Tax Finale

7/23/2019 Tax Finale

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ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner,

vs.

HON. JUAN P. AQUINO, Jude, C!urt !" #$rst Inst%n&e, Abr%' AR(IN (. CARIAGA,

Pr!)$n&$%* +re%surer, Abr%' GAPAR V. BOQUE, (un$&$p%* +re%surer, B%nued,

Abr%' HEIR O# PA+ERNO (ILLARE,respondents.

This is a petition for review on certiorari of the decision - of the defunct Court of First

Instance of Abra, Branch I, dated June 14, 1974, rendered in Civi Case !o. "#",

entited $Abra %ae& Junior Coe'e, Inc., represented b& (edro %. Bor'onia, paintiff vs.

Ar)in *. Caria'a as (rovincia Treasurer of Abra, +aspar %. Bosue as *unicipa

Treasurer of Ban'ued, Abra and (aterno *iare, defendants,$ the decreta portion of

which reads-

I! %I/ 0F A T2 F03+0I!+, the Court hereb& decares-

That the distraint seiure and sae b& the *unicipa Treasurer of Ban'ued, Abra,

the (rovincia Treasurer of said province a'ainst the ot and buidin' of the Abra

%ae& Junior Coe'e, Inc., represented b& 5irector (edro Bor'onia ocated at

Ban'ued, Abra, is vaid6

That since the schoo is not ee)pt fro) pa&in' taes, it shoud therefore pa& a

bac8 taes in the a)ount of (#,14.:1 and bac8 taes and penaties fro) the

pro)u'ation of this decision6

That the a)ount deposited b& the paintaff hi) the su) of (",. before the

tria, be confiscated to app& for the pa&)ent of the bac8 taes and for the

rede)ption of the propert& in uestion, if the a)ount is ess than (",., the

re)ainder )ust be returned to the 5irector of (edro Bor'onia, who represents

the paintiff herein6

That the deposit of the *unicipa Treasurer in the a)ount of (",. aso

before the tria )ust be returned to said *unicipa Treasurer of Ban'ued, Abra6

And fina& the case is hereb& ordered dis)issed with costs a'ainst the paintiff.

;0 03535. <3oo, pp. ==>=:?

(etitioner, an educationa corporation and institution of hi'her earnin' du& incorporated

with the ;ecurities and chan'e Co))ission in 194@, fied a co)paint <Anne $1$ of

Answer b& the respondents 2eirs of (aterno *iare6 3oo, pp. 9#>97? on Ju& 1, 197=

in the court a quo to annu and decare void the $!otice of ;eiure and the $!otice of



;ae$ of its ot and buidin' ocated at Ban'ued, Abra, for non>pa&)ent of rea estate

taes and penaties a)ountin' to (#,14.:1. ;aid $!otice of ;eiure$ of the coe'e ot

and buidin' covered b& 0ri'ina Certificate of Tite !o. >@: du& re'istered in the na)e

of petitioner, paintiff beow, on Ju& ", 197=, b& respondents *unicipa Treasurer and

(rovincia Treasurer, defendants beow, was issued for the satisfaction of the said taes

thereon. The $!otice of ;ae$ was caused to be served upon the petitioner b& the

respondent treasurers on Ju& @, 197= for the sae at pubic auction of said coe'e ot

and buidin', which sae was hed on the sa)e date. 5r. (aterno *iare, then *unicipa

*a&or of Ban'ued, Abra, offered the hi'hest bid of (",. which was du& accepted.

The certificate of sae was correspondin'& issued to hi).

0n Au'ust 1, 197=, the respondent (aterno *iare <now deceased? fied throu'h

counste a )otion to dis)iss the co)paint.

0n Au'ust =:, 197=, the respondent (rovincia Treasurer and *unicipa Treasurer,

throu'h then (rovincia Fisca oreto C. 3odan, fied their answer <Anne $=$ of Answer

b& the respondents 2eirs of (ate)o *iare6 3oo, pp. 9@>1? to the co)paint. This

was foowed b& an a)ended answer <Anne $:,$ ibid , 3oo, pp. 11>1:? on Au'ust :1,

197=.

0n ;epte)ber 1, 197= the respondent (aterno *iare fied his answer <Anne $#,$ ibid 6

3oo, pp. 1">1@?.

0n 0ctober 1=, 197=, with the aforesaid sae of the schoo pre)ises at pubic auction,

the respondent Jud'e, 2on. Juan (. Auino of the Court of First Instance of Abra,Branch I, ordered <Anne $",$ ibid 6 3oo, pp. 19>11? the respondents provincia and

)unicipa treasurers to deiver to the Cer8 of Court the proceeds of the auction sae.

2ence, on 5ece)ber 14, 197=, petitioner, throu'h 5irector Bor'onia, deposited with the

tria court the su) of (",. evidenced b& (!B Chec8 !o. 94:"9.

0n Apri 1=, 197:, the parties entered into a stipuation of facts adopted and e)bodied

b& the tria court in its uestioned decision. ;aid ;tipuations reads-

;TI(ATI0! 0F FACT;

C0* !0/ the parties, assisted b& counses, and to this 2onorabe

Court respectfu& enter into the foowin' a'reed stipuation of facts-

1. That the persona circu)stances of the parties as stated in para'raph 1

of the co)paint is ad)itted6 but the particuar person of *r. Ar)in *.



Caria'a is to be substituted, however, b& an&one who is actua& hodin'

the position of (rovincia Treasurer of the (rovince of Abra6

=. That the paintiff Abra %ae& Junior Coe'e, Inc. is the owner of the ot

and buidin's thereon ocated in Ban'ued, Abra under 0ri'ina Certificate

of Tite !o. >@:6

:. That the defendant +aspar %. Bosue, as *unicipa treasurer of

Ban'ued, Abra caused to be served upon the Abra %ae& Junior Coe'e,

Inc. a !otice of ;eiure on the propert& of said schoo under 0ri'ina

Certificate of Tite !o. >@: for the satisfaction of rea propert& taes

thereon, a)ountin' to (#,14.:16 the !otice of ;eiure bein' the one

attached to the co)paint as hibit A6

4. That on June @, 197= the above properties of the Abra %ae& Junior

Coe'e, Inc. was sod at pubic auction for the satisfaction of the unpaid

rea propert& taes thereon and the sa)e was sod to defendant (aterno

*iare who offered the hi'hest bid of (",. and a Certificate of ;ae

in his favor was issued b& the defendant *unicipa Treasurer.

#. That a other )atters not particuar& and specia& covered b& this

stipuation of facts wi be the subDect of evidence b& the parties.

/23F03, it is respectfu& pra&ed of the 2onorabe Court to consider

and ad)it this stipuation of facts on the point a'reed upon b& the parties.

