Drugstores Association of the Philippines, Inc. v.

National Council on Disability participation of the private sector, in order to achieve the purpose or objective of
Affairs the law, is reasonably and directly related. Also, the means employed to provide a
fair, just and quality health care to PWDs are reasonably related to its
Facts: accomplishment, and are not oppressive, considering that as a form of
In 2007, RA 9447 was enacted or the Magna Carta Persons with Disability granting reimbursement, the discount extended to PWDs in the purchase of medicine can be
20% discounts on the purchase of medicines and a tax deduction scheme (gross claimed by the establishments as allowable tax deductions pursuant to Section 32
income – discount granted). Petitioners questioned the Constitutionality of the law of R.A. No. 9442 as implemented in Section 4 of DOF Revenue Regulations No. 1-
on the ground that the same violates the equal protection clause. The CA however 2009. Otherwise stated, the discount reduces taxable income upon which the tax
upheld its constitutionality. liability of the establishments is computed.

Issues: (1) W/N the law is violative to both due process and equal protection Lastly, petitioners contend that R.A. No. 7227, as amended by R.A. No. 9442,
violates the equal protection clause of the Constitution because it fairly singles out
Ruling: drugstores to bear the burden of the discount, and that it can hardly be said to
Negative; The law is a legitimate exercise of police power which, similar to the "rationally" meet a legitimate government objective which is the purpose of the
power of eminent domain, has general welfare for its object. Police power is not law. The law allegedly targets only retailers such as petitioners, and that the other
capable of an exact definition, but has been purposely veiled in general terms to enterprises in the drug industry are not imposed with similar burden. This same
underscore its comprehensiveness to meet all exigencies and provide enough room argument had been raised in the case of Carlos Superdrug Corp., et al. v. DSWD, et
for an efficient and flexible response to conditions and circumstances, thus assuring al., and We reaffirm and apply the ruling therein in the case at bar:
the greatest benefits. Accordingly, it has been described as the most essential,
insistent and the least limitable of powers, extending as it does to all the great The Court is not oblivious of the retail side of the pharmaceutical industry
public needs. It is [t]he power vested in the legislature by the constitution to make, and the competitive pricing component of the business. While the
ordain, and establish all manner of wholesome and reasonable laws, statutes, and Constitution protects property rights, petitioners must accept the realities
ordinances, either with penalties or without, not repugnant to the constitution, as of business and the State, in the exercise of police power, can intervene in
they shall judge to be for the good and welfare of the commonwealth, and of the the operations of a business which may result in an impairment of
subjects of the same. property rights in the process.

For this reason, when the conditions so demand as determined by the legislature, Under the equal protection clause, all persons or things similarly situated must be
property rights must bow to the primacy of police power because property rights, treated alike, both in the privileges conferred and the obligations imposed.
though sheltered by due process, must yield to general welfare. Conversely, all persons or things differently situated should be treated
differently. In the case of ABAKADA Guro Party List, et al. v. Hon. Purisima, et al.,We
Police power as an attribute to promote the common good would be diluted held:ChanRoblesVirtualawlibrary
considerably if on the mere plea of petitioners that they will suffer loss of earnings
and capital, the questioned provision is invalidated. Moreover, in the absence of Equality guaranteed under the equal protection clause is equality under
evidence demonstrating the alleged confiscatory effect of the provision in question, the same conditions and among persons similarly situated; it is equality
there is no basis for its nullification in view of the presumption of validity which among equals, not similarity of treatment of persons who are classified
every law has in its favor. based on substantial differences in relation to the object to be
accomplished. When things or persons are different in fact or
The PWD mandatory discount on the purchase of medicine is supported by a valid circumstance, they may be treated in law differently. In Victoriano v.
objective or purpose as aforementioned. It has a valid subject considering that the Elizalde Rope Workers' Union, this Court declared:
concept of public use is no longer confined to the traditional notion of use by the
public, but held synonymous with public interest, public benefit, public welfare, The guaranty of equal protection of the laws is not a guaranty of equality in
and public convenience. As in the case of senior citizens, the discount privilege to the application of the laws upon all citizens of the State. It is not, therefore,
which the PWDs are entitled is actually a benefit enjoyed by the general public to a requirement, in order to avoid the constitutional prohibition against
which these citizens belong. The means employed in invoking the active inequality, that every man, woman and child should be affected alike by a
 statute. Equality of operation of statutes does not mean indiscriminate Gerochi v. DOE
operation on persons merely as such, but on persons according to the
circumstances surrounding them. It guarantees equality, not identity of Facts:
rights. The Constitution does not require that things which are different in In 2002, RA 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) was
fact be treated in law as though they were the same. The equal protection enacted by Congress. Under such law, a universal charge is to be determined by the
clause does not forbid discrimination as to things that are different. It does Energy Regulatory Commission (ERC) to be imposed on all electricity end-users. As a
not prohibit legislation which is limited either in the object to which it is consequence of the additional charge, Gerochi and other end-users assailed the its
directed or by the territory within which it is to operate. constitutionality on the ground that as a tax measure, it was an unduly delegated
legislative power. On the other hand, respondents argued that the charge was not a
The equal protection of the laws clause of the Constitution allows classification. tax because it was levied for a specific regulatory purpose and that the rate is
Classification in law, as in the other departments of knowledge or practice, is the uniform and not based on an individual’s capacity to pay.
grouping of things in speculation or practice because they agree with one another
in certain particulars. A law is not invalid because of simple inequality. The very idea Issue: W/N (1) the the Universal Charge under EPIRA is a tax; and (2) there is unde
of classification is that of inequality, so that it goes without saying that the mere delegation of legislative power
fact of inequality in no manner determines the matter of constitutionality. All that is
required of a valid classification is that it be reasonable, which means that the Ruling:
classification should be based on substantial distinctions which make for real Negative; The power to tax is an incident of sovereignty and is unlimited in its
differences, that it must be germane to the purpose of the law; that it must not be range, acknowledging in its very nature no limits, so that security against its abuse is
limited to existing conditions only; and that it must apply equally to each member to be found only in the responsibility of the legislature which imposes the tax on the
of the class. This Court has held that the standard is satisfied if the classification or constituency that is to pay it. It is based on the principle that taxes are the lifeblood
distinction is based on a reasonable foundation or rational basis and is not palpably of the government, and their prompt and certain availability is an imperious
arbitrary. need. Thus, the theory behind the exercise of the power to tax emanates from
necessity; without taxes, government cannot fulfill its mandate of promoting the
The equal protection clause recognizes a valid classification, that is, a classification general welfare and well-being of the people.
that has a reasonable foundation or rational basis and not arbitrary. With respect to
R.A. No. 9442, its expressed public policy is the rehabilitation, self-development and On the other hand, police power is the power of the state to promote public
self-reliance of PWDs. Persons with disability form a class separate and distinct from welfare by restraining and regulating the use of liberty and property. It is the most
the other citizens of the country. Indubitably, such substantial distinction is pervasive, the least limitable, and the most demanding of the three fundamental
germane and intimately related to the purpose of the law. Hence, the classification powers of the State. The justification is found in the Latin maxims salus populi est
and treatment accorded to the PWDs fully satisfy the demands of equal protection. suprema lex (the welfare of the people is the supreme law) and sic utere tuo ut
Thus, Congress may pass a law providing for a different treatment to persons with alienum non laedas (so use your property as not to injure the property of others).
disability apart from the other citizens of the country. As an inherent attribute of sovereignty which virtually extends to all public needs,
police power grants a wide panoply of instrument through which the State,
as parens patriae, gives effect to a host of its regulatory powers.

