Essay: My take on the constitutionality of Bangsamoro Basic Bill

Bangsamoro Basic Bill is unconstitutional. While the 1987 Constitution provides for the creation of autonomous regions in Muslim Mindanao, such region should still be considered as a territorial and political subdivision of the Philippines and that the President of the Philippines should still exercise general supervision over it. Several provisions of Bangsamoro Basic Bill clearly violates it in such a way that framers of the bill are aiming to give the Bangsamoro Government powers which are not normally given to a mere autonomous region, particularly sovereignty.

Sec. 1, Art. X of the Constitution states that “the territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as hereinafter provided.” This is highly reflective of the idea that the Philippines should consider these autonomous regions as included among its territory. Sec. 16, Art. X of the Constitution states “The President shall exercise general supervision over autonomous regions to ensure that laws are faithfully executed.” Sec. 18, Art. X of the Constitution also provides “The Congress shall enact an organic act for each autonomous region. xxx The organic act shall define the basic structure of government for the region consisting of the executive department and legislative assembly, both of which shall be elective and representative of the constituent political units.”

House Bill No. 4994, also known as the Bangsamoro Basic Law, in its full title “An Act Providing for the Basic Law for the Bangsamoro and Abolishing the Autonomous Region of Muslim Mindanao”, which also repeals RA 9054 and RA 6735, which were organic acts for the creation of such autonomous region, is currently being deliberated in the Congress. For the purposes of discussion, the author selected the following provisions from the bill:

Sec. 1, Art IV of the bill states, “In its exercise of its right to self-governance and self-determination, the Bangsamoro is free to pursue its economic, social and cultural development.” Sec. 2., Art IV of the bill provides “The Bangsamoro Government shall be parliamentary. Its political system is democratic, allowing its people to freely participate in the political processes within its territory.”

The bill title and the two provisions above are clearly indicative that the framers of the bill intend to give Bangsamoro Government great authority, deviating and different from that which is given to a mere autonomous region. In the past, these autonomous regions, while given independence, are still generally governed by the Central Government, and are still subject to its limitations. However, these two provisions in the bill can be construed that the Bangsamoro is aiming to become a small state, having the essential elements of a normal State, including a sovereignty which cannot be touched or encroached upon by the central government. There has never been any indication in the Constitution, especially in Article X, regarding the creation of smaller states.

Furthermore, Sec. 1, Art. VI of the bill provides “The relationship between the Central Government and the Bangsamoro Government shall be asymmetric. xxx This makes it distinct from other regions and other local governments.” Sec. 4, Art. VI of the bill states “The Central Government and the Bangsamoro Government shall be guided by the principles of parity of esteem and accepted norms of good governance. The Central Government shall respect the exercise of competencies and exclusive powers of the Bangsamoro Government. The Bangsamoro Government shall respect the exercise of the competencies and reserve powers of the Central Government.”

While vague, it can be interpreted as violative of the constitutional mandate that autonomous regions should still be under the Central Government, and as such, must still comply with its laws. While the Central Government respects autonomy, it is the locality which must adjust and conform to the existing laws of the higher government and not the other way around.

Sovereignty, being one of the elements of a State, gives it the right and power to govern itself without any interference from outside bodies. The Bangsamoro Basic Bill clearly gives such sovereignty to the Bangsamoro Government. Nowhere in the provisions of Constitution states that this is allowed. It is through here that the author takes his stand in alleging that the Bangsamoro Basic Bill is unconstitutional.

Case Brief: The Province of Zamboanga del Norte v City of Zamboanga, et. al.

G.R. No. L-24440             March 28, 1968

THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE,defendants-appellants.

Facts:

Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also provided that “Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.”

Such properties include lots of capitol site, schools, hospitals, leprosarium, high school playgrounds, burleighs, and hydro-electric sites.

On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided between the two new ones, Sec. 6 of that law provided “Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the recommendation of the Auditor General.”

However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing that, “All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga.”

This constrained Zamboanga del Norte to file on March 5, 1962, a complaint against defendants-appellants Zamboanga City; that, among others, Republic Act 3039 be declared unconstitutional for depriving Zamboanga del Norte of property without due process and just compensation.

Lower court declared RA 3039 unconstitutional as it deprives Zamboanga del Norte of its private properties.

Hence the appeal.

Issue:

Whether RA 3039 is unconstitutional on the grounds that it deprives Zamboanga del Norte of its private properties.

Held:

No. RA 3039 is valid. The properties petitioned by Zamboanga del Norte is a public property.