Ban'ued, Abra, Apri 1=, 197:.

;'d. A'ripino Briantes

T&p A+3I(I!0 B3IA!T;

Attorne& for (aintiff

;'d. oreto 3odan

T&p 03T0 305A!

(rovincia Fisca

Counse for 5efendants

(rovincia Treasurer of

Abra and the *unicipa

Treasurer of Ban'ued, Abra

;'d. 5e)etrio %. (re

T&p. 5*T3I0 %. (3



Attorne& for 5efendant

(aterno *iare <3oo, pp. 17>1@?

Aside fro) the ;tipuation of Facts, the tria court a)on' others, found the foowin'- <a?

that the schoo is reco'nied b& the 'overn)ent and is offerin' (ri)ar&, 2i'h ;choo

and Coe'e Courses, and has a schoo popuation of )ore than one thousand students

a in a6 <b? that it is ocated ri'ht in the heart of the town of Ban'ued, a few )eters fro)

the paa and about 1= )eters fro) the Court of First Instance buidin'6 <c? that the

ee)entar& pupis are housed in a two>store& buidin' across the street6 <d? that the hi'h

schoo and coe'e students are housed in the )ain buidin'6 <e? that the 5irector with

his fa)i& is in the second foor of the )ain buidin'6 and <f? that the annua 'ross

inco)e of the schoo reaches )ore than one hundred thousand pesos.

Fro) a the fore'oin', the on& issue eft for the Court to deter)ine and as a'reed b&

the parties, is whether or not the ot and buidin' in uestion are used exclusively for

educational purposes. <3oo, p. =?

The succeedin' (rovincia Fisca, 2on. Jose A. ;oo)on and his Assistant, 2on.

ustauio E. *ontero, fied a *e)orandu) for the +overn)ent on *arch =#, 1974, and

a ;uppe)enta *e)orandu) on *a& 7, 1974, wherein the& opined $that based on the

evidence, the aws appicabe, court decisions and Durisprudence, the schoo buidin'

and schoo ot used for educationa purposes of the Abra %ae& Coe'e, Inc., are

ee)pted fro) the pa&)ent of taes.$ <Annees $B,$ $B>1$ of (etition6 3oo, pp. =4>496

44 and 49?.

!onetheess, the tria court disa'reed because of the use of the second foor b& the

5irector of petitioner schoo for residentia purposes. 2e thus rued for the 'overn)ent

and rendered the assaied decision.

After havin' been 'ranted b& the tria court ten <1? da&s fro) Au'ust ", 1974 within

which to perfect its appea <(er 0rder dated Au'ust ", 19746 Anne $+$ of (etition6

3oo, p. #7? petitioner instead avaied of the instant petition for review on certiorari with

pra&er for prei)inar& inDunction before this Court, which petition was fied on Au'ust 17,

1974 <3oo, p.=?.

In the resoution dated Au'ust 1", 1974, this Court resoved to 'ive 5 C03; to

the petition <3oo, p. #@?. 3espondents were reuired to answer said petition <3oo, p.

74?.

(etitioner raised the foowin' assi'n)ents of error-



I

T2 C03T A QUO 335 I! ;;TAI!I!+ A; %AI5 T2 ;IE3 A!5 ;A 0F

T2 C0+ 0T A!5 BI5I!+ ;5 F03 5CATI0!A (3(0;; 0F

T2 (TITI0!3.

II

T2 C03T A QUO 335 I! 5CA3I!+ T2AT T2 C0+ 0T A!5

BI5I!+ 0F T2 (TITI0!3 A3 !0T ;5 C;I%G F03

5CATI0!A (3(0;; *3G BCA; T2 C0+ (3;I5!T

3;I5; I! 0! 300* 0F T2 C0+ BI5I!+.

III

T2 C03T A QUO 335 I! 5CA3I!+ T2AT T2 C0+ 0T A!5BI5I!+ 0F T2 (TITI0!3 A3 !0T *(T F30* (30(3TG TA; A!5

I! 0353I!+ (TITI0!3 T0 (AG (#,14.:1 A; 3ATG TA;.

I%

T2 C03T A QUO 335 I! 0353I!+ T2 C0!FI;CATI0! 0F T2 (",.

5(0;IT *A5 I! T2 C03T BG (TITI0!3 A; (AG*!T 0F T2 (#,14.:1

3ATG TA;. <;ee Brief for the (etitioner, pp. 1>=?

The )ain issue in this case is the proper interpretation of the phrase $used ecusive&for educationa purposes.$

(etitioner contends that the pri)ar& use of the ot and buidin' for educationa purposes,

and not the incidenta use thereof, deter)ines and ee)ption fro) propert& taes under

;ection == <:?, Artice %I of the 19:# Constitution. 2ence, the seiure and sae of

subDect coe'e ot and buidin', which are contrar& thereto as we as to the provision of

Co))onweath Act !o. 47, otherwise 8nown as the Assess)ent aw, are without e'a

basis and therefore void.

0n the other hand, private respondents )aintain that the coe'e ot and buidin' in

uestion which were subDected to seiure and sae to answer for the unpaid ta are

used- <1? for the educationa purposes of the coe'e6 <=? as the per)anent residence of

the (resident and 5irector thereof, *r. (edro %. Bor'onia, and his fa)i& incudin' the

in>aws and 'randchidren6 and <:? for co))ercia purposes because the 'round foor of

the coe'e buidin' is bein' used and rented b& a co))ercia estabish)ent, the



!orthern *ar8etin' Corporation <;ee photo'raph attached as Anne $@$ <Co))ent6

3oo, p. 9H?.

5ue to its ti)e fra)e, the constitutiona provision which finds appication in the case at

bar is ;ection ==, para'raph :, Artice %I, of the then 19:# (hiippine Constitution, which

epress& 'rants ee)ption fro) reat& taes for $Ce)eteries, churches and

parsona'es or convents appurtenant thereto, and a ands, buidin's, and

i)prove)ents used exclusively for rei'ious, charitabe or educationa purposes ...

3eative thereto, ;ection #4, para'raph c, Co))onweath Act !o. 47 as a)ended b&

3epubic Act !o. 49, otherwise 8nown as the Assess)ent aw, provides-

The foowin' are ee)pted fro) rea propert& ta under the Assess)ent

aw-

<c? churches and parsona'es or convents appurtenant thereto, and a

ands, buidin's, and i)prove)ents used exclusively for rei'ious,

charitabe, scientific or educationa purposes.

In this re'ard petitioner ar'ues that the pri)ar& use of the schoo ot and buidin' is the

basic and controin' 'uide, nor) and standard to deter)ine ta ee)ption, and not the

)ere incidenta use thereof.

