ORTIGAS & CO. LIMITED PARTNERSHIP vs.

FEATI BANK
AND TRUST CO.
G.R. No. L-24670 14 December 1979
Santos, J.

FACTS:
Ortigas and Co. is engaged in real estate business developing and selling lots
to the public. It sold to Augusto Padilla and Natividad Angeles Lots Nos. 5 and 6,
Block 31 of the Highway Hills Subdivision, Mandaluyong by sale on instalments.
The vendees then transferred their rights and interests over the aforesaid lots in
favour of one Emma Chavez. The agreements of sale on instalment and the deeds
of sale contained the restriction that The parcel of land subject of this deed of
sale shall be used by the Buyer exclusively for residential purposes, and she shall
not be entitled to take or remove soil, stones or gravel from it or any other lots
belonging to the Seller.

Feati Bank and Trust Co. later bought said lots from Emma Chavez in the
name of Republic Flour Mills. Ortigas and Co. claims that the restrictions were
imposed as part of its general building scheme designed for the beautification and
development of the Highway Hills Subdivision which forms part of its big landed
estate. Feati Bank, on the other hand, maintains that the area along the western
part of EDSA from Shaw Boulevard to Pasig River has been declared a commercial
and industrial zone, per Resolution No. 27 s-1960 of the Municipal Council of
Mandaluyong, Rizal. Later on, Feati Bank commenced construction on the said lots
for a building devoted to banking purposes. It refused to comply with the demands
of Ortigas & Co. to stop the said construction.

ISSUE:
Whether or not Resolution No. 27 s-1960 can nullify or supersede the
contractual obligations assumed by the defendant.

HELD:
Yes. While non-impairment of contracts is constitutionally guaranteed, the
rule is not absolute, since it has to be reconciled with the legitimate exercise of
police power, i.e. the power to prescribe regulations to promote the health,
morals, peace, education, good order or safety of the general welfare of the
people. This general welfare clause shall be liberally interpreted in case of doubt,
so as to give more power to local governments in promoting the economic
conditions, social welfare and material progress of the people in the community.
The only exceptions under Section 12 of the Local Autonomy Act (R.A. 2264) are
existing vested rights arising out of a contract between a province, city or
municipality on one hand and a third party on the other hand. Said case is not
present in this petition.
Resolution No. 27 s-1960 declaring the western part of EDSA as an industrial
and commercial zone was passed in the exercise of police power to safeguard or
promote the health, safety, peace, good order and general welfare of the people in
the locality.
REYES VS SAN PABLO CITY (305 SCRA 353)
City Government of San Pablo, Laguna vs Reyes 305 SCRA
353 [GR No. 127708 March 25, 1999]

Facts:
Act 3648 granted the Escudero Electric Service Company a legislative
franchise to maintain and operate an electric light and power system in the city of
San Pablo and nearby municipalities. Section 10 of said act provides:
In consideration of the franchise and rights hereby granted, the grantee shall
pay unto the municipal treasury of each municipality in which it is supplying
electric current to the public under this franchise, a tax equal to two percentum of
the gross earning from electric current sold or supplied under this franchise in
each said municipality. Said tax shall be due and payable quarterly and shall be in
lieu of any and all taxes of any kind nature or description levied, established or
collected by any authority whatsoever, municipal, provincial or insular, now or in
the future, or its pole wires, insulator, switches, transformers, and structures,
installations, conductors and accessories placed in and over and under all public
property, including public streets and highways, provincial roads, bridges and
public squares, and on its franchises, rights, privileges, receipts, revenues and
profits from which taxes the grantee is hereby expressly exempted.
Escuderos franchise was transferred to the plaintiff MERALCO under RA
2340.
On October 5, 1992, the sangguniang panlungsod of San Pablo City enacted
ordinance no. 56 otherwise known as the Revenue Code of the City of San Pablo.
Pursuant to sec 2.09 article D of the said ordinance, the petitioner city treasurer
sent to private respondent a letter demanding payment of the aforesaid franchise
tax.

Issue: Whether or not the city of San Pablo may impose a local franchise tax
to MERALCO.