The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the matter involved here is the extent of legislative control over the properties of a municipal corporation, of which a province is one. The principle itself is simple: If the property is owned by the municipality (meaning municipal corporation) in its public and governmental capacity, the property is public and Congress has absolute control over it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality cannot be deprived of it without due process and payment of just compensation.

The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal Corporations, must be used in classifying the properties in question?

Civil Code

The Civil provide: ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and patrimonial property; ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws.

Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could be considered as patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for public use. They would fall under the phrase “public works for public service” for it has been held that under the ejusdem generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceding enumerated properties in the first paragraph of Art 424. The playgrounds, however, would fit into this category.

Law of Municipal Corporations

On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all those of the 50 properties in question which are devoted to public service are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is enough that the property be held and, devoted for governmental purposes like local administration, public education, public health, etc.

 Final Ruling

The controversy here is more along the domains of the Law of Municipal Corporations — State vs. Province — than along that of Civil Law. If municipal property held and devoted to public service is in the same category as ordinary private property, then that would mean they can be levied upon and attached; they can even be acquired thru adverse possession — all these to the detriment of the local community. It is wrong to consider those properties as ordinary private property.

Lastly, the classification of properties other than those for public use in the municipalities as patrimonial under Art. 424 of the Civil Code — is “… without prejudice to the provisions of special laws.” For purpose of this article, the principles, obtaining under the Law of Municipal Corporations can be considered as “special laws”. Hence, the classification of municipal property devoted for distinctly governmental purposes as public should prevail over the Civil Code classification in this particular case.

WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.

(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the amount of P43,030.11 which the former took back from the latter out of the sum of P57,373.46 previously paid to the latter; and

(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiff’s 54.39% share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of quarterly payments from the allotments of defendant City, in the manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No costs. So ordered.

Case Brief: The Holy See v. Rosario Jr, et al.

G.R. No. 101949   December 1, 1994

THE HOLY SEE, petitioner,

vs.

THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.

Facts:

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is represented in the Philippines by the Papal Nuncio. Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate business.

The petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of Parañaque, Metro Manila and registered in the name of petitioner.

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his rights to the sale to private respondent. In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as to who of the parties has the responsibility of evicting and clearing the land of squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to Tropicana Properties and Development Corporation (Tropicana).

Respondent filed a complained for the annulment of the sale of the land and damages against the petitioner, as represented by the Papal Nuncio and other defendants.

Petitioner answered, saying that the complaint should be dismissed for lack of jurisdiction based on sovereign immunity from suit. Respondent contended that the petitioner “shed off [its] sovereign immunity by entering into the business contract in question.”

Issue:

Whether the petitioner Holy See is immune from suit from its act of entering into a contractual relations centering on the sale of lot to a private person.

Held:

Yes, Holy See is immune from suit in the case at hand.

The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a foreign state enjoying sovereign immunity. On the other hand, private respondent insists that the doctrine of non-suability is not anymore absolute and that petitioner has divested itself of such a cloak when, of its own free will, it entered into a commercial transaction for the sale of a parcel of land located in the Philippines.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with the Philippine government since 1957. This appears to be the universal practice in international relations.

In a community of national states, the Vatican City represents an entity organized not for political but for ecclesiastical purposes and international objects. Despite its size and object, the Vatican City has an independent government of its own, with the Pope, who is also head of the Roman Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and the demands of its mission in the world. Indeed, the world-wide interests and activities of the Vatican City are such as to make it in a sense an “international state.”

As expressed in Section 2 of Article II of the 1987 Constitution, the country has adopted the generally accepted principles of International Law. Even without this affirmation, such principles of International Law are deemed incorporated as part of the law of the land as a condition and consequence of our admission in the society of nations.

In the absence of legislation defining what activities and transactions shall be considered “commercial” and as constituting acts jure gestionis, we have to come out with our own guidelines, tentative they may be. Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business, surely the said transaction can be categorized as an act jure gestionis. However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were made for profit but claimed that it acquired said property for the site of its mission or the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.

The right of a foreign sovereign to acquire property, real or personal, in a receiving state, necessary for the creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and entered into force in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and administrative jurisdiction of the receiving state over any real action relating to private immovable property situated in the territory of the receiving state which the envoy holds on behalf of the sending state for the purposes of the mission. If this immunity is provided for a diplomatic envoy, with all the more reason should immunity be recognized as regards the sovereign itself, which in this case is the Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a governmental character. Petitioner did not sell Lot 5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon made it almost impossible for petitioner to use it for the purpose of the donation. The fact that squatters have occupied and are still occupying the lot, and that they stubbornly refuse to leave the premises, has been admitted by private respondent in its complaint.

