Sr.,... Aggrieved,
petitioners interposed an appeal to the CA.
fter the filing of the necessary appellate briefs, the CA rendered its assailed Decision
dated February 28, 2006, denying petitioners' appeal and affirming in toto the Decision
of the RTC, Branch 57, Cebu City.
Issues:
(1) the respondents utterly failed to prove that there was a repurchase agreement or
compromise settlement between them and the Government; (2) the judgment in Civil
Case No. R-1881 was absolute and unconditional, giving title in fee simple to... the
Republic;

Ruling:
The petition should be denied.
Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is
apparent that the acquisition by the Republic of the expropriated lots was subject to the
condition that the Lahug Airport would continue its operation. The condition not
having... materialized because the airport had been abandoned, the former owner
should then be allowed to reacquire the expropriated property.
More particularly, with respect to the element of public use, the expropriator should
commit to use the property pursuant to the purpose stated in the petition for
expropriation filed, failing which, it should file another petition for the new purpose.
In light of these premises, we now expressly hold that the taking of private property,
consequent to the Government's exercise of its power of eminent domain, is always
subject to the condition that the property be devoted to the specific public purpose for
which it was taken.
Corollarily, if this particular purpose or intent is not initiated or not at all pursued, and is
peremptorily abandoned, then the former owners, if they so desire, may seek the
reversion of the property, subject to the return of the amount of just compensation
received. In such... a case, the exercise of the power of eminent domain has become
improper for lack of the required factual justification.
It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon
this factual issue and have declared, in no uncertain terms, that a compromise
agreement was, in fact, entered into between the Government and respondents, with
the former undertaking to resell Lot
No. 88 to the latter if the improvement and expansion of the Lahug Airport would not
be pursued.
the testimony of Lozada was based on... personal knowledge as the assurance from the
government was personally made to him.
As regards the position of petitioners that respondents' testimonial evidence violates the
Statute of Frauds, suffice it to state that the Statute of Frauds operates only with
respect to executory contracts, and does not apply to contracts which have been
completely or partially... performed, ... The right of respondents to repurchase Lot No.
88 may be enforced based on a constructive trust constituted on the property held by
the government in favor of the former.
WHEREFORE, the petition is DENIED.
Principles:
If x x x land is expropriated for a particular purpose, with the condition that when that
purpose is ended or abandoned the property shall return to its former owner, then, of
course, when the purpose is terminated or abandoned the former owner reacquires
the... property so expropriated. If x x x land is expropriated for a public street and the
expropriation is granted upon condition that the city can only use it for a public street,
then, of course, when the city abandons its use as a public street, it returns to the
former... owner, unless there is some statutory provision to the contrary. x x x. If, upon
the contrary, however, the decree of expropriation gives to the entity a fee simple title,
then, of course, the land becomes the absolute property of the expropriator, whether it
be the State, a... province, or municipality, and in that case the non-user does not have
the effect of defeating the title acquired by the expropriation proceedings. x x x.
When land has been acquired for public use in fee simple, unconditionally, either by the
exercise of eminent domain or by purchase, the former owner retains no right in the
land, and the public use may be abandoned, or the land may be devoted to a different
use, without... any impairment of the estate or title acquired, or any reversion to the
former owner. x x x.
 G.R. No. 193023 June 22, 2011
National Power Corporation, petitioner
vs.
Yunita Tuazon, Rosauro Tuazon and Maria Teresa Tuazon, respondents