Held:
Yes. A general law cannot be construed to have repealed a special law by
mere implication unless the intent to repeal or alter is manifest and it must be
convincingly demonstrated that the two laws are so clearly repugnant and patently
inconsistent that they cannot co-exist.
It is our view that petitions correctly rely on the provisions of sections 137
and 193 of the LGC to support their position that MERALCOs tax exemption has
been withdrawn. The explicit language of section 137 which authorizes the
province to impose franchise tax not withstanding any exemption granted by law
or other special law is all encompassing and clear. The franchise is imposable
despite any exemption enjoyed under special law.
Sec 193 buttresses the withdrawal of extant tax exemption privileges. By stating
that unless otherwise provided in this code, tax exemptions or incentives granted
to or presently enjoyed all persons whether natural or juridical, including GOCCs
except: 1.) local water districts; 2.) Cooperatives duly registered under RA 6938;
3.) Non-stock and non-profit hospitals and education institutions, are withdrawn
upon the effectivity of this code, the obvious import is to limit the exemptions to
the 3 enumerated entities. It is a basic precept of statutory construction that the
express mention of one person, thing, act or consequences excludes all others as
expressed in the familiar maxim expressio unius est exclusio alterus. In the
absence of any provision of the code to the contrary, and we find no other
provision in point, any existing tax exemption or incentive enjoyed by the
MERALCO under the existing law was clearly intended to be withdrawn.
Reading together section 193 and 137 of the LGC conclude that under the
LGC, the local government unit may now impose a local tax at a rate not excluding
50% of 1% of the gross annual receipts for the preceding calendar year based on
the incoming receipts realized within its territorial jurisdiction. The legislative
purpose to withdraw tax privilege only enjoy and an existing law or charter is
clearly manifested by the language used in sections 137 and 193 categorically
withdrawing such exemption subject only to the exceptions enumerated. Since it
would be not only tedious and impractical to attempt to enumerate all the existing
statutes providing for special tax exemptions or privileges, the LGC provided for an
express, albeit general withdrawal of such exemptions or privileges. No more
unequivocal language could have been used.
It is true that the phrase in lieu of all taxes found in special franchises has
been held in several cases to exempt the franchise holder from payment of tax on
its corporate franchise imposed of the internal revenue code, as the charter is in
the nature of a private contract and the exemption is part of the inducement for
the acceptance of the franchise, and that the imposition of another franchise tax
by the local authority would constitute an impairment of contract between the
government and the corporation. But these magic words contained in the phrase
shall be in lieu of all taxes have to give way to the premptory language of the
LGC specifically providing for the withdrawal of such exemption privileges.

BANAT v COMELEC G.R. No. 179271 April 21, 2009

Facts:
On 27 June 2002, BANAT filed a Petition to Proclaim the Full Number of Party-
List Representatives Provided by the Constitution, docketed as NBC No. 07-041
(PL) before the NBC. BANAT filed its petition because "the Chairman and the
Members of the COMELEC have recently been quoted in the national papers that
the COMELEC is duty bound to and shall implement the Veterans ruling, that is,
would apply the Panganiban formula in allocating party-list seats."

BANAT filed a petition for certiorari and mandamus assailing the ruling in
NBC Resolution No. 07-88. BANAT did not file a motion for reconsideration of NBC
Resolution No. 07-88.
 On 9 July 2007, Bayan Muna, Abono, and A Teacher asked the COMELEC,
acting as NBC, to reconsider its decision to use the Veteransformula as stated in its
NBC Resolution No. 07-60 because the Veteransformula is violative of the
Constitution and of Republic Act No. 7941 (R.A. No. 7941). On the same day, the
COMELEC denied reconsideration during the proceedings of the NBC.

Issue:
Considering the allegations in the petitions and the comments of the
parties in these cases, we defined the following issues in our advisory for the oral
arguments set on 22 April 2008:
1. Is the twenty percent allocation for party-list representatives in Section 5(2),
Article VI of the Constitution mandatory or merely a ceiling?
2. Is the three-seat limit in Section 11(b) of RA 7941 constitutional?
3. Is the two percent threshold prescribed in Section 11(b) of RA 7941 to qualify
for one seat constitutional?
4. How shall the party-list representative seats be allocated?
5. Does the Constitution prohibit the major political parties from participating in
the party-list elections? If not, can the major political parties be barred from
participating in the party-list elections?