As ear& as 191" in YMCA of Manila vs. Collector of lnternal Revenue , :: (hi. =17

191"H, this Court rued that whie it )a& be true that the G*CA 8eeps a od'in' and a

boardin' house and )aintains a restaurant for its )e)bers, sti these do not constitute

business in the ordinar& acceptance of the word, but an institution used ecusive& for

rei'ious, charitabe and educationa purposes, and as such, it is entited to be

ee)pted fro) taation.

In the case of Bishop of Nueva Seovia v. !rovincial "oard of #locos Norte, #1 (hi. :#=

197=H, this Court incuded in the ee)ption a ve'etabe 'arden in an adDacent ot and

another ot for)er& used as a ce)eter&. It was carified that the ter) $used ecusive&$

considers incidenta use aso. Thus, the ee)ption fro) pa&)ent of and ta in favor of

the convent incudes, not on& the and actua& occupied b& the buidin' but aso the

adDacent 'arden devoted to the incidenta use of the parish priest. The ot which is not

used for co))ercia purposes but serves soe& as a sort of od'in' pace, aso uaifies

for ee)ption because this constitutes incidenta use in rei'ious functions.



The phrase $ecusive& used for educationa purposes$ was further carified b& this

Court in the cases of $errera vs. Que%on City "oard of assess&ent Appeals, : ;C3A

1@" 19"1H and Co&&issioner of #nternal Revenue vs. "is'op of t'e Missionary (istrict ,

14 ;C3A 991 19"#H, thus

*oreover, the ee)ption in favor of propert& used ecusive& for

charitabe or educationa purposes is not i)ited to propert& actua&

indispensabe therefor <Cooe& on Taation, %o. =, p. 14:?, but etends

to faciities which are incidenta to and reasonab& necessar& for the

acco)pish)ent of said purposes, such as in the case of hospitas, $a

schoo for trainin' nurses, a nurses ho)e, propert& use to provide

housin' faciities for interns, resident doctors, superintendents, and other

)e)bers of the hospita staff, and recreationa faciities for student nurses,

interns, and residents <@4 CJ; ""=1?, such as $Athetic fieds$ incudin' $a

fir) used for the in)ates of the institution. <Cooe& on Taation, %o. =, p.14:?.

The test of ee)ption fro) taation is the use of the propert& for purposes )entioned in

the Constitution <Apostoic (refect v. Cit& Treasurer of Ba'uio, 71 (hi, #47 1941H?.

It )ust be stressed however, that whie this Court aows a )ore ibera and non>

restrictive interpretation of the phrase $ecusive& used for educationa purposes$ as

provided for in Artice %I, ;ection ==, para'raph : of the 19:# (hiippine Constitution,

reasonabe e)phasis has awa&s been )ade that ee)ption etends to faciities which

are incidenta to and reasonab& necessar& for the acco)pish)ent of the )ainpurposes. 0therwise stated, the use of the schoo buidin' or ot for co))ercia

purposes is neither conte)pated b& aw, nor b& Durisprudence. Thus, whie the use of

the second foor of the )ain buidin' in the case at bar for residentia purposes of the

5irector and his fa)i&, )a& find Dustification under the concept of incidenta use, which

is co)pi)entar& to the )ain or pri)ar& purposeeducationa, the ease of the first

foor thereof to the !orthern *ar8etin' Corporation cannot b& an& stretch of the

i)a'ination be considered incidenta to the purpose of education.

It wi be noted however that the afore)entioned ease appears to have been raised for

the first ti)e in this Court. That the )atter was not ta8en up in the to court is rea&apparent in the decision of respondent Jud'e. !o )ention thereof was )ade in the

stipuation of facts, not even in the description of the schoo buidin' b& the tria Dud'e,

both e)bodied in the decision nor as one of the issues to resove in order to deter)ine

whether or not said proper& )a& be ee)pted fro) pa&)ent of rea estate taes <3oo,

pp. 17>=:?. 0n the other hand, it is noteworth& that such fact was not disputed even

after it was raised in this Court.



Indeed, it is aio)atic that facts not raised in the ower court cannot be ta8en up for the

first ti)e on appea. !onetheess, as an eception to the rue, this Court has hed that

athou'h a factua issue is not suare& raised beow, sti in the interest of substantia

Dustice, this Court is not prevented fro) considerin' a pivota factua )atter. $The

;upre)e Court is cothed with a)pe authorit& to review papabe errors not assi'ned as

such if it finds that their consideration is necessar& in arrivin' at a Dust decision.$ <(ere

vs. Court of Appeas, 1=7 ;C3A "4# 19@4H?.

nder the 19:# Constitution, the tria court correct& arrived at the concusion that the

schoo buidin' as we as the ot where it is buit, shoud be taed, not because the

second foor of the sa)e is bein' used b& the 5irector and his fa)i& for residentia

purposes, but because the first foor thereof is bein' used for co))ercia purposes.

2owever, since on& a portion is used for purposes of co))erce, it is on& fair that haf

of the assessed ta be returned to the schoo invoved.

(3*I;; C0!;I535, the decision of the Court of First Instance of Abra, Branch I,

is hereb& AFFI3*5 subDect to the )odification that haf of the assessed ta be

returned to the petitioner.

;0 03535.



AN+ERO (. ION, JR., petitioner,

vs.

RUBEN B. ANCHE+A, A&t$n C!$ss$!ner, Bure%u !" Intern%* Re)enue'

RO(ULO VILLA, Deputy C!$ss$!ner, Bure%u !" Intern%* Re)enue' +O(A

+OLEDO Deputy C!$ss$!ner, Bure%u !" Intern%* Re)enue' (ANUEL ALBA,

($n$ster !" Budet, #RANCICO +AN+UICO, C/%$r%n, C!$ss$!ner !n Aud$t,

%nd CEAR E. A. VIRA+A, ($n$ster !" #$n%n&e, respondents.

Antero Sison for petitioner and for 'is o)n be'alf.

*'e Solicitor +eneral for respondents.