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-183 against petitioner is DISMISSED.

Case Brief: Tanada v Angara

G.R. No. 118295   May 2, 1997

WIGBERTO E. TAÑADA et al, petitioners,

vs.

EDGARDO ANGARA, et al, respondents.

Facts:

Petitioners prayed for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and for the prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of public officials and employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned therewith.

They contended that WTO agreement violates the mandate of the 1987 Constitution to “develop a self-reliant and independent national economy effectively controlled by Filipinos x x x (to) give preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and locally produced goods” as (1) the WTO requires the Philippines “to place nationals and products of member-countries on the same footing as Filipinos and local products” and (2) that the WTO “intrudes, limits and/or impairs” the constitutional powers of both Congress and the Supreme Court.

Issue:

Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is ‘vested in the Congress of the Philippines.

Held:

No, the WTO agreement does not unduly limit, restrict, and impair the Philippine sovereignty, particularly the legislative power granted by the Philippine Constitution. The Senate was acting in the proper manner when it concurred with the President’s ratification of the agreement.

While sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country from the rest of the world. In its Declaration of Principles and State Policies, the Constitution “adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations.” By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. One of the oldest and most fundamental rules in international law is pacta sunt servanda — international agreements must be performed in good faith. “A treaty engagement is not a mere moral obligation but creates a legally binding obligation on the parties x x x. A state which has contracted valid international obligations is bound to make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken.”

By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States concerning such widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the regulation of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling of claims, the laying down of rules governing conduct in peace and the establishment of international organizations. The sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of membership in the family of nations and (2) limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, “Today, no nation can build its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here.”

The WTO reliance on “most favored nation,” “national treatment,” and “trade without discrimination” cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on “equality and reciprocity,” the fundamental law encourages industries that are “competitive in both domestic and foreign markets,” thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire.

WHEREFORE, the petition is DISMISSED for lack of merit.

Case Brief: The Roman Catholic Bishop of Nueva Segovia v The Provincial Board of Ilocos Norte

G.R. No. L-27588 December 31, 1927
THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA, as representative of the Roman Catholic Apostolic Church, plaintiff-appellant,
vs.
THE PROVINCIAL BOARD OF ILOCOS NORTE, ET AL., defendants-appellants.

Facts:
The plaintiff, the Roman Catholic Apostolic Church, represented by the Bishop of Nueva Segovia, possesses and is the owner of a parcel of land in the municipality of San Nicolas, Ilocos Norte, all four sides of which face on public streets. On the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden, containing an area off 1,624 square meters, in which there is a stable and a well for the use of the convent. In the center is the remainder of the churchyard and the church. On the north is an old cemetery with two of its walls still standing, and a portion where formerly stood a tower, the base of which still be seen, containing a total area of 8,955 square meters.
On July 3, 1925, the defendants required the plaintiff to pay the land tax on the lot adjoining the convent and the lot which formerly was the cemetery and on the portion where the tower stood. The plaintiff filed an action to recover the sum of land tax that was paid to the defendants, alleging that it is illegal.
The lower court declared that defendants were correct in collecting land tax for the lot adjoining the convent, and that they erred in collecting land tax for the lot which was formerly the cemetery and on the portion were the tower stood.
Both parties appealed for this judgment.

Issues:
1. Whether the lot on the southern side adjoining the convent is subject to land tax exemption.
2. Whether the lot on the northern side which formerly was the cemetery and the portion where the tower stood is subject to land tax exemption.

Held:
The Supreme Court held that both the lots must be subject to land tax exemption.

1. Yes. The land adjoining the convent is subject to land tax exemption.
The exemption in favor of the convent in the payment of the land tax (sec. 344 [c] Administrative Code) refers to the home of the parties who presides over the church and who has to take care of himself in order to discharge his duties. It therefore must, in the sense, include not only the land actually occupied by the church, but also the adjacent ground destined to the ordinary incidental uses of man. Except in large cities where the density of the population and the development of commerce require the use of larger tracts of land for buildings, a vegetable garden belongs to a house and, in the case of a convent, it use is limited to the necessities of the priest, which comes under the exemption.

2. Yes. The lot on the northern side which formerly was the cemetery and the portion where the tower stood is subject to land tax exemption.
Even if it is no longer used as a cemetery, neither is it used for commercial purposes and, according to the evidence, is now being used as a lodging house by the people who participate in religious festivities, which constitutes an incidental use in religious functions, which also comes within the exemption.