Held:
WHEREFORE we PARTIALLY GRANT the petition. We SET ASIDEthe
Resolution of the COMELEC dated 3 August 2007 in NBC No. 07-041 (PL) as well as
the Resolution dated 9 July 2007 in NBC No. 07-60. We
declare unconstitutional the two percent threshold in the distribution of
additional party-list seats.

Ratio:
Neither the Constitution nor R.A. No. 7941 mandates the filling-up of the
entire 20% allocation of party-list representatives found in the Constitution.
However, we cannot allow the continued existence of a provision in the law which
will systematically prevent the constitutionally allocated 20% party-list
representatives from being filled. The three-seat cap, as a limitation to the number
of seats that a qualified party-list organization may occupy, remains a valid
statutory device that prevents any party from dominating the party-list elections.

We rule that, in computing the allocation of additional seats, the continued

operation of the two percent threshold for the distribution of the additional seats
as found in the second clause of Section 11(b) of R.A. No. 7941
is unconstitutional. This Court finds that the two percent threshold makes it
mathematically impossible to achieve the maximum number of available
party list seats when the number of available party list seats exceeds 50. The
continued operation of the two percent threshold in the distribution of the
additional seats frustrates the attainment of the permissiveceiling.

In declaring the two percent threshold unconstitutional, we do not

limit our allocation of additional seats to the two-percenters. The percentage of
votes garnered by each party-list candidate is arrived at by dividing the number of
votes garnered by each party by 15,950,900, the total number of votes cast for
party-list candidates. There are two steps in the second round of seat allocation.
First, the percentage is multiplied by the remaining available seats, 38, which is
the difference between the 55 maximum seats reserved under the Party-List
System and the 17 guaranteed seats of the two-percenters. The whole integer of
the product of the percentage and of the remaining available seats corresponds to
a partys share in the remaining available seats. Second, we assign one party-list
seat to each of the parties next in rank until all available seats are completely
distributed. We distributed all of the remaining 38 seats in the second round of
seat allocation. Finally, we apply the three-seat cap to determine the number of
seats each qualified party-list candidate is entitled.

Neither the Constitution nor R.A. No. 7941 prohibits major political
parties from participating in the party-list system. On the contrary, the
framers of the Constitution clearly intended the major political parties to
participate in party-list elections through their sectoral wings. In fact, the members
of the Constitutional Commission voted down, 19-22, any permanent sectoral
seats, and in the alternative the reservation of the party-list system to the sectoral
groups. In defining a "party" that participates in party-list elections as either "a
political party or a sectoral party," R.A. No. 7941 also clearly intended that major
political parties will participate in the party-list elections. Excluding the major
political parties in party-list elections is manifestly against the Constitution, the
intent of the Constitutional Commission, and R.A. No. 7941. This Court cannot
engage in socio-political engineering and judicially legislate the exclusion of major
political parties from the party-list elections in patent violation of the Constitution
and the law.

In view of the inclusion of major political parties (according to Puno,

J.)
The Court today effectively reversed the ruling in Ang Bagong Bayani v.
COMELEC with regard to the computation of seat allotments and the participation
of major political parties in the party-list system. I vote for the formula propounded
by the majority as it benefits the party-list system but I regret that my
interpretation of Article VI, Section 5 of the Constitution with respect to the
participation of the major political parties in the election of party-list
representatives is not in direct congruence with theirs, hence,

There is no gainsaying the fact that the party-list parties are no match to our
traditional political parties in the political arena. This is borne out in the party-list
elections held in 2001 where major political parties were initially allowed to
campaign and be voted for. The results confirmed the fear expressed by some
commissioners in the Constitutional Commission that major political parties would
figure in the disproportionate distribution of votes: of the 162 parties which
participated, the seven major political parties made it to the top 50. These
seven parties garnered an accumulated 9.54% of the total number of votes
counted, yielding an average of 1.36% each, while the remaining 155 parties
(including those whose qualifications were contested) only obtained 90.45% or an
average of 0.58% each. Of these seven, three parties or 42.8% of the total number
of the major parties garnered more than 2% of the total number of votes each, a
feat that would have entitled them to seat their members as party-list
representatives. In contrast, only about 4% of the total number of the remaining
parties, or only 8 out of the 155 parties garnered more than 2%.