#ERNANDO, C.J.:

The success of the chaen'e posed in this suit for decarator& reief or prohibition

proceedin' 0 on the vaidit& of ;ection I of Batas (a)bansa B'. 1:# depends upon a

showin' of its constitutiona infir)it&. The assaied provision further a)ends ;ection =1

of the !ationa Interna 3evenue Code of 1977, which provides for rates of ta on

citiens or residents on <a? taabe co)pensation inco)e, <b? taabe net inco)e, <c?

ro&aties, pries, and other winnin's, <d? interest fro) ban8 deposits and &ied or an&

other )onetar& benefit fro) deposit substitutes and fro) trust fund and si)iar

arran'e)ents, <e? dividends and share of individua partner in the net profits of taabe

partnership, <f? adDusted 'ross inco)e. 1 (etitioner 2 as tapa&er ae'es that b& virtue

thereof, $he woud be undu& discri)inated a'ainst b& the i)position of hi'her rates of

ta upon his inco)e arisin' fro) the eercise of his profession vis,a,vis those which are

i)posed upon fied inco)e or saaried individua tapa&ers. 3 2e characteries the

above sction as arbitrar& a)ountin' to cass e'isation, oppressive and capricious in

character 4 For petitioner, therefore, there is a trans'ression of both the eua protection

and due process causes 5 of the Constitution as we as of the rue reuirin' unifor)it&

in taation. 6

The Court, in a resoution of Januar& =", 19@=, reuired respondents to fie an answer

within 1 da&s fro) notice. ;uch an answer, after two etensions were 'ranted the0ffice of the ;oicitor +enera, was fied on *a& =@, 19@=. 7 The facts as ae'ed were

ad)itted but not the ae'ations which to their )ind are $)ere ar'u)ents, opinions or

concusions on the part of the petitioner, the truth for the)H bein' those stated in theirH

;pecia and Affir)ative 5efenses.$ 8 The answer then affir)ed- $Batas (a)bansa Bi'.

1:# is a vaid eercise of the ;tates power to ta. The authorities and cases cited whie



correct& uoted or para'hraph do not support petitioners stand.$ 09 The pra&er is for

the dis)issa of the petition for ac8 of )erit.

This Court finds such a pea )ore than Dustified. The petition )ust be dis)issed.

1. It is )anifest that the fied of state activit& has assu)ed a )uch wider scope, Thereason was so cear& set forth b& retired Chief Justice *a8ainta thus- $The areas

which used to be eft to private enterprise and initiative and which the 'overn)ent was

caed upon to enter optiona&, and on& because it was better euipped to ad)inister

for the pubic wefare than is an& private individua or 'roup of individuas, continue to

ose their we>defined boundaries and to be absorbed within activities that the

'overn)ent )ust underta8e in its soverei'n capacit& if it is to )eet the increasin' socia

chaen'es of the ti)es.$ 00 2ence the need for )ore revenues. The power to ta, an

inherent prero'ative, has to be avaied of to assure the perfor)ance of vita state

functions. It is the source of the bu8 of pubic funds. To praphrase a recent decision,

taes bein' the ifebood of the 'overn)ent, their pro)pt and certain avaiabiit& is of the

essence. 01

=. The power to ta )oreover, to borrow fro) Justice *aco), $is an attribute of

soverei'nt&. It is the stron'est of a the powers of of 'overn)ent.$ 02 It is, of course, to

be ad)itted that for a its penitude the power to ta is not unconfined. There are

restrictions. The Constitution sets forth such i)its . Adverse& affectin' as it does

proper& ri'hts, both the due process and eua protection causes ina& proper& be

invo8ed, a petitioner does, to invaidate in appropriate cases a revenue )easure. if it

were otherwise, there woud >be truth to the 1@: dictu) of Chief Justice *arsha that$the power to ta invoves the power to destro&.$ 03 In a separate opinion in +raves v.

Ne) Yor- , 04 Justice Fran8furter, after referrin' to it as an 1, unfortunate re)ar8

characteried it as $a fourish of rhetoric attributabe toH the inteectua fashion of the

ti)es foowin'H a free use of absoutes.$ 05 This is )ere& to e)phasie that it is riot

and there cannot be such a constitutiona )andate. Justice Fran8furter coud ri'htfu&

concude- $The web of unreait& spun fro) *arshas fa)ous dictu) was brushed awa&

b& one stro8e of *r. Justice 2o)ess pen- The power to ta is not the power to destro&

whie this Court sits.$ 06 ;o it is in the (hiippines.

:. This Court then is eft with no choice. The Constitution as the funda)enta awoverrides an& e'isative or eecutive, act that runs counter to it. In an& case therefore

where it can be de)onstrated that the chaen'ed statutor& provision as petitioner

here ae'es fais to abide b& its co))and, then this Court )ust so decare and

adDud'e it nu. The inDur& thus is centered on the uestion of whether the i)position of a

hi'her ta rate on taabe net inco)e derived fro) business or profession than on

co)pensation is constitutiona& infir).



4, The difficut& confrontin' petitioner is thus apparent. 2e ae'es arbitrariness. A )ere

ae'ation, as here. does not suffice. There )ust be a factua foundation of such

unconstitutiona taint. Considerin' that petitioner here woud conde)n such a provision

as void or its face, he has not )ade out a case. This is )ere& to adhere to the

authoritative doctrine that were the due process and eua protection causes are

invo8ed, considerin' that the& arc not fied rues but rather broad standards, there is a

need for of such persuasive character as woud ead to such a concusion. Absent such

a showin', the presu)ption of vaidit& )ust prevai. 07

#. It is undoubted that the due process cause )a& be invo8ed where a tain' statute is

so arbitrar& that it finds no support in the Constitution. An obvious ea)pe is where it

can be shown to a)ount to the confiscation of propert&. That woud be a cear abuse of

power. It then beco)es the dut& of this Court to sa& that such an arbitrar& act a)ounted

to the eercise of an authorit& not conferred. That proper& cas for the appication of the

2o)es dictu). It has aso been hed that where the assaied ta )easure is be&ond the Durisdiction of the state, or is not for a pubic purpose, or, in case of a retroactive statute

is so harsh and unreasonabe, it is subDect to attac8 on due process 'rounds. 08

". !ow for eua protection. The appicabe standard to avoid the char'e that there is a

denia of this constitutiona )andate whether the assaied act is in the eercise of the

ice power or the power of e)inent do)ain is to de)onstrated that the 'overn)enta act

assaied, far fro) bein' inspired b& the attain)ent of the co))on wea was pro)pted

b& the spirit of hostiit&, or at the ver& east, discri)ination that finds no support in

reason. It suffices then that the aws operate eua& and unifor)& on a persons under

si)iar circu)stances or that a persons )ust be treated in the sa)e )anner, theconditions not bein' different, both in the privie'es conferred and the iabiities

i)posed. Favoritis) and undue preference cannot be aowed. For the principe is that

eua protection and securit& sha be 'iven to ever& person under circu)tances which if

not Identica are anao'ous. If aw be oo8ed upon in ter)s of burden or char'es, those

that fa within a cass shoud be treated in the sa)e fashion, whatever restrictions cast

on so)e in the 'roup eua& bindin' on the rest.$ 19 That sa)e for)uation appies as

we to taation )easures. The eua protection cause is, of course, inspired b& the

nobe concept of approi)atin' the Idea of the aws benefits bein' avaiabe to a and

the affairs of )en bein' 'overned b& that serene and i)partia unifor)it&, which is of the

ver& essence of the Idea of aw. There is, however, wisdo), as we as reais) in these

words of Justice Fran8furter- $The euait& at which the eua protection cause ai)s is

not a dise)bodied euait&. The Fourteenth A)end)ent enDoins the eua protection of

the aws, and aws are not abstract propositions. The& do not reate to abstract units A,

B and C, but are epressions of poic& arisin' out of specific difficuties, address to the

attain)ent of specific ends b& the use of specific re)edies. The Constitution does not

reuire thin's which are different in fact or opinion to be treated in aw as thou'h the&



were the sa)e.$ 10 2ence the constant reiteration of the view that cassification if

rationa in character is aowabe. As a )atter of fact, in a eadin' case of ut %.