The judgment appealed from is reversed in all it parts and it is held that both lots are exempt from land tax and the defendants are ordered to refund to plaintiff whatever was paid as such tax, without any special pronouncement as to costs. 

Dissenting opinion of Justice Malcolm:
The Assessment Law exempts from taxation “Cemeteries or burial grounds . . . and all lands, buildings, and improvements use exclusively for religious . . . purposes, but this exemption shall not extend to property held for investment, or which produces income, even though the income be devoted to some one or more of the purposes above specified.” (Administrative Code, sec. 344; Act No. 2749, sec. 1.) That is the applicable law. The facts may be taken as found by the judge of First Instance, who made his findings more certain by an ocular inspection of the property under consideration. The testimony and the inspection disclosed that the lot Known as “huerta” was not devoted to religious purposes, and that the old cemetery had long since leased to be used as such and had been planted to corn. Those are the facts. The test to be applied to the combined law and facts must be the actual use of the property. The property legally exempt from the payment of taxes must be devoted to some purpose specified in the law. A “huerta” not needed or used exclusively for religious purposes is not thus exempt. A cemetery or burial ground no longer a cemetery or a burial ground is not thus exempt. Accordingly, I prefer to vote for the affirmance of Judge Mariano’s decision.

Case Brief: White Light Corporation v City of Manila

G.R. No. 122846 January 20, 2009
WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST & DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent.

Facts:

On December 3, 1992, City Mayor Alfredo S. Lim signed into law Manila City Ordinance No. 7774 entitled “An Ordinance Prohibiting Short-Time Admission, Short-Time Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging Houses, Pension Houses, and Similar Establishments in the City of Manila” (the Ordinance).” The ordinance sanctions any person or corporation who will allow the admission and charging of room rates for less than 12 hours or the renting of rooms more than twice a day.

The petitioners White Light Corporation (WLC), Titanium Corporation (TC), and Sta. Mesa Tourist and Development Corporation (STDC), who own and operate several hotels and motels in Metro Manila, filed a motion to intervene and to admit attached complaint-in-intervention on the ground that the ordinance will affect their business interests as operators. The respondents, in turn, alleged that the ordinance is a legitimate exercise of police power.

RTC declared Ordinance No. 7774 null and void as it “strikes at the personal liberty of the individual guaranteed and jealously guarded by the Constitution.” Reference was made to the provisions of the Constitution encouraging private enterprises and the incentive to needed investment, as well as the right to operate economic enterprises. Finally, from the observation that the illicit relationships the Ordinance sought to dissuade could nonetheless be consummated by simply paying for a 12-hour stay,
When elevated to CA, the respondents asserted that the ordinance is a valid exercise of police power pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities the power to regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses and other similar establishments, including tourist guides and transports. Also, they contended that under Art III Sec 18 of Revised Manila Charter, they have the power to enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of the prosperity and the promotion of the morality, peace, good order, comfort, convenience and general welfare of the city and its inhabitants and to fix penalties for the violation of ordinances.

Petitioners argued that the ordinance is unconstitutional and void since it violates the right to privacy and freedom of movement; it is an invalid exercise of police power; and it is unreasonable and oppressive interference in their business.
CA, in turn, reversed the decision of RTC and affirmed the constitutionality of the ordinance. First, it held that the ordinance did not violate the right to privacy or the freedom of movement, as it only penalizes the owners or operators of establishments that admit individuals for short time stays. Second, the virtually limitless reach of police power is only constrained by having a lawful object obtained through a lawful method. The lawful objective of the ordinance is satisfied since it aims to curb immoral activities. There is a lawful method since the establishments are still allowed to operate. Third, the adverse effect on the establishments is justified by the well-being of its constituents in general.

Hence, the petitioners appeared before the SC.

Issue:

Whether Ordinance No. 7774 is a valid exercise of police power of the State.

Held:

No. Ordinance No. 7774 cannot be considered as a valid exercise of police power, and as such, it is unconstitutional.

The facts of this case will recall to mind not only the recent City of Manila v Laguio Jr ruling, but the 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc., v. Hon. City Mayor of Manila. The common thread that runs through those decisions and the case at bar goes beyond the singularity of the localities covered under the respective ordinances. All three ordinances were enacted with a view of regulating public morals including particular illicit activity in transient lodging establishments. This could be described as the middle case, wherein there is no wholesale ban on motels and hotels but the services offered by these establishments have been severely restricted. At its core, this is another case about the extent to which the State can intrude into and regulate the lives of its citizens

The test of a valid ordinance is well established. A long line of decisions including City of Manila has held that for an ordinance to be valid, it must not only be within the corporate powers of the local government unit to enact and pass according to the procedure prescribed by law, it must also conform to the following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable.