The conservative and pivotal distinction between these two powers rests in the
purpose for which the charge is made. If generation of revenue is the primary
purpose and regulation is merely incidental, the imposition is a tax; but if regulation
is the primary purpose, the fact that revenue is incidentally raised does not make
the imposition a tax.

In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's
police power, particularly its regulatory dimension, is invoked. Such can be deduced
from Sec. 34 which enumerates the purposes for which the Universal Charge is
imposed and which can be amply discerned as regulatory in character. The EPIRA power"and "watershed rehabilitation and management" meet the requirements for
stands to ensure the quality, reliability, security and affordability of the supply of valid delegation, as they provide the limitations on the ERC’s power to formulate
electric power. the IRR. These are sufficient standards.

Thus, the assailed Universal Charge is not a tax, but an exaction in the exercise of
the State's police power. Public welfare is surely promoted.
With the Universal Charge, a Special Trust Fund (STF) is also created under the
administration of PSALM. This feature of the Universal Charge further boosts the
position that the same is an exaction imposed primarily in pursuit of the State's
police objectives. The STF reasonably serves and assures the attainment and
perpetuity of the purposes for which the Universal Charge is imposed, i.e., to
ensure the viability of the country's electric power industry.

For the second issue, due to the increasing complexity of modern life, delegation of
legislative power to various specialized administrative agencies is allowed as an
exception to this principle. Given the volume and variety of interactions in today's
society, it is doubtful if the legislature can promulgate laws that will deal adequately
with and respond promptly to the minutiae of everyday life. Hence, the need to
delegate to administrative bodies - the principal agencies tasked to execute laws in
their specialized fields - the authority to promulgate rules and regulations to
implement a given statute and effectuate its policies. All that is required for the
valid exercise of this power of subordinate legislation is that the regulation be
germane to the objects and purposes of the law and that the regulation be not in
contradiction to, but in conformity with, the standards prescribed by the law. These
requirements are denominated as the completeness test and the sufficient
standard test.

Under the first test, the law must be complete in all its terms and conditions when
it leaves the legislature such that when it reaches the delegate, the only thing he
will have to do is to enforce it. The second test mandates adequate guidelines or
limitations in the law to determine the boundaries of the delegate's authority and
prevent the delegation from running riot.

Contrary to the petitioners’ contention, the ERC does not enjoy a wide latitude of
discretion in the determination of the Universal Charge. Thus, the law is complete
and passes the first test for valid delegation of legislative power.

As to the second test, this Court had, in the past, accepted as sufficient standards
the following: "interest of law and order;" "adequate and efficient
instruction;" "public interest;" "justice and equity;" "public convenience and
welfare;" "simplicity, economy and efficiency;" "standardization and regulation of
medical education;" and "fair and equitable employment practices." Provisions of
the EPIRA such as, among others, "to ensure the total electrification of the country
and the quality, reliability, security and affordability of the supply of electric
PKSMMN v. Executive Secretary Of course, unlike ordinary revenue laws, R.A. 6260 and P.D. 276 did not raise money
to boost the government’s general funds but to provide means for the
Facts: rehabilitation and stabilization of a threatened industry, the coconut industry,
In 1971 RA 6260 was enacted by Congress establishing a Coconut Investment Fund which is so affected with public interest as to be within the police power of the
for the development of the coconut industry by imposing levy of Php0.55 on the State. The funds sought to support the coconut industry, one of the main economic
farmer’s first 100-kilo sale. Several PDs were subsequently enacted by the President backbones of the country, and to secure economic benefits for the coconut farmers
Marcos establishing several funds of the same nature. In 1775, PD 755 was enacted and farm workers.
by Marcos authorizing the Philippine Coconut Authority (PCA) to acquire a bank
(now UCPB) in order to realize the industry’s objective. PD 961 and 1468 were Respondent UCPB suggests that the coco-levy funds are closely similar to the Social
likewise enacted authorizing UCPB to make investments from the fund and Security System (SSS) funds, which have been declared to be not public funds but
distribute them for free to coconut farmers in their private capacity (mandating that properties of the SSS members and held merely in trust by the government. But the
the coco-levy funds shall not be considered or construed, under any law or SSS Law collects premium contributions. It does not collect taxes from members for
regulation, special and/or fiduciary funds and do not form part of the general funds a specific public purpose. They pay contributions in exchange for insurance
of the national government). In 2000, then President Estrada issued EO 312 and protection and benefits like loans, medical or health services, and retirement
313, seeking to establish a Php1 billion fund by disposing assets acquired using the packages. The benefits accrue to every SSS member, not to the public, in general.
coco-levy fund and provide financial assistance to the farmers and the coconut Furthermore, SSS members do not lose ownership of their contributions. The
industry and other agri-related programs. Petitioner organizations and individuals government merely holds these in trust, together with his employer’s contribution,
instituted to nullify Section 2 of P.D. 755, (b) Article III, Section 5 of P.D.s 961 and to answer for his future benefits. The coco-levy funds, on the other hand, belong to
1468 (c) E.O. 312, and (d) E.O. 313 as unconstitutional. For petitioners, the coco- the government and are subject to its administration and disposition. Thus, these
levy fund are public in character and cannot be given away freely (PDs 755, 961 and funds, including its incomes, interests, proceeds, or profits, as well as all its assets,
1468) and that it’s use must only be limited to the purpose for which it was properties, and shares of stocks procured with such funds must be treated, used,
established (EOs 312 and 313). administered, and managed as public funds.