Facts

The respondents are co-owners of a 136,736-square-meter coconut land in

Barangay Sta. Cruz, Tarangnan, Samar. The land has been declared for tax purposes in
the name of the respondents’ predecessor-in-interest, the late Mr. Pascual Tuazon.
Sometime in 1996, NAPOCOR installed transmission lines on a portion of the land for its
350 KV Leyte-Luzon HVDC Power TL Project. In the process, several improvements on
the land were destroyed. Instead of initiating expropriation proceedings, however,
NAPOCOR entered into a mere right-of-way agreement with Mr. Tuazon for the total
amount of TWENTY SIX THOUSAND NINE HUNDRED SEVENTY EIGHT and 21/100
PESOS (P26,978.21). The amount represents payments for “damaged improvements”
(P23,970.00), “easement and tower occupancy fees” (P1,808.21), and “additional
damaged improvements” (P1,200.00).
In 2002, the respondents filed a complaint against NAPOCOR for just
compensation and damages, claiming that no expropriation proceedings were made and
that they only allowed NAPOCOR entry into the land after being told that the fair market
value would be paid. They also stated that lots similarly located in Catbalogan, Samar,
likewise utilized by NAPOCOR for the similar projects, were paid just compensation in
sums ranging from P2,000.00 toP2,200.00 per square meter, pursuant to the
determination made by different branches of the RTC in Samar.
The herein petitioner filed an ordinary appeal with the CA. In its Appellee’s
Brief, NAPOCOR denied that expropriation had occurred. Instead, it claimed to have
lawfully established a right-of-way easement on the land per its agreement with Mr.
Tuazon, which agreement is in accord with its charter, Republic Act No. (R.A.)
6395. NAPOCOR maintained that Section 3-A(b) of R.A. 6395 gave it the right to acquire
a right-of-way easement upon payment of “just compensation” equivalent to not more
than 10% of the market value of a private lot traversed by transmission lines.

Issue
Whether or not the right-of-way easement instead of just compensation on the private
land taken for the installation of transmission lines is valid.

Ruling
NAPOCOR is liable to pay respondents herein just compensation and not only
easement fee.

Normally, the power of eminent domain results in the taking or appropriation of title to,
and possession of, the expropriated property; but no cogent reason appears why the said
power may not be availed of to impose only a burden upon the owner of condemned
property, without loss of title and possession. It is unquestionable that real property may,
through expropriation, be subjected to an easement of right of way. True, an easement
of a right of way transmits no rights except the easement itself, and respondent retains
full ownership of the property. The acquisition of such easement is, nevertheless,
not gratis. As correctly observed by the CA, considering the nature and the effect of the
installation power lines, the limitations on the use of the land for an indefinite period
would deprive respondent of normal use of the property. For this reason, the latter is
entitled to payment of a just compensation, which must be neither more nor less than
the monetary equivalent of the land.
Just compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator. The measure is not the taker’s gain, but the owner’s
loss. The word “just” is used to intensify the meaning of the word “compensation” and to
convey thereby the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full and ample. In eminent domain or expropriation proceedings,
the just compensation to which the owner of a condemned property is entitled is generally
the market value. Market value is “that sum of money which a person desirous but not
compelled to buy, and an owner willing but not compelled to sell, would agree on as a
price to be given and received therefore.”
CITY OF MANILA VS. CHINESE COMMUNITY [40 Phil 349; No. 14355; 31 Oct
1919]
Saturday, January 31, 2009

Facts:

The City of Manila, plaintiff herein, prayed for the expropriation of a portion private
cemetery for the conversion into an extension of Rizal Avenue. Plaintiff claims that it is
necessary that such public improvement be made in the said portion of the private
cemetery and that the said lands are within their jurisdiction.

Defendants herein answered that the said expropriation was not necessary because
other routes were available. They further claimed that the expropriation of the
cemetery would create irreparable loss and injury to them and to all those persons
owing and interested in the graves and monuments that would have to be destroyed.

The lower court ruled that the said public improvement was not necessary on the
particular-strip of land in question. Plaintiff herein assailed that they have the right to
exercise the power of eminent domain and that the courts have no right to inquire and
determine the necessity of the expropriation. Thus, the same filed an appeal.

Issue:

Whether or not the courts may inquire into, and hear proof of the necessity of the
expropriation.