The ordinance in this case prohibits two specific and distinct business practices, namely wash rate admissions and renting out a room more than twice a day. The ban is evidently sought to be rooted in the police power as conferred on local government units by the Local Government Code through such implements as the general welfare clause.

Police power is based upon the concept of necessity of the State and its corresponding right to protect itself and its people. Police power has been used as justification for numerous and varied actions by the State.

The apparent goal of the ordinance is to minimize if not eliminate the use of the covered establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are unimpeachable and certainly fall within the ambit of the police power of the State. Yet the desirability of these ends do not sanctify any and all means for their achievement. Those means must align with the Constitution.

SC contended that if they were to take the myopic view that an ordinance should be analyzed strictly as to its effect only on the petitioners at bar, then it would seem that the only restraint imposed by the law that they were capacitated to act upon is the injury to property sustained by the petitioners. Yet, they also recognized the capacity of the petitioners to invoke as well the constitutional rights of their patrons – those persons who would be deprived of availing short time access or wash-up rates to the lodging establishments in question. The rights at stake herein fell within the same fundamental rights to liberty. Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include “the right to exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such restraint as are necessary for the common welfare,

Indeed, the right to privacy as a constitutional right must be recognized and the invasion of it should be justified by a compelling state interest. Jurisprudence accorded recognition to the right to privacy independently of its identification with liberty; in itself it is fully deserving of constitutional protection. Governmental powers should stop short of certain intrusions into the personal life of the citizen.

An ordinance which prevents the lawful uses of a wash rate depriving patrons of a product and the petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of the ordinance as a police power measure. It must appear that the interests of the public generally, as distinguished from those of a particular class, require an interference with private rights and the means must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive of private rights. It must also be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can work. More importantly, a reasonable relation must exist between the purposes of the measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded.

Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary intrusion into private rights.
The behavior which the ordinance seeks to curtail is in fact already prohibited and could in fact be diminished simply by applying existing laws. Less intrusive measures such as curbing the proliferation of prostitutes and drug dealers through active police work would be more effective in easing the situation. So would the strict enforcement of existing laws and regulations penalizing prostitution and drug use. These measures would have minimal intrusion on the businesses of the petitioners and other legitimate merchants. Further, it is apparent that the ordinance can easily be circumvented by merely paying the whole day rate without any hindrance to those engaged in illicit activities. Moreover, drug dealers and prostitutes can in fact collect “wash rates” from their clientele by charging their customers a portion of the rent for motel rooms and even apartments.

SC reiterated that individual rights may be adversely affected only to the extent that may fairly be required by the legitimate demands of public interest or public welfare. The State is a leviathan that must be restrained from needlessly intruding into the lives of its citizens. However well¬-intentioned the ordinance may be, it is in effect an arbitrary and whimsical intrusion into the rights of the establishments as well as their patrons. The ordinance needlessly restrains the operation of the businesses of the petitioners as well as restricting the rights of their patrons without sufficient justification. The ordinance rashly equates wash rates and renting out a room more than twice a day with immorality without accommodating innocuous intentions.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is hereby declared UNCONSTITUTIONAL. No pronouncement as to costs.

Case Brief: Chevron Philippines Inc v Bases Conversion Development Authority

G.R. No. 173863  September 15, 2010
CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES, INC.), Petitioner,
vs.
BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK DEVELOPMENT CORPORATION, Respondents

Facts:

On June 28, 2002, the Board of Directors of respondent Clark Development Corporation (CDC) issued and approved Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone. In one of its provisions, it levied royalty fees to suppliers delivering Coastal fuel from outside sources for Php0.50 per liter for those delivering fuel to CSEZ locators not sanctioned by CDC and Php1.00 per litter for those bringing-in petroleum fuel from outside sources. The policy guidelines were implemented effective July 27, 2002.

The petitioner Chevron Philippines Inc (formerly Caltex Philippines Inc) who is a fuel supplier to Nanox Philippines, a locator inside the CSEZ, received a Statement of Account from CDC billing them to pay the royalty fees amounting to Php115,000 for its fuel sales from Coastal depot to Nanox Philippines from August 1 to September 21, 2002.