Issue: W/N the PDs 755, 961 and 1468, and Eos 312 and 313 are unconstitutional Lastly, the coco-levy funds are evidently special funds. In Gaston v. Republic
Planters Bank, the Court held that the State collected stabilization fees from sugar
Ruling: millers, planters, and producers for a special purpose: to finance the growth and
Affirmative; The Court was satisfied that the coco-levy funds were raised pursuant development of the sugar industry and all its components. The fees were levied for
to law to support a proper governmental purpose. They were raised with the use of a special purpose and, therefore, constituted special fund when collected.
the police and taxing powers of the State for the benefit of the coconut industry In Osmeña v. Orbos, the Court held that the oil price stabilization fund was a special
and its farmers in general. The COA reviewed the use of the funds. The Bureau of fund mainly because this was segregated from the general fund and placed in what
Internal Revenue (BIR) treated them as public funds and the very laws governing the law referred to as a trust account. Yet it remained subject to COA scrutiny and
coconut levies recognize their public character. review. The Court finds no substantial distinction between these funds and the
coco-levy funds, except as to the industry they each support.
The Court has also recently declared that the coco-levy funds are in the nature of
taxes and can only be used for public purpose. Taxes are enforced proportional Section 2 of P.D. 755, Article III, Section 5 of P.D. 961, and Article III, Section 5 of
contributions from persons and property, levied by the State by virtue of its P.D. 1468 completely ignore the fact that coco-levy funds are public funds raised
sovereignty for the support of the government and for all its public needs. Here, the through taxation. And since taxes could be exacted only for a public purpose, they
coco-levy funds were imposed pursuant to law, namely, R.A. 6260 and P.D. 276. The cannot be declared private properties of individuals although such individuals fall
funds were collected and managed by the PCA, an independent government within a distinct group of persons.
corporation directly under the President. And, as the respondent public officials
pointed out, the pertinent laws used the term levy, which means to tax, in Consequently, such declarations are void since they appropriate public funds for
describing the exaction. private purpose and, therefore, violate the citizens’ right to substantive due
process.
On another point, in stating that the coco-levy fund "shall not be construed or b) E.O. 313, for being in contravention of Section 84(2) of P.D. 1445, and
interpreted, under any law or regulation, as special and/or fiduciary funds, or as Article IX-D, Section 2(1) and Article VI, Section 29(3) of the Constitution.
part of the general funds of the national government," P.D.s 961 and 1468 seek to
remove such fund from COA scrutiny. This is also the fault of President Estrada’s
E.O. 312 which deals with ₱1 billion to be generated out of the sale of coco-fund
acquired assets.

But, since coco-levy funds are taxes, the provisions of P.D.s 755, 961 and 1468 as
well as those of E.O.s 312 and 313 that remove such funds and the assets acquired
through them from the jurisdiction of the COA violate Article IX-D, Section 2(1) of
the 1987 Constitution. Section 2(1) vests in the COA the power and authority to
examine uses of government money and property. The cited P.D.s and E.O.s also
contravene Section 270 of P.D. 898 (Providing for the Restructuring of the
Commission on Audit), which has the force of a statute.

And there is no legitimate reason why such funds should be shielded from COA
review and audit. The PCA, which implements the coco-levy laws and collects the
coco-levy funds, is a government-owned and controlled corporation subject to COA
review and audit.

E.O. 313 suffers from an additional infirmity. Its title, "Rationalizing the Use of the
Coconut Levy Funds by Constituting a ‘Fund for Assistance to Coconut Farmers’ as
an Irrevocable Trust Fund and Creating a Coconut Trust Fund Committee for the
Management thereof" tends to mislead. Apparently, it intends to create a trust
fund out of the coco-levy funds to provide economic assistance to the coconut
farmers and, ultimately, benefit the coconut industry. But on closer look, E.O. 313
strays from the special purpose for which the law raises coco-levy funds in that it
permits the use of coco-levy funds for improving productivity in other food areas.
Clearly, E.O. 313 above runs counter to the constitutional provision which directs
that all money collected on any tax levied for a special purpose shall be treated as a
special fund and paid out for such purpose only. Assisting other agriculturally-
related programs is way off the coco-fund’s objective of promoting the general
interests of the coconut industry and its farmers.

EO 313 also transfers the power to allocate, use, and disburse coco-levy funds that
P.D. 232 vested in the PCA and transferred the same, without legislative
authorization and in violation of P.D. 232, to the Committees mentioned above. An
executive order cannot repeal a presidential decree which has the same standing as
a statute enacted by Congress
.
Wherefore, this Court declares the following void:
a) E.O. 312, for being repugnant to Section 84(2) of P.D. 1445, and Article
IX-D, Section 2(1) of the Constitution; and
 Francia v. IAC on. "The general rule based on grounds of public policy is well-settled that
no set-off admissible against demands for taxes levied for general or local
Facts: governmental purposes. The reason on which the general rule is based, is
Francia is the owner of a 328sqm residential lot and a two-story house built upon it. that taxes are not in the nature of contracts between the party and party
In 1977, 125sqm was of the lot was expropriated by the government for the sum of but grow out of duty to, and are the positive acts of the government to the
Php4, 116. Francia was not able to pay real estate taxes from 1963 to 1977, thus, his making and enforcing of which, the personal consent of individual
property was sold at a public auction to satisfy the tax delinquency of Php2, 400. taxpayers is not required. ..."
Alleging that since the government owed him a sum of Php4, 116, his obligation to
pay his taxes was set-off by such indebtedness. However, the lower court and the We stated that a taxpayer cannot refuse to pay his tax when called upon by the
IAC ruled against him. collector because he has a claim against the governmental body not included in the
tax levy.
Issues: W/N set-off was properly applicable in the case
This rule was reiterated in the case of Corders v. Gonda (18 SCRA 331) where we
Ruling: stated that: "... internal revenue taxes can not be the subject of compensation:
Negative; Francia contends that his tax delinquency of P2,400.00 has been Reason: government and taxpayer are not mutually creditors and debtors of each
extinguished by legal compensation. He claims that the government owed him other' under Article 1278 of the Civil Code and a "claim for taxes is not such a debt,
P4,116.00 when a portion of his land was expropriated on October 15, 1977. Hence, demand, contract or judgment as is allowed to be set-off."
his tax obligation had been set-off by operation of law as of October 15, 1977.
Petitioner's third assignment of grave error likewise lacks merit. As a general rule,
There is no legal basis for the contention. By legal compensation, obligations of gross inadequacy of price is not material. See also Barrozo Vda. de Gordon v. Court
persons, who in their own right are reciprocally debtors and creditors of each other, of Appeals (109 SCRA 388) we held that "alleged gross inadequacy of price is not
are extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy material when the law gives the owner the right to redeem as when a sale is made
the requirements provided by Article 1279, to wit: at public auction, upon the theory that the lesser the price, the easier it is for the
(1) that each one of the obligors be bound principally and that he be at the owner to effect redemption.
same time a principal creditor of the other;
xxx In Black on Tax Titles (2nd Ed.), the correct rule is stated as follows: "where land is
(3) that the two debts be due. sold for taxes, the inadequacy of the price given is not a valid objection to the sale."
This rule arises from necessity, for, if a fair price for the land were essential to the
This principal contention of the petitioner has no merit. We have consistently ruled sale, it would be useless to offer the property. Indeed, it is notorious that the prices
that there can be no off-setting of taxes against the claims that the taxpayer may habitually paid by purchasers at tax sales are grossly out of proportion to the value
have against the government. A person cannot refuse to pay a tax on the ground of the land.
that the government owes him an amount equal to or greater than the tax being
collected. The collection of a tax cannot await the results of a lawsuit against the
government.