In sum, the evils that faced our marginalized and underrepresented people
at the time of the framing of the 1987 Constitution still haunt them today. It is
through the party-list system that the Constitution sought to address this systemic
dilemma. In ratifying the Constitution, our people recognized how the interests of
our poor and powerless sectoral groups can be frustrated by the traditional
political parties who have the machinery and chicanery to dominate our political
institutions. If we allow major political parties to participate in the party-list system
electoral process, we will surely suffocate the voice of the
marginalized, frustrate their sovereignty and betray the democratic spirit
of the Constitution. That opinion will serve as the graveyard of the party-list
system.

IN VIEW WHEREOF, I dissent on the ruling allowing the entry of major

political parties into the party-list system.

In view of 2% being unconstitutional (according to Nachura, J.)

However, I wish to add a few words to support the proposition that the inflexible
2% threshold vote required for entitlement by a party-list group to a seat in the
House of Representatives in Republic Act (R.A.) No. 7941 is unconstitutional. This
minimum vote requirement fixed at 2% of the total number of votes cast for the
party list system presents an unwarranted obstacle to the full implementation of
Section 5 (2), Article VI, of the Philippine Constitution. As such, it effectively
defeats the declared constitutional policy, as well as the legislative objective
expressed in the enabling law, to allow the peoples broadest representation in
Congress,the raison detre for the adoption of the party-list system.

Today, a little over eight (8) years after this Courts decision in Veterans
Federation Party, we see that in the 14th Congress, 55 seats are allocated to party-
list representatives, using the Veterans formula. But that figure (of 55) can never
be realized, because the 2% threshold vote requirement makes it mathematically
impossible to have more than 50 seats. After all, the total number of votes cast for
the party-list system can never exceed 100%.

Lest I be misunderstood, I do not advocate doing away completely with a

threshold vote requirement. The need for such a minimum vote requirement was
explained in careful and elaborate detail by Chief Justice Puno in his separate
concurring opinion in Veterans Federation Party. I fully agree with him that a
minimum vote requirement is needed --

1. to avoid a situation where the candidate will just use the party-list system as a
fallback position;

2. to discourage nuisance candidates or parties, who are not ready and whose
chances are very low, from participating in the elections;
3. to avoid the reserve seat system by opening up the system;

4. to encourage the marginalized sectors to organize, work hard, and earn their
seats within the system;

5. to enable sectoral representatives to rise to the same majesty as that of the

elected representatives in the legislative body, rather than owing to some degree
their seats in the legislative body either to an outright constitutional gift or to an
appointment by the President of the Philippines;

6. if no threshold is imposed, this will actually proliferate political party groups and
those who have not really been given by the people sufficient basis for them to
represent their constituents and, in turn, they will be able to get to the Parliament
through the backdoor under the name of the party-list system; and

7. to ensure that only those with a more or less substantial following can be
represented.9

However, with the burgeoning of the population, the steady increase in the
party-list seat allotment as it keeps pace with the creation of additional legislative
districts, and the foreseeable growth of party-list groups, the fixed 2% vote
requirement is no longer viable. It does not adequately respond to the inevitable
changes that come with time; and it is, in fact, inconsistent with the Constitution,
because it prevents the fundamental law from ever being fully operative.

It is correct to say, and I completely agree with Veterans Federation Party, that
Section 5 (2), Article VI of the Constitution, is not mandatory, that it
merely provides a ceiling for the number of party-list seats in
Congress.But when the enabling law, R.A. 7941, enacted by Congress for the
precise purpose of implementing the constitutional provision, contains a condition
that places the constitutional ceiling completely beyond reach, totally impossible
of realization, then we must strike down the offending condition as an affront to
the fundamental law. This is not simply an inquiry into the wisdom of the
legislative measure; rather it involves the duty of this Court to ensure that
constitutional provisions remain effective at all times. No rule of statutory
construction can save a particular legislative enactment that renders a
constitutional provision inoperative and ineffectual.