Petitioner, contending that nothing in the law authorizes CDC to impose royalty fees based on a per unit measurement of any commodity sold within the special economic zone, protested against the CDC and Bases Conversion Development Authority (BCDA). They alleged that the royalty fees imposed had no reasonable relation to the probably expenses of regulation and that the imposition on a per unit measurement of fuel sales was for a revenue generating purpose, thus, akin to a “tax”.

BCDA denied the protest. The Office of the President dismissed the appeal as well for lack of merit.

Upon appeal, CA dismissed the case. CA held that in imposing the royalty fees, CDC was exercising its right to regulate the flow of fuel into CSEZ under the vested exclusive right to distribute fuel within CSEZ pursuant to its Joint Venture Agreement (JVA) with Subic Bay Metropolitan Authority (SBMA) and Coastal Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996. The appellate court also found that royalty fees were assessed on fuel delivered, not on the sale, by petitioner and that the basis of such imposition was petitioner’s delivery receipts to Nanox Philippines. The fact that revenue is incidentally also obtained does not make the imposition a tax as long as the primary purpose of such imposition is regulation.

When elevated in SC, petitioner argued that: 1) CDC has no power to impose fees on sale of fuel inside CSEZ on the basis of income generating functions and its right to market and distribute goods inside the CSEZ as this would amount to tax which they have no power to impose, and that the imposed fee is not regulatory in nature but rather a revenue generating measure; 2) even if the fees are regulatory in nature, it is unreasonable and are grossly in excess of regulation costs.

Respondents contended that the purpose of royalty fees is to regulate the flow of fuel to and from the CSEZ and revenue (if any) is just an incidental product. They viewed it as a valid exercise of police power since it is aimed at promoting the general welfare of public; that being the CSEZ administrator, they are responsible for the safe distribution of fuel products inside the CSEZ.

Issue:
Whether the act of CDC in imposing royalty fees can be considered as valid exercise of the police power.

Held:
Yes. SC held that CDC was within the limits of the police power of the State when it imposed royalty fees.

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is generated.

In this case, SC held that the subject royalty fee was imposed for regulatory purposes and not for generation of income or profits. The Policy Guidelines was issued to ensure the safety, security, and good condition of the petroleum fuel industry within the CSEZ. The questioned royalty fees form part of the regulatory framework to ensure “free flow or movement” of petroleum fuel to and from the CSEZ. The fact that respondents have the exclusive right to distribute and market petroleum products within CSEZ pursuant to its JVA with SBMA and CSBTI does not diminish the regulatory purpose of the royalty fee for fuel products supplied by petitioner to its client at the CSEZ.

However, it was erroneous for petitioner to argue that such exclusive right of respondent CDC to market and distribute fuel inside CSEZ is the sole basis of the royalty fees imposed under the Policy Guidelines. Being the administrator of CSEZ, the responsibility of ensuring the safe, efficient and orderly distribution of fuel products within the Zone falls on CDC. Addressing specific concerns demanded by the nature of goods or products involved is encompassed in the range of services which respondent CDC is expected to provide under Sec. 2 of E.O. No. 80, in pursuance of its general power of supervision and control over the movement of all supplies and equipment into the CSEZ.

There can be no doubt that the oil industry is greatly imbued with public interest as it vitally affects the general welfare. Fuel is a highly combustible product which, if left unchecked, poses a serious threat to life and property. Also, the reasonable relation between the royalty fees imposed on a “per liter” basis and the regulation sought to be attained is that the higher the volume of fuel entering CSEZ, the greater the extent and frequency of supervision and inspection required to ensure safety, security, and order within the Zone.

Respondents submit that the increased administrative costs were triggered by security risks that have recently emerged, such as terrorist strikes. The need for regulation is more evident in the light of 9/11 tragedy considering that what is being moved from one location to another are highly combustible fuel products that could cause loss of lives and damage to properties.

As to the issue of reasonableness of the amount of the fees, SC held that no evidence was adduced by the petitioner to show that the fees imposed are unreasonable. Administrative issuances have the force and effect of law. They benefit from the same presumption of validity and constitutionality enjoyed by statutes. These two precepts place a heavy burden upon any party assailing governmental regulations. Petitioner’s plain allegations are simply not enough to overcome the presumption of validity and reasonableness of the subject imposition.

WHEREFORE, the petition is DENIED for lack of merit and the Decision of the Court of Appeals dated November 30, 2005 in CA-G.R. SP No. 87117 is hereby AFFIRMED.