In the case of Republic v. Mambulao Lumber Co. this Court ruled that Internal
Revenue Taxes can not be the subject of set-off or compensation. We stated that:

A claim for taxes is not such a debt, demand, contract or judgment as is

allowed to be set-off under the statutes of set-off, which are construed
uniformly, in the light of public policy, to exclude the remedy in an action
or any indebtedness of the state or municipality to one who is liable to the
state or municipality for taxes. Neither are they a proper subject of
recoupment since they do not arise out of the contract or transaction sued
Domingo v. Garlitos Diaz v. Sec. of Finance

Facts: Facts:
A judgment of Php40, 058 for taxes against Price’s estate has already been In 2010, BIR sought to impose VAT on the collections of tollway operators. It is the
rendered final and executory by the lower court. A petition for execution of the view of the petitioners that Congress did not include toll fees in the “sale of
judgement was however denied by respondent judge on the ground that the services” when it enacted the NIRC and that a toll fee is a user’s tax not a sale of
Government is indebted to the estate in the amount of Php262, 200. As services, hence the VAT would constitute as a tax on a tax. Furthermore, petitioners
Commissioner of Internal Revenue, Domingo filed a petition of mandamus against aver that the imposition of the VAT would violate the non-impairment clause of the
Judge Garlitos and the the estate of Walter Price to execute judgement in favor of constitution as the VAT has not been factored in the computation of tool fees. The
the Government for internal revenue taxes of Price’s estate. government argued that the NIRC imposed VAT on all kinds of services of franchise
grantees i.e., toll way operators, and that petitioners have no right to invoke the
Issue: W/N it execution of the judgement in favor of the government is proper non-impairment clause not being parties to the contract. Petitioners, in their reply
despite its indebtedness to the decedent’s estate aver that tollway operators are not franchise grantees as they do not hold
legislative franchises, thus, the government has unlawfully expanded the VAT
Ruling: coverage under Sec. 108, NIRC. Furhtermore, petitioners also aver that the VAT
Negative;The petition to set aside the above orders of the court below and for the imposition is not administratively feasible. The petition is one for declaratory relief.
execution of the claim of the Government against the estate must be denied for
lack of merit. The ordinary procedure by which to settle claims of indebtedness Issues: (1) W/N the VAT imposed on tollway operators amounts to a tax on a tax
against the estate of a deceased person, as an inheritance tax, is for the claimant to (and not tax on services)
present a claim before the probate court so that said court may order the
administrator to pay the amount thereof. Ruling:
I. There are precedents for treating a petition for declaratory relief as one for
Another ground for denying the petition of the provincial fiscal is the fact that the prohibition if the case has far-reaching implications and raises questions that need
court having jurisdiction of the estate had found that the claim of the estate against to be resolved for the public good. The Court has also held that a petition for
the Government has been recognized and an amount of P262,200 has already been prohibition is a proper remedy to prohibit or nullify acts of executive officials that
appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under amount to usurpation of legislative authority. Here, the imposition of VAT on toll
the above circumstances, both the claim of the Government for inheritance taxes fees has far-reaching implications. Its imposition would impact, not only on the
and the claim of the intestate for services rendered have already become overdue more than half a million motorists who use the tollways everyday, but more so on
and demandable is well as fully liquidated. Compensation, therefore, takes place by the government’s effort to raise revenue for funding various projects and for
operation of law, in accordance with the provisions of Articles 1279 and 1290 of the reducing budgetary deficits.
Civil Code, and both debts are extinguished to the concurrent amount, thus:
The third paragraph of Section 108 defines "sale or exchange of services" as follows:
ART. 1200. When all the requisites mentioned in article 1279 are present,
compensation takes effect by operation of law, and extinguished both The phrase ‘sale or exchange of services’ means the performance of all
debts to the concurrent amount, eventhough the creditors and debtors are kinds of services in the Philippines for others for a fee, remuneration or
not aware of the compensation. consideration, including those performed or rendered by construction and
service contractors; stock, real estate, commercial, customs and
It is clear, therefore, that the petitioner has no clear right to execute the judgment immigration brokers; lessors of property, whether personal or real;
for taxes against the estate of the deceased Walter Scott Price. Furthermore, the warehousing services; lessors or distributors of cinematographic films;
petition for certiorari and mandamus is not the proper remedy for the petitioner. persons engaged in milling, processing, manufacturing or repacking goods
Appeal is the remedy. for others; proprietors, operators or keepers of hotels, motels, resthouses,
pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and
caterers; dealers in securities; lending investors; transportation contractors
 on their transport of goods or cargoes, including persons who transport Tollway operators are franchise grantees and they do not belong to exceptions (the
goods or cargoes for hire and other domestic common carriers by land low-income radio and/or television broadcasting companies with gross annual
relative to their transport of goods or cargoes; common carriers by air and incomes of less than ₱10 million and gas and water utilities) that Section 119 spares
sea relative to their transport of passengers, goods or cargoes from one from the payment of VAT. The word "franchise" broadly covers government grants
place in the Philippines to another place in the Philippines; sales of of a special right to do an act or series of acts of public concern.
electricity by generation companies, transmission, and distribution Petitioners of course contend that tollway operators cannot be considered
companies; services of franchise grantees of electric utilities, telephone "franchise grantees" under Section 108 since they do not hold legislative franchises.
and telegraph, radio and television broadcasting and all other franchise But nothing in Section 108 indicates that the "franchise grantees" it speaks of are
grantees except those under Section 119 of this Code and non-life those who hold legislative franchises. Petitioners give no reason, and the Court
insurance companies (except their crop insurances), including surety, cannot surmise any, for making a distinction between franchises granted by
fidelity, indemnity and bonding companies; and similar services regardless Congress and franchises granted by some other government agency. The latter,
of whether or not the performance thereof calls for the exercise or use of properly constituted, may grant franchises. Indeed, franchises conferred or granted
the physical or mental faculties. by local authorities, as agents of the state, constitute as much a legislative franchise
as though the grant had been made by Congress itself.The term "franchise" has
It is plain from the above that the law imposes VAT on "all kinds of services" been broadly construed as referring, not only to authorizations that Congress
rendered in the Philippines for a fee, including those specified in the list. The directly issues in the form of a special law, but also to those granted by
enumeration of affected services is not exclusive. By qualifying "services" with the administrative agencies to which the power to grant franchises has been delegated
words "all kinds," Congress has given the term "services" an all-encompassing by Congress.
meaning. The listing of specific services are intended to illustrate how pervasive and
broad is the VAT’s reach rather than establish concrete limits to its application. Tollway operators are, owing to the nature and object of their business, "franchise
Thus, every activity that can be imagined as a form of "service" rendered for a fee grantees." The construction, operation, and maintenance of toll facilities on public
should be deemed included unless some provision of law especially excludes it. improvements are activities of public consequence that necessarily require a special
grant of authority from the state. Indeed, Congress granted special franchise for the
Now, do tollway operators render services for a fee? Presidential Decree (P.D.) 1112 operation of tollways to the Philippine National Construction Company, the former
or the Toll Operation Decree establishes the legal basis for the services that tollway tollway concessionaire for the North and South Luzon Expressways. Apart from
operators render. Essentially, tollway operators construct, maintain, and operate Congress, tollway franchises may also be granted by the TRB, pursuant to the
expressways, also called tollways, at the operators’ expense. Tollways serve as exercise of its delegated powers under P.D. 1112. The franchise in this case is
alternatives to regular public highways that meander through populated areas and evidenced by a "Toll Operation Certificate."