Held:

The courts have the power of restricting the exercise of eminent domain to the actual
reasonable necessities of the case and for the purposes designated by the law. The
moment the municipal corporation or entity attempts to exercise the authority
conferred, it must comply with the conditions accompanying the authority. The
necessity for conferring the authority upon a municipal corporation to exercise the right
of eminent domain is admittedly within the power of the legislature. But whether or not
the municipal corporation or entity is exercising the right in a particular case under the
conditions imposed by the general authority, is a question that the courts have the right
to inquire to.
 CIR v. CITYTRUST INVESTMENT PHILS., INC. G.R. No. 139786
ASIANBANK CORPORATION v. CIR G.R. No. 140857
September 27, 2006 Sandoval-Gutierrez, J.

TOPIC IN SYLLABUS: Double Taxation- Instances of double taxation in its broad sense

SUMMARY: Citytrust reported its total gross receipts and paid the 5% GRT
corresponding to it. Citytrust claimed for tax refund, seeking to be reimbursed of the
5% GRT it paid on the portion of 20% FWT contending that the 20% final tax on the
passive income was already deducted and withheld by various withholding agents.

Hence, the actual or the exact amount received, as its passive income was less the
20% final tax and to include the same would constitute double taxation. SC held that
the 20% FWT is included in computing the 5% GRT and such does not amount to
double taxation. The GRT is a percentage tax, while the FWT is an income tax. The
two concepts are different from each other.

DOCTRINE:

Double taxation means taxing for the same tax period the same thing or activity
twice, when it should be taxed but once, for the same purpose and with the same
kind of character of tax.

HOW THE CASE REACHED THE SC: PETITIONS for review on certiorari of the decisions
of the CA

FACTS:

G.R. No. 139786

 Citytrust is a domestic corporation engaged in quasi-banking activities.
 In 1994, Citytrust reported the amount of P110,788,542.30 as its total gross receipts
and paid the amount of P5,539,427.11 corresponding to its 5% GRT.
 On January 30, 1996, the CTA, in Asian Bank Corporation v. Commissioner of
Internal Revenue (ASIAN BANK case), ruled that the basis in computing the 5% GRT
is the gross receipts minus the 20% FWT.
 Based on this ruling, Citytrust claimed for tax, seeking to be reimbursed of the 5%
GRT it paid on the portion of 20% FWT or the amount of P326,007.01.
 CTA:
 monies or receipts that do not redound to the benefit of the taxpayer are not
part of its gross receipts for the purpose of computing its taxable gross receipts
 the 20% final tax on the passive income was already deducted and withheld by
various withholding agents. Hence, the actual or the exact amount received, as
its passive income in the year 1994, was less the 20% final tax already withheld
by various withholding agents.
 to include it again would tantamount to double taxation

G.R. No. 140857

 Asianbank is a domestic corporation also engaged in banking business. It
remitted to the BIR 5% GRT on its total gross receipts.
 It filed a claim for refund for the overpaid GRT based on the Asian bank case.
 CTA: allowed refund in the reduced amount of P1,345,743.01
 CA: Reversed CTA.
 It is true that Revenue Regulation No. 12-80 provides that the gross receipts tax
on banks and other financial institutions should be based on all items of income
 actually received. Actual receipt here is used in opposition to mere accrual. But
receipt may be actual or constructive. The 20% final tax withheld from interest
income of banks and other similar institutions is not income that they have not
received; it is simply withheld from them and paid to the government, for their
benefit.

PETITIONER’S ARGUMENT:
Commissioner’s Arguments:
 first, there is no law which excludes the 20% FWT from the taxable gross
receipts for the purpose of computing the 5% GRT;
 second, the imposition of the 20% FWT on the bank's passive income and the
5% GRT on its taxable gross receipts, which include the bank's passive income,
does not constitute double taxation;
 third, the ruling by this Court in Manila Jockey Club, cited in the ASIAN BANK
case, is not applicable; and
 fourth, in the computation of the 5% GRT, the passive income need not be
actually received in order to form part of the taxable gross receipts.