Araneta, 11 this Court, throu'h Justice J.B.. 3e&es, went so far as to hod $at an& rate,

it is inherent in the power to ta that a state be free to seect the subDects of taation,

and it has been repeated& hed that ineuaities which resut fro) a sin'in' out of one

particuar cass for taation, or ee)ption infrin'e no constitutiona i)itation.$ 12

7. (etitioner i8ewise invo8ed the 8indred concept of unifor)it&. Accordin' to the

Constitution- $The rue of taation sha' be unifor) and euitabe.$ 13 This reuire)ent is

)et accordin' to Justice aure in !'ilippine *rust Co&pany v. Yatco 14 decided in 194,

when the ta $operates with the sa)e force and effect in ever& pace where the subDect

)a& be found. $ 15 2e i8ewise added- $The rue of unifor)it& does not ca for perfect

unifor)it& or perfect euait&, because this is hard& attainabe.$ 16 The probe) of

cassification did not present itsef in that case. It did not arise unti nine &ears ater,

when the ;upre)e Court hed- $uait& and unifor)it& in taation )eans that ataabe artices or 8inds of propert& of the sa)e cass sha be taed at the sa)e rate.

The tain' power has the authorit& to )a8e reasonabe and natura cassifications for

purposes of taation, ... . 17 As carified b& Justice Tuason, where $the differentiation$

co)pained of $confor)s to the practica dictates of Dustice and euit&$ it $is not

discri)inator& within the )eanin' of this cause and is therefore unifor).$ 18 There is

uite a si)iarit& then to the standard of eua protection for a that is reuired is that

the ta $appies eua& to a persons, fir)s and corporations paced in si)iar

situation.$ 29

@. Further on this point. Apparent&, what )ised petitioner is his faiure to ta8e intoconsideration the distinction between a ta rate and a ta base. There is no e'a

obDection to a broader ta base or taabe inco)e b& ei)inatin' a deductibe ite)s

and at the sa)e ti)e reducin' the appicabe ta rate. Tapa&ers )a& be cassified into

different cate'ories. To repeat, it. is enou'h that the cassification )ust rest upon

substantia distinctions that )a8e rea differences. In the case of the 'ross inco)e

taation e)bodied in Batas (a)bansa B'. 1:#, the, discernibe basis of cassification

is the susceptibiit& of the inco)e to the appication of 'eneraied rues re)ovin' a

deductibe ite)s for a tapa&ers within the cass and fiin' a set of reduced ta rates to

be appied to a of the). Tapa&ers who are recipients of co)pensation inco)e are set

apart as a cass. As there is practica& no overhead epense, these tapa&ers are e not

entited to )a8e deductions for inco)e ta purposes because the& are in the sa)e

situation )ore or ess. 0n the other hand, in the case of professionas in the practice of

their cain' and business)en, there is no unifor)it& in the costs or epenses necessar&

to produce their inco)e. It woud not be Dust then to disre'ard the disparities b& 'ivin'

a of the) ero deduction and indiscri)inate& i)pose on a ai8e the sa)e ta rates on

the basis of 'ross inco)e. There is a)pe Dustification then for the Batasan' (a)bansa



to adopt the 'ross s&ste) of inco)e taation to co)pensation inco)e, whie continuin'

the s&ste) of net inco)e taation as re'ards professiona and business inco)e.

9. !othin' can be cearer, therefore, than that the petition is without )erit, considerin'

the <1? ac8 of factua foundation to show the arbitrar& character of the assaied

provision6 20 <=? the force of controin' doctrines on due process, eua protection, and

unifor)it& in taation and <:? the reasonabeness of the distinction between

co)pensation and taabe net inco)e of professionas and business)an certain& not a

suspect cassification,

/23F03, the petition is dis)issed. Costs a'ainst petitioner.



OR(OC UGAR CO(PANY, INC., paintiff>appeant,

vs.

+HE +REAURER O# OR(OC CI+Y, +HE (UNICIPAL BOARD O# OR(OC CI+Y,

HON. E+EBAN C. CONEJO %s (%y!r !" Or!& C$ty %nd OR(OC

CI+Y, defendants>appeees.

!once /nrile Siuion Reyna Montecillo 0 "elo and *ee'an-ee Carreon 0 *a1ada for

plaintiff,appellant.

Ra&on O. de 2eyra for defendants,appellees.

BENG:ON, J.P., J.:

0n Januar& =9, 19"4, the *unicipa Board of 0r)oc Cit& passed 1 0rdinance !o.

4, ;eries of 19"4, i)posin' $on an& and a productions of centrifu'a su'ar )ied at t'e

Or&oc Suar Co&pany #nc ., in 0r)oc Cit& a )unicipa ta euivaent to one per

centu) <1K? per eport sae to the nited ;tates of A)erica and other forei'n

countries.$ =

(a&)ents for said ta were )ade, under protest, b& 0r)oc ;u'ar Co)pan&, Inc.

on *arch =, 19"4 for (7,@7.# and on Apri =, 19"4 for (#,, or a tota of

(1=,@7.#.

0n June 1, 19"4, 0r)oc ;u'ar Co)pan&, Inc. fied before the Court of First

Instance of e&te, with service of a cop& upon the ;oicitor +enera, a

co)paint : a'ainst the Cit& of 0r)oc as we as its Treasurer, *unicipa Board and

*a&or, ae'in' that the afore>stated ordinance is unconstitutiona for bein' vioative of

the eua protection cause <;ec. 11H, Art. III, Constitution? and the rue of unifor)it& of

taation <;ec. ==1H?, Art. %I, Constitution?, aside fro) bein' an eport ta forbidden

under ;ection ==@7 of the 3evised Ad)inistrative Code. It further ae'ed that the ta is

neither a production nor a icense ta which 0r)oc Cit& under ;ection 1#>88 of its

charter and under ;ection = of 3epubic Act =="4, otherwise 8nown as the oca

Autono)& Act, is authoried to i)pose6 and that the ta a)ounts to a custo)s dut&, fee

or char'e in vioation of para'raph 1 of ;ection = of 3epubic Act =="4 because the ta

is on both the sae and eport of su'ar.