branch out to local roads. Traffic in the regular public highways is for this reason
slow-moving. In consideration for constructing tollways at their expense, the Petitioners contend that the public nature of the services rendered by tollway
operators are allowed to collect government-approved fees from motorists using operators excludes such services from the term "sale of services" under Section 108
the tollways until such operators could fully recover their expenses and earn of the Code. But, again, nothing in Section 108 supports this contention. The
reasonable returns from their investments. reverse is true. In specifically including by way of example electric utilities,
telephone, telegraph, and broadcasting companies in its list of VAT-covered
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the businesses, Section 108 opens other companies rendering public service for a fee to
latter’s use of the tollway facilities over which the operator enjoys private the imposition of VAT. Businesses of a public nature such as public utilities and the
proprietary rights that its contract and the law recognize. In this sense, the tollway collection of tolls or charges for its use or service is a franchise.
operator is no different from the service providers under Section 108 who allow
others to use their properties or facilities for a fee. II. Petitioners argue that a toll fee is a "user’s tax" and to impose VAT on toll fees is
tantamount to taxing a tax. Actually, petitioners base this argument on the
And not only do tollway operators come under the broad term "all kinds of following discussion in Manila International Airport Authority (MIAA) v. Court of
services," they also come under the specific class described in Section 108 as "all Appeals:
other franchise grantees" who are subject to VAT, "except those under Section 119
of this Code."
 No one can dispute that properties of public dominion mentioned in Article As can be seen, the discussion in the MIAA case on toll roads and toll fees was
420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges made, not to establish a rule that tollway fees are user’s tax, but to make the point
constructed by the State," are owned by the State. The term "ports" that airport lands and buildings are properties of public dominion and that the
includes seaports and airports. The MIAA Airport Lands and Buildings collection of terminal fees for their use does not make them private properties.
constitute a "port" constructed by the State. Under Article 420 of the Civil Tollway fees are not taxes. Indeed, they are not assessed and collected by the BIR
Code, the MIAA Airport Lands and Buildings are properties of public and do not go to the general coffers of the government.
dominion and thus owned by the State or the Republic of the Philippines.
x x x The operation by the government of a tollway does not change the It would of course be another matter if Congress enacts a law imposing a user’s tax,
character of the road as one for public use. Someone must pay for the collectible from motorists, for the construction and maintenance of certain
maintenance of the road, either the public indirectly through the taxes roadways. The tax in such a case goes directly to the government for the
they pay the government, or only those among the public who actually use replenishment of resources it spends for the roadways. This is not the case here.
the road through the toll fees they pay upon using the road. The tollway What the government seeks to tax here are fees collected from tollways that are
system is even a more efficient and equitable manner of taxing the public constructed, maintained, and operated by private tollway operators at their own
for the maintenance of public roads. expense under the build, operate, and transfer scheme that the government has
adopted for expressways. Except for a fraction given to the government, the toll
The charging of fees to the public does not determine the character of the fees essentially end up as earnings of the tollway operators.
property whether it is for public dominion or not. Article 420 of the Civil
Code defines property of public dominion as "one intended for public In sum, fees paid by the public to tollway operators for use of the tollways, are not
use." Even if the government collects toll fees, the road is still "intended taxes in any sense. A tax is imposed under the taxing power of the government
for public use" if anyone can use the road under the same terms and principally for the purpose of raising revenues to fund public expenditures. Toll
conditions as the rest of the public. The charging of fees, the limitation on fees, on the other hand, are collected by private tollway operators as
the kind of vehicles that can use the road, the speed restrictions and other reimbursement for the costs and expenses incurred in the construction,
conditions for the use of the road do not affect the public character of the maintenance and operation of the tollways, as well as to assure them a reasonable
road. margin of income. Although toll fees are charged for the use of public facilities,
therefore, they are not government exactions that can be properly treated as a tax.
The terminal fees MIAA charges to passengers, as well as the landing fees Taxes may be imposed only by the government under its sovereign authority, toll
MIAA charges to airlines, constitute the bulk of the income that maintains fees may be demanded by either the government or private individuals or entities,
the operations of MIAA. The collection of such fees does not change the as an attribute of ownership.
character of MIAA as an airport for public use. Such fees are often termed
user’s tax. This means taxing those among the public who actually use a Parenthetically, VAT on tollway operations cannot be deemed a tax on tax due to
public facility instead of taxing all the public including those who never use the nature of VAT as an indirect tax. In indirect taxation, a distinction is made
the particular public facility. A user’s tax is more equitable – a principle of between the liability for the tax and burden of the tax. The seller who is liable for
taxation mandated in the 1987 Constitution." the VAT may shift or pass on the amount of VAT it paid on goods, properties or
services to the buyer. In such a case, what is transferred is not the seller’s liability
Petitioners assume that what the Court said above, equating terminal fees to a but merely the burden of the VAT.
"user’s tax" must also pertain to tollway fees. But the main issue in the MIAA case
was whether or not Parañaque City could sell airport lands and buildings under Thus, the seller remains directly and legally liable for payment of the VAT, but the
MIAA administration at public auction to satisfy unpaid real estate taxes. Since local buyer bears its burden since the amount of VAT paid by the former is added to the
governments have no power to tax the national government, the Court held that selling price. Once shifted, the VAT ceases to be a tax and simply becomes part of
the City could not proceed with the auction sale. MIAA forms part of the national the cost that the buyer must pay in order to purchase the good, property or service.
government although not integrated in the department framework." Thus, its Consequently, VAT on tollway operations is not really a tax on the tollway user, but
airport lands and buildings are properties of public dominion beyond the commerce on the tollway operator. Under Section 105 of the Code, VAT is imposed on any
of man under Article 420(1) of the Civil Code and could not be sold at public person who, in the course of trade or business, sells or renders services for a fee. In
auction. other words, the seller of services, who in this case is the tollway operator, is the
person liable for VAT. The latter merely shifts the burden of VAT to the tollway user If the legislative intent was to exempt tollway operations from VAT, as petitioners
as part of the toll fees. so strongly allege, then it would have been well for the law to clearly say so. Tax
exemptions must be justified by clear statutory grant and based on language in the
For this reason, VAT on tollway operations cannot be a tax on tax even if toll fees law too plain to be mistaken. But as the law is written, no such exemption obtains
were deemed as a "user’s tax." VAT is assessed against the tollway operator’s gross for tollway operators. The Court is thus duty-bound to simply apply the law as it is
receipts and not necessarily on the toll fees. Although the tollway operator may found.
shift the VAT burden to the tollway user, it will not make the latter directly liable for
the VAT. The shifted VAT burden simply becomes part of the toll fees that one has Lastly, the grant of tax exemption is a matter of legislative policy that is within the
to pay in order to use the tollways. exclusive prerogative of Congress. The Court’s role is to merely uphold this
legislative policy, as reflected first and foremost in the language of the tax statute.
III. Petitioner Timbol has no personality to invoke the non-impairment of contract Thus, any unwarranted burden that may be perceived to result from enforcing such
clause on behalf of private investors in the tollway projects. She will neither be policy must be properly referred to Congress. The Court has no discretion on the
prejudiced by nor be affected by the alleged diminution in return of investments matter but simply applies the law.
that may result from the VAT imposition. She has no interest at all in the profits to
be earned under the TOAs. The interest in and right to recover investments solely
belongs to the private tollway investors.