RESPONDENT’S ARGUMENT:
 first, Section 4(e) of Revenue Regulations No. 12-80 dated November 7, 1980
provides that the rates of taxes on the gross receipts of financial institutions shall
be based only on all items of income actually received;
 second, Court's ruling in Manila Jockey Club is applicable

ISSUES+HELD:

1. WON the 20% FWT on a bank's interest income forms part of the taxable gross
receipts for the purpose of computing the 5% GRT? - NO
 Numerous cases are unanimous in defining "gross receipts" as "the entire
receipts without any deduction.”
 CIR v. Bank of Philippine Islands: The Tax Code does not provide a definition of
the term "gross receipts". Accordingly, the term is properly understood in its
plain and ordinary meaning and must be taken to comprise of the entire receipts
without any deduction
 CIR v. Bank of Commerce: The word "gross" must be used in its plain and
ordinary meaning. It is defined as "whole, entire, total, without deduction." Gross
is the antithesis of net.
 China Banking Corporation v. Court of Appeals: Under the ordinary basic
methods of handling accounts, the term gross receipts, in the absence of any
statutory definition of the term, must be taken to include the whole total gross
receipts without any deductions
o the legislative intent to apply the term in its plain and ordinary meaning
may be surmised from a historical perspective of the levy on gross
receipts. From the time the GRT on banks was first imposed in 1946 under
Republic Act No. 39 the legislature has not established a definition of the
term "gross receipts."
o Under Revenue Regulations No. 12-80 and No. 17-84, as well as several
numbered rulings, the BIR has consistently ruled that the term "gross
receipts" does not admit of any deduction. This interpretation has
remained unchanged throughout the various re-enactments of the present
Section 121 of the Tax Code.
 Commissioner of Internal Revenue v. Solidbank Corporation: When we speak of
the "gross earnings" of a person or corporation, we mean the entire earnings or
 receipts of such person or corporation from the business or operation to which
we refer. Webster's Dictionary gross ="whole or entire."

2. WON there is double taxation - NO

The 20% FWT and 5% GRT does not constitute double taxation.
 Double taxation means taxing for the same tax period the same thing or activity
twice, when it should be taxed but once, for the same purpose and with the
same kind of character of tax. This is not the situation in the case at bar. The
GRT is a percentage tax under Title V of the Tax Code ([Section 121], Other
Percentage Taxes), while the FWT is an income tax under Title II of the Code
(Tax on Income). The two concepts are different from each other.
 Solidbank Case: a percentage tax is a national tax measured by a certain
percentage of the gross selling price or gross value in money of goods sold,
bartered or imported; or of the gross receipts or earnings derived by any person
engaged in the sale of services. It is not subject to withholding. An income tax,
on the other hand, is a national tax imposed on the net or the gross income
realized in a taxable year. It is subject to withholding. Tax Code imposes two
different kinds of taxes.

DISPOSITIVE:
 G.R. No. 139786: GRANT the petition of the Commissioner of Internal Revenue
and REVERSE the Decision of the CA
 G.R. No. 140857: DENY petition of Asianbank and affirm in toto the decision of
the CA
 British American Tobacco V. Camacho (2008)

British American Tobacco v. Camacho (2008)

G.R. No. 163583 August 20, 2008
YNARES-SANTIAGO, J.