Answerin', the defendants asserted that the ta ordinance was within defendant

cit&s power to enact under the oca Autono)& Act and that the sa)e did not vioate the

afore>cited constitutiona i)itations. After pre>tria and sub)ission of the case on

)e)oranda, the Court of First Instance, on Au'ust ", 19"4, rendered a decision that

uphed the constitutionait& of the ordinance and decared the tain' power of defendant



chartered cit& broadened b& the oca Autono)& Act to incude a other for)s of taes,

icenses or fees not ecuded in its charter.

Appea therefro) was direct& ta8en to s b& paintiff 0r)oc ;u'ar Co)pan&, Inc.

Appeant ae'es the sa)e statutor& and constitutiona vioations in the aforesaid tain'

ordinance )entioned earier.

;ection 1 of the ordinance states- $There sha be paid to the Cit& Treasurer on

an& and a productions of centrifu'a su'ar )ied at the 0r)oc ;u'ar Co)pan&,

Incorporated, in 0r)oc Cit&, a )unicipa ta euivaent to one per centu) <1K? per

eport sae to the nited ;tates of A)erica and other forei'n countries.$ Thou'h

referred to as a ta on the eport of centrifu'a su'ar produced at 0r)oc ;u'ar

Co)pan&, Inc. For production of su'ar aone is not taabe6 the on& ti)e the ta appies

is when the su'ar produced is eported.

Appeant uestions the authorit& of the defendant *unicipa Board to ev& such

an eport ta, in view of ;ection ==@7 of the 3evised Ad)inistrative Code which denies

fro) )unicipa councis the power to i)pose an eport ta. ;ection ==@7 in part states-

$It sha not be in the power of the )unicipa counci to i)pose a ta in an& for)

whatever, upon 'oods and )erchandise carried into the )unicipait&, or out of the sa)e,

and an& atte)pt to i)pose an i)port or eport ta upon such 'oods in the 'uise of an

unreasonabe char'e for wharfa'e use of brid'es or otherwise, sha be void.$

;ubseuent&, however, ;ection = of 3epubic Act =="4 effective June 19, 19#9,

'ave chartered cities, )unicipaities and )unicipa districts authorit& to ev& for pubicpurposes Dust and unifor) taes, icenses or fees. Anent the inconsistenc& between

;ection ==@7 of the 3evised Ad)inistrative Code and ;ection = of 3epubic Act =="4,

this Court, in Nin "ay Minin Co. v. Municipality of Roxas 4 hed the for)er to have been

repeaed b& the atter. And epressin' 0ur awareness of the transcendenta effects that

)unicipa eport or i)port taes or icenses wi have on the nationa econo)&, due to

;ection = of 3epubic Act =="4, /e stated that there was no other aternative unti

Con'ress acts to provide re)edia )easures to foresta an& unfavorabe resuts.

The point re)ains to be deter)ined, however, whether constitutiona i)its on the

power of taation, specifica& the eua protection cause and rue of unifor)it& oftaation, were infrin'ed.

The Constitution in the bi of ri'hts provides- $. . . nor sha an& person be denied

the eua protection of the aws.$ <;ec. 1 1H, Art. III? In 3el)a vs. Salas, # /e rued that

the eua protection cause appies on& to persons or thin's identica& situated and

does not bar a reasonabe cassification of the subDect of e'isation, and a cassification



is reasonabe where <1? it is based on substantia distinctions which )a8e rea

differences6 <=? these are 'er)ane to the purpose of the aw6 <:? the cassification

appies not on& to present conditions but aso to future conditions which are

substantia& identica to those of the present6 <4? the cassification appies on& to those

who beon' to the sa)e cass.

A perusa of the reuisites instant& shows that the uestioned ordinance does not

)eet the), for it taes on& centrifu'a su'ar produced and eported b& the 0r)oc

;u'ar Co)pan&, Inc. and none other. At the ti)e of the tain' ordinances enact)ent,

0r)oc ;u'ar Co)pan&, Inc., it is true, was the on& su'ar centra in the cit& of 0r)oc.

;ti, the cassification, to be reasonabe, shoud be in ter)s appicabe to future

conditions as we. The tain' ordinance shoud not be sin'uar and ecusive as to

ecude an& subseuent& estabished su'ar centra, of the sa)e cass as paintiff, for

the covera'e of the ta. As it is now, even if ater a si)iar co)pan& is set up, it cannot

be subDect to the ta because the ordinance epress& points on& to 0r)oc Cit& ;u'arCo)pan&, Inc. as the entit& to be evied upon.

Appeant, however, is not entited to interest6 on the refund because the taes

were not arbitrari& coected <Coector of Interna 3evenue v. Binaba'an?. " At the ti)e

of coection, the ordinance provided a sufficient basis to precude arbitrariness, the

sa)e bein' then presu)ed constitutiona unti decared otherwise.

/23F03, the decision appeaed fro) is hereb& reversed, the chaen'ed

ordinance is decared unconstitutiona and the defendants>appeees are hereb& ordered

to refund the (1=,@7.# paintiff>appeant paid under protest. !o costs. ;o ordered.



G.R. N!. L;18535 N!)eber 09, 0867

(AYOR AN+ONIO J. VILLEGA, petitioner,

vs.

HIU CHIONG +AI PAO HO %nd JUDGE #RANCICO ARCA, respondents.

This is a petition for certiorari to review tie decision dated ;epte)ber 17, 19"@ of

respondent Jud'e Francisco Arca of the Court of First Instance of *ania, Branch I, in

Civi Case !o. 7=797, the dispositive portion of winch reads.

/herefore, Dud')ent is hereb& rendered in favor of the petitioner and

a'ainst the respondents, decarin' 0rdinance !o. " :7 of the Cit& of

*ania nu and void. The prei)inar& inDunction is )ade per)anent. !opronounce)ent as to cost.

;0 03535.

*ania, (hiippines, ;epte)ber 17, 19"@.