IV. Finally, petitioners assert that the substantiation requirements for claiming input
VAT make the VAT on tollway operations impractical and incapable of
implementation. They cite the fact that, in order to claim input VAT, the name,
address and tax identification number of the tollway user must be indicated in the
VAT receipt or invoice. The manner by which the BIR intends to implement the VAT
– by rounding off the toll rate and putting any excess collection in an escrow
account – is also illegal, while the alternative of giving "change" to thousands of
motorists in order to meet the exact toll rate would be a logistical nightmare. Thus,
according to them, the VAT on tollway operations is not administratively feasible.

Administrative feasibility is one of the canons of a sound tax system. It simply

means that the tax system should be capable of being effectively administered and
enforced with the least inconvenience to the taxpayer. Non-observance of the
canon, however, will not render a tax imposition invalid "except to the extent that
specific constitutional or statutory limitations are impaired." Thus, even if the
imposition of VAT on tollway operations may seem burdensome to implement, it is
not necessarily invalid unless some aspect of it is shown to violate any law or the
Constitution.

Conclusion: In fine, the Commissioner of Internal Revenue did not usurp legislative
prerogative or expand the VAT law’s coverage when she sought to impose VAT on
tollway operations. Section 108(A) of the Code clearly states that services of all
other franchise grantees are subject to VAT, except as may be provided under
Section 119 of the Code. Tollway operators are not among the franchise grantees
subject to franchise tax under the latter provision. Neither are their services among
the VAT-exempt transactions under Section 109 of the Code.
Gomez v. Palomar The five centavo charge levied by Republic Act 1635, as amended, is in the nature of
an excise tax, laid upon the exercise of a privilege, namely, the privilege of using the
Facts: mails. As such the objections levelled against it must be viewed in the light of
In 1957, RA 1535 was enacted to help raise funds for the Philippines Tubercolosis applicable principles of taxation.
Society by directing the Post Master General to require semi-postal stamps (Anti-TB To begin with, it is settled that the legislature has the inherent power to select the
stamp) in the amount of .05 cents and that no mail matter shall be accepted unless subjects of taxation and to grant exemptions. This power has aptly been described
the same bears such semi-postal stamps. The Postmaster General then issued as "of wide range and flexibility." Indeed, it is said that in the field of taxation, more
several administrative orders to implement the law, citing among others entities than in other areas, the legislature possesses the greatest freedom in classification.
exempt from the imposition. In 1963, Gomez mailed a letter that did not bear the The reason for this is that traditionally, classification has been a device for fitting tax
special Anti-TB Stamp required by the statute. Consequently, it was returned. programs to local needs and usages in order to achieve an equitable distribution of
Hence Gomez filed a petition for declaratory relief in the CFI challenging the the tax burden.
constitutionality of the statute on the ground that it violates the equal protection That legislative classifications must be reasonable is of course undenied. But what
clause as well as the rule of uniformity and equality of taxation. The CFI declared the petitioner asserts is that statutory classification of mail users must bear some
the stature unconstitutional, hence the appeal by respondents. reasonable relationship to the end sought to be attained, and that absent such
relationship the selection of mail users is constitutionally impermissible. This is
Issue: W/N the statute violated the equal protection clause and the rule on altogether a different proposition. As explained in Commonwealth v. Life Assurance
uniformity and equality of taxation Co.:
While the principle that there must be a reasonable relationship between
Ruling: classification made by the legislation and its purpose is undoubtedly true in
Negative;The prime specification of an action for declaratory relief is that it must be some contexts, it has no application to a measure whose sole purpose is to
brought "before breach or violation" of the statute has been committed. Rule 64, raise revenue ... So long as the classification imposed is based upon some
section 1 so provides. Section 6 of the same rule, which allows the court to treat an standard capable of reasonable comprehension, be that standard based
action for declaratory relief as an ordinary action, applies only if the breach or upon ability to produce revenue or some other legitimate distinction,
violation occurs after the filing of the action but before the termination thereof. equal protection of the law has been afforded.
Nevertheless, we are of the view that the petitioner's choice of remedy is correct
because this suit was filed not only with respect to the letter which he mailed on We are not wont to invalidate legislation on equal protection grounds except by the
September 15, 1963, but also with regard to any other mail that he might send in clearest demonstration that it sanctions invidious discrimination, which is all that
the future. Thus, in his complaint, the petitioner prayed that due course be given to the Constitution forbids. The remedy for unwise legislation must be sought in the
"other mails without the semi-postal stamps which he may deliver for mailing ... if legislature. Now, the classification of mail users is not without any reason. It is
any, during the period covered by Republic Act 1635, as amended, as well as other based on ability to pay, let alone the enjoyment of a privilege, and on
mails hereafter to be sent by or to other mailers which bear the required postage, administrative convenience. In the allocation of the tax burden, Congress must have
without collection of additional charge of five centavos prescribed by the same concluded that the contribution to the anti-TB fund can be assured by those whose
Republic Act." As one whose mail was returned, the petitioner is certainly who can afford the use of the mails.
interested in a ruling on the validity of the statute requiring the use of additional
stamps. The classification is likewise based on considerations of administrative convenience.
For it is now a settled principle of law that "consideration of practical administrative
I. It is said that the statute is violative of the equal protection clause of convenience and cost in the administration of tax laws afford adequate ground for
the Constitution. More specifically the claim is made that it constitutes imposing a tax on a well-recognized and defined class."
mail users into a class for the purpose of the tax while leaving untaxed
the rest of the population and that even among postal patrons the Granted the power to select the subject of taxation, the State's power to grant
statute discriminatorily grants exemption to newspapers while exemption must likewise be conceded as a necessary corollary. Tax exemptions are
Administrative Order 9 of the respondent Postmaster General grants a too common in the law; they have never been thought of as raising issues under the
similar exemption to offices performing governmental functions. equal protection clause.
II.
It is thus erroneous for the trial court to hold that because certain mail users are without appropriation by law. But as the Solicitor General points out, the Society is
exempted from the levy the law and administrative officials have sanctioned an not really the beneficiary but only the agency through which the State acts in
invidious discrimination offensive to the Constitution. The application of the lower carrying out what is essentially a public function. The money is treated as a special
courts theory would require all mail users to be taxed, a conclusion that is hardly fund and as such need not be appropriated by law.
tenable in the light of differences in status of mail users. The Constitution does not
require this kind of equality.

As the United States Supreme Court has said, the legislature may withhold the
burden of the tax in order to foster what it conceives to be a beneficent enterprise.
This is the case of newspapers which, under the amendment introduced by Republic
Act 2631, are exempt from the payment of the additional stamp.

As for the Government and its instrumentalities, their exemption rests on the
State's sovereign immunity from taxation. The State cannot be taxed without its
consent and such consent, being in derogation of its sovereignty, is to be strictly
construed. Administrative Order 9 of the respondent Postmaster General, which
lists the various offices and instrumentalities of the Government exempt from the
payment of the anti-TB stamp, is but a restatement of this well-known principle of
constitutional law.

II. The petitioner further argues that the tax in question is invalid, first, because it is
not levied for a public purpose as no special benefits accrue to mail users as
taxpayers, and second, because it violates the rule of uniformity in taxation.

The eradication of a dreaded disease is a public purpose, but if by public purpose

the petitioner means benefit to a taxpayer as a return for what he pays, then it is
sufficient answer to say that the only benefit to which the taxpayer is
constitutionally entitled is that derived from his enjoyment of the privileges of living
in an organized society, established and safeguarded by the devotion of taxes to
public purposes. Any other view would preclude the levying of taxes except as they
are used to compensate for the burden on those who pay them and would involve
the abandonment of the most fundamental principle of government — that it exists
primarily to provide for the common good.

Nor is the rule of uniformity and equality of taxation infringed by the imposition of a
flat rate rather than a graduated tax. A tax need not be measured by the weight of
the mail or the extent of the service rendered. We have said that considerations of
administrative convenience and cost afford an adequate ground for classification.
The same considerations may induce the legislature to impose a flat tax which in
effect is a charge for the transaction, operating equally on all persons within the
class regardless of the amount involved.

According to the trial court, the money raised from the sales of the anti-TB stamps
is spent for the benefit of the Philippine Tuberculosis Society, a private organization,
Tio v. Videogram Regulatory Board The foregoing provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the DECREE,
Facts: which is the regulation of the video industry through the Videogram
In 1986, PD 1987 was enacted creating the Videogram Regulatory Board Regulatory Board as expressed in its title. The tax provision is not
with broad powers to regulate the videogram industry. The measure was inconsistent with, nor foreign to that general subject and title. As a tool for
intended to counter the proliferation of unregulated circulation of regulation it is simply one of the regulatory and control mechanisms
videograms and the decline in theatrical attendance leading to annual losses scattered throughout the DECREE. The express purpose of the DECREE to
in government revenues. As a consequence, petitioners along with several include taxation of the video industry in order to regulate and rationalize
intervenors attacked the constitutionality of the Decree on the grounds that the heretofore uncontrolled distribution of videograms is evident from
Sec. 10 of the same imposes a 30% tax on the gross receipts payable to the Preambles 2 and 5, supra. Those preambles explain the motives of the
local government is a rider (re: one-subject rule) and not germane to the lawmaker in presenting the measure. The title of the DECREE, which is the
subject matter thereof; that such tax imposed is confiscatory, oppressive creation of the Videogram Regulatory Board, is comprehensive enough to
and is an unlawful restraint in of trade in violation of the due process clause; include the purposes expressed in its Preamble and reasonably covers all its
and that there is undue delegation of power. provisions. It is unnecessary to express all those objectives in the title or
that the latter be an index to the body of the DECREE.
Issues: W/N the tax imposed is in violation of the due process clause
(confiscatory, oppressive and is in an unlawful restraint of trade) Petitioner also submits that the thirty percent (30%) tax imposed is harsh
and oppressive, confiscatory, and in restraint of trade. However, it is beyond
Ruling: serious question that a tax does not cease to be valid merely because it
Negative; The Constitutional requirement that "every bill shall embrace only regulates, discourages, or even definitely deters the activities taxed. The
one subject which shall be expressed in the title thereof" is sufficiently power to impose taxes is one so unlimited in force and so searching in
complied with if the title be comprehensive enough to include the general extent, that the courts scarcely venture to declare that it is subject to any
purpose which a statute seeks to achieve. It is not necessary that the title restrictions whatever, except such as rest in the discretion of the authority
express each and every end that the statute wishes to accomplish. The which exercises it. In imposing a tax, the legislature acts upon its
requirement is satisfied if all the parts of the statute are related, and are constituents. This is, in general, a sufficient security against erroneous and
germane to the subject matter expressed in the title, or as long as they are oppressive taxation.
not inconsistent with or foreign to the general subject and title. An act
having a single general subject, indicated in the title, may contain any The tax imposed by the DECREE is not only a regulatory but also a revenue
number of provisions, no matter how diverse they may be, so long as they measure prompted by the realization that earnings of videogram
are not inconsistent with or foreign to the general subject, and may be establishments of around P600 million per annum have not been subjected
considered in furtherance of such subject by providing for the method and to tax, thereby depriving the Government of an additional source of
means of carrying out the general object." The rule also is that the revenue. It is an end-user tax, imposed on retailers for every videogram they
constitutional requirement as to the title of a bill should not be so narrowly make available for public viewing. It is similar to the 30% amusement tax
construed as to cripple or impede the power of legislation. It should be imposed or borne by the movie industry which the theater-owners pay to
given practical rather than technical construction. the government, but which is passed on to the entire cost of the admission
ticket, thus shifting the tax burden on the buying or the viewing public. It is
Tested by the foregoing criteria, petitioner's contention that the tax a tax that is imposed uniformly on all videogram operators.
provision of the DECREE is a rider is without merit.
The levy of the 30% tax is for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because of
the rampant film piracy, the flagrant violation of intellectual property rights, relatively new industry, the need for its regulation was apparent. While the
and the proliferation of pornographic video tapes. And while it was also an underlying objective of the DECREE is to protect the moribund movie
objective of the DECREE to protect the movie industry, the tax remains a industry, there is no question that public welfare is at bottom of its
valid imposition. enactment, considering "the unfair competition posed by rampant film
piracy; the erosion of the moral fiber of the viewing public brought about by
The public purpose of a tax may legally exist even if the motive the availability of unclassified and unreviewed video tapes containing
which impelled the legislature to impose the tax was to favor one pornographic films and films with brutally violent sequences; and losses in
industry over another. government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually
It is inherent in the power to tax that a state be free to select the untaxed since mere payment of Mayor's permit and municipal license fees
subjects of taxation, and it has been repeatedly held that "inequities are required to engage in business.
which result from a singling out of one particular class for taxation
or exemption infringe no constitutional limitation". Taxation has
been made the implement of the state's police power.

At bottom, the rate of tax is a matter better addressed to the taxing

legislature.

Neither can it be successfully argued that the DECREE contains an undue

delegation of legislative power. The grant in Section 11 of the DECREE of
authority to the BOARD to "solicit the direct assistance of other agencies
and units of the government and deputize, for a fixed and limited period,
the heads or personnel of such agencies and units to perform enforcement
functions for the Board" is not a delegation of the power to legislate but
merely a conferment of authority or discretion as to its execution,
enforcement, and implementation. "The true distinction is between the
delegation of power to make the law, which necessarily involves discretion
as to what it shall be, and conferring authority or discretion as to its
execution to be exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be made." Besides, in
the very language of the decree, the authority of the BOARD to solicit such
assistance is for a "fixed and limited period" with the deputized agencies
concerned being "subject to the direction and control of the BOARD." That
the grant of such authority might be the source of graft and corruption
would not stigmatize the DECREE as unconstitutional. Should the
eventuality occur, the aggrieved parties will not be without adequate
remedy in law.

We do not share petitioner's fears that the video industry is being over-
regulated and being eased out of existence as if it were a nuisance. Being a
Pacual v. Sec. of Public Works Generally, under the express or implied provisions of the
constitution, public funds may be used only for public purpose.
Facts: The right of the legislature to appropriate funds is correlative with
Pascual, Provincial Governor of Rizal instituted an action for the for the declaratory its right to tax, and, under constitutional provisions against
relief of with injunction of RA 920, appropriating Php85, 000 for the construction taxation except for public purposes and prohibiting the collection
and improvement of the Pasig feeder roads located inside the subdivision of of a tax for one purpose and the devotion thereof to another
Zulueta, a member of the senate, who thereafter donated said roads on the purpose, no appropriation of state funds can be made for other
condition that the same be used for street purposes only. According to Pascual, the than for a public purpose.
legislature is without power to appropriate public revenues for anything but a
public purpose and the construction of the feeder roads on private property would xxx xxx xxx
not be a public purpose. However, the lower court granted the motion to dismiss
filed by Zulueta (techniacality; standing), hence the appeal by petitioner. The test of the constitutionality of a statute requiring the use of
public funds is whether the statute is designed to promote the
Issue: W/N the public interest, as opposed to the furtherance of the advantage of
individuals, although each advantage to individuals
Ruling: might incidentally serve the public. (81 C.J.S. pp. 1147; emphasis
supplied.)
As regards the legal feasibility of appropriating public funds for a public
purpose, the principle according to Ruling Case Law, is this: Needless to say, this Court is fully in accord with the foregoing views
which, apart from being patently sound, are a necessary corollary to our
It is a general rule that the legislature is without power to democratic system of government, which, as such, exists primarily for the
appropriate public revenue for anything but a public purpose. . . . promotion of the general welfare. Besides, reflecting as they do, the
It is the essential character of the direct object of the expenditure established jurisprudence in the United States, after whose constitutional
which must determine its validity as justifying a tax, and not the system ours has been patterned, said views and jurisprudence are,
magnitude of the interest to be affected nor the degree to which likewise, part and parcel of our own constitutional law. law phil.net

the general advantage of the community, and thus the public

welfare, may be ultimately benefited by their This notwithstanding, the lower court felt constrained to uphold the
promotion. Incidental to the public or to the state, which results appropriation in question, upon the ground that petitioner may not contest
from the promotion of private interest and the prosperity of private the legality of the donation above referred to because the same does not
enterprises or business, does not justify their aid by the use affect him directly. This conclusion is, presumably, based upon the
public money. (25 R.L.C. pp. 398-400; Emphasis supplied.) following premises, namely: (1) that, if valid, said donation cured the
constitutional infirmity of the aforementioned appropriation; (2) that the
The rule is set forth in Corpus Juris Secundum in the following language: latter may not be annulled without a previous declaration of
unconstitutionality of the said donation; and (3) that the rule set forth in
In accordance with the rule that the taxing power must be Article 1421 of the Civil Code is absolute, and admits of no exception. We
exercised for public purposes only, discussed suprasec. 14, do not agree with these premises.
money raised by taxation can be expended only for public
purposes and not for the advantage of private individuals. (85 The validity of a statute depends upon the powers of Congress at the
C.J.S. pp. 645-646; emphasis supplied.) time of its passage or approval, not upon events occurring, or acts
performed, subsequently thereto, unless the latter consists of an
Explaining the reason underlying said rule, Corpus Juris Secundum amendment of the organic law, removing, with retrospective operation,
states: the constitutional limitation infringed by said statute. Referring to the
P85,000.00 appropriation for the projected feeder roads in question, the
legality thereof depended upon whether said roads were public or private
property when the bill, which, latter on, became Republic Act 920, was
passed by Congress, or, when said bill was approved by the President
and the disbursement of said sum became effective, or on June 20, 1953
(see section 13 of said Act). Inasmuch as the land on which the projected
feeder roads were to be constructed belonged then to respondent
Zulueta, the result is that said appropriation sought a private purpose,
and hence, was null and void. 4 The donation to the Government, over
five (5) months after the approval and effectivity of said Act, made,
according to the petition, for the purpose of giving a "semblance of
legality", or legalizing, the appropriation in question, did not cure its
aforementioned basic defect. Consequently, a judicial nullification of said
donation need not precede the declaration of unconstitutionality of said
appropriation.

Again, it is well-stated that the validity of a statute may be contested only

by one who will sustain a direct injury in consequence of its enforcement.
Yet, there are many decisions nullifying, at the instance of taxpayers,
laws providing for the disbursement of public funds, 5upon the theory that
"the expenditure of public funds by an officer of the State for the purpose
of administering an unconstitutional act constitutes a misapplication of
such funds," which may be enjoined at the request of a
taxpayer. 6Although there are some decisions to the contrary, 7the
prevailing view in the United States is stated in the American
Jurisprudence as follows:

In the determination of the degree of interest essential to give the

requisite standing to attack the constitutionality of a statute, the
general rule is that not only persons individually affected, but
also taxpayers, have sufficient interest in preventing the illegal
expenditure of moneys raised by taxation and may therefore
question the constitutionality of statutes requiring expenditure of
public moneys.

Remanded.