Lessons Applicable: Court of Tax Appeals Jurisdiction, Regional Trial Court Jurisdiction,
Equal Protection and Uniformity of Taxation (constitutional issue), BIR Power to
Conduct Resurvey and Reclassification (delegated by express legislation)

Laws Applicable:

FACTS:

 June 2001, petitioner British American Tobacco introduced and sold Lucky Strike,
Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes w/ SRP P 9.90/pack -
Initial assessed excise tax: P 8.96/pack (Sec. 145 [c])
 February 17, 2003: RR 9-2003: Periodic review every 2 years or earlier of the
current net retail price of new brands and variants thereof for the purpose of the
establishing and updating their tax classification
 March 11, 2003: RMO 6-2003: Guidelines and procedures in establishing current net
retail prices of new brands of cigarettes and alcohol products
 August 8, 2003: RR 22-2003: Implement the revised tax classification of certain new
brands introduced in the market after January 1, 1997 based on the survey of their
current net retail prices. This increased the excise tax to P13.44 since the average
net retail price is above P 10/pack. This cause petitioner to file before the RTC of
Makati a petition for injunction with prayer for issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction sought to enjoin the implementation of
Sec. 145 of the NIRC, RR No. 1-97, 9-2003, 22-2003 and 6-2003 on the ground that
they discriminate against new brands of cigarettes in violation of the equal
protection and uniformity provisions of the Constitution
 RTC: Dismissed
 While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997
NIRC among other took effect on January 1, 2005 which in effect increased
petitioners excise tax to P25/pack
 Petitioner filed a Motion to Admit attached supplement and a supplement to the
petition for review assailing the constitutionality of RA 9334 and praying a
downward classification of Lucky Strike products at the bracket taxable at P
8.96/pack since existing brands are still taxed based on their price as of October
1996 eventhough they are equal or higher than petitioner's product price.
 Philip Morris Philippines Manufacturing Incorporated, Fortune Tobacco Corp., Mighty
Corp. and JT International Intervened.
 Fortune Tobacco claimed that the CTA should have the exclusive appellate
jurisdiction over the decision of the BIR in tax disputes

ISSUE:

1. W/N the RTC rather than the CTA has jurisdiction.

 2. W/N RA 9334 of the classification freeze provision is unconstitutional for violating
the equal protection and uniformity provisions of the Constitution
3. W/N RR Nos. 1-97, 9-2003, 22-2003 and RA 8243 even prior to its amendment by
RA 9334 can authorize the BIR to conduct resurvey and reclassification.

HELD:

1. Yes. The jurisdiction of the CTA id defined in RA 1125 which confers on the CTA
jurisdiction to resolve tax disputes in general. BUT does NOT include cases where the
constitutionality of a law or rule is challenged which is a judicial power belonging to
regular courts.

2. No. In Sison Jr. v. Ancheta, the court held that "xxx It suffices then that the laws
operate equally and uniformly on all persons under similar circumstances or that all
persons must be treated in the same manner, the conditions not being different, both in
the privileges conferred and the liabilities imposed. If the law be looked upon in tems
of burden on charges, those that fall within a class should be treated in the same
fashion, whatever restrictions cast on some in the group equally binding on the rest.
xxx” Thus, classification if rational in character is allowable. In Lutz v. Araneta: "it is
inherent in the power to tax that a state be free to select the subjects of taxation, and
it has been repeatedly held that 'inequalities which result from a singling out of one
particular class for taxation, or exemption infringe no constitutional limitation” SC
previously held: "Equality and uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed at the same rate. The taxing power
has the authority to make reasonable and natural classifications for purposes of
taxation"

Under the the rational basis test, a legislative classification, to survive an equal
protection challenge, must be shown to rationally further a legitimate state interest. The
classifications must be reasonable and rest upon some ground of difference having a
fair and substantial relation to the object of the legislation

A legislative classification that is reasonable does not offend the constitutional guaranty
of the equal protection of the laws. The classification is considered valid and reasonable
provided that: (1) it rests on substantial distinctions; (2) it is germane to the purpose of
the law; (3) it applies, all things being equal, to both present and future conditions; and
(4) it applies equally to all those belonging to the same class.

Moreover, petitioner failed to clearly demonstrate the exact extent of such impact as
the price is not the only factor that affects competition.

3. NO. Unless expressly granted to the BIR, the power to reclassify cigarette brands
remains a prerogative of the legislature which cannot be usurped by the former. These
are however modified by RA 9334.