<;+5.? F3A!CI;C0 A3CA

The controverted 0rdinance !o. "#:7 was passed b& the *unicipa Board of *ania on

Februar& ==, 19"@ and si'ned b& the herein petitioner *a&or Antonio J. %ie'as of*ania on *arch =7, 19"@. 1

Cit& 0rdinance !o. "#:7 is entited-

A! 035I!A!C *ALI!+ IT !A/F F03 A!G (3;0! !0T A

CITIE! 0F T2 (2II((I!; T0 B *(0G5 I! A!G (AC 0F

*(0G*!T 03 T0 B !+A+5 I! A!G LI!5 0F T3A5,

B;I!;; 03 0CC(ATI0! /IT2I! T2 CITG 0F *A!IA /IT20T

FI3;T ;C3I!+ A! *(0G*!T (3*IT F30* T2 *AG03 0F

*A!IA6 A!5 F03 0T23 (3(0;;.2

;ection 1 of said 0rdinance !o. "#:7 3 prohibits aiens fro) bein' e)po&ed or to

en'a'e or participate in an& position or occupation or business enu)erated therein,

whether per)anent, te)porar& or casua, without first securin' an e)po&)ent per)it

fro) the *a&or of *ania and pa&in' the per)it fee of (#. ecept persons e)po&ed

in the dipo)atic or consuar )issions of forei'n countries, or in the technica assistance



pro'ra)s of both the (hiippine +overn)ent and an& forei'n 'overn)ent, and those

wor8in' in their respective househods, and )e)bers of rei'ious orders or

con're'ations, sect or deno)ination, who are not paid )onetari& or in 8ind.

%ioations of this ordinance is punishabe b& an i)prison)ent of not ess than three <:?

)onths to si <"? )onths or fine of not ess than (1. but not )ore than (=. or

both such fine and i)prison)ent, upon conviction. 4

0n *a& 4, 19"@, private respondent 2iu Chion' Tsai (ao 2o who was e)po&ed in

*ania, fied a petition with the Court of First Instance of *ania, Branch I, deno)inated

as Civi Case !o. 7=797, pra&in' for the issuance of the writ of prei)inar& inDunction

and restrainin' order to stop the enforce)ent of 0rdinance !o. "#:7 as we as for a

Dud')ent decarin' said 0rdinance !o. "#:7 nu and void. 5

In this petition, 2iu Chion' Tsai (ao 2o assi'ned the foowin' as his 'rounds for

wantin' the ordinance decared nu and void-

1? As a revenue )easure i)posed on aiens e)po&ed in the Cit& of *ania,

0rdinance !o. "#:7 is discri)inator& and vioative of the rue of the unifor)it& in

taation6

=? As a poice power )easure, it )a8es no distinction between usefu and non>

usefu occupations, i)posin' a fied (#. e)po&)ent per)it, which is out of

proportion to the cost of re'istration and that it fais to prescribe an& standard to

'uide andMor i)it the action of the *a&or, thus, vioatin' the funda)enta

principe on ie'a dee'ation of e'isative powers-

:? It is arbitrar&, oppressive and unreasonabe, bein' appied on& to aiens who

are thus, deprived of their ri'hts to ife, ibert& and propert& and therefore,

vioates the due process and eua protection causes of the Constitution. 6

0n *a& =4, 19"@, respondent Jud'e issued the writ of prei)inar& inDunction and on

;epte)ber 17, 19"@ rendered Dud')ent decarin' 0rdinance !o. "#:7 nu and void

and )a8in' per)anent the writ of prei)inar& inDunction. 7

Contestin' the aforecited decision of respondent Jud'e, then *a&or Antonio J. %ie'as

fied the present petition on *arch =7, 19"9. (etitioner assi'ned the foowin' as errors

ae'ed& co))itted b& respondent Jud'e in the atters decision of ;epte)ber

17,19"@- 8

I



T2 3;(0!5!T J5+ C0**ITT5 A ;3I0; A!5 (AT!T 3303

0F A/ I! 3I!+ T2AT 035I!A!C !0. "#:7 %I0AT5 T2 CA35I!A

3 0F !IF03*ITG 0F TAATI0!.

II

3;(0!5!T J5+ IL/I; C0**ITT5 A +3A% A!5 (AT!T

3303 0F A/ I! 3I!+ T2AT 035I!A!C !0. "#:7 %I0AT5 T2

(3I!CI( A+AI!;T !5 5;I+!ATI0! 0F +I;ATI% (0/3.

III

3;(0!5!T J5+ F3T23 C0**ITT5 A ;3I0; A!5 (AT!T

3303 0F A/ I! 3I!+ T2AT 035I!A!C !0. "#:7 %I0AT5 T2

5 (30C;; A!5 A (30TCTI0! CA;; 0F T2

C0!;TITTI0!.

(etitioner *a&or %ie'as ar'ues that 0rdinance !o. "#:7 cannot be decared nu and

void on the 'round that it vioated the rue on unifor)it& of taation because the rue on

unifor)it& of taation appies on& to pure& ta or revenue )easures and that

0rdinance !o. "#:7 is not a ta or revenue )easure but is an eercise of the poice

power of the state, it bein' principa& a re'uator& )easure in nature.

The contention that 0rdinance !o. "#:7 is not a pure& ta or revenue )easure

because its principa purpose is re'uator& in nature has no )erit. /hie it is true that

the first part which reuires that the aien sha secure an e)po&)ent per)it fro) the

*a&or invoves the eercise of discretion and Dud')ent in the processin' and approva

or disapprova of appications for e)po&)ent per)its and therefore is re'uator& in

character the second part which reuires the pa&)ent of (#. as e)po&ees fee is

not re'uator& but a revenue )easure. There is no o'ic or Dustification in eactin'

(#. fro) aiens who have been ceared for e)po&)ent. It is obvious that the

purpose of the ordinance is to raise )one& under the 'uise of re'uation.

The (#. fee is unreasonabe not on& because it is ecessive but because it fais to

consider vaid substantia differences in situation a)on' individua aiens who arereuired to pa& it. Athou'h the eua protection cause of the Constitution does not

forbid cassification, it is i)perative that the cassification shoud be based on rea and

substantia differences havin' a reasonabe reation to the subDect of the particuar

e'isation. The sa)e a)ount of (#. is bein' coected fro) ever& e)po&ed aien

whether he is casua or per)anent, part ti)e or fu ti)e or whether he is a ow&

e)po&ee or a hi'h& paid eecutive



0rdinance !o. "#:7 does not a& down an& criterion or standard to 'uide the *a&or in

the eercise of his discretion. It has been hed that where an ordinance of a )unicipait&

fais to state an& poic& or to set up an& standard to 'uide or i)it the )a&ors action,

epresses no purpose to be attained b& reuirin' a per)it, enu)erates no conditions

for its 'rant or refusa, and entire& ac8s standard, thus conferrin' upon the *a&or

arbitrar& and unrestricted power to 'rant or den& the issuance of buidin' per)its, such

ordinance is invaid, bein' an undefined and uni)ited dee'ation of power to aow or

prevent an activit& per se awfu. 09

In C'inese 3lour #&porters Association vs. !rice Stabili%ation "oard , 00 where a aw

'ranted a 'overn)ent a'enc& power to deter)ine the aocation of wheat four a)on'

i)porters, the ;upre)e Court rued a'ainst the interpretation of uncontroed power as it

vested in the ad)inistrative officer an arbitrar& discretion to be eercised without a

poic&, rue, or standard fro) which it can be )easured or controed.

It was aso hed in !ri&icias vs. 3uoso 01 that the authorit& and discretion to 'rant and

refuse per)its of a casses conferred upon the *a&or of *ania b& the 3evised Charter

of *ania is not uncontroed discretion but e'a discretion to be eercised within the

i)its of the aw.

0rdinance !o. "#:7 is void because it does not contain or su''est an& standard or

criterion to 'uide the )a&or in the eercise of the power which has been 'ranted to hi)

b& the ordinance.

The ordinance in uestion vioates the due process of aw and eua protection rue ofthe Constitution.

3euirin' a person before he can be e)po&ed to 'et a per)it fro) the Cit& *a&or of

*ania who )a& withhod or refuse it at wi is tanta)ount to den&in' hi) the basic ri'ht

of the peope in the (hiippines to en'a'e in a )eans of iveihood. /hie it is true that

the (hiippines as a ;tate is not obi'ed to ad)it aiens within its territor&, once an aien

is ad)itted, he cannot be deprived of ife without due process of aw. This 'uarantee

incudes the )eans of iveihood. The sheter of protection under the due process and

eua protection cause is 'iven to a persons, both aiens and citiens. 02

The tria court did not co))it the errors assi'ned.

/23F03, the decision appeaed fro) is hereb& affir)ed, without pronounce)ent

as to costs.



Arturo Tolentino vs Secretary of Finance

Tolentino et al is questioning the constitutionality of RA 7716 otherwise known as the Expanded

Value Added Tax (EVAT !aw" Tolentino a#erred that this re#enue $ill did not exclusi#elyoriginate fro% the &ouse of Representati#es as required $y 'ection )* Article 6 of the

+onstitution" E#en though RA 7716 originated as &, 111-7 and that it passed the . readings in

the &oR* the sa%e did not co%plete the . readings in 'enate for after the 1st reading it wasreferred to the 'enate /ays 0 eans +o%%ittee thereafter 'enate passed its own #ersion known

as 'enate ,ill 16.2" Tolentino a#erred that what 'enate could ha#e done is a%end &, 111-7 $y

striking out its text and su$stituting it w3 the text of ', 16.2 in that way 4the $ill re%ains a&ouse ,ill and the 'enate #ersion 5ust $eco%es the text (only the text of the &," Tolentino and

copetitioner Roco 8howe#er9 e#en signed the said 'enate ,ill"

ISSUE: /hether or not EVAT originated in the &oR"

HELD: ,y a -6 #ote* the '+ re5ected the challenge* holding that such consolidation was

consistent with the power of the 'enate to propose or concur with a%end%ents to the #ersionoriginated in the &oR" /hat the +onstitution si%ply %eans* according to the - 5ustices* is that

the initiati#e %ust co%e fro% the &oR" :ote also that there were se#eral instances $efore where

'enate passed its own #ersion rather than ha#ing the &oR #ersion as far as re#enue and othersuch $ills are concerned" This practice of a%end%ent $y su$stitution has always $een accepted"

The proposition of Tolentino concerns a %ere %atter of for%" There is no showing that it would

%ake a significant difference if 'enate were to adopt his o#er what has $een done"

TOLENTINO VS. THE SECRETARY OF FINANCE Case DigestAR+URO (. +OLEN+INO V. +HE ECRE+ARYO# #INANCE %nd +HECO((IIONER O# IN+ERNAL REVENUE0883 Au 14G.R.N!. 004344124 CRA 529#AC+<The vaued>added ta <%AT? is evied on the sae, barter or echan'e of 'oodsandproperties as we as on the sae or echan'e of services. It is euivaent to 1K of the'ross sein' price or 'ross vaue in )one& of 'oods or properties sod, barteredor echan'ed or of the 'ross receipts fro) the sae or echan'e of services. 3epubic

Act!o. 771" see8s to widen the ta base of the eistin' %AT s&ste) and enhanceitsad)inistration b& a)endin' the !ationa Interna 3evenue Code.The Cha)ber of3ea state and Buiders Association <C3BA? contends that thei)position of %AT on

saes and eases b& virtue of contracts entered into prior to theeffectivit& of the aw woud vioate the constitutiona provision of Nnon>i)pair)ent ofcontracts.O IUE</hether 3.A. !o. 771" is unconstitutiona on 'round that it vioates the contractcauseunder Art. III, sec 1 of the Bi of 3i'hts.



RULING<!o. The ;upre)e Court the contention of C3BA, that the i)position of the%AT on thesaes and eases of rea estate b& virtue of contracts entered into prior to theeffectivit& of the aw woud vioate the constitutiona provision of non>i)pair)ent of contracts, is on&si'ht& ess abstract but nonetheess h&pothetica. It is enou'h to sa&that the parties to

a contract cannot, throu'h the eercise of prophetic discern)ent,fetter the eercise ofthe tain' power of the ;tate. For not on& are eistin' aws readinto contracts in orderto fi obi'ations as between parties, but the reservation of essentia attributes ofsoverei'n power is aso read into contracts as a basic postuate of the e'a order. Thepoic& of protectin' contracts a'ainst i)pair)ent presupposes the)aintenance of a'overn)ent which retains adeuate authorit& to secure the peace and'ood order ofsociet&. In truth, the Contract Cause has never been thou'ht as ai)itation on theeercise of the ;tates power of taation save on& where a taee)ption has been'ranted for a vaid consideration.;uch is not the case of (A in +.3. !o. 11#@#=, andthe Court does not understand itto )a8e this cai). 3ather, its position, as discussedabove, is that the re)ova of its taee)ption cannot be )ade b& a 'enera, but on& b&

a specific, aw.Further, the ;upre)e Court hed the vaidit& of 3epubic Act !o. 771" inits for)a andsubstantive aspects as this has been raised in the various cases before it.To su) up,the Court hods-<1? That the procedura reuire)ents of the Constitutionhave been co)pied with b&Con'ress in the enact)ent of the statute6<=? That Dudiciainuir& whether the for)a reuire)ents for the enact)ent of statutes > be&ond thoseprescribed b& the Constitution > have been observed is precuded b& theprincipe ofseparation of powers6<:? That the aw does not abrid'e freedo) of speech, epressionor the press, nor interfere with the free eercise of rei'ion, nor den& to an& of theparties the ri'ht to aneducation6 and<4? That, in view of the absence of a factuafoundation of record, cai)s that the aw isre'ressive, oppressive and confiscator& andthat it vioates vested ri'hts protectedunder the Contract Cause are pre)ature& raised

and do not Dustif& the 'rant of prospective reief b& writ of prohibition./23F03, thepetitions are 5I;*I;;